| D. | Dividends and Proceeds of Sales Under the Foreign Exchange Law, dividends paid on, and the proceeds of sales in Japan of, shares held bynon-residents of Japan may in general be converted into any foreign currency and repatriated abroad. The acquisition of our shares bynon-residents of Japan by way of a stock split is not subject to any notification or reporting requirements. Acquisition of Shares In general, anon-resident of Japan who acquires shares from a resident of Japan is not subject to any prior filing requirement, although the Foreign Exchange Law empowers the Minister of Finance of Japan to require a prior approval for any such acquisition in certain limited circumstances. If a foreign investor acquires our shares, and, together with parties who have a special relationship with that foreign investor, holds 10% or more of our issued shares as a result of such acquisition, the foreign investor must file a report of such acquisition with the Minister of Finance and any other competent Minister by the fifteenth day of the month immediately following the month to which the date of such acquisition belongs. In certain limited circumstances, however, a prior notification of such acquisition must be filed with the Minister of Finance and any other competent Minister, who may modify or prohibit the proposed acquisition. Deposit and Withdrawal under American Depositary SharesFacility The Bankdeposit of New York Mellonshares with us, in our capacity as custodian and agent for the depositary, in Tokyo, the issuance of ADSs by the depositary to anon-resident of Japan in respect of the deposit and the withdrawal of the underlying shares upon the surrender of the ADSs are not subject to any of the formalities or restrictions referred to above. However, where as a result of a deposit or withdrawal the aggregate number of shares held by the depositary, including shares deposited with us as custodian for the depositary, or the holder surrendering ADSs, as the case may be, would be 10% or more of the total outstanding shares, a report will issuebe 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 theover-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. Japanese Taxation The following sets forth the material Japanese tax consequences to owners of shares of our common stock or ADSs who arenon-resident individuals ornon-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. Each ADR Generally, anon-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 tonon-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 individualnon-resident holder who holds 3% or more of our issued shares for which the applicable rate is (a) 20.42% for dividends to be paid on or before December 31, 2037 and (b) 20% for dividends to be paid thereafter, pursuant to Japanese tax law. The Tax Convention establishes the maximum rate of Japanese withholding tax which may be imposed on dividends paid to a U.S. resident not having a permanent establishment in Japan. Under the Tax Convention, the maximum withholding rate for U.S. holders (as defined below) is generally set at 10% of the gross amount distributed. However, the maximum rate is 5% of the gross amount distributed if the recipient is a corporation and owns directly or indirectly, on the date on which entitlement to the dividends is determined, at least 10% of the voting shares of the paying corporation. Furthermore, the amount distributed shall not be taxed if the recipient is (i) a pension fund which is a U.S. resident, provided that such dividends are not derived from the carrying on of a business, directly or indirectly, by such pension fund or (ii) a parent company with a controlling interest in the paying company and satisfies certain other requirements. U.S. holders (as defined below) are urged to consult their own tax advisors with respect to their eligibility for benefits under the Tax Convention. 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 fornon-resident holders may provide this application service for thenon-resident holders. In this regard, a certain simplified special filing procedure is available fornon-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 representbe applicable tonon-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, interestsas 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 suchnon-resident holders are entitled to a reduced treaty rate under the applicable tax treaty) or the full amount of tax withheld (if suchnon-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, fornon-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 anon-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 anon-resident holder in exchange for ADSs are not subject to Japanese income or corporation tax. Japanese inheritance and gift taxes, at progressive rates, may be payable by an individual who has acquired shares of our common stock or ADSs as legatee, heir or donee, even if none of the individual, the decedent or the donor is a Japanese resident. U.S. Taxation The following sets forth the material U.S. federal income tax consequences of the ownership of shares and ADSs by a U.S. holder, as defined below. This summary is based on U.S. federal income tax laws, including the U.S. Internal Revenue Code of 1986, or the Code, its legislative history, existing and proposed Treasury regulations thereunder, published rulings and court decisions, and the Tax Convention (as defined above), all of which are subject to change, possibly with retroactive effect. The following summary is not a complete analysis or description of all potential U.S. federal income tax consequences to a particular U.S. holder. It does not address all U.S. federal income tax considerations that may be relevant to all categories of potential purchasers, certain of which (such as banks or other financial institutions, insurance companies, dealers in securities,tax-exempt entities,non-U.S. persons, persons holding a 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 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. EachAccordingly, 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 represents oneand 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 certainnon-corporate U.S. holders, each as described below, could be affected by actions taken by intermediaries in the chain of ownership between the holder of ADSs and us if, as a result of such actions, the holders of ADSs are not properly treated as beneficial owners of the underlying shares. We are not aware of any intention to take any such actions, and accordingly, the remainder of this discussion assumes that holders of ADSs will be properly treated as beneficial owners of the underlying shares. Special adverse U.S. federal income tax rules apply if a U.S. holder holds shares or ADSs of a company that is treated as a “passive foreign investment company” (a “PFIC”) for any taxable year during which the U.S. holder held shares or ADSs, as discussed in more detail below. U.S. holders should consult their own tax advisors as to the potential application of the PFIC rules to their ownership and disposition of shares or ADSs. 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 common stock. Each ADScurrent 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 bynon-corporate U.S. holders from a qualified corporation may be eligible for reduced rates of taxation. Qualified corporations include those foreign corporations eligible for the benefits of a comprehensive income tax treaty with the United States that the U.S. Treasury Department determines to be satisfactory for these purposes and that includes an exchange of information provision. The Tax Convention meets these requirements. Subject to the PFIC discussion below, we believe that we are a qualified foreign corporation and that dividends received by U.S. investors with respect to our shares or ADSs will be qualified dividends. Dividends received by U.S. investors from a foreign corporation that was a PFIC in either the taxable year of the distribution or the preceding taxable year are not qualified dividends. Passive Foreign Investment Company Considerations Special adverse U.S. federal income tax rules apply if a U.S. holder holds shares or ADSs of a company that is treated as a PFIC, for any taxable year during which the U.S. holder held shares or ADSs. A foreign corporation will be considered a PFIC for any taxable year in which (i) 75% or more of its gross income is passive income (the “income test”), or (ii) 50% or more of the average fair market value of its assets (determined quarterly) is attributable to assets that produce or are held for the production of passive income (the “asset test”). For this purpose, passive income generally includes dividends, interest, royalties, rents and certain gains from the sale of stock and securities. If a foreign corporation owns at least 25% (by value) of the stock of another corporation, the corporation will be treated, for purposes of the PFIC tests, as owning a proportionate share of the other corporation’s assets and receiving its proportionate share of the other corporation’s income. The determination of whether a foreign corporation is a PFIC is made annually. Proposed Treasury regulations convert what would otherwise be passive income intonon-passive income when such income is banking income earned by an active bank. Based upon these proposed Treasury regulations, and upon certain management estimates and assumptions, we do not believe that we were a PFIC for the year ended March 31, 2019 because we did not meet either the income test or the asset test. The determination of whether we are a PFIC must be made annually and involves a fact-intensive analysis based upon, among other things, the composition of our income and assets and the value of our assets from time to time. It is possible that we may become a PFIC in the fiscal year ending March 31, 2020 or any future taxable year due to changes in our income or asset composition and the expiration of the temporary IRS guidance described above. In addition, a decrease in the price of our shares may also result in our becoming a PFIC. Furthermore, there can be no assurance that the above-described proposed Treasury regulations will be finalized in their current form. Moreover, the application of the proposed Treasury regulations is not clear. If we were classified as a PFIC in any year during which a U.S. holder owns shares or ADSs and the U.S. holder does not make a“mark-to-market” election, as discussed below, we generally would continue to be treated as a PFIC as to such U.S. holder in all succeeding years, regardless of whether we continue to meet the income or asset test discussed above. U.S. Holders are urged to consult their own tax advisors with respect to the tax consequences to them if we were to become a PFIC for any taxable year in which they own our shares or ADSs. If we were classified as a PFIC for any taxable year during which a U.S. holder holds our shares or ADSs, the U.S. holder would generally not receive capital gains treatment upon the sale of the shares or ADSs and would be subject to increased tax liability (generally including an interest charge) upon the sale or other disposition of the shares or ADSs or upon the receipt of certain distributions treated as “excess distributions,” unless the U.S. holder makes themark-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 amark-to-market election. After making such an election, the U.S. holder generally would include as ordinary income each year during which the election is in effect and during which we are a PFIC the excess, if any, of the fair market value of our shares or ADSs at the end of the taxable year over such holder’s adjusted basis in such shares or ADSs. These amounts of ordinary income would not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains. A U.S. holder also would be allowed to take an ordinary loss in respect of the excess, if any, of the holder’s adjusted basis in our shares or ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of income that was previously included as a result of themark-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 amark-to-market election. If made, amark-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 themark-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 ofnon-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: 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 FormW-9 or other appropriate form which certifies that the U.S. holder is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amount withheld under these rules will be creditable against the U.S. holder’s U.S. federal income tax liability or refundable to the extent that it exceeds such liability if the U.S. holder provides the required information to the IRS. If a U.S. holder is required to and does not provide a correct taxpayer identification number, the U.S. holder may be subject to penalties imposed by the IRS. All holders should consult their tax advisors as to their qualification for the exemption from backup withholding and the procedure for obtaining an exemption. 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. Not applicable. We file periodic reports and other information with the SEC. You may read and copy any document that we file with the SEC at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at1-800-SEC-0330 for further information on the operation of its public reference room. The SEC also maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC (http://www.sec.gov). 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. 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 | | Definition | | | Credit Risk | | The risk of financial loss in credit assets (includingoff-balance sheet instruments) caused by deterioration in the credit conditions of counterparties. This category includes country risk. | | | Market 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. | | | Funding Liquidity Risk | | 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. | | | Operational Risk | | The risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. | | | • Operations Risk | | 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. | | | • Information 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. | | | • IT Risk | | 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. | | | • Tangible Asset Risk | | 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. | | | • Personnel Risk | | 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. | | | • 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. | | | • Legal 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. | | | Reputation Risk | | 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. | | | Model Risk | | The risk of loss due to decision-making based on information provided by an inaccurate model or the misuse of a model. |
Risk Management System We have adopted an integrated risk management system to promote close cooperation among the holding company and group companies. The holding company and the major subsidiaries (which include MUFG Bank, acting as custodian, at its principal office in Tokyo, on behalfMitsubishi 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 The Bankdirectors of New York Mellon, acting as depositary. Each ADS will also represent securities, cash or other property deposited with The Bankthe holding company determines risk management policies for various types of New York Mellon but not distributed to ADS holders. The Bank of New York Mellon’s corporate trust office is located at 101 Barclay 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 relyrisks 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 your broker or other financial institutionrisks from both quantitative and qualitative perspectives. The holding company seeks to assertenhance group-wide risk identification, to integrate and improve the rightsGroup’s risk management system and related methods, to maintain asset quality, and to eliminate concentrations of ADS holders described in this section. 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.specific risks.
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.diagram summarizes our integrated risk management framework: Risk Management System 
Share Dividends and Other DistributionsCrisis Management Framework
The Bank of New York Mellon has agreedIn order to payhave a clear critical response rationale and associated decision-making criteria, we have developed systems designed to you the cash dividendsensure that our operations are not interrupted 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 proportioncan be restored 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. See “—E. Taxation—Japanese Taxation.” 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 proceedsnormal quickly in the same wayevent of a natural disaster or system failure so as it distributes cash dividends. If The Bank of New York Mellon does not distribute additional ADSs, each ADS will also representto minimize any disruption to customers and markets. A crisis management team within 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 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 itholding company 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 proceedscentral coordinating body in the same way as it distributes cash dividends. The Bankevent of New York Mellon may allow rightsany 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 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 sendcould implement all countermeasures 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 deciderestore full operations. We have business continuity plans to sell what we distributed and distribute the net proceeds,maintain continuous operational viability in the same wayevent of natural disasters, system failures and other types of emergencies. Regular training drills are conducted to upgrade the practical effectiveness of these systems.
Recognizing that our operations, particularly in Japan, are subject to the risk of earthquakes and other natural disasters as it doeswell 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 ouroff-siteback-up data storage and other information technology systems. Implementation of Basel Standards In determining capital ratios under the FSA guidelines implementing Basel III, we and our banking subsidiaries used the Advanced Internal Ratings-Based approach, or the AIRB approach, to calculate capital requirements for credit risk as of March 31, 2019. The Standardized Approach is used for some subsidiaries that are considered to be immaterial to the overall MUFG capital requirements, and MUFG Americas Holdings has adopted a phased rollout of the Internal Ratings-Based Approach. We reflect market risk in our risk-weighted assets by applying the Internal Models Approach to calculate general market risk and the Standardized Measurement Method to calculate specific risk. Under the Internal Models Approach, we principally use a historical simulation model to calculatevalue-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 cash. Or, it may decidean aim to hold what we distributed,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 which case ADSs will also represent the newly distributed property. The Bankfinancial condition 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.borrower. We have no obligationestablished risk management systems to register ADSs, shares, rightsmaintain asset quality, manage credit risk exposure and achieve earnings commensurate with risk.
MUFG and its major banking subsidiaries apply a uniform credit rating system for asset evaluation and assessment, loan pricing, and quantitative measurement of credit risk. This system also underpins the calculation of capital requirements and the management of credit portfolios. We continually seek to our upgrade credit portfolio management, or CPM, expertise to achieve an improved risk-adjusted return based on the Group’s credit portfolio status and flexible response capability to economic and other 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.external changes. Deposit, Withdrawal and CancellationCredit Risk Management System
The Bankcredit portfolios of New York Mellon willour major banking subsidiaries are monitored and assessed on a regular basis by the holding company to maintain and improve asset quality. A uniform credit rating and asset evaluation and assessment system is used to ensure timely and proper evaluation of all credit risks. 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 ADSs if youguidance 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: 
Credit Rating System MUFG and its major banking subsidiaries use an integrated credit rating system to evaluate credit risk. The credit rating system consists primarily of borrower rating, facility risk rating, structured finance rating and asset securitization rating. Country risk is also rated on a uniform group-wide basis. Our country risk rating is reviewed periodically to take into account relevant political and economic factors, including foreign currency availability. Risk exposure for small retail loans, such as residential mortgage loans, is managed by grouping loans into various pools and assigning ratings at the pool level. Borrower rating Our borrower rating classifies borrowers into 15 grades based on evaluations of their expected debt-service capability over the next three to five years. The following table sets forth our borrower grades: Definition of MUFG Borrower Rating | | | | | | | | | MUFG Borrower
Rating | | | MUFG Borrower Rating Definition | | | | 1 | | | The capacity to meet financial commitments is extremely certain, and the borrower has the highest level of creditworthiness. | | | | 2 | | | The capacity to meet financial commitments is highly certain, but there are some elements that may result in lower creditworthiness in the future. | | | | 3 | | | The capacity to meet financial commitments is sufficiently certain, but there is the possibility that creditworthiness may fall in the long run. | | | | 4 | | | There are no problems concerning the capacity to meet financial commitments, but there is the possibility that creditworthiness may fall in the long run. | | | | 5 | | | There are no problems concerning the capacity to meet financial commitments, and creditworthiness is in the middle range. | | | | 6 | | | There are no problems concerning the capacity to meet financial commitments presently, but there are elements that require attention if the situation changes. | | | | 7 | | | There are no problems concerning the capacity to meet financial commitments presently, but long-term stability is poor. | | | | 8 | | | There are no problems concerning the capacity to meet financial commitments presently, but long-term stability is poor, and creditworthiness is relatively low. | | | | 9 | | | The capacity to meet financial commitments is somewhat poor, and creditworthiness is the lowest among “Normal” customers. | | | | 10 through 12 | | | Borrowers who must be closely monitored because of the following business performance and financial conditions: | | (1) Borrowers who have problematic business performance, such as virtually delinquent principal repayment or interest payment; | | (2) Borrowers whose business performance is unsteady, or who have unfavorable financial conditions; | | (3) Borrowers who have problems with loan conditions, for whom interest rates have been reduced or shelved. | | | | | | | | | 10 | | | 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. | | | | | | | | | 11 | | | 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. | | | | | | | | | 12 | | | Borrowers who fall under the criteria of Rating 10 or 11 and have a loan concession granted. Borrowers who have “Loans contractually past due 90 days or more.” (As a rule, delinquent borrowers are categorized as “Likely to Become Bankrupt,” but the definition here applies to borrowers delinquent for 90 days or more because of inheritance and other special reasons.) | | | | 13 | | | Borrowers who pose a serious risk with respect to debt repayment, loss is likely to occur in the course of transactions. While still not bankrupt, these borrowers are in financial difficulty, with poor progress in achieving restructuring plans, and are likely to become bankrupt in the future. | | | | 14 | | | 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. | | | | 15 | | | Borrowers who are legally bankrupt (i.e., who have no prospects for continued business operations because ofnon-payment, suspension of business, voluntary liquidation, or filing for legal liquidation). |
The Japanese regulatory authorities require Japanese banks to categorize borrowers as follows: Normal borrowers (generally corresponding to borrowers in categories 1 through 9 in our ratings), which are borrowers that are performing well, with no significant financial concerns, Borrowers requiring close watch (generally corresponding to borrowers in categories 10 through 12 in our ratings), which include loans that have been amended to allow for delays or your broker deposits sharesforgiveness of interest payments, borrowers experiencing difficulty in complying with loan terms and conditions and borrowers that are recording losses or evidenceperforming 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 rightstransactions. While still not bankrupt, these borrowers are in financial difficulty, with poor progress in achieving restructuring plans, and are likely to receive sharesbecome 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 ofnon-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 obtainnon-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 andmedium-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 andmedium-sized corporations, which constitute the largest borrower attribute in our current loan portfolio in terms of number of borrowers, we have adopted an internally developed financial scoring model, exclusively designed and developed for such attribute. We have selected various financial ratios that we believe to be useful and meaningful to quantitatively measure and assess the borrowers’ financial standing and repayment capability. Such financial ratios represent, among other things, borrowers’ growth, profitability, stability, cash flow, company size and capital efficiency. The model is periodically tested against historical results. The following is an illustration of some of the financial ratios we utilize as part of our financial scoring model: To measure growth: Sales growth, and growth in total assets, To measure profitability: Current profit to sales, and profit before tax to sales, and To measure stability: Equity ratio and current ratio. The financial score obtained through the models is reviewed and, when necessary, adjusted downward to reflect our qualitative assessment of the borrower’s financial strength and other factors that could affect the borrower’s ability to service the debt. For example, we take into account: capability of turning around the business (in case of borrowers with losses) or recovering positive net worth (in case of borrowers with negative net worth), industry risk, management risk, legal risk, as well as our assessment of the probability of receiving support from parent companies (if the borrower is a subsidiary of a large listed company). When adjusting the results of primary financial scoring assigned to borrowers with losses, we consider the severity of losses and the possibility of improving operating results. We analyze and assess whether the loss is temporary, the trend in operating results is improving, or the loss is expected to continue for an extended period. When adjusting the results of primary financial scoring assigned to borrowers with losses or borrowers with negative net worth, we also analyze whether the borrower can return to a positive net worth, and the time period needed to achieve such recovery (one to two years, three to five years, or five years or more). 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 custodian. Upon paymentborrower ratings and the status of its feescollateral, guarantees, 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 apre-release of ADSs. Apre-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 apre-release. The depositary maypre-release ADSs only under the following conditions:
Before or at the time of thepre-release, the person to whom thepre-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;
Thepre-release must be fully collateralized with cash or collateral that the depositary considers appropriate; and
The depositary must be able to close out thepre-release on not more than five business days’ notice.
Thepre-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 apre-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.factors.
The ADSs may only be presentedsystem 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 cancellationinternal management purposes, including loan pricing and releasemeasuring economic capital. When quantifying credit risk amounts using the internal models, MUFG and its major banking subsidiaries consider various parameters, including the probability of the underlying shares of common stockdefault, 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 other deposited securitiesindustry sectors. MUFG and its major banking subsidiaries also share credit portfolio data 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.appropriate cases. Voting RightsLoan Portfolio Management
If youWe aim to achieve and maintain levels of earnings commensurate with credit risk exposure. Products are an ADS holderpriced to take into account expected losses, based on a record date fixedthe internal credit ratings.
We assess and monitor loan amounts and credit exposure by The Bankcredit rating, industry and region. Portfolios are managed to limit concentrations 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 shareholdersrisk 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 procedures set forthprevalence 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 deposit agreement.prices of our equity investments. The BankWe hold shares of New York Mellon will notify you ofvarious corporate clients for strategic purposes, in particular to maintain long-term relationships with these clients. These investments have the upcoming meetingpotential to increase business revenue and arrange to deliver our voting materials to you. The notice shall contain (a) such information as is containedappreciate in such notice of meeting, (b) a statement that as ofvalue. At 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 assame time, we are exposed to the exerciserisk of price fluctuation in the voting rights, if any, pertainingJapanese 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 or other deposited securities represented by your ADSs, and (c) a brief statementin excess of their adjusted Tier 1 capital.
We use quantitative analysis to manage the risks associated with the portfolio of equities held for strategic purposes. According to internal calculations, the market value of our strategically held (Tokyo Stock Exchange-listed) stocks (excluding foreign stock exchange-listed stocks) as 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 proxyMarch 31, 2019 was subject to a person designated by us. Upon your written request, receivedvariation of approximately ¥3.1billion when TOPIX index moves one point in either direction. We seek to manage and reduce strategic equity portfolio risk based on or beforequantitative analysis such as the date established bysensitivity analysis described above. The Bank of New York Mellon for such purpose, The Bank of New York Mellon shall endeavor in so far as practicableaim is to vote or cause to be voted the amount of shares or other deposited securities represented by your ADSs in accordancekeep this risk at appropriate levels compared with Tier 1 capital while generating returns commensurate with the instructions set forthdegree 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 your request. So longmarket variables such as Japanese law providesinterest 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 votes may only be castearnings are commensurate with respect to one or more whole shares or other deposited securities, The Banklevels 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. 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.
Fees and Expenses
See “Item 12.D. Description of Securities Other than Equity Securities—American Depositary Shares.”
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.risk.
Reclassifications, Recapitalizations and MergersMarket Risk Management System
If we:We have adopted an integrated system to manage market risk from our trading andnon-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 reclassify, split up or consolidate any
Market Risk Management and Control At the holding company and the major subsidiaries, market risk exposure is reported to the Chief Risk Officers on a daily basis. At the holding company, the Chief Risk Officer monitors market risk exposure across the Group as well as the major subsidiaries’ control over their quantitative limits for market risk and losses. Meanwhile, the Chief Risk Officers at the major subsidiaries monitor their own market risk exposure and their control over their quantitative limits for market risk and losses. In addition, various analyses on risk profiles, including stress testing, are conducted and reported to the Executive Committees and the Corporate Risk Management Committees on a regular basis. At the business unit levels in the major subsidiaries, the market risks on their marketable assets and liabilities, such as interest rate risk and foreign exchange rate risk, are controlled by entering into various hedging transactions using marketable securities and derivatives. As part of our shares ormarket 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 deposited securities; recapitalize, reorganize, merge, liquidate, consolidate or sell all or substantially alluse 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 generallynon-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 fromon-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 andnon-trading activities is measured using a uniform market risk measurement model. The principal model used for these activities is a historical simulation, or take any similar action; or distribute securitiesHS, 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 shares thatcurrent 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 withnon-linear behavior. The holding company and banking subsidiaries also use the HS model as part of the calculation of their Basel III regulatory capital adequacy ratios.In calculating VaR using the HS method, we have implemented an integrated market risk measurement system throughout the Group. Our major subsidiaries calculate their VaR based on the risk and market data prepared by the information systems of their front offices and other departments. The major subsidiaries provide this risk data to the holding company, which calculates overall VaR, taking into account the diversification effect among all portfolios of the major subsidiaries. For the purpose of internally evaluating capital adequacy on an economic capital basis in terms of market risk, we use this market risk measurement model to calculate risk amounts based on a holding period of one year and a confidence interval of 99.9%. Monitoring and managing our sensitivity to interest rate fluctuations is the key to managing market risk in MUFG’snon-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 not distributedregularly 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, 2019) Trading activities The aggregate VaR for our total trading activities as of March 31, 2019 was ¥20.84 billion, comprising interest rate risk exposure of ¥20.58 billion, foreign exchange risk exposure of ¥4.44 billion, and equity-related risk exposure of ¥1.55 billion. Compared with the VaR as of March 31, 2018, we experienced an increase in market risk during the fiscal year ended March 31, 2019, primarily due to you, then, Our average daily VaR for the fiscal year ended March 31, 2019 was ¥14.25 billion. Based on a simple sum of figures across market risk categories, interest rate risk accounted for approximately 67%, foreign exchange risk for approximately 23% and equity-related risk for approximately 10%, of our total trading activity market risks. Due to the nature of trading operations which involves frequent changes in trading positions, market risk varied substantially during the fiscal year, depending on our trading positions. The following tables set forth the VaR related to our trading activities by risk category for the periods indicated: | | | | | | | | | | | | | | | | | April 1, 2017—March 31, 2018 | | Average | | | Maximum(1) | | | Minimum(1) | | | March 31, 2018 | | | | | (in billions) | | MUFG | | ¥ | 13.58 | | | ¥ | 18.46 | | | ¥ | 11.29 | | | ¥ | 13.27 | | Interest rate | | | 13.28 | | | | 16.93 | | | | 11.47 | | | | 12.79 | | Yen | | | 6.59 | | | | 9.79 | | | | 4.70 | | | | 6.72 | | U.S. Dollars | | | 5.96 | | | | 8.46 | | | | 3.94 | | | | 4.63 | | Foreign exchange | | | 4.66 | | | | 7.69 | | | | 2.62 | | | | 3.83 | | Equities | | | 1.81 | | | | 5.72 | | | | 0.62 | | | | 1.99 | | Commodities | | | 0.01 | | | | 0.20 | | | | 0.00 | | | | 0.00 | | Less diversification effect | | | (6.18 | ) | | | — | | | | — | | | | (5.34 | ) | | | | | | April 1, 2018—March 31, 2019 | | Average | | | Maximum(1) | | | Minimum(1) | | | March 31, 2019 | | | | | (in billions) | | MUFG | | ¥ | 14.25 | | | ¥ | 35.71 | | | ¥ | 11.42 | | | ¥ | 20.84 | | Interest rate | | | 13.32 | | | | 20.94 | | | | 10.78 | | | | 20.58 | | Yen | | | 5.52 | | | | 9.45 | | | | 3.44 | | | | 4.40 | | U.S. Dollars | | | 5.28 | | | | 11.23 | | | | 3.27 | | | | 11.03 | | Foreign exchange | | | 4.52 | | | | 7.26 | | | | 3.10 | | | | 4.44 | | Equities | | | 2.06 | | | | 26.66 | | | | 0.98 | | | | 1.55 | | Commodities | | | 0.00 | | | | 0.05 | | | | 0.00 | | | | 0.00 | | Less diversification effect | | | (5.65 | ) | | | — | | | | — | | | | (5.73 | ) |
| (1)Assumptions for VaR calculations: | Historical simulation method | 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; andHolding period: 10 business days | Confidence interval: 99% | Observation period: 701 business days |
| (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, 2019 was as follows: | | | | | Quarter | | Daily average VaR | | | | (in billions) | | April—June 2018 | | ¥ | 13.84 | | July—September 2018 | | | 13.71 | | October—December 2018 | | | 14.51 | | January—March 2019 | | | 14.96 | |
The quantitative market risk figures from trading activities tend to fluctuate widely due to the market sensitive nature of the trading business. During the fiscal year ended March 31, 2019, the revenue from our trading activities has been relatively stable, keeping positive numbers in 244 days out of 259 trading days in the period. During the same period, there were 62 days with positive revenue exceeding ¥1 billion and 1 day with negative revenue exceeding minus ¥1 billion. Non-trading Activities The aggregate VaR for our totalnon-trading activities as of March 31, 2019, excluding market risks related to our strategic equity portfolio and measured using the same standards as trading activities, was ¥315.5 billion. Market risk related to interest rates equaled ¥283.1 billion and equities-related risk equaled ¥202.5 billion. Compared with the VaR as of March 31, 2018, we experienced a decrease in market risk during the fiscal year ended March 31, 2019, primarily due to a decrease in interest rate risk and equities-related risk. For a description of our strategic equity investment risk management, see “—Risk Management of Strategic Equity Portfolio.” Based on a simple sum of figures across market risk categories, interest rate risks accounted for approximately 58% of our totalnon-trading activity market risks. Looking at a breakdown of interest rate related risk by currency, as of March 31, 2019, the yen accounted for approximately 44% while the U.S. dollar accounted for approximately 32%, and the euro approximately 24%. The following tables set forth the VaR related to ournon-trading activities by risk category for the periods indicated: | | | | | | | | | | | | | | | | | April 1, 2017—March 31, 2018 | | Average | | | Maximum(1) | | | Minimum(1) | | | March 31, 2018 | | | | | (in billions) | | Interest rate | | ¥ | 305.2 | | | ¥ | 330.1 | | | ¥ | 270.1 | | | ¥ | 304.9 | | Yen | | | 236.1 | | | | 253.5 | | | | 212.6 | | | | 231.2 | | U.S. Dollars | | | 146.2 | | | | 174.1 | | | | 116.5 | | | | 128.5 | | Foreign exchange | | | 8.0 | | | | 10.8 | | | | 3.4 | | | | 10.0 | | Equities(2) | | | 233.1 | | | | 271.9 | | | | 171.0 | | | | 225.9 | | Less diversification effect | | | (151.7 | ) | | | — | | | | — | | | | (154.9 | ) | Total | | | 394.6 | | | | 440.5 | | | | 348.4 | | | | 385.9 | |
| | | | | | | | | | | | | | | | | April 1, 2018—March 31, 2019 | | Average | | | Maximum(1) | | | Minimum(1) | | | March 31, 2019 | | | | | (in billions) | | Interest rate | | ¥ | 290.3 | | | ¥ | 309.8 | | | ¥ | 265.2 | | | ¥ | 283.1 | | Yen | | | 219.2 | | | | 240.3 | | | | 169.6 | | | | 169.6 | | U.S. Dollars | | | 114.0 | | | | 140.8 | | | | 85.9 | | | | 122.2 | | Foreign exchange | | | 9.5 | | | | 11.2 | | | | 2.8 | | | | 4.0 | | Equities(2) | | | 215.6 | | | | 245.1 | | | | 147.4 | | | | 202.5 | | Less diversification effect | | | (170.1 | ) | | | — | | | | — | | | | (174.1 | ) | Total | | | 345.3 | | | | 399.2 | | | | 308.0 | | | | 315.5 | |
| Assumptions for VaR calculations: | Historical simulation method | Holding period: 10 business days | Confidence interval: 99% | Observation period: 701 business days |
| (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 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.equities-related risk figures do not include market risk exposure from our strategic equity portfolio. |
Amendment and Termination
We may agree with The Bank of New York Mellon to amendaverage daily interest rate VaR by quarter in 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 agreementfiscal year ended March 31, 2019 was 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:follows.
| (1) | | | | Quarter | | collect dividends and distributions on the deposited securities;Daily average VaR | |
| | (2) | (in billions) | | April—June 2018 | | sell rights and other property offered to holders of deposited securities; and¥ |
| 370.5 | | (3)July—September 2018 | | deliver shares and other deposited securities in exchange for ADSs surrendered to The Bank of New York Mellon. | 352.0 | | October—December 2018 | | | 326.1 | | January—March 2019 | | | 332.7 | |
At any time after oneComparing the proportion of each currency’s interest rate VaR to the total interest rate VaR as of March 31, 2019 against that as of March 31, 2018, there was a 9 percentage point decrease in the Japanese yen from 53% to 44%, a 2 percentage point increase in the U.S. dollar from 30% to 32%, and a 7 percentage point increase in the euro from 17% to 24%.
Backtesting We conduct backtesting in which a VaR is compared with hypothetical profits and losses on a daily basis to verify the accuracy of our VaR measurement model. We also conduct additional backtesting using other methods, including testing VaR against actual realized and unrealized losses and testing VaR by various changing parameters such as confidence intervals and observation periods used in the model. Hypothetical losses never exceeded VaR in the fiscal year ended March 31, 2019. This means that our VaR model provided reasonably accurate measurements of market risk during the fiscal year. The following termination, graph shows daily VaR of trading activities and the distribution of corresponding hypothetical profits and losses for the fiscal year ended March 31, 2019: 
The Bankfollowing graph shows VaR of New York Mellontrading activities and hypothetical profits and losses on a daily basis for the fiscal year ended March 31, 2019: 
Stress Testing We use anHS-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 sell any remaining deposited securities. Afterexceed the value at risk obtained by the application of the model in the event, for example, that The Bankthe 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 New York Mellon will holdtheHS-VaR model and measure potential losses that the money it receivedmodel is not designed to capture, we conduct stress testing. Through the daily stress testing, we estimate maximum potential losses in each market on the sale,current trading portfolio based on the worstten-day historical volatility recorded during the VaR observation period of 701 days. As of March 31, 2019, we held a total trading activity position subject to estimated maximum potential losses of ¥15.4 billion as compared to ¥8.8 billion as of March 31, 2018. In addition, the holding company and major subsidiaries conduct stress testing, as appropriate, by applying various stress scenarios, including those which take into account estimates regarding future market volatility, in order to better identify risks and manage our portfolio in a more stable and appropriate manner. The holding company and major subsidiaries also measure stressed VaR relating to their trading activities based on aone-year observation period with the highest VaR at least in the immediately preceding ten years. Funding Liquidity Risk Management Liquidity risk is the risk of incurring losses if a poor financial position hampers the ability to meet funding requirements, or necessitates fund procurement at interest rates markedly higher than normal. Our major subsidiaries maintain appropriate liquidity in both Japanese yen and foreign currencies by managing their funding sources and mechanisms, such as liquidity gap, liquidity-supplying products such as commitment lines, and buffer assets. We have established a group-wide system for managing liquidity risk by categorizing the risk in the following three stages: normal, concern and crisis. The front offices and risk management offices of the major subsidiaries and the holding company exchange information and data on liquidity risk even at the normal stage. At higher alert stages, we centralize information about liquidity risk and discuss issues relating to group-wide liquidity control actions among Group companies, if necessary. We have also established a system for liaison and consultation on funding in preparation for contingency, such as natural disasters, wars and terrorist attacks. The holding company and the major subsidiaries conduct group-wide contingency preparedness drills on a regular basis to ensure smooth implementation in the event of an emergency. In addition, we have established a group-wide system for ensuring compliance with the minimum regulatory liquidity coverage ratio requirements by categorizing the risk in the following three stages: sufficient, concern and insufficient. The holding company and the major subsidiaries exchange information and data on LCR even at the sufficient stage. At higher alert stages, we hold group-wide LCR liaison meetings to discuss issues relating to LCR and, based on the discussion as well as any other cash itthe 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 assub-category risks. The holding company has established, based on its Executive Committee’s determination, the MUFG Operational Risk Management Policy as a group-wide policy for managing operational risk. This policy sets forth the core principles regarding operational risk management, including the definition of operational risk, and the risk management system and processes. Under the policy, the board of directors and the Executive Committee formulate fundamental principles of operational risk management and establish and maintain an appropriate risk management system. The Chief Risk Management Officer is holding underresponsible for recognizing, evaluating, and appropriately managing operational risk in accordance with the deposit agreement forfundamental principles formulated by the pro rata benefitboard 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 ADS holders thatmajor 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 
As set forth in the following diagram, we have not surrendered their ADSs. It will not invest the moneyestablished a risk management framework for loss data collection, control self-assessment, and has no liability for interest. The Bankmeasurement of New York Mellon’s only obligations will beoperational risk in order to account for the moneyappropriately identify, recognize, evaluate, measure, control, monitor and other cash andreport operational risk. We have also established group-wide reporting guidelines with respect to indemnificationloss 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. The following diagram summarizes our operational risk management framework: Operational Risk Management Framework 
Operations Risk Management Operations risk refers to retain depositary documents. After termination,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 only obligations will bereputation, our banking subsidiaries continue to work on improving their management systems to create and apply appropriate operations risk-related controls. Specific ongoing measures to reduce operations risk include the development of databases to manage, analyze and prevent the recurrence of related loss events; efforts to tighten controls over administrative procedures and related operating authority, while striving to improve human resources management, investments in systems to improve the efficiency of administrative operations, and programs to expand and upgrade internal auditing and operational guidance systems. Senior management receives regular reports on the status of our businesses from an operations risk management perspective. We work to promote the sharing within the Group of information and expertise concerning any operational incidents and the measures implemented to prevent any recurrence. Efforts to upgrade the management of operations risk continue with respectthe aim of providing our customers with a variety of high-quality services. Information Risk Management Information risk refers to indemnificationthe 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 responsibility to pay certain amountshandle customer information properly, and we continue to The Bankwork on enhancing our framework to manage such risk. Complying with laws and regulations requiring proper handling of New York Mellon.customer information, we implement information security management measures, including the establishment of an information risk management framework, enhancement of our internal operational procedures, and training courses mandatory for all officers and staff. We have also formulated our Personal Information Protection Policy as the basis for our ongoing programs designed to protect the confidentiality of personal information. With the aim of preventing any recurrence and minimizing risk or loss, we also work to promote sharing on a group-wide basis of experience, knowledge and expertise related to information risk incidents. IT Risk Management IT risk refers to the risk of loss arising from destruction, suspension, malfunction or misuse of IT, or unauthorized alteration and leakage of electronic data caused by insufficient IT systems planning, development or operations or by vulnerabilities of or external threats to IT system security, including cybersecurity, as well as risks similar to these risks. Systems planning, development and operations include appropriate design and extensive testing phases to ensure that systems are designed to help prevent failures while providing sufficient safeguards for the security of electronic data including personal information. System development projects are managed and overseen by a team dedicated to perform such management and oversight functions, and the development status of any mission-critical IT systems is reported regularly to senior management. We have developed disaster countermeasures systems and have also been investing in duplication of the Group’s IT infrastructure to minimize damage in the event of any system failure. Emergency drills are conducted to help increase staff preparedness. With the aim of preventing any recurrence and minimizing risk or loss, we also work to promote sharing on a group-wide basis of experience, knowledge and expertise related to system failures. In addition, the risk of increasingly sophisticated cyber-attacks is a significant focus of the Board of Directors, and the Board regularly receives reports on our cybersecurity program. We continue to work to strengthen measures designed to address and mitigate the risk, including the establishment of MUFG-CERT, our Computer Security Incident Response Team, implementation of multi-layered defense and detection measures, enhancement of monitoring systems through our Security Operation Centers, and cooperation with global organizations with relevant expertise. MUFG-CERT is charged with the responsibility of taking, coordinating and managing prompt action in response to cyber security incidents to mitigate their impact. Tangible Asset Risk Management Tangible asset risk refers to the risk of loss due to damage to tangible assets or deterioration in the operational environment caused by disasters or inadequate asset maintenance, as well as risks similar to this risk. Tangible assets include movable physical properties and immovable properties, owned or leased, such as land, buildings, equipment attached to buildings, fixtures and furniture. We recognize the potentially significant impact tangible asset risk-related events can have on the management and execution of the Group’s businesses, which in turn can result in economic losses to, or diminished market confidence in, the Group. Accordingly, we continue to improve our risk control framework designed to appropriately manage such risk. LimitationsPersonnel 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 Obligationsthe management and Liabilityexecution of the Group’s businesses, which in turn can result in economic losses to, ADS Holdersor 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 percentileone-tailed confidence interval and aone-year holding period. In calculating the operational risk equivalent amount, we exclude expected losses relating to the amount of allowance for repayment of excess interest associated with the consumer finance business of a subsidiary. We do not exclude any other expected losses and do not reflect the risk mitigating impact of insurance. In addition, we take into account credit risk-related events that are not reflected in the measurement of the credit risk equivalent amount. (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 
The risk equivalent amount for each loss event type represents the amount of maximum loss estimated with a 99.9th percentileone-tailed confidence interval and aone-year holding period based on the distribution of losses arising from all relevant risk events for aone-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 anon-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 aone-year holding period based on a normal distribution assumed by applying data on losses that arose in a given period, excluding any related expected losses. We confirm the appropriateness of the measurement models by periodic verification and back testing. (4) Outline of Scenario Analysis As an initial step of our scenario analysis, we identify potential severe loss events that we have not experienced but may potentially experience in the future. In this identification process, we seek to ensure exhaustive coverage of potential severe loss events by comprehensively examining our experience relating to loss events and legal proceedings, external loss data, the control self-assessment results and other relevant information. In the next step, we prepare scenario data for each identified severe loss event by quantifying the values depending on its occurrence frequency and loss severity, taking into account relevant transaction amounts and restructuring costs as well as BEICFs. In preparing scenario data, we apply an analysis method we deem appropriate for the type and nature of the operational risk involved. In order to obtain an operational risk equivalent amount that is commensurate with, and appropriate for, our risk profile, we assess the need for an additional scenario or modification to our existing scenarios semi-annually. We then reflect, as necessary, new risks arising as a result of changes in the business environment and the results of the implementation of measures to enhance our internal controls in response to newly identified risks in our scenario data. Reputation Risk Management Reputation risk refers to the risk of harm to our corporate value arising from perceptions of our customers, shareholders, investors or other stakeholders and in the market or society that we deviate from their expectations or confidence. We recognize that such risk, if materialized, can have a material negative impact on our business and continue to work on enhancing our framework designed to appropriately manage the risk based on our Corporate Vision, MUFG Group Code of Conduct, and other rules and codes of the Group. Specifically, in order to manage our reputation risk effectively on a group-wide basis, we have established a risk management system designed to ensure mutual consultation and reporting if a reputation risk-related event occurs or is anticipated and, through this system, share relevant information within the Group. Through the risk control framework and risk management system, we seek to prevent reputation risk-related events and minimize damage to the corporate value of the Group by promptly obtaining an accurate understanding of relevant facts relating to risk events and disclosing information concerning such events and the measures we take in response to such events in an appropriate and timely manner. Model Risk Management Model risk refers to the risk of loss due to decision-making based on information provided by an inaccurate model or the misuse of a model. We recognize the potentially significant impact model risk-related events can have on the management and execution of the Group’s businesses, which in turn can result in economic losses to, or diminished market confidence in, the Group. Models are used for increasingly wider and more important purposes, including valuing exposures, instruments and positions, measuring risks, and determining capital adequacy. Accordingly, we continue to work on improving our risk control framework. Compliance Basic Policy We have clarified our mission, our vision and our values in the Corporate Vision and have expressed our commitment to meeting the expectations of customers and society as a whole. Furthermore, we have established MUFG Group Code of Conduct as the guidelines for how the Group’s directors and employees act to realize the Corporate Vision, in which we have expressed our commitment to complying with laws and regulations, to acting with honesty and integrity, and to behaving in a manner that supports and strengthens the trust and confidence of society. In addition, as we expand the geographic scope of our business globally, we are committed to keeping abreast of developments in laws and regulations of the jurisdictions in which we operate including anti-money laundering and anti-bribery, as well as paying attention to trends in financial crimes. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—Legal and regulatory changes could have a negative impact on our business, financial condition and results of operations.” and “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—We may become subject to regulatory actions or other legal proceedings relating to our transactions or other aspects of our operations, which could result in significant financial losses, restrictions on our operations and damage to our reputation.” See also “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation.” MUFG Group Code of Conduct The Code of Conduct encapsulates the standards that guide staff conduct and decision-making in ourday-to-day business activities under the MUFG Corporate Vision. It is designed to provide guidance in times of doubt, or when we find it difficult to know if we are making the right choice. Chapter 1 deals with the attitude we should adopt with our customers. Acting with honesty and integrity and pursuing the best interests of our customers is a core component of our business practices. Chapter 2 presents a set of standards designed to help us fulfill our responsibilities as a good corporate citizen. MUFG’s reputation depends upon the trust and confidence of our customers and other stakeholders, including local communities, and we are responsible to society on a global level. Chapter 3 describes the actions and mindset that will create a stimulating and supportive working environment as MUFG continues to grow. Our success depends on building and maintaining a dynamic workplace where all staff can reach their full potential in ways that support our customers and make a valuable contribution to society as a whole. Chapter 1.Customer Focus Our customers are at the center of everything we do, and should always be the focus of our thoughts. Our aim should be to win the trust and confidence of our customers at all times. MUFG exists today because of the trust and confidence that customers have placed in us over many years. Our role is to increase and strengthen this bedrock of trust and confidence. Our activities are not driven by the prospect of short-term gains. Instead, we look to build ongoing relationships with our customers to support their long-term growth. 1-1 Honesty and Integrity Our customers are at the center of everything we do. We carry out fair and transparent corporate activities with honesty and integrity. We treat customer assets with care and respect and strive always to ensure that our actions do not unjustly damage our customers’ interests. 1-2 Ensuring Quality To build lasting relationships of trust and confidence with our customers, we listen carefully to what our customers are telling us, and maintain thoroughgoing quality control of all our products and services, from planning and development to provision and subsequent revisions, with a view to further enhancing quality. 1-3 Exceeding Customer Expectations We aim to meet the diverse needs of our customers worldwide, and to provide services exceeding their expectations through the highest standards of professionalism, by leveraging our global network and the consolidated strengths of the entire Group. Chapter 2 Responsibility as a Corporate Citizen As we develop our business globally, we comply with all the domestic and international laws and rules that may apply. We do all we can to maintain stability and confidence in the global financial system, and contribute to the sound and healthy growth of society. Aware of the responsibility each of us has as a member of MUFG, we carry out fair and transparent corporate activities with honesty and integrity, in a manner that supports and strengthens the trust and confidence MUFG has earned from society over many years. 2-1 Adherence to Laws and Rules In addition to adhering strictly to all domestic and international laws and rules, we strive to do the right thing based on our strict code of ethics. Violations of laws or rules damage the vital social infrastructure of the financial system and lead to a loss of trust in MUFG. We strictly abide by all laws and rules relating to our business, including the prohibition of insider trading, ban on unfair trading practices,anti-bribery and corruption and appropriate disclosure. 2-2 Prevention of Financial Crime We have zero tolerance for financial crime or any attempt to circumvent the rules and procedures aimed at preventing financial crime. We take all reasonable steps possible to prevent our products and services being used by individuals or entities involved in illegal or improper activities such as money laundering and terrorist financing. 2-3 Contributing to Society We respect the history, cultures, and customs of different countries and regions around the world, and work to contribute to the development of local and global communities and the protection of the environment throughout our corporate activities and the social volunteer efforts of our staff. Chapter 3 Attitudes and Behaviors in the Workplace We strive to respond and adapt promptly to the diversifying and evolving needs of our customers and the rapidly changing environment in which we work. The working environment at MUFG fosters mutual respect, enables individuals to make the most of their abilities as professionals, and maximizes the power of teamwork across regions and different areas of business, encouraging all staff to embrace new challenges. We work always to protect and maintain the tangible and intangible assets and property that MUFG has accumulated. 3-1 Challenge Ourselves to Grow We strive to enhance our knowledge, expertise, and potential and maximize the power of teamwork. We believe that the changing business environment represents opportunity and are always ready to embrace new challenges in new fields. 3-2 Collaborative and Professional Working Environment We respect the human rights and diversity of all MUFG staff. We do not engage in or tolerate any form of discrimination or harassment or any other behavior that infringes these beliefs. 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. The following diagram summarizes our compliance framework: Compliance Framework 
Internal Reporting System and Accounting Auditing Hotline The deposit agreement expressly limitsmajor subsidiaries have established internal reporting systems that aim to identify compliance issues early so that any problems can be quickly rectified. This system includes an independent external compliance hotline. Furthermore, the holding company has set up an MUFG Group Compliance Helpline that acts in parallel with group-company internal reporting systems and provides a reporting channel for directors and employees of Group companies. In the holding company, the contents of the reported cases as well as the result of surveys is reported to the audit committee on a regular basis or whenever necessary. In addition to these internal reporting systems, the holding company has also established an accounting auditing hotline that provides a means to report any problems related to MUFG accounting. MUFG Accounting Auditing Hotline MUFG has set up an accounting auditing hotline to be used to make reports related to instances of improper practices (violations of laws and regulations) and inappropriate practices, or of practices raising questions about such impropriety or inappropriateness, regarding accounting and internal control or audits related to accounting in Group companies. The audit committee oversees the reporting process to ensure the appropriateness and effectiveness of the reporting process and monitors the reports received through the hotline. The reporting process works as follows, and may be carried out via letter ore-mail: Hokusei Law Office, P.C. Address: Kojimachi4-3-4,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 obligationsinvestigations 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 informanthim- 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 obligationsimplementation of business operations from legal compliance, rationality and efficiency perspectives, beyond checking compliance with defined procedures. In addition, Internal Audit provides instructions and recommendations for operational improvement to audited divisions and reports to senior management on such instructions and recommendations, thereby contributing to safeguarding and development of the Group’s assets. Three Lines of Defense Framework Risk management is conducted at multiple levels within a business organization, including front-office divisions in charge of managing specific categories of risk, a compliance division, and an internal audit division. As for financial institutions, including the MUFG Group, based on the experience of past financial crises, the traditional risk management structure that was heavily dependent on front-office divisions has been under close scrutiny. As a result, there is an increasing expectation for financial institutions to achieve more effective risk management through, for example, appropriate allocation of risk management roles and responsibilities among various divisions. 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 • Responsible and accountable for identifying, evaluating and controlling business risks | | | | The 2nd Line of Defense | | Risk management division, compliance division, etc. | | • 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 BankMUFG 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 New York Mellon. It also limits our liabilitythe holding company receives reports from the internal audit divisions of subsidiaries on the status and results of their internal audits and provides them with instructions and evaluations as needed. Reports to the Audit Committee The holding company has an audit committee within its board of directors as required by the Companies Act of Japan, and each of the major subsidiaries has established an audit and supervisory committee or an internal audit and compliance committee. Within each of the holding company and the liability of The Bank of New York Mellon. We and The Bank of New York Mellon: are only obligated to takemajor subsidiaries, 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 their control from performing their 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 relatedinternal audit division reports to the ADSs orcommittee on important matters, including governing principles for internal audit plans and the deposit agreement on your behalf or on behalfstatus and results of any other party unless indemnifiedinternal 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 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 faithencourage Internal Audit staff 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 partyconduct internal audits in accordance with the deposit agreement.
Requirementsglobal standards set by the Institute of Internal Auditors, an international organization established for, Depositary Actions
Before The Bank of New York Mellon will issue or register transfer of an ADS, make a distribution on an ADS, or permit withdrawal of shares, it may require:
payment of stock transfer oramong 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;
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.purposes, formulating practical internal audit standards.
| Item 12. | Description of Securities Other than Equity Securities. |
Reports and Other Communications
Not applicable. 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.Not applicable.
| C. | | Material ContractsOther Securities |
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.Not applicable.
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 bynon-residents of Japan of payment with respect to shares to be issued by us and the acquisition and holding of shares bynon-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 bynon-residents of Japan and foreign investors. Generally, the Foreign Exchange Law currently in effect does not affect the right of anon-resident of Japan to purchase or sell an ADS outside Japan fornon-Japanese currency.
“Non-residents of Japan” are defined as individuals who are not resident in Japan and corporations whose principal offices are located outside Japan. Generally, the branches and offices ofnon-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 asnon-residents of Japan.
“Foreign investors” are defined as:
natural persons who arenon-resident of Japan;
corporations which are organized under the laws of foreign countries or whose principal offices are located outside Japan;
corporations of which 50% or more of the shares are directly or indirectly held by individuals not resident of Japan and corporations which are organized under the laws of foreign countries or whose principal offices are located outside Japan; and
corporations, a majority of officers (or a majority of officers having the power of representation) of which arenon-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 bynon-residents of Japan may in general be converted into any foreign currency and repatriated abroad. The acquisition of our shares bynon-residents of Japan by way of a stock split is not subject to any notification or reporting requirements. Acquisition of Shares In general, anon-resident of Japan who acquires shares from a resident of Japan is not subject to any prior filing requirement, although the Foreign Exchange Law empowers the Minister of Finance of Japan to require a prior approval for any such acquisition in certain limited circumstances. If a foreign investor acquires our shares, and, together with parties who have a special relationship with that foreign investor, holds 10% or more of our issued shares as a result of such acquisition, the foreign investor must file a report of such acquisition with the Minister of Finance and any other competent Minister by the fifteenth day of the month immediately following the month to which the date of such acquisition belongs. In certain limited circumstances, however, a prior notification of such acquisition must be filed with the Minister of Finance and any other competent Minister, who may modify or prohibit the proposed acquisition. Deposit and Withdrawal under American Depositary Facility The deposit of shares with us, in our capacity as custodian and agent for the depositary, in Tokyo, the issuance of ADSs by the depositary to anon-resident of Japan in respect of the deposit and the withdrawal of the underlying shares upon the surrender of the ADSs are not subject to any of the formalities or restrictions referred to above. However, where as a result of a deposit or withdrawal the aggregate number of shares held by the depositary, including shares deposited with us as custodian for the depositary, or the holder surrendering ADSs, as the case may be, would be 10% or more of the total outstanding shares, a report will be required, and in specified circumstances, a prior notification may be required, as noted above. 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 theover-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. Japanese Taxation The following sets forth the material Japanese tax consequences to owners of shares of our common stock or ADSs who arenon-resident individuals ornon-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, anon-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 tonon-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 individualnon-resident holder who holds 3% or more of our issued shares for which the applicable rate is (a) 20.42% for dividends to be paid on or before December 31, 2037 and (b) 20% for dividends to be paid thereafter, pursuant to Japanese tax law. The Tax Convention establishes the maximum rate of Japanese withholding tax which may be imposed on dividends paid to a U.S. resident not having a permanent establishment in Japan. Under the Tax Convention, the maximum withholding rate for U.S. holders (as defined below) is generally set at 10% of the gross amount distributed. However, the maximum rate is 5% of the gross amount distributed if the recipient is a corporation and owns directly or indirectly, on the date on which entitlement to the dividends is determined, at least 10% of the voting shares of the paying corporation. Furthermore, the amount distributed shall not be taxed if the recipient is (i) a pension fund which is a U.S. resident, provided that such dividends are not derived from the carrying on of a business, directly or indirectly, by such pension fund or (ii) a parent company with a controlling interest in the paying company and satisfies certain other requirements. U.S. holders (as defined below) are urged to consult their own tax advisors with respect to their eligibility for benefits under the Tax Convention. 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 fornon-resident holders may provide this application service for thenon-resident holders. In this regard, a certain simplified special filing procedure is available fornon-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 tonon-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 suchnon-resident holders are entitled to a reduced treaty rate under the applicable tax treaty) or the full amount of tax withheld (if suchnon-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, fornon-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 anon-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 anon-resident holder in exchange for ADSs are not subject to Japanese income or corporation tax. Japanese inheritance and gift taxes, at progressive rates, may be payable by an individual who has acquired shares of our common stock or ADSs as legatee, heir or donee, even if none of the individual, the decedent or the donor is a Japanese resident. U.S. Taxation The following sets forth the material U.S. federal income tax consequences of the ownership of shares and ADSs by a U.S. holder, as defined below. This summary is based on U.S. federal income tax laws, including the U.S. Internal Revenue Code of 1986, or the Code, its legislative history, existing and proposed Treasury regulations thereunder, published rulings and court decisions, and the Tax Convention (as defined above), all of which are subject to change, possibly with retroactive effect. The following summary is not a complete analysis or description of all potential U.S. federal income tax consequences to a particular U.S. holder. It does not address all U.S. federal income tax considerations that may be relevant to all categories of potential purchasers, certain of which (such as banks or other financial institutions, insurance companies, dealers in securities,tax-exempt entities,non-U.S. persons, persons holding a 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 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 certainnon-corporate U.S. holders, each as described below, could be affected by actions taken by intermediaries in the chain of ownership between the holder of ADSs and us if, as a result of such actions, the holders of ADSs are not properly treated as beneficial owners of the underlying shares. We are not aware of any intention to take any such actions, and accordingly, the remainder of this discussion assumes that holders of ADSs will be properly treated as beneficial owners of the underlying shares. Special adverse U.S. federal income tax rules apply if a U.S. holder holds shares or ADSs of a company that is treated as a “passive foreign investment company” (a “PFIC”) for any taxable year during which the U.S. holder held shares or ADSs, as discussed in more detail below. U.S. holders should consult their own tax advisors as to the potential application of the PFIC rules to their ownership and disposition of shares or ADSs. 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 bynon-corporate U.S. holders from a qualified corporation may be eligible for reduced rates of taxation. Qualified corporations include those foreign corporations eligible for the benefits of a comprehensive income tax treaty with the United States that the U.S. Treasury Department determines to be satisfactory for these purposes and that includes an exchange of information provision. The Tax Convention meets these requirements. Subject to the PFIC discussion below, we believe that we are a qualified foreign corporation and that dividends received by U.S. investors with respect to our shares or ADSs will be qualified dividends. Dividends received by U.S. investors from a foreign corporation that was a PFIC in either the taxable year of the distribution or the preceding taxable year are not qualified dividends. Passive Foreign Investment Company Considerations Special adverse U.S. federal income tax rules apply if a U.S. holder holds shares or ADSs of a company that is treated as a PFIC, for any taxable year during which the U.S. holder held shares or ADSs. A foreign corporation will be considered a PFIC for any taxable year in which (i) 75% or more of its gross income is passive income (the “income test”), or (ii) 50% or more of the average fair market value of its assets (determined quarterly) is attributable to assets that produce or are held for the production of passive income (the “asset test”). For this purpose, passive income generally includes dividends, interest, royalties, rents and certain gains from the sale of stock and securities. If a foreign corporation owns at least 25% (by value) of the stock of another corporation, the corporation will be treated, for purposes of the PFIC tests, as owning a proportionate share of the other corporation’s assets and receiving its proportionate share of the other corporation’s income. The determination of whether a foreign corporation is a PFIC is made annually. Proposed Treasury regulations convert what would otherwise be passive income intonon-passive income when such income is banking income earned by an active bank. Based upon these proposed Treasury regulations, and upon certain management estimates and assumptions, we do not believe that we were a PFIC for the year ended March 31, 20182019 because we did not meet either the income test or the asset test. Until recently, temporary IRS guidance treated certain qualifying government bonds as assets that generate active banking income for these purposes; however, such guidance has expired for taxable years beginning after 2016. 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, 20192020 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 themark-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 amark-to-market election. After making such an election, the U.S. holder generally would include as ordinary income each year during which the election is in effect and during which we are a PFIC the excess, if any, of the fair market value of our shares or ADSs at the end of the taxable year over such holder’s adjusted basis in such shares or ADSs. These amounts of ordinary income would not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains. A U.S. holder also would be allowed to take an ordinary loss in respect of the excess, if any, of the holder’s adjusted basis in our shares or ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of income that was previously included as a result of themark-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 amark-to-market election. If made, amark-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 themark-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 ofnon-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: 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 FormW-9 or other appropriate form which certifies that the U.S. holder is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amount withheld under these rules will be creditable against the U.S. holder’s U.S. federal income tax liability or refundable to the extent that it exceeds such liability if the U.S. holder provides the required information to the IRS. If a U.S. holder is required to and does not provide a correct taxpayer identification number, the U.S. holder may be subject to penalties imposed by the IRS. All holders should consult their tax advisors as to their qualification for the exemption from backup withholding and the procedure for obtaining an exemption. 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. Not applicable. We file periodic reports and other information with the SEC. You may read and copy any document that we file with the SEC at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at1-800-SEC-0330 for further information on the operation of its public reference room. The SEC also maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC (http://www.sec.gov). 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. 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 | | Definition | | | Credit Risk | | The risk of financial loss in credit assets (includingoff-balance sheet instruments) caused by deterioration in the credit conditions of counterparties. This category includes country risk. | | | Market 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. | | | Funding Liquidity Risk | | 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. | | | Operational Risk | | The risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. | | | • Operations Risk | | 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. | | | • Information Risk | | The risk of loss caused by loss, alteration, falsification or leakage of personal or other confindentialconfidential information, as well as risks similar to these risks. | | | • IT Risk | | 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. | | | • Tangible Asset Risk | | 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. | | | • Personnel Risk | | 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. | | | • 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. | | | • Legal 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. | | | Reputation Risk | | 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. | | | Model Risk | | The risk of loss due to decision-making based on information provided by an inaccurate model or the misuse of a model. |
Risk Management System We have adopted an integrated risk management system to promote close cooperation among the holding company and group companies. The holding company and the major subsidiaries (which include MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings) each appoint a chief risk officer and establish an independent risk management division. The board of directors of the holding company determines risk management policies for various types of risks based on the discussions at, and reports and recommendations from, committees established specially for risk management purposes. The holding company has established committees to oversee management in managing risks relevant to the Group. Following the fundamental risk management policies determined by the board of directors, each group company establishes its own systems and procedures for identifying, analyzing and managing various types of risks from both quantitative and qualitative perspectives. The holding company seeks to enhance group widegroup-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 
Crisis Management Framework In order to have a clear critical response rationale and associated decision-making criteria, we have developed systems designed to ensure that our operations are not interrupted or can be restored to normal quickly in the event of a natural disaster or system failure so as to minimize any disruption to customers and markets. A crisis management team within the holding company is the central coordinating body in the event of any emergency. Based on information collected from crisis management personnel at the major subsidiaries, this central body would assess the overall impact of a crisis on the Group’s business and establish task forces that could implement all countermeasures to restore full operations. We have business continuity plans to maintain continuous operational viability in the event of natural disasters, system failures and other types of emergencies. Regular training drills are conducted to upgrade the practical effectiveness of these systems. Recognizing that our operations, particularly in Japan, are subject to the risk of earthquakes and other natural disasters as well as accidents resulting from such disasters, including a sudden massive blackout in major metropolitan areas in Japan, and that our contingency plans may not address all eventualities that may occur in the event of a material disruption to our operations, we conduct a comprehensive review of our existing business continuity plan to more effectively respond to such extreme scenarios, and contemplate and implement measures to augment our current business continuity management framework, including enhancing ouroff-siteback-up data storage and other information technology systems. Implementation of Basel Standards In determining capital ratios under the FSA guidelines implementing Basel III, we and our banking subsidiaries used the Advanced Internal Ratings-Based approach, or the AIRB approach, to calculate capital requirements for credit risk as of March 31, 2018.2019. The Standardized Approach is used for some subsidiaries that are considered to be immaterial to the overall MUFG capital requirements, and MUFG Americas Holdings has adopted a phased rollout of the Internal Ratings-Based Approach. We reflect market risk in our risk-weighted assets by applying the Internal Models Approach to calculate general market risk and the Standardized Measurement Method to calculate specific risk. Under the Internal Models Approach, we principally use a historical simulation model to calculatevalue-at-risk, or VaR, amounts by estimating the profit and loss on our portfolio by applying actual fluctuations in historical market rates and prices over a fixed period. Under the FSA guidelines implementing Basel III, we reflect operational risk in our risk-weighted assets by using the Standardized Approach and the Advanced Measurement Approach. Based on the Basel III framework, the Japanese capital ratio framework has been revised to implement the more stringent requirements, which are being implemented in phases beginning on March 31, 2013. Likewise, local banking regulators outside of Japan, such as those in the United States, have begun, or are expected, to revise the capital and liquidity requirements imposed on our subsidiaries and operations in those countries to implement the more stringent requirements of Basel III as adopted in those countries. We intend to carefully monitor further developments with an aim to enhance our corporate value and maximize shareholder value by integrating the various strengths within the Group. For more information on the Basel regulatory framework and requirements, see “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation.” Credit Risk Management Credit risk is the risk of losses due to deterioration in the financial condition of a borrower. We have established risk management systems to maintain asset quality, manage credit risk exposure and achieve earnings commensurate with risk. MUFG and its major banking subsidiaries apply a uniform credit rating system for asset evaluation and assessment, loan pricing, and quantitative measurement of credit risk. This system also underpins the calculation of capital requirements and the management of credit portfolios. We continually seek to our upgrade credit portfolio management, or CPM, expertise to achieve an improved risk-adjusted return based on the Group’s credit portfolio status and flexible response capability to economic and other external changes. Credit Risk Management System The credit portfolios of our major banking subsidiaries are monitored and assessed on a regular basis by the holding company to maintain and improve asset quality. A uniform credit rating and asset evaluation and assessment system is used to ensure timely and proper evaluation of all credit risks. 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:
Credit Rating System MUFG and its major banking subsidiaries use an integrated credit rating system to evaluate credit risk. The credit rating system consists primarily of borrower rating, facility risk rating, structured finance rating and asset securitization rating. Country risk is also rated on a uniform group-wide basis. Our country risk rating is reviewed periodically to take into account relevant political and economic factors, including foreign currency availability. Risk exposure for small retail loans, such as residential mortgage loans, is managed by grouping loans into various pools and assigning ratings at the pool level. Borrower rating Our borrower rating classifies borrowers into 15 grades based on evaluations of their expected debt-service capability over the next three to five years. The following table sets forth our borrower grades: Definition of MUFG Borrower Rating | | | | | | | | | MUFG Borrower
Rating | | | MUFG Borrower Rating Definition | | 1
| | 1 | | | The capacity to meet financial commitments is extremely certain, and the borrower has the highest level of creditworthiness. | | 2
| | 2 | | | The capacity to meet financial commitments is highly certain, but there are some elements that may result in lower creditworthiness in the future. | | 3
| | 3 | | | The capacity to meet financial commitments is sufficiently certain, but there is the possibility that creditworthiness may fall in the long run. | | 4
| | 4 | | | There are no problems concerning the capacity to meet financial commitments, but there is the possibility that creditworthiness may fall in the long run. | | 5
| | 5 | | | There are no problems concerning the capacity to meet financial commitments, and creditworthiness is in the middle range. | | 6
| | 6 | | | There are no problems concerning the capacity to meet financial commitments presently, but there are elements that require attention if the situation changes. | | 7
| | 7 | | | There are no problems concerning the capacity to meet financial commitments presently, but long-term stability is poor. | | 8
| | 8 | | | There are no problems concerning the capacity to meet financial commitments presently, but long-term stability is poor, and creditworthiness is relatively low. | | 9
| | 9 | | | The capacity to meet financial commitments is somewhat poor, and creditworthiness is the lowest among “Normal” customers. | | | | 10 through 12 | | | Borrowers who must be closely monitored because of the following business performance and financial conditions: | | | (1) Borrowers who have problematic business performance, such as virtually delinquent principal repayment or interest payment; | | | (2) Borrowers whose business performance is unsteady, or who have unfavorable financial conditions; | | | (3) Borrowers who have problems with loan conditions, for whom interest rates have been reduced or shelved. | | | | | | | | | | 10 | | | 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. | | | | | | | | | | 11 | | | 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. | | | | | | | | | | 12 | | | Borrowers who fall under the criteria of Rating 10 or 11 and have a loan concession granted. Borrowers who have “Loans contractually past due 90 days or more.” (As a rule, delinquent borrowers are categorized as “Likely to Become Bankrupt,” but the definition here applies to borrowers delinquent for 90 days or more because of inheritance and other special reasons.) | | 13
| | 13 | | | Borrowers who pose a serious risk with respect to debt repayment, loss is likely to occur in the course of transactions. While still not bankrupt, these borrowers are in financial difficulty, with poor progress in achieving restructuring plans, and are likely to become bankrupt in the future. | | 14
| | 14 | | | 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. | | 15
| | 15 | | | Borrowers who are legally bankrupt (i.e., who have no prospects for continued business operations because ofnon-payment, suspension of business, voluntary liquidation, or filing for legal liquidation). |
The Japanese regulatory authorities require Japanese banks to categorize borrowers as follows: Normal borrowers (generally corresponding to borrowers in categories 1 through 9 in our ratings), which are borrowers that are performing well, with no significant financial concerns, Borrowers requiring close watch (generally corresponding to borrowers in categories 10 through 12 in our ratings), which include loans that have been amended to allow for delays or forgiveness of interest payments, borrowers experiencing difficulty in complying with loan terms and conditions and borrowers that are recording losses or performing badly, 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 ofnon-payment, suspension of business, voluntary liquidation, or filing for legal liquidation) proceedings.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 obtainnon-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 partythird-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 andmedium-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 andmedium-sized corporations, which constitute the largest borrower attribute in our current loan portfolio in terms of number of borrowers, we have adopted an internally developed financial scoring model, exclusively designed and developed for such attribute. We have selected various financial ratios that we believe to be useful and meaningful to quantitatively measure and assess the borrowers’ financial standing and repayment capability. Such financial ratios represent, among other things, borrowers’ growth, profitability, stability, cash flow, company size and capital efficiency. The model is periodically tested against historical results. The following is an illustration of some of the financial ratios we utilize as part of our financial scoring model: To measure growth: Sales growth, and growth in total assets, To measure profitability: Current profit to sales, and profit before tax to sales, and To measure stability: Equity ratio and current ratio. The financial score obtained through the models is reviewed and, when necessary, adjusted downward to reflect our qualitative assessment of the borrower’s financial strength and other factors that could affect the borrower’s ability to service the debt. For example, we take into account: capability of turning around the business (in case of borrowers with losses) or recovering positive net worth (in case of borrowers with negative net worth), industry risk, management risk, legal risk, as well as our assessment of the probability of receiving support from parent companies (if the borrower is a subsidiary of a large listed company). When adjusting the results of primary financial scoring assigned to borrowers with losses, we consider the severity of losses and the possibility of improving operating results. We analyze and assess whether the loss is temporary, the trend in operating results is improving, or the loss is expected to continue for an extended period. When adjusting the results of primary financial scoring assigned to borrowers with losses or borrowers with negative net worth, we also analyze whether the borrower can return to a positive net worth, and the time period needed to achieve such recovery (one to two years, three to five years, or five years or more). In addition, adjustments based on industry risk are based on future prospects, applicable laws and regulations, and other factors surrounding the industry. Adjustments for management risk reflect our assessment of management’s track record, the composition of the management team including the board of directors, any management succession plan as well as the risk management and compliance framework of the borrower. Adjustments for legal risk are made when the borrower is facing a lawsuit and when there is a possibility of a significant claim payment related to product liability, intellectual property, environmental problems, building standard law, and other legal issues. When assessing the probability of receiving support from parent companies, various factors are examined, such as the parent company’s credit standings, whether key management personnel are sent by the parent, whether the borrower is consolidated by the parent, and the proportion of the borrower in consolidated sales and profits of the parent. In addition, we consider outside ratings, and our internal borrower ratings may be adjusted when deemed appropriate. Facility risk rating Facility risk rating is used to evaluate and classify the quality of individual credit facilities, including guarantees and collateral. Ratings are assigned by quantitatively measuring the estimated loss rate of a facility in the event of a default. Structured finance rating and asset securitization rating Structured finance rating and asset securitization rating are used to evaluate and classify the quality of individual credit facilities, including guarantees and collateral, and focus on the structure, including the applicable credit period, of each credit facility. In evaluating the debt service potential of a credit facility, we scrutinize its underlying structure to determine the likelihood of the planned future cash flows being achieved. Pool assignment Each major banking subsidiary has its own system for pooling and rating small retail loans designed to reflect the risk profile of its loan portfolios. Asset evaluation and assessment system The asset evaluation and assessment system is used to classify assets held by us according to the probability of collection and the risk of any impairment in value based on borrower classifications consistent with the borrower ratings and the status of collateral, guarantees, and other factors. The system is used to conduct write-offs and allocate allowances against credit risk in a timely and adequate manner. Quantitative Analysis of Credit Risk MUFG and its major banking subsidiaries manage credit risk by monitoring credit amount and expected losses, and run simulations based on internal models to estimate the maximum amount of credit risk. These models are used for internal management purposes, including loan pricing and measuring economic capital. When quantifying credit risk amounts using the internal models, MUFG and its major banking subsidiaries consider various parameters, including the probability of default, loss given default, and exposure at default used in their borrower ratings, facility risk ratings and pool assignments as well as any credit concentration risk in particular borrower groups or industry sectors. MUFG and its major banking subsidiaries also share credit portfolio data in appropriate cases. Loan Portfolio Management We aim to achieve and maintain levels of earnings commensurate with credit risk exposure. Products are priced to take into account expected losses, based on the internal credit ratings. We assess and monitor loan amounts and credit exposure by credit rating, industry and region. Portfolios are managed to limit concentrations of risk in specific categories in accordance with our Large Credit Guidelines. To manage country risk, we have established specific credit ceilings by country. These ceilings are reviewed when there is a material change in a country’s credit standing, in addition to being subject to a regular periodic review. Continuous CPM Improvement With the prevalence of securitized products and credit derivatives in global markets, we seek to supplement conventional CPM techniques with advanced methods based on the use of such market-based instruments. Through credit risk quantification and portfolio management, we aim to improve the risk return profile of the Group’s credit portfolio, using financial markets to rebalance credit portfolios in a dynamic and active manner based on an accurate assessment of credit risk. Risk Management of Strategic Equity Portfolio Strategic equity investment risk is the risk of loss caused by a decline in the prices of our equity investments. We hold shares of various corporate clients for strategic purposes, in particular to maintain long-term relationships with these clients. These investments have the potential to increase business revenue and appreciate in value. At the same time, we are exposed to the risk of price fluctuation in the Japanese stock market. For that reason, in recent years, it has been a high priority for us to reduce our equity portfolio to limit the risks associated with holding a large equity portfolio, but also to respond to applicable regulatory requirements as well as increasing market expectations and demands for us to reduce our equity portfolio. We are required to comply with a regulatory framework that prohibits Japanese banks from holding an amount of shares in excess of their adjusted Tier 1 capital. We use quantitative analysis to manage the risks associated with the portfolio of equities held for strategic purposes. According to internal calculations, the market value of our strategically held (Tokyo Stock Exchange-listed) stocks (excluding foreign stock exchange-listed stocks) as of March 31, 20182019 was subject to a variation of approximately ¥3.23billion¥3.1billion when TOPIX index moves one point in either direction. We seek to manage and reduce strategic equity portfolio risk based on quantitative analysis such as the sensitivity analysis described above. The aim is to keep this risk at appropriate levels compared with Tier 1 capital while generating returns commensurate with the degree of risk exposure. Market Risk Management Market risk is the risk that the value of our assets and liabilities could be adversely affected by changes in market variables such as interest rates, securities prices, or foreign exchange rates. Management of market risk at MUFG aims to control related risk exposure across the Group while ensuring that earnings are commensurate with levels of risk. Market Risk Management System We have adopted an integrated system to manage market risk from our trading andnon-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
Market Risk Management and Control At the holding company and the major subsidiaries, market risk exposure is reported to the Chief Risk Officers on a daily basis. At the holding company, the Chief Risk Officer monitors market risk exposure across the Group as well as the major subsidiaries’ control over their quantitative limits for market risk and losses. Meanwhile, the Chief Risk Officers at the major subsidiaries monitor their own market risk exposure and their control over their quantitative limits for market risk and losses. In addition, various analyses on risk profiles, including stress testing, are conducted and reported to the Executive Committees and the Corporate Risk Management Committees on a regular basis. At the business unit levels in the major subsidiaries, the market risks on their marketable assets and liabilities, such as interest rate risk and foreign exchange rate risk, are controlled by entering into various hedging transactions using marketable securities and derivatives. As part of our market risk management activities, we use certain derivative financial instruments to manage our interest rate and currency exposures. We maintain an overall interest rate risk management strategy that incorporates the use of interest rate contracts to minimize significant unplanned fluctuations in earnings that are caused by interest rate volatility. We enter into interest rate swaps and other contracts as part of our interest rate risk management strategy primarily to alter the interest rate sensitivity of our loans, investment securities and deposit liabilities. Our principal objectives in risk management include asset and liability management. Asset and liability management is viewed as one of the methods for us to manage our interest rate exposures on interest-earning assets and interest-bearing liabilities. Interest rate contracts, which are generallynon-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 fromon-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 andnon-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 withnon-linear behavior. The holding company and banking subsidiaries also use the HS model as part of the calculation of their Basel III regulatory capital adequacy ratios. In calculating VaR using the HS method, we have implemented an integrated market risk measurement system throughout the Group. Our major subsidiaries calculate their VaR based on the risk and market data prepared by the information systems of their front offices and other departments. The major subsidiaries provide this risk data to the holding company, which calculates overall VaR, taking into account the diversification effect among all portfolios of the major subsidiaries. For the purpose of internally evaluating capital adequacy on an economic capital basis in terms of market risk, we use this market risk measurement model to calculate risk amounts based on a holding period of one year and a confidence interval of 99.9%. Monitoring and managing our sensitivity to interest rate fluctuations is the key to managing market risk in MUFG’snon-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, 2018)2019) Trading activities The aggregate VaR for our total trading activities as of March 31, 2018was ¥13.272019 was ¥20.84 billion, comprising interest rate risk exposure of ¥12.79¥20.58 billion, foreign exchange risk exposure of ¥3.83¥4.44 billion, and equity-related risk exposure of ¥1.99¥1.55 billion. Compared with the VaR as of March 31, 2017,2018, we experienced a decreasean increase in market risk during the fiscal year ended March 31, 2018,2019, primarily due to a decreasean increase in foreign exchange risk and interest rate risk. Our average daily VaR for the fiscal year ended March 31, 20182019 was ¥13.58¥14.25 billion. Based on a simple sum of figures across market risk categories, interest rate risk accounted for approximately 67%, foreign exchange risk for approximately 24%23% and equity-related risk for approximately 9%10%, of our total trading activity market risks. Due to the nature of trading operations which involves frequent changes in trading positions, market risk varied substantially during the fiscal year, depending on our trading positions. The following tables set forth the VaR related to our trading activities by risk category for the periods indicated: | April 1, 2016—March 31, 2017 | | Average | | Maximum(1) | | | Minimum(1) | | | March 31, 2017 | | | | | | (in billions) | | | MUFG | | ¥ | 17.52 | | | ¥ | 30.10 | | | ¥ | 12.55 | | | ¥ | 15.87 | | | Interest rate | | | 18.43 | | | 28.08 | | | | 14.30 | | | | 15.21 | | | Yen | | | 10.59 | | | 21.25 | | | | 5.40 | | | | 7.95 | | | U.S. Dollars | | | 8.87 | | | 12.79 | | | | 6.02 | | | | 6.69 | | | Foreign exchange | | | 8.81 | | | 16.59 | | | | 5.45 | | | | 6.14 | | | Equities | | | 2.00 | | | 5.85 | | | | 1.02 | | | | 1.89 | | | Commodities | | | 0.01 | | | 0.16 | | | | 0.00 | | | | 0.00 | | | Less diversification effect | | | (11.73 | ) | | | — | | | | — | | | | (7.37 | ) | | | April 1, 2017—March 31, 2018 | | Average | | Maximum(1) | | | Minimum(1) | | | March 31, 2018 | | | Average | | Maximum(1) | | | Minimum(1) | | | March 31, 2018 | | | | | (in billions) | | | (in billions) | | MUFG | | ¥ | 13.58 | | | ¥ | 18.46 | | | ¥ | 11.29 | | | ¥ | 13.27 | | | ¥ | 13.58 | | | ¥ | 18.46 | | | ¥ | 11.29 | | | ¥ | 13.27 | | Interest rate | | | 13.28 | | | 16.93 | | | | 11.47 | | | | 12.79 | | | | 13.28 | | | 16.93 | | | | 11.47 | | | | 12.79 | | Yen | | | 6.59 | | | 9.79 | | | | 4.70 | | | | 6.72 | | | | 6.59 | | | 9.79 | | | | 4.70 | | | | 6.72 | | U.S. Dollars | | | 5.96 | | | 8.46 | | | | 3.94 | | | | 4.63 | | | | 5.96 | | | 8.46 | | | | 3.94 | | | | 4.63 | | Foreign exchange | | | 4.66 | | | 7.69 | | | | 2.62 | | | | 3.83 | | | | 4.66 | | | 7.69 | | | | 2.62 | | | | 3.83 | | Equities | | | 1.81 | | | 5.72 | | | | 0.62 | | | | 1.99 | | | | 1.81 | | | 5.72 | | | | 0.62 | | | | 1.99 | | Commodities | | | 0.01 | | | 0.20 | | | | 0.00 | | | | 0.00 | | | | 0.01 | | | 0.20 | | | | 0.00 | | | | 0.00 | | Less diversification effect | | | (6.18 | ) | | | — | | | | — | | | | (5.34 | ) | | | (6.18 | ) | | | — | | | | — | | | | (5.34 | ) | | April 1, 2018—March 31, 2019 | | | Average | | Maximum(1) | | | Minimum(1) | | | March 31, 2019 | | | | | | (in billions) | | MUFG | | | ¥ | 14.25 | | | ¥ | 35.71 | | | ¥ | 11.42 | | | ¥ | 20.84 | | Interest rate | | | | 13.32 | | | 20.94 | | | | 10.78 | | | | 20.58 | | Yen | | | | 5.52 | | | 9.45 | | | | 3.44 | | | | 4.40 | | U.S. Dollars | | | | 5.28 | | | 11.23 | | | | 3.27 | | | | 11.03 | | Foreign exchange | | | | 4.52 | | | 7.26 | | | | 3.10 | | | | 4.44 | | Equities | | | | 2.06 | | | 26.66 | | | | 0.98 | | | | 1.55 | | Commodities | | | | 0.00 | | | 0.05 | | | | 0.00 | | | | 0.00 | | Less diversification effect | | | | (5.65 | ) | | | — | | | | — | | | | (5.73 | ) |
| Assumptions for VaR calculations: | Historical simulation method | Holding period: 10 business days | Confidence interval: 99% | Observation period: 701 business days |
| (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, 20182019 was as follows: | | | | | Quarter | | Daily average VaR | | | | | (in billions) | | April—June 20172018 | | ¥ | 12.8113.84 | | July—September 20172018 | | | 13.7913.71 | | October—December 20172018 | | | 14.3114.51 | | January—March 20182019 | | | 13.4114.96 | |
The quantitative market risk figures from trading activities tend to fluctuate widely due to the market sensitive nature of the trading business. During the fiscal year ended March 31, 2018,2019, the revenue from our trading activities has been relatively stable, keeping positive numbers in 249244 days out of 259 trading days in the period. During the same period, there were 8762 days with positive revenue exceeding ¥1 billion and 1 day with negative revenue exceeding minus ¥1 billion. Non-trading Activities The aggregate VaR for our totalnon-trading activities as of March 31, 2018,2019, excluding market risks related to our strategic equity portfolio and measured using the same standards as trading activities, was ¥385.9¥315.5 billion. Market risk related to interest rates equaled ¥304.9¥283.1 billion and equities-related risk equaled ¥225.9¥202.5 billion. Compared with the VaR as of March 31, 2017,2018, we experienced an increasea decrease in market risk during the fiscal year ended March 31, 2018,2019, primarily due to an increasea decrease in interest rate risk and equities-related risk. For a description of our strategic equity investment risk management, see “—Risk Management of Strategic Equity Portfolio.” Based on a simple sum of figures across market risk categories, interest rate risks accounted for approximately 56%58% of our totalnon-trading activity market risks. Looking at a breakdown of interest rate related risk by currency, as of March 31, 2018,2019, the yen accounted for approximately 53%44% while the U.S. dollar accounted for approximately 30%32%, and the euro approximately 17%24%. The following tables set forth the VaR related to ournon-trading activities by risk category for the periods indicated: | April 1, 2016—March 31, 2017 | | Average | | Maximum(1) | | | Minimum(1) | | | March 31, 2017 | | | April 1, 2017—March 31, 2018 | | | Average | | Maximum(1) | | | Minimum(1) | | | March 31, 2018 | | | | | (in billions) | | | (in billions) | | Interest rate | | ¥ | 393.1 | | | ¥ | 528.5 | | | ¥ | 265.7 | | | ¥ | 273.1 | | | ¥ | 305.2 | | | ¥ | 330.1 | | | ¥ | 270.1 | | | ¥ | 304.9 | | Yen | | | 290.7 | | | 345.1 | | | | 231.1 | | | | 240.7 | | | | 236.1 | | | 253.5 | | | | 212.6 | | | | 231.2 | | U.S. Dollars | | | 220.6 | | | 289.3 | | | | 116.3 | | | | 121.4 | | | | 146.2 | | | 174.1 | | | | 116.5 | | | | 128.5 | | Foreign exchange | | | 2.6 | | | 5.4 | | | | 1.0 | | | | 5.4 | | | | 8.0 | | | 10.8 | | | | 3.4 | | | | 10.0 | | Equities(2) | | | 236.7 | | | 266.6 | | | | 185.3 | | | | 259.3 | | | | 233.1 | | | 271.9 | | | | 171.0 | | | | 225.9 | | Less diversification effect | | | (171.2 | ) | | | — | | | | — | | | | (165.8 | ) | | | (151.7 | ) | | | — | | | | — | | | | (154.9 | ) | Total | | | 461.2 | | | 564.5 | | | | 368.9 | | | | 372.0 | | | | 394.6 | | | 440.5 | | | | 348.4 | | | | 385.9 | |
| | | | | | | | | | | | | | | | | April 1, 2018—March 31, 2019 | | Average | | | Maximum(1) | | | Minimum(1) | | | March 31, 2019 | | | | | (in billions) | | Interest rate | | ¥ | 290.3 | | | ¥ | 309.8 | | | ¥ | 265.2 | | | ¥ | 283.1 | | Yen | | | 219.2 | | | | 240.3 | | | | 169.6 | | | | 169.6 | | U.S. Dollars | | | 114.0 | | | | 140.8 | | | | 85.9 | | | | 122.2 | | Foreign exchange | | | 9.5 | | | | 11.2 | | | | 2.8 | | | | 4.0 | | Equities(2) | | | 215.6 | | | | 245.1 | | | | 147.4 | | | | 202.5 | | Less diversification effect | | | (170.1 | ) | | | — | | | | — | | | | (174.1 | ) | Total | | | 345.3 | | | | 399.2 | | | | 308.0 | | | | 315.5 | |
| | | | | | | | | | | | | | | | | April 1, 2017—March 31, 2018 | | Average | | | Maximum(1) | | | Minimum(1) | | | March 31, 2018 | | | | | (in billions) | | Interest rate | | ¥ | 305.2 | | | ¥ | 330.1 | | | ¥ | 270.1 | | | ¥ | 304.9 | | Yen | | | 236.1 | | | | 253.5 | | | | 212.6 | | | | 231.2 | | U.S. Dollars | | | 146.2 | | | | 174.1 | | | | 116.5 | | | | 128.5 | | Foreign exchange | | | 8.0 | | | | 10.8 | | | | 3.4 | | | | 10.0 | | Equities(2) | | | 233.1 | | | | 271.9 | | | | 171.0 | | | | 225.9 | | Less diversification effect | | | (151.7 | ) | | | — | | | | — | | | | (154.9 | ) | Total | | | 394.6 | | | | 440.5 | | | | 348.4 | | | | 385.9 | |
| Assumptions for VaR calculations: | Historical simulation method | Holding period: 10 business days | Confidence interval: 99% | Observation period: 701 business days |
| (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, 20182019 was as follows. | | | | | Quarter | | Daily average VaR | | | | | (in billions) | | April—June 20172018 | | ¥ | 391.4370.5 | | July—September 20172018 | | | 417.0352.0 | | October—December 20172018 | | | 385.2326.1 | | January—March 20182019 | | | 385.0332.7 | |
Comparing the proportion of each currency’s interest rate VaR to the total interest rate VaR as of March 31, 20182019 against that as of March 31, 2017,2018, there was a 89 percentage point decrease in the Japanese yen from 61%53% to 53%44%, a 12 percentage point decreaseincrease in the U.S. dollar from 31%30% to 30%32%, and a 97 percentage point increase in the euro from 8%17% to 17%24%. Backtesting We conduct backtesting in which a VaR is compared with hypothetical profits and losses on a daily basis to verify the accuracy of our VaR measurement model. We also conduct additional backtesting using other methods, including testing VaR against actual realized and unrealized losses and testing VaR by various changing parameters such as confidence intervals and observation periods used in the model. Hypothetical losses never exceeded VaR in the fiscal year ended March 31, 2018.2019. 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, 2018:2019: 
The following graph shows VaR of trading activities and hypothetical profits and losses on a daily basis for the fiscal year ended March 31, 2018:2019: 
Stress Testing We use anHS-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 theHS-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 worstten-day historical volatility recorded during the VaR observation period of 701 days. As of March 31, 2018,2019, we held a total trading activity position subject to estimated maximum potential losses of ¥8.8¥15.4 billion as compared to ¥10.8¥8.8 billion as of March 31, 2017.2018. In addition, the holding company and major subsidiaries conduct stress testing, as appropriate, by applying various stress scenarios, including those which take into account estimates regarding future market volatility, in order to better identify risks and manage our portfolio in a more stable and appropriate manner. The holding company and major subsidiaries also measure stressed VaR relating to their trading activities based on aone-year observation period with the highest VaR at least in the immediately preceding ten years. To verify the effectiveness of ourHS-VaR model, we also examine whether the data group of hypothetical profits and losses used in the VaR calculation represents an appropriate profit and loss distribution by monitoring the autocorrelation and the kurtosis of the data group. Funding Liquidity Risk Management Liquidity risk is the risk of incurring losses if a poor financial position hampers the ability to meet funding requirements, or necessitates fund procurement at interest rates markedly higher than normal. Our major subsidiaries maintain appropriate liquidity in both Japanese yen and foreign currencies by managing their funding sources and mechanisms, such as liquidity gap, liquidity-supplying products such as commitment lines, and buffer assets. We have established a group-wide system for managing liquidity risk by categorizing the risk in the following three stages: normal, concern and crisis. The front offices and risk management offices of the major subsidiaries and the holding company exchange information and data on liquidity risk even at the normal stage. At higher alert stages, we centralize information about liquidity risk and discuss issues relating to group-wide liquidity control actions among Group companies, if necessary. We have also established a system for liaison and consultation on funding in preparation for contingency, such as natural disasters, wars and terrorist attacks. The holding company and the major subsidiaries conduct group-wide contingency preparedness drills on a regular basis to ensure smooth implementation in the event of an emergency. In addition, we have established a group-wide system for ensuring compliance with the minimum regulatory liquidity coverage ratio requirements by categorizing the risk in the following three stages: sufficient, concern and insufficient. The holding company and the major subsidiaries exchange information and data on LCR even at the sufficient stage. At higher alert stages, we hold group-wide LCR liaison meetings to discuss issues relating to LCR and, based on the discussion as well as the information and data that have been shared, take countermeasures to improve LCR as necessary. For more information, see “Item 5.B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financial Condition—Sources of Funding and Liquidity.” Operational Risk Management Operational risk refers to the risk of loss caused by either internal control issues such as inadequate operational processes or misconduct, system failures, or external factors such as serious political instability, major terrorist activity, health epidemics or natural disasters. The term includes a broad range of risks that could lead to losses, including operations risk, information risk, IT risk, tangible asset risk, personnel risk, incompliance with laws and regulations risk, and legal risk. These risks that comprise operational risk are referred to assub-category risks. The holding company has established, based on its Executive Committee’s determination, the MUFG Operational Risk Management Policy as a group-wide policy for managing operational risk. This policy sets forth the core principles regarding operational risk management, including the definition of operational risk, and the risk management system and processes. Under the policy, the board of directors and the Executive Committee formulate fundamental principles of operational risk management and establish and maintain an appropriate risk management system. The Chief Risk Management Officer is responsible for recognizing, evaluating, and appropriately managing operational risk in accordance with the fundamental principles formulated by the board of directors and the Executive Committee. A division in charge of operational risk management has been established that is independent of business promotion sections to manage overall operational risk in a comprehensive manner. These fundamental principles have also been approved by the boards of directors of the major subsidiaries, providing a consistent framework for operational risk management of the Group. The diagram below sets forth the operational risk management system of each major banking subsidiary: Operational Risk Management System of Our Major Banking Subsidiaries
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. The following diagram summarizes our operational risk management framework: Operational Risk Management Framework
Operations Risk Management Operations risk refers to the risk of incurring losses arising from negligence of correct operational processing, incidents or misconduct involving officers or staff, as well as risks similar to this risk. The Group companies offer a wide range of financial services, ranging from commercial banking products such as deposits, exchange services and loans to trust and related services covering pensions, securities, real estate and securitization, as well as transfer agent services. Cognizant of the potentially significant impact that operations risk-related events could have in terms of both economic losses and damage to our reputation, our banking subsidiaries continue to work on improving their management systems to create and apply appropriate operations risk-related controls. Specific ongoing measures to reduce operations risk include the development of databases to manage, analyze and prevent the recurrence of related loss events; efforts to tighten controls over administrative procedures and related operating authority, while striving to improve human resources management, investments in systems to improve the efficiency of administrative operations, and programs to expand and upgrade internal auditing and operational guidance systems. Senior management receives regular reports on the status of our businesses from an operations risk management perspective. We work to promote the sharing within the Group of information and expertise concerning any operational incidents and the measures implemented to prevent any recurrence. Efforts to upgrade the management of operations risk continue with the aim of providing our customers with a variety of high-quality services. Information Risk Management Information risk refers to the risk of loss caused by loss, alteration, falsification or leakage of personal or other confidential information, as well as risks similar to these risks. We recognize our grave social and legal 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. The status of System development projects are managed and overseen by a team dedicated to perform such management and oversight functions, and the development status of any mission-critical IT systems is reported regularly to senior management. We have developed disaster countermeasures systems and have also been investing in duplication of the Group’s IT infrastructure to minimize damage in the event of any system failure. Emergency drills are conducted to help increase staff preparedness. With the aim of preventing any recurrence and minimizing risk or loss, we also work to promote sharing on a group-wide basis of experience, knowledge and expertise related to system failures. In addition, the risk of increasingly sophisticated cyber-attacks is a significant focus of the Board of Directors, and the Board regularly receives reports on our cybersecurity program. We continue to work to strengthen measures designed to address and mitigate the risk, including the establishment of MUFG-CERT, our Computer Security Incident Response Team, implementation of multi-layered defense and detection measures, enhancement of monitoring systems through our Security Operation Centers, and cooperation with global organizations with relevant expertise. MUFG-CERT is charged with the responsibility of taking, coordinating and managing prompt action in response to cyber security incidents to mitigate their impact. Tangible Asset Risk Management Tangible asset risk refers to the risk of loss due to damage to tangible assets or deterioration in the operational environment caused by disasters or inadequate asset maintenance, as well as risks similar to this risk. Tangible assets include movable physical properties and immovable properties, owned or leased, such as land, buildings, equipment attached to buildings, fixtures and furniture. We recognize the potentially significant impact tangible asset risk-related events can have on the management and execution of the Group’s businesses, which in turn can result in economic losses to, or diminished market confidence in, the Group. Accordingly, we continue to improve our risk control framework designed to appropriately manage such risk. 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, in order to promote compliance, we have established our PrinciplesMUFG Group Code of Ethics and Conduct as the basic legal compliance policyguideline 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 percentileone-tailed confidence interval and aone-year holding period. In calculating the operational risk equivalent amount, we exclude expected losses relating to the amount of allowance for repayment of excess interest associated with the consumer finance business of a subsidiary. We do not exclude any other expected losses and do not reflect the risk mitigating impact of insurance. In addition, we take into account credit risk-related events that are not reflected in the measurement of the credit risk equivalent amount. (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
The risk equivalent amount for each loss event type represents the amount of maximum loss estimated with a 99.9th percentileone-tailed confidence interval and aone-year holding period based on the distribution of losses arising from all relevant risk events for aone-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 anon-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 aone-year holding period based on a normal distribution assumed by applying data on losses that arose in a given period, excluding any related expected losses. We confirm the appropriateness of the measurement models by periodic verification and back testing. (4) Outline of Scenario Analysis As an initial step of our scenario analysis, we identify potential severe loss events that we have not experienced but may potentially experience in the future. In this identification process, we seek to ensure 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, PrinciplesMUFG Group Code of Ethics and Conduct, and other rules and codes of the Group. Specifically, in order to manage our reputation risk effectively on a group-wide basis, we have established a risk management system designed to ensure mutual consultation and reporting if a reputation risk-related event occurs or is anticipated and, through this system, share relevant information within the Group. Through the risk control framework and risk management system, we seek to prevent reputation risk-related events and minimize damage to the corporate value of the Group by promptly obtaining an accurate understanding of relevant facts relating to risk events and disclosing information concerning such events and the measures we take in response to such events in an appropriate and timely manner. Model Risk Management Model risk refers to the risk of loss due to decision-making based on information provided by an inaccurate model or the misuse of a model. We recognize the potentially significant impact model risk-related events can have on the management and execution of the Group’s businesses, which in turn can result in economic losses to, or diminished market confidence in, the Group. Models are used for increasingly wider and more important purposes, including valuing exposures, instruments and positions, measuring risks, and determining capital adequacy. Accordingly, we continue to work on improving our risk control framework. Compliance Basic Policy We have clarified our mission, our vision and our values in the Corporate Vision and have expressed our commitment to meeting the expectations of customers and society as a whole. Furthermore, we have established PrinciplesMUFG Group Code of Ethics and 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—Risks Related to Our Business—Legal and regulatory changes could have a negative impact on our business, financial condition and results of operations.” and “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business—We may become subject to regulatory actions or other legal proceedings relating to our transactions or other aspects of our operations, which could result in significant financial losses, restrictions on our operations and damage to our reputation.” See also “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation.” PrinciplesMUFG Group Code of Ethics and Conduct
Introduction
These PrinciplesThe Code of EthicsConduct encapsulates the standards that guide staff conduct and Conduct establish clear and consistent standards for all MUFG employees to guide decisions and actions. They reflect and supportdecision-making in ourday-to-day business activities under the MUFG Corporate Vision. The principlesIt is designed to provide guidance in times of doubt, or when we find it difficult to know if we are organized in three sections. making the right choice.
Chapter 1 presentsdeals with the attitude that we should adopt with our customers, to actcustomers. Acting with honesty and integrity and pursue theirpursuing the best interests whichof 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 employeesstaff can reach their full potential in ways that support our customers and contributemake a valuable contribution to society as a whole. Outline / Overview
Chapter 1 Customer1.Customer Focus We place our diverseOur 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 our activities and always act in their best interests.times. MUFG is able to thriveexists today because of the trust and confidence that customers have placed in us—the resultus over many years. Our role is to increase and strengthen this bedrock of years of fair, transparent,trust and honorable dealings.confidence. Our business culture isactivities are not driven by the prospect of short-term immediate gains. Instead, we place a premium on supporting long-term, sustainablelook to build ongoing relationships with our customers to help them meetsupport their goals.long-term growth.
1-1. Acting1-1 with Honesty and Integrity
We always place our diverseOur customers are at the center of alleverything we do. We carry out fair and transparent corporate activities and act with honesty and integrity in all of our dealings with them.integrity. We protecttreat customer assets including their personal information,with care and respect and strive at all timesalways to ensure that our actions do not tounjustly damage theirour customers’ interests.
1-2. Controlling1-2 Ensuring Quality
In order to earn theTo build lasting relationships of trust and confidence ofwith our customers, we listen carefully to what our customers are telling us, and maintain thoroughthoroughgoing quality control of all our products and services, in all aspects from product designplanning and development to delivery,provision and continually improve our processessubsequent revisions, with a view to provide accurate and secure transactions.further enhancing quality.
1-3.1-3 Exceeding Customer Expectations
We striveaim to satisfymeet the diverse needs of our customers worldwide, and to exceedprovide services exceeding their expectations through the highest standards of professionalism, and by effectively leveraging our global network and the consolidated strength.strengths of the entire Group. Chapter 2 Responsibility as a Corporate Citizen As a member of MUFGwe develop our business globally, we comply with global operations,all the domestic and international laws and rules that may apply. We do all we act honorably, with honesty and integrity, and comply at all times with laws, regulations, rules, and internal policies globally. We strivecan to maintain stability and confidence in the global financial system, and to contribute to the sound growth and developmenthealthy growth of society. We behaveAware 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 that MUFG has built upearned from society over themany years. 2-1.2-1 Adherence to Laws and RegulationsRules
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 always judge and act with honesty and integrity, do what is right, and comply with both the letter and the spirit of the laws, regulations, and rules that apply to us. We avoid insider trading, do not engage in anti-competitive conducthave zero tolerance for financial crime or any form of corrupt activity,attempt to circumvent the rules and publicly disclose corporate information in an appropriate manner. 2-2. Combating Criminal Activity
procedures aimed at preventing financial crime. We do not conduct business with criminal elements. We do not allowtake all reasonable steps possible to prevent our financial products and services to bebeing used forby individuals or entities involved in illegal or improper activities such as money laundering fraud, or financingand terrorist activities.financing. 2-3. Commitment2-3 Contributing to Social SustainabilitySociety
We respect the history, culture,cultures, and customs of local communitiesdifferent countries and striveregions around the world, and work to contribute to theirthe development of local and global communities and the protection of the environment throughthroughout our corporate activities and employeethe social volunteer efforts.efforts of our staff. Chapter 3 EthicalAttitudes and DynamicBehaviors in the Workplace We are committedstrive to creating arespond and adapt promptly to the diversifying and evolving needs of our customers and the rapidly changing environment in which we work. The working environment thatat MUFG fosters mutual respect, among MUFG employees, supportsenables individuals to make the full expressionmost of our individualitytheir abilities as professionals, promotesand maximizes the power of teamwork honors diversity, transcends differences,across regions and embracesdifferent 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. Stimulating3-1 WorkplaceChallenge Ourselves to Grow
We strive to enhance our knowledge, expertise, and expertise, focus on maximizingpotential and maximize the valuepower of teamwork, and view changes inteamwork. We believe that the changing business environment as opportunitiesrepresents opportunity and are always ready to launchembrace new initiatives.challenges in new fields. 3-2. Ethical3-2 WorkplaceCollaborative and Professional Working Environment
We respect the diversityhuman rights and human rightsdiversity of all MUFG employees.staff. We do not engage in or tolerate any form of discrimination or harassment intimidation, 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 activity that is inconsistent with these core beliefs. Wethe provisions of this Code of Conduct, or any other problem situations, you should promptly report any violations of lawsthe matter and rules, and we manage corporate assets appropriately.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. The following diagram summarizes our compliance framework: Compliance Framework 
Internal Reporting System and Accounting Auditing Hotline The major subsidiaries have established internal reporting systems that aim to identify compliance issues early so that any problems can be quickly rectified. This system includes an independent external compliance hotline. Furthermore, the holding company has set up an MUFG Group Compliance Helpline that acts in parallel with group-company internal reporting systems and provides a reporting channel for directors and employees of Group companies. In the holding company, the contents of the reported cases as well as the result of surveys is reported to the audit committee on a regular basis or whenever necessary. In addition to these internal reporting systems, the holding company has also established an accounting auditing hotline that provides a means to report any problems related to MUFG accounting. MUFG Accounting Auditing Hotline MUFG has set up an accounting auditing hotline to be used to make reports related to instances of improper practices (violations of laws and regulations) and inappropriate practices, or of practices raising questions about such impropriety or inappropriateness, regarding accounting and internal control or audits related to accounting in Group companies. The audit committee oversees the reporting process to ensure the appropriateness and effectiveness of the reporting process and monitors the reports received through the hotline. The reporting process works as follows, and may be carried out via letter ore-mail: Hokusei Law Office, P.C. Address: Kojimachi4-3-4,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 informanthim- 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 functions within MUFG seekAudit aims to verifyevaluate and assist in the adequacy andimprovement of the effectiveness of internalgovernance, risk management and control systems from a standpoint independentprocesses with high proficiency and independence, thereby contributing to the enhancement of the operating functions. This includes monitoringcorporate value of the statusMUFG Group and to the achievement of the Group’s corporate vision. Internal Audit covers all aspects of the Group’s business activities and discusses and evaluates the management and operational frameworks and the implementation of business operations from legal compliance, rationality and efficiency perspectives, beyond checking compliance with defined procedures. In addition, Internal Audit provides instructions and recommendations for operational improvement to audited divisions and reports to senior management on such instructions and recommendations, thereby contributing to safeguarding and development of the Group’s assets. Three Lines of Defense Framework Risk management is conducted at multiple levels within a business organization, including front-office divisions in charge of managing specific categories of risk, a compliance division, and an internal audit division. As for financial institutions, including the MUFG Group, based on the experience of past financial crises, the traditional risk management structure that was heavily dependent on front-office divisions has been under close scrutiny. As a result, there is an increasing expectation for financial institutions to achieve more effective risk management through, for example, appropriate allocation of risk management roles and compliance systems, whichresponsibilities 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 critical todefined, 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 • Responsible and accountable for identifying, evaluating and controlling business risks | | | | The 2nd Line of Defense | | Risk management division, compliance division, etc. | | • 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 maintenanceGroup’s risk management through ongoing communications with the 1st and 2nd Lines of sound and appropriate business operations. Internal audit results are reported to senior management. An additional role of internal audit is to make suggestions to help improve or rectify any issues or specific problems that are identified.Defense, while maintaining independence. Group Internal Audit Framework The holding companyMUFG Group has instituted MUFG’s internal audit policy to define the policy, function and organizational position of internal audits. Separate internal audit divisions have been created withinfunctions at the holding company level as well as at the subsidiary level, which are designed to ensure proficiency and certain subsidiaries. Through close cooperation and collaboration among theindependence through effective collaboration. The internal audit divisionsdivision of the holding company and these subsidiaries, these internal audit divisions provide coverage for the Group and also support the board of directors of the holding company in monitoring and overseeing all MUFG operations. In addition to having primary responsibility for initiating and preparing plans and proposals related to internal audits of the Group, the internal audit division at the holding company monitors and, as necessary, guides, advises and administersreceives reports from the internal audit divisions of subsidiaries on the status and affiliated companies. The internal audit divisions within the major subsidiaries conduct audits of the respective head office and branch operations of these companies. In addition, each of these internal audit divisions undertakes direct auditsresults of their respective subsidiaries, and monitors and oversees the separate internal audit functions established within them. This helps to evaluate and verify the adequacy and effectiveness of internal controls within MUFG on a consolidated basis.
Implementing Effective and Efficient Internal Audits
To ensure that internal audit processes use available resources with optimal effectiveness and efficiency, the internal audit divisions implement risk-focused internal audits in which the nature and magnitude of the associated risks are considered in determining audit prioritiesprovides them with instructions and the frequency and depth of internal audit activities. The internal audit divisions ensure that audit personnel attend key meetings, collect important internal control documents and access databases to facilitate efficientoff-site monitoring.evaluations as needed.
Reports to the Audit Committee The holding company has an audit committee within its board of directors as required by the Companies Act of Japan, and each of the major subsidiaries has established an audit and supervisory committee or an internal audit and compliance committee. Within each of the holding company and the major subsidiaries, the internal audit division reports to the committee on important matters, including governing principles for internal audit plans and the status and results of the internal audits andaudits. MUFG Internal Audit Activity Charter In April 2019, we adopted “MUFG Internal Audit Activity Charter”, which defines our basic policies for planningInternal Audit, including its mission, purposes, responsibilities, and roles. This charter is designed to encourage Internal Audit staff to conduct internal audits.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. | Item 12. | Description of Securities Other than Equity Securities. |
Not applicable. Not applicable. 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) | | 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 | | | $0.02 (or less) per ADS | | Any cash distribution, to the extent permitted by any securities exchange on which the ADSs may be listed for trading | | | | 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 | | Distribution of securities distributed to holders of deposited securities which are distributed by the Depositary to registered ADS registered holders | | | Registration or transfer fees | | 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 | | | Expenses of The Bank of New York Mellon | | Conversion of foreign currency to U.S. dollars, as well as cable, telex and facsimile transmission expenses | | | | 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 | | As necessary |
Fees Waived or Paid by the Depositary The Depositary has agreed to waive the standardout-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, 2018,2019, the Depositary waived $135,367.53$135,030.16 of standardout-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, 2018,2019, the Depositary reimbursed us $1.0 million for such expenses. PART II | Item 13. | Defaults, Dividend Arrearages and Delinquencies. |
None. | 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 Rule13a-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, 2018.2019. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule13a-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) | | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of MUFG, |
| | (ii) | | 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, 20182019 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, 2018.2019. The effectiveness of our internal control over financial reporting as of March 31, 20182019 has been audited by Deloitte Touche Tohmatsu LLC, an independent registered public accounting firm, as stated in its report, presented on page 232.208. 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. 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, 2018,2019, based on criteria established inInternal Control—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, 2018,2019, based on criteria established inInternal Control—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, 2018,2019, of the MUFG Group and our report dated July 12, 2018,10, 2019, expressed an unqualified opinion on those financial statements. Basis for Opinion The MUFG Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the MUFG Group’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the MUFG Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte Touche Tohmatsu LLC Tokyo, Japan July 12, 201810, 2019 | 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 Form20-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 New York Stock Exchange.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. We have adopted a code of ethics, which consists of internal rules named MUFG Group Code of Conduct (formerly called Principles of Ethics and Conduct,Conduct), compliance rules, compliance manual and rules of employment. Each of these rules applies to our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. Our internal compliance rules were most recently amended on September 13, 2017 and AprilAugust 2, 2018, clarifyingreflecting the complaint submission channels and the manner in which complaints should be handled.establishment of a new division within MUFG. A copy of the PrinciplesMUFG Group Code of Ethics and 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 Form20-F) is attached as Exhibit 11 to this Annual Report. No waivers of the PrinciplesMUFG Group Code of Ethics and Conduct or the ethical framework and code of conduct, as applicable, 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, 2018.2019. | Item 16C. | Principal Accountant Fees and Services. |
Fees and Services of Deloitte Touche Tohmatsu LLC The aggregate fees billed by Deloitte Touche Tohmatsu LLC, our independent registered public accounting firm and its affiliates, for the fiscal years ended March 31, 20172018 and 20182019 are presented in the following table: | | | | 2017 | | | 2018 | | | 2018 | | | 2019 | | | | | (in millions) | | | (in millions) | | Audit fees | | ¥ | 8,107 | | | ¥ | 8,032 | | | ¥ | 8,032 | | | ¥ | 8,079 | | Audit-related fees | | | 393 | | | | 199 | | | | 199 | | | | 119 | | Tax fees | | | 504 | | | | 307 | | | | 307 | | | | 172 | | All other fees | | | 119 | | | | 97 | | | | 97 | | | | 119 | | | | | | | | | | | | | | | Total | | ¥ | 9,123 | | | ¥ | 8,635 | | | ¥ | 8,635 | | | ¥ | 8,489 | | | | | | | | | | | | | | |
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. Pre-Approval Policies and Procedures for Services by Deloitte Touche Tohmatsu LLC Our audit committee performs thepre-approval function required by applicable SEC rules and regulations. Our audit committee has establishedpre-approval policies and procedures that MUFG and its subsidiaries must follow before engaging Deloitte Touche Tohmatsu LLC to perform audit and permittednon-audit services. When MUFG or a subsidiary intends to engage Deloitte Touche Tohmatsu LLC to perform audit and permittednon-audit services, it must make an application forpre-approval on either a periodic orcase-by-case basis. | | • | | Periodic applicationis an application forpre-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 applicationis an application forpre-approval made on acase-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 anycase-by-case application forpre-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 paragraph2-01(c)(7)(i)(C) of RegulationS-X, which provides for an exception to the general requirement forpre-approval in certain circumstances, were less than 0.1% of the total fees paid to Deloitte Touche Tohmatsu LLC for each of the fiscal yearsyear ended March 31, 20172018 and 2018. Reviewapproximately 0.3% of Deloitte Touche Tohmatsu LLC’s Independence in Prior Periods
As disclosed in our Annual Reports on Form 20-F for the fiscal years ended March 31, 2015, 2016 and 2017,total fees paid to Deloitte Touche Tohmatsu LLC or Tohmatsu, previously advised MUFG’s Audit Committee of several SEC auditor independence rule violations relating to its audit of MUFG’s financial statements as of and for the fiscal yearsyear ended March 31, 2015, 2016 and 2017. The violations primarily involved financial interests, including deposit accounts with balances in excess of deposit insurance limits held at MUFG Group companies by partners and other members of Tohmatsu’s audit engagement teams for MUFG and its subsidiaries and affiliates and their immediate family members, including a senior partner who at the time served in an executive management role at Tohmatsu and was in the Chain of Command of Tohmatsu’s audit engagement of MUFG’s financial statements.2019.
With respect to the prior fiscal year audit reports, Tohmatsu reported to the Audit Committee that it had investigated the relevant facts and circumstances, and concluded that Tohmatsu’s objectivity, impartiality and integrity with respect to its audit on MUFG’s financial statements were unaffected by the violations. Tohmatsu also reported to the Audit Committee that corrective and remedial measures were implemented. Finally, Tohmatsu reported that it had informed the Audit Committee of all identified violations, and represented its good faith belief that there should not be any unidentified violations.
In connection with the prior year audited financial statements included in our Annual Reports on Form 20-F for the fiscal years ended March 31, 2015, 2016 and 2017, the Audit Committee engaged counsel to review the circumstances relating to the violations reported by Tohmatsu. Based on discussions with Tohmatsu, and after undertaking its own work to review the circumstances, prior to the filing of MUFG’s Annual Reports on Form 20-F for the fiscal years ended March 31, 2015, 2016 and 2017, the Audit Committee concluded that Tohmatsu’s ability to exercise objective and impartial judgment on issues within the scope of its audit of MUFG’s financial statements had not been impaired. Based on this determination, the Audit Committee concluded that the audited financial statements as of and for the fiscal years ended March 31, 2016 and 2017 may be included in this Annual Report on Form 20-F.
| 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 | | | 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) | | April 1 to April 30, 2017 | | | 1,473 | | | ¥ | 673.64 | | | | — | | | | — | | May 1 to May 31, 2017 | | | 2,180 | | | | 698.59 | | | | 54,807,800 | | | | 145,192,200 | | June 1 to June 30, 2017 | | | 2,745 | | | | 714.66 | | | | 86,351,100 | | | | 58,841,100 | | July 1 to July 31, 2017 | | | 6,415 | | | | 737.54 | | | | — | | | | — | | August 1 to August 31, 2017 | | | 5,588 | | | | 700.62 | | | | — | | | | — | | September 1 to September 30, 2017 | | | 3,703 | | | | 685.81 | | | | — | | | | — | | October 1 to October 31, 2017 | | | 4,066 | | | | 731.39 | | | | — | | | | — | | November 1 to November 30, 2017 | | | 5,069 | | | | 747.38 | | | | 45,491,700 | | | | 154,508,300 | | December 1 to December 31, 2017 | | | 5,997 | | | | 803.17 | | | | 82,175,200 | | | | 72,333,100 | | January 1 to January 31, 2018 | | | 6,835 | | | | 861.73 | | | | — | | | | — | | February 1 to February 28, 2018 | | | 3,871 | | | | 808.13 | | | | — | | | | — | | March 1 to March 31, 2018 | | | 2,925 | | | | 732.96 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | Total | | | 50,867 | | | ¥ | 743.98 | | | | 268,825,800 | | | | — | |
| | | | | | | | | | | | | | | | | | | | Total
Number of
Shares
Purchased(1) | | | Average Price
Paid per Share | | | 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) | | April 1 to April 30, 2018 | | | 2,201 | | | ¥ | 701.82 | | | | — | | | | — | | May 1 to May 31, 2018 | | | 1,468,484 | | | | 710.73 | | | | 37,173,600 | | | | 62,826,400 | | June 1 to June 30, 2018 | | | 1,880 | | | | 670.07 | | | | 35,247,100 | | | | 27,579,300 | | July 1 to July 31, 2018 | | | 5,778 | | | | 647.41 | | | | — | | | | — | | August 1 to August 31, 2018 | | | 5,168 | | | | 676.63 | | | | — | | | | — | | September 1 to September 30, 2018 | | | 2,458 | | | | 688.15 | | | | — | | | | — | | October 1 to October 31, 2018 | | | 195,987 | | | | 713.55 | | | | — | | | | — | | November 1 to November 30, 2018 | | | 108,019 | | | | 639.05 | | | | 74,549,800 | | | | 125,450,200 | | December 1 to December 31, 2018 | | | 30,509 | | | | 613.94 | | | | 85,287,000 | | | | 40,163,200 | | January 1 to January 31, 2019 | | | 31,068 | | | | 570.64 | | | | — | | | | — | | February 1 to February 28, 2019 | | | 18,478 | | | | 580.40 | | | | — | | | | — | | March 1 to March 31, 2019 | | | 9,202 | | | | 572.09 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | Total | | | 1,879,232 | | | ¥ | 646.45 | | | | 232,257,500 | | | | — | |
| (1) | | All of theThe shares purchased shares were shares constituting less than one unit (100 shares) purchased from registered holders of suchthe 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 of those shares.price. |
| (2) | | During May and June 2017,2018, we repurchased 141,158,90072,420,700 shares of our common stock for ¥99,999,941,022¥49,999,969,714 under a share repurchase program that was adopted on May 15, 20172018 and completed in June 2017.2018. Under the program, we were authorized by the Board of Directors to repurchase up to the lesser of an aggregate of 200,000,000100,000,000 shares of our common stock and an aggregate of ¥100.0¥50.0 billion between May 16, 20172018 and June 30, 2017.2018. All of the repurchased shares were cancelled on July 20, 2017.2018. |
| | | During November and December 2017,2018, we repurchased 127,666,900159,836,800 shares of our common stock for ¥99,999,957,675¥99,999,974,078 under a share repurchase program that was adopted on November 14, 201713, 2018 and completed in December 2017.2018. Under the program, we were authorized by the Board of Directors to repurchase up to the lesser of an aggregate of 200,000,000 shares of our common stock and an aggregate of ¥100.0 billion between November 15, 201714, 2018 and December 31, 2017.2018. All of the repurchased shares were cancelled on January 22, 2018.2019. |
We did not make any purchases of shares of our common stock other than as shown in the above table for the fiscal year ended March 31, 2018. During May and June 2018, we repurchased 72,420,700 shares of our common stock for ¥49,999,969,714 under a share repurchase program that was adopted on May 15, 2018 and completed in June 2018. Under the program, we were authorized by the Board of Directors to repurchase up to the lesser of an aggregate of 100,000,000 shares of our common stock and an aggregate of ¥50.0 billion between May 16, 2018 and June 30, 2018. We plan to cancel all of the repurchased shares on July 20, 2018.2019.
In May 2018, 13,049,600 shares were purchased by the trustee of the trust for the first performance-based stock compensation plan. In connection with the MUFG Americas Holdings Corporation Stock Bonus Plan, 9,085,2238,149,808 ADSs were purchased by the trustee of the independent trust between April 1, 20172018 and March 31, 2018. In the same period, 616,514 ADSs were purchased by the trustee of the independent trust in connection with the Bank of Tokyo-Mitsubishi UFJ, Ltd. Headquarters for the Americas Stock Bonus Plan. In the same period, 1,643,459 ADSs were purchased by the trustee of the independent trust in connection with the UNBC Stock Bonus Plan.2019. For descriptions of our stock compensation and bonus plans, see “Item 6.B. Directors, Senior Management and Employees—Compensation.”
| Item 16F. | Change in Registrant’s Certifying Accountant. |
None. | Item 16G. | Corporate Governance. |
The NYSE allows NYSE-listed companies that are foreign private issuers, such as MUFG, with certain exceptions, to follow home-country practices in lieu of the corporate governance practices followed by U.S. companies pursuant to the NYSE’s Listed Company Manual. The following is a summary of the significant differences between MUFG’s corporate governance practices and those followed by U.S. listed companies under the NYSE’s Listed Company Manual. 1. A NYSE-listed U.S. company must have a majority of directors that meet the independence requirements under Section 303A of the NYSE’s Listed Company Manual. As of the date of this Annual Report, we have eightnine outside directors as members of our board of directors, which consists of a total of fifteensixteen members. Under our governance system, we are required to have a majority of outside directors on each of our nominating, audit and compensation committees.committees, constituting a majority of its members. For a description of an outside director, see “Item 6.C. Directors and Senior Management—Board Practices.” The Tokyo Stock Exchange rules require listed companies, including us, to identify at least one individual who the company believes is unlikely to have a conflict of interest with general shareholders and have such individual serve as an independent director or outside corporate auditor. Further, a listed company with fewer than two outside directors who are considered independent based on such internal standards as the company establishes pursuant to the Tokyo Stock Exchange requirements must publicly disclose the reason for not having at least two such directors on its board of directors. In addition, if a listed company determines that at leastone-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, cases, at leastone-thirdhalf of the members of our board of directors will be independent outside directors, and that, in general cases, the majority of the members of our board of directors will benon-executivedirectors. 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 threenon-executive directors, and the majority of its members must be outside directors. Currently, our audit committee consists of three outside directors and twonon-executive directors. Our audit committee satisfies the requirements of Rule10A-3 under the U.S. Securities Exchange Act of 1934, including the independence requirements thereunder.thereunder except as disclosed in “Item 6.C. Directors, Senior Management and Employees—Board Practices—Audit Committee.” 3. A NYSE-listed U.S. company must have a compensation committee composed entirely of independent directors. Under the Companies Act, we are required to have a compensation committee consisting of at least three directors, and the majority of its members must be outside directors. Currently, our compensation committee consists of five directors, four of whom are outside directors. 4. A NYSE-listed U.S. company must have a nominating or corporate governance committee composed entirely of independent directors. Under the Companies Act, we are required to have a nominating committee consisting of at least three directors, and the majority of its members must be outside directors. Currently, our nominating committee, which we call the nominating and governance committee, consists of five directors, four of whom are outside directors. 5. A NYSE-listed U.S. company must obtain shareholder approval with respect to any equity compensation plan. Under the Companies Act, an equity compensation plan for directors and corporate executive officersexecutives is deemed to be compensation for the services performed by the company’s directors and corporate executive officers.executives. Our compensation committee establishes the policy with respect to the determination of the individual compensation of our directors and corporate executive officers,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 ethics,conduct, compliance rules, and a 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 tonon-management directors. Under the Companies Act, Japanese corporations are not obliged to hold executive sessions where participants are limited tonon-management directors. Such executive sessions are also not required under our internal corporate governance rules. | Item 16H. | Mine Safety Disclosure. |
Not Applicable. PART III | Item 17. | Financial Statements. |
In lieu of responding to this item, we have responded to Item 18 of this Annual Report. | Item 18. | Financial Statements. |
The informationOur consolidated financial statements are included in this Annual Report, as required by this item, is set forth in our consolidatedstarting on pageF-1.
Pursuant to Rule3-09 of RegulationS-X, the financial statements starting onpage F-1and supplementary data of Morgan Stanley, our equity method investee, as of and for the fiscal year ended December 31, 2018, are incorporated in this Annual Report.Report as Exhibit 99(c) by reference to Morgan Stanley’s annual report on Form10-K filed on February 26, 2019. | | | Exhibit | | Description | | | 1(a) | | Articles of Incorporation of Mitsubishi UFJ Financial Group, Inc., as amended on July 6, 2018 (English translation)* | | | 1(b) | | Board of Directors Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on June 25, 2015 (English translation)* | | | 1(c) | | Corporation Meetings Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on July 1, 2018 (English translation)* | | | 1(d) | | Share Handling Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on June 27, 201325, 2015 (English Translation)** | | | 1(e) | | Charter of the Audit Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1, 2018 (English translation)* | | | 1(f) | | Charter of the Compensation Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1, 2018 (English translation)* | | | 1(g) | | Charter of the Nominating and Governance Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1, 2018 (English translation)* | | | 1(h) | | Charter of the Risk Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1, 2018 (English translation)* | | | 2(a) | | Form of American Depositary ReceiptReceipt* | | | 2(b) | | 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 thereunderthereunder* | | | 7 2(c) | | StatementDescription of Computation of Consolidated Ratio of Earnings to Fixed Charges for the fiscal years ended March 31, 2014, 2015, 2016, 2017 and 2018**Securities | | | 8 | | Subsidiaries of the Company—see “Item 4.C. Information on the Company—Organizational Structure.” | | | 11 | | PrinciplesMUFG Group Code of Ethics and 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) | | | 12 | | Certifications required byRule 13a-14(a) (17 CFR240.13a-14(a)) orRule 15d-14(a)(17 CFR 240.15d-14(a)) |
| | | Exhibit | | Description | | | 13 | | Certifications required byRule 13a-14(b) (17 CFR240.13a-14(b)) orRule 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) | | | 15 15(a) | | Consent of independent registered public accounting firm (Deloitte Touche Tohmatsu LLC) |
| | | Exhibit 15(b)
| | Description
Consent of independent registered public accounting firm (Deloitte & Touche LLP) | | | 99(a) | | Capitalization and Indebtedness of Mitsubishi UFJ Financial Group, Inc. as of March 31, 2018*2019*** | | | 99(b) | | Unaudited Reverse Reconciliation of Selected Financial Information of Mitsubishi UFJ Financial Group, Inc. as of and for the fiscal year ended March 31, 2018*2019**** | | | 99(c) | | Financial Statements and Supplementary Data of Morgan Stanley***** | | | 101.INS | | XBRL Instance Document | | | 101.SCH | | XBRL Schema Document | | | 101.CAL | | XBRL Calculation Linkbase Document | | | 101.DEF | | XBRL Definition Linkbase Document | | | 101.LAB | | XBRL Label Linkbase Document | | | 101.PRE | | XBRL Presentation Linkbase Document |
| * | | Incorporated by reference to our registration statementannual report on FormS-820-F (FileNo. 333-204845)000-54189) filed on June 10, 2015.July 12, 2018. |
| ** | | DeemedIncorporated by reference to be incorporated as Exhibit 12.1 to theour registration statement on FormF-3S-8 (No.333-209455) of Mitsubishi UFJ Financial Group, Inc. and to be a part thereof.(File No. 333-230590) filed on March 29, 2019. |
| *** | | Deemed to be incorporated by reference into the registration statement on FormF-3 (No.333-209455) 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 FormF-3 (No.333-209455) 333-229697) of Mitsubishi UFJ Financial Group, Inc. and to be a part thereof. |
| ***** | | Incorporated by reference to Morgan Stanley’s annual report on Form10-K (FileNo. 001-11758) filed on February 26, 2019. |
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. | 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, 2016, 2017, 2018 and 2018.2019. Average balances are generally based on a daily average while amonth-end average is used for certain average balances when it is not practicable to obtain applicable daily averages. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal years ended March 31, | | | Fiscal years ended March 31, | | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | Average
balance | | Interest
income | | Average
rate | | Average
balance | | Interest
income | | Average
rate | | Average
balance | | Interest
income | | Average
rate | | | Average
balance | | Interest
income | | Average
rate | | Average
balance | | Interest
income | | Average
rate | | Average
balance | | Interest
income | | Average
rate | | | | | (in millions, except percentages) | | | (in millions, except percentages) | | Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-earning deposits in other banks: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | 31,905,984 | | | ¥ | 32,063 | | | 0.10 | % | | ¥ | 31,322,995 | | | ¥ | 28,975 | | | 0.09 | % | | ¥ | 31,515,803 | | | ¥ | 26,391 | | | 0.08 | % | | ¥ | 31,322,995 | | | ¥ | 28,975 | | | | 0.09 | % | | ¥ | 31,515,803 | | | ¥ | 26,391 | | | | 0.08 | % | | ¥ | 32,727,743 | | | ¥ | 31,287 | | | | 0.10 | % | Foreign | | 9,259,479 | | | 50,591 | | | 0.55 | | | 7,118,443 | | | 49,760 | | | 0.70 | | | 7,889,777 | | | 100,217 | | | 1.27 | | | | 7,118,443 | | | | 49,760 | | | | 0.70 | | | | 7,889,777 | | | | 100,217 | | | | 1.27 | | | | 9,025,391 | | | | 152,040 | | | | 1.68 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 41,165,463 | | | 82,654 | | | 0.20 | | | 38,441,438 | | | 78,735 | | | 0.20 | | | 39,405,580 | | | 126,608 | | | 0.32 | | | | 38,441,438 | | | | 78,735 | | | | 0.20 | | | | 39,405,580 | | | | 126,608 | | | | 0.32 | | | | 41,753,134 | | | | 183,327 | | | | 0.44 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Call loans, funds sold, and receivables under resale agreements and securities borrowing transactions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | 3,997,009 | | | 1,184 | | | 0.03 | | | 5,825,863 | | | 2,116 | | | 0.04 | | | 7,703,606 | | | 7,246 | | | 0.09 | | | | 5,825,863 | | | | 2,116 | | | | 0.04 | | | | 7,703,606 | | | | 7,246 | | | | 0.09 | | | | 6,429,788 | | | | 5,920 | | | | 0.09 | | Foreign | | 10,633,966 | | | 57,440 | | | 0.54 | | | 8,259,160 | | | 59,263 | | | 0.72 | | | 7,873,112 | | | 77,447 | | | 0.98 | | | | 8,259,160 | | | | 59,263 | | | | 0.72 | | | | 7,873,112 | | | | 77,447 | | | | 0.98 | | | | 7,594,119 | | | | 149,788 | | | | 1.97 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 14,630,975 | | | 58,624 | | | 0.40 | | | 14,085,023 | | | 61,379 | | | 0.44 | | | 15,576,718 | | | 84,693 | | | 0.54 | | | | 14,085,023 | | | | 61,379 | | | | 0.44 | | | | 15,576,718 | | | | 84,693 | | | | 0.54 | | | | 14,023,907 | | | | 155,708 | | | | 1.11 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading account assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | 5,328,794 | | | 33,076 | | | 0.62 | | | 3,818,370 | | | 24,262 | | | 0.64 | | | 4,737,292 | | | 27,126 | | | 0.57 | | | | 3,818,370 | | | | 24,262 | | | | 0.64 | | | | 4,737,292 | | | | 27,126 | | | | 0.57 | | | | 5,204,308 | | | | 31,284 | | | | 0.60 | | Foreign | | 22,146,669 | | | 389,004 | | | 1.76 | | | 23,111,674 | | | 431,598 | | | 1.87 | | | 20,012,444 | | | 405,469 | | | 2.03 | | | | 23,111,674 | | | | 431,598 | | | | 1.87 | | | | 20,012,444 | | | | 405,469 | | | | 2.03 | | | | 19,467,632 | | | | 468,440 | | | | 2.41 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 27,475,463 | | | 422,080 | | | 1.54 | | | 26,930,044 | | | 455,860 | | | 1.69 | | | 24,749,736 | | | 432,595 | | | 1.75 | | | | 26,930,044 | | | | 455,860 | | | | 1.69 | | | | 24,749,736 | | | | 432,595 | | | | 1.75 | | | | 24,671,940 | | | | 499,724 | | | | 2.03 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment securities(1): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | 41,308,432 | | | 230,478 | | | 0.56 | | | 35,863,993 | | | 219,443 | | | 0.61 | | | 34,659,859 | | | 183,622 | | | 0.53 | | | | 35,863,993 | | | | 219,443 | | | | 0.61 | | | | 34,659,859 | | | | 183,622 | | | | 0.53 | | | | 35,073,801 | | | | 202,755 | | | | 0.58 | | Foreign | | 7,059,232 | | | 157,564 | | | 2.23 | | | 6,583,759 | | | 151,701 | | | 2.30 | | | 6,891,939 | | | 160,279 | | | 2.33 | | | | 6,583,759 | | | | 151,701 | | | | 2.30 | | | | 6,891,939 | | | | 160,279 | | | | 2.33 | | | | 7,782,349 | | | | 195,448 | | | | 2.51 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 48,367,664 | | | 388,042 | | | 0.80 | | | 42,447,752 | | | 371,144 | | | 0.87 | | | 41,551,798 | | | 343,901 | | | 0.83 | | | | 42,447,752 | | | | 371,144 | | | | 0.87 | | | | 41,551,798 | | | | 343,901 | | | | 0.83 | | | | 42,856,150 | | | | 398,203 | | | | 0.93 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans(2): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | 71,072,445 | | | 800,723 | | | 1.13 | | | 68,348,115 | | | 743,683 | | | 1.09 | | | 65,985,440 | | | 757,623 | | | 1.15 | | | | 68,348,115 | | | | 743,683 | | | | 1.09 | | | | 65,985,440 | | | | 757,623 | | | | 1.15 | | | | 65,843,445 | | | | 777,306 | | | | 1.18 | | Foreign | | 50,003,733 | | | 1,253,615 | | | 2.51 | | | 48,940,077 | | | 1,279,966 | | | 2.62 | | | 51,779,709 | | | 1,513,596 | | | 2.92 | | | | 48,940,077 | | | | 1,279,966 | | | | 2.62 | | | | 51,779,709 | | | | 1,513,596 | | | | 2.92 | | | | 52,258,780 | | | | 1,799,111 | | | | 3.44 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 121,076,178 | | | 2,054,338 | | | 1.70 | | | 117,288,192 | | | 2,023,649 | | | 1.73 | | | 117,765,149 | | | 2,271,219 | | | 1.93 | | | | 117,288,192 | | | | 2,023,649 | | | | 1.73 | | | | 117,765,149 | | | | 2,271,219 | | | | 1.93 | | | | 118,102,225 | | | | 2,576,417 | | | | 2.18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | 153,612,664 | | | 1,097,524 | | | 0.71 | | | 145,179,336 | | | 1,018,479 | | | 0.70 | | | 144,602,000 | | | 1,002,008 | | | 0.69 | | | | 145,179,336 | | | | 1,018,479 | | | | 0.70 | | | | 144,602,000 | | | | 1,002,008 | | | | 0.69 | | | | 145,279,085 | | | | 1,048,552 | | | | 0.72 | | Foreign | | 99,103,079 | | | 1,908,214 | | | 1.93 | | | 94,013,113 | | | 1,972,288 | | | 2.10 | | | 94,446,981 | | | 2,257,008 | | | 2.39 | | | | 94,013,113 | | | | 1,972,288 | | | | 2.10 | | | | 94,446,981 | | | | 2,257,008 | | | | 2.39 | | | | 96,128,271 | | | | 2,764,827 | | | | 2.88 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 252,715,743 | | | 3,005,738 | | | 1.19 | | | 239,192,449 | | | 2,990,767 | | | 1.25 | | | 239,048,981 | | | 3,259,016 | | | 1.36 | | | | 239,192,449 | | | | 2,990,767 | | | | 1.25 | | | | 239,048,981 | | | | 3,259,016 | | | | 1.36 | | | | 241,407,356 | | | | 3,813,379 | | | | 1.58 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and due from banks | | 3,853,732 | | | | | | | 21,989,856 | | | | | | | 34,040,675 | | | | | | | | 21,989,856 | | | | | | | | 34,040,675 | | | | | | | | 33,631,665 | | | | | | Othernon-interest-earning assets | | 43,703,112 | | | | | | | 47,775,376 | | | | | | | 48,549,541 | | | | | | | | 47,775,376 | | | | | | | | 48,549,541 | | | | | | | | 46,952,826 | | | | | | Allowance for credit losses | | (1,001,714 | ) | | | | | | (1,018,982 | ) | | | | | | (1,049,265 | ) | | | | | | | (1,018,982 | ) | | | | | | | (1,049,265 | ) | | | | | | | (699,000 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Totalnon-interest-earning assets | | 46,555,130 | | | | | | | 68,746,250 | | | | | | | 81,540,951 | | | | | | | | 68,746,250 | | | | | | | | 81,540,951 | | | | | | | | 79,885,491 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total assets | | ¥ | 299,270,873 | | | | | | | ¥ | 307,938,699 | | | | | | | ¥ | 320,589,932 | | | | | | | ¥ | 307,938,699 | | | | | | | ¥ | 320,589,932 | | | | | | | ¥ | 321,292,847 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | Tax-exempt income oftax-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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal years ended March 31, | | | | | 2016 | | | 2017 | | | 2018 | | | | | 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 | | ¥ | 110,396,310 | | | ¥ | 69,634 | | | | 0.06 | % | | ¥ | 117,156,484 | | | ¥ | 45,790 | | | | 0.04 | % | | ¥ | 123,141,060 | | | ¥ | 58,779 | | | | 0.05 | % | Foreign | | | 41,066,208 | | | | 280,701 | | | | 0.68 | | | | 38,411,021 | | | | 301,640 | | | | 0.79 | | | | 41,421,717 | | | | 456,089 | | | | 1.10 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 151,462,518 | | | | 350,335 | | | | 0.23 | | | | 155,567,505 | | | | 347,430 | | | | 0.22 | | | | 164,562,777 | | | | 514,868 | | | | 0.31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Call money, funds purchased, and payables under repurchase agreements and securities lending transactions(1): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | | 24,017,338 | | | | 50,567 | | | | 0.21 | | | | 22,024,053 | | | | 82,162 | | | | 0.37 | | | | 17,913,277 | | | | 113,805 | | | | 0.64 | | Foreign | | | 11,666,364 | | | | 16,732 | | | | 0.14 | | | | 10,765,446 | | | | 20,425 | | | | 0.19 | | | | 10,138,998 | | | | 56,955 | | | | 0.56 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 35,683,702 | | | | 67,299 | | | | 0.19 | | | | 32,789,499 | | | | 102,587 | | | | 0.31 | | | | 28,052,275 | | | | 170,760 | | | | 0.61 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Due to trust account— Domestic | | | 1,162,326 | | | | 505 | | | | 0.04 | | | | 3,122,190 | | | | 207 | | | | 0.01 | | | | 3,065,511 | | | | 109 | | | | 0.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other short-term borrowings and trading account liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | | 7,945,537 | | | | 26,145 | | | | 0.33 | | | | 3,644,192 | | | | 11,679 | | | | 0.32 | | | | 3,768,213 | | | | 11,012 | | | | 0.29 | | Foreign | | | 5,787,927 | | | | 28,427 | | | | 0.49 | | | | 5,435,977 | | | | 49,458 | | | | 0.91 | | | | 6,476,232 | | | | 82,523 | | | | 1.27 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 13,733,464 | | | | 54,572 | | | | 0.40 | | | | 9,080,169 | | | | 61,137 | | | | 0.67 | | | | 10,244,445 | | | | 93,535 | | | | 0.91 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt(1): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | | 15,791,409 | | | | 150,124 | | | | 0.95 | | | | 20,358,348 | | | | 173,634 | | | | 0.85 | | | | 25,277,891 | | | | 183,944 | | | | 0.73 | | Foreign | | | 3,301,789 | | | | 121,529 | | | | 3.68 | | | | 2,604,585 | | | | 84,644 | | | | 3.25 | | | | 2,654,153 | | | | 65,539 | | | | 2.47 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 19,093,198 | | | | 271,653 | | | | 1.42 | | | | 22,962,933 | | | | 258,278 | | | | 1.12 | | | | 27,932,044 | | | | 249,483 | | | | 0.89 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | | 159,312,920 | | | | 296,975 | | | | 0.19 | | | | 166,305,267 | | | | 313,472 | | | | 0.19 | | | | 173,165,952 | | | | 367,649 | | | | 0.21 | | Foreign | | | 61,822,288 | | | | 447,389 | | | | 0.72 | | | | 57,217,029 | | | | 456,167 | | | | 0.80 | | | | 60,691,100 | | | | 661,106 | | | | 1.09 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 221,135,208 | | | | 744,364 | | | | 0.34 | | | | 223,522,296 | | | | 769,639 | | | | 0.34 | | | | 233,857,052 | | | | 1,028,755 | | | | 0.44 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-interest-bearing liabilities | | | 62,849,899 | | | | | | | | | | | | 69,405,574 | | | | | | | | | | | | 71,309,802 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total equity | | | 15,285,766 | | | | | | | | | | | | 15,010,829 | | | | | | | | | | | | 15,423,078 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities and equity | | ¥ | 299,270,873 | | | | | | | | | | | ¥ | 307,938,699 | | | | | | | | | | | ¥ | 320,589,932 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income and interest rate spread | | | | | | ¥ | 2,261,374 | | | | 0.85 | % | | | | | | ¥ | 2,221,128 | | | | 0.91 | % | | | | | | ¥ | 2,230,261 | | | | 0.92 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income as a percentage of total interest-earning assets | | | | | | | | | | | 0.89 | % | | | | | | | | | | | 0.93 | % | | | | | | | | | | | 0.93 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Note:
(1) | | The table above reflects changes in presentation that were made to long-term repurchase agreements for the fiscal years ended March 31, 2016 and 2017. For further information, see Note 1 to our consolidated financial statements included elsewhere in this Annual Report. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal years ended March 31, | | | | | 2017 | | | 2018 | | | 2019 | | | | | Average
balance | | | Interest
expense | | | Average
rate | | | Average
balance | | | Interest
expense | | | Average
rate | | | Average
balance | | | Interest
expense | | | Average
rate | | | | | (in millions, except percentages) | | Liabilities and equity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | 117,156,484 | | | ¥ | 45,790 | | | | 0.04 | % | | ¥ | 123,141,060 | | | ¥ | 58,779 | | | | 0.05 | % | | ¥ | 124,661,909 | | | ¥ | 67,948 | | | | 0.05 | % | Foreign | | | 38,411,021 | | | | 301,640 | | | | 0.79 | | | | 41,421,717 | | | | 456,089 | | | | 1.10 | | | | 41,945,626 | | | | 649,418 | | | | 1.55 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 155,567,505 | | | | 347,430 | | | | 0.22 | | | | 164,562,777 | | | | 514,868 | | | | 0.31 | | | | 166,607,535 | | | | 717,366 | | | | 0.43 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Call money, funds purchased, and payables under repurchase agreements and securities lending transactions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | | 22,024,053 | | | | 82,162 | | | | 0.37 | | | | 17,913,277 | | | | 113,805 | | | | 0.64 | | | | 17,201,589 | | | | 188,009 | | | | 1.09 | | Foreign | | | 10,765,446 | | | | 20,425 | | | | 0.19 | | | | 10,138,998 | | | | 56,955 | | | | 0.56 | | | | 9,204,904 | | | | 149,536 | | | | 1.62 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 32,789,499 | | | | 102,587 | | | | 0.31 | | | | 28,052,275 | | | | 170,760 | | | | 0.61 | | | | 26,406,493 | | | | 337,545 | | | | 1.28 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Due to trust account—Domestic | | | 3,122,190 | | | | 207 | | | | 0.01 | | | | 3,065,511 | | | | 109 | | | | 0.00 | | | | 3,062,655 | | | | 124 | | | | 0.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other short-term borrowings and trading account liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | | 3,644,192 | | | | 11,679 | | | | 0.32 | | | | 3,768,213 | | | | 11,012 | | | | 0.29 | | | | 2,714,678 | | | | 13,452 | | | | 0.50 | | Foreign | | | 5,435,977 | | | | 49,458 | | | | 0.91 | | | | 6,476,232 | | | | 82,523 | | | | 1.27 | | | | 7,184,301 | | | | 141,697 | | | | 1.97 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 9,080,169 | | | | 61,137 | | | | 0.67 | | | | 10,244,445 | | | | 93,535 | | | | 0.91 | | | | 9,898,979 | | | | 155,149 | | | | 1.57 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | | 20,358,348 | | | | 173,634 | | | | 0.85 | | | | 25,277,891 | | | | 183,944 | | | | 0.73 | | | | 25,558,707 | | | | 234,603 | | | | 0.92 | | Foreign | | | 2,604,585 | | | | 84,644 | | | | 3.25 | | | | 2,654,153 | | | | 65,539 | | | | 2.47 | | | | 3,108,828 | | | | 73,194 | | | | 2.35 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 22,962,933 | | | | 258,278 | | | | 1.12 | | | | 27,932,044 | | | | 249,483 | | | | 0.89 | | | | 28,667,535 | | | | 307,797 | | | | 1.07 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | | 166,305,267 | | | | 313,472 | | | | 0.19 | | | | 173,165,952 | | | | 367,649 | | | | 0.21 | | | | 173,199,538 | | | | 504,136 | | | | 0.29 | | Foreign | | | 57,217,029 | | | | 456,167 | | | | 0.80 | | | | 60,691,100 | | | | 661,106 | | | | 1.09 | | | | 61,443,659 | | | | 1,013,845 | | | | 1.65 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 223,522,296 | | | | 769,639 | | | | 0.34 | | | | 233,857,052 | | | | 1,028,755 | | | | 0.44 | | | | 234,643,197 | | | | 1,517,981 | | | | 0.65 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-interest-bearing liabilities | | | 69,405,574 | | | | | | | | | | | | 71,309,802 | | | | | | | | | | | | 70,572,971 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total equity | | | 15,010,829 | | | | | | | | | | | | 15,423,078 | | | | | | | | | | | | 16,076,679 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities and equity | | ¥ | 307,938,699 | | | | | | | | | | | ¥ | 320,589,932 | | | | | | | | | | | ¥ | 321,292,847 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income and interest rate spread | | | | | | ¥ | 2,221,128 | | | | 0.91 | % | | | | | | ¥ | 2,230,261 | | | | 0.92 | % | | | | | | ¥ | 2,295,398 | | | | 0.93 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income as a percentage of total interest-earning assets | | | | | | | | | | | 0.93 | % | | | | | | | | | | | 0.93 | % | | | | | | | | | | | 0.95 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The percentage of total average assets attributable to foreign activities was 39.4%37.3%, 37.3%36.6% and 36.6%36.8%, respectively, for the fiscal years ended March 31, 2016, 2017, 2018 and 2018.2019. The percentage of total average liabilities attributable to foreign activities was 40.1%38.1%, 38.1%36.9% and 36.9%37.0%, respectively, for the fiscal years ended March 31, 2016, 2017, 2018 and 2018.2019. 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, 2017 compared to the fiscal year ended March 31, 2016, and the fiscal year ended March 31, 2018 compared to the fiscal year ended March 31, 2017.2017, and the fiscal year ended March 31, 2019 compared to the fiscal year ended March 31, 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2016
versus
fiscal year ended March 31, 2017 | | Fiscal year ended March 31, 2017
versus
fiscal year ended March 31, 2018 | | | Fiscal year ended March 31, 2017
versus
fiscal year ended March 31, 2018 | | Fiscal year ended March 31, 2018
versus
fiscal year ended March 31, 2019 | | | | | Increase (decrease)
due to changes in | | Net change | | | Increase (decrease)
due to changes in | | Net change | | | Increase (decrease)
due to changes in | | | Net change | | | Increase (decrease)
due to changes in | | | Net change | | | | | Volume(1) | | Rate(1) | | Volume(1) | | Rate(1) | | | Volume(1) | | Rate(1) | | Volume(1) | | Rate(1) | | | | | (in millions) | | | (in millions) | | Interest income: | | | | | | | | | | | | | | | | | | | | | | | | | Interest-earning deposits in other banks: | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | (577 | ) | | ¥ | (2,511 | ) | | ¥ | (3,088 | ) | | ¥ | 177 | | | ¥ | (2,761 | ) | | ¥ | (2,584 | ) | | ¥ | 177 | | | ¥ | (2,761 | ) | | ¥ | (2,584 | ) | | ¥ | 1,046 | | | ¥ | 3,850 | | | ¥ | 4,896 | | Foreign | | (13,178 | ) | | 12,347 | | | (831 | ) | | 5,908 | | | 44,549 | | | 50,457 | | | | 5,908 | | | | 44,549 | | | | 50,457 | | | | 15,865 | | | | 35,958 | | | | 51,823 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | (13,755 | ) | | 9,836 | | | (3,919 | ) | | 6,085 | | | 41,788 | | | 47,873 | | | | 6,085 | | | | 41,788 | | | | 47,873 | | | | 16,911 | | | | 39,808 | | | | 56,719 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Call loans, funds sold, and receivables under resale agreements and securities borrowing transactions: | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | 624 | | | 308 | | | 932 | | | 865 | | | 4,265 | | | 5,130 | | | | 865 | | | | 4,265 | | | | 5,130 | | | | (1,176 | ) | | | (150 | ) | | | (1,326 | ) | Foreign | | (14,533 | ) | | 16,356 | | | 1,823 | | | (2,885 | ) | | 21,069 | | | 18,184 | | | | (2,885 | ) | | | 21,069 | | | | 18,184 | | | | (2,838 | ) | | | 75,179 | | | | 72,341 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | (13,909 | ) | | 16,664 | | | 2,755 | | | (2,020 | ) | | 25,334 | | | 23,314 | | | | (2,020 | ) | | | 25,334 | | | | 23,314 | | | | (4,014 | ) | | | 75,029 | | | | 71,015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading account assets: | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | (9,580 | ) | | 766 | | | (8,814 | ) | | 5,430 | | | (2,566 | ) | | 2,864 | | | | 5,430 | | | | (2,566 | ) | | | 2,864 | | | | 2,763 | | | | 1,395 | | | | 4,158 | | Foreign | | 17,387 | | | 25,207 | | | 42,594 | | | (60,886 | ) | | 34,757 | | | (26,129 | ) | | | (60,886 | ) | | | 34,757 | | | | (26,129 | ) | | | (11,301 | ) | | | 74,272 | | | | 62,971 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | 7,807 | | | 25,973 | | | 33,780 | | | (55,456 | ) | | 32,191 | | | (23,265 | ) | | | (55,456 | ) | | | 32,191 | | | | (23,265 | ) | | | (8,538 | ) | | | 75,667 | | | | 67,129 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment securities(2): | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | (32,071 | ) | | 21,036 | | | (11,035 | ) | | (7,170 | ) | | (28,651 | ) | | (35,821 | ) | | | (7,170 | ) | | | (28,651 | ) | | | (35,821 | ) | | | 2,216 | | | | 16,917 | | | | 19,133 | | Foreign | | (10,844 | ) | | 4,981 | | | (5,863 | ) | | 7,156 | | | 1,422 | | | 8,578 | | | | 7,156 | | | | 1,422 | | | | 8,578 | | | | 21,730 | | | | 13,439 | | | | 35,169 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | (42,915 | ) | | 26,017 | | | (16,898 | ) | | (14 | ) | | (27,229 | ) | | (27,243 | ) | | | (14 | ) | | | (27,229 | ) | | | (27,243 | ) | | | 23,946 | | | | 30,356 | | | | 54,302 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans: | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | (30,138 | ) | | (26,902 | ) | | (57,040 | ) | | (26,254 | ) | | 40,194 | | | 13,940 | | | | (26,254 | ) | | | 40,194 | | | | 13,940 | | | | (1,634 | ) | | | 21,317 | | | | 19,683 | | Foreign | | (27,046 | ) | | 53,397 | | | 26,351 | | | 77,153 | | | 156,477 | | | 233,630 | | | | 77,153 | | | | 156,477 | | | | 233,630 | | | | 14,127 | | | | 271,388 | | | | 285,515 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | (57,184 | ) | | 26,495 | | | (30,689 | ) | | 50,899 | | | 196,671 | | | 247,570 | | | | 50,899 | | | | 196,671 | | | | 247,570 | | | | 12,493 | | | | 292,705 | | | | 305,198 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest income: | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | (71,742 | ) | | (7,303 | ) | | (79,045 | ) | | (26,952 | ) | | 10,481 | | | (16,471 | ) | | | (26,952 | ) | | | 10,481 | | | | (16,471 | ) | | | 3,215 | | | | 43,329 | | | | 46,544 | | Foreign | | (48,214 | ) | | 112,288 | | | 64,074 | | | 26,446 | | | 258,274 | | | 284,720 | | | | 26,446 | | | | 258,274 | | | | 284,720 | | | | 37,583 | | | | 470,236 | | | | 507,819 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | (119,956 | ) | | ¥ | 104,985 | | | ¥ | (14,971 | ) | | ¥ | (506 | ) | | ¥ | 268,755 | | | ¥ | 268,249 | | | ¥ | (506 | ) | | ¥ | 268,755 | | | ¥ | 268,249 | | | ¥ | 40,798 | | | ¥ | 513,565 | | | ¥ | 554,363 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | Volume/rate variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total “net change.” |
| (2) | | Tax-exempt income oftax-exempt investment securities has not been calculated on a tax equivalent basis because the effect of such calculation would not be material. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2016
versus
fiscal year ended March 31, 2017 | | Fiscal year ended March 31, 2017
versus
fiscal year ended March 31, 2018 | | | Fiscal year ended March 31, 2017
versus
fiscal year ended March 31, 2018 | | Fiscal year ended March 31, 2018
versus
fiscal year ended March 31, 2019 | | | | | Increase (decrease)
due to changes in | | Net change | | | Increase (decrease)
due to changes in | | Net change | | | Increase (decrease)
due to changes in | | | Net change | | | Increase (decrease)
due to changes in | | | Net change | | | | | Volume(1) | | Rate(1) | | Volume(1) | | Rate(1) | | | Volume(1) | | Rate(1) | | Volume(1) | | Rate(1) | | | | | (in millions) | | | (in millions) | | Interest expense: | | | | | | | | | | | | | | | | | | | | | | | | | Deposits: | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | 4,039 | | | ¥ | (27,883 | ) | | ¥ | (23,844 | ) | | ¥ | 2,436 | | | ¥ | 10,553 | | | ¥ | 12,989 | | | ¥ | 2,436 | | | ¥ | 10,553 | | | ¥ | 12,989 | | | ¥ | 734 | | | ¥ | 8,435 | | | ¥ | 9,169 | | Foreign | | | (18,967 | ) | | 39,906 | | | 20,939 | | | 25,194 | | | 129,255 | | | 154,449 | | | | 25,194 | | | | 129,255 | | | | 154,449 | | | | 5,839 | | | | 187,490 | | | | 193,329 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | (14,928 | ) | | 12,023 | | | (2,905 | ) | | 27,630 | | | 139,808 | | | 167,438 | | | | 27,630 | | | | 139,808 | | | | 167,438 | | | | 6,573 | | | | 195,925 | | | | 202,498 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Call money, funds purchased, and payables under repurchase agreements and securities lending transactions(2): | | | | | | | | | | | | | | Call money, funds purchased, and payables under repurchase agreements and securities lending transactions: | | | | | | | | | | | | | | Domestic | | | (4,511 | ) | | 36,106 | | | 31,595 | | | (17,597 | ) | | 49,240 | | | 31,643 | | | | (17,597 | ) | | | 49,240 | | | | 31,643 | | | | (4,692 | ) | | | 78,896 | | | | 74,204 | | Foreign | | | (1,373 | ) | | 5,066 | | | 3,693 | | | (1,256 | ) | | 37,786 | | | 36,530 | | | | (1,256 | ) | | | 37,786 | | | | 36,530 | | | | (5,708 | ) | | | 98,289 | | | | 92,581 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | (5,884 | ) | | 41,172 | | | 35,288 | | | (18,853 | ) | | 87,026 | | | 68,173 | | | | (18,853 | ) | | | 87,026 | | | | 68,173 | | | | (10,400 | ) | | | 177,185 | | | | 166,785 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Due to trust account—Domestic | | | 371 | | | (669 | ) | | (298 | ) | | (4 | ) | | (94 | ) | | (98 | ) | | | (4 | ) | | | (94 | ) | | | (98 | ) | | | — | | | | 15 | | | | 15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other short-term borrowings and trading account liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | | (13,802 | ) | | (664 | ) | | (14,466 | ) | | 388 | | | (1,055 | ) | | (667 | ) | | | 388 | | | | (1,055 | ) | | | (667 | ) | | | (3,693 | ) | | | 6,133 | | | | 2,440 | | Foreign | | | (1,827 | ) | | 22,858 | | | 21,031 | | | 10,690 | | | 22,375 | | | 33,065 | | | | 10,690 | | | | 22,375 | | | | 33,065 | | | | 9,845 | | | | 49,329 | | | | 59,174 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | (15,629 | ) | | 22,194 | | | 6,565 | | | 11,078 | | | 21,320 | | | 32,398 | | | | 11,078 | | | | 21,320 | | | | 32,398 | | | | 6,152 | | | | 55,462 | | | | 61,614 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt(2): | | | | | | | | | | | | | | Long-term debt: | | | | | | | | | | | | | | Domestic | | | 40,122 | | | (16,612 | ) | | 23,510 | | | 38,127 | | | (27,817 | ) | | 10,310 | | | | 38,127 | | | | (27,817 | ) | | | 10,310 | | | | 2,065 | | | | 48,594 | | | | 50,659 | | Foreign | | | (23,729 | ) | | (13,156 | ) | | (36,885 | ) | | 1,582 | | | (20,687 | ) | | (19,105 | ) | | | 1,582 | | | | (20,687 | ) | | | (19,105 | ) | | | 10,816 | | | | (3,161 | ) | | | 7,655 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 16,393 | | | (29,768 | ) | | (13,375 | ) | | 39,709 | | | (48,504 | ) | | (8,795 | ) | | | 39,709 | | | | (48,504 | ) | | | (8,795 | ) | | | 12,881 | | | | 45,433 | | | | 58,314 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest expense: | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | | 26,219 | | | (9,722 | ) | | 16,497 | | | 23,350 | | | 30,827 | | | 54,177 | | | | 23,350 | | | | 30,827 | | | | 54,177 | | | | (5,586 | ) | | | 142,073 | | | | 136,487 | | Foreign | | | (45,896 | ) | | 54,674 | | | 8,778 | | | 36,210 | | | 168,729 | | | 204,939 | | | | 36,210 | | | | 168,729 | | | | 204,939 | | | | 20,792 | | | | 331,947 | | | | 352,739 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | (19,677 | ) | | ¥ | 44,952 | | | ¥ | 25,275 | | | ¥ | 59,560 | | | ¥ | 199,556 | | | ¥ | 259,116 | | | ¥ | 59,560 | | | ¥ | 199,556 | | | ¥ | 259,116 | | | ¥ | 15,206 | | | ¥ | 474,020 | | | ¥ | 489,226 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income: | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | (97,961 | ) | | ¥ | 2,419 | | | ¥ | (95,542 | ) | | ¥ | (50,302 | ) | | ¥ | (20,346 | ) | | ¥ | (70,648 | ) | | ¥ | (50,302 | ) | | ¥ | (20,346 | ) | | ¥ | (70,648 | ) | | ¥ | 8,801 | | | ¥ | (98,744 | ) | | ¥ | (89,943 | ) | Foreign | | | (2,318 | ) | | 57,614 | | | 55,296 | | | (9,764 | ) | | 89,545 | | | 79,781 | | | | (9,764 | ) | | | 89,545 | | | | 79,781 | | | | 16,791 | | | | 138,289 | | | | 155,080 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | (100,279 | ) | | ¥ | 60,033 | | | ¥ | (40,246 | ) | | ¥ | (60,066 | ) | | ¥ | 69,199 | | | ¥ | 9,133 | | | ¥ | (60,066 | ) | | ¥ | 69,199 | | | ¥ | 9,133 | | | ¥ | 25,592 | | | ¥ | 39,545 | | | ¥ | 65,137 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: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.” |
(2) | | The table above reflects changes in presentation that were made to long-term repurchase agreements for the fiscal years ended March 31, 2016 and 2017. For further information, see Note 1 to our consolidated financial statements included elsewhere in this Annual Report. |
The following table shows information as to the value of ourAvailable-for-sale debt securities,Held-to-maturity debt securities, andHeld-to-maturity Marketable equity securities at March 31, 2016, 2017, 2018 and 2018:2019: | | | | At March 31, | | | At March 31, | | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | Amortized
cost | | Fair value | | Net
unrealized
gains
(losses) | | Amortized
cost | | Fair value | | Net
unrealized
gains
(losses) | | Amortized
cost | | Fair value | | Net
unrealized
gains
(losses) | | | Amortized
cost | | Fair value | | Net
unrealized
gains
(losses) | | Amortized
cost | | Fair value | | Net
unrealized
gains
(losses) | | Amortized
cost | | Fair value | | Net
unrealized
gains
(losses) | | | | | (in millions) | | | (in millions) | | Available-for-sale securities: | | | | | | | | | | Available-for-sale debt securities: | | | | | | | | | | Domestic: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | ¥28,427,163 | | | ¥29,127,841 | | | ¥ | 700,678 | | | ¥ | 25,435,570 | | | ¥ | 25,826,288 | | | ¥ | 390,718 | | | ¥ | 24,272,345 | | | ¥ | 24,567,904 | | | ¥ | 295,559 | | | ¥25,435,570 | | | ¥25,826,288 | | | ¥ | 390,718 | | | ¥ | 24,272,345 | | | ¥ | 24,567,904 | | | ¥ | 295,559 | | | ¥ | 23,748,558 | | | ¥ | 24,077,696 | | | ¥ | 329,138 | | Corporate bonds | | | 795,427 | | | | 816,984 | | | 21,557 | | | 899,572 | | | 917,170 | | | 17,598 | | | 923,912 | | | 935,965 | | | 12,053 | | | | 899,572 | | | | 917,170 | | | 17,598 | | | 923,912 | | | 935,965 | | | 12,053 | | | 988,137 | | | 999,707 | | | 11,570 | | Marketable equity securities | | 2,646,182 | | | 5,602,328 | | | 2,956,146 | | | 2,719,146 | | | 6,115,213 | | | 3,396,067 | | | 2,638,796 | | | 6,544,938 | | | 3,906,142 | | | Other securities | | | 1,088,843 | | | | 1,103,232 | | | 14,389 | | | 1,844,358 | | | 1,851,402 | | | 7,044 | | | 2,581,942 | | | 2,589,367 | | | 7,425 | | | | 1,844,358 | | | | 1,851,402 | | | 7,044 | | | 2,581,942 | | | 2,589,367 | | | 7,425 | | | 3,377,266 | | | 3,402,696 | | | 25,430 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | 32,957,615 | | | 36,650,385 | | | 3,692,770 | | | 30,898,646 | | | 34,710,073 | | | 3,811,427 | | | 30,416,995 | | | 34,638,174 | | | 4,221,179 | | | 28,179,500 | | | 28,594,860 | | | 415,360 | | | 27,778,199 | | | 28,093,236 | | | 315,037 | | | 28,113,961 | | | 28,480,099 | | | 366,138 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | U.S. Treasury and other U.S. government agencies bonds | | 869,152 | | | 880,154 | | | 11,002 | | | 1,075,244 | | | 1,060,868 | | | (14,376 | ) | | 1,400,997 | | | 1,366,456 | | | (34,541 | ) | | 1,075,244 | | | 1,060,868 | | | (14,376 | ) | | 1,400,997 | | | 1,366,456 | | | (34,541 | ) | | 1,722,943 | | | 1,710,328 | | | (12,615 | ) | Other governments and official institutions bonds | | 1,177,635 | | | 1,193,914 | | | 16,279 | | | 1,087,653 | | | 1,089,061 | | | 1,408 | | | 806,665 | | | 805,236 | | | (1,429 | ) | | Other government and official institution bonds | | | 1,087,653 | | | 1,089,061 | | | 1,408 | | | 806,665 | | | 805,236 | | | (1,429 | ) | | 925,931 | | | 931,091 | | | 5,160 | | Mortgage-backed
securities | | 1,090,886 | | | 1,076,866 | | | (14,020 | ) | | 913,118 | | | 898,301 | | | (14,817 | ) | | 1,229,111 | | | 1,214,211 | | | (14,900 | ) | | 913,118 | | | 898,301 | | | (14,817 | ) | | 1,229,111 | | | 1,214,211 | | | (14,900 | ) | | 1,138,101 | | | 1,115,714 | | | (22,387 | ) | Other securities | | | 1,419,445 | | | | 1,424,912 | | | 5,467 | | | 1,321,273 | | | 1,331,796 | | | 10,523 | | | 1,492,293 | | | 1,480,621 | | | (11,672 | ) | | | 1,303,443 | | | | 1,308,595 | | | 5,152 | | | 1,341,697 | | | 1,353,975 | | | 12,278 | | | 1,273,551 | | | 1,281,271 | | | 7,720 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total foreign | | 4,557,118 | | | 4,575,846 | | | 18,728 | | | 4,397,288 | | | 4,380,026 | | | (17,262 | ) | | 4,929,066 | | | 4,866,524 | | | (62,542 | ) | | 4,379,458 | | | 4,356,825 | | | (22,633 | ) | | 4,778,470 | | | 4,739,878 | | | (38,592 | ) | | 5,060,526 | | | 5,038,404 | | | (22,122 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 37,514,733 | | | ¥ | 41,226,231 | | | ¥ | 3,711,498 | | | ¥ | 35,295,934 | | | ¥ | 39,090,099 | | | ¥ | 3,794,165 | | | ¥ | 35,346,061 | | | ¥ | 39,504,698 | | | ¥ | 4,158,637 | | | ¥ | 32,558,958 | | | ¥ | 32,951,685 | | | ¥ | 392,727 | | | ¥ | 32,556,669 | | | ¥ | 32,833,114 | | | ¥ | 276,445 | | | ¥ | 33,174,487 | | | ¥ | 33,518,503 | | | ¥ | 344,016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Held-to-maturity securities: | | | | | | | | | | | | | | | | | | | | Held-to-maturity debt securities: | | | | | | | | | | | | | | | | | | | | Domestic: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | ¥1,101,107 | | | ¥ | 1,159,115 | | | ¥ | 58,008 | | | ¥ | 1,100,955 | | | ¥ | 1,144,070 | | | ¥ | 43,115 | | | ¥ | 1,100,807 | | | ¥ | 1,141,019 | | | ¥ | 40,212 | | | ¥1,100,955 | | | ¥ | 1,144,070 | | | ¥ | 43,115 | | | ¥ | 1,100,807 | | | ¥ | 1,141,019 | | | ¥ | 40,212 | | | ¥ | 1,100,701 | | | ¥ | 1,142,320 | | | ¥ | 41,619 | | Other securities | | | 200 | | | | 200 | | | | — | | | 100 | | | 100 | | | | — | | | | — | | | | — | | | | — | | | | 100 | | | | 100 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | 1,101,307 | | | 1,159,315 | | | 58,008 | | | 1,101,055 | | | 1,144,170 | | | 43,115 | | | 1,100,807 | | | 1,141,019 | | | 40,212 | | | 1,101,055 | | | 1,144,170 | | | 43,115 | | | 1,100,807 | | | 1,141,019 | | | 40,212 | | | 1,100,701 | | | 1,142,320 | | | 41,619 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | U.S. Treasury and other U.S. government agencies bonds | | 62,563 | | | 63,965 | | | 1,402 | | | 60,910 | | | 62,023 | | | 1,113 | | | 59,330 | | | 59,610 | | | 280 | | | 60,910 | | | 62,023 | | | 1,113 | | | 59,330 | | | 59,610 | | | 280 | | | 138,731 | | | 138,712 | | | (19 | ) | Other governments and official institutions bonds | | 26,772 | | | 26,290 | | | (482 | ) | | 225 | | | 225 | | | | — | | | | — | | | | — | | | | — | | | Other government and official institution bonds | | | 225 | | | 225 | | | | — | | | | — | | | | — | | | | — | | | | — | | | — | | | — | | Mortgage-backed securities | | 1,139,631 | | | 1,145,520 | | | 5,889 | | | 1,146,828 | | | 1,143,938 | | | (2,890 | ) | | 1,057,612 | | | 1,047,635 | | | (9,977 | ) | | 1,146,828 | | | 1,143,938 | | | (2,890 | ) | | 1,057,612 | | | 1,047,635 | | | (9,977 | ) | | 1,071,257 | | | 1,051,135 | | | (20,122 | ) | Asset-backed securities | | | 1,536,395 | | | | 1,536,158 | | | (237 | ) | | 1,278,303 | | | 1,287,395 | | | 9,092 | | | 1,365,192 | | | 1,372,408 | | | 7,216 | | | | 1,278,303 | | | | 1,287,395 | | | 9,092 | | | 1,365,192 | | | 1,372,408 | | | 7,216 | | | 2,131,212 | | | 2,120,780 | | | (10,432 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total foreign | | 2,765,361 | | | 2,771,933 | | | 6,572 | | | 2,486,266 | | | 2,493,581 | | | 7,315 | | | 2,482,134 | | | 2,479,653 | | | (2,481 | ) | | 2,486,266 | | | 2,493,581 | | | 7,315 | | | 2,482,134 | | | 2,479,653 | | | (2,481 | ) | | 3,341,200 | | | 3,310,627 | | | (30,573 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 3,866,668 | | | ¥ | 3,931,248 | | | ¥ | 64,580 | | | ¥ | 3,587,321 | | | ¥ | 3,637,751 | | | ¥ | 50,430 | | | ¥ | 3,582,941 | | | ¥ | 3,620,672 | | | ¥ | 37,731 | | | ¥ | 3,587,321 | | | ¥ | 3,637,751 | | | ¥ | 50,430 | | | ¥ | 3,582,941 | | | ¥ | 3,620,672 | | | ¥ | 37,731 | | | ¥ | 4,441,901 | | | ¥ | 4,452,947 | | | ¥ | 11,046 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Marketable equity securities: | | | | | | | | | | | | | | | | | | | | Domestic: | | | | | | | | | | | | | | | | | | | | Marketable equity securities | | | | — | | | ¥ | 6,115,213 | | | | — | | | | — | | | ¥ | 6,544,938 | | | | — | | | | — | | | ¥ | 6,331,815 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | | | — | | | 6,115,213 | | | | — | | | | — | | | 6,544,938 | | | | — | | | | — | | | 6,331,815 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign: | | | | | | | | | | | | | | | | | | | | Marketable equity securities | | | | — | | | 23,201 | | | | — | | | | — | | | 126,646 | | | | — | | | | — | | | 26,728 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total foreign | | | | — | | | 23,201 | | | | — | | | | — | | | 126,646 | | | | — | | | | — | | | 26,728 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | — | | | ¥ | 6,138,414 | | | | — | | | | — | | | ¥ | 6,671,584 | | | | — | | | | — | | | ¥ | 6,358,543 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nonmarketable equity securities presented in Other investmentEquity securities in the accompanying consolidated financial statements were primarily carried at cost of ¥530,026 million, ¥529,869 million, ¥538,251 million and ¥538,251¥591,237 million, at March 31, 2016, 2017, 2018 and 2018,2019, respectively. The corresponding fair values at those dates were not readily determinable. Investment securities held by certain subsidiaries subject to specialized industry accounting principles for investment companies and brokers and dealers presented in Other investmentEquity securities were carried at fair value of ¥24,689 million, ¥26,292 million, ¥28,359 million and ¥28,359¥27,820 million, at March 31, 2016, 2017, 2018 and 2018,2019, respectively. The following table presents the book values, maturities and weighted average yields ofAvailable-for-sale debt securities andHeld-to-maturity securities, excluding equitydebt securities at March 31, 2018.2019. Weighted average yields are calculated based on amortized cost. Yields ontax-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 | | | 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 | | | Amount | | Yield | | Amount | | Yield | | Amount | | Yield | | Amount | | Yield | | Amount | | Yield | | | | | (in millions, except percentages) | | | (in millions, except percentages) | | Available-for-sale securities: | | | | | | | | | | | | | | | | | | | | | | Available-for-sale debt securities: | | | | | | | | | | | | | | | | | | | | | | Domestic: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | ¥ | 10,914,592 | | | 0.07 | % | | ¥ | 7,870,360 | | | 0.50 | % | | ¥ | 3,344,997 | | | 0.56 | % | | ¥ | 2,437,955 | | | 1.22 | % | | ¥ | 24,567,904 | | | 0.38 | % | | ¥ | 11,552,613 | | | 0.10 | % | | ¥ | 7,382,959 | | | 0.27 | % | | ¥ | 2,096,074 | | | 0.48 | % | | ¥ | 3,046,050 | | | 0.98 | % | | ¥ | 24,077,696 | | | 0.29 | % | Corporate bonds | | 114,018 | | | 0.47 | | | 597,427 | | | 0.27 | | | 183,468 | | | 0.41 | | | 41,052 | | | 0.73 | | | 935,965 | | | 0.34 | | | 138,369 | | | 0.26 | | | 688,730 | | | 0.17 | | | 131,541 | | | 0.45 | | | 41,067 | | | 0.68 | | | 999,707 | | | 0.24 | | Other securities | | 180,526 | | | 0.62 | | | 511,180 | | | 0.25 | | | 1,420,873 | | | 0.24 | | | 476,788 | | | 0.29 | | | 2,589,367 | | | 0.27 | | | 119,015 | | | 0.34 | | | 623,929 | | | 0.20 | | | 2,050,169 | | | 0.23 | | | 609,583 | | | 0.27 | | | 3,402,696 | | | 0.23 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | 11,209,136 | | | 0.08 | | | 8,978,967 | | | 0.47 | | | 4,949,338 | | | 0.46 | | | 2,955,795 | | | 1.06 | | | 28,093,236 | | | 0.37 | | | 11,809,997 | | | 0.11 | | | 8,695,618 | | | 0.26 | | | 4,277,784 | | | 0.36 | | | 3,696,700 | | | 0.85 | | | 28,480,099 | | | 0.28 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | U.S. Treasury and other U.S. government agencies bonds | | 112,139 | | | 1.50 | | | 527,561 | | | 1.77 | | | 725,438 | | | 1.86 | | | 1,318 | | | 3.62 | | | 1,366,456 | | | 1.80 | | | 149,312 | | | 1.40 | | | 794,520 | | | 1.93 | | | 766,496 | | | 2.23 | | | | — | | | | — | | | 1,710,328 | | | 2.02 | | Other governments and official institutions bonds | | 236,108 | | | 1.52 | | | 498,559 | | | 2.39 | | | 66,316 | | | 2.99 | | | 4,253 | | | 3.44 | | | 805,236 | | | 2.19 | | | Other government and official institution bonds | | | 290,403 | | | 1.83 | | | 613,530 | | | 1.97 | | | 19,967 | | | 3.18 | | | 7,191 | | | 1.80 | | | 931,091 | | | 1.95 | | Mortgage-backed securities | | 191 | | | 5.37 | | | 390 | | | 2.28 | | | 110,922 | | | 2.02 | | | 1,102,708 | | | 2.61 | | | 1,214,211 | | | 2.56 | | | 34 | | | | — | | | 26,283 | | | 1.50 | | | 149,751 | | | 2.25 | | | 939,646 | | | 2.97 | | | 1,115,714 | | | 2.83 | | Other securities | | 354,107 | | | 1.85 | | | 646,913 | | | 2.25 | | | 160,675 | | | 2.83 | | | 192,280 | | | 2.59 | | | 1,353,975 | | | 2.27 | | | 290,000 | | | 1.30 | | | 718,039 | | | 2.21 | | | 102,286 | | | 3.30 | | | 170,946 | | | 3.15 | | | 1,281,271 | | | 2.22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total foreign | | 702,545 | | | 1.69 | | | 1,673,423 | | | 2.14 | | | 1,063,351 | | | 2.09 | | | 1,300,559 | | | 2.61 | | | 4,739,878 | | | 2.19 | | | 729,749 | | | 1.53 | | | 2,152,372 | | | 2.03 | | | 1,038,500 | | | 2.36 | | | 1,117,783 | | | 2.99 | | | 5,038,404 | | | 2.24 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 11,911,681 | | | 0.17 | % | | ¥ | 10,652,390 | | | 0.74 | % | | ¥ | 6,012,689 | | | 0.76 | % | | ¥ | 4,256,354 | | | 1.56 | % | | ¥ | 32,833,114 | | | 0.64 | % | | ¥ | 12,539,746 | | | 0.19 | % | | ¥ | 10,847,990 | | | 0.61 | % | | ¥ | 5,316,284 | | | 0.76 | % | | ¥ | 4,814,483 | | | 1.37 | % | | ¥ | 33,518,503 | | | 0.58 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Held-to-maturity securities: | | | | | | | | | | | | | | | | | | | | | | Held-to-maturity debt securities: | | | | | | | | | | | | | | | | | | | | | | Domestic: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | ¥ | — | | | — | % | | ¥ | — | | | — | % | | ¥ | 1,100,807 | | | 0.51 | % | | ¥ | — | | | — | % | | ¥ | 1,100,807 | | | 0.51 | % | | ¥ | — | | | — | % | | ¥ | 199,816 | | | 0.60 | % | | ¥ | 900,885 | | | 0.49 | % | | ¥ | — | | | — | % | | ¥ | 1,100,701 | | | 0.51 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | | — | | | | — | | | | — | | | | — | | | 1,100,807 | | | 0.51 | | | | — | | | | — | | | 1,100,807 | | | 0.51 | | | | — | | | | — | | | 199,816 | | | 0.60 | | | 900,885 | | | 0.49 | | | | — | | | | — | | | 1,100,701 | | | 0.51 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | U.S. Treasury and other U.S. government agencies bonds | | | — | | | | — | | | 59,330 | | | 2.09 | | | | — | | | | — | | | | — | | | | — | | | 59,330 | | | 2.09 | | | 57,609 | | | 1.97 | | | 999 | | | 8.62 | | | 80,123 | | | 3.61 | | | | — | | | | — | | | 138,731 | | | 2.97 | | Mortgage-backed securities | | | — | | | | — | | | 96,389 | | | 2.25 | | | 44,070 | | | 2.32 | | | 917,153 | | | 2.45 | | | 1,057,612 | | | 2.42 | | | 5,106 | | | 1.65 | | | 87,340 | | | 2.27 | | | 111,888 | | | 2.35 | | | 866,923 | | | 2.61 | | | 1,071,257 | | | 2.55 | | Asset-backed securities | | | — | | | | — | | | 57,160 | | | 6.27 | | | 454,342 | | | 2.48 | | | 853,690 | | | 2.14 | | | 1,365,192 | | | 2.42 | | | 11,458 | | | 1.65 | | | 44,336 | | | 1.68 | | | 312,244 | | | 3.72 | | | 1,763,174 | | | 2.41 | | | 2,131,212 | | | 2.58 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total foreign | | | — | | | | — | | | 212,879 | | | 3.29 | | | 498,412 | | | 2.46 | | | 1,770,843 | | | 2.30 | | | 2,482,134 | | | 2.42 | | | 74,173 | | | 1.90 | | | 132,675 | | | 2.12 | | | 504,255 | | | 3.40 | | | 2,630,097 | | | 2.48 | | | 3,341,200 | | | 2.59 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | — | | | — | % | | ¥ | 212,879 | | | 3.29 | % | | ¥ | 1,599,219 | | | 1.12 | % | | ¥ | 1,770,843 | | | 2.30 | % | | ¥ | 3,582,941 | | | 1.83 | % | | ¥ | 74,173 | | | 1.90 | % | | ¥ | 332,491 | | | 1.21 | % | | ¥ | 1,405,140 | | | 1.53 | % | | ¥ | 2,630,097 | | | 2.48 | % | | ¥ | 4,441,901 | | | 2.07 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other than U.S. Treasury and other U.S. government agencies bonds and Japanese national government bonds, none of the individual issuers held in our investment securities portfolio exceeded 10% of the consolidated total Mitsubishi UFJ Financial Group shareholders’ equity at March 31, 2018.2019. 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, 2018.2019. Classification of loans by industry is based on the industry segment loan classification as defined by the Bank of Japan for regulatory reporting purposes and is not necessarily based on the use of proceeds: | | | | At March 31, | | | At March 31, | | | | | 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Domestic: | | | | | | | | | | | | | | | | | | | | | Manufacturing | | ¥ | 11,540,753 | | | ¥ | 11,703,428 | | | ¥ | 12,158,642 | | | ¥ | 11,796,803 | | | ¥ | 10,876,625 | | | ¥ | 11,703,428 | | | ¥ | 12,158,642 | | | ¥ | 11,796,803 | | | ¥ | 10,876,625 | | | ¥ | 11,153,996 | | Construction | | | 980,877 | | | 977,892 | | | 913,180 | | | 819,262 | | | 781,262 | | | | 977,892 | | | 913,180 | | | 819,262 | | | 781,262 | | | 717,664 | | Real estate | | | 10,989,562 | | | 10,911,240 | | | 11,175,130 | | | 11,622,372 | | | 11,763,769 | | | | 10,911,240 | | | 11,175,130 | | | 11,622,372 | | | 11,763,769 | | | 11,706,419 | | Services | | | 2,693,561 | | | 2,684,355 | | | 2,503,446 | | | 2,549,300 | | | 2,689,086 | | | | 2,684,355 | | | 2,503,446 | | | 2,549,300 | | | 2,689,086 | | | 2,653,191 | | Wholesale and retail | | | 8,475,143 | | | 8,345,481 | | | 7,891,364 | | | 7,970,579 | | | 7,989,080 | | | | 8,345,481 | | | 7,891,364 | | | 7,970,579 | | | 7,989,080 | | | 7,643,397 | | Banks and other financial institutions(1) | | | 3,985,106 | | | 4,329,964 | | | 5,146,932 | | | 5,223,906 | | | 4,818,364 | | | | 4,329,964 | | | 5,146,932 | | | 5,223,906 | | | 4,818,364 | | | 5,213,020 | | Communication and information services | | | 1,443,466 | | | 1,527,811 | | | 1,509,858 | | | 1,634,584 | | | 1,551,533 | | | | 1,527,811 | | | 1,509,858 | | | 1,634,584 | | | 1,551,533 | | | 1,510,596 | | Other industries | | | 13,496,763 | | | 12,674,004 | | | 14,739,826 | | | 8,898,712 | | | 8,939,291 | | | | 12,674,004 | | | 14,739,826 | | | 8,898,712 | | | 8,939,291 | | | 8,756,483 | | Consumer | | | 16,921,352 | | | 16,720,590 | | | 16,397,560 | | | 16,491,010 | | | 16,287,332 | | | | 16,720,590 | | | 16,397,560 | | | 16,491,010 | | | 16,287,332 | | | 15,802,024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | | 70,526,583 | | | 69,874,765 | | | 72,435,938 | | | 67,006,528 | | | 65,696,342 | | | | 69,874,765 | | | 72,435,938 | | | 67,006,528 | | | 65,696,342 | | | 65,156,790 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign: | | | | | | | | | | | | | | | | | | | | | Governments and official institutions | | | 811,475 | | | 1,052,051 | | | 1,125,031 | | | 1,037,795 | | | 920,538 | | | | 1,052,051 | | | 1,125,031 | | | 1,037,795 | | | 920,538 | | | 841,695 | | Banks and other financial institutions(1) | | | 9,792,255 | | | 11,973,021 | | | 13,654,335 | | | 13,844,964 | | | 12,851,570 | | | | 11,973,021 | | | 13,654,335 | | | 13,844,964 | | | 12,851,570 | | | 11,641,373 | | Commercial and industrial | | | 24,533,816 | | | 29,593,255 | | | 30,056,474 | | | 30,279,641 | | | 30,591,173 | | | | 29,593,255 | | | 30,056,474 | | | 30,279,641 | | | 30,591,173 | | | 31,951,169 | | Other | | | 4,872,372 | | | 6,065,782 | | | 5,818,747 | | | 6,334,551 | | | 7,270,928 | | | | 6,065,782 | | | 5,818,747 | | | 6,334,551 | | | 7,270,928 | | | 7,597,502 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total foreign | | | 40,009,918 | | | 48,684,109 | | | 50,654,587 | | | 51,496,951 | | | 51,634,209 | | | | 48,684,109 | | | 50,654,587 | | | 51,496,951 | | | 51,634,209 | | | 52,031,739 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 110,536,501 | | | 118,558,874 | | | 123,090,525 | | | 118,503,479 | | | 117,330,551 | | | | 118,558,874 | | | 123,090,525 | | | 118,503,479 | | | 117,330,551 | | | 117,188,529 | | Unearned income, unamortized premiums—net and deferred loan fees—net | | | (260,090 | ) | | (293,672 | ) | | (299,567 | ) | | (288,507 | ) | | (294,656 | ) | | | (293,672 | ) | | (299,567 | ) | | (288,507 | ) | | (294,656 | ) | | (304,588 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total(2) | | ¥ | 110,276,411 | | | ¥ | 118,265,202 | | | ¥ | 122,790,958 | | | ¥ | 118,214,972 | | | ¥ | 117,035,895 | | | ¥ | 118,265,202 | | | ¥ | 122,790,958 | | | ¥ | 118,214,972 | | | ¥ | 117,035,895 | | | ¥ | 116,883,941 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | Loans toso-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 ¥46,635 million, ¥88,927 million, ¥100,889 million, ¥185,940 million, ¥226,923 million and ¥226,923¥291,794 million at March 31, 2014, 2015, 2016, 2017, 2018 and 2018,2019, respectively, which are carried at the lower of cost or fair value. |
Maturities and Sensitivities of Loans to Changes in Interest Rates The following table shows the maturities of our loan portfolio at March 31, 2018:2019: | | | | Maturity | | | Maturity | | | | | One year or less | | | One to five years | | | Over five years | | | Total | | | One year or less | | | One to five years | | | Over five years | | | Total | | | | | (in millions) | | | (in millions) | | Domestic: | | | | | | | | | | | | | | | | | Manufacturing | | ¥ | 5,755,042 | | | ¥ | 3,337,562 | | | ¥ | 1,784,021 | | | ¥ | 10,876,625 | | | ¥ | 6,212,225 | | | ¥ | 3,356,894 | | | ¥ | 1,584,877 | | | ¥ | 11,153,996 | | Construction | | | 433,696 | | | | 265,187 | | | | 82,379 | | | | 781,262 | | | | 396,243 | | | | 225,160 | | | | 96,261 | | | | 717,664 | | Real estate | | | 2,700,520 | | | | 4,028,924 | | | | 5,034,325 | | | | 11,763,769 | | | | 2,828,822 | | | | 4,000,616 | | | | 4,876,981 | | | | 11,706,419 | | Services | | | 1,218,534 | | | | 1,028,196 | | | | 442,356 | | | | 2,689,086 | | | | 1,151,797 | | | | 1,044,960 | | | | 456,434 | | | | 2,653,191 | | Wholesale and retail | | | 5,307,471 | | | | 2,002,391 | | | | 679,218 | | | | 7,989,080 | | | | 5,430,996 | | | | 1,735,157 | | | | 477,244 | | | | 7,643,397 | | Banks and other financial institutions | | | 3,073,154 | | | | 1,232,652 | | | | 512,558 | | | | 4,818,364 | | | | 3,374,489 | | | | 1,218,358 | | | | 620,173 | | | | 5,213,020 | | Communication and information services | | | 435,506 | | | | 683,481 | | | | 432,546 | | | | 1,551,533 | | | | 328,360 | | | | 751,835 | | | | 430,401 | | | | 1,510,596 | | Other industries | | | 5,628,641 | | | | 2,007,878 | | | | 1,302,772 | | | | 8,939,291 | | | | 5,563,384 | | | | 1,994,653 | | | | 1,198,446 | | | | 8,756,483 | | Consumer | | | 2,366,078 | | | | 3,210,899 | | | | 10,710,355 | | | | 16,287,332 | | | | 2,166,861 | | | | 3,008,857 | | | | 10,626,306 | | | | 15,802,024 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Domestic | | | 26,918,642 | | | | 17,797,170 | | | | 20,980,530 | | | | 65,696,342 | | | | 27,453,177 | | | | 17,336,490 | | | | 20,367,123 | | | | 65,156,790 | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign | | | 20,086,876 | | | | 19,423,923 | | | | 12,123,410 | | | | 51,634,209 | | | | 20,923,818 | | | | 18,992,979 | | | | 12,114,942 | | | | 52,031,739 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 47,005,518 | | | ¥ | 37,221,093 | | | ¥ | 33,103,940 | | | ¥ | 117,330,551 | | | ¥ | 48,376,995 | | | ¥ | 36,329,469 | | | ¥ | 32,482,065 | | | ¥ | 117,188,529 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The above loans due after one year which had predetermined interest rates and floating or adjustable interest rates at March 31, 20182019 are shown below: | | | | Domestic | | | Foreign | | | Total | | | Domestic | | | Foreign | | | Total | | | | | (in millions) | | | | | | (in millions) | | | | | Predetermined rate | | ¥ | 16,307,036 | | | ¥ | 4,293,127 | | | ¥ | 20,600,163 | | | ¥ | 17,217,580 | | | ¥ | 4,668,477 | | | ¥ | 21,886,057 | | Floating or adjustable rate | | | 22,470,664 | | | | 27,254,206 | | | | 49,724,870 | | | | 20,486,033 | | | | 26,439,444 | | | | 46,925,477 | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 38,777,700 | | | ¥ | 31,547,333 | | | ¥ | 70,325,033 | | | ¥ | 37,703,613 | | | ¥ | 31,107,921 | | | ¥ | 68,811,534 | | | | | | | | | | | | | | | | | | | | |
Nonaccrual, Past Due and Restructured Loans We generally discontinue the accrual of interest income on loans when substantial doubt exists as to the full and timely collection of either principal or interest, when principal or interest is contractually past due one month or more with respect to loans within all classes of the Commercial segment, three months or more with respect to loans within the Card, MUFG Americas Holdings, and Krungsri segments, and six months or more with respect to loans within the Residential segment. Generally, accruing loans that are modified in a troubled debt restructuring (“TDR”) remain as accruing loans subsequent to the modification, and nonaccrual loans remain as nonaccrual. However, if a nonaccrual loan has been restructured as a TDR, the borrower is not delinquent under the restructured terms, and demonstrates that its financial condition has improved, we may reclassify the loan to accrual status. This determination is generally performed at least once a year through a detailed internal credit rating review process. Once a nonaccrual loan is deemed to be a TDR, we will continue to designate the loan as a TDR even if the loan is reclassified to accrual status. 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, 2018,2019, based on the domicile and type of industry of the borrowers: | | | | At March 31, | | | At March 31, | | | | | 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Nonaccrual loans: | | | | | | | | | | | | | | | | | | | | | Domestic: | | | | | | | | | | | | | | | | | | | | | Manufacturing | | ¥ | 167,962 | | | ¥ | 119,052 | | | ¥ | 372,875 | | | ¥ | 185,124 | | | ¥ | 77,188 | | | ¥ | 119,052 | | | ¥ | 372,875 | | | ¥ | 185,124 | | | ¥ | 77,188 | | | ¥ | 65,921 | | Construction | | 30,202 | | | 20,150 | | | 15,256 | | | 15,248 | | | 10,922 | | | 20,150 | | | 15,256 | | | 15,248 | | | 10,922 | | | 9,877 | | Real estate | | 154,766 | | | 85,625 | | | 66,210 | | | 50,142 | | | 37,853 | | | 85,625 | | | 66,210 | | | 50,142 | | | 37,853 | | | 26,513 | | Services | | 72,851 | | | 54,801 | | | 41,056 | | | 38,977 | | | 31,733 | | | 54,801 | | | 41,056 | | | 38,977 | | | 31,733 | | | 27,115 | | Wholesale and retail | | 212,356 | | | 158,454 | | | 132,858 | | | 131,545 | | | 108,639 | | | 158,454 | | | 132,858 | | | 131,545 | | | 108,639 | | | 94,990 | | Banks and other financial institutions | | 7,234 | | | 5,715 | | | 675 | | | 2,432 | | | 1,145 | | | 5,715 | | | 675 | | | 2,432 | | | 1,145 | | | 898 | | Communication and information services | | 24,956 | | | 23,204 | | | 20,270 | | | 18,711 | | | 13,815 | | | 23,204 | | | 20,270 | | | 18,711 | | | 13,815 | | | 11,955 | | Other industries | | 36,861 | | | 19,094 | | | 29,715 | | | 10,352 | | | 37,677 | | | 19,094 | | | 29,715 | | | 10,352 | | | 37,677 | | | 26,110 | | Consumer | | 227,476 | | | 199,665 | | | 174,106 | | | 161,680 | | | 149,491 | | | 199,665 | | | 174,106 | | | 161,680 | | | 149,491 | | | 143,668 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | 934,664 | | | 685,760 | | | 853,021 | | | 614,211 | | | 468,463 | | | 685,760 | | | 853,021 | | | 614,211 | | | 468,463 | | | 407,047 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign: | | | | | | | | | | | | | | | | | | | | | Governments and official institutions | | 43 | | | 40 | | | 132 | | | | — | | | | — | | | 40 | | | 132 | | | | — | | | | — | | | | — | | Banks and other financial institutions | | 24,091 | | | 7,372 | | | 14,337 | | | 5,902 | | | 1,716 | | | 7,372 | | | 14,337 | | | 5,902 | | | 1,716 | | | 1,160 | | Commercial and industrial | | 87,808 | | | 144,609 | | | 264,163 | | | 301,685 | | | 215,601 | | | 144,609 | | | 264,163 | | | 301,685 | | | 215,601 | | | 219,669 | | Other | | 68,840 | | | 75,916 | | | 68,514 | | | 64,834 | | | 67,869 | | | 75,916 | | | 68,514 | | | 64,834 | | | 67,869 | | | 78,780 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total foreign | | 180,782 | | | 227,937 | | | 347,146 | | | 372,421 | | | 285,186 | | | 227,937 | | | 347,146 | | | 372,421 | | | 285,186 | | | 299,609 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 1,115,446 | | | ¥ | 913,697 | | | ¥ | 1,200,167 | | | ¥ | 986,632 | | | ¥ | 753,649 | | | ¥ | 913,697 | | | ¥ | 1,200,167 | | | ¥ | 986,632 | | | ¥ | 753,649 | | | ¥ | 706,656 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Restructured loans: | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | 718,027 | | | ¥ | 735,348 | | | ¥ | 459,294 | | | ¥ | 682,041 | | | ¥ | 557,368 | | | ¥ | 735,348 | | | ¥ | 459,294 | | | ¥ | 682,041 | | | ¥ | 557,368 | | | ¥ | 511,151 | | Foreign | | 153,204 | | | 144,089 | | | 166,240 | | | 158,784 | | | 137,674 | | | 144,089 | | | 166,240 | | | 158,784 | | | 137,674 | | | 127,931 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 871,231 | | | ¥ | 879,437 | | | ¥ | 625,534 | | | ¥ | 840,825 | | | ¥ | 695,042 | | | ¥ | 879,437 | | | ¥ | 625,534 | | | ¥ | 840,825 | | | ¥ | 695,042 | | | ¥ | 639,082 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accruing loans contractually past due 90 days or more: | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | 47,759 | | | ¥ | 48,050 | | | ¥ | 47,919 | | | ¥ | 37,650 | | | ¥ | 17,356 | | | ¥ | 48,050 | | | ¥ | 47,919 | | | ¥ | 37,650 | | | ¥ | 17,356 | | | ¥ | 13,621 | | Foreign(1) | | 961 | | | 360 | | | 314 | | | 3,430 | | | 2,408 | | | 360 | | | 314 | | | 3,430 | | | 2,408 | | | 2,778 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 48,720 | | | ¥ | 48,410 | | | ¥ | 48,233 | | | ¥ | 41,080 | | | ¥ | 19,764 | | | ¥ | 48,410 | | | ¥ | 48,233 | | | ¥ | 41,080 | | | ¥ | 19,764 | | | ¥ | 16,399 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total(2) | | ¥ | 2,035,397 | | | ¥ | 1,841,544 | | | ¥ | 1,873,934 | | | ¥ | 1,868,537 | | | ¥ | 1,468,455 | | | ¥ | 1,841,544 | | | ¥ | 1,873,934 | | | ¥ | 1,868,537 | | | ¥ | 1,468,455 | | | ¥ | 1,362,137 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | Foreign accruing loans contractually past due 90 days or more do not include ¥13,068 million, ¥5,666 million, ¥1,930 million, ¥1,514 million, ¥549 million and ¥549¥234 million of Federal Deposit Insurance Corporation (“FDIC”) covered loans held by MUFG Americas Holdings which are subject to the guidance on loans and debt securities acquired with deteriorated credit quality at March 31, 2014, 2015, 2016, 2017, 2018 and 2018,2019, respectively. |
| (2) | | The sum of nonaccrual loans, restructured loans and accruing loans contractually past due 90 days or more includes large groups of smaller-balance homogenous loans that have not been modified and are collectively evaluated for impairment, and accruing loans contractually past due 90 days or more. However, these loans are excluded from the impaired loan balances of ¥1,715,850¥1,331,123 million and ¥1,331,123¥1,209,791 million, at March 31, 20172018 and 2018,2019, respectively, disclosed in Note 4 to our consolidated financial statements included elsewhere in this Annual Report. |
Gross interest income which would have been accrued at the original terms on domestic nonaccrual and restructured loans outstanding during the fiscal year ended March 31, 20182019 was approximately ¥38.3¥33.8 billion, of which ¥14.0¥16.3 billion was included in the results of operations for the fiscal year. Gross interest income which would have been accrued at the original terms on foreign nonaccrual and restructured loans outstanding for the fiscal year ended March 31, 20182019 was approximately ¥28.9¥29.9 billion, of which ¥15.2¥15.9 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, 2016, 2017, 2018 and 2018.2019. Cross-border outstandings are defined, for this purpose, as loans (including accrued interest), acceptances, interest-earning deposits with other banks, other interest-earning investments and any other monetary assets denominated in Japanese yen or othernon-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, 2018,2019, there were no concentrations of loans to a single industry group of borrowers, as defined by the Bank of Japan industry segment loan classifications, which exceeded 10%10 % of our consolidated total loans, except for loans in a category disclosed in the table of loans outstanding above. Credit Risk Management We have a credit rating system, under which borrowers and transactions are graded on a worldwide basis. We calculate probability of default by statistical means and manage our credit portfolio based on this credit rating system. For a detailed description of this system and other elements of our risk management structure, see “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk Management.” | 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, 2018:2019: | | | | Fiscal years ended March 31, | | | Fiscal years ended March 31, | | | | | 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 | | | | | (in millions, except percentages) | | | (in millions, except percentages) | | Allowance for credit losses at beginning of fiscal year | | ¥ | 1,335,987 | | | ¥ | 1,094,420 | | | ¥ | 1,055,479 | | | ¥ | 1,111,130 | | | ¥ | 1,182,188 | | | ¥ | 1,094,420 | | | ¥ | 1,055,479 | | | ¥ | 1,111,130 | | | ¥ | 1,182,188 | | | ¥ | 764,124 | | Provision for (reversal of) credit losses | | | (106,371 | ) | | 86,998 | | | 231,862 | | | 253,688 | | | (240,847 | ) | | | 86,998 | | | 231,862 | | | 253,688 | | | (240,847 | ) | | 34,330 | | Charge-offs: | | | | | | | | | | | | | | | | | | | | | Domestic: | | | | | | | | | | | | | | | | | | | | | Manufacturing | | | 52,579 | | | 28,413 | | | 50,813 | | | 30,549 | | | 10,621 | | | | 28,413 | | | 50,813 | | | 30,549 | | | 10,621 | | | 10,525 | | Construction | | | 2,985 | | | 2,066 | | | 1,617 | | | 647 | | | 789 | | | | 2,066 | | | 1,617 | | | 647 | | | 789 | | | 992 | | Real estate | | | 17,124 | | | 8,571 | | | 1,857 | | | 2,318 | | | 1,305 | | | | 8,571 | | | 1,857 | | | 2,318 | | | 1,305 | | | 619 | | Services | | | 13,555 | | | 9,447 | | | 5,102 | | | 5,225 | | | 1,867 | | | | 9,447 | | | 5,102 | | | 5,225 | | | 1,867 | | | 4,207 | | Wholesale and retail | | | 39,218 | | | 37,477 | | | 32,910 | | | 17,402 | | | 20,979 | | | | 37,477 | | | 32,910 | | | 17,402 | | | 20,979 | | | 20,901 | | Banks and other financial institutions | | | 243 | | | 745 | | | 35 | | | | — | | | 650 | | | | 745 | | | 35 | | | | — | | | 650 | | | 2,523 | | Communication and information services | | | 5,061 | | | 3,668 | | | 1,173 | | | 2,903 | | | 1,254 | | | | 3,668 | | | 1,173 | | | 2,903 | | | 1,254 | | | 11,309 | | Other industries | | | 3,312 | | | 3,158 | | | 953 | | | 767 | | | 29,839 | | | | 3,158 | | | 953 | | | 767 | | | 29,839 | | | 2,758 | | Consumer | | | 27,888 | | | 27,148 | | | 15,847 | | | 22,877 | | | 26,786 | | | | 27,148 | | | 15,847 | | | 22,877 | | | 26,786 | | | 24,795 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total domestic | | | 161,965 | | | 120,693 | | | 110,307 | | | 82,688 | | | 94,090 | | | | 120,693 | | | 110,307 | | | 82,688 | | | 94,090 | | | 78,629 | | Total foreign | | | 29,133 | | | 56,468 | | | 88,464 | | | 131,070 | | | 138,019 | | | | 56,468 | | | 88,464 | | | 131,070 | | | 138,019 | | | 95,412 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 191,098 | | | 177,161 | | | 198,771 | | | 213,758 | | | 232,109 | | | | 177,161 | | | 198,771 | | | 213,758 | | | 232,109 | | | 174,041 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Recoveries: | | | | | | | | | | | | | | | | | | | | | Domestic | | | 27,105 | | | 22,083 | | | 22,357 | | | 21,954 | | | 22,261 | | | | 22,083 | | | 22,357 | | | 21,954 | | | 22,261 | | | 15,467 | | Foreign | | | 10,245 | | | 4,412 | | | 19,455 | | | 21,995 | | | 28,849 | | | | 4,412 | | | 19,455 | | | 21,995 | | | 28,849 | | | 28,650 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 37,350 | | | 26,495 | | | 41,812 | | | 43,949 | | | 51,110 | | | | 26,495 | | | 41,812 | | | 43,949 | | | 51,110 | | | 44,117 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net charge-offs | | | 153,748 | | | 150,666 | | | 156,959 | | | 169,809 | | | 180,999 | | | | 150,666 | | | 156,959 | | | 169,809 | | | 180,999 | | | 129,924 | | Others(1) | | | 18,552 | | | 24,727 | | | (19,252 | ) | | (12,821 | ) | | 3,782 | | | | 24,727 | | | (19,252 | ) | | (12,821 | ) | | 3,782 | | | (10,346 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for credit losses at end of fiscal year | | ¥ | 1,094,420 | | | ¥ | 1,055,479 | | | ¥ | 1,111,130 | | | ¥ | 1,182,188 | | | ¥ | 764,124 | | | ¥ | 1,055,479 | | | ¥ | 1,111,130 | | | ¥ | 1,182,188 | | | ¥ | 764,124 | | | ¥ | 658,184 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for credit losses applicable to foreign activities: | | | | | | | | | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 207,111 | | | ¥ | 184,460 | | | ¥ | 267,293 | | | ¥ | 416,221 | | | ¥ | 387,250 | | | ¥ | 184,460 | | | ¥ | 267,293 | | | ¥ | 416,221 | | | ¥ | 387,250 | | | ¥ | 303,719 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 184,460 | | | ¥ | 267,293 | | | ¥ | 416,221 | | | ¥ | 387,250 | | | ¥ | 303,719 | | | ¥ | 267,293 | | | ¥ | 416,221 | | | ¥ | 387,250 | | | ¥ | 303,719 | | | ¥ | 303,867 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Provision for (reversal of) credit losses | | ¥ | (21,727 | ) | | ¥ | 110,494 | | | ¥ | 237,189 | | | ¥ | 92,689 | | | ¥ | 21,889 | | | Provision for credit losses | | | ¥ | 110,494 | | | ¥ | 237,189 | | | ¥ | 92,689 | | | ¥ | 21,889 | | | ¥ | 77,338 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ratio of net charge-offs during the fiscal year to average loans outstanding during the fiscal year | | | 0.15 | % | | 0.13 | % | | 0.13 | % | | 0.14 | % | | 0.15 | % | | | 0.13 | % | | 0.13 | % | | 0.14 | % | | 0.15 | % | | 0.11 | % |
Note: | (1) | | Others principally include losses (gains) from foreign exchange translation. |
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, 2018:2019: | | | | At March 31, | | | At March 31, | | | | | 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 | | | | | Amount | | % of
loans in
each
category
to total
loans | | Amount | | % of
loans in
each
category
to total
loans | | Amount | | % of
loans in
each
category
to total
loans | | Amount | | % of
loans in
each
category
to total
loans | | Amount | | % of
loans in
each
category
to total
loans | | | Amount | | % of
loans in
each
category
to total
loans | | Amount | | % of
loans in
each
category
to total
loans | | Amount | | % of
loans in
each
category
to total
loans | | Amount | | % of
loans in
each
category
to total
loans | | Amount | | % of
loans in
each
category
to total
loans | | | | | (in millions, except percentages) | | | (in millions, except percentages) | | Domestic: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Manufacturing | | ¥ | 239,461 | | | 10.44 | % | | ¥ | 240,013 | | | 9.87 | % | | ¥ | 321,412 | | | 9.88 | % | | ¥ | 409,018 | | | 9.95 | % | | ¥ | 179,799 | | | 9.27 | % | | ¥ | 240,013 | | | 9.87 | % | | ¥ | 321,412 | | | 9.88 | % | | ¥ | 409,018 | | | 9.95 | % | | ¥ | 179,799 | | | 9.27 | % | | ¥ | 108,463 | | | 9.52 | % | Construction | | 25,447 | | | 0.89 | | | 17,318 | | | 0.82 | | | 9,813 | | | 0.74 | | | 12,097 | | | 0.69 | | | 7,934 | | | 0.67 | | | 17,318 | | | 0.82 | | | 9,813 | | | 0.74 | | | 12,097 | | | 0.69 | | | 7,934 | | | 0.67 | | | 6,856 | | | 0.61 | | Real estate | | 81,685 | | | 9.94 | | | 70,423 | | | 9.20 | | | 31,960 | | | 9.08 | | | 33,579 | | | 9.81 | | | 21,062 | | | 10.03 | | | 70,423 | | | 9.20 | | | 31,960 | | | 9.08 | | | 33,579 | | | 9.81 | | | 21,062 | | | 10.03 | | | 15,664 | | | 9.99 | | Services | | 69,511 | | | 2.44 | | | 51,760 | | | 2.26 | | | 34,430 | | | 2.03 | | | 42,023 | | | 2.15 | | | 29,518 | | | 2.29 | | | 51,760 | | | 2.26 | | | 34,430 | | | 2.03 | | | 42,023 | | | 2.15 | | | 29,518 | | | 2.29 | | | 24,473 | | | 2.26 | | Wholesale and retail | | 207,281 | | | 7.67 | | | 164,729 | | | 7.04 | | | 116,450 | | | 6.41 | | | 138,119 | | | 6.73 | | | 99,985 | | | 6.81 | | | 164,729 | | | 7.04 | | | 116,450 | | | 6.41 | | | 138,119 | | | 6.73 | | | 99,985 | | | 6.81 | | | 93,112 | | | 6.52 | | Banks and other financial institutions | | 21,110 | | | 3.61 | | | 30,597 | | | 3.65 | | | 12,840 | | | 4.18 | | | 14,732 | | | 4.41 | | | 7,636 | | | 4.11 | | | 30,597 | | | 3.65 | | | 12,840 | | | 4.18 | | | 14,732 | | | 4.41 | | | 7,636 | | | 4.11 | | | 6,198 | | | 4.45 | | Communication and information services | | 20,196 | | | 1.31 | | | 20,130 | | | 1.29 | | | 14,371 | | | 1.23 | | | 13,902 | | | 1.38 | | | 17,300 | | | 1.32 | | | 20,130 | | | 1.29 | | | 14,371 | | | 1.23 | | | 13,902 | | | 1.38 | | | 17,300 | | | 1.32 | | | 8,327 | | | 1.29 | | Other industries | | 59,770 | | | 12.20 | | | 64,443 | | | 10.69 | | | 48,870 | | | 11.97 | | | 25,156 | | | 7.50 | | | 13,543 | | | 7.62 | | | 64,443 | | | 10.69 | | | 48,870 | | | 11.97 | | | 25,156 | | | 7.50 | | | 13,543 | | | 7.62 | | | 15,398 | | | 7.47 | | Consumer | | 177,384 | | | 15.30 | | | 126,362 | | | 14.11 | | | 102,351 | | | 13.33 | | | 106,312 | | | 13.92 | | | 80,238 | | | 13.88 | | | 126,362 | | | 14.11 | | | 102,351 | | | 13.33 | | | 106,312 | | | 13.92 | | | 80,238 | | | 13.88 | | | 75,271 | | | 13.49 | | Foreign: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Governments and official institutions | | 28,599 | | | 0.73 | | | 25,136 | | | 0.89 | | | 22,950 | | | 0.91 | | | 25,098 | | | 0.88 | | | 751 | | | 0.78 | | | 25,136 | | | 0.89 | | | 22,950 | | | 0.91 | | | 25,098 | | | 0.88 | | | 751 | | | 0.78 | | | 367 | | | 0.72 | | Banks and other financial institutions | | 26,921 | | | 8.86 | | | 18,325 | | | 10.10 | | | 24,471 | | | 11.09 | | | 20,717 | | | 11.68 | | | 10,452 | | | 10.95 | | | 18,325 | | | 10.10 | | | 24,471 | | | 11.09 | | | 20,717 | | | 11.68 | | | 10,452 | | | 10.95 | | | 6,970 | | | 9.93 | | Commercial and industrial | | 119,204 | | | 22.20 | | | 176,823 | | | 24.96 | | | 307,050 | | | 24.42 | | | 263,429 | | | 25.55 | | | 197,653 | | | 26.07 | | | 176,823 | | | 24.96 | | | 307,050 | | | 24.42 | | | 263,429 | | | 25.55 | | | 197,653 | | | 26.07 | | | 196,237 | | | 27.27 | | Other | | 9,736 | | | 4.41 | | | 47,009 | | | 5.12 | | | 61,750 | | | 4.73 | | | 78,006 | | | 5.35 | | | 94,863 | | | 6.20 | | | 47,009 | | | 5.12 | | | 61,750 | | | 4.73 | | | 78,006 | | | 5.35 | | | 94,863 | | | 6.20 | | | 100,293 | | | 6.48 | | Unallocated | | 8,115 | | | | — | | | 2,411 | | | | — | | | 2,412 | | | | — | | | | — | | | | — | | | 3,390 | | | | — | | | 2,411 | | | | — | | | 2,412 | | | | — | | | | — | | | | — | | | 3,390 | | | | — | | | 555 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 1,094,420 | | | 100.00 | % | | ¥ | 1,055,479 | | | 100.00 | % | | ¥ | 1,111,130 | | | 100.00 | % | | ¥ | 1,182,188 | | | 100.00 | % | | ¥ | 764,124 | | | 100.00 | % | | ¥ | 1,055,479 | | | 100.00 | % | | ¥ | 1,111,130 | | | 100.00 | % | | ¥ | 1,182,188 | | | 100.00 | % | | ¥ | 764,124 | | | 100.00 | % | | ¥ | 658,184 | | | 100.00 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance as a percentage of loans | | 0.99 | % | | | | 0.89 | % | | | | 0.90 | % | | | | 1.00 | % | | | | 0.65 | % | | | | 0.89 | % | | | | 0.90 | % | | | | 1.00 | % | | | | 0.65 | % | | | | 0.56 | % | | | Allowance as a percentage of nonaccrual loans, restructured loans and accruing loans contractually past due 90 days or more | | 53.77 | % | | | | 57.31 | % | | | | 59.29 | % | | | | 63.27 | % | | | | 52.04 | % | | | | 57.31 | % | | | | 59.29 | % | | | | 63.27 | % | | | | 52.04 | % | | | | 48.32 | % | | |
While the allowance for credit losses contains amounts allocated to components of specifically identified loans as well as a group on a portfolio of loans, the allowance for credit losses covers the credit losses of the entire loan portfolio and the allocations shown above are not intended to be restricted to the specific loan category. Accordingly, as the evaluation of credit risk changes, allocations of the allowance will be adjusted to reflect current conditions and various other factors. 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, 2016, 2017, 2018 and 2018:2019: | | | | Fiscal years ended March 31, | | | Fiscal years ended March 31, | | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | Average
amount | | | Average
rate | | Average
amount | | | Average
rate | | Average
amount | | Average
rate | | | Average
amount | | | Average
rate | | Average
amount | | | Average
rate | | Average
amount | | Average
rate | | | | | (in millions, except percentages) | | | (in millions, except percentages) | | Domestic offices: | | | | | | | | | | | | | | | | | | | | | | | | | Non-interest-bearing demand deposits | | ¥ | 16,771,050 | | | | — | % | | ¥ | 20,034,315 | | | | — | % | | ¥ | 22,701,413 | | | — | % | | ¥ | 20,034,315 | | | | — | % | | ¥ | 22,701,413 | | | | — | % | | ¥ | 24,429,358 | | | — | % | Interest-bearing demand deposits | | | 62,669,203 | | | | 0.03 | | | 69,961,568 | | | | 0.02 | | | 76,104,436 | | | 0.03 | | | | 69,961,568 | | | | 0.02 | | | 76,104,436 | | | | 0.03 | | | 80,318,814 | | | 0.05 | | Deposits at notice | | | 1,204,182 | | | | 0.02 | | | 1,704,160 | | | | 0.00 | | | 1,773,780 | | | 0.00 | | | | 1,704,160 | | | | 0.00 | | | 1,773,780 | | | | 0.00 | | | 1,658,467 | | | 0.01 | | Time deposits | | | 40,389,469 | | | | 0.12 | | | 41,782,117 | | | | 0.08 | | | 41,501,996 | | | 0.08 | | | | 41,782,117 | | | | 0.08 | | | 41,501,996 | | | | 0.08 | | | 40,670,338 | | | 0.07 | | Certificates of deposit | | | 6,133,456 | | | | 0.08 | | | 3,708,639 | | | | 0.02 | | | 3,760,848 | | | 0.01 | | | | 3,708,639 | | | | 0.02 | | | 3,760,848 | | | | 0.01 | | | 2,014,290 | | | 0.01 | | Foreign offices: | | | | | | | | | | | | | | | | | | | | | | | | | Non-interest-bearing demand deposits | | | 5,711,170 | | | | — | | | 5,636,431 | | | | — | | | 5,477,038 | | | | — | | | | 5,636,431 | | | | — | | | 5,477,038 | | | | — | | | 5,356,424 | | | | — | | Interest-bearing deposits, principally time deposits and certificates of deposit | | | 41,066,208 | | | | 0.68 | | | 38,411,021 | | | | 0.79 | | | 41,421,717 | | | 1.10 | | | | 38,411,021 | | | | 0.79 | | | 41,421,717 | | | | 1.10 | | | 41,945,626 | | | 1.55 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 173,944,738 | | | | | ¥ | 181,238,251 | | | | | ¥ | 192,741,228 | | | | | ¥ | 181,238,251 | | | | | ¥ | 192,741,228 | | | | | ¥ | 196,393,317 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits at notice represent interest-bearing demand deposits which require the depositor to give two or more days notice in advance of withdrawal. The average amounts of total deposits by foreign depositors included in domestic offices for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 were ¥799,134 million, ¥886,274 million, ¥882,772 million and ¥882,772¥820,311 million, respectively. At March 31, 2018,2019, the balances and remaining maturities of time deposits and certificates of deposit (“CDs”) issued by domestic offices in amounts of ¥10 million (approximately U.S.$9490 thousand at the Federal Reserve Bank of New York’s noon buying rate on March 30, 2018)29, 2019) or more and total foreign deposits issued in amounts of U.S.$100,000 or more are shown in the following table: | | | | Time
deposits | | | Certificates of
deposit | | | Total | | | Time
deposits | | | Certificates of
deposit | | | Total | | | | | (in millions) | | | (in millions) | | Domestic offices: | | | | | | | | | | | | | Three months or less | | ¥ | 6,159,725 | | | ¥ | 2,868,180 | | | ¥ | 9,027,905 | | | ¥ | 6,329,422 | | | ¥ | 1,427,695 | | | ¥ | 7,757,117 | | Over three months through six months | | | 4,642,366 | | | | 278,375 | | | | 4,920,741 | | | | 4,038,389 | | | | 146,870 | | | | 4,185,259 | | Over six months through twelve months | | | 9,461,413 | | | | 156,461 | | | | 9,617,874 | | | | 10,298,134 | | | | 148,671 | | | | 10,446,805 | | Over twelve months | | | 3,712,550 | | | | 102,850 | | | | 3,815,400 | | | | 3,439,282 | | | | 71,317 | | | | 3,510,599 | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 23,976,054 | | | ¥ | 3,405,866 | | | ¥ | 27,381,920 | | | ¥ | 24,105,227 | | | ¥ | 1,794,553 | | | ¥ | 25,899,780 | | | | | | | | | | | | | | | | | | | | | Foreign offices | | | | | | ¥ | 22,386,612 | | | | | | | ¥ | 23,858,381 | | | | | | | | | | | | | | | | |
The following table shows certain additional information with respect to our short-term borrowings for the fiscal years ended March 31, 2016, 2017, 2018 and 2018:2019: | | | | | | | | | | | | | | | | Fiscal years ended March 31, | | | | | 2016 | | | 2017 | | | 2018 | | | | | (in millions, except percentages) | | Call money, funds purchased, and payables under repurchase agreements and securities lending transactions(1): | | | | | | | | | | | | | Average balance outstanding during the fiscal year | | ¥ | 35,683,702 | | | ¥ | 32,789,499 | | | ¥ | 28,052,275 | | Maximum balance outstanding at anymonth-end during the fiscal year | | | 39,344,453 | | | | 32,927,067 | | | | 28,757,355 | | Balance at end of fiscal year | | | 29,647,941 | | | | 25,217,396 | | | | 28,757,355 | | Weighted average interest rate during the fiscal year | | | 0.19 | % | | | 0.31 | % | | | 0.61 | % | Weighted average interest rate on balance at end of fiscal year | | | 0.24 | % | | | 0.27 | % | | | 0.61 | % | Due to trust account: | | | | | | | | | | | | | Average balance outstanding during the fiscal year | | ¥ | 1,162,326 | | | ¥ | 3,122,190 | | | ¥ | 3,065,511 | | Maximum balance outstanding at anymonth-end during the fiscal year | | | 6,338,154 | | | | 4,099,102 | | | | 3,386,158 | | Balance at end of fiscal year | | | 6,338,154 | | | | 3,335,155 | | | | 3,386,158 | | Weighted average interest rate during the fiscal year | | | 0.04 | % | | | 0.01 | % | | | 0.00 | % | Weighted average interest rate on balance at end of fiscal year | | | 0.02 | % | | | 0.00 | % | | | 0.00 | % | Other short-term borrowings: | | | | | | | | | | | | | Average balance outstanding during the fiscal year | | ¥ | 11,030,368 | | | ¥ | 6,527,129 | | | ¥ | 7,491,384 | | Maximum balance outstanding at anymonth-end during the fiscal year | | | 11,875,134 | | | | 7,969,521 | | | | 8,705,257 | | Balance at end of fiscal year | | | 9,357,728 | | | | 7,969,521 | | | | 6,881,124 | | Weighted average interest rate during the fiscal year | | | 0.23 | % | | | 0.58 | % | | | 0.92 | % | Weighted average interest rate on balance at end of fiscal year | | | 0.36 | % | | | 0.66 | % | | | 1.29 | % |
Note:
(1) | | The table above reflects changes in presentation that were made to long-term repurchase agreements for the fiscal years ended March 31, 2016 and 2017. For further information, see Note 1 to our consolidated financial statements included elsewhere in this Annual Report. |
| | | | | | | | | | | | | | | | Fiscal years ended March 31, | | | | | 2017 | | | 2018 | | | 2019 | | | | | (in millions, except percentages) | | Call money, funds purchased, and payables under repurchase agreements and securities lending transactions: | | | | | | | | | | | | | Average balance outstanding during the fiscal year | | ¥ | 32,789,499 | | | ¥ | 28,052,275 | | | ¥ | 26,406,493 | | Maximum balance outstanding at anymonth-end during the fiscal year | | | 32,927,067 | | | | 28,757,355 | | | | 31,395,497 | | Balance at end of fiscal year | | | 25,217,396 | | | | 28,757,355 | | | | 28,588,039 | | Weighted average interest rate during the fiscal year | | | 0.31 | % | | | 0.61 | % | | | 1.28 | % | Weighted average interest rate on balance at end of fiscal year | | | 0.27 | % | | | 0.61 | % | | | 1.13 | % | Due to trust account: | | | | | | | | | | | | | Average balance outstanding during the fiscal year | | ¥ | 3,122,190 | | | ¥ | 3,065,511 | | | ¥ | 3,062,655 | | Maximum balance outstanding at anymonth-end during the fiscal year | | | 4,099,102 | | | | 3,386,158 | | | | 3,531,717 | | Balance at end of fiscal year | | | 3,335,155 | | | | 3,386,158 | | | | 2,735,952 | | Weighted average interest rate during the fiscal year | | | 0.01 | % | | | 0.00 | % | | | 0.00 | % | Weighted average interest rate on balance at end of fiscal year | | | 0.00 | % | | | 0.00 | % | | | 0.00 | % | Other short-term borrowings: | | | | | | | | | | | | | Average balance outstanding during the fiscal year | | ¥ | 6,527,129 | | | ¥ | 7,491,384 | | | ¥ | 6,812,706 | | Maximum balance outstanding at anymonth-end during the fiscal year | | | 7,969,521 | | | | 8,705,257 | | | | 7,588,971 | | Balance at end of fiscal year | | | 7,969,521 | | | | 6,881,124 | | | | 6,731,073 | | Weighted average interest rate during the fiscal year | | | 0.58 | % | | | 0.92 | % | | | 1.82 | % | Weighted average interest rate on balance at end of fiscal year | | | 0.66 | % | | | 1.29 | % | | | 1.97 | % |
CONSOLIDATED FINANCIAL STATEMENTS INDEX | | | | | | | | Page | | Report of Independent Registered Public Accounting Firm | | | F-3 | | Consolidated Balance Sheets as of March 31, 20172018 and 20182019 | | | F-4 | | Consolidated Statements of Income for the Fiscal Years ended March 31, 2016, 2017, 2018 and 20182019 | | | F-6 | | Consolidated Statements of Comprehensive Income for the Fiscal Years ended March 31, 2016, 2017, 2018 and 20182019 | | | F-8 | | Consolidated Statements of Equity for the Fiscal Years ended March 31, 2016, 2017, 2018 and 20182019 | | | F-9 | | Consolidated Statements of Cash Flows for the Fiscal Years ended March 31, 2016, 2017, 2018 and 20182019 | | | F-11 | | Notes to Consolidated Financial Statements | | | F-13 | | 1. Basis of Financial Statements and Summary of Significant Accounting Policies | | | F-13 | | 2. Business Developments | | | F-32F-33 | | 3. Investment Securities | | | F-35F-36 | | 4. Loans and Allowance for Credit Losses | | | F-43F-44 | | 5. Premises and Equipment | | | F-61F-62 | | 6. Goodwill and Other Intangible Assets | | | F-62F-63 | | 7. Income Taxes | | | F-65F-66 | | 8. Pledged Assets and Collateral | | | F-71F-70 | | 9. Deposits | | | F-72 | | 10. Call Money and Funds Purchased | | | F-73F-72 | | 11. Due to Trust Account | | | F-73 | | 12. Short-term Borrowings and Long-term Debt | | | F-73 | | 13. Severance Indemnities and Pension Plans | | | F-77F-76 | | 14. Other Assets and Liabilities | | | F-89F-88 | | 15. Offsetting of Derivatives, Repurchase Agreements, and Securities Lending Transactions | | | F-92F-90 | | 16. Repurchase Agreements, and Securities Lending Transactions Accounted for as Secured Borrowings | | | F-94F-91 | | 17. Preferred Stock | | | F-95F-93 | | 18. Common Stock and Capital Surplus | | | F-96F-93 | | 19. Retained Earnings, Legal Reserve and Dividends | | | F-98F-95 | | 20. Accumulated Other Comprehensive Income (Loss) | | | F-100F-97 | | 21. Noncontrolling Interests | | | F-104F-101 | | 22. Regulatory Capital Requirements | | | F-105F-102 | | 23. Earnings per Common Share Applicable to Common Shareholders of MUFG | | | F-112F-109 | | 24. Derivative Financial Instruments | | | F-113F-109 | | 25. Obligations Under Guarantees and OtherOff-balance Sheet Instruments | | | F-120F-116 | | 26. Variable Interest Entities | | | F-124F-120 | | 27. Commitments and Contingent Liabilities | | | F-135F-131 | | 28. Fees and Commissions Income | | | F-137F-133 | | 29. Trading Account Profits and Losses | | | F-137F-134 | | 30. Business Segments | | | F-138F-135 | | 31. Foreign Activities | | | F-141F-138 | | 32. Fair Value | | | F-143F-140 | | 33. Stock-based Compensation | | | F-164F-159 | | 34. Parent Company Only Financial Information | | | F-169F-164 | | 35. SEC Registered Funding Vehicles IssuingNon-dilutive Preferred Securities | | | F-172 | | 36. Subsequent Events
| | | F-173F-167 | |
(This page is intentionally left blank) 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, 20172018 and 2018,2019, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended March 31, 2018,2019, and the related notes (collectively referred to as the “financial statements”) (all expressed in Japanese Yen)yen). In our opinion, the financial statements present fairly, in all material respects, the financial position of the MUFG Group as of March 31, 20172018 and 2018,2019, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2018,2019, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the MUFG Group’s internal control over financial reporting as of March 31, 2018,2019, based on criteria established inInternal Control—Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 12, 2018,10, 2019, expressed an unqualified opinion on the MUFG Group’s internal control over financial reporting. Change in Accounting Principle As discussed in Note 1 to the financial statements, the MUFG Group has changed its method of accounting for unrealized holding gains and losses on equity investment securities on April 1, 2018 due to the adoption of Financial Accounting Standards Board Accounting Standards Update 2016-01, Financial Instruments—Overall (Subtopic 825-10)—Recognition and Measurement of Financial Assets and Financial Liabilities. Basis for Opinion These financial statements are the responsibility of the MUFG Group’s management. Our responsibility is to express an opinion on the MUFG Group’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the MUFG Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte Touche Tohmatsu LLC Tokyo, Japan July 12, 201810, 2019 We have served as the MUFG Group’s auditor since 1976. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 20172018 AND 20182019 | | | | | | | | | | | | | | (in millions) | | 2017 | | 2018 | | | 2018 | | 2019 | | ASSETS | | | | | | | | | Cash and due from banks (Note 8) | | ¥ | 25,682,741 | | | ¥ | 32,648,387 | | | ¥ | 32,648,387 | | | ¥ | 33,924,340 | | Interest-earning deposits in other banks (Notes 8 and 32) | | | 38,327,029 | | | 43,209,662 | | | Interest-earning deposits in other banks (Note 8) | | | | 43,209,662 | | | | 40,646,920 | | | | | | | | | | Cash, due from banks and interest-earning deposits in other banks | | | 64,009,770 | | | 75,858,049 | | | | 75,858,049 | | | | 74,571,260 | | | | | | | | | | Call loans and funds sold | | | 704,237 | | | 896,360 | | | | 896,360 | | | | 1,109,995 | | Receivables under resale agreements (Notes 15 and 32) | | | 8,188,146 | | | 5,725,921 | | | Receivables under securities borrowing transactions (Notes 15 and 32) | | | 11,002,724 | | | 9,268,756 | | | Trading account assets (including assets pledged that secured parties are permitted to sell or repledge of ¥6,175,242 and ¥6,558,587 in 2017 and 2018) (including ¥14,957,135 and ¥15,007,706 measured at fair value under the fair value option in 2017 and 2018) (Notes 8, 15, 24 and 32) | | | 41,320,049 | | | 35,186,689 | | | Receivables under resale agreements (Note 15) | | | | 5,725,921 | | | | 10,974,740 | | Receivables under securities borrowing transactions (Note 15) | | | | 9,268,756 | | | | 2,758,573 | | Trading account assets (including assets pledged that secured parties are permitted to sell or repledge of ¥6,558,587 and ¥7,512,025 in 2018 and 2019) (including ¥15,007,706 and ¥18,597,303 measured at fair value under the fair value option in 2018 and 2019) (Notes 8, 15, 24 and 32) | | | | 35,186,689 | | | | 40,576,618 | | Investment securities (Notes 3, 8 and 32): | | | | | | | | | Available-for-sale securities—carried at fair value (including assets pledged that secured parties are permitted to sell or repledge of ¥11,133,433 and ¥11,360,089 in 2017 and 2018) | | | 39,090,099 | | | 39,504,698 | | | Held-to-maturity securities—carried at amortized cost (including assets pledged that secured parties are permitted to sell or repledge of ¥446,146 and ¥414,857 in 2017 and 2018) (fair value of ¥3,637,751 and ¥3,620,672 in 2017 and 2018) | | | 3,587,321 | | | 3,582,941 | | | Other investment securities | | | 556,161 | | | 566,610 | | | Available-for-sale debt securities (including assets pledged that secured parties are permitted to sell or repledge of ¥11,358,439 and ¥6,981,664 in 2018 and 2019) | | | | 32,833,114 | | | | 33,518,503 | | Held-to-maturity debt securities (including assets pledged that secured parties are permitted to sell or repledge of ¥414,857 and ¥160,828 in 2018 and 2019) (fair value of ¥3,620,672 and ¥4,452,947 in 2018 and 2019) | | | | 3,582,941 | | | | 4,441,901 | | Equity securities (including assets pledged that secured parties are permitted to sell or repledge of ¥1,650 and ¥1,364 in 2018 and 2019) (including ¥6,699,943 and ¥6,413,867 in 2018 and 2019 measured at fair value) | | | | 7,238,194 | | | | 6,977,600 | | | | | | | | | | | | | | | Total investment securities | | | 43,233,581 | | | 43,654,249 | | | | 43,654,249 | | | | 44,938,004 | | | | | | | | | | | | | | | Loans, net of unearned income, unamortized premiums and deferred loan fees (including assets pledged that secured parties are permitted to sell or repledge of ¥1,010,730 and ¥898,186 in 2017 and 2018) (Notes 4 and 8) | | | 118,214,972 | | | 117,035,895 | | | Loans, net of unearned income, unamortized premiums and deferred loan fees (including assets pledged that secured parties are permitted to sell or repledge of ¥898,186 and ¥802,185 in 2018 and 2019) (Notes 4 and 8) | | | | 117,035,895 | | | | 116,883,941 | | Allowance for credit losses (Note 4) | | | (1,182,188 | ) | | (764,124 | ) | | | (764,124 | ) | | | (658,184 | ) | | | | | | | | | | | | | | Net loans | | | 117,032,784 | | | 116,271,771 | | | | 116,271,771 | | | | 116,225,757 | | | | | | | | | | | | | | | Premises and equipment—net (Note 5) | | | 994,271 | | | 1,013,588 | | | | 1,013,588 | | | | 973,600 | | Accrued interest | | | 281,752 | | | 324,624 | | | | 324,624 | | | | 359,648 | | Customers’ acceptance liability | | | 156,208 | | | 183,084 | | | | 183,084 | | | | 247,996 | | Intangible assets—net (Notes 2 and 6) | | | 1,020,359 | | | 1,011,119 | | | | 1,011,119 | | | | 927,196 | | Goodwill (Notes 2 and 6) | | | 450,143 | | | 441,334 | | | | 441,334 | | | | 433,891 | | Deferred tax assets (Notes 7 and 14) | | | 76,452 | | | 68,704 | | | Deferred tax assets (Note 7) | | | | 68,704 | | | | 89,719 | | Other assets (Notes 8, 13, 14 and 32) | | | 8,714,543 | | | 10,666,064 | | | | 10,666,064 | | | | 11,041,902 | | | | | | | | | | | | | | | Total assets | | ¥ | 297,185,019 | | | ¥ | 300,570,312 | | | ¥ | 300,570,312 | | | ¥ | 305,228,899 | | | | | | | | | | | | | | | Assets of consolidated VIEs included in total assets above that can be used only to settle obligations of consolidated VIEs (Note 26) | | | | | | | | | Cash and due from banks | | ¥ | 186 | | | ¥ | 130 | | | ¥ | 130 | | | ¥ | 7 | | Interest-earning deposits in other banks | | | 12,048 | | | 23,161 | | | | 23,161 | | | | 23,655 | | Trading account assets | | | 539,809 | | | 477,583 | | | | 477,583 | | | | 528,690 | | Investment securities | | | 1,637,587 | | | 1,952,683 | | | | 1,952,683 | | | | 1,828,194 | | Loans | | | 12,713,190 | | | 16,550,107 | | | | 16,550,107 | | | | 15,545,328 | | All other assets | | | 271,041 | | | 187,329 | | | | 187,329 | | | | 294,212 | | | | | | | | | | | | | | | Total assets of consolidated VIEs | | ¥ | 15,173,861 | | | ¥ | 19,190,993 | | | ¥ | 19,190,993 | | | ¥ | 18,220,086 | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS—(Continued) AS OF MARCH 31, 20172018 AND 20182019 | | | | | | | | | | | | | | (in millions, except shares) | | 2017 | | 2018 | | | 2018 | | 2019 | | | LIABILITIES AND EQUITY | | | | | | | | | Deposits (Notes 8 and 9): | | | | | | | | | Domestic offices: | | | | | | | | | Non-interest-bearing | | ¥ | 23,098,886 | | | ¥ | 24,406,759 | | | ¥ | 24,406,759 | | | ¥ | 25,222,218 | | Interest-bearing | | | 121,741,545 | | | 125,195,310 | | | | 125,195,310 | | | | 124,859,036 | | Overseas offices: | | | | | | | | | Non-interest-bearing | | | 6,387,219 | | | 5,455,677 | | | | 5,455,677 | | | | 5,220,557 | | Interest-bearing | | | 39,173,973 | | | 40,616,847 | | | | 40,616,847 | | | | 43,978,978 | | | | | | | | | | | | | | | Total deposits | | | 190,401,623 | | | 195,674,593 | | | | 195,674,593 | | | | 199,280,789 | | | | | | | | | | | | | | | Call money and funds purchased (Notes 8 and 10) | | | 1,974,977 | | | 2,452,543 | | | | 2,452,543 | | | | 2,450,320 | | Payables under repurchase agreements (Notes 8, 15 and 16) | | | 17,693,415 | | | 18,134,594 | | | | 18,134,594 | | | | 25,224,632 | | Payables under securities lending transactions (Notes 8, 15 and 16) | | | 5,549,004 | | | 8,170,218 | | | | 8,170,218 | | | | 913,087 | | Due to trust account (Note 11) | | | 3,335,155 | | | 3,386,158 | | | | 3,386,158 | | | | 2,735,952 | | Other short-term borrowings (including ¥112,424 and ¥264,783 measured at fair value under the fair value option in 2017 and 2018) (Notes 8, 12 and 32) | | | 7,969,521 | | | 6,881,124 | | | Other short-term borrowings (including ¥264,783 and ¥289,755 measured at fair value under the fair value option in 2018 and 2019) (Notes 8, 12 and 32) | | | | 6,881,124 | | | | 6,731,073 | | Trading account liabilities (Notes 15, 24 and 32) | | | 18,790,133 | | | 12,222,331 | | | | 12,222,331 | | | | 13,009,492 | | Obligations to return securities received as collateral (Notes 15, 16 and 32) | | | 3,516,232 | | | 3,176,962 | | | | 3,176,962 | | | | 3,087,026 | | Bank acceptances outstanding | | | 156,208 | | | 183,084 | | | | 183,084 | | | | 247,996 | | Accrued interest | | | 147,351 | | | 165,921 | | | | 165,921 | | | | 214,735 | | Long-term debt (including ¥377,423 and ¥333,985 measured at fair value under the fair value option in 2017 and 2018) (Notes 8, 12 and 32) | | | 26,131,527 | | | 27,069,556 | | | Long-term debt (including ¥333,985 and ¥325,808 measured at fair value under the fair value option in 2018 and 2019) (Notes 8, 12 and 32) | | | | 27,069,556 | | | | 27,990,543 | | Other liabilities (Notes 1, 7, 8, 13, 14 and 27) | | | 6,755,165 | | | 7,407,413 | | | | 7,407,413 | | | | 7,358,506 | | | | | | | | | | | | | | | Total liabilities | | | 282,420,311 | | | 284,924,497 | | | | 284,924,497 | | | | 289,244,151 | | | | | | | | | | | | | | | Commitments and contingent liabilities (Notes 25 and 27) | | | | | | | | | Mitsubishi UFJ Financial Group shareholders’ equity: | | | | | | | | | Capital stock (Notes 17 and 18)—common stock authorized, 33,000,000,000 shares; common stock issued, 14,168,853,820 shares and 13,900,028,020 shares in 2017 and 2018, with no stated value | | | 2,090,270 | | | 2,090,270 | | | Capital stock (Notes 17 and 18)—common stock authorized, 33,000,000,000 shares; common stock issued, 13,900,028,020 shares and 13,667,770,520 shares at March 31, 2018 and 2019, with no stated value | | | | 2,090,270 | | | | 2,090,270 | | Capital surplus (Note 18) | | | 5,956,644 | | | 5,740,165 | | | | 5,740,165 | | | | 5,577,186 | | Retained earnings (Notes 19 and 36): | | | | | | Retained earnings (Notes 19 and 35): | | | | | | Appropriated for legal reserve | | | 239,571 | | | 239,571 | | | | 239,571 | | | | 239,571 | | Unappropriated retained earnings | | | 3,931,612 | | | 4,945,733 | | | | 4,945,733 | | | | 8,094,026 | | Accumulated other comprehensive income, net of taxes (Note 20) | | | 2,281,423 | | | 2,477,315 | | | | 2,477,315 | | | | (284,269 | ) | Treasury stock, at cost—739,564,216 common shares and 737,772,882 common shares in 2017 and 2018 | | | (513,988 | ) | | (522,872 | ) | | Treasury stock, at cost—737,772,882 common shares and 745,921,774 common shares at March 31, 2018 and 2019 | | | | (522,872 | ) | | | (517,236 | ) | | | | | | | | | | | | | | Total Mitsubishi UFJ Financial Group shareholders’ equity | | | 13,985,532 | | | 14,970,182 | | | | 14,970,182 | | | | 15,199,548 | | Noncontrolling interests (Note 21) | | | 779,176 | | | 675,633 | | | | 675,633 | | | | 785,200 | | | | | | | | | | | | | | | Total equity | | | 14,764,708 | | | 15,645,815 | | | | 15,645,815 | | | | 15,984,748 | | | | | | | | | | | | | | | Total liabilities and equity | | ¥ | 297,185,019 | | | ¥ | 300,570,312 | | | ¥ | 300,570,312 | | | ¥ | 305,228,899 | | | | | | | | | | | | | | | Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Mitsubishi UFJ Financial Group(Note 26) | | | | | | | | | Other short-term borrowings | | ¥ | 22,044 | | | ¥ | 28,451 | | | ¥ | 28,451 | | | ¥ | 20,535 | | Long-term debt | | | 547,971 | | | 510,948 | | | | 510,948 | | | | 490,033 | | All other liabilities | | | 49,447 | | | 84,040 | | | | 84,040 | | | | 62,146 | | | | | | | | | | | | | | | Total liabilities of consolidated VIEs | | ¥ | 619,462 | | | ¥ | 623,439 | | | ¥ | 623,439 | | | ¥ | 572,714 | | | | | | | | | | | | | | |
See the accompanying notes to Consolidated Financial Statements. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017, 2018 AND 20182019 | | | | | | | | | | | | | | | | | | | | (in millions) | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | Interest income: | | | | | | | | | | | | | Loans, including fees (Note 4) | | ¥ | 2,054,338 | | | ¥ | 2,023,649 | | | ¥ | 2,271,219 | | | ¥ | 2,023,649 | | | ¥ | 2,271,219 | | | ¥ | 2,576,417 | | Deposits in other banks | | | 82,654 | | | 78,735 | | | 126,608 | | | | 78,735 | | | | 126,608 | | | | 183,327 | | Investment securities: | | | | | | | | | | | | | Interest | | | 254,214 | | | 235,638 | | | 198,715 | | | | 235,638 | | | | 198,715 | | | | 237,378 | | Dividends | | | 133,828 | | | 135,506 | | | 145,186 | | | | 135,506 | | | | 145,186 | | | | 160,825 | | Trading account assets | | | 422,080 | | | 455,860 | | | 432,595 | | | | 455,860 | | | | 432,595 | | | | 499,724 | | Call loans and funds sold | | | 10,450 | | | 11,023 | | | 10,808 | | | | 11,023 | | | | 10,808 | | | | 10,354 | | Receivables under resale agreements and securities borrowing transactions | | | 48,174 | | | 50,356 | | | 73,885 | | | | 50,356 | | | | 73,885 | | | | 145,354 | | | | | | | | | | | | | | | | | | | | | Total | | | 3,005,738 | | | 2,990,767 | | | 3,259,016 | | | | 2,990,767 | | | | 3,259,016 | | | | 3,813,379 | | | | | | | | | | | | | | | | | | | | | Interest expense: | | | | | | | | | | | | | Deposits | | | 350,335 | | | 347,430 | | | 514,868 | | | | 347,430 | | | | 514,868 | | | | 717,366 | | Call money and funds purchased | | | 8,802 | | | 1,791 | | | 5,248 | | | | 1,791 | | | | 5,248 | | | | 3,913 | | Payables under repurchase agreements and securities lending transactions | | | 58,497 | | | 100,796 | | | 165,512 | | | | 100,796 | | | | 165,512 | | | | 333,632 | | Due to trust account | | | 505 | | | 207 | | | 109 | | | | 207 | | | | 109 | | | | 124 | | Other short-term borrowings and trading account liabilities | | | 54,572 | | | 61,137 | | | 93,535 | | | | 61,137 | | | | 93,535 | | | | 155,149 | | Long-term debt | | | 271,653 | | | 258,278 | | | 249,483 | | | | 258,278 | | | | 249,483 | | | | 307,797 | | | | | | | | | | | | | | | | | | | | | Total | | | 744,364 | | | 769,639 | | | 1,028,755 | | | | 769,639 | | | | 1,028,755 | | | | 1,517,981 | | | | | | | | | | | | | | | | | | | | | Net interest income | | | 2,261,374 | | | 2,221,128 | | | 2,230,261 | | | | 2,221,128 | | | | 2,230,261 | | | | 2,295,398 | | Provision for (reversal of) credit losses (Note 4) | | | 231,862 | | | 253,688 | | | (240,847 | ) | | | 253,688 | | | | (240,847 | ) | | | 34,330 | | | | | | | | | | | | | | | | | | | | | Net interest income after provision for (reversal of) credit losses | | | 2,029,512 | | | 1,967,440 | | | 2,471,108 | | | | 1,967,440 | | | | 2,471,108 | | | | 2,261,068 | | | | | | | | | | | | | | | | | | | | | Non-interest income: | | | | | | | | | | | | | Fees and commissions income (Note 28) | | | 1,475,872 | | | 1,414,893 | | | 1,462,792 | | | | 1,414,893 | | | | 1,462,792 | | | | 1,438,578 | | Foreign exchange gains (losses)—net (Note 29) | | | 192,086 | | | (134,885 | ) | | (49,561 | ) | | Foreign exchange losses—net (Note 29) | | | | (134,885 | ) | | | (49,561 | ) | | | (95,987 | ) | Trading account profits (losses)—net (Notes 29 and 32) | | | 276,654 | | | (639,184 | ) | | (73,114 | ) | | | (639,184 | ) | | | (73,114 | ) | | | 168,900 | | Investment securities gains—net (Note 3)(1) | | | 232,259 | | | 281,158 | | | 286,903 | | | Investment securities gains (losses)—net (Note 3)(1)(2) | | | | 281,158 | | | | 286,903 | | | | (252,307 | ) | Equity in earnings of equity method investees—net (Note 14) | | | 176,857 | | | 197,821 | | | 227,984 | | | | 197,821 | | | | 227,984 | | | | 209,732 | | Gains on sales of loans (Note 4) | | | 12,293 | | | 13,286 | | | 16,109 | | | | 13,286 | | | | 16,109 | | | | 22,663 | | Othernon-interest income (Note 21) | | | 41,669 | | | 63,617 | | | 63,978 | | | | 63,617 | | | | 63,978 | | | | 103,665 | | | | | | | | | | | | | | | | | | | | | Total | | | 2,407,690 | | | 1,196,706 | | | 1,935,091 | | | | 1,196,706 | | | | 1,935,091 | | | | 1,595,244 | | | | | | | | | | | | | | | | | | | | | Non-interest expense: | | | | | | | | | | | | | Salaries and employee benefits (Note 13) | | | 1,158,896 | | | 1,096,797 | | | 1,099,493 | | | | 1,139,677 | | | | 1,165,357 | | | | 1,175,405 | | Occupancy expenses—net (Notes 5 and 27) | | | 182,782 | | | 176,819 | | | 179,100 | | | | 176,819 | | | | 179,100 | | | | 179,780 | | Fees and commissions expenses | | | 285,387 | | | 273,675 | | | 297,847 | | | | 273,675 | | | | 297,847 | | | | 313,745 | | Outsourcing expenses, including data processing | | | 244,734 | | | 258,345 | | | 276,236 | | | | 258,345 | | | | 276,236 | | | | 275,052 | | Depreciation of premises and equipment (Note 5) | | | 99,680 | | | 99,774 | | | 96,180 | | | | 99,774 | | | | 96,180 | | | | 98,867 | | Amortization of intangible assets (Note 6) | | | 237,342 | | | 227,942 | | | 234,376 | | | | 227,942 | | | | 234,376 | | | | 235,083 | | Impairment of intangible assets (Note 6) | | | 117,726 | | | 5,803 | | | 21,900 | | | | 5,803 | | | | 21,900 | | | | 118,108 | | Insurance premiums, including deposit insurance | | | 91,854 | | | 91,881 | | | 91,847 | | | | 91,881 | | | | 91,847 | | | | 93,756 | | Communications | | | 58,314 | | | 55,274 | | | 58,067 | | | | 55,274 | | | | 58,067 | | | | 59,166 | | Taxes and public charges | | | 93,734 | | | 94,047 | | | 90,210 | | | | 94,047 | | | | 90,210 | | | | 95,358 | | Impairment of goodwill (Note 6) | | | 333,719 | | | 6,638 | | | | — | | | | 6,638 | | | | — | | | | — | | Provision for (reversal of)off-balance sheet credit instruments | | | (185 | ) | | 106,556 | | | (96,054 | ) | | | 106,556 | | | | (96,054 | ) | | | 38,463 | | Othernon-interest expenses (Notes 4, 5, 21 and 27) | | | 370,549 | | | 398,052 | | | 395,178 | | | Othernon-interest expenses (Notes 5, 21 and 27) | | | | 355,172 | | | | 329,314 | | | | 302,687 | | | | | | | | | | | | | | | | | | | | | Total | | | 3,274,532 | | | 2,891,603 | | | 2,744,380 | | | | 2,891,603 | | | | 2,744,380 | | | | 2,985,470 | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME—(Continued) FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017, 2018 AND 20182019 | | | | | | | | | | | | | | | | | | | | (in millions, except per share amount) | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | Income before income tax expense | | | 1,162,670 | | | 272,543 | | | 1,661,819 | | | | 272,543 | | | | 1,661,819 | | | | 870,842 | | Income tax expense (Note 7) | | | 369,432 | | | 94,453 | | | 407,823 | | | | 94,453 | | | | 407,823 | | | | 133,237 | | | | | | | | | | | | | | | | | | | | | Net income before attribution of noncontrolling interests | | | 793,238 | | | 178,090 | | | 1,253,996 | | | | 178,090 | | | | 1,253,996 | | | | 737,605 | | Net income (loss) attributable to noncontrolling interests (Note 21) | | | (9,094 | ) | | (24,590 | ) | | 25,836 | | | | (24,590 | ) | | | 25,836 | | | | 18,960 | | | | | | | | | | | | | | | | | | | | | Net income attributable to Mitsubishi UFJ Financial Group | | ¥ | 802,332 | | | ¥ | 202,680 | | | ¥ | 1,228,160 | | | ¥ | 202,680 | | | ¥ | 1,228,160 | | | ¥ | 718,645 | | | | | | | | | | | | | | | | | | | | | Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group | | ¥ | 802,332 | | | ¥ | 202,680 | | | ¥ | 1,228,160 | | | ¥ | 202,680 | | | ¥ | 1,228,160 | | | ¥ | 718,645 | | | | | | | | | | | | | | | | | | | | | Earnings per common share applicable to common shareholders of Mitsubishi UFJ Financial Group (Notes 19 and 23): | | | | | | | | | | | | | Basic earnings per common share—Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group | | ¥ | 57.78 | | | ¥ | 14.93 | | | ¥ | 92.40 | | | ¥ | 14.93 | | | ¥ | 92.40 | | | ¥ | 55.03 | | Diluted earnings per common share—Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group | | | 57.51 | | | 14.68 | | | 92.10 | | | | 14.68 | | | | 92.10 | | | | 54.74 | | Cash dividend per common share | | | 18.00 | | | 18.00 | | | 18.00 | | | | 18.00 | | | | 18.00 | | | | 21.00 | | Weighted average common shares outstanding | | | 13,886 | | | 13,574 | | | 13,292 | | | | 13,574 | | | | 13,292 | | | | 13,059 | | Weighted average diluted common shares outstanding | | | 13,903 | | | 13,585 | | | 13,293 | | | | 13,585 | | | | 13,293 | | | | 13,059 | | (1) The following credit losses are included in Investment securities gains—net: | | | | | | | | Notes: (1) The following credit losses are included in Investment securities gains (losses)—net: | | Notes: (1) The following credit losses are included in Investment securities gains (losses)—net: | | | | (in millions) | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | Decline in fair value | | ¥ | 937 | | | ¥ | 706 | | | ¥ | 99 | | | ¥ | 706 | | | ¥ | 99 | | | ¥ | 596 | | Other comprehensive income—net | | | 26 | | | 35 | | | 15 | | | | 35 | | | | 15 | | | | 10 | | | | | | | | | | | | | | | | | | | | | Total credit losses | | ¥ | 963 | | | ¥ | 741 | | | ¥ | 114 | | | ¥ | 741 | | | ¥ | 114 | | | ¥ | 606 | | | | | | | | | | | | | | | | | | | | |
| (2) | | New guidance on recognition and measurement of financial assets and financial liabilities requires equity investments to be measured at fair value with changes in fair value recognized in net income for the fiscal year ended March 31, 2019. For additional information, refer to Note 1. |
See the accompanying notes to Consolidated Financial Statements. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE FISCAL YEARS ENDED MARCH 31, 2017, 2018 AND 2019 | | | | | | | | | | | | | | (in millions) | | 2017 | | | 2018 | | | 2019 | | Net income before attribution of noncontrolling interests | | ¥ | 178,090 | | | ¥ | 1,253,996 | | | ¥ | 737,605 | | Other comprehensive income (loss), net of tax(Note 20): | | | | | | | | | | | | | Net unrealized gains on investment securities(1) | | | 12,961 | | | | 230,308 | | | | 88,180 | | Net debt valuation adjustments | | | (8,552 | ) | | | (2,178 | ) | | | 9,729 | | Net unrealized losses on derivatives qualifying for cash flow hedges | | | (13,245 | ) | | | (7,025 | ) | | | (4,890 | ) | Defined benefit plans (Note 13) | | | 103,572 | | | | 109,838 | | | | (88,940 | ) | Foreign currency translation adjustments | | | (143,210 | ) | | | (104,778 | ) | | | (42,212 | ) | | | | | | | | | | | | | | Total | | | (48,474 | ) | | | 226,165 | | | | (38,133 | ) | | | | | | | | | | | | | | Comprehensive income | | | 129,616 | | | | 1,480,161 | | | | 699,472 | | Net income (loss) attributable to noncontrolling interests | | | (24,590 | ) | | | 25,836 | | | | 18,960 | | Other comprehensive income (loss) attributable to noncontrolling interests | | | (24,765 | ) | | | 1,320 | | | | 21,209 | | | | | | | | | | | | | | | Comprehensive income attributable to Mitsubishi UFJ Financial Group | | ¥ | 178,971 | | | ¥ | 1,453,005 | | | ¥ | 659,303 | | | | | | | | | | | | | | |
Note: | (1) | | Included unrealized gains (losses) related to only debt securities for the fiscal year ended March 31, 2019. |
See the accompanying notes to Consolidated Financial Statements. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEEQUITY FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017, 2018 AND 20182019 | | | | | | | | | | | | | | (in millions) | | 2016 | | | 2017 | | | 2018 | | Net income before attribution of noncontrolling interests | | ¥ | 793,238 | | | ¥ | 178,090 | | | ¥ | 1,253,996 | | Other comprehensive income (loss), net of tax(Note 20): | | | | | | | | | | | | | Net unrealized gains (losses) on investment securities | | | (249,781 | ) | | | 12,961 | | | | 230,308 | | Net debt valuation adjustments (Note 14) | | | 3,505 | | | | (8,552 | ) | | | (2,178 | ) | Net unrealized gains (losses) on derivatives qualifying for cash flow hedges | | | 1,808 | | | | (13,245 | ) | | | (7,025 | ) | Defined benefit plans (Note 13) | | | (131,493 | ) | | | 103,572 | | | | 109,838 | | Foreign currency translation adjustments | | | (356,677 | ) | | | (143,210 | ) | | | (104,778 | ) | | | | | | | | | | | | | | Total | | | (732,638 | ) | | | (48,474 | ) | | | 226,165 | | | | | | | | | | | | | | | Comprehensive income | | | 60,600 | | | | 129,616 | | | | 1,480,161 | | Net income (loss) attributable to noncontrolling interests | | | (9,094 | ) | | | (24,590 | ) | | | 25,836 | | Other comprehensive income (loss) attributable to noncontrolling interests | | | 27,773 | | | | (24,765 | ) | | | 1,320 | | | | | | | | | | | | | | | Comprehensive income attributable to Mitsubishi UFJ Financial Group | | ¥ | 41,921 | | | ¥ | 178,971 | | | ¥ | 1,453,005 | | | | | | | | | | | | | | |
See the accompanying notes to Consolidated Financial Statements.
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017 AND 2018
| | (in millions, except per share amount) | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | Capital stock (Notes 17 and 18): | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 2,090,270 | | | ¥ | 2,090,270 | | | ¥ | 2,090,270 | | | ¥ | 2,090,270 | | | ¥ | 2,090,270 | | | ¥ | 2,090,270 | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 2,090,270 | | | ¥ | 2,090,270 | | | ¥ | 2,090,270 | | | ¥ | 2,090,270 | | | ¥ | 2,090,270 | | | ¥ | 2,090,270 | | | | | | | | | | | | | | | | | | | | | Capital surplus (Note 18): | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 5,959,626 | | | ¥ | 5,958,929 | | | ¥ | 5,956,644 | | | ¥ | 5,958,929 | | | ¥ | 5,956,644 | | | ¥ | 5,740,165 | | Stock-based compensation (Note 33) | | | 1,002 | | | (1,856 | ) | | 315 | | | | (1,856 | ) | | 315 | | | (180 | ) | Purchase of shares of Mitsubishi UFJ NICOS from noncontrolling interest shareholder (Note 2) | | | — | | | | — | | | (34,751 | ) | | | — | | | (34,751 | ) | | | — | | Retirement of common stock | | | — | | | | — | | | (190,054 | ) | | | — | | | (190,054 | ) | | (162,720 | ) | Other—net | | | (1,699 | ) | | (429 | ) | | 8,011 | | | | (429 | ) | | 8,011 | | | (79 | ) | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 5,958,929 | | | ¥ | 5,956,644 | | | ¥ | 5,740,165 | | | ¥ | 5,956,644 | | | ¥ | 5,740,165 | | | ¥ | 5,577,186 | | | | | | | | | | | | | | | | | | | | | Retained earnings appropriated for legal reserve (Note 19): | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 239,571 | | | ¥ | 239,571 | | | ¥ | 239,571 | | | ¥ | 239,571 | | | ¥ | 239,571 | | | ¥ | 239,571 | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 239,571 | | | ¥ | 239,571 | | | ¥ | 239,571 | | | ¥ | 239,571 | | | ¥ | 239,571 | | | ¥ | 239,571 | | | | | | | | | | | | | | | | | | | | | Unappropriated retained earnings(Note 19): | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 3,424,864 | | | ¥ | 3,980,257 | | | ¥ | 3,931,612 | | | ¥ | 3,980,257 | | | ¥ | 3,931,612 | | | ¥ | 4,945,733 | | Net income attributable to Mitsubishi UFJ Financial Group | | | 802,332 | | | 202,680 | | | 1,228,160 | | | | 202,680 | | | 1,228,160 | | | 718,645 | | Cash dividends: | | | | | | | | | | | | | Common stock—¥18.00 per share in 2016, 2017 and 2018 | | | (251,342 | ) | | (246,338 | ) | | (240,497 | ) | | Common stock—¥18.00 per share in 2017 and 2018, and ¥21.00 per share in 2019 | | | | (246,338 | ) | | (240,497 | ) | | (275,551 | ) | Losses on sales of shares of treasury stock | | | (1,182 | ) | | (1,114 | ) | | (8 | ) | | | (1,114 | ) | | (8 | ) | | | — | | Effect of adopting new guidance by a foreign affiliated company | | | 5,585 | (1) | | | — | | | | (2,605 | )(2) | | | — | | | (2,605 | )(1) | | 1,173 | (2) | Effect of adopting new guidance on consolidation of certain variable interest entities (Note 26) | | | — | | | (3,873 | ) | | | — | | | | (3,873 | ) | | | — | | | | — | | Effect of adopting new guidance on reclassification of certain tax effets (Note 1) | | | — | | | | — | | | 29,071 | | | Effect of adopting new guidance on reclassification of certain tax effects | | | | — | | | 29,071 | | | | — | | Effect of adopting new guidance on recognition and measurement of financial assets and financial liabilities (Note 1) | | | | — | | | | — | | | 2,702,242 | | Effect of adopting new guidance on recognition of breakage for certain prepaid stored-value products (Note 1) | | | | — | | | | — | | | 1,784 | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year (Note 36) | | ¥ | 3,980,257 | | | ¥ | 3,931,612 | | | ¥ | 4,945,733 | | | Balance at end of fiscal year | | | ¥ | 3,931,612 | | | ¥ | 4,945,733 | | | ¥ | 8,094,026 | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY—(Continued) FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017, 2018 AND 20182019 | | (in millions) | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | Accumulated other comprehensive income, net of taxes: | | | | | | | | Accumulated other comprehensive income (loss), net of taxes: | | | | | | | | Balance at beginning of fiscal year | | ¥ | 3,067,255 | | | ¥ | 2,301,259 | | | ¥ | 2,281,423 | | | ¥ | 2,301,259 | | | ¥ | 2,281,423 | | | ¥ | 2,477,315 | | Net change during the fiscal year | | | (760,411 | ) | | (23,709 | ) | | 224,845 | | | | (23,709 | ) | | 224,845 | | | (59,342 | ) | Effect of adopting new guidance by a foreign affiliated company | | | (5,585 | )(1) | | | — | | | 118 | | | | — | | | 118 | | | | — | | Effect of adopting new guidance on consolidation of certain variable interest entities (Note 26) | | | — | | | 3,873 | | | | — | | | | 3,873 | | | | — | | | | — | | Effect of adopting new guidance on reclassification of certain tax effects (Note 1) | | | — | | | | — | | | (29,071 | ) | | Effect of adopting new guidance on reclassification of certain tax effects | | | | — | | | (29,071 | ) | | | — | | Effect of adopting new guidance on recognition and measurement of financial assets and financial liabilities (Note 1) | | | | — | | | | — | | | (2,702,242 | ) | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 2,301,259 | | | ¥ | 2,281,423 | | | ¥ | 2,477,315 | | | ¥ | 2,281,423 | | | ¥ | 2,477,315 | | | ¥ | (284,269 | ) | | | | | | | | | | | | | | | | | | | | Treasury stock, at cost: | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | (102,521 | ) | | ¥ | (299,661 | ) | | ¥ | (513,988 | ) | | ¥ | (299,661 | ) | | ¥ | (513,988 | ) | | ¥ | (522,872 | ) | Purchases of shares of treasury stock (Notes 17 and 18) | | | (200,053 | ) | | (217,803 | ) | | (201,102 | ) | | Purchases of shares of treasury stock (Note 18) | | | | (217,803 | ) | | (201,102 | ) | | (161,043 | ) | Sales of shares of treasury stock | | | 2,829 | | | 3,491 | | | 2,098 | | | | 3,491 | | | 2,098 | | | 3,775 | | Retirement of common stock | | | — | | | | — | | | 190,054 | | | | — | | | 190,054 | | | 162,720 | | Net decrease (increase) resulting from changes in interests in consolidated subsidiaries, consolidated variable interest entities, and affiliated companies | | | 84 | | | (15 | ) | | 66 | | | | (15 | ) | | 66 | | | 184 | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | (299,661 | ) | | ¥ | (513,988 | ) | | ¥ | (522,872 | ) | | ¥ | (513,988 | ) | | ¥ | (522,872 | ) | | ¥ | (517,236 | ) | | | | | | | | | | | | | | | | | | | | Total Mitsubishi UFJ Financial Group shareholders’ equity | | ¥ | 14,270,625 | | | ¥ | 13,985,532 | | | ¥ | 14,970,182 | | | ¥ | 13,985,532 | | | ¥ | 14,970,182 | | | ¥ | 15,199,548 | | | | | | | | | | | | | | | | | | | | | Noncontrolling interests: | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 602,276 | | | ¥ | 577,642 | | | ¥ | 779,176 | | | ¥ | 577,642 | | | ¥ | 779,176 | | | ¥ | 675,633 | | Initial subscriptions of noncontrolling interests (Note 2) | | | 28,246 | | | 112,644 | | | 48,828 | | | Initial subscriptions of noncontrolling interests | | | | 112,644 | | | 48,828 | | | 108,235 | | Transactions between the consolidated subsidiaries and the related noncontrolling interest shareholders | | | 8,658 | | | 113,878 | | | (120,216 | ) | | | 113,878 | | | (120,216 | ) | | (2,830 | ) | Decrease in noncontrolling interests related to deconsolidation of subsidiaries | | | (54,238 | ) | | (563,918 | ) | | (22,556 | ) | | | (563,918 | ) | | (22,556 | ) | | (20,497 | ) | Decrease in noncontrolling interests related to disposition of subsidiaries | | | (120 | ) | | (1,026 | ) | | | — | | | | (1,026 | ) | | | — | | | | — | | Purchase of shares of Mitsubishi UFJ NICOS from noncontrolling interest shareholder (Note 2) | | | — | | | | — | | | (15,390 | ) | | | — | | | (15,390 | ) | | | — | | Net income (loss) attributable to noncontrolling interests | | | (9,094 | ) | | (24,590 | ) | | 25,836 | | | | (24,590 | ) | | 25,836 | | | 18,960 | | Dividends paid to noncontrolling interests | | | (30,255 | ) | | (6,842 | ) | | (21,675 | ) | | | (6,842 | ) | | (21,675 | ) | | (15,853 | ) | Other comprehensive income (loss), net of taxes | | | 27,773 | | | (24,765 | ) | | 1,320 | | | | (24,765 | ) | | 1,320 | | | 21,209 | | Effect of adopting new guidance on consolidation of certain variable interest entities (Note 26) | | | — | | | 595,982 | | | | — | | | | 595,982 | | | | — | | | | — | | Other—net | | | 4,396 | | | 171 | | | 310 | | | | 171 | | | 310 | | | 343 | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 577,642 | | | ¥ | 779,176 | | | ¥ | 675,633 | | | ¥ | 779,176 | | | ¥ | 675,633 | | | ¥ | 785,200 | | | | | | | | | | | | | | | | | | | | | Total equity | | ¥ | 14,848,267 | | | ¥ | 14,764,708 | | | ¥ | 15,645,815 | | | ¥ | 14,764,708 | | | ¥ | 15,645,815 | | | ¥ | 15,984,748 | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | The effect resulted from the early adoption of certain provisions of new accounting guidance on “Recognition and Measurement of Financial Assets and Financial Liabilities”. See Note 14 for more information. |
(2) | | The effect mainly resulted from the adoption of new accounting guidance on “Targeted Improvements to Accounting for Hedging Activities”. See Note 14 for more information. |
| (2) | | The effect resulted from the adoption of new accounting guidance on “Leases”. |
See the accompanying notes to Consolidated Financial Statements. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017, 2018 AND 20182019 | | (in millions) | | 2016(1) | | 2017(1) | | 2018 | | | 2017(1) | | 2018(1) | | 2019 | | Cash flows from operating activities: | | | | | | | | | | | | | Net income before attribution of noncontrolling interests | | ¥ | 793,238 | | | ¥ | 178,090 | | | ¥ | 1,253,996 | | | ¥ | 178,090 | | | ¥ | 1,253,996 | | | ¥ | 737,605 | | Adjustments to reconcile net income before attribution of noncontrolling interests to net cash provided by operating activities: | | | | | | | | | | | | | Depreciation and amortization (Notes 5 and 6) | | | 337,022 | | | 327,716 | | | 330,556 | | | | 327,716 | | | 330,556 | | | 333,950 | | Impairment of goodwill (Note 6) | | | 333,719 | | | 6,638 | | | | — | | | | 6,638 | | | | — | | | | — | | Impairment of intangible assets (Note 6) | | | 117,726 | | | 5,803 | | | 21,900 | | | | 5,803 | | | 21,900 | | | 118,108 | | Provision for (reversal of) credit losses (Note 4) | | | 231,862 | | | 253,688 | | | (240,847 | ) | | | 253,688 | | | (240,847 | ) | | 34,330 | | Employee benefit cost (income) for severance indemnities and pension plans (Note 13) | | | 17,441 | | | 20,274 | | | (7,955 | ) | | | 20,274 | | | (7,955 | ) | | (19,839 | ) | Investment securities gains—net | | | (232,259 | ) | | (281,158 | ) | | (286,903 | ) | | Investment securities (gains) losses—net | | | | (281,158 | ) | | (286,903 | ) | | 252,307 | | Amortization of premiums on investment securities | | | 133,534 | | | 95,091 | | | 118,863 | | | | 95,091 | | | 118,863 | | | 78,509 | | Changes in financial instruments measured at fair value under fair value option, excluding trading account securities—net (Note 32) | | | (13,867 | ) | | 103,845 | | | (13,456 | ) | | | 103,845 | | | (13,456 | ) | | 13,880 | | Foreign exchange gains—net | | | (358,858 | ) | | (136,976 | ) | | (208,398 | ) | | Equity in earnings of equity method investees—net (Note 2) | | | (176,857 | ) | | (197,821 | ) | | (227,984 | ) | | Foreign exchange (gains) losses—net | | | | (136,976 | ) | | (208,398 | ) | | 565,304 | | Equity in earnings of equity method investees—net | | | | (197,821 | ) | | (227,984 | ) | | (209,732 | ) | Provision (benefit) for deferred income tax expense | | | (60,945 | ) | | (212,368 | ) | | 120,595 | | | | (212,368 | ) | | 120,595 | | | (47,796 | ) | Decrease (increase) in trading account assets, excluding foreign exchange contracts | | | (1,718,145 | ) | | 42,609 | | | 5,653,904 | | | | 42,609 | | | 5,653,904 | | | (2,695,035 | ) | Increase (decrease) in trading account liabilities, excluding foreign exchange contracts | | | 4,351,881 | | | 521,093 | | | (6,433,948 | ) | | | 521,093 | | | (6,433,948 | ) | | 1,370,846 | | Increase (decrease) in unearned income, unamortized premiums and deferred loan fees | | | 18,999 | | | (20,476 | ) | | (35,857 | ) | | Decrease in unearned income, unamortized premiums and deferred loan fees | | | | (20,476 | ) | | (35,857 | ) | | (7,054 | ) | Decrease (increase) in accrued interest receivable and other receivables | | | (43,962 | ) | | 49,783 | | | (172,599 | ) | | | 49,783 | | | (172,599 | ) | | (135,656 | ) | Increase in accrued interest payable and other payables | | | 104,487 | | | 66,419 | | | 153,365 | | | | 66,419 | | | 153,365 | | | 92,334 | | Net increase (decrease) in accrued income taxes and decrease (increase) in income tax receivables | | | 9,856 | | | (81,083 | ) | | 1,212 | | | | (81,083 | ) | | 1,212 | | | (136,047 | ) | Increase (decrease) in allowance for repayment of excess interest | | | 10,933 | | | (7,790 | ) | | (15,658 | ) | | | (7,790 | ) | | (15,658 | ) | | 1,258 | | Net decrease (increase) in collateral for derivative transactions | | | 539,852 | | | (276,476 | ) | | 259,287 | | | | (276,476 | ) | | 259,287 | | | (79,338 | ) | Increase in cash collateral for the use of Bank of Japan’s settlement infrastructure | | | — | | | (207,498 | ) | | (643,568 | ) | | | (207,498 | ) | | (643,568 | ) | | (60,462 | ) | Other—net | | | (219,462 | ) | | 441,026 | | | (190,341 | ) | | | 441,026 | | | (190,341 | ) | | 20,862 | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) operating activities | | | 4,176,195 | | | 690,429 | | | (563,836 | ) | | | 690,429 | | | (563,836 | ) | | 228,334 | | | | | | | | | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | | | Proceeds from sales ofAvailable-for-sale securities (including proceeds from securities under the fair value option) (Note 3) | | | 59,737,908 | | | 39,097,727 | | | 33,359,364 | | | Proceeds from maturities ofAvailable-for-sale securities (including proceeds from securities under the fair value option) (Note 3) | | | 29,412,596 | | | 26,685,532 | | | 40,011,886 | | | Purchases ofAvailable-for-sale securities (including purchases of securities under the fair value option) (Note 3) | | | (88,088,620 | ) | | (56,306,531 | ) | | (73,770,878 | ) | | Proceeds from maturities ofHeld-to-maturity securities | | | 949,592 | | | 810,838 | | | 1,085,603 | | | Purchases ofHeld-to-maturity securities | | | (817,350 | ) | | (632,116 | ) | | (1,156,122 | ) | | Proceeds from sales and redemption of Other investment securities | | | 108,615 | | | 18,539 | | | 12,807 | | | Purchases of Other investment securities | | | (88,001 | ) | | (10,242 | ) | | (19,619 | ) | | Acquisition of Alternative Fund Services, a business of TB, net of cash acquired (Note 2) | | | 221,169 | | | | — | | | | — | | | Proceeds from sales ofAvailable-for-sale debt securities (including proceeds from debt securities under the fair value option) (Note 3) | | | | 37,348,721 | | | 30,995,426 | | | 31,283,601 | | Proceeds from maturities ofAvailable-for-sale debt securities (including proceeds from debt securities under the fair value option) (Note 3) | | | | 26,684,497 | | | 40,011,298 | | | 26,448,801 | | Purchases ofAvailable-for-sale debt securities (including purchases of debt securities under the fair value option) (Note 3) | | | | (54,588,932 | ) | | (71,593,326 | ) | | (62,309,072 | ) | Proceeds from maturities ofHeld-to-maturity debt securities | | | | 810,838 | | | 1,085,603 | | | 560,646 | | Purchases ofHeld-to-maturity debt securities | | | | (632,116 | ) | | (1,156,122 | ) | | (1,192,989 | ) | Proceeds from sales and redemption of Equity securities (including proceeds from equity securities under the fair value option) | | | | 1,768,580 | | | 2,377,333 | | | 2,722,948 | | Purchases of Equity securities (including purchases of equity securities under the fair value option) | | | | (1,727,841 | ) | | (2,197,171 | ) | | (2,770,356 | ) | Acquisition of MUFG Capital Analytics LLC (formerly Capital Analytics II LLC), a subsidiary of TB, net of cash acquired (Note 2) | | | — | | | (4,154 | ) | | | — | | | | (4,154 | ) | | | — | | | | — | | Purchase of common stock and preferred stock investment in Security Bank Corporation, an equity method investee of BK (Note 2) | | | — | | | (91,993 | ) | | | — | | | | (91,993 | ) | | | — | | | | — | | Acquisition of MUFG Investor Services (US) (formerly Rydex Fund Services, LLC), a subsidiary of TB, net of cash acquired (Note 2) | | | — | | | (17,175 | ) | | | — | | | | (17,175 | ) | | | — | | | | — | | Purchase of common stock in Hitachi Capital Corporation, an equity method investee of MUFG (Note 2) | | | — | | | (91,877 | ) | | | — | | | | (91,877 | ) | | | — | | | | — | | Acquisition of Hattha Kaksekar Limited, a subsidiary of Krungsri, net of cash acquired (Note 2) | | | — | | | (556 | ) | | | — | | | | (556 | ) | | | — | | | | — | | Purchase of common stock in Bank Danamon, an equity method investee of BK (Note 2) | | | | — | | | | — | | | (132,335 | ) | Net decrease (increase) in loans | | | (8,118,108 | ) | | 2,514,824 | | | (169,478 | ) | | | 2,514,824 | | | (169,478 | ) | | 330,198 | | Net decrease (increase) in call loans, funds sold, and receivables under resale agreements and securities borrowing transactions | | | (1,928,024 | ) | | (6,971,016 | ) | | 4,187,093 | | | | (6,971,016 | ) | | 4,187,093 | | | 627,327 | | Proceeds from sales of premises and equipment | | | 37,828 | | | 32,512 | | | 12,211 | | | | 32,512 | | | 12,211 | | | 26,191 | | Capital expenditures for premises and equipment | | | (140,651 | ) | | (116,786 | ) | | (159,003 | ) | | | (116,786 | ) | | (159,003 | ) | | (126,479 | ) | Purchases of intangible assets | | | (221,264 | ) | | (237,253 | ) | | (239,755 | ) | | | (237,253 | ) | | (239,755 | ) | | (276,880 | ) | Proceeds from sales and dispositions of investments in equity method investees | | | 35,666 | | | 66,729 | | | 39,710 | | | | 66,729 | | | 39,710 | | | 161,566 | | Proceeds from sales of consolidated VIEs and subsidiaries—net | | | 207,229 | | | 244,476 | | | 122,962 | | | | 244,476 | | | 122,962 | | | 64,395 | | Other—net | | | (77,313 | ) | | (151,078 | ) | | (72,765 | ) | | | (151,078 | ) | | (72,765 | ) | | (49,590 | ) | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) investing activities | | | (8,768,728 | ) | | 4,840,400 | | | 3,244,016 | | | | 4,840,400 | | | 3,244,016 | | | (4,632,028 | ) | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued) FOR THE FISCAL YEARS ENDED MARCH 31, 2016, 2017, 2018 AND 20182019 | | (in millions) | | 2016 | | 2017 | | 2018 | | | 2017(1) | | 2018(1) | | 2019 | | Cash flows from financing activities: | | | | | | | | | | | | | Net increase in deposits | | | 12,400,034 | | | 10,902,923 | | | 5,720,011 | | | | 10,902,923 | | | 5,720,011 | | | 3,602,674 | | Net increase (decrease) in call money, funds purchased, and payables under repurchase agreements and securities lending transactions | | | (2,716,018 | ) | | (2,790,342 | ) | | 3,963,120 | | | | (2,790,342 | ) | | 3,963,120 | | | (303,042 | ) | Net increase (decrease) in due to trust account | | | 4,727,162 | | | (3,002,999 | ) | | 51,003 | | | | (3,002,999 | ) | | 51,003 | | | (650,206 | ) | Net decrease in other short-term borrowings | | | (1,955,867 | ) | | (1,221,838 | ) | | (957,705 | ) | | | (1,221,838 | ) | | (957,705 | ) | | (118,443 | ) | Proceeds from issuance of long-term debt | | | 5,919,214 | | | 12,265,629 | | | 6,671,031 | | | | 12,265,629 | | | 6,671,031 | | | 5,020,636 | | Repayments of long-term debt | | | (3,726,410 | ) | | (6,641,722 | ) | | (5,485,894 | ) | | | (6,641,722 | ) | | (5,485,894 | ) | | (4,236,887 | ) | Proceeds from sales of treasury stock | | | 15 | | | 256 | | | 1,316 | | | | 256 | | | 1,316 | | | 2,322 | | Payments for acquisition of treasury stock (Note 18) | | | (200,053 | ) | | (217,803 | ) | | (201,102 | ) | | | (217,803 | ) | | (201,102 | ) | | (159,962 | ) | Payments for acquisition of shares of certain subsidiaries from noncontrolling interest shareholders | | | (4,398 | ) | | (1,612 | ) | | (318 | ) | | | (1,612 | ) | | (318 | ) | | | — | | Payments for acquisition of shares of Mitsubishi UFJ NICOS from noncontrolling interest shareholders (Note 2) | | | — | | | | — | | | (50,000 | ) | | | — | | | (50,000 | ) | | | — | | Dividends paid | | | (251,448 | ) | | (246,345 | ) | | (240,514 | ) | | | (246,345 | ) | | (240,514 | ) | | (275,581 | ) | Dividends paid by subsidiaries to noncontrolling interests | | | (30,255 | ) | | (6,842 | ) | | (21,675 | ) | | | (6,842 | ) | | (21,675 | ) | | (15,853 | ) | Other—net | | | 6,703 | | | 105,995 | | | (87,067 | ) | | | 105,995 | | | (87,067 | ) | | 197,673 | | | | | | | | | | | | | | | | | | | | | Net cash provided by financing activities | | | 14,168,679 | | | 9,145,300 | | | 9,362,206 | | | | 9,145,300 | | | 9,362,206 | | | 3,063,331 | | | | | | | | | | | | | | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | | (625,002 | ) | | (334,793 | ) | | (188,149 | ) | | | (334,793 | ) | | (188,149 | ) | | 43,975 | | | | | | | | | | | | | | | | | | | | | Net increase in cash and cash equivalents | | | 8,951,144 | | | 14,341,336 | | | 11,854,237 | | | | 14,341,336 | | | 11,854,237 | | | (1,296,388 | ) | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents at beginning of fiscal year | | | 40,726,739 | | | 49,677,883 | | | 64,019,219 | | | | 49,677,883 | | | 64,019,219 | | | 75,873,456 | | Cash and cash equivalents: | | | | | | | | | | | | | Cash, due from banks and interest-earning deposits in other banks | | | 49,673,901 | | | 64,009,770 | | | 75,858,049 | | | | 64,009,770 | | | 75,858,049 | | | 74,571,260 | | Restricted cash included in other assets | | | 3,982 | | | 9,449 | | | 15,407 | | | | 9,449 | | | 15,407 | | | 5,808 | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents at end of fiscal year | | ¥ | 49,677,883 | | | ¥ | 64,019,219 | | | ¥ | 75,873,456 | | | ¥ | 64,019,219 | | | ¥ | 75,873,456 | | | ¥ | 74,577,068 | | | | | | | | | | | | | | | | | | | | | | Supplemental disclosure of cash flow information: | | | | | | | | | | | | | Cash paid during the fiscal year for: | | | | | | | | | | | | | Interest | | ¥ | 755,739 | | | ¥ | 779,239 | | | ¥ | 1,040,337 | | | ¥ | 779,239 | | | ¥ | 1,040,337 | | | ¥ | 1,488,136 | | Income taxes, net of refunds | | | 406,287 | | | 373,887 | | | 265,225 | | | | 373,887 | | | 265,225 | | | 302,019 | | Non-cash investing and financing activities: | | | | | | | | | | | | | Assets acquired under capital lease arrangements | | | 4,831 | | | 7,065 | | | 7,111 | | | | 7,065 | | | 7,111 | | | 11,280 | | | Acquisition of Alternative Fund Services, a business of TB (Note 2): | | | | | | | | Fair value of assets acquired, excluding cash and cash equivalents | | | 121,242 | | | | — | | | | — | | | Fair value of liabilities assumed | | | 342,411 | | | | — | | | | — | | | Adoption of new guidance on consolidation of certain variable interest entities (Note 26): | | | | | | | | | | | | | Increase in total assets, excluding cash and cash equivalents | | | — | | | 598,236 | | | | — | | | | 598,236 | | | | — | | | | — | | Increase in total liabilities | | | — | | | 32,254 | | | | — | | | | 32,254 | | | | — | | | | — | | Increase in noncontrolling interests | | | — | | | 595,982 | | | | — | | | | 595,982 | | | | — | | | | — | | Acquisition of MUFG Capital Analytics LLC, a subsidiary of TB (Note 2): | | | | | | | | | | | | | Fair value of assets acquired, excluding cash and cash equivalents | | | — | | | 5,038 | | | | — | | | | 5,038 | | | | — | | | | — | | Fair value of liabilities assumed | | | — | | | 884 | | | | — | | | | 884 | | | | — | | | | — | | Acquisition of MUFG Investor Services (US), LLC, a subsidiary of TB (Note 2): | | | | | | | | | | | | | Fair value of assets acquired, excluding cash and cash equivalents | | | — | | | 17,847 | | | | — | | | | 17,847 | | | | — | | | | — | | Fair value of liabilities assumed | | | — | | | 672 | | | | — | | | | 672 | | | | — | | | | — | | Acquisition of Hattha Kaksekar Limited, a subsidiary of Krungsri (Note 2): | | | | | | | | | | | | | Fair value of assets acquired, excluding cash and cash equivalents | | | — | | | 54,186 | | | | — | | | | 54,186 | | | | — | | | | — | | Fair value of liabilities assumed | | | — | | | 53,630 | | | | — | | | | 53,630 | | | | — | | | | — | | Marketable Equity Securities issued by Bank Danamon transferred to investments in subsidiaries and affiliates (Note 2) | | | | — | | | | — | | | 98,934 | | Available-for-sale debt securities transferred to Held-to-maturity debt securities | | | | — | | | | — | | | 221,537 | |
Note: | (1) | | The MUFG Group early adopted new guidancereclassification of certain items on restricted cash retrospectivelythe consolidated balance sheets resulted in the second halfreclassification of the consolidated statements of cash flows for the fiscal yearyears ended March 31, 2017 and 2018, and prior year amounts were revised.respectively. See Note 1 Reclassifications for further information. |
See the accompanying notes to Consolidated Financial Statements. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 1. | | BASIS OF FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Description of Business Mitsubishi UFJ Financial Group, Inc. (“MUFG”) is a holding company for MUFG Bank, Ltd. (formerly, The Bank of Tokyo-Mitsubishi UFJ, Ltd., “MUFG Bank” or “BK”), Mitsubishi UFJ Trust and Banking Corporation (“Mitsubishi UFJ Trust and Banking” or “TB”), Mitsubishi UFJ Securities Holdings Co., Ltd. (“Mitsubishi UFJ Securities Holdings” or “SCHD”), Mitsubishi UFJ NICOS Co., Ltd. (“Mitsubishi UFJ NICOS”), and other subsidiaries. Mitsubishi UFJ Securities Holdings is an intermediate holding company for Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (“Mitsubishi UFJ Morgan Stanley Securities”). Through its subsidiaries and affiliated companies, MUFG engages in a broad range of financial operations, including commercial banking, investment banking, trust banking and asset management services, securities businesses, and credit card businesses, and it provides related services to individual and corporate customers. See Note 30 for more information by business segment. Basis of Financial Statements The accompanying consolidated financial statements are presented in Japanese yen, the currency of the country in which MUFG is incorporated and principally operates. The accompanying consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”). In certain respects, the accompanying consolidated financial statements reflect adjustments which are not included in the consolidated financial statements issued by MUFG and certain of its subsidiaries in accordance with applicable statutory requirements and accounting practices in their respective countries of incorporation. The major adjustments include those relating to (1) investment securities, (2) derivative financial instruments, (3) allowance for credit losses, (4) income taxes, (5) consolidation, (6) premises and equipment, (7) transfer of financial assets, (8) accrued severance indemnities and pension liabilities, (9) goodwill and other intangible assets and (10) lease transactions. Fiscal years of certain subsidiaries, which end on December 31, and MUFG’s fiscal year, which ends on March 31, have been treated as coterminous. For the fiscal years ended March 31, 2016, 2017, 2018 and 2018,2019, the effect of recording intervening events for the three-month periods ended March 31 on MUFG’s proportionate equity in net income of subsidiaries with fiscal years ended on December 31, would have resulted in an increase of ¥1.34¥10.22 billion, a decrease of ¥10.76 billion, and an increase of ¥10.22 billion, and a decrease of ¥10.76¥19.97 billion to net income attributable to Mitsubishi UFJ Financial Group, respectively. No intervening events occurred during each of the three-month periods ended March 31, 2016, 2017, 2018 and 20182019 which, if recorded, would have had material effects on consolidated total assets, loans, total liabilities, deposits or total equity as of March 31, 2016, 2017, 2018 and 2018.2019. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to management judgment primarily relate to the allowance for credit losses, the valuation of deferred tax assets, the valuation of financial instruments, the accounting for goodwill and intangible assets, impairment of investment securities, the allowances for repayment of excess interest and accrued severance indemnities and pension liabilities. 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 methodinvestees-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 andday-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 fiscalyear-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 adjustments, a component of Accumulated other comprehensive income (“Accumulated OCI”). Tax effects of 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 fiscalyear-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 relatedoff-balance sheet forward repurchase commitments or purchases of securities with relatedoff-balance sheet forward resale commitments. For the fiscal years ended March 31, 2016, 2017, 2018 and 2018,2019, there were no such transactions accounted for as sales or purchases. Collateral—For secured lending transactions, including resale agreements, securities borrowing transactions, commercial lending and derivative transactions, the MUFG Group, as a secured party, generally has the right to require the counterparties to provide collateral, including letters of credit, cash, securities and other financial assets. For most secured lending transactions, the MUFG Group maintains strict levels of collateralization governed by a dailymark-to-market analysis. Financial assets pledged as collateral are generally negotiable financial instruments and are permitted to be sold or repledged by secured parties. If the MUFG Group sells these financial assets received as collateral, it recognizes the proceeds from the sale and its obligation to return the collateral. For secured borrowing transactions, principally repurchase agreements and securities lending transactions and derivative transactions, where the secured party has the right to sell or repledge financial assets pledged as collateral, the MUFG Group separately discloses those financial assets pledged as collateral in the accompanying consolidated balance sheets. Trading Account Securities—Securities and money market instruments held in anticipation of short-term market movements and for resale to customers are included in Trading account assets, and short trading positions of these instruments are included in Trading account liabilities. Trading positions are carried at fair value in the accompanying consolidated balance sheets and recorded on a trade date basis. Changes in the fair value of trading positions are recognized in Trading account profits (losses). The MUFG Group has elected the fair value option for certain foreign securities. See Note 32 for a further discussion of fair value option. Investment Securities—Debt securities for which the MUFG Group has both the ability and positive intent to hold to maturity are classified asHeld-to-maturity debt securities and are carried at amortized cost. Debt securities that the MUFG Group may not hold to maturity and marketable equity securities, other than those classified as Trading account securities, are classified asAvailable-for-sale debt securities, and are carried at their fair values, with unrealized gains and losses reported on anet-of-tax basis within Accumulated OCI, net of taxes, which is a component of equity. Other investment securities include nonmarketable equity securities carried at their acquisition cost and investment securities held by subsidiaries that are investment companies or brokers and dealers. Such securities held by those subsidiaries are subject to the specialized industry accounting principles for investment companies and brokers and dealers applicable for those subsidiaries. Securities of those subsidiaries are carried at their fair values. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For marketable equity securities, an OTTI is recognized in earnings when a decline in fair value below the cost is deemed other-than-temporary. 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
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 investmentdebt securities, the MUFG Group generally considers factors such as the ability and positive intent to hold the investments for a period of time sufficient to allow for anticipated recovery in fair value, the financial condition of the issuer, the extent of decline in fair value, and the length of time that the decline in fair value below cost has existed. Equity securities include marketable equity investment securities and nonmarketable equity investment securities. Marketable equity investment securities are measured at fair value with unrealized gains or losses reflected in net income. Nonmarketable equity investment securities are primarily measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes. Nonmarketable equity investment securities held by subsidiaries that are investment companies or brokers and dealers, are subject to the specialized industry accounting principles for investment companies and brokers and dealers. Securities of those subsidiaries are carried at their fair values. Interest and dividends on investment securities are reported in Interest income. Dividends are recognized when the shareholder right to receive the dividend is established. Gains and losses on disposition of investment securities are computed using the average cost method and are recognized on the trade date. Derivative Financial Instruments—The MUFG Group engages in derivative activities involving swaps, forwards, futures, options, and other types of derivative contracts. Derivatives are used in trading activities to generate trading revenues and fee income for its own account and to respond to customers’ financial needs. Derivatives are also used to manage counterparty credit risk and market risk exposures to fluctuations in interest and foreign exchange rates, equity and commodity prices. Derivatives entered into for trading purposes are carried at fair value and are reported as Trading account assets or Trading account liabilities, as appropriate. The fair values of derivative contracts executed with the same counterparty under legally enforceable master netting agreements are presented on a gross basis. Changes in the fair value of such contracts are recognized currently in Foreign exchange gains (losses)—net with respect to foreign exchange contracts and in Trading account profits (losses)—net with respect to interest rate contracts and other types of contracts. Embedded features that are not clearly and closely related to the host contracts and meet the definition of derivatives are separated from the host contracts and measured at fair value unless the contracts embedding the derivatives are measured at fair value in their entirety. Derivatives are also used to manage exposures to fluctuations in interest and foreign exchange rates arising from mismatches of asset and liability positions. Certain of those derivatives are designated as hedging instruments and qualify for hedge accounting. The MUFG Group designates a derivative as a hedging instrument at the inception of each such hedge relationship, and it documents, for such individual hedging relationships, the risk management objective and strategy, including the item being hedged, the specific risk being hedged and the method used to assess the hedge effectiveness. In order for a hedging relationship to qualify for hedge accounting, the changes in the fair value of the derivative instruments must be highly effective in achieving offsetting changes in fair values or variable cash flows of the hedged items attributable to the risk being hedged. Any ineffectiveness, which arises during the hedging relationship, is recognized inNon-interest income or expense in the period in which it arises. All qualifying hedging derivatives are valued at fair value and included in Other assets or Other liabilities, as appropriate. For cash flow hedges, the unrealized changes in fair value to the extent effective are recognized in Accumulated OCI. Amounts realized on cash flow hedges related to variable rate loans are recognized in Net interest income in the period when the cash flow from the hedged item MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) is realized. The fair value of cash flow hedges related to forecasted transactions, if any, is recognized inNon-interest income or expense in the period when the forecasted transaction occurs. Any difference that arises from gains or losses on hedging derivatives offsetting corresponding gains or losses on the hedged items, and gains and losses on derivatives attributable to the risks excluded from the assessment of hedge effectiveness are recognized inNon-interest income or expense. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 theheld-for-sale classification and carried at the lower of cost or estimated fair value generally on an individual loan basis. Loan origination fees, net of certain direct origination costs, are deferred and recognized over the contractual life of the loan as an adjustment to yield using a method that approximates the interest method. Interest income on loans that are not impaired is accrued and credited to interest income as it is earned. Unearned income and discounts or premiums on purchased loans are deferred and recognized over the remaining contractual terms of the loans using a method that approximates the interest method when such purchased loans are outside the scope of the guidance on loans and debt securities acquired with deteriorated credit quality as described below. The MUFG Group classifies its loan portfolio into the following portfolio segments—Commercial, Residential, Card, MUFG Americas Holdings Corporation (“MUFG Americas Holdings ” or “MUAH”), and Bank of Ayudhya Public Company Limited (“Krungsri”) based on the grouping used by the MUFG Group to determine the allowance for credit losses. The MUFG Group further classifies the Commercial segment into classes based on initial measurement attributes, risk characteristics, and its method of monitoring and assessing credit risk. Originated loans are considered impaired when, based on current information and events, it is probable that the MUFG Group will be unable to collect all the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Past due status is determined based on the contractual terms of the loan and the actual number of days since the last payment date, and is considered in determining impairment. Originated loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on acase-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 aloan-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) to minimize economic loss, to avoid foreclosure or repossession of collateral, and to ultimately maximize payments received from the borrower. The concessions granted vary by portfolio segment, by program, and by borrower-specific characteristics, and may include interest rate reductions, term extensions, payment deferrals, and partial principal forgiveness. Loan modifications that represent concessions made to borrowers who are experiencing financial difficulties are identified as troubled debt restructurings (“TDRs”). MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 itscharge-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, 2018,2019, the MUFG Group did not make any significant changes to the methodologies or policies used to determine its allowance for credit losses. 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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 thecharge-off policy for each portfolio segment are as follows: Commercial segment In the Commercial segment, the methodology for assessing the appropriateness of the allowance consists of several key elements, which include the allocated allowance for loans individually evaluated for impairment, the formula allowance, and the allocated allowance for large groups of smaller-balance homogeneous loans. The allocated allowance for loans individually evaluated for impairment represents the impairment allowance determined in accordance with the guidance on accounting by creditors for the impairment of a loan. The factors considered by management in determining impairment are the internal credit rating assigned to each borrower which represents the borrower’s creditworthiness determined based on payment status, the number of delinquencies, and the probability of collecting principal and interest payments when due. The impairment of a loan is measured based on the present value of expected future cash flows discounted at the loan’s original effective interest rate, or the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. The formula allowance is applied to loans that are categorized as Normal or Close Watch, excluding loans identified as a TDR, based on the internal credit rating and historical loss factors which are based on the loss experience. See Note 4 for the information on loans to borrowers categorized based on the internal borrower rating. Estimated losses inherent in the loans at the balance sheet date are calculated by multiplying the default ratio by the nonrecoverable ratio (determined as a complement of the recovery ratio). The default ratio is determined by each internal credit rating, taking into account the historical number of defaults of borrowers within each internal credit rating divided by the total number of borrowers. The recovery ratio is mainly determined by the historical experience of collections against loans in default. The default ratio, the recovery ratio and other indicators are continually reviewed to determine the appropriate level of the allowance. Because the evaluation of inherent loss for these loans involves an uncertainty, subjectivity and judgment, the estimation of the formula allowance is back-tested by comparing the allowance with the actual results subsequent to the balance sheet date. The results of such back-testing are evaluated by management to determine whether the manner and level of the formula allowance needs to be changed in subsequent years. The allocated allowance for large groups of smaller-balance homogeneous loans is established through a process that begins with estimates of probable losses inherent in the portfolio. These estimates are based upon various analyses, including historical delinquency and historical loss experience. Loans that have been modified into a TDR are treated as impaired loans. For nonaccrual TDRs, the allowance for credit losses is provided for these loans using the discounted cash flow method, or based on the fair MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) value of the collateral. For TDRs accounted for as accruing loans, the allowance for credit losses is determined by discounting the estimated future cash flows using the original effective interest rate of the loans prior to modification. In relation to loans categorized as Legally/Virtually Bankrupt, the carrying amount of loans less estimated value of the collateral and guaranteed amount is generally considered uncollectible, and is charged off. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. 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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 netcharge-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. 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 netcharge-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 forOff-Balance Sheet Credit Instruments—The MUFG Group maintains an allowance for credit losses onoff-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: | | | | | | | | Years | | Buildings | | | 15 to 50 | | Equipment and furniture | | | 2 to 20 | | Leasehold improvements | | | 5 to 39 | |
Maintenance, repairs and minor improvements are charged to operations as incurred. Major improvements are capitalized. Net gains or losses on dispositions of premises and equipment are included in Othernon-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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Asset retirement obligations related to restoration of certain leased properties upon lease termination are recorded in Other liabilities with a corresponding increase in leasehold improvements. The amounts represent the present value of expected future cash flows associated with returning such leased properties to their original condition. The difference between the gross and present value of expected future cash flows is accreted over the life of the related leases as anon-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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A reporting unit is an operating segment, or an identified business unit one level below an operating segment. An impairment loss is recognized to the extent that the carrying amount of goodwill exceeds its implied fair value. Intangible assets—Intangible assets consist of software, core deposit intangibles, customer relationships, trade names and other intangible assets. These are amortized over their estimated useful lives unless they have indefinite useful lives. Amortization of intangible assets is computed in a manner that best reflects the economic benefits of the intangible assets as follows: | | | | | | | | | | Useful lives
(years) | | | Amortization method | Software | | | 2 to 10 | | | Straight-line | Core deposit intangibles | | | 10 to 16 | | | Straight-line | Customer relationships | | | 7 to 27 | | | Straight-line,Declining-balance | Trade names | | | 7 to 40 | | | 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 ofinternal-use software. Costs subject to capitalization are salaries and employee benefits for employees who are directly associated with and who devote time to theinternal-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. The costs of the plans, basedBased on actuarial computations of current and future employee benefits, arethe service cost component is charged to Salaries and MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) employee benefits.benefits while other components of net pension benefit/cost are charged to Othernon-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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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—RevenueThe 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 major componentsthe product or service to a customer over time or at a point in time. The following is an explanation of feesthe MUFG Group’s key revenue from contracts with customers and commissions is as follows: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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Fees and commissions on credit card business consist of fees and commissions such as interchange income, royalty and other service charges from franchisees. Interchange income from the credit card business is recognized as processed transactions are settled through the associated payment networks, while royalty and other service charges related to the credit card business are recognized on a straight-line basis over the period of service. Fees and commissions on security-related services primarily consist of fees and commissions for sales and transfers of securities including investment funds, underwriting, brokerage and advisory services, arrangement fees on securitizations, and agency services for the calculation and payment of dividends. Fees and commissions on security-related services are recognized in the period in which the related service is provided. If they arise from security-related services under which the customer consumes the related services at a point in time (e.g. sales and transfers of securities are executed at the customer’s direction; underwritings of debt and equity securities or securitizations are completed at the trade date; advice is provided to the clients; and dividends are calculated and then paid to investors), such fees are recognized at the same point in time. If they arise from security-related services under which the customer consumes the related services equally over the period of service (e.g. retainer fees on M&A advisory fees), such fees are recognized over the same period. The advisory fees which are paid upon meeting certain performance goals (e.g. success fees on M&A advisory fees) are recognized at the point in time when the performance goals are met. Fees and commissions on administration and management serviceservices for investment funds insurance commissions,primarily consist of fees and commissions earned from administrating and managing investment funds, including assets under management on real estate business andbehalf of clients. Such fees and commissions from other services are generally recognized as revenue when the related services are performed or recognized over the period that the service is provided. Fees from trade-related financing services are recognized equally over the period of service at the financing.
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 reserve,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. AnnualGuarantee fees and royalty and other service chargesconsist of fees related to the credit cardguarantee business are recordedsuch as providing guarantees on a straight-line basis as servicesresidential mortgage loans and other loans, and are provided.
Interchange income from the credit card business is recognized as billed.
Guarantee fees are generally recognized over the contractual periods of the respective guarantees. Amounts initially recordedInsurance 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 a liability corresponding to the obligations at fair value are generallyinsurance contract is established by the insurance company, while the latter is recognized as revenue over the termsinsurance period. Fees and commissions on real estate business primarily consist of fees from real estate agent services, and are recognized in the guarantees asperiod 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 includesnon-refundable financing related fees such as arrangement fees that are recognized when the service is deemed to be released from the risk under guarantees.provided. 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 atwo-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
those tax positions that meet themore-likely-than-not recognition threshold, the MUFG Group recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The MUFG Group recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Accrued interest and penalties are included within Other liabilities. Free Distributions of Common Shares—As permitted by the Companies Act of Japan (the “Companies Act”), Japanese companies, upon approval by the Board of Directors, may make a free distribution of shares, in the form of a “stock split” as defined, to shareholders. In accordance with generally accepted accounting practice in Japan, such distribution does not give rise to any change in capital stock or capital surplus accounts. Common shares distributed are recorded as shares issued on the distribution date. See Note 18 for further information. Earnings per Common Share—Basic earnings per share (“EPS”) excludes dilutive effects of potential common shares and is computed by dividing earnings applicable to common stock shareholders by the weighted average number of common shares outstanding for the period, while diluted EPS gives effect to all dilutive potential common shares that were outstanding during the period. See Note 23 for the computation of basic and diluted EPS. Treasury Stock—The MUFG Group presents its treasury stock, including shares of MUFG owned by its subsidiaries and affiliated companies, as a reduction of equity on the accompanying consolidated balance sheets at cost and accounts for treasury stock transactions under an average cost method. Gains (losses) on sales of treasury stock are charged to capital surplus and unappropriated retained earnings. Comprehensive Income—Comprehensive income includes net income before attribution to noncontrolling interests and other comprehensive income (“OCI”). All changes in unrealized gains and losses on investment securities, unrealized gains and losses on derivatives qualifying for cash flow hedges, defined benefit plans and foreign currency translation adjustments constitute OCI and are presented, with related income tax effects, in the accompanying consolidated statements of comprehensive income. OCI also includes changes in the instrument-specific credit risk on financial liabilities (“debt valuation adjustments” or “DVA”) accounted for under the fair value option of a foreign affiliated company. See Note 14 for information about the DVA.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 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 fiscalyear-end and remeasured at the end of each reporting period. Changes in quoted prices of common shares of MUFG between the date of grant and the settlement of awards are recognized in the period which the changes occur. For awards classified as equity, compensation costs are measured based on the grant date fair value by the quoted price of the common shares of MUFG for employees or the fair value as of earlier of the date the performance commitment is reached or the date of completion of officers’ performance for nonemployees. See Note 33 for further discussion of stock-based compensation plans. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Reclassifications Certain reclassifications and format changes have been made to the consolidated financial statements for the fiscal years ended March 31, 20162017 and 20172018 to conform to the presentation for the fiscal year ended March 31, 2018.2019. These reclassifications and format changes include 1)reclassifications of equity investment securities from“Available-for-sale securities” and “Other investment securities” to a new line labeled as “Equity securities” within Investment securities in the presentationconsolidated balance sheet to report all marketable and nonmarketable equity investment securities separately fromAvailable-for-sale debt securities andHeld-to-maturity debt securities. The related cash flows were also reclassified from “Proceeds from sales and maturities of “Increase in cash collateral for useAvailable-for-sale securities” and “Proceeds from sales and redemption of BankOther investment securities” to “Proceeds from sales and redemption of Japan’s settlement infrastructure” as a separate line item which had previously been included within theEquity securities”, and from “Purchases of“Other-net”Available-for-sale linesecurities” and “Purchases of Other investment securities” to “Purchases of Equity securities” in cash flows from operating activities in the consolidated statements of cash flows and 2) the reclassifications of long-term repurchase agreements from “Long-term debt” to “Payables under repurchase agreements” in the consolidated balance sheets, the related interest expense from “Long-term debt” to “Payables under repurchase agreements and securities lending transactions” within interest expense in the consolidated statements of income, and the related cash flows from “Proceeds from issuance of long-term debt” and “Repayments of long-term debt” to “Net increase (decrease) in call money, funds purchased, and payables under repurchase agreements and securities lending transactions” in cash flows from financinginvesting activities in the consolidated statements of cash flows. These reclassifications and format changes did not result in a change to previously reported financial positions,condition, results of operations, and cash flows. In addition, certain reclassifications and format changes were made to notes to the consolidated financial statements. See Notes 12, 31 and 32 for these changes in notes. Accounting Changes Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships—In March 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance which clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. This guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The MUFG Group adopted this guidance on April 1, 2017, and there was no material impact on its financial position and results of operations.
Contingent Put and Call Options in Debt Instruments—In March 2016, the FASB issued new guidance which clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under this guidance is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence, and does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks. This guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The MUFG Group adopted this guidance on April 1, 2017, and there was no material impact on its financial position and results of operations.
Simplifying the Transition to the Equity Method of Accounting—In March 2016, the FASB issued new guidance which eliminates the requirement for retrospective application of the equity method and instead requires investors to apply the equity method prospectively from the date on which significant influence is obtained. This guidance also requires the equity method investor to add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest, and recognize through earnings the unrealized holding gain or loss of anavailable-for-sale equity security at the date on which that equity security becomes qualified for use of the equity method, if applicable. This guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted. The MUFG Group adopted this guidance on April 1, 2017, and there was no material impact on its financial position and results of operations.
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Improvements to Employee Share-Based Payment Accounting—In March 2016, the FASB issued new guidance which amends several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under this guidance, an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. This guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. The MUFG Group adopted this guidance on April 1, 2017, and elected to account for forfeitures as they occur, which represents a change from the previous requirement to estimate forfeitures when recognizing compensation expense. There was no material impact on its financial position and results of operations.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income—In February 2018, the FASB issued new guidance which allows a reclassification from Accumulated OCI to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This guidance also requires certain disclosures about stranded tax effects. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period, for which financial statements have not yet been issued. The MUFG Group early adopted this guidance and elected to reclassify ¥29,071 million from Accumulated OCI to retained earnings in the fiscal year ended March 31, 2018.
Restricted Cash—In November 2016, the FASB issued new guidance which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance also requires an entity to disclose how the statement of cash flows reconciles to the balance sheet when cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents are presented in more than one line item within the balance sheet, and information about the nature of the restrictions on its cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The MUFG Group early adopted this guidance in the second half of the fiscal year ended March 31, 2018 retrospectively. The adoption of the guidance resulted in reclassification of restricted cash balances into cash and cash equivalents on the consolidated statements of cash flows. In addition, the MUFG Group included cash and due from banks and interest-earning deposits in other banks in cash and cash equivalents in the consolidated statements of cash flows, resulting in interest-earning deposits in other banks no longer being reflected in investing activities. Upon adoption, the MUFG Group recorded a decrease of ¥(4,845) million and an increase of ¥5,235 million in Net cash provided by (used in) operating activities for the fiscal year ended March 31, 2016 and 2017, respectively, and an increase of ¥4,226,248 million and a decrease of ¥(2,407,935) million in Net cash provided by (used in) investing activities for the fiscal year ended March 31, 2016 and 2017, respectively.
Recently Issued Accounting Pronouncements
Revenue from Contracts with Customers—In May 2014, the FASB issued new guidance which supersedes the currentthen-current revenue recognition requirements, including most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
changes in judgments, and assets recognized from the costs incurred to obtain or fulfill a contract. In March 2016, the FASB issued further guidance related to the principal-versus-agent assessment which requires an entity to determine the nature of the promise to the customer by identifying each specified good or service to be provided and assessing whether an entity controls each specified good or service before that good or service is transferred to the customer. In addition, in April 2016, the FASB issued guidance clarifying certain aspects of identification of promised goods or services and provides implementation guidance on licensing of intellectual property. Furthermore, in May 2016, the FASB issued guidance which amends the guidance on assessing collectibility, presentation of sales taxes, noncash consideration, and contract modifications and completed contracts at transition, and on disclosure around transition. In December 2016, the FASB issued additional MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) guidance which amends the new revenue standard to clarify certain aspects, including the scope and disclosure requirements. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The guidance does not apply to revenue relating to financial instruments, including trading account assets, investment securities, and loans that are accounted for in accordance with other applicable guidance. The MUFG Group adopted the guidance on April 1, 2018 using theon a modified retrospective method. The MUFG Group assessed the impact of the new guidance by evaluating its contracts, identifying the related performance obligations, determining when the performance obligations were satisfied,method, and determining the amount of revenue to recognize. As a result of this analysis, the adoption of this guidance does not have athere was no material impact on its consolidated financial position and resultresults of operations. The MUFG Group is currently developing the quantitative and qualitative disclosures required by the guidance.For additional information, see Note 28. Recognition and Measurement of Financial Assets and Financial Liabilities—In January 2016, the FASB issued new guidance which requires equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income. However, for equity investments that do not have readily determinable fair values, the fair value may be measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer,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 positionportion 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 toavailable-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. As a resultIn February 2018, the FASB issued additional guidance to improve certain aspects of adopting thisthe new guidance. The MUFG Group adopted the guidance on April 1, 2018. Upon adoption, the MUFG Group estimatesrecorded an increase in the beginning balance of retained earnings as of April 1, 2018 of ¥2,710¥2,702 billion, with a corresponding decrease in Accumulated OCI, on equity investments at fair value, net of taxes. Other amendments required under the new guidance aredid not expected to have a material impact on the MUFG Group’s consolidated financial statements. 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 aright-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 dateresults 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
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The MUFG Group will continue to evaluate what effect this guidance will have on its financial statements and related disclosures. The MUFG Group expects agross-up on its consolidated balance sheet asoperations. As a result of the adoption ofadopting this guidance, recognizing lease liabilitiesmarketable equity investment securities are measured at fair value with unrealized gains or losses reflected in net income. Prior to adoption, such unrealized gains andright-of-use assets, although the extent of such agross-up is under evaluation. The MUFG Group is losses were reflected in the technology development phase of this project to support the ongoing lessee accounting requiredother comprehensive income. Nonmarketable equity investment securities previously accounted for under the new guidance. The MUFG Group’s implementation efforts include reviewing its existing lease contracts and service contracts that may include embedded leases.cost method of accounting are now measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes.
Recognition of Breakage for Certain Prepaid Stored-Value Products—In March 2016, the FASB issued new guidance which clarifies that liabilities related to the sale of certain prepaid stored-value products are financial liabilities. The guidance also provides a narrow scope exception to the guidance on extinguishments of liabilities to require that breakage for those liabilities be accounted for consistent with the breakage model required by the guidance on revenue from contracts with customers fornon-financial liabilities. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application is permitted, including adoption in an interim period. The MUFG Group does not expect that the adoption ofadopted this guidance will have a material impact on its consolidated financial statements and related disclosures. Measurement of Credit Losses on Financial Instruments—In June 2016,April 1, 2018. Upon adoption, 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. Foravailable-for-sale debt securities, a credit loss isMUFG Group 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 changesincrease in the allowance are recordedbeginning balance of retained earnings 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 classApril 1, 2018 of financial asset by credit quality indicator, disaggregated by the year¥1,784 million, net of origination. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The MUFG Group is currently evaluating what effect the guidance above will have on its consolidated financial statements and related disclosures. The MUFG Group’s implementation efforts include identifying key interpretive issues and assessing existing credit forecasting models and processes against this guidance to determine what modifications may be required.taxes.
Classification of Certain Cash Receipts and Cash Payments—In August 2016, the FASB issued new guidance which provides specific guidance on eight cash flow classification issues to reduce diversity in practice. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Since this guidance only impacts classification in the statement of MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) cash flows, adoption will not affect the MUFG Group’s consolidated statements of income or consolidated balance sheets. The MUFG Group is currently evaluating what effect theadopted this guidance will haveon April 1, 2018, and there was no material impact on its consolidated financial statements. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
statements of cash flows. Intra-Entity Transfers of Assets Other Than Inventory—In October 2016, the FASB issued new guidance which simplifies the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Under current U.S. GAAP, the recognition of current and deferred income taxes for an intra-entity asset transfer is prohibited until the asset has been sold to an outside party. This guidance eliminates this exception for all intra-entity sales of assets other than inventory. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. Early adoption is permitted. The MUFG Group does not expect that the adoption ofadopted this guidance will have aon April 1, 2018, and there was no material impact on its consolidated financial statementsposition and related disclosures.results of operations. Clarifying the Definition of a Business—In January 2017, the FASB issued new guidance which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, an integrated set of assets and activities is not a business. This guidance also requires that to be considered a business, an integrated set of assets and activities must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs, provides a framework to evaluate whether both an input and a substantive process are present, and removes the current requirement to assess if a market participant could replace any missing elements. Furthermore, this guidance narrows the definition of outputs so that the term is consistent with how outputs are described in the new revenue standard. This guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early application is permitted for transactions that occur in a period for which financial statements have not been issued. The MUFG Group adopted this guidance on April 1, 2018, and there was no material impact on its financial position and results of operations. Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets—In February 2017, the FASB issued new guidance which clarifies the scope of the guidance on derecognition of nonfinancial assets and provides guidance on the accounting for partial sales of nonfinancial assets. This guidance defines an in substance nonfinancial asset, unifies guidance related to partial sales of nonfinancial assets, eliminates rules specifically addressing sales of real estate, removes exceptions to the financial asset derecognition model, and clarifies the accounting for contributions of nonfinancial assets to joint venture. The effective date and early adoption of this guidance will dependbe the same as the effective date and early adoption of the new revenue standard. The MUFG Group adopted this guidance on April 1, 2018, and there was no material impact on its financial position and results of operations. Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost—In March 2017, the FASB issued new guidance which requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. This guidance also allows only the service cost component to be eligible for capitalization when applicable. This guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued. The MUFG Group retrospectively adopted MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) this guidance on April 1, 2018 using the practical expedient permitted by this guidance and reclassified thenon-service cost components of net pension benefit/cost to Othernon-interest expenses, and there was no material impact on its financial position and results of operation. See Note 13 for further information. Scope of Modification Accounting—In May 2017, the FASB issued new guidance which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under this guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for which financial statements have not yet been issued. The MUFG Group adopted this guidance on April 1, 2018, and there was no material impact on its financial position and results of operations. Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement—In August 2018, the FASB issued new guidance which modifies the disclosure requirements on fair value measurements. This guidance removes disclosure requirements for the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and valuation processes for Level 3 fair value measurements. In addition, the guidance modifies disclosure requirements for investments in certain entities that calculate net asset value and modifies disclosure requirements related to measurement uncertainty. Lastly, the guidance adds disclosure requirements for changes in unrealized gains and losses for the period that are included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and the guidance adds disclosure requirements related to the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of this guidance. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this guidance and delay adoption of the additional disclosures until their effective date. The MUFG Group early adopted removal disclosure requirements as of March 31, 2019 and will adopt other requirements of this guidance on or prior to the effective date. The guidance affected disclosures in the notes to the consolidated financial statements and did not affect its financial position and results of operations. See Note 32 for further information. Recently Issued Accounting Pronouncements Leases—In February 2016, the FASB issued new guidance which requires that lessees recognize in the statement of financial position a liability to make lease payments (the lease liability) and aright-of-use asset representing its right to use the underlying asset for the lease term. The accounting applied by lessors is largely unchanged, but the accounting model for leveraged leases is not retained for leases that commence after the effective date of this guidance. This guidance also requires entities to provide qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The MUFG Group adopted this guidance on April 1, 2019 under a modified retrospective approach, and recorded approximately ¥0.4 trillion ofright-of-use assets and ¥0.5 trillion of lease liabilities on the MUFG Group’s acquisitionconsolidated balance sheet. The adoption of this guidance was not material to the MUFG Group’s results of operations. Measurement of Credit Losses on Financial Instruments—In June 2016, the FASB issued new guidance which replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) expected credit losses and disposal activitiesrequires 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. Foravailable-for-sale debt securities, a credit loss is recorded through an allowance for credit losses and the amount of the allowance is limited to the amount by which fair value is below amortized cost. For purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense, only subsequent changes in the allowance are recorded as a credit loss expense, and interest income is recognized based on the effective interest rate, excluding the discount embedded in the purchase price that is attributable to the acquirer’s assessment of credit losses at acquisition. This guidance also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance, and requires the entity to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. In April 2019, the FASB issued additional guidance to improve certain aspects of this guidance. This guidance is effective for fiscal years beginning after adoption.December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The MUFG Group is currently evaluating what effect the guidance above will have on its consolidated financial statements and related disclosures. The MUFG Group’s implementation efforts include identifying key interpretive issues, assessing the impact and developing credit forecasting models and processes. Simplifying the Test for Goodwill Impairment—In January 2017, the FASB issued new guidance which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. This guidance eliminates Step 2 and instead requires an entity to perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. This guidance also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test, and instead requires the disclosure of the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. This guidance is effective for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The MUFG Group is currently evaluating what effect the guidance will have on its consolidated financial statements and related disclosures. Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets—In February 2017, the FASB issued new guidance which clarifies the scope of the guidance on derecognition of nonfinancial assets and provides guidance on the accounting for partial sales of nonfinancial assets. This guidance defines an in substance nonfinancial asset, unifies guidance related to partial sales of nonfinancial assets, eliminates rules specifically addressing sales of real estate, removes exceptions to the financial asset derecognition model, and clarifies the accounting for contributions of nonfinancial assets to joint venture. The effective date and early adoption of this guidance will be the same as the effective date and early adoption of the new revenue standard, which is not yet effective. 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.
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost—In March 2017, the FASB issued new guidance which requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. This guidance also allows only the service cost component to be eligible for capitalization when applicable. This guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued. The MUFG Group does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.
Premium Amortization on Purchased Callable Debt Securities—In March 2017, the FASB issued new guidance which shortens the amortization period for certain callable debt securities held at a premium, specifically requiring the premium to be amortized to the earliest call date. This guidance does not require an accounting change for securities held at a discount, and the discount continues to be amortized to maturity. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The MUFG Group is currently evaluating what effect the guidance will have on its consolidated financial statements and related disclosures. Scope of Modification Accounting—In May 2017, the FASB issued new guidance which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under this guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for which financial statements have not yet been issued. The MUFG Group does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements and related disclosures.
Targeted Improvements to Accounting for Hedging Activities—In August 2017, the FASB issued new guidance which better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, this guidance expands and refines MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. In addition, this guidance includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. This guidance also modifies the requirement to disclose the effect on the income statement of fair value and cash flow hedges, eliminates the requirement to disclose the ineffective portion of the change in fair value of hedging instruments, and requires new tabular disclosures related to cumulative basis adjustments for fair value hedges. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of this guidance. The MUFG Group is currently evaluating what effectdoes not expect that the adoption of this guidance will have a material impact on its consolidated financial statements and related disclosures. Improvements to Nonemployee Share-Based Payment Accounting—In June 2018, the FASB issued new guidance which largely aligns the accounting for share-based payment awards issued to employees and nonemployees. Under this guidance, equity-classified share-based payment awards issued to nonemployees are measured at the grant date, instead of the previous requirement to measure the awards at the earlier of the date at which the performance commitment is reached or the date of performance completion. For awards issued to nonemployees with performance conditions, compensation cost associated with the awards is recognized when achievement of the performance condition is probable, instead of the previous requirement to recognize the costs MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
based on the lowest aggregate fair value. This guidance also eliminates the previous requirement to reassess the classification for certain nonemployee awards upon vesting. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of the new revenue standard. The MUFG Group is currently evaluating what effect the guidance will have on its consolidated financial statements and related disclosures. Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans—In August 2018, the FASB issued new guidance which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This guidance removes certain disclosure requirements, including amounts in Accumulated OCI expected to be recognized as components of net periodic benefit cost over the next fiscal year and the amount and timing of plan assets expected to be returned to the employer, clarifies disclosure requirements for defined benefit plans with projected or accumulated benefit obligations in excess of plan assets, and adds disclosure requirements for weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates as well as an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. This guidance is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The MUFG Group is currently evaluating what effect the guidance will have on its disclosures. Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract—In August 2018, the FASB issued new guidance which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtaininternal-use software. This guidance requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance oninternal-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 oninternal-use software to the capitalized implementation costs as if the costs were long-lived assets, and present thecapitalized-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) within those fiscal years. Early adoption is permitted, including adoption in any interim period. The MUFG Group is currently evaluating what effect the guidance will have on its consolidated financial statements and related disclosures. Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes—In October 2018, the FASB issued new guidance which permits use of the Overnight Index Swap (“OIS”) rate based on Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (“LIBOR��), the OIS rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association Municipal Swap Rate. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period upon issuance of this guidance if an entity already has adopted the new hedge accounting standard. The MUFG Group is currently evaluating what effect the guidance will have on its consolidated financial statements and related disclosure. Mitsubishi UFJ Fund Services’s Acquisition of UBS Global Asset Management’s Alternative Fund Services Business
On December 11, 2015, Mitsubishi UFJ Fund Services Holdings Limited (“Mitsubishi UFJ Fund Services”), a global asset servicing subsidiary of Mitsubishi UFJ Trust and Banking, acquired the alternative fund services business of UBS Global Asset Management for ¥24,601 million in cash, and thereby recorded goodwill of ¥2,732 million and intangible assets of ¥7,622 million. UBS Global Asset Management is a global fund administrator providing professional services for hedge funds, funds of hedge funds, private equity funds and real estate structures. Mitsubishi UFJ Fund Services has focused on strengthening its operational abilities, to further improve the quality of services, and to expand its global network through acquisitions and investments. The purpose of this acquisition is to enhance the MUFG Group’s competitiveness and scale of operations in the global fund administration market with the aim to be a global industry-leading fund administrator. The assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date. During the fiscal year ended March 31, 2017, no measurement period adjustments were applied to the acquisition date fair values, resulting in no change in goodwill and intangible assets.
MUFG Bank’s Acquisition of Security Bank Corporation’s shares On April 1, 2016, MUFG Bank acquired newly issued common shares and preferred shares with voting rights of Security Bank Corporation (“Security Bank”), representing in the aggregate approximately 20.0% of Security Bank’s equity interest for ¥91,993 million. Security Bank is listed on the Philippines Stock Exchange and is not part of any local conglomerate in the Philippines. Considering both MUFG Bank’s ownership of the common stock and preferred stock and representation on the board of directors, the MUFG Group has determined that MUFG Bank has the ability to exercise significant influence over the operating and financial policies of Security Bank and applied the equity method of accounting for its investment. Mitsubishi UFJ Trust and Banking’s Acquisition of Capital Analytics II LLC On April 30, 2016, Mitsubishi UFJ Trust and Banking acquired 100% ownership of Capital Analytics II LLC for ¥4,494 million in cash, and thereby recorded goodwill of ¥2,858 million and intangible assets of ¥1,388 million. Capital Analytics II LLC is an overseas fund management company that mainly provides fund administration services for private equity funds. The purpose of this acquisition is to meet the diversified global fund administration needs of its Japanese and overseas customers through the utilization of Capital Analytics II LLC’s unparalleled operational expertise and the MUFG Group’s extensive network. Upon conclusion of the acquisition, Capital Analytics II LLC was renamed MUFG Capital Analytics LLC. During the fiscal year ended March 31, 2017, measurement period adjustments were applied to the acquisition date fair values, which decreased goodwill by ¥115 million. Krungsri’s Acquisition of Hattha Kaksekar Limited On September 12, 2016, Krungsri acquired 100% ownership of Hattha Kaksekar Limited for ¥15,703 million in cash, and thereby recorded goodwill of ¥8,280 million and intangible assets of ¥476 million. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Hattha Kaksekar Limited is a financial institution in Cambodia providing financial services primarily to sole proprietors. The purpose of this acquisition is to enable the MUFG Group to tap into the growth of the Cambodian market by leveraging the knowhow of Ngern Tid Lor Co., Ltd., a subsidiary of Krungsri engaged in microfinance in Thailand, with an aim to promote and develop the microfinance business. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) MUFG’s Acquisition of Hitachi Capital Corporation’s shares On October 3, 2016, MUFG acquired 23.0% of the common shares of Hitachi Capital Corporation (“Hitachi Capital”) for ¥91,877 million from Hitachi, Ltd. Considering both MUFG’s ownership of the common stock and representation on the board of directors, the MUFG Group has determined that MUFG has the ability to exercise significant influence over the operating and financial policies of Hitachi Capital and applied the equity method of accounting for its investment. Mitsubishi UFJ Trust and Banking’s Acquisition of Rydex Fund Services, LLC On October 4, 2016, Mitsubishi UFJ Trust and Banking acquired 100% ownership of Rydex Fund Services, LLC for ¥17,431 million in cash, and thereby recorded goodwill of ¥5,232 million and intangible assets of ¥11,507 million. Rydex Fund Services, LLC is an overseas fund management company that mainly provides fund administration services for funds established under the 1940 Investment Companies Act of the United States. The purpose of this acquisition is to meet the diversified global fund administration needs of its Japanese and overseas customers through the utilization of Rydex Fund Services, LLC’s unparalleled operational expertise and the MUFG Group’s extensive network. Upon conclusion of the acquisition, Rydex Fund Services, LLC was renamed MUFG Investor Services (US), LLC. Mitsubishi UFJ NICOS Became a Wholly-Owned Subsidiary On May 15, 2017, MUFG and its subsidiary Mitsubishi UFJ NICOS entered into a share exchange agreement for MUFG to acquire the remaining 15.02% ownership of Mitsubishi UFJ NICOS by agreeing, on October 2, 2017, to pay ¥50,000 million cash to the only holder of Mitsubishi UFJ NICOS common stock other than MUFG. The transaction was accounted for as anon-cancellable forward purchase contract. Accordingly, a liability of ¥50,000 million was recognized in Other liabilities on the accompanying consolidated balance sheet with a corresponding reduction in Noncontrolling interests of ¥15,390 million and Capital surplus of ¥34,751 million, and an increase in Accumulated OCI, net of taxes of ¥141 million. On October 2, 2017, MUFG settled Other liabilities of ¥50,000 million.The purpose of making a wholly-owned subsidiary is to effect a shift in posture enabling a more flexible response to changes in the business environment and the swift pursuit of group synergies. Acquisition of shares in Bank Danamon in Indonesia On December 26, 2017, MUFG Bank entered into conditional share purchase agreements with Asia Financial (Indonesia) Pte. Ltd. (“AFI”) and other affiliated entities (the “Sellers”) to acquire their 73.8% equity interests in an Indonesian bank, PT Bank Danamon Indonesia, Tbk. (“Danamon”), subject to applicable regulatory approvals. Danamon, which was established in 1956, is the fifth most profitable Indonesian commercial bank in terms of net income. Danamon provides banking and financial products and services to consumer, micro-finance, small and medium enterprise (“SME”) and corporate customers, with a network of around 1,800 offices in Indonesia. MUFG Bank intends to establish an integrated and comprehensive services platform that serves as a gateway for clients wishing to make inroads into Indonesia’s growing economy as well as local companies MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) This strategic investment by MUFG Bank will be executed through three steps (the “Proposed Transaction”), and the completion of the Proposed Transaction will result in MUFG Bank becoming the largest shareholder in Danamon and Danamon becoming a consolidated subsidiary of MUFG Bank. In Step 1, MUFG Bank acquired an initial 19.9% equity interest in Danamon from the Sellers on December 29, 2017, based on a price of IDR 8,323 (approximately ¥70(1)) per share, for an investment amount of IDR 15,875 billion (approximately ¥133 billion(1)). The price was based on a price book-value ratio of 2.0 calculated on the basis of Danamon’s net assets as of September 30, 2017 with certain adjustments applied. AFI continues to be the majority shareholder in Danamon after closing of Step 1. MUFG Bank classified Danamon’s equity securities asAvailable-for-sale securities.securities on the acquisition date. In Step 2, MUFG Bank is expected to acquireacquired an additional 20.1% to increase its equity interest in Danamon to 40% with regulatory approvals and other relevant approvals. This step is expected to close by September 2018. The price for Danamon’s shares in Step 2 will befrom the Sellers on August 3, 2018, based on a similar approachprice 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 Step 1.40%, 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, upon completion of Step 2, MUFG Bank intends to seek the necessary approvals to increase its equity interest in Danamon beyond the 40%, and this will provide an opportunity for all other existing Danamon shareholders to either remain as shareholders or receive cash from MUFG Bank. With the closing of Step 3, MUFG Bank’s final equity interest in Danamon is expected to be above 73.8%. The prices for Danamon’s shares in Step 3 will be based on a similar approach as Step 1.1 and Step 2. See Note 35 for further developments on acquisition of shares in Danamon. Note:Notes:
| (1) | | Calculated based on the exchange rate of IDR1 = ¥0.0084 |
| (2) | | Calculated based on the exchange rate of IDR1 = ¥0.0077 |
Acquisition of Colonial First State Global Asset Management On October 31, 2018, Mitsubishi UFJ Trust and Banking entered into a Share Sale Deed with Commonwealth Bank of Australia (“CBA”), and its wholly-owned subsidiary, Colonial First State Group Limited (the “Seller”) to acquire 100% of the shares in each of nine subsidiaries of the Seller, which collectively represent CBA’s global asset management business known as Colonial First State Global Asset Management (“CFSGAM”), for approximately ¥328 billion or approximately AUD 4.0 billion, subject to applicable regulatory and other approvals and certain conditions. CFSGAM is the third largest asset management group by assets under management in Asian markets excluding Japan, offers a wide range of products including equities, fixed income and alternatives, and has specialist capabilities in Asian and emerging equity markets, alternatives (property and infrastructure), as well as passive and other products. The investment in CFSGAM aims to meet various client needs by expanding product lineup and enhancing presence as the largest asset management firm in the Asia and Oceania region. Acquisition of DVB Bank SE’s Aviation Finance Division On March 1, 2019, MUFG Bank and its consolidated subsidiary, BOT Lease Co., Ltd. (“BOT Lease”), entered into an agreement with DVB Bank SE (“DVB”) to transfer DVB’s aviation finance division to MUFG Bank and BOT Lease, subject to applicable regulatory and other approvals and certain conditions. Under the agreement, the entire aviation finance client lending portfolio of approximately ¥716.3 billion or approximately €5.6 billion, employees, and other parts of the operating infrastructure will be transferred to MUFG Bank. In addition, DVB’s aviation investment management and asset management businesses will be transferred to a newly established subsidiary of BOT Lease. 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. The following tables present the amortized cost, gross unrealized gains and losses, and fair value ofAvailable-for-sale debt securities,Held-to-maturity debt securities, and Marketable equity securities included inHeld-to-maturityAvailable-for-sale securities at March 31, 20172018, and 2018:Available-for-sale debt securities andHeld-to-maturity debt securities at March 31, 2019: | | | | | | | | | | | | | | | | | At March 31, 2017: | | Amortized
cost | | | Gross
unrealized
gains | | | Gross
unrealized
losses | | | Fair value | | | | | (in millions) | | Available-for-sale securities: | | | | | | | | | | | | | | | | | Debt securities: | | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | ¥ | 25,435,570 | | | ¥ | 396,057 | | | ¥ | 5,339 | | | ¥ | 25,826,288 | | Japanese prefectural and municipal bonds | | | 1,010,336 | | | | 9,598 | | | | 4,445 | | | | 1,015,489 | | Foreign governments and official institutions bonds | | | 2,162,897 | | | | 14,006 | | | | 26,974 | | | | 2,149,929 | | Corporate bonds | | | 1,121,967 | | | | 20,854 | | | | 1,089 | | | | 1,141,732 | | Residential mortgage-backed securities | | | 1,203,685 | | | | 551 | | | | 15,318 | | | | 1,188,918 | | Commercial mortgage-backed securities | | | 80,564 | | | | 454 | | | | 750 | | | | 80,268 | | Asset-backed securities | | | 1,374,754 | | | | 5,416 | | | | 1,898 | | | | 1,378,272 | | Other debt securities(1) | | | 169,185 | | | | 4,899 | | | | 3,295 | | | | 170,789 | | Marketable equity securities | | | 2,736,976 | | | | 3,407,915 | | | | 6,477 | | | | 6,138,414 | | | | | | | | | | | | | | | | | | | Total | | ¥ | 35,295,934 | | | ¥ | 3,859,750 | | | ¥ | 65,585 | | | ¥ | 39,090,099 | | | | | | | | | | | | | | | | | | | Held-to-maturity securities: | | | | | | | | | | | | | | | | | Debt securities: | | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | ¥ | 1,100,955 | | | ¥ | 43,115 | | | ¥ | — | | | ¥ | 1,144,070 | | Foreign governments and official institutions bonds | | | 61,135 | | | | 1,113 | | | | — | | | | 62,248 | | Corporate bonds | | | 100 | | | | — | | | | — | | | | 100 | | Residential mortgage-backed securities | | | 962,492 | | | | 4,009 | | | | 11,196 | (2) | | | 955,305 | | Commercial mortgage-backed securities | | | 184,336 | | | | 5,065 | | | | 768 | (2) | | | 188,633 | | Asset-backed securities | | | 1,278,303 | | | | 9,277 | | | | 185 | | | | 1,287,395 | | | | | | | | | | | | | | | | | | | Total | | ¥ | 3,587,321 | | | ¥ | 62,579 | | | ¥ | 12,149 | | | ¥ | 3,637,751 | | | | | | | | | | | | | | | | | | |
Notes:
(1) | | Other debt securities in the table above include ¥160,479 million of private placement debt conduit bonds. |
(2) | | MUFG Americas Holdings reclassified residential mortgage-backed securities and commercial mortgage-backed securities fromAvailable-for-sale securities toHeld-to-maturity securities during the fiscal year ended March 31, 2014. As a result of the reclassification of residential mortgage-backed securities and commercial mortgage-backed securities, the unrealized losses before taxes at the date of reclassification remaining in Accumulated OCI in the accompanying consolidated balance sheets were ¥4,662 million and ¥7,295 million, respectively, at March 31, 2017 and are not included in the table above. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| At March 31, 2018: | | Amortized
cost | | Gross
unrealized
gains | | Gross
unrealized
losses | | Fair value | | | Amortized
cost | | | Gross
unrealized
gains | | | Gross
unrealized
losses | | Fair value | | | | | (in millions) | | | (in millions) | | Available-for-sale securities: | | | | | | | | | | Debt securities: | | | | | | | | | | Available-for-sale debt securities: | | | | | | | | | | Japanese national government and Japanese government agency bonds | | ¥ | 24,272,345 | | | ¥ | 299,402 | | | ¥ | 3,843 | | | ¥ | 24,567,904 | | | ¥ | 24,272,345 | | | ¥ | 299,402 | | | ¥ | 3,843 | | | ¥ | 24,567,904 | | Japanese prefectural and municipal bonds | | 1,532,143 | | | | 7,808 | | | 2,520 | | | 1,537,431 | | | | 1,532,143 | | | | 7,808 | | | | 2,520 | | | 1,537,431 | | Foreign governments and official institutions bonds | | 2,207,662 | | | 8,938 | | | 44,908 | | | 2,171,692 | | | Foreign government and official institution bonds | | | | 2,207,662 | | | | 8,938 | | | | 44,908 | | | 2,171,692 | | Corporate bonds | | 1,104,799 | | | | 15,589 | | | 1,028 | | | 1,119,360 | | | | 1,104,799 | | | | 15,589 | | | | 1,028 | | | 1,119,360 | | Residential mortgage-backed securities | | 1,632,346 | | | | 752 | | | 15,563 | | | 1,617,535 | | | | 1,632,346 | | | | 752 | | | | 15,563 | | | 1,617,535 | | Commercial mortgage-backed securities | | 95,383 | | | | 473 | | | 620 | | | 95,236 | | | | 95,383 | | | | 473 | | | | 620 | | | 95,236 | | Asset-backed securities | | 1,546,989 | | | | 12,775 | | | 1,415 | | | 1,558,349 | | | | 1,546,989 | | | | 12,775 | | | | 1,415 | | | 1,558,349 | | Other debt securities(1) | | 165,002 | | | | 3,635 | | | 3,030 | | | 165,607 | | | | 165,002 | | | | 3,635 | | | | 3,030 | | | 165,607 | | Marketable equity securities | | 2,789,392 | | | | 3,925,680 | | | 43,488 | | | 6,671,584 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 35,346,061 | | | ¥ | 4,275,052 | | | ¥ | 116,415 | | | ¥ | 39,504,698 | | | ¥ | 32,556,669 | | | ¥ | 349,372 | | | ¥ | 72,927 | | | ¥ | 32,833,114 | | | | | | | | | | | | | | | | | | | | | | | | | | | Held-to-maturity securities: | | | | | | | | | | Debt securities: | | | | | | | | | | Held-to-maturity debt securities: | | | | | | | | | | Japanese national government and Japanese government agency bonds | | ¥ | 1,100,807 | | | ¥ | 40,212 | | | ¥ | — | | | ¥ | 1,141,019 | | | ¥ | 1,100,807 | | | ¥ | 40,212 | | | ¥ | — | | | ¥ | 1,141,019 | | Foreign governments and official institutions bonds | | 59,330 | | | 383 | | | 103 | | | 59,610 | | | Foreign government and official institution bonds | | | | 59,330 | | | | 383 | | | | 103 | | | 59,610 | | Residential mortgage-backed securities | | | 885,965 | | | 1,660 | | | | 14,726 | (2) | | 872,899 | | | | 885,965 | | | | 1,660 | | | | 14,726 | (2) | | 872,899 | | Commercial mortgage-backed securities | | | 171,647 | | | 4,107 | | | | 1,018 | (2) | | 174,736 | | | | 171,647 | | | | 4,107 | | | | 1,018 | (2) | | 174,736 | | Asset-backed securities | | | 1,365,192 | | | 8,438 | | | 1,222 | | | 1,372,408 | | | | 1,365,192 | | | | 8,438 | | | | 1,222 | | | 1,372,408 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 3,582,941 | | | ¥ | 54,800 | | | ¥ | 17,069 | | | ¥ | 3,620,672 | | | ¥ | 3,582,941 | | | ¥ | 54,800 | | | ¥ | 17,069 | | | ¥ | 3,620,672 | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity securities: | | | | | | | | | | Marketable equity securities | | | ¥ | 2,789,392 | | | ¥ | 3,925,680 | | | ¥ | 43,488 | | | ¥ | 6,671,584 | | | | | | | | | | | | | | | | Total | | | ¥ | 2,789,392 | | | ¥ | 3,925,680 | | | ¥ | 43,488 | | | ¥ | 6,671,584 | | | | | | | | | | | | | | | |
Notes: | (1) | | Other debt securities in the table above include ¥152,374 million of private placement debt conduit bonds. |
| (2) | | MUFG Americas Holdings reclassified residential mortgage-backed securities and commercial mortgage-backed securities fromAvailable-for-sale debt securities toHeld-to-maturity debt securities during the fiscal year ended March 31, 2014. As a result of the reclassification of residential mortgage-backed securities and commercial mortgage-backed securities, the unrealized losses before taxes at the date of reclassification remaining in Accumulated OCI in the accompanying consolidated balance sheets were ¥3,457 million and ¥5,932 million, respectively, at March 31, 2018 and are not included in the table above. |
Other Securities
Investment securities other thanAvailable-for-sale securities orHeld-to-maturity securities (i.e., nonmarketable equity securities presented in Other investment securities) were primarily carried at cost of ¥529,869 million and ¥538,251 million at March 31, 2017 and 2018, respectively, because their fair values were not readily determinable.
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES The remaining balances were investment securities held by certain subsidiaries subject to specialized industry accounting principles for investment companies and broker-dealers and carried at fair value of ¥26,292 million and ¥28,359 million at March 31, 2017 and 2018, respectively. See Note 32 for the valuation techniques and inputs used to estimate the fair values.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
With respect to cost-method investments of ¥97,774 million and ¥97,586 million at March 31, 2017 and 2018, respectively, the MUFG Group estimated a fair value using commonly accepted valuation techniques to
| | | | | | | | | | | | | | | | | At March 31, 2019: | | Amortized
cost | | | Gross
unrealized
gains | | | Gross
unrealized
losses | | | Fair value | | | | | (in millions) | | Available-for-sale debt securities: | | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | ¥ | 23,748,558 | | | ¥ | 330,115 | | | ¥ | 977 | | | ¥ | 24,077,696 | | Japanese prefectural and municipal bonds | | | 2,203,978 | | | | 22,593 | | | | 5 | | | | 2,226,566 | | Foreign government and official institution bonds | | | 2,648,874 | | | | 18,099 | | | | 25,554 | | | | 2,641,419 | | Corporate bonds | | | 1,117,302 | | | | 14,251 | | | | 822 | | | | 1,130,731 | | Residential mortgage-backed securities | | | 1,635,220 | | | | 1,469 | | | | 21,338 | | | | 1,615,351 | | Commercial mortgage-backed securities | | | 132,996 | | | | 310 | | | | 2,351 | | | | 130,955 | | Asset-backed securities | | | 1,494,629 | | | | 10,846 | | | | 2,553 | | | | 1,502,922 | | Other debt securities(1) | | | 192,930 | | | | 2,851 | | | | 2,918 | | | | 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 | | | 138,731 | | | | 193 | | | | 212 | | | | 138,712 | | Residential mortgage-backed securities | | | 910,990 | | | | 1,209 | | | | 21,202 | (2) | | | 890,997 | | Commercial mortgage-backed securities | | | 160,267 | | | | 1,903 | | | | 2,032 | (2) | | | 160,138 | | Asset-backed securities | | | 2,131,212 | | | | 1,415 | | | | 11,847 | | | | 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 fromAvailable-for-sale debt securities toHeld-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. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) determine whether the investments were impaired in each reporting period. See Note 32 for the details of these commonly accepted valuation techniques. If the fair value of the investment is less than the cost of the investment, the MUFG Group proceeds to evaluate whether the impairment is other-than-temporary.
With respect to cost-method investments of ¥432,095 million and ¥440,665 million at March 31, 2017 and 2018, respectively, the MUFG Group performed a test to determine whether any impairment indicators existed for each investment in each reporting period. If an impairment indicator exists, the MUFG Group estimates the fair value of the cost-method investment. If the fair value of the investment is less than the cost of the investment, the MUFG Group performs an evaluation of whether the impairment is other-than-temporary. The primary method the MUFG Group uses to identify impairment indicators is a comparison of the MUFG Group’s share of an investee’s net assets to the cost of the MUFG Group’s investment in the investee. The MUFG Group also considers whether significant adverse changes in the regulatory, economic or technological environment have occurred with respect to the investee. The MUFG Group periodically monitors the status of each investee including the credit rating, which is generally updated once a year based on the annual financial statements of the issuer. In addition, if an event that could impact the credit rating of an investee occurs, the MUFG Group reassesses the appropriateness of the credit rating assigned to the issuer in order to maintain an updated credit rating. The MUFG Group did not estimate the fair value of cost-method investments, which had aggregated costs of ¥429,313 million and ¥437,486 million at March 31, 2017 and 2018, respectively, since it was not practical and the MUFG Group identified no impairment indicators.
Based on the procedures described above, the MUFG Group recognized OTTI losses on the cost-method investments of ¥14,242 million, ¥1,044 million and ¥1,422 million for the fiscal years ended March 31, 2016, 2017 and 2018, respectively. The OTTI losses of ¥14,242 million for the fiscal year ended March 31, 2016 was derived from a limited number of companies categorized in the manufacturing industry. Each impairment loss was recognized based on the specific circumstances of each individual company.
Contractual Maturities The amortized cost and fair values ofHeld-to-maturity debt securities and the fair values ofAvailable-for-sale debt securities at March 31, 20182019 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 | | | | | Amortized
cost | | | Fair value | | | Fair value | | | | | (in millions) | | Due in one year or less | | ¥ | — | | | ¥ | — | | | ¥ | 11,911,681 | | Due from one year to five years | | | 212,879 | | | | 216,474 | | | | 10,652,390 | | Due from five years to ten years | | | 1,599,219 | | | | 1,639,974 | | | | 6,012,689 | | Due after ten years | | | 1,770,843 | | | | 1,764,224 | | | | 4,256,354 | | | | | | | | | | | | | | | Total | | ¥ | 3,582,941 | | | ¥ | 3,620,672 | | | ¥ | 32,833,114 | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | | | | | | | | Held-to-maturity debt
securities | | | Available-for-sale
debt securities | | | | | Amortized
cost | | | Fair value | | | Fair value | | | | | (in millions) | | Due in one year or less | | ¥ | 74,173 | | | ¥ | 74,059 | | | ¥ | 12,539,746 | | Due from one year to five years | | | 332,491 | | | | 341,814 | | | | 10,847,990 | | Due from five years to ten years | | | 1,405,140 | | | | 1,434,699 | | | | 5,316,284 | | Due after ten years | | | 2,630,097 | | | | 2,602,375 | | | | 4,814,483 | | | | | | | | | | | | | | | Total | | ¥ | 4,441,901 | | | ¥ | 4,452,947 | | | ¥ | 33,518,503 | | | | | | | | | | | | | | |
Realized Gains and Losses and Transfers of Investment Securities For the fiscal years ended March 31, 2016, 2017 and 2018, gross realized gains on sales ofAvailable-for-sale debt securities and marketable equity securities were ¥317,454 million, ¥367,548 million and ¥330,508 million, respectively, and gross realized losses on sales ofAvailable-for-sale debt securities and marketable equity securities were ¥52,904 million, ¥63,031 million and ¥49,290 million, respectively. For the fiscal year ended March 31, 2019, gross realized gains on sales ofAvailable-for-sale debt securities were ¥45,244 million and gross realized losses on sales ofAvailable-for-sale debt securities were ¥16,541 million. For the fiscal year ended March 31, 2017, the MUFG Group transferred certain securities which had a carrying value of ¥14,142 million fromHeld-to-maturity securities toAvailable-for-sale securities in response to the Volcker Rule of the Dodd-Frank Act. These securities were sold and the MUFG Group recorded a profit of ¥669 million for the fiscal year ended March 31, 2017. The transfer was in accordance with the circumstances consistent with aHeld-to-maturity classification, therefore, management has determined the transfer out ofHeld-to-maturity is consistent with the original designation and does not taint the remaining portfolio. Other-than-temporary Impairments of Investment Securities For the fiscal years ended March 31, 2016, 2017 and 2018, losses resulting from impairment of investment securities to reflect the decline in value considered to be other-than-temporary were ¥37,153 million, ¥33,823 million and ¥8,196 million, respectively, which were included in Investment securities gains—gains (losses)—net in the accompanying consolidated statements of income. The losses of ¥37,153 million for the fiscal year ended March 31, 2016 included losses of ¥21,948 million from marketable equity securities, ¥963 million fromAvailable-for-sale debt securities which mainly comprised of corporate bonds, and ¥14,242 million from nonmarketable equity securities. The losses of ¥33,823 million for the fiscal year ended March 31, 2017 included losses of ¥32,038 million from marketable equity securities, ¥741 million fromAvailable-for-sale debt securities which mainly comprised of corporate bonds, and ¥1,044 million from nonmarketable equity securities. The losses of ¥8,196 million for the fiscal year ended March 31, 2018 included losses of ¥6,660 million from marketable equity securities, ¥114 million fromAvailable-for-sale debt securities which mainly comprised of corporate bonds, and ¥1,422 million from nonmarketable equity securities. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) For the fiscal year ended March 31, 2019, losses resulting from impairment of investment securities to reflect the decline in value considered to be other-than-temporary were ¥606 million, which were included in Investment securities gains (losses)—net in the accompanying consolidated statements of income. The losses of ¥606 million for the fiscal year ended March 31, 2019 was recorded substantially fromAvailable-for-sale debt securities which mainly comprised of corporate bonds. Impairment of marketable equity securities is eliminated according to new guidance on recognition and measurement of financial assets and financial liabilities. TheAvailable-for-sale securities (AFS category) is eliminated for equity securities and, therefore, OTTI review is not required for those securities. Gross Unrealized Losses and Fair Value The following tables show the gross unrealized losses and fair value ofAvailable-for-sale debt securities,Held-to-maturity debt securities andHeld-to-maturity Equity securities at March 31, 20172018, and 2018Available-for-sale debt securities,Held-to-maturity debt securities at March 31, 2019, by length of time that individual securities in each category have been in a continuous loss position: | | | | Less than 12 months | | 12 months or more | | Total | | | Less than 12 months | | 12 months or more | | Total | | At March 31, 2017: | | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Number of
securities | | | At March 31, 2018: | | | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Number of
securities | | | | | (in millions, except number of securities) | | | (in millions, except number of securities) | | Available-for-sale securities: | | | | | | | | | | | | | | | | Debt securities: | | | | | | | | | | | | | | | | Available-for-sale debt securities: | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | ¥ | 6,088,856 | | | ¥ | 5,339 | | | ¥ | — | | | ¥ | — | | | ¥ | 6,088,856 | | | ¥ | 5,339 | | | 107 | | | ¥ | 4,767,893 | | | ¥ | 2,701 | | | ¥ | 187,000 | | | ¥ | 1,142 | | | ¥ | 4,954,893 | | | ¥ | 3,843 | | | 140 | | Japanese prefectural and municipal bonds | | 579,684 | | | 4,445 | | | | — | | | | — | | | 579,684 | | | 4,445 | | | 139 | | | 400,705 | | | 453 | | | 353,047 | | | 2,067 | | | 753,752 | | | 2,520 | | | 193 | | Foreign governments and official institutions bonds | | 1,034,336 | | | 26,677 | | | 115,053 | | | 297 | | | 1,149,389 | | | 26,974 | | | 142 | | | Foreign government and official institution bonds | | | 846,818 | | | 16,955 | | | 818,937 | | | 27,953 | | | 1,665,755 | | | 44,908 | | | 157 | | Corporate bonds | | 277,394 | | | 933 | | | 15,613 | | | 156 | | | 293,007 | | | 1,089 | | | 160 | | | 312,993 | | | 856 | | | 74,717 | | | 172 | | | 387,710 | | | 1,028 | | | 150 | | Residential mortgage-backed securities | | 754,557 | | | 14,086 | | | 81,065 | | | 1,232 | | | 835,622 | | | 15,318 | | | 412 | | | 438,545 | | | 2,644 | | | 623,285 | | | 12,919 | | | 1,061,830 | | | 15,563 | | | 503 | | Commercial mortgage-backed securities | | 51,360 | | | 748 | | | 1,298 | | | 2 | | | 52,658 | | | 750 | | | 65 | | | 50,898 | | | 386 | | | 9,067 | | | 234 | | | 59,965 | | | 620 | | | 60 | | Asset-backed securities | | 80,059 | | | 1,269 | | | 128,372 | | | 629 | | | 208,431 | | | 1,898 | | | 85 | | | 144,073 | | | 1,403 | | | 5,345 | | | 12 | | | 149,418 | | | 1,415 | | | 29 | | Other debt securities | | 35,375 | | | 1,488 | | | 50,845 | | | 1,807 | | | 86,220 | | | 3,295 | | | 26 | | | 12,341 | | | 367 | | | 56,117 | | | 2,663 | | | 68,458 | | | 3,030 | | | 23 | | Marketable equity securities | | 222,950 | | | 6,449 | | | 554 | | | 28 | | | 223,504 | | | 6,477 | | | 111 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 9,124,571 | | | ¥ | 61,434 | | | ¥ | 392,800 | | | ¥ | 4,151 | | | ¥ | 9,517,371 | | | ¥ | 65,585 | | | 1,247 | | | ¥ | 6,974,266 | | | ¥ | 25,765 | | | ¥ | 2,127,515 | | | ¥ | 47,162 | | | ¥ | 9,101,781 | | | ¥ | 72,927 | | | 1,255 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Held-to-maturity securities: | | | | | | | | | | | | | | | | Debt securities: | | | | | | | | | | | | | | | | Held-to-maturity debt securities: | | | | | | | | | | | | | | | | Foreign government and official institution bonds | | | ¥ | 55,837 | | | ¥ | 103 | | | ¥ | — | | | ¥ | — | | | ¥ | 55,837 | | | ¥ | 103 | | | 10 | | Residential mortgage-backed securities | | ¥ | 523,237 | | | ¥ | 10,736 | | | ¥ | 161,453 | | | ¥ | 460 | | | ¥ | 684,690 | | | ¥ | 11,196 | | | 263 | | | 299,286 | | | 3,487 | | | 451,968 | | | 11,239 | | | 751,254 | | | 14,726 | | | 332 | | Commercial mortgage-backed securities | | 12,906 | | | 125 | | | 168,724 | | | 643 | | | 181,630 | | | 768 | | | 31 | | | 2,150 | | | 2 | | | 169,065 | | | 1,016 | | | 171,215 | | | 1,018 | | | 32 | | Asset-backed securities | | 25,679 | | | 13 | | | 101,345 | | | 172 | | | 127,024 | | | 185 | | | 5 | | | 275,814 | | | 1,222 | | | | — | | | | — | | | 275,814 | | | 1,222 | | | 11 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 561,822 | | | ¥ | 10,874 | | | ¥ | 431,522 | | | ¥ | 1,275 | | | ¥ | 993,344 | | | ¥ | 12,149 | | | 299 | | | ¥ | 633,087 | | | ¥ | 4,814 | | | ¥ | 621,033 | | | ¥ | 12,255 | | | ¥ | 1,254,120 | | | ¥ | 17,069 | | | 385 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity securities: | | | | | | | | | | | | | | | | Marketable equity securities | | | ¥ | 448,489 | | | ¥ | 43,482 | | | ¥ | 28 | | | ¥ | 6 | | | ¥ | 448,517 | | | ¥ | 43,488 | | | 116 | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | ¥ | 448,489 | | | ¥ | 43,482 | | | ¥ | 28 | | | ¥ | 6 | | | ¥ | 448,517 | | | ¥ | 43,488 | | | 116 | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | Less than 12 months | | 12 months or more | | Total | | | Less than 12 months | | 12 months or more | | Total | | At March 31, 2018: | | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Number of
securities | | | At March 31, 2019: | | | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Number of
securities | | | | | (in millions, except number of securities) | | | (in millions, except number of securities) | | Available-for-sale securities: | | | | | | | | | | | | | | | | Debt securities: | | | | | | | | | | | | | | | | Available-for-sale debt securities: | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | ¥ | 4,767,893 | | | ¥ | 2,701 | | | ¥ | 187,000 | | | ¥ | 1,142 | | | ¥ | 4,954,893 | | | ¥ | 3,843 | | | 140 | | | ¥ | 4,149,302 | | | ¥ | 976 | | | ¥ | 5,599 | | | ¥ | 1 | | | ¥ | 4,154,901 | | | ¥ | 977 | | | 39 | | Japanese prefectural and municipal bonds | | 400,705 | | | 453 | | | 353,047 | | | 2,067 | | | 753,752 | | | 2,520 | | | 193 | | | 12,772 | | | 5 | | | | — | | | | — | | | 12,772 | | | 5 | | | 4 | | Foreign governments and official institutions bonds | | 846,818 | | | 16,955 | | | 818,937 | | | 27,953 | | | 1,665,755 | | | 44,908 | | | 157 | | | Foreign government and official institution bonds | | | 397,718 | | | 1,125 | | | 1,160,671 | | | 24,429 | | | 1,558,389 | | | 25,554 | | | 179 | | Corporate bonds | | 312,993 | | | 856 | | | 74,717 | | | 172 | | | 387,710 | | | 1,028 | | | 150 | | | 163,615 | | | 776 | | | 79,758 | | | 46 | | | 243,373 | | | 822 | | | 92 | | Residential mortgage-backed securities | | 438,545 | | | 2,644 | | | 623,285 | | | 12,919 | | | 1,061,830 | | | 15,563 | | | 503 | | | 316,942 | | | 1,757 | | | 648,353 | | | 19,581 | | | 965,295 | | | 21,338 | | | 536 | | Commercial mortgage-backed securities | | 50,898 | | | 386 | | | 9,067 | | | 234 | | | 59,965 | | | 620 | | | 60 | | | 42,126 | | | 678 | | | 57,167 | | | 1,673 | | | 99,293 | | | 2,351 | | | 104 | | Asset-backed securities | | 144,073 | | | 1,403 | | | 5,345 | | | 12 | | | 149,418 | | | 1,415 | | | 29 | | | 164,738 | | | 2,553 | | | — | | | | — | | | 164,738 | | | 2,553 | | | 87 | | Other debt securities | | 12,341 | | | 367 | | | 56,117 | | | 2,663 | | | 68,458 | | | 3,030 | | | 23 | | | 77,660 | | | 549 | | | 37,027 | | | 2,369 | | | 114,687 | | | 2,918 | | | 38 | | Marketable equity securities | | 448,489 | | | 43,482 | | | 28 | | | 6 | | | 448,517 | | | 43,488 | | | 116 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 7,422,755 | | | ¥ | 69,247 | | | ¥ | 2,127,543 | | | ¥ | 47,168 | | | ¥ | 9,550,298 | | | ¥ | 116,415 | | | 1,371 | | | ¥ | 5,324,873 | | | ¥ | 8,419 | | | ¥ | 1,988,575 | | | ¥ | 48,099 | | | ¥ | 7,313,448 | | | ¥ | 56,518 | | | 1,079 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Held-to-maturity securities: | | | | | | | | | | | | | | | | Debt securities: | | | | | | | | | | | | | | | | Foreign governments and official institution bonds | | ¥ | 55,837 | | | ¥ | 103 | | | ¥ | — | | | ¥ | — | | | ¥ | 55,837 | | | ¥ | 103 | | | 10 | | | Held-to-maturity debt securities: | | | | | | | | | | | | | | | | Foreign government and official institution bonds | | | ¥ | — | | | ¥ | — | | | ¥ | 55,084 | | | ¥ | 212 | | | ¥ | 55,084 | | | ¥ | 212 | | | 10 | | Residential mortgage-backed securities | | 299,286 | | | 3,487 | | | 451,968 | | | 11,239 | | | 751,254 | | | 14,726 | | | 332 | | | 74,180 | | | 1,199 | | | 798,165 | | | 20,003 | | | 872,345 | | | 21,202 | | | 457 | | Commercial mortgage-backed securities | | 2,150 | | | 2 | | | 169,065 | | | 1,016 | | | 171,215 | | | 1,018 | | | 32 | | | 3,154 | | | 37 | | | 155,011 | | | 1,995 | | | 158,165 | | | 2,032 | | | 32 | | Asset-backed securities | | 275,814 | | | 1,222 | | | — | | | — | | | 275,814 | | | 1,222 | | | 11 | | | 1,423,048 | | | 10,196 | | | 241,233 | | | 1,651 | | | 1,664,281 | | | 11,847 | | | 102 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 633,087 | | | ¥ | 4,814 | | | ¥ | 621,033 | | | ¥ | 12,255 | | | ¥ | 1,254,120 | | | ¥ | 17,069 | | | 385 | | | ¥ | 1,500,382 | | | ¥ | 11,432 | | | ¥ | 1,249,493 | | | ¥ | 23,861 | | | ¥ | 2,749,875 | | | ¥ | 35,293 | | | 601 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Evaluating Investment Securities for Other-than-temporary Impairments The following describes the nature of the MUFG Group’s investments and the conclusions reached in determining whether the unrealized losses were temporary or other-than-temporary. Japanese national government and Japanese government agency bonds, Foreign governments and official institutions bonds and commercial mortgage-backed securities
As of March 31, 2018, unrealized losses associated with these securities were deemed to be attributable to changes in market interest rates rather than a deterioration in the creditworthiness of the underlying obligor. Based on a consideration of factors, including cash flow analysis, the MUFG Group expects to recover the entire amortized cost basis of these securities. Accordingly, such changes are considered to be temporary and no impairment loss has been recorded.
Corporate bonds As of March 31, 2018,2019, unrealized losses associated with corporate bonds were primarily related to private placement bonds issued by Japanesenon-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents a roll-forward of the credit loss component recognized in earnings. The balance at the beginning of each fiscal year represents the credit loss component for which OTTI occurred on debt securities in prior periods. The additions represent the first time a debt security was credit impaired or when subsequent credit impairment has occurred. The credit loss component is reduced when the corporate bonds mature or are sold. | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Balance at beginning of fiscal year | | ¥ | 8,814 | | | ¥ | 6,691 | | | ¥ | 4,125 | | | ¥ | 6,691 | | | ¥ | 4,125 | | | ¥ | 3,499 | | | Additions: | | | | | | | | | | | | | Initial credit impairments | | | 915 | | | 645 | | | 111 | | | | 645 | | | 111 | | | 555 | | Subsequent credit impairments | | | 48 | | | 96 | | | 3 | | | | 96 | | | 3 | | | 51 | | | Reductions: | | | | | | | | | | | | | Securities sold or matured | | | (3,086 | ) | | (3,307 | ) | | (740 | ) | | | (3,307 | ) | | (740 | ) | | (2,344 | ) | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 6,691 | | | ¥ | 4,125 | | | ¥ | 3,499 | | | ¥ | 4,125 | | | ¥ | 3,499 | | | ¥ | 1,761 | | | | | | | | | | | | | | | | | | | | |
The cumulative declines in fair value of the credit impaired debt securities, which were mainly corporate bonds, held at March 31, 20172018 and 20182019 were ¥3,450¥2,992 million and ¥2,992¥1,069 million, respectively. Of which, the credit loss components recognized in earnings were ¥4,125¥3,499 million and ¥3,499¥1,761 million, and the remaining amounts related to all other factors recognized in Accumulated OCI before taxes were ¥675¥507 million and ¥507¥692 million at March 31, 20172018 and 2018,2019, respectively. Residential mortgage-backed securities As of March 31, 2018,2019, unrealized losses on these securities were primarily driven by securities guaranteed by a U.S. government agency or a government-sponsored agency which are collateralized by residential mortgage loans. Unrealized losses mainly resulted from changes in interest rates and not from changes in credit quality. The MUFG Group analyzed that no OTTI was identified on such securities as of March 31, 20182019 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, 2018,2019, unrealized losses on these securities were primarily driven by certain collateralized loan obligations (“CLOs”), highly illiquid securities for which fair values are difficult to determine. Unrealized losses arise from widening credit spreads, deterioration of the credit quality of the underlying collateral, uncertainty regarding the valuation of such securities and the market’s view of the performance of the fund managers. When the fair value of a security is lower than its amortized cost or when any security is subject to a deterioration in credit rating, the MUFG Group undertakes a cash flow analysis of the underlying collateral to estimate the OTTI and confirms the intent and ability to hold these securities until recovery. Based on the analysis performed, no OTTI was identified as of March 31, 20182019 and no impairment loss has been recorded. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other debt securities As of March 31, 2018,2019, other debt securities primarily consist of private placement debt conduit bonds, which are not rated by external credit rating agencies. The unrealized losses on these bonds result from a higher return on capital expected by the secondary market compared with the return on capital required at the time of MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) origination when the bonds were purchased. The MUFG Group estimates loss projections for each security by assessing the underlying collateral of each security. The MUFG Group estimates the portion of loss attributable to credit based on the expected cash flows of the underlying collateral using estimates of current key assumptions such as probability of default and loss severity. Cash flow analysis of the underlying collateral provides an estimate of OTTI, which is performed when the fair value of a security is lower than its amortized cost and potential impairment is identified. Based on the analysis, no OTTI losses were recorded in the accompanying consolidated statements of income. Marketable equity securities included in Equity Securities The MUFG Group determines whether unrealized losses on marketable equity securities are temporary based on its ability and positive intent to hold the investments for a period of time sufficient to allow for any anticipated recovery and the results of its review conducted to identify and evaluate investments that have indications of possible impairment. Impairment is evaluated considering various factors, and their relative significance varies from case to case. The MUFG Group’s review includes, but is not limited to, consideration of the following factors: The length of time that the fair value of the investment has been below cost—The MUFG Group generally deems a continued decline of fair value below cost for six months or more to be other-than-temporary. The extent to which the fair value of investments has been below cost as of the end of the reporting period—The MUFG Group’s investment portfolio is exposed to volatile equity prices affected by many factors including investors’ perspectives as to future economic prospects and the issuers’ performance. The MUFG Group generally deems the decline in fair value below cost of 20% or more as an indicator of an other-than-temporary decline in fair value. The financial condition and near-term prospects of the issuer—The MUFG Group considers the financial condition and near-term prospects of the issuer primarily based on the credit standing of the issuers as determined by its credit rating system. At March 31, 2018, unrealized losses on marketable equity securities which have been in a continuous loss position are considered temporary based on the evaluation as described above. OTTI of marketable equity securities is eliminated according to new guidance on recognition and measurement of financial assets and financial liabilities. Equity Securities The following table presents net realized losses on sales of equity securities, and net unrealized losses on equity securities still held at March 31, 2019. | | | | | | | Fiscal year ended
March 31, | | | | 2019 | | | | (in millions) | | Net losses recognized during the period(1) | | ¥ | (278,746 | ) | Less: | | | | | Net losses recognized during the period on equity securities sold during the period | | | (3,303 | ) | | | | | | Net unrealized losses recognized during the reporting period still held at the reporting date | | ¥ | (275,443 | ) | | | | | |
Note: | (1) | | Included in Investment securities gains (losses)—net. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Nonmarketable Equity Securities Nonmarketable equity securities included in Equity securities were primarily carried at cost of ¥538,251 million at March 31, 2018, because their fair values were not readily determinable. The remaining balances were nonmarketable equity securities included in Equity securities held by certain subsidiaries subject to specialized industry accounting principles for investment companies and broker-dealers and carried at fair value of ¥28,359 million at March 31, 2018. See Note 32 for the valuation techniques and inputs used to estimate the fair values. With respect to cost-method investments of ¥97,586 million at March 31, 2018, the MUFG Group estimated a fair value using commonly accepted valuation techniques to determine whether the investments were impaired in each reporting period. See Note 32 for the details of these commonly accepted valuation techniques. If the fair value of the investment is less than the cost of the investment, the MUFG Group proceeds to evaluate whether the impairment is other-than-temporary. With respect to cost-method investments of ¥440,665 million at March 31, 2018, the MUFG Group performed a test to determine whether any impairment indicators existed for each investment in each reporting period. If an impairment indicator exists, the MUFG Group estimates the fair value of the cost-method investment. If the fair value of the investment is less than the cost of the investment, the MUFG Group performs an evaluation of whether the impairment is other-than-temporary. The primary method the MUFG Group uses to identify impairment indicators is a comparison of the MUFG Group’s share of an investee’s net assets to the cost of the MUFG Group’s investment in the investee. The MUFG Group also considers whether significant adverse changes in the regulatory, economic or technological environment have occurred with respect to the investee. The MUFG Group periodically monitors the status of each investee including the credit rating, which is generally updated once a year based on the annual financial statements of the issuer. In addition, if an event that could impact the credit rating of an investee occurs, the MUFG Group reassesses the appropriateness of the credit rating assigned to the issuer in order to maintain an updated credit rating. The MUFG Group did not estimate the fair value of cost-method investments, which had aggregated costs of ¥437,486 million at March 31, 2018, since it was not practical and the MUFG Group identified no impairment indicators. Based on the procedures described above, the MUFG Group recognized OTTI losses on the cost-method investments of ¥1,044 million and ¥1,422 million for the fiscal years ended March 31, 2017 and 2018, respectively. Each impairment loss was recognized based on the specific circumstances of each individual company. No impairment loss was individually material. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Measurement Alternative of Equity Securities The following table presents the carrying value of nonmarketable equity securities held at March 31, 2019, that were measured under the measurement alternative, and the related adjustments for these securities for the fiscal year ended March 31, 2019. | | | | | | | Fiscal year ended
March 31, | | | | 2019 | | | | (in millions) | | Measurement alternative balance at March 31, 2019 | | ¥ | 563,733 | | Measurement alternative impairment losses(1) | | ¥ | (2,292 | ) | Measurement alternative downward changes for observable prices(1)(2) | | ¥ | — | | Measurement alternative upward changes for observable prices(1)(2)(3) | | ¥ | 53,077 | |
Notes: | (1) | | Included in Investment securities gains (losses)—net. |
| (2) | | Under the measurement alternative, nonmarketable equity securities are carried at cost plus or minus changes resulting from observable prices in orderly transactions for the identical or a similar investment of the same issuer. |
| (3) | | The MUFG Group applied measurement alternative upward changes to certain nonmarketable equity securities, resulting from observable prices in orderly transactions, such as partial repurchase and transactions by other entities. |
| 4. | | LOANS AND ALLOWANCE FOR CREDIT LOSSES |
Loans at March 31, 20172018 and 20182019 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. | | | | 2017 | | 2018 | | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Domestic: | | | | | | | | | Manufacturing | | ¥ | 11,796,803 | | | ¥ | 10,876,625 | | | ¥ | 10,876,625 | | | ¥ | 11,153,996 | | Construction | | | 819,262 | | | 781,262 | | | | 781,262 | | | 717,664 | | Real estate | | | 11,622,372 | | | 11,763,769 | | | | 11,763,769 | | | 11,706,419 | | Services | | | 2,549,300 | | | 2,689,086 | | | | 2,689,086 | | | 2,653,191 | | Wholesale and retail | | | 7,970,579 | | | 7,989,080 | | | | 7,989,080 | | | 7,643,397 | | Banks and other financial institutions(1) | | | 5,223,906 | | | 4,818,364 | | | | 4,818,364 | | | 5,213,020 | | Communication and information services | | | 1,634,584 | | | 1,551,533 | | | | 1,551,533 | | | 1,510,596 | | Other industries | | | 8,898,712 | | | 8,939,291 | | | | 8,939,291 | | | 8,756,483 | | Consumer | | | 16,491,010 | | | 16,287,332 | | | | 16,287,332 | | | 15,802,024 | | | | | | | | | | | | | | | Total domestic | | | 67,006,528 | | | 65,696,342 | | | | 65,696,342 | | | 65,156,790 | | | | | | | | | | | | | | | Foreign: | | | | | | | | | Governments and official institutions | | | 1,037,795 | | | 920,538 | | | | 920,538 | | | 841,695 | | Banks and other financial institutions(1) | | | 13,844,964 | | | 12,851,570 | | | | 12,851,570 | | | 11,641,373 | | Commercial and industrial | | | 30,279,641 | | | 30,591,173 | | | | 30,591,173 | | | 31,951,169 | | Other | | | 6,334,551 | | | 7,270,928 | | | | 7,270,928 | | | 7,597,502 | | | | | | | | | | | | | | | Total foreign | | | 51,496,951 | | | 51,634,209 | | | | 51,634,209 | | | 52,031,739 | | | | | | | | | | | | | | | Unearned income, unamortized premiums—net and deferred loan fees—net | | | (288,507 | ) | | (294,656 | ) | | | (294,656 | ) | | (304,588 | ) | | | | | | | | | | | | | | Total(2) | | ¥ | 118,214,972 | | | ¥ | 117,035,895 | | | ¥ | 117,035,895 | | | ¥ | 116,883,941 | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Notes: | (1) | | Loans toso-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 ¥185,940¥226,923 million and ¥226,923¥291,794 million at March 31, 20172018 and 2018,2019, respectively. |
The MUFG Group classifies its loan portfolio into the following portfolio segments—Commercial, Residential, Card, MUFG Americas Holdings, and Krungsri based on the grouping used by the MUFG Group to determine the allowance for credit losses. See Note 1 for further information. Nonaccrual Loans Originated loans are generally placed on nonaccrual status when substantial doubt exists as to the full and timely collection of either principal or interest, when principal or interest is contractually past due one month or more with respect to loans within all classes of the Commercial segment, three months or more with respect to loans within the Card, MUFG Americas Holdings, and Krungsri segments, and six months or more with respect to loans within the Residential segment. See Note 1 for further information. The nonaccrual loans by class at March 31, 2018 and 2019 is shown below: | | | | | | | | | | | | 2018 | | | 2019 | | | | | (in millions) | | Commercial | | | | | | | | | Domestic | | ¥ | 332,994 | | | ¥ | 272,777 | | Manufacturing | | | 77,163 | | | | 65,896 | | Construction | | | 10,791 | | | | 9,813 | | Real estate | | | 33,317 | | | | 23,152 | | Services | | | 30,717 | | | | 26,188 | | Wholesale and retail | | | 108,175 | | | | 94,531 | | Banks and other financial institutions | | | 1,145 | | | | 898 | | Communication and information services | | | 13,815 | | | | 11,955 | | Other industries | | | 37,549 | | | | 25,406 | | Consumer | | | 20,322 | | | | 14,938 | | Foreign-excluding MUAH and Krungsri | | | 109,516 | | | | 111,002 | | Residential | | | 69,464 | | | | 68,499 | | Card | | | 61,387 | | | | 61,419 | | MUAH | | | 52,282 | | | | 46,549 | | Krungsri | | | 121,286 | | | | 127,424 | | | | | | | | | | | Total(1) | | ¥ | 746,929 | | | ¥ | 687,670 | | | | | | | | | | |
| (1) | | The above table does not include loans held for sale of ¥61 million and ¥12,702 million at March 31, 2018 and 2019, respectively, and loans acquired with deteriorated credit quality of ¥6,659 million and ¥6,284 million at March 31, 2018 and 2019, respectively. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The nonaccrual loans by class at March 31, 2017 and 2018 is shown below:
| | | | | | | | | | | | 2017 | | | 2018 | | | | | (in millions) | | Commercial | | | | | | | | | Domestic | | ¥ | 471,148 | | | ¥ | 332,994 | | Manufacturing | | | 185,095 | | | | 77,163 | | Construction | | | 15,202 | | | | 10,791 | | Real estate | | | 44,374 | | | | 33,317 | | Services | | | 38,602 | | | | 30,717 | | Wholesale and retail | | | 131,213 | | | | 108,175 | | Banks and other financial institutions | | | 2,432 | | | | 1,145 | | Communication and information services | | | 18,685 | | | | 13,815 | | Other industries | | | 10,034 | | | | 37,549 | | Consumer | | | 25,511 | | | | 20,322 | | Foreign-excluding MUAH and Krungsri | | | 191,889 | | | | 109,516 | | Residential | | | 75,399 | | | | 69,464 | | Card | | | 61,424 | | | | 61,387 | | MUAH | | | 82,150 | | | | 52,282 | | Krungsri | | | 94,902 | | | | 121,286 | | | | | | | | | | | Total(1) | | ¥ | 976,912 | | | ¥ | 746,929 | | | | | | | | | | |
Note:
(1) | | The above table does not include loans held for sale of nil and ¥61 million at March 31, 2017 and 2018, respectively, and loans acquired with deteriorated credit quality of ¥9,720 million and ¥6,659 million at March 31, 2017 and 2018, respectively. |
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, 20172018 and 2018:2019: | | | | Recorded Loan Balance | | | | | | | | | Recorded Loan Balance | | | | | | | | At March 31, 2017: | | Requiring
an Allowance for
Credit Losses | | | Not Requiring
an Allowance for
Credit Losses(1) | | | Total(2) | | | Unpaid
Principal
Balance | | | Related
Allowance for
Credit Losses | | | At March 31, 2018: | | | 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) | | | (in millions) | | Commercial | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | 875,977 | | | ¥ | 187,738 | | | ¥ | 1,063,715 | | | ¥ | 1,107,203 | | | ¥ | 608,122 | | | ¥ | 626,469 | | | ¥ | 188,984 | | | ¥ | 815,453 | | | ¥ | 875,795 | | | ¥ | 331,851 | | Manufacturing | | | 555,009 | | | | 39,587 | | | | 594,596 | | | | 602,038 | | | | 411,787 | | | | 361,268 | | | | 36,566 | | | | 397,834 | | | | 408,124 | | | | 166,098 | | Construction | | | 15,007 | | | | 9,068 | | | | 24,075 | | | | 24,907 | | | | 9,107 | | | | 10,936 | | | | 7,172 | | | | 18,108 | | | | 18,490 | | | | 7,921 | | Real estate | | | 53,048 | | | | 30,274 | | | | 83,322 | | | | 90,797 | | | | 14,987 | | | | 43,553 | | | | 23,053 | | | | 66,606 | | | | 71,809 | | | | 10,665 | | Services | | | 48,304 | | | | 23,162 | | | | 71,466 | | | | 78,097 | | | | 31,074 | | | | 38,097 | | | | 16,600 | | | | 54,697 | | | | 59,335 | | | | 25,890 | | Wholesale and retail | | | 160,422 | | | | 53,760 | | | | 214,182 | | | | 224,141 | | | | 115,673 | | | | 128,661 | | | | 49,628 | | | | 178,289 | | | | 189,404 | | | | 94,832 | | Banks and other financial institutions | | | 1,836 | | | | 607 | | | | 2,443 | | | | 2,443 | | | | 1,674 | | | | 1,125 | | | | 26 | | | | 1,151 | | | | 1,151 | | | | 972 | | Communication and information services | | | 14,166 | | | | 10,652 | | | | 24,818 | | | | 26,641 | | | | 10,565 | | | | 18,782 | | | | 7,852 | | | | 26,634 | | | | 28,082 | | | | 16,041 | | Other industries | | | 10,714 | | | | 5,806 | | | | 16,520 | | | | 17,403 | | | | 7,226 | | | | 12,978 | | | | 34,282 | | | | 47,260 | | | | 67,525 | | | | 5,350 | | Consumer | | | 17,471 | | | | 14,822 | | | | 32,293 | | | | 40,736 | | | | 6,029 | | | | 11,069 | | | | 13,805 | | | | 24,874 | | | | 31,875 | | | | 4,082 | | Foreign-excluding MUAH and Krungsri | | | 262,887 | | | | 23,019 | | | | 285,906 | | | | 309,975 | | | | 164,682 | | | | 122,243 | | | | 40,249 | | | | 162,492 | | | | 190,518 | | | | 82,855 | | Loans acquired with deteriorated credit quality | | | 8,013 | | | | — | | | | 8,013 | | | | 11,513 | | | | 3,619 | | | | 7,837 | | | | — | | | | 7,837 | | | | 15,470 | | | | 4,324 | | Residential | | | 120,465 | | | | 6,557 | | | | 127,022 | | | | 154,006 | | | | 46,971 | | | | 105,089 | | | | 6,261 | | | | 111,350 | | | | 134,777 | | | | 16,928 | | Card | | | 71,849 | | | | 462 | | | | 72,311 | | | | 80,392 | | | | 20,523 | | | | 66,964 | | | | 388 | | | | 67,352 | | | | 74,840 | | | | 21,223 | | MUAH | | | 77,160 | | | | 16,292 | | | | 93,452 | | | | 113,414 | | | | 19,173 | | | | 48,895 | | | | 33,650 | | | | 82,545 | | | | 94,565 | | | | 7,743 | | Krungsri | | | 44,679 | | | | 20,752 | | | | 65,431 | | | | 71,075 | | | | 19,118 | | | | 58,529 | | | | 25,565 | | | | 84,094 | | | | 90,957 | | | | 29,402 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total(3) | | ¥ | 1,461,030 | | | ¥ | 254,820 | | | ¥ | 1,715,850 | | | ¥ | 1,847,578 | | | ¥ | 882,208 | | | ¥ | 1,036,026 | | | ¥ | 295,097 | | | ¥ | 1,331,123 | | | ¥ | 1,476,922 | | | ¥ | 494,326 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | Recorded Loan Balance | | | | | | | | | Recorded Loan Balance | | | | | | | | At March 31, 2018: | | Requiring
an Allowance for
Credit Losses | | | Not Requiring
an Allowance for
Credit Losses(1) | | | Total(2) | | | Unpaid
Principal
Balance | | | Related
Allowance for
Credit Losses | | | At March 31, 2019: | | | 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) | | | (in millions) | | Commercial | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | 626,469 | | | ¥ | 188,984 | | | ¥ | 815,453 | | | ¥ | 875,795 | | | ¥ | 331,851 | | | ¥ | 560,474 | | | ¥ | 157,465 | | | ¥ | 717,939 | | | ¥ | 759,399 | | | ¥ | 227,004 | | Manufacturing | | | 361,268 | | | | 36,566 | | | | 397,834 | | | | 408,124 | | | | 166,098 | | | | 349,597 | | | | 28,189 | | | | 377,786 | | | | 384,306 | | | | 92,919 | | Construction | | | 10,936 | | | | 7,172 | | | | 18,108 | | | | 18,490 | | | | 7,921 | | | | 8,366 | | | | 5,975 | | | | 14,341 | | | | 14,779 | | | | 6,574 | | Real estate | | | 43,553 | | | | 23,053 | | | | 66,606 | | | | 71,809 | | | | 10,665 | | | | 20,848 | | | | 29,961 | | | | 50,809 | | | | 55,943 | | | | 5,704 | | Services | | | 38,097 | | | | 16,600 | | | | 54,697 | | | | 59,335 | | | | 25,890 | | | | 30,239 | | | | 13,020 | | | | 43,259 | | | | 46,838 | | | | 20,059 | | Wholesale and retail | | | 128,661 | | | | 49,628 | | | | 178,289 | | | | 189,404 | | | | 94,832 | | | | 118,253 | | | | 45,620 | | | | 163,873 | | | | 175,714 | | | | 84,503 | | Banks and other financial institutions | | | 1,125 | | | | 26 | | | | 1,151 | | | | 1,151 | | | | 972 | | | | 1,012 | | | | 21 | | | | 1,033 | | | | 1,033 | | | | 830 | | Communication and information services | | | 18,782 | | | | 7,852 | | | | 26,634 | | | | 28,082 | | | | 16,041 | | | | 8,794 | | | | 6,929 | | | | 15,723 | | | | 16,587 | | | | 6,817 | | Other industries | | | 12,978 | | | | 34,282 | | | | 47,260 | | | | 67,525 | | | | 5,350 | | | | 13,772 | | | | 17,989 | | | | 31,761 | | | | 38,342 | | | | 6,874 | | Consumer | | | 11,069 | | | | 13,805 | | | | 24,874 | | | | 31,875 | | | | 4,082 | | | | 9,593 | | | | 9,761 | | | | 19,354 | | | | 25,857 | | | | 2,724 | | Foreign-excluding MUAH and Krungsri | | | 122,243 | | | | 40,249 | | | | 162,492 | | | | 190,518 | | | | 82,855 | | | | 127,521 | | | | 34,484 | | | | 162,005 | | | | 183,133 | | | | 85,966 | | Loans acquired with deteriorated credit quality | | | 7,837 | | | | — | | | | 7,837 | | | | 15,470 | | | | 4,324 | | | | 8,136 | | | | — | | | | 8,136 | | | | 14,990 | | | | 5,450 | | Residential | | | 105,089 | | | | 6,261 | | | | 111,350 | | | | 134,777 | | | | 16,928 | | | | 97,176 | | | | 6,495 | | | | 103,671 | | | | 120,526 | | | | 14,357 | | Card | | | 66,964 | | | | 388 | | | | 67,352 | | | | 74,840 | | | | 21,223 | | | | 64,691 | | | | 330 | | | | 65,021 | | | | 72,226 | | | | 21,829 | | MUAH | | | 48,895 | | | | 33,650 | | | | 82,545 | | | | 94,565 | | | | 7,743 | | | | 46,552 | | | | 23,208 | | | | 69,760 | | | | 83,300 | | | | 8,294 | | Krungsri | | | 58,529 | | | | 25,565 | | | | 84,094 | | | | 90,957 | | | | 29,402 | | | | 57,066 | | | | 26,193 | | | | 83,259 | | | | 90,377 | | | | 28,254 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total(3) | | ¥ | 1,036,026 | | | ¥ | 295,097 | | | ¥ | 1,331,123 | | | ¥ | 1,476,922 | | | ¥ | 494,326 | | | ¥ | 961,616 | | | ¥ | 248,175 | | | ¥ | 1,209,791 | | | ¥ | 1,323,951 | | | ¥ | 391,154 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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. |
| (2) | | Included in impaired loans at March 31, 20172018 and 20182019 are accrual TDRs as follows: ¥688,746¥536,748 million and ¥536,748¥497,013 million—Commercial; ¥50,213¥40,734 million and ¥40,734¥34,449 million—Residential; ¥32,564¥28,541 million and ¥28,541¥26,183 million—Card; ¥24,708¥39,333 million and ¥39,333¥33,155 million—MUFG Americas Holdings; and ¥23,588¥24,899 million and ¥24,899¥26,851 million—Krungsri, respectively. |
| (3) | | In addition to impaired loans presented in the above table, there were impaired loans held for sale of ¥9,879¥61 million and ¥61¥12,702 million at March 31, 20172018 and 2018,2019, respectively. |
| (4) | | Impaired Loans for Residential, Card, MUAH and Krungsri segments in the above table include loans acquired with deteriorated credit quality. |
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, 2016, 2017, 2018 and 2018:2019: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | Average
Recorded Loan
Balance | | Recognized
Interest
Income | | Average
Recorded Loan
Balance | | Recognized
Interest
Income | | Average
Recorded Loan
Balance | | Recognized
Interest
Income | | | Average
Recorded Loan
Balance | | Recognized
Interest
Income | | Average
Recorded Loan
Balance | | Recognized
Interest
Income | | Average
Recorded Loan
Balance | | Recognized
Interest
Income | | | | | (in millions) | | | (in millions) | | Commercial | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | 1,066,585 | | | ¥ | 16,572 | | | ¥ | 1,137,501 | | | ¥ | 14,116 | | | ¥ | 918,093 | | | ¥ | 9,441 | | | ¥ | 1,137,501 | | | ¥ | 14,116 | | | ¥ | 918,093 | | | ¥ | 9,441 | | | ¥ | 766,847 | | | ¥ | 12,383 | | Manufacturing | | 464,157 | | | 5,530 | | | 601,256 | | | 5,845 | | | 472,081 | | | 3,787 | | | 601,256 | | | 5,845 | | | 472,081 | | | 3,787 | | | 387,725 | | | 6,057 | | Construction | | 29,548 | | | 708 | | | 26,684 | | | 434 | | | 19,465 | | | 281 | | | 26,684 | | | 434 | | | 19,465 | | | 281 | | | 15,721 | | | 291 | | Real estate | | 123,203 | | | 2,169 | | | 96,229 | | | 1,593 | | | 74,087 | | | 1,146 | | | 96,229 | | | 1,593 | | | 74,087 | | | 1,146 | | | 57,850 | | | 1,069 | | Services | | 91,339 | | | 1,967 | | | 81,967 | | | 1,236 | | | 59,916 | | | 794 | | | 81,967 | | | 1,236 | | | 59,916 | | | 794 | | | 48,945 | | | 1,044 | | Wholesale and retail | | 249,656 | | | 4,333 | | | 238,798 | | | 3,466 | | | 186,356 | | | 2,347 | | | 238,798 | | | 3,466 | | | 186,356 | | | 2,347 | | | 171,687 | | | 2,848 | | Banks and other financial institutions | | 3,982 | | | 51 | | | 2,272 | | | 11 | | | 1,729 | | | 8 | | | 2,272 | | | 11 | | | 1,729 | | | 8 | | | 1,330 | | | 8 | | Communication and information services | | 29,547 | | | 677 | | | 27,531 | | | 570 | | | 25,461 | | | 388 | | | 27,531 | | | 570 | | | 25,461 | | | 388 | | | 22,478 | | | 491 | | Other industries | | 29,018 | | | 301 | | | 24,709 | | | 397 | | | 50,377 | | | 215 | | | 24,709 | | | 397 | | | 50,377 | | | 215 | | | 39,178 | | | 234 | | Consumer | | 46,135 | | | 836 | | | 38,055 | | | 564 | | | 28,621 | | | 475 | | | 38,055 | | | 564 | | | 28,621 | | | 475 | | | 21,933 | | | 341 | | Foreign-excluding MUAH and Krungsri | | 230,018 | | | 3,235 | | | 291,612 | | | 5,132 | | | 209,297 | | | 4,244 | | | 291,612 | | | 5,132 | | | 209,297 | | | 4,244 | | | 159,999 | | | 3,127 | | Loans acquired with deteriorated credit quality | | 11,549 | | | 495 | | | 9,974 | | | 432 | | | 8,591 | | | 492 | | | 9,974 | | | 432 | | | 8,591 | | | 492 | | | 7,814 | | | 182 | | Residential | | 154,760 | | | 2,918 | | | 133,876 | | | 1,883 | | | 119,409 | | | 1,563 | | | 133,876 | | | 1,883 | | | 119,409 | | | 1,563 | | | 107,165 | | | 1,620 | | Card | | 85,006 | | | 3,330 | | | 75,809 | | | 2,483 | | | 69,831 | | | 1,993 | | | 75,809 | | | 2,483 | | | 69,831 | | | 1,993 | | | 66,187 | | | 1,614 | | MUAH | | 71,966 | | | 1,550 | | | 91,690 | | | 1,664 | | | 83,504 | | | 1,993 | | | 91,690 | | | 1,664 | | | 83,504 | | | 1,993 | | | 71,162 | | | 2,292 | | Krungsri | | 40,037 | | | 2,252 | | | 51,597 | | | 2,201 | | | 75,370 | | | 3,899 | | | 51,597 | | | 2,201 | | | 75,370 | | | 3,899 | | | 83,165 | | | 4,995 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 1,659,921 | | | ¥ | 30,352 | | | ¥ | 1,792,059 | | | ¥ | 27,911 | | | ¥ | 1,484,095 | | | ¥ | 23,625 | | | ¥ | 1,792,059 | | | ¥ | 27,911 | | | ¥ | 1,484,095 | | | ¥ | 23,625 | | | ¥ | 1,262,339 | | | ¥ | 26,213 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income on nonaccrual loans for all classes was recognized on a cash basis when ultimate collectibility of principal was certain. Otherwise, cash receipts were applied as principal reductions. Interest income on accruing impaired loans, including TDRs, was recognized on an accrual basis to the extent that the collectibility of interest income was reasonably certain based on management’s assessment. 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, 2016, 2017, 2018 and 2018:2019: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Accrual TDRs: | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 867,090 | | | ¥ | 613,844 | | | ¥ | 819,819 | | | ¥ | 613,844 | | | ¥ | 819,819 | | | ¥ | 670,255 | | Additions (new accrual TDR status)(1) | | | 175,178 | | | 492,269 | | | 144,368 | | | | 492,269 | | | 144,368 | | | 71,033 | | Transfers to other impaired loans (including nonaccrual TDRs) | | | (164,016 | ) | | (40,182 | ) | | (25,122 | ) | | | (40,182 | ) | | (25,122 | ) | | (19,053 | ) | Loans sold | | | (9 | ) | | (1,637 | ) | | (39,378 | ) | | | (1,637 | ) | | (39,378 | ) | | (26 | ) | Principal payments and other | | | (264,399 | ) | | (244,475 | ) | | (229,432 | ) | | | (244,475 | ) | | (229,432 | ) | | (104,558 | ) | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year(1) | | ¥ | 613,844 | | | ¥ | 819,819 | | | ¥ | 670,255 | | | ¥ | 819,819 | | | ¥ | 670,255 | | | ¥ | 617,651 | | | | | | | | | | | | | | | | | | | | | Other impaired loans (including nonaccrual TDRs): | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 819,716 | | | ¥ | 1,111,306 | | | ¥ | 896,031 | | | ¥ | 1,111,306 | | | ¥ | 896,031 | | | ¥ | 660,868 | | Additions (new other impaired loans (including nonaccrual TDRs) status)(1)(2) | | | 617,481 | | | 541,789 | | | 281,275 | | | | 541,789 | | | 281,275 | | | 222,003 | | Charge-off | | | (65,198 | ) | | (106,097 | ) | | (98,355 | ) | | | (106,097 | ) | | (98,355 | ) | | (55,309 | ) | Transfers to accrual TDRs | | | (32,190 | ) | | (333,478 | ) | | (43,858 | ) | | | (333,478 | ) | | (43,858 | ) | | (22,110 | ) | Loans sold | | | (12,224 | ) | | (44,984 | ) | | (31,581 | ) | | | (44,984 | ) | | (31,581 | ) | | (26,022 | ) | Principal payments and other | | | (216,279 | ) | | (272,505 | ) | | (342,644 | ) | | | (272,505 | ) | | (342,644 | ) | | (187,290 | ) | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year(1) | | ¥ | 1,111,306 | | | ¥ | 896,031 | | | ¥ | 660,868 | | | ¥ | 896,031 | | | ¥ | 660,868 | | | ¥ | 592,140 | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | For the fiscal year ended March 31, 2016, lease receivables of ¥3,124 million and ¥240 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 ¥4,172 million and ¥567 million, are also excluded from the balance of accrual TDRs and other impaired loans, respectively, as of March 31, 2016. For the fiscal year ended March 31, 2017, lease receivables of ¥875 million and ¥74 million in the Krungsri segment, which were accrual TDRs and nonaccrual TDRs, respectively, are excluded from the additions of accrual TDRs and other impaired loans, respectively, and the related ending balances of such TDRs amounting to ¥4,065 million and ¥389 million, are also excluded from the balance of accrual TDRs and other impaired loans, respectively, as of March 31, 2017. For the fiscal year ended March 31, 2018, lease receivables of ¥1,809 million and ¥113 million in the Krungsri segment, which were accrual TDRs and nonaccrual TDRs, respectively, are excluded from the additions of accrual TDRs and other impaired loans, respectively, and the related ending balances of such TDRs amounting to ¥4,282 million and ¥1,286 million, are also excluded from the balance of accrual TDRs and other impaired loans, respectively, as of March 31, 2018. For the fiscal year ended March 31, 2019, lease receivables of ¥2,947 million and ¥2,088 million in the Krungsri segment, which were accrual TDRs and nonaccrual TDRs, respectively, are excluded from the additions of accrual TDRs and other impaired loans, respectively, and the related ending balances of such TDRs amounting to ¥5,060 million and ¥3,361 million, are also excluded from the balance of accrual TDRs and other impaired loans, respectively, as of March 31, 2019. |
| (2) | | Included in the additions of other impaired loans for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 are nonaccrual TDRs as follows: ¥10,954 million, ¥11,699 million, ¥12,002 million and ¥12,002¥13,493 million—Card; ¥19,725 million, ¥25,023 million, ¥12,799 million and ¥12,799¥12,738 million—MUFG Americas Holdings; and ¥7,989 million, ¥7,471 million, ¥12,280 million and ¥12,280¥10,519 million—Krungsri, respectively. |
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, 2016, 2017, 2018 and 2018:2019: | | | | 2016 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2019 | | | | | Troubled Debt Restructurings | | | 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 | | | 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) | | | (in millions) | | Commercial(1)(3) | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | 116,299 | | | ¥ | 76,530 | | | ¥ | 377,563 | | | ¥ | 377,563 | | | ¥ | 70,380 | | | ¥ | 69,021 | | | ¥ | 377,563 | | | ¥ | 377,563 | | | ¥ | 70,380 | | | ¥ | 69,021 | | | ¥ | 36,693 | | | ¥ | 36,693 | | Manufacturing | | | 63,304 | | | | 23,535 | | | | 335,347 | | | | 335,347 | | | | 35,954 | | | | 35,954 | | | | 335,347 | | | | 335,347 | | | | 35,954 | | | | 35,954 | | | | 11,654 | | | | 11,654 | | Construction | | | 2,881 | | | | 2,881 | | | | 1,377 | | | | 1,377 | | | | 1,020 | | | | 1,020 | | | | 1,377 | | | | 1,377 | | | | 1,020 | | | | 1,020 | | | | 703 | | | | 703 | | Real estate | | | 7,167 | | | | 7,167 | | | | 7,457 | | | | 7,457 | | | | 1,269 | | | | 1,269 | | | | 7,457 | | | | 7,457 | | | | 1,269 | | | | 1,269 | | | | 948 | | | | 948 | | Services | | | 12,226 | | | | 12,226 | | | | 5,268 | | | | 5,268 | | | | 4,139 | | | | 4,139 | | | | 5,268 | | | | 5,268 | | | | 4,139 | | | | 4,139 | | | | 2,141 | | | | 2,141 | | Wholesale and retail | | | 27,545 | | | | 27,545 | | | | 22,868 | | | | 22,868 | | | | 16,280 | | | | 14,921 | | | | 22,868 | | | | 22,868 | | | | 16,280 | | | | 14,921 | | | | 19,315 | | | | 19,315 | | Banks and other financial institutions | | | — | | | | — | | | | — | | | | — | | | | 246 | | | | 246 | | | | — | | | | — | | | | 246 | | | | 246 | | | | — | | | | — | | Communication and information services | | | 869 | | | | 869 | | | | 2,405 | | | | 2,405 | | | | 9,643 | | | | 9,643 | | | | 2,405 | | | | 2,405 | | | | 9,643 | | | | 9,643 | | | | 268 | | | | 268 | | Other industries | | | 1,240 | | | | 1,240 | | | | 1,493 | | | | 1,493 | | | | 761 | | | | 761 | | | | 1,493 | | | | 1,493 | | | | 761 | | | | 761 | | | | 472 | | | | 472 | | Consumer | | | 1,067 | | | | 1,067 | | | | 1,348 | | | | 1,348 | | | | 1,068 | | | | 1,068 | | | | 1,348 | | | | 1,348 | | | | 1,068 | | | | 1,068 | | | | 1,192 | | | | 1,192 | | Foreign-excluding MUAH and Krungsri | | | 23,849 | | | | 23,849 | | | | 58,178 | | | | 58,178 | | | | 25,522 | | | | 25,522 | | | | 58,178 | | | | 58,178 | | | | 25,522 | | | | 25,522 | | | | 5,692 | | | | 5,692 | | Loans acquired with deteriorated credit quality | | | — | | | | — | | | | 1,030 | | | | 1,030 | | | | — | | | | — | | | | 1,030 | | | | 1,030 | | | | — | | | | — | | | | 50 | | | | 50 | | Residential(1)(3) | | | 19,316 | | | | 19,316 | | | | 13,092 | | | | 13,092 | | | | 9,763 | | | | 9,763 | | | | 13,092 | | | | 13,092 | | | | 9,763 | | | | 9,763 | | | | 7,379 | | | | 7,379 | | Card(2)(3) | | | 16,002 | | | | 15,670 | | | | 17,256 | | | | 16,759 | | | | 17,436 | | | | 16,912 | | | | 17,256 | | | | 16,759 | | | | 17,436 | | | | 16,912 | | | | 19,685 | | | | 18,837 | | MUAH(2)(3) | | | 64,064 | | | | 64,064 | | | | 38,558 | | | | 38,449 | | | | 40,578 | | | | 38,224 | | | | 38,558 | | | | 38,449 | | | | 40,578 | | | | 38,224 | | | | 19,837 | | | | 19,837 | | Krungsri(2)(3) | | | 17,869 | | | | 17,781 | | | | 32,340 | | | | 32,340 | | | | 24,015 | | | | 23,929 | | | | 32,340 | | | | 32,340 | | | | 24,015 | | | | 23,929 | | | | 24,392 | | | | 24,330 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 257,399 | | | ¥ | 217,210 | | | ¥ | 538,017 | | | ¥ | 537,411 | | | ¥ | 187,694 | | | ¥ | 183,371 | | | ¥ | 538,017 | | | ¥ | 537,411 | | | ¥ | 187,694 | | | ¥ | 183,371 | | | ¥ | 113,728 | | | ¥ | 112,818 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | 2016 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2019 | | | | | Troubled Debt Restructurings
That Subsequently defaulted | | | Troubled Debt Restructurings
That Subsequently defaulted | | | | | Recorded Investment | | | Recorded Investment | | | | | (in millions) | | | (in millions) | | Commercial(1)(3) | | | | | | | | | | | | | Domestic | | ¥ | 150,142 | | | ¥ | 4,587 | | | ¥ | 4,067 | | | ¥ | 4,587 | | | ¥ | 4,067 | | | ¥ | 11,002 | | Manufacturing | | | 147,025 | | | | 1,373 | | | | 839 | | | | 1,373 | | | | 839 | | | | 312 | | Construction | | | 6 | | | | 11 | | | | — | | | | 11 | | | | — | | | | 89 | | Real estate | | | 745 | | | | 38 | | | | 10 | | | | 38 | | | | 10 | | | | — | | Services | | | 1,193 | | | | 217 | | | | 822 | | | | 217 | | | | 822 | | | | 473 | | Wholesale and retail | | | 1,090 | | | | 2,530 | | | | 2,231 | | | | 2,530 | | | | 2,231 | | | | 1,713 | | Banks and other financial institutions | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Communication and information services | | | 20 | | | | 385 | | | | 140 | | | | 385 | | | | 140 | | | | 8,365 | | Other industries | | | 40 | | | | — | | | | — | | | | — | | | | — | | | | 50 | | Consumer | | | 23 | | | | 33 | | | | 25 | | | | 33 | | | | 25 | | | | — | | Foreign-excluding MUAH and Krungsri | | | — | | | | 11,268 | | | | — | | | | 11,268 | | | | — | | | | — | | Loans acquired with deteriorated credit quality | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Residential(1)(3) | | | 284 | | | | 231 | | | | 159 | | | | 231 | | | | 159 | | | | 362 | | Card(2)(3) | | | 4,479 | | | | 3,661 | | | | 4,191 | | | | 3,661 | | | | 4,191 | | | | 3,442 | | MUAH(2)(3) | | | 3,925 | | | | 6,624 | | | | 2,565 | | | | 6,624 | | | | 2,565 | | | | 349 | | Krungsri(2)(3) | | | 6,219 | | | | 3,984 | | | | 4,789 | | | | 3,984 | | | | 4,789 | | | | 7,926 | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 165,049 | | | ¥ | 30,355 | | | ¥ | 15,771 | | | ¥ | 30,355 | | | ¥ | 15,771 | | | ¥ | 23,081 | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | TDRs for the Commercial and Residential segments include accruing loans, and do not include nonaccrual loans. |
| (2) | | TDRs for the Card, MUFG Americas Holdings and Krungsri segments include accrual and nonaccrual loans. |
| (3) | | For the fiscal year ended March 31, 2016, 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, 2017, extension of the stated maturity date of loans was the primary concession type in the Residential segment, reduction in the stated rate was the primary concession type in the Commercial and Card segments and payment deferrals were the primary concession type in the MUFG Americas Holdings and Krungsri segments. For the fiscal year ended March 31, 2018, extension of the stated maturity date of loans was the primary concession type in the Commercial, Residential and Krungsri segments, reduction in the stated rate was the primary concession type in the Card segment and payment deferrals were the primary concession type in the MUFG Americas Holdings segment. For the fiscal year ended March 31, 2019, extension of the stated maturity date of loans was the primary concession type in the Commercial, Residential and Krungsri segments, reduction in the stated rate was the primary concession type in the Card segment and forbearance was the primary concession type in the MUFG Americas Holdings segment. |
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, 20172018 and 2018:2019: | | | | 2017 | | | 2018 | | | 2018 | | | 2019 | | | | | (in millions) | | | (in millions) | | Commercial(1) | | | | | | | | | Domestic | | ¥ | 592,578 | | | ¥ | 482,566 | | | ¥ | 482,566 | | | ¥ | 445,312 | | Manufacturing | | | 409,500 | | | | 320,702 | | | | 320,702 | | | | 311,890 | | Construction | | | 8,881 | | | | 7,362 | | | | 7,362 | | | | 4,591 | | Real estate | | | 38,953 | | | | 33,289 | | | | 33,289 | | | | 27,657 | | Services | | | 32,864 | | | | 23,987 | | | | 23,987 | | | | 17,135 | | Wholesale and retail | | | 82,968 | | | | 70,119 | | | | 70,119 | | | | 69,350 | | Banks and other financial institutions | | | 11 | | | | 6 | | | | 6 | | | | 135 | | Communication and information services | | | 6,133 | | | | 12,837 | | | | 12,837 | | | | 3,780 | | Other industries | | | 6,486 | | | | 9,712 | | | | 9,712 | | | | 6,357 | | Consumer | | | 6,782 | | | | 4,552 | | | | 4,552 | | | | 4,417 | | Foreign-excluding MUAH and Krungsri | | | 96,168 | | | | 54,182 | | | | 54,182 | | | | 51,701 | | Residential(1) | | | 50,213 | | | | 40,734 | | | | 40,734 | | | | 34,449 | | Card(2) | | | 72,311 | | | | 67,352 | | | | 67,352 | | | | 65,021 | | MUAH(2) | | | 69,830 | | | | 65,373 | | | | 65,373 | | | | 48,128 | | Krungsri(2) | | | 46,651 | | | | 54,036 | | | | 54,036 | | | | 62,980 | | | | | | | | | | | | | | | Total | | ¥ | 927,751 | | | ¥ | 764,243 | | | ¥ | 764,243 | | | ¥ | 707,591 | | | | | | | | | | | | | | |
Notes: | (1) | | TDRs for the Commercial and Residential segments include accruing loans, and do not include nonaccrual loans. |
| (2) | | TDRs for the Card, MUFG Americas Holdings and Krungsri segments include accrual and nonaccrual loans. Included in the outstanding recorded investment balances as of March 31, 20172018 and 20182019 are nonaccrual TDRs as follows: ¥39,747¥38,811 million and ¥38,811¥38,838 million—Card; ¥45,122¥26,040 million and ¥26,040¥14,973 million—MUFG Americas Holdings; and ¥18,998¥24,855 million and ¥24,855¥31,069 million—Krungsri, respectively. |
A modification of terms of a loan under a TDR mainly involves: (i) a reduction in the stated interest rate applicable to the loan, (ii) an extension of the stated maturity date of the loan, (iii) a partial forgiveness of the principal of the loan, or (iv) a combination of all of these. Those loans are also considered impaired loans, and hence the allowance for credit losses is separately established for each loan. As a result, the amount of allowance for credit losses increases in many cases upon classification as a TDR loan. The amount ofpre-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, 2016, 2017, 2018 and 20182019 was not material. TDRs for the Commercial and Residential segments in the above tables include accruing loans, and do not include nonaccrual loans. Once a loan is classified as a nonaccrual loan, a modification would have little likelihood of resulting in the recovery of the loan in view of the severity of the financial difficulty of the borrower. Therefore, even if a nonaccrual loan is modified, the loan continues to be classified as a nonaccrual loan. The vast majority of modifications to nonaccrual loans are temporary extensions of the maturity dates, typically for periods up to 90 days, and continually made as the borrower is unable to repay or refinance the loan at the extended maturity. Accordingly, the impact of such TDRs on the outstanding recorded investment is immaterial, and the vast majority of nonaccrual TDRs have subsequently defaulted. TDRs that subsequently defaulted in the Commercial and Residential segments in the above tables include those accruing loans that became past due one month or more within the Commercial segment and six months or MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) more within the Residential segment, and those accruing loans reclassified to nonaccrual loans due to financial difficulties even without delinquencies. This is because classification as a nonaccrual loan is regarded as default under the MUFG Group’s credit policy. Also, the MUFG Group defines default as payment default for the purpose of the disclosure. In regards to the Card, MUFG Americas Holdings and Krungsri segments, the TDRs in the above tables represent nonaccrual and accruing loans, and the defaulted loans in the above table represent nonaccruing and accruing loans that became past due one month or more within the Card segment, 60 days or more within the MUFG Americas Holdings segment, and six months or more within the Krungsri segment. Historical payment defaults are one of the factors considered when projecting future cash flows in determining the allowance for credit losses for each segment. The MUFG Group provided commitments to extend credit to customers with TDRs. The amounts of such commitments were ¥168,840¥172,159 million and ¥172,159¥169,819 million at March 31, 20172018 and 2018,2019, respectively. See Note 25 for further discussion of commitments to extend credit. Credit Quality Indicator Credit quality indicators of loans by class at March 31, 20172018 and 20182019 are shown below: | At March 31, 2017: | | Normal | | | Close
Watch | | | Likely to become
Bankrupt or
Legally/Virtually
Bankrupt | | | Total(1) | | | At March 31, 2018: | | | Normal | | | Close
Watch | | | Likely to become
Bankrupt or
Legally/Virtually
Bankrupt | | | Total(1) | | | | | (in millions) | | | (in millions) | | Commercial | | | | | | | | | | | | | | | | | Domestic | | ¥ | 49,572,413 | | | ¥ | 2,161,965 | | | ¥ | 296,961 | | | ¥ | 52,031,339 | | | ¥ | 49,050,274 | | | ¥ | 1,690,924 | | | ¥ | 271,456 | | | ¥ | 51,012,654 | | Manufacturing | | | 10,882,533 | | | | 821,062 | | | | 65,112 | | | | 11,768,707 | | | | 10,215,497 | | | | 596,662 | | | | 57,730 | | | | 10,869,889 | | Construction | | | 753,879 | | | | 53,255 | | | | 11,550 | | | | 818,684 | | | | 727,932 | | | | 43,673 | | | | 9,116 | | | | 780,721 | | Real estate | | | 11,137,637 | | | | 352,785 | | | | 42,382 | | | | 11,532,804 | | | | 11,379,291 | | | | 279,931 | | | | 32,692 | | | | 11,691,914 | | Services | | | 2,267,272 | | | | 237,067 | | | | 31,202 | | | | 2,535,541 | | | | 2,467,540 | | | | 175,733 | | | | 24,081 | | | | 2,667,354 | | Wholesale and retail | | | 7,403,680 | | | | 462,577 | | | | 98,423 | | | | 7,964,680 | | | | 7,518,383 | | | | 374,706 | | | | 77,870 | | | | 7,970,959 | | Banks and other financial institutions | | | 5,207,774 | | | | 14,341 | | | | 892 | | | | 5,223,007 | | | | 4,800,281 | | | | 10,923 | | | | 1,145 | | | | 4,812,349 | | Communication and information services | | | 1,573,518 | | | | 45,342 | | | | 15,357 | | | | 1,634,217 | | | | 1,491,093 | | | | 48,153 | | | | 11,958 | | | | 1,551,204 | | Other industries | | | 8,725,914 | | | | 125,725 | | | | 8,086 | | | | 8,859,725 | | | | 8,780,517 | | | | 120,466 | | | | 36,951 | | | | 8,937,934 | | Consumer | | | 1,620,206 | | | | 49,811 | | | | 23,957 | | | | 1,693,974 | | | | 1,669,740 | | | | 40,677 | | | | 19,913 | | | | 1,730,330 | | Foreign-excluding MUAH and Krungsri | | | 36,134,401 | | | | 971,228 | | | | 189,599 | | | | 37,295,228 | | | | 36,049,123 | | | | 569,137 | | | | 108,276 | | | | 36,726,536 | | Loans acquired with deteriorated credit quality | | | 16,503 | | | | 12,572 | | | | 5,065 | | | | 34,140 | | | | 12,035 | | | | 11,728 | | | | 3,562 | | | | 27,325 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 85,723,317 | | | ¥ | 3,145,765 | | | ¥ | 491,625 | | | ¥ | 89,360,707 | | | ¥ | 85,111,432 | | | ¥ | 2,271,789 | | | ¥ | 383,294 | | | ¥ | 87,766,515 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Accrual | | | Nonaccrual | | | Total(1) | | | Accrual | | | Nonaccrual | | | Total(1) | | | | | (in millions) | | | (in millions) | | Residential | | ¥ | 14,256,263 | | | ¥ | 76,185 | | | ¥ | 14,332,448 | | | ¥ | 14,012,978 | | | ¥ | 67,258 | | | ¥ | 14,080,236 | | Card | | ¥ | 531,331 | | | ¥ | 61,822 | | | ¥ | 593,153 | | | ¥ | 528,108 | | | ¥ | 61,707 | | | ¥ | 589,815 | |
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) | | | | | (in millions) | | MUAH | | ¥ | 3,837,763 | | | ¥ | 22,949 | | | ¥ | 4,879,158 | | | ¥ | 133,032 | | | ¥ | 151,553 | | | ¥ | 9,024,455 | | | | | | | | | | | | | | | | | | Normal | | | Special
Mention | | | Substandard or
Doubtful or
Doubtful
of Loss | | | Total(1) | | | | | | | | | | | (in millions) | | Krungsri | | | ¥ | 4,672,435 | | | ¥ | 195,472 | | | ¥ | 98,335 | | | ¥ | 4,966,242 | |
| | | | | | | | | | | | | | | | | At March 31, 2018: | | Normal | | | Close Watch | | | Likely to become
Bankrupt or
Legally/Virtually
Bankrupt | | | Total(1) | | | | | (in millions) | | Commercial | | | | | | | | | | | | | | | | | Domestic | | ¥ | 49,050,274 | | | ¥ | 1,690,924 | | | ¥ | 271,456 | | | ¥ | 51,012,654 | | Manufacturing | | | 10,215,497 | | | | 596,662 | | | | 57,730 | | | | 10,869,889 | | Construction | | | 727,932 | | | | 43,673 | | | | 9,116 | | | | 780,721 | | Real estate | | | 11,379,291 | | | | 279,931 | | | | 32,692 | | | | 11,691,914 | | Services | | | 2,467,540 | | | | 175,733 | | | | 24,081 | | | | 2,667,354 | | Wholesale and retail | | | 7,518,383 | | | | 374,706 | | | | 77,870 | | | | 7,970,959 | | Banks and other financial institutions | | | 4,800,281 | | | | 10,923 | | | | 1,145 | | | | 4,812,349 | | Communication and information services | | | 1,491,093 | | | | 48,153 | | | | 11,958 | | | | 1,551,204 | | Other industries | | | 8,780,517 | | | | 120,466 | | | | 36,951 | | | | 8,937,934 | | Consumer | | | 1,669,740 | | | | 40,677 | | | | 19,913 | | | | 1,730,330 | | Foreign-excluding MUAH and Krungsri | | | 36,049,123 | | | | 569,137 | | | | 108,276 | | | | 36,726,536 | | Loans acquired with deteriorated credit quality | | | 12,035 | | | | 11,728 | | | | 3,562 | | | | 27,325 | | | | | | | | | | | | | | | | | | | Total | | ¥ | 85,111,432 | | | ¥ | 2,271,789 | | | ¥ | 383,294 | | | ¥ | 87,766,515 | | | | | | | | | | | | | | | | | | |
| | | | | 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 | | | ¥ | 4,360,445 | | | ¥ | 14,238 | | | ¥ | 4,509,044 | | | ¥ | 59,890 | | | ¥ | 116,842 | | | ¥ | 9,060,459 | | | | | | | | | | | Normal | | Special
Mention | | Substandard or
Doubtful or
Doubtful
of Loss | | Total(1) | | | | | | | | | | (in millions) | | Krungsri | | Krungsri | | | ¥ | 5,284,018 | | | ¥ | 198,526 | | | ¥ | 123,106 | | | ¥ | 5,605,650 | | | At March 31, 2019: | | At March 31, 2019: | | Normal | | Close Watch | | Likely to become
Bankrupt or
Legally/Virtually
Bankrupt | | Total(1) | | | | | | | | | | (in millions) | | Commercial | | Commercial | | | | | | | | | | Domestic | | Domestic | | | ¥ | 49,391,991 | | | ¥ | 1,242,075 | | | ¥ | 217,745 | | | ¥ | 50,851,811 | | Manufacturing | | Manufacturing | | | 10,819,594 | | | 279,801 | | | 47,968 | | | 11,147,363 | | Construction | | Construction | | | 672,152 | | | 37,236 | | | 7,857 | | | 717,245 | | Real estate | | Real estate | | | 11,403,613 | | | 222,791 | | | 22,515 | | | 11,648,919 | | Services | | Services | | | 2,436,489 | | | 174,784 | | | 19,953 | | | 2,631,226 | | Wholesale and retail | | Wholesale and retail | | | 7,240,801 | | | 329,249 | | | 68,736 | | | 7,638,786 | | Banks and other financial institutions | | Banks and other financial institutions | | | 5,199,889 | | | 7,654 | | | 898 | | | 5,208,441 | | Communication and information services | | Communication and information services | | | 1,465,652 | | | 34,542 | | | 10,172 | | | 1,510,366 | | Other industries | | Other industries | | | 8,610,464 | | | 119,581 | | | 24,947 | | | 8,754,992 | | Consumer | | Consumer | | | 1,543,337 | | | 36,437 | | | 14,699 | | | 1,594,473 | | Foreign-excluding MUAH and Krungsri | | Foreign-excluding MUAH and Krungsri | | | 35,418,267 | | | 562,854 | | | 112,103 | | | 36,093,224 | | Loans acquired with deteriorated credit quality | | Loans acquired with deteriorated credit quality | | | 11,622 | | | 10,833 | | | 3,790 | | | 26,245 | | | | | | | | | | | | | | | | | | | | Total | | Total | | | ¥ | 84,821,880 | | | ¥ | 1,815,762 | | | ¥ | 333,638 | | | ¥ | 86,971,280 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accrual | | | Nonaccrual | | | Total(1) | | | | | | | | | Accrual | | Nonaccrual | | Total(1) | | | | | | | | | | | | | | (in millions) | | | | | | | | | (in millions) | | Residential | Residential | | | | | ¥ | 14,012,978 | | | ¥ | 67,258 | | | ¥ | 14,080,236 | | Residential | | | ¥ | 13,661,794 | | | ¥ | 66,290 | | | ¥ | 13,728,084 | | Card | Card | | | | | ¥ | 528,108 | | | ¥ | 61,707 | | | ¥ | 589,815 | | Card | | | ¥ | 516,983 | | | ¥ | 61,599 | | | ¥ | 578,582 | | | | | | Credit Quality Based on
the Number of Delinquencies | | | Credit Quality Based on
Internal Credit Ratings | | | | | | Credit Quality Based on
the Number of Delinquencies | | Credit Quality Based on
Internal Credit Ratings | | | | | | | Accrual | | | Nonaccrual | | | Pass | | | Special
Mention | | | Classified | | | Total(1)(2) | | | Accrual | | Nonaccrual | | Pass | | Special
Mention | | Classified | | Total(1)(2) | | | | | (in millions) | | | (in millions) | | MUAH | | ¥ | 4,360,445 | | | ¥ | 14,238 | | | ¥ | 4,509,044 | | | ¥ | 59,890 | | | ¥ | 116,842 | | | ¥ | 9,060,459 | | | ¥ | 4,752,021 | | | ¥ | 15,540 | | | ¥ | 4,699,698 | | | ¥ | 51,948 | | | ¥ | 88,356 | | | ¥ | 9,607,563 | | | | | | | | | | | | Normal | | | Special
Mention | | | Substandard or
Doubtful or
Doubtful
of Loss | | | Total(1) | | | | | | | Normal | | Special
Mention | | Substandard or
Doubtful or
Doubtful
of Loss | | Total(1) | | | | | | | | | | | (in millions) | | | | | | | (in millions) | | Krungsri | Krungsri | | | ¥ | 5,284,018 | | | ¥ | 198,526 | | | ¥ | 123,106 | | | ¥ | 5,605,650 | | Krungsri | | | ¥ | 5,682,245 | | | ¥ | 199,070 | | | ¥ | 129,222 | | | ¥ | 6,010,537 | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Notes: | (1) | | Total loans in the above table do not include loans held for sale, and represent balances without adjustments in relation to unearned income, unamortized premiums and deferred loan fees. |
| (2) | | Total loans of MUFG Americas Holdings do not include FDIC covered loans which are not individually rated totaling ¥40,534¥953 million and ¥953¥689 million as of March 31, 20172018 and 2018,2019, respectively. The MUFG Group will be reimbursed for a substantial portion of any future losses on FDIC covered loans under the terms of the FDIC loss share agreements. |
The MUFG Group classifies loans into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, historical and current financial information, historical and current payment experience, credit documentation, public andnon-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 ofnon-payment, suspension of business, voluntary liquidation or filing for legal liquidation. The accrual status is a primary credit quality indicator for loans within the Residential segment, the Card segment and consumer loans within the MUFG Americas Holdings segment. The accrual status of these loans is determined based on the number of delinquent payments. See Note 1 for further details of categorization of Accrual and Nonaccrual. Commercial loans within the MUFG Americas Holdings segment are categorized as either pass or criticized based on the internal credit rating assigned to each borrower. Criticized credits are those that are internally risk graded as Special Mention, Substandard or Doubtful. Special Mention credits are potentially weak, as the borrower has begun to exhibit deteriorating trends, which, if not corrected, may jeopardize repayment of the loan and result in further downgrade. Classified credits are those that are internally risk graded as Substandard or MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Doubtful. Substandard credits have well-defined weaknesses, which, if not corrected, could jeopardize the full satisfaction of the debt. A credit classified as Doubtful has critical weaknesses that make full collection improbable on the basis of currently existing facts and conditions. Loans within the Krungsri segment are categorized as Normal, Special Mention, Substandard, Doubtful, and Doubtful of Loss primarily based on their delinquency status. Loans categorized as Special Mention generally represent those that have the overdue principal or interest payments for a cumulative period exceeding one month commencing from the contractual due date. Loans categorized as Substandard, Doubtful or Doubtful of Loss generally represent those that have the overdue principal or interest payments for a cumulative period exceeding three months commencing from the contractual due date. For the Commercial, Residential and Card segments, credit quality indicators are based on information as of March 31. For the MUFG Americas Holdings and Krungsri segments, credit quality indicators are generally based on information as of December 31. Past Due Analysis Ages of past due loans by class at March 31, 20172018 and 20182019 are shown below: | At March 31, 2017: | | 1-3 months
Past Due | | | Greater
Than
3 months | | | Total
Past Due | | | Current | | | Total
Loans(1)(2) | | | Recorded
Investment>
90 Days and
Accruing | | | At March 31, 2018: | | | 1-3 months
Past Due | | | Greater
Than
3 months | | | Total
Past Due | | | Current | | | Total
Loans(1) | | | Recorded
Investment>
90 Days and
Accruing | | | | | (in millions) | | | (in millions) | | Commercial | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | 12,410 | | | ¥ | 19,468 | | | ¥ | 31,878 | | | ¥ | 51,999,461 | | | ¥ | 52,031,339 | | | ¥ | 5,817 | | | ¥ | 13,290 | | | ¥ | 43,913 | | | ¥ | 57,203 | | | ¥ | 50,955,451 | | | ¥ | 51,012,654 | | | ¥ | 6,419 | | Manufacturing | | | 1,427 | | | | 1,671 | | | | 3,098 | | | | 11,765,609 | | | | 11,768,707 | | | | 20 | | | | 1,495 | | | | 1,300 | | | | 2,795 | | | | 10,867,094 | | | | 10,869,889 | | | | — | | Construction | | | 281 | | | | 235 | | | | 516 | | | | 818,168 | | | | 818,684 | | | | — | | | | 359 | | | | 437 | | | | 796 | | | | 779,925 | | | | 780,721 | | | | — | | Real estate | | | 2,655 | | | | 5,058 | | | | 7,713 | | | | 11,525,091 | | | | 11,532,804 | | | | 1,542 | | | | 2,090 | | | | 3,225 | | | | 5,315 | | | | 11,686,599 | | | | 11,691,914 | | | | 1,633 | | Services | | | 1,294 | | | | 3,225 | | | | 4,519 | | | | 2,531,022 | | | | 2,535,541 | | | | 4 | | | | 1,025 | | | | 620 | | | | 1,645 | | | | 2,665,709 | | | | 2,667,354 | | | | 26 | | Wholesale and retail | | | 1,932 | | | | 1,883 | | | | 3,815 | | | | 7,960,865 | | | | 7,964,680 | | | | 149 | | | | 3,886 | | | | 4,198 | | | | 8,084 | | | | 7,962,875 | | | | 7,970,959 | | | | 1,349 | | Banks and other financial institutions | | | 3 | | | | 21 | | | | 24 | | | | 5,222,983 | | | | 5,223,007 | | | | — | | | | — | | | | 21 | | | | 21 | | | | 4,812,328 | | | | 4,812,349 | | | | — | | Communication and information services | | | 583 | | | | 216 | | | | 799 | | | | 1,633,418 | | | | 1,634,217 | | | | — | | | | 657 | | | | 328 | | | | 985 | | | | 1,550,219 | | | | 1,551,204 | | | | — | | Other industries | | | 337 | | | | 99 | | | | 436 | | | | 8,859,289 | | | | 8,859,725 | | | | — | | | | 251 | | | | 28,315 | | | | 28,566 | | | | 8,909,368 | | | | 8,937,934 | | | | — | | Consumer | | | 3,898 | | | | 7,060 | | | | 10,958 | | | | 1,683,016 | | | | 1,693,974 | | | | 4,102 | | | | 3,527 | | | | 5,469 | | | | 8,996 | | | | 1,721,334 | | | | 1,730,330 | | | | 3,411 | | Foreign-excluding MUAH and Krungsri | | | 5,268 | | | | 50,105 | | | | 55,373 | | | | 37,239,855 | | | | 37,295,228 | | | | 2,244 | | | | 12,512 | | | | 19,655 | | | | 32,167 | | | | 36,694,369 | | | | 36,726,536 | | | | 1,083 | | Residential | | | 78,227 | | | | 42,335 | | | | 120,562 | | | | 14,202,076 | | | | 14,322,638 | | | | 31,382 | | | | 78,073 | | | | 19,399 | | | | 97,472 | | | | 13,974,118 | | | | 14,071,590 | | | | 10,806 | | Card | | | 17,490 | | | | 31,298 | | | | 48,788 | | | | 533,484 | | | | 582,272 | | | | — | | | | 18,887 | | | | 32,218 | | | | 51,105 | | | | 528,284 | | | | 579,389 | | | | — | | MUAH | | | 25,162 | | | | 14,212 | | | | 39,374 | | | | 8,998,049 | | | | 9,037,423 | | | | 1,165 | | | | 23,145 | | | | 13,648 | | | | 36,793 | | | | 9,009,426 | | | | 9,046,219 | | | | 771 | | Krungsri | | | 103,055 | | | | 73,261 | | | | 176,316 | | | | 4,780,709 | | | | 4,957,025 | | | | — | | | | 116,665 | | | | 99,315 | | | | 215,980 | | | | 5,383,477 | | | | 5,599,457 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 241,612 | | | ¥ | 230,679 | | | ¥ | 472,291 | | | ¥ | 117,753,634 | | | ¥ | 118,225,925 | | | ¥ | 40,608 | | | ¥ | 262,572 | | | ¥ | 228,148 | | | ¥ | 490,720 | | | ¥ | 116,545,125 | | | ¥ | 117,035,845 | | | ¥ | 19,079 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | At March 31, 2018: | | 1-3 months
Past Due | | | Greater
Than
3 months | | | Total
Past Due | | | Current | | | Total
Loans(1)(2) | | | Recorded
Investment>
90 Days and
Accruing | | | At March 31, 2019: | | | 1-3 months
Past Due | | | Greater
Than
3 months | | | Total
Past Due | | | Current | | | Total
Loans(1) | | | Recorded
Investment>
90 Days and
Accruing | | | | | (in millions) | | | (in millions) | | Commercial | | | | | | | | | | | | | | | | | | | | | | | | | Domestic | | ¥ | 13,290 | | | ¥ | 43,913 | | | ¥ | 57,203 | | | ¥ | 50,955,451 | | | ¥ | 51,012,654 | | | ¥ | 6,419 | | | ¥ | 11,551 | | | ¥ | 30,648 | | | ¥ | 42,199 | | | ¥ | 50,809,612 | | | ¥ | 50,851,811 | | | ¥ | 6,900 | | Manufacturing | | | 1,495 | | | | 1,300 | | | | 2,795 | | | | 10,867,094 | | | | 10,869,889 | | | | — | | | | 1,597 | | | | 3,036 | | | | 4,633 | | | | 11,142,730 | | | | 11,147,363 | | | | — | | Construction | | | 359 | | | | 437 | | | | 796 | | | | 779,925 | | | | 780,721 | | | | — | | | | 218 | | | | 60 | | | | 278 | | | | 716,967 | | | | 717,245 | | | | 1 | | Real estate | | | 2,090 | | | | 3,225 | | | | 5,315 | | | | 11,686,599 | | | | 11,691,914 | | | | 1,633 | | | | 2,034 | | | | 4,256 | | | | 6,290 | | | | 11,642,629 | | | | 11,648,919 | | | | 2,524 | | Services | | | 1,025 | | | | 620 | | | | 1,645 | | | | 2,665,709 | | | | 2,667,354 | | | | 26 | | | | 778 | | | | 569 | | | | 1,347 | | | | 2,629,879 | | | | 2,631,226 | | | | 1 | | Wholesale and retail | | | 3,886 | | | | 4,198 | | | | 8,084 | | | | 7,962,875 | | | | 7,970,959 | | | | 1,349 | | | | 2,791 | | | | 2,390 | | | | 5,181 | | | | 7,633,605 | | | | 7,638,786 | | | | 62 | | Banks and other financial institutions | | | — | | | | 21 | | | | 21 | | | | 4,812,328 | | | | 4,812,349 | | | | — | | | | — | | | | 21 | | | | 21 | | | | 5,208,420 | | | | 5,208,441 | | | | — | | Communication and information services | | | 657 | | | | 328 | | | | 985 | | | | 1,550,219 | | | | 1,551,204 | | | | — | | | | 411 | | | | 758 | | | | 1,169 | | | | 1,509,197 | | | | 1,510,366 | | | | — | | Other industries | | | 251 | | | | 28,315 | | | | 28,566 | | | | 8,909,368 | | | | 8,937,934 | | | | — | | | | 365 | | | | 13,037 | | | | 13,402 | | | | 8,741,590 | | | | 8,754,992 | | | | — | | Consumer | | | 3,527 | | | | 5,469 | | | | 8,996 | | | | 1,721,334 | | | | 1,730,330 | | | | 3,411 | | | | 3,357 | | | | 6,521 | | | | 9,878 | | | | 1,584,595 | | | | 1,594,473 | | | | 4,312 | | Foreign-excluding MUAH and Krungsri | | | 12,512 | | | | 19,655 | | | | 32,167 | | | | 36,694,369 | | | | 36,726,536 | | | | 1,083 | | | | 10,881 | | | | 19,993 | | | | 30,874 | | | | 36,062,350 | | | | 36,093,224 | | | | 236 | | Residential | | | 78,073 | | | | 19,399 | | | | 97,472 | | | | 13,974,118 | | | | 14,071,590 | | | | 10,806 | | | | 62,686 | | | | 16,615 | | | | 79,301 | | | | 13,641,449 | | | | 13,720,750 | | | | 6,584 | | Card | | | 18,887 | | | | 32,218 | | | | 51,105 | | | | 528,284 | | | | 579,389 | | | | — | | | | 17,203 | | | | 30,568 | | | | 47,771 | | | | 527,421 | | | | 575,192 | | | | — | | MUAH | | | 23,145 | | | | 13,648 | | | | 36,793 | | | | 9,009,426 | | | | 9,046,219 | | | | 771 | | | | 28,696 | | | | 10,827 | | | | 39,523 | | | | 9,557,501 | | | | 9,597,024 | | | | 2,287 | | Krungsri | | | 116,665 | | | | 99,315 | | | | 215,980 | | | | 5,383,477 | | | | 5,599,457 | | | | — | | | | 126,313 | | | | 106,777 | | | | 233,090 | | | | 5,771,541 | | | | 6,004,631 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 262,572 | | | ¥ | 228,148 | | | ¥ | 490,720 | | | ¥ | 116,545,125 | | | ¥ | 117,035,845 | | | ¥ | 19,079 | | | ¥
| 257,330
|
| | ¥ | 215,428 | | | ¥ | 472,758 | | | ¥ | 116,369,874 | | | ¥ | 116,842,632 | | | ¥ | 16,007 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: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. |
(2) | | Total loans of MUFG Americas Holdings do not include ¥438 million and ¥5 million of FDIC covered loans at March 31, 2017 and 2018, respectively, which are not subject to the guidance on loans and debt securities acquired with deteriorated credit quality. |
Allowance for Credit Losses Changes in the allowance for credit losses by portfolio segment for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 are shown below: | | Fiscal year ended March 31, 2016: | | Commercial | | Residential | | Card | | | MUAH | | Krungsri | | Total | | | Fiscal year ended March 31, 2017: | | | Commercial | | Residential | | Card | | | MUAH | | Krungsri | | Total | | | | | (in millions) | | | (in millions) | | Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 807,716 | | | ¥ | 72,366 | | | ¥ | 35,670 | | | ¥ | 64,769 | | | ¥ | 74,958 | | | ¥ | 1,055,479 | | | ¥ | 816,559 | | | ¥ | 58,598 | | | ¥ | 31,187 | | | ¥ | 108,454 | | | ¥ | 96,332 | | | ¥ | 1,111,130 | | Provision for (reversal of) credit losses | | | 117,024 | | | (9,478 | ) | | 885 | | | | 47,429 | | | 76,002 | | | 231,862 | | | | 177,295 | | | 12,224 | | | 13,289 | | | | (62 | ) | | 50,942 | | | 253,688 | | Charge-offs | | | 116,620 | | | 6,691 | | | 8,323 | | | | 5,721 | | | 61,416 | | | 198,771 | | | | 108,262 | | | 5,339 | | | 16,309 | | | | 32,074 | | | 51,774 | | | 213,758 | | Recoveries | | | 21,110 | | | 2,401 | | | 2,955 | | | | 2,412 | | | 12,934 | | | 41,812 | | | | 21,124 | | | 1,853 | | | 1,998 | | | | 2,916 | | | 16,058 | | | 43,949 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net charge-offs | | | 95,510 | | | 4,290 | | | 5,368 | | | | 3,309 | | | 48,482 | | | 156,959 | | | | 87,138 | | | 3,486 | | | 14,311 | | | | 29,158 | | | 35,716 | | | 169,809 | | Others(1) | | | (12,671 | ) | | | — | | | | — | | | | (435 | ) | | (6,146 | ) | | (19,252 | ) | | | (6,030 | ) | | | — | | | | — | | | | (5,501 | ) | | (1,290 | ) | | (12,821 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 816,559 | | | ¥ | 58,598 | | | ¥ | 31,187 | | | ¥ | 108,454 | | | ¥ | 96,332 | | | ¥ | 1,111,130 | | | ¥ | 900,686 | | | ¥ | 67,336 | | | ¥ | 30,165 | | | ¥ | 73,733 | | | ¥ | 110,268 | | | ¥ | 1,182,188 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | Fiscal year ended March 31, 2017: | | Commercial | | Residential | | Card | | | MUAH | | Krungsri | | Total | | | | | | (in millions) | | | Allowance for credit losses: | | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 816,559 | | | ¥ | 58,598 | | | ¥ | 31,187 | | | ¥ | 108,454 | | | ¥ | 96,332 | | | ¥ | 1,111,130 | | | Provision for (reversal of) credit losses | | | 177,295 | | | 12,224 | | | 13,289 | | | | (62 | ) | | 50,942 | | | 253,688 | | | Charge-offs | | | 108,262 | | | 5,339 | | | 16,309 | | | | 32,074 | | | 51,774 | | | 213,758 | | | Recoveries | | | 21,124 | | | 1,853 | | | 1,998 | | | | 2,916 | | | 16,058 | | | 43,949 | | | | | | | | | | | | | | | | | | | | | | | Net charge-offs | | | 87,138 | | | 3,486 | | | 14,311 | | | | 29,158 | | | 35,716 | | | 169,809 | | | Others(1) | | | (6,030 | ) | | | — | | | | — | | | | (5,501 | ) | | (1,290 | ) | | (12,821 | ) | | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 900,686 | | | ¥ | 67,336 | | | ¥ | 30,165 | | | ¥ | 73,733 | | | ¥ | 110,268 | | | ¥ | 1,182,188 | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2018: | | Commercial | | Residential | | Card | | | MUAH | | Krungsri | | Total | | | Commercial | | Residential | | Card | | MUAH | | Krungsri | | Total | | | | | (in millions) | | | (in millions) | | Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 900,686 | | | ¥ | 67,336 | | | ¥ | 30,165 | | | ¥ | 73,733 | | | ¥ | 110,268 | | | ¥ | 1,182,188 | | | ¥ | 900,686 | | | ¥ | 67,336 | | | ¥ | 30,165 | | | ¥ | 73,733 | | | ¥ | 110,268 | | | ¥ | 1,182,188 | | Provision for (reversal of) credit losses | | | (297,401 | ) | | (22,291 | ) | | 23,422 | | | | (9,309 | ) | | 64,732 | | | (240,847 | ) | | (297,401 | ) | | (22,291 | ) | | 23,422 | | | (9,309 | ) | | 64,732 | | | (240,847 | ) | Charge-offs | | | 134,807 | | | 3,838 | | | 22,696 | | | | 14,701 | | | 56,067 | | | 232,109 | | | 134,807 | | | 3,838 | | | 22,696 | | | 14,701 | | | 56,067 | | | 232,109 | | Recoveries | | | 24,913 | | | 1,339 | | | 1,228 | | | | 6,140 | | | 17,490 | | | 51,110 | | | 24,913 | | | 1,339 | | | 1,228 | | | 6,140 | | | 17,490 | | | 51,110 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net charge-offs | | | 109,894 | | | 2,499 | | | 21,468 | | | | 8,561 | | | 38,577 | | | 180,999 | | | 109,894 | | | 2,499 | | | 21,468 | | | 8,561 | | | 38,577 | | | 180,999 | | Others(1) | | | (2,293 | ) | | — | | | — | | | | (2,098 | ) | | 8,173 | | | 3,782 | | | (2,293 | ) | | | — | | | | — | | | (2,098 | ) | | 8,173 | | | 3,782 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 491,098 | | | ¥ | 42,546 | | | ¥ | 32,119 | | | ¥ | 53,765 | | | ¥ | 144,596 | | | ¥ | 764,124 | | | ¥ | 491,098 | | | ¥ | 42,546 | | | ¥ | 32,119 | | | ¥ | 53,765 | | | ¥ | 144,596 | | | ¥ | 764,124 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2019: | | | Commercial | | Residential | | Card | | MUAH | | Krungsri | | Total | | | | | | (in millions) | | Allowance for credit losses: | | | | | | | | | | | | | | Balance at beginning of fiscal year | | | ¥ | 491,098 | | | ¥ | 42,546 | | | ¥ | 32,119 | | | ¥ | 53,765 | | | ¥ | 144,596 | | | ¥ | 764,124 | | Provision for (reversal of) credit losses | | | (43,850 | ) | | (4,480 | ) | | 23,809 | | | 9,277 | | | 49,574 | | | 34,330 | | Charge-offs | | | 76,664 | | | 274 | | | 24,310 | | | 13,224 | | | 59,569 | | | 174,041 | | Recoveries | | | 17,565 | | | 834 | | | 932 | | | 3,733 | | | 21,053 | | | 44,117 | | | | | | | | | | | | | | | | | | | | | | Net charge-offs | | | 59,099 | | | (560 | ) | | 23,378 | | | 9,491 | | | 38,516 | | | 129,924 | | Others(1) | | | 1,466 | | | — | | | — | | | (970 | ) | | (10,842 | ) | | (10,346 | ) | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | | ¥ | 389,615 | | | ¥ | 38,626 | | | ¥ | 32,550 | | | ¥ | 52,581 | | | ¥ | 144,812 | | | ¥ | 658,184 | | | | | | | | | | | | | | | | | | | | | |
Note: | (1) | | Others are principally comprised of gains or losses from foreign exchange translation. |
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, 20172018 and 20182019 are shown below: | At March 31, 2017: | | Commercial | | Residential | | Card | | MUAH | | Krungsri | | Total | | | At March 31, 2018: | | | Commercial | | Residential | | Card | | MUAH | | Krungsri | | Total | | | | | (in millions) | | | (in millions) | | Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | | | | Individually evaluated for impairment | | ¥ | 772,804 | | | ¥ | 46,520 | | | ¥ | 20,523 | | | ¥ | 19,174 | | | ¥ | 19,035 | | | ¥ | 878,056 | | | ¥ | 414,706 | | | ¥ | 16,644 | | | ¥ | 21,223 | | | ¥ | 7,743 | | | ¥ | 29,402 | | | ¥ | 489,718 | | Collectively evaluated for impairment | | 115,489 | | | 19,255 | | | 9,632 | | | 54,096 | | | 91,137 | | | 289,609 | | | 64,375 | | | 24,718 | | | 10,884 | | | 45,571 | | | 115,161 | | | 260,709 | | Loans acquired with deteriorated credit quality | | 12,393 | | | 1,561 | | | 10 | | | 463 | | | 96 | | | 14,523 | | | Loans acquired with deteriorated credit quality(2) | | | 12,017 | | | 1,184 | | | 12 | | | 451 | | | 33 | | | 13,697 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 900,686 | | | ¥ | 67,336 | | | ¥ | 30,165 | | | ¥ | 73,733 | | | ¥ | 110,268 | | | ¥ | 1,182,188 | | | ¥ | 491,098 | | | ¥ | 42,546 | | | ¥ | 32,119 | | | ¥ | 53,765 | | | ¥ | 144,596 | | | ¥ | 764,124 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans: | | | | | | | | | | | | | | | | | | | | | | | | | Individually evaluated for impairment | | ¥ | 1,349,621 | | | ¥ | 125,611 | | | ¥ | 71,879 | | | ¥ | 93,452 | | | ¥ | 65,028 | | | ¥ | 1,705,591 | | | ¥ | 977,945 | | | ¥ | 110,197 | | | ¥ | 66,957 | | | ¥ | 82,545 | | | ¥ | 84,094 | | | ¥ | 1,321,738 | | Collectively evaluated for impairment | | 87,976,946 | | | 14,197,027 | | | 510,393 | | | 8,944,409 | | | 4,891,997 | | | 116,520,772 | | | 86,761,245 | | | 13,961,393 | | | 512,432 | | | 8,963,679 | | | 5,515,363 | | | 115,714,112 | | Loans acquired with deteriorated credit quality | | 34,140 | | | 9,810 | | | 10,881 | | | 27,128 | | | 9,217 | | | 91,176 | | | Loans acquired with deteriorated credit quality(2) | | | 27,325 | | | 8,646 | | | 10,426 | | | 15,188 | | | 6,193 | | | 67,778 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total(1) | | ¥ | 89,360,707 | | | ¥ | 14,332,448 | | | ¥ | 593,153 | | | ¥ | 9,064,989 | | | ¥ | 4,966,242 | | | ¥ | 118,317,539 | | | ¥ | 87,766,515 | | | ¥ | 14,080,236 | | | ¥ | 589,815 | | | ¥ | 9,061,412 | | | ¥ | 5,605,650 | | | ¥ | 117,103,628 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At March 31, 2018: | | Commercial | | Residential | | Card | | MUAH | | Krungsri | | Total | | | At March 31, 2019: | | | Commercial | | Residential | | Card | | MUAH | | Krungsri | | Total | | | | | (in millions) | | | (in millions) | | Allowance for credit losses: | | | | | | | | | | | | | | | | | | | | | | | | | Individually evaluated for impairment | | ¥ | 414,706 | | | ¥ | 16,644 | | | ¥ | 21,223 | | | ¥ | 7,743 | | | ¥ | 29,402 | | | ¥ | 489,718 | | | ¥ | 312,970 | | | ¥ | 14,175 | | | ¥ | 21,829 | | | ¥ | 8,294 | | | ¥ | 28,254 | | | ¥ | 385,522 | | Collectively evaluated for impairment | | 64,375 | | | 24,718 | | | 10,884 | | | 45,571 | | | 115,161 | | | 260,709 | | | 63,366 | | | 23,413 | | | 10,708 | | | 44,282 | | | 116,529 | | | 258,298 | | Loans acquired with deteriorated credit quality | | 12,017 | | | 1,184 | | | 12 | | | 451 | | | 33 | | | 13,697 | | | Loans acquired with deteriorated credit quality(2) | | | 13,279 | | | 1,038 | | | 13 | | | 5 | | | 29 | | | 14,364 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 491,098 | | | ¥ | 42,546 | | | ¥ | 32,119 | | | ¥ | 53,765 | | | ¥ | 144,596 | | | ¥ | 764,124 | | | ¥ | 389,615 | | | ¥ | 38,626 | | | ¥ | 32,550 | | | ¥ | 52,581 | | | ¥ | 144,812 | | | ¥ | 658,184 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans: | | | | | | | | | | | | | | | | | | | | | | | | | Individually evaluated for impairment | | ¥ | 977,945 | | | ¥ | 110,197 | | | ¥ | 66,957 | | | ¥ | 82,545 | | | ¥ | 84,094 | | | ¥ | 1,321,738 | | | ¥ | 879,944 | | | ¥ | 102,948 | | | ¥ | 64,752 | | | ¥ | 69,760 | | | ¥ | 83,259 | | | ¥ | 1,200,663 | | Collectively evaluated for impairment | | 86,761,245 | | | 13,961,393 | | | 512,432 | | | 8,963,679 | | | 5,515,363 | | | 115,714,112 | | | 86,065,091 | | | 13,617,802 | | | 510,440 | | | 9,527,264 | | | 5,921,372 | | | 115,641,969 | | Loans acquired with deteriorated credit quality | | 27,325 | | | 8,646 | | | 10,426 | | | 15,188 | | | 6,193 | | | 67,778 | | | Loans acquired with deteriorated credit quality(2) | | | 26,245 | | | 7,334 | | | 3,390 | | | 11,228 | | | 5,906 | | | 54,103 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total(1) | | ¥ | 87,766,515 | | | ¥ | 14,080,236 | | | ¥ | 589,815 | | | ¥ | 9,061,412 | | | ¥ | 5,605,650 | | | ¥ | 117,103,628 | | | ¥ | 86,971,280 | | | ¥ | 13,728,084 | | | ¥ | 578,582 | | | ¥ | 9,608,252 | | | ¥ | 6,010,537 | | | ¥ | 116,896,735 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Note: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. |
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 due to loan disposal activity amounting to ¥0.8 billion, ¥11.0 billion and ¥12.2 billion for the fiscal years ended March 31, 2016, 2017 and 2018, respectively.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 ¥640 billion, ¥833 billion, ¥1,409 billion and ¥1,409¥1,769 billion of loans within the Commercial segment during the fiscal years ended March 31, 2016, 2017, 2018 and 2018,2019, respectively. Loans Acquired in a Transfer In accordance with the guidance on loans and debt securities acquired with deteriorated credit quality, the following table sets forth information regarding loans acquired in connection with mergers, for which it is probable, at acquisition, that the MUFG Group will be unable to collect all contractually required payments receivable. | | | | 2017 | | 2018 | | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Loans acquired during the fiscal year: | | | | | | | | | Contractually required payments receivable at acquisition | | ¥ | 2,624 | | | ¥ | 537 | | | ¥ | 537 | | | ¥ | 3,880 | | Cash flows expected to be collected at acquisition | | | 398 | | | 197 | | | | 197 | | | 1,449 | | Fair value of loans at acquisition | | | 398 | | | 197 | | | | 197 | | | 1,449 | | Accretable yield for loans within the scope of the guidance on loans and debt securities acquired with deteriorated credit quality: | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 53,018 | | | ¥ | 40,917 | | | ¥ | 40,917 | | | ¥ | 29,672 | | Additions | | | — | | | | — | | | | — | | | | — | | Accretion | | | (17,025 | ) | | (14,067 | ) | | | (14,067 | ) | | (7,178 | ) | Disposals | | | (69 | ) | | (11 | ) | | | (11 | ) | | | — | | Reclassifications from nonaccretable difference | | | 6,462 | | | 3,267 | | | Reclassifications from (to) nonaccretable difference | | | | 3,267 | | | 896 | | Foreign currency translation adjustments | | | (1,469 | ) | | (434 | ) | | | (434 | ) | | (230 | ) | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 40,917 | | | ¥ | 29,672 | | | ¥ | 29,672 | | | ¥ | 23,160 | | | | | | | | | | | | | | | Loans within the scope of the guidance on loans and debt securities acquired with deteriorated credit quality: | | | | | | | | | Outstanding balance at beginning of fiscal year | | ¥ | 301,447 | | | ¥ | 223,695 | | | ¥ | 223,695 | | | ¥ | 180,011 | | Outstanding balance at end of fiscal year | | | 223,695 | | | 180,011 | | | | 180,011 | | | 161,525 | | Carrying amount at beginning of fiscal year | | | 124,806 | | | 91,176 | | | | 91,176 | | | 67,778 | | Carrying amount at end of fiscal year | | | 91,176 | | | 67,778 | | | | 67,778 | | | 54,103 | | Nonaccruing loans within the scope of the guidance on loans and debt securities acquired with deteriorated credit quality: | | | | | | | | | Carrying amount at acquisition date during fiscal year | | ¥ | 398 | | | ¥ | 197 | | | ¥ | 197 | | | ¥ | 1,449 | | Carrying amount at end of fiscal year | | | 9,720 | | | 6,659 | | | | 6,659 | | | 6,284 | | Allowance for credit losses within the scope of the guidance on loans and debt securities acquired with deteriorated credit quality: | | | | | | | | | Balance of allowance for credit losses at beginning of fiscal year | | ¥ | 15,731 | | | ¥ | 14,523 | | | ¥ | 14,523 | | | ¥ | 13,697 | | Additional provisions during fiscal year | | | 3,020 | | | 2,285 | | | | 2,285 | | | 1,744 | | Reductions of allowance during fiscal year | | | 1,250 | | | 732 | | | | 732 | | | 401 | | Balance of allowance for credit losses at end of fiscal year | | | 14,523 | | | 13,697 | | | | 13,697 | | | 14,364 | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The MUFG Group considered prepayments in the determination of contractual cash flows and cash flows expected to be collected based on historical results. Lease Receivables As part of its financing activities, the MUFG Group enters into leasing arrangements with customers. The MUFG Group’s leasing operations are conducted through leasing subsidiaries and consist principally of direct financing leases involving various types of data processing equipment, office equipment and transportation equipment. As of March 31, 20172018 and 2018,2019, the components of the investment in direct financing leases were as follows: | | | | 2017 | | 2018 | | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Minimum lease payments receivable | | ¥ | 1,672,338 | | | ¥ | 1,862,664 | | | ¥ | 1,862,664 | | | ¥ | 1,922,339 | | Estimated residual values of leased property | | | 29,314 | | | 31,650 | | | | 31,650 | | | 27,468 | | Less—unearned income | | | (234,874 | ) | | (279,081 | ) | | | (279,081 | ) | | (299,283 | ) | | | | | | | | | | | | | | Net investment in direct financing leases | | ¥ | 1,466,778 | | | ¥ | 1,615,233 | | | ¥ | 1,615,233 | | | ¥ | 1,650,524 | | | | | | | | | | | | | | |
Future minimum lease payment receivables under noncancelable leasing agreements as of March 31, 20182019 were as follows: | | | | Direct
Financing
Leases | | | Direct
Financing
Leases | | | | | (in millions) | | | (in millions) | | Fiscal year ending March 31: | | | | | 2019 | | ¥ | 507,905 | | | 2020 | | | 442,369 | | | ¥ | 510,439 | | 2021 | | | 325,821 | | | | 425,023 | | 2022 | | | 243,682 | | | | 353,355 | | 2023 | | | 140,914 | | | | 240,609 | | 2024 and thereafter | | | 201,973 | | | 2024 | | | | 171,286 | | 2025 and thereafter | | | | 221,627 | | | | | | | | | Total minimum lease payment receivables | | ¥ | 1,862,664 | | | ¥ | 1,922,339 | | | | | | | | |
Sales of Loans The MUFG Group originates various types of loans to corporate and individual borrowers in Japan and overseas in the normal course of business. In order to improve its loan quality, MUFG Bank and Mitsubishi UFJ Trust and Banking actively disposed of nonperforming loans. Most of the nonperforming loans were disposed of by sales to third parties without any continuing involvement. Management of MUFG Bank and Mitsubishi UFJ Trust and Banking generally approves disposals after significant sales terms, including prices, are negotiated. As such, loans are disposed of by sales shortly after the loans are transferred to theheld-for-sale classification. The net gains on the sales of loans were ¥12,094 million, ¥19,466 million, ¥2,976 million and ¥2,976¥20,696 million for the fiscal years ended March 31, 2016, 2017, 2018 and 2018,2019, respectively. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Related Party Loans In some cases, the banking subsidiaries of MUFG make loans to related parties, including their directors and executive officers, in the course of their normal commercial banking business. At March 31, 20172018 and 2018,2019, outstanding loans to such related parties were not material. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In the opinion of management, these related party loans were made on substantially the same terms, including interest rates and collateral requirements, as those terms prevailing at the date these loans were made. For the fiscal years ended March 31, 2016, 2017, 2018 and 2018,2019, there were no loans to related parties that were charged off. Additionally, at March 31, 2016, 2017, 2018, and 2018,2019, there were no loans to related parties that were impaired. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| 5. | | PREMISES AND EQUIPMENT |
Premises and equipment at March 31, 20172018 and 20182019 consisted of the following: | | | | 2017 | | | 2018 | | | 2018 | | | 2019 | | | | | (in millions) | | | (in millions) | | Land | | ¥ | 385,961 | | | ¥ | 370,669 | | | ¥ | 370,669 | | | ¥ | 362,742 | | Buildings | | | 750,232 | | | | 739,665 | | | | 739,665 | | | | 829,606 | | Equipment and furniture | | | 650,120 | | | | 659,699 | | | | 659,699 | | | | 648,598 | | Leasehold improvements | | | 303,130 | | | | 311,645 | | | | 311,645 | | | | 305,281 | | Construction in progress | | | 46,375 | | | | 119,195 | | | | 119,195 | | | | 34,002 | | | | | | | | | | | | | | | Total | | | 2,135,818 | | | | 2,200,873 | | | | 2,200,873 | | | | 2,180,229 | | Less accumulated depreciation | | | 1,141,547 | | | | 1,187,285 | | | | 1,187,285 | | | | 1,206,629 | | | | | | | | | | | | | | | Premises andequipment-net | | ¥ | 994,271 | | | ¥ | 1,013,588 | | | ¥ | 1,013,588 | | | ¥ | 973,600 | | | | | | | | | | | | | | |
Premises and equipment include capitalized leases, principally related to data processing equipment, which amounted to ¥26,871¥31,458 million and ¥31,458¥34,141 million at March 31, 20172018 and 2018,2019, respectively. Accumulated depreciation on such capitalized leases at March 31, 20172018 and 20182019 amounted to ¥14,750¥17,298 million and ¥17,298¥19,946 million, respectively. MUFG Bank has entered into sales agreements to sell its buildings and land and, under separate agreements, leased those properties back for its business operations, including bank branches. MUFG Bank either provided nonrecourse financing to the buyers for the sales proceeds or invested in the equity or common stock of the buyers. As a result, MUFG Bank was considered to have continuing involvement with the properties. For accounting and reporting purposes, these transactions were accounted for under the financing method with the sales proceeds recognized as a financing obligation. The properties were reported on the accompanying consolidated balance sheets and depreciated. The financing obligation at March 31, 20172018 and 20182019 was ¥43,031¥41,892 million and ¥41,892¥40,732 million, respectively. For the fiscal years ended March 31, 2016, 2017, 2018 and 2018,2019, the MUFG Group recognized ¥7,016 million, ¥5,964 million, ¥39,358 million and ¥39,358¥31,345 million, respectively, of impairment losses for long-lived assets, primarily real estate which was either formerly used for its banking operations and is no longer used or real estate that is being used where recovery of the carrying amount is doubtful. In addition, ¥541 million, ¥901 million, ¥213 million and ¥213¥411 million of impairment losses were recognized for real estate held for sale for the fiscal years ended March 31, 2016, 2017, 2018 and 2018,2019, respectively. These losses are included in Othernon-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, MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) based on an MUFGRe-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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Impairment losses for the fiscal year ended March 31, 2019 included ¥21,096 million losses on long-lived assets, including land, buildings, and equipment and furniture, which were held by certain consumer finance subsidiary. See Note 6 for the details of these impairments.
| 6. | | GOODWILL AND OTHER INTANGIBLE ASSETS |
Goodwill The table below presents the movement in the carrying amount of goodwill by business segment during the fiscal years ended March 31, 20172018 and 2018:2019: Effective April 1, 2018, the MUFG Group reorganized its business groups in an effort to further integrate the expertise and capabilities of its consolidated subsidiaries to respond to the needs of customers more effectively and efficiently, as part of its current medium-term business plan. To make and execute unified group-wide strategies based on customer characteristics and the nature of business, the MUFG Group integrated the operations of its consolidated subsidiaries into six business segments.—Retail & Commercial Banking, Japanese Corporate & Investment Banking, Global Corporate & Investment Banking, Global Commercial Banking, Asset Management & Investor Services, and Global Markets. See Note 30 for the business segment information of the MUFG Group. | | | | Customer Business | | Global
Markets
Business
Group | | | Total | | | Global
Commercial
Banking
Business
Group | | Asset
Management &
Investor
Services
Business
Group | | Global
Markets
Business
Group | | | Total | | | | Retail
Banking
Business
Group | | Corporate
Banking
Business
Group | | Global
Business
Group | | Trust
Assets
Business
Group | | Total | | | (in millions) | | | | | (in millions) | | | Balance at March 31, 2016: | | | | | | | | | | | | | | | | Goodwill | | ¥ | 840,055 | | | ¥ | 885,234 | | | ¥ | 769,585 | | | ¥ | 42,700 | | | ¥ | 2,537,574 | | | ¥ | 2,300 | | | ¥ | 2,539,874 | | | Accumulated impairment losses | | (840,055 | ) | | (885,234 | ) | | (329,953 | ) | | (30,257 | ) | | (2,085,499 | ) | | | — | | | (2,085,499 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | — | | | 439,632 | | | 12,443 | | | 452,075 | | | 2,300 | | | 454,375 | | | Goodwill acquired during the fiscal year(2) | | | — | | | | — | | | 8,280 | | | 7,975 | | | 16,255 | | | | — | | | 16,255 | | | Impairment loss | | | — | | | | — | | | | — | | | (6,638 | ) | | (6,638 | ) | | | — | | | (6,638 | ) | | Foreign currency translation adjustments and other | | | — | | | | — | | | (13,835 | ) | | (14 | ) | | (13,849 | ) | | | — | | | (13,849 | ) | | | | | | | | | | | | | | | | | | | | | | | | | Balance at March 31, 2017: | | | | | | | | | | | | | | | | | | | | | | | Goodwill | | 840,055 | | | 885,234 | | | 764,030 | | | 50,661 | | | 2,539,980 | | | 2,300 | | | 2,542,280 | | | Accumulated impairment losses | | (840,055 | ) | | (885,234 | ) | | (329,953 | ) | | (36,895 | ) | | (2,092,137 | ) | | | — | | | (2,092,137 | ) | | Goodwill(1) | | | ¥ | 611,827 | | | ¥ | 28,134 | | | ¥ | 2,300 | | | ¥ | 642,261 | | Accumulated impairment losses(1) | | | | (177,750 | ) | | (14,368 | ) | | | — | | | | (192,118 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | — | | | 434,077 | | | 13,766 | | | 447,843 | | | 2,300 | | | 450,143 | | | | 434,077 | | | 13,766 | | | 2,300 | | | | 450,143 | | Foreign currency translation adjustments and other | | | — | | | | — | | | (8,399 | ) | | (410 | ) | | (8,809 | ) | | | — | | | (8,809 | ) | | | (8,399 | ) | | (410 | ) | | | — | | | | (8,809 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at March 31, 2018: | | | | | | | | | | | | | | | | | | | | | | | Goodwill | | 840,055 | | | 885,234 | | | 755,631 | | | 50,251 | | | 2,531,171 | | | 2,300 | | | 2,533,471 | | | | 603,428 | | | 27,724 | | | 2,300 | | | | 633,452 | | Accumulated impairment losses | | (840,055 | ) | | (885,234 | ) | | (329,953 | ) | | (36,895 | ) | | (2,092,137 | ) | | | — | | | (2,092,137 | ) | | | (177,750 | ) | | (14,368 | ) | | | — | | | | (192,118 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | — | | | ¥ | — | | | ¥ | 425,678 | | | ¥ | 13,356 | | | ¥ | 439,034 | | | ¥ | 2,300 | | | ¥ | 441,334 | | | | 425,678 | | | 13,356 | | | 2,300 | | | | 441,334 | | Foreign currency translation adjustments and other | | | | (7,206 | ) | | (237 | ) | | | — | | | | (7,443 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at March 31, 2019: | | | | | | | | | | Goodwill | | | | 596,222 | | | 27,487 | | | 2,300 | | | | 626,009 | | Accumulated impairment losses | | | | (177,750 | ) | | (14,368 | ) | | | — | | | | (192,118 | ) | | | | | | | | | | | | | | | | | | ¥ | 418,472 | | | ¥ | 13,119 | | | ¥ | 2,300 | | | ¥ | 433,891 | | | | | | | | | | | | | | | |
Notes:Note:
| (1) | | See Note 30Effective 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 |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | was ¥1,900,019 million, which has been fully impaired before April 1, 2017. As these impairment losses recorded in past before the business segment informationreorganization of the MUFG Group. |
(2) | | See Note 2 forsegment and are irrelevant to the goodwill acquired in connection with acquisition.annual impairment test under the new segment, the accumulated impaired loss is not allocated to new business segments after the reorganization of business group. |
U.S. GAAP requires to test goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate that goodwill may be impaired, using atwo-step process that begins with an estimation of the fair value of a reporting unit, which is to be compared with the carrying amount of the reporting unit including goodwill, to identify potential impairment of goodwill. If the carrying amount of a reporting unit including goodwill exceeds its estimated fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss recorded in the consolidated statements of income. This test requires comparison of the implied fair value of the reporting unit’s goodwill with the carrying amount of its goodwill. For the fiscal years ended March 31, 2016 and 2017, the MUFG Group recognized ¥4,298 million and ¥6,638 million, respectively, in impairment of goodwill relating to reporting units within the Trust Assets Business Group segment. There were no impairment losses recognized for the fiscal yearyears ended March 31, 2018.2018 and 2019. The MUFG Group readjusted its future cash flow projection of the reporting units in this segment, considering the subsidiaries’ recent business performance. Due to the situation, the fair value of the reporting units, which were based on discounted future cash flows, fell below the carrying amounts of the reporting units. Accordingly, the second step of the goodwill impairment test was performed for the reporting units. As a result, the carrying MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
amounts of the reporting units’ goodwill exceeded the implied fair value of the reporting units’ goodwill, and the impairment losses were recognized on the related goodwill. For the fiscal year ended March 31, 2016, the MUFG Group recognized a total of ¥329,421 million in impairment of goodwill relating to the reporting unit Other than MUFG Americas Holdings/Krungsri and the Krungsri reporting unit, both of which were within the Global Business Group segment.
The MUFG Group recognized ¥151,671 million in impairment of goodwill relating to the reporting unit Other than MUFG Americas Holdings/Krungsri within the Global Business Group segment. The Bank of Japan introduced Quantitative and Qualitative Monetary Easing with Negative Interest Rates in January 2016, and the benchmark yield turned and stayed negative through to the end of the fiscal year. Share prices have fallen and the Japanese yen appreciated since the start of the calendar year as a reflection of heightened risk aversion around the globe. It led MUFG’s stock price to decline from ¥743.7 at March 31, 2015 to ¥521.5 at March 31, 2016. Since the fair value of the reporting unit Other than MUFG Americas Holdings/Krungsri within the Global Business Group segment was estimated based on MUFG’s stock price, this decline led to a decrease in the market capitalization and negatively affected the fair value of the reporting unit. Due to the situation, the fair value of the reporting unit fell below the carrying amount of the reporting unit. Accordingly, the second step of the goodwill impairment test was performed for this reporting unit. As a result, the carrying amount of the reporting unit’s goodwill exceeded the implied fair value of the reporting unit’s goodwill, and the impairment loss was recognized on the related goodwill.
The MUFG Group recognized ¥177,750 million in impairment of goodwill relating to the Krungsri reporting unit within the Global Business Group segment. The economy in China continued to slow down due to the suppressed investment environment, while weak exports weighed on other Asian economies. It led to a slow down in economic growth in Thailand causing Krungsri’s stock price to decline from Thai baht 44.75 at December 31, 2014 to Thai baht 29.75 at December 31, 2015. Since the fair value of the Krungsri reporting unit within the Global Business Group segment was estimated based on Krungsri’s stock price, this decline led to a decrease in the market capitalization and negatively affected the fair value of the reporting unit. Due to the situation, the fair value of the reporting unit fell below the carrying amount of the reporting unit. Accordingly, the second step of the goodwill impairment test was performed for this reporting unit. As a result, the carrying amount of the reporting unit’s goodwill exceeded the implied fair value of the reporting unit’s goodwill, and the impairment loss was recognized on the related goodwill.
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 20172018 and 2018:2019: | | | | 2017 | | 2018 | | | 2018 | | 2019 | | | | | Gross
carrying
amount | | Accumulated
amortization | | Net
carrying
amount | | Gross
carrying
amount | | Accumulated
amortization | | Net
carrying
amount | | | Gross
carrying
amount | | Accumulated
amortization | | Net
carrying
amount | | Gross
carrying
amount | | Accumulated
amortization | | Net
carrying
amount | | | | | (in millions) | | | (in millions) | | Intangible assets subject to amortization: | | | | | | | | | | | | | | | | | | | | | | | | | Software | | ¥ | 2,386,754 | | | ¥ | 1,675,564 | | | ¥ | 711,190 | | | ¥ | 2,585,161 | | | ¥ | 1,852,333 | | | ¥ | 732,828 | | | ¥ | 2,585,161 | | | ¥ | 1,852,333 | | | ¥ | 732,828 | | | ¥ | 2,703,413 | | | ¥ | 2,029,775 | | | ¥ | 673,638 | | Core deposit intangibles | | 126,728 | | | 76,628 | | | 50,100 | | | 128,679 | | | 83,382 | | | 45,297 | | | 128,679 | | | 83,382 | | | 45,297 | | | 126,796 | | | 88,643 | | | 38,153 | | Customer relationships | | 395,136 | | | 203,144 | | | 191,992 | | | 391,832 | | | 227,079 | | | 164,753 | | | 391,832 | | | 227,079 | | | 164,753 | | | 387,936 | | | 246,526 | | | 141,410 | | Trade names | | 77,024 | | | 27,210 | | | 49,814 | | | 77,821 | | | 30,801 | | | 47,020 | | | 77,821 | | | 30,801 | | | 47,020 | | | 77,204 | | | 34,283 | | | 42,921 | | Other | | 12,068 | | | 3,929 | | | 8,139 | | | 9,706 | | | 3,977 | | | 5,729 | | | 9,706 | | | 3,977 | | | 5,729 | | | 9,601 | | | 4,220 | | | 5,381 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 2,997,710 | | | ¥ | 1,986,475 | | | 1,011,235 | | | ¥ | 3,193,199 | | | ¥ | 2,197,572 | | | 995,627 | | | ¥ | 3,193,199 | | | ¥ | 2,197,572 | | | 995,627 | | | ¥ | 3,304,950 | | | ¥ | 2,403,447 | | | 901,503 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Intangible assets not subject to amortization: | | | | | | | | | | | | | | | | | | | | | | | | | Other | | | | | | 9,124 | | | | | | | | 15,492 | (1) | | Other(1) | | | | | | | 15,492 | | | | | | | 25,693 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | ¥ | 1,020,359 | | | | | | | ¥ | 1,011,119 | | | | | | | ¥ | 1,011,119 | | | | | | | ¥ | 927,196 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Note: | (1) | | Intangible assets not subject to amortization includes ¥7,268 million and ¥17,431 million of mortgage servicing rights accounted for at fair value at March 31, 2018.2018 and 2019, respectively. |
Intangible assets subject to amortization acquired during the fiscal year ended March 31, 2017 amounted to ¥254,064 million, which primarily consisted of ¥234,882 million of software and ¥19,086 million of customer relationships. The weighted average amortization periods for these assets are 5 years and 20 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, 2017 amounted to ¥1 million.
Intangible assets subject to amortization acquired during the fiscal year ended March 31, 2018 amounted to ¥242,017 million, which primarily consisted of ¥239,460 million of software and ¥2,200 million of customer MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) relationships. The weighted average amortization periods for these assets are 5 years and 22 years, respectively. There is no significant residual value estimated for these assets. Intangible assets not subject to amortization acquired during the fiscal year ended March 31, 2018 amounted to ¥28 million. Intangible assets subject to amortization acquired during the fiscal year ended March 31, 2019 amounted to ¥262,700 million, which primarily consisted of ¥262,408 million of software. The weighted average amortization periods for these assets are 6 years. There is no significant residual value estimated for these assets. Intangible assets not subject to amortization acquired during the fiscal year ended March 31, 2019 amounted to ¥11,172 million. For the fiscal years ended March 31, 2016, 2017, 2018 and 2018,2019, the MUFG Group recognized ¥117,726 million, ¥5,803 million, ¥21,900 million and ¥21,900¥118,108 million, respectively, of impairment losses for intangible assets whose carrying amounts exceeded their fair value. In computing the amount of impairment losses, fair value was determined primarily based on the present value of expected future cash flows, the estimated value based on appraisals, or market prices. The impairment loss for the fiscal year ended March 31, 2016 included a loss of ¥8,043 million relating to customer relationship under the Trust Asset Business Group segment. The fair value of the customer relationship was calculated based on the present value of expected future cash flows, which could be affected by the amount of the assets under management and fluctuation of the markets. Estimated future cash flows of the above
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
customer relationship were readjusted downwards due to instability in bond markets and large fluctuations in foreign exchange markets. Accordingly, the MUFG Group reevaluated the fair value of the customer relationship and recognized an impairment loss. Also, for the fiscal year ended March 31, 2016, the MUFG Group recognized an impairment loss of ¥8,923 million related to software for internal use.
The impairment loss for the fiscal year ended March 31, 2016 included a loss of ¥99,981 million relating to a core deposit intangible acquired in connection with the merger with UFJ Holdings. The fair value of this core deposit intangible was calculated based on the present value of expected future cash flows in 2005. As a result of the negative interest rate policy by the Bank of Japan, estimated future cost savings became negative due to the decrease of the spread between the interest rate of the core deposit funding and the decreased alternative interest rate of the market funding, and the estimated future cash flows were revised downwards. Accordingly, the MUFG Group reevaluated the core deposit intangible and recognized an impairment loss.
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: | | | | (in millions) | | | (in millions) | | Fiscal year ending March 31: | | | | | 2019 | | ¥ | 250,234 | | | 2020 | | | 213,606 | | | ¥ | 230,962 | | 2021 | | | 171,934 | | | | 195,126 | | 2022 | | | 133,685 | | | | 160,504 | | 2023 | | | 90,383 | | | | 120,350 | | 2024 | | | | 83,523 | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Income before Income Tax Expense Income before income tax expense by jurisdiction for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 was as follows: | | | | | | | | | | | | | | | | 2016 | | | 2017 | | | 2018 | | | | | (in millions) | | Domestic income (loss) | | ¥ | 735,128 | | | ¥ | (413,499 | ) | | ¥ | 803,057 | | Foreign income | | | 427,542 | | | | 686,042 | | | | 858,762 | | | | | | | | | | | | | | | Total | | ¥ | 1,162,670 | | | ¥ | 272,543 | | | ¥ | 1,661,819 | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | | | | | | | | 2017 | | | 2018 | | | 2019 | | | | | (in millions) | | Domestic income (loss) | | ¥ | (413,499 | ) | | ¥ | 803,057 | | | ¥ | 228,018 | | Foreign income | | | 686,042 | | | | 858,762 | | | | 642,824 | | | | | | | | | | | | | | | Total | | ¥ | 272,543 | | | ¥ | 1,661,819 | | | ¥ | 870,842 | | | | | | | | | | | | | | |
Income Tax Expense (Benefit) The detail of current and deferred income tax expense (benefit) for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 was as follows: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Current: | | | | | | | | | | | | | Domestic | | ¥ | 293,337 | | | ¥ | 176,415 | | | ¥ | 180,109 | | | ¥ | 176,415 | | | ¥ | 180,109 | | | ¥ | 57,303 | | Foreign | | | 137,040 | | | 130,406 | | | 107,119 | | | | 130,406 | | | 107,119 | | | 123,730 | | | | | | | | | | | | | | | | | | | | | Total | | | 430,377 | | | 306,821 | | | 287,228 | | | | 306,821 | | | 287,228 | | | 181,033 | | | | | | | | | | | | | | | | | | | | | Deferred: | | | | | | | | | | | | | Domestic | | | (22,019 | ) | | (217,485 | ) | | 116,873 | | | | (217,485 | ) | | 116,873 | | | (32,746 | ) | Foreign | | | (38,926 | ) | | 5,117 | | | 3,722 | | | | 5,117 | | | 3,722 | | | (15,050 | ) | | | | | | | | | | | | | | | | | | | | Total | | | (60,945 | ) | | (212,368 | ) | | 120,595 | | | | (212,368 | ) | | 120,595 | | | (47,796 | ) | | | | | | | | | | | | | | | | | | | | Income tax expense | | | 369,432 | | | 94,453 | | | 407,823 | | | | 94,453 | | | 407,823 | | | 133,237 | | Income tax expense (benefit) reported in Accumulated OCI relating to: | | | | | | | | | | | | | Investment securities | | | (162,535 | ) | | 20,237 | | | 120,588 | | | | 20,237 | | | 120,588 | | | 15,590 | | Debt valuation adjustments (Note 14) | | | 1,793 | | | (3,926 | ) | | (960 | ) | | Debt valuation adjustments | | | | (3,926 | ) | | (960 | ) | | 4,293 | | Derivatives qualifying for cash flow hedges | | | 1,226 | | | (9,443 | ) | | (4,421 | ) | | | (9,443 | ) | | (4,421 | ) | | (1,845 | ) | Defined benefit plans | | | (67,877 | ) | | 48,504 | | | 50,774 | | | | 48,504 | | | 50,774 | | | (38,229 | ) | Foreign currency translation adjustments | | | (43,988 | ) | | (1,957 | ) | | (34,527 | ) | | | (1,957 | ) | | (34,527 | ) | | 15,148 | | | | | | | | | | | | | | | | | | | | | Total | | | (271,381 | ) | | 53,415 | | | 131,454 | | | | 53,415 | | | 131,454 | | | (5,043 | ) | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 98,051 | | | ¥ | 147,868 | | | ¥ | 539,277 | | | ¥ | 147,868 | | | ¥ | 539,277 | | | ¥ | 128,194 | | | | | | | | | | | | | | | | | | | | |
The MUFG Group has changed to filingfiles tax returns on a consolidated basis for corporate income taxes within Japan beginning with the fiscal year ended March 31, 2015.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. On March 29, 2016, the Japanese Diet enacted the “2016 Tax Reform” which reduces in the effective statutory rate of corporate income tax from approximately 33.9% to 31.5% for the fiscal year beginning on or after April 1, 2016. In addition, this “2016 Tax Reform” partially amends the articles in the “2015 Tax Reform” relating to the limitation on the use of net operating loss carryforwards and the carryforward period of certain net operating loss carryforwards in order to equalize the tax burden of companies. That is, changes in the limitation on the use of net operating loss carryforwards from 65% to 60% of taxable income for the period between April 1, 2016 and March 31, 2017, and from 50% to 55% for the period between April 1, 2017 and March 31, 2018, respectively, andone-year decrease in the carryforward period of certain net operating loss carryforwards fromten-year period to nine-year period for the period between April 1, 2017 and March 31, 2018. The change in tax law resulted in a decrease of ¥50,081 million in income tax expense for the fiscal year ended March 31, 2016.
In June 2016, the Tokyo Metropolitan Government Bureau of Taxation promulgated revisions to the local tax law. The revision reduces the effective statutory rate of corporate income tax from approximately 31.5% as of March 31, 2016 to 30.6% for the fiscal year beginning on or after April 1, 2017. The revision resulted in a decrease of ¥26,820 million in income tax expense for the fiscal year ended March 31, 2017. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In the United States of America, on December 22, 2017, the Tax Cuts & Jobs Act was signed into law reducing the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result of the MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
reduction in the corporate income tax rate, the MUFG Group revalued its net deferred tax liabilities at March 31, 2018, resulting in aone-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 33.9%31.5%, 31.5%30.6%, and 30.6% for the fiscal years ended March 31, 2016, 2017, 2018 and 2018,2019, respectively. Foreign subsidiaries are subject to income taxes of the countries in which they operate. A reconciliation of the effective income tax rates reflected in the accompanying consolidated statements of income to the combined normal effective statutory tax rates for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 is as follows: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | Combined normal effective statutory tax rate | | | 33.9 | % | | 31.5 | % | | 30.6 | % | | | 31.5 | % | | 30.6 | % | | 30.6 | % | Nondeductible expenses | | | 0.3 | | | 2.0 | | | 0.2 | | | | 2.0 | | | 0.2 | | | 0.5 | | Impairment of goodwill | | | 9.7 | | | 0.8 | | | | — | | | | 0.8 | | | | — | | | | — | | Foreign tax credit and payments | | | (1.9 | ) | | (9.6 | ) | | (1.7 | ) | | | (9.6 | ) | | (1.7 | ) | | (3.3 | ) | Lower tax rates applicable to income of subsidiaries | | | (0.2 | ) | | (0.2 | ) | | (0.4 | ) | | | (0.2 | ) | | (0.4 | ) | | (2.5 | ) | Change in valuation allowance | | | (4.0 | ) | | 25.4 | | | (3.0 | ) | | | 25.4 | | | (3.0 | ) | | (1.4 | ) | Nontaxable dividends received | | | (1.9 | ) | | (12.5 | ) | | (2.0 | ) | | | (12.5 | ) | | (2.0 | ) | | (9.1 | ) | Undistributed earnings of subsidiaries | | | 0.7 | | | 3.5 | | | 0.7 | | | | 3.5 | | | 0.7 | | | 0.6 | | Tax and interest expense for uncertainty in income taxes | | | 0.0 | | | (0.6 | ) | | 0.0 | | | | (0.6 | ) | | 0.0 | | | 0.6 | | Noncontrolling interest income (loss) | | | (0.1 | ) | | 5.4 | | | 0.1 | | | Noncontrolling interest income | | | | 5.4 | | | 0.1 | | | 0.2 | | Effect of changes in tax laws | | | (4.3 | ) | | (9.8 | ) | | (0.6 | ) | | | (9.8 | ) | | (0.6 | ) | | 0.0 | | Other—net | | | (0.4 | ) | | (1.2 | ) | | 0.6 | | | | (1.2 | ) | | 0.6 | | | (0.9 | ) | | | | | | | | | | | | | | | | | | | | Effective income tax rate | | | 31.8 | % | | 34.7 | % | | 24.5 | % | | | 34.7 | % | | 24.5 | % | | 15.3 | % | | | | | | | | | | | | | | | | | | | |
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, 20172018 and 20182019 were as follows: | | | | 2017 | | 2018 | | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Deferred tax assets: | | | | | | | | | Allowance for credit losses | | ¥ | 515,553 | | | ¥ | 337,718 | | | ¥ | 337,718 | | | ¥ | 301,222 | | Operating loss carryforwards | | | 156,040 | | | 167,355 | | | | 167,355 | | | 177,143 | | Loans | | | 13,345 | | | 3,483 | | | | 3,483 | | | 691 | | Accrued liabilities and other | | | 174,945 | | | 133,728 | | | | 133,728 | | | 236,363 | | Premises and equipment, includingsale-and-leaseback transactions | | | 86,681 | | | 120,505 | | | | 120,505 | | | 158,144 | | Derivative financial instruments | | | 96,048 | | | 111,677 | | | | 111,677 | | | 101,118 | | Defined benefit plans | | | | — | | | 5,238 | | Valuation allowance | | | (268,490 | ) | | (215,130 | ) | | | (215,130 | ) | | (218,191 | ) | | | | | | | | | | | | | | Total deferred tax assets | | | 774,122 | | | 659,336 | | | | 659,336 | | | 761,728 | | | | | | | | | | | | | | | Deferred tax liabilities: | | | | | | | | | Investment securities (including trading account assets at fair value under the fair value option) | | | 869,931 | | | 973,390 | | | | 973,390 | | | 911,483 | | Intangible assets | | | 66,692 | | | 52,396 | | | | 52,396 | | | 38,772 | | Lease transactions | | | 94,255 | | | 83,445 | | | | 83,445 | | | 65,115 | | Defined benefit plans | | | 8,483 | | | 15,484 | | | | 15,484 | | | | — | | Other | | | 72,039 | | | 119,970 | | | | 119,970 | | | 280,701 | | | | | | | | | | | | | | | Total deferred tax liabilities | | | 1,111,400 | | | 1,244,685 | | | | 1,244,685 | | | 1,296,071 | | | | | | | | | | | | | | | Net deferred tax assets (liabilities) | | ¥ | (337,278 | ) | | ¥ | (585,349 | ) | | ¥ | (585,349 | ) | | ¥ | (534,343 | ) | | | | | | | | | | | | | |
The valuation allowance was provided primarily against deferred tax assets recorded at MUFG and its subsidiaries with operating loss carryforwards. The valuation allowance is determined to reduce the measurement of deferred tax assets not expected to be realized. Management considers all available evidence, both positive and negative, to determine whether the valuation allowance is necessary based on the weight of that evidence. Management determines the amount of the valuation allowance based on future reversals of existing taxable temporary differences and future taxable income exclusive of reversing temporary differences. Future taxable income is developed from forecasted operating results, based on recent historical trends and approved business plans, the eligible carryforward periods and other relevant factors. For certain subsidiaries where strong negative evidence exists, such as the existence of significant amounts of operating loss carryforwards, cumulative losses and the expiration of unused operating loss carryforwards in recent years, a valuation allowance was recognized against the deferred tax assets as of March 31, 20172018 and 20182019 to the extent that it is more likely than not that they will not be realized. For the fiscal year ended March 31, 2017, the MUFG Group recorded an additional valuation allowance of ¥60,208 million. This was mainly due to a decline in estimated future taxable income of a certain subsidiary resulting from the downturn in the consumer finance business. Management considered various factors, including the existence of significant amounts of operating loss carryforwards and cumulative operating results over the prior several years of the subsidiary as well as the outlook regarding prospective operating performance of the subsidiary, and determined that sufficient negative evidence existed as of March 31, 2017, to conclude that it was more likely than not that deferred tax assets would not be realizable.
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 consolidatedcorporate-tax system. Management believes that the net operating loss carryforwards related to Japanese corporate taxes will be fully utilized by the application of the consolidatedcorporate-tax system. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Income taxes are not provided on undistributed earnings of certain foreign subsidiaries that are considered to be indefinitely reinvested in the operations of such subsidiaries. At March 31, 20172018 and 2018,2019, the undistributed earnings of such foreign subsidiaries amounted to approximately ¥28,338¥38,358 million and ¥38,358¥48,103 million, respectively. Determination of the amount of unrecognized deferred tax liabilities with respect to these undistributed earnings is not practicable because of the complexity associated with its hypothetical calculation including foreign withholding taxes and foreign tax credits. MUFG has neither plans nor the intention to dispose of investments in such foreign subsidiaries and, accordingly, does not expect to record capital gains or losses, or otherwise monetize the undistributed earnings of such foreign subsidiaries. Furthermore, under the Japanese tax law, 95% of a dividend received from a foreign company in which a domestic company has held generally at least 25% of the outstanding shares for a continuous period of six months or more ending on the date on which the dividend is declared can be excluded from the domestic company’s taxable income. Therefore, if undistributed earnings of certain foreign subsidiaries are repatriated through dividends, only 5% of the amount of dividends will be included in taxable income. Operating Loss and Tax Credit Carryforwards At March 31, 2018,2019, the MUFG Group had operating loss carryforwards for corporate tax of ¥506,650¥527,882 million and tax credit carryforwards of ¥37,096¥52,546 million for tax purposes. Such carryforwards, if not utilized, are scheduled to expire as follows: | | | | | | | | | | | | Operating loss
carryforwards | | | Tax credit
carryforwards | | | | | (in millions) | | Fiscal year ending March 31: | | | | | | | | | 2019 | | ¥ | 2,295 | | | ¥ | 800 | | 2020 | | | 34,413 | | | | 206 | | 2021 | | | 11,698 | | | | 200 | | 2022 | | | 24,112 | | | | 106 | | 2023 | | | 66,993 | | | | 106 | | 2024 | | | 104,892 | | | | 116 | | 2025 and thereafter | | | 242,696 | | | | 31,758 | | No definite expiration date | | | 19,551 | | | | 3,804 | | | | | | | | | | | Total | | ¥ | 506,650 | | | ¥ | 37,096 | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | | | | Operating loss
carryforwards | | | Tax credit
carryforwards | | | | | (in millions) | | Fiscal year ending March 31: | | | | | | | | | 2020 | | ¥ | 33,066 | | | ¥ | 700 | | 2021 | | | 12,727 | | | | 194 | | 2022 | | | 23,346 | | | | 230 | | 2023 | | | 68,850 | | | | 232 | | 2024 | | | 105,110 | | | | 182 | | 2025 | | | 167,035 | | | | 117 | | 2026 and thereafter | | | 95,686 | | | | 46,239 | | No definite expiration date | | | 22,062 | | | | 4,652 | | | | | | | | | | | Total | | ¥ | 527,882 | | | ¥ | 52,546 | | | | | | | | | | |
Uncertainty in Income Tax The following is a roll-forward of the MUFG Group’s unrecognized tax benefits for the fiscal years ended March 31, 2016, 2017, 2018 and 2018:2019: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Balance at beginning of fiscal year | | ¥ | 10,940 | | | ¥ | 9,950 | | | ¥ | 7,851 | | | ¥ | 9,950 | | | ¥ | 7,851 | | | ¥ | 12,917 | | Gross amount of increases for current year’s tax positions | | | 1,095 | | | 888 | | | 427 | | | | 888 | | | 427 | | | 313 | | Gross amount of increases for prior years’ tax positions | | | 162 | | | 1,014 | | | 6,642 | | | | 1,014 | | | 6,642 | | | 8,836 | | Gross amount of decreases for prior years’ tax positions | | | — | | | (95 | ) | | (455 | ) | | | (95 | ) | | (455 | ) | | (1,090 | ) | Net amount of changes relating to settlements with tax authorities | | | (1,299 | ) | | (39 | ) | | (1,074 | ) | | | (39 | ) | | (1,074 | ) | | | — | | Decreases due to lapse of applicable statutes of limitations | | | (296 | ) | | (3,437 | ) | | (253 | ) | | | (3,437 | ) | | (253 | ) | | (1,540 | ) | Foreign exchange translation and others | | | (652 | ) | | (430 | ) | | (221 | ) | | | (430 | ) | | (221 | ) | | (276 | ) | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 9,950 | | | ¥ | 7,851 | | | ¥ | 12,917 | | | ¥ | 7,851 | | | ¥ | 12,917 | | | ¥ | 19,160 | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The total amounts of unrecognized tax benefits for the years ended March 31, 2016, 2017, 2018 and 20182019 that, if recognized, would affect the effective tax rate are ¥1,065 million, ¥1,443 million, ¥6,518 million and ¥6,518¥14,092 million, respectively. The remainder of the uncertain tax positions have offsetting amounts in other jurisdictions or are temporary differences. The MUFG Group classifies interest and penalties, if applicable, related to income taxes as Income tax expense. Accrued interest and penalties (not included in the “unrecognized tax benefits” above) are a component of Other liabilities. The following is a roll-forward of the interest and penalties recognized in the accompanying consolidated financial statements for the fiscal years ended March 31, 2016, 2017, 2018 and 2018:2019: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Balance at beginning of fiscal year | | ¥ | 4,876 | | | ¥ | 4,727 | | | ¥ | 4,054 | | | ¥ | 4,727 | | | ¥ | 4,054 | | | ¥ | 4,564 | | Total interest and penalties in the consolidated statements of income | | | 201 | | | (591 | ) | | 694 | | | | (591 | ) | | 694 | | | (1,655 | ) | Total cash settlements, foreign exchange translation and others | | | (350 | ) | | (82 | ) | | (184 | ) | | | (82 | ) | | (184 | ) | | 147 | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 4,727 | | | ¥ | 4,054 | | | ¥ | 4,564 | | | ¥ | 4,054 | | | ¥ | 4,564 | | | ¥ | 3,056 | | | | | | | | | | | | | | | | | | | | |
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 | | | 20172018 and forward | | United States—Federal | | | 20102014 and forward | | United States—California | | | 20142015 and forward | | Thailand | | | 20102012 and forward | | Indonesia | | | 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 ¥4.0¥2.6 billion during the next twelve months. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| 8. | | PLEDGED ASSETS AND COLLATERAL |
Pledged Assets At March 31, 2018,2019, assets mortgaged, pledged, or otherwise subject to lien were as follows: | | | | | | | | 20182019 | | | | | (in millions) | | Trading account securities | | ¥ | 7,848,3878,921,825 | | Investment securities | | | 12,670,1787,907,010 | | Loans | | | 13,682,58814,192,075 | | Other | | | 54,15551,714 | | | | | | | Total | | ¥ | 34,255,30831,072,624 | | | | | | |
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: | | | | | | | | 20182019 | | | | | (in millions) | | Deposits | | ¥ | 252,233 | | Call money and funds purchased
| | | 4,931223,075 | | Payables under repurchase agreements and securities lending transactions | | | 18,643,57916,316,732 | | Other short-term borrowings and long-term debt | | | 15,330,63014,522,393 | | Other | | | 23,93510,424 | | | | | | | Total | | ¥ | 34,255,30831,072,624 | | | | | | |
At March 31, 2018,2019, certain investment securities, principally Japanese national government and Japanese government agency bonds, loans, and other assets with a combined carrying value of ¥20,661,314¥19,875,392 million were pledged for acting as a collection agent of public funds, for settlement of exchange at the Bank of Japan and Japanese Banks’ Payment Clearing Network, for derivative transactions and for certain other purposes. The MUFG Group engages inon-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, 20172018 and 20182019 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 ¥2,765,966¥2,679,482 million and ¥2,679,482¥2,568,340 million, respectively. Collateral The MUFG Group accepts and provides financial assets as collateral for transactions, principally commercial loans, repurchase agreements and securities lending transactions, call money, and derivatives. Financial assets eligible for such collateral include, among others, marketable equity securities, trade and notes receivable and CDs. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2018,2019, the MUFG Group pledged ¥31,507¥30,204 billion of assets that may not be sold or repledged by the secured parties. Certain banking subsidiaries accept collateral for commercial loans and certain banking transactions under a standardized agreement with customers, which provides that these banking subsidiaries may require the 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, 20172018 and 2018,2019, the fair value of the collateral accepted by the MUFG Group that is permitted to be sold or repledged was ¥26,850¥25,358 billion and ¥25,358¥22,927 billion, respectively, of which ¥18,420¥17,738 billion and ¥17,738¥16,514 billion, respectively, was sold or repledged. At March 31, 20172018 and 2018,2019, the cash collateral pledged for derivative transactions, which is included in Other assets, was ¥1,663,945¥1,473,109 million and ¥1,473,109¥1,276,897 million, respectively, and the cash collateral received for derivative transactions, which is included in Other liabilities, was ¥1,080,929¥1,158,053 million and ¥1,158,053¥844,234 million, respectively. The balances of time deposits, including CDs, issued in amounts of ¥10 million (approximately U.S.$ 9490 thousand at the Federal Reserve Bank of New York’s noon buying rate on March 30, 2018)29, 2019) or more with respect to domestic deposits and issued in amounts of U.S.$100,000 or more with respect to foreign deposits were ¥27,891,132 million and ¥22,944,072 million, respectively, at March 31, 2017, and ¥27,381,920 million and ¥22,386,612 million, respectively, at March 31, 2018. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2018, and ¥25,899,780 million and ¥23,858,381 million, respectively, at March 31, 2019. The maturity information at March 31, 20182019 for domestic and foreign time deposits, including CDs, is summarized as follows: | | | | Domestic | | | Foreign | | | Domestic | | | Foreign | | | | | (in millions) | | | (in millions) | | Due in one year or less | | ¥ | 34,905,906 | | | ¥ | 21,978,687 | | | ¥ | 33,351,324 | | | ¥ | 23,559,245 | | Due after one year through two years | | | 4,957,492 | | | | 572,306 | | | | 4,987,763 | | | | 1,145,596 | | Due after two years through three years | | | 3,103,698 | | | | 251,116 | | | | 2,688,960 | | | | 351,794 | | Due after three years through four years | | | 657,641 | | | | 108,218 | | | | 539,629 | | | | 146,985 | | Due after four years through five years | | | 590,870 | | | | 121,550 | | | | 574,244 | | | | 22,104 | | Due after five years | | | 840,071 | | | | 31,462 | | | | 836,549 | | | | 29,634 | | | | | | | | | | | | | | | Total | | ¥ | 45,055,678 | | | ¥ | 23,063,339 | | | ¥ | 42,978,469 | | | ¥ | 25,255,358 | | | | | | | | | | | | | | |
| 10. | | CALL MONEY AND FUNDS PURCHASED |
A summary of funds transactions for the fiscal years ended March 31, 20172018 and 20182019 is as follows: | | | | 2017 | | 2018 | | | 2018 | | 2019 | | | | | (in millions, except percentages and days) | | | (in millions, except percentages and days) | | Outstanding at end of fiscal year: | | | | | | | | | Amount | | ¥ | 1,974,977 | | | ¥ | 2,452,543 | | | ¥ | 2,452,543 | | | ¥ | 2,450,320 | | Principal range of maturities | | | 1 day to 30 days | | | 1 day to 30 days | | | | 1 day to 30 days | | | 1 day to 30 days | | Weighted average interest rate | | | 0.20 | % | | 0.31 | % | | | 0.31 | % | | 0.12 | % |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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 theday-to-day changes in the excess funds placed by the trust accounts. A summary of due to trust account transactions at March 31, 20172018 and 20182019 is as follows: | | | | 2017 | | 2018 | | | 2018 | | 2019 | | | | | (in millions, except percentages) | | | (in millions, except percentages) | | Amount outstanding at end of fiscal year | | ¥ | 3,335,155 | | | ¥ | 3,386,158 | | | ¥ | 3,386,158 | | | ¥ | 2,735,952 | | Weighted average interest rate on outstanding balance at end of fiscal year | | | 0.00 | % | | 0.00 | % | | | 0.00 | % | | 0.00 | % |
| 12. | | SHORT-TERM BORROWINGS AND LONG-TERM DEBT |
At March 31, 20172018 and 2018,2019, the MUFG Group had unused lines of credit for short-term financing amounting to ¥3,234,066¥5,142,206 million and ¥5,142,206¥5,525,069 million, respectively. The amounts principally consist ofnon-interest-bearing collateralized intraday overdraft lines and collateralized overnight loans on bills at the official discount rate granted by the Bank of Japan, 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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other short-term borrowings at March 31, 20172018 and 20182019 were comprised of the following: | | | | 2017 | | 2018 | | | 2018 | | 2019 | | | | | (in millions, except percentages) | | | (in millions, except percentages) | | Domestic offices: | | | | | | | | | Commercial paper | | ¥ | 1,080,838 | | | ¥ | 1,094,487 | | | ¥ | 1,094,487 | | | ¥ | 1,033,568 | | Borrowings from the Bank of Japan | | | 1,499,653 | | | 305,520 | | | | 305,520 | | | 241,070 | | Borrowings from other financial institutions | | | 262,985 | | | 243,968 | | | | 243,968 | | | 227,482 | | Other | | | 46,518 | | | 84,620 | | | | 84,620 | | | 122,166 | | | | | | | | | | | | | | | Total domestic offices | | | 2,889,994 | | | 1,728,595 | | | | 1,728,595 | | | 1,624,286 | | | | | | | | | | | | | | | Foreign offices: | | | | | | | | | Commercial paper | | | 4,675,653 | | | 4,275,278 | | | | 4,275,278 | | | 3,929,636 | | Borrowings from other financial institutions | | | 216,596 | | | 784,949 | | | | 784,949 | | | 967,901 | | Short-term debentures | | | 5,654 | | | 18,523 | | | | 18,523 | | | 68,492 | | Other | | | 182,549 | | | 73,917 | | | | 73,917 | | | 141,803 | | | | | | | | | | | | | | | Total foreign offices | | | 5,080,452 | | | 5,152,667 | | | | 5,152,667 | | | 5,107,832 | | | | | | | | | | | | | | | Total | | | 7,970,446 | | | 6,881,262 | | | | 6,881,262 | | | 6,732,118 | | Less unamortized discount | | | 925 | | | 138 | | | | 138 | | | 1,045 | | | | | | | | | | | | | | | Other short-term borrowings—net | | ¥ | 7,969,521 | | | ¥ | 6,881,124 | | | ¥ | 6,881,124 | | | ¥ | 6,731,073 | | | | | | | | | | | | | | | Weighted average interest rate on outstanding balance at end of fiscal year | | | 0.66 | % | | 1.29 | % | | | 1.29 | % | | 1.97 | % |
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, 20172018 and 20182019 was comprised of the following: | | | | | | | | | | | | 2017 | | | 2018 | | | | | (in millions) | | MUFG: | | | | | | | | | Obligations under capital leases | | ¥ | 15 | | | ¥ | 1,973 | | Unsubordinated debt(1): | | | | | | | | | Fixed rate bonds, payable in US dollars, due 2021-2028, principally 2.19%-3.96% | | | 1,265,620 | | | | 1,737,809 | | Fixed rate bonds, payable in Euro, due 2021-2033, principally 0.40%-1.75% | | | 23,958 | | | | 230,629 | | Fixed rate bonds, payable in other currencies, due 2027, principally 3.77%-4.05%(2) | | | — | | | | 17,639 | | Floating rate bonds, payable in US dollars, due 2021-2023, principally 2.54%-3.89% | | | 268,725 | | | | 424,795 | | | | | | | | | | | Total | | | 1,558,303 | | | | 2,410,872 | | | | | | | | | | | Subordinated debt(1): | | | | | | | | | Fixed rate bonds, payable in Japanese yen, due 2024-2030, principally 0.37%-1.39% | | | 412,783 | | | | 482,662 | | Adjustable rate bonds, payable in Japanese yen, due 2024-2028, principally 0.35%-0.66% | | | 426,838 | | | | 795,944 | | Adjustable rate bonds, payable in Japanese yen, no stated maturity, principally 1.12%-4.42% | | | 1,229,282 | | | | 1,557,610 | | Adjustable rate borrowings, payable in Japanese yen, due 2025-2028, principally 0.46%-0.50% | | | 16,000 | | | | 32,500 | | Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally 4.78% | | | 1,500 | | | | 1,500 | | Floating rate bonds, payable in Japanese yen, no stated maturity, principally 3.03% | | | 3,500 | | | | 3,500 | | Floating rate borrowings, payable in Japanese yen, due 2025-2027, principally 0.58%-0.79% | | | 53,000 | | | | 76,000 | | Floating rate borrowings, payable in Euro, no stated maturity, principally 1.73% | | | 599 | | | | — | | Floating rate borrowings, payable in other currencies, no stated maturity, principally 2.49%(2) | | | 420 | | | | — | | | | | | | | | | | Total | | | 2,143,922 | | | | 2,949,716 | | | | | | | | | | | Total | | | 3,702,240 | | | | 5,362,561 | | | | | | | | | | | BK: | | | | | | | | | Obligations under capital leases | | ¥ | 7,310 | | | ¥ | 6,906 | | Obligation under sale-and-leaseback transactions | | | 43,032 | | | | 41,892 | | Unsubordinated debt(1): | | | | | | | | | Fixed rate bonds, payable in Japanese yen, due 2018-2027, principally 0.22%-2.69% | | | 472,300 | | | | 346,800 | | Fixed rate bonds, payable in US dollars, due 2018-2048, principally 0.00%-4.70% | | | 1,761,868 | | | | 1,451,745 | | Fixed rate bonds, payable in Euro, due 2022-2037, principally 0.88%-2.06% | | | 92,708 | | | | 111,956 | | Fixed rate bonds, payable in other currencies, due 2021-2047, principally 0.00%-5.30%(2) | | | 23,550 | | | | 19,502 | | Fixed rate borrowings, payable in Japanese yen, due 2018-2028, principally 0.00%-0.25% | | | 10,064,790 | | | | 9,561,784 | | Fixed rate borrowings, payable in US dollars, due 2018, principally 7.49% | | | 124 | | | | 38 | | Fixed rate borrowings, payable in Euro, due 2026, principally 0.00% | | | 479 | | | | 1,044 | | Adjustable rate bonds, payable in US dollars, due 2030, principally 3.00% | | | 1,122 | | | | 1,062 | | Floating rate bonds, payable in US dollars, due 2018, principally 3.13% | | | 145,847 | | | | 53,120 | | Floating rate bonds, payable in other currencies, due 2017, principally 2.90%(2) | | | 55,796 | | | | — | | Floating rate borrowings, payable in US dollars, due 2018-2031, principally 1.53%-2.91% | | | 1,075,494 | | | | 1,071,239 | | Floating rate borrowings, payable in Euro, due 2021-2022, principally 0.00%-0.06% | | | 20,885 | | | | 20,150 | | | | | | | | | | | Total | | | 13,714,963 | | | | 12,638,440 | | | | | | | | | | | Subordinated debt(1): | | | | | | | | | Fixed rate bonds, payable in Japanese yen, due 2019-2031, principally 1.31%-2.91% | | | 706,677 | | | | 520,350 | | Fixed rate borrowings, payable in Japanese yen, due 2022-2035, principally 0.38%-2.24% | | | 230,400 | | | | 98,400 | | Adjustable rate borrowings, payable in Japanese yen, due 2023-2028, principally 0.40%-2.86% | | | 129,000 | | | | 73,000 | | Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally 1.69%-4.78% | | | 651,000 | | | | 496,000 | | Adjustable rate borrowings, payable in Euro, no stated maturity, principally 1.73% | | | 2,995 | | | | — | | Adjustable rate borrowings, payable in other currencies, no stated maturity, principally 2.49%(2) | | | 2,101 | | | | — | | Floating rate borrowings, payable in Japanese yen, due 2027, principally 0.16% | | | 15,000 | | | | 15,000 | | | | | | | | | | | Total | | | 1,737,173 | | | | 1,202,750 | | | | | | | | | | | Obligations under loan securitization transaction accounted for as secured borrowings due 2018-2077, principally 0.42%-3.89% | | | 605,709 | | | | 622,061 | | | | | | | | | | | Total | | | 16,108,187 | | | | 14,512,049 | | | | | | | | | | |
| | | | | | | | | | | | 2018 | | | 2019 | | | | | (in millions) | | MUFG: | | | | | | | | | Obligations under capital leases | | ¥ | 1,973 | | | ¥ | 1,725 | | Unsubordinated debt(1): | | | | | | | | | Fixed rate bonds, payable in US dollars, due 2021-2039, principally2.19%-4.29% | | | 1,737,809 | | | | 2,949,022 | | Fixed rate bonds, payable in Euro, due 2021-2033, principally0.40%-1.75% | | | 230,629 | | | | 301,124 | | Fixed rate bonds, payable in other currencies, due 2025-2027, principally3.55%-4.05%(2) | | | 17,639 | | | | 21,257 | | Floating rate bonds, payable in US dollars, due 2021-2023, principally3.31%-4.51% | | | 424,795 | | | | 765,188 | | Floating rate bonds, payable in Euro, due 2023, principally 0.24% | | | — | | | | 43,596 | | | | | | | | | | | Total | | | 2,410,872 | | | | 4,080,187 | | | | | | | | | | | Subordinated debt(1): | | | | | | | | | Fixed rate bonds, payable in Japanese yen, due 2024-2030, principally0.37%-1.39% | | | 482,662 | | | | 618,925 | | Adjustable rate bonds, payable in Japanese yen, due 2024-2028, principally0.30%-0.66% | | | 795,944 | | | | 890,359 | | Adjustable rate bonds, payable in Japanese yen, no stated maturity, principally1.03%-4.42% | | | 1,557,610 | | | | 1,706,695 | | Adjustable rate borrowings, payable in Japanese yen, due 2025-2028, principally0.46%-0.50% | | | 32,500 | | | | 32,500 | | Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally1.17%-4.78% | | | 1,500 | | | | 45,960 | | Floating rate bonds, payable in Japanese yen, no stated maturity, principally 3.00% | | | 3,500 | | | | 3,500 | | Floating rate borrowings, payable in Japanese yen, due 2025-2028, principally0.57%-0.79% | | | 76,000 | | | | 86,000 | | | | | | | | | | | Total | | | 2,949,716 | | | | 3,383,939 | | | | | | | | | | | Total | | | 5,362,561 | | | | 7,465,851 | | | | | | | | | | | MUFG Bank: | | | | | | | | | Obligations under capital leases | | ¥ | 6,906 | | | ¥ | 7,704 | | Obligation undersale-and-leaseback transactions | | | 41,892 | | | | 40,732 | | Unsubordinated debt(1): | | | | | | | | | Fixed rate bonds, payable in Japanese yen, due 2019-2027, principally0.22%-2.69% | | | 346,800 | | | | 234,500 | | Fixed rate bonds, payable in US dollars, due 2019-2049, principally0.00%-4.70% | | | 1,451,745 | | | | 1,284,812 | | Fixed rate bonds, payable in Euro, due 2022-2037, principally0.88%-2.06% | | | 111,956 | | | | 112,687 | | Fixed rate bonds, payable in other currencies, due 2021-2047, principally0.00%-5.30%(2) | | | 19,502 | | | | 19,084 | | Fixed rate borrowings, payable in Japanese yen, due 2019-2028, principally0.00%-0.25% | | | 9,561,784 | | | | 10,786,372 | | Fixed rate borrowings, payable in US dollars, due 2018, principally 7.49% | | | 38 | | | | — | | Fixed rate borrowings, payable in Euro, due 2026, principally 0.00% | | | 1,044 | | | | — | | Fixed rate borrowings, payable in other currencies, due 2030, principally 2.93%(2) | | | — | | | | 9,483 | | Adjustable rate bonds, payable in US dollars, due 2030, principally 3.00% | | | 1,062 | | | | 1,110 | | Floating rate bonds, payable in US dollars, due 2018, principally 3.13% | | | 53,120 | | | | — | | Floating rate borrowings, payable in US dollars, due 2019-2031, principally2.64%-3.34% | | | 1,071,239 | | | | 1,008,949 | | Floating rate borrowings, payable in Euro, due 2021-2022, principally0.00%-0.06% | | | 20,150 | | | | 15,382 | | Floating rate borrowings, payable in other currencies, due 2028, principally 3.23%(2) | | | — | | | | 5,240 | | | | | | | | | | | Total | | | 12,638,440 | | | | 13,477,619 | | | | | | | | | | | Subordinated debt(1): | | | | | | | | | Fixed rate bonds, payable in Japanese yen, due 2019-2031, principally1.31%-2.91% | | | 520,350 | | | | 513,420 | | Fixed rate borrowings, payable in Japanese yen, due 2022-2035, principally0.37%-2.24% | | | 98,400 | | | | 73,400 | | Adjustable rate borrowings, payable in Japanese yen, due 2024-2028, principally0.37%-2.56% | | | 73,000 | | | | 20,000 | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | 2017 | | | 2018 | | | | | (in millions) | | Other subsidiaries: | | | | | | | | | Obligations under capital leases | | ¥ | 9,348 | | | ¥ | 9,835 | | Unsubordinated debt(1): | | | | | | | | | Fixed rate borrowings, bonds and notes, payable in Japanese yen, due 2018-2042, principally 0.00%-6.20% | | | 2,688,264 | | | | 3,453,352 | | Fixed rate borrowings, bonds and notes, payable in US dollars, due 2018-2037, principally 0.00%-8.00% | | | 952,937 | | | | 936,086 | | Fixed rate bonds and notes, payable in Euro, due 2020-2022, principally 1.10%-1.28% | | | 1,079 | | | | 2,619 | | Fixed rate bonds and notes, payable in Thai baht, due 2018-2024, principally 0.01%-9.00% | | | 308,804 | | | | 330,814 | | Fixed rate borrowings, bonds and notes, payable in other currencies, due 2018-2037, principally 0.50%-15.33%(2) | | | 166,346 | | | | 190,567 | | Floating/Adjustable rate borrowings, bonds and notes, payable in Japanese yen, due 2018-2048, principally 0.00%-20.00% | | | 1,269,910 | | | | 1,342,318 | | Floating rate borrowings, bonds and notes, payable in US dollars, due 2018-2027, principally 0.00%-38.00% | | | 217,469 | | | | 186,515 | | Floating rate bonds and notes, payable in Euro, due 2018, principally 1.00% | | | 266 | | | | — | | Floating rate borrowings, bonds and notes, payable in other currencies, due 2018-2020, principally 1.43%-9.63%(2) | | | 2,761 | | | | 5,420 | | | | | | | | | | | Total | | | 5,607,836 | | | | 6,447,691 | | | | | | | | | | | Subordinated debt(1): | | | | | | | | | Fixed rate borrowings, bonds and notes, payable in Japanese yen, due 2018-2030, principally 0.65%-2.89% | | | 378,548 | | | | 364,326 | | Fixed rate bonds and notes, payable in US dollars, due 2019-2027, principally 7.50%-10.85% | | | 1,710 | | | | 1,661 | | Fixed rate bonds and notes, payable in Thai baht, due 2020-2027, principally 3.40%-3.90% | | | 80,560 | | | | 144,900 | | Fixed rate borrowings, bonds and notes, payable in other currencies, due 2021, principally 0.00%(2) | | | 6,847 | | | | 7,428 | | Adjustable rate borrowings, bonds and notes, payable in Japanese yen, no stated maturity, principally 3.50% | | | 104,500 | | | | 104,500 | | Floating rate borrowings, bonds and notes, payable in Japanese yen, due 2018-2021, principally 0.45%-0.73% | | | 112,985 | | | | 72,493 | | Floating rate borrowings, bonds and notes, payable in US dollars, due 2019-2036, principally 3.29%-10.44% | | | 5,393 | | | | 5,250 | | | | | | | | | | | Total | | | 690,543 | | | | 700,558 | | | | | | | | | | | Obligations under loan securitization transaction accounted for as secured borrowings due 2018-2020, principally 0.23%-2.32% | | | 26,831 | | | | 50,551 | | | | | | | | | | | Total | | | 6,334,558 | | | | 7,208,635 | | | | | | | | | | | Total | | | 26,144,985 | | | | 27,083,245 | | | | | | | | | | | Debt Issuance Cost | | ¥ | (13,458 | ) | | ¥ | (13,689 | ) | | | | | | | | | | Total | | ¥ | 26,131,527 | | | ¥ | 27,069,556 | | | | | | | | | | |
| | | | | | | | | | | | 2018 | | | 2019 | | | | | (in millions) | | Adjustable rate borrowings, payable in Japanese yen, no stated maturity, principally2.67%-4.78% | | | 496,000 | | | | 355,000 | | Floating rate borrowings, payable in Japanese yen, due 2027, principally 0.19% | | | 15,000 | | | | 15,000 | | | | | | | | | | | Total | | | 1,202,750 | | | | 976,820 | | | | | | | | | | | Obligations under loan securitization transaction accounted for as secured borrowings due 2019-2078, principally0.13%-6.90% | | | 622,061 | | | | 639,037 | | | | | | | | | | | Total | | | 14,512,049 | | | | 15,141,912 | | | | | | | | | | | Other subsidiaries: | | | | | | | | | Obligations under capital leases | | ¥ | 9,835 | | | ¥ | 13,107 | | Unsubordinated debt(1): | | | | | | | | | Fixed rate borrowings, bonds and notes, payable in Japanese yen, due 2019-2044, principally0.00%-20.00% | | | 3,453,352 | | | | 1,291,537 | | Fixed rate borrowings, bonds and notes, payable in US dollars, due 2019-2037, principally0.00%-34.00% | | | 936,086 | | | | 1,385,936 | | Fixed rate borrowings, bonds and notes, payable in Euro, due 2020-2026, principally0.15%-1.28% | | | 2,619 | | | | 2,479 | | Fixed rate borrowings, bonds and notes, payable in Thai baht, due 2019-2025, principally0.01%-7.15% | | | 330,814 | | | | 334,586 | | Fixed rate borrowings, bonds and notes, payable in other currencies, due 2019-2037, principally0.00%-15.33%(2) | | | 190,567 | | | | 219,781 | | Floating/Adjustable rate borrowings, bonds and notes, payable in Japanese yen, due 2019-2048, principally0.00%-7.70% | | | 1,342,318 | | | | 1,425,387 | | Floating rate borrowings, bonds and notes, payable in US dollars, due 2019-2028, principally0.00%-27.00% | | | 186,515 | | | | 244,253 | | Floating rate borrowings, bonds and notes, payable in other currencies, due 2019-2022, principally1.43%-3.41%(2) | | | 5,420 | | | | 6,241 | | | | | | | | | | | Total | | | 6,447,691 | | | | 4,910,200 | | | | | | | | | | | Subordinated debt(1): | | | | | | | | | Fixed rate borrowings, bonds and notes, payable in Japanese yen, due 2019-2030, principally0.65%-2.61% | | | 364,326 | | | | 269,373 | | Fixed rate bonds and notes, payable in US dollars, due 2019-2027, principally7.50%-10.85% | | | 1,661 | | | | 1,409 | | Fixed rate bonds and notes, payable in Thai baht, due 2020-2027, principally3.40%-3.90% | | | 144,900 | | | | 143,212 | | Fixed rate bonds and notes, payable in other currencies, due 2021, principally 0.00%(2) | | | 7,428 | | | | 7,347 | | Adjustable rate borrowings, bonds and notes, payable in Japanese yen, no stated maturity, principally 2.83% | | | 104,500 | | | | 4,500 | | Floating rate borrowings, bonds and notes, payable in Japanese yen, due 2019-2021, principally0.53%-0.73% | | | 72,493 | | | | 41,000 | | Floating rate bonds and notes, payable in US dollars, due 2019-2036, principally4.49%-11.86% | | | 5,250 | | | | 5,172 | | | | | | | | | | | Total | | | 700,558 | | | | 472,013 | | | | | | | | | | | Obligations under loan securitization transaction accounted for as secured borrowings due 2020-2022, principally1.10%-2.20% | | | 50,551 | | | | 2,813 | | | | | | | | | | | Total | | | 7,208,635 | | | | 5,398,133 | | | | | | | | | | | Total | | | 27,083,245 | | | | 28,005,896 | | | | | | | | | | | Debt Issuance Cost | | ¥ | (13,689 | ) | | ¥ | (15,353 | ) | | | | | | | | | | Total | | ¥ | 27,069,556 | | | ¥ | 27,990,543 | | | | | | | | | | |
Notes: | (1) | | Adjustable rate debts are debts where interest rates are reset in accordance with the terms of the debt agreements, and floating rate debts are debts where interest rates are repriced in accordance with movements of markets indices. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | (2) | | Minor currencies, such as Australian dollars, British pounds, Indonesian rupiah, Brazilian real, Russian ruble, etc, have been summarized into the “other currencies” classification. |
(3) | | The table above reflects changes in presentation that were made to long-term repurchase agreements at March 31, 2017. Payables under long-term repurchase agreements are included in Payables under repurchase agreements in the accompanying consolidated balance sheets. See Note 1 for further information. |
The MUFG Group uses derivative financial instruments to manage its interest rate and currency exposures for certain debts. The derivative financial instruments include swaps, forwards, options and other types of derivatives. As a result of these derivative instruments, the effective rates reflected in the table above may differ from the coupon rates. The interest rates for the adjustable and floating rate debt shown in the above table are those in effect at March 31, 20172018 and 2018. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2019. Certain debt agreements permit the MUFG Group to redeem the related debt, in whole or in part, prior to maturity at the option of the issuer on terms specified in the respective agreements. The following is a summary of maturities of long-term debt subsequent to March 31, 2018:2019: | | | | MUFG | | | BK | | | Other
subsidiaries | | | Total | | | MUFG | | | BK | | | Other
subsidiaries | | | Total | | | | | (in millions) | | | (in millions) | | Fiscal year ending March 31: | | | | | | | | | | | | | | | | | 2019 | | ¥ | 415 | | | ¥ | 1,549,014 | | | ¥ | 1,452,406 | | | ¥ | 3,001,835 | | | 2020 | | | 407 | | | | 1,068,804 | | | | 1,500,799 | | | | 2,570,010 | | | ¥ | 450 | | | ¥ | 1,551,272 | | | ¥ | 1,502,213 | | | ¥ | 3,053,935 | | 2021 | | | 346,342 | | | | 7,827,519 | | | | 1,397,405 | | | | 9,571,266 | | | | 685,348 | | | | 8,552,229 | | | | 895,647 | | | | 10,133,224 | | 2022 | | | 444,581 | | | | 1,458,833 | | | | 1,016,093 | | | | 2,919,507 | | | | 1,172,368 | | | | 2,166,840 | | | | 720,272 | | | | 4,059,480 | | 2023 | | | 620,845 | | | | 339,743 | | | | 394,862 | | | | 1,355,450 | | | | 746,235 | | | | 663,227 | | | | 580,257 | | | | 1,989,719 | | 2024 and thereafter | | | 3,949,971 | | | | 2,268,136 | | | | 1,447,070 | | | | 7,665,177 | | | 2024 | | | | 265,873 | | | | 315,828 | | | | 414,380 | | | | 996,081 | | 2025 and thereafter | | | | 4,595,577 | | | | 1,892,516 | | | | 1,285,364 | | | | 7,773,457 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 5,362,561 | | | ¥ | 14,512,049 | | | ¥ | 7,208,635 | | | ¥ | 27,083,245 | | | ¥ | 7,465,851 | | | ¥ | 15,141,912 | | | ¥ | 5,398,133 | | | ¥ | 28,005,896 | | | | | | | | | | | | | | | | | | | | | | | | | | |
New Issuances of Bonds for Basel III For the fiscal year ended March 31, 2018,2019, the MUFG Group issued to institutional investors in Japan ¥320,000¥155,000 million aggregate principal amount of unsecured perpetual subordinated Additional Tier 1 notes. These notes are subject to the MUFG Group’s discretion to cease interest payments and a write-down of the principal upon the occurrence of certain events, including when the MUFG Group’s Common Equity Tier 1 ratio declines below 5.125%, when the MUFG Group is deemed to be at risk of becomingnon-viable or when the MUFG Group becomes subject to bankruptcy proceedings. For the fiscal year ended March 31, 2018,2019, the MUFG Group issued $7,680$13,220 million €1,570(approximately ¥1,467,288 million), €1,000 million (approximately ¥124,560 million) and AU$216HK$302 million (approximately ¥4,270 million) of the 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 fundednon-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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) MUFG Bank and certain domestic subsidiaries, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi UFJ NICOS and some subsidiaries of MUFG havenon-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 arenon-contributory defined pension plans, which provide benefits upon retirement based on years of service and average compensation and cover substantially all of the employees of such foreign offices and subsidiaries. With respect to the offices and subsidiaries in the United States of America, the qualified plans are funded on a current basis in compliance with the requirement of MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
the Employee Retirement Income Security Act of the United States of America. The nonqualified plans arenon-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, tolump-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 alump-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”). MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Net periodic cost of pension benefits and other benefits for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 include the following components: | | | | Domestic subsidiaries | | Foreign offices and subsidiaries | | | Domestic subsidiaries | | Foreign offices and subsidiaries | | | | | 2016 | | 2017 | | 2018 | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | 2017 | | 2018 | | 2019 | | | | | Pension
benefits
and SIP | | Pension
benefits
and SIP | | Pension
benefits
and SIP | | Pension
benefits | | Other
benefits | | Pension
benefits | | Other
benefits | | Pension
benefits | | Other
benefits | | | Pension
benefits
and SIP | | Pension
benefits
and SIP | | Pension
benefits
and SIP | | Pension
benefits | | Other
benefits | | Pension
benefits | | Other
benefits | | Pension
benefits | | Other
benefits | | | | | (in millions) | | | (in millions) | | Service cost—benefits earned during the fiscal year | | ¥ | 47,739 | | | ¥ | 49,057 | | | ¥ | 47,064 | | | ¥ | 14,842 | | | ¥ | 1,409 | | | ¥ | 13,107 | | | ¥ | 990 | | | ¥ | 10,169 | | | ¥ | 676 | | | ¥ | 49,057 | | | ¥ | 47,064 | | | ¥ | 48,352 | | | ¥ | 13,107 | | | ¥ | 990 | | | ¥ | 10,169 | | | ¥ | 676 | | | ¥ | 12,395 | | | ¥ | 525 | | Interest cost on projected benefit obligation | | 16,529 | | | 12,308 | | | 14,383 | | | 18,120 | | | 1,843 | | | 15,287 | | | 1,229 | | | 15,359 | | | 1,079 | | | 12,308 | | | 14,383 | | | 13,504 | | | 15,287 | | | 1,229 | | | 15,359 | | | 1,079 | | | 14,958 | | | 1,046 | | Expected return on plan assets | | (59,461 | ) | | (60,255 | ) | | (68,432 | ) | | (30,486 | ) | | (2,341 | ) | | (29,339 | ) | | (2,047 | ) | | (32,110 | ) | | (2,122 | ) | | (60,255 | ) | | (68,432 | ) | | (74,270 | ) | | (29,339 | ) | | (2,047 | ) | | (32,110 | ) | | (2,122 | ) | | (33,266 | ) | | (2,314 | ) | Amortization of net actuarial loss | | 7,698 | | | 17,764 | | | 7,309 | | | 11,743 | | | 1,810 | | | 12,707 | | | 1,366 | | | 8,847 | | | 1,124 | | | 17,764 | | | 7,309 | | | 731 | | | 12,707 | | | 1,366 | | | 8,847 | | | 1,124 | | | 9,993 | | | 707 | | Amortization of prior service cost | | (7,613 | ) | | (6,348 | ) | | (1,094 | ) | | (2,307 | ) | | (927 | ) | | (2,045 | ) | | (1,534 | ) | | (3,090 | ) | | (2,775 | ) | | (6,348 | ) | | (1,094 | ) | | (1,210 | ) | | (2,045 | ) | | (1,534 | ) | | (3,090 | ) | | (2,775 | ) | | (3,039 | ) | | (2,020 | ) | Loss (gain) on settlements and curtailment | | (1,168 | ) | | (1,765 | ) | | (4,394 | ) | | 11 | | | | — | | | (208 | ) | | | — | | | 52 | | | | — | | | (1,765 | ) | | (4,394 | ) | | (5,980 | ) | | (208 | ) | | | — | | | 52 | | | | — | | | 49 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net periodic benefit cost (income) | | ¥ | 3,724 | | | ¥ | 10,761 | | | ¥ | (5,164 | ) | | ¥ | 11,923 | | | ¥ | 1,794 | | | ¥ | 9,509 | | | ¥ | 4 | | | ¥ | (773 | ) | | ¥ | (2,018 | ) | | ¥ | 10,761 | | | ¥ | (5,164 | ) | | ¥ | (18,873 | ) | | ¥ | 9,509 | | | ¥ | 4 | | | ¥ | (773 | ) | | ¥ | (2,018 | ) | | ¥ | 1,090 | | | ¥ | (2,056 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As a result of adopting the new guidance issued in March 2017, as described in Note 1, the service cost component continues to be presented in Salaries and employee benefits while other components of net pension benefit/cost (i.e., Interest cost on projected benefit obligation, Expected return on plan assets, Amortization of net actuarial loss, Amortization of prior service cost, and Loss (gain) on settlements and curtailment disclosed in the above table) are now presented in Othernon-interest expenses. 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 | | | Domestic subsidiaries | | Foreign offices and subsidiaries | | | | | 2016 | | 2017 | | 2018 | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | 2017 | | 2018 | | 2019 | | | | | Pension
benefits
and SIP | | Pension
benefits
and SIP | | Pension
benefits
and SIP | | Pension
benefits | | Other
benefits | | Pension
benefits | | Other
benefits | | Pension
benefits | | Other
benefits | | | 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 | | 0.93 | % | | 0.68 | % | | 0.82 | % | | 3.87 | % | | 3.83 | % | | 3.90 | % | | 3.03 | % | | 3.52 | % | | 3.61 | % | | 0.68 | % | | 0.82 | % | | 0.76 | % | | 3.90 | % | | 3.03 | % | | 3.52 | % | | 3.61 | % | | 3.19 | % | | 3.27 | % | Discount rates in determining benefit obligation | | 0.68 | | | 0.82 | | | 0.76 | | | 4.17 | | | 4.09 | | | 3.81 | | | 3.86 | | | 3.38 | | | 3.43 | | | 0.82 | | | 0.76 | | | 0.61 | | | 3.81 | | | 3.86 | | | 3.38 | | | 3.43 | | | 3.87 | | | 3.99 | | Rates of increase in future compensation level for determining expense | | 3.23 | | | 3.23 | | | 3.23 | | | 4.65 | | | | — | | | 4.65 | | | | — | | | 4.65 | | | | — | | | 3.23 | | | 3.23 | | | 3.21 | | | 4.65 | | | | — | | | 4.65 | | | | — | | | 4.65 | | | | — | | Rates of increase in future compensation level for determining benefit obligation | | 3.23 | | | 3.23 | | | 3.21 | | | 4.65 | | | | — | | | 4.65 | | | | — | | | 4.65 | | | | — | | | 3.23 | | | 3.21 | | | 3.21 | | | 4.65 | | | | — | | | 4.65 | | | | — | | | 5.01 | | | | — | | Expected rates of return on plan assets | | 2.60 | | | 2.75 | | | 2.87 | | | 6.81 | | | 7.50 | | | 6.80 | | | 7.50 | | | 6.71 | | | 7.50 | | | 2.75 | | | 2.87 | | | 2.83 | | | 6.80 | | | 7.50 | | | 6.71 | | | 7.50 | | | 6.70 | | | 7.50 | |
The following tables present the assumed health care cost trend rates for foreign offices and subsidiaries, which are used to measure the expected cost of benefits for the next year, and the effect of aone-percentage-point change in the assumed health care cost trend rate: | | | | MUAH | | Other than MUAH | | | MUAH | | Other than MUAH | | | | | 2017(1) | | 2018(1) | | 2017(1) | | 2018(1) | | | 2018(1) | | 2019(1) | | 2018(1) | | 2019(1) | | Initial trend rate | | | 4.64 | % | | 4.44 | % | | 7.50 | % | | 7.00 | % | | | 4.44 | % | | 4.44 | % | | 7.00 | % | | 7.00 | % | Ultimate trend rate | | | 3.96 | % | | 3.94 | % | | 4.50 | % | | 4.50 | % | | | 3.94 | % | | 3.94 | % | | 4.50 | % | | 4.50 | % | Year the rate reaches the ultimate trend rate | | | 2026 | | | 2026 | | | 2026 | | | 2026 | | | | 2026 | | | 2027 | | | 2026 | | | 2027 | | | | | | MUAH | | Other than MUAH | | | MUAH | | Other than MUAH | | | | | One-percentage-
point increase | | One-percentage-
point decrease | | One-percentage-
point increase | | One-percentage-
point decrease | | | One-percentage-
point increase | | One-percentage-
point decrease | | One-percentage-
point increase | | One-percentage-
point decrease | | | | | (in millions) | | | (in millions) | | Effect on total of service and interest cost components | | ¥ | 226 | | | ¥ | (226 | ) | | ¥ | 44 | | | ¥ | (35 | ) | | ¥ | 183 | | | ¥ | (152 | ) | | ¥ | 44 | | | ¥ | (35 | ) | Effect on postretirement benefit obligation | | | 3,729 | | | (3,164 | ) | | 779 | | | (616 | ) | | | 3,110 | | | (2,630 | ) | | 812 | | | (644 | ) |
Note: | (1) | | Fiscal years of MUFG Americas Holdings and foreign subsidiaries end on December 31. Therefore, the above tables present the rates and amounts at December 31, 20162017 and 2017,2018, respectively. |
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, 20172018 and 2018:2019: | | | | Domestic subsidiaries | | Foreign offices and subsidiaries | | | Domestic subsidiaries | | Foreign offices and subsidiaries | | | | | 2017 | | 2018 | | 2017 | | 2018 | | | 2018 | | 2019 | | 2018 | | 2019 | | | | | Non-contributory
pension benefits
and SIP | | Non-contributory
pension benefits
and SIP | | Pension
benefits | | Other
benefits | | Pension
benefits | | Other
benefits | | | Non-contributory
pension benefits
and SIP | | Non-contributory
pension benefits
and SIP | | Pension
benefits | | Other
benefits | | Pension
benefits | | Other
benefits | | | | | (in millions) | | | (in millions) | | Change in benefit obligation: | | | | | | | | | | | | | | | | | | | | | | | | | Benefit obligation at beginning of fiscal year | | ¥ | 1,850,847 | | | ¥ | 1,793,848 | | | ¥ | 470,578 | | | ¥ | 46,061 | | | ¥ | 478,463 | | | ¥ | 35,222 | | | ¥ | 1,793,848 | | | ¥ | 1,821,794 | | | ¥ | 478,463 | | | ¥ | 35,222 | | | ¥ | 502,056 | | | ¥ | 34,347 | | Service cost | | 49,057 | | | 47,064 | | | 13,107 | | | 990 | | | 10,169 | | | 676 | | | 47,064 | | | 48,352 | | | 10,169 | | | 676 | | | 12,395 | | | 525 | | Interest cost | | 12,308 | | | 14,383 | | | 15,287 | | | 1,229 | | | 15,359 | | | 1,079 | | | 14,383 | | | 13,504 | | | 15,359 | | | 1,079 | | | 14,958 | | | 1,046 | | Plan participants’ contributions | | | — | | | | — | | | 13 | | | 866 | | | 28 | | | 455 | | | | — | | | | — | | | 28 | | | 455 | | | 37 | | | 452 | | Acquisitions/ Divestitures | | (192 | ) | | (29 | ) | | | — | | | | — | | | | — | | | | — | | | (29 | ) | | (160 | ) | | | — | | | | — | | | (17 | ) | | | — | | Amendments | | 654 | | | | — | | | (8,311 | ) | | (8,562 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 64 | | | | — | | Actuarial loss (gain) | | (35,868 | ) | | 49,678 | | | 26,295 | | | (489 | ) | | 25,519 | | | 506 | | | 49,678 | | | 43,527 | | | 25,519 | | | 506 | | | (28,466 | ) | | (2,354 | ) | Benefits paid | | (67,038 | ) | | (67,913 | ) | | (16,359 | ) | | (3,182 | ) | | (19,388 | ) | | (2,520 | ) | | (67,913 | ) | | (66,539 | ) | | (19,388 | ) | | (2,520 | ) | | (19,894 | ) | | (2,221 | ) | Lump-sum payment | | (15,920 | ) | | (15,237 | ) | | (724 | ) | | | — | | | (861 | ) | | | — | | | (15,237 | ) | | (18,594 | ) | | (861 | ) | | | — | | | (1,750 | ) | | | — | | Translation adjustments and other | | | — | | | | — | | | (21,423 | ) | | (1,691 | ) | | (7,233 | ) | | (1,071 | ) | | | — | | | | — | | | (7,233 | ) | | (1,071 | ) | | (10,303 | ) | | (285 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Benefit obligation at end of fiscal year | | 1,793,848 | | | 1,821,794 | | | 478,463 | | | 35,222 | | | 502,056 | | | 34,347 | | | 1,821,794 | | | 1,841,884 | | | 502,056 | | | 34,347 | | | 469,080 | | | 31,510 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change in plan assets: | | | | | | | | | | | | | | | | | | | | | | | | | Fair value of plan assets at beginning of fiscal year | | 2,200,033 | | | 2,346,310 | | | 457,989 | | | 30,653 | | | 477,479 | | | 30,339 | | | 2,346,310 | | | 2,603,329 | | | 477,479 | | | 30,339 | | | 542,646 | | | 32,466 | | Actual return on plan assets | | 159,287 | | | 250,704 | | | 35,040 | | | 1,902 | | | 75,824 | | | 4,890 | | | 250,704 | | | 13,664 | | | 75,824 | | | 4,890 | | | (21,353 | ) | | (1,948 | ) | Employer contributions | | 54,000 | | | 74,181 | | | 21,648 | | | 1,099 | | | 16,969 | | | 190 | | | 74,181 | | | 44,427 | | | 16,969 | | | 190 | | | 3,117 | | | 102 | | Acquisitions/ Divestitures | | 28 | | | 47 | | | | — | | | | — | | | | — | | | | — | | | 47 | | | (93 | ) | | | — | | | | — | | | | — | | | | — | | Plan participants’ contributions | | | — | | | | — | | | 13 | | | 866 | | | 28 | | | 455 | | | | — | | | | — | | | 28 | | | 455 | | | 37 | | | 452 | | Benefits paid | | (67,038 | ) | | (67,913 | ) | | (16,359 | ) | | (3,182 | ) | | (19,388 | ) | | (2,520 | ) | | (67,913 | ) | | (66,539 | ) | | (19,388 | ) | | (2,520 | ) | | (19,894 | ) | | (2,221 | ) | Translation adjustments and other | | | — | | | | — | | | (20,852 | ) | | (999 | ) | | (8,266 | ) | | (888 | ) | | | — | | | | — | | | (8,266 | ) | | (888 | ) | | (11,058 | ) | | (593 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value of plan assets at end of fiscal year | | 2,346,310 | | | 2,603,329 | | | 477,479 | | | 30,339 | | | 542,646 | | | 32,466 | | | 2,603,329 | | | 2,594,788 | | | 542,646 | | | 32,466 | | | 493,495 | | | 28,258 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Amounts recognized in the consolidated balance sheets: | | | | | | | | | | | | | | | | | | | | | | | | | Prepaid benefit cost | | ¥ | 569,218 | | | ¥ | 798,849 | | | ¥ | 43,405 | | | ¥ | — | | | ¥ | 83,578 | | | ¥ | 2,552 | | | ¥ | 798,849 | | | ¥ | 770,564 | | | ¥ | 83,578 | | | ¥ | 2,552 | | | ¥ | 67,821 | | | ¥ | 1,372 | | Accrued benefit cost | | (16,756 | ) | | (17,314 | ) | | (44,389 | ) | | (4,883 | ) | | (42,988 | ) | | (4,433 | ) | | (17,314 | ) | | (17,660 | ) | | (42,988 | ) | | (4,433 | ) | | (43,406 | ) | | (4,624 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net amount recognized | | ¥ | 552,462 | | | ¥ | 781,535 | | | ¥ | (984 | ) | | ¥ | (4,883 | ) | | ¥ | 40,590 | | | ¥ | (1,881 | ) | | ¥ | 781,535 | | | ¥ | 752,904 | | | ¥ | 40,590 | | | ¥ | (1,881 | ) | | ¥ | 24,415 | | | ¥ | (3,252 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The aggregated accumulated benefit obligations of these plans at March 31, 20172018 and 20182019 were as follows: | | | | | | | | | | | | | | | | | | | | Domestic
subsidiaries | | | Foreign offices
and subsidiaries | | | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | | | (in millions) | | Aggregated accumulated benefit obligations | | ¥ | 1,758,736 | | | ¥ | 1,784,837 | | | ¥ | 457,591 | | | ¥ | 475,522 | |
| | | | | | | | | | | | | | | | | | | | Domestic
subsidiaries | | | Foreign offices
and subsidiaries | | | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | | | (in millions) | | Aggregated accumulated benefit obligations | | ¥ | 1,784,837 | | | ¥ | 1,800,992 | | | ¥ | 475,522 | | | ¥ | 457,048 | |
The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for the plans with accumulated benefit obligations in excess of plan assets at March 31, 20172018 and 20182019 were as follows: | | | | Domestic
subsidiaries | | | Foreign offices
and subsidiaries | | | Domestic
subsidiaries | | | Foreign offices
and subsidiaries | | | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2018 | | | 2019 | | | 2018 | | | 2019 | | | | | (in millions) | | | (in millions) | | Projected benefit obligations | | ¥ | 21,625 | | | ¥ | 22,445 | | | ¥ | 90,315 | | | ¥ | 62,511 | | | ¥ | 22,445 | | | ¥ | 23,108 | | | ¥ | 62,511 | | | ¥ | 63,273 | | Accumulated benefit obligations | | | 21,625 | | | | 22,445 | | | | 80,258 | | | | 52,012 | | | | 22,445 | | | | 23,108 | | | | 52,012 | | | | 52,249 | | Fair value of plan assets | | | 4,988 | | | | 5,272 | | | | 45,925 | | | | 19,521 | | | | 5,272 | | | | 5,629 | | | | 19,521 | | | | 19,866 | |
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 speciallump-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, 2016, 2017, 2018 and 20182019 were ¥7,428 million, ¥7,722 million, ¥10,153 million and ¥10,153¥9,325 million, respectively. The following table presents the amounts recognized in Accumulated OCI of the MUFG Group at March 31, 20172018 and 2018:2019: | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic subsidiaries | | | Foreign offices and subsidiaries | | | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | | | Pension
benefits
and SIP | | | Pension
benefits
and SIP | | | Pension
benefits | | | Other
benefits | | | Pension
benefits | | | Other
benefits | | | | | (in millions) | | Net actuarial loss | | ¥ | 271,164 | | | ¥ | 135,656 | | | ¥ | 143,070 | | | ¥ | 11,229 | | | ¥ | 111,820 | | | ¥ | 7,449 | | Prior service cost | | | (7,763 | ) | | | (6,669 | ) | | | (21,710 | ) | | | (9,370 | ) | | | (17,936 | ) | | | (6,237 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Gross amount recognized in Accumulated OCI | | | 263,401 | | | | 128,987 | | | | 121,360 | | | | 1,859 | | | | 93,884 | | | | 1,212 | | Taxes | | | (122,871 | ) | | | (81,747 | ) | | | (47,387 | ) | | | (534 | ) | | | (25,251 | ) | | | (358 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Net amount recognized in Accumulated OCI | | ¥ | 140,530 | | | ¥ | 47,240 | | | ¥ | 73,973 | | | ¥ | 1,325 | | | ¥ | 68,633 | | | ¥ | 854 | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following table presents OCI for the fiscal years ended March 31, 2017 and 2018:
| | | | | Domestic subsidiaries | | Foreign offices and subsidiaries | | | | | | 2018 | | 2019 | | 2018 | | 2019 | | | | | | Pension
benefits
and SIP | | Pension
benefits
and SIP | | Pension
benefits | | Other
benefits | | Pension
benefits | | Other
benefits | | | | | | (in millions) | | Net actuarial loss | | | ¥ | 135,656 | | | ¥ | 245,037 | | | ¥ | 111,820 | | | ¥ | 7,449 | | | ¥ | 126,238 | | | ¥ | 8,628 | | Prior service cost | | | | (6,669 | ) | | (5,459 | ) | | (17,936 | ) | | (6,237 | ) | | (14,536 | ) | | (4,263 | ) | | | | | | | | | | | | | | | | | | | | | Gross amount recognized in Accumulated OCI | | | | 128,987 | | | 239,578 | | | 93,884 | | | 1,212 | | | 111,702 | | | 4,365 | | Taxes | | | | (81,747 | ) | | (115,816 | ) | | (25,251 | ) | | (358 | ) | | (29,875 | ) | | (1,282 | ) | | | | | | | | | | | | | | | | | | | | | Net amount recognized in Accumulated OCI | | | ¥ | 47,240 | | | ¥ | 123,762 | | | ¥ | 68,633 | | | ¥ | 854 | | | ¥ | 81,827 | | | ¥ | 3,083 | | | | | | | | | | | | | | | | | | | | | | The following table presents OCI for the fiscal years ended March 31, 2018 and 2019: | | The following table presents OCI for the fiscal years ended March 31, 2018 and 2019: | | | | | | Domestic subsidiaries | | Foreign offices and subsidiaries | | | Domestic subsidiaries | | Foreign offices and subsidiaries | | | | | 2017 | | 2018 | | 2017 | | 2018 | | | 2018 | | 2019 | | 2018 | | 2019 | | | | | Pension
benefits
and SIP | | Pension
benefits
and SIP | | Pension
benefits | | Other
benefits | | Pension
benefits | | Other
benefits | | | Pension
benefits
and SIP | | Pension
benefits
and SIP | | Pension
benefits | | Other
benefits | | Pension
benefits | | Other
benefits | | | | | (in millions) | | | (in millions) | | Net actuarial loss (gain) arising during the year | | ¥ | (134,902 | ) | | ¥ | (132,593 | ) | | ¥ | 20,461 | | | ¥ | (330 | ) | | ¥ | (18,165 | ) | | ¥ | (2,262 | ) | | ¥ | (132,593 | ) | | ¥ | 104,132 | | | ¥ | (18,165 | ) | | ¥ | (2,262 | ) | | ¥ | 26,155 | | | ¥ | 1,908 | | Prior service cost arising during the year | | | 654 | | | — | | | (8,311 | ) | | (8,562 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 65 | | | | — | | Losses (gains) due to amortization: | | | | | | | | | | | | | | | | | | | | | | | | | Net actuarial loss | | | (17,764 | ) | | (7,309 | ) | | (12,707 | ) | | (1,366 | ) | | (8,847 | ) | | (1,124 | ) | | | (7,309 | ) | | (731 | ) | | (8,847 | ) | | (1,124 | ) | | (9,993 | ) | | (707 | ) | Prior service cost | | | 6,348 | | | 1,094 | | | 2,045 | | | 1,534 | | | 3,090 | | | 2,775 | | | | 1,094 | | | 1,210 | | | 3,090 | | | 2,775 | | | 3,039 | | | 2,020 | | Curtailment and settlement | | | 1,765 | | | 4,394 | | | 208 | | | | — | | | (52 | ) | | | — | | | | 4,394 | | | 5,980 | | | (52 | ) | | | — | | | (49 | ) | | | — | | Foreign currency translation adjustments | | | — | | | | — | | | (3,910 | ) | | (779 | ) | | (3,502 | ) | | (36 | ) | | | — | | | | — | | | (3,502 | ) | | (36 | ) | | (1,399 | ) | | (68 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total changes in Accumulated OCI | | ¥ | (143,899 | ) | | ¥ | (134,414 | ) | | ¥ | (2,214 | ) | | ¥ | (9,503 | ) | | ¥ | (27,476 | ) | | ¥ | (647 | ) | | ¥ | (134,414 | ) | | ¥ | 110,591 | | | ¥ | (27,476 | ) | | ¥ | (647 | ) | | ¥ | 17,818 | | | ¥ | 3,153 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents the expected amounts that will be amortized from Accumulated OCI as components of net periodic benefit cost, before taxes, for the fiscal year ending March 31, 2019:2020: | | | | Domestic
subsidiaries | | Foreign offices
and subsidiaries | | | Domestic
subsidiaries | | Foreign offices
and subsidiaries | | | | | Pension
benefits
and SIP | | Pension
benefits | | Other
benefits | | | Pension
benefits
and SIP | | Pension
benefits | | Other
benefits | | | | | (in millions) | | | (in millions) | | Net actuarial loss | | ¥ | 1,419 | | | ¥ | 10,592 | | | ¥ | 693 | | | ¥ | 5,395 | | | ¥ | 7,731 | | | ¥ | 1,130 | | Prior service cost | | | (1,274 | ) | | (3,107 | ) | | (2,046 | ) | | | (1,269 | ) | | (3,056 | ) | | (1,916 | ) | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 145 | | | ¥ | 7,485 | | | ¥ | (1,353 | ) | | ¥ | 4,126 | | | ¥ | 4,675 | | | ¥ | (786 | ) | | | | | | | | | | | | | | | | | | | |
Investment policies MUFG’s investment policy for plan assets is based on an asset liability matching strategy which is intended to maintain adequate liquidity for benefit payments and to achieve a stable increase in the plan assets in the medium and long-term through proper risk control and return maximization. As a general rule, investment policies for plan assets are reviewed periodically for some plans and in the following situations for all plans: (1) large fluctuations in pension plan liabilities caused by modifications to pension plans, or (2) changes in the market environment. The plan assets allocation strategies are the principal determinant in achieving expected investment returns on the plan assets. Actual asset allocations may fluctuate within acceptable ranges due to market value variability. Plan assets are managed by a combination of internal and external asset management companies and are rebalanced when market fluctuations cause an asset category to fall outside of its strategic asset allocation range. Performance of each plan asset category is compared against established indices and similar plan asset groups to evaluate whether the risk associated with the portfolio is appropriate for the level of return. The weighted-average target asset allocation of plan assets for the pension benefits and other benefits at March 31, 20182019 was as follows: | | | | Domestic
subsidiaries | | Foreign offices
and subsidiaries | | | Domestic
subsidiaries | | Foreign offices
and subsidiaries | | Asset category | | Pension
benefits
and SIP | | Pension
benefits | | Other
benefits | | | Pension
benefits
and SIP | | Pension
benefits | | Other
benefits | | Japanese equity securities | | | 41.3 | % | | 0.3 | % | | — | % | | | 39.3 | % | | 0.3 | % | | — | % | Japanese debt securities | | | 32.0 | | | | — | | | | — | | | | 32.1 | | | | — | | | | — | | Non-Japanese equity securities | | | 14.2 | | | 57.4 | | | 70.0 | | | | 14.9 | | | 48.5 | | | 70.0 | | Non-Japanese debt securities | | | 8.3 | | | 30.4 | | | 30.0 | | | | 9.1 | | | 39.1 | | | 30.0 | | Real estate | | | 1.5 | | | 9.9 | | | | — | | | | 1.3 | | | 9.9 | | | | — | | Short-term assets | | | 2.7 | | | 2.0 | | | | — | | | | 3.3 | | | 2.2 | | | | — | | | | | | | | | | | | | | | | | | | | | Total | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | | 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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) MUFG has determined the expected long-term rate of return for each asset category as follows: Japanese equity securities: the rate for Japanese debt securities plus a premium for the risk associated with Japanese equity securities Japanese debt securities: economic growth rate of Japan Non-Japanese equity securities: the rate fornon-Japanese debt securities plus a premium for the risk associated withnon-Japanese equity securities Non-Japanese debt securities: global economic growth rate Foreign offices and subsidiaries periodically reconsider the expected long-term rate of return for their plan assets. They evaluate the investment return volatility of different asset categories and compare the liability structure of their pension and other benefits to those of other companies, while considering their funding policy to maintain a funded status sufficient to meet participants’ benefit obligations, and reduce long-term funding requirements and pension costs. Based on this information, foreign offices and subsidiaries update the expected long-term rate of return. Cash flows The MUFG Group expects to contribute to the plan assets for the fiscal year ending March 31, 20192020 based upon its current funded status and expected asset return assumptions as follows: | | | | | For the pension benefits of domestic subsidiaries | | ¥ | 75.232.7 billion | | For the pension benefits of foreign offices and subsidiaries | | | 2.60.7 billion | | For the other benefits of foreign offices and subsidiaries | | | 0.50.4 billion | |
Estimated future benefit payments The following table presents benefit payments expected to be paid, which include the effect of expected future service for the fiscal years indicated: | | | | Domestic
subsidiaries | | | Foreign offices
and subsidiaries | | | Domestic
subsidiaries | | | Foreign offices
and subsidiaries | | | | | Pension
benefits
and SIP | | | Pension
benefits | | | Other
benefits | | | Pension
benefits
and SIP | | | Pension
benefits | | | Other
benefits | | | | | (in millions) | | | (in millions) | | Fiscal year ending March 31: | | | | | | | | | | | | | 2019 | | ¥ | 84,208 | | | ¥ | 20,888 | | | ¥ | 1,933 | | | 2020 | | | 81,662 | | | | 22,113 | | | | 2,018 | | | ¥ | 84,558 | | | ¥ | 19,923 | | | ¥ | 1,997 | | 2021 | | | 81,591 | | | | 23,033 | | | | 2,090 | | | | 82,297 | | | | 20,928 | | | | 2,072 | | 2022 | | | 81,714 | | | | 23,771 | | | | 2,145 | | | | 82,320 | | | | 21,903 | | | | 2,129 | | 2023 | | | 81,370 | | | | 25,343 | | | | 2,199 | | | | 81,710 | | | | 22,881 | | | | 2,177 | | Thereafter (2024-2028) | | | 401,939 | | | | 171,865 | | | | 10,761 | | | 2024 | | | | 81,684 | | | | 23,726 | | | | 2,205 | | Thereafter (2025-2029) | | | | 401,772 | | | | 162,850 | | | | 10,222 | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Fair value measurement of the plan assets The following is a description of the valuation methodologies used for plan assets measured at fair value as well as the classification of the plan assets pursuant to the fair value hierarchy described in Note 32: Government bonds and other debt securities When quoted prices are available in an active market, the MUFG Group adopts the quoted prices to measure the fair value of securities and such securities are classified in Level 1 of the fair value hierarchy. Level 1 securities include Japanese government bonds, mostnon-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 usingnon-binding prices obtained from independent pricing vendors. Such securities are generally classified in Level 2 of the fair value hierarchy. Level 2 securities include certainnon-Japanese government bonds, official institutionsinstitution 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 ofnon-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 andNon-Japanese debt securities type. The other types of funds invest in short-term financial instruments or loans receivable. Japanese pooled funds are generally readily redeemable at their net asset values. The fair values of Japanese pooled funds are measured at their net asset values per share (or its equivalent) as a practical expedient. Other investment funds Other investment funds include mutual funds, private investments funds, common collective funds, private equity funds and real estate funds. The listed investment funds or mutual funds are valued at quoted prices and classified in Level 1 or Level 2 of the fair value hierarchy. When there is no available market quotation, the fair values are generally determined at net asset values per share (or its equivalent) as a practical expedient. Other investment funds classified in Level 3 of the fair value hierarchy consist of certain real estate funds whose fair values are not measured at their net asset values but by using significant unobservable inputs and there is inherent lack of the funds’ liquidity. Japanese general accounts of life insurance companies These instruments are contracts with life insurance companies that guarantee return of a certain level of fixed income, which are mainly invested in assets with low market risk such as Japanese debt securities. They are measured at conversion value and classified in Level 2 of the fair value hierarchy. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Other investments Other investments mainly consist of call loans and the rest consist of miscellaneous accounts such as deposits with banks and short-term investments. These instruments are generally classified in Level 1 or Level 2 of the fair value hierarchy depending on observability of the inputs to measure their fair values. The following table presents the fair value of each major category of plan assets as of March 31, 20172018 and 2018:2019: Pension benefits and SIP Investments: | At March 31, 2017 | | Domestic subsidiaries | | Foreign offices and subsidiaries | | | Assets category | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | | | | | (in millions) | | | Japanese government bonds | | ¥ | 137,201 | | | ¥ | — | | | ¥ | — | | | ¥ | 137,201 | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | Non-Japanese government bonds | | 14,817 | | | 2,411 | | | | — | | | 17,228 | | | 16,161 | | | 3,811 | | | | — | | | 19,972 | | | Other debt securities | | 211 | | | 1,858 | | | 208 | | | 2,277 | | | | — | | | 67,956 | | | | — | | | 67,956 | | | Japanese marketable equity securities | | 810,772 | | | | — | | | | — | | | 810,772 | | | 856 | | | | — | | | | — | | | 856 | | | Non-Japanese marketable equity securities | | 33,385 | | | 287 | | | | — | | | 33,672 | | | 37,986 | | | 682 | | | | — | | | 38,668 | | | Other investment funds | | | — | | | | — | | | 206 | | | 206 | | | 83,868 | | | 10,042 | | | | — | | | | 93,910 | (2) | | Japanese general account of life insurance companies(1) | | | — | | | 225,921 | | | | — | | | 225,921 | | | | — | | | | — | | | | — | | | | — | | | Other investments | | 3,423 | | | 22,582 | | | | — | | | 26,005 | | | 48 | | | 2,704 | | | 760 | | | 3,512 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 999,809 | | | ¥ | 253,059 | | | ¥ | 414 | | | ¥ | 1,253,282 | | | ¥ | 138,919 | | | ¥ | 85,195 | | | ¥ | 760 | | | ¥ | 224,874 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At March 31, 2018 | | Domestic subsidiaries | | Foreign offices and subsidiaries | | | Domestic subsidiaries | | Foreign offices and subsidiaries | | Assets category | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | | | | (in millions) | | | (in millions) | | Japanese government bonds | | ¥ | 139,847 | | | ¥ | — | | | ¥ | — | | | ¥ | 139,847 | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | 139,847 | | | ¥ | — | | | ¥ | — | | | ¥ | 139,847 | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | — | | Non-Japanese government bonds | | 15,552 | | | 944 | | | | — | | | 16,496 | | | 17,945 | | | 4,081 | | | | — | | | 22,026 | | | 15,552 | | | 944 | | | | — | | | 16,496 | | | 17,945 | | | 4,081 | | | | — | | | 22,026 | | Other debt securities | | 201 | | | 3,482 | | | 1,071 | | | 4,754 | | | | — | | | 81,968 | | | | — | | | 81,968 | | | 201 | | | 3,482 | | | 1,071 | | | 4,754 | | | | — | | | 81,968 | | | | — | | | 81,968 | | Japanese marketable equity securities | | 934,691 | | | | — | | | | — | | | 934,691 | | | 887 | | | | — | | | | — | | | 887 | | | 934,691 | | | | — | | | | — | | | 934,691 | | | 887 | | | | — | | | | — | | | 887 | | Non-Japanese marketable equity securities | | 71,729 | | | 255 | | | | — | | | 71,984 | | | 42,166 | | | 815 | | | | — | | | 42,981 | | | 71,729 | | | 255 | | | | — | | | 71,984 | | | 42,166 | | | 815 | | | | — | | | 42,981 | | Other investment funds | | | — | | | | — | | | | — | | | | — | | | 99,798 | | | 9,997 | | | | — | | | | 109,795 | (2) | | | — | | | | — | | | | — | | | | — | | | 99,798 | | | 9,997 | | | | — | | | 109,795 | (2) | Japanese general account of life insurance companies(1) | | | — | | | 225,925 | | | | — | | | 225,925 | | | | — | | | | — | | | | — | | | | — | | | | — | | | 225,925 | | | | — | | | 225,925 | | | | — | | | | — | | | | — | | | | — | | Other investments | | 3,485 | | | 23,195 | | | | — | | | 26,680 | | | 2 | | | 4,867 | | | 155 | | | 5,024 | | | 3,485 | | | 23,195 | | | | — | | | 26,680 | | | 2 | | | 4,867 | | | 155 | | | 5,024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 1,165,505 | | | ¥ | 253,801 | | | ¥ | 1,071 | | | ¥ | 1,420,377 | | | ¥ | 160,798 | | | ¥ | 101,728 | | | ¥ | 155 | | | ¥ | 262,681 | | | ¥ | 1,165,505 | | | ¥ | 253,801 | | | ¥ | 1,071 | | | ¥ | 1,420,377 | | | ¥ | 160,798 | | | ¥ | 101,728 | | | ¥ | 155 | | | ¥ | 262,681 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At March 31, 2019 | | | Domestic subsidiaries | | Foreign offices and subsidiaries | | Assets category | | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | | | | | (in millions) | | Japanese government bonds | | | ¥ | 146,060 | | | ¥ | — | | | ¥ | — | | | ¥ | 146,060 | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | — | | Non-Japanese government bonds | | | 8,570 | | | 656 | | | | — | | | 9,226 | | | 38,687 | | | 4,615 | | | | — | | | 43,302 | | Other debt securities | | | 109 | | | 3,698 | | | 1,030 | | | 4,837 | | | | — | | | 100,462 | | | | — | | | 100,462 | | Japanese marketable equity securities | | | 855,353 | | | | — | | | | — | | | 855,353 | | | | — | | | | — | | | | — | | | | — | | Non-Japanese marketable equity securities | | | 64,957 | | | 234 | | | | — | | | 65,191 | | | 20,569 | | | 652 | | | | — | | | 21,221 | | Other investment funds | | | | — | | | | — | | | | — | | | | — | | | 73,286 | | | 9,044 | | | | — | | | 82,330 | (2) | Japanese general account of life insurance companies(1) | | | | — | | | 222,460 | | | | — | | | 222,460 | | | | — | | | | — | | | | — | | | | — | | Other investments | | | 917 | | | 18,626 | | | | — | | | 19,543 | | | 18 | | | 4,415 | | | 188 | | | 4,621 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | ¥ | 1,075,966 | | | ¥ | 245,674 | | | ¥ | 1,030 | | | ¥ | 1,322,670 | | | ¥ | 132,560 | | | ¥ | 119,188 | | | ¥ | 188 | | | ¥ | 251,936 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | “Japanese general accounts of life insurance companies” is a contract with life insurance companies that guarantees a return of approximately 1.25% from April 1, 2016 to March 31, 2017 and 1.24% from April 1, 2017 to March 31, 2018.2018 and 1.24% from April 1, 2018 to March 31, 2019. |
| (2) | | Other investment funds of the foreign offices and subsidiaries include mutual funds and real estate funds of ¥79,763¥93,821 million and ¥310¥516 million, respectively, which were held by MUFG Americas Holdings at December 31, 20162017 and ¥93,821¥68,556 million and ¥516 million,nil, respectively, at December 31, 2017.2018. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents fair values of certain investments valued at net asset value per share (or its equivalent) as a practical expedient that were excluded from the above table as of March 31, 20172018 and 2018:2019: | | | | Domestic subsidiaries | | Foreign offices and
subsidiaries | | | Domestic subsidiaries | | Foreign offices and
subsidiaries | | Assets category | | 2017 | | 2018 | | 2017 | | 2018 | | | 2018 | | 2019 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Japanese pooled funds: | | | | | | | | | | | | | | | | | Japanese marketable equity securities | | ¥ | 101,958 | | | ¥ | 83,205 | | | ¥ | — | | | ¥ | — | | | ¥ | 83,205 | | | ¥ | 109,915 | | | ¥ | — | | | ¥ | — | | Japanese debt securities | | | 222,785 | | | 252,730 | | | | — | | | | — | | | | 252,730 | | | 184,121 | | | | — | | | | — | | Non-Japanese marketable equity securities | | | 187,939 | | | 151,893 | | | | — | | | | — | | | | 151,893 | | | 162,901 | | | | — | | | | — | | Non-Japanese debt securities | | | 84,199 | | | 100,998 | | | | — | | | | — | | | | 100,998 | | | 155,792 | | | | — | | | | — | | Other | | | 113,519 | | | 135,275 | | | | — | | | | — | | | | 135,275 | | | 134,306 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Total pooled funds | | | 710,400 | | | 724,101 | | | | — | | | | — | | | | 724,101 | | | 747,035 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | Other investment funds | | | 382,628 | (1) | | | 458,851 | (1) | | | 252,605 | (2) | | | 279,965 | (2) | | | 458,851 | (1) | | 525,083 | (1) | | 279,965 | (2) | | 241,559 | (2) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 1,093,028 | | | ¥ | 1,182,952 | | | ¥ | 252,605 | | | ¥ | 279,965 | | | ¥ | 1,182,952 | | | ¥ | 1,272,118 | | | ¥ | 279,965 | | | ¥ | 241,559 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | Other investment funds of the domestic subsidiaries include mutual funds and real estate funds of ¥358,584 million and ¥13,550 million, respectively, at March 31, 2017 and ¥433,221 million and ¥13,664 million, respectively, at March 31, 2018.2018 and ¥500,850 million and ¥12,058 million, respectively, at March 31, 2019. |
| (2) | | Other investment funds of the foreign offices and subsidiaries include mutual funds, real estate funds and common collective funds of ¥54,689 million, ¥40,779 million and ¥138,987 million, respectively, at March 31, 2017 and ¥63,088 million, ¥40,205 million and ¥158,249 million, respectively, at March 31, 2018.2018 and ¥53,775 million, ¥46,818 million and ¥140,728 million, respectively, at March 31, 2019. |
Other debt securities and Japanese debt securities in the above Pension benefits and SIP tables include ¥1,523¥982 million (0.05%(0.03% of plan assets) of debt securities issued by the MUFG Group at March 31, 20172018 and ¥982¥1,224 million (0.03%(0.04% of plan assets) at March 31, 2018,2019, respectively. Japanese marketable equity securities in the above Pension benefits and SIP tables include ¥8,169¥7,596 million (0.29%(0.24% of plan assets) of common stock issued by the MUFG Group at March 31, 20172018 and ¥7,596¥5,414 million (0.24%(0.18% of plan assets) at March 31, 2018,2019, respectively. Other post retirement plan investments: | | | | Foreign offices and subsidiaries | | | Foreign offices and subsidiaries | | | | | 2017 | | 2018 | | | 2018 | | 2019 | | Assets category | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | | | | (in millions) | | | (in millions) | | Non-Japanese government bonds | | ¥ | 2,516 | | | ¥ | — | | | ¥ | — | | | ¥ | 2,516 | | | ¥ | 2,523 | | | ¥ | — | | | ¥ | — | | | ¥ | 2,523 | | | ¥ | 2,523 | | | ¥ | — | | | ¥ | — | | | ¥ | 2,523 | | | ¥ | 1,705 | | | ¥ | — | | | ¥ | — | | | ¥ | 1,705 | | Other debt securities | | | — | | | 5,219 | | | | — | | | 5,219 | | | | — | | | 5,797 | | | | — | | | 5,797 | | | | — | | | 5,797 | | | | — | | | 5,797 | | | | — | | | 6,124 | | | | — | | | 6,124 | | Non-Japanese marketable equity securities | | | — | | | 18 | | | | — | | | 18 | | | | — | | | 7 | | | | — | | | 7 | | | | — | | | 7 | | | | — | | | 7 | | | | — | | | 6 | | | | — | | | 6 | | Other investment funds(1) | | 14,294 | | | | — | | | | — | | | 14,294 | | | 6,082 | | | | — | | | | — | | | 6,082 | | | 6,082 | | | | — | | | | — | | | 6,082 | | | 5,487 | | | | — | | | | — | | | 5,487 | | Other investments | | 2 | | | 6 | | | | — | | | 8 | | | 1 | | | 264 | | | | — | | | 265 | | | 1 | | | 264 | | | | — | | | 265 | | | | — | | | 130 | | | | — | | | 130 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 16,812 | | | ¥ | 5,243 | | | ¥ | — | | | ¥ | 22,055 | | | ¥ | 8,606 | | | ¥ | 6,068 | | | ¥ | — | | | ¥ | 14,674 | | | ¥ | 8,606 | | | ¥ | 6,068 | | | ¥ | — | | | ¥ | 14,674 | | | ¥ | 7,192 | | | ¥ | 6,260 | | | ¥ | — | | | ¥ | 13,452 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Note: | (1) | | Other investment funds mainly consist of mutual funds. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents fair values of certain investments valued at net asset value per share (or its equivalent) as a practical expedient that were excluded from the above table as of March 31, 20172018 and 2018:2019: | | | | Foreign offices
and subsidiaries | | | Foreign offices
and subsidiaries | | Assets category | | 2017 | | | 2018 | | | 2018 | | | 2019 | | | | | (in millions) | | | (in millions) | | Other investment funds(1) | | ¥ | 8,284 | | | ¥ | 17,792 | | | ¥ | 17,792 | | | ¥ | 14,806 | | | | | | | | | | | | | | | Total | | ¥ | 8,284 | | | ¥ | 17,792 | | | ¥ | 17,792 | | | ¥ | 14,806 | | | | | | | | | | | | | | |
Note: | (1) | | Other investment funds of the foreign offices and subsidiaries include mutual funds, common collective funds and pooled separate accounts with variable life insurance policies of ¥441¥553 million, ¥2,298¥11,332 million and ¥5,545¥5,907 million, respectively, which were held by MUFG Americas Holdings at December 31, 20162017 and ¥553¥147 million, ¥11,332¥9,583 million and ¥5,907¥5,076 million, respectively, at December 31, 2017.2018. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following tables present a reconciliation of plan assets measured at fair value using significant unobservable inputs (Level 3) during the fiscal years ended March 31, 20172018 and 2018:2019: Pension benefits and SIP Investments: | | | | Domestic subsidiaries | | | Domestic subsidiaries | | Assets category | | March 31,
2016 | | Realized
gains
(losses) | | Unrealized
gains
(losses) | | Purchase,
sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | March 31,
2017 | | | March 31,
2017 | | | Realized
gains
(losses) | | Unrealized
gains
(losses) | | Purchase,
sales and
settlements | | Transfer
into
Level 3 | | | Transfer
out of
Level 3 | | | March 31,
2018 | | | | | (in millions) | | | (in millions) | | Other debt securities | | ¥ | 5,927 | | | ¥ | (669 | ) | | ¥ | 4 | | | ¥ | (5,054 | ) | | ¥ | — | | | ¥ | — | | | ¥ | 208 | | | ¥ | 208 | | | ¥ | (6 | ) | | ¥ | (18 | ) | | ¥ | 887 | | | ¥ | — | | | ¥ | — | | | ¥ | 1,071 | | Other investment funds | | 537 | | | 1 | | | 1 | | | (333 | ) | | | — | | | | — | | | 206 | | | | 206 | | | | 36 | | | | — | | | (242 | ) | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 6,464 | | | ¥ | (668 | ) | | ¥ | 5 | | | ¥ | (5,387 | ) | | ¥ | — | | | ¥ | — | | | ¥ | 414 | | | ¥ | 414 | | | ¥ | 30 | | | ¥ | (18 | ) | | ¥ | 645 | | | ¥ | — | | | ¥ | — | | | ¥ | 1,071 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign offices and subsidiaries | | | Foreign offices and subsidiaries | | Assets category | | March 31,
2016 | | Realized
gains
(losses) | | Unrealized
gains
(losses) | | Purchase,
sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | March 31,
2017 | | | March 31,
2017 | | | Realized
gains
(losses) | | Unrealized
gains
(losses) | | Purchase,
sales and
settlements | | Transfer
into
Level 3 | | | Transfer
out of
Level 3 | | | March 31,
2018 | | | | | (in millions) | | | (in millions) | | Other investments | | ¥ | 985 | | | ¥ | — | | | ¥ | (34 | ) | | ¥ | (191 | ) | | ¥ | — | | | ¥ | — | | | ¥ | 760 | | | ¥ | 760 | | | ¥ | 51 | | | ¥ | (2 | ) | | ¥ | (654 | ) | | ¥ | — | | | ¥ | — | | | ¥ | 155 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 985 | | | ¥ | — | | | ¥ | (34 | ) | | ¥ | (191 | ) | | ¥ | — | | | ¥ | — | | | ¥ | 760 | | | ¥ | 760 | | | ¥ | 51 | | | ¥ | (2 | ) | | ¥ | (654 | ) | | ¥ | — | | | ¥ | — | | | ¥ | 155 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Domestic subsidiaries | | | Domestic subsidiaries | | Assets category | | March 31,
2017 | | Realized
gains
(losses) | | Unrealized
gains
(losses) | | Purchase,
sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | March 31,
2018 | | | March 31,
2018 | | | Realized
gains
(losses) | | Unrealized
gains
(losses) | | Purchase,
sales and
settlements | | Transfer
into
Level 3 | | | Transfer
out of
Level 3 | | | March 31,
2019 | | | | | (in millions) | | | (in millions) | | Other debt securities | | ¥ | 208 | | | ¥ | (6 | ) | | ¥ | (18 | ) | | ¥ | 887 | | | ¥ | — | | | ¥ | — | | | ¥ | 1,071 | | | ¥ | 1,071 | | | ¥ | 4 | | | ¥ | 49 | | | ¥ | (94 | ) | | ¥ | — | | | ¥ | — | | | ¥ | 1,030 | | Other investment funds | | 206 | | | 36 | | | | — | | | (242 | ) | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 414 | | | ¥ | 30 | | | ¥ | (18 | ) | | ¥ | 645 | | | ¥ | — | | | ¥ | — | | | ¥ | 1,071 | | | ¥ | 1,071 | | | ¥ | 4 | | | ¥ | 49 | | | ¥ | (94 | ) | | ¥ | — | | | ¥ | — | | | ¥ | 1,030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign offices and subsidiaries | | | Foreign offices and subsidiaries | | Assets category | | March 31,
2017 | | Realized
gains
(losses) | | Unrealized
gains
(losses) | | Purchase,
sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | March 31,
2018 | | | March 31,
2018 | | | Realized
gains
(losses) | | Unrealized
gains
(losses) | | Purchase,
sales and
settlements | | Transfer
into
Level 3 | | | Transfer
out of
Level 3 | | | March 31,
2019 | | | | | (in millions) | | | (in millions) | | Other investments | | ¥ | 760 | | | ¥ | 51 | | | ¥ | (2 | ) | | ¥ | (654 | ) | | ¥ | — | | | ¥ | — | | | ¥ | 155 | | | ¥ | 155 | | | ¥ | — | | | ¥ | (3 | ) | | ¥ | 36 | | | ¥ | — | | | ¥ | — | | | ¥ | 188 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 760 | | | ¥ | 51 | | | ¥ | (2 | ) | | ¥ | (654 | ) | | ¥ | — | | | ¥ | — | | | ¥ | 155 | | | ¥ | 155 | | | ¥ | — | | | ¥ | (3 | ) | | ¥ | 36 | | | ¥ | — | | | ¥ | — | | | ¥ | 188 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Defined Contribution Plans The MUFG Group maintains several qualified defined contribution plans in its domestic and foreign offices and subsidiaries, all of which are administered in accordance with applicable local laws and regulations. Each office and subsidiary matches eligible employee contributions up to a certain percentage of benefits-eligible compensation per pay period, subject to plan and legal limits. Terms of the plan, including matching percentage and vesting periods, are individually determined by each office and subsidiary. The cost of these defined contribution plans charged to operations for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 was ¥16,254 million, ¥15,636 million, and ¥17,413 million and ¥17,859 million, respectively. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| 14. | | OTHER ASSETS AND LIABILITIES |
Major components of other assets and liabilities at March 31, 20172018 and 20182019 were as follows: | | | | | | | | | | | | 2017 | | | 2018 | | | | | (in millions) | | Other assets: | | | | | | | | | Accounts receivable: | | | | | | | | | Receivables from brokers, dealers and customers for securities transactions | | ¥ | 546,747 | | | ¥ | 1,017,194 | | Other | | | 1,043,766 | | | | 1,190,885 | | Investments in equity method investees | | | 2,199,706 | | | | 2,219,196 | | Prepaid benefit cost (Note 13) | | | 612,623 | | | | 884,979 | | Cash collateral pledged for derivative transactions (Note 8) | | | 1,663,945 | | | | 1,473,109 | | Cash collateral for the use of Bank of Japan’s settlement infrastructure(1) | | | 207,498 | | | | 851,066 | | Other | | | 2,440,258 | | | | 3,029,635 | | | | | | | | | | | Total | | ¥ | 8,714,543 | | | ¥ | 10,666,064 | | | | | | | | | | | Other liabilities: | | | | | | | | | Accounts payable: | | | | | | | | | Payables to brokers, dealers and customers for securities transactions | | ¥ | 646,638 | | | ¥ | 1,247,652 | | Other | | | 1,322,498 | | | | 1,357,387 | | Deferred tax liabilities | | | 413,730 | | | | 654,053 | | Allowance foroff-balance sheet credit instruments | | | 178,118 | | | | 81,739 | | Accrued benefit cost (Note 13) | | | 66,028 | | | | 64,735 | | Guarantees and indemnifications | | | 38,904 | | | | 41,349 | | Cash collateral received for derivative transactions (Note 8) | | | 1,080,929 | | | | 1,158,053 | | Accrued and other liabilities | | | 3,008,320 | | | | 2,802,445 | | | | | | | | | | | Total | | ¥ | 6,755,165 | | | ¥ | 7,407,413 | | | | | | | | | | |
(1) | | Certain reclassifications have been made to prior period to conform to the current presentation. |
| | | | | | | | | | | | 2018 | | | 2019 | | | | | (in millions) | | Other assets: | | | | | | | | | Accounts receivable: | | | | | | | | | Receivables from brokers, dealers and customers for securities transactions | | ¥ | 1,017,194 | | | ¥ | 1,141,075 | | Other | | | 1,190,885 | | | | 1,394,794 | | Investments in equity method investees | | | 2,219,196 | | | | 2,487,389 | | Prepaid benefit cost (Note 13) | | | 884,979 | | | | 839,757 | | Cash collateral pledged for derivative transactions (Note 8) | | | 1,473,109 | | | | 1,276,897 | | Cash collateral for the use of Bank of Japan’s settlement infrastructure | | | 851,066 | | | | 911,528 | | Other | | | 3,029,635 | | | | 2,990,462 | | | | | | | | | | | Total | | ¥ | 10,666,064 | | | ¥ | 11,041,902 | | | | | | | | | | | Other liabilities: | | | | | | | | | Accounts payable: | | | | | | | | | Payables to brokers, dealers and customers for securities transactions | | ¥ | 1,247,652 | | | ¥ | 1,289,672 | | Other | | | 1,357,387 | | | | 1,308,733 | | Deferred tax liabilities | | | 654,053 | | | | 624,062 | | Allowance foroff-balance sheet credit instruments | | | 81,739 | | | | 119,307 | | Accrued benefit cost (Note 13) | | | 64,735 | | | | 65,690 | | Guarantees and indemnifications | | | 41,349 | | | | 45,346 | | Cash collateral received for derivative transactions (Note 8) | | | 1,158,053 | | | | 844,234 | | Accrued and other liabilities | | | 2,802,445 | | | | 3,061,462 | | | | | | | | | | | Total | | ¥ | 7,407,413 | | | ¥ | 7,358,506 | | | | | | | | | | |
Investments in equity method investees include marketable equity securities carried at ¥1,602,702¥1,627,896 million and ¥1,627,896¥1,936,468 million at March 31, 20172018 and 2018,2019, respectively. Corresponding aggregated market values were ¥2,701,170¥3,186,618 million and ¥3,186,618¥2,702,838 million, respectively. Marketable equity securities include Morgan Stanley’s common stock carried at ¥1,178,919¥1,206,998 million and ¥1,206,998¥1,326,339 million at March 31, 20172018 and 2018,2019, respectively. As of March 31, 2018,2019, the MUFG Group held approximately 24.35%24.01% of its common stock. Investments in equity method investees also include investments in Morgan Stanley MUFG Securities, Co., Ltd. at ¥172,424¥174,459 million and ¥174,459¥178,679 million at March 31, 20172018 and 2018,2019, respectively. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The MUFG Group periodically evaluates whether a loss in value of investments in equity method investees is other-than-temporary. As a result of evaluations, the MUFG Group recognized other-than-temporary declines in the value of an investment and recorded impairment losses related to certain affiliated companies of ¥681 million, ¥5,465 million, ¥29,442 million and ¥29,442¥51,645 million for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 respectively. The impairment losses are included in Equity in earnings of equity method investees—net in the accompanying consolidated statements of income. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 20172018 and 2018,2019, and for each of the three years ended March 31, 20182019 is as follows: | | | | 2017(1) | | | 2018 | | | 2018 | | | 2019 | | | | | (in billions) | | | (in billions) | | Trading assets | | ¥ | 31,900 | | | ¥ | 29,008 | | | ¥ | 29,008 | | | ¥ | 29,392 | | Securities purchased under agreements to resell | | | 11,760 | | | | 8,525 | | | | 8,525 | | | | 10,718 | | Securities borrowed | | | 12,543 | | | | 14,431 | | | | 14,431 | | | | 15,416 | | Total assets | | | 93,386 | | | | 91,207 | | | | 91,207 | | | | 97,223 | | Deposits | | | 17,065 | | | | 17,043 | | | | 17,043 | | | | 19,948 | | Customer and other payables | | | 21,265 | | | | 20,709 | | | | 20,709 | | | | 21,431 | | Borrowings | | | 19,500 | | | | 20,713 | | | | 20,713 | | | | 21,165 | | Total liabilities | | | 84,514 | | | | 82,762 | | | | 82,762 | | | | 88,134 | | Noncontrolling interests | | | 130 | | | | 155 | | | | 155 | | | | 130 | |
| | | | | | | | | | | | | | | | 2017 | | | 2018 | | | 2019 | | | | | (in billions) | | Net revenues | | ¥ | 3,939 | | | ¥ | 4,354 | | | ¥ | 4,365 | | Totalnon-interest expenses | | | 2,871 | | | | 3,133 | | | | 3,170 | | Income from continuing operations before income taxes | | | 1,068 | | | | 1,221 | | | | 1,195 | | Net income applicable to Morgan Stanley | | | 730 | | | | 759 | | | | 944 | |
Note:
(1) | | Certain reclassifications have been made to prior period to conform to the current presentation. |
| | | | | | | | | | | | | | | | 2016 | | | 2017 | | | 2018 | | | | | (in billions) | | Net revenues | | ¥ | 3,961 | | | ¥ | 3,939 | | | ¥ | 4,354 | | Totalnon-interest expenses | | | 3,076 | | | | 2,871 | | | | 3,133 | | Income from continuing operations before income taxes | | | 885 | | | | 1,068 | | | | 1,221 | | Net income applicable to Morgan Stanley | | | 585 | | | | 730 | | | | 759 | |
Morgan Stanley early adopted, retrospective to January 1, 2016, the provisions of new accounting guidance on “Recognition and Measurement of Financial Assets and Financial Liabilities” related to a change in the instrument-specific credit risk on financial liabilities under the fair value option. This resulted in reclassifying the MUFG Group’s proportionate share of the accumulated DVA of Morgan Stanley from retained earnings to AOCI as reflected on the MUFG Group’s consolidated statement of equity. In connection with the new accounting guidance, changes in DVA fair value are presented separately in other comprehensive income.
In addition, 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 cumulativecatch-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.
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, 20172018 and 2018,2019, and for each of the three years ended March 31, 20182019 is as follows: | | | | | | | | | | | | 2017 | | | 2018 | | | | | (in billions) | | Net loans | | ¥ | 13,405 | | | ¥ | 14,343 | | Total assets | | | 24,273 | | | | 26,008 | | Deposits | | | 6,946 | | | | 7,783 | | Total liabilities | | | 19,678 | | | | 21,209 | | Noncontrolling interests | | | 841 | | | | 1,009 | |
| | | | | | | | | | | | | | | | 2016 | | | 2017 | | | 2018 | | | | | (in billions) | | Total interest income | | ¥ | 661 | | | ¥ | 777 | | | ¥ | 901 | | Total interest expense | | | 222 | | | | 252 | | | | 329 | | Net interest income | | | 439 | | | | 525 | | | | 572 | | Provision for credit losses | | | 92 | | | | 97 | | | | 136 | | Income before income tax expense | | | 171 | | | | 147 | | | | 337 | | Net income | | | 117 | | | | 97 | | | | 229 | |
| | | | | | | | | | | | 2018 | | | 2019 | | | | | (in billions) | | Net loans | | ¥ | 14,343 | | | ¥ | 15,772 | | Total assets | | | 26,008 | | | | 28,910 | | Deposits | | | 7,783 | | | | 9,103 | | Total liabilities | | | 21,209 | | | | 23,423 | | Noncontrolling interests | | | 1,009 | | | | 1,135 | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | 2017 | | | 2018 | | | 2019 | | | | | (in billions) | | Total interest income | | ¥ | 777 | | | ¥ | 901 | | | ¥ | 1,036 | | Total interest expense | | | 252 | | | | 329 | | | | 430 | | Net interest income | | | 525 | | | | 572 | | | | 606 | | Provision for credit losses | | | 97 | | | | 136 | | | | 157 | | Income before income tax expense | | | 147 | | | | 337 | | | | 205 | | Net income | | | 97 | | | | 229 | | | | 135 | |
| 15. | | OFFSETTING OF DERIVATIVES, REPURCHASE AGREEMENTS, AND SECURITIES LENDING TRANSACTIONS |
The following tables present, as of March 31, 20172018 and 2018,2019, the gross and net amounts of the derivatives, resale and repurchase agreements, and securities borrowing and lending transactions, including the related gross amounts subject to an enforceable master netting arrangement or similar agreement not offset in the consolidated balance sheets. The MUFG Group primarily enters into International Swaps and Derivatives Association master netting agreements, master repurchase agreements and master securities lending agreements or similar agreements for derivative contracts, resale and repurchase agreements, and securities borrowing and lending transactions. In the event of default on or termination of any one contract, these agreements provide the contracting parties with the right to net a counterparty’s rights and obligations and to liquidate and setoff collateral against any net amount owed by the counterparty. Generally, as the MUFG Group has elected to present such amounts on a gross basis, the amounts subject to these agreements are included in “Gross amounts not offset in the consolidated balance sheet” column in the tabular disclosure below. For certain transactions where a legal opinion with respect to the enforceability of netting has not been sought or obtained, the related amounts are not subject to enforceable master netting agreements and not included in “Gross amounts not offset in the consolidated balance sheet” column in the tabular disclosure below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At March 31, 2017 | | 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 | | Net amounts | | | | | | Financial
instruments | | Cash collateral
received/pledged | | | At March 31, 2018 | | | 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 | | | Net amounts | | | | Financial
instruments | | Cash collateral
received/pledged | | | | | (in billions) | | | (in billions) | | Financial assets: | | | | | | | | | | | | | | | | | | | | | | | | | Derivative assets | | ¥ | 18,835 | | | ¥ | — | | | ¥ | 18,835 | | | ¥ | (15,053 | ) | | ¥ | (726 | ) | | ¥ | 3,056 | | | ¥ | 12,585 | | | ¥ | — | | | ¥ | 12,585 | | | ¥ | (9,664 | ) | | ¥ | (832 | ) | | ¥ | 2,089 | | Receivables under resale agreements | | 11,044 | | | (2,856 | ) | | 8,188 | | | (7,461 | ) | | (11 | ) | | 716 | | | | 8,825 | | | | (3,099 | ) | | | 5,726 | | | | (5,171 | ) | | | (17 | ) | | | 538 | | Receivables under securities borrowing transactions | | 11,003 | | | | — | | | 11,003 | | | (10,880 | ) | | (9 | ) | | 114 | | | | 9,305 | | | | (36 | ) | | | 9,269 | | | | (9,208 | ) | | | (1 | ) | | | 60 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 40,882 | | | ¥ | (2,856 | ) | | ¥ | 38,026 | | | ¥ | (33,394 | ) | | ¥ | (746 | ) | | ¥ | 3,886 | | | ¥ | 30,715 | | | ¥ | (3,135 | ) | | ¥ | 27,580 | | | ¥ | (24,043 | ) | | ¥ | (850 | ) | | ¥ | 2,687 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities | | ¥ | 18,562 | | | ¥ | — | | | ¥ | 18,562 | | | ¥ | (15,063 | ) | | ¥ | (1,229 | ) | | ¥ | 2,270 | | | ¥ | 11,877 | | | ¥ | — | | | ¥ | 11,877 | | | ¥ | (9,631 | ) | | ¥ | (1,126 | ) | | ¥ | 1,120 | | Payables under repurchase agreements | | 20,549 | | | (2,856 | ) | | 17,693 | | | (17,489 | ) | | (11 | ) | | 193 | | | | 21,169 | | | | (3,034 | ) | | | 18,135 | | | | (17,890 | ) | | | (31 | ) | | | 214 | | Payables under securities lending transactions | | 5,549 | | | | — | | | 5,549 | | | (5,526 | ) | | (8 | ) | | 15 | | | | 8,206 | | | | (36 | ) | | | 8,170 | | | | (8,139 | ) | | | (12 | ) | | | 19 | | Obligations to return securities received as collateral | | 3,516 | | | | — | | | 3,516 | | | (492 | ) | | | — | | | 3,024 | | | | 3,177 | | | | — | | | | 3,177 | | | | (1,072 | ) | | | — | | | | 2,105 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 48,176 | | | ¥ | (2,856 | ) | | ¥ | 45,320 | | | ¥ | (38,570 | ) | | ¥ | (1,248 | ) | | ¥ | 5,502 | | | ¥ | 44,429 | | | ¥ | (3,070 | ) | | ¥ | 41,359 | | | ¥ | (36,732 | ) | | ¥ | (1,169 | ) | | ¥ | 3,458 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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 | | | Net amounts | | At March 31, 2018 | | | | | Financial
instruments | | | Cash collateral
received/pledged | | | | | | (in billions) | | Financial assets: | | | | | | | | | | | | | | | | | | | | | | | | | Derivative assets | | ¥ | 12,585 | | | ¥ | — | | | ¥ | 12,585 | | | ¥ | (9,664 | ) | | ¥ | (832 | ) | | ¥ | 2,089 | | Receivables under resale agreements | | | 8,825 | | | | (3,099 | ) | | | 5,726 | | | | (5,171 | ) | | | (17 | ) | | | 538 | | Receivables under securities borrowing transactions | | | 9,305 | | | | (36 | ) | | | 9,269 | | | | (9,208 | ) | | | (1 | ) | | | 60 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 30,715 | | | ¥ | (3,135 | ) | | ¥ | 27,580 | | | ¥ | (24,043 | ) | | ¥ | (850 | ) | | ¥ | 2,687 | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities | | ¥ | 11,877 | | | ¥ | — | | | ¥ | 11,877 | | | ¥ | (9,631 | ) | | ¥ | (1,126 | ) | | ¥ | 1,120 | | Payables under repurchase agreements | | | 21,169 | | | | (3,034 | ) | | | 18,135 | | | | (17,890 | ) | | | (31 | ) | | | 214 | | Payables under securities lending transactions | | | 8,206 | | | | (36 | ) | | | 8,170 | | | | (8,139 | ) | | | (12 | ) | | | 19 | | Obligations to return securities received as collateral | | | 3,177 | | | | — | | | | 3,177 | | | | (1,072 | ) | | | — | | | | 2,105 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 44,429 | | | ¥ | (3,070 | ) | | ¥ | 41,359 | | | ¥ | (36,732 | ) | | ¥ | (1,169 | ) | | ¥ | 3,458 | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | At March 31, 2019 | | 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 | | | Net amounts | | | | Financial
instruments | | | Cash collateral
received/pledged | | | | | (in billions) | | Financial assets: | | | | | | | | | | | | | | | | | | | | | | | | | Derivative assets | | ¥ | 13,205 | | | ¥ | — | | | ¥ | 13,205 | | | ¥ | (10,752 | ) | | ¥ | (590 | ) | | ¥ | 1,863 | | Receivables under resale 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 | | ¥ | 12,710 | | | ¥ | — | | | ¥ | 12,710 | | | ¥ | (10,671 | ) | | ¥ | (933 | ) | | ¥ | 1,106 | | Payables under repurchase agreements | | | 28,125 | | | | (2,900 | ) | | | 25,225 | | | | (24,930 | ) | | | (15 | ) | | | 280 | | Payables under securities lending transactions | | | 913 | | | | — | | | | 913 | | | | (880 | ) | | | — | | | | 33 | | Obligations to return securities received as collateral | | | 3,087 | | | | — | | | | 3,087 | | | | (1,244 | ) | | | — | | | | 1,843 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 44,835 | | | ¥ | (2,900 | ) | | ¥ | 41,935 | | | ¥ | (37,725 | ) | | ¥ | (948 | ) | | ¥ | 3,262 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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, 20172018 and 2018.2019. Potential risks associated with these arrangements primarily relate to market and liquidity risks. To manage risks associated with market exposure, the MUFG Group generally revalues the collateral underlying its repurchase agreements and securities lending transactions on a daily basis and monitors the value of the underlying securities, consisting of primarily high-quality securities such as Japanese national government and Japanese government agency bonds, and foreign governmentsgovernment and official institutionsinstitution 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. | | | | March 31, 2017 | | | March 31, 2018 | | | | | Remaining Contractual Maturity | | | Remaining Contractual Maturity | | | | | Overnight
and open | | | 30 days
or less | | | 31-90
days | | | Over
90 days | | | Total | | | Overnight
and open | | | 30 days
or less | | | 31-90
days | | | Over
90 days | | | Total | | | | | (in billions) | | | (in billions) | | Payables under repurchase agreements | | ¥ | 2,309 | | | ¥ | 13,455 | | | ¥ | 3,083 | | | ¥ | 1,702 | | | ¥ | 20,549 | | | ¥ | 2,290 | | | ¥ | 14,328 | | | ¥ | 2,004 | | | ¥ | 2,547 | | | ¥ | 21,169 | | Payables under securities lending transactions | | | 1,811 | | | | 1,970 | | | | 1,768 | | | | — | | | | 5,549 | | | | 4,647 | | | | 2,343 | | | | 1,216 | | | | — | | | | 8,206 | | Obligations to return securities received as collateral | | | 3,329 | | | | 102 | | | | 85 | | | | — | | | | 3,516 | | | | 2,855 | | | | 202 | | | | 120 | | | | — | | | | 3,177 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 7,449 | | | ¥ | 15,527 | | | ¥ | 4,936 | | | ¥ | 1,702 | | | ¥ | 29,614 | | | ¥ | 9,792 | | | ¥ | 16,873 | | | ¥ | 3,340 | | | ¥ | 2,547 | | | ¥ | 32,552 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2018 | | | | | | Remaining Contractual Maturity | | | | | | Overnight
and open | | | 30 days
or less | | | 31-90
days | | | Over
90 days | | | Total | | | | | | (in billions) | | | Payables under repurchase agreements | | ¥ | 2,290 | | | ¥ | 14,328 | | | ¥ | 2,004 | | | ¥ | 2,547 | | | ¥ | 21,169 | | | Payables under securities lending transactions | | | 4,647 | | | | 2,343 | | | | 1,216 | | | | — | | | | 8,206 | | | Obligations to return securities received as collateral | | | 2,855 | | | | 202 | | | | 120 | | | | — | | | | 3,177 | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 9,792 | | | ¥ | 16,873 | | | ¥ | 3,340 | | | ¥ | 2,547 | | | ¥ | 32,552 | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2019 | | | | | Remaining Contractual Maturity | | | | | Overnight
and open | | | 30 days
or less | | | 31-90
days | | | Over
90 days | | | Total | | | | | (in billions) | | Payables under repurchase agreements | | ¥ | 3,892 | | | ¥ | 18,586 | | | ¥ | 2,824 | | | ¥ | 2,823 | | | ¥ | 28,125 | | Payables under securities lending transactions | | | 913 | | | | — | | | | — | | | | — | | | | 913 | | Obligations to return securities received as collateral | | | 2,572 | | | | 396 | | | | 117 | | | | 2 | | | | 3,087 | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 7,377 | | | ¥ | 18,982 | | | ¥ | 2,941 | | | ¥ | 2,825 | | | ¥ | 32,125 | | | | | | | | | | | | | | | | | | | | | | |
Secured borrowing by the class of collateral pledged at March 31, 20172018 and 20182019 was as follows: | | | | March 31, 2017 | | | March 31, 2018 | | | | | Payables under
repurchase
agreements | | | Payables under
securities lending
transactions | | | Obligations
to return
securities received
as collateral | | | Total | | | Payables under
repurchase
agreements | | | Payables under
securities lending
transactions | | | Obligations
to return
securities received
as collateral | | | Total | | | | | (in billions) | | | (in billions) | | Japanese national government and Japanese government agency bonds | | ¥ | 2,975 | | | ¥ | 5,030 | | | ¥ | 2,020 | | | ¥ | 10,025 | | | ¥ | 2,462 | | | ¥ | 7,085 | | | ¥ | 1,242 | | | ¥ | 10,789 | | Foreign governments and official institutions bonds | | | 13,195 | | | | — | | | | 1,101 | | | | 14,296 | | | Foreign government and official institution bonds | | | | 14,316 | | | | 36 | | | | 1,344 | | | | 15,696 | | Corporate bonds | | | 636 | | | | 1 | | | | 117 | | | | 754 | | | | 570 | | | | — | | | | 84 | | | | 654 | | Residential mortgage-backed securities | | | 3,401 | | | | — | | | | — | | | | 3,401 | | | | 3,567 | | | | — | | | | — | | | | 3,567 | | Other debt securities | | | 205 | | | | — | | | | 3 | | | | 208 | | | | 121 | | | | — | | | | — | | | | 121 | | Marketable equity securities | | | 104 | | | | 518 | | | | 275 | | | | 897 | | | | 123 | | | | 1,085 | | | | 507 | | | | 1,715 | | Others | | | 33 | | | | — | | | | — | | | | 33 | | | | 10 | | | | — | | | | — | | | | 10 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 20,549 | | | ¥ | 5,549 | | | ¥ | 3,516 | | | ¥ | 29,614 | | | ¥ | 21,169 | | | ¥ | 8,206 | | | ¥ | 3,177 | | | ¥ | 32,552 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2018 | | | March 31, 2019 | | | | | Payables under
repurchase
agreements | | | Payables under
securities lending
transactions | | | Obligations
to return
securities received
as collateral | | | Total | | | Payables under
repurchase
agreements | | | Payables under
securities lending
transactions | | | Obligations
to return
securities received
as collateral | | | Total | | | | | (in billions) | | | (in billions) | | Japanese national government and Japanese government agency bonds | | ¥ | 2,462 | | | ¥ | 7,085 | | | ¥ | 1,242 | | | ¥ | 10,789 | | | ¥ | 8,306 | | | ¥ | 21 | | | ¥ | 856 | | | ¥ | 9,183 | | Foreign governments and official institutions bonds | | | 14,316 | | | | 36 | | | | 1,344 | | | | 15,696 | | | Foreign government and official institution bonds | | | | 14,291 | | | | — | | | | 1,286 | | | | 15,577 | | Corporate bonds | | | 570 | | | | — | | | | 84 | | | | 654 | | | | 705 | | | | — | | | | 172 | | | | 877 | | Residential mortgage-backed securities | | | 3,567 | | | | — | | | | — | | | | 3,567 | | | | 4,369 | | | | — | | | | — | | | | 4,369 | | Other debt securities | | | 121 | | | | — | | | | — | | | | 121 | | | | 238 | | | | — | | | | — | | | | 238 | | Marketable equity securities | | | 123 | | | | 1,085 | | | | 507 | | | | 1,715 | | | | 200 | | | | 892 | | | | 772 | | | | 1,864 | | Others | | | 10 | | | | — | | | | — | | | | 10 | | | | 16 | | | | — | | | | 1 | | | | 17 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 21,169 | | | ¥ | 8,206 | | | ¥ | 3,177 | | | ¥ | 32,552 | | | ¥ | 28,125 | | | ¥ | 913 | | | ¥ | 3,087 | | | ¥ | 32,125 | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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, 2018.2019. All classes of preferred stock arenon-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 allnon-cumulative andnon-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, 2016, 2017, 2018 and 2018,2019, there was no preferred stock outstanding and the entire amount of Capital stock on the consolidated balance sheets consisted of only common stock. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| 18. | | COMMON STOCK AND CAPITAL SURPLUS |
The changes in the number of issued shares of common stock during the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 were as follows: | | | | 2016 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | 2019 | | | | | (shares) | | | (shares) | | Balance at beginning of fiscal year | | | 14,168,853,820 | | | | 14,168,853,820 | | | | 14,168,853,820 | | | | 14,168,853,820 | | | | 14,168,853,820 | | | 13,900,028,020 | | Retirement of shares of common stock | | | — | | | | — | | | | (268,825,800 | ) | | | — | | | | (268,825,800 | ) | | (232,257,500 | ) | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | | 14,168,853,820 | | | | 14,168,853,820 | | | | 13,900,028,020 | | | | 14,168,853,820 | | | | 13,900,028,020 | | | 13,667,770,520 | | | | | | | | | | | | | | | | | | | | |
Under the Companies Act, issuances of common stock, including conversions of bonds and notes, are required to be credited to the common stock account for at least 50% of the proceeds and to the legal capital surplus account (“legal capital surplus”) for the remaining amounts. The Companies Act permits Japanese companies, upon approval by the Board of Directors, to issue shares in the form of a “stock split,” as defined in the Companies Act. Also, prior to April 1, 1991, Japanese companies were permitted to issue free share distributions. MUFG Bank and Mitsubishi UFJ Trust and Banking from time to time made free share distributions. These free distributions usually ranged from 5% to 10% of outstanding common stock and publicly-owned corporations in the United States issuing shares in similar transactions would be required to account for them as stock dividends as of the shareholders’ record date by reducing retained earnings and increasing the appropriate capital accounts by an amount equal to the fair value of the shares issued. The application of such U.S. accounting practices to the cumulative free distributions made by MUFG Bank and Mitsubishi UFJ Trust and Banking at March 31, 2018,2019, would have increased capital accounts by ¥1,910,106 million with a corresponding decrease in unappropriated retained earnings. The Companies Act permits that common stock, legal reserve, additionalpaid-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 ofpaid-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. 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 18, 2015 to June 16, 2015, MUFG repurchased 111,151,800 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 May 15, 2015. The repurchase plan, as authorized by the Board of Directors of MUFG, allowed for the repurchase of an aggregate amount of up to 160,000,000 shares, which represents the
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
equivalent of 1.14% of the total number of common shares outstanding, or of an aggregate repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve capital efficiency, and to implement flexible capital policies.
From November 16, 2015 to December 8, 2015, MUFG repurchased 121,703,700 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, 2015. The repurchase plan, as authorized by the Board of Directors of MUFG, allowed for the repurchase of an aggregate amount of up to 140,000,000 shares, which represents the equivalent of 1.01% of the total number of common shares outstanding, or of an aggregate repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve capital efficiency, and to implement flexible capital policies.
From May 17, 2016 to June 13, 2016, MUFG repurchased 190,614,800 shares of MUFG’s common stock. These purchases were made throughOff-Auction Own Share Repurchase Trading(ToSTNeT-3) of the Tokyo Stock Exchange and by market purchases based on the discretionary dealing contract regarding repurchase of own shares for approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on May 16, 2016. The repurchase plan as authorized by the Board of Directors of MUFG allowed for the repurchase of an aggregate amount of up to 230,000,000 shares, which represents the equivalent of 1.67% of the total number of common shares outstanding, or of an aggregate repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve capital efficiency, and to implement flexible capital policies. From November 15, 2016 to December 22, 2016, MUFG repurchased 142,238,800 shares of MUFG’s common stock by market purchases based on the discretionary dealing contract regarding repurchase of own shares for approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on November 14, 2016. The repurchase plan, as authorized by the Board of Directors of MUFG, allowed for the repurchase of an aggregate amount of up to 230,000,000 shares, which represents the equivalent of 1.69% of the total number of common shares outstanding, or of an aggregate repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve capital efficiency, and to implement flexible capital policies. From May 16, 2017 to June 21, 2017 MUFG repurchased 141,158,900 shares of MUFG’s common stock by market purchases based on the discretionary dealing contract regarding repurchase of own shares for approximately ¥100 billion in aggregate in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on May 15, 2017. The repurchase plan as authorized by the Board of Directors of MUFG allowed for the repurchase of an aggregate amount of up to 200,000,000 shares, which represents the equivalent of 1.49% of the total number of common shares outstanding, or of an aggregate repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve capital efficiency, and to implement flexible capital policies. On July 20, 2017, MUFG cancelled all the acquired shares in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on May 15, 2017. From November 15, 2017 to December 22, 2017, MUFG repurchased 127,666,900 shares of MUFG’s common stock by market purchases based on the discretionary dealing contract regarding repurchase of own shares for approximately ¥100 billion, in aggregate, in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on November 14, 2017. The repurchase plan as authorized by the Board of Directors of MUFG allowed for the repurchase of an aggregate amount of up to 200,000,000 shares, which MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) From May 16, 2018 to June 4, 2018, MUFG repurchased 72,420,700 shares of MUFG’s common stock by market purchases based on the discretionary dealing contract regarding repurchase of own shares for approximately ¥50 billion, in aggregate, in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on May 15, 2018. The repurchase plan as authorized by the Board of Directors of MUFG allowed for the repurchase of an aggregate amount of up to 100,000,000 shares, which represents the equivalent of 0.76% of the total number of common shares outstanding, or of an aggregate repurchase amount of up to ¥50 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve capital efficiency, and to implement flexible capital policies. On July 20, 2018, MUFG cancelled all of the acquired shares in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on May 15, 2018. From November 14, 2018 to December 10, 2018, MUFG repurchased 159,836,800 shares of MUFG’s common stock by market purchases based on the discretionary dealing contract regarding repurchase of own shares for approximately ¥100 billion, in aggregate, in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on November 13, 2018. The repurchase plan as authorized by the Board of Directors of MUFG allowed for the repurchase of an aggregate amount of up to 200,000,000 shares, which represents the equivalent of 1.52% of the total number of common shares outstanding, or of an aggregate repurchase amount of up to ¥100 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve capital efficiency, and to implement flexible capital policies. On January 22, 2019, MUFG cancelled all of the acquired shares in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on November 13, 2018. Parent Company Shares Held by Subsidiaries and Affiliated Companies At March 31, 2018,2019, certain subsidiaries and affiliated companies owned shares of common stock of MUFG. Such shares are included in treasury stock in the accompanying consolidated balance sheets and deducted from the MUFG’s shareholders’ equity. | 19. | | RETAINED EARNINGS, LEGAL RESERVE AND DIVIDENDS |
In addition to the Companies Act, Japanese banks, including MUFG Bank and Mitsubishi UFJ Trust and Banking, are required to comply with the Banking Law of Japan (the “Banking Law”). Legal Reserve Set Aside as Appropriation of Retained Earnings and Legal Capital Surplus Under the Companies Act The Companies Act provides that an amount at least equal to 10% of the aggregate amount of cash dividends and certain appropriations of retained earnings associated with cash outlays applicable to each period shall be appropriated and set aside as a legal reserve until the aggregate amount of legal reserve set aside as an appropriation of retained earnings and the legal capital surplus equals 25% of stated capital as defined in the Companies Act. Under the Banking Law The Banking Law provides that an amount at least equal to 20% of the aggregate amount of cash dividends and certain appropriations of retained earnings associated with cash outlays applicable to each fiscal year shall be appropriated and set aside as a legal reserve until the aggregate amount of legal reserve set aside as appropriation of retained earnings and the legal capital surplus equals 100% of stated capital as defined in the Companies Act. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Transfer of Legal Reserve Under the Companies Act Under the Companies Act, Japanese companies, including MUFG, were permitted, pursuant to a resolution by the shareholders at a general meeting, to make legal reserve set aside as appropriation of retained earnings and legal capital surplus available for dividends until the aggregate amount of the legal reserve and legal capital surplus equals 25% of stated capital as defined in the Companies Act. Under the Companies Act, Japanese companies, including MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking, are permitted, primarily pursuant to a resolution by the shareholders at a general meeting, to transfer legal capital surplus and legal reserve to stated capital and/or retained earnings without limitations of thresholds, thereby effectively removing the thresholds provided for in the Companies Act and Banking Law at the company’s discretion. 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, 2018,2019, was ¥4,515,486¥4,221,793 million, which is based on the amount recorded in MUFG’s general books of account under Japanese GAAP. Annual dividends, including those for preferred stock, are approved by the shareholders at an annual general meeting held subsequent to the fiscal year to which the dividends are applicable. In addition, a semi-annual interim dividend payment may be made by resolution of the Board of Directors, subject to limitations imposed by the Companies Act and the Banking Law. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In the accompanying consolidated statements of equity, dividends and appropriations to legal reserve shown for each fiscal year represent dividends approved and paid during the fiscal year and the related appropriation to legal reserve. 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, 2016, 2017, 2018 and 2018:2019: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Accumulated other comprehensive income (loss), net of taxes: | | | | | | | | | | | | | Net unrealized gains (losses) on investment securities: | | | | | | | | Net unrealized gains (losses) on investment securities(1): | | | | | | | | Balance at beginning of fiscal year | | ¥ | 2,304,555 | | | ¥ | 1,995,314 | | | ¥ | 2,032,807 | | | ¥ | 1,995,314 | | | ¥ | 2,032,807 | | | ¥ | 2,270,346 | | Net change during the fiscal year | | | (309,241 | ) | | 31,984 | | | 244,249 | | | 31,984 | | | 244,249 | | | 60,616 | | Effect of adopting new guidance by a foreign affiliated company | | | — | | | | — | | | 118 | | | | — | | | 118 | | | | — | | Effect of adopting new guidance on consolidation of certain variable interest entities (Note 26) | | | — | | | 5,509 | | | | — | | | 5,509 | | | | — | | | | — | | Effect of adopting new guidance on reclassification on certain tax effects (Note 1) | | | — | | | | — | | | (6,828 | ) | | Effect of adopting new guidance on reclassification on certain tax 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 | | ¥ | 1,995,314 | | | ¥ | 2,032,807 | | | ¥ | 2,270,346 | | | ¥ | 2,032,807 | | | ¥ | 2,270,346 | | | ¥ | (369,369 | ) | | | | | | | | | | | | | | | | | | | | Net debt valuation adjustments (Note 14): | | | | | | | | Net debt valuation adjustments: | | | | | | | | Balance at beginning of fiscal year | | ¥ | — | | | ¥ | (2,080 | ) | | ¥ | (10,632 | ) | | ¥ | (2,080 | ) | | ¥ | (10,632 | ) | | ¥ | (16,488 | ) | Net change during the fiscal year | | | 3,505 | | | (8,552 | ) | | (2,178 | ) | | (8,552 | ) | | (2,178 | ) | | 9,729 | | Effect of adopting new guidance by a foreign affiliated company | | | (5,585 | ) | | | — | | | | — | | | Effect of adopting new guidance on reclassification on certain tax effects (Note 1) | | | — | | | | — | | | (3,678 | ) | | Effect of adopting new guidance on reclassification on certain tax 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 | | ¥ | (2,080 | ) | | ¥ | (10,632 | ) | | ¥ | (16,488 | ) | | ¥ | (10,632 | ) | | ¥ | (16,488 | ) | | ¥ | (8,670 | ) | | | | | | | | | | | | | | | | | | | | Net unrealized gains (losses) on derivatives qualifying for cash flow hedges: | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 2,708 | | | ¥ | 4,516 | | | ¥ | (8,729 | ) | | ¥ | 4,516 | | | ¥ | (8,729 | ) | | ¥ | (19,250 | ) | Net change during the fiscal year | | | 1,808 | | | (13,245 | ) | | (7,025 | ) | | (13,245 | ) | | (7,025 | ) | | (4,890 | ) | Effect of adopting new guidance on reclassification on certain tax effects (Note 1) | | | — | | | | — | | | (3,496 | ) | | Effect of adopting new guidance on reclassification on certain tax effects | | | | — | | | (3,496 | ) | | | — | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 4,516 | | | ¥ | (8,729 | ) | | ¥ | (19,250 | ) | | ¥ | (8,729 | ) | | ¥ | (19,250 | ) | | ¥ | (24,140 | ) | | | | | | | | | | | | | | | | | | | | Defined benefit plans: | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | (187,640 | ) | | ¥ | (317,422 | ) | | ¥ | (214,062 | ) | | ¥ | (317,422 | ) | | ¥ | (214,062 | ) | | ¥ | (119,593 | ) | Net change during the fiscal year | | | (129,782 | ) | | 103,360 | | | 109,012 | | | 103,360 | | | 109,012 | | | (88,680 | ) | Effect of adopting new guidance on reclassification on certain tax effects (Note 1) | | | — | | | | — | | | (14,543 | ) | | Effect of adopting new guidance on reclassification on certain tax effects | | | | — | | | (14,543 | ) | | | — | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | (317,422 | ) | | ¥ | (214,062 | ) | | ¥ | (119,593 | ) | | ¥ | (214,062 | ) | | ¥ | (119,593 | ) | | ¥ | (208,273 | ) | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustments: | | | | | | | | | | | | | Balance at beginning of fiscal year | | ¥ | 947,632 | | | ¥ | 620,931 | | | ¥ | 482,039 | | | ¥ | 620,931 | | | ¥ | 482,039 | | | ¥ | 362,300 | | Net change during the fiscal year | | | (326,701 | ) | | (137,256 | ) | | (119,213 | ) | | (137,256 | ) | | (119,213 | ) | | (36,117 | ) | Effect of adopting new guidance on consolidation of certain variable interest entities (Note 26) | | | — | | | (1,636 | ) | | | — | | | (1,636 | ) | | | — | | | | — | | Effect of adopting new guidance on reclassification on certain tax effects (Note 1) | | | — | | | | — | | | (526 | ) | | Effect of adopting new guidance on reclassification on certain tax effects | | | | — | | | (526 | ) | | | — | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 620,931 | | | ¥ | 482,039 | | | ¥ | 362,300 | | | ¥ | 482,039 | | | ¥ | 362,300 | | | ¥ | 326,183 | | | | | | | | | | | | | | | | | | | | | Balance at end of fiscal year | | ¥ | 2,301,259 | | | ¥ | 2,281,423 | | | ¥ | 2,477,315 | | | ¥ | 2,281,423 | | | ¥ | 2,477,315 | | | ¥ | (284,269 | ) | | | | | | | | | | | | | | | | | | | |
Note: | (1) | | Included unrealized gains (losses) related to only debt securities for the fiscal year ended March 31, 2019. |
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, 2016, 2017, 2018 and 2018:2019: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | Before tax | | 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 | | 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 | | | | | (in millions) | | | (in millions) | | Net unrealized gains (losses) on investment securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net unrealized gains (losses) on investment securities | | ¥ | (172,382 | ) | | ¥ | 81,568 | | | ¥ | (90,814 | ) | | ¥ | 307,476 | | | ¥ | (107,082 | ) | | ¥ | 200,394 | | | ¥ | 631,154 | | | ¥ | (204,916 | ) | | ¥ | 426,238 | | | Net unrealized gains on investment securities(1) | | | ¥ | 307,476 | | | ¥ | (107,082 | ) | | ¥ | 200,394 | | | ¥ | 631,154 | | | ¥ | (204,916 | ) | | ¥ | 426,238 | | | ¥ | 132,723 | | | ¥ | (24,690) | | | ¥ | 108,033 | | Reclassification adjustment for gains included in net income before attribution of noncontrolling interests | | (239,934 | ) | | 80,967 | | | (158,967 | ) | | (274,278 | ) | | 86,845 | | | (187,433 | ) | | (280,258 | ) | | 84,328 | | | (195,930 | ) | | (274,278 | ) | | 86,845 | | | (187,433 | ) | | (280,258 | ) | | 84,328 | | | (195,930 | ) | | (28,953 | ) | | 9,100 | | | (19,853 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net change | | (412,316 | ) | | 162,535 | | | (249,781 | ) | | 33,198 | | | (20,237 | ) | | 12,961 | | | 350,896 | | | (120,588 | ) | | 230,308 | | | 33,198 | | | (20,237 | ) | | 12,961 | | | 350,896 | | | (120,588 | ) | | 230,308 | | | 103,770 | | | (15,590 | ) | | 88,180 | | Net unrealized gains (losses) on investment securities attributable to noncontrolling interests | | | | | | 59,460 | | | | | | | (19,023 | ) | | | | | | (13,941 | ) | | | | | | (19,023 | ) | | | | | | (13,941 | ) | | | | | | 27,564 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net unrealized gains (losses) on investment securities attributable to Mitsubishi UFJ Financial Group | | | | | | (309,241 | ) | | | | | | 31,984 | | | | | | | 244,249 | | | Net unrealized gains on investment securities attributable to Mitsubishi UFJ Financial Group | | | | | | | 31,984 | | | | | | | 244,249 | | | | | | | 60,616 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net debt valuation adjustments (Note 14): | | | | | | | | | | | | | | | | | | | | Net debt valuation adjustments: | | | | | | | | | | | | | | | | | | | | Net debt valuation adjustments | | 6,005 | | | (2,032 | ) | | 3,973 | | | (12,693 | ) | | 3,994 | | | (8,699 | ) | | (3,555 | ) | | 1,088 | | | (2,467 | ) | | (12,693 | ) | | 3,994 | | | (8,699 | ) | | (3,555 | ) | | 1,088 | | | (2,467 | ) | | 13,006 | | | (3,982 | ) | | 9,024 | | Reclassification adjustment for losses (gains) included in net income before attribution of noncontrolling interests | | (707 | ) | | 239 | | | (468 | ) | | 215 | | | (68 | ) | | 147 | | | 417 | | | (128 | ) | | 289 | | | Reclassification adjustment for losses included in net income before attribution of noncontrolling interests | | | 215 | | | (68 | ) | | 147 | | | 417 | | | (128 | ) | | 289 | | | 1,016 | | | (311 | ) | | 705 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net change | | 5,298 | | | (1,793 | ) | | 3,505 | | | (12,478 | ) | | 3,926 | | | (8,552 | ) | | (3,138 | ) | | 960 | | | (2,178 | ) | | (12,478 | ) | | 3,926 | | | (8,552 | ) | | (3,138 | ) | | 960 | | | (2,178 | ) | | 14,022 | | | (4,293 | ) | | 9,729 | | Net debt valuation adjustments attributable to noncontrolling interests | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net debt valuation adjustments attributable to Mitsubishi UFJ Financial Group | | | | | | 3,505 | | | | | | | (8,552 | ) | | | | | | (2,178 | ) | | | | | | (8,552 | ) | | | | | | (2,178 | ) | | | | | | 9,729 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net unrealized gains (losses) on derivatives qualifying for cash flow hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net unrealized gains (losses) on derivatives qualifying for cash flow hedges | | 23,633 | | | (9,320 | ) | | 14,313 | | | (4,321 | ) | | 2,041 | | | (2,280 | ) | | (3,430 | ) | | 1,571 | | | (1,859 | ) | | Reclassification adjustment for gains included in net income before attribution of noncontrolling interests | | (20,599 | ) | | 8,094 | | | (12,505 | ) | | (18,367 | ) | | 7,402 | | | (10,965 | ) | | (8,016 | ) | | 2,850 | | | (5,166 | ) | | Net unrealized losses on derivatives qualifying for cash flow hedges | | | (4,321 | ) | | 2,041 | | | (2,280 | ) | | (3,430 | ) | | 1,571 | | | (1,859 | ) | | (10,397 | ) | | 2,825 | | | (7,572 | ) | Reclassification adjustment for losses (gains) included in net income before attribution of noncontrolling interests | | | (18,367 | ) | | 7,402 | | | (10,965 | ) | | (8,016 | ) | | 2,850 | | | (5,166 | ) | | 3,662 | | | (980 | ) | | 2,682 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net change | | 3,034 | | | (1,226 | ) | | 1,808 | | | (22,688 | ) | | 9,443 | | | (13,245 | ) | | (11,446 | ) | | 4,421 | | | (7,025 | ) | | (22,688 | ) | | 9,443 | | | (13,245 | ) | | (11,446 | ) | | 4,421 | | | (7,025 | ) | | (6,735 | ) | | 1,845 | | | (4,890 | ) | Net unrealized gains 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 | | | | | | 1,808 | | | | | | | (13,245 | ) | | | | | | (7,025 | ) | | Net unrealized losses on derivatives qualifying for cash flow hedges attributable to Mitsubishi UFJ Financial Group | | | | | | | (13,245 | ) | | | | | | (7,025 | ) | | | | | | (4,890 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | Before tax | | 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 | | 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 | | | | | (in millions) | | | (in millions) | | Defined benefit plans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Defined benefit plans | | (209,209 | ) | | 72,115 | | | (137,094 | ) | | 131,971 | | | (41,852 | ) | | 90,119 | | | 154,708 | | | (48,537 | ) | | 106,171 | | | 131,971 | | | (41,852 | ) | | 90,119 | | | 154,708 | | | (48,537 | ) | | 106,171 | | | (126,001 | ) | | 37,655 | | | (88,346 | ) | Reclassification adjustment for losses included in net income before attribution of noncontrolling interests | | 9,839 | | | (4,238 | ) | | 5,601 | | | 20,105 | | | (6,652 | ) | | 13,453 | | | 5,904 | | | (2,237 | ) | | 3,667 | | | Reclassification adjustment for losses (gains) included in net income before attribution of noncontrolling interests | | | 20,105 | | | (6,652 | ) | | 13,453 | | | 5,904 | | | (2,237 | ) | | 3,667 | | | (1,168 | ) | | 574 | | | (594 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net change | | (199,370 | ) | | 67,877 | | | (131,493 | ) | | 152,076 | | | (48,504 | ) | | 103,572 | | | 160,612 | | | (50,774 | ) | | 109,838 | | | 152,076 | | | (48,504 | ) | | 103,572 | | | 160,612 | | | (50,774 | ) | | 109,838 | | | (127,169 | ) | | 38,229 | | | (88,940 | ) | Defined benefit plans attributable to noncontrolling interests | | | | | | (1,711 | ) | | | | | | 212 | | | | | | | 826 | | | | | | | 212 | | | | | | | 826 | | | | | | | (260 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Defined benefit plans attributable to Mitsubishi UFJ Financial Group | | | | | | (129,782 | ) | | | | | | 103,360 | | | | | | | 109,012 | | | | | | | 103,360 | | | | | | | 109,012 | | | | | | | (88,680 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustments | | (396,995 | ) | | 43,109 | | | (353,886 | ) | | (148,460 | ) | | 2,424 | | | (146,036 | ) | | (137,811 | ) | | 32,767 | | | (105,044 | ) | | (148,460 | ) | | 2,424 | | | (146,036 | ) | | (137,811 | ) | | 32,767 | | | (105,044 | ) | | (18,062 | ) | | (17,932 | ) | | (35,994 | ) | Reclassification adjustment for losses (gains) included in net income before attribution of noncontrolling interests | | (3,670 | ) | | 879 | | | (2,791 | ) | | 3,293 | | | (467 | ) | | 2,826 | | | (1,494 | ) | | 1,760 | | | 266 | | | 3,293 | | | (467 | ) | | 2,826 | | | (1,494 | ) | | 1,760 | | | 266 | | | (9,002 | ) | | 2,784 | | | (6,218 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net change | | (400,665 | ) | | 43,988 | | | (356,677 | ) | | (145,167 | ) | | 1,957 | | | (143,210 | ) | | (139,305 | ) | | 34,527 | | | (104,778 | ) | | (145,167 | ) | | 1,957 | | | (143,210 | ) | | (139,305 | ) | | 34,527 | | | (104,778 | ) | | (27,064 | ) | | (15,148 | ) | | (42,212 | ) | Foreign currency translation adjustments attributable to noncontrolling interests | | | | | | (29,976 | ) | | | | | | (5,954 | ) | | | | | | 14,435 | | | | | | | (5,954 | ) | | | | | | 14,435 | | | | | | | (6,095 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustments attributable to Mitsubishi UFJ Financial Group | | | | | | (326,701 | ) | | | | | | (137,256 | ) | | | | | | (119,213 | ) | | | | | | (137,256 | ) | | | | | | (119,213 | ) | | | | | | (36,117 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other comprehensive income (loss) attributable to Mitsubishi UFJ Financial Group | | | | | | ¥ | (760,411 | ) | | | | | | ¥ | (23,709 | ) | | | | | | ¥ | 224,845 | | | | | | | ¥ | (23,709 | ) | | | | | | ¥ | 224,845 | | | | | | | ¥ | (59,342 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Note: | (1) | | Included unrealized gains (losses) related to only debt securities for the fiscal year ended March 31, 2019. |
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, 2016, 2017, 2018 and 2018:2019: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | Details of Accumulated OCI components | | Amount reclassified out of
Accumulated OCI | | Line items in the consolidated
statements of income | | Amount reclassified out of
Accumulated OCI | | Line items in the consolidated
statements of income | | | | (in millions) | | | (in millions) | | Net unrealized losses (gains) on investment securities | | | | | | | | | | | | | | | | | Net gains on sales and redemptions ofAvailable-for-sale securities | | ¥ | (267,240 | ) | | ¥ | (307,041 | ) | | ¥ | (287,279 | ) | | Investment securities gains—net | | Net gains on sales and redemptions ofAvailable-for-sale debt securities(1) | | | ¥ | (307,041 | ) | | ¥ | (287,279 | ) | | ¥ | (29,182 | ) | | Investment securities gains
(losses)—net | Impairment losses on investment securities | | | 22,885 | | | 32,744 | | | 6,759 | | | Investment securities gains—net | | | 32,744 | | | 6,759 | | | 596 | | | Investment securities gains
(losses)—net | Other | | | 4,421 | | | 19 | | | 262 | | | | | | 19 | | | 262 | | | (367 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (239,934 | ) | | (274,278 | ) | | (280,258 | ) | | Total before tax | | | (274,278 | ) | | (280,258 | ) | | (28,953 | ) | | Total before tax | | | | 80,967 | | | 86,845 | | | 84,328 | | | Income tax expense | | | 86,845 | | | 84,328 | | | 9,100 | | | Income tax expense | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | (158,967 | ) | | ¥ | (187,433 | ) | | ¥ | (195,930 | ) | | Net of tax | | ¥ | (187,433 | ) | | ¥ | (195,930 | ) | | ¥ | (19,853 | ) | | Net of tax | | | | | | | | | | | | | | | | | | | | | | | | Net debt valuation adjustments (Note 14) | | ¥ | (707 | ) | | ¥ | 215 | | | ¥ | 417 | | | Equity in earnings of equity
method investees—net | | Net debt valuation adjustments | | | ¥ | 215 | | | ¥ | 417 | | | ¥ | 1,016 | | | Equity in earnings of equity
method investees—net | | | | | | | | | | | | | | | | | | | | | | | | | | | (707 | ) | | 215 | | | 417 | | | Total before tax | | | 215 | | | 417 | | | 1,016 | | | Total before tax | | | | 239 | | | (68 | ) | | (128 | ) | | Income tax expense | | | (68 | ) | | (128 | ) | | (311 | ) | | Income tax expense | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | (468 | ) | | ¥ | 147 | | | ¥ | 289 | | | Net of tax | | ¥ | 147 | | | ¥ | 289 | | | ¥ | 705 | | | Net of tax | | | | | | | | | | | | | | | | | | | | | | | | Net unrealized losses (gains) on derivatives qualifying for cash flow hedges | | | | | | | | | | | | | | | | | Interest rate contracts | | ¥ | (20,338 | ) | | ¥ | (18,332 | ) | | ¥ | (7,782 | ) | | Interest income on Loans,
including fees | | ¥ | (18,332 | ) | | ¥ | (7,782 | ) | | ¥ | 3,739 | | | Interest income on Loans,
including fees | Other | | | (261 | ) | | (35 | ) | | (234 | ) | | | | | (35 | ) | | (234 | ) | | (77 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (20,599 | ) | | (18,367 | ) | | (8,016 | ) | | Total before tax | | | (18,367 | ) | | (8,016 | ) | | 3,662 | | | Total before tax | | | | 8,094 | | | 7,402 | | | 2,850 | | | Income tax expense | | | 7,402 | | | 2,850 | | | (980 | ) | | Income tax expense | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | (12,505 | ) | | ¥ | (10,965 | ) | | ¥ | (5,166 | ) | | Net of tax | | ¥ | (10,965 | ) | | ¥ | (5,166 | ) | | ¥ | 2,682 | | | Net of tax | | | | | | | | | | | | | | | | | | | | | | | | Defined benefit plans | | | | | | | | | | | | | | | | | Net actuarial loss(1)(2) | | ¥ | 21,251 | | | ¥ | 31,837 | | | ¥ | 17,280 | | | | | ¥ | 31,837 | | | ¥ | 17,280 | | | ¥ | 11,431 | | | Othernon-interest expenses | Prior service cost(1)(2) | | | (10,847 | ) | | (9,927 | ) | | (6,959 | ) | | | | | (9,927 | ) | | (6,959 | ) | | (6,269 | ) | | Othernon-interest expenses | Loss (gain) on settlements and curtailment, and other(1) | | | (565 | ) | | (1,805 | ) | | (4,417 | ) | | | | Gain on settlements and curtailment, and other(2) | | | | (1,805 | ) | | (4,417 | ) | | (6,330 | ) | | Othernon-interest expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | 9,839 | | | 20,105 | | | 5,904 | | | Total before tax | | | 20,105 | | | 5,904 | | | (1,168 | ) | | Total before tax | | | | (4,238 | ) | | (6,652 | ) | | (2,237 | ) | | Income tax expense | | | (6,652 | ) | | (2,237 | ) | | 574 | | | Income tax expense | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 5,601 | | | ¥ | 13,453 | | | ¥ | 3,667 | | | Net of tax | | ¥ | 13,453 | | | ¥ | 3,667 | | | ¥ | (594 | ) | | Net of tax | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | Details of Accumulated OCI components | | Amount reclassified out of
Accumulated OCI | | Line items in the consolidated
statements of income | | Amount reclassified out of
Accumulated OCI | | Line items in the consolidated
statements of income | | | | (in millions) | | | (in millions) | | Foreign currency translation adjustments | | ¥ | (4,270 | ) | | ¥ | (39 | ) | | ¥ | (5,743 | ) | | Othernon-interest income | | ¥ | (39 | ) | | ¥ | (5,743 | ) | | ¥ | (9,004 | ) | | Other non-interest income | | | | 600 | | | 3,332 | | | 4,249 | | | Othernon-interest expenses | | | 3,332 | | | 4,249 | | | 2 | | | Other non-interest expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | (3,670 | ) | | 3,293 | | | (1,494 | ) | | Total before tax | | | 3,293 | | | (1,494 | ) | | (9,002 | ) | | Total before tax | | | | 879 | | | (467 | ) | | 1,760 | | | Income tax expense | | | (467 | ) | | 1,760 | | | 2,784 | | | Income tax expense | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | (2,791 | ) | | ¥ | 2,826 | | | ¥ | 266 | | | Net of tax | | ¥ | 2,826 | | | ¥ | 266 | | | ¥ | (6,218 | ) | | Net of tax | | | | | | | | | | | | | | | | | | | | | | | | | Total reclassifications for the period | | ¥ | (255,071 | ) | | ¥ | (269,032 | ) | | ¥ | (283,447 | ) | | Total before tax | | ¥ | (269,032 | ) | | ¥ | (283,447 | ) | | ¥ | (34,445 | ) | | Total before tax | | | | 85,941 | | | 87,060 | | | 86,573 | | | Income tax expense | | | 87,060 | | | 86,573 | | | 11,167 | | | Income tax expense | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | (169,130 | ) | | ¥ | (181,972 | ) | | ¥ | (196,874 | ) | | Net of tax | | ¥ | (181,972 | ) | | ¥ | (196,874 | ) | | ¥ | (23,278 | ) | | Net of tax | | | | | | | | | | | | | | | | | | | | | | | |
Note:Notes:
| (1) | | Included unrealized gains (losses) related to only debt securities for the fiscal year ended March 31, 2019 while included unrealized gains (losses) related to both debt and equity securities for the fiscal years ended March 31, 2017 and 2018. |
| (2) | | These Accumulated OCI components are included in the computationcomponents of net periodic benefit cost. See Note 13 for more information. |
| 21. | | NONCONTROLLING INTERESTS |
Deconsolidation of Subsidiaries The gains and losses due to deconsolidation of subsidiaries were recognized under “Othernon-interest income” and “Othernon-interest expenses,” respectively, in the accompanying consolidated statements of income. The amount of net gains was ¥3,261 million for the fiscal year ended March 31, 2016, the amount of net losses was ¥2,848 million for the fiscal year ended March 31, 2017, and the amount of net gains was ¥4,448 million for the fiscal year ended March 31, 2018 and the amount of net gains was ¥7,228 million for the fiscal year ended March 31, 2019, respectively. Changes in MUFG’s Ownership Interests in Subsidiaries The following table presents the effect on MUFG’s shareholders’ equity from changes in ownership of subsidiaries resulting from transactions with the noncontrolling interest shareholders during the fiscal years ended March 31, 2016, 2017, 2018 and 2018:2019: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Net income attributable to Mitsubishi UFJ Financial Group | | ¥ | 802,332 | | | ¥ | 202,680 | | | ¥ | 1,228,160 | | | ¥ | 202,680 | | | ¥ | 1,228,160 | | | ¥ | 718,645 | | Transactions between Mitsubishi UFJ Financial Group and the noncontrolling interest shareholders: | | | | | | | | | | | | | Purchase of shares of Mitsubishi UFJ NICOS from noncontrolling interest shareholder (Note 2) | | | — | | | | — | | | (34,751 | ) | | | — | | | (34,751 | ) | | | — | | Other | | | (1,630 | ) | | (429 | ) | | 8,006 | | | | (429 | ) | | 8,006 | | | (78 | ) | | | | | | | | | | | | | | | | | | | | Net transfers to the noncontrolling interest shareholders | | | (1,630 | ) | | (429 | ) | | (26,745 | ) | | | (429 | ) | | (26,745 | ) | | (78 | ) | | | | | | | | | | | | | | | | | | | | Change from net income attributable to Mitsubishi UFJ Financial Group and transactions between Mitsubishi UFJ Financial Group and the noncontrolling interest shareholders | | ¥ | 800,702 | | | ¥ | 202,251 | | | ¥ | 1,201,415 | | | ¥ | 202,251 | | | ¥ | 1,201,415 | | | ¥ | 718,567 | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | 22. | | REGULATORY CAPITAL REQUIREMENTS |
Japan MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings are subject to various regulatory capital requirements promulgated by the regulatory authorities of the countries in which they operate. Failure to meet minimum capital requirements will initiate certain mandatory actions by regulators that, if undertaken, could have a direct material effect on MUFG’s consolidated financial statements. In Japan, MUFG, MUFG Bank, and Mitsubishi UFJ Trust and Banking are subject to regulatory capital requirements promulgated by the Financial Services Agency of Japan (“FSA”) in accordance with the provisions of the Banking Law and related regulations. A banking institution is subject to the minimum capital requirements both on a consolidated basis and a stand-alone basis, and is required to maintain the minimum capital irrespective of whether it operates independently or as a subsidiary under the control of another company. When a bank holding company manages operations of its banking subsidiaries, it is required to maintain the minimum capital adequacy ratio on a consolidated basis in the same manner as its subsidiary banks. The FSA provides two sets of capital adequacy guidelines. One is a set of guidelines applicable to Japanese banks and bank holding companies with their foreign offices conducting international operations, as defined, and the other is applicable to Japanese banks and bank holding companies that are not engaged in international operations conducted by their foreign offices. The Basel Committee on Banking Supervision (“BCBS”) of the Bank for International Settlements (“BIS”) sets capital adequacy standards for all internationally active banks to ensure minimum levels of capital. The Basel Committee revised the 1988 Accord (“Basel I”) in June 2004 and released “International Convergence of Capital Measurement and Capital Standards: A Revised Framework” (“Basel II”). In addition, the Group of Central Bank Governors and Heads of Supervision reached an agreement on the new global regulatory framework, which has been referred to as “Basel III,” in July and September 2010. In December 2010, the Basel Committee agreed on the details of the Basel III rules. Effective as of March 31, 2013, Basel III was adopted by the FSA with transitional measures for Japanese banking institutions with international operations conducted by their foreign offices. MUFG calculated capital ratios as of March 31, 20172018 and 20182019 in accordance with Basel III. Capital Ratios Basel III, the same as Basel II, is based on “three pillars”: (1) minimum capital requirements, (2) the self-regulation of financial institutions based on supervisory review process, and (3) market discipline through the disclosure of information. The framework of the 1988 Accord, Basel I is improved and expanded to be included in “minimum capital requirements” as the first pillar of Basel II and Basel III. As for the denominator of the capital ratio, the Basel framework provides the following risk-based approaches and a range of options for determining risk-weighted assets. “Credit Risk” The Basel framework provides options for determining the risk-weighted assets for credit risk to allow banks to select approaches that are most appropriate for their level of risk assessment. Banks choose one of three approaches: “Standardized Approach,” “Foundation Internal Ratings-Based Approach” or “Advanced Internal Ratings-Based Approach (“AIRB”).” MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) “Market Risk” In the “Amendment to the Capital Accord to incorporate market risks” of the year 1996, a choice between two methodologies “the Standardized Measurement Method” and “Internal Models Approach” is permitted. “Combination of Internal Models Approach and the Standardized Measurement Method” is also allowed under certain conditions. This is unchanged in Basel III. “Operational Risk��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 asoff-balance sheet items requiring a capital charge in accordance with the capital adequacy guidelines. Under Basel III, as adopted by the FSA, MUFG’s risk-weighted assets increased, largely reflecting the new capital charge of the credit valuation adjustment (CVA), the credit risk related to asset value correlation multiplier for large financial institutions, and the 250% risk-weighted threshold items not deducted from Common Equity Tier 1 capital, as well as the conversion of certain Basel II capital deductions to risk-weighted assets, such as securitizations. On the other hand, as for the numerator of the capital ratio, there are three primary regulatory capital ratios used to assess capital adequacy, Common Equity Tier 1, Tier 1 and Total capital ratios, which are determined by dividing applicable capital components by risk-weighted assets. Tier 1 capital is redefined, and consists of Common Equity Tier 1 capital 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 OCI. Regulatory adjustments including certain intangible fixed assets, such as goodwill, and defined-benefit pension fund assets, will be deducted fromare made to Common Equity Tier 1. The amount of adjustments to be deducted will increase progressively over time. 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 netnoncontrolling interests in subsidiaries’ Tier 2 instruments. Total capital is defined as the sum of regulatory adjustments. Subject to transitional measures, adjustments are made to Additional Tier 1 capital for itemsand Tier 2 capital. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) including intangible fixed assets, such as goodwill, and foreign currency translation adjustments, with the amounts of such adjustments to Additional Tier 1 capital progressively decreasing over time. Tier 2 capital generally consists of Basel III compliant deferred obligations, such as subordinated debts, capital that meet Tier 2 requirements under Basel II standards, certain allowances for credit losses and noncontrolling interests in subsidiaries’ Tier 2 instruments. Subject to transitional measures, certain items including 45% of unrealized profit onAvailable-for-sale securities and revaluation of land are deducted from Tier 2 capital with the deduction amounts progressively decreasing over time. Total capital is defined as the sum of Tier 1 and Tier 2 capital.
Basel III will be adopted in accordance with transition arrangements. Examples of these transition arrangements include initially lower capital adequacy ratios that will increase progressively up to the Basel III adequacy levels as issued by BCBS. In addition, individual elements of capital will be phased out progressively over the same period of time to arrive at a capital base that is consistent with that defined by BCBS in Basel III.
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 are currently beinghad been phased in and fully implemented as of March 31, 2018,2019. MUFG is required to maintain a capital conservation buffer of 1.875% and 2.5%, aG-SIB surcharge of 1.125% and 1.5%, and a countercyclical buffer of 0.01% and 0.04%, in addition to the 4.50% minimum Common Equity Tier 1 capital ratio. When fully implementedratio, as of March 31, 2018 and 2019, respectively. Leverage Ratios The leverage ratio is designed for monitoring and preventing thebuild-up of excessive leverage in the banking sector and is expressed as the ratio of Tier 1 capital to both on andoff-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 aG-SIB leverage ratio buffer equal to 50% of the applicableG-SIB capital surcharge. The announcement sets forth implementation dates of January 1, 2018 for the minimum leverage ratio requirement and January 1, 2022 for theG-SIB leverage ratio buffer requirement. Effective as of March 31, 2019, MUFG will be required to maintain a capital conservation buffer of 2.5%, a countercyclical buffer of up to 2.5%, and aG-SIB surcharge of 1.5%, assuming MUFG will be in Bucket 2 of theG-SIB list. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
minimum leverage ratio requirement was adopted by the FSA. The risk-adjusted capital amounts and ratios, and leverage ratios, of MUFG, MUFG Bank and Mitsubishi UFJ Trust and Banking presented in the following table are based on amounts calculated in accordance with Japanese GAAP as required by the FSA. | | | | Actual | | For capital
adequacy purposes | | | Actual | | For capital
adequacy purposes | | | | | Amount | | | Ratio | | Amount | | | Ratio | | | Amount | | | Ratio | | Amount | | | Ratio | | | | | (in millions, except percentages) | | | (in millions, except percentages) | | Consolidated: | | | | | | | | | | | | | | | | | At March 31, 2017: | | | | | | | | | | Total capital (to risk-weighted assets): | | | | | | | | | | MUFG(1) | | ¥ | 18,076,158 | | | | 15.85 | % | | ¥ | 11,398,640 | | | | 10.00 | % | | BK | | | 14,053,431 | | | | 15.28 | | | 7,356,801 | | | | 8.00 | | | TB | | | 2,406,555 | | | | 19.80 | | | 971,933 | | | | 8.00 | | | Tier1 capital (to risk-weighted assets): | | | | | | | | | | MUFG(1) | | | 15,232,491 | | | | 13.36 | | | 9,118,912 | | | | 8.00 | | | BK | | | 11,680,740 | | | | 12.70 | | | 5,517,601 | | | | 6.00 | | | TB | | | 2,058,449 | | | | 16.94 | | | 728,950 | | | | 6.00 | | | Common Equity Tier1 capital (to risk-weighted assets): | | | | | | | | | | MUFG(1) | | | 13,413,885 | | | | 11.76 | | | 7,409,116 | | | | 6.50 | | | BK | | | 10,245,812 | | | | 11.14 | | | 4,138,201 | | | | 4.50 | | | TB | | | 1,928,970 | | | | 15.87 | | | 546,713 | | | | 4.50 | | | At March 31, 2018: | | | | | | | | | | | | | | | | | Total capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | MUFG(1) | | ¥ | 18,795,480 | | | | 16.56 | % | | ¥ | 12,492,344 | | | | 11.01 | % | | ¥ | 18,795,480 | | | | 16.56 | % | | ¥ | 12,492,344 | | | | 11.01 | % | BK | | | 14,470,240 | | | | 15.90 | | | 7,280,570 | | | | 8.00 | | | | 14,470,240 | | | | 15.90 | | | 7,280,570 | | | | 8.00 | | TB | | | 2,545,648 | | | | 20.03 | | | 1,016,420 | | | | 8.00 | | | | 2,545,648 | | | | 20.03 | | | 1,016,420 | | | | 8.00 | | Tier1 capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | MUFG(1) | | | 16,251,749 | | | | 14.32 | | | 10,223,072 | | | | 9.01 | | | | 16,251,749 | | | | 14.32 | | | 10,223,072 | | | | 9.01 | | BK | | | 12,374,074 | | | | 13.59 | | | 5,460,427 | | | | 6.00 | | | | 12,374,074 | | | | 13.59 | | | 5,460,427 | | | | 6.00 | | TB | | | 2,245,853 | | | | 17.67 | | | 762,315 | | | | 6.00 | | | | 2,245,853 | | | | 17.67 | | | 762,315 | | | | 6.00 | | Common Equity Tier1 capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | MUFG(1) | | | 14,284,945 | | | | 12.58 | | | 8,521,118 | | | | 7.51 | | | | 14,284,945 | | | | 12.58 | | | 8,521,118 | | | | 7.51 | | BK | | | 10,788,381 | | | | 11.85 | | | 4,095,321 | | | | 4.50 | | | | 10,788,381 | | | | 11.85 | | | 4,095,321 | | | | 4.50 | | TB | | | 2,060,107 | | | | 16.21 | | | 571,736 | | | | 4.50 | | | | 2,060,107 | | | | 16.21 | | | 571,736 | | | | 4.50 | | Stand-alone: | | | | | | | | | | At March 31, 2017: | | | | | | | | | | At March 31, 2019: | | | | | | | | | | Total capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | MUFG(1) | | | ¥ | 18,769,793 | | | | 16.03 | % | | ¥ | 14,097,771 | | | | 12.04 | % | BK | | ¥ | 12,823,393 | | | | 16.70 | % | | ¥ | 6,140,606 | | | | 8.00 | % | | | 14,632,620 | | | | 14.42 | | | 8,114,105 | | | | 8.00 | | TB | | | 2,426,482 | | | | 20.48 | | | 947,592 | | | | 8.00 | | | | 2,213,195 | | | | 24.40 | | | 725,540 | | | | 8.00 | | Tier1 capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | MUFG(1) | | | | 16,276,301 | | | | 13.90 | | | 11,755,949 | | | | 10.04 | | BK | | | 10,655,522 | | | | 13.88 | | | 4,605,455 | | | | 6.00 | | | | 12,639,454 | | | | 12.46 | | | 6,085,579 | | | | 6.00 | | TB | | | 2,067,034 | | | | 17.45 | | | 710,694 | | | | 6.00 | | | | 1,928,955 | | | | 21.26 | | | 544,155 | | | | 6.00 | | Common Equity Tier1 capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | MUFG(1) | | | | 14,322,407 | | | | 12.23 | | | 9,999,582 | | | | 8.54 | | BK | | | 9,247,740 | | | | 12.04 | | | 3,454,091 | | | | 4.50 | | | | 10,990,820 | | | | 10.83 | | | 4,564,184 | | | | 4.50 | | TB | | | 1,937,599 | | | | 16.35 | | | 533,020 | | | | 4.50 | | | | 1,775,565 | | | | 19.57 | | | 408,116 | | | | 4.50 | | At March 31, 2018: | | | | | | | | | | Total capital (to risk-weighted assets): | | | | | | | | | | Leverage ratio(2): | | | | | | | | | | MUFG | | | | 16,276,301 | | | | 4.94 | | | 9,871,460 | | | | 3.00 | | BK | | ¥ | 13,211,327 | | | | 16.90 | % | | ¥ | 6,252,458 | | | | 8.00 | % | | | 12,639,454 | | | | 4.63 | | | 8,189,494 | | | | 3.00 | | TB | | | 2,529,316 | | | | 19.88 | | | 1,017,331 | | | | 8.00 | | | | 1,928,955 | | | | 5.09 | | | 1,135,795 | | | | 3.00 | | Tier1 capital (to risk-weighted assets): | | | | | | | | | | BK | | | 11,344,078 | | | | 14.51 | | | 4,689,344 | | | | 6.00 | | | TB | | | 2,232,760 | | | | 17.55 | | | 762,998 | | | | 6.00 | | | Common Equity Tier1 capital (to risk-weighted assets): | | | | | | | | | | BK | | | 9,802,445 | | | | 12.54 | | | 3,517,008 | | | | 4.50 | | | TB | | | 2,057,760 | | | | 16.18 | | | 572,249 | | | | 4.50 | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | Actual | | | For capital
adequacy purposes | | | | | Amount | | | Ratio | | | Amount | | | Ratio | | | | | (in millions, except percentages) | | Stand-alone: | | | | | | | | | | | | | | | | | At March 31, 2018: | | | | | | | | | | | | | | | | | Total capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | BK | | ¥ | 13,211,327 | | | | 16.90 | % | | ¥ | 6,252,458 | | | | 8.00 | % | TB | | | 2,529,316 | | | | 19.88 | | | | 1,017,331 | | | | 8.00 | | Tier1 capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | BK | | | 11,344,078 | | | | 14.51 | | | | 4,689,344 | | | | 6.00 | | TB | | | 2,232,760 | | | | 17.55 | | | | 762,998 | | | | 6.00 | | Common Equity Tier1 capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | BK | | | 9,802,445 | | | | 12.54 | | | | 3,517,008 | | | | 4.50 | | TB | | | 2,057,760 | | | | 16.18 | | | | 572,249 | | | | 4.50 | | At March 31, 2019: | | | | | | | | | | | | | | | | | Total capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | BK | | ¥ | 13,560,583 | | | | 15.58 | % | | ¥ | 6,959,207 | | | | 8.00 | % | TB | | | 2,195,098 | | | | 24.25 | | | | 723,953 | | | | 8.00 | | Tier1 capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | BK | | | 11,773,839 | | | | 13.53 | | | | 5,219,405 | | | | 6.00 | | TB | | | 1,911,237 | | | | 21.12 | | | | 542,965 | | | | 6.00 | | Common Equity Tier1 capital (to risk-weighted assets): | | | | | | | | | | | | | | | | | BK | | | 10,172,206 | | | | 11.69 | | | | 3,914,554 | | | | 4.50 | | TB | | | 1,758,237 | | | | 19.42 | | | | 407,224 | | | | 4.50 | | Leverage ratio(2): | | | | | | | | | | | | | | | | | BK | | | 11,773,839 | | | | 4.84 | | | | 7,284,812 | | | | 3.00 | | TB | | | 1,911,237 | | | | 5.55 | | | | 1,031,484 | | | | 3.00 | |
Note:Notes:
| (1) | | Effective March 31, 2016, the FSA’s capital conservation buffer, countercyclical buffer andG-SIB surcharge requirements became applicable to Japanese banking institutions with international operations conducted through foreign offices. As a result, in addition to the |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| 4.50% minimum Common Equity Tier 1 capital ratio, MUFG is required to maintain a capital conservation buffer of 1.25% and aG-SIB surcharge of 0.75% as of March 31, 2017 and a capital conservation buffer of 1.875% and aG-SIB surcharge of 1.125% as of March 31, 2018.2018 and a capital conservation buffer of 2.5% and aG-SIB surcharge of 1.5% as of March 31, 2019. As of the same date, the countercyclical buffer applicable to MUFG is 0.01%0.04%. |
| (2) | | Effective as of March 31, 2019, the minimum leverage ratio requirement was adopted by the FSA. |
Mitsubishi UFJ Morgan Stanley Securities and other securities subsidiaries in Japan and overseas are also subject to regulatory capital requirements of the countries or jurisdictions in which they operate. In Japan, the Financial Instruments and Exchange Act and related ordinance require financial instruments firms to maintain a minimum capital ratio of 120% calculated as a percentage of capital accounts less certain fixed assets, as determined in accordance with Japanese GAAP, against amounts equivalent to market, counterparty credit and operationsoperational risks. Specific guidelines are issued as a ministerial ordinance which details the definition of essential components of the capital ratios, including capital, deductible fixed asset items and risks, and related measures. Failure to maintain a minimum capital ratio will trigger mandatory regulatory actions. A capital ratio of less than 140% will call for regulatory reporting and a capital ratio of less than 100% may lead to a suspension of all or part of the business for a period of time and cancellation of a registration. At March 31, 2017,2018, Mitsubishi UFJ Morgan Stanley Securities’s capital accounts less certain fixed assets of ¥426,133 million on a stand-alone basis and ¥451,285 million on a consolidated basis, were 323.0% and 324.7% of the total amounts equivalent to market, counterparty credit and operations risks, respectively. At March 31, 2018, its capital accounts less certain fixed assets of ¥446,539 million on a stand-alone basis and ¥473,296 million on a consolidated basis, were 291.2% and 293.2% of the total amounts equivalent to market, counterparty credit and operationsoperational risks, respectively. At March 31, 2019, its capital accounts less certain fixed assets of ¥446,609 million on a stand-alone basis and ¥469,272 million on a consolidated basis, were 331.6% and 332.2% of the total amounts equivalent to market, counterparty credit and operational risks, respectively. Management believes, as of March 31, 2018,2019, that MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Morgan Stanley Securities and other regulated securities subsidiaries met all capital adequacy requirements to which they are subject. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) United States of America In the United States of America, MUFG Americas Holdings and its banking subsidiary MUFG Union Bank, N.A. (“MUFG Union Bank” or “BK(US)”), MUFG Bank’s largest subsidiaries operating outside Japan, are subject to various regulatory capital requirements administered by the U. S. Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a material effect on MUFG Americas Holdings’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, MUFG Americas Holdings and MUFG Union Bank must meet specific capital guidelines that involve quantitative measures of MUFG Americas Holdings’s and MUFG Union Bank’s assets, liabilities, and certainoff-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 incorporatesoff-balance sheet exposures; revise Basel I rules for calculating risk-weighted assets under a standardized approach; modify the existing Basel II advanced approaches rules for calculating risk-weighted assets under U.S. Basel III; and eliminate, for advanced approaches institutions, over a four-yearphase-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 tophase-in periods. As permitted for institutions not subject to the advanced approaches methodology, MUFG Americas Holdings made aone-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) U.S. Basel III rules are scheduled to be substantially phased in by January 1, 2019. Effective June 30, 2015, MUFG Americas Holdings updated the methodologies applied to the calculation of its regulatory capital ratios due to recent regulatory guidance, which clarified the treatment of certainoff-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 aphased-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 fullyphased-in basis if those requirements were effective as of December 31, 2017.2018. The figures on the table below are calculated according to U.S. Basel III as of December 31, 2017 and 2018. MUFG Americas Holdings’s actual capital amounts and ratios are presented as follows: | | | | | | | | | | | | | | | | | | | | Actual | | | Minimum capital
ratios required(1) | | | | | Amount | | | Ratio | | | Amount | | | Ratio | | | | | (in millions, except percentages) | | MUAH: | | | | | | | | | | | | | | | | | At December 31, 2017: | | | | | | | | | | | | | | | | | Total capital (to risk-weighted assets) | | $ | 17,106 | | | | 17.76 | % | | $ | 8,910 | | | | 9.250 | % | Tier 1 capital (to risk-weighted assets) | | | 15,708 | | | | 16.31 | | | | 6,984 | | | | 7.250 | | Tier 1 capital (to quarterly average assets)(2) | | | 15,708 | | | | 10.06 | | | | 6,245 | | | | 4.000 | | Common Equity Tier 1 capital (to risk-weighted assets) | | | 15,708 | | | | 16.31 | | | | 5,539 | | | | 5.750 | | At December 31, 2018: | | | | | | | | | | | | | | | | | Total capital (to risk-weighted assets) | | $ | 14,904 | | | | 14.60 | % | | $ | 10,081 | | | | 9.875 | % | Tier 1 capital (to risk-weighted assets) | | | 14,256 | | | | 13.96 | | | | 8,039 | | | | 7.875 | | Tier 1 capital (to quarterly average assets)(2) | | | 14,256 | | | | 8.77 | | | | 6,502 | | | | 4.000 | | Common Equity Tier 1 capital (to risk-weighted assets) | | | 14,256 | | | | 13.96 | | | | 6,508 | | | | 6.375 | |
Notes: | (1) | | The minimum capital requirement includes a capital conservation buffer of 1.250% at December 31, 2017 and 1.875% at December 31, 2018. |
| (2) | | Excludes certain deductions. |
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, 20162017 and 2017. 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, 2016: | | | | | | | | | | | | | | | | | Total capital (to risk-weighted assets) | | $ | 16,431 | | | | 16.45 | % | | $ | 8,617 | | | | 8.625 | % | Tier 1 capital (to risk-weighted assets) | | | 14,757 | | | | 14.77 | | | | 6,619 | | | | 6.625 | | Tier 1 capital (to quarterly average assets)(2) | | | 14,757 | | | | 9.92 | | | | 5,952 | | | | 4.000 | | Common Equity Tier 1 capital (to risk-weighted assets) | | | 14,757 | | | | 14.77 | | | | 5,120 | | | | 5.125 | | At December 31, 2017: | | | | | | | | | | | | | | | | | Total capital (to risk-weighted assets) | | $ | 17,106 | | | | 17.76 | % | | $ | 8,910 | | | | 9.250 | % | Tier 1 capital (to risk-weighted assets) | | | 15,708 | | | | 16.31 | | | | 6,984 | | | | 7.250 | | Tier 1 capital (to quarterly average assets)(2) | | | 15,708 | | | | 10.06 | | | | 6,245 | | | | 4.000 | | Common Equity Tier 1 capital (to risk-weighted assets) | | | 15,708 | | | | 16.31 | | | | 5,539 | | | | 5.750 | |
Notes:
(1) | | The minimum capital requirement includes a capital conservation buffer of 1.250% at December 31, 2017 and 0.625% at December 31, 2016. |
(2) | | Excludes certain deductions. |
The figures on the table below are calculated according to U.S. Basel III as of December 31, 2016 and 2017.2018. MUFG Union Bank’s actual capital amounts and ratios are presented as follows:
| | | | Actual | | Minimum capital
ratios required(1) | | Ratios OCC
requires to be
“well capitalized” | | | Actual | | Minimum capital
ratios required(1) | | Ratios OCC
requires to be
“well capitalized” | | | | | Amount | | | Ratio | | Amount | | | Ratio | | Amount | | | Ratio | | | Amount | | | Ratio | | Amount | | | Ratio | | Amount | | | Ratio | | | | | (in millions, except percentages) | | | (in millions, except percentages) | | BK(US): | | | | | | | | | | | | | | | | | | | | | | | | | At December 31, 2016: | | | | | | | | | | | | | | Total capital (to risk-weighted assets) | | $ | 14,560 | | | | 16.29 | % | | $ | 7,709 | | | | 8.625 | % | | $ | 8,938 | | | | 10.00 | % | | Tier 1 capital (to risk-weighted assets) | | | 13,056 | | | | 14.61 | | | 5,922 | | | | 6.625 | | | 7,151 | | | | 8.00 | | | Tier 1 capital (to quarterly average assets)(2) | | | 13,056 | | | | 11.46 | | | 4,558 | | | | 4.000 | | | 5,697 | | | | 5.00 | | | Common Equity Tier 1 capital (to risk-weighted assets) | | | 13,056 | | | | 14.61 | | | 4,581 | | | | 5.125 | | | 5,810 | | | | 6.50 | | | At December 31, 2017: | | | | | | | | | | | | | | | | | | | | | | | | | Total capital (to risk-weighted assets) | | $ | 15,335 | | | | 17.68 | % | | $ | 8,023 | | | | 9.250 | % | | $ | 8,673 | | | | 10.00 | % | | $ | 15,335 | | | | 17.68 | % | | $ | 8,023 | | | | 9.250 | % | | $ | 8,673 | | | | 10.00 | % | Tier 1 capital (to risk-weighted assets) | | | 14,028 | | | | 16.17 | | | 6,288 | | | | 7.250 | | | 6,938 | | | | 8.00 | | | | 14,028 | | | | 16.17 | | | 6,288 | | | | 7.250 | | | 6,938 | | | | 8.00 | | Tier 1 capital (to quarterly average assets)(2) | | | 14,028 | | | | 11.78 | | | 4,762 | | | | 4.000 | | | 5,953 | | | | 5.00 | | | | 14,028 | | | | 11.78 | | | 4,762 | | | | 4.000 | | | 5,953 | | | | 5.00 | | Common Equity Tier 1 capital (to risk-weighted assets) | | | 14,028 | | | | 16.17 | | | 4,987 | | | | 5.750 | | | 5,637 | | | | 6.50 | | | | 14,028 | | | | 16.17 | | | 4,987 | | | | 5.750 | | | 5,637 | | | | 6.50 | | At December 31, 2018: | | | | | | | | | | | | | | Total capital (to risk-weighted assets) | | | $ | 13,905 | | | | 15.09 | % | | $ | 9,102 | | | | 9.875 | % | | $ | 9,217 | | | | 10.00 | % | Tier 1 capital (to risk-weighted assets) | | | | 13,316 | | | | 14.45 | | | 7,258 | | | | 7.875 | | | 7,374 | | | | 8.00 | | Tier 1 capital (to quarterly average assets)(2) | | | | 13,316 | | | | 10.61 | | | 5,018 | | | | 4.000 | | | 6,273 | | | | 5.00 | | Common Equity Tier 1 capital (to risk-weighted assets) | | | | 13,316 | | | | 14.45 | | | 5,876 | | | | 6.375 | | | 5,991 | | | | 6.50 | |
Notes: | (1) | | Beginning January 1, 2016,2017 and 2018, the minimum capital requirement includes a capital conservation buffer of 1.250%. and 1.875%, respectively. |
| (2) | | Excludes certain deductions. |
Management believes, as of December 31, 2017,2018, that MUFG Americas Holdings and MUFG Union Bank met all capital adequacy requirements to which they are subject. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 20162017 and 2017,2018, the notification from the OCC categorized MUFG Union Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” MUFG Union Bank must maintain a minimum total risk-based capital ratio of 10% as of December 31, 20162017 and 2017,2018, a Tier 1 risk-based capital ratio of 8% as of December 31, 20162017 and 2017,2018, a Tier 1 capital to quarterly average assets of 5% as of December 31, 20162017 and 2017,2018, and Common Equity Tier 1 risk-based capital ratio of 6.5% as of December 31, 20162017 and 2017,2018, as set forth in the table. There are no conditions or events since that notification that management believes have changed MUFG Union Bank’s category. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | 23. | | EARNINGS PER COMMON SHARE APPLICABLE TO COMMON SHAREHOLDERS OF MUFG |
Reconciliations of net income and weighted average number of common shares outstanding used for the computation of basic EPS to the adjusted amounts for the computation of diluted EPS for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 are as follows: | | | | | | | | | | | | | | | | 2016 | | | 2017 | | | 2018 | | | | | (in millions) | | Income (Numerator): | | | | | | | | | | | | | Net income attributable to Mitsubishi UFJ Financial Group | | ¥ | 802,332 | | | ¥ | 202,680 | | | ¥ | 1,228,160 | | | | | | | | | | | | | | | Effect of dilutive instruments: | | | | | | | | | | | | | Stock acquisition rights and restricted stock units—Morgan Stanley | | | (2,704 | ) | | | (3,212 | ) | | | (3,826 | ) | | | | | | | | | | | | | | Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group and assumed conversions | | ¥ | 799,628 | | | ¥ | 199,468 | | | ¥ | 1,224,334 | | | | | | | | | | | | | | | | | | | | | | 2016 | | | 2017 | | | 2018 | | | | | (thousands of shares) | | Shares (Denominator): | | | | | | | | | | | | | Weighted average common shares outstanding | | | 13,885,842 | | | | 13,574,314 | | | | 13,291,842 | | Effect of dilutive instruments: | | | | | | | | | | | | | Stock acquisition rights and the common shares of MUFG under Board Incentive Plan | | | 17,474 | | | | 10,571 | | | | 1,650 | | | | | | | | | | | | | | | Weighted average common shares for diluted computation | | | 13,903,316 | | | | 13,584,885 | | | | 13,293,492 | | | | | | | | | | | | | | | | | | | | | | 2016 | | | 2017 | | | 2018 | | | | | (in yen) | | 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 | | ¥ | 57.78 | | | ¥ | 14.93 | | | ¥ | 92.40 | | | | | | | | | | | | | | | Diluted earnings per common share: | | | | | | | | | | | | | Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group | | ¥ | 57.51 | | | ¥ | 14.68 | | | ¥ | 92.10 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | 2017 | | | 2018 | | | 2019 | | | | | (in millions) | | Income (Numerator): | | | | | | | | | | | | | Net income attributable to Mitsubishi UFJ Financial Group | | ¥ | 202,680 | | | ¥ | 1,228,160 | | | ¥ | 718,645 | | | | | | | | | | | | | | | Effect of dilutive instruments: | | | | | | | | | | | | | Stock acquisition rights and restricted stock units—Morgan Stanley | | | (3,212 | ) | | | (3,826 | ) | | | (3,745 | ) | | | | | | | | | | | | | | Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group and assumed conversions | | ¥ | 199,468 | | | ¥ | 1,224,334 | | | ¥ | 714,900 | | | | | | | | | | | | | | | | | | | | | | 2017 | | | 2018 | | | 2019 | | | | | (thousands of shares) | | Shares (Denominator): | | | | | | | | | | | | | Weighted average common shares outstanding | | | 13,574,314 | | | | 13,291,842 | | | | 13,058,698 | | Effect of dilutive instruments: | | | | | | | | | | | | | Stock acquisition rights and the common shares of MUFG under the Board Incentive Plan(1) | | | 10,571 | | | | 1,650 | | | | 484 | | | | | | | | | | | | | | | Weighted average common shares for diluted computation | | | 13,584,885 | | | | 13,293,492 | | | | 13,059,182 | | | | | | | | | | | | | | | | | | | | | | 2017 | | | 2018 | | | 2019 | | | | | (in yen) | | Earnings per common share applicable to common shareholders of Mitsubishi UFJ Financial Group: | | | | | | | | | | | | | Basic earnings per common share: | | | | | | | | | | | | | Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group | | ¥ | 14.93 | | | ¥ | 92.40 | | | ¥ | 55.03 | | | | | | | | | | | | | | | Diluted earnings per common share: | | | | | | | | | | | | | Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group(1) | | ¥ | 14.68 | | | ¥ | 92.10 | | | ¥ | 54.74 | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIESNote:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| (1) | | For the fiscal year ended March 31, 2019, the performance-based plan under the Board Incentive Plan could potentially dilute earnings per common share but were not included in the computation of diluted earnings per common share due to their antidilutive effects. |
| 24. | | DERIVATIVE FINANCIAL INSTRUMENTS |
The MUFG Group uses various derivative financial instruments both for trading purposes and for purposes other than trading (primarily risk management purposes) in the normal course of business to meet the financial needs of its customers, as a source of revenue and to manage its exposures to a variety of risks. Market risk is the possibility that future changes in market indices make the financial instruments less valuable. The MUFG Group is a party to derivative financial instruments, including swaps, forwards, options and 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 acase-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 generallynon-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 fromon-balance sheet assets and liabilities denominated in foreign currencies in order to limit the net foreign exchange position by currency to an appropriate level. Derivatives Designated as Hedges The MUFG Group adopts hedging strategies and applies hedge accounting to certain derivative transactions entered by MUFG Americas Holdings whose fiscal period ends on December 31. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Cash Flow Hedges MUFG Americas Holdings uses interest rate swaps to hedge the risk of changes in cash flows attributable to changes in the designated benchmark interest rate on the London Interbank Offered Rate (“LIBOR”) indexed loans, and to a lesser extent, to hedge interest rate risk on rollover debt.
At December 31, 2018, MUFG Americas Holdings used interest rate floors with a notional amount of ¥55.5 billion and interest rate swaps with a notional amount of ¥768.4¥19.3 billion at December 31, 2017 to hedge the risk of changes in cash flows attributable to changes in the designated benchmark interest rate on LIBOR indexed loans. To the extent effective, payments received or paid under the swap contract offset fluctuations in interest income on loans caused by changes in the relevant LIBOR index. MUFG Americas Holdings used interest rate swaps with a notional amount of ¥22.4 billion at December 31, 2017 to hedge the risk of changes in cash flows attributable to changes in the designated benchmark interest rate onand LIBOR indexed short-term borrowings.borrowings, respectively. At December 31, 2017,2018, the weighted average remaining life of the active cash flow hedges was 3.72.6 years. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) For cash flow hedges, the effective portion of the gain or loss on the hedging instruments is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged cash flows are recognized in net interest income. Gains and losses representing hedge ineffectiveness are recognized innon-interest expense in the period in which they arise. At December 31, 2017,2018, MUFG Americas Holdings expects to reclassify approximately ¥2.6¥9.8 billion of losses from Accumulated OCI as a reduction to net interest income during the year ending December 31, 2018.2019. This amount could differ from amounts actually realized due to changes in interest rates, hedge terminations and the addition of other hedges subsequent to December 31, 2017.2018. Fair Value Hedges MUFG Americas Holdings engagesengaged in an interest rate hedging strategy in which one or more interest rate swaps arewere associated with a specified interest-bearinginterest bearing liability, in order to convert the liability from a fixed rate to a floating rate instrument. This strategy mitigatesmitigated the changes in fair value of the hedged liability caused by changes in the designated benchmark interest rate, U.S. dollar LIBOR. For fair value hedges, any ineffectiveness is recognized innon-interest expense in the period in which it arises. The change in the fair value of the hedged item and the hedging instrument, to the extent completely effective, offsets with no impact on earnings. For the fiscal years ended December 31, 20162017 and 2017,2018, MUFG Americas Holdings recorded losses on the hedging instruments and gains on the hedged liability, both of which were less than ¥1 billion. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Notional Amounts of Derivative Contracts The following table summarizes the notional amounts of derivative contracts at March 31, 20172018 and 2018:2019: | | | | Notional amounts(1) | | | Notional amounts(1) | | | | | 2017 | | | 2018 | | | 2018 | | | 2019 | | | | | (in trillions) | | | (in trillions) | | Interest rate contracts | | ¥ | 1,252.7 | | | ¥ | 1,219.7 | | | ¥ | 1,219.7 | | | ¥ | 1,409.6 | | Foreign exchange contracts | | | 216.9 | | | | 220.8 | | | | 220.8 | | | | 230.5 | | Equity contracts | | | 4.7 | | | | 6.1 | | | | 6.1 | | | | 6.4 | | Commodity contracts | | | 0.5 | | | | 0.3 | | | | 0.3 | | | | 0.2 | | Credit derivatives | | | 6.0 | | | | 6.5 | | | | 6.5 | | | | 7.2 | | Others | | | 4.3 | | | | 3.1 | | | | 3.1 | | | | 3.0 | | | | | | | | | | | | | | | Total | | ¥ | 1,485.1 | | | ¥ | 1,456.5 | | | ¥ | 1,456.5 | | | ¥ | 1,656.9 | | | | | | | | | | | | | | |
Note: | (1) | | Includes both written and purchased positions. |
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, 20172018 and 2018:2019: | | | | Fair value of derivative instruments | | | Fair value of derivative instruments | | | | | 2017(1)(5) | | 2018(1)(5) | | | 2018(1)(5) | | 2019(1)(5) | | | | | Not designated
as hedges(2) | | Designated
as hedges(3) | | Total
derivatives(4) | | Not designated
as hedges(2) | | Designated
as hedges(3) | | Total
derivatives(4) | | | 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) | | | (in billions) | | Derivative assets: | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate contracts | | ¥ | 14,240 | | | ¥ | 2 | | | ¥ | 14,242 | | | ¥ | 8,712 | | | ¥ | — | | | ¥ | 8,712 | | | ¥ | 8,712 | | | ¥ | — | | | ¥ | 8,712 | | | ¥ | 10,108 | | | ¥ | 1 | | | ¥ | 10,109 | | Foreign exchange contracts | | 4,301 | | | | — | | | 4,301 | | | 3,557 | | | | — | | | 3,557 | | | 3,557 | | | | — | | | 3,557 | | | 2,795 | | | | — | | | 2,795 | | Equity contracts | | 188 | | | | — | | | 188 | | | 207 | | | | — | | | 207 | | | 207 | | | | — | | | 207 | | | 188 | | | | — | | | 188 | | Commodity contracts | | 35 | | | | — | | | 35 | | | 35 | | | | — | | | 35 | | | 35 | | | | — | | | 35 | | | 27 | | | | — | | | 27 | | Credit derivatives | | 67 | | | | — | | | 67 | | | 72 | | | | — | | | 72 | | | 72 | | | | — | | | 72 | | | 84 | | | | — | | | 84 | | Others | | 2 | | | | — | | | 2 | | | 2 | | | | — | | | 2 | | | 2 | | | | — | | | 2 | | | 2 | | | | — | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total derivative assets | | ¥ | 18,833 | | | ¥ | 2 | | | ¥ | 18,835 | | | ¥ | 12,585 | | | ¥ | — | | | ¥ | 12,585 | | | ¥ | 12,585 | | | ¥ | — | | | ¥ | 12,585 | | | ¥ | 13,204 | | | ¥ | 1 | | | ¥ | 13,205 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate contracts | | ¥ | 14,305 | | | ¥ | 23 | | | ¥ | 14,328 | | | ¥ | 8,674 | | | ¥ | 17 | | | ¥ | 8,691 | | | ¥ | 8,674 | | | ¥ | 17 | | | ¥ | 8,691 | | | ¥ | 9,896 | | | ¥ | — | | | ¥ | 9,896 | | Foreign exchange contracts | | 4,084 | | | | — | | | 4,084 | | | 3,000 | | | | — | | | 3,000 | | | 3,000 | | | | — | | | 3,000 | | | 2,671 | | | | — | | | 2,671 | | Equity contracts | | 182 | | | | — | | | 182 | | | 227 | | | | — | | | 227 | | | 227 | | | | — | | | 227 | | | 183 | | | | — | | | 183 | | Commodity contracts | | 31 | | | | — | | | 31 | | | 33 | | | | — | | | 33 | | | 33 | | | | — | | | 33 | | | 27 | | | | — | | | 27 | | Credit derivatives | | 58 | | | | — | | | 58 | | | 71 | | | | — | | | 71 | | | 71 | | | | — | | | 71 | | | 69 | | | | — | | | 69 | | Others(6) | | (121 | ) | | | — | | | (121 | ) | | (145 | ) | | | — | | | (145 | ) | | (145 | ) | | | — | | | (145 | ) | | (136 | ) | | | — | | | (136 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total derivative liabilities | | ¥ | 18,539 | | | ¥ | 23 | | | ¥ | 18,562 | | | ¥ | 11,860 | | | ¥ | 17 | | | ¥ | 11,877 | | | ¥ | 11,860 | | | ¥ | 17 | | | ¥ | 11,877 | | | ¥ | 12,710 | | | ¥ | — | | | ¥ | 12,710 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | The fair value of derivative instruments is presented on a gross basis even when derivative instruments are subject to master netting agreements. Cash collateral payable and receivable associated with derivative instruments are not added to or netted against the fair value amounts. |
| (2) | | The derivative instruments which are not designated as a hedging instrument are held for trading and risk management purposes, and are presented in Trading account assets/liabilities except for (6). |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| (3) | | The MUFG Group adopts hedging strategies and applies hedge accounting to certain derivative transactions entered into by MUFG Americas Holdings. The derivative instruments which are designated as hedging instruments are presented in Other assets or Other liabilities on the accompanying consolidated balance sheets. |
| (4) | | This table does not include contracts with embedded derivatives for which the fair value option has been elected. |
| (5) | | For more information about fair value measurement and assumptions used to measure the fair value of derivatives, see Note 32. |
| (6) | | Others include mainly bifurcated embedded derivatives carried at fair value, which are presented in Deposits and Long-term debt. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Impact of Derivatives and Hedged Items on the Consolidated Statements of Income and Accumulated OCI The following tables provide more detailed information regarding the derivative-related impact on the accompanying consolidated statements of income and Accumulated OCI by accounting designation for the fiscal years ended March 31, 2016, 2017, 2018 and 2018:2019: Gains and losses for trading and risk management derivatives (not designated as hedging instruments) | | | | Trading and risk management derivatives gains and losses
(Not designated as hedging instruments) | | | Trading and risk management derivatives gains and losses
(Not designated as hedging instruments) | | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | Foreign
exchange
gains (losses)
—net | | Trading
account
profits (losses)
—net | | Total | | Foreign
exchange
gains (losses)
—net | | Trading
account
profits (losses)
—net | | Total | | Foreign
exchange
gains (losses)
—net | | Trading
account
profits (losses)
—net | | Total | | | 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) | | | (in billions) | | Interest rate contracts | | ¥ | — | | | ¥ | 244 | | | ¥ | 244 | | | ¥ | — | | | ¥ | (137 | ) | | ¥ | (137 | ) | | ¥ | — | | | ¥ | 51 | | | ¥ | 51 | | | ¥ | — | | | ¥ | (137 | ) | | ¥ | (137 | ) | | ¥ | — | | | ¥ | 51 | | | ¥ | 51 | | | ¥ | — | | | ¥ | 6 | | | ¥ | 6 | | Foreign exchange contracts | | 368 | | | | — | | | 368 | | | (183 | ) | | | — | | | (183 | ) | | (163 | ) | | | — | | | (163 | ) | | (183 | ) | | | — | | | (183 | ) | | (163 | ) | | | — | | | (163 | ) | | (347 | ) | | | — | | | (347 | ) | Equity contracts | | | — | | | 149 | | | 149 | | | | — | | | (153 | ) | | (153 | ) | | | — | | | (260 | ) | | (260 | ) | | | — | | | (153 | ) | | (153 | ) | | | — | | | (260 | ) | | (260 | ) | | | — | | | 80 | | | 80 | | Commodity contracts | | | — | | | 2 | | | 2 | | | | — | | | 2 | | | 2 | | | | — | | | 6 | | | 6 | | | | — | | | 2 | | | 2 | | | | — | | | 6 | | | 6 | | | | — | | | | — | | | | — | | Credit derivatives | | | — | | | 12 | | | 12 | | | | — | | | 18 | | | 18 | | | | — | | | (2 | ) | | (2 | ) | | | — | | | 18 | | | 18 | | | | — | | | (2 | ) | | (2 | ) | | | — | | | (40 | ) | | (40 | ) | Others | | 6 | | | 27 | | | 33 | | | | — | | | (55 | ) | | (55 | ) | | 3 | | | (22 | ) | | (19 | ) | | | — | | | (55 | ) | | (55 | ) | | 3 | | | (22 | ) | | (19 | ) | | (7 | ) | | (70 | ) | | (77 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 374 | | | ¥ | 434 | | | ¥ | 808 | | | ¥ | (183 | ) | | ¥ | (325 | ) | | ¥ | (508 | ) | | ¥ | (160 | ) | | ¥ | (227 | ) | | ¥ | (387 | ) | | ¥ | (183 | ) | | ¥ | (325 | ) | | ¥ | (508 | ) | | ¥ | (160 | ) | | ¥ | (227 | ) | | ¥ | (387 | ) | | ¥ | (354) | | | ¥ | (24 | ) | | ¥ | (378 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gains and losses for derivatives designated as cash flow hedges | | | | 2016 | | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | (in billions) | | | (in billions) | | Gains (losses) recognized in Accumulated OCI on derivative instruments (Effective portion) | | | | | | | | Losses recognized in Accumulated OCI on derivative instruments (Effective portion) | | | | | | | | Interest rate contracts | | ¥ | 24 | | | ¥ | (3 | ) | | ¥ | (4 | ) | | ¥ | (3 | ) | | ¥ | (4 | ) | | ¥ | (11 | ) | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 24 | | | ¥ | (3 | ) | | ¥ | (4 | ) | | ¥ | (3 | ) | | ¥ | (4 | ) | | ¥ | (11 | ) | | | | | | | | | | | | | | | | | | | | Gains reclassified from Accumulated OCI into income (Effective portion) | | | | | | | | Gains (losses) reclassified from Accumulated OCI into income (Effective portion) | | | | | | | | Interest rate contracts(1) | | ¥ | 21 | | | ¥ | 18 | | | ¥ | 8 | | | ¥ | 18 | | | ¥ | 8 | | | ¥ | (4 | ) | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 21 | | | ¥ | 18 | | | ¥ | 8 | | | ¥ | 18 | | | ¥ | 8 | | | ¥ | (4 | ) | | | | | | | | | | | | | | | | | | | |
Note: | (1) | | Included in Interest income. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Embedded Derivatives Features embedded in othernon-derivative hybrid contracts are separated from the host contracts and measured at fair value when they are not clearly and closely related to the host contracts and meet the definition of a derivative. The change in the fair value of such an embedded derivative is recognized currently in earnings, unless it qualifies as a hedge. The fair value of the embedded derivative is presented in the accompanying consolidated balance sheets with the host contract. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Credit Derivatives The MUFG Group enters into credit derivatives to manage its credit risk exposure, to facilitate client transactions, and for proprietary trading purposes, under which they provide the counterparty protection against the risk of default on a set of debt obligations issued by a specified reference entity or entities. Types of such credit derivatives primarily include single name credit default swaps, index and basket credit default swaps. The MUFG Group will have to perform under a credit derivative if a credit event as defined under the contract occurs. Such credit events include bankruptcy, dissolution or insolvency of the referenced entity, default and restructuring of the obligations of the referenced entity. The MUFG Group’s counterparties are banks, broker-dealers, insurance and other financial institutions. The contractual or notional amounts of these credit derivatives represent the maximum potential amounts of future payments without consideration of possible recoveries under recourse provisions or from collateral held or pledged. The table below summarizes certain information regarding protection sold through credit derivatives as of March 31, 2018 and 2019: | | | | | | | | | | | | | | | | | | | | | | | | Protection sold | | | | | Maximum potential/Notional amount
by expiration period | | | Fair value | | At March 31, 2018: | | 1 year
or less | | | 1-5 years | | | Over
5 years | | | Total | | | (Asset)/
Liability(1) | | | | | (in millions) | | Single name credit default swaps: | | | | | | | | | | | | | | | | | | | | | Investment grade(2) | | ¥ | 440,610 | | | ¥ | 1,199,269 | | | ¥ | 85,094 | | | ¥ | 1,724,973 | | | ¥ | (33,389 | ) | Non-investment grade | | | 168,102 | | | | 259,497 | | | | 4,775 | | | | 432,374 | | | | (3,431 | ) | Not rated | | | — | | | | 45,425 | | | | — | | | | 45,425 | | | | 8 | | | | | | | | | | | | | | | | | | | | | | | Total | | | 608,712 | | | | 1,504,191 | | | | 89,869 | | | | 2,202,772 | | | | (36,812 | ) | | | | | | | | | | | | | | | | | | | | | | Index and basket credit default swaps held by BK: | | | | | | | | | | | | | | | | | | | | | Investment grade(2) | | | 3,000 | | | | 118,359 | | | | 37,781 | | | | 159,140 | | | | (3,381 | ) | Non-investment grade | | | 7,000 | | | | 82,867 | | | | — | | | | 89,867 | | | | (1,311 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | | 10,000 | | | | 201,226 | | | | 37,781 | | | | 249,007 | | | | (4,692 | ) | | | | | | | | | | | | | | | | | | | | | | Index and basket credit default swaps held by SCHD: | | | | | | | | | | | | | | | | | | | | | Investment grade(2) | | | 15,000 | | | | 108,000 | | | | 6,000 | | | | 129,000 | | | | (2,641 | ) | Non-investment grade | | | 12,000 | | | | 29,000 | | | | — | | | | 41,000 | | | | (749 | ) | Not rated | | | 42,439 | | | | 260,951 | | | | 1,863 | | | | 305,253 | | | | (16,294 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | | 69,439 | | | | 397,951 | | | | 7,863 | | | | 475,253 | | | | (19,684 | ) | | | | | | | | | | | | | | | | | | | | | | Total index and basket credit default swaps sold | | | 79,439 | | | | 599,177 | | | | 45,644 | | | | 724,260 | | | | (24,376 | ) | | | | | | | | | | | | | | | | | | | | | | Total credit default swaps sold | | | 688,151 | | | | 2,103,368 | | | | 135,513 | | | | 2,927,032 | | | | (61,188 | ) | | | | | | | | | | | | | | | | | | | | | | Other credit derivatives sold(3) | | | | | | | | | | | | | | | | | | | | | Investment grade | | | — | | | | 74,368 | | | | — | | | | 74,368 | | | | (24 | ) | | | | | | | | | | | | | | | | | | | | | | Total credit derivatives | | ¥ | 688,151 | | | ¥ | 2,177,736 | | | ¥ | 135,513 | | | ¥ | 3,001,400 | | | ¥ | (61,212 | ) | | | | | | | | | | | | | | | | | | | | | |
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, 2017 and 2018:
| | | | | | | | | | | | | | | | | | | | | | | | Protection sold | | | | | Maximum potential/Notional amount
by expiration period | | | Fair value | | At March 31, 2017: | | 1 year
or less | | | 1-5 years | | | Over
5 years | | | Total | | | (Asset)/
Liability(1) | | | | | (in millions) | | Single name credit default swaps: | | | | | | | | | | | | | | | | | | | | | Investment grade(2) | | ¥ | 627,355 | | | ¥ | 949,129 | | | ¥ | 29,493 | | | ¥ | 1,605,977 | | | ¥ | (21,005 | ) | Non-investment grade | | | 107,663 | | | | 349,886 | | | | 6,580 | | | | 464,129 | | | | 1,654 | | Not rated | | | 5,973 | | | | 5,981 | | | | — | | | | 11,954 | | | | (516 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | | 740,991 | | | | 1,304,996 | | | | 36,073 | | | | 2,082,060 | | | | (19,867 | ) | | | | | | | | | | | | | | | | | | | | | | Index and basket credit default swaps held by BK: | | | | | | | | | | | | | | | | | | | | | Investment grade(2) | | | 7,000 | | | | 198,335 | | | | 63,767 | | | | 269,102 | | | | (4,145 | ) | Non-investment grade | | | 17,000 | | | | 52,145 | | | | 21,316 | | | | 90,461 | | | | (837 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | | 24,000 | | | | 250,480 | | | | 85,083 | | | | 359,563 | | | | (4,982 | ) | | | | | | | | | | | | | | | | | | | | | | Index and basket credit default swaps held by SCHD: | | | | | | | | | | | | | | | | | | | | | Investment grade(2) | | | 14,000 | | | | 72,192 | | | | 1,000 | | | | 87,192 | | | | (1,278 | ) | Non-investment grade | | | 21,000 | | | | 73,000 | | | | — | | | | 94,000 | | | | (1,725 | ) | Not rated | | | 16,228 | | | | 194,533 | | | | — | | | | 210,761 | | | | (11,734 | ) | | | | | | | | | | | | | | | | | | | | | | Total | | | 51,228 | | | | 339,725 | | | | 1,000 | | | | 391,953 | | | | (14,737 | ) | | | | | | | | | | | | | | | | | | | | | | Total index and basket credit default swaps sold | | | 75,228 | | | | 590,205 | | | | 86,083 | | | | 751,516 | | | | (19,719 | ) | | | | | | | | | | | | | | | | | | | | | | Total credit default swaps sold | | | 816,219 | | | | 1,895,201 | | | | 122,156 | | | | 2,833,576 | | | | (39,586 | ) | | | | | | | | | | | | | | | | | | | | | | Other credit derivatives sold(3) | | | | | | | | | | | | | | | | | | | | | Investment grade | | | — | | | | 78,553 | | | | — | | | | 78,553 | | | | — | | | | | | | | | | | | | | | | | | | | | | | Total credit derivatives | | ¥ | 816,219 | | | ¥ | 1,973,754 | | | ¥ | 122,156 | | | ¥ | 2,912,129 | | | ¥ | (39,586 | ) | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | Protection sold | | | Protection sold | | | | | Maximum potential/Notional amount
by expiration period | | | Fair value | | | Maximum potential/Notional amount
by expiration period | | | Fair value | | At March 31, 2018: | | 1 year
or less | | | 1-5 years | | | Over
5 years | | | Total | | | (Asset)/
Liability(1) | | | At March 31, 2019: | | | 1 year
or less | | | 1-5 years | | | Over
5 years | | | Total | | | (Asset)/
Liability(1) | | | | | (in millions) | | | (in millions) | | Single name credit default swaps: | | | | | | | | | | | | | | | | | | | | | Investment grade(2) | | ¥ | 440,610 | | | ¥ | 1,199,269 | | | ¥ | 85,094 | | | ¥ | 1,724,973 | | | ¥ | (33,389 | ) | | ¥ | 378,527 | | | ¥ | 1,603,962 | | | ¥ | 145,689 | | | ¥ | 2,128,178 | | | ¥ | (30,303 | ) | Non-investment grade | | | 168,102 | | | | 259,497 | | | | 4,775 | | | | 432,374 | | | | (3,431 | ) | | | 112,901 | | | | 238,330 | | | | 5,672 | | | | 356,903 | | | | (127 | ) | Not rated | | | — | | | | 45,425 | | | | — | | | | 45,425 | | | | 8 | | | | — | | | | 5,097 | | | | — | | | | 5,097 | | | | (47 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 608,712 | | | | 1,504,191 | | | | 89,869 | | | | 2,202,772 | | | | (36,812 | ) | | | 491,428 | | | | 1,847,389 | | | | 151,361 | | | | 2,490,178 | | | | (30,477 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Index and basket credit default swaps held by BK: | | | | | | | | | | | | | | | | | | | | | Investment grade(2) | | | 3,000 | | | | 118,359 | | | | 37,781 | | | | 159,140 | | | | (3,381 | ) | | | — | | | | 120,854 | | | | — | | | | 120,854 | | | | (82 | ) | Non-investment grade | | | 7,000 | | | | 82,867 | | | | — | | | | 89,867 | | | | (1,311 | ) | | | — | | | | 101,001 | | | | — | | | | 101,001 | | | | (2,010 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 10,000 | | | | 201,226 | | | | 37,781 | | | | 249,007 | | | | (4,692 | ) | | | — | | | | 221,855 | | | | — | | | | 221,855 | | | | (2,092 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Index and basket credit default swaps held by SCHD: | | | | | | | | | | | | | | | | | | | | | Investment grade(2) | | | 15,000 | | | | 108,000 | | | | 6,000 | | | | 129,000 | | | | (2,641 | ) | | | 13,000 | | | | 194,618 | | | | 8,000 | | | | 215,618 | | | | (3,853 | ) | Non-investment grade | | | 12,000 | | | | 29,000 | | | | — | | | | 41,000 | | | | (749 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | Not rated | | | 42,439 | | | | 260,951 | | | | 1,863 | | | | 305,253 | | | | (16,294 | ) | | | 8,863 | | | | 206,832 | | | | 3,444 | | | | 219,139 | | | | (3,043 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 69,439 | | | | 397,951 | | | | 7,863 | | | | 475,253 | | | | (19,684 | ) | | | 21,863 | | | | 401,450 | | | | 11,444 | | | | 434,757 | | | | (6,896 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total index and basket credit default swaps sold | | | 79,439 | | | | 599,177 | | | | 45,644 | | | | 724,260 | | | | (24,376 | ) | | | 21,863 | | | | 623,305 | | | | 11,444 | | | | 656,612 | | | | (8,988 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total credit default swaps sold | | | 688,151 | | | | 2,103,368 | | | | 135,513 | | | | 2,927,032 | | | | (61,188 | ) | | | 513,291 | | | | 2,470,694 | | | | 162,805 | | | | 3,146,790 | | | | (39,465 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other credit derivatives sold(3) | | | | | | | | | | | | | | | | | | | | | Investment grade | | | — | | | | 74,368 | | | | — | | | | 74,368 | | | | (24 | ) | | | 77,693 | | | | — | | | | — | | | | 77,693 | | | | (620 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total credit derivatives | | ¥ | 688,151 | | | ¥ | 2,177,736 | | | ¥ | 135,513 | | | ¥ | 3,001,400 | | | ¥ | (61,212 | ) | | ¥ | 590,984 | | | ¥ | 2,470,694 | | | ¥ | 162,805 | | | ¥ | 3,224,483 | | | ¥ | (40,085 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting. |
| (2) | | The MUFG Group considers ratings ofBaa3/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 apro-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. 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 ¥33 billion and ¥2,327 billion, respectively, at March 31, 2017, and approximately ¥52 billion and ¥2,416 billion, respectively, at March 31, 2018.2018, and approximately ¥35 billion and ¥2,687 billion, respectively, at March 31, 2019. Collateral is held by the MUFG Group in relation to these instruments. Collateral requirements are determined at the counterparty level and cover numerous transactions and products as opposed to individual contracts. Credit Risk, Liquidity Risk and Credit-risk-related Contingent Features Certain ofderivative instruments held by the MUFG Group’s derivative instrumentsGroup 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, 20172018 and 20182019 was approximately ¥1.0¥0.7 trillion and ¥0.7¥0.6 trillion, respectively, for which the MUFG Group has posted collateral of approximately ¥251¥127 billion and ¥127¥85 billion, respectively, in the normal course of business. The amount of additional collateral and early termination amount which could be requested if the MUFG Group’s debt falls below investment grade was ¥81 billion and ¥79 billion, respectively, as of March 31, 2017 and ¥78 billion and ¥65 billion, respectively, as of March 31, 2018.2018 and ¥84 billion and ¥56 billion, respectively, as of March 31, 2019. | 25. | | OBLIGATIONS UNDER GUARANTEES AND OTHEROFF-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, otheroff-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, 20172018 and 2018.2019. The contractual or notional amounts of these instruments represent the maximum potential amounts of future payments without consideration of possible recoveries under recourse provisions or from collateral held or pledged. For certain types of derivatives, such as written interest rate options and written currency options, the maximum potential future payments are unlimited. Accordingly, it is impracticable to estimate the maximum potential amount of future payments. As such, the notional amounts of the related contracts, other than the maximum potential payments, are included in the table. The MUFG Group mitigates its credit risk exposure resulting from guarantees by utilizing various techniques, including collateralization in the form of cash, securities, and real estate properties based on management’s credit assessment of the guaranteed parties and the related credit profile. In order to manage the credit risk exposure, the MUFG Group also enters intosub-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 ¥390.4¥403.2 billion and ¥403.2¥468.9 billion at March 31, 20172018 and 2018,2019, respectively, which are syndicated out to third parties. The contractual or notional 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. | | | | Maximum
potential/
Contractual
or Notional
amount | | | Amount by expiration period | | | Maximum
potential/
Contractual
or Notional
amount | | | Amount by expiration period | | At March 31, 2017: | | 1 year
or less | | | 1-5 years | | | Over
5 years | | | At March 31, 2018: | | | Maximum
potential/
Contractual
or Notional
amount | | | 1 year
or less | | | 1-5 years | | | Over
5 years | | | | | (in billions) | | (in billions) | | Standby letters of credit and financial guarantees | | ¥ | 3,775 | | | ¥ | 2,494 | | | ¥ | 926 | | | ¥ | 355 | | | ¥ | 4,311 | | | ¥ | 3,115 | | | ¥ | 850 | | | ¥ | 346 | | Performance guarantees | | | 2,968 | | | | 2,037 | | | | 836 | | | | 95 | | | | 3,051 | | | | 2,144 | | | | 801 | | | | 106 | | Derivative instruments(1) | | | 44,249 | | | | 16,590 | | | | 20,717 | | | | 6,942 | | | | 40,513 | | | | 15,230 | | | | 18,314 | | | | 6,969 | | Liabilities of trust accounts | | | 9,561 | | | | 6,568 | | | | 668 | | | | 2,325 | | | | 9,444 | | | | 6,017 | | | | 558 | | | | 2,869 | | Others | | | 5 | | | | — | | | | 1 | | | | 4 | | | | 22 | | | | 2 | | | | 4 | | | | 16 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 60,558 | | | ¥ | 27,689 | | | ¥ | 23,148 | | | ¥ | 9,721 | | | ¥ | 57,341 | | | ¥ | 26,508 | | | ¥ | 20,527 | | | ¥ | 10,306 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Maximum
potential/
Contractual
or Notional
amount | | | Amount by expiration period | | | Maximum
potential/
Contractual
or Notional
amount | | | Amount by expiration period | | At March 31, 2018: | | 1 year
or less | | | 1-5 years | | | Over
5 years | | | At March 31, 2019: | | | Maximum
potential/
Contractual
or Notional
amount | | | 1 year
or less | | | 1-5 years | | | Over
5 years | | | | | (in billions) | | (in billions) | | Standby letters of credit and financial guarantees | | ¥ | 4,311 | | | ¥ | 3,115 | | | ¥ | 850 | | | ¥ | 346 | | | ¥ | 3,901 | | | ¥ | 2,792 | | | ¥ | 838 | | | ¥ | 271 | | Performance guarantees | | | 3,051 | | | | 2,144 | | | | 801 | | | | 106 | | | | 3,256 | | | | 2,332 | | | | 784 | | | | 140 | | Derivative instruments(1) | | | 40,513 | | | | 15,230 | | | | 18,314 | | | | 6,969 | | | | 58,025 | | | | 29,734 | | | | 20,921 | | | | 7,370 | | Liabilities of trust accounts | | | 9,444 | | | | 6,017 | | | | 558 | | | | 2,869 | | | | 11,520 | | | | 5,884 | | | | 420 | | | | 5,216 | | Others | | | 22 | | | | 2 | | | | 4 | | | | 16 | | | | 53 | | | | 12 | | | | 13 | | | | 28 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 57,341 | | | ¥ | 26,508 | | | ¥ | 20,527 | | | ¥ | 10,306 | | | ¥ | 76,755 | | | ¥ | 40,754 | | | ¥ | 22,976 | | | ¥ | 13,025 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Note: | (1) | | Credit derivatives sold by the MUFG Group are excluded from this presentation. |
Nature of Guarantee Contracts Standby letters of credit and financial guarantees generally include an obligation of an issuer or a designated third-party to guarantee the performance of the customer to the beneficiary under the terms of contracts such as lending contracts and other similar financial transactions. The MUFG Group is required to make payments to the guaranteed parties in the event that the customers fail to fulfill the obligations under the contracts. The guarantees whose contractual maturities are over 5 years are mainly comprised of guarantees of housing loans. Performance guarantees are contracts that contingently require the MUFG Group to make payments to the guaranteed party based on another party’s failure to perform under an obligating agreement, except financial obligation. For example, performance guarantees include guarantees of completion of construction projects. Derivative instruments that are deemed to be included within the definition of guarantees as prescribed in the guidance on guarantees include certain written options and credit default swaps. In order for the MUFG Group to determine if those derivative instruments meet the definition of guarantees, as prescribed in the guidance on guarantees, the MUFG Group has to track whether the counterparties are actually exposed to losses that will result from the adverse change in the underlyings. Accordingly, the MUFG Group has disclosed information on all credit default swaps and certain written options for which there is a possibility of meeting the definition of guarantees as prescribed in the guidance on guarantees, regardless of whether the counterparties 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, 20172018 and 20182019 are excluded from this presentation, as they are disclosed in Note 24. Liabilities of trust accounts represent the trustee’s potential responsibility for temporary payments to creditors of liabilities of trust accounts making use of funds of the MUFG Group, unless there are certain agreements with trust creditors that have provisions limiting the MUFG Group’s exposure as a trustee to the trust account assets. A trust may incur external liabilities to obtain certain services during the terms of the trust arrangement. While in principle, any liabilities of a trust are payable by the trust account and its beneficiaries. A trustee’s responsibility may be interpreted to encompass temporary payments for the trust account liabilities when the trust account does not maintain sufficient liquidity available for such liabilities unless the agreement with trust creditors limits the trustee’s exposure to the trust account assets. At March 31, 20172018 and 2018,2019, there were liabilities of ¥9,561¥9,444 billion and ¥9,444¥11,520 billion, respectively, in the segregated records of trust accounts including the amounts related to liabilities with provisions limiting trustee responsibility. Liabilities of trust accounts principally includes obligations to return collateral under security lending transactions. The MUFG Group has experienced no significant losses on such responsibilities and its exposure to the risk associated with the temporary payments is judged to be remote because trust account liabilities are generally covered by the corresponding trust account assets. The MUFG Group continuously monitors the liabilities of trust accounts and assesses the trust account’s ability to perform its obligations to prevent any unfavorable outcomes; the MUFG Group claims its recourse for its temporary payments against the trust account assets and the beneficiaries. Carrying Amount At March 31, 20172018 and 2018,2019, the carrying amounts of the liabilities related to guarantees and similar instruments set forth above were ¥1,329,475¥1,110,505 million and ¥1,110,505¥1,051,297 million, respectively, which are included in Other liabilities and Trading account liabilities. The guarantees and similar instruments comprising the largest components of the total were options sold in the amount of ¥1,290,563¥1,069,156 million and ¥1,069,156¥1,005,951 million as of March 31, 20172018 and 2018,2019, respectively. Credit derivatives sold by the MUFG Group at March 31, 20172018 and 20182019 are excluded from this presentation, as they are disclosed in Note 24. In addition, Other liabilities include an allowance foroff-balance sheet instruments of ¥79,803¥31,101 million and ¥31,101¥96,946 million at March 31, 20172018 and 2018,2019, respectively, related to these transactions. Performance Risk The MUFG Group monitors performance risk of its guarantees using the same credit rating system utilized for estimating probabilities of default with its loan portfolio. The MUFG Group’s credit rating system is consistent with both the method of evaluating credit risk under Basel III and those of third-party credit rating agencies. On certain underlying referenced credits or entities, ratings are not available. Such referenced credits are included in the “Not rated” category in the following tables. 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, 20172018 and 2018.2019. The determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible recoveries under recourse provisions or from collateral held or pledged. Such amounts do not represent the anticipated losses, if any, on these guarantees. | | | | | | | Amount by borrower grade | | | At March 31, 2017: | | Maximum
potential/
Contractual
or Notional
amount | | | Normal | | | Close
Watch(1) | | | Likely to
become
Bankrupt
or Legally/
Virtually
Bankrupt(2) | | | Not
rated | | | | | | (in billions) | | | Standby letters of credit and financial guarantees | | ¥ | 3,775 | | | ¥ | 3,629 | | | ¥ | 119 | | | ¥ | 24 | | | ¥ | 3 | | | Performance guarantees | | | 2,968 | | | | 2,831 | | | | 96 | | | | 11 | | | | 30 | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 6,743 | | | ¥ | 6,460 | | | ¥ | 215 | | | ¥ | 35 | | | ¥ | 33 | | | | | | | | | | | | | | | | | | | | | | | | | | | Amount by borrower grade | | | | | | Amount by borrower grade | | At March 31, 2018: | | Maximum
potential/
Contractual
or Notional
amount | | | Normal | | | Close
Watch(1) | | | Likely to
become
Bankrupt
or Legally/
Virtually
Bankrupt(2) | | | Not
rated | | | Maximum
potential/
Contractual
or Notional
amount | | | Normal | | | Close
Watch(1) | | | Likely to
become
Bankrupt
or Legally/
Virtually
Bankrupt(2) | | | Not
rated | | | | | (in billions) | | | (in billions) | | Standby letters of credit and financial guarantees | | ¥ | 4,311 | | | ¥ | 4,211 | | | ¥ | 83 | | | ¥ | 13 | | | ¥ | 4 | | | ¥ | 4,311 | | | ¥ | 4,211 | | | ¥ | 83 | | | ¥ | 13 | | | ¥ | 4 | | Performance guarantees | | | 3,051 | | | | 2,910 | | | | 113 | | | | 5 | | | | 23 | | | | 3,051 | | | | 2,910 | | | | 113 | | | | 5 | | | | 23 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 7,362 | | | ¥ | 7,121 | | | ¥ | 196 | | | ¥ | 18 | | | ¥ | 27 | | | ¥ | 7,362 | | | ¥ | 7,121 | | | ¥ | 196 | | | ¥ | 18 | | | ¥ | 27 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Amount by borrower grade | | At March 31, 2019: | | | Maximum
potential/
Contractual
or Notional
amount | | | Normal | | | Close
Watch(1) | | | Likely to
become
Bankrupt
or Legally/
Virtually
Bankrupt(2) | | | Not
rated | | | | | | (in billions) | | Standby letters of credit and financial guarantees | | | ¥ | 3,901 | | | ¥ | 3,779 | | | ¥ | 98 | | | ¥ | 21 | | | ¥ | 3 | | Performance guarantees | | | | 3,256 | | | | 3,070 | | | | 79 | | | | 78 | | | | 29 | | | | | | | | | | | | | | | | | | | Total | | | ¥ | 7,157 | | | ¥ | 6,849 | | | ¥ | 177 | | | ¥ | 99 | | | ¥ | 32 | | | | | | | | | | | | | | | | | | |
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 ofnon-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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The MUFG Group conducts securities lending transactions for institutional customers as a fully disclosed agent. At times, securities lending indemnifications are issued to guarantee that a security lending customer will be made whole in the event the borrower does not return the security subject to the lending agreement and collateral held is insufficient to cover the market value of the security. All lending transactions are collateralized, primarily by cash. At March 31, 2018,2019, the MUFG Group had no exposure that would require it to pay under this securities lending indemnification, since the collateral market value exceeds the fair value of securities lent. OtherOff-balance Sheet Instruments In addition to obligations under guarantees and similar arrangements set forth above, the MUFG Group issues otheroff-balance sheet instruments to meet the financial needs of its customers and for purposes other than trading. Suchoff-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 theseoff-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, 2018,2019, approximately 66%64% of these commitments will expire within one year, 31%33% from one year to five years and 3% after five years. The table below presents the contractual amounts with regard to such instruments at March 31, 20172018 and 2018:2019: | | | | 2017 | | | 2018 | | | 2018 | | | 2019 | | | | | (in billions) | | | (in billions) | | Commitments to extend credit | | ¥ | 84,334 | | | ¥ | 80,090 | | | ¥ | 80,090 | | | ¥ | 77,273 | | Commercial letters of credit | | | 1,214 | | | | 1,191 | | | | 1,191 | | | | 1,057 | | Commitments to make investments | | | 135 | | | | 183 | | | | 183 | | | | 240 | | Other | | | 13 | | | | 13 | | | | 13 | | | | 5 | |
Commitments to extend credit, which generally have fixed expiration dates or other termination clauses, are legally binding agreements to lend to customers. Commitments are different from guarantees in that the commitments are generally revocable or have provisions that enable the MUFG Group to avoid payments in the event of violations of any conditions of the contracts and certain deterioration of the potential borrowers’ financial condition. Commercial letters of credit, generally used for trade transactions, are typically secured by the underlying goods. The MUFG Group continually monitors the type and amount of collateral and other securities, and requires counterparties to provide additional collateral or guarantors as necessary. Commitments to make investments are legally binding contracts to make additional contributions to corporate recovery or private equity investment funds in accordance with limited partnership agreements. Some of these funds, in which the MUFG Group has significant variable interests, are described in Note 26. | 26. | | VARIABLE INTEREST ENTITIES |
In the normal course of business, the MUFG Group has financial interests and other contractual obligations in various entities which may be deemed to be VIEs such as asset-backed conduits, various investment funds, special purpose entities created for structured financing, repackaged instruments, entities created for the securitization of the MUFG Group’s assets and trust arrangements. 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, 20172018 and 2018:2019: | Consolidated VIEs | | Consolidated assets | | | Consolidated assets | | At March 31, 2017: | | Total | | Cash and
due from
banks | | Interest-earning
deposits in
other banks | | Trading
account
assets | | Investment
securities | | Loans | | All other
assets | | | At March 31, 2018: | | | Total | | Cash and
due from
banks | | Interest-earning
deposits in
other banks | | Trading
account
assets | | Investment
securities | | Loans | | All other
assets | | | | | (in millions) | | | (in millions) | | Asset-backed conduits | | ¥ | 7,332,485 | | | ¥ | 48,688 | | | ¥ | 34,690 | | | ¥ | 23,423 | | | ¥ | 1,485,377 | | | ¥ | 5,733,202 | | | ¥ | 7,105 | | | ¥ | 7,390,029 | | | ¥ | 52,703 | | | ¥ | 44,902 | | | ¥ | 2,273 | | | ¥ | 1,777,017 | | | ¥ | 5,502,892 | | | ¥ | 10,242 | | Investment funds | | 712,694 | | | | — | | | 9,020 | | | 511,924 | | | 15,611 | | | | — | | | 176,139 | | | 598,662 | | | | — | | | 10,300 | | | 461,036 | | | 19,895 | | | | — | | | 107,431 | | Special purpose entities created for structured financing | | 226,380 | | | | — | | | 2,310 | | | | — | | | | — | | | 172,008 | | | 52,062 | | | 198,484 | | | | — | | | 2,332 | | | | — | | | | — | | | 149,194 | | | 46,958 | | Repackaged instruments | | 77,211 | | | | — | | | | — | | | 20,783 | | | 56,428 | | | | — | | | | — | | | 152,781 | | | 520 | | | | — | | | 17,376 | | | 92,210 | | | 42,632 | | | 43 | | Securitization of the MUFG Group’s assets(1) | | 6,798,561 | | | | — | | | | — | | | | — | | | | — | | | 6,775,344 | | | 23,217 | | | 10,852,539 | | | | — | | | | — | | | | — | | | | — | | | 10,827,488 | | | 25,051 | | Trust arrangements | | 6,749,808 | | | | — | | | 7,681 | | | 593 | | | 149,205 | | | 6,578,701 | | | 13,628 | | | 7,177,407 | | | | — | | | 10,541 | | | 702 | | | 152,277 | | | 7,011,255 | | | 2,632 | | Others | | 65,883 | | | 350 | | | 30,853 | | | | — | | | 52 | | | 16,905 | | | 17,723 | | | 44,247 | | | 361 | | | 14,236 | | | | — | | | 42 | | | 12,963 | | | 16,645 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total consolidated assets before elimination | | 21,963,022 | | | 49,038 | | | 84,554 | | | 556,723 | | | 1,706,673 | | | 19,276,160 | | | 289,874 | | | 26,414,149 | | | 53,584 | | | 82,311 | | | 481,387 | | | 2,041,441 | | | 23,546,424 | | | 209,002 | | The amounts eliminated in consolidation | | (6,789,161 | ) | | (48,852 | ) | | (72,506 | ) | | (16,914 | ) | | (69,086 | ) | | (6,562,970 | ) | | (18,833 | ) | | (7,223,156 | ) | | (53,454 | ) | | (59,150 | ) | | (3,804 | ) | | (88,758 | ) | | (6,996,317 | ) | | (21,673 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total consolidated assets | | ¥ | 15,173,861 | | | ¥ | 186 | | | ¥ | 12,048 | | | ¥ | 539,809 | | | ¥ | 1,637,587 | | | ¥ | 12,713,190 | | | ¥ | 271,041 | | | ¥ | 19,190,993 | | | ¥ | 130 | | | ¥ | 23,161 | | | ¥ | 477,583 | | | ¥ | 1,952,683 | | | ¥ | 16,550,107 | | | ¥ | 187,329 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Consolidated liabilities | | | Consolidated liabilities | | | | | Total | | Deposits | | Other short-term
borrowings | | Long-term
debt | | All other
liabilities | | | Total | | Deposits | | Other short-term
borrowings | | Long-term
debt | | All other
liabilities | | | | | (in millions) | | | (in millions) | | Asset-backed conduits | | ¥ | 7,357,874 | | | ¥ | — | | | ¥ | 5,397,811 | | | ¥ | 1,379,498 | | | ¥ | 580,565 | | | ¥ | 7,409,190 | | | ¥ | — | | | ¥ | 5,176,663 | | | ¥ | 1,708,354 | | | ¥ | 524,173 | | Investment funds | | 2,882 | | | | — | | | | — | | | | — | | | 2,882 | | | 11,735 | | | | — | | | | — | | | | — | | | 11,735 | | Special purpose entities created for structured financing | | 135,667 | | | | — | | | 573 | | | 128,804 | | | 6,290 | | | 115,353 | | | | — | | | 587 | | | 112,054 | | | 2,712 | | Repackaged instruments | | 76,713 | | | | — | | | 4,000 | | | 72,096 | | | 617 | | | 148,928 | | | | — | | | 12,676 | | | 132,012 | | | 4,240 | | Securitization of the MUFG Group’s assets(1) | | 6,768,108 | | | | — | | | 29,637 | | | 6,734,855 | | | 3,616 | | | 10,816,672 | | | | — | | | 5,000 | | | 10,806,145 | | | 5,527 | | Trust arrangements | | 6,743,464 | | | 6,676,198 | | | | — | | | | — | | | 67,266 | | | 7,171,852 | | | 7,103,738 | | | 655 | | | | — | | | 67,459 | | Others | | 65,031 | | | | — | | | 45,450 | | | 1,834 | | | 17,747 | | | 43,030 | | | | — | | | 24,747 | | | 1,603 | | | 16,680 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total consolidated liabilities before elimination | | 21,149,739 | | | 6,676,198 | | | 5,477,471 | | | 8,317,087 | | | 678,983 | | | 25,716,760 | | | 7,103,738 | | | 5,220,328 | | | 12,760,168 | | | 632,526 | | The amounts eliminated in consolidation | | (10,843,144 | ) | | | — | | | (3,034,973 | ) | | (7,766,722 | ) | | (41,449 | ) | | (15,347,991 | ) | | | — | | | (3,028,987 | ) | | (12,248,680 | ) | | (70,324 | ) | The amount of liabilities with recourse to the general credit of the MUFG Group | | (9,687,133 | ) | | (6,676,198 | ) | | (2,420,454 | ) | | (2,394 | ) | | (588,087 | ) | | (9,745,330 | ) | | (7,103,738 | ) | | (2,162,890 | ) | | (540 | ) | | (478,162 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of the MUFG Group | | ¥ | 619,462 | | | ¥ | — | | | ¥ | 22,044 | | | ¥ | 547,971 | | | ¥ | 49,447 | | | ¥ | 623,439 | | | ¥ | — | | | ¥ | 28,451 | | | ¥ | 510,948 | | | ¥ | 84,040 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | Consolidated VIEs | | Consolidated assets | | | Consolidated assets | | At March 31, 2018: | | Total | | Cash and
due from
banks | | Interest-earning
deposits in
other banks | | Trading
account
assets | | Investment
securities | | Loans | | All other
assets | | | At March 31, 2019: | | | Total | | Cash and
due from
banks | | Interest-earning
deposits in
other banks | | Trading
account
assets | | Investment
securities | | Loans | | All other
assets | | | | | (in millions) | | | (in millions) | | Asset-backed conduits | | ¥ | 7,390,029 | | | ¥ | 52,703 | | | ¥ | 44,902 | | | ¥ | 2,273 | | | ¥ | 1,777,017 | | | ¥ | 5,502,892 | | | ¥ | 10,242 | | | ¥ | 6,698,146 | | | ¥ | 92,310 | | | ¥ | 26,101 | | | ¥ | 3,005 | | | ¥ | 1,424,444 | | | ¥ | 5,124,462 | | | ¥ | 27,824 | | Investment funds | | 598,662 | | | | — | | | 10,300 | | | 461,036 | | | 19,895 | | | | — | | | 107,431 | | | 680,922 | | | | — | | | 14,113 | | | 477,239 | | | 18,118 | | | | — | | | 171,452 | | Special purpose entities created for structured financing | | 198,484 | | | | — | | | 2,332 | | | | — | | | | — | | | 149,194 | | | 46,958 | | | 203,458 | | | | — | | | 2,214 | | | | — | | | | — | | | 127,243 | | | 74,001 | | Repackaged instruments | | 152,781 | | | 520 | | | | — | | | 17,376 | | | 92,210 | | | 42,632 | | | 43 | | | 279,327 | | | 506 | | | | — | | | 53,346 | | | 137,509 | | | 86,753 | | | 1,213 | | Securitization of the MUFG Group’s assets(1) | | 10,852,539 | | | | — | | | | — | | | | — | | | | — | | | 10,827,488 | | | 25,051 | | | 10,208,496 | | | | — | | | | — | | | | — | | | | — | | | 10,183,624 | | | 24,872 | | Trust arrangements | | 7,177,407 | | | | — | | | 10,541 | | | 702 | | | 152,277 | | | 7,011,255 | | | 2,632 | | | 7,888,210 | | | | — | | | 8,953 | | | 202 | | | 311,412 | | | 7,565,862 | | | 1,781 | | Others | | 44,247 | | | 361 | | | 14,236 | | | | — | | | 42 | | | 12,963 | | | 16,645 | | | 34,303 | | | 362 | | | 1,635 | | | | — | | | 42 | | | 9,699 | | | 22,565 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total consolidated assets before elimination | | 26,414,149 | | | 53,584 | | | 82,311 | | | 481,387 | | | 2,041,441 | | | 23,546,424 | | | 209,002 | | | 25,992,862 | | | 93,178 | | | 53,016 | | | 533,792 | | | 1,891,525 | | | 23,097,643 | | | 323,708 | | The amounts eliminated in consolidation | | (7,223,156 | ) | | (53,454 | ) | | (59,150 | ) | | (3,804 | ) | | (88,758 | ) | | (6,996,317 | ) | | (21,673 | ) | | (7,772,776 | ) | | (93,171 | ) | | (29,361 | ) | | (5,102 | ) | | (63,331 | ) | | (7,552,315 | ) | | (29,496 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total consolidated assets | | ¥ | 19,190,993 | | | ¥ | 130 | | | ¥ | 23,161 | | | ¥ | 477,583 | | | ¥ | 1,952,683 | | | ¥ | 16,550,107 | | | ¥ | 187,329 | | | ¥ | 18,220,086 | | | ¥ | 7 | | | ¥ | 23,655 | | | ¥ | 528,690 | | | ¥ | 1,828,194 | | | ¥ | 15,545,328 | | | ¥ | 294,212 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Consolidated liabilities | | | | | Total | | | Deposits | | | Other short-term
borrowings | | | Long-term
debt | | | All other
liabilities | | | | | (in millions) | | Asset-backed conduits | | ¥ | 7,409,190 | | | ¥ | — | | | ¥ | 5,176,663 | | | ¥ | 1,708,354 | | | ¥ | 524,173 | | Investment funds | | | 11,735 | | | | — | | | | — | | | | — | | | | 11,735 | | Special purpose entities created for structured financing | | | 115,353 | | | | — | | | | 587 | | | | 112,054 | | | | 2,712 | | Repackaged instruments | | | 148,928 | | | | — | | | | 12,676 | | | | 132,012 | | | | 4,240 | | Securitization of the MUFG Group’s assets(1) | | | 10,816,672 | | | | — | | | | 5,000 | | | | 10,806,145 | | | | 5,527 | | Trust arrangements | | | 7,171,852 | | | | 7,103,738 | | | | 655 | | | | — | | | | 67,459 | | Others | | | 43,030 | | | | — | | | | 24,747 | | | | 1,603 | | | | 16,680 | | | | | | | | | | | | | | | | | | | | | | | Total consolidated liabilities before elimination | | | 25,716,760 | | | | 7,103,738 | | | | 5,220,328 | | | | 12,760,168 | | | | 632,526 | | The amounts eliminated in consolidation | | | (15,347,991 | ) | | | — | | | | (3,028,987 | ) | | | (12,248,680 | ) | | | (70,324 | ) | The amount of liabilities with recourse to the general credit of the MUFG Group | | | (9,745,330 | ) | | �� | (7,103,738 | ) | | | (2,162,890 | ) | | | (540 | ) | | | (478,162 | ) | | | | | | | | | | | | | | | | | | | | | | Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of the MUFG Group | | ¥ | 623,439 | | | ¥ | — | | | ¥ | 28,451 | | | ¥ | 510,948 | | | ¥ | 84,040 | | | | | | | | | | | | | | | | | | | | | | |
Note:
(1) | | Securitization of the MUFG Group’s assets includes ¥5,793,956 million and ¥9,974,383 million of assets primarily consisting of loans and the same amounts of liabilities primarily consisting of long-term debt relating to eligible beneficiary interests in housing loan trusts as of March 31, 2017 and 2018, respectively. For more information, see analysis of each transaction category below. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | Consolidated liabilities | | | | | Total | | | Deposits | | | Other short-term
borrowings | | | Long-term
debt | | | All other
liabilities | | | | | (in millions) | | Asset-backed conduits | | ¥ | 6,691,362 | | | ¥ | — | | | ¥ | 4,678,588 | | | ¥ | 1,552,572 | | | ¥ | 460,202 | | Investment funds | | | 6,852 | | | | — | | | | — | | | | 5,158 | | | | 1,694 | | Special purpose entities created for structured financing | | | 114,469 | | | | — | | | | 609 | | | | 111,523 | | | | 2,337 | | Repackaged instruments | | | 277,179 | | | | — | | | | 48,014 | | | | 174,215 | | | | 54,950 | | Securitization of the MUFG Group’s assets | | | 10,167,632 | | | | — | | | | — | | | | 10,162,231 | | | | 5,401 | | Trust arrangements | | | 7,881,332 | | | | 7,616,575 | | | | — | | | | — | | | | 264,757 | | Others | | | 32,584 | | | | — | | | | 8,611 | | | | 1,474 | | | | 22,499 | | | | | | | | | | | | | | | | | | | | | | | Total consolidated liabilities before 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 | | | (9,922,307 | ) | | | (7,566,179 | ) | | | (1,719,246 | ) | | | (121 | ) | | | (636,761 | ) | | | | | | | | | | | | | | | | | | | | | | Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of the MUFG Group | | ¥ | 572,714 | | | ¥ | — | | | ¥ | 20,535 | | | ¥ | 490,033 | | | ¥ | 62,146 | | | | | | | | | | | | | | | | | | | | | | |
In general, the creditors or beneficial interest holders of consolidated VIEs have recourse only to the assets of those VIEs of which they are creditors or beneficial interest holders, and do not have recourse to other assets of the MUFG Group, except where the MUFG Group is also contractually required to provide credit enhancement or program-wide liquidity. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following tables present the total assets ofnon-consolidated VIEs, the maximum exposure to loss resulting from the MUFG Group’s involvement withnon-consolidated VIEs and the assets and liabilities which relate to the MUFG’s variable interests innon-consolidated VIEs at March 31, 20172018 and 2018:2019: | Non-consolidated VIEs | | | | On-balance sheet assets | | On-balance sheet
liabilities | | | At March 31, 2017: | | Total assets | | Maximum
exposure | | Total | | Trading
account
assets | | Investment
securities | | Loans | | All
other
assets | | Total | | All other
liabilities | | | | | | (in millions) | | | Asset-backed conduits | | ¥ | 29,604,929 | | | ¥ | 5,608,909 | | | ¥ | 4,383,707 | | | ¥ | 1,072 | | | ¥ | 1,236,094 | | | ¥ | 3,146,541 | | | ¥ | — | | | ¥ | 1 | | | ¥ | 1 | | | Investment funds | | 30,591,880 | | | 1,674,567 | | | 1,396,830 | | | 200,651 | | | 829,641 | | | 356,828 | | | 9,710 | | | 98 | | | 98 | | | Special purpose entities created for structured financing | | 40,710,546 | | | 4,717,235 | | | 3,699,415 | | | 279,471 | | | 147,543 | | | 3,207,369 | | | 65,032 | | | 4,657 | | | 4,657 | | | Repackaged instruments | | 10,127,497 | | | 2,269,149 | | | 2,104,697 | | | 581,912 | | | 1,203,181 | | | 294,703 | | | 24,901 | | | | — | | | | — | | | Others | | 52,012,087 | | | 3,731,571 | | | 2,723,625 | | | 98,289 | | | 83,629 | | | 2,462,462 | | | 79,245 | | | 18,539 | | | 18,539 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 163,046,939 | | | ¥ | 18,001,431 | | | ¥ | 14,308,274 | | | ¥ | 1,161,395 | | | ¥ | 3,500,088 | | | ¥ | 9,467,903 | | | ¥ | 178,888 | | | ¥ | 23,295 | | | ¥ | 23,295 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-consolidated VIEs | Non-consolidated VIEs | | | | On-balance sheet assets | | On-balance sheet
liabilities | | Non-consolidated VIEs | | | | On-balance sheet assets | | On-balance sheet
liabilities | | At March 31, 2018: | | Total assets | | Maximum
exposure | | Total | | Trading
account
assets | | Investment
securities | | Loans | | All
other
assets | | Total | | All other
liabilities | | | Total assets | | Maximum
exposure | | Total | | Trading
account
assets | | Investment
securities | | Loans | | All
other
assets | | Total | | All other
liabilities | | | | | (in millions) | | | (in millions) | | Asset-backed conduits | | ¥ | 29,011,749 | | | ¥ | 5,721,627 | | | ¥ | 4,645,697 | | | ¥ | 620 | | | ¥ | 1,541,591 | | | ¥ | 3,103,486 | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | 29,011,749 | | | ¥ | 5,721,627 | | | ¥ | 4,645,697 | | | ¥ | 620 | | | ¥ | 1,541,591 | | | ¥ | 3,103,486 | | | ¥ | — | | | ¥ | — | | | ¥ | — | | Investment funds | | 45,090,381 | | | 1,776,366 | | | 1,525,127 | | | 213,722 | | | 891,062 | | | 413,855 | | | 6,488 | | | 17,919 | | | 17,919 | | | 45,090,381 | | | 1,776,366 | | | 1,525,127 | | | 213,722 | | | 891,062 | | | 413,855 | | | 6,488 | | | 17,919 | | | 17,919 | | Special purpose entities created for structured financing | | 35,437,349 | | | 4,016,999 | | | 3,193,621 | | | 309,560 | | | 116,961 | | | 2,697,126 | | | 69,974 | | | 7,217 | | | 7,217 | | | 35,437,349 | | | 4,016,999 | | | 3,193,621 | | | 309,560 | | | 116,961 | | | 2,697,126 | | | 69,974 | | | 7,217 | | | 7,217 | | Repackaged instruments | | 10,212,933 | | | 2,576,619 | | | 2,487,377 | | | 759,591 | | | 1,421,716 | | | 236,852 | | | 69,218 | | | | — | | | | — | | | 10,212,933 | | | 2,576,619 | | | 2,487,377 | | | 759,591 | | | 1,421,716 | | | 236,852 | | | 69,218 | | | | — | | | | — | | Others | | 49,582,444 | | | 3,760,375 | | | 2,740,529 | | | 94,882 | | | 61,192 | | | 2,482,141 | | | 102,314 | | | 24,830 | | | 24,830 | | | 49,582,444 | | | 3,760,375 | | | 2,740,529 | | | 94,882 | | | 61,192 | | | 2,482,141 | | | 102,314 | | | 24,830 | | | 24,830 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 169,334,856 | | | ¥ | 17,851,986 | | | ¥ | 14,592,351 | | | ¥ | 1,378,375 | | | ¥ | 4,032,522 | | | ¥ | 8,933,460 | | | ¥ | 247,994 | | | ¥ | 49,966 | | | ¥ | 49,966 | | | ¥ | 169,334,856 | | | ¥ | 17,851,986 | | | ¥ | 14,592,351 | | | ¥ | 1,378,375 | | | ¥ | 4,032,522 | | | ¥ | 8,933,460 | | | ¥ | 247,994 | | | ¥ | 49,966 | | | ¥ | 49,966 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-consolidated VIEs | | Non-consolidated VIEs | | | | On-balance sheet assets | | On-balance sheet
liabilities | | At March 31, 2019: | | | Total assets | | Maximum
exposure | | Total | | Trading
account
assets | | Investment
securities | | Loans | | All
other
assets | | Total | | All other
liabilities | | | | | | (in millions) | | Asset-backed 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 | | | 42,676,571 | | | 3,972,450 | | | 3,015,593 | | | 252,597 | | | 48,895 | | | 2,709,008 | | | 5,093 | | | 9,827 | | | 9,827 | | Repackaged instruments | | | 12,885,367 | | | 3,477,545 | | | 3,383,161 | | | 690,305 | | | 2,169,798 | | | 478,252 | | | 44,806 | | | 6,087 | | | 6,087 | | Others | | | 60,074,743 | | | 3,482,153 | | | 2,454,807 | | | 123,595 | | | 65,451 | | | 2,145,665 | | | 120,096 | | | 57,567 | | | 57,567 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | ¥ | 213,008,709 | | | ¥ | 19,106,098 | | | ¥ | 15,589,741 | | | ¥ | 1,254,322 | | | ¥ | 5,242,402 | | | ¥ | 8,914,380 | | | ¥ | 178,637 | | | ¥73,687 | | | ¥73,687 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Maximum exposure to loss on each type of entity is determined based on the carrying amount of anyon-balance sheet assets and anyoff-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
sheet date and does not reflect the likelihood of such a loss being incurred. The difference between the amount ofon-balance sheet assets and the maximum exposure to loss primarily comprises the remaining undrawn commitments. In February 2015, the FASB issued new guidance which amends the consolidation analysis under the current consolidation guidance. The amendments change the VIE analysis for limited partnerships and similar MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) legal entities, the criteria for evaluating whether fees paid to a decision maker or a service provider are a variable interest, the effect of fee arrangements and related parties on the primary beneficiary determination, and rescind the indefinite deferral provision that affects the consolidation evaluation for certain investment funds. The MUFG group adopted this new accounting guidance on April 1, 2016, which resulted in the consolidation and deconsolidation of certain investment funds. The net increase in the MUFG Group’s consolidated assets, liabilities and Noncontrolling interests, were ¥628,236 million, ¥32,254 million and ¥595,982 million, respectively, as of April 1, 2016. The cumulative effect on retained earnings was a decrease of ¥3,873 million upon the adoption. Asset-Backed Conduits This category primarily comprises the following: Multi-Seller Conduits (MUFG-sponsored Asset-Backed Commercial Paper (“ABCP”) Conduits and Other ABCP Conduits) The MUFG Group administers several conduits under asset-backed financing programs under which the conduits purchase financial assets, primarily trade accounts receivable, from the MUFG Group’s customers by issuing short-term financing instruments, primarily commercial paper, to third-party investors. Under the asset-backed financing programs, the MUFG Group acts as an agent for the conduits, which enter into agreements with the MUFG Group’s customers where the customers transfer financial assets to the conduits in exchange for monetary consideration. The MUFG Group also underwrites commercial paper for the conduits that is secured by the assets held by them and provides program-wide liquidity and credit enhancement facilities to the conduits. The MUFG Group receives fees related to the services it provides to the conduits and the program-wide liquidity and credit enhancement. The MUFG Group considers itself to be the primary beneficiary of the multi-seller conduits because, as an agent and sponsor, the MUFG Group has the power to direct activities of the conduits that most significantly impact the conduits’ economic performance and also has the obligation to absorb losses of the conduits that could potentially be significant to the conduits through the program-wide liquidity and credit enhancement. Consequently, the MUFG Group consolidates the conduits. In addition to the entities described above, the MUFG Group participates as a provider of financing to several conduits that are administered by third parties. Most of these conduits are established under a multi-seller asset-backed financing program and the MUFG Group provides financing along with other financial institutions. With respect to these conduits, the MUFG Group is not considered as the primary beneficiary because the MUFG Group’s participation in the conduits is only to provide financing along with other third-party financial institutions and it does not have the power to direct the activities of the conduits. Consequently, the MUFG Group does not consolidate the conduits. Asset-Backed Conduits (MUFG-sponsored Asset-Backed Loan (“ABL”) Programs and Other Programs) The MUFG Group administers several conduits under asset-backed financing programs where the MUFG Group provides financing to fund the conduits’ purchases of financial assets, comprising primarily trade accounts receivable, from its customers. The MUFG Group acts as an agent and sponsor for the conduits, which enter into MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) original obligors, that most significantly impact the conduits’ economic performance, and also has the obligation to absorb losses of the conduits that could potentially be significant to the conduits through financing it provides. Consequently, the MUFG Group consolidates the conduits. In addition, the MUFG Group is involved with entities, which take in most cases the form of a trust, where originators of financial assets, which primarily comprise lease receivables, entrust the assets with trust banks and receive beneficial certificates of trusts in exchange. The originators then transfer the beneficiary certificates to the MUFG Group in exchange for cash. The originators of the financial assets entrusted continue to be involved in the assets as servicers. Because the originators are deemed to have the power to direct activities of the entities that most significantly impact the entities’ economic performance through their role as a servicer, the MUFG Group is not considered as the primary beneficiary of these entities. Consequently, the MUFG Group does not consolidate these entities. The MUFG Group also participates as a provider of financing to the ABL programs that are managed by third parties. The MUFG Group is not considered as the primary beneficiary of the entities used in these programs as the MUFG Group’s participation in the entities is only to provide financing along with other third parties and it does not have the power to direct the activities of the entities. Consequently, the MUFG Group does not consolidate the entities used in these programs. Investment Funds This category primarily comprises the following: Corporate Recovery Funds These entities are established by fund managers, which are unrelated to the MUFG Group, for the purpose of investing in debt or equity instruments issued by distressed companies. After investment, the fund managers work closely with the management of the entities and attempt to enhance corporate value by various means including corporate restructuring and reorganization. Their exit strategies include, among others, sales to others and initial public offerings. Typically, these entities take the form of a limited partnership which is entirely funded by general and limited partner interests. These partnerships are considered as VIEs unless the limited partners hold substantivekick-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
connection with their acquisition of equity interests, such as providing financing and other support tostart-up businesses, medium and small entities in a particular geographical area, and to companies with certain technology or companies in a high-growth industry. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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 substantivekick-out rights or participating rights. The MUFG Group participates in these partnerships as a general partner or limited partner. The MUFG Group consolidates these funds, which are considered as VIEs, if the MUFG Group has the power to direct the activities of these funds that most significantly impact the economic performance of these funds, and also has the obligation to absorb losses of these funds that could potentially be significant to these funds or the right to receive benefits from these funds that could potentially be significant to these funds. Investment Trusts The MUFG Group invests in investment trusts that are professionally managed collective investment schemes which pool money from many investors and invest in, among others, equity and debt securities. Most of these funds take the form of a trust where there is a separation in investment decisions, which is assumed by an investment manager who has no investment in a trust, and ownership through beneficiary interests issued by a trust are owned by investors. Therefore, these investment trusts are considered as VIEs. The MUFG Group consolidates these funds if the MUFG Group has the power to direct the activities of these funds that most significantly impact the economic performance of these funds, and also has the obligation to absorb losses of these funds that could potentially be significant to these funds or the right to receive benefits from these funds that could potentially be significant to these funds. Buy-out Financing Vehicles The MUFG Group provides financing tobuy-out vehicles. Thebuy-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 thebuy-out vehicles in the form of loans. While thebuy-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 innon-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 inlow-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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.
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 andnon-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: Leveraged 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 substantivekick-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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 leaseback agreements. These vehicles typically take the form of a limited partnership, and are considered as VIEs unless the limited partners hold substantivekick-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 substantivekick-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”) and synthetic 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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) issued by the entities to general investors. For these entities, the MUFG Group has the power to direct activities that most significantly impact the economic performance and it has the obligation to absorb losses or receive benefits that could potentially be significant to the entities. As such, the MUFG Group considers itself as the primary beneficiary of these entities and consolidates them. Investments in Securitized Financial Instruments The MUFG Group holds investments in special purpose entities that issue securitized financial products. The assets held by the entities include credit card receivables and residential mortgage loans. These entities are established and managed by parties that are unrelated to the MUFG Group and the MUFG Group’s involvement with these entities is for its own investment purposes. In all cases, the MUFG Group participates as one of many other investors and the MUFG Group does not have the power to direct activities of the entities that most significantly impact the entities’ economic performance. Therefore, the MUFG Group is not considered as the primary beneficiary of these entities and does not consolidate them. Securitization of the MUFG Group’s Assets This category primarily comprises the following: Securitization for issuing interests or financing The MUFG Group establishes entities to securitize its own financial assets that include, among others, corporate and retail loans and lease receivables. The entities used for securitization, which typically take the form of a special purpose company or a trust, are established by the MUFG Group and, in most cases, issue senior and subordinate interests or financing. After securitization, the MUFG Group typically continues to service securitized assets as a servicer. The MUFG Group may also retain subordinate interests or financing or other interests. The MUFG Group is considered as the primary beneficiary and consolidates the entities used for securitization since it has the obligation to absorb losses through subordinate interests, and also has the power for determining and implementing policies as servicer that give it the ability to manage the entities’ assets that become delinquent or are in default in order to improve the economic performance of the entities. Eligible beneficiary interests in housing loan trusts The MUFG Group establishes trusts, which acquire the MUFG Group’s housing loans and in turn issue beneficiary interests to the MUFG Group, to pledge these beneficiary interests as collateral for borrowings from the Bank of Japan, as a result of the decision by the Bank of Japan on June 30, 2016 to accept these beneficial interests as collateral in the same way as it does for Japanese national government bonds. The MUFG Group is considered as the primary beneficiary and consolidates the trusts since it has the obligation to absorb losses through beneficiary interests, and also has the power for determining and implementing policies as servicer that give it the ability to manage housing loans owned by the trusts that become delinquent or are in default in order to improve the economic performance of the trusts. Trust Arrangements The MUFG Group offers, primarily through Mitsubishi UFJ Trust and Banking, a variety of trust products and services including securities investment trusts, pension trusts and trusts used as securitization vehicles. In a typical trust arrangement, however, the MUFG Group manages and administers assets on behalf of the customers in an agency, fiduciary and trust capacity and does not assume risks associated with the entrusted assets. The MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) trusts are generally considered as VIEs because the trust beneficiaries, who provide all of the equity at risk, usually do not have power to direct the activities that most significantly impact its economic performance in the arrangements. The MUFG Group, however, is not considered as the primary beneficiary, except for the case mentioned below, because it merely receives fees for compensation for its services on terms that are customary for these activities and the fees are insignificant relative to the total amount of the trusts’ economic performance and variability. Therefore, the MUFG Group does not consolidate these entities. With respect to the jointly operated designated money in trusts, Mitsubishi UFJ Trust and Banking pools money from investors and determines how best to invest it. In addition, certain investors, such as money reserve funds and investment funds, place excess funds in the jointly operated designated money trusts. Mitsubishi UFJ Trust and Banking typically invests in high-quality financial assets, including government bonds, corporate bonds and corporate loans including loans to Mitsubishi UFJ Trust and Banking and receives fees as compensation for services. In this role as a sponsor of these trusts’ Mitsubishi UFJ Trust and Banking provides guarantees under which it is required to compensate a loss on the stated principal of the trust beneficial interests. Mitsubishi UFJ Trust and Banking is considered as the primary beneficiary of these trusts’ because it is exposed to a potentially significant amount of losses and also has the power to direct activities of these trusts’ that most significantly impact their economic performance. Upon consolidation of the trusts, the certificates issued to the investors are accounted for as deposit liabilities as the products are structured and marketed to customers similar to Mitsubishi UFJ Trust and Banking’s term deposit products. Mitsubishi UFJ Trust and Banking considers the likelihood of incurring losses on the stated principal guarantee to be highly remote. In the trusts’ operational history that extends over decades, the stated principal guarantee has never been called upon. The variability in fair value of the net assets of the trusts has been primarily affected by the fluctuations in interest rates, and the majority of such variability has been absorbed by investors or trust beneficiaries. Others This category primarily comprises the following: Financing Vehicles of the MUFG Group’s Customers The MUFG Group is involved with several entities that are established by the MUFG Group’s customers. These entities borrow funds from financial institutions and extend loans to their group entities. These entities effectively work as fund-raising vehicles for their respective group entities and enable the groups to achieve efficient financing by integrating their financing activities into a single entity. In all cases, the MUFG Group is not considered as the primary beneficiary because the MUFG Group’s participation in these entities is only to provide financing, and the customers effectively hold the power to direct activities of these entities that most significantly impact the economic performance of the entities. Consequently, the MUFG Group does not consolidate these entities. Funding Vehicles The MUFG Group has established several wholly-ownedoff-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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Troubled Borrowers During the normal course of business, the borrowers from the MUFG Group may experience financial difficulties and sometimes enter into certain transactions that require the MUFG Group to assess whether they would be considered as VIEs due to their difficult financial position. While in most cases such borrowers are not considered as VIEs when the transactions take place, in limited circumstances they are considered as VIEs due to insufficient equity investment at risk. In all cases, the MUFG Group is not considered as the primary beneficiary because the power to direct activities that most significantly impact the economic performance of the troubled borrowers resides with the management of the troubled borrowers, and the MUFG Group, as a lender, does not have power over or assume any role in management. Therefore, the MUFG Group does not consolidate these troubled borrowers. | 27. | | COMMITMENTS AND CONTINGENT LIABILITIES |
Lease Commitments The MUFG Group leases certain technology systems, office space and equipment under noncancelable agreements which expire through the fiscal year 2048. Future minimum rental commitments for noncancelable leases at March 31, 20182019 were as follows: | | | | Capital
leases | | Operating
leases | | | Capital
leases | | Operating
leases | | | | | (in millions) | | | (in millions) | | Fiscal year ending March 31: | | | | | | | | | 2019 | | ¥ | 5,559 | | | ¥ | 93,378 | | | 2020 | | | 4,297 | | | 79,284 | | | ¥ | 6,573 | | | ¥ | 94,422 | | 2021 | | | 3,746 | | | 70,402 | | | | 5,957 | | | 81,431 | | 2022 | | | 2,784 | | | 61,145 | | | | 4,739 | | | 68,416 | | 2023 | | | 1,602 | | | 54,551 | | | | 3,287 | | | 56,471 | | 2024 and thereafter | | | 3,513 | | | 311,437 | | | 2024 | | | | 1,672 | | | 50,571 | | 2025 and thereafter | | | | 3,104 | | | 271,031 | | | | | | | | | | | | | | | Total minimum lease payments | | ¥ | 21,501 | | | ¥ | 670,197 | | | ¥ | 25,332 | | | ¥ | 622,342 | | | | | | | | | | | | | Amount representing interest | | | (2,787 | ) | | | | | (2,797 | ) | | | | | | | | | | | | | | Present value of minimum lease payments | | ¥ | 18,714 | | | | | ¥ | 22,535 | | | | | | | | | | | | | | |
Total rental expense for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 was ¥118,286 million, ¥113,649 million, and ¥119,208 million and ¥116,525million, respectively. Repayment of Excess Interest The Japanese government implemented regulatory reforms affecting the consumer lending industry. In December 2006, the Diet passed legislation to reduce the maximum permissible interest rate under the Act Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest Rates from 29.2% per annum to 20% per annum. The reduction in interest rates was implemented in June 2010. The regulatory reforms also included amendments to the Money Lending Business Act which, effective June 18, 2010, abolished theso-called “gray-zone interest.” Gray-zone interest refers to interest rates exceeding the limits stipulated by the Interest Rate Restriction Act (between 15% per annum to 20% per annum depending on the amount of principal). Under the regulatory reforms, all interest rates for loans originated after this reform are subject to the lower limits MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) imposed by the Interest Rate Restriction Act. Furthermore, the new regulations require stringent review procedures for consumer finance companies before lending, and with the exception of certain provisions, one of those new regulations introduces a limit on aggregate credit extensions toone-third of the borrower’s annual income. Formerly, consumer finance companies were able to charge interest rates exceeding the limits stipulated by the Interest Rate Restriction Act so long as the payment was made voluntarily by the borrowers, and the lender complied with various notice and other requirements. Accordingly, MUFG’s consumer finance subsidiaries and equity method investees offered loans at interest rates above the Interest Rate Restriction Act. Upon the implementation of the regulatory reforms in June 2010, they lowered the interest rates for loans originated after this reform to below the Interest Rate Restriction Act. In 2006, the Supreme Court of Japan passed decisions in a manner more favorable to borrowers requiring reimbursement of previously paid interest exceeding the limits stipulated by the Interest Rate Restriction Act in certain circumstances. Borrowers’ claims for reimbursement of excess interest arose after such decisions and other regulatory changes. The MUFG Group maintains an allowance for repayment of excess interest based on an analysis of past experience of reimbursement of excess interest, borrowers’ profile, recent trend of borrowers’ claims for reimbursement, and management future forecasts. Management believes that the provision for repayment of excess interest is adequate and the allowance is at the appropriate amount to absorb probable losses, so that the impact of future claims for reimbursement of excess interest will not have a material adverse effect on the MUFG Group’s financial position and results of operations. The allowance for repayment of excess interest established by MUFG’s consumer finance subsidiaries, which was included in Other liabilities, was ¥39,414¥23,724 million and ¥23,724¥24,983 million as of March 31, 20172018 and 2018,2019, respectively. Provision (reversal) related to the allowance is included in Othernon-interest expenses in the accompanying consolidated statements of income. For the fiscal years ended March 31, 2016, 2017, 2018 and 2018,2019, there was a negative impact of ¥22,426 million, ¥56,911 million, nil and nil,¥15,632 million, respectively, on Equity in earnings of equity method investees—net in the accompanying consolidated statements of income. Litigation In the ordinary course of business, the MUFG Group is subject to various litigation and regulatory matters. In accordance with applicable accounting guidance, the MUFG Group establishes an accrued liability for loss contingencies arising from litigation and regulatory matters when they are determined to be probable in their occurrence and the probable loss amount can be reasonably estimated. Based upon current knowledge and consultation with counsel, management believes the eventual outcome of such litigation and regulatory matters, where losses are probable and the probable loss amounts can be reasonably estimated, would not have a material adverse effect on the MUFG Group’s financial position, results of operations or cash flows. Additionally, management believes the amount of loss that is reasonably possible, but not probable, from various litigation and regulatory matters is not material to the MUFG Group’s financial position, results of operations or cash flows. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | 28. | | FEES AND COMMISSIONS INCOME |
Disaggregation of Contract Revenue Details of fees and commissions income for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 were as follows: | | | | 2016 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2019 | | | | | (in millions) | | | (in millions) | | Fees and commissions on deposits | | ¥ | 58,865 | | | ¥ | 53,891 | | | ¥ | 53,483 | | | ¥ | 53,891 | | | ¥ | 53,483 | | | ¥ | 52,624 | | Fees and commissions on remittances and transfers | | | 169,101 | | | | 168,571 | | | | 169,300 | | | | 168,571 | | | | 169,300 | | | | 168,756 | | Fees and commissions on foreign trading business | | | 84,688 | | | | 75,024 | | | | 78,239 | | | | 75,024 | | | | 78,239 | | | | 73,176 | | Fees and commissions on credit card business | | | 193,646 | | | | 198,145 | | | | 212,515 | | | | 198,145 | | | | 212,515 | | | | 225,877 | | Fees and commissions on security-related services | | | 285,334 | | | | 239,516 | | | | 258,728 | | | | 239,516 | | | | 258,728 | | | | 233,448 | | Fees and commissions on administration and management services for investment funds | | | 149,916 | | | | 155,708 | | | | 159,481 | | | | 155,708 | | | | 159,481 | | | | 147,597 | | Trust fees | | | 110,051 | | | | 103,110 | | | | 112,399 | | | | 103,110 | | | | 112,399 | | | | 115,002 | | Guarantee fees | | | 44,740 | | | | 41,818 | | | | 44,160 | | | | 41,818 | | | | 44,160 | | | | 44,962 | | Insurance commissions | | | 69,485 | | | | 59,853 | | | | 49,223 | | | | 59,853 | | | | 49,223 | | | | 46,918 | | Fees and commissions on real estate business | | | 43,516 | | | | 39,808 | | | | 40,573 | | | | 39,808 | | | | 40,573 | | | | 45,160 | | Other fees and commissions | | | 266,530 | | | | 279,449 | | | | 284,691 | | | | 279,449 | | | | 284,691 | | | | 285,058 | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 1,475,872 | | | ¥ | 1,414,893 | | | ¥ | 1,462,792 | | | ¥ | 1,414,893 | | | ¥ | 1,462,792 | | | ¥ | 1,438,578 | | | | | | | | | | | | | | | | | | | | |
Fees
Notes: | (1) | | Guarantee fees are not within the scope of the guidance on revenue from contracts with customers. |
| (2) | | Other fees and commissions includenon-refundable financing related fees that are not within the scope of the guidance on revenue from contracts with customers. |
The following is an explanation of the relationship with revenue information disclosed for each reportable segment. These revenues from contracts with customers are related to various reportable segments disclosed in Note 30. The business segment information is derived from the internal management reporting system used by management to measure the performance of the MUFG Group’s business segments. In addition, the business segment information is primarily based on the financial information prepared in accordance with accounting principles generally accepted in Japan as adjusted in accordance with internal management accounting rules and practices. Further, the format and information as disclosed in Note 30 are not consistent with the accompanying consolidated financial statements prepared on the basis of U.S. GAAP. For example, management does not use information on segments’ gross revenue to allocate resources and assess performance. The majority of fees and commissions on deposits consist ofare from the business activities relevant to Retail & Commercial Banking Business Group (“R&C”), with Global Commercial Banking Group (“GCB”) providing a smaller impact. The business activities relevant to fees and commissions charged for deposits transactions such as checking account deposits, deposit and withdrawal services and using automated teller machines. Fees and commissions on remittances and transfers consist ofare attributable to R&C, Japanese Corporate Investment Banking Group (“JCIB”), Global Corporate Investment Banking Group (“GCIB”), and GCB with no significant concentration in any particular segments. The business activities relevant to fees and commissions charged for settlement transactions such as domestic fund remittances, including transactions used by electronic banking. Fees and commissions on foreign trading business consist ofare attributable to R&C, JCIB, GCIB, and GCB with no significant concentration in any particular segments. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The business activities relevant to fees and commissions charged for fund collection and trade-related financing services related to foreign trading business. Fees and commissions on credit card business consistare substantially attributable to R&C. The majority of fees and commissions relatedon security-related services are from the business activities relevant to credit cardR&C, with JCIB and GCIB providing a smaller impact. The business such as interchange income, annualactivities relevant to fees royalty and other service charges from franchisees. Fees and commissions on securities-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 administration and management services for investment funds primarily consistare 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 fees andinsurance commissions earnedare from managing investment funds on behalf of the clients. Trustbusiness activities relevant to R&C, with GCB providing a smaller impact. The business activities relevant to fees consist primarily of fees earned by fiduciary asset management and administration services for corporate pension plans and investment funds. Guarantee fees consist of fees related to guarantee business such as providing guarantees on residential mortgage loans and other loans. Insurance commissions consist of commissions earned by acting as agent for insurance companies to sell insurance products. Fees and commissions on real estate business are attributable to R&C and JCIB with no significant concentration in any particular segments. Contract Balances Contract balances are recognized in the consolidated balance sheets in accordance with the definition of receivables and contract liabilities specified in the guidance on revenue from contracts with customers. Receivables include receivables for which the services are completed, and accrued income which represents the amount of consideration unpaid for the performance obligations that have been fulfilled pursuant to certain contracts under which the services are continuously provided. Contract liabilities include unearned revenue which represents the amount of consideration received for the performance obligations that have not been fulfilled pursuant to certain contracts under which the services are continuously provided. As of March 31, 2019, receivables from contracts with customers of ¥185 billion were included primarily consistin Other assets, and contract liabilities of fees from real estate agent services.¥8 billion were included in Other fees and commissions include various fees and commissions mainly such as arrangement fees and agent fees excluding the fees mentioned above.liabilities. | 29. | | TRADING ACCOUNT PROFITS AND LOSSES |
The MUFG Group performs trading activities through market-making, sales and arbitrage, while maintaining risk levels within appropriate limits in accordance with its risk management policy. The MUFG Group has trading account securities and trading derivative assets and liabilities for this purpose. In addition, the trading account securities include foreign currency-denominated debt securities such as foreign government or official institution bonds, corporate bonds and mortgage-backed securities, which are mainly comprised of securities measured at fair value under the fair value option. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Net trading gains (losses) for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 were comprised of the following: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Interest rate and other derivative contracts | | ¥ | 434,323 | | | ¥ | (325,007 | ) | | ¥ | (226,788 | ) | | ¥ | (325,007 | ) | | ¥ | (226,788 | ) | | ¥ | (24,031 | ) | Trading account securities, excluding derivatives | | | (157,669 | ) | | (314,177 | ) | | 153,674 | | | | (314,177 | ) | | 153,674 | | | 192,931 | | | | | | | | | | | | | | | | | | | | | Trading account profits (losses)—net | | | 276,654 | | | (639,184 | ) | | (73,114 | ) | | | (639,184 | ) | | (73,114 | ) | | 168,900 | | Foreign exchange derivative contracts(1) | | | 374,324 | | | (183,159 | ) | | (159,986 | ) | | | (183,159 | ) | | (159,986 | ) | | (354,401 | ) | | | | | | | | | | | | | | | | | | | | Net trading gains (losses) | | ¥ | 650,978 | | | ¥ | (822,343 | ) | | ¥ | (233,100 | ) | | Net trading losses | | | ¥ | (822,343 | ) | | ¥ | (233,100 | ) | | ¥ | (185,501 | ) | | | | | | | | | | | | | | | | | | | |
Note: | (1) | | Gains (losses)Losses on foreign exchange derivative contracts are included in Foreign exchange gains (losses)—losses—net in the accompanying consolidated statements of income. Foreign exchange gains (losses)—losses—net in the accompanying consolidated statements of income are also comprised of foreign exchange gains (losses) other than derivative contracts and foreign exchange gains (losses)losses related to the fair value option. |
For further information on the methodologies and assumptions used to estimate fair value, see Note 32, which also shows fair values of trading account securities by major category. Note 24 discloses further information regarding the derivative-related impact on Trading account profits (losses)—net by major category. The business segment information, set forth below, is derived from the internal management reporting system used by management to measure the performancereportable 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 segments. In addition,units according to the characteristics of customers and the nature of the underlying business. Each business unit engages in business activities based on comprehensive strategies developed for and aimed at respective targeted customers and businesses. The business segment information is primarily based on the financial information prepared in accordance with accounting principles generally accepted in Japan as adjusted in accordance with internal management accounting rules and practices. Accordingly, the format and information are not consistent with the accompanying consolidated financial statements prepared on the basis of U.S. GAAP. A reconciliation is provided for the total amounts of segments’ operating profit with income before income tax expense under U.S. GAAP. See Note 31 for financial information relating to the MUFG Group’s operations by geographic area. The geographic financial information is consistent with the basis of the accompanying consolidated financial statements. Effective April 1, 2018, the MUFG Group reorganized its business groups in an effort to further integrate the expertise and capabilities of its consolidated subsidiaries to respond to the needs of customers more effectively and efficiently, as part of its current medium-term business plan. To make and execute unified group-wide strategies based on customer characteristics and the nature of business, the MUFG Group integrated the operations of its consolidated subsidiaries into six business segments.—Retail & Commercial Banking, Japanese Corporate & Investment Banking, Global Corporate & Investment Banking, Global Commercial Banking, Asset Management & Investor Services, and Global Markets. The following is a brief explanation of the MUFG Group’s business segments: Retail & Commercial Banking Business Group—Covers allthe domestic retail businesses, includingand commercial banking trust banking and securities businesses in Japan. This business group integrates the retail businesses of MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi UFJ NICOS and other subsidiaries as well as retail product development, promotion and marketing in a single management structure. At the same time, this business group has developed and implemented MUFG Plaza, aone-stop, comprehensive financial services concept that provides integrated banking, trust and securities services. Corporate Banking Business Group—Covers all domestic corporate businesses, including commercial banking, investment banking, trust banking and securities businesses, as well as businesses outside of Japan, assisting mainly Japanese companies. Through the integration of these business lines, diverse financial products and services are provided to the MUFG Group’s corporate clients. This business group has strategic domains, sales channels and methods to match the different growth stages and financial needs of the MUFG Group’s corporate clients.
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 andmedium-sized enterprise customers in Japan an extensive array of commercial banking, trust banking and securities products and services. GlobalJapanese 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 outside Japan, including commercial banking such as loans, deposits and cash management services, investment banking, retail banking, trust assets and securities businesses (with the retail banking and trust assets businesses being conducted through MUFG Union Bank and Krungsri), throughHoldings. Through a global network of nearly 1,200 offices outside Japan to provideand branches, this business group providesnon-Japanese large corporate and financial institution customers with financial products and servicesa comprehensive set of solutions that meet their increasingly diverse and sophisticated financing needs. Trust AssetsGlobal Commercial Banking Business Group—Covers the retail and commercial banking businesses of MUFG Union Bank and Krungsri. This business group offers a comprehensive array of financial products and services such as loans, deposits, fund transfers, investments and asset management services for local retail, small andmedium-sized enterprise, and corporate customers across the Asia-Pacific region.
Asset Management & Investor Services Business Group—Covers the asset management and asset administration services for products such as pension trustsbusinesses of Mitsubishi UFJ Trust and security trusts byBanking and MUFG Bank. By integrating the trust banking expertise of Mitsubishi UFJ Trust and Banking and the global networkstrengths of MUFG Bank. ThisBank, the business group providesoffers a full range of asset management and administration services to corporatefor corporations and other pension funds, including stable and secure pension fund management and administration, advice on pension schemesstructures, and payment of benefitspayments to scheme members.beneficiaries, and also offer investment trusts for retail customers. Global Markets Business Group—Covers assetthe customer business and liability management and strategic investments of MUFG Bank and Mitsubishi UFJ Trust and Banking, and sales and trading of financial productsthe 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 iswas 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 refine the definition of the overseas Japanese corporate business, effective October 1, 2016, and made additional modifications for similar purposes, effective April 1, 2017. These modifications had the impact of increasing the operating profit of the Corporate Banking Business Group for the fiscal years ended March 31, 2016 and 2017 by ¥9.7 billion and ¥9.8 billion, respectively.
The MUFG Group also 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, 2017. These modifications had the following impact:
for the fiscal year ended March 31, 2016, increasing the operating profits of the Retail Banking Business Group and the Global Markets Business Group by ¥0.2 billion and ¥1.8 billion, respectively, and reducing the operating profits of the Corporate Banking Business Group and Other by ¥0.7 billion and ¥1.3 billion, respectively; and
for the fiscal year ended March 31, 2017, increasing the operating profits of the Retail Banking Business Group and the Global Markets Business Group by ¥0.4 billion and ¥0.6 billion, respectively, and reducing the operating profits of the Corporate Banking Business Group, the Global Business Group and Other by ¥0.5 billion, ¥0.3 billion and ¥0.2 billion, respectively.
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The table set forth belowPrior period business segment information has been reclassifiedrestated to enable comparisonscomparison between the relevant amounts for the fiscal years ended March 31, 2016, 2017, 2018 and 2018, respectively:2019.
| | | | Customer Business | | Global
Markets
Business
Group | | | Other | | | Total | | | Customer Business | | | Global
Markets
Business
Group | | Other | | Total(1) | | | | | Retail
Banking
Business
Group | | Corporate
Banking
Business
Group(1) | | Global
Business
Group(1) | | Trust
Assets
Business
Group | | Total(1) | | | 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 | | Total | | | | | (in billions) | | | (in billions) | | Fiscal year ended March 31, 2016: | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2017: | | | | | | | | | | | | | | | | | | | | Net revenue: | | ¥ | 1,258.7 | | | ¥ | 1,078.2 | | | ¥ | 1,272.8 | | | ¥ | 172.2 | | | ¥ | 3,603.8 | | | ¥ | 637.9 | | | ¥ | 4.5 | | | ¥ | 4,246.2 | | | ¥ | 1,568.0 | | | ¥ | 527.1 | | | ¥ | 418.3 | | | ¥ | 628.6 | | | ¥ | 176.7 | | | ¥ | 3,318.7 | | | ¥ | 686.8 | | | ¥ | 56.3 | | | ¥ | 4,061.8 | | BK and TB: | | 534.9 | | | 872.3 | | | 446.9 | | | 74.3 | | | 1,825.5 | | | 453.9 | | | 116.6 | | | 2,396.0 | | | BK and TB(2): | | | 817.0 | | | 446.9 | | | 275.6 | | | (1.8 | ) | | 72.7 | | | 1,610.4 | | | 491.5 | | | 88.6 | | | 2,190.5 | | Net interest income | | 355.7 | | | 341.9 | | | 207.9 | | | | — | | | 859.9 | | | 195.5 | | | 271.1 | | | 1,326.5 | | | 482.0 | | | 143.8 | | | 107.3 | | | (1.7 | ) | | | — | | | 731.4 | | | 291.0 | | | 199.4 | | | 1,221.8 | | Net fees | | 171.8 | | | 405.9 | | | 187.1 | | | 74.3 | | | 809.3 | | | (23.9 | ) | | (91.7 | ) | | 693.7 | | | 300.6 | | | 245.0 | | | 177.3 | | | | — | | | 72.7 | | | 795.6 | | | (8.2 | ) | | (98.8 | ) | | 688.6 | | Other | | 7.4 | | | 124.5 | | | 51.9 | | | | — | | | 156.3 | | | 282.3 | | | (62.8 | ) | | 375.8 | | | 34.4 | | | 58.1 | | | (9.0 | ) | | (0.1 | ) | | | — | | | 83.4 | | | 208.7 | | | (12.0 | ) | | 280.1 | | Other than BK and TB(2) | | 723.8 | | | 205.9 | | | 825.9 | | | 97.9 | | | 1,778.3 | | | 184.0 | | | (112.1 | ) | | 1,850.2 | | | Operating expenses | | 971.9 | | | 582.9 | | | 814.8 | | | 102.0 | | | 2,329.2 | | | 208.6 | | | 157.4 | | | 2,695.2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating profit (loss) | | ¥ | 286.8 | | | ¥ | 495.3 | | | ¥ | 458.0 | | | ¥ | 70.2 | | | ¥ | 1,274.6 | | | ¥ | 429.3 | | | ¥ | (152.9 | ) | | ¥ | 1,551.0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2017: | | | | | | | | | | | | | | | | | | Net revenue: | | ¥ | 1,198.1 | | | ¥ | 1,029.0 | | | ¥ | 1,303.2 | | | ¥ | 173.1 | | | ¥ | 3,526.3 | | | ¥ | 582.9 | | | ¥ | 2.7 | | | ¥ | 4,111.9 | | | BK and TB: | | 485.9 | | | 834.7 | | | 444.6 | | | 73.0 | | | 1,731.3 | | | 387.3 | | | 71.9 | | | 2,190.5 | | | Net interest income | | 335.3 | | | 323.7 | | | 213.3 | | | | — | | | 824.7 | | | 189.2 | | | 207.9 | | | 1,221.8 | | | Net fees | | 144.4 | | | 420.0 | | | 185.1 | | | 73.0 | | | 793.1 | | | (8.6 | ) | | (95.9 | ) | | 688.6 | | | Other | | 6.2 | | | 91.0 | | | 46.2 | | | | — | | | 113.5 | | | 206.7 | | | (40.1 | ) | | 280.1 | | | Other than BK and TB(2) | | 712.2 | | | 194.3 | | | 858.6 | | | 100.1 | | | 1,795.0 | | | 195.6 | | | (69.2 | ) | | 1,921.4 | | | Other than BK and TB | | | 751.0 | | | 80.2 | | | 142.7 | | | 630.4 | | | 104.0 | | | 1,708.3 | | | 195.3 | | | (32.3 | ) | | 1,871.3 | | Operating expenses | | 972.4 | | | 576.5 | | | 821.0 | | | 112.2 | | | 2,335.9 | | | 213.2 | | | 167.0 | | | 2,716.1 | | | 1,234.1 | | | 290.0 | | | 236.0 | | | 435.8 | | | 114.7 | | | 2,310.6 | | | 217.4 | | | 162.3 | | | 2,690.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating profit (loss) | | ¥ | 225.7 | | | ¥ | 452.5 | | | ¥ | 482.2 | | | ¥ | 60.9 | | | ¥ | 1,190.4 | | | ¥ | 369.7 | | | ¥ | (164.3 | ) | | ¥ | 1,395.8 | | | ¥ | 333.9 | | | ¥ | 237.1 | | | ¥ | 182.3 | | | ¥ | 192.8 | | | ¥ | 62.0 | | | ¥ | 1,008.1 | | | ¥ | 469.4 | | | ¥ | (106.0 | ) | | ¥ | 1,371.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2018: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net revenue: | | ¥ | 1,226.9 | | | ¥ | 1,003.2 | | | ¥ | 1,279.6 | | | ¥ | 186.7 | | | ¥ | 3,514.8 | | | ¥ | 477.2 | | | ¥ | (24.8 | ) | | ¥ | 3,967.2 | | | ¥ | 1,584.3 | | | ¥ | 522.6 | | | ¥ | 378.6 | | | ¥ | 666.3 | | | ¥ | 190.4 | | | ¥ | 3,342.2 | | | ¥ | 565.2 | | | ¥ | 10.7 | | | ¥ | 3,918.1 | | BK and TB: | | 468.1 | | | 809.8 | | | 409.0 | | | 84.3 | | | 1,662.5 | | | 280.2 | | | 87.2 | | | 2,029.9 | | | BK and TB(2): | | | 785.9 | | | 439.8 | | | 246.3 | | | (3.5 | ) | | 83.8 | | | 1,552.3 | | | 368.6 | | | 109.0 | | | 2,029.9 | | Net interest income | | 331.6 | | | 313.6 | | | 198.5 | | | | — | | | 789.5 | | | 92.6 | | | 237.6 | | | 1,119.7 | | | 465.8 | | | 150.7 | | | 95.2 | | | (3.4 | ) | | | — | | | 708.3 | | | 182.0 | | | 229.4 | | | 1,119.7 | | Net fees | | 130.9 | | | 408.2 | | | 169.2 | | | 84.3 | | | 766.1 | | | (12.9 | ) | | (86.0 | ) | | 667.2 | | | 288.4 | | | 233.2 | | | 153.1 | | | | — | | | 83.8 | | | 758.5 | | | (12.2 | ) | | (79.1 | ) | | 667.2 | | Other | | 5.6 | | | 88.0 | | | 41.3 | | | | — | | | 106.9 | | | 200.5 | | | (64.4 | ) | | 243.0 | | | 31.7 | | | 55.9 | | | (2.0 | ) | | (0.1 | ) | | | — | | | 85.5 | | | 198.8 | | | (41.3 | ) | | 243.0 | | Other than BK and TB(2) | | 758.8 | | | 193.4 | | | 870.6 | | | 102.4 | | | 1,852.3 | | | 197.0 | | | (112.0 | ) | | 1,937.3 | | | Other than BK and TB | | | 798.4 | | | 82.8 | | | 132.3 | | | 669.8 | | | 106.6 | | | 1,789.9 | | | 196.6 | | | (98.3 | ) | | 1,888.2 | | Operating expenses | | 960.8 | | | 580.7 | | | 857.3 | | | 116.9 | | | 2,363.8 | | | 222.7 | | | 156.6 | | | 2,743.1 | | | 1,227.6 | | | 295.6 | | | 242.8 | | | 463.6 | | | 119.4 | | | 2,349.0 | | | 225.7 | | | 142.8 | | | 2,717.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating profit (loss) | | ¥ | 266.1 | | | ¥ | 422.5 | | | ¥ | 422.3 | | | ¥ | 69.8 | | | ¥ | 1,151.0 | | | ¥ | 254.5 | | | ¥ | (181.4 | ) | | ¥ | 1,224.1 | | | ¥ | 356.7 | | | ¥ | 227.0 | | | ¥ | 135.8 | | | ¥ | 202.7 | | | ¥ | 71.0 | | | ¥ | 993.2 | | | ¥ | 339.5 | | | ¥ | (132.1 | ) | | ¥ | 1,200.6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal year ended March 31, 2019: | | | | | | | | | | | | | | | | | | | | Net revenue: | | | ¥ | 1,521.6 | | | ¥ | 541.5 | | | ¥ | 399.7 | | | ¥ | 706.9 | | | ¥ | 203.0 | | | ¥ | 3,372.7 | | | ¥ | 472.5 | | | ¥ | (32.8 | ) | | ¥ | 3,812.4 | | BK and TB(2): | | | 738.6 | | | 421.6 | | | 266.6 | | | (1.4 | ) | | 93.2 | | | 1,518.6 | | | 303.9 | | | 38.5 | | | 1,861.0 | | Net interest income | | | 460.4 | | | 152.1 | | | 113.6 | | | (1.4 | ) | | | — | | | 724.7 | | | 183.1 | | | 237.4 | | | 1,145.2 | | Net fees | | | 243.9 | | | 213.1 | | | 152.4 | | | | — | | | 93.2 | | | 702.6 | | | (14.2 | ) | | (67.5 | ) | | 620.9 | | Other | | | 34.3 | | | 56.4 | | | 0.6 | | | | — | | | | — | | | 91.3 | | | 135.0 | | | (131.4 | ) | | 94.9 | | Other than BK and TB | | | 783.0 | | | 119.9 | | | 133.1 | | | 708.3 | | | 109.8 | | | 1,854.1 | | | 168.6 | | | (71.3 | ) | | 1,951.4 | | Operating expenses | | | 1,222.8 | | | 291.8 | | | 247.0 | | | 486.5 | | | 124.6 | | | 2,372.7 | | | 221.3 | | | 146.1 | | | 2,740.1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating profit (loss) | | | ¥ | 298.8 | | | ¥ | 249.7 | | | ¥ | 152.7 | | | ¥ | 220.4 | | | ¥ | 78.4 | | | ¥ | 1,000.0 | | | ¥ | 251.2 | | | ¥ | (178.9 | ) | | ¥ | 1,072.3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | Net revenue, operating expenses,Prior period business segment information has been restated to reflect the transfer of corporate loan-related businesses of Mitsubishi UFJ Trust and Banking to MUFG Bank. In accordance with internal management accounting rules and practices, the transfer resulted in a decrease of the total operating profit relating to the overseas Japanese Corporate business were ¥178.1 billion, ¥142.4by ¥24.3 billion and ¥35.7¥23.5 billion for the fiscal year ended March 31, 2016, ¥177.1 billion, ¥146.2 billion, and ¥30.9 billion for the fiscal yearyears ended March 31, 2017 and ¥181.6 billion, ¥151.9 billion, and ¥29.7 billion for the fiscal year ended March 31, 2018, respectively. To eliminate the double-counting of these amounts, adjustments have been made to the Total of Customer Business. These amounts have been restated in accordance with the modifications resulting in the restatement of the prior period business segment information. |
| (2) | | Includes MUFG“BK and its subsidiaries other thanTB” is a sum of MUFG Bank on a stand-alone basis and Mitsubishi UFJ Trust and Banking on a stand-alone basis. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Reconciliation As set forth above, the measurement basis and the income and expense items of the internal management reporting system are different from the accompanying consolidated statements of income. Therefore, it is impracticable to present reconciliations of all of the business segments’ information, other than operating profit, to corresponding items in the accompanying consolidated statements of income. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A reconciliation of operating profit under the internal management reporting system for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 above to income before income tax expense shown in the accompanying consolidated statements of income is as follows: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | (in billions) | | | (in billions) | | Operating profit: | | ¥ | 1,551 | | | ¥ | 1,396 | | | ¥ | 1,224 | | | ¥ | 1,372 | | | ¥ | 1,201 | | | ¥ | 1,072 | | Reversal of (provision for) credit losses | | | (232 | ) | | (254 | ) | | 241 | | | | (254 | ) | | 241 | | | (34 | ) | Trading account losses—net | | | (6 | ) | | (880 | ) | | (287 | ) | | Equity investment securities gains—net | | | 105 | | | 181 | | | 215 | | | Trading account profits (losses)—net | | | | (880 | ) | | (287 | ) | | 182 | | Equity investment securities gains (losses)—net | | | | 181 | | | 215 | | | (305 | ) | Debt investment securities gains (losses)—net | | | (19 | ) | | 48 | | | 71 | | | | 48 | | | 71 | | | (3 | ) | Foreign exchange gains (losses)—net | | | 129 | | | (110 | ) | | 7 | | | | (110 | ) | | 7 | | | 47 | | Equity in earnings of equity method investees—net | | | 177 | | | 198 | | | 228 | | | | 198 | | | 228 | | | 210 | | Impairment of goodwill | | | (334 | ) | | (7 | ) | | | — | | | | (7 | ) | | | — | | | | — | | Impairment of intangible assets | | | (118 | ) | | (6 | ) | | (22 | ) | | | (6 | ) | | (22 | ) | | (118 | ) | Reversal of (provision for)off-balance sheet credit instruments | | | — | | | (107 | ) | | 96 | | | | (107 | ) | | 96 | | | (38 | ) | Other—net | | | (90 | ) | | (186 | ) | | (111 | ) | | | (162 | ) | | (88 | ) | | (142 | ) | | | | | | | | | | | | | | | | | | | | Income before income tax expense | | ¥ | 1,163 | | | ¥ | 273 | | | ¥ | 1,662 | | | ¥ | 273 | | | ¥ | 1,662 | | | ¥ | 871 | | | | | | | | | | | | | | | | | | | | |
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. 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, 2016, 2017, 2018 and 2018,2019, and estimated total revenue, total expense, income (loss) before income tax expense (benefit) and net income (loss) attributable to Mitsubishi UFJ Financial Group for the respective fiscal years then ended: | | | | Domestic | | Foreign | | Total | | | Domestic | | Foreign | | Total | | | | | Japan | | United
States of
America | | Europe | | Asia/Oceania
excluding
Japan | | Other
areas(1) | | | | | Japan | | United
States of
America | | Europe | | Asia/Oceania
excluding
Japan | | Other
areas(1) | | | | | | | (in millions) | | | (in millions) | | Fiscal year ended March 31, 2016: | | | | | | | | | | | | | | Total revenue(2) | | ¥ | 2,995,693 | | | ¥ | 800,726 | | | ¥ | 326,381 | | | ¥ | 981,076 | | | ¥ | 309,552 | | | ¥ | 5,413,428 | | | Total expense(3) | | 2,501,616 | | | 741,930 | | | 205,459 | | | 661,920 | | | 139,833 | | | 4,250,758 | | | Income before income tax expense | | 494,077 | | | 58,796 | | | 120,922 | | | 319,156 | | | 169,719 | | | 1,162,670 | | | Net income attributable to Mitsubishi UFJ Financial Group | | 185,395 | | | 173,376 | | | 162,620 | | | 196,712 | | | 84,229 | | | 802,332 | | | Total assets at end of fiscal year | | 176,979,064 | | | 52,719,811 | | | 26,194,772 | | | 25,019,537 | | | 11,644,171 | | | 292,557,355 | | | Fiscal year ended March 31, 2017: | | | | | | | | | | | | | | | | | | | | | | | | | Total revenue(2) | | ¥ | 1,903,336 | | | ¥ | 749,513 | | | ¥ | 330,751 | | | ¥ | 818,917 | | | ¥ | 384,956 | | | ¥ | 4,187,473 | | | ¥ | 1,903,336 | | | ¥ | 749,513 | | | ¥ | 330,751 | | | ¥ | 818,917 | | | ¥ | 384,956 | | | ¥ | 4,187,473 | | Total expense(3) | | 2,345,731 | | | 677,548 | | | 138,128 | | | 582,665 | | | 170,858 | | | 3,914,930 | | | 2,345,731 | | | 677,548 | | | 138,128 | | | 582,665 | | | 170,858 | | | 3,914,930 | | Income (loss) before income tax expense (benefit) | | (442,395 | ) | | 71,965 | | | 192,623 | | | 236,252 | | | 214,098 | | | 272,543 | | | (442,395 | ) | | 71,965 | | | 192,623 | | | 236,252 | | | 214,098 | | | 272,543 | | Net income (loss) attributable to Mitsubishi UFJ Financial Group | | (365,734 | ) | | 119,189 | | | 216,584 | | | 102,803 | | | 129,838 | | | 202,680 | | | (365,734 | ) | | 119,189 | | | 216,584 | | | 102,803 | | | 129,838 | | | 202,680 | | Total assets at end of fiscal year | | 191,305,636 | | | 46,053,230 | | | 23,821,920 | | | 25,255,955 | | | 10,748,278 | | | 297,185,019 | | | 191,305,636 | | | 46,053,230 | | | 23,821,920 | | | 25,255,955 | | | 10,748,278 | | | 297,185,019 | | Fiscal year ended March 31, 2018: | | | | | | | | | | | | | | | | | | | | | | | | | Total revenue(2) | | ¥ | 2,127,278 | | | ¥ | 1,337,529 | | | ¥ | 506,211 | | | ¥ | 779,983 | | | ¥ | 443,106 | | | ¥ | 5,194,107 | | | ¥ | 2,127,278 | | | ¥ | 1,337,529 | | | ¥ | 506,211 | | | ¥ | 779,983 | | | ¥ | 443,106 | | | ¥ | 5,194,107 | | Total expense(3) | | 1,687,344 | | | 843,885 | | | 173,665 | | | 651,125 | | | 176,269 | | | 3,532,288 | | | 1,687,344 | | | 843,885 | | | 173,665 | | | 651,125 | | | 176,269 | | | 3,532,288 | | Income before income tax expense | | 439,934 | | | 493,644 | | | 332,546 | | | 128,858 | | | 266,837 | | | 1,661,819 | | | 439,934 | | | 493,644 | | | 332,546 | | | 128,858 | | | 266,837 | | | 1,661,819 | | Net income attributable to Mitsubishi UFJ Financial Group | | 140,091 | | | 447,887 | | | 322,581 | | | 92,016 | | | 225,585 | | | 1,228,160 | | | 140,091 | | | 447,887 | | | 322,581 | | | 92,016 | | | 225,585 | | | 1,228,160 | | Total assets at end of fiscal year | | 196,121,542 | | | 44,831,664 | | | 22,342,574 | | | 27,163,121 | | | 10,111,411 | | | 300,570,312 | | | 196,121,542 | | | 44,831,664 | | | 22,342,574 | | | 27,163,121 | | | 10,111,411 | | | 300,570,312 | | Fiscal year ended March 31, 2019: | | | | | | | | | | | | | | Total revenue(2) | | | ¥ | 1,886,469 | | | ¥ | 1,637,569 | | | ¥ | 222,267 | | | ¥ | 1,157,946 | | | ¥ | 504,372 | | | ¥ | 5,408,623 | | Total expense(3) | | | 2,204,147 | | | 1,012,978 | | | 173,934 | | | 892,729 | | | 253,993 | | | 4,537,781 | | Income (loss) before income tax expense (benefit) | | | (317,678 | ) | | 624,591 | | | 48,333 | | | 265,217 | | | 250,379 | | | 870,842 | | Net income (loss) attributable to Mitsubishi UFJ Financial Group | | | (345,148 | ) | | 573,698 | | | 50,877 | | | 214,582 | | | 224,636 | | | 718,645 | | Total assets at end of fiscal year | | | 194,070,495 | | | 49,987,389 | | | 21,535,278 | | | 27,992,986 | | | 11,642,751 | | | 305,228,899 | |
Notes: | (1) | | Other areas primarily include Canada, Latin America, the Caribbean and the Middle East. |
| (2) | | Total revenue is comprised of Interest income andNon-interest income. |
| (3) | | Total expense is comprised of Interest expense, Provision for (reversal of) credit losses andNon-interest expense. |
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, 20172018 and 2018:2019: | | | | | | | | | | | | 2017 | | | 2018 | | | | | (in millions) | | Cash and due from banks | | ¥ | 1,179,613 | | | ¥ | 1,816,704 | | Interest-earning deposits in other banks | | | 6,798,036 | | | | 8,560,283 | | | | | | | | | | | Total | | ¥ | 7,977,649 | | | ¥ | 10,376,987 | | | | | | | | | | | Trading account assets | | ¥ | 27,436,540 | | | ¥ | 23,904,678 | | | | | | | | | | | Investment securities | | ¥ | 6,863,563 | | | ¥ | 7,692,969 | | | | | | | | | | | Loans—net of unearned income, unamortized premiums and deferred loan fees | | ¥ | 51,191,297 | | | ¥ | 51,339,696 | | | | | | | | | | | Deposits | | ¥ | 45,264,323 | | | ¥ | 45,818,648 | | | | | | | | | | | Funds borrowed: | | | | | | | | | Call money, funds purchased | | ¥ | 362,984 | | | ¥ | 355,666 | | Payables under repurchase agreements(1) | | | 10,880,012 | | | | 8,181,347 | | Payables under securities lending transactions | | | 75,916 | | | | 276,563 | | Other short-term borrowings | | | 5,080,452 | | | | 5,152,667 | | Long-term debt(1) | | | 2,243,251 | | | | 2,223,246 | | | | | | | | | | | Total | | ¥ | 18,642,615 | | | ¥ | 16,189,489 | | | | | | | | | | | Trading account liabilities | | ¥ | 8,298,435 | | | ¥ | 4,251,049 | | | | | | | | | | |
Note:
(1) | | The table above reflects changes in presentation that were made to long-term repurchase agreements at March 31, 2017. See Note 1 for further information. |
| | | | | | | | | | | | 2018 | | | 2019 | | | | | (in millions) | | Cash and due from banks | | ¥ | 1,816,704 | | | ¥ | 828,839 | | Interest-earning deposits in other banks | | | 8,560,283 | | | | 8,453,191 | | | | | | | | | | | Total | | ¥ | 10,376,987 | | | ¥ | 9,282,030 | | | | | | | | | | | Trading account assets | | ¥ | 23,904,678 | | | ¥ | 26,991,984 | | | | | | | | | | | Investment securities | | ¥ | 7,692,969 | | | ¥ | 8,779,340 | | | | | | | | | | | Loans—net of unearned income, unamortized premiums and deferred loan fees | | ¥ | 51,339,696 | | | ¥ | 51,678,674 | | | | | | | | | | | Deposits | | ¥ | 45,818,648 | | | ¥ | 49,044,234 | | | | | | | | | | | Funds borrowed: | | | | | | | | | Call money, funds purchased | | ¥ | 355,666 | | | ¥ | 67,246 | | Payables under repurchase agreements | | | 8,181,347 | | | | 9,459,547 | | Payables under securities lending transactions | | | 276,563 | | | | 47,886 | | Other short-term borrowings | | | 5,152,667 | | | | 5,107,832 | | Long-term debt | | | 2,223,246 | | | | 2,697,463 | | | | | | | | | | | Total | | ¥ | 16,189,489 | | | ¥ | 17,379,974 | | | | | | | | | | | Trading account liabilities | | ¥ | 4,251,049 | | | ¥ | 3,897,844 | | | | | | | | | | |
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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 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. Interest-earning Deposits in Other Banks
Cash flows are estimated based on the terms of the contracts and discounted using the market interest rates applicable to the maturity of the contracts, which are adjusted to reflect credit risks on counterparties. As the inputs into the valuation techniques are readily observable, these deposits are classified in Level 2 of the fair value hierarchy.
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 governmentsgovernment and official institutionsinstitution 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 ornon-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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 usingnon-binding prices obtained from independent third parties. Residential mortgage-backed securities are classified as level 2 unless otherwise significant unobservable input is used for the valuation. When there is less liquidity for securities or significant inputs used in the fair value measurements are unobservable, such securities are classified in Level 3 of the fair value hierarchy. Examples of such Level 3 securities include CLOs backed by general corporate loans, which are classified in asset-backed securities. The MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) fair value of CLOs is measured by weighing the estimated fair value amounts from the internal model and thenon-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 tradedover-the-counter and valued using valuation techniques as there are no quoted prices for such derivatives. The valuation techniques and inputs vary depending on the types and contractual terms of the derivatives. The principal valuation techniques used to value derivatives include discounted cash flows, the Black-Scholes model and the Hull-White model. The key inputs include interest rate yield curve, foreign currency exchange rate, volatility, credit quality of the counterparty or the MUFG Group and spot price of the underlying. These models are commonly accepted in the financial industry and key inputs to the models are generally readily observable in an active market. Derivatives valued using such valuation techniques and inputs are generally classified in Level 2 of the fair value hierarchy. Examples of such Level 2 derivatives include plain-vanilla interest rate swaps, foreign currency forward contracts and currency option contracts. Derivatives that are valued using valuation techniques with significant unobservable inputs are classified in Level 3 of the fair value hierarchy. Examples of Level 3 derivatives include long-term interest rate or currency swaps and certain credit derivatives, where significant inputs such as volatility, credit curves and correlation of such inputs are unobservable. Investment Securities Investment securities includeAvailable-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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Money in trust for segregating cash deposited by customers on security transactions mainly consists of certain Japanese government bonds which are valued using the valuation techniques described in the“Trading Account Assets and Liabilities—Trading Account Securities” above and is included in Level 1 or Level 2 of the fair value hierarchy depending on the component assets. The fair values of derivatives designated as hedging instruments are measured using the valuation techniques described in the“Trading Account Assets and Liabilities—Derivatives” above. Obligations to Return Securities Received as Collateral Obligations to return securities received as collateral under securities lending transactions are measured at the fair values of the securities received as collateral. The securities received as collateral consist primarily of certain Japanese and foreign government bonds, whose fair values are measured using the valuation techniques described in the“Trading Account Assets and Liabilities—Trading Account Securities” above. Other Short-term Borrowings and Long-term Debt Certain short-term borrowings and long-term debt are measured at fair value due to the election of the fair value option. The fair value of these instruments are measured principally based on the discounted cash flows. Where the inputs into the valuation techniques are mainly based on observable inputs, these instruments are classified in Level 2 of the fair value hierarchy. Where significant inputs are unobservable, they are classified in Level 3 of the fair value hierarchy. Market Valuation Adjustments Counterparty credit risk adjustments are made to certain financial assets such asover-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. For its own credit risk adjustments,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 theover-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 takes into consideration all the factsGroup’s positions with each counterparty and circumstances, including its own credit rating, the difference between its funding rate and market interest rate,collateral arrangements, and the existence of collateralization or netting agreements. As a result of these analyses,estimated market funding cost in the principal market, which considers the MUFG Group considered that its ownGroup’s credit risk adjustments for financial liabilities were not material.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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. 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 tostart-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. Itfund, the timing of which is estimated that the underlying assets of the fund would be liquidated within aten-year period.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. Itliquidated, the timing of which is estimated that the underlying assets of the funds would be liquidated within a four-year period.uncertain. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present the financial instruments carried at fair value by level within the fair value hierarchy as of March 31, 20172018 and 2018:2019: | At March 31, 2017 | | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value | | | At March 31, 2018 | | | Level 1 | | | Level 2 | | | Level 3 | | Fair Value | | | | | (in millions) | | | (in millions) | | Assets | | | | | | | | | | | | | | | | | Trading account assets: | | | | | | | | | | | | | | | | | Trading securities(1) | | ¥ | 10,646,728 | | | ¥ | 11,027,560 | | | ¥ | 799,493 | | | ¥ | 22,473,781 | | | ¥ | 10,876,424 | | | ¥ | 10,876,080 | | | ¥ | 827,493 | | | ¥ | 22,579,997 | | Debt securities | | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | | 1,794,233 | | | | 390,147 | | | | — | | | | 2,184,380 | | | | 1,388,143 | | | | 477,530 | | | | — | | | 1,865,673 | | Japanese prefectural and municipal bonds | | | — | | | | 136,226 | | | | — | | | | 136,226 | | | | — | | | | 189,756 | | | | — | | | 189,756 | | Foreign governments and official institutions bonds | | | 7,764,734 | | | | 466,151 | | | | 1,836 | | | | 8,232,721 | | | Foreign government and official institution bonds | | | | 8,190,781 | | | | 469,342 | | | | 1,047 | | | 8,661,170 | | Corporate bonds | | | — | | | | 3,305,520 | | | | 25,521 | | | | 3,331,041 | | | | — | | | | 3,255,503 | | | | 23,092 | | | 3,278,595 | | Residential mortgage-backed securities | | | — | | | | 4,816,323 | | | | 47,914 | | | | 4,864,237 | | | | — | | | | 4,432,307 | | | | 41,141 | | | 4,473,448 | | Asset-backed securities | | | — | | | | 280,502 | | | | 654,814 | | | | 935,316 | | | | — | | | | 186,351 | | | | 684,637 | | | 870,988 | | Other debt securities | | | — | | | | 5,155 | | | | 35,552 | | | | 40,707 | | | | — | | | | 2,800 | | | | 33,450 | | | 36,250 | | Commercial paper | | | — | | | | 1,084,421 | | | | — | | | | 1,084,421 | | | | — | | | | 1,210,775 | | | | — | | | 1,210,775 | | Equity securities(2) | | | 1,087,761 | | | | 543,115 | | | | 33,856 | | | | 1,664,732 | | | | 1,297,500 | | | | 651,716 | | | | 44,126 | | | 1,993,342 | | Trading derivative assets | | | 112,687 | | | | 18,619,331 | | | | 101,100 | | | | 18,833,118 | | | | 71,175 | | | | 12,420,100 | | | | 93,900 | | | 12,585,175 | | Interest rate contracts | | | 27,321 | | | | 14,174,526 | | | | 38,188 | | | | 14,240,035 | | | | 3,320 | | | | 8,681,427 | | | | 27,092 | | | 8,711,839 | | Foreign exchange contracts | | | 9,661 | | | | 4,270,548 | | | | 20,455 | | | | 4,300,664 | | | | 1,890 | | | | 3,543,413 | | | | 12,118 | | | 3,557,421 | | Equity contracts | | | 75,545 | | | | 88,154 | | | | 24,707 | | | | 188,406 | | | | 65,965 | | | | 118,351 | | | | 22,994 | | | 207,310 | | Commodity contracts | | | 160 | | | | 18,740 | | | | 17,745 | | | | 36,645 | | | | — | | | | 6,239 | | | | 30,753 | | | 36,992 | | Credit derivatives | | | — | | | | 67,363 | | | | 5 | | | | 67,368 | | | | — | | | | 70,670 | | | | 943 | | | 71,613 | | Investment securities: | | | | | | | | | | | | | | | | | Available-for-sale securities | | | 30,214,302 | | | | 8,538,271 | | | | 337,526 | | | | 39,090,099 | | | Debt securities | | | | | | | | | | Available-for-sale debt securities | | | | 23,105,682 | | | | 9,376,772 | | | | 350,660 | | | 32,833,114 | | Japanese national government and Japanese government agency bonds | | | 23,053,677 | | | | 2,772,611 | | | | — | | | | 25,826,288 | | | | 21,522,128 | | | | 3,045,776 | | | | — | | | 24,567,904 | | Japanese prefectural and municipal bonds | | | — | | | | 1,015,489 | | | | — | | | | 1,015,489 | | | | — | | | | 1,537,431 | | | | — | | | 1,537,431 | | Foreign governments and official institutions bonds | | | 1,360,060 | | | | 769,770 | | | | 20,099 | | | | 2,149,929 | | | Foreign government and official institution bonds | | | | 1,583,554 | | | | 567,946 | | | | 20,192 | | | 2,171,692 | | Corporate bonds | | | — | | | | 1,104,800 | | | | 36,932 | | | | 1,141,732 | | | | — | | | | 1,113,323 | | | | 6,037 | | | 1,119,360 | | Residential mortgage-backed securities | | | — | | | | 1,188,903 | | | | 15 | | | | 1,188,918 | | | | — | | | | 1,617,520 | | | | 15 | | | 1,617,535 | | Commercial mortgage-backed securities | | | — | | | | 77,297 | | | | 2,971 | | | | 80,268 | | | | — | | | | 92,806 | | | | 2,430 | | | 95,236 | | Asset-backed securities | | | — | | | | 1,261,353 | | | | 116,919 | | | | 1,378,272 | | | | — | | | | 1,397,177 | | | | 161,172 | | | 1,558,349 | | Other debt securities | | | — | | | | 10,199 | | | | 160,590 | | | | 170,789 | | | | — | | | | 4,793 | | | | 160,814 | | | 165,607 | | Equity securities(6) | | | | 6,255,413 | | | | 416,171 | | | | 28,359 | | | 6,699,943 | | Marketable equity securities | | | 5,800,565 | | | | 337,849 | | | | — | | | | 6,138,414 | | | | 6,255,413 | | | | 416,171 | | | | — | | | 6,671,584 | | Other investment securities | | | — | | | | — | | | | 26,292 | | | | 26,292 | | | Nonmarketable equity securities | | | | — | | | | — | | | | 28,359 | | | 28,359 | | Others(3)(4) | | | 453,214 | | | | 37,942 | | | | 3,850 | | | | 495,006 | | | | 955,548 | | | | 93,042 | | | | 8,660 | | | 1,057,250 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 41,426,931 | | | ¥ | 38,223,104 | | | ¥ | 1,268,261 | | | ¥ | 80,918,296 | | | ¥ | 41,264,242 | | | ¥ | 33,182,165 | | | ¥ | 1,309,072 | | | ¥ | 75,755,479 | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | Trading account liabilities: | | | | | | | | | | | | | | | | | Trading securities sold, not yet purchased | | ¥ | 128,292 | | | ¥ | 1,392 | | | ¥ | — | | | ¥ | 129,684 | | | ¥ | 208,354 | | | ¥ | 7,060 | | | ¥ | — | | | ¥ | 215,414 | | Trading derivative liabilities | | | 135,342 | | | | 18,461,252 | | | | 63,855 | | | | 18,660,449 | | | | 80,673 | | | | 11,844,463 | | | | 81,781 | | | 12,006,917 | | Interest rate contracts | | | 45,539 | | | | 14,249,439 | | | | 9,637 | | | | 14,304,615 | | | | 3,085 | | | | 8,659,042 | | | | 12,496 | | | 8,674,623 | | Foreign exchange contracts | | | 5,219 | | | | 4,072,787 | | | | 5,597 | | | | 4,083,603 | | | | 2,058 | | | | 2,992,812 | | | | 5,382 | | | 3,000,252 | | Equity contracts | | | 84,514 | | | | 66,482 | | | | 31,019 | | | | 182,015 | | | | 75,530 | | | | 117,572 | | | | 33,679 | | | 226,781 | | Commodity contracts | | | 70 | | | | 14,730 | | | | 17,375 | | | | 32,175 | | | | — | | | | 4,362 | | | | 30,070 | | | 34,432 | | Credit derivatives | | | — | | | | 57,814 | | | | 227 | | | | 58,041 | | | | — | | | | 70,675 | | | | 154 | | | 70,829 | | Obligation to return securities received as collateral | | | 3,423,936 | | | | 92,296 | | | | — | | | | 3,516,232 | | | | 3,030,974 | | | | 145,988 | | | | — | | | 3,176,962 | | Others(5) | | | — | | | | 376,724 | | | | 28,432 | | | | 405,156 | | | | — | | | | 507,700 | | | | (25,528 | ) | | 482,172 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 3,687,570 | | | ¥ | 18,931,664 | | | ¥ | 92,287 | | | ¥ | 22,711,521 | | | ¥ | 3,320,001 | | | ¥ | 12,505,211 | | | ¥ | 56,253 | | | ¥ | 15,881,465 | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | At March 31, 2018 | | Level 1 | | | Level 2 | | | Level 3 | | Fair Value | | | At March 31, 2019 | | | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value | | | | | (in millions) | | | (in millions) | | Assets | | | | | | | | | | | | | | | | | Trading account assets: | | | | | | | | | | | | | | | | | Trading securities(1) | | ¥ | 10,876,424 | | | ¥ | 10,876,080 | | | ¥ | 827,493 | | | ¥ | 22,579,997 | | | ¥ | 12,821,328 | | | ¥ | 13,725,079 | | | ¥ | 785,326 | | | ¥ | 27,331,733 | | Debt securities | | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | | 1,388,143 | | | | 477,530 | | | | — | | | 1,865,673 | | | | 2,117,841 | | | | 512,134 | | | | — | | | | 2,629,975 | | Japanese prefectural and municipal bonds | | | — | | | | 189,756 | | | | — | | | 189,756 | | | | — | | | | 117,799 | | | | — | | | | 117,799 | | Foreign governments and official institutions bonds | | | 8,190,781 | | | | 469,342 | | | | 1,047 | | | 8,661,170 | | | Foreign government and official institution bonds | | | | 9,264,028 | | | | 454,365 | | | | 792 | | | | 9,719,185 | | Corporate bonds | | | — | | | | 3,255,503 | | | | 23,092 | | | 3,278,595 | | | | — | | | | 3,203,585 | | | | 31,384 | | | | 3,234,969 | | Residential mortgage-backed securities | | | — | | | | 4,432,307 | | | | 41,141 | | | 4,473,448 | | | | — | | | | 7,038,353 | | | | 35,181 | | | | 7,073,534 | | Asset-backed securities | | | — | | | | 186,351 | | | | 684,637 | | | 870,988 | | | | — | | | | 253,274 | | | | 627,678 | | | | 880,952 | | Other debt securities | | | — | | | | 2,800 | | | | 33,450 | | | 36,250 | | | | — | | | | 747 | | | | 35,148 | | | | 35,895 | | Commercial paper | | | — | | | | 1,210,775 | | | | — | | | 1,210,775 | | | | — | | | | 1,473,693 | | | | — | | | | 1,473,693 | | Equity securities(2) | | | 1,297,500 | | | | 651,716 | | | | 44,126 | | | 1,993,342 | | | | 1,439,459 | | | | 671,129 | | | | 55,143 | | | | 2,165,731 | | Trading derivative assets | | | 71,175 | | | | 12,420,100 | | | | 93,900 | | | 12,585,175 | | | | 63,582 | | | | 13,047,590 | | | | 93,313 | | | | 13,204,485 | | Interest rate contracts | | | 3,320 | | | | 8,681,427 | | | | 27,092 | | | 8,711,839 | | | | 23,430 | | | | 10,067,719 | | | | 17,307 | | | | 10,108,456 | | Foreign exchange contracts | | | 1,890 | | | | 3,543,413 | | | | 12,118 | | | 3,557,421 | | | | 1,115 | | | | 2,771,115 | | | | 22,861 | | | | 2,795,091 | | Equity contracts | | | 65,965 | | | | 118,351 | | | | 22,994 | | | 207,310 | | | | 39,037 | | | | 139,666 | | | | 9,000 | | | | 187,703 | | Commodity contracts | | | — | | | | 6,239 | | | | 30,753 | | | 36,992 | | | | — | | | | 3,727 | | | | 25,684 | | | | 29,411 | | Credit derivatives | | | — | | | | 70,670 | | | | 943 | | | 71,613 | | | | — | | | | 65,363 | | | | 18,461 | | | | 83,824 | | Investment securities: | | | | | | | | | | | | | | | | | Available-for-sale securities | | | 29,361,095 | | | | 9,792,943 | | | | 350,660 | | | 39,504,698 | | | Debt securities | | | | | | | | | | Available-for-sale debt securities | | | | 22,550,086 | | | | 10,684,983 | | | | 283,434 | | | | 33,518,503 | | Japanese national government and Japanese government agency bonds | | | 21,522,128 | | | | 3,045,776 | | | | — | | | 24,567,904 | | | | 20,635,872 | | | | 3,441,824 | | | | — | | | | 24,077,696 | | Japanese prefectural and municipal bonds | | | — | | | | 1,537,431 | | | | — | | | 1,537,431 | | | | — | | | | 2,226,566 | | | | — | | | | 2,226,566 | | Foreign governments and official institutions bonds | | | 1,583,554 | | | | 567,946 | | | | 20,192 | | | 2,171,692 | | | Foreign government and official institution bonds | | | | 1,914,214 | | | | 707,959 | | | | 19,246 | | | | 2,641,419 | | Corporate bonds | | | — | | | | 1,113,323 | | | | 6,037 | | | 1,119,360 | | | | — | | | | 1,126,535 | | | | 4,196 | | | | 1,130,731 | | Residential mortgage-backed securities | | | — | | | | 1,617,520 | | | | 15 | | | 1,617,535 | | | | — | | | | 1,615,336 | | | | 15 | | | | 1,615,351 | | Commercial mortgage-backed securities | | | — | | | | 92,806 | | | | 2,430 | | | 95,236 | | | | — | | | | 128,917 | | | | 2,038 | | | | 130,955 | | Asset-backed securities | | | — | | | | 1,397,177 | | | | 161,172 | | | 1,558,349 | | | | — | | | | 1,371,467 | | | | 131,455 | | | | 1,502,922 | | Other debt securities | | | — | | | | 4,793 | | | | 160,814 | | | 165,607 | | | | — | | | | 66,379 | | | | 126,484 | | | | 192,863 | | Equity securities(6) | | | | 5,982,629 | | | | 375,914 | | | | 27,820 | | | | 6,386,363 | | Marketable equity securities | | | 6,255,413 | | | | 416,171 | | | | — | | | 6,671,584 | | | | 5,982,629 | | | | 375,914 | | | | — | | | | 6,358,543 | | Other investment securities | | | — | | | | — | | | | 28,359 | | | 28,359 | | | Nonmarketable equity securities(7) | | | | — | | | | — | | | | 27,820 | | | | 27,820 | | Others(3)(4) | | | 955,548 | | | | 93,042 | | | | 8,660 | | | 1,057,250 | | | | 807,193 | | | | 42,184 | | | | 32,378 | | | | 881,755 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 41,264,242 | | | ¥ | 33,182,165 | | | ¥ | 1,309,072 | | | ¥ | 75,755,479 | | | ¥ | 42,224,818 | | | ¥ | 37,875,750 | | | ¥ | 1,222,271 | | | ¥ | 81,322,839 | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | Trading account liabilities: | | | | | | | | | | | | | | | | | Trading securities sold, not yet purchased | | ¥ | 208,354 | | | ¥ | 7,060 | | | ¥ | — | | | ¥ | 215,414 | | | ¥ | 157,114 | | | ¥ | 5,796 | | | ¥ | — | | | ¥ | 162,910 | | Trading derivative liabilities | | | 80,673 | | | | 11,844,463 | | | | 81,781 | | | 12,006,917 | | | | 88,329 | | | | 12,701,110 | | | | 57,143 | | | | 12,846,582 | | Interest rate contracts | | | 3,085 | | | | 8,659,042 | | | | 12,496 | | | 8,674,623 | | | | 35,179 | | | | 9,839,618 | | | | 21,496 | | | | 9,896,293 | | Foreign exchange contracts | | | 2,058 | | | | 2,992,812 | | | | 5,382 | | | 3,000,252 | | | | 2,633 | | | | 2,663,347 | | | | 4,670 | | | | 2,670,650 | | Equity contracts | | | 75,530 | | | | 117,572 | | | | 33,679 | | | 226,781 | | | | 50,517 | | | | 126,737 | | | | 6,138 | | | | 183,392 | | Commodity contracts | | | — | | | | 4,362 | | | | 30,070 | | | 34,432 | | | | — | | | | 2,916 | | | | 24,735 | | | | 27,651 | | Credit derivatives | | | — | | | | 70,675 | | | | 154 | | | 70,829 | | | | — | | | | 68,492 | | | | 104 | | | | 68,596 | | Obligation to return securities received as collateral | | | 3,030,974 | | | | 145,988 | | | | — | | | 3,176,962 | | | | 2,912,355 | | | | 174,671 | | | | — | | | | 3,087,026 | | Others(5) | | | — | | | | 507,700 | | | | (25,528 | ) | | 482,172 | | | | — | | | | 426,368 | | | | 65,648 | | | | 492,016 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 3,320,001 | | | ¥ | 12,505,211 | | | ¥ | 56,253 | | | ¥ | 15,881,465 | | | ¥ | 3,157,798 | | | ¥ | 13,307,945 | | | ¥ | 122,791 | | | ¥ | 16,588,534 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | Includes securities measured under the fair value option. |
| (2) | | Excludes certain investments valued at net asset value of private equity funds whose fair values were ¥13,150¥21,517 million and ¥21,517¥40,400 million at March 31, 20172018 and 2018,2019, respectively. The amounts of unfunded commitments related to these private equity funds were ¥27,735¥61,463 million and ¥61,463¥94,483 million at March 31, 20172018 and 2018,2019, respectively. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | (3) | | Mainly comprises securities received as collateral that may be sold or repledged under securities lending transactions, money in trust for segregating cash deposited by customers on security transactions and derivative assets designated as hedging instruments. |
| (4) | | Excludes certain investments valued at net asset value of real estate funds and private equity funds, whose fair values at March 31, 2017 were ¥412018 was ¥35 million, and ¥119 million, respectively, and those at March 31, 2018 were2019 was nil, and ¥35 million, respectively. There was no amount of unfunded commitments related to these real estate funds and private equity funds at March 31, 20172018 and 2018.2019. |
| (5) | | Includes other short-term borrowings, long-term debt, bifurcated embedded derivatives carried at fair value and derivative liabilities designated as hedging instruments. |
Transfers Between Level 1 and Level 2
During the fiscal years ended March 31, 2017 and 2018, the transfers between Level 1 and Level 2 were as follows:
| | | | | | | | | | | | | | | | | | | | 2017 | | | 2018 | | | | | Transfers out of
Level 1
into Level 2(1) | | | Transfers out of
Level 2
into Level 1(1) | | | Transfers out of
Level 1
into Level 2(1) | | | Transfers out of
Level 2
into Level 1(1) | | | | | (in millions) | | Assets | | | | | | | | | | | | | | | | | Trading account assets: | | | | | | | | | | | | | | | | | Trading Securities | | | | | | | | | | | | | | | | | Debt securities | | | | | | | | | | | | | | | | | Foreign governments and official institutions bonds | | ¥ | — | | | ¥ | — | | | ¥ | 6,176 | | | ¥ | — | | Trading derivative assets | | | | | | | | | | | | | | | | | Equity contracts | | | — | | | | — | | | | 26,781 | (2) | | | — | | Investment securities: | | | | | | | | | | | | | | | | | Available-for-sale securities | | | | | | | | | | | | | | | | | Marketable equity securities | | | 22,578 | | | | 27,807 | | | | 8,022 | | | | 5,566 | | Liabilities | | | | | | | | | | | | | | | | | Trading account liabilities: | | | | | | | | | | | | | | | | | Trading derivative liabilities | | | | | | | | | | | | | | | | | Equity contracts | | | — | | | | — | | | | 31,341 | (2) | | | — | |
Notes:
(1)(6) | | The transfers between leveltable above reflects changes in presentation that were made to equity investment securities at March 31, 2018. See Note 1 and 2 occurred during the first-half of the fiscal year are assumed to have occurred at the beginning of the first-half year, and the transfers occurred during the second-half of the fiscal year are assumed to have occurred at the beginning of the second-half year.for further information. |
(2)(7) | | Transfer outExcludes certain investments valued at net asset value of Level 1 into Level 2 for trading derivative assetsreal estate funds and trading derivative liabilitiesprivate funds, whose fair values at March 31, 2019 were caused by the adoption¥17,583 million, and ¥9,921 million, respectively. The amounts of valuation techniques instead of quoted prices whichunfunded commitments related to these real estate funds and private funds at March 31, 2019 were not obtained at the end of the period due to the reduction of activities in the market.¥2,054 million, and nil, respectively. |
In general, the transfers from Level 1 into Level 2 comprised of securities whose fair values were measured at quoted prices in active markets at the beginning of the period but such quoted prices were no longer available at the end of the period. The transfers from Level 2 into Level 1 comprised of securities for which quoted prices in active markets became available at the end of the period even though such quoted prices were not available at the beginning of the period.
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, 20172018 and MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2018. 2019. The determination to classify a financial instrument within Level 3 is based upon the significance of the unobservable inputs to overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable or Level 3 input, observable inputs (inputs that are actively quoted and can be validated to external sources). Accordingly, the gains and losses in the tables below include changes in fair value due in part to observable inputs used in the valuation techniques.
| | | | March 31,
2016 | | | Total gains (losses)
for the period | | Purchases | | | Issues | | | Sales | | | Settlements | | | Transfers
into
Level 3(5) | | | Transfers
out of
Level 3(5) | | | March 31,
2017 | | | Change in
unrealized
gains (losses)
included in
earnings for
assets and
liabilities
still held at
March 31,
2017 | | | March 31,
2017 | | | Total gains (losses)
for the period | | | Purchases | | Issues | | Sales | | Settlements | | Transfers
into
Level 3 | | Transfers
out of
Level 3 | | March 31,
2018 | | Change in
unrealized
gains (losses)
included in
earnings for
assets and
liabilities
still held at
March 31,
2018 | | | | | Included
in
earnings | | Included
in other
comprehensive
income | | | Included
in
earnings | | Included
in other
comprehensive
income | | | | | (in millions) | | | (in millions) | | Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading account assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading securities(1) | | ¥ | 879,946 | | | ¥ | (3,062 | )(2) | | ¥ | — | | | ¥ | 375,549 | | | ¥ | — | | | ¥ | (143,806 | ) | | ¥ | (315,002 | ) | | ¥ | 58,409 | | | ¥ | (52,541 | ) | | ¥ | 799,493 | | | ¥ | 8,227 | (2) | | ¥ | 799,493 | | | ¥ | (25,944 | )(2) | | ¥ | — | | | ¥ | 702,402 | | | ¥ | — | | | ¥ | (281,927 | ) | | ¥ | (376,333 | ) | | ¥ | 34,986 | | | ¥ | (25,184 | ) | | ¥ | 827,493 | | | ¥ | (26,391 | )(2) | Debt securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | | — | | | (1,209 | ) | | | — | | | | — | | | | — | | | | — | | | (10,106 | ) | | 11,315 | | | | — | | | | — | | | | — | | | | — | | | (4 | ) | | | — | | | 1,079 | | | | — | | | | — | | | | — | | | | — | | | (1,075 | ) | | | — | | | | — | | Japanese prefectural and municipal bonds | | 2,467 | | | 84 | | | | — | | | | — | | | | — | | | (2,551 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | Foreign governments and official institutions bonds | | 57,470 | | | (5,273 | ) | | | — | | | 49,631 | | | | — | | | (49,342 | ) | | (50,638 | ) | | | — | | | (12 | ) | | 1,836 | | | 83 | | | Foreign government and official institution bonds | | | 1,836 | | | 720 | | | | — | | | 107,685 | | | | — | | | (107,157 | ) | | (1,064 | ) | | | — | | | (973 | ) | | 1,047 | | | (2 | ) | Corporate bonds | | 98,236 | | | | (2,783 | ) | | | — | | | 2,802 | | | | — | | | (6,659 | ) | | (60,640 | ) | | | 47,094 | (6) | | | (52,529 | )(6) | | 25,521 | | | 107 | | | 25,521 | | | (6,424 | ) | | | — | | | 3,170 | | | | — | | | (533 | ) | | (10,391 | ) | | 34,885 | (5) | | (23,136 | )(5) | | 23,092 | | | (6,377 | ) | Residential mortgage-backed securities | | 23,540 | | | | (5,036 | ) | | | — | | | 38,086 | | | | — | | | | — | | | (8,676 | ) | | | — | | | | — | | | 47,914 | | | (4,304 | ) | | 47,914 | | | 1,014 | | | | — | | | | — | | | | — | | | | — | | | (7,787 | ) | | | — | | | | — | | | 41,141 | | | 829 | | Asset-backed securities | | 630,247 | | | | 9,437 | | | | — | | | 281,792 | | | | — | | | (85,254 | ) | | (181,408 | ) | | | — | | | | — | | | 654,814 | | | | 11,761 | | | 654,814 | | | (21,124 | ) | | | — | | | 576,668 | | | | — | | | (172,324 | ) | | (353,397 | ) | | | — | | | | — | | | 684,637 | | | (19,387 | ) | Other debt securities | | 35,944 | | | | (392 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 35,552 | | | (393 | ) | | 35,552 | | | (2,102 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 33,450 | | | (2,102 | ) | Equity securities | | 32,042 | | | 2,110 | | | | — | | | 3,238 | | | | — | | | | — | | | (3,534 | ) | | | — | | | | — | | | 33,856 | | | 973 | | | 33,856 | | | 1,976 | | | | — | | | 13,800 | | | | — | | | (1,913 | ) | | (3,694 | ) | | 101 | | | | — | | | 44,126 | | | 648 | | Trading derivatives—net | | 31,254 | | | | (2,305 | )(2) | | (847 | ) | | 1,274 | | | (2,968 | ) | | | — | | | (13,573 | ) | | 31,839 | | | (7,429 | ) | | 37,245 | | | | (7,768 | )(2) | | 37,245 | | | 3,912 | (2) | | 520 | | | 1,367 | | | (1,518 | ) | | | — | | | (23,699 | ) | | (466 | ) | | (5,242 | ) | | 12,119 | | | (9,055 | )(2) | Interest rate contracts—net | | 38,213 | | | (1,942 | ) | | (457 | ) | | | — | | | (2 | ) | | | — | | | (6,704 | ) | | 4,170 | | | (4,727 | ) | | 28,551 | | | (909 | ) | | 28,551 | | | (4,730 | ) | | (42 | ) | | | — | | | | — | | | | — | | | (8,810 | ) | | (2,433 | ) | | 2,060 | | | 14,596 | | | (3,908 | ) | Foreign exchange contracts—net | | 1,235 | | | (14,291 | ) | | 15 | | | 524 | | | (20 | ) | | | — | | | 1,035 | | | 29,126 | | | (2,766 | ) | | 14,858 | | | (12,420 | ) | | 14,858 | | | (2,434 | ) | | 294 | | | 26 | | | | — | | | | — | | | (67 | ) | | 1,996 | (5) | | (7,937 | ) | | 6,736 | | | 1,713 | | Equity contracts—net | | (7,915 | ) | | 12,917 | | | (376 | ) | | 147 | | | (1,529 | ) | | | — | | | (8,155 | ) | | (1,465 | ) | | 64 | | | (6,312 | ) | | 3,572 | | | (6,312 | ) | | 12,518 | | | 272 | | | 687 | | | (1,154 | ) | | | — | | | (17,302 | ) | | (29 | )(5) | | 635 | (5) | | (10,685 | ) | | (5,446 | ) | Commodity contracts—net | | (345 | ) | | 1,397 | | | (12 | ) | | 603 | | | (1,417 | ) | | | — | | | 144 | | | | — | | | | — | | | 370 | | | 2,050 | | | 370 | | | 30 | | | (4 | ) | | 654 | | | (364 | ) | | | — | | | (3 | ) | | | — | | | | — | | | 683 | | | 116 | | Credit derivatives—net | | 66 | | | (386 | ) | | (17 | ) | | | — | | | | — | | | | — | | | 107 | | | 8 | | | | — | | | (222 | ) | | (61 | ) | | (222 | ) | | (1,472 | ) | | | — | | | | — | | | | — | | | | — | | | 2,483 | | | | — | | | | — | | | 789 | | | (1,530 | ) | Investment securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Available-for-sale securities | | 375,274 | | | | (3,504 | )(3) | | (35,082 | ) | | 300,765 | | | | — | | | (268 | ) | | (292,198 | ) | | 6,835 | | | (14,296 | ) | | 337,526 | | | | (419 | )(3) | | Debt securities | | | | | | | | | | | | | | | | | | | | | | | | Foreign governments and official institutions bonds | | 20,941 | | | | — | | | (1,099 | ) | | 999 | | | | — | | | | — | | | (742 | ) | | | — | | | | — | | | 20,099 | | | | — | | | Available-for-sale debt securities | | | 337,526 | | | 4,831 | (3) | | (15,344 | ) | | 319,092 | | | | — | | | (163 | ) | | (264,616 | ) | | 93 | | | (30,759 | ) | | 350,660 | | | (167 | )(3) | Foreign government and official institution bonds | | | 20,099 | | | | — | | | (186 | ) | | 621 | | | | — | | | | — | | | (342 | ) | | | — | | | | — | | | 20,192 | | | | — | | Corporate bonds | | 23,595 | | | 22 | | | (463 | ) | | 26,222 | | | | — | | | (268 | ) | | (6,086 | ) | | | 6,835 | (6) | | | (12,925 | )(6) | | 36,932 | | | | (419 | ) | | 36,932 | | | 150 | | | (43 | ) | | 521 | | | | — | | | (52 | ) | | (805 | ) | | 93 | (5) | | (30,759 | )(5) | | 6,037 | | | (167 | ) | Residential mortgage-backed securities | | 15 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 15 | | | | — | | | 15 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 15 | | | | — | | Commercial mortgage-backed securities | | 3,764 | | | | — | | | (282 | ) | | | — | | | | — | | | | — | | | (511 | ) | | | — | | | | — | | | 2,971 | | | | — | | | 2,971 | | | | — | | | 4 | | | | — | | | | — | | | | — | | | (545 | ) | | | — | | | | — | | | 2,430 | | | | — | | Asset-backed securities | | 158,281 | | | (3,526 | ) | | (26,651 | ) | | 250,156 | | | | — | | | | — | | | (259,970 | ) | | | — | | | (1,371 | ) | | 116,919 | | | | — | | | 116,919 | | | 4,681 | | | (9,605 | ) | | 306,680 | | | | — | | | | — | | | (257,503 | ) | | | — | | | | — | | | 161,172 | | | | — | | Other debt securities | | 168,678 | | | | — | | | (6,587 | ) | | 23,388 | | | | — | | | | — | | | (24,889 | ) | | | — | | | | — | | | 160,590 | | | | — | | | 160,590 | | | | — | | | (5,514 | ) | | 11,270 | | | | — | | | (111 | ) | | (5,421 | ) | | | — | | | | — | | | 160,814 | | | | — | | Other investment securities | | 24,689 | | | | 2,432 | (4) | | | — | | | 4,012 | | | | — | | | (4,662 | ) | | (110 | ) | | | — | | | (69 | ) | | 26,292 | | | | (1,270 | )(4) | | Equity securities | | | 26,292 | | | 1,640 | (3) | | | — | | | 3,930 | | | | — | | | (2,782 | ) | | (7 | ) | | | — | | | (714 | ) | | 28,359 | | | 300 | (3) | Nonmarketable equity securities | | | 26,292 | | | 1,640 | | | | — | | | 3,930 | | | | — | | | (2,782 | ) | | (7 | ) | | | — | | | (714 | ) | | 28,359 | | | 300 | | Others | | 846 | | | | 280 | (4) | | 111 | | | 1,230 | | | | — | | | (32 | ) | | | — | | | 1,415 | | | | — | | | 3,850 | | | | 131 | (4) | | 3,850 | | | (426 | )(7) | | (37 | ) | | 5,584 | | | | — | | | (311 | ) | | | — | | | | — | | | | — | | | 8,660 | | | (592 | )(7) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 1,312,009 | | | ¥ | (6,159 | ) | | ¥ | (35,818 | ) | | ¥ | 682,830 | | | ¥ | (2,968 | ) | | ¥ | (148,768 | ) | | ¥ | (620,883 | ) | | ¥ | 98,498 | | | ¥ | (74,335 | ) | | ¥ | 1,204,406 | | | ¥ | (1,099 | ) | | ¥ | 1,204,406 | | | ¥ | (15,987 | ) | | ¥ | (14,861 | ) | | ¥ | 1,032,375 | | | ¥ | (1,518 | ) | | ¥ | (285,183 | ) | | ¥ | (664,655 | ) | | ¥ | 34,613 | | | ¥ | (61,899 | ) | | ¥ | 1,227,291 | | | ¥ | (35,905 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Others | | ¥ | (9,821 | ) | | ¥ | (24,383 | )(4) | | ¥ | 17,155 | | | ¥ | — | | | ¥ | 4,062 | | | ¥ | — | | | ¥ | (30,214 | ) | | ¥ | 59,635 | | | ¥ | (2,458 | ) | | ¥ | 28,432 | | | ¥ | (15,362 | )(4) | | ¥ | 28,432 | | | ¥ | 4,508 | (4) | | ¥ | (2,005 | ) | | ¥ | — | | | ¥ | 6,601 | | | ¥ | — | | | ¥ | (27,824 | ) | | ¥ | 1,056 | (6) | | ¥ | (31,290 | )(6) | | ¥ | (25,528 | ) | | ¥ | 35,010 | (4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | (9,821 | ) | | ¥ | (24,383 | ) | | ¥ | 17,155 | | | ¥ | — | | | ¥ | 4,062 | | | ¥ | — | | | ¥ | (30,214 | ) | | ¥ | 59,635 | | | ¥ | (2,458 | ) | | ¥ | 28,432 | | | ¥ | (15,362 | ) | | ¥ | 28,432 | | | ¥ | 4,508 | | | ¥ | (2,005 | ) | | ¥ | — | | | ¥ | 6,601 | | | ¥ | — | | | ¥ | (27,824 | ) | | ¥ | 1,056 | | | ¥ | (31,290 | ) | | ¥ | (25,528 | ) | | ¥ | 35,010 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | March 31,
2017 | | | Total gains (losses) for the
period | | | | Issues | | | Sales | | | Settlements | | | Transfers
into
Level 3(5) | | | Transfers
out of
Level 3(5) | | | March 31,
2018 | | | Change in
unrealized
gains (losses)
included in
earnings for
assets and
liabilities
still held at
March 31,
2018 | | | March 31,
2018 | | | Total gains (losses) for the period | | | Purchases | | Issues | | Sales | | Settlements | | 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 | | | | | Included
in
earnings | | Included
in other
comprehensive
income | | Purchases | | | Included
in
earnings | | Included
in other
comprehensive
income | | | | | (in millions) | | | (in millions) | | Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading account assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading securities(1) | | ¥ | 799,493 | | | ¥ | (25,944 | )(2) | | ¥ | — | | | ¥ | 702,402 | | | ¥ | — | | | ¥ | (281,927 | ) | | ¥ | (376,333 | ) | | ¥ | 34,986 | | | ¥ | (25,184 | ) | | ¥ | 827,493 | | | ¥ | (26,391 | )(2) | | ¥ | 827,493 | | | ¥ | 23,848 | (2) | | ¥ | (1,341 | ) | | ¥ | 454,048 | | | ¥ | — | | | ¥ | (316,384 | ) | | ¥ | (213,944 | ) | | ¥ | 29,445 | | | ¥ | (17,839 | ) | | ¥ | 785,326 | | | ¥ | 18,299 | (2) | Debt securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese national government and Japanese government agency bonds | | | — | | | (4 | ) | | | — | | | 1,079 | | | | — | | | | — | | | | — | | | | — | | | (1,075 | ) | | | — | | | | — | | | Foreign governments and official institutions bonds | | 1,836 | | | 720 | | | | — | | | 107,685 | | | | — | | | (107,157 | ) | | (1,064 | ) | | | — | | | (973 | ) | | 1,047 | | | (2 | ) | | Foreign government and official institution bonds | | | 1,047 | | | 863 | | | | — | | | 117,619 | | | | — | | | (118,377 | ) | | (317 | ) | | | — | | | (43 | ) | | 792 | | | 5 | | Corporate bonds | | 25,521 | | | (6,424 | ) | | | — | | | 3,170 | | | | — | | | (533 | ) | | (10,391 | ) | | | 34,885 | (6) | | | (23,136 | )(6) | | 23,092 | | | (6,377 | ) | | 23,092 | | | 611 | | | | — | | | 2,040 | | | | — | | | (1,798 | ) | | (4,188 | ) | | 29,423 | (5) | | (17,796 | )(5) | | 31,384 | | | 286 | | Residential mortgage-backed securities | | 47,914 | | | 1,014 | | | | — | | | | — | | | | — | | | | — | | | (7,787 | ) | | | — | | | | — | | | 41,141 | | | 829 | | | 41,141 | | | (282 | ) | | | — | | | | — | | | | — | | | | — | | | (5,678 | ) | | | — | | | | — | | | 35,181 | | | (289 | ) | Asset-backed securities | | 654,814 | | | (21,124 | ) | | | — | | | 576,668 | | | | — | | | (172,324 | ) | | (353,397 | ) | | | — | | | | — | | | 684,637 | | | (19,387 | ) | | 684,637 | | | 18,692 | | | (1,341 | ) | | 315,865 | | | | — | | | (195,851 | ) | | (194,324 | ) | | | — | | | | — | | | 627,678 | | | 15,528 | | Other debt securities | | 35,552 | | | (2,102 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 33,450 | | | (2,102 | ) | | 33,450 | | | 1,698 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 35,148 | | | 1,698 | | Equity securities | | 33,856 | | | 1,976 | | | | — | | | 13,800 | | | | — | | | (1,913 | ) | | (3,694 | ) | | 101 | | | | — | | | 44,126 | | | 648 | | | 44,126 | | | 2,266 | | | | — | | | 18,524 | | | | — | | | (358 | ) | | (9,437 | ) | | 22 | | | | — | | | 55,143 | | | 1,071 | | Trading derivatives—net | | 37,245 | | | | 3,912 | (2) | | 520 | | | 1,367 | | | (1,518 | ) | | | — | | | (23,699 | ) | | (466 | ) | | (5,242 | ) | | 12,119 | | | | (9,055 | )(2) | | 12,119 | | | (5,871 | )(2) | | (744 | ) | | 787 | | | (682 | ) | | | — | | | 37 | | | 20,192 | | | 10,332 | | | 36,170 | | | (25,241 | )(2) | Interest rate contracts—net | | 28,551 | | | (4,730 | ) | | (42 | ) | | | — | | | | — | | | | — | | | (8,810 | ) | | (2,433 | ) | | 2,060 | | | 14,596 | | | (3,908 | ) | | 14,596 | | | 12,397 | | | 57 | | | | — | | | (119 | ) | | | — | | | (25,601 | ) | | (7,013 | ) | | 1,494 | | | (4,189 | ) | | 11,507 | | Foreign exchange contracts—net | | 14,858 | | | (2,434 | ) | | 294 | | | 26 | | | | — | | | | — | | | (67 | ) | | 1,996 | | | (7,937 | ) | | 6,736 | | | 1,713 | | | 6,736 | | | (10,997 | ) | | (419 | ) | | 210 | | | | — | | | | — | | | (322 | ) | | 27,230 | (5) | | (4,247 | ) | | 18,191 | | | (10,451 | ) | Equity contracts—net | | (6,312 | ) | | 12,518 | | | 272 | | | 687 | | | (1,154 | ) | | | — | | | (17,302 | ) | | (29 | ) | | 635 | | | (10,685 | ) | | (5,446 | ) | | (10,685 | ) | | 18,756 | | | (374 | ) | | 13 | | | (228 | ) | | | — | | | (17,680 | ) | | (25 | )(5) | | 13,085 | (5) | | 2,862 | | | (752 | ) | Commodity contracts—net | | 370 | | | 30 | | | (4 | ) | | 654 | | | (364 | ) | | | — | | | (3 | ) | | | — | | | | — | | | 683 | | | 116 | | | 683 | | | 32 | | | 6 | | | 564 | | | (335 | ) | | | — | | | (1 | ) | | | — | | | | — | | | 949 | | | 795 | | Credit derivatives—net | | (222 | ) | | (1,472 | ) | | | — | | | | — | | | | — | | | | — | | | 2,483 | | | | — | | | | — | | | 789 | | | (1,530 | ) | | 789 | | | (26,059 | ) | | (14 | ) | | | — | | | | — | | | | — | | | 43,641 | | | | — | | | | — | | | 18,357 | | | (26,340 | ) | Investment securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Available-for-sale securities | | 337,526 | | | | 4,831 | (3) | | (15,344 | ) | | 319,092 | | | | — | | | (163 | ) | | (264,616 | ) | | 93 | | | (30,759 | ) | | 350,660 | | | | (167 | )(3) | | Debt securities | | | | | | | | | | | | | | | | | | | | | | | | Foreign governments and official institutions bonds | | 20,099 | | | | — | | | (186 | ) | | 621 | | | | — | | | | — | | | (342 | ) | | | — | | | | — | | | 20,192 | | | | — | | | Available-for-sale debt securities | | | 350,660 | | | 6,415 | (3) | | (9,791 | ) | | 273,201 | | | | — | | | | — | | | (338,180 | ) | | 1,456 | | | (327 | ) | | 283,434 | | | (498 | )(3) | Foreign government and official institution bonds | | | 20,192 | | | | — | | | (876 | ) | | 645 | | | | — | | | | — | | | (715 | ) | | | — | | | | — | | | 19,246 | | | | — | | Corporate bonds | | 36,932 | | | 150 | | | (43 | ) | | 521 | | | | — | | | (52 | ) | | (805 | ) | | | 93 | (6) | | | (30,759 | )(6) | | 6,037 | | | (167 | ) | | 6,037 | | | (345 | ) | | 3 | | | 3,450 | | | | — | | | | — | | | (6,078 | ) | | 1,456 | (5) | | (327 | )(5) | | 4,196 | | | (498 | ) | Residential mortgage-backed securities | | 15 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 15 | | | | — | | | 15 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | 15 | | | | — | | Commercial mortgage-backed securities | | 2,971 | | | | — | | | 4 | | | | — | | | | — | | | | — | | | (545 | ) | | | — | | | | — | | | 2,430 | | | | — | | | 2,430 | | | | — | | | (135 | ) | | | — | | | | — | | | | — | | | (257 | ) | | | — | | | | — | | | 2,038 | | | | — | | Asset-backed securities | | 116,919 | | | 4,681 | | | (9,605 | ) | | 306,680 | | | | — | | | | — | | | (257,503 | ) | | | — | | | | — | | | 161,172 | | | | — | | | 161,172 | | | 6,760 | | | (5,016 | ) | | 263,587 | | | | — | | | | — | | | (295,048 | ) | | | — | | | | — | | | 131,455 | | | | — | | Other debt securities | | 160,590 | | | | — | | | (5,514 | ) | | 11,270 | | | | — | | | (111 | ) | | (5,421 | ) | | | — | | | | — | | | 160,814 | | | | — | | | 160,814 | | | | — | | | (3,767 | ) | | 5,519 | | | | — | | | | — | | | (36,082 | ) | | | — | | | | — | | | 126,484 | | | | — | | Other investment securities | | 26,292 | | | | 1,640 | (7) | | | — | | | 3,930 | | | | — | | | (2,782 | ) | | (7 | ) | | | — | | | (714 | ) | | 28,359 | | | | 300 | (7) | | Equity securities | | | 28,359 | | | (2,298 | )(3) | | | — | | | 3,795 | | | | — | | | (1,418 | ) | | | — | | | | — | | | (618 | ) | | 27,820 | | | (3,060 | )(3) | Nonmarketable equity securities | | | 28,359 | | | (2,298 | ) | | | — | | | 3,795 | | | | — | | | (1,418 | ) | | | — | | | | — | | | (618 | ) | | 27,820 | | | (3,060 | ) | Others | | 3,850 | | | | (426 | )(8) | | (37 | ) | | 5,584 | | | | — | | | (311 | ) | | | — | | | | — | | | | — | | | 8,660 | | | | (592 | )(8) | | 8,660 | | | (1,022 | )(7) | | (20 | ) | | 24,961 | | | | — | | | (206 | ) | | | — | | | 5 | | | | — | | | 32,378 | | | (1,191 | )(7) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 1,204,406 | | | ¥ | (15,987 | ) | | ¥ | (14,861 | ) | | ¥ | 1,032,375 | | | ¥ | (1,518 | ) | | ¥ | (285,183 | ) | | ¥ | (664,655 | ) | | ¥ | 34,613 | | | ¥ | (61,899 | ) | | ¥ | 1,227,291 | | | ¥ | (35,905 | ) | | ¥ | 1,227,291 | | | ¥ | 21,072 | | | ¥ | (11,896 | ) | | ¥ | 756,792 | | | ¥ | (682 | ) | | ¥ | (318,008 | ) | | ¥ | (552,087 | ) | | ¥ | 51,098 | | | ¥ | (8,452 | ) | | ¥ | 1,165,128 | | | ¥ | (11,691 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Others | | 28,432 | | | | 4,508 | (4) | | (2,005 | ) | | | — | | | 6,601 | | | | — | | | (27,824 | ) | | 1,056 | | | (31,290 | ) | | (25,528 | ) | | | 35,010 | (4) | | ¥ | (25,528 | ) | | ¥ | (19,629 | )(4) | | ¥ | 6,670 | | | ¥ | — | | | ¥ | 16,759 | | | ¥ | — | | | ¥ | (18,499 | ) | | ¥ | 44,727 | (6) | | ¥ | 35,230 | (6) | | ¥ | 65,648 | | | ¥ | (10,778 | )(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 28,432 | | | ¥ | 4,508 | | | ¥ | (2,005 | ) | | ¥ | — | | | ¥ | 6,601 | | | ¥ | — | | | ¥ | (27,824 | ) | | ¥ | 1,056 | | | ¥ | (31,290 | ) | | ¥ | (25,528 | ) | | ¥ | 35,010 | | | ¥ | (25,528 | ) | | ¥ | (19,629 | ) | | ¥ | 6,670 | | | ¥ | — | | | ¥ | 16,759 | | | ¥ | — | | | ¥ | (18,499 | ) | | ¥ | 44,727 | | | ¥ | 35,230 | | | ¥ | 65,648 | | | ¥ | (10,778 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | Includes Trading securities measured under the fair value option. |
| (2) | | Included in Trading account profits (losses)—net and in Foreign exchange gains (losses)—losses—net. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| (3) | | Included in Investment securities gains—gains (losses)—net. |
| (4) | | Included in Trading account profits (losses)—net. |
| (5) | | All transfers out of Level 3 orTransfers into Level 3 for Foreign exchange contract were assumed to have occurred atmainly caused by the beginning of the first-half or the second-half of the fiscal year. |
(6) | | valuation using certain unobservable input. Transfers into (out of) Level 3 for corporate bonds were caused by the decrease (increase) in liquidity or the availability of the quoted prices provided by third-party venders.venders and Equity contracts—net were mainly caused by the change of valuation model and the change cease using certain unobservable input. |
| (6) | | Transfers into (out of) Level 3 for bifurcated embedded derivatives in Others were mainly caused by the decrease (increase) in the observability of the key inputs to the valuation models and a corresponding increase (decrease) in the significance of the unobservable inputs. |
| (7) | | Included in Investment securities gains—net.Othernon-interest income. |
| (8) | | IncludedThe table above reflects changes in Other non-interest income.presentation that were made to equity investment securities at March 31, 2018. See Note 1 for further information. |
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, 2017 | | Fair value(1) | | | Valuation technique | | Significant unobservable inputs | | Range | | | Weighted
Average(2) | | | | | (in millions) | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | Trading securities and Investment securities: | | | | | | | | | | | | | | | | | Foreign governments and official institutions bonds | | ¥ | 20,099 | | | Return on equity method | | Probability of default | | | 0.1%~0.4% | | | | 0.3 | % | | | | | | | | | Recovery rate | | | 60.0%~70.0% | | | | 67.0 | % | | | | | | | | | Market-required return on capital | | | 8.0%~10.0% | | | | 9.0 | % | Corporate bonds | | | 19,313 | | | Discounted cash flow | | Probability of default | | | 4.4%~8.8% | | | | 5.6 | % | | | | | | | | | Recovery rate | | | 41.0%~81.2% | | | | 42.8 | % | Residential mortgage-backed securities, Commercial mortgage-backed securities and Asset-backed securities | | | 108,132 | | | Discounted cash flow | | Probability of default | | | 1.2%~5.3% | | | | 4.3 | % | | | | | | | | | Recovery rate | | | 60.0%~76.0% | | | | 64.7 | % | | | | 650,814 | | | Internal model(4) | | Asset correlations | | | 7.0%~11.0% | | | | 11.0 | % | | | | | | | | | Discount factor | | | 1.2%~1.4% | | | | 1.2 | % | | | | | | | | | Prepayment rate | | | 9.5%~29.5% | | | | 29.3 | % | | | | | | | | | Probability of default | | | 0.0%~83.1% | | | | — | (3) | | | | | | | | | Recovery rate | | | 52.8%~80.9% | | | | 80.6 | % | Other debt securities | | | 35,552 | | | Discounted cash flow | | Liquidity premium | | | 0.5%~1.0% | | | | 0.6 | % | | | | 160,479 | | | Return on equity method | | Probability of default | | | 0.0%~25.0% | | | | 0.3 | % | | | | | | | | | Recovery rate | | | 40.0%~90.0% | | | | 71.1 | % | | | | | | | | | Market-required return on capital | | | 8.0%~10.0% | | | | 9.7 | % |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | | | | | | | At March 31, 2018 | | Fair value(1) | | | Valuation technique | | Significant unobservable inputs | | Range | | Weighted
Average(2) | | | | | (in millions) | | | | | | | | | | | Assets | | | | | | | | | | | | | | | Trading securities and Investment securities: | | | | | | | | | | | | | | | Foreign government and official institution bonds | | ¥ | 20,192 | | | Return on equity method | | Probability of default | | 0.0%~0.4% | | | 0.2 | % | | | | | | | | | Recovery rate | | 60.0%~70.0% | | | 66.7 | % | | | | | | | | | Market-required return on capital | | 8.0%~10.0% | | | 9.5 | % | Residential mortgage-backed securities, Commercial mortgage-backed securities and Asset-backed securities | | | 110,536 | | | Discounted cash flow | | Probability of default | | 1.2%~5.3% | | | 4.5 | % | | | | | | | | | Recovery rate | | 60.0%~76.0% | | | 66.3 | % | | | | 684,586 | | | Internal model(4) | | Asset correlations | | 9.0% | | | 9.0 | % | | | | | | | | | Discount factor | | 1.0% | | | 1.0 | % | | | | | | | | | Prepayment rate | | 37.2% | | | 37.2 | % | | | | | | | | | Probability of default | | 0.0%~91.3% | | | — | (3) | | | | | | | | | Recovery rate | | 65.3% | | | 65.3 | % | Other debt securities | | | 33,450 | | | Discounted cash flow | | Liquidity premium | | 0.5%~2.4% | | | 0.8 | % | | | | 149,759 | | | Return on equity method | | Probability of default | | 0.0%~25.0% | | | 0.3 | % | | | | | | | | | Recovery rate | | 40.0%~90.0% | | | 72.5 | % | | | | | | | | | Market-required return on capital | | 8.0%~10.0% | | | 9.7 | % |
| | | | | | | | | | | At March 31, 20172018 | | Fair value(1) | | | Valuation technique | | Significant unobservable inputs | | Range | | | | (in millions) | | | | | | | | Trading derivatives—net: | | | | | | | | | | | Interest rate contracts—net | | 28,297 | 14,460 | | Option model | | Probability of default | | 0.1%~13.2% | | | | | | | Correlation between interest rates | | 36.0%~100.0% | | | | | | | Correlation between interest rate and foreign exchange rate
| | 20.4%~48.8% | | | | | | | Recovery rate | | 41.0%~48.0% | | | | | | | Volatility | | 21.6%~100.0% | Foreign exchange contracts—net
| | 14,890 | | Option model | | Probability of default | | 0.1%~8.7% | | | | | | | Correlation between interest rates
| | 40.3%~74.0% | | | | | | | Correlation between interest rate and foreign exchange rate
| | 46.4%~50.7% | | | | | | | Correlation between underlying assets
| | 85.0% | | | | | | | Recovery rate
| | 41.0%~48.0% | | | | | | | Volatility
| | 16.8%~20.6% | Equity contracts—net
| | (6,659) | | Option model | | Correlation between interest rate and equity
| | 33.3%~39.0% | | | | | | | Correlation between foreign exchange rate and equity
| | 3.0%~69.2% | | | | | | | Correlation between equities | | 25.5%~81.3% | | | | | | | Volatility | | 29.8%~127.4% |
| | | | | | | | | | | | | | | | | At March 31, 2018 | | Fair value(1) | | | Valuation technique | | Significant unobservable inputs | | Range | | | Weighted
Average(2) | | | | | (in millions) | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | Trading securities and Investment securities: | | | | | | | | | | | | | | | | | Foreign governments and official institutions bonds | | ¥ | 20,192 | | | Return on equity method | | Probability of default | | | 0.0%~0.4% | | | | 0.2 | % | | | | | | | | | Recovery rate | | | 60.0%~70.0% | | | | 66.7 | % | | | | | | | | | Market-required return on capital | | | 8.0%~10.0% | | | | 9.5 | % | Corporate bonds | | | 267 | | | Discounted cash flow | | Recovery rate | | | 70.8% | | | | 70.8 | % | | | | | | | Residential mortgage-backed securities, Commercial mortgage-backed securities and Asset-backed securities | | | 110,536 | | | Discounted cash flow | | Probability of default | | | 1.2%~5.3% | | | | 4.5 | % | | | | | | | | | Recovery rate | | | 60.0%~76.0% | | | | 66.3 | % | | | | 684,586 | | | Internal model(4) | | Asset correlations | | | 9.0% | | | | 9.0 | % | | | | | | | | | Discount factor | | | 1.0% | | | | 1.0 | % | | | | | | | | | Prepayment rate | | | 37.2% | | | | 37.2 | % | | | | | | | | | Probability of default | | | 0.0%~91.3% | | | | — | (3) | | | | | | | | | Recovery rate | | | 65.3% | | | | 65.3 | % | Other debt securities | | | 33,450 | | | Discounted cash flow | | Liquidity premium | | | 0.5%~2.4% | | | | 0.8 | % | | | | 149,759 | | | Return on equity method | | Probability of default | | | 0.0%~25.0% | | | | 0.3 | % | | | | | | | | | Recovery rate | | | 40.0%~90.0% | | | | 72.5 | % | | | | | | | | | Market-required return on capital | | | 8.0%~10.0% | | | | 9.7 | % |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | At March 31, 2018
| | Fair value(1)
| | Valuation technique
| | Significant unobservable inputs
| | Range
| | | (in millions) | | | | | | | Trading derivatives—net:
| | | | | | | | | Interest rate contracts—net
| | 14,460 | | Option model | | Probability of default | | 0.0%~12.5% | | | | | | | | | Correlation between interest rates | | 34.1%~52.7% | | | | | | | | | Correlation between interest rate and foreign exchange rate | | 19.7%~50.4% | | | | | | | | | Recovery rate | | 41.0%~46.0% | | | | | | | | | Volatility | | 13.4%~100.0% | | | | | | | | | Probability of prepayment | | 100.0% | Foreign exchange contracts—net | | | 6,779 | | | Option model | | Probability of default | | 0.0%~12.5% | | | | | | | | | Correlation between interest rates | | 40.3%~74.0% | | | | | | | | | Correlation between interest rate and foreign exchange rate | | 28.1%~50.7% | | | | | | | | | Recovery rate | | 41.0%~46.0% | | | | | | | | | Correlation between underlying assets | | 85.0% | | | | | | | | | Volatility | | 10.3%~16.2% | Equity contracts—net | | (16,600) | (16,600 | ) | | Option model | | Correlation between interest rate and equity | | 37.1%~39.0% | | | | | | | | | Correlation between foreign exchange rate and equity | | 7.0%~65.2% | | | | | | | | | Correlation between equities | | 20.6%~81.7% | | | | | | | | | Correlation between underlying assets | | 76.0% | | | | 6,528 | | | Discounted cash flow | | Term of litigation | | 2.0 years |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | At March 31, 2019 | | Fair value(1) | | | Valuation technique | | Significant unobservable inputs | | Range | | Weighted
Average(2) | | | | | (in millions) | | | | | | | | | | | Assets | | | | | | | | | | | | | | | Trading securities and Investment securities: | | | | | | | | | | | | | | | Foreign government and official institution bonds | | ¥ | 19,246 | | | Return on equity method | | Probability of default | | 0.0%~0.4% | | | 0.3 | % | | | | | | | | | Recovery rate | | 60.0%~70.0% | | | 66.7 | % | | | | | | | | | Market-required return on capital | | 10.0% | | | 10.0 | % | Residential mortgage-backed securities, Commercial mortgage-backed securities and Asset-backed securities | | | 109,213 | | | Discounted cash flow | | Probability of default | | 1.2%~5.3% | | | 5.0 | % | | | | | | | | | Recovery rate | | 60.0%~76.0% | | | 67.2 | % | | | | | | | | | Loan price | | 90.5%~100.3% | | | 95.4 | % | | | | 587,577 | | | Internal model(4) | | Asset correlations | | 10.0% | | | 10.0 | % | | | | | | | | | Discount factor | | 1.0%~1.2% | | | 1.2 | % | | | | | | | | | Prepayment rate | | 22.7% | | | 22.7 | % | | | | | | | | | Probability of default | | 0.0%~90.1% | | | — | (3) | | | | | | | | | Recovery rate | | 64.3% | | | 64.3 | % | Other debt securities | | | 35,148 | | | Discounted cash flow | | Liquidity premium | | 1.0%~2.4% | | | 1.3 | % | | | | 112,822 | | | Return on equity method | | Probability of default | | 0.0%~25.0% | | | 0.3 | % | | | | | | | | | Recovery rate | | 40.0%~90.0% | | | 78.0 | % | | | | | | | | | Market-required return on capital | | 8.0%~10.0% | | | 9.5 | % |
| | | | | | | | | | | At March 31, 2019 | | 2.0yearsFair value(1) | | | Valuation technique | | Significant unobservable inputs | | Range | | | (in millions) | | | | | | | | Trading derivatives—net: | | | | | | | | | | | Interest rate contracts—net | | | (4,189 | ) | | Option model | | Probability of default | | 0.0%~12.0% | | | | | | | | | Correlation between interest rates | | 29.2%~51.3% | | | | | | | | | Correlation between interest rate and foreign exchange rate | | 22.8%~60.0% | | | | | | | | | Recovery rate | | 41.0%~48.0% | | | | | | | | | Volatility | | 11.0%~71.3% | Foreign exchange contracts—net | | | 18,198 | | | Option model | | Probability of default | | 0.0%~12.0% | | | | | | | | | Correlation between interest rates | | 35.0%~70.0% | | | | | | | | | Correlation between interest rate and foreign exchange rate | | 14.8%~60.0% | | | | | | | | | Recovery rate | | 41.0%~48.0% | | | | | | | | | Correlation between underlying assets | | 65.0% | | | | | | | | | Volatility | | 9.7%~18.2% | Equity contracts—net | | | (2,727 | ) | | Option model | | Correlation between foreign exchange rate and equity | | 7.0%~64.1% | | | | | | | | | Correlation between equities | | 21.6%~80.3% | | | | | | | | | Correlation between underlying assets | | 51.7%~82.0% | | | | | | | | | Volatility | | 21.0%~30.0% | | | | 5,878 | | | Discounted cash flow | | Term of litigation | | 1.0 year |
Notes: | (1) | | The fair value as of March 31, 20172018 and 20182019 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.” |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Sensitivity to and range of unobservable inputs Probability of default—Probability of default is an estimate of the likelihood that the default event will occur and the MUFG Group will be unable to collect the contractual amounts. A significant increase (decrease) in the default rate would result in a significant decrease (increase) in a fair value through a decrease (increase) in the estimated cash flows. Probability of default used in internal model of Residential mortgage-backed securities, Commercial mortgage-backed securities and Asset-backed securities represents that of underlying assets, whereas probability of default used in other valuation techniques represents the counterparty default risks, determined through the MUFG Group’s credit rating system. The wide range of probability of default used in the internal model of Residential mortgage-backed securities, Commercial mortgage-backed securities and Asset-backed securities is mainly caused by Asset-backed securities. Asset-backed securities have a large number of underlying loans, mainly corporate loans, in several industries. The MUFG Group primarily makes investments in the senior tranches of such securities, with no investments in the equity portion. Thus, the MUFG Group’s investments have higher priority of payments than mezzanine and equity and even if some of underlying loans become default, the MUFG Group may still be able to receive the full contractual payments. For derivative contracts, the MUFG Group holds positions with a large number of counterparties with various credit quality, which results in wider range of probability of default. However, the majority of counterparties have higher ratings, categorized as “Normal” in the internal credit rating system, the inputs used to estimate fair value of derivative contracts are concentrated in the lower end of the range. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 asasset-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. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Correlation—Correlation is a measure of the relationship between the movements of two variables (i.e. how the change in one variable influences a change in the other variables). A variety of correlation-related assumptions are required for a wide range of instruments including foreign governmentsgovernment and official institutionsinstitution bonds, asset-backed securities, corporate bonds, derivatives and certain other instruments. In most cases, correlations used are not observable in the market and must be estimated using historical information. Changes in correlation inputs can have a major impact, favorable or unfavorable, on the value of an instrument, depending on its nature. In addition, the wide range of correlation inputs are primarily due to the complex and unique nature of these instruments. There are many different types of correlation inputs, including cross-asset correlation (such as correlation between interest rate and equity), and same-asset correlation (such as correlation between interest rates). Correlation levels are highly dependent on market conditions and could have a relatively wide range of levels within or across asset classes. For interest rate contracts and foreign exchange contracts, the diversity in the portfolio held by the MUFG Group is reflected in wide ranges of correlation, as the fair values of transactions with a variety of currencies and tenors are determined using several foreign exchange and interest rate curves. For equity derivative contracts, the wide range of correlation between interest rate and equity is primarily due to the large number of correlation pairs with different maturities of contracts. For credit derivative contracts, the wide range of correlation between underlying assets is primarily due to factors such as reference assets with different maturities, capital structure subordinations, and credit quality. Term of litigation—Term of litigation is the estimated period until the resolution of a certain litigation matter that relates to an issuer’s restricted shares (“Covered Litigation”) that the MUFG Group purchased, which is referenced in certain swap transactions. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. Valuation Process for Level 3 Fair Value MeasurementsLoan Price
The MUFG Group establishes valuation policies and procedures for measuring—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 for which the risk management departments ensure that the valuation techniques used are logical, appropriate and consistent with market information. Theof a financial accounting offices ensure that the valuation techniques are consistent with the accounting policies.
In accordance with the valuation policies and procedures, fair value is determined by the risk management departments or similar sections that are independent of the front offices in order to ensure objectivity and validity of measuring fair value. An analysis performed on the determined fair value is periodically reported to management.
When valuation techniques are used to measure fair value, the valuation techniques are required to bepre-approved by the risk management departments. If the risk management departments determine that the techniques are not consistent with market practice, the valuation techniques are modified as necessary.
Fair value measurements are verified for reasonableness by the risk management departments which are responsible to perform an analytical review of the fair value measurements which includes a comparison with market trends and information.
Fornon-binding prices obtained from independent third parties, internal price verification procedures are performed by the risk management departments. Such verification procedures include comparison of pricing sources and analysis of variances beyond certain thresholds.
Unobservable inputs used in a Level 3 fair value measurement are internally estimated by the risk management departments based upon the market information such as observable inputs. The reasonableness of the inputs is validated by other risk management departments by a comparison analysis between the market value of financial instruments using such Level 3 inputs and the internally estimated fair value, to the extent necessary.asset.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities may be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets are subject to fair value adjustments that result from the application of the MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) lower of cost or fair value accounting, or write-downs of individual assets.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, 20172018 and 2018:2019: | | | | 2017 | | 2018 | | | 2018 | | 2019 | | | | | Level 1 | | Level 2 | | Level 3 | | Total
carrying value | | Level 1 | | Level 2 | | Level 3 | | Total
carrying value | | | Level 1 | | Level 2 | | Level 3 | | Total
carrying value | | Level 1 | | Level 2 | | Level 3 | | Total
carrying value | | | | | (in millions) | | | (in millions) | | Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment securities(1)(2) | | ¥ | — | | | ¥ | — | | | ¥ | 2,224 | | | ¥ | 2,224 | | | ¥ | — | | | ¥ | — | | | ¥ | 1,984 | | | ¥ | 1,984 | | | ¥ | — | | | ¥ | — | | | ¥ | 1,984 | | | ¥ | 1,984 | | | ¥ | — | | | ¥ | 80,779 | | | ¥ | 4,208 | | | ¥ | 84,987 | | Loans | | 4,941 | | | 9,020 | | | 219,963 | | | 233,924 | | | 3,458 | | | 8,329 | | | 239,653 | | | 251,440 | | | 3,458 | | | 8,329 | | | 239,653 | | | 251,440 | | | 2,656 | | | 9,104 | | | 250,678 | | | 262,438 | | Loans held for sale | | | — | | | | — | | | 6,480 | | | 6,480 | | | | — | | | | — | | | 22,835 | | | 22,835 | | | | — | | | | — | | | 22,835 | | | 22,835 | | | | — | | | | — | | | 77,506 | | | 77,506 | | Collateral dependent loans | | 4,941 | | | 9,020 | | | 213,483 | | | 227,444 | | | 3,458 | | | 8,329 | | | 216,818 | | | 228,605 | | | 3,458 | | | 8,329 | | | 216,818 | | | 228,605 | | | 2,656 | | | 9,104 | | | 173,172 | | | 184,932 | | Premises and equipment | | | — | | | | — | | | 3,507 | | | 3,507 | | | | — | | | | — | | | 34,326 | | | 34,326 | | | | — | | | | — | | | 34,326 | | | 34,326 | | | | — | | | | — | | | 35,352 | | | 35,352 | | Intangible assets | | | — | | | | — | | | 1,652 | | | 1,652 | | | | — | | | | — | | | 9,402 | | | 9,402 | | | | — | | | | — | | | 9,402 | | | 9,402 | | | | — | | | | — | | | 19,635 | | | 19,635 | | Goodwill | | | — | | | | — | | | 4,869 | | | 4,869 | | | | — | | | | — | | | | — | | | | — | | | Other assets | | | — | | | | — | | | 6,872 | | | 6,872 | | | 92,223 | | | | — | | | 6,196 | | | 98,419 | | | 92,223 | | | | — | | | 6,196 | | | 98,419 | | | 136,528 | | | 49,756 | | | 9,774 | | | 196,058 | | Investments in equity method investees(1) | | | — | | | | — | | | | — | | | | — | | | 92,223 | | | | — | | | | — | | | 92,223 | | | 92,223 | | | | — | | | | — | | | 92,223 | | | 136,528 | | | 49,756 | | | | — | | | 186,284 | | Other | | | — | | | | — | | | 6,872 | | | 6,872 | | | | — | | | | — | | | 6,196 | | | 6,196 | | | | — | | | | — | | | 6,196 | | | 6,196 | | | | — | | | | — | | | 9,774 | | | 9,774 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 4,941 | | | ¥ | 9,020 | | | ¥ | 239,087 | | | ¥ | 253,048 | | | ¥ | 95,681 | | | ¥ | 8,329 | | | ¥ | 291,561 | | | ¥ | 395,571 | | | ¥ | 95,681 | | | ¥ | 8,329 | | | ¥ | 291,561 | | | ¥ | 395,571 | | | ¥ | 139,184 | | | ¥ | 139,639 | | | ¥ | 319,647 | | | ¥ | 598,470 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Note:Notes:
| (1) | | Excludes certain investments valued at net asset value of ¥15,884¥8,443 million and ¥8,443¥8,866 million at March 31, 20172018 and 2018,2019, respectively. The unfunded commitments related to these investments are ¥5,359¥1,544 million and ¥1,544¥12,242 million at March 31, 20172018 and 2018,2019, respectively. These investments are in private equity funds and limited partnerships. |
| (2) | | 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. |
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, 20172018 and 2018:2019: | | | | 2017 | | | 2018 | | | 2018 | | | 2019 | | | | | (in millions) | | | (in millions) | | Investment securities | | ¥ | 1,016 | | | ¥ | 1,423 | | | ¥ | 1,423 | | | ¥ | (50,785 | ) | Loans | | | 63,581 | | | | 47,352 | | | | 47,352 | | | | 30,153 | | Loans held for sale | | | 55 | | | | 990 | | | | 990 | | | | 4,762 | | Collateral dependent loans | | | 63,526 | | | | 46,362 | | | | 46,362 | | | | 25,391 | | Premises and equipment | | | 6,798 | | | | 39,361 | | | | 39,361 | | | | 31,345 | | Intangible assets | | | 5,803 | | | | 21,900 | | | | 21,900 | | | | 118,108 | | Goodwill | | | 6,638 | | | | — | | | Other assets | | | 6,561 | | | | 30,852 | | | | 30,852 | | | | 59,557 | | Investments in equity method investees | | | 5,465 | | | | 29,442 | | | | 29,442 | | | | 51,645 | | Other | | | 1,096 | | | | 1,410 | | | | 1,410 | | | | 7,912 | | | | | | | | | | | | | | | Total | | ¥ | 90,397 | | | ¥ | 140,888 | | | ¥ | 140,888 | | | ¥ | 188,378 | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Investment securities for the year ended March 31, 2018 primarily include impaired cost-method investments which were written down to fair value during the period. The fair values are determined based on recent net asset value and projected future cash flows of investees. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Investment securities for the year ended March 31, 2019 primarily include nonmarketable equity securities measured under the measurement alternative. See Note 3 for the details of the measurement alternative. Loans include loans held for sale and collateral dependent loans. Loans held for sale are recorded at the lower of cost or estimated fair value. The fair value of the loans held for sale is based on secondary market prices, recent transactions or discounted cash flows. These loans are principally classified in Level 3 of the fair value hierarchy, and when quoted prices are available but not traded actively, such loans held for sale are classified in Level 2 of the fair value hierarchy. Collateral dependent loans are measured at fair value of the underlying collateral. Collateral is comprised mainly of real estate and exchange-traded equity securities. The MUFG Group maintains an established process for internally determining the fair value of real estate, using the following valuation techniques and assumptions. Collateral dependent loans that are measured based on underlying real estate collateral are classified in Level 3 of the fair value hierarchy. | | • | | Replacement cost approach. The replacement cost approach is primarily used for buildings and the land they are built on. This approach calculates the fair value of the collateral using the replacement cost of the property as of the valuation date. Replacement cost tables and useful life tables used for this approach are developed by subsidiaries of MUFG. |
| | • | | Sales comparison approach. The sales comparison approach is mainly used for land. The fair value of the collateral located in Japan is based on Japanese government official land prices and standard land prices, considering the results of comparison analysis between the official roadside value which is used for tax purposes and the related government official land and standard land prices. |
| | • | | Income approach. The income approach is, as a general rule, applied to all rental properties based on the highest and best use concept. This approach calculates the fair value of the collateral using expected future cash flows. In this approach, the expected annual net operating income is discounted using the related capitalization yield. The significant assumptions within the income approach are the expected annual net operating income and capitalization yield. The expected annual net operating income is estimated based on rental income of the property. The capitalization yield is determined based on the location and use of the property by subsidiaries of MUFG. The capitalization yield may be adjusted to reflect the trends in locations, occupancy rates and rent level and other factors. |
Premises and equipment consist of those assets which were written down to fair value. The fair values are determined based on prices obtained from an appraiser or discounted cash flows. These impaired premises and equipment are classified as Level 3 of the fair value hierarchy. Intangible assets consist of those assets which were written down to fair value. The fair values are determined based on discounted cash flows. These impaired intangible assets are classified as Level 3 of the fair value hierarchy. Other assets mainly consist of investments in equity method investees which were written down to fair value due to impairment. When investments in equity method investees are marketable equity securities, the fair values are determined based on quoted prices. Impaired investments in equity method investees which are marketable equity securities are classified in either Level 1 or Level 2 of the fair value hierarchy. When investments in equity method investees are nonmarketable equity securities, the fair values are determined using the same methodologies as those for impaired nonmarketable equity securities described above. Impaired investments in equity method investees which are nonmarketable equity securities are classified in Level 3 of the fair value hierarchy. 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 MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. Had the fair value option not been elected, theThe gains and losses on translation of thesedebt securities would have been reflectedwithout the fair value option, are included in OCI, while the gains and losses on translation of foreign currency-denominated financial liabilities would have beenare included in current earnings. As a result of adopting the new guidance issued in January 2016, as described in Note 1, the gains and losses on change in fair value of equity securities with or without fair value option are included in current earnings. The MUFG Group also elected the fair value option for certain financial instruments held by Mitsubishi UFJ Securities Holdings’s foreign subsidiaries because those financial instruments are managed on a fair value basis, and these exposures are considered to be trading-related positions. These financial assets are included in Other assets. These financial liabilities are mainly included in Other short-term borrowings and Long-term debt. Unrealized gains and losses on such financial instruments are recognized in the accompanying consolidated statements of income. The following table presents the gains or losses recorded for the fiscal years ended March 31, 2016, 2017, 2018 and 20182019 related to the eligible instruments for which the MUFG Group elected the fair value option: | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | Trading
account
profits (losses) | | Foreign
exchange
gains (losses) | | Total
changes in
fair value | | Trading
account
profits (losses) | | Foreign
exchange
gains (losses) | | Total
changes in
fair value | | Trading
account
profits (losses) | | Foreign
exchange
gains (losses) | | Total
changes in
fair value | | | 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) | | | (in millions) | | Financial assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading account securities(1) | | ¥ | (157,814 | ) | | ¥ | (1,058,046 | ) | | ¥ | (1,215,860 | ) | | ¥ | (464,947 | ) | | ¥ | (407,439 | ) | | ¥ | (872,386 | ) | | ¥ | (148,242 | ) | | ¥ | (267,507 | ) | | ¥ | (415,749 | ) | | ¥ | (464,947 | ) | | ¥ | (407,439 | ) | | ¥ | (872,386 | ) | | ¥ | (148,242 | ) | | ¥ | (267,507 | ) | | ¥ | (415,749 | ) | | ¥ | 208,952 | | | ¥ | 186,578 | | | ¥ | 395,530 | | Other assets | | 3 | | | | — | | | 3 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | (157,811 | ) | | ¥ | (1,058,046 | ) | | ¥ | (1,215,857 | ) | | ¥ | (464,947 | ) | | ¥ | (407,439 | ) | | ¥ | (872,386 | ) | | ¥ | (148,242 | ) | | ¥ | (267,507 | ) | | ¥ | (415,749 | ) | | ¥ | (464,947 | ) | | ¥ | (407,439 | ) | | ¥ | (872,386 | ) | | ¥ | (148,242 | ) | | ¥ | (267,507 | ) | | ¥ | (415,749 | ) | | ¥ | 208,952 | | | ¥ | 186,578 | | | ¥ | 395,530 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other short-term borrowings(2) | | ¥ | 3,422 | | | ¥ | — | | | ¥ | 3,422 | | | ¥ | (10,380 | ) | | ¥ | — | | | ¥ | (10,380 | ) | | ¥ | 5,902 | | | ¥ | — | | | ¥ | 5,902 | | | ¥ | (10,380 | ) | | ¥ | — | | | ¥ | (10,380 | ) | | ¥ | 5,902 | | | ¥ | — | | | ¥ | 5,902 | | | ¥ | (5,559 | ) | | ¥ | — | | | ¥ | (5,559 | ) | Long-term debt(2) | | 10,443 | | | | — | | | 10,443 | | | (93,464 | ) | | | — | | | (93,464 | ) | | 7,554 | | | | — | | | 7,554 | | | (93,464 | ) | | | — | | | (93,464 | ) | | 7,554 | | | | — | | | 7,554 | | | (8,322 | ) | | | — | | | (8,322 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 13,865 | | | ¥ | — | | | ¥ | 13,865 | | | ¥ | (103,844 | ) | | ¥ | — | | | ¥ | (103,844 | ) | | ¥ | 13,456 | | | ¥ | — | | | ¥ | 13,456 | | | ¥ | (103,844 | ) | | ¥ | — | | | ¥ | (103,844 | ) | | ¥ | 13,456 | | | ¥ | — | | | ¥ | 13,456 | | | ¥ | (13,881 | ) | | ¥ | — | | | ¥ | (13,881 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | (1) | | Excludes Danamon’s equity securities. See Note 2 for reference. |
| (2) | | Change in value attributable to the instrument-specific credit risk related to those financial liabilities are not material. |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents the differences between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as of March 31, 20172018 and 20182019 for long-term debt instruments for which the fair value option has been elected: | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | 2018 | | | | | Remaining
aggregate
contractual
amounts
outstanding | | | Fair value | | | Fair value
over (under)
remaining
aggregate
contractual
amounts
outstanding | | | Remaining
aggregate
contractual
amounts
outstanding | | | Fair value | | �� | Fair value
over (under)
remaining
aggregate
contractual
amounts
outstanding | | | | | (in millions) | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt | | ¥ | 404,510 | | | ¥ | 377,423 | | | ¥ | (27,087 | ) | | ¥ | 347,002 | | | ¥ | 333,985 | | | ¥ | (13,017 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 404,510 | | | ¥ | 377,423 | | | ¥ | (27,087 | ) | | ¥ | 347,002 | | | ¥ | 333,985 | | | ¥ | (13,017 | ) | | | | | | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | | 2019 | | | | | Remaining
aggregate
contractual
amounts
outstanding | | | Fair value | | | Fair value
over (under)
remaining
aggregate
contractual
amounts
outstanding | | | Remaining
aggregate
contractual
amounts
outstanding | | | Fair value | | | Fair value
over (under)
remaining
aggregate
contractual
amounts
outstanding | | | | | (in millions) | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | Long-term debt | | ¥ | 347,002 | | | ¥ | 333,985 | | | ¥ | (13,017 | ) | | ¥ | 358,730 | | | ¥ | 325,808 | | | ¥ | (32,922 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | ¥ | 347,002 | | | ¥ | 333,985 | | | ¥ | (13,017 | ) | | ¥ | 358,730 | | | ¥ | 325,808 | | | ¥ | (32,922 | ) | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income and expense related to the assets and liabilities for which the fair value option is elected are measured based on the contractual rates and dividend income related to these assets are recognized when the shareholder right to receive the dividend is established. These interest income and expense and dividend income are reported in the accompanying consolidated statements of income as either interest income or expense, depending on the nature of the related asset or liability. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Estimated Fair Value of Financial Instruments The following is a summary of carrying amounts and estimated fair values by level within the fair value hierarchy of financial instruments which are not carried at fair value on a recurring basis in the accompanying consolidated balance sheets as of March 31, 20172018 and 2018:2019: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying
amount | | | Estimated fair value | | | Carrying
amount | | | Estimated fair value | | At March 31, 2017 | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | At March 31, 2018 | | | Carrying
amount | | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | | | (in billions) | | (in billions) | | Financial assets: | | | | | | | | | | | | | | | | | | | | | Cash and due from banks | | ¥ | 25,683 | | | ¥ | 25,683 | | | ¥ | 25,683 | | | ¥ | — | | | ¥ | — | | | ¥ | 32,648 | | | ¥ | 32,648 | | | ¥ | 32,648 | | | ¥ | — | | | ¥ | — | | Interest-earning deposits in other banks | | | 38,327 | | | | 38,327 | | | | — | | | | 38,327 | | | | — | | | | 43,210 | | | | 43,210 | | | | — | | | | 43,210 | | | | — | | Call loans and funds sold | | | 704 | | | | 704 | | | | — | | | | 704 | | | | — | | | | 896 | | | | 896 | | | | — | | | | 896 | | | | — | | Receivables under resale agreements | | | 8,188 | | | | 8,188 | | | | — | | | | 8,188 | | | | — | | | | 5,726 | | | | 5,726 | | | | — | | | | 5,726 | | | | — | | Receivables under securities borrowing transactions | | | 11,003 | | | | 11,003 | | | | — | | | | 11,003 | | | | — | | | | 9,269 | | | | 9,269 | | | | — | | | | 9,269 | | | | — | | Investment securities(1)(2) | | | 3,688 | | | | 3,808 | | | | 1,206 | | | | 1,144 | | | | 1,458 | | | | 3,684 | | | | 3,797 | | | | 1,197 | | | | 1,051 | | | | 1,549 | | Loans, net of allowance for credit losses(3) | | | 117,033 | | | | 118,765 | | | | 5 | | | | 257 | | | | 118,503 | | | | 116,272 | | | | 117,753 | | | | 3 | | | | 330 | | | | 117,420 | | Other financial assets(4) | | | 5,827 | | | | 5,827 | | | | — | | | | 5,827 | | | | — | | | | 7,000 | | | | 7,000 | | | | — | | | | 7,000 | | | | — | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | Deposits | | | | | | | | | | | | | | | | | | | | | Non-interest-bearing | | ¥ | 29,486 | | | ¥ | 29,486 | | | ¥ | — | | | ¥ | 29,486 | | | ¥ | — | | | ¥ | 29,862 | | | ¥ | 29,862 | | | ¥ | — | | | ¥ | 29,862 | | | ¥ | — | | Interest-bearing | | | 160,928 | | | | 160,948 | | | | — | | | | 160,948 | | | | — | | | | 165,831 | | | | 165,825 | | | | — | | | | 165,825 | | | | — | | Total deposits | | | 190,414 | | | | 190,434 | | | | — | | | | 190,434 | | | | — | | | | 195,693 | | | | 195,687 | | | | — | | | | 195,687 | | | | — | | Call money and funds purchased | | | 1,975 | | | | 1,975 | | | | — | | | | 1,975 | | | | — | | | | 2,453 | | | | 2,453 | | | | — | | | | 2,453 | | | | — | | Payables under repurchase agreements(5) | | | 17,693 | | | | 17,693 | | | | — | | | | 17,693 | | | | — | | | | 18,135 | | | | 18,135 | | | | — | | | | 18,135 | | | | — | | Payables under securities lending transactions | | | 5,549 | | | | 5,549 | | | | — | | | | 5,549 | | | | — | | | | 8,170 | | | | 8,170 | | | | — | | | | 8,170 | | | | — | | Due to trust account | | | 3,335 | | | | 3,335 | | | | — | | | | 3,335 | | | | — | | | | 3,386 | | | | 3,386 | | | | — | | | | 3,386 | | | | — | | Other short-term borrowings | | | 7,857 | | | | 7,857 | | | | — | | | | 7,857 | | | | — | | | | 6,617 | | | | 6,617 | | | | — | | | | 6,617 | | | | — | | Long-term debt(5) | | | 25,863 | | | | 26,015 | | | | — | | | | 26,015 | | | | — | | | | 26,861 | | | | 26,919 | | | | — | | | | 26,919 | | | | — | | Other financial liabilities | | | 6,094 | | | | 6,094 | | | | — | | | | 6,094 | | | | — | | | | 6,642 | | | | 6,642 | | | | — | | | | 6,642 | | | | — | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Carrying
amount | | | Estimated fair value | | | Carrying
amount | | | Estimated fair value | | At March 31, 2018 | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | At March 31, 2019 | | | Carrying
amount | | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | | | (in billions) | | (in billions) | | Financial assets: | | | | | | | | | | | | | | | | | | | | | Cash and due from banks | | ¥ | 32,648 | | | ¥ | 32,648 | | | ¥ | 32,648 | | | ¥ | — | | | ¥ | — | | | ¥ | 33,924 | | | ¥ | 33,924 | | | ¥ | 33,924 | | | ¥ | — | | | ¥ | — | | Interest-earning deposits in other banks | | | 43,210 | | | | 43,210 | | | | — | | | | 43,210 | | | | — | | | | 40,647 | | | | 40,647 | | | | — | | | | 40,647 | | | | — | | Call loans and funds sold | | | 896 | | | | 896 | | | | — | | | | 896 | | | | — | | | | 1,110 | | | | 1,110 | | | | — | | | | 1,110 | | | | — | | Receivables under resale agreements | | | 5,726 | | | | 5,726 | | | | — | | | | 5,726 | | | | — | | | | 10,975 | | | | 10,975 | | | | — | | | | 10,975 | | | | — | | Receivables under securities borrowing transactions | | | 9,269 | | | | 9,269 | | | | — | | | | 9,269 | | | | — | | | | 2,759 | | | | 2,759 | | | | — | | | | 2,759 | | | | — | | Investment securities(2) | | | 3,684 | | | | 3,797 | | | | 1,197 | | | | 1,051 | | | | 1,549 | | | | 4,442 | | | | 4,453 | | | | 1,197 | | | | 1,135 | | | | 2,121 | | Loans, net of allowance for credit losses(3) | | | 116,272 | | | | 117,753 | | | | 3 | | | | 330 | | | | 117,420 | | | | 116,213 | | | | 117,064 | | | | 3 | | | | 247 | | | | 116,814 | | Other financial assets(4) | | | 7,000 | | | | 7,000 | | | | — | | | | 7,000 | | | | — | | | | 7,455 | | | | 7,455 | | | | — | | | | 7,455 | | | | — | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | Deposits | | | | | | | | | | | | | | | | | | | | | Non-interest-bearing | | ¥ | 29,862 | | | ¥ | 29,862 | | | ¥ | — | | | ¥ | 29,862 | | | ¥ | — | | | ¥ | 30,443 | | | ¥ | 30,443 | | | ¥ | — | | | ¥ | 30,443 | | | ¥ | — | | Interest-bearing | | | 165,831 | | | | 165,825 | | | | — | | | | 165,825 | | | | — | | | | 168,846 | | | | 168,899 | | | | — | | | | 168,899 | | | | — | | Total deposits | | | 195,693 | | | | 195,687 | | | | — | | | | 195,687 | | | | — | | | | 199,289 | | | | 199,342 | | | | — | | | | 199,342 | | | | — | | Call money and funds purchased | | | 2,453 | | | | 2,453 | | | | — | | | | 2,453 | | | | — | | | | 2,450 | | | | 2,450 | | | | — | | | | 2,450 | | | | — | | Payables under repurchase agreements | | | 18,135 | | | | 18,135 | | | | — | | | | 18,135 | | | | — | | | | 25,225 | | | | 25,225 | | | | — | | | | 25,225 | | | | — | | Payables under securities lending transactions | | | 8,170 | | | | 8,170 | | | | — | | | | 8,170 | | | | — | | | | 913 | | | | 913 | | | | — | | | | 913 | | | | — | | Due to trust account | | | 3,386 | | | | 3,386 | | | | — | | | | 3,386 | | | | — | | | | 2,736 | | | | 2,736 | | | | — | | | | 2,736 | | | | — | | Other short-term borrowings | | | 6,617 | | | | 6,617 | | | | — | | | | 6,617 | | | | — | | | | 6,441 | | | | 6,441 | | | | — | | | | 6,441 | | | | — | | Long-term debt | | | 26,861 | | | | 26,919 | | | | — | | | | 26,919 | | | | — | | | | 27,790 | | | | 27,968 | | | | — | | | | 27,968 | | | | — | | Other financial liabilities | | | 6,642 | | | | 6,642 | | | | — | | | | 6,642 | | | | — | | | | 6,781 | | | | 6,781 | | | | — | | | | 6,781 | | | | — | |
Notes: | (1) | | Includes impaired securities measured at fair value on a nonrecurring basis.basis at March 31, 2018. Refer to “Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis” for the details of the level classification. |
| (2) | | Excludes cost-method investments of ¥429 billion and ¥437 billion at March 31, 2017 and 2018, respectively, of which the MUFG Group did not estimate the fair value since it was not practical and no impairment indicators were identified. See Note 3 for the details of these cost-method investments. |
| (3) | | Includes loans held for sale and collateral dependent loans measured at fair value on a nonrecurring basis. Refer to “Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis” for the details of the level classification. |
| (4) | | Excludes investments in equity method investees of ¥2,200¥2,219 billion and ¥2,219¥2,487 billion at March 31, 20172018 and 2018,2019, respectively. |
(5) | | The table above reflects changes in presentation that were made to long-term repurchase agreements at March 31, 2017. See Note 1 for further information. |
The following section describes the valuation techniques adopted by the MUFG Group to estimate fair values of financial instruments that are not recorded at fair value in the accompanying consolidated balance sheets.
Cash and due from banks, Interest-earning deposits in other banks, Call loans and funds sold, Receivables under resale agreements and Receivable under securities borrowing transactions—For cash and due from banks, interest-earning deposits in other banks, call loans and funds sold, receivables under resale agreements and receivable under securities borrowing transactions, the carrying amounts are a reasonable estimate of the fair values because of their short-term nature and limited credit risk.
Investment securities—The fair values of investment securities other than those classified asAvailable-for-sale orHeld-to-maturity (i.e., nonmarketable equity securities) are not readily determinable as they do not have readily available quoted prices or secondary market prices. The fair values of certain nonmarketable
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
equity securities, such as preferred stock convertible to marketable common stock issued by public companies, are determined by utilizing commonly accepted valuation techniques to derive a fair value using the present value of dividend cash flows and option prices. For option prices, the Trinomial Tree Method determines possible paths of future stock prices using a forward rate for a common stock, and the price is calculated by multiplying the possible paths of future stock prices by the expected cash flows generated from the probability of exercising options or upon exercising the options.
Inputs used in the valuation include but are not limited to stock price, volatility and credit spread. The valuation is performed on a quarterly basis. At the time of any sale, the MUFG Group generally separately calculates a valuation to be used in sales price negotiations with the counterparty. The price agreed between the MUFG Group and a counterparty is also used as a reference for validating the appropriateness of previous valuations of the investment. The MUFG Group performs periodic validation of the valuation techniques. Specifically, the sensitivity and appropriateness of the inputs are verified by using different valuation techniques employed by the MUFG Group. It is not practicable for the MUFG Group to estimate the fair value of other nonmarketable securities issued bynon-public companies for which a quoted price is not available. For these securities, the MUFG Group is unable to estimate fair value without incurring undue cost because they comprise investments in numerousnon-public companies and each investment represents an insignificant percentage relative to each company. Therefore, the above summary does not include the carrying amounts of such investment securities.
Loans—The fair value of loans is estimated by discounting expected future cash flows based on types of loans, internal ratings and possibility of prepayment using the discount rates which include adjustments to reflect the expectations about possible variations to the current market rates. For certain residential loans with variable interest rates provided to individual home owners, the carrying amount is presented as the fair value since such carrying amount approximates the fair value, unless the creditworthiness of the borrower has changed significantly since the loan origination. Where quoted prices or estimated fair values are available, primarily for loans to refinancing countries, loans held for sales and certain other foreign loans, the fair values are based on such quoted prices and estimated fair values, including secondary market prices. For receivables from bankrupt, virtually bankrupt, and likely to become bankrupt borrowers, fair value is estimated based mainly on the expected amount to be collected from collateral and guarantees. The carrying amount is presented as the fair value since the fair value approximates such carrying amount.
Other financial assets—The estimated fair values of other financial assets, which primarily include accrued interest receivable, customers’ acceptance liabilities and accounts receivable, approximate their carrying amounts.
Non-interest-bearing deposits, Call money and funds purchased, Payables under repurchase agreements and Payable under securities lending transactions—Fornon-interest-bearing deposits, the amount payable on demand as of the consolidated balance sheet date (i.e., the carrying amount) is considered to be the fair value. For call money and funds purchased, payables under repurchase agreements and payable under securities lending transactions, the carrying amounts are reasonable estimate of the fair value because of their short-term nature and limited credit risk.
Interest-bearing deposits—For variable rate time deposits, the carrying amount is presented as the fair value because the market interest rate is reflected in such deposits within a short time period. Fixed rate time deposits are grouped by certain maturity lengths. The fair value of such deposits is estimated by discounting expected future cash flows using the discount rates that would be applied to newly accepted deposits.
Due to trust account—Since these are cash deposits with no maturity, the carrying amount is presented as the fair value as the fair value approximates such carrying amount.
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other short-term borrowings—For most other short-term borrowings, the carrying amount is presented as the fair value since such carrying amount approximates the fair value because of their short-term nature and limited credit risk.
Long-term debt—The fair value of corporate bonds issued by the MUFG Group is determined based on quoted prices of those corporate bonds. The fair value of fixed rate corporate bonds without quoted prices is the present value of expected future cash flows from these borrowings, which is discounted at an interest rate generally applicable to similar fixed rate corporate bonds reflecting premium applicable to the MUFG Group. For variable rate corporate bonds without quoted prices, the carrying amount of such bonds is presented as the fair value since such carrying amount approximates the fair value. This is on the basis that the market interest rate is reflected in the fair value of such corporate bonds because such bond terms were set within a short time period and that there has been no significant impact on the fair value of those bonds.
Other financial liabilities—The estimated fair values of other financial liabilities, which primarily include accrued interest payable, bank acceptances, accounts payable and obligations under standby letters of credit and guarantees, approximate their carrying amounts. The fair values of obligations under standby letters of credit and guarantees are based on fees received or receivable by the MUFG Group.
The fair values of certainoff-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, 20172018 and 20182019 was not material. | 33. | | STOCK-BASED COMPENSATION |
The following describes the stock-based compensation plans of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings, Mitsubishi UFJ Morgan Stanley Securities and MUFG Americas Holdings. MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi UFJ Morgan Stanley Securities On May 16, 2016, MUFG introduced the Board Incentive Plan as a new incentive plan for officers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) UFJ Morgan Stanley Securities. On November 14, 2016, MUFG expanded the Board Incentive Plan to officers who hold unexercised Stock Acquisition Rights granted under the Stock Option Plan. As a result of this transaction, the Stock Option Plan remains available to officers who are on overseas assignment as of the transition date and hold unexercised Stock Acquisition Rights. This transition which consists of the exchange of unexercised Stock Acquisition Rights for common share of MUFG under the Board Incentive Plan was treated as modification of the Stock Option Plan for accounting purpose and incremental compensation cost resulting from the modification was ¥2,028 million. Stock Option Plan MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi UFJ Morgan Stanley Securities have the Stock Option Plan. The Stock Acquisition Rights under the Stock Option Plan were normally issued and granted to officers once a year until the fiscal year ended March 31, 2013. They were normally issued and granted to officers except for outside directors and corporate auditors once a year from the fiscal year ended March 31, 2014. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The class of shares to be issued or transferred upon exercise of the Stock Acquisition Rights is common shares of MUFG. The number of shares to be issued or transferred upon exercise of each Stock Acquisition Right (“number of granted shares”) is 100 common shares of MUFG. In the event of a stock split or reverse stock split of common shares of MUFG, the number of granted shares shall be adjusted in accordance with the ratio of the stock split or reverse stock split. If any events occur that require the adjustment to the number of granted shares (e.g., mergers, consolidations, corporate separations or capital reductions of MUFG), MUFG shall appropriately adjust the number of granted shares to a reasonable extent. The contractual term of the Stock Acquisition Rights is approximately 30 years from the date of grant. Some of the Stock Acquisition Rights vest on the date of grant and the rest of the Stock Acquisition Rights granted vest depending on the holders’ service periods as officers. The Stock Acquisition Rights are only exercisable after the date on which the following conditions are met: (1) holder as a director, a corporate executive or an executive officer is no longer a director, a corporate executive and an executive officer, and (2) holder as a corporate auditor is no longer a corporate auditor, and (3) holder as a senior fellow is no longer a senior fellow. The exercise price is ¥1 per share. The following is a summary of the Stock Acquisition Rights transactions of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi UFJ Morgan Stanley Securities for the fiscal year ended March 31, 2018:2019: | | | | Number of
shares | | | Weighted average
exercise price | | | Weighted average
remaining
contractual term | | | Aggregate
intrinsic value | | | Number of
shares | | | Weighted average
exercise price | | | Weighted average
remaining
contractual term | | | Aggregate
intrinsic value | | | | | | | | | | | (in years) | | | (in millions) | | | | | | | | | (in years) | | | (in millions) | | Outstanding, beginning of fiscal year | | | 892,800 | | | ¥ | 1 | | | | | | | | 606,400 | | | ¥ | 1 | | | | | | Exercised | | | (23,100 | ) | | | 1 | | | | | | | Transitioned to the Board Incentive Plan(1) | | | (263,300 | ) | | | 1 | | | | | | | | (121,100 | ) | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding, end of fiscal year | | | 606,400 | | | ¥ | 1 | | | | 24.29 | | | ¥ | 422 | | | | 485,300 | | | ¥ | 1 | | | | 22.86 | | | ¥ | 266 | | | | | | | | | | | | | | | | | | | | | Exercisable, end of fiscal year | | | — | | | ¥ | — | | | | — | | | ¥ | — | | | | — | | | ¥ | — | | | | — | | | ¥ | — | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Note:
Notes: | (1) | | All shares transitioned to the Board Incentive Plan were granted and vested. See the explanation of the following item,The Board Incentive Plan, for more information. |
The fair value of the Stock Acquisition Rights is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions described in the following table. The risk-free interest rate is based on the Japanese government bonds yield curve in effect at the date of grant based on the expected term. The expected volatility is based on the historical data from traded common shares of MUFG. The expected term is based on the average service period of officers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi UFJ Morgan Stanley Securities, which represents the expected outstanding period of the Stock Acquisition Rights granted. The expected dividend yield is based on the dividend rate of common share of MUFG at the date of grant.
| | | | | | | Fiscal year ended March 31, 2016(1) | | Risk-free interest rate
| | | 0.07% | | Expected volatility
| | | 28.03% | | Expected term
| | | 4 years | | Expected dividend yield
| | | 2.06% | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note:
(1)(2) | | There arewere no issuances under the Stock Option Plan during the fiscal years ended March 31, 2017, 2018 and 2018.2019. |
The weighted-average grant date fair value of the Stock Acquisition Rights granted for the fiscal years ended March 31, 2016 was ¥80,200 per 100 shares.
The MUFG Group recognized ¥1,647 million and ¥252 million of compensation costs related to the Stock Acquisition Rights with ¥518 million and ¥77 million of the corresponding tax benefit for the fiscal yearsyear ended March 31, 2016 and 2017, respectively.2017. Cash received from the exercise of the Stock Acquisition Rights for the fiscal years ended March 31, 2016, 2017 and 2018 was ¥4 million, ¥4 million and ¥0 million, respectively. The actual tax benefit realized for the tax deductions from exercise of the Stock Acquisition Rights for the fiscal years ended March 31, 2016, 2017 and 2018 was ¥538 million, ¥651 million and ¥2 million, respectively. The Board Incentive Plan On May 16, 2016, MUFG’s compensation committee approved the introduction of a Board Incentive Plan as a new incentive plan for officers and covers the fiscal years corresponding to the medium-term business plan of MUFG under which common shares of MUFG and cash equivalent to the liquidation value of the common shares of MUFG together with dividends attributable to the common shares of MUFG are delivered and/or provided as compensation. The Board Incentive Plan uses the trust structure called a Board Incentive Plan Trust (“the BIP Trust”) and was authorized to purchase up to ¥15,800 million common shares of MUFG in the open market. The BIP Trust initially consistsconsisted of the BIP Trust I and the BIP Trust II and started on May 17, 2016, and will end onwith the expiration date of August 31, 2018. These trusts period may be extended through the modification of the trust agreement and additional contributions to the trust. On November 14, 2016, MUFG’s compensation committee also approved the introduction of the BIP Trust III, using the same structure as above for officers to implement the transition from the Stock Option Plan under which Stock Acquisition Rights had previously been granted but have not been exercised by officers to the Board Incentive Plan. The BIP Trust III was authorized to purchase up to ¥8,100 million common shares of MUFG in the open market. In addition, on May 15, 2017, The BIP Trust III was also authorized to additional purchase and was revised amount of trust money up to ¥9,600 million common shares of MUFG. The BIP Trust III started on November 15, 2016 and will end on November 30, 2019. If any beneficiary under the BIP Trust III remains as active officers at the initial expiration date, the trust period will be extended for additional three years. The extension of the trust period will be made in the same manner up to 30 years. On May 15, 2018, MUFG’s compensation committee approved to continue with the Board Incentive Plan with amending it in part. As a result, the BIP Trust I and the BIP Trust II will be continued to August 31, 2021 by extending the trust period as approved at the compensation committee’s meeting. MUFG also approved to revise the limited amount of trust money for the BIP Trust I and the BIP Trust II up to ¥16,700 million from ¥15,800 million. MUFG funded and established the BIP Trust, and from time to time, make contributions to the BIP Trust whose beneficiaries are officers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi UFJ Morgan Stanley Securities within the limit approved by MUFG’s compensation committee. MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi UFJ Morgan Stanley Securities also reimburse MUFG for its contributions to the BIP Trust. The trustee of the BIP Trusts, Mitsubishi UFJ Trust and Banking, acquires common shares of MUFG in the open market in accordance with the instructions from the trust administrator, who is a third party that does not have any interest in MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi UFJ Morgan Stanley Securities. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) During the period of the BIP Trust, certain points are awarded to officers. The number of the points will be determined based on each rank of officers, promotions to a higher rank in the BIP Trust I and based on single- MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
single year financial results and the degree to which the medium-term business plan has been achieved in the BIP Trust II. At December 1, 2016, certain points were awarded to officers who have exchanged their unexercised stock acquisition rights at the transition from the Stock Option Plan to the BIP Trust III. Points of the BIP Trust III are awarded to officers who are on overseas assignment as of the transition date when the officers become domestic residents and waive their unexercised Stock Acquisition Rights. One point corresponds to one common share of MUFG, and if the number of common share of MUFG owned by the BIP Trusts has increased or decreased due to a stock split, gratis allotment of shares, reverse stock split, etc., the number of common share of MUFG to be delivered and/or provided for one point will be adjusted accordingly. Officers will receive common shares of MUFG in the number corresponding to a certain percentage of these points and cash equivalent to the liquidation value of the common shares of MUFG corresponding to the remaining points after they are liquidated within the BIP Trusts. As to the BIP Trust I and the BIP Trust III, common shares of MUFG and cash will be delivered and/or provided upon resignation of the officers. As to the BIP Trust II, common shares of MUFG and cash will be delivered and/or provided immediately following the last day of the fiscal years corresponding to the medium-term business plan of MUFG. Dividends arising from common share of MUFG will also be distributed to officers based on the number of the points or the beneficial interest of officers. The following is a roll-forward of common share of MUFG under the BIP Trust I and the BIP Trust II of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking, Mitsubishi UFJ Securities Holdings and Mitsubishi UFJ Morgan Stanley Securities for the fiscal year ended March 31, 2018.2019. For the BIP Trust III, all shares were vested and there is no nonvested shares for the fiscal years ended March 31, 2017, 2018 and 2019: | | | | | | | | | | | | | | | | | | | | 2019 | | | | | The BIP Trust I | | | The BIP Trust II | | | | | Number of
Shares | | | Weighted—
average
grant—date
fair value | | | Number of
Shares | | | Weighted—
average
grant—date
fair value | | Nonvested, beginning of fiscal year | | | 2,085,633 | | | ¥ | 533.17 | | | | 7,045,349 | | | ¥ | 524.43 | | Granted | | | 6,959,500 | | | | 722.10 | | | | 6,090,100 | | | | 722.10 | | Vested | | | (2,654,379 | ) | | | 630.44 | | | | (1,825,882 | ) | | | 659.75 | | Forfeited | | | (850,072 | ) | | | 544.77 | | | | (6,566,937 | ) | | | 527.37 | | | | | | | | | | | | | | | | | | | Nonvested, end of fiscal year | | | 5,540,682 | | | ¥ | 722.10 | | | | 4,742,630 | | | ¥ | 722.10 | | | | | | | | | | | | | | | | | | |
The weighted-average grant date fair value of the common shares of MUFG held by the BIP Trust I and the BIP Trust II, that were granted during the year ended March 31, 2017 and 2018: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | 2018 | | | | | The BIP Trust I | | | The BIP Trust II | | | The BIP Trust I | | | The BIP Trust II | | | | | Number
of
Shares | | | Weighted—
average
grant—date
fair value | | | Number
of
Shares | | | Weighted—
average
grant—date
fair value | | | Number
of
Shares | | | Weighted—
average
grant—date
fair value | | | Number
of
Shares | | | Weighted—
average
grant—date
fair value | | Nonvested, beginning of fiscal year | | | — | | | ¥ | — | | | | — | | | ¥ | — | | | | 4,711,821 | | | ¥ | 521.60 | | | | 9,551,841 | | | ¥ | 521.60 | | Granted | | | 7,497,800 | | | | 521.60 | | | | 11,287,600 | | | | 521.60 | | | | 1,317,354 | | | | 721.50 | | | | 441,382 | | | | 721.50 | | Vested | | | (2,772,141 | ) | | | 521.60 | | | | (1,662,334 | ) | | | 521.60 | | | | (3,412,714 | ) | | | 590.06 | | | | (2,391,545 | ) | | | 548.50 | | Forfeited | | | (13,838 | ) | | | 521.60 | | | | (73,425 | ) | | | 521.60 | | | | (530,828 | ) | | | 532.12 | | | | (556,329 | ) | | | 528.77 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nonvested, end of fiscal year | | | 4,711,821 | | | ¥ | 521.60 | | | | 9,551,841 | | | ¥ | 521.60 | | | | 2,085,633 | | | ¥ | 533.17 | | | | 7,045,349 | | | ¥ | 524.43 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2018, were ¥521.60 and ¥721.50, respectively. The total fair value of the common shares of MUFG held by the BIP Trust I and the BIP Trust II that vested during the year ended March 31, 2017 were ¥1,940 million and ¥1,163 million, respectively, and during the year ended March 31, 2018 were ¥2,378 million and ¥1,668 million, respectively, and during the year ended March 31, 2019 were ¥1,452 million and ¥900 million, respectively. MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following is a summary of compensation costs, the corresponding tax benefit under the BIP Trust for the fiscal year ended March 31, 2017, 2018 and 20182019 and unrecognized compensation costs as of March 31, 2017, 2018 and 2018:2019: | | | | 2017 | | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | The BIP
Trust I | | | The BIP
Trust II | | | The BIP
Trust III | | | The BIP
Trust I | | | The BIP
Trust II | | | The BIP
Trust III | | | The BIP
Trust I | | The BIP
Trust II | | The BIP
Trust III | | The BIP
Trust I | | The BIP
Trust II | | The BIP
Trust III | | The BIP
Trust I | | The BIP
Trust II | | The BIP
Trust III | | | | | (in millions) | | | (in millions) | | Compensation costs | | | ¥1,238 | | | | ¥1,039 | | | | ¥2,112 | | | | ¥2,514 | | | | ¥1,452 | | | | ¥218 | | | ¥1,238 | | | ¥1,039 | | | ¥2,112 | | | ¥2,514 | | | ¥1,452 | | | ¥218 | | | ¥1,601 | | | ¥723 | | | ¥520 | | Tax benefit | | | 379 | | | | 318 | | | | 385 | | | | 770 | | | | 445 | | | | 67 | | | 379 | | | 318 | | | 385 | | | 770 | | | 445 | | | 67 | | | 490 | | | 221 | | | 159 | | Unrecognized compensation costs | | | 1,617 | | | | 346 | | | | — | | | | 396 | | | | 360 | | | | — | | | 1,617 | | | 346 | | | | — | | | 396 | | | 360 | | | | — | | | 2,604 | | | 182 | | | | — | |
Unrecognized compensation costs are expected to be recognized over a weighted-average period of 0.32.3 years for the BIP Trust I and 0.3 years for the BIP Trust II. MUFG Americas Holdings In April 2010, MUFG Americas Holdings adopted the UnionBanCalMUAH Plan (“UNBC Plan”).on June 8, 2015. Under the UNBCMUAH Plan, MUFG Americas Holdings grants restricted stock units settled in American Depositary Receipts (“ADRs”)ADRs representing shares of common sharesstock of MUFG to key employees at the discretion of the Human Capital Committee of the Board of Directors (“the Committee”). The Committee determines the number of shares, vesting requirements and other features and conditions of the restricted stock units. Under the UNBCMUAH Plan, MUFG ADRs are purchased in the open market upon the vesting of the restricted stock units, through a revocable trust. There is no amount authorized to be issued under the UNBCMUAH Plan since all shares are purchased in the open market. These awards generally vestpro-rata on each anniversary of the grant date and generally become fully vested three years from the grant date, provided that the employee has completed the specified continuous service requirement. Generally, the grants vest earlier if the employee dies, is permanently and totally disabled, retires under certain grant, age and service conditions, or terminates employment under certain conditions. MUFG Americas Holdings also issues a small number ofoff-cycle grants each year, primarily for reasons related to recruitment of new employees.
Under The weighted-average service period for grants issued under the UNBCMUAH Plan thewith outstanding restricted stock unit participants do not have dividend rights, voting rights or other stockholder rights. The grant date fair valueunits as of these awards is equal to the closing price of the MUFG ADRs on date of grant.December 31, 2018 was 3.0 years.
Effective July 1, 2014, the U.S. branch banking operations of MUFG Bank were integrated under MUFG Union Bank’s operations and MUFG Americas Holdings assumed the obligations of the stock bonus plan established by MUFG Bank Headquarters for the Americas (“HQA Plan”). The HQA Plan is substantially similar to the UNBC Plan; however, participantsParticipants in the HQAMUAH Plan are entitled to “dividend equivalent credits” on their unvested restricted stock units when MUFG pays dividends to its shareholders. The credit is equal to the dividends that the participants would have received on the shares had the shares been issued to the participants when the restricted stock units were granted. Accumulated dividend equivalents are paid to participants in cash on an annual basis.
Effective June 8, 2015, MUFG Americas Holdings amended and restated the HQA Plan as the MUFG Americas Holdings Plan. The MUFG Americas Holdings Plan is substantially similar to the UNBC and HQA Plans. MUFG Americas Holdings’s future grants will be made under the MUFG Americas Holdings Plan only. “Dividend equivalent credits” arising from grants under the MUFG Americas HoldingsMUAH Plan are paid to participants in shares on an annual basis. The weighted-average service period for grants issued under the MUFG Americas Holdings Plan with outstanding restricted stock units as of December 31, 2017 was 2.9 years.
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table is a roll-forward of the restricted stock units under the Stock Bonus PlansMUAH Plan for the fiscal year ended December 31, 2017:2018: | | | | Restricted Stock Units | | | Restricted Stock Units | | | | | 2017 | | | 2018 | | | | | Number of Units | | Weighted Average Grant
Date Fair Value | | | Number of Units | | Weighted Average Grant
Date Fair Value | | Units outstanding, beginning of fiscal year | | | 26,725,582 | | | $ | 5.35 | | | | 27,838,414 | | | $ | 5.86 | | Activity during fiscal year: | | | | | | | | | Granted | | | 14,362,249 | | | 6.53 | | | | 14,667,730 | | | 5.89 | | Vested | | | (11,709,454 | ) | | 5.58 | | | | (13,198,540 | ) | | 5.88 | | Forfeited | | | (1,539,963 | ) | | 5.55 | | | | (864,534 | ) | | 5.97 | | | | | | | | | | | | | Units outstanding, end of fiscal year | | | 27,838,414 | | | 5.86 | | | | 28,443,070 | | | 5.86 | | | | | | | | | | | | |
The weighted-average grant date fair value of restricted stock units granted during the fiscal years ended December 31, 20152016 and 20162017 were $7.15$4.63 and $4.63,$6.53, respectively. The total fair value of RSUs that vested during the fiscal years ended December 31, 2015, 2016, 2017, and 20172018 were ¥6,416 million, ¥5,333 million, ¥8,414 million, and ¥8,414¥8,614 million, respectively. The following table is a summary of MUFG Americas Holdings’sHoldings’ compensation costs, the corresponding tax benefit for the fiscal years ended December 31, 2015, 2016, 2017 and 2017,2018, and unrecognized compensation costs as of December 31, 2015, 2016, 2017 and 2017:2018: | | | | 2015 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2018 | | | | | (in millions) | | | (in millions) | | Compensation costs | | ¥ | 6,537 | | | ¥ | 7,292 | | | ¥ | 7,405 | | | ¥ | 7,292 | | | ¥ | 7,405 | | | ¥ | 8,503 | | Tax benefit | | | 2,542 | | | | 2,830 | | | | 2,917 | | | | 2,830 | | | | 2,917 | | | | 2,209 | | Unrecognized compensation costs | | | 7,598 | | | | 11,183 | | | | 12,543 | | | | 11,183 | | | | 12,543 | | | | 12,210 | |
At December 31, 2017,2018, approximately ¥12,543¥12,210 million (pretax) of compensation expense related to unvested grants had not yet been charged to net income. That cost isUnrecognized compensation costs as of December 31, 2018 are expected to be amortized into compensation expense over a weighted-average period of 1.51.4 years. | 34. | | PARENT COMPANY ONLY FINANCIAL INFORMATION |
Distributions of retained earnings of MUFG Bank and Mitsubishi UFJ Trust and Banking are restricted in order to meet the minimum capital adequacy requirements under the Banking Law. Additionally, retained earnings of these banking subsidiaries are restricted, except for approximately ¥5,672¥5,819 billion and ¥5,819¥6,077 billion, in accordance with the statutory reserve requirements under the Companies Act at March 31, 20172018 and 2018,2019, respectively. See Notes 19 and 22 for further information. The Banking Law and related regulations restrict the ability of these banking subsidiaries to extend loans or credit to the parent company. Such loans or credits to the parent company are generally limited to 15% of the banking subsidiary’s consolidated total capital, as determined by the capital adequacy guidelines. At March 31, 20172018 and 2018,2019, approximately ¥4,787¥5,341 billion and ¥5,341¥5,160 billion, respectively, of net assets of consolidated subsidiaries may be restricted as to payment of cash dividends and loans to the parent company. 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, | | | As of March 31, | | | | | 2017 | | | 2018 | | | 2018 | | | 2019 | | | | | (in millions) | | | (in millions) | | Assets: | | | | | | | | | Cash and interest-earning deposits with banking subsidiaries | | ¥ | 158,603 | | | ¥ | 114,784 | | | ¥ | 114,784 | | | ¥ | 203,713 | | Investments in subsidiaries and affiliated companies | | | 15,798,922 | | | | 16,720,286 | | | | 16,720,286 | | | | 16,668,232 | | Banking subsidiaries | | | 11,961,515 | | | | 12,638,315 | | | | 12,638,315 | | | | 12,754,653 | | Non-banking subsidiaries and affiliated companies | | | 3,837,407 | | | | 4,081,971 | | | | 4,081,971 | | | | 3,913,579 | | Loans to subsidiaries | | | 3,419,961 | | | | 5,072,330 | | | | 5,072,330 | | | | 7,199,052 | | Banking subsidiaries | | | 3,278,961 | | | | 4,885,830 | | | | 4,885,830 | | | | 6,864,309 | | Non-banking subsidiaries | | | 141,000 | | | | 186,500 | | | | 186,500 | | | | 334,743 | | Other assets | | | 97,742 | | | | 166,514 | | | | 166,514 | | | | 223,725 | | | | | | | | | | | | | | | Total assets | | ¥ | 19,475,228 | | | ¥ | 22,073,914 | | | ¥ | 22,073,914 | | | ¥ | 24,294,722 | | | | | | | | | | | | | | | Liabilities and Shareholders’ equity: | | | | | | | | | Short-term borrowings from banking subsidiaries | | ¥ | 1,667,063 | | | ¥ | 1,600,179 | | | ¥ | 1,600,179 | | | ¥ | 1,425,682 | | Long-term debt fromnon-banking subsidiaries and affiliated companies | | | 261,586 | | | | 264,332 | | | | 264,332 | | | | 277,138 | | Long-term debt | | | 3,433,423 | | | | 5,088,478 | | | | 5,088,478 | | | | 7,187,469 | | Other liabilities | | | 127,624 | | | | 150,743 | | | | 150,743 | | | | 204,885 | | | | | | | | | | | | | | | Total liabilities | | | 5,489,696 | | | | 7,103,732 | | | | 7,103,732 | | | | 9,095,174 | | | | | | | | | | | | | | | Total shareholders’ equity | | | 13,985,532 | | | | 14,970,182 | | | | 14,970,182 | | | | 15,199,548 | | | | | | | | | | | | | | | Total liabilities and shareholders’ equity | | ¥ | 19,475,228 | | | ¥ | 22,073,914 | | | ¥ | 22,073,914 | | | ¥ | 24,294,722 | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Condensed Statements of Income | | | | Fiscal years ended March 31, | | | Fiscal years ended March 31, | | | | | 2016 | | 2017 | | 2018 | | | 2017 | | 2018 | | 2019 | | | | | (in millions) | | | (in millions) | | Income: | | | | | | | | | | | | | Dividends from subsidiaries and affiliated companies | | ¥ | 574,118 | | | ¥ | 608,504 | | | ¥ | 576,332 | | | ¥ | 608,504 | | | ¥ | 576,332 | | | ¥ | 306,879 | | Banking subsidiaries | | | 501,788 | | | 535,512 | | | 487,491 | | | | 535,512 | | | 487,491 | | | 207,161 | | Non-banking subsidiaries and affiliated companies | | | 72,330 | | | 72,992 | | | 88,841 | | | | 72,992 | | | 88,841 | | | 99,718 | | Management fees from subsidiaries | | | 24,388 | | �� | | 26,095 | | | 26,073 | | | | 26,095 | | | 26,073 | | | 28,305 | | Interest income from subsidiaries | | | 8,043 | | | 48,665 | | | 80,670 | | | | 48,665 | | | 80,670 | | | 127,117 | | Foreign exchange gains—net | | | 36,715 | | | 3,614 | | | 24,726 | | | Foreign exchange gains (losses)—net | | | | 3,614 | | | 24,726 | | | (20,598 | ) | Trading account losses—net | | | (7,907 | ) | | (41,279 | ) | | (26,749 | ) | | | (41,279 | ) | | (26,749 | ) | | (8,078 | ) | Gains on sales of investment in subsidiaries and affiliated companies | | | | — | | | | — | | | 252,253 | | Other income | | | 975 | | | 1,427 | | | 1,508 | | | | 1,427 | | | 1,508 | | | 3,199 | | | | | | | | | | | | | | | | | | | | | Total income | | | 636,332 | | | 647,026 | | | 682,560 | | | | 647,026 | | | 682,560 | | | 689,077 | | | | | | | | | | | | | | | | | | | | | Expense: | | | | | | | | | | | | | Operating expenses | | | 23,074 | | | 25,692 | | | 26,016 | | | | 25,692 | | | 26,016 | | | 28,168 | | Interest expense to subsidiaries and affiliated companies | | | 26,553 | | | 28,867 | | | 31,426 | | | | 28,867 | | | 31,426 | | | 34,594 | | Interest expense | | | 3,429 | | | 35,689 | | | 65,068 | | | | 35,689 | | | 65,068 | | | 108,756 | | Other expense | | | 1,788 | | | 2,554 | | | 1,791 | | | | 2,554 | | | 1,791 | | | 1,657 | | | | | | | | | | | | | | | | | | | | | Total expense | | | 54,844 | | | 92,802 | | | 124,301 | | | | 92,802 | | | 124,301 | | | 173,175 | | | | | | | | | | | | | | | | | | | | | Equity in undistributed net income (loss) of subsidiaries and affiliated companies—net | | | 216,632 | | | (362,899 | ) | | 672,421 | | | | (362,899 | ) | | 672,421 | | | 194,390 | | | | | | | | | | | | | | | | | | | | | Income before income tax expense (benefit) | | | 798,120 | | | 191,325 | | | 1,230,680 | | | | 191,325 | | | 1,230,680 | | | 710,292 | | Income tax expense (benefit) | | | (4,212 | ) | | (11,355 | ) | | 2,520 | | | | (11,355 | ) | | 2,520 | | | (8,353 | ) | | | | | | | | | | | | | | | | | | | | Net income | | ¥ | 802,332 | | | ¥ | 202,680 | | | ¥ | 1,228,160 | | | ¥ | 202,680 | | | ¥ | 1,228,160 | | | ¥ | 718,645 | | | | | | | | | | | | | | | | | | | | |
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Condensed Statements of Cash Flows | | | | | | | | | | | | | | | | Fiscal years ended March 31, | | | | | 2016(1) | | | 2017(1) | | | 2018 | | | | | (in millions) | | Operating activities: | | | | | | | | | | | | | Net income | | ¥ | 802,332 | | | ¥ | 202,680 | | | ¥ | 1,228,160 | | Adjustments and other | | | (158,564 | ) | | | 371,901 | | | | (799,571 | ) | | | | | | | | | | | | | | Net cash provided by operating activities | | | 643,768 | | | | 574,581 | | | | 428,589 | | | | | | | | | | | | | | | Investing activities: | | | | | | | | | | | | | Proceeds from sales of investment in affiliated companies | | | — | | | | 1,574 | | | | — | | Purchase of equity investment in subsidiaries and an affiliated company | | | — | | | | (91,877 | ) | | | (53,000 | ) | Net increase in loans to subsidiaries | | | (1,433,700 | ) | | | (1,802,664 | ) | | | (1,682,576 | ) | Other—net | | | (3,135 | ) | | | (2,659 | ) | | | (4,361 | ) | | | | | | | | | | | | | | Net cash used in investing activities | | | (1,436,835 | ) | | | (1,895,626 | ) | | | (1,739,937 | ) | | | | | | | | | | | | | | Financing activities: | | | | | | | | | | | | | Net decrease in short-term borrowings from subsidiaries | | | (84,959 | ) | | | (32,412 | ) | | | (41,402 | ) | Proceeds from issuance of long-term debt | | | 1,432,755 | | | | 1,808,672 | | | | 1,872,986 | | Repayment of long-term debt | | | (22 | ) | | | (20 | ) | | | (112,184 | ) | Repayment of long-term debt to affiliated companies | | | — | | | | (1,136 | ) | | | (1,090 | ) | Proceeds from sales of treasury stock | | | 2 | | | | 1 | | | | 1 | | Payments for acquisition of treasury stock | | | (200,053 | ) | | | (200,028 | ) | | | (200,038 | ) | Dividends paid | | | (251,497 | ) | | | (246,564 | ) | | | (241,067 | ) | Other—net | | | (14,366 | ) | | | (9,333 | ) | | | (9,677 | ) | | | | | | | | | | | | | | Net cash provided by financing activities | | | 881,860 | | | | 1,319,180 | | | | 1,267,529 | | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 88,793 | | | | (1,865 | ) | | | (43,819 | ) | Cash and cash equivalents at beginning of fiscal year | | | 71,675 | | | | 160,468 | | | | 158,603 | | | | | | | | | | | | | | | Cash and cash equivalents at end of fiscal year | | ¥ | 160,468 | | | ¥ | 158,603 | | | ¥ | 114,784 | | | | | | | | | | | | | | |
Note:
(1) | | The MUFG Group early adopted new guidance on restricted cash retrospectively in the second half of the fiscal year ended March 31, 2018, and prior year amounts were revised. See Note 1 for further information. |
| | | | | | | | | | | | | | | | Fiscal years ended March 31, | | | | | 2017 | | | 2018 | | | 2019 | | | | | (in millions) | | Operating activities: | | | | | | | | | | | | | Net income | | ¥ | 202,680 | | | ¥ | 1,228,160 | | | ¥ | 718,645 | | Adjustments and other | | | 371,901 | | | | (799,571 | ) | | | (351,775 | ) | | | | | | | | | | | | | | Net cash provided by operating activities | | | 574,581 | | | | 428,589 | | | | 366,870 | | | | | | | | | | | | | | | Investing activities: | | | | | | | | | | | | | Proceeds from sales of investment in subsidiaries and affiliated companies | | | 1,574 | | | | — | | | | 455,605 | | Purchase of equity investment in subsidiaries and an affiliated company | | | (91,877 | ) | | | (53,000 | ) | | | (18,346 | ) | Net increase in loans to subsidiaries | | | (1,802,664 | ) | | | (1,682,576 | ) | | | (2,112,711 | ) | Other—net | | | (2,659 | ) | | | (4,361 | ) | | | (9,009 | ) | | | | | | | | | | | | | | Net cash used in investing activities | | | (1,895,626 | ) | | | (1,739,937 | ) | | | (1,684,461 | ) | | | | | | | | | | | | | | Financing activities: | | | | | | | | | | | | | Net decrease in short-term borrowings from subsidiaries | | | (32,412 | ) | | | (41,402 | ) | | | (194,300 | ) | Proceeds from issuance of long-term debt | | | 1,808,672 | | | | 1,872,986 | | | | 2,043,677 | | Repayment of long-term debt | | | (20 | ) | | | (112,184 | ) | | | (314 | ) | Repayment of long-term debt to affiliated companies | | | (1,136 | ) | | | (1,090 | ) | | | (500 | ) | Proceeds from sales of treasury stock | | | 1 | | | | 1 | | | | 3 | | Payments for acquisition of treasury stock | | | (200,028 | ) | | | (200,038 | ) | | | (150,277 | ) | Dividends paid | | | (246,564 | ) | | | (241,067 | ) | | | (276,279 | ) | Other—net | | | (9,333 | ) | | | (9,677 | ) | | | (15,490 | ) | | | | | | | | | | | | | | Net cash provided by financing activities | | | 1,319,180 | | | | 1,267,529 | | | | 1,406,520 | | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | (1,865 | ) | | | (43,819 | ) | | | 88,929 | | Cash and cash equivalents at beginning of fiscal year | | | 160,468 | | | | 158,603 | | | | 114,784 | | | | | | | | | | | | | | | Cash and cash equivalents at end of fiscal year | | ¥ | 158,603 | | | ¥ | 114,784 | | | ¥ | 203,713 | | | | | | | | | | | | | | |
| 35. | | SEC REGISTERED FUNDING VEHICLES ISSUINGNON-DILUTIVE PREFERRED SECURITIESSUBSEQUENT EVENTS |
In February 2006,Approval of Dividends
On June 6, 2019, the shareholders approved the payment of cash dividends of ¥11 per share of Common stock, totaling ¥142,552 million, that were payable on June 28, 2019, to the shareholders of record on March 31, 2019. Announcement to redeem “Non-dilutive” Preferred Securities Issued by a Special Purpose Company On May 27, 2019, the Board of Directors of MUFG establishedapproved to redeem in total ¥90 billion of non-cumulative and non-dilutive perpetual preferred securities issued by MUFG Capital Finance 18 Limited, MUFG Capital Finance 2 Limited and MUFG Capital Finance 3 Limited, wholly-owned funding vehicles incorporateda special purpose company established in the Cayman Islands,Islands. MUFG plans to redeem these securities on July 25, 2019. The securities were previously accounted for the issuanceas part of preferred securities to enhance the flexibility ofMUFG’s Tier 1 capital at March 31, 2019 under its capital management. On March 17, 2006, MUFG Capital Finance 1 Limited, MUFG Capital Finance 2 Limited and MUFG Capital Finance 3 Limited registered with the SEC and issued $2,300,000,000 in 6.346%non-cumulative preferred securities, €750,000,000 in 4.850%non-cumulative preferred securities and ¥120,000,000,000 in 2.680%non-cumulative preferred securities (collectively, the “Preferred Securities”), respectively. Total net proceeds before expenses were approximately $4.17 billion. All of the ordinary shares of MUFG Capital Finance 1 Limited, MUFG Capital Finance 2 Limited and MUFG Capital Finance 3 Limited are owned by MUFG. MUFG fully and unconditionally guarantees the payment of dividends and payments on liquidation oradequacy requirements, subject to certain limitations.
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) redemptionAcquisition of the obligations under the Preferred Securities. Noshares in Bank Danamon in Indonesia
On April 29, 2019, MUFG Bank acquired an additional 54.0% equity interest in Danamon from AFI and other shareholders, based on a price of IDR 9,590 (approximately ¥77(1)) per share, for an investment amount of IDR 50 trillion (approximately ¥397 billion). As a result, equity interest in Danamon increased to 94.0%, and Danamon became a consolidated subsidiary of MUFG guarantees the Preferred Securities.Bank. In addition, MUFG Bank acquired an additional 92.1% equity interest in PT Bank Nusantara Parahyangan, Tbk. (“BNP”) from ACOM CO., LTD., an equity method investee of MUFG, and other shareholders, based on a price of IDR 4,088 (approximately ¥33(1)) per share, for an investment amount of IDR 3 trillion (approximately ¥24.1 billion). As a result, equity interest in BNP increased to 99.9%, and BNP became a consolidated subsidiary of MUFG Bank. On May 1, 2019, MUFG Bank made BNP merged into Danamon, acquiring an additional equity interest in Danamon in exchange for its equity interest in BNP, which resulted in MUFG Bank holding 94.1% equity interest in Danamon. The Preferred Securities entitle holders to receive anon-cumulative preferential cash dividend starting on July 25, 2006initial accounting for the business combination is incomplete and on January 25 and July 25supplemental pro forma information of each year thereafter. These funding vehicles willthis acquisition could not be obligated to pay dividends ondisclosed in the Preferred Securities uponaccompanying consolidated financial statements because this transaction occurred near the occurrence of certain events relating to the financial condition of MUFG. From July 25, 2016, dividends on the Preferred Securities have beenre-calculated at a floating rate per annum. The dollar-denominated and euro-denominated preferred securities are subject to redemption on any dividend payment date on or after July 25, 2016. All the Preferred Securities are subject to redemption in whole (but not in part) at any time upon the occurrence of specified events, in each case at the option of each of the funding vehicles and subject to necessary government approvals.
The Preferred Securities arenon-dilutive and not convertible into MUFG’s common shares. The Preferred Securities were included as partissuance of MUFG’s Tier 1 capital at March 31, 2016 under its capital adequacy requirements.
On July 25, 2011, MUFG redeemed a total of ¥120,000,000,000 ofnon-cumulative andnon-dilutive perpetual preferred securities issued by MUFG Capital Finance 3 Limited.
On July 25, 2016, MUFG redeemed a total of $2,300,000,000 and €750,000,000of non-cumulative andnon-dilutive perpetual preferred securities issued by MUFG Capital Finance 1 Limited and MUFG Capital Finance 2 Limited, respectively.
Approval of Dividends
On June 28, 2018, the shareholders approved the payment of cash dividends of ¥10 per share of Common stock, totaling ¥131,934 million, that were payable on June 29, 2018, to the shareholders of record on March 31, 2018.
Additional Entrustment for the Performance-based Stock Compensation Plan
MUFG resolved to continue with the Board Incentive Plan with amending it in part at the compensation committee’s meeting held at May 15, 2018. According to this resolution, the BIP Trust Isuch consolidated financial statements and the BIP Trust II, which were founded as a trust structure underMUFG Group is still in the Board Incentive Planprocess of determining the fair value of assets acquired, liabilities assumed, and will be expired on August 31, 2018, will be continued to August 31, 2021 by extending the trust period as approved at the compensation committee’s meeting. MUFG also resolved to revise the limited amount of trust money for the BIP Trust I and the BIP Trust II up to ¥16,700 million from ¥15,800 million. non-controlling interest.
See Note 332 for further information regarding the Board Incentive Plan. Repurchase and Cancellation of own shares
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 repurchaseAcquisition 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
MITSUBISHI UFJ FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Danamon.
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 will cancel 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.Note:
| (1) | | Calculated based on the exchange rate of IDR1 = ¥0.008 |
* * * * * EXHIBIT INDEX | | | Exhibit | | Description | | | 1(a) | | Articles of Incorporation of Mitsubishi UFJ Financial Group, Inc., as amended on July 6, 2018 (English translation)* | | | 1(b) | | Board of Directors Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on June 25, 2015 (English translation)* | | | 1(c) | | Corporation Meetings Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on July 1, 2018 (English translation)* | | | 1(d) | | Share Handling Regulations of Mitsubishi UFJ Financial Group, Inc., as amended on June 27, 201325, 2015 (English Translation)** | | | 1(e) | | Charter of the Audit Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1, 2018 (English translation)* | | | 1(f) | | Charter of the Compensation Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1, 2018 (English translation)* | | | 1(g) | | Charter of the Nominating and Governance Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1, 2018 (English translation)* | | | 1(h) | | Charter of the Risk Committee of Mitsubishi UFJ Financial Group, Inc., as amended on July 1, 2018 (English translation)* | | | 2(a) | | Form of American Depositary ReceiptReceipt* | | | 2(b) | | 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 thereunderthereunder* | | | 7 2(c) | | StatementDescription of Computation of Consolidated Ratio of Earnings to Fixed Charges for the fiscal years ended March 31, 2014, 2015, 2016, 2017 and 2018**Securities | | | 8 | | Subsidiaries of the Company—see “Item 4.C. Information on the Company—Organizational Structure.” | | | 11 | | PrinciplesMUFG Group Code of Ethics and 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) | | | 12 | | Certifications required byRule 13a-14(a) (17 CFR240.13a-14(a)) orRule 15d-14(a)(17 CFR 240.15d-14(a)) | | | 13 | | Certifications required byRule 13a-14(b) (17 CFR240.13a-14(b)) orRule 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) | | | 15 15(a) | | Consent of independent registered public accounting firm (Deloitte Touche Tohmatsu LLC) | | | 15(b) | | Consent of independent registered public accounting firm (Deloitte & Touche LLP) | | | 99(a) | | Capitalization and Indebtedness of Mitsubishi UFJ Financial Group, Inc. as of March 31, 2018*2019*** | | | 99(b) | | Unaudited Reverse Reconciliation of Selected Financial Information of Mitsubishi UFJ Financial Group, Inc. as of and for the fiscal year ended March 31, 2018*2019**** | | | 99(c) | | Financial Statements and Supplementary Data of Morgan Stanley***** | | | 101.INS | | XBRL Instance Document |
| | | Exhibit | | Description | | | 101.SCH | | XBRL Schema Document | | | 101.CAL | | XBRL Calculation Linkbase Document |
| | | Exhibit
| | Description
| | | 101.DEF | | XBRL Definition Linkbase Document | | | 101.LAB | | XBRL Label Linkbase Document | | | 101.PRE | | XBRL Presentation Linkbase Document |
| * | | Incorporated by reference to our registration statementannual report on FormS-820-F (FileNo. 333-204845)000-54189) filed on June 10, 2015.July 12, 2018. |
| ** | | DeemedIncorporated by reference to be incorporated as Exhibit 12.1 to theour registration statement on FormF-3S-8 (No.333-209455) of Mitsubishi UFJ Financial Group, Inc. and to be a part thereof.(File No. 333-230590) filed on March 29, 2019. |
| *** | | Deemed to be incorporated by reference into the registration statement on FormF-3 (No.333-209455) 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 FormF-3 (No.333-209455) 333-229697) of Mitsubishi UFJ Financial Group, Inc. and to be a part thereof. |
| ***** | | Incorporated by reference to Morgan Stanley’s annual report on Form10-K (FileNo. 001-11758) filed on February 26, 2019. |
Signature The registrant hereby certifies that it meets all of the requirements for filing on Form20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf. | | | MITSUBISHI UFJ FINANCIAL GROUP, INC. | | | By: | | /s/ NKOBUYUKIANETSUGU HMIRANOIKE
| | Name: | | Nobuyuki HiranoKanetsugu Mike | | Title: | | President & Group Chief Executive Officer |
Date: July 12, 201810, 2019 |
