Restricted Stock Unit (“RSU”) awards
| | | | Settled in the Company’s common stock.
(1) | Represents total assets lessSecurities purchased under agreements to resell and. Adjusted assets is anon-GAAP financial measure and is calculated as follows: |
| (2) | Graded vesting period generally over three years.
| | | Extended vesting period of up to seven years for certain senior management and employees in order to meet local regulatory requirements based on the role they perform in Nomura.
| | | New type of award introduced in 2018 as the primary type of deferred compensation award in Nomura. Granted in May 2018 in respect of the prior fiscal year.
| | | | | Linked to the price of Company’s common stock and cash-settled.
| | | Graded vesting period generally over three years. Extended vesting period of up to seven years for certain senior management and employees based on the role they perform in Nomura in order to meet local regulatory requirements.
| | | Used in countries where equity-settled RSU awards are less favorably treated from a tax or other perspective.
| | | Following the introduction of RSU awards, NSU awards are less commonly used in Nomura.
| | | Granted in May each year in respect of the prior fiscal year and also quarterly to new employees as a recruitment incentive to replace awards forfeited from prior employers.
| Stock Acquisition Right (“SAR”) Plan A awards
| | | | Exercisable into 100 of the Company’s common stock.
| | | Exercise price not less than the fair value of the Company’s common stock on grant date.
| | | Cliff vesting period of two years.
| | | Expire approximately seven years after grant date.
| | | Not subject to claw back.
| | | Granted in November each year in respect of various performance periods.
Equals total assets divided by NHI shareholders’ equity. |
(3) | Equals adjusted assets divided by NHI shareholders’ equity. |
Following the introduction
| | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 42,516.5 | | | ¥ | 43,412.2 | | | | | | | | | | | Securities purchased under agreements to resell | | | 10,775.1 | | | | 11,879.3 | | | | | 5,264.4 | | | | 4,997.1 | | | | | | | | | | | | | ¥ | 26,477.0 | | | ¥ | 26,535.8 | | | | | | | | | | |
Total assets increased by 2.1% reflecting primarily an increase inSecurities purchased under agreements to resell. Total NHI shareholders’ equity increased by 8.2% reflecting primarily an increase inAccumulated other comprehensive income . As a result, our leverage ratios were 15.8 times as of Restricted Stock Unit (“RSU”) awardsMarch 31, 2021 and 14.9 times as of March 31, 2022. Adjusted assets increased primarily due to an increase in 2018. As a result, our adjusted leverage ratios were 9.8 times as the primary type of deferred compensation award to be used by Nomura, certain core deferral awardsMarch 31, 2021 and all supplemental awards are no longer used by Nomura.9.1 times as of March 31, 2022. For fiscal years ended March 31, 2017 and prior fiscal years, we granted SAR Plan B awards as a type of core deferral award to certain senior management which are stock unit awards linked to price of the Company’s common stock pursuant to several stock unit plans designed to replicate the structure of restricted stock awards commonly used in the United States and Europe. These awards are physically-settled upon exercise into the Company’s common stock, have an exercise price of ¥1 per share and graded vesting generally over three years76
with certain longer vesting or holding periods where required under localCapital Management Policy We seek to enhance shareholder value and to capture growing business opportunities by maintaining sufficient levels of capital. We will continue to review our levels of capital as appropriate, taking into consideration the economic risks inherent to operating our businesses, the regulatory requirements, and maintaining our ratings necessary to operate businesses globally. We believe that raising corporate value over the long term and paying dividends is essential to rewarding shareholders. We will strive to pay dividends using a consolidatedpay-out ratio of 30 percent of each semi-annual consolidated earnings as a key indicator. Dividend payments are determined taking into account a comprehensive range of factors such as the tightening of Basel regulations and are subjectother changes to forfeiture, reduction or clawback in the same wayregulatory environment as well as the above awards.Company’s consolidated financial performance. For fiscal years endedDividends will in principle be paid on a semi-annual basis with record dates of September 30 and March 31.
Additionally we will aim for a total payout ratio, which includes dividends and share buybacks, of at least 50 percent. With respect to retained earnings, in order to implement measures to adapt to regulatory changes and to increase shareholder value, we seek to efficiently invest in business areas where high profitability and growth may reasonably be expected, including the development and expansion of infrastructure. Dividends for the Fiscal Year Based on our Capital Management Policy described above, we paid a dividend of ¥8 per share to shareholders of record as of September 30, 2021 and have decided to pay a dividend of ¥14 per share to shareholders of record as of March 31, 2011 through to March 31, 2017, we granted supplemental deferral awards comprising Collared Notional Stock Unit (“CSU”) awards and Notional Index Unit (“NIU”) awards. CSU awards are linked to2022. As a result, the price of the Company’s stock subject to a cap and a floor and NIU awards are linked to a world stock index quoted by Morgan Stanley Capital International. Both types of award are cash-settled with graded vesting generally over three years with certain longer vesting periods where required by local regulations, and are subject to forfeiture, reduction or clawback in the same way as the above awards.total annual dividend will be ¥22 per share. FollowingThe following table presented the introductionamounts of RSU awards, no new SAR Plan B, CSU or NIU awards were granted in May 2018dividends per share paid by us in respect of the fiscal year ended March 31, 2018. However, existing unvested awards continue to vestperiods indicated:
| | | | | | | | | | | | | | | | | | | | | Fiscal year ended or ending March 31, | | | | | | | | | | | | | | | | | | ¥ | — | | | ¥ | 9.00 | | | ¥ | — | | | ¥ | 11.00 | | | ¥ | 20.00 | | | | | — | | | | 9.00 | | | | — | | | | 11.00 | | | | 20.00 | | | | | — | | | | 3.00 | | | | — | | | | 3.00 | | | | 6.00 | | | | | — | | | | 15.00 | | | | — | | | | 5.00 | | | | 20.00 | | | | | — | | | | 20.00 | | | | — | | | | 15.00 | | | | 35.00 | | | | | — | | | | 8.00 | | | | — | | | | 14.00 | | | | 22.00 | |
Consolidated Regulatory Capital Requirements The FSA established the “Guideline for Financial Conglomerates Supervision” (“Financial Conglomerates Guideline”) in June 2005 and set out the rules on consolidated regulatory capital. We started monitoring our consolidated capital adequacy ratio in accordance with their original contractual terms. (b-3)
Consistency with risk management and linkage to performanceIn determining aggregate compensation, Nomura considers the ratio of compensation and benefit expenses to adjusted net income (defined as net income before income taxes and before deduction of compensation and benefits expenses followed by a specific risk adjustment). The risk adjustment to income is determined by deducting a certain proportion of economic capitalFinancial Conglomerates Guideline from each division’s revenue. Such economic capital comprehensively recognizes quantitatively assessed risks, and reflects various risks including market, credit, liquidity, and operational risks.April 2005.
Nomura recognizes that its aggregate compensation should maintain consistency withThe Company has been assigned by the current financial soundness and future prospects of Nomura, and that it should not have significant impact onFSA as a Final Designated Parent Company who must calculate a consolidated capital adequacy in the future.
2. Compensation for Directors and Executive Officers
Pursuantratio according to the fundamental approach and framework of compensation as described above, and as a company which adopts a committee-based corporate governance system, a Compensation Committee of Nomura determines compensation of its Directors and Executive Officers in accordance with our applicable compensation policy.Capital Adequacy Notice on Final Designated Parent
2-1. Aggregate compensation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2020 | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | (Outside Directors included in above) | | | | ) | | | | ) | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Compensation to Directors who were concurrently serving as Executive Officers is included in that of Executive Officers. |
(2) | Basic compensation of ¥813 million includes other compensation (such as commuter pass allowances) of ¥750 thousand. |
(3) | In addition to basic compensation of Executive Officers, ¥27 million of corporate housing costs, such as housing allowance and related tax adjustments, were provided. |
(4) | Deferred compensation (such as RSU, SAR Plan A and B) granted during and prior to the fiscal year ended March 31, 2020 is recognized as expense in the financial statements for the fiscal year ended March 31, 2020. |
(5) | Subsidiaries of the Company paid ¥61 million to Outside Directors as compensation etc. for their directorship at those subsidiaries for the year ended March 31, 2020. |
(6) | The Company abolished retirement bonuses to Directors in 2001. |
2-2. Individual compensation of Directors and Executive Officers receiving
¥100 million or more | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Chairman of the Board of Directors | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | Representative Executive Officer, | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | Executive Managing Director, Deputy President | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | Executive Managing Director | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | Executive Managing Director | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | Executive Managing Director | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | |
(1) | Variable Compensation indicates the amount determined as remuneration based on the performance during the fiscal year ended March 31, 2020. |
(2) | The amount reflects voluntary salary cut, conducted in May 2019. |
(3) | In addition to basic compensation, ¥24 million of corporate housing costs, such as housing allowance and related tax adjustments, were provided. |
(4) | In addition to basic compensation, ¥3 million of corporate housing costs, such as housing allowance and related tax adjustments, were provided. |
Status of indicators referred in determining performance-linked compensationPerformance-linked compensation has been determined based on the mechanism described in above sections and certain indicators. Changes of the indicators between actuals of previous fiscal year and current year are referred in determining the performance-linked compensation as well as other qualitative information, compensation trends among competitors and industry.
Please referCompany in April 2011. Since then, we have been calculating our consolidated capital adequacy ratio according to Item 3.A. the Capital Adequacy Notice on Final Designated Parent Company. The Capital Adequacy Notice on Final Designated Parent Company has been revised to be in line with Basel 2.5 and Basel III since then. We have calculated a BaselIII-based consolidated capital adequacy ratio from the end of March 2013. Basel 2.5 includes significant change in calculation method of market risk and Basel III includes redefinition of capital items for the purpose of requiring higher quality of capital and expansion of the scope of credit risk-weighted assets calculation. In accordance with Article 2 of the Capital Adequacy Notice on Final Designated Parent Company, our consolidated capital adequacy ratio is currently calculated based on the amounts of common equity Tier 1 capital, Tier 1 capital (sum of common equity Tier 1 capital and additional Tier 1 capital), total capital (sum of Tier 1 capital and Tier 2 capital), credit risk-weighted assets, market risk and operational risk. As of March 31, 2022, our common equity Tier 1 capital ratio is 17.22%, Tier 1 capital ratio is 19.60% and consolidated capital adequacy ratio is 19.60% and we are in compliance with the requirement for each ratio set out in the Capital Adequacy Notice on Final Designated Parent Company, etc. (required level including applicable minimum consolidated capital buffers as of March 31, 2022 is 7.51% for the common equity Tier 1 capital ratio, 9.01% for the Tier 1 capital ratio and 11.01% for the consolidated capital adequacy ratio). In accordance with Article 2 of the “Notice of the Establishment of Standards that Indicate Soundness pertaining to Loss-absorbing and Recapitalisation Capacity, Established as Criteria by which the Highest Designated Parent Company is to Judge the Soundness in the Management of the Highest Designated Parent Company and its Subsidiary Corporations, etc., under Paragraph 1, Article 57-17 of the Financial Instruments and Exchange Act” (the ”TLAC Notification”), we have started calculating our external TLAC ratio on a risk-weighted assets basis from March 2021. As of March 31, 2022, our external TLAC as a percentage of risk-weighted assets is 30.72% and we are in compliance with the requirement set out in the TLAC Notification. The following table presents the Company’s consolidated capital adequacy ratios and External TLAC as a percentage of risk-weighted assets as of March 31, 2021 and March 31, 2022. | | | | | | | | | | | Billions of yen, except ratios | | | | | | | | | | | | | Common equity Tier 1 capital | | ¥ | 2,522.1 | | | ¥ | 2,726.4 | | | | | 2,840.5 | | | | 3,103.0 | | | | | 2,845.2 | | | | 3,103.4 | | | | | | | | | | | Credit risk-weighted assets | | | 8,550.9 | | | | 8,301.2 | | Market risk equivalent assets | | | 4,951.6 | | | | 4,899.0 | | Operational risk equivalent assets | | | 2,448.5 | | | | 2,629.7 | | | | | | | | | | | Total risk-weighted assets | | ¥ | 15,951.0 | | | ¥ | 15,829.9 | | | | | | | | | | | Consolidated Capital Adequacy Ratios | | | | | | | | | Common equity Tier 1 capital ratio | | | 15.81 | % | | | 17.22 | % | | | | 17.80 | % | | | 19.60 | % | Consolidated capital adequacy ratio | | | 17.83 | % | | | 19.60 | % | External TLAC as a percentage of risk-weighted assets | | | 23.06 | % | | | 30.72 | % |
Since the end of March 2011, we have been calculating credit risk-weighted assets and operational risk equivalent assets by using the foundation Internal Ratings-Based Approach and the Standardized Approach, respectively, with the approval of the FSA. Furthermore, market risk equivalent assets are calculated using the Internal Models Approach.
We provide consolidated capital adequacy ratios not only to demonstrate that we are in compliance with the requirements set out in the Capital Adequacy Notice on Final Designated Parent Company but also for benchmarking purposes so that users of this annual report can compare our capital position against those of other financial groups to which Basel III is applied. Our management receives and reviews these capital ratios on a regular basis. Consolidated Leverage Ratio Requirements In March 2019, the FSA set out requirements for the calculation and disclosure and minimum requirement of 3% of a consolidated leverage ratio, and the publication of “Notice of the Establishment of Standards for Determining Whether the Adequacy of Leverage, the Supplementary Measure to the Adequacy of Equity Capital of a Final Designated Parent Company and its Subsidiary Corporations, etc. is Appropriate Compared to the Assets Held by the Final Designated Parent Company and its Subsidiary Corporations, etc., under Paragraph 1, Article57-17 of the Financial Instruments and Exchange Act” (2019 FSA Regulatory Notice No. 13; “Notice on Consolidated Leverage Ratio”), through amendments to revising “Specification of items which a final designated parent company should disclose on documents to show the status of its sound management” (2010 FSA Regulatory Notice No. 132; “Notice on Pillar 3 Disclosure”). We started calculating and disclosing a consolidated leverage ratio from March 31, 2015 in accordance with these Notices. We have also started calculating a consolidated leverage ratio from March 31, 2019 in accordance with the Notice on Pillar 3 Disclosure, Notice on Consolidated Leverage Ratio and other related Notices. In coordination with the monetary policy of the Bank of Japan in response to the impact of theCOVID-19 pandemic, the FSA published amendments to the Notice on Consolidated Leverage Ratio on June 2020 and March 2021. Under these amendments, deposits with the Bank of Japan have been excluded from the total exposure measure used to calculate the leverage ratio during the period from June 30, 2020 to March 31, 2022. In March 2022, the FSA announced this measure will be extended to March 31, 2024. As of March 31, 2022, our consolidated leverage ratio is 5.98%. In accordance with Article 2 of the TLAC Notification we have started calculating our external TLAC ratio on a total exposure basis from March 2021. As of March 31, 2022, our external TLAC as a percentage of leverage ratio exposure measure is 10.30% and we are in compliance with the requirement set out in the TLAC Notification. Regulatory changes which affect us The Basel Committee has issued a series of announcements regarding a Basel III program designed to strengthen the regulatory capital framework in light of weaknesses revealed by the financial crises. The following is a summary of the proposals which are most relevant to us. On December 16, 2010, in an effort to promote a more resilient banking sector, the Basel Committee issued Basel III, that is, “International framework for liquidity risk measurement, standards and monitoring” and “A global regulatory framework for more resilient banks and banking systems”. They include raising the quality, consistency and transparency of the capital base; strengthening the risk coverage of the capital framework such as the implementation of a credit value adjustment (“CVA”) charge for OTC derivative trades; introducing a leverage ratio requirement as a supplemental measure to the risk-based framework; introducing a series of measures to address concerns over the “procyclicality” of the current framework; and introducing a liquidity standard including a30-day liquidity coverage ratio as well as the net stable funding ratio to measure stability of financing structure. These standards were implemented from 2013, which includes transitional treatment, (i.e., they are phased in gradually from 2013). In addition, the Basel Committee has issued interim rules for the capitalization of bank exposures to central counterparties (“CCPs”) on July 25, 2012, which came into effect in 2013 as part of Basel III. Moreover, in addition to Basel III leverage ratio framework under which we started the calculation and disclosure of consolidated leverage ratio as above, a series of final standards on the regulatory frameworks such as capital requirements for banks’ equity investments in funds, the standardized approach for
measuring counterparty credit risk exposures, capital requirements for bank exposures to CCPs, supervisory framework for measuring and controlling large exposures, and revisions to the securitization framework, and revised framework for market risk capital requirements have been published by the Basel Committee. At theG-20 summit in November 2011, the Financial Stability Board (“FSB”) and the Basel Committee announced the list of global systemically important banks(“G-SIBs”) and the additional requirements to theG-SIBs including the recovery and resolution plan. The group ofG-SIBs have been updated annually and published by the FSB each November. Since November 2011, we have not been designated as aG-SIBs. On the other hand, the FSB and the Basel Committee were asked to work on extending the framework forG-SIBs to domestic systemically important financial institutions(“D-SIBs”) and the Basel Committee developed and published a set of principles on the assessment methodology and the higher loss absorbency requirement forD-SIBs. In December 2015, the FSA identified us as aD-SIB and required additional capital charge of 0.5% after March 2016, with3-year transitional arrangement. In November 2015, the FSB issued the final TLAC standard forG-SIBs. The TLAC standard has been designed so that failingG-SIBs will have sufficient loss-absorbing and recapitalization capacity available in resolution for authorities to implement an orderly resolution. In response to the FSB’s publication of the TLAC standard, in April 2016, the FSA published its policy to develop the TLAC framework in Japan applicable to JapaneseG-SIBs and, in April 2018, revised such policy to apply the TLAC requirements in Japan not only to JapaneseG-SIBs but also to JapaneseD-SIBs that are deemed (i) of particular need for a cross-border resolution arrangement and (ii) of particular systemic significance to Japanese financial system if they fail. In the revised policy, the JapaneseG-SIBs and Nomura (“TLAC Covered SIBs”) would be subject to the TLAC requirements in Japan. On March 2019, the FSA published the notices and revised the guidelines of TLAC regulations. Although Nomura is not identified as aG-SIB as of the date of this annual report, the TLAC Covered SIBs, including Nomura, will be required to meet the TLAC requirement alongside the minimum regulatory requirements set out in the Basel III framework. Specifically, Nomura will be required to meet a minimum TLAC requirement of holding TLAC in an amount at least 16% of our consolidated risk-weighted assets as from March 31, 2021 and at least 18% as from March 31, 2024 as well as at least 6% of the applicable Basel III leverage ratio denominator from March 31, 2021 and at least 6.75% from March 31, 2024. Furthermore, according to the FSA’s revised policy published in April 2018, which is subject to change based on future international discussions, the preferred resolution strategy for the TLAC Covered SIBs is Single Point of Entry (“SPE”) resolution, in which resolution powers are applied to the top of a group by a single national resolution authority (i.e., the FSA), although the actual measures to be taken will be determined on abasis considering the actual condition of the relevant the TLAC Covered SIBs in crisis. To implement this SPE resolution strategy effectively, the FSA requires holding companies of the TLAC Covered SIBs (“Domestic Resolution Entities”) to (i) meet the minimum external TLAC requirements and (ii) cause their material subsidiaries that are designated as systemically important by the FSA, including but not limited to certain materialsub-groups as provided in the FSB’s TLAC standard, to maintain a certain level of capital and debt recognized by the FSA as having loss-absorbing and recapitalization capacity, or Internal TLAC. In addition, the TLAC Covered SIBs’ Domestic Resolution Entities will be allowed to count the amount equivalent to 2.5% of their consolidated risk-weighted assets from the implementation date of the TLAC requirements in Japan (March 31, 2021 for Nomura) and 3.5% of their consolidated risk-weighted assets from 3 years after the implementation date (March 31, 2024 for Nomura) as our external TLAC, considering the Japanese Deposit Insurance Fund Reserves. It is likely that the FSA’s regulation and notice will be revised further to be in line with a series of rules and standards proposed by the Basel Committee, FSB or International Organization of Securities Commissions.
The cost and availability of unsecured funding are generally dependent on credit ratings. Our long-term and short-term debt is rated by several recognized credit rating agencies. We believe that our credit ratings include the credit ratings agencies’ assessment of the general operating environment, our positions in the markets in which we operate, reputation, earnings structure, trend and volatility of our earnings, risk management framework, liquidity and capital management. An adverse change in any of these factors could result in a downgrade of our credit ratings, and that could, in turn, increase our borrowing costs and limit our access to the capital markets or require us to post additional collateral and permit counterparties to terminate transactions pursuant to certain contractual obligations. In addition, our credit ratings can have a significant impact on certain of our trading revenues, particularly in those businesses where longer term counterparty performance is critical, such as OTC derivative transactions. On September 2, 2021, Fitch Ratings removed the negative watch on the bbb+ viability ratings of the Company and NSC. As of May 20, 2022, the credit ratings of the Company and NSC were as follows. | | | | | | | | | | | | A-2 | | BBB+ (Stable) | Moody’s Investors Service | | | | Baa1 (Negative) | | | F1 | | A- (Stable) | Rating and Investment Information, Inc. | | a-1 | | A (Stable) | Japan Credit Rating Agency, Ltd. | | | | AA- (Stable) | | | | Nomura Securities Co., Ltd. | | | | | | | A-2 | | A- (Stable) | Moody’s Investors Service | | P-2 | | A3 (Negative) | | | F1 | | A- (Stable) | Rating and Investment Information, Inc. | | a-1 | | A+ (Stable) | Japan Credit Rating Agency, Ltd. | | — | | AA- (Stable) |
Both Rating and Investment Information, Inc. and Japan Credit Rating Agency, Ltd. are credit rating agencies nationally recognized in Japan. We rely on, or utilize, credit ratings on our long-term and short-term debt provided by these Japanese credit rating agencies, as well as S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings for unsecured funding and other financing purposes and also for our trading and other business activities. Within the rating classification system of Rating and Investment Information, Inc.,“a-1” is the highest of five categories for short-term debt and indicates “a strong degree of certainty regarding debt repayment”; and “A” is the third highest of nine categories for long-term debt and indicates “a high degree of certainty regarding debt repayment with excellence in specific component factors”, with a plus (+) or minus (-) sign added to a rating in that category to indicate its relative standing within that category. Within the rating classification system of Japan Credit Rating Agency, Ltd., “AA” is the second highest of eleven categories for long-term debt and indicates “a very high level of capacity to honor the financial commitment on the obligation”, with a plus (+) or minus (-) sign added to a rating in that category to indicate its relative standing within that category. There has been no change to the ratings in the above table since the date indicated. The following table presents selected financial information as of and for the actual values of the referring indicators. 3. Compensation governanceyears ended March 31, 2018, 2019, 2020, 2021 and control 2022 which is derived from our consolidated financial statements.The Compensation Committee of Nomura, which is a statutory committee, is responsible for approving our overall compensation policy and for ensuring that the Nomura Group’s compensation framework supports our business strategy.
The Compensation Committee was held 8 times during the fiscal year to review and determine policies, framework, and individual compensation of directors and executive officers. To ensure effective discussion and determination at the Compensation Committee, executive officers are invited. Regarding the members of the Compensation Committee, please refer to Item 6.A. “Directors and Senior Management.
”The Compensation Committee’s activities during the fiscal year are following, variable compensation were discussed and determined on April 25, 2019. In addition, voluntary salary cut was reported on May 24, 2019. On June 24, 2019, after the appointment of directors at the annual shareholder meeting, the Compensation Committee reviewed and confirmed our compensation policy and determined fixed compensation for new directors. Also, checked and confirmed a partial amendment of the Nomura Group Compensation Policy. Furthermore, held 3 consequtive meetings since August 26, 2019, for discussing compensation control of directors and executive officers, which resulted to a resolution for a few sections on March 3, 2020, aiming to apply from the performance period ending March 31, 2021. On March 30, 2020, the fixed remuneration was determined for newly appointed executive officers as of April 1.
| | | | | | | | | | | | | | | | | | | | | | | Millions of yen, except per share data and percentages | | | | | | | | | | | | | | | | | | | | | | Statement of income data: | | | | | | | | | | | | | | | | | | | | | | | ¥ | 1,972,158 | | | ¥ | 1,835,118 | | | ¥ | 1,952,482 | | | ¥ | 1,617,235 | | | ¥ | 1,593,999 | | | | | 475,189 | | | | 718,348 | | | | 664,653 | | | | 215,363 | | | | 230,109 | | | | | | | | | | | | | | | | | | | | | | | | | | 1,496,969 | | | | 1,116,770 | | | | 1,287,829 | | | | 1,401,872 | | | | 1,363,890 | | | | | 1,168,811 | | | | 1,154,471 | | | | 1,039,568 | | | | 1,171,201 | | | | 1,137,267 | | | | | | | | | | | | | | | | | | | | | | | Income (loss) before income taxes | | | 328,158 | | | | (37,701 | ) | | | 248,261 | | | | 230,671 | | | | 226,623 | | | | | 103,866 | | | | 57,010 | | | | 28,894 | | | | 70,274 | | | | 80,090 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 224,292 | | | ¥ | (94,711 | ) | | ¥ | 219,367 | | | ¥ | 160,397 | | | ¥ | 146,533 | | Less: Net income attributable to noncontrolling interests | | | 4,949 | | | | 5,731 | | | | 2,369 | | | | 7,281 | | | | 3,537 | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to NHI shareholders | | ¥ | 219,343 | | | ¥ | (100,442 | ) | | ¥ | 216,998 | | | ¥ | 153,116 | | | ¥ | 142,996 | | | | | | | | | | | | | | | | | | | | | | | Balance sheet data (period end): | | | | | | | | | | | | | | | | | | | | | | | ¥ | 40,343,947 | | | ¥ | 40,969,439 | | | ¥ | 43,999,815 | | | ¥ | 42,516,480 | | | ¥ | 43,412,156 | | Total NHI shareholders’ equity | | | 2,749,320 | | | | 2,631,061 | | | | 2,653,467 | | | | 2,694,938 | | | | 2,914,605 | | | | | 2,799,824 | | | | 2,680,793 | | | | 2,731,264 | | | | 2,756,451 | | | | 2,972,803 | | | | | 594,493 | | | | 594,493 | | | | 594,493 | | | | 594,493 | | | | 594,493 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to NHI shareholders—basic | | ¥ | 63.13 | | | ¥ | (29.90 | ) | | ¥ | 67.76 | | | ¥ | 50.11 | | | ¥ | 46.68 | | Net income (loss) attributable to NHI shareholders—diluted | | | 61.88 | | | | (29.92 | ) | | | 66.20 | | | | 48.63 | | | | 45.23 | | Total NHI shareholders’ equity (1) | | | 810.31 | | | | 794.69 | | | | 873.26 | | | | 879.79 | | | | 965.80 | | | | | 20.00 | | | | 6.00 | | | | 20.00 | | | | 35.00 | | | | 22.00 | | | | $ | 0.19 | | | $ | 0.05 | | | $ | 0.19 | | | $ | 0.32 | | | $ | 0.18 | | Weighted average number of shares outstanding (in thousands) (3) | | | 3,474,593 | | | | 3,359,565 | | | | 3,202,370 | | | | 3,055,526 | | | | 3,063,524 | | | | | 7.9 | % | | | (3.7 | %) | | | 8.2 | % | | | 5.7 | % | | | 5.1 | % |
(1) | Calculated using the number of shares outstanding at year end. |
(2) | Calculated using the Japanese Yen—U.S. Dollar exchange rate as of the respective fiscal year end date, the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. |
(3) | The number shown is used to calculate basic earnings per share. |
(4) | Calculated as net income (loss) attributable to NHI shareholders divided by total NHI shareholders’ equity. |
Regulatory Capital Requirements Many of our business activities are subject to statutory capital requirements, including those of Japan, the U.S., the U.K. and certain other countries in which we operate. For further discussion on statutory capital requirements, see Note 18 “” in our consolidated financial statements included in this annual report. A significant portion of our business is conducted in currencies other than Japanese Yen—most significantly, U.S. Dollars, British pounds and Euros. We prepare financial statements of each of our consolidated subsidiaries in its functional currency, which is the currency of the primary economic environment in which the entity operates. Translation exposure is the risk arising from the effect of fluctuations in exchange rates on the net assets of our foreign subsidiaries. Translation exposure is not recognized in our consolidated statements of income unless and until we dispose of, or liquidate, the relevant foreign subsidiary. Assets and Liabilities Associated with Investment and Financial Services Business Exposure to Certain Financial Instruments and Counterparties Market conditions continue to impact numerous products to which we have certain exposures. We also have exposures to Special Purpose Entities (“SPEs”) and others in the normal course of business. We provide loans to clients in connection with leveragedbuy-outs and leveragedbuy-ins. As this type of financing is usually initially provided through a commitment, we have both funded and unfunded exposures on these transactions. The following table sets forth our exposure to leveraged finance with unfunded commitments, presenting funded and unfunded portions by geographic location of the target company as of March 31, 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 6,361 | | | ¥ | 69,040 | | | ¥ | 75,401 | | | | | 17,370 | | | | 106,915 | | | | 124,285 | | | | | 10,448 | | | | 27,289 | | | | 37,737 | | | | | | | | | | | | | | | | | ¥ | 34,179 | | | ¥ | 203,244 | | | ¥ | 237,423 | | | | | | | | | | | | | | |
Special Purpose Entities (“SPEs”) Our involvement with these entities includes structuring, underwriting, distributing and selling debt instruments and beneficial interests issued by these entities, subject to prevailing market conditions. In connection with our securitization and equity derivative activities, we also act as a transferor of financial assets to these entities, as well as, underwriter, distributor and seller of asset-repackaged financial instruments issued by these entities. We retain, purchase and sell variable interests in SPEs in connection with our market-making, investing and structuring activities. Our other types of involvement with SPEs include guarantee agreements and derivative contracts.
For further discussion on Nomura’s involvement with variable interest entities, see Note 6 “Securitizations and Variable Interest Entities ” in our consolidated financial statements included in this annual report. See Note 1“Summary of accounting policies: New accounting pronouncements adopted during the current year ” in our consolidated financial statements included in this annual report. Details of deferred tax assets and liabilities The following table presents details of deferred tax assets and liabilities reported withinOther and Other liabilities , respectively, in the consolidated balance sheets as of March 31, 2022. | | | | | | | | | | | | | | | | | | Depreciation, amortization and valuation of fixed assets | | ¥ | 30,441 | | Investments in subsidiaries and affiliates | | | 21,390 | | Valuation of financial instruments | | | 102,021 | | Accrued pension and severance costs | | | 20,492 | | Other accrued expenses and provisions | | | 79,061 | | | | | 370,481 | | | | | 49,060 | | | | | 15,425 | | | | | | | Gross deferred tax assets | | | 688,371 | | | | | (466,145 | ) | | | | | | Total deferred tax assets | | | 222,226 | | | | | | | | | | | | Investments in subsidiaries and affiliates | | | 91,040 | | Valuation of financial instruments | | | 85,301 | | Undistributed earnings of foreign subsidiaries | | | 2,745 | | Valuation of fixed assets | | | 23,962 | | | | | 48,519 | | | | | 7,044 | | | | | | | Total deferred tax liabilities | | | 258,611 | | | | | | | Net deferred tax assets (liabilities) | | ¥ | (36,385 | ) | | | | | |
Calculation method of deferred tax assets In accordance with U.S. GAAP, we recognize deferred tax assets to the extent we believe that it is more likely than not that a benefit will be realized. A valuation allowance is provided for tax benefits available to us, which are not deemed more likely than not to be realized. B. Liquidity and Capital Resources. Funding and Liquidity Management We define liquidity risk as the risk of loss arising from difficulty in securing the necessary funding or from a significantly higher cost of funding than normal levels due to deterioration of the Nomura Group’s
creditworthiness or deterioration in market conditions. This risk could arise from Nomura-specific or market-wide events such as inability to access the secured or unsecured debt markets, a deterioration in our credit ratings, a failure to manage unplanned changes in funding requirements, a failure to liquidate assets quickly and with minimal loss in value, or changes in regulatory capital restrictions which may prevent the free flow of funds between different group entities. Our global liquidity risk management policy is based on liquidity risk appetite formulated by the Executive Management Board (“EMB”). Nomura’s liquidity risk management, under market-wide stress and in addition, under Nomura-specific stress, seeks to ensure enough continuous liquidity to meet all funding requirements and unsecured debt obligations across one year and30-day periods, respectively, without raising funds through unsecured funding or through the liquidation of assets. We are required to meet regulatory notice on the liquidity coverage ratio issued by the FSA. We have in place a number of liquidity risk management frameworks that enable us to achieve our primary liquidity objective. These frameworks include (1) Centralized Control of Residual Cash and Maintenance of Liquidity Portfolio; (2) Utilization of Unencumbered Assets as Part of Our Liquidity Portfolio; (3) Appropriate Funding and Diversification of Funding Sources and Maturities Commensurate with the Composition of Assets; (4) Management of Credit Lines to Nomura Group Entities; (5) Implementation of Liquidity Stress Tests; and (6) Contingency Funding Plan. Our EMB has the authority to make decisions concerning group liquidity management. The Chief Financial Officer (“CFO”) has the operational authority and responsibility over our liquidity management based on decisions made by the EMB. 1. Centralized Control of Residual Cash and Maintenance of Liquidity Portfolio. We centrally control residual cash held at Nomura Group entities for effective liquidity utilization purposes. As for the usage of funds, the CFO decides the maximum amount of available funds, provided without posting any collateral, for allocation within Nomura and the EMB allocates the funds to each business division. Global Treasury monitors usage by businesses and reports to the EMB. In order to enable us to transfer funds smoothly between group entities, we limit the issuance of securities by regulated broker-dealers or banking entities within the Nomura Group and seek to raise unsecured funding primarily through the Company or through unregulated subsidiaries. The primary benefits of this strategy include cost minimization, wider investor name recognition and greater flexibility in providing funding to various subsidiaries across the Nomura Group. To meet any potential liquidity requirement, we maintain a liquidity portfolio, managed by Global Treasury apart from other assets, in the form of cash and highly liquid, unencumbered securities that may be sold or pledged to provide liquidity. As of March 31, 2022, our liquidity portfolio was ¥7,074.2 billion which sufficiently met liquidity requirements under the stress scenarios. The following table presents a breakdown of our liquidity portfolio by type of financial assets as of March 31, 2021 and 2022 and averages maintained for the years ended March 31, 2021 and 2022. Yearly averages are calculated usingmonth-end amounts. | | | | | | | | | | | | | | | | | | | | | | |
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| | Cash, cash equivalents and time deposits (1) | | ¥ | 2,775.9 | | | ¥ | 2,765.0 | | | ¥ | 3,151.6 | | | ¥ | 2,997.5 | | Government debt securities | | | 3,082.8 | | | | 2,641.2 | | | | 3,629.8 | | | | 3,674.2 | | | | | 254.0 | | | | 252.1 | | | | 298.3 | | | | 402.5 | | | | | | | | | | | | | | | | | | | Total liquidity portfolio | | ¥ | 6,112.7 | | | ¥ | 5,658.3 | | | ¥ | 7,079.7 | | | ¥ | 7,074.2 | | | | | | | | | | | | | | | | | | |
(1) | Cash, cash equivalents, and time deposits include nostro balances and deposits with both central banks and market counterparties that are readily available to support the liquidity position of Nomura. |
(2) | Others include other liquid financial assets such as money market funds and U.S. agency securities. |
The following table presents a breakdown of our liquidity portfolio by currency as of March 31, 2021 and 2022 and averages maintained for the years ended March 31, 2021 and 2022. Yearly averages are calculated usingmonth-end amounts. | | | | | | | | | | | | | | | | | | | | | | |
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| | | | �� | 2,298.1 | | | ¥ | 966.5 | | | ¥ | 1,913.7 | | | ¥ | 1,409.8 | | | | | 2,441.2 | | | | 3,367.1 | | | | 3,567.3 | | | | 3,924.1 | | | | | 795.1 | | | | 793.5 | | | | 792.3 | | | | 868.5 | | | | | 405.4 | | | | 333.8 | | | | 578.3 | | | | 597.5 | | | | | 172.9 | | | | 197.5 | | | | 228.1 | | | | 274.3 | | | | | | | | | | | | | | | | | | | Total liquidity portfolio | | ¥ | 6,112.7 | | | ¥ | 5,658.3 | | | ¥ | 7,079.7 | | | ¥ | 7,074.2 | | | | | | | | | | | | | | | | | | |
(1) | Includes other currencies such as the Australian dollar, the Canadian dollar and the Swiss franc. |
We assess our liquidity portfolio requirements globally as well as by each major operating entity in the Nomura Group. We primarily maintain our liquidity portfolio at Nomura Holdings, Inc. (“NHI”) and Nomura Securities Co. Ltd. (“NSC”), our other major broker-dealer subsidiaries, our bank subsidiaries, and other group entities. In determining the amounts and entities which hold this liquidity portfolio, we consider legal, regulatory and tax restrictions which may impact our ability to freely transfer liquidity across different entities in the Nomura Group. For more information regarding regulatory restrictions, see Note 18 “” in our consolidated financial statements included within this annual report. The following table presents a breakdown of our liquidity portfolio by entity as of March 31, 2021 and 2022. | | | | | | | | | | | | | | | | | | | | | | ¥ | 981.8 | | | ¥ | 1,395.4 | | Major broker-dealer subsidiaries | | | 2,632.6 | | | | 3,118.5 | | | | | 752.6 | | | | 1,008.5 | | | | | 1,291.3 | | | | 1,551.8 | | | | | | | | | | | Total liquidity portfolio | | ¥ | 5,658.3 | | | ¥ | 7,074.2 | | | | | | | | | | |
(1) | NSC, a broker-dealer located in Japan, holds an account with the Bank of Japan (“BOJ”) and has direct access to the BOJ Lombard facility through which same day funding is available for our securities pool. Any liquidity surplus at NHI is lent to NSC via short-term intercompany loans, which can be unwound immediately when needed. |
(2) | Includes Nomura Bank International plc (“NBI”), Nomura Singapore Limited and Nomura Bank Luxembourg S.A. |
2. Utilization of Unencumbered Assets as Part of Our Liquidity Portfolio. In addition to our liquidity portfolio, we had ¥2,665.7 billion of other unencumbered assets comprising mainly of unpledged trading assets that can be used as an additional source of secured funding. Global Treasury monitors other unencumbered assets and can, under a liquidity stress event when the contingency funding plan has been invoked, monetize and utilize the cash generated as a result. The aggregate of our liquidity portfolio and other unencumbered assets as of March 31, 2022 was ¥9,739.9 billion, which represented 332.2of our total unsecured debt maturing within one year. | | | | | | | | | | | | | | | | | | | | Net liquidity value of other unencumbered assets | | ¥ | 2,771.6 | | | ¥ | 2,665.7 | | | | | 5,658.3 | | | | 7,074.2 | | | | | | | | | | | | | ¥ | 8,429.9 | | | ¥ | 9,739.9 | | | | | | | | | | |
3. Appropriate Funding and Diversification of Funding Sources and Maturities Commensurate with the Composition of Assets We seek to maintain a surplus of long-term debt and equity above the cash capital requirements of our assets. We also seek to achieve diversification of our funding by market, instrument type, investors, currency, and staggered maturities in order to reduce unsecured refinancing risk. We diversify funding by issuing various types of debt instruments—these include both structured loans and structured notes with returns linked to interest rates, currencies, equities, commodities, or related indices. We issue structured loans and structured notes in order to increase the diversity of our debt instruments. We typically hedge the returns we are obliged to pay with derivatives and/or the underlying assets to obtain funding equivalent to our unsecured long-term debt. The proportion of ournon-Japanese Yen denominated long-term debt increased to 51.4% of total long-term debt outstanding as of March 31, 2022 from 47.2% as of March 31, 2021. 3.1 Short-Term Unsecured Debt Our short-term unsecured debt consists of short-term bank borrowings (including long-term bank borrowings maturing within one year), other loans, commercial paper, deposit at banking entities, certificates of deposit and debt securities maturing within one year. Deposits at banking entities and certificates of deposit comprise customer deposits and certificates of deposit of our banking subsidiaries. Short-term unsecured debt includes the current portion of long-term unsecured debt. The following table presents an analysis of our short-term unsecured debt by type of financial liability as of March 31, 2021 and 2022. | | | | | | | | | | | | | | | | | | | | Short-term bank borrowings | | ¥ | 265.8 | | | ¥ | 148.0 | | | | | 138.7 | | | | 228.1 | | | | | 460.0 | | | | 131.9 | | Deposits at banking entities | | | 1,149.9 | | | | 1,520.7 | | | | | 83.6 | | | | 127.8 | | Debt securities maturing within one year | | | 831.5 | | | | 775.6 | | | | | | | | | | | Total short-term unsecured debt | | ¥ | 2,929.5 | | | ¥ | 2,932.1 | | | | | | | | | | |
3.2 Long-Term Unsecured Debt We meet our long-term capital requirements and also achieve both cost-effective funding and an appropriate maturity profile by routinely funding through long-term debt and diversifying across various maturities and currencies. Our long-term unsecured debt includes senior and subordinated debt issued through U.S. registered shelf offerings and our U.S. registered medium-term note programs, our Euro medium-term note programs, registered shelf offerings in Japan and various other debt programs. As a globally competitive financial services group in Japan, we have access to multiple global markets and major funding centers. The Company, NSC, Nomura Europe Finance N.V., NBI, Nomura International Funding Pte. Ltd. and Nomura Global Finance Co., LTD. are the main group entities that borrow externally, issue debt instruments and engage in other funding activities. By raising funds to match the currencies and liquidities of our assets or by using foreign exchange swaps as necessary, we pursue optimization of our funding structures. We use a wide range of products and currencies to ensure that our funding is efficient and well diversified across markets and investor types. Our unsecured senior debt is mostly issued without financial covenants, such as covenants related to adverse changes in our credit ratings, cash flows, results of operations or financial ratios, which could trigger an increase in our cost of financing or accelerate repayment of the debt. The following table presents an analysis of our long-term unsecured debt by type of financial liability as of March 31, 2021 and 2022. | | | | | | | | | | | | | | | | | | | | Long-term deposits at banking entities | | ¥ | 109.0 | | | ¥ | 112.3 | | Long-term bank borrowings | | | 2,635.2 | | | | 2,820.5 | | | | | 74.2 | | | | 219.5 | | | | | 3,877.9 | | | | 4,745.8 | | | | | | | | | | | Total long-term unsecured debt | | ¥ | 6,696.3 | | | ¥ | 7,898.1 | | | | | | | | | | |
(1) | Excludes long-term debt securities issued by consolidated special purpose entities and similar entities that meet the definition of variable interest entities under ASC 810 “” and secured financing transactions recognized withinas a result of transfers of financial assets that are accounted for as financings rather than sales in accordance with ASC 860 “” |
We also seek to maintain an average maturity for our plain vanilla debt securities and borrowings greater than or equal to three years. The average maturity for our plain vanilla debt securities and borrowings with maturities longer than one year was 4.4 years as of March 31, 2022. A significant amount of our structured loans and structured notes are linked to interest rates, currencies, equities, commodities, or related indices. These maturities are evaluated based on internal models and monitored by Global Treasury. Where there is a possibility that these may be called prior to their scheduled maturity date, maturities are based on our internal stress option adjusted model. The model values the embedded optionality under stress market conditions in order to determine when the debt securities or borrowing is likely to be called. The graph below shows the distribution of maturities of our outstanding long-term debt securities and borrowings by the model. On this basis, the average maturity of our structured loans and structured notes with maturities longer than one year was 10.1 years as of March 31, 2022. The average maturity of our entire long-term debt with maturities longer than one year including plain vanilla debt securities and borrowings, was 7.2 years as of March 31, 2022.
We typically fund our trading activities through secured borrowings, repurchase agreements and Japanese “Gensaki Repo” transactions. We believe such funding activities in the secured markets are more cost-efficient and less credit-rating sensitive than financing in the unsecured market. Our secured funding capabilities depend on the quality of the underlying collateral and market conditions. While we have shorter term secured financing for highly liquid assets, we seek longer terms for less liquid assets. We also seek to lower the refinancing risks of secured funding by transacting with a diverse group of global counterparties and delivering various types of securities collateral. In addition, we reserve an appropriate level of liquidity portfolio for the refinancing risks of secured funding maturing in the short term for less liquid assets. For more detail of secured borrowings and repurchase agreements, see Note 5 “Collateralized transactions ” in our consolidated financial statements. 4. Management of Credit Lines to Nomura Group Entities We maintain and expand credit lines to Nomura Group entities from other financial institutions to secure stable funding. We ensure that the maturity dates of borrowing agreements are distributed evenly throughout the year in order to prevent excessive maturities in any given period. 5. Implementation of Liquidity Stress Tests We maintain our liquidity portfolio and monitor the sufficiency of our liquidity based on an internal model which simulates changes in cash outflow under specified stress scenarios to comply with our above mentioned liquidity management policy. We assess the liquidity requirements of the Nomura Group under various stress scenarios with differing levels of severity over multiple time horizons. We evaluate these requirements under Nomura-specific and broad market-wide events, including potential credit rating downgrades at the Company and subsidiary levels. We call this risk analysis our Maximum Cumulative Outflow (“MCO”) framework.
The MCO framework is designed to incorporate the primary liquidity risks for Nomura and models the relevant future cash flows in the following two primary scenarios: Stressed scenario—To maintain adequate liquidity during a severe market-wide liquidity event without raising funds through unsecured financing or through the liquidation of assets for a year; and Acute stress scenario—To maintain adequate liquidity during a severe market-wide liquidity event coupled with credit concerns regarding Nomura’s liquidity position, without raising funds through unsecured funding or through the liquidation of assets for 30 days. We assume that Nomura will not be able to liquidate assets or adjust its business model during the time horizons used in each of these scenarios. The MCO framework therefore defines the amount of liquidity required to be held in order to meet our expected liquidity needs in a stress event to a level we believe appropriate based on our liquidity risk appetite. As of March 31, 2022, our liquidity portfolio exceeded net cash outflows under the stress scenarios described above. We constantly evaluate and modify our liquidity risk assumptions based on regulatory and market changes. The model we use in order to simulate the impact of stress scenarios includes the following assumptions: No liquidation of assets; No ability to issue additional unsecured funding; Upcoming maturities of unsecured debt (maturities less than one year); Potential buybacks of our outstanding debt; Loss of secured funding lines particularly for less liquid assets; Fluctuation of funding needs under normal business circumstances; Cash deposits and free collateralroll-off in a stress event; Widening of haircuts on outstanding repo funding; Additional collateralization requirements of clearing banks and depositories; Drawdown on loan commitments; Loss of liquidity from market losses; Assuming atwo-notch downgrade of our credit ratings, the aggregate fair value of assets that we would be required to post as additional collateral in connection with our derivative contracts; and Legal and regulatory requirements that can restrict the flow of funds between entities in the Nomura Group. 6. Contingency Funding Plan We have developed a detailed contingency funding plan to integrate liquidity risk control into our comprehensive risk management strategy and to enhance the quantitative aspects of our liquidity risk control procedures. As a part of our Contingency Funding Plan (“CFP”), we have developed an approach for analyzing and quantifying the impact of any liquidity crisis. This allows us to estimate the likely impact of both Nomura-specific and market-wide events; and specifies the immediate action to be taken to mitigate any risk. The CFP lists details of key internal and external parties to be contacted and the processes by which information is to be disseminated. This has been developed at a legal entity level in order to capture specific cash requirements at the local level—it assumes that our parent company does not have access to cash that may be trapped at a subsidiary
level due to regulatory, legal or tax constraints. We periodically test the effectiveness of our funding plans for different Nomura-specific and market-wide events. We also have access to central banks including, but not exclusively, the BOJ, which provide financing against various types of securities. These operations are accessed in the normal course of business and are an important tool in mitigating contingent risk from market disruptions. Liquidity Regulatory Framework In 2008, the Basel Committee published “Principles for Sound Liquidity Risk Management and Supervision”. To complement these principles, the Committee has further strengthened its liquidity framework by developing two minimum standards for funding liquidity. These standards have been developed to achieve two separate but complementary objectives. The first objective is to promote short-term resilience of a financial institution’s liquidity risk profile by ensuring that it has sufficient high-quality liquid assets to survive a significant stress scenario lasting for 30 days. The Committee developed the Liquidity Coverage Ratio (“LCR”) to achieve this objective. The second objective is to promote resilience over a longer time horizon by creating additional incentives for financial institutions to fund their activities with more stable sources of funding on an ongoing basis. The Net Stable Funding Ratio (“NSFR”) has a time horizon of one year and has been developed to provide a sustainable maturity structure of assets and liabilities. These two standards are comprised mainly of specific parameters which are internationally “harmonized” with prescribed values. Certain parameters, however, contain elements of national discretion to reflect jurisdiction-specific conditions. In Japan, the regulatory notice on the LCR, based on the international agreement issued by the Basel Committee with necessary national revisions, was published by Financial Services Agency (on October 31, 2014). The notices have been implemented since the end of March 2015 withphased-in minimum standards. Average of Nomura’s LCRs for the three months ended March 31, 2022 was 241.7%, and Nomura was compliant with requirements of the above notices. As for the NSFR, the revision of the liquidity regulatory notice was published by Financial Services Agency (on March 31, 2021) and it has been implemented from the end of September 2021. Nomura’s NSFR as of March 31, 2022 was compliant with the regulatory requirements. Nomura’s cash flows are primarily generated from operating activities undertaken in connection with our client flows and trading and from financing activities which are closely related to such activities. As a financial institution, growth in operations tends to result in cash outflows from operating activities as well as investing activities. For the year ended March 2021, we recorded net cash inflows from operating activities and net cash outflow from investing and financing activities. For the year ended March 2022, we recorded net cash outflows from operating activities and investing activities and net cash inflow from financing activities as discussed in the comparative analysis below.
The following table presents the summary information on our consolidated cash flows for the years ended March 31, 2021 and 2022. | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) operating activities | | ¥ | 665.8 | | | ¥ | (1,368.7 | ) | | | | 160.4 | | | | 146.5 | | Trading assets and private equity and debt investments | | | 1,468.4 | | | | 1,254.3 | | | | | 777.7 | | | | (284.7 | ) | Securities purchased under agreements to resell, net of securities sold under agreements to repurchase | | | (1,453.9 | ) | | | (2,220.5 | ) | Securities borrowed, net of securities loaned | | | (1,242.5 | ) | | | 595.1 | | | | | 955.7 | | | | (859.4 | ) | Cash flows from investing activities: | | | (139.0 | ) | | | (45.3 | ) | Cash flows from financing activities: | | | (269.9 | ) | | | 1,070.7 | | Long-term borrowings, net | | | (1.0 | ) | | | 1,225.0 | | Decrease in short-term borrowings, net | | | (325.2 | ) | | | (475.5 | ) | Increase in deposits received at banks, net | | | 126.2 | | | | 448.1 | | | | | (69.9 | ) | | | (126.9 | ) | Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents | | | 60.8 | | | | 149.7 | | | | | | | | | | | Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents | | | 317.7 | | | | (193.6 | ) | Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of the year | | | 3,192.3 | | | | 3,510.0 | | | | | | | | | | | Cash, cash equivalents, restricted cash and restricted cash equivalents at end of the year | | ¥ | 3,510.0 | | | ¥ | 3,316.4 | | | | | | | | | | |
See the consolidated statements of cash flows in our consolidated financial statements included within this annual report for more detailed information. For the year ended March 31, 2022, our cash, cash equivalents, restricted cash and restricted cash equivalents decreased by ¥193.6 billion to ¥3,316.4 billion. Net cash of ¥1,070.7 billion was provided by financing activities due to net cash inflows of ¥1,225.0 billion from. As part of trading activities, while there were net cash inflows of ¥969.6 billion mainly due to a decrease inTrading assets and private equity and debt investments, they were offset by net cash outflows of ¥1,625.4 billion from repo transactions and securities borrowed and loaned transactions such asSecurities purchased under agreements to resell, Securities sold under agreements to repurchase , andSecurities borrowed, net of Securities loaned. As a result, net cash of ¥1,368.7 billion was used in operating activities. For the year ended March 31, 2021, our cash, cash equivalents, restricted cash and restricted cash equivalents increased by ¥317.7 billion to ¥3,510.0 billion. Net cash of ¥269.9 billion was used in financing activities due to net cash outflows of ¥325.2 billion from. As part of trading activities, while there were net cash inflows of ¥2,246.1 billion mainly due to a decrease inTrading assets and Private equity and debt investments, they were offset by net cash outflows of ¥2,696.4 billion from repo transactions and securities borrowed and loaned transactions such asSecurities purchased under agreements to resell, Securities sold under agreements to repurchase , andSecurities borrowed, net of Securities loaned. As a result, net cash of ¥665.8 billion was provided by operating activities.
Balance Sheet and Financial Leverage Total assets as of March 31, 2022, were ¥43,412.2 billion, an increase of ¥895.7 billion compared with ¥42,516.5 billion as of March 31, 2021, reflecting primarily an increase inSecurities purchased under agreements to resell Total liabilities as of March 31, 2022, were ¥40,439.4 billion, an increase of ¥679.3 billion compared with ¥39,760.0 billion as of March 31, 2021, reflecting primarily an increase in. NHI shareholders’ equity as of March 31, 2022 was ¥2,914.6 billion, an increase of ¥219.7 billion compared with ¥2,694.9 billion as of March 31, 2021, primarily due to an increase in We seek to maintain sufficient capital at all times to withstand losses due to extreme market movements. The EMB is responsible for implementing and enforcing capital policies. This includes the determination of our balance sheet size and required capital levels. We continuously review our equity capital base to ensure that it can support the economic risk inherent in our business. There are also regulatory requirements for minimum capital of entities that operate in regulated securities or banking businesses. As leverage ratios are commonly used by other financial institutions similar to us, we voluntarily provide a leverage ratio and adjusted leverage ratio primarily for benchmarking purposes so that users of our annual report can compare our leverage against other financial institutions. Adjusted leverage ratio is anon-GAAP financial measure that Nomura considers to be a useful supplemental measure of leverage. The following table presents NHI shareholders’ equity, total assets, adjusted assets and leverage ratios as of March 31, 2021 and 2022. | | | | | | | | | | | Billions of yen, except ratios | | | | | | | | | | | | | | | ¥ | 2,694.9 | | | ¥ | 2,914.6 | | | | | 42,516.5 | | | | 43,412.2 | | | | | 26,477.0 | | | | 26,535.8 | | | | | 15.8 x | | | | 14.9 x | | Adjusted leverage ratio (3) | | | 9.8 x | | | | 9.1 x | |
(1) | Represents total assets lessSecurities purchased under agreements to resell and. Adjusted assets is anon-GAAP financial measure and is calculated as follows: |
(2) | Equals total assets divided by NHI shareholders’ equity. |
(3) | Equals adjusted assets divided by NHI shareholders’ equity. |
| | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 42,516.5 | | | ¥ | 43,412.2 | | | | | | | | | | | Securities purchased under agreements to resell | | | 10,775.1 | | | | 11,879.3 | | | | | 5,264.4 | | | | 4,997.1 | | | | | | | | | | | | | ¥ | 26,477.0 | | | ¥ | 26,535.8 | | | | | | | | | | |
Total assets increased by 2.1% reflecting primarily an increase inSecurities purchased under agreements to resell. Total NHI shareholders’ equity increased by 8.2% reflecting primarily an increase inAccumulated other comprehensive income . As a result, our leverage ratios were 15.8 times as of March 31, 2021 and 14.9 times as of March 31, 2022. Adjusted assets increased primarily due to an increase in. As a result, our adjusted leverage ratios were 9.8 times as of March 31, 2021 and 9.1 times as of March 31, 2022.
Capital Management Policy We seek to enhance shareholder value and to capture growing business opportunities by maintaining sufficient levels of capital. We will continue to review our levels of capital as appropriate, taking into consideration the economic risks inherent to operating our businesses, the regulatory requirements, and maintaining our ratings necessary to operate businesses globally. We believe that raising corporate value over the long term and paying dividends is essential to rewarding shareholders. We will strive to pay dividends using a consolidatedpay-out ratio of 30 percent of each semi-annual consolidated earnings as a key indicator. Dividend payments are determined taking into account a comprehensive range of factors such as the tightening of Basel regulations and other changes to the regulatory environment as well as the Company’s consolidated financial performance. Dividends will in principle be paid on a semi-annual basis with record dates of September 30 and March 31. Additionally we will aim for a total payout ratio, which includes dividends and share buybacks, of at least 50 percent. With respect to retained earnings, in order to implement measures to adapt to regulatory changes and to increase shareholder value, we seek to efficiently invest in business areas where high profitability and growth may reasonably be expected, including the development and expansion of infrastructure. Dividends for the Fiscal Year Based on our Capital Management Policy described above, we paid a dividend of ¥8 per share to shareholders of record as of September 30, 2021 and have decided to pay a dividend of ¥14 per share to shareholders of record as of March 31, 2022. As a result, the total annual dividend will be ¥22 per share. The following table presented the amounts of dividends per share paid by us in respect of the periods indicated: | | | | | | | | | | | | | | | | | | | | | Fiscal year ended or ending March 31, | | | | | | | | | | | | | | | | | | ¥ | — | | | ¥ | 9.00 | | | ¥ | — | | | ¥ | 11.00 | | | ¥ | 20.00 | | | | | — | | | | 9.00 | | | | — | | | | 11.00 | | | | 20.00 | | | | | — | | | | 3.00 | | | | — | | | | 3.00 | | | | 6.00 | | | | | — | | | | 15.00 | | | | — | | | | 5.00 | | | | 20.00 | | | | | — | | | | 20.00 | | | | — | | | | 15.00 | | | | 35.00 | | | | | — | | | | 8.00 | | | | — | | | | 14.00 | | | | 22.00 | |
Consolidated Regulatory Capital Requirements The FSA established the “Guideline for Financial Conglomerates Supervision” (“Financial Conglomerates Guideline”) in June 2005 and set out the rules on consolidated regulatory capital. We started monitoring our consolidated capital adequacy ratio in accordance with the Financial Conglomerates Guideline from April 2005. The Company has been assigned by the FSA as a Final Designated Parent Company who must calculate a consolidated capital adequacy ratio according to the Capital Adequacy Notice on Final Designated Parent
Company in April 2011. Since then, we have been calculating our consolidated capital adequacy ratio according to the Capital Adequacy Notice on Final Designated Parent Company. The Capital Adequacy Notice on Final Designated Parent Company has been revised to be in line with Basel 2.5 and Basel III since then. We have calculated a BaselIII-based consolidated capital adequacy ratio from the end of March 2013. Basel 2.5 includes significant change in calculation method of market risk and Basel III includes redefinition of capital items for the purpose of requiring higher quality of capital and expansion of the scope of credit risk-weighted assets calculation. In accordance with Article 2 of the Capital Adequacy Notice on Final Designated Parent Company, our consolidated capital adequacy ratio is currently calculated based on the amounts of common equity Tier 1 capital, Tier 1 capital (sum of common equity Tier 1 capital and additional Tier 1 capital), total capital (sum of Tier 1 capital and Tier 2 capital), credit risk-weighted assets, market risk and operational risk. As of March 31, 2022, our common equity Tier 1 capital ratio is 17.22%, Tier 1 capital ratio is 19.60% and consolidated capital adequacy ratio is 19.60% and we are in compliance with the requirement for each ratio set out in the Capital Adequacy Notice on Final Designated Parent Company, etc. (required level including applicable minimum consolidated capital buffers as of March 31, 2022 is 7.51% for the common equity Tier 1 capital ratio, 9.01% for the Tier 1 capital ratio and 11.01% for the consolidated capital adequacy ratio). In accordance with Article 2 of the “Notice of the Establishment of Standards that Indicate Soundness pertaining to Loss-absorbing and Recapitalisation Capacity, Established as Criteria by which the Highest Designated Parent Company is to Judge the Soundness in the Management of the Highest Designated Parent Company and its Subsidiary Corporations, etc., under Paragraph 1, Article 57-17 of the Financial Instruments and Exchange Act” (the ”TLAC Notification”), we have started calculating our external TLAC ratio on a risk-weighted assets basis from March 2021. As of March 31, 2022, our external TLAC as a percentage of risk-weighted assets is 30.72% and we are in compliance with the requirement set out in the TLAC Notification. The following table presents the Company’s consolidated capital adequacy ratios and External TLAC as a percentage of risk-weighted assets as of March 31, 2021 and March 31, 2022. | | | | | | | | | | | Billions of yen, except ratios | | | | | | | | | | | | | Common equity Tier 1 capital | | ¥ | 2,522.1 | | | ¥ | 2,726.4 | | | | | 2,840.5 | | | | 3,103.0 | | | | | 2,845.2 | | | | 3,103.4 | | | | | | | | | | | Credit risk-weighted assets | | | 8,550.9 | | | | 8,301.2 | | Market risk equivalent assets | | | 4,951.6 | | | | 4,899.0 | | Operational risk equivalent assets | | | 2,448.5 | | | | 2,629.7 | | | | | | | | | | | Total risk-weighted assets | | ¥ | 15,951.0 | | | ¥ | 15,829.9 | | | | | | | | | | | Consolidated Capital Adequacy Ratios | | | | | | | | | Common equity Tier 1 capital ratio | | | 15.81 | % | | | 17.22 | % | | | | 17.80 | % | | | 19.60 | % | Consolidated capital adequacy ratio | | | 17.83 | % | | | 19.60 | % | External TLAC as a percentage of risk-weighted assets | | | 23.06 | % | | | 30.72 | % |
Since the end of March 2011, we have been calculating credit risk-weighted assets and operational risk equivalent assets by using the foundation Internal Ratings-Based Approach and the Standardized Approach, respectively, with the approval of the FSA. Furthermore, market risk equivalent assets are calculated using the Internal Models Approach.
We provide consolidated capital adequacy ratios not only to demonstrate that we are in compliance with the requirements set out in the Capital Adequacy Notice on Final Designated Parent Company but also for benchmarking purposes so that users of this annual report can compare our capital position against those of other financial groups to which Basel III is applied. Our management receives and reviews these capital ratios on a regular basis. Consolidated Leverage Ratio Requirements In March 2019, the FSA set out requirements for the calculation and disclosure and minimum requirement of 3% of a consolidated leverage ratio, and the publication of “Notice of the Establishment of Standards for Determining Whether the Adequacy of Leverage, the Supplementary Measure to the Adequacy of Equity Capital of a Final Designated Parent Company and its Subsidiary Corporations, etc. is Appropriate Compared to the Assets Held by the Final Designated Parent Company and its Subsidiary Corporations, etc., under Paragraph 1, Article57-17 of the Financial Instruments and Exchange Act” (2019 FSA Regulatory Notice No. 13; “Notice on Consolidated Leverage Ratio”), through amendments to revising “Specification of items which a final designated parent company should disclose on documents to show the status of its sound management” (2010 FSA Regulatory Notice No. 132; “Notice on Pillar 3 Disclosure”). We started calculating and disclosing a consolidated leverage ratio from March 31, 2015 in accordance with these Notices. We have also started calculating a consolidated leverage ratio from March 31, 2019 in accordance with the Notice on Pillar 3 Disclosure, Notice on Consolidated Leverage Ratio and other related Notices. In coordination with the monetary policy of the Bank of Japan in response to the impact of theCOVID-19 pandemic, the FSA published amendments to the Notice on Consolidated Leverage Ratio on June 2020 and March 2021. Under these amendments, deposits with the Bank of Japan have been excluded from the total exposure measure used to calculate the leverage ratio during the period from June 30, 2020 to March 31, 2022. In March 2022, the FSA announced this measure will be extended to March 31, 2024. As of March 31, 2022, our consolidated leverage ratio is 5.98%. In accordance with Article 2 of the TLAC Notification we have started calculating our external TLAC ratio on a total exposure basis from March 2021. As of March 31, 2022, our external TLAC as a percentage of leverage ratio exposure measure is 10.30% and we are in compliance with the requirement set out in the TLAC Notification. Regulatory changes which affect us The Basel Committee has issued a series of announcements regarding a Basel III program designed to strengthen the regulatory capital framework in light of weaknesses revealed by the financial crises. The following is a summary of the proposals which are most relevant to us. On December 16, 2010, in an effort to promote a more resilient banking sector, the Basel Committee issued Basel III, that is, “International framework for liquidity risk measurement, standards and monitoring” and “A global regulatory framework for more resilient banks and banking systems”. They include raising the quality, consistency and transparency of the capital base; strengthening the risk coverage of the capital framework such as the implementation of a credit value adjustment (“CVA”) charge for OTC derivative trades; introducing a leverage ratio requirement as a supplemental measure to the risk-based framework; introducing a series of measures to address concerns over the “procyclicality” of the current framework; and introducing a liquidity standard including a30-day liquidity coverage ratio as well as the net stable funding ratio to measure stability of financing structure. These standards were implemented from 2013, which includes transitional treatment, (i.e., they are phased in gradually from 2013). In addition, the Basel Committee has issued interim rules for the capitalization of bank exposures to central counterparties (“CCPs”) on July 25, 2012, which came into effect in 2013 as part of Basel III. Moreover, in addition to Basel III leverage ratio framework under which we started the calculation and disclosure of consolidated leverage ratio as above, a series of final standards on the regulatory frameworks such as capital requirements for banks’ equity investments in funds, the standardized approach for
measuring counterparty credit risk exposures, capital requirements for bank exposures to CCPs, supervisory framework for measuring and controlling large exposures, and revisions to the securitization framework, and revised framework for market risk capital requirements have been published by the Basel Committee. At theG-20 summit in November 2011, the Financial Stability Board (“FSB”) and the Basel Committee announced the list of global systemically important banks(“G-SIBs”) and the additional requirements to theG-SIBs including the recovery and resolution plan. The group ofG-SIBs have been updated annually and published by the FSB each November. Since November 2011, we have not been designated as aG-SIBs. On the other hand, the FSB and the Basel Committee were asked to work on extending the framework forG-SIBs to domestic systemically important financial institutions(“D-SIBs”) and the Basel Committee developed and published a set of principles on the assessment methodology and the higher loss absorbency requirement forD-SIBs. In December 2015, the FSA identified us as aD-SIB and required additional capital charge of 0.5% after March 2016, with3-year transitional arrangement. In November 2015, the FSB issued the final TLAC standard forG-SIBs. The TLAC standard has been designed so that failingG-SIBs will have sufficient loss-absorbing and recapitalization capacity available in resolution for authorities to implement an orderly resolution. In response to the FSB’s publication of the TLAC standard, in April 2016, the FSA published its policy to develop the TLAC framework in Japan applicable to JapaneseG-SIBs and, in April 2018, revised such policy to apply the TLAC requirements in Japan not only to JapaneseG-SIBs but also to JapaneseD-SIBs that are deemed (i) of particular need for a cross-border resolution arrangement and (ii) of particular systemic significance to Japanese financial system if they fail. In the revised policy, the JapaneseG-SIBs and Nomura (“TLAC Covered SIBs”) would be subject to the TLAC requirements in Japan. On March 2019, the FSA published the notices and revised the guidelines of TLAC regulations. Although Nomura is not identified as aG-SIB as of the date of this annual report, the TLAC Covered SIBs, including Nomura, will be required to meet the TLAC requirement alongside the minimum regulatory requirements set out in the Basel III framework. Specifically, Nomura will be required to meet a minimum TLAC requirement of holding TLAC in an amount at least 16% of our consolidated risk-weighted assets as from March 31, 2021 and at least 18% as from March 31, 2024 as well as at least 6% of the applicable Basel III leverage ratio denominator from March 31, 2021 and at least 6.75% from March 31, 2024. Furthermore, according to the FSA’s revised policy published in April 2018, which is subject to change based on future international discussions, the preferred resolution strategy for the TLAC Covered SIBs is Single Point of Entry (“SPE”) resolution, in which resolution powers are applied to the top of a group by a single national resolution authority (i.e., the FSA), although the actual measures to be taken will be determined on abasis considering the actual condition of the relevant the TLAC Covered SIBs in crisis. To implement this SPE resolution strategy effectively, the FSA requires holding companies of the TLAC Covered SIBs (“Domestic Resolution Entities”) to (i) meet the minimum external TLAC requirements and (ii) cause their material subsidiaries that are designated as systemically important by the FSA, including but not limited to certain materialsub-groups as provided in the FSB’s TLAC standard, to maintain a certain level of capital and debt recognized by the FSA as having loss-absorbing and recapitalization capacity, or Internal TLAC. In addition, the TLAC Covered SIBs’ Domestic Resolution Entities will be allowed to count the amount equivalent to 2.5% of their consolidated risk-weighted assets from the implementation date of the TLAC requirements in Japan (March 31, 2021 for Nomura) and 3.5% of their consolidated risk-weighted assets from 3 years after the implementation date (March 31, 2024 for Nomura) as our external TLAC, considering the Japanese Deposit Insurance Fund Reserves. It is likely that the FSA’s regulation and notice will be revised further to be in line with a series of rules and standards proposed by the Basel Committee, FSB or International Organization of Securities Commissions.
The cost and availability of unsecured funding are generally dependent on credit ratings. Our long-term and short-term debt is rated by several recognized credit rating agencies. We believe that our credit ratings include the credit ratings agencies’ assessment of the general operating environment, our positions in the markets in which we operate, reputation, earnings structure, trend and volatility of our earnings, risk management framework, liquidity and capital management. An adverse change in any of these factors could result in a downgrade of our credit ratings, and that could, in turn, increase our borrowing costs and limit our access to the capital markets or require us to post additional collateral and permit counterparties to terminate transactions pursuant to certain contractual obligations. In addition, our credit ratings can have a significant impact on certain of our trading revenues, particularly in those businesses where longer term counterparty performance is critical, such as OTC derivative transactions. On September 2, 2021, Fitch Ratings removed the negative watch on the bbb+ viability ratings of the Company and NSC. As of May 20, 2022, the credit ratings of the Company and NSC were as follows. | | | | | | | | | | | | A-2 | | BBB+ (Stable) | Moody’s Investors Service | | | | Baa1 (Negative) | | | F1 | | A- (Stable) | Rating and Investment Information, Inc. | | a-1 | | A (Stable) | Japan Credit Rating Agency, Ltd. | | | | AA- (Stable) | | | | Nomura Securities Co., Ltd. | | | | | | | A-2 | | A- (Stable) | Moody’s Investors Service | | P-2 | | A3 (Negative) | | | F1 | | A- (Stable) | Rating and Investment Information, Inc. | | a-1 | | A+ (Stable) | Japan Credit Rating Agency, Ltd. | | — | | AA- (Stable) |
Both Rating and Investment Information, Inc. and Japan Credit Rating Agency, Ltd. are credit rating agencies nationally recognized in Japan. We rely on, or utilize, credit ratings on our long-term and short-term debt provided by these Japanese credit rating agencies, as well as S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings for unsecured funding and other financing purposes and also for our trading and other business activities. Within the rating classification system of Rating and Investment Information, Inc.,“a-1” is the highest of five categories for short-term debt and indicates “a strong degree of certainty regarding debt repayment”; and “A” is the third highest of nine categories for long-term debt and indicates “a high degree of certainty regarding debt repayment with excellence in specific component factors”, with a plus (+) or minus (-) sign added to a rating in that category to indicate its relative standing within that category. Within the rating classification system of Japan Credit Rating Agency, Ltd., “AA” is the second highest of eleven categories for long-term debt and indicates “a very high level of capacity to honor the financial commitment on the obligation”, with a plus (+) or minus (-) sign added to a rating in that category to indicate its relative standing within that category. There has been no change to the ratings in the above table since the date indicated. Off-Balance Sheet Arrangements.Off-balance sheet entitiesIn the normal course of business, we engage in a variety ofoff-balance sheet arrangements withoff-balance sheet entities which may have an impact on Nomura’s future financial position and performance.
Off-balance sheet arrangements withoff-balance sheet entities include where Nomura has:an obligation under a guarantee contract; a retained or contingent interest in assets transferred to anoff-balance sheet entity or similar arrangement that serves to provide credit, liquidity or market risk support to such entity; any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument; or any obligation, including a contingent obligation, arising out of a variable interest in anoff-balance sheet entity that is held by, and material to, us, where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with, us. Off-balance sheet entities may take the form of a corporation, partnership, fund, trust or other legal vehicle which is designed to fulfill a limited, specific purpose by its sponsor. We both create or sponsor these entities and also enter into arrangements with entities created or sponsored by others.Our involvement with these entities includes structuring, underwriting, distributing and selling debt instruments and beneficial interests issued by these entities, subject to prevailing market conditions. In connection with our securitization and equity derivative activities, we also act as a transferor of financial assets to these entities, as well as, underwriter, distributor and seller of asset-repackaged financial instruments issued by these entities. We retain, purchase and sell variable interests in SPEs in connection with our market-making, investing and structuring activities. Our other types ofoff-balance sheet arrangements include guarantee agreements and derivative contracts. Significant involvement is assessed based on all of our arrangements with these entities, even if the probability of loss, as assessed at the balance sheet date, is remote. For further information about transactions with VIEs, see Note 6 “Securitizations and Variable Interest Entities ” in our consolidated financial statements included in this annual report. Tabular Disclosure of Contractual Obligations. In the ordinary course of our business, we enter into a variety of contractual obligations and contingent commitments, which may require future payments. These arrangements include: Standby letters of credit and other guarantees: In connection with our banking and financing activities, we enter into various guarantee arrangements with counterparties in the form of standby letters of credit and other guarantees, which generally have fixed expiration dates. Long-term borrowings and contractual interest payments: In connection with our operating activities, we issue Japanese Yen andnon-Japanese Yen denominated long-term borrowings which incur variable and fixed interest payments in accordance with our funding policy. Operating lease commitments: We lease office space, residential facilities for employees, motor vehicles, equipment and technology assets in the ordinary course of business both in Japan and overseas as lessee. These arrangements predominantly consist of operating leases. Separately we sublease certain real estate and equipment through operating lease arrangements.
Finance lease commitments: We lease certain equipments and facilities in Japan and overseas which are classified as finance lease agreements. We have purchase obligations for goods and services which include payments for construction, advertising, and computer and telecommunications maintenance agreements. Commitments to extend credit: In connection with our banking and financing activities, we enter into contractual commitments to extend credit, which generally have fixed expiration dates. In connection with our investment banking activities, we enter into agreements with clients under which we commit to underwrite securities that may be issued by clients. As a member of certain central clearing counterparties, Nomura is committed to provide liquidity facilities through entering into reverse repo transactions backed by government and government agency debt securities with those counterparties in a situation where a default of another clearing member occurs. Commitments to invest in partnerships: We have commitments to invest in interests in various partnerships and other entities and commitments to provide financing for investments related to those partnerships. Note 8 “” in our consolidated financial statements contains further detail on our operating leases and finance leases. Note 11 “” in our consolidated financial statements contains further detail on our short-term and long-term borrowing obligations and Note 20 “Commitments, contingencies and guarantees ” in our consolidated financial statements included in this annual report contains further detail on our other commitments, contingencies and guarantees. The contractual amounts of commitments to extend credit represent the maximum amounts at risk should the contracts be fully drawn upon, should the counterparties default, and assuming the value of any existing collateral becomes worthless. The total contractual amount of these commitments may not represent future cash requirements since the commitments may expire without being drawn upon. The credit risk associated with these commitments varies depending on our clients’ creditworthiness and the value of collateral held. We evaluate each client’s creditworthiness on abasis. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on management’s credit evaluation of the counterparty.
The following table presents information regarding amounts and timing of our future contractual obligations and contingent commitments as of March 31, 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Standby letters of credit and other guarantees | | ¥ | 1,698,193 | | | ¥ | 1,684,360 | | | ¥ | 7,705 | | | ¥ | 4,519 | | | ¥ | 1,609 | | | | | 8,988,356 | | | | 456,663 | | | | 2,085,430 | | | | 2,273,072 | | | | 4,173,191 | | Contractual interest payments (2) | | | 1,032,515 | | | | 134,019 | | | | 220,913 | | | | 152,920 | | | | 524,663 | | Operating lease commitments (3) | | | 209,040 | | | | 44,493 | | | | 57,884 | | | | 42,761 | | | | 63,902 | | | | | 98,214 | | | | 14,012 | | | | 18,652 | | | | 65,397 | | | | 153 | | Commitments to extend credit (5) | | | 2,012,851 | | | | 1,354,834 | | | | 269,828 | | | | 163,515 | | | | 224,674 | | | | | 32,286 | | | | 149 | | | | 4,102 | | | | 6,175 | | | | 21,860 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 14,071,455 | | | ¥ | 3,688,530 | | | ¥ | 2,664,514 | | | ¥ | 2,708,359 | | | ¥ | 5,010,052 | | | | | | | | | | | | | | | | | | | | | | |
(1) | The amounts disclosed within long-term borrowings exclude financial liabilities recognized within long-term borrowings as a result of transfers of financial assets that are accounted for as financings rather than sales in accordance with ASC 860. These are not borrowings issued for our own funding purposes and therefore do not represent actual contractual obligations by us to deliver cash. |
(2) | The amounts represent estimated future interest payments related to long-time borrowings based on the period through to their maturity and applicable interest rates as of March 31, 2022. |
(3) | The amounts of operating lease commitments are undiscounted future minimum lease payments. The amounts of finance lease contracts were immaterial. |
(4) | The minimum contractual obligations under enforceable and legally binding contracts that specify all significant terms. Amounts exclude obligations that are already reflected on our consolidated balance sheets as liabilities or payables. Includes the commitment to purchase parts of the redeveloped real estate in Tokyo Nihonbashi district from the redevelopment association. |
(5) | Contingent liquidity facilities to central clearing counterparties are included. |
Excluded from the above table are obligations that are generally short-term in nature, including short-term borrowings, deposits received at banks and other payables, collateralized agreements and financing transactions (such as reverse repurchase and repurchase agreements), and trading liabilities. In addition to amounts presented above, we have commitments under reverse repurchase and repurchase agreements including amounts in connection with collateralized agreements and collateralized financing. These commitments amount to ¥1,565 billion for reverse repurchase agreements and ¥2,673 billion for repurchase agreements as of March 31, 2022. C. Research and Development, Patents and Licenses, etc. The information required by this item is set forth in Item 5.A of this annual report. E. Critical Accounting Policies and Estimates Critical accounting policies are the accounting policies which have the most significant impact on the preparation of our consolidated financial statements included within this annual report and which require the
most difficult, subjective and complex judgments by our management to develop estimates used in the application of these policies. Such estimates determined by management include estimates regarding the fair value of financial instruments and the outcome of litigations that affect the reported amounts of assets and liabilities related footnote as the disclosures in our consolidated financial statements. Estimates, by their nature, are based on underlying assumptions which require management judgment and depend on the extent of available information. Actual results in future reporting periods may differ from current estimates, which could have a material impact on our consolidated financial statements. The following table summarizes the critical accounting policies within our consolidated financial statements which have had the most significant impact on our financial condition and financial performance during the year ended March 31, 2022. For each such critical accounting policy, the following table also identifies the critical accounting estimates inherent within application of those policies, the nature of the estimates, the underlying assumptions made by our management during the year to derive those estimates and the financial impact had we used different estimates or assumptions during the year. See Note 1“Summary of Accounting Policies” in our consolidated financial statements included in this annual report for more information on the critical accounting policies we apply for all of these areas and the relevant additional footnote disclosures referred to in the table for more information around how these critical accounting policies and critical accounting estimates have been applied. | | | | | | | | | Critical accounting estimates | | Underlying subjective key assumptions by management | | Effect of changes in estimates and assumptions during year ended March 31,
2022 (including impact of the COVID-19 pandemic) | Fair value of financial instruments | | Estimating fair value for financial instruments | | A significant portion of our financial instruments is carried at fair value. The fair values of these financial instruments may not only measured at quoted prices but also impacted by other factors including selection of valuation techniques/ models and other assumptions that require judgment. Selection of appropriate valuation techniques • For financial instruments measured at fair value where quoted prices are available in active markets, Nomura generally uses quoted prices as level 1 inputs for determining the fair value of these financial instruments. • For financial instruments where such quoted prices are not available, fair value of the financial instruments are measured by level 2 or level 3 input(s). Significant judgment is involved in selection of appropriate valuation techniques and validation of | | See Note 2“Fair value measurements” in our consolidated financial statements included in this annual report for valuation methodologies including active/ inactive principal market, as well as our policy in fair value hierarchy. Level 3 fair value hierarchy (assets net of derivative liabilities) during the year increased from ¥566 billion as of March 2021 to ¥792 billion as of March 2022. Level 3 financial assets as a proportion of total financial assets carried at fair value on a recurring basis was 6% as of March 31, 2022 (5% as of March 31, 2021.) See Note 2,for further quantitative and qualitative information regarding level 3 inputs, including the sensitivity of fair value |
| | | | | | | | | Critical accounting estimates | | Underlying subjective key assumptions by management | | Effect of changes in estimates and assumptions during year ended March 31,
2022 (including impact of the COVID-19 pandemic) | | | | | assumptions applied in models because the fair value measured could be varied by the selection of those models and assumptions. When selecting valuation techniques, various factors such as the particular circumstances where these financial instruments are traded, availability of reliable inputs, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs are considered. Significance of level 3 inputs • Fair value measurement is more judgmental in respect of level 3 inputs, which are valued based on significantnon-market based unobservable inputs. | | of the underlying financial instruments to changes in level 3 inputs. | | | | | Note 20“Commitments, contingencies and guarantees” | | Determination of whether a loss is probable and measurement of provisions and reasonably possible loss | | In the normal course of business, Nomura may be involved in investigations, lawsuits and other legal proceedings and, as a result, may suffer losses from any fines, penalties or settlements where Nomura chooses to make to resolve the matters and these could be significant to Nomura’s results of operations. Determination if a loss is probable • Recognition of litigation provisions are only required if a loss is probable and can be reasonably estimated. • Significant judgment required in deciding whether loss from litigation, investigations, claims or other actions is probable or just reasonably possible. • Such judgment usually involves consideration of external legal counsel opinion, our own historical experiences in court and similar matters, the progress of regulatory | | See Note 20“Commitments, contingencies and guarantees” in our consolidated financial statements included in this annual report for details of the various legal matters Nomura is currently involved with, including those where provisions have been recognized or where loss is considered reasonably possible. If we concluded as of June 24, 2022 that for cases where an estimate of a range of reasonably possible losses can be made, such loss was actually now probable, we would recognize additional legal provisions through earnings of approximately ¥61 billion. However, this estimate does not include the impact of probable losses where we |
| | | | | | | | | Critical accounting estimates | | Underlying subjective key assumptions by management | | Effect of changes in estimates and assumptions during year ended March 31,
2022 (including impact of the COVID-19 pandemic) | | | | | investigation or litigation proceedings and management or our counterparty’s appetite to settle the matter. • If a loss is only considered to be reasonably possible, no provision is required. Measurement of a probable / reasonably possible loss • Once a loss has been determined as being probable of occurring, a provision is recognized when a loss is probable and the amount of such loss or range of loss can be reasonably estimated. • Where a loss is not probable but still reasonably possible and an estimate of the range of reasonably possible losses can be made based on current information available as of the date of our consolidated financial statements, the reasonably possible maximum loss in excess of amounts recognized as a provision is disclosed. • All of the above determination is often inherently difficult, especially for legal claims or regulatory investigations that are indeterminate or still at an early stage. • For certain exceptional matters, given the inherent complexities where we believe a loss is probable or reasonably possible, we may be unable to reasonably estimate the amount of loss and therefore are unable to recognize a provision or disclose the reasonably possible maximum loss in excess of amounts recognized as a provision for the matter. In these situations, we disclose this fact. | | cannot reasonably estimate such loss. See Note.20 “Commitments, contingencies and guarantees ”. |
Item 6. Directors, Senior Management and Employees A. Directors and Senior Management. The following table presents information about our Directors as of June 24, 2022. | | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | Chairman of the Board Directors Member of the Nomination Committee Member of the Compensation Committee Director and Chairman of Nomura Securities Co., Ltd. | | Apr. 1981 | | Joined the Company | | Apr. 2003 | | Director of Nomura Securities Co., Ltd. | | Jun. 2003 | | Executive Officer of Nomura Securities Co., Ltd. | | Apr. 2007 | | Executive Officer (Executive Managing Director) of Nomura Securities Co., Ltd. | | Oct. 2008 | | Senior Corporate Managing Director of Nomura Securities Co., Ltd. | | Apr. 2009 | | Executive Officer and Executive Vice President of Nomura Securities Co., Ltd. | | Apr. 2011 | | Co-COO and Deputy President of Nomura Securities Co., Ltd. | | Apr. 2012 | | Senior Managing Director of the Company Director, Representative Executive Officer and President of Nomura Securities Co., Ltd. | | Aug. 2012 | | Representative Executive Officer & Group CEO of the Company Director, Representative Executive Officer and President of Nomura Securities Co., Ltd. | | Jun. 2013 | | Director, Representative Executive Officer & Group CEO of the Company Director, Representative Executive Officer and President of Nomura Securities Co., Ltd. | | Apr. 2017 | | Director, Representative Executive Officer, President & Group CEO of the Company Director and Chairman of Nomura Securities Co., Ltd. | | Apr. 2020 | | Director and Chairman of the Company (Current) Director and Chairman of Nomura Securities Co., Ltd. (Current) |
| | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | | | | | Director, Representative Executive Officer, President and Group CEO Representative Director and President of Nomura Securities Co., Ltd. | | Apr. 1987 | | Joined the Company | | Apr. 2010 | | Senior Managing Director of Nomura Securities Co., Ltd. | | Apr. 2012 | | Senior Corporate Managing Director of Nomura Securities Co., Ltd. | | Aug. 2012 | | Senior Corporate Managing Director of the Company Senior Corporate Managing Director of Nomura Securities Co., Ltd. | | Apr. 2013 | | Senior Managing Director of the Company Senior Corporate Managing Director of Nomura Securities Co., Ltd. | | Apr. 2015 | | Senior Managing Director of the Company Executive Vice President of Nomura Securities Co., Ltd. | | Apr. 2016 | | Senior Managing Director of the Company Executive Officer and Executive Vice President of Nomura Securities Co., Ltd. | | Apr. 2017 | | Senior Managing Director of the Company Executive Vice President of Nomura Securities Co., Ltd. | | Apr. 2018 | | Executive Officer and GroupCo-COO of the Company Director, Executive Officer and Deputy President of Nomura Securities Co., Ltd. | | Apr. 2019 | | Executive Officer, Deputy President and Group Co-COO of the Company | | Apr. 2020 | | Representative Executive Officer, President & Group CEO of the Company Representative Director of Nomura Securities Co., Ltd. | | Jun. 2020 | | Director, Representative Executive Officer, President & Group CEO of the Company Representative Director of Nomura Securities Co., Ltd. | | Jun. 2021 | | Director, Representative Executive Officer, President & Group CEO of the Company (Current) Representative Director and President of Nomura Securities Co., Ltd. (Current) |
| | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | Director, Representative Executive Officer and Deputy President Representative Director and Deputy President of Nomura Securities Co., Ltd. | | Apr. 1986 | | Joined the Company | | Apr. 2009 | | Senior Managing Director and Global Equity Strategy Office of Nomura Securities Co., Ltd. | | Apr. 2011 | | Senior Managing Director and Global Markets Joint COO of Nomura Securities Co., Ltd. | | Feb. 2013 | | Senior Managing Director and Global Markets COO of Nomura Securities Co., Ltd. | | Apr. 2013 | | Senior Managing Director, Global Markets COO and Global Research of Nomura Securities Co., Ltd. | | Apr. 2016 | | Senior Managing Director, Group Compliance Head and Operations of the Company Representative Executive Officer, Compliance Division and Operations of Nomura Securities Co., Ltd., Internal Control Supervisory Manager | | Apr. 2017 | | Senior Managing Director, Group Compliance Head and Operations of the Company Representative Executive Officer, Senior Corporate Managing Director, Compliance Division and Operations of Nomura Securities Co., Ltd., Internal Control Supervisory Manager | | May. 2019 | | Executive Officer and Chief Compliance Officer of the Company Representative Director, Executive Vice President, Compliance and Legal of Nomura Securities Co., Ltd., Internal Control Supervisory Manager | | Apr. 2020 | | Executive Officer, Chief of Staff and Chief Compliance Officer of the Company Representative Director and Deputy President, Compliance and Legal of Nomura Securities Co., Ltd., Internal Control Supervisory Manager |
| | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | | | Apr. 2021 | | Representative Executive Officer, Deputy President, Chief of Staff and Chief Compliance Officer of the Company Representative Director and Deputy President and Chief of Staff of Nomura Securities Co., Ltd. | | | | | Jun. 2021 | | Director, Representative Executive Officer, Deputy President, Chief of Staff and Chief Compliance Officer of the Company Representative Director, Deputy President and Chief of Staff of Nomura Securities Co., Ltd. | | | | | Apr. 2022 | | Director, Representative Executive Officer and Deputy President of the Company (Current) Representative Director and Deputy President of Nomura Securities Co., Ltd. (Current) | | | | | | | Member of the Audit Committee (full-time) Member of the Board Risk Committee Corporate Auditor of Nomura Asia Pacific Holdings Co., Ltd Non-Executive Director of Nomura Holding America Inc.Non-Executive Director of Instinet Incorporated | | Apr. 1987 | | Joined the Company | | Apr. 2007 | | Head of Investment Banking Strategic Planning Dept of Nomura Securities Co., Ltd. | | Oct. 2008 | | Head of Capital Markets Dept. and Capital Solutions Dept. of Nomura Securities Co., Ltd. | | Jul. 2009 | | Head of Capital Markets Dept. of Nomura Securities Co., Ltd. | | Apr. 2012 | | Head of Investment Banking Strategic Planning Dept. of Nomura Securities Co., Ltd. | | Jul. 2013 | | Head of Office of Audit Committee of the Company Head of Office of Audit Committee of Nomura Securities Co., Ltd. | | Aug. 2016 | | Head of Office ofNon-Executive Directors and Audit Committee of the Head of Office ofNon-Executive Directors and Audit Committee of Nomura Securities Co., Ltd. |
| | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | | | Apr. 2017 | | Senior Managing Director and Group Internal Audit of the Company Senior Managing Director and Internal Audit of Nomura Securities Co., Ltd. | | | | | Apr. 2021 | | Advisor of the Company | | | | | Jun. 2021 | | Director of the Company (Current) | | | | | | | Chairman of the Nomination Committee Chairman of the Compensation Committee President of the National Institute of Advanced Industrial Science and Technology Outside Director of Ricoh Company, Ltd. | | Apr. 1979 | | Joined Asahi Glass Co., Ltd. (currently, AGC Inc.) (“AGC”) | | Jan. 2006 | | Executive Officer and GM of Kansai Plant of AGC | | Jan. 2007 | | Senior Executive Officer and GM of Electronics & Energy General Division of AGC | | Mar. 2008 | | Representative Director and President & COO of AGC | | Jan. 2010 | | Representative Director and President & CEO of AGC | | Jan. 2015 | | Representative Director & Chairman of AGC | | Jan. 2018 | | Director & Chairman of AGC | | Jun. 2018 | | Outside Director of the Company (Current) | | Mar. 2020 | | Director of AGC | | Apr. 2020 | | President of the National Institute of Advanced Industrial Science and | | | | | | | Member of the Nomination Committee Member of the Compensation Committee Representative Director, President & CEO of Unicharm Corporation Outside Director of Calbee, Inc. | | Apr. 1991 | | Joined Unicharm Corporation | | Jun. 1995 | | Director of Unicharm Corporation | | Apr. 1996 | | Director, General Manager of Procurement Division and Deputy General Manager of International Division of Unicharm Corporation | | Jun. 1997 | | Senior Director of Unicharm Corporation | | Apr. 1998 | | Senior Director, General Manager of Feminine Hygiene Business Division of Unicharm Corporation | | Oct. 2000 | | Senior Director, Responsible for Management Strategy of Unicharm Corporation |
| | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | | | Jun. 2001 | | Representative Director, President of Unicharm Corporation | | | | | Jun. 2004 | | Representative Director, President & CEO of Unicharm Corporation (Current) | | | | | Jun. 2021 | | Outside Director of the Company (Current) | | | | | | | Chairman of the Audit Committee Member of the Board Risk Committee Director of Nomura Securities Co., Ltd. Outside Director of Loginet Japan Co., Ltd. | | Apr. 1969 | | Joined Sumitomo Corporation | | Jun. 1998 | | Director of Sumitomo Corporation | | Apr. 2002 | | Representative Director and Managing Director of Sumitomo Corporation | | Jan. 2003 | | Member of the Business Accounting Council of the Financial Services Agency | | Apr. 2004 | | Representative Director and Senior Managing Executive Officer of Sumitomo Corporation | | Apr. 2005 | | Representative Director and Executive Vice President of Sumitomo Corporation | | Jan. 2009 | | Trustee of the IASC Foundation (currently, IFRS Foundation) | | Jul. 2009 | | Special Advisor of Sumitomo Corporation | | Jun. 2011 | | Director of the Financial Accounting Standards Foundation Chairman of Self-regulation Board and Public Governor of the Japan Securities Dealers Association | | Sep. 2013 | | Advisor of the IFRS Foundation Asia-Oceania Office Advisor of the Japanese Institute of Certified Public Accountants (Current) | | Jun. 2016 | | Outside Director of the Company (Current) Director of Nomura Securities Co., Ltd. (Current) | | Aug.2019 | | Senior Advisor of the IFRS Foundation Asia-Oceania Office (Current) |
| | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | Member of the Audit Committee Auditor of WASEDA University | | Oct. 1976 | | Joined NISSHIN Audit Corporation (*) | | Mar. 1979 | | Registered as Certified Public Accountant | | Nov. 1988 | | Partner of CENTURY Audit Corporation (*) | | Nov. 1990 | | Member of “Certified Public Accountant Examination System Subcommittee”, Certified Public Accountant Examination and Investigation Board, Ministry of Finance | | Apr. 1992 | | Member of “Business Accounting Council”, Ministry of Finance | | Dec. 1994 | | Senior Partner, CENTURY Audit Corporation (*) | | Oct. 2002 | | Member of Secretariat of the Information Disclosure, Cabinet Office (currently, Secretariat of the Information Disclosure and Personal Information Protection Review Board, Ministry of Internal Affairs and Communications) | | Apr. 2005 | | External Comprehensive Auditor, Tokyo | | Jul. 2008 | | Senior Partner of Ernst & Young ShinNihon LLC | | Aug. 2012 | | Retired from Ernst & Young ShinNihon LLC | | Dec. 2013 | | Commissioner of the Securities and Exchange Surveillance Commission | | Jun. 2017 | | Outside Director of the Company (Current) *Each of the corporation is currently Ernst & Young ShinNihon LLC |
| | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | Chairperson of the Board Risk Committee Independent Director of Navient Corporation Independent Director of Nomura Holding America Inc. Independent Director of Nomura Securities International, Inc. Independent Director of Nomura Global Financial Products Inc. Independent Director of Instinet Holdings Incorporated | | Jan. 1988 | | Enforcement Attorney of the U.S. Securities and Exchange Commission (SEC) | | Oct. 1990 | | Counsel of the U.S. Senate Committee on Banking, Housing, and Urban Affairs | | Nov. 1997 | | Commissioner of the SEC | | Feb. 2001 | | Acting Chairperson of the SEC | | Jul. 2002 | | Regulatory Expert of CNBC | | May 2003 | | Independent Consultant of JPMorgan Chase & Co. | | Aug. 2004 | | Independent Director of CA Inc. | | Jan. 2010 | | Special Advisor of Promontory Financial Group | | Dec. 2010 | | Independent Director of CIT Group Inc. | | Nov. 2014 | | Independent Director of Navient Corporation (Current) | | Jun. 2018 | | Outside Director of the Company (Current) | | | | | | | Member of the Audit Committee Member of the Board Risk Committee Chairman and Chief Executive Officer of First Eastern Investment Group Chair of Council, University College London Co-Chair, International Business Council of the World Economic ForumIndependent Director of Airbus SE | | Dec. 1982 | | Solicitor of the Supreme Court, Hong Kong | | Jan. 1988 | | Chairman and Chief Executive Officer of First Eastern Investment Group (Current) | | Oct. 1988 | | Director and Council Member of the Hong Kong Stock Exchange | | Jun. 1992 | | Advisory Committee Member of the Securities and Futures Commission, Hong Kong | | Aug. 2003 | | Foundation Board Member of the World Economic Forum | | Apr 2018 | | Independent Director of Airbus SE (Current) | | Jun. 2021 | | Outside Director of the Company (Current) |
| | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | Member of the Board Risk Committee Senior Counsel of Willkie Farr & Gallagher LLP Independent Director of the American Financial Exchange Principal of Digital Dollar Project Independent Director of Nomura Securities International, Inc. Independent Director of Nomura Global Financial Products Inc. | | Sep. 1984 | | Associate Attorney of Mudge Rose Guthrie Alexander & Ferdon | | Oct. 1985 | | Associate Attorney of Curtis, Mallet-Prevost, Colt & Mosle | | Jan. 1992 | | Attorney, Founding Partner of Giancarlo & Gleiberman | | Sep. 1997 | | Attorney, (Equity) Partner of Thelen Reid Brown Raysman & Steiner | | Apr. 2000 | | Vice President and Legal Counsel of Fenics Software | | Apr. 2001 | | Executive Vice President of GFI Group Inc. | | Jun. 2014 | | Commissioner of the U.S. Commodity Futures Trading Commission | | Jan. 2017 | | Chairman of the U.S. Commodity Futures Trading Commission | | Oct. 2019 | | Independent Director of the American Financial Exchange (Current) | | Jan. 2020 | | Senior Counsel of Willkie Farr & Gallagher LLP (Current) | | Jun. 2021 | | Outside Director of the Company (Current) | | | Member of the Board Risk Committee Director of the MPA Program in Economic Policy Management* Director of Central Banking and Financial Policy* *Positions at Columbia University, School of International and Public Affairs Independent Director of Nomura Holding America Inc. | | Jul. 1986 | | Assistant Professor, Economics Department, Columbia University | | Jan. 1991 | | Economist and Vice President of the Federal Reserve Bank of New York (FRBNY) | | Nov. 2006 | | Senior Vice President, FRBNY, Member of the FX Forum, Executive Meeting of East Asia and Pacific (EMEAP) Central Banks, Bank for International Settlements | | Jan. 2007 | | Board Member of the American Economic Association’s Committee on the Status of Women in the Economics Profession | | Jun. 2007 | | Member of the Markets Committee, Bank for International Settlements |
| | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | | | Jan 2009 | | Acting Systemic Open Market Account Manager for the Federal Open Market Committee (FOMC) | | | | | Oct. 2013 | | Deputy Director of the Office of Financial Research (OFR), U.S. Treasury Department | | | | | Oct. 2013 | | Member of the Deputies Committee of the Financial Stability Oversight Council (FSOC) | | | | | Jun. 2015 | | Senior Research Scholar and Director of Central Banking and Financial Policy at Columbia University’s School of International and Public Affairs (Current) | | | | | Jun. 2021 | | Outside Director of the Company (Current) |
Among the Directors listed above Kazuhiko Ishimura, Takahisa Takahara, Noriaki Shimazaki, Mari Sono, Laura Simone Unger, Victor Chu, J.Christopher Giancarlo and Patricia Mosser satisfy the requirements for an “Outside Director” under the Companies Act.
The following table presents information about our Executive Officers as of June 24, 2022. | | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | See “” under this Item 6.A. | | See “” under this Item 6.A. | | | | | | See “” under this Item 6.A. | | See “” under this Item 6.A. | | | | | | | Representative Director and Deputy President of Nomura Securities Co., Ltd. | | Apr. 1987 | | Joined the Company | | Apr. 2012 | | Senior Managing Director of Nomura Securities Co., Ltd. | | Apr. 2015 | | Senior Managing Director of the Company Senior Managing Director of Nomura Securities Co., Ltd. | | Apr. 2016 | | Senior Managing Director of the Company Senior Corporate Managing Director of Nomura Securities Co., Ltd. | | Apr. 2018 | | Senior Managing Director of the Company Executive Officer and Executive Vice President of Nomura Securities | | Apr. 2019 | | Senior Managing Director of the Company Executive Vice President of Nomura Securities Co., Ltd. | | Apr. 2020 | | Senior Managing Director of the Company Representative Director and Deputy President of Nomura Securities Co., Ltd. | | Apr. 2021 | | Executive Officer and Chief Health Officer of the Company (Current) Representative Director and Deputy President of Nomura Securities Co., Ltd. (Current) | | | | | | | Director, Executive Vice President of Nomura Securities Co., Ltd. | | Apr. 1990 | | Joined the Company | | Apr. 2016 | | Executive Officer and Chief Financial Officer of the Company Executive Officer and Financial Officer of Nomura Securities Co., Ltd. |
| | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | | | Apr. 2019 | | Executive Officer and Chief Financial Officer of the Company Director and Senior Corporate Managing Director of Nomura Securities Co., Ltd. | | Apr. 2021 | | Executive Officer and Chief Financial Officer of the Company Director, Executive Vice President of Nomura Securities Co., Ltd. | | | | | | | | | Oct. 2021 | | Executive Officer, Chief Financial Officer and Chief Administrative Officer of the Company Director, Executive Vice President of Nomura Securities Co., Ltd. | | Apr. 2022 | | Executive Officer and Chief Financial Officer of the Company(Current) Director, Executive Vice President of Nomura Securities Co., Ltd. (Current) | | | | | | | Director and Senior Corporate Managing Director of Nomura Securities Co., Ltd. | | Sep. 2002 | | Joined the Company | | Apr. 2020 | | Executive Officer and Chief Risk Officer of the Company (based in New York) (Current) Director and Senior Corporate Managing Director of Nomura Securities Co., Ltd. (Current) | | | | | | | | | Apr. 1991 | | Joined the Company | | Apr. 2015 | | Senior Managing Director of Nomura Securities Co., Ltd. | | | | | | | | | Apr. 2020 | | Senior Corporate Managing Director of Nomura Securities Co., Ltd. | | Apr. 2022 | | Executive Officer and Chief Compliance Officer of the Company (Current) Senior Corporate Managing Director of Nomura Securities Co., Ltd. (Current) |
| | | | | | | | | Responsibilities and Status within Nomura/ Other Principal Business Activities | | | | | Director and Senior Corporate Managing Director of Nomura Securities Co., Ltd. | | Apr. 1991 | | Joined the Company | | Apr. 2018 | | Senior Managing Director of the Company Senior Managing Director of Nomura Securities Co., Ltd. | | | | | | | | | May. 2019 | | Senior Managing Director and Chief Strategy Officer of the Company Senior Managing Director of Nomura Securities Co., Ltd. | | Apr. 2021 | | Executive Officer and Chief Strategy Officer of the Company (Current) Director and Senior Corporate Managing Director of Nomura Securities Co., Ltd. (Current) |
B. Compensation of Statutory Officers Our compensation program for our statutory officers is outlined as following. 1. Compensation Program of Statutory Officers | | | | | Overview of our Compensation Program of Statutory Officers | Key performance indicator (KPI) regarding Performance-Linked Compensation | | Return on Equity (ROE) | | | Determination method for amounts of Performance-Linked Compensation | | Determined by considering qualitative evaluation etc. by the Compensation Committee, based on the level of achievement in actual value against the target value regarding KPI. | | | Determination method for compensation of each Statutory Officers | | Determined by reflecting individual roles and responsibilities, respective jurisdiction’s regulations and compensation level etc. in addition to other qualitative elements. | | | Nominating Committee and Compensation Committee | | Chairman: Kazuhiko Ishimura (outside director) Member: Takahisa Takahara (outside director) Member: Koji Nagai (chairman of board of directors,non-executive director) |
2. Compensation Policy and Compensation Scheme We have developed Nomura Group compensation policy for all the employees and statutory officers (“Basic Policy”) and Compensation Policy for Directors and Executive Officers of Nomura Holdings, Inc. (“NHI”) (“Policy for Statutory Officers”) to enable us to achieve sustainable growth, realize a long-term increase in
shareholder value, deliver client excellence, compete in a global market and enhance our reputation. The Compensation Committee has been setting those policies with discussion for its appropriateness on every fiscal year. Separately, we have established compensation policy for Nomura Group officers and employees, including senior managing directors of NHI and directors of subsidiaries of NHI but excluding Directors and Executive officers of NHI. This policy is referred to as the “Employee Policy”. < Overview of Nomura’s Compensation Policy Structure > <a> ”Basic Policy” is as follows: Nomura Group has established compensation policy for Nomura Group officers and employees, including directors and executive officers of NHI. This policy is referred to as the “Basic Policy” and is as follows. As a company with three Board Committees structure, pursuant to Japanese corporate law, NHI has established an independent statutory Compensation Committee. Majority the Committee members are outside directors. The Committee has established both the Basic Policy and a Compensation Policy for Directors and Executive Officers of NHI, on the basis of which it considers and determines the details of individual compensation for Directors and Executive Officers of NHI. With respect to the relevant policies and total compensation funding for Nomura Group officers and employees other than the Company’s directors and executive officers, certain decisions regarding employment and remuneration matters are delegated to the “Human Resources Committee” (“HRC”) by Executive Management Board of NHI. The HRC is chaired by the Group CEO and at a minimum is composed of the Chief Finance Officer and Chief Risk Management Officer. The HRC considers and determine the above mentioned matters by cooperating with the remuneration committees in each region. Compensation Policies and Practices Nomura Group recognizes that its employees are key in contributing to society in line with its mission of “We help to enrich society through our expertise in capital markets”. Compensation for Nomura Group employees is designed to support achieving sustainable corporate growth, increasing enterprise value over the medium and long-term and maintaining sound and effective risk management, while at the same time positively contributing to the interest of all Nomura shareholders. In addition, in order to ensure that Numara Group attracts, retains, motivates and develops talent, the level and structure of remuneration takes into account the roles and responsibilities of individuals as well as the market pay levels in Japan and overseas, doing so in line with any relevant laws and regulatory expectations.
1) Sustainable corporate growth and increasing enterprise value over the medium and long-term Compensation for Nomura Group employees aims to realize Nomura Group corporate philosophy, to promote healthy corporate culture and behaviour in line with Nomura Group “Code of Conduct” and to facilitate a greater alignment with the environmental, social and governance (“ESG”) considerations. Based on theprinciple, compensation supports Nomura Group business strategy, objectives and the aim of sustainable growth and increasing enterprise value over the medium and long-term, while at the same time it ensures the maintenance of sound and market-competitive remuneration practices. 2) Sound and effective risk management Nomura Group maintains a sound and effective risk management with an appropriate risk appetite. The Company adjusts the performance measurement standards and indicators when determining compensation by considering both financial andnon-financial risks in each business. The qualitative factors such as conduct, compliance, professional ethics and corporate philosophy are considered in determining the final amount of remuneration, which may include a reduction resulting from a disciplinary action. 3) Alignment of interests with shareholders For Nomura Group employees who receive a certain amount of remuneration, a portion of the remuneration is stock-related remuneration linked to shares of NHI with an appropriate deferral period applicable, in order to ensure an alignment with the shareholders’ interests. In addition, when granting stock-related compensation, in the event of a material revision of Nomura Group financial statements or a material violation of Nomura Group rules and policies, employees’ compensation may be subject to suspension, reduction, forfeiture of rights, or for some employees evenre-payment (so-called “clawback”). Approval and Revision of the Basic Policy The approval, amendment or repeal of the Basic Policy can be made by the Compensation Committee of NHI. <b> ”Policy for Statutory Officers” is as follows: Compensation of Directors and Executive Officers is composed of base salary, cash bonus and long-term incentive plans. Base salary is determined based on factors such as professional background, career history, responsibilities and compensation standards of related business fields. With respect to Executive Officers, a portion of base salary may be paid in equity-linked awards with appropriate vesting periods to ensure that medium to long-term interests of Executive Officers are closely aligned with those of shareholders. Annual bonuses of Directors and Executive Officers are determined by taking into account both quantitative and qualitative factors. Quantitative factors include performance of the Group and the division. Qualitative factors include achievement of individual goals and subjective assessment of individual contribution.
In principle, certain portion of annual bonus payment should be deferred. With respect to the Group CEO, given the overall responsibility of business execution of the Nomura Group, the basic amount of the annual bonus is calculated based on the level of achievement in actual value(s) against the target value(s) of key performance indicator(s). In addition, qualitative evaluation should be reflected when determining final annual bonus amount. With respect to Directors and other Executive Officers, amount of annual bonus is determined with the annual bonus of Group CEO as standard baseline, taking into consideration the roles and responsibilities, local remuneration regulations and compensation levels in each jurisdiction etc., in addition to the qualitative evaluation of the individual. Audit Committee members and Outside Directors are not bonus-eligible in order to maintain and ensure their independence from business execution. In principle, certain portion of annual bonus should be deferred and paid in an equity-linked awards with appropriate vesting periods in lieu of cash to ensure that medium-term interests of Directors and Executive Officers are closely aligned with those of shareholders. In specific circumstances, unvested bonus may be required to be forfeited. Any voluntary resignation, material modification of Nomura’s financial statements, material breach of Nomura’s internal policies and regulations, amongst others, may render such forfeiture. Additionally, in certain jurisdictions, clawback provisions may apply to already paid and/or vested bonus. 3) Long-term Incentive Plan Long-term incentive plans may be awarded to Directors and Executive Officers, depending on their individual responsibilities, performance etc. Payments under long-term incentive plans are made when a certain degree of achievements are accomplished. Payments are made in equity-linked awards with appropriate vesting periods to ensure that long-term interests of Directors and Executive Officers are closely aligned with those of shareholders. <c> ”Employee Policy” is as follows: Based on the “Basic Policy”, Nomura Group has established compensation policy for Nomura Group officers and employees, including senior managing directors of NHI and directors of subsidiaries of NHI but excluding directors and executive officers of NHI. This policy is referred to as the “Employee Policy” and is as follows. Matters not provided for in the Employee Policy shall be governed by the provisions of the Basic Policy. Supervised by NHI Human Resources Committee (“HRC”), the regional committees governing employee compensation are composed of representatives of Finance, Risk Management, Compliance, Human Resources, and other departments as appropriate. These committees implement Nomura Group global compensation governance rules. The proposed compensation of Control Function staff (Risk Management, Compliance, Internal Audit) shall not be determined by the front office business and the performance evaluation of such staff shall not be determined solely by the financial performance of the business for which such staff are responsible.
Compensation Policies and Practices Nomura Group recognizes that its employees are key in contributing to society in line with its mission of “We help to enrich society through our expertise in capital markets”. Compensation for Nomura Group employees is designed to support achieving sustainable corporate growth, increasing enterprise value over the medium and long-term and maintaining sound and effective risk management, while at the same time positively contributing to the interest of all NHI shareholders. In addition, in order to ensure that Nomura Group attracts, retains, motivates and develops talent, the level and structure of remuneration takes into account the roles and responsibilities of individuals as well as the market pay levels in Japan and overseas, doing so in line with any relevant laws and regulatory expectations. 1) Sustainable corporate growth and increasing enterprise value over the medium and long-term Compensation for Nomura Group employees aims to realize Nomura Group corporate philosophy which underpins its Mission of Contributing to Society and its Vision of being a Trusted Partner, being based on the Values of Entrepreneurial Leadership, Teamwork and Integrity, to promote healthy, diverse corporate culture and the right behaviour in line with Nomura Group “Code of Conduct” and to facilitate a greater alignment with the environmental, social and governance (“ESG”) considerations. Based on theprinciple, compensation supports Nomura Group business strategy, objectives and the aim of sustainable growth and increasing enterprise value over the medium and long-term, while at the same time it ensures the maintenance of sound and market-competitive remuneration practices. Compensation at Nomura reflects and aligns with the performance of Nomura Group as a whole, its divisions, as well as individual employees, taking into account both the business strategy and market considerations. 2) Sound and effective risk management Nomura Group maintains a sound and effective risk management with an appropriate risk appetite. It adjusts the performance measurement standards and indicators when determining compensation by considering both financial andnon-financial risks in each business, taking a holistic approach. The qualitative factors such as conduct, compliance, professional ethics and corporate philosophy are considered in determining the final amount of remuneration, which may include a reduction resulting from a disciplinary action. Risk Management, Compliance and Finance divisions provide key inputs into the overall risk and performance assessment to ensure appropriate consideration of these factors. The compensation package offered to Nomura Group employees comprises two key elements: Fixed compensation—reflects the role, responsibilities and experience of the employee; and Variable compensation—intends to incentivise performance, promote the right behaviours, drive employee growth and development. For higher paid employees, a portion of the variable compensation may be deferred, balancing short-term with medium and long-term interests of Nomura Group. Nomura Group seeks to balance the components of compensation between fixed and variable according to the employee’ role and seniority. In principle, the percentage of deferral increases as an employee’s compensation increases. Guaranteed compensation is allowed only in limited circumstances such as new hire or, where allowed, strategic business needs. Multi-year guarantees are typically prohibited. 3) Alignment of interests with shareholders Deferred variable compensation is intended to align the interests of employees and NHI shareholders, and to encourage a long-term, sustainable approach to the management of the Company by senior management and
more highly paid employees. For Nomura Group employees who receive a certain amount of remuneration, a portion of the remuneration is stock-related remuneration linked to shares of NHI with an appropriate deferral period applicable, in order to ensure an alignment with the shareholders’ interests. In addition, when granting stock-related compensation, in the event of a material revision of Nomura Group financial statements or a material violation of Nomura Group rules and policies, employees’ compensation may be subject to suspension, reduction, forfeiture of rights, or for some employees located in specific jurisdictions/regions evenre-payment (so-called “clawback”). Approval and Revision of the Employee Policy The approval, amendment or repeal of the Employee Policy can be made by the HRC. (2) Scheme and details of Compensation for Directors and Executive Officers 1) Scheme of Compensation and Directors and Executive Officers and calculation method. The result of TC for the President and the Group CEO regarding the fiscal year ended as of March 31, 2022 is as follows. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Millions of yen, except percentages) | | Base Salary (Fixed Compensation) | | | Annual Bonus (Variable Compensation) | | | | | | | | Equity-linked compensation | | | | | |
| | | | | | | | | 102.0 | | | | 17.4 | | | | 119.4 | | | | 116.5 | | | | 116.5 | | | | 233.0 | | | | 352.4 | | | 28.9 | % | | | 4.9 | % | | | 33.9 | % | | | 33.1 | | | | 33.1 | | | | 66.1 | | | | 100.0 | |
The percentage of Base Salary (Fixed Compensation) and Annual Bonus (Variable Compensation) in TC is approximately 35% : 65%. Also, Base Salary (Fixed Compensation) includes equity-linked compensation, which is delivered by Nomura’ shares after the relevant fiscal year, same as deferred compensation. To be in line with overall responsibility of business execution of the Nomura Group, approximately 40% (equity-linked compensation, which is a part of Base Salary (Fixed Compensation), and deferred compensation) of TC are paid as equity-linked compensation, which leads to the alignment of interest with shareholders and appropriate medium-term incentives. 2) Calculation method of the Annual Bonus <Outline of calculation method> In calculating the Annual Bonus for the Directors and the Executive Officers, a different calculation method is applied depending on the position. <Specific calculation method by position> With respect to the President and the Group CEO, given the overall responsibility of business execution of the Nomura Group, the basic amount of the Annual Bonus is calculated based on the level of achievement in actual value against the target value regarding ROE. In addition, Total Compensation (hereafter “TC”) , including the Base Salary and the Annual Bonus, is determined by considering, as needed, qualitative evaluation etc. by the Compensation Committee. With respect to the Directors and Executive Officers other than the Group CEO, their Annual Bonus and TC are determined based on the ones of the Group CEO, reflecting individual roles and responsibilities, respective jurisdiction’s regulations and compensation level etc. in addition to other qualitative elements. With respect to the Director of the audit committee member and Outside Directors are out of scope of the Annual Bonus in order to keep independency from business execution. <Actual value regarding the performance indicator used for the calculation of the Annual Bonus > | | | | | | | | | | | | | | Actual value for the Fiscal Year | | | | | 8.0 | % | | | 5.1 | % |
3) | Matters relating toNon-Monetary Compensation |
(1) Deferred Compensation (equity-linked compensation) The Company sets half of the amount of the Annual Bonus of the Directors and Executive Officers. In principle, equity-linked compensation (Restricted Stock Unit (“RSU”), Notional Stock Unit (“NSU”) ) that falls under theNon-Monetary Compensation is used for payment of the amount.
(2) Outline of current Deferred Compensation Awards. The outline of current Deferred Compensation Awards is as follows. | | | | | | | | • Settled in Nomura’s common stock. • Graded vesting period is set as three years in principle. • It is introduced as the Deferred Compensation since the fiscal year ended March 31, 2018. • In principle, it has been granted in May every year. | | | | | • Linked to the price of Nomura’s common stock and cash-settled. • Same as RSU awards, graded vesting period is set as three years in principle. • Following the introduction of RSU as a principle vehicle in 2,018 NSU awards are less commonly used in Nomura. • Same as RSU awards, in principle, it has been granted in May every year. |
As stated above, RSU awards have been introduced as a principle vehicle from the fiscal year ended as of March 31, 2018 and replaced with stock acquisition rights and other awards. (3) Effect of payment of deferred compensation as equity-related compensation By providing deferred compensation as equity-linked compensation, the economic value of the compensation is linked to the stock price of Nomura, and a certain vesting period is set. Alignment of interests with shareholders. Medium-term incentives (*) and retention by providing an opportunity for the economic value of Deferred Compensation at the time of grant to be increased by a rise in shares during a period of time from grant to vesting. | * | In line with the introduction of RSU, among the equity-linked compensation, as the principal vehicle for Deferred Compensation, in principle, Nomura’s common stock will be paid instead of cash over the three year deferral period from the fiscal year following the fiscal year in which the deferred compensation was granted. Since the number of shares to be paid is determined based on the Nomura’s share price at the time of grant, the increase in Nomura’s share price will increase the economic value of Deferred Compensation at the time of vest. Since the increase in share prices reflects the increase in corporate value, alignment of interest with that of shareholders, in addition to medium-term incentive effects for the Directors and Executive Officers, will be achieved. |
Promotion of cross-divisional collaboration and cooperation by providing a common goal of increasing corporate value over the medium to long term. As a result of these benefits, deferred compensation awards are also recommended by regulators in the key jurisdictions in which we operate. The deferral period over which our deferred compensation awards vest is generally three or more years. This is in line with the “Principles for Sound Compensation Practices” issued by the Financial Stability Board which recommends, among other things, a deferral period of three or more years.
(4) Clawback prescribed in Deferred Compensation Any voluntary resignation, material modification of the financial statements, material breach of Nomura’s internal policies and regulations etc. are subject to forfeiture, reduction or clawback (Conclusion of individual contracts including “clawback clause”). 3. Compensation for Directors and Executive Officers Pursuant to the fundamental approach and framework of compensation as described above, and as a company which adopts a committee-based corporate governance system, a Compensation Committee of Nomura determines compensation of its Directors and Executive Officers in accordance with our applicable compensation policies. 3-1. Aggregate compensation 1) Aggregate Compensation for Directors and Officers | | | | | | | | | | | | | | | | | | | | | | |
| | | Base Salary etc. (Note 2, 3) | | | Performance- linked Compensation (Note 4) | | | Non-monetary Compensation (Note 5) | | | | | | | | 13 | | | ¥ | 323 | | | ¥ | 70 | | | ¥ | 63 | | | ¥ | 456 | | (Outside Directors included in above) | | | (10 | ) | | | (166 | ) | | | ( — | ) | | | ( — | ) | | | (166 | ) | | | | 7 | | | ¥ | 430 | | | ¥ | 301 | | | ¥ | 258 | | | ¥ | 989 | | | | | 20 | | | ¥ | 753 | | | ¥ | 371 | | | ¥ | 321 | | | ¥ | 1,445 | |
(1) | The number of people includes 3 Directors and 1 Executive Officer who retired in June 2021. There were 10 Directors and 6 Executive Officers as of March 31, 2022. Compensation to Directors who were concurrently serving as Executive Officers is included in that of Executive Officers. |
(2) | Base Salary of ¥753 million includes other compensation (commuter pass allowance) of ¥60 thousand. |
(3) | In addition to base salary of Executive Officers, ¥16 million of corporate housing costs, such as housing allowance and related tax adjustments, were provided. |
(4) | Out of the Annual Bonus, amounts to be paid in cash after the Fiscal Year close are shown. |
(5) | Deferred compensation (such as RSU and stock options) granted during and prior to the fiscal year ended March 31, 2022 is recognized as expense in the financial statements for the fiscal year ended March 31, 2022. |
(6) | Subsidiaries of the Company paid ¥56 million to Outside Directors as compensation, etc. for their directorship at those subsidiaries for the fiscal year ended March 31, 2022. |
2) Individual compensation of Directors and Executive Officers receiving ¥100 million or more | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | Nomura | | Chairman of the Board of Directors | | ¥ | 91.2 | | | ¥ | 0 | | | ¥ | 91.2 | | | ¥ | 69.9 | | | ¥ | 69.9 | | | ¥ | 139.8 | | | ¥ | 231.0 | | | | Nomura | | | | ¥ | 102.0 | | | ¥ | 17.4 | | | ¥ | 119.4 | | | ¥ | 116.5 | | | ¥ | 116.5 | | | ¥ | 233.0 | | | ¥ | 352.4 | | | | Nomura | | | | ¥ | 75.6 | | | ¥ | 14.4 | | | ¥ | 90.0 | | | ¥ | 65.0 | | | ¥ | 65.0 | | | ¥ | 130.0 | | | ¥ | 220.0 | | | | Nomura | | | | ¥ | 66.0 | | | ¥ | 13.2 | | | ¥ | 79.2 | | | ¥ | 45.4 | | | ¥ | 45.4 | | | ¥ | 90.8 | | | ¥ | 170.0 | | | | Nomura | | | | ¥ | 60.0 | | | ¥ | 13.2 | | | ¥ | 73.2 | | | ¥ | 28.4 | | | ¥ | 28.4 | | | ¥ | 56.8 | | | ¥ | 130.0 | | | | Nomura | | | | ¥ | 51.3 | | | ¥ | 9.6 | | | ¥ | 60.9 | | | ¥ | 23.3 | | | ¥ | 23.3 | | | ¥ | 46.6 | | | ¥ | 107.5 | | | | Nomura | | | | ¥ | 54.0 | | | ¥ | 9.6 | | | ¥ | 63.6 | | | ¥ | 22.7 | | | ¥ | 22.7 | | | ¥ | 45.4 | | | ¥ | 109.0 | |
(1) | Variable Compensation indicates the amount determined as remuneration based on the performance during the fiscal year ended March 31, 2022. |
(2) | In addition to basic compensation, ¥16 million of corporate housing costs, such as housing allowance and related tax adjustments, were provided. |
The following table presents a summary of the meetings held by our Compensation Committee during the year ended March 31, 2022, a summary of key matters discussed and also whether all members of the Committee attended the meeting. | | | | | | | Summary of the discussion and the resolution | | | | | Discussion: Annual bonus for the year ended Mar 31, 2021 | | | | | Resolution: Annual bonus for the year ended Mar 31, 2021 | | | | | Resolution: Transformation of the determination process of the Directors and Executive Officers compensation (bonus). Discussion: Updating disclosure material to meet a revised Japan Corporate Law requirement. Discussion: Revision of the Compensation Policy for Directors and Executive Officers of NHI. | | | | | Resolution: Reduction in base salary for certain Executive Officers | | | | | Resolution: The appointment of the Director with the right to convoke the board of directors meetings and the Director who reports the executions of the committee’s duties to the board of the directors meetings. Resolution: The compensation policies | | |
| | | | | | | Summary of the discussion and the resolution | | | | | Resolution: Individual base salary of the Directors and Executive Officers Discussion: Transformation of the determination process of the Directors and Executive Officers compensation (bonus). | | | | | Resolution: Granting RSUs to the Directors and Executive Officers. | | | | | Resolution: Individual base salary of the Directors. Discussion: Revision of the Compensation Policy of Nomura Group Resolution: Revision of the Compensation Policy for Directors and Executive Officers of NHI. Discussion: Establishment of the Nomura Group Compensation Policy for Employees | | | | | Resolution: Revision of the Compensation Policy of Nomura Group | | | | | Resolution: Individual base salary of the Directors and Executive Officers. | | |
Through discussion and resolution of the above topics, our Compensation Committee confirmed that compensation for our Directors and Executive Officers in respect of the year ended March 31, 2022 are appropriate and consistent with our relevant compensation policies. Outlines of the above meetings have been reported to our Board of Directors. Stock Acquisition Rights (“SARs”) The following table presents information regarding unexercised Stock Acquisition Rights as of March 31, 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.46 | | | | | | | | | | ¥ | | | | ¥ | | | Stock Acquisition Rights No.47 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.48 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.49 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.50 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.53 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.54 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.55 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.56 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.57 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.58 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.60 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.61 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.62 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.63 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.64 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.65 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.68 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.69 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.70 | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.71 | | | | | | | | | | | | | | | | |
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| | Stock Acquisition Rights No.48 | | June 5, 2012 | | | 34,300 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.50 | | June 5, 2012 | | | 36,400 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.58 | | June 5, 2014 | | | 124,800 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.64 | | June 5, 2015 | | | 133,900 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.65 | | June 5, 2015 | | | 799,300 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.68 | | November 18, 2015 | | | 2,565,800 | | | | | ¥ | 801 | | | ¥ | 0 | | Stock Acquisition Rights No.69 | | June 7, 2016 | | | 138,200 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.70 | | June 7, 2016 | | | 883,400 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.71 | | June 7, 2016 | | | 1,162,400 | | | | | ¥ | 1 | | | ¥ | 0 | |
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| | Stock Acquisition Rights No.72 | | | | | | | | | | ¥ | | | | ¥ | | | | Stock Acquisition Rights No.73 | | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.74 | | | | | | | | | | | | | | | | | | November 11, 2016 | | | 2,365,400 | | | | | ¥ | 593 | | | ¥ | 0 | | Stock Acquisition Rights No.75 | | | | | | | | | | | | | | | | | | June 9, 2017 | | | 729,700 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.76 | | | | | | | | | | | | | | | | | | June 9, 2017 | | | 908,400 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.77 | | | | | | | | | | | | | | | | | | June 9, 2017 | | | 1,280,000 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.78 | | | | | | | | | | | | | | | | | | June 9, 2017 | | | 398,600 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.79 | | | | | | | | | | | | | | | | | | June 9, 2017 | | | 809,900 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.80 | | | | | | | | | | | | | | | | | | June 9, 2017 | | | 136,200 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.81 | | | | | | | | | | | | | | | | | | June 9, 2017 | | | 136,200 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.82 | | | | | | | | | | | | | | | | | | June 9, 2017 | | | 202,100 | | | | | ¥ | 1 | | | ¥ | 0 | | Stock Acquisition Rights No.83 | | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.84 | | | | | | | | | | | | | | | | | | November 17, 2017 | | | 2,475,300 | | | | | ¥ | 684 | | | ¥ | 0 | | Stock Acquisition Rights No.85 | | | | | | | | | | | | | | | | | | November 20, 2018 | | | 2,310,300 | | | | | ¥ | 573 | | | ¥ | 0 | |
(1) | SARs (including those granted to Directors and Executive Officers of Nomura which are stated in the table below) are issued in conjunction with deferred compensation plan. |
(2) | The number of shares issuable under SARs is subject to adjustments under certain circumstances including stock splits. |
SARs Held by Directors and Executive Officers of Nomura The following table presents details of Stock Acquisition Rights held by Directors and Executive Officers as of March 31, 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock Acquisition Rights No.47 | | | | | | | | | Stock Acquisition Rights No.48 | | | | | | | | | Stock Acquisition Rights No.54 | | | | | | | | | Stock Acquisition Rights No.58 | | | | | | | | | Stock Acquisition Rights No.60 | | | | | | | | | Stock Acquisition Rights No.61 | | | | | | | | | Stock Acquisition Rights No.63 | | | | | | | | | Stock Acquisition Rights No.64 | | | | | | | | | Stock Acquisition Rights No.65 | | | | | | | | | Stock Acquisition Rights No.69 | | | | | | | | | Stock Acquisition Rights No.70 | | | | | | | | | Stock Acquisition Rights No.71 | | | | | | | | | Stock Acquisition Rights No.75 | | | | | | | | | Stock Acquisition Rights No.76 | | | | | | | | | Stock Acquisition Rights No.77 | | | | | | | | |
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| | Stock Acquisition Rights No.65 | | | 438 | | | | 2 | | Stock Acquisition Rights No.70 | | | 635 | | | | 3 | | Stock Acquisition Rights No.71 | | | 634 | | | | 3 | | Stock Acquisition Rights No.75 | | | 687 | | | | 3 | | Stock Acquisition Rights No.76 | | | 687 | | | | 3 | | Stock Acquisition Rights No.77 | | | 684 | | | | 3 | |
Pension, Retirement or Similar Benefits See Note 13 “ ” in our consolidated financial statements included in this annual report.
Information Concerning Directors The Companies Act states that a Company with Three Board Committees (as defined below) must establish three committees; a nomination committee, an audit committee and a compensation committee. The members of each committee are chosen from the company’s directors, and the majority of the members of each committee must be outside directors. At a Company with Three Board Committees, the board of directors is entitled to establish the basic management policy for the company, has decision-making authority over certain prescribed matters, and supervises the execution by the executive officers of their duties. Executive officers and representative executive officers appointed by a resolution adopted by the board of directors manage the business affairs of the company, based on a delegation of authority by the board of directors. Since June 2003, theThe Company has adopted a corporate governance structure that separates management oversight functions from business execution functions (“Company with Three Board Committees”). Through this governance structure, the Company aims to strengthen management oversight, increase the transparency of the Company’s management and expedite the decision-making process within the Nomura Group. An outline of the Company’s Board of Directors, Nomination Committee, Audit Committee and Compensation Committee is provided below.
The Company’s Board of Directors consists of Directors who are elected at a general meeting of shareholders and the Company’s Articles of Incorporation provide that the number of Directors shall not exceed
twenty. The term of office of each Director expires upon the conclusion of the ordinary general meeting of shareholders with respect to the last fiscal year ending within one year after their appointment. Directors may serve any number of consecutive terms. From among its members, the Company’s Board of Directors elects the Chairman. The Company’s Board of Directors met eleventwelve times during the fiscal year ended March 31, 2020.2022. As a group, the Directors attended 100% of the total number of meetings of the Board of Directors during the year. The Board of Directors has the authority to determine the Company’s basic management policy and supervise the execution by the Executive Officers of their duties. Although the Board of Directors also has the authority to make decisions with regard to the Company’s business, most of this authority has been delegated to the Executive Officers by a resolution adopted by the Board of Directors. There are no Directors’ service contracts with the Company or any of its subsidiaries providing for benefits upon termination of employment. As of June 20, 2022, the members of the Board of Directors are Koji Nagai, Kentaro Okuda, Tomoyuki Teraguchi, Shoji Ogawa, Kazuhiko Ishimura, Takahisa Takahara, Noriaki Shimazaki, Mari Sono, Laura Simone Unger, Victor Chu, J. Christopher Giancarlo, Patricia Mosser. Koji Nagai is the Chairman of the Board. The Nomination Committee, in accordance with the Company’s Regulations of the Nomination Committee, determines the details of any proposals concerning the election and dismissal of Directors to be submitted to general meetings of shareholders by the Board of Directors. The Nomination Committee met nineseven times during the fiscal year ended March 31, 2020.2022. As a group, the member Directors attended all of the meetings of the Nomination Committee during the year. As of June 24, 2020,20, 2022, the members of the Nomination Committee are Koji Nagai, a Director not concurrently serving as an Executive Officer, and Outside Directors Hiroshi KimuraKazuhiko Ishimura and Takahisa Takahara. Kazuhiko Ishimura. Hiroshi KimuraIshimura is the Chairman of this Committee. The Audit Committee, in accordance with the Company’s Regulations of the Audit Committee, (i) audits the execution by the Directors and the Executive Officers of their duties and the preparation of audit reports and (ii) determines the details of proposals concerning the election, dismissal or non-reappointment of the accounting auditor to be submitted to general meetings of shareholders by the Board of Directors. With respect to financial
reporting, the Audit Committee has the statutory duty to examine financial statements and business reports to be prepared by Executive Officers designated by the Board of Directors and is authorized to report its opinion to the ordinary general meeting of shareholders. The Audit Committee met sixteentwenty-four times during the fiscal year ended March 31, 2020.2022. As a group, the member Directors attended all of the meetings of the Audit Committee during the year. As of June 24, 2020,20, 2022, the members of the Audit Committee are Hisato MiyashitaShoji Ogawa (a full-time member of the Audit Committee) and Outside Directors, Noriaki Shimazaki, Mari Sono and Mari Sono.Victor Chu. Noriaki Shimazaki is the Chairman of this Committee. The Compensation Committee, in accordance with the Company’s Regulations of the Compensation Committee, determines the Company’s policy with respect to the determination of the details of each Director and Executive Officer’s compensation. The Compensation Committee also determines the details of each Director and Executive Officer’s actual compensation. The Compensation Committee met eightnine times during the fiscal year ended March 31, 2020.2022. As a group, the member Directors attended all of the meetings of the Compensation Committee during the year. As of June 24, 2020,20, 2022, the members of the Compensation Committee are Koji Nagai, a Director not concurrently serving as an Executive Officer, and Outside Directors Hiroshi KimuraKazuhiko Ishimura and Takahisa Takahara. Kazuhiko Ishimura. Hiroshi KimuraIshimura is the Chairman of this Committee. The Board Risk Committee is anon-statutory organ, in accordance with the Company’s Regulations of the Board Risk Committee, of which purpose is to assist the Board of Directors in supervising Nomura Group’s risk management and to contribute to sophistication of the risk management. At meetings of the Board Risk Committee, to further strengthen the risk management of Nomura Group, consent to the Risk Appetite Statement and the main design of the risk management framework, analysis of risk environment/verification results and future projections, supervision of overall execution of risk management and medium- to long-term risk strategies are mainly deliberated. The status of execution of the function in the Board Risk Committee is reported to the Board of Directors. The Board Risk Committee met four times during the fiscal year ended March 31, 2022. As a group, the member Directors attended all of the meetings of the Board Risk Committee during the year. As of June 20, 2022, the members of the Board Risk Committee are Outside Directors Laura Simone Unger, Noriaki Shimazaki, Victor Chu, J. Christopher Giancarlo and Patricia Mosser, and Shoji Ogawa, a Director not concurrently serving as an Executive Officer. Laura Simone Unger is the Chairperson of this Committee. Limitation of Director Liability In accordance with Article 33, Paragraph 2 of the Company’s Articles of Incorporation and Article 426, Paragraph 1 of the Companies Act, the Company may execute agreements with Directors (excluding a person who serves as an executive director, etc.) that limit their liability to the Company for damages suffered by the
Company if they acted in good faith and without gross negligence. Accordingly, the Company has entered into agreements to limit Companies Act Article 423 Paragraph 1 liability for damages (“Limitation of Liability Agreements”) with each of the following Directors: Hisato Miyashita, Hiroshi Kimura,Shoji Ogawa, Kazuhiko Ishimura, Takahisa Takahara, Noriaki Shimazaki, Mari Sono, Michael Lim Choo San and Laura Simone Unger.Unger, Victor Chu, J. Christopher Giancarlo and Patricia Mosser. Liability under each such agreement is limited to either ¥20 million or the amount prescribed by laws and regulations, whichever is greater. Directors and Officers Liability Insurance Contracts The Company has entered into directors and officers liability insurance contracts set forth in Article430-3, Paragraph 1 of the Companies Act with insurance companies, which have persons such as directors, executive officers, senior managing directors, auditors, and senior employees of the Company and its subsidiaries as
insured persons. Under such insurance contracts, there will be an indemnification of losses, such as compensation for damages and litigation costs, incurred by an insured person due to a claim for loss or damage caused by an act (including an omission) carried out on the basis of the position, such as director or officer, held by the insured at the Company, and all insurance premiums of insureds have been entirely borne by the Company. However, there are certain exclusions applicable to such insurance contracts such as losses caused by a deliberately fraudulent or dishonest act of individuals such as directors/officers. Information Concerning Executive Officers Executive Officers of the Company are appointed by the Board of Directors, and the Company’s Articles of Incorporation provide that the number of Executive Officers shall not exceed forty-five. The term of office of each Executive Officer expires upon the conclusion of the first meeting of the Board of Directors convened after the ordinary general meeting of shareholders for the last fiscal year ending within one year after each Executive Officer’s assumption of office. Executive Officers may serve any number of consecutive terms. Executive Officers have the authority to determine matters delegated to them by resolutions adopted by the Board of Directors and to execute business activities. The following table shows the number of our employees as of the dates indicated: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 15,748 | | | | 15,330 | | | | 15,213 | | | | | 2,691 | | | | 2,769 | | | | 2,820 | | | | | 2,120 | | | | 2,152 | | | | 2,257 | | | | | 6,070 | | | | 6,151 | | | | 6,295 | | | | | | | | | | | | | | | | | | 26,629 | | | | 26,402 | | | | 26,585 | | | | | | | | | | | | | | |
As of March 31, 2020,2022, we had 15,74815,213 employees in Japan, including 9,2158,265 in our Retail Division, 1,6301,013 in our WholesaleInvestment Management Division and 8371,701 in our Asset ManagementWholesale Division. In overseas, we had 10,88111,372 employees, of which 2,6912,820 were located in Europe, 2,1202,257 in the Americas, and 6,0706,295 in Asia and Oceania. As of March 31, 2020, 8,8562022, 8,371 of Nomura Securities’ employees in Japan were members of the Nomura employees’ union, with which we have a labor contract. The Company and labor union communicate frequently in order to resolve labor-related matters. We have not experienced any strikes or other labor disputes in Japan or overseas and consider our employee relations to be excellent.
The following table shows the number of shares owned by our Directors and Executive Officers as of May 31, 2020.2022. As of that date, none of them owned 1% or more of our issued and outstanding shares. None of the shares referred to below have different voting rights.
| | | | | | | | | | | | 393,142 | | | | | 264,038 | | Toshio MoritaTomoyuki Teraguchi
| | | 248,877 | | Hisato MiyashitaShoji Ogawa
| | | | | | | | 38,618 | | | | | | | | | | 881 | | | | | 25,630 | | | | | | | | | | | | | | | | ) (1) | | | | | | | | | | | | | | | | | | | | | | | | 971,186 | | | | | | |
(1) | ADRs are not included in the total. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | See above | | | | | 95,194 | | | | | 64,294 | | | | | 8,290 | | | | | 84,293 | | | | | 27,732 | | | | | | | | | | 279,803 | | | | | | | | | | | |
For information regarding stock options granted to our Directors and Executive Officers, see Item 6.B “ ” of this annual report. Item 7. Major Shareholders and Related Party Transactions According to a statement on Schedule 13G (Amendment No.5)No.7) filed by BlackRock, Inc. with the SEC on February 5, 2020,3, 2022, BlackRock, Inc. owned 201,152,010206,811,679 shares, representing 5.80%6.40% of the issued shares of the Company’s common stock. However, the Company has not confirmed the status of these shareholdings as of March 31, 2020.2022. According to a statement on Schedule 13G (Amendment No.2) filed by Sumitomo Mitsui Trust Holdings, Inc. with the SEC on February 12, 2020,4, 2022, Sumitomo Mitsui Trust Holdings, Inc. owned 176,742,300176,175,500 shares, representing 5.10%5.40% of the issued shares of the Company’s common stock. However, the Company has not confirmed the status of these shareholdings as of March 31, 2020.2022.
To our knowledge, we are not directly or indirectly owned or controlled by another corporation, by any government or by any other natural or legal person severally or jointly. We know of no arrangements the operation of which may at a later time result in a change of control of Nomura. Also as of March 31, 2020,2022, there were 273281 Nomura shareholders of record with addresses in the U.S., and those U.S. holders held 350,494,286
373,610,477 shares of the Company’s common stock, representing 10.0%11.6% of Nomura’s then outstandingissued common stock. As of March 31, 2020,2022, there were 30,223,15136,833,403 ADSs outstanding, representing 30,223,15136,833,403 shares of the Company’s common stock or 0.8%1.1% of Nomura’s then outstandingissued common stock. Our major shareholders above do not have different voting rights. B. Related Party Transactions. Nomura Research Institute, Ltd. NRI develops and manages computer systems and provides research services and management consulting services. We are one of the major clients of NRI. We held 28.8%24.5% of NRI’s outstanding share capital as of March 31, 2020.2022. For the year ended March 31, 2020,2022, we purchased ¥17,716¥12,760 million worth of software and computer equipment and paid ¥45,911¥45,103 million for other services to NRI, while received ¥642¥847 million from NRI. Nomura has sold 14,105,000 ordinary shares it held at ¥50,002 million to NRI in response to its own share repurchase through off-floor trading(ToSTNeT-3) on June 22, 2021. As a result of the transaction, a gain of ¥36,249 million was recognized in earnings withinduring the year ended March 31, 2022. See also Note 2019 “ Affiliated companies and other equity-method investees ” in the consolidated financial statements included in this annual report. ThereDuring the fiscal year ended March 31, 2022, no loans that were outstanding were made to our directors other than in the normal course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers, involving no significant transactions.more than the normal risk of collectability and presenting no other unfavorable features.
C. Interests of Experts and Counsel. Item 8. Financial Information A. Consolidated Statements and Other Financial Information. The information required by this item is set forth in our consolidated financial statements included elsewhere in this annual report. For a discussion of our litigation and related matters, see Note 2120 “ Commitments, contingencies and guarantees ” in the consolidated financial statements included in this annual report. For our dividend policy, see Item 5.B “Liquidity and Capital Resources—Resources Capital Management—Management this annual report.
Except as disclosed in this annual report, there have been no significant changes since March 31, 2020.2022. Item 9. The Offer and Listing A. Offer and Listing Details. See Item 9. C. “The9.C. “The Offer and Listing—Markets”Markets ”.
The principal trading market for the Company’s common stock is the Tokyo Stock Exchange. The Company’s common stock has been listed on the Tokyo Stock Exchange and the Nagoya Stock Exchange since 1961. The trading symbol on those trading markets is “8604”.“8604.” Since December 2001, the Company’s common stock has been listed on the New York Stock Exchange in the form of ADSs evidenced by ADRs. Each ADS represents one share of common stock. The trading symbol is “NMR”.“NMR.” The Company’s common stock has been listed on the Singapore Stock Exchange since 1994. The trading symbol is “N33”.“N33.” F. Expenses of the Issue. Item 10. Additional Information B. Memorandum and Articles of Association. Register, Objects and Purposes in the Company’s Articles of Incorporation Nomura Holdings, Inc. is incorporated in Japan and is registered in the Commercial Register ( in Japanese) maintained by the Tokyo Legal Affairs Bureau. Article 2 of the Company’s Articles of Incorporation, which is an exhibit to this annual report, states that the Company’s purpose is, by means of holding shares, to control and manage the business activities of domestic companies which engage in the following businesses and the business activities of foreign companies which engage in the businesses equivalent to the following businesses: | (1) | Financial instruments business prescribed in the Financial Instruments and Exchange Law; |
| (2) | Banking business prescribed in the Banking Law and trust business prescribed in the Trust Business Law; and |
| (3) | Any other financial services and any business incidental or related to such financial services. |
| (4) | Other than as prescribed in the items above, any other business ancillary or related to survey and research in connection with the economy, financial or capital markets, or infrastructure or undertaking the outsourcing thereof. |
Provisions Regarding the Company’s Directors Although there is no provision in the Company’s Articles of Incorporation as to a Director’s power to vote on a proposal or arrangement in which the Director is materially interested, under the Companies Act and the Company’s Regulations of the Board of Directors, a Director must abstain from voting on such matters at meetings of the Board of Directors. As a Company with Three Board Committees, the compensation of the Company’s Directors and Executive Officers is determined by the Compensation Committee (see Item 6.C. “Board Practices-Information Concerning Directors-Compensation Committee” in this annual report). The Compensation Committee establishes the policy with respect to the determination of the individual compensation (including variable compensation) of each of the Company’s Directors and Executive Officers and makes determinations in accordance with that compensation policy. With respect to borrowing powers, these as well as other powers relating to the management of the business (with the exception of certain exclusions specified under the Companies Act) have been delegated to the Executive Officers by the Board of Directors as a Company with Three Board Committees. There is no mandatory retirement age for the Company’s Directors under the Companies Act or the Company’s Articles of Incorporation. There is no requirement concerning the number of shares an individual must hold in order to qualify him or her to serve as a Director of the Company under the Companies Act or the Company’s Articles of Incorporation. Pursuant to the Companies Act and the Company’s Articles of Incorporation, the Company may, by a resolution adopted by the Company’s Board of Directors, release the liabilities of any Directors or Executive Officers to the Company for damages suffered by the Company due to their acts taken in good faith and without gross negligence, to the extent permitted by the Companies Act and the Company’s Articles of Incorporation. In addition, the Company may execute with Directors (excluding a person who serves as an executive director, etc.) agreements that limit their liabilities to the Company for damages suffered by the Company if they acted in good faith and without gross negligence, to the extent permitted by the Companies Act and the Company’s Articles of Incorporation. See Item 6.C. “Board Practices-Limitation of Director Liability” in this annual report. For disclosures under the following items, see “Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934” which is an exhibit to this annual report: Item 10.B.3, B.4, B.5, B.6, B.7, B.8, B.9 and B.10. In addition to the items disclosed in Item 6.C “Board Practices”Not applicable.
Table of this annual report, Nomura tendered to the self-tender offer made by Nomura Research Institute, Ltd. (“NRI”) conducted between July 1, 2019 and July 29, 2019. Upon the settlement on August 21, 2019, Nomura sold ¥101,889,300 ordinary shares it held at ¥159,966,201,000 (¥1,570 per share) to NRI. NRI remains an equity method affiliate of NHI.Contents The following summary is not intended to be a complete analysis of the prior notification or reporting requirements under Japanese foreign exchange regulations as a result of the acquisition by investors of shares of the Company. Potential investors should consult their own legal advisors on the consequences of the acquisition of shares of the Company, including specifically the applicable notification, reporting and other procedures and any available exemption therefrom under Japanese foreign exchange regulations.
The Foreign Exchange and Foreign Trade Law of Japan and its related cabinet orders and ministerial ordinances (“Foreign Exchange Regulations”) governs certain aspects relating to the acquisition and holding of shares of the Company by “foreign investors,” as defined below. If a foreign investor acquires shares of the Company and as a result of this acquisition directly or indirectly holds 1% or more of the issued shares of the Company, together with its existing holdings and those of other parties who have a close relationship with that foreign investor (the “closely-related person”), the foreign investor is, in general, required to report the acquisition to the Minister of Finance and any other competent ministers via the Bank of Japan within 45 days from the date of acquisition. If (i) the foreign investor or its closely-related person will not become a board member of the Company, (ii) the foreign investor will not propose, at a general shareholders meeting of the Company, a transfer or disposition of its business, and (iii) the foreign investor will not have access to any non-public information regarding the Company’s technologies in relation to its business, in general, a prior notification is exempted. “Foreign investors” are generally defined as (i) individuals who are not residents in Japan, (ii) corporations which are organized under the laws of foreign countries or whose principal offices are located outside Japan, (iii) corporations of which (a) 50% or more of the voting rights are held directly or indirectly by (i) and/or (ii) above, (b) a majority of officers consists of non-residents of Japan or (c) a majority of officers having the power of representation consists of non-residents of Japan, and (iv) partnerships or limited partnerships engaging in investment business, in which (a) 50% or more of the total amount of contributions are made directly or indirectly by (i) and/or (ii) above or (b) a majority of the managing partners are (i) and/or (ii) above. Dividends and Proceeds of Sale Under the Foreign Exchange Regulations, dividends paid on, and the proceeds of sales in Japan of, shares held by non-residents of Japan may in general be converted into any foreign currency and repatriated abroad. Under the terms of the deposit agreement pursuant to which ADSs of the Company will be issued, the depositary is required, to the extent that in its judgment it can convert yen on a reasonable basis into dollars and transfer the resulting dollars to the U.S., to convert all cash dividends that it receives in respect of deposited shares into dollars and to distribute the amount received (after deduction of applicable withholding taxes) to the holders of ADSs. “Non-residents of Japan” are generally defined as individuals who are not resident in Japan and corporations whose principal offices are located outside Japan. Branches and other offices of Japanese corporations located outside Japan are considered non-residents of Japan, and branches and other offices located within Japan of non-resident corporations are considered residents of Japan. U.S. Federal Income Taxation This section describes the material U.S. federal income tax consequences of owning shares or ADSs. It applies to you only if you are a U.S. holder (as defined below), you acquire your shares or ADSs in an offering
and you hold your shares or ADSs as capital assets for tax purposes. This section does not apply to you if you are a member of a special class of holders subject to special rules, including: a trader in securities that elects to use a method of accounting for your securities holdings, a life insurance company,
a person liable for alternative minimum tax, a person that actually or constructively owns 10% or more of the combined voting power of our voting stock or of the total value of our stock, a person that holds shares or ADSs as part of a straddle or a hedging, conversion, integrated or constructive sale transaction, a person that purchases or sells shares or ADSs as part of a wash sale for tax purposes, or a person whose functional currency is not the U.S. dollar. This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect, as well as on the Income Tax Convention Between the U.S. and Japan (“Japan-U.S. Tax Treaty”). These laws are subject to change, possibly on a retroactive basis. In addition, this section is based in part upon the representations of The Bank of New York Mellon (“depositary”) and the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms. If a partnership holds the shares or ADSs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the shares or ADSs should consult its tax advisor with regard to the U.S. federal income tax treatment of an investment in the shares or ADSs. You are a U.S. holder if you are a beneficial owner of shares or ADSs and you are: a citizen or resident of the U.S., a corporation created or organized in or under the laws of the U.S. or any political subdivision thereof, an estate whose income is subject to U.S. federal income tax regardless of its source, or a trust if a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust. You should consult your own tax advisor regarding the U.S. federal, state, local and other tax consequences of owning and disposing of shares and ADSs in your particular circumstances. This discussion addresses only U.S. federal income taxation. In general, and taking into account the earlier assumptions, for U.S. federal income tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the shares represented by those ADSs. Exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to U.S. federal income tax. Under the U.S. federal income tax laws, and subject to the passive foreign investment company (“PFIC”) rules discussed below, the gross amount of any dividend we pay out of our current or accumulated earnings and
profits (as determined for U.S. federal income tax purposes) is subject to U.S. federal income taxation. If you are a non-corporate U.S. holder, dividends that constitute qualified dividend income will be taxable to you at the preferential rates applicable to long-term capital gains provided that you hold the shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meet other holding period requirements. Dividends we pay with respect to the shares or ADSs generally will be qualified dividend income. You must include any Japanese tax withheld from the dividend payment in this gross amount even though you do not in fact receive it.
The dividend is taxable when you, in the case of shares, or the depositary, in the case of ADSs, receive the dividend, actually or constructively. The dividend will not be eligible for the “dividends-received deduction” generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations. The amount of the dividend distribution that you must include in your income as a U.S. holder will be the U.S. dollar value of the Japanese yen payments made, determined at the spot Japanese yen/U.S. dollar rate on the date the dividend distributionis distributed is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in incomeis distributed to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the U.S. for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the shares or ADSs and thereafter as capital gain. However, we do not expect to calculate earnings and profits in accordance with United States federal income tax principles. Accordingly, you should expect generally to treat distributions we make as dividends. Subject to certain limitations, the Japanese tax withheld in accordance with the Japan-U.S. Tax Treaty and paid over to Japan will be creditable against your U.S. federal income tax liability. However, under recently issued United States Treasury regulations, it is possible that such withholding tax will not be creditable unless you are eligible to claim the benefits of the Japan-U.S. Tax Treaty and elect to apply the Japan-U.S. Tax Treaty. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the preferential tax rates. To the extent a refund of the tax withheld is available under Japanese law or the Japan-U.S. Tax Treaty, the amount of tax withheld that is refundable will not be eligible for credit against your U.S. federal income tax liability. For foreign tax credit purposes, dividends will generally be income from sources outside the U.S. and will generally be “passive income” for purposes of computing the foreign tax credit allowable to you. Taxation of Capital Gains Subject to the PFIC rules discussed below, if you are a U.S. holder and you sell or otherwise dispose of your shares or ADSs, you will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your shares or ADSs. Capital gain of a non-corporate U.S. holder is generally taxed at preferential rates where the property is held for more than one year. The gain or loss will generally be income or loss from sources within the U.S. for foreign tax credit limitation purposes. We do not expect our shares and ADSs to be treated as stock of a PFIC for U.S. federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. Moreover, the application of the PFIC rules to a corporation, such as Nomura, that is primarily engaged in an active business as a securities dealer is not entirely clear.
In general, if you are a U.S. holder, we will be a PFIC with respect to you if for any taxable year in which you held our ADSs or shares: at least 75% of our gross income for the taxable year is passive income, or at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income. Passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation’s income.
If we are treated as a PFIC, and you are a U.S. holder that did not make a election, as described below, you will be subject to special rules with respect to: any gain you realize on the sale or other disposition of your shares or ADSs, and any excess distribution that we make to you (generally, any distributions to you during a single taxable year that are greater than 125% of the average annual distributions received by you in respect of the shares or ADSs during the three preceding taxable years or, if shorter, your holding period for the shares or ADSs). the gain or excess distribution will be allocated ratably over your holding period for the shares or ADSs, the amount allocated to the taxable year in which you realized the gain or excess distribution, or to prior years before the first year in which we were a PFIC with respect to you, will be taxed as ordinary income, the amount allocated to each other previous year will be taxed at the highest tax rate in effect for that year, and the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year. Special rules apply for calculating the amount of the foreign tax credit with respect to excess distributions by a PFIC. If you own shares or ADSs in a PFIC that are regularly traded on a qualified exchange, they will be treated as marketable stock, and you may elect to mark your shares or ADSs to market. If you make this election, you will not be subject to the PFIC rules described above. Instead, in general, you will include as ordinary income each year the excess, if any, of the fair market value of your shares or ADSs at the end of the taxable year over your adjusted basis in your shares or ADSs. These amounts of ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains. You will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of your 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 previously included income as a result of the election). Your basis in the shares or ADSs will be adjusted to reflect any such income or loss amounts. Your shares or ADSs will be treated as stock in a PFIC if we were a PFIC at any time during your holding period in your shares or ADSs, even if we are not currently a PFIC. For purposes of this rule, if you make a election with respect to your shares or ADSs, you will be treated as having a new holding period in your shares or ADSs beginning on the first day of the first taxable year beginning after the last taxable year for which the election applies.
In addition, notwithstanding any election you make with regard to the shares or ADSs, dividends that you receive from us will not constitute qualified dividend income to you if we are a PFIC (or treated as a PFIC with respect to you) either in the taxable year of the distribution or the preceding taxable year. Dividends that you receive that do not constitute qualified dividend income are not eligible for taxation at the preferential rates applicable to qualified dividend income. Instead, you must include the gross amount of any such dividend paid by us out of our accumulated earnings and profits (as determined for U.S. federal income tax purposes) in your gross income, and it will be subject to tax at rates applicable to ordinary income. If you own shares or ADSs during any year that we are a PFIC with respect to you, you may be required to file Internal Revenue Service Form 8621.
The following is a summary of the principal Japanese tax consequences to owners of shares of the Company who are non-resident individuals or non-Japanese corporations (“non-resident shareholders”) without a permanent establishment in Japan to which the relevant income is attributable. As tax laws are frequently revised, the tax treatments described in this summary are also subject to changes in the applicable Japanese laws and/or double taxation conventions occurring in the future, if any. This summary is not exhaustive of all possible tax considerations which may apply to specific investors under particular circumstances. Potential investors should, by consulting with their own tax advisers, satisfy themselves as to the overall tax consequences of the acquisition, ownership and disposition of shares 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. Generally, a non-resident shareholder is subject to Japanese withholding tax on dividends on the shares paid by the Company. A stock split is not subject to Japanese income or corporation tax, as it is characterized merely as an increase of number of shares (as opposed to an increase of value of shares) from Japanese tax perspectives. Conversion of retained earnings or legal reserve (but other than additional paid-in capital, in general) into stated capital on a non-consolidated basis is not characterized as a deemed dividend for Japanese tax purposes, and therefore such a conversion does not trigger Japanese withholding taxation (Article 2(16) of the Japanese Corporation Tax Law and Article 8(1)(xiii) of the Japanese Corporation Tax Law Enforcement Order). Unless an applicable tax treaty, convention or agreement reducing the maximum rate of withholding tax applies, the rate of Japanese withholding tax applicable to dividends on listed shares such as those paid by the Company to non-resident shareholders is currently 15%, except for dividends paid to any individual shareholder who holds 3% or more of the issued shares for which the applicable rate is 20% (please refer to Article 170 and Article 213(1)(i) of the Japanese Income Tax Law and Article 9-3(1)(i) of the Japanese Special Tax Measures Law). On December 2, 2011, the “Special measures act to secure the financial resources required to implement policy on restoration after the East Japan Earthquake” (Act No. 117 of 2011) was promulgated and special surtax measures on income tax were introduced to fund the restoration effort from the earthquake. Income tax and withholding tax payers will need to pay a surtax, calculated by multiplying the base income tax with 2.1% for 25 years starting from January 1, 2013. As a result of the fractional tax rate increase, 15.315% is applicable until December 31, 2037. If a non-resident taxpayer is a resident of a country that Japan has tax treaty with, as described below, such non-residents will not be subject to the surtax to the extent that the applicable rate agreed in the tax treaty is lower than the aggregate domestic rate. Japan has income tax treaties, conventions or agreements whereby the above-mentioned withholding tax rate is reduced, generally to 15% for portfolio investors, with, among others, Canada, Denmark, Finland,
Germany, Ireland, Italy, Luxembourg, New Zealand, Norway, Singapore and Spain.Singapore. Under the Japan-U.S. Tax Treaty, the withholding tax rate on dividends is 10% for portfolio investors, provided that they do not have a permanent establishment in Japan, or if there is a permanent establishment, the shares with respect to which such dividends are paid are not effectively connected with such permanent establishment, and that they are qualified U.S. residents eligible to enjoy treaty benefits. It shall be noted that, under the Japan-U.S. Tax Treaty, withholding tax on dividends to be paid is exempt from Japanese taxation by way of withholding or otherwise for pension funds which are qualified U.S. residents eligible to enjoy treaty benefits unless such dividends are derived from the carrying on of a business, directly or indirectly, by such pension funds (please refer to Article 10(3)(b) of the Japan-U.S. Tax Treaty). In addition to the Japan-U.S. Tax Treaty, Japan currently has income tax treaties with, among others, the U.K., France, Australia, the Netherlands, Switzerland, Sweden and Belgium whereby the withholding tax rate on dividends is also reduced from 15% to 10% for portfolio investors.
Non-resident shareholders who are entitled to a reduced treaty rate of Japanese withholding tax on payment of dividends on the shares by the Company are required to submit the “Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends” or the “Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends with respect to Foreign Depositary Receipt”, as the case may be, in advance through the Company, which is the case for ADS holders, or (in cases where the relevant withholding taxpayer for the dividend payment is not the Company but a financial institution in Japan) through the financial institution, to the relevant tax authority before payment of dividends. Non-resident shareholders who receive dividends through a financial institution may select a simplified procedure with respect to dividends payable on or after January 1, 2014. Under such procedure, non-resident shareholders who submit the “Special Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends of Listed Stocks” to the relevant tax authority through a financial institution are deemed to have submitted the “Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends” mentioned above with respect to any dividend which will be paid by the Company to non-resident shareholders through the financial institution thereafter, provided that such non-resident shareholders shall notify the financial institution of certain information regarding the dividends before the payment of such dividends. Non-resident shareholders who do not submit an application in advance will be entitled to claim the refund of withholding taxes withheld in excess of the rate of an applicable tax treaty from the relevant Japanese tax authority. For Japanese tax purpose, the treaty rate normally applies superseding the tax rate under the domestic law. However, due to the so-called “preservation doctrine” under Article 3-2 of the Special Measures Law for the Income Tax Law, Corporation Tax Law and Local Taxes Law with respect to the Implementation of Tax Treaties, if the tax rate under the domestic tax law is lower than that promulgated under the applicable income tax treaty, then the domestic tax rate is still applicable. Consequently, if the domestic tax rate still applies, no treaty application is required to be filed. Gains derived from the sale of shares outside Japan by a non-resident shareholder without a permanent establishment in Japan as a portfolio investor, are, in general, not subject to Japanese income or corporation taxes. Japanese inheritance and gift taxes at progressive rates may be payable by an individual who has acquired shares as a legatee, heir or donee, even if the individual is not a Japanese resident. You should consult your own tax advisers regarding the Japanese tax consequences of the acquisition, ownership and disposition of the shares and ADSs in your particular circumstances. F. Dividends and Paying Agents.
The Company is subject to the informational requirements of the Securities Exchange Act of 1934 and, in accordance therewith, the Company will file with the Securities and Exchange Commission annual reports on Form 20-F within four months of the Company’s fiscal year-end and other reports and information on Form 6-K. You can access the documents filed via the Electronic Data Gathering, Analysis, and Retrieval system on the SEC’s website (http://www.sec.gov). I. Subsidiary Information.
Item 11. Quantitative and Qualitative Disclosures about Market, Credit and Other Risk Nomura defines risks as (i) the potential erosion of Nomura’s capital base due to unexpected losses arising from risks to which its business operations are exposed, such as market risk, credit risk, operational risk and model risk, (ii) liquidity risk, the potential lack of access to funds or higher cost of funding than normal levels due to a deterioration in Nomura’s creditworthiness or deterioration in market conditions, and (iii) strategic risk, the potential failure of revenues to cover costs due to a deterioration in the earnings environment or a deterioration in the efficiency or effectiveness of its business operations. A fundamental principle established by Nomura is that all employees shall regard themselves as principals of risk management and appropriately manage these risks. Nomura seeks to promote a culture of proactive risk management throughout all levels of the organization and to limit risks to the confines of its risk appetite. The risk management framework that Nomura uses to manage these risks consists of its risk appetite, risk management governance and oversight, the management of financial resources, the management of all risk classes, and processes to measure and control risks. Furthermore, in response to the U.S. Prime Brokerage Event, we are in the process of reviewing our risk management framework for considering improvements thereto. Each of these key components is explained in further detail below.in this Item 11. As a part of the efforts to enhance the risk management governance, the Board Risk Committee (the “BRC”) was formally established on October 29, 2021 to discuss important risks independently of the execution side within the high-level governance structure. The BRC assists the Board of Directors (the “BoD”) in supervising such matters as (i) providing consent to Risk Appetite Statement, (ii) providing consent to the main design of the risk management framework, (iii) results of analysis and verification or future forecasts of risk environment, and (iv) supervision over execution state of the overall risk management and medium- to long-term risk strategies for contributing to the sophistication of the Group’s risk management. Besides, the Group Integrated Risk Management Committee (the “GIRMC”) was formally changed its name to the Group Risk Management Committee (the “GRMC”), further ensuring global representatives and efficiency in the operations, with an intention to increase the senior management’s involvement in risk management, stimulate dialog and analysis further, and effectively coordinate with the BRC of supervisory side. Nomura engages in the risk management through the Three Lines of Defense framework. First Line of Defense: All executives and employees of the front office for Financial Risk and all executives and employees forNon-Financial Risk are primarily responsible for risk management and assume the consequences associated with business execution and to provide evidence and justify that the risk arising from their business activities is in line with risk appetite. Second Line of Defense: The department responsible for risk management supports and monitors management activities on the First Line of Defense and reports to boards and the senior management. In addition, the Second Line independently evaluates risk management governance established by the First Line.
Third Line of Defense: The Internal Audit function examines and evaluates the risk management from an independent standpoint, provides advice for improvement, and reports the examination and evaluation are reported to the Audit Committee. Nomura has determined the types and levels of risk that it will assume in pursuit of its strategic objectives and business plan and has articulated this in its Risk Appetite Statement. This document is jointly submitted by the Chief Risk Officer (“CRO”(the “CRO”), the Chief Financial Officer (“CFO”(the “CFO”) and the Chief Compliance Officer (“CCO”(the “CCO”) to the Executive Management Board (“EMB”(the “EMB”) for approval. It will then be further reviewed at the BRC through the authority to consent to the relevant proposal raised by the executive side. The Risk Appetite Statement provides an aggregated view of risk and includes capital adequacy, liquidity, financial risk and non-financial risk. It is subject to regular monitoring and breach escalation as appropriate by the owner of the relevant risk appetite statement. Nomura’s Risk Appetite Statement is required to be reviewed at least annually by the EMB but it is reviewed on an ad hoc basis if necessary, and must specifically be reviewed following any significant changes in Nomura’s strategy. Risk appetite underpins all additional aspects of Nomura’s risk management framework.
Risk Management Governance and Oversight Nomura has established a committee structure to facilitate effective business operations and management of Nomura’s risks. The formal governance structure for risk management within Nomura is as follows: The BoD determines the policy for the execution of the business of Nomura and other matters prescribed in laws and regulations, supervises the execution of Directors’ and Executive Officers’ duties and has the authority to adopt, alter or abolish the regulations of the EMB.
The BRC provides specialized oversight to deepen the oversight functions of the BoD. To ensure a high degree of independence, the BRC is chaired by an outside director. The BRC contributes to more sophisticated Group risk management mainly in the areas outlined below: Amendment and abolition of the Risk Appetite Statement Change in risk management framework Results of analysis and verification or future forecasts of risk environment Execution state of the overall risk management and medium- to long-term risk strategies Executive Management Board ( “”The EMB deliberates on and determines management strategy, the allocation of management resources and important management matters of Nomura, and seeks to increase shareholder value by promoting effective use of management resources and unified decision-making with regard to the execution of business. The EMB delegates responsibility for deliberation of matters concerning risk management to the Group Integrated Risk Management Committee (“GIRMC”).GRMC. Key responsibilities of the EMB include the following: Resource Allocation—At the beginning of each financial year, the EMB determines the allocation of management resources and financial resources such as risk-weighted asset and unsecured funding to business units and establishes usage limits for these resources; Business Plan—At the beginning of each financial year, the EMB approves the business plan and budget of Nomura. Introduction of significant new businesses, changes to business plans, the budget and the allocation of management resources during the year are also approved by the EMB; and Reporting—The EMB reports the status of its deliberations to the BoD. Group Integrated Risk Management Committee ( “”Upon delegation from the EMB, the GIRMCGRMC deliberates on or determines important matters concerning integrated risk management of Nomura to assure the sound and effective management of its businesses. The GIRMCGRMC establishes a framework of integrated risk management consistent with Nomura’s risk appetite. The GIRMCGRMC supervises Nomura’s risk management by establishing and operating its risk management framework. The GIRMCGRMC reports the status of key risk management issues and any other matters deemed necessary by the committee chairman to the BoD and the EMB.
In addition, the GIRMC,GRMC, upon delegation from the EMB, has established the Risk Management Policy, describing Nomura’s overall risk management framework including the fundamental risk management principles followed by Nomura. Global PortfolioNomura Group Conduct Committee (
“”Upon delegation from the GIRMC,EMB, the Nomura Group Conduct Committee deliberates on the matters necessary for compliance and conduct risk management to assure the sound and effective management of its businessesGlobal Portfolio Committee (the “GPC”) Upon delegation from the GRMC, the GPC deliberates on or determines all matters in relation to the management of a specific portfolio, for the purpose of achieving a risk profile consistent with the risk allocation and risk appetite of Nomura. The portfolio consists of businesses and products that fall within at least oneFinancial Risks of the three following categories: event financing, term financing and asset-based financingWholesale Division, in addition to global portfolio concentration risk.
Asset Liability Committee ( “”Upon delegation from the EMB and the GIRMC,GRMC, the ALCO deliberates on, based on Nomura’s risk appetite determined by the EMB, balance sheet management, financial resource allocation, liquidity management and related matters. The ALCO reports to the GIRMCGRMC the status of discussions at its meetings and any other matters as deemed necessary by the committee chairman. Global Transaction Committee ( “”Upon delegation from the GPC, the GTC deliberates on or determines individual transactions in line with Nomura’s risk appetite determined by the EMB and thereby assuresseeks to assure the sound and effective management of Nomura’s businesses. Transaction Profile Review Committee (the “TPC”) Upon delegation from the GRMC, the TPC deliberates on and makes decisions on matters relating to transactions and/or clients/counterparties that require consideration of the Nomura Group’s reputational risk in view of the Nomura Group’s Code of Conduct and Risk Appetite Statement, thereby ensuring the sound and effective management of the businesses. TheModel Risk Management Committees such as the Global Risk Analytics Committee and the Model Risk Analytics Committee deliberate on or determine matters concerning the development, management and strategy of risk models and valuation models upon delegation from the CRO, respectively.CRO. The primary responsibility of these committees is to govern and provide oversight of model management, including the approval of new models and significant model changes. Both committees report all significant matters and material decisions taken to the CRO on a regular basis. The Global Collateral Steering Committee deliberates on or determines Nomura’s collateral risk management, including concentrations, liquidity, collateral re-use, limits and stress tests, provides direction on Nomura’s collateral strategy and ensures compliance with regulatory collateral requirements upon delegation from the CRO. The CRO is responsible for setting the overall strategy and direction of the Risk Management Division. The CRO is responsible for supervising the Risk Management Division and maintaining the effectiveness of the risk management framework independently from the business units within Nomura. The CRO regularly reports on the status of Nomura’s risk management to the GIRMC,GRMC, and reports to and seeks the approval of the GIRMCGRMC on measures required for risk management. Chief Financial Officer ( “”The CFO is responsible for overall financial strategy of Nomura, and has operational authority and responsibility over Nomura’s liquidity management based on decisions made by the EMB. Chief Compliance Officer (“CCO”) The CCO is responsible for supervising the Legal, Compliance and Controls Division (“LCC(the “LCC Division”) and maintaining the effectiveness of the non-financial risk management framework (operational risk and reputational risk).
Risk Management Division, Finance Division and LCC Division The Risk Management Division, the Finance Division and the LCC Division comprise various departments or units established independently from Nomura’s business units. These three divisions are responsible for
establishing and operating risk management processes, establishing and enforcing risk management policies and regulations, verifying the effectiveness of risk management methods, gathering reports from Nomura Group entities, reporting to Executive Officers/Senior Managing Directors and the GIRMCGRMC and others, as well as reporting to regulatory bodies and handling regulatory applications concerning risk management methods and other items as necessary. Important risk management issues are closely communicated between these three divisions and the CRO, CFO and CCO. The CRO, CFO and CCO regularly attend the EMB and GIRMCthe GRMC meetings to report specific risk issues. Policies and procedures are essential tools of governance and define principles, rules and standards, and the specific processes that must be adhered to in order to effectively manage risk at Nomura. Risk management operations are rundesigned to function in accordance with these policies and procedures. Monitoring, Reporting and Data Integrity Development, consolidation, monitoring and reporting of risk management information (“risk MI”) are fundamental to the appropriate management of risk. The aim of all risk MI is to provide a basis for sound decision-making, action and escalation as required. The Risk Management Division, the Finance Division and the LCC Division are responsible for producing regular risk MI, which reflects the position of Nomura relative to stated risk appetite. Risk MI includes information from across the risk classes defined in the risk management framework and reflect the use of the various risk tools used to identify and assess those risks. These three divisions are responsible for implementing appropriate controls over data integrity for risk MI. Risk Management Enhancement Program U.S. Prime Brokerage Event In March 2021, following the default of one of our prime brokerage clients in the United States on its obligations to post additional margin in respect of its positions with us, we issued a closeout notice to the client following which we began to wind down the positions held by us and liquidate hedges held against those positions. Due to fluctuations in the market values of the hedges against the positions and our expectation that we will not be able to recover those losses from the client, we recognized significant losses during the fourth quarter and fiscal year ended March 31, 2021, and recognized additional losses in the fiscal year ended March 31, 2022. Our transactions with the client comprised (i) total return swaps (the “TRS transactions”), which are transactions that allow the client to obtain synthetic (i.e., derivative) long or short exposure to underlying individual equities or indices, as well as (ii) providing financing against a portfolio of securities in the client’s cash prime brokerage account. To manage credit risk in relation to prime brokerage clients, we require that prime brokerage clients deposit collateral (referred to as “margin”) in respect of their positions with us in accordance with the margin ratios applied to them. These margin ratios are determined based on the results of an internal risk assessment of the specific client and the composition of the client’s positions and may require that they post additional margin based on the effect of market movements on these ratios. TRS transactions are hedged from a market risk perspective by holding long or short positions in individual equities or indices and through derivative transactions, depending on the positions taken by the relevant client. For long equity positions taken by the client, we hold cash equity long positions in the underlying equities as well as derivative transactions. For short equity positions taken by the client, we hold cash equity short positions and derivative transactions. Lending transactions against cash prime brokerage portfolios are generally overcollateralized, and therefore not separately hedged, and we may enter into separate hedges if the value of the collateral falls. Particularly between January and March 2021, transaction amounts and volumes with the client increased significantly as a result of changes in market prices as well as new positions entered into by the client. However,
in March 2021, the market value of certain securities in which the client held a large synthetic position experienced a sharp decline, after which we requested that the client deposit additional margin with us pursuant to our contractual agreements with the client. The client defaulted on its obligation to post additional margin, and we issued a closeout notice to the client. It became clear that the client had similar large positions with other financial institutions, and that the client had also defaulted on margin calls with these financial institutions. Although we endeavored to take a disciplined approach to unwind the positions and liquidate the hedges for the TRS transactions, taking into account both market impact and our own trading losses, due to the significant volume of positions being closed by both us and the other affected financial institutions and the effect on market prices, we recognized ¥204.2 billion of losses in earnings reported within Net gain (loss) on trading in the quarter and fiscal year ended March 31, 2021. We also recognized additional provisions for current expected credit losses of ¥41.6 billion in earnings reported within other expenses during the same period against loans extended to the client collateralized by a cash portfolio of securities, reflecting the reduced likelihood of recovery on these lending transactions. All of the positions with the client were closed out and hedges liquidated by May 17, 2021, as a result of which we recognized losses of approximately ¥65.4 billion during the quarter ended June 30, 2021, of which ¥56.1 billion booked in Equities revenues as trading loss and ¥9.3 billion booked as loan loss provision in expenses. Immediately following the incident, we conducted an internal investigation of the underlying facts, and our Audit Committee hired an external law firm to conduct a comprehensive review. In addition, we reviewed our risk management framework, centered on the prime brokerage business, and conducted a comprehensive review by third-party risk management experts on our risk management framework for the Wholesale division and our Risk Management function. Based on those, we have determined various measures to enhance risk management and its governance structure to drive it forward. We took measures to strengthen the functions of our risk management committees, including expanding the scope of our Wholesale division’s risk monitoring beyond our financing businesses to include other businesses in the Wholesale division. In addition, we established the BRC, effective October 29, 2021, which is chaired by an independent director and constituted ofnon-executive directors, to discuss important risk matters from a standpoint independent of execution. At the same time, the existing committee to discuss risk management on execution side is partially reformed, from the GIRMC to the GRMC, in order to effectively coordinate with the BRC of supervisory side. For detail of the BRC and the GRMC, see ‘Risk Management Governance and Oversight’. Moreover, to build out our platform to provide value-added products and services to our clients as a global financial services company, we have appointed Mr. Christopher Willcox, who has extensive experience with the U.S. financial services business, as the CEO & President of our U.S. subsidiaries Nomura Securities International, Inc. (our registered broker-dealer subsidiary in the U.S.) and Nomura Global Financial Products Inc. (our registered swap dealer subsidiary in the U.S.), as well asCo-CEO of Nomura Holding America, Inc. (the intermediate holding company for our U.S. subsidiaries), effective May 3, 2021. Programme Governance Structure Given our strong commitment to timely remediation of weaknesses across the firm, we have already taken several important steps to launch remediation actions and align resources to ensure successful implementation. Importantly, we have set up a robust governance process in 2021, including the Steering Committee for Enhancement of Risk Management (the “Steering Committee”) which is chaired by Group CEO, and Deputy President as vice chair. The Steering Committee deliberates on matters such as formulating and overseeing the execution of enhancement measures, securing necessary resources, and developing a global cooperation structure to ensure enhancements are achieved. Further, a Chief Transformation Officer (the “CTO”) and members of the Steering Committee will lead efforts to advance group-wide initiatives, and foster collaboration and consistency across regions. To ensure supervision of the enhancement plan at the highest level, the Steering Committee updates the EMB on a regular basis as well as reports progress of the plan directly to the BoD. Under the leadership of the Steering Committee, detailed measures to enhance risk management have already been discussed and implementation has begun. These measures have been categorized into four areas:
business strategy, oversight, risk management, and risk culture. We have assigned an executive officer or executive-level person to each area and have prioritized the resources necessary for implementation. By clarifying our Global Markets business strategy and conducting regular reviews of the business portfolio using various methods, we continue our efforts to maintain consistency between the risk profile, and other areas such as the firm’s strategic direction, risk appetite and allocation of resources. In particular, we are committing the required resources and investments to ensure a risk management framework for safe and sound execution of the business thorough review of our businesses and strategic planning processes. For example, we have reviewed and significantly revised the strategy of the Prime Brokerage business to better align with its core capabilities, risk appetite and financial resources position. In order to build a more robust, global cross-border governance framework, we are reviewing the cross-border booking model and controls at local entities from front office to back office. To strengthen critical first-line risk management functions and enhance oversight of complex business activities carried out globally, we made critical hires including for newly created positions as part of efforts to strengthen business oversight, for example a Global Head of Wholesale Front Office & Risk Control and a Global Head of Wholesale Client Account Management. To strengthen the risk control function in the first line and risk management function in the second line, we are in a process of significantly increasing the headcount in each line. We also plan to increase the number of employees in Internal Audit, which is the third line. By the end of October 2021, we have already advanced expertise of our Risk Management function. To increase managers in the risk management function, strengthen our global cooperation and controls, and further enhance risk management, we assigned a new executive officer in charge of risk management at the Tokyo headquarters and implementing other initiatives. To supervise risk management enhancement initiatives and business management, and strengthen our implementation capabilities, we also newly established the Group Risk Management Head Office. The Group Risk Management Head Office monitors risk management operations globally, support the work of the CRO and bolster collaboration with relevant departments. We are also working to improve processes related to risk appetite, by adding quantitative indicators to our Risk Appetite Statement, and by reviewing our limit framework as well as Management Information suite. We established a firm-wide programme to strengthen risk management and foster a shared sense of responsibility toward managing risks. To appropriately evaluate and embed the targeted actions, we have revised the Nomura Group Code of Conduct in March 2022, and will continue further efforts such as expanding conduct-related workshops and annual training programs to all regions, and systematically reviewing and changing policies and practices for providing incentives. To measure the progress of these initiatives, we plan to establish a framework to assess the effectiveness of the program, including risk culture surveys and other metrics. Management of Financial Resources Nomura has established a framework for management of financial resources in order to adequately manage utilization of these resources. The EMB allocates financial resources to business units at the beginning of each
financial year. These allocations are used to set revenue forecasts for each business units.unit. Key components are set out below: A key component used in the calculation of our consolidated capital adequacy ratios is risk-weighted assets. The EMB determines the risk appetite for our consolidated Tier 1 capital ratio on an annual basis and sets the limits for the usage of risk-weighted assets by each division and by additional lower levels of the division. In addition the EMB determines the risk appetite for the level of exposures under the leverage ratio framework which is a non-risk based measure to supplement risk-weighted assets. See Item 4.B. “Business“Business Overview—Regulatory Capital Rules”, Item 5.B. “ConsolidatedRules ” of our annual report on Form20-F for the fiscal year ended March 31, 2022, and “Consolidated Regulatory Capital Requirements”Requirements ” and “Consolidated“Consolidated Leverage Ratio Requirements”Requirements ” in this annual report for further information on our consolidated capital adequacy ratios and risk-weighted assets. Nomura’s internal measure of the capital required to support its business is the Nomura Capital Allocation Target (“NCAT”). NCAT is measured as the amount of capital required to absorb maximum potential losses over aone-year
time horizon, computed by the risk model at the 99.95th percentile, or the equivalent Expected Shortfall. NCAT consists of Portfolio NCAT andNon-Portfolio
NCAT. Portfolio NCAT consists of market risk,
credit risk, event risk, principal finance risk, private equity risk and investment securities risk.Non-Portfolio
NCAT consists of business risk and operational risk. NCAT is aggregated by taking into account the correlation among its various components. Nomura’s NCAT limit is initially set by the EMB, and the EMB subsequently allocates it to each business division and additional lower levels of the organization. (Please note the management by NCAT was abolished on March 31, 2020 and the management with risk-weighted asset is solely in place since April 1, 2020.)The CFO decides the maximum amount of available funds, provided without posting of any collateral, for allocation within Nomura and the EMB approves the allocation of the funds to each business division. Global Treasury monitors the usage by businesses and reports to the EMB. Classification and Definition of Risk Nomura classifies and defines risks as follows and has established departments or units to manage each risk type. | | | | | | | | | | | | | Risk of loss arising from fluctuations in values of financial assets and liabilitiesor debts (including off-balance sheet items) due to fluctuations in market risk factors (interest rates, foreign exchange rates, prices of securities and others). | | | | | | Risk of loss arising from an obligor’s default, insolvency or administrative proceeding which results in the obligor’s failure to meet its contractual obligations in accordance with agreed terms. This includes both on andoff-balance
sheet exposures. It is also the risk of loss arising through a credit valuation adjustment (“CVA”(the “CVA”) associated with deterioration in the creditworthiness of a counterparty. | | | | | Risk of financial loss, incorrect decision making, or damage to the firm’s credibility arising from model errors or incorrect or inappropriate model application. | | | | | Risk of loss arising from difficulty in securing the necessary funding or from a significantly higher cost of funding than normal levels due to deterioration of the Nomura Group’s creditworthiness or deterioration in market conditions. | | | | | | | | | | Risk of financial loss or non-financial impact arising from inadequate or failed internal processes, people and systems, or from external events. Operational risk includes in its definition Compliance, Legal, IT and Cyber Security, Fraud, Third Party and other non-financial risks. Operational risk does not include strategic risk and reputational risk, however, some operational risks can lead to reputational issues and as such operational and reputational risks may be closely linked. | | | | | | Possible damage to Nomura’s reputation and associated risk to earnings, capital or liquidity arising from any association, action or inaction which could be perceived by stakeholders to be inappropriate, unethical or inconsistent with Nomura Group’s values and corporate philosophy. |
| | | Risk of financial loss, incorrect decision making, or damage to the firm’s credibility arising from model errors or incorrect or inappropriate model application.Category | | | | | | Funding and Liquidity riskOther Risks | | Risk of loss arising from difficulty in securing the necessary funding or from a significantly higher cost of funding than normal levels due to deterioration of Nomura’s creditworthiness or deterioration in market conditions.
| | | | BusinessESG: Environmental,
| | ESG is a collective term for Environmental (E), Social (S) and Governance (G) factors. “Environmental” includes issues related to impacts on the natural environment, including climate change. “Social” includes interactions with stakeholders and communities, for example the approach to human rights, workplace related issues and engagement on social issues. Governance includes issues related to corporate governance, corporate behaviour and the approach to transparent reporting. | | | | | Risk of failure of revenues to cover costs due to deterioration ofcurrent or anticipated earning, capital, liquidity, enterprise value, or the earnings environment or deterioration of the efficiency or effectivenessNomura Group’s reputation arising from adverse business decisions, poor implementation of business operations. Business risk is managed bydecisions, or lack of responsiveness to change in the senior management at Nomura. industry or external environment. |
Market risk is the risk of loss arising from fluctuations in values of financial assets and liabilities (including off-balance sheet items) due to fluctuations in market risk factors (interest rates, foreign exchange rates, prices of securities and others).
Market Risk Management Process Effective management of market risk requires the ability to analyze a complex and evolving portfolio in a constantly changing global market environment, identify problematic trends and ensure that appropriate action is taken in a timely manner. Nomura uses a variety of statistical risk measurement tools to assess and monitor market risk on an ongoing basis, including, but not limited to, Value at Risk (“VaR”), Stressed VaR (“SVaR”) and Incremental Risk Charge (“IRC”).Charge. In addition, Nomura uses sensitivity analysis and stress testing to measure and analyze its market risk. Sensitivities are measures used to show the potential changes to a portfolio due to standard moves in market risk factors. They are specific to each asset class and cannot usually be aggregated across risk factors. Stress testing enables the analysis of portfolio risks or tail risks, including non-linear behaviors and can be aggregated across risk factors at any level of the group hierarchy, from group level to business division, units or desk levels. Market risk is monitored against a set of approved limits, with daily reports and other management information provided to the business units and senior management. VaR is a measure of the potential loss due to adverse movements of market factors, such as equity prices, interest rates, credit, foreign exchange rates, and commodities with associated volatilities and correlations. VaR Methodology Assumptions Nomura uses a single VaR model which has been implemented globally in order to determine the total trading VaR. A historical simulation is implemented, where historical market moves over a two-year window are applied to current exposure in order to construct a profit and loss distribution. Potential losses can be estimated at required confidence levels or probabilities. For internal risk management purposes, VaR is calculated across Nomura using a1-day time horizon; this data is presented below. A scenario weighting scheme is employed to ensure that the VaR model responds to changing market volatility. Nomura uses the same VaR model for both internal risk management purposes and for regulatory reporting. For internal risk management purposes, VaR is calculated across Nomura at a 99% confidence level and using a1-day
time horizon. For regulatory reporting purposes, Nomura uses the same confidence level but a 10-day time horizon, calculated using actual 10-day historical market moves.moves and employ an equal weight scheme to ensure VaR is not overly sensitive to changing market volatility. To complement VaR under Basel 2.5 regulations, Nomura also computes SVaR, which samples from a one-year window during a period of financial stress. The SVaR window is regularly calibrated and observations are equally weighted.
Nomura’s VaR model uses exact time series for each individual risk factor. However, if good quality data is not available, a ‘proxy logic’ maps the exposure to an appropriate time series. The level of proxying taking place is carefully monitored through internal risk management processes and there is a continual effort to source new time series to use in the VaR calculation. Nomura has decided to change the confidence level used to calculate its disclosedone-day VaR from 99% to 95% effective from the end of the fiscal year ended March 31, 2022, as Nomura believes based on its historical experience that the 95th percentile measure better reflects theprofit and loss volatility expected for the firm. In addition to data for the fiscal year ended March 31, 2022 calculated using the 95% confidence interval, pursuant to the requirements of Form20-F, Nomura is also providing data for the fiscal years ended March 31, 2021 and 2022 calculated using the previously-used 99% confidence interval. The performance of Nomura’s VaR model is constantlyclosely monitored to help ensure that it remains fit for purpose. The main approach for validating VaR is to compare actual 1-day trading losses with the corresponding VaR estimate. Nomura’s VaR model is backtested at different hierarchy levels. Backtesting results are reviewed on a monthly basis by Nomura’s Risk Management Division. NoOne-dayone-day
trading losses did not exceedexceeded the 99% VaR estimate (the currently required regulatory backtesting level) at the Nomura Group level on any occasion for the twelve months250 business days ended March 31, 2020.2022.Limitations and Advantages of VaR VaR aggregates risks from different asset classes in a transparent and intuitive way. However, there are limitations. VaR is a backward-looking measure: it implicitly assumes that distributions and correlations of
recent factor moves are adequate to represent moves in the near future. VaR is appropriate for liquid markets and is not appropriate for risk factors that exhibit sudden jumps. Therefore it may understate the impact of severe events. Given these limitations, Nomura uses VaR only as one component of a diverse market risk management process. VaR metricsmetrics: 95% Confidence Interval As described above, Nomura has decided to change the confidence level used to calculate its disclosedone-day VaR from 99% to 95%. See “—VaR Methodology Assumption.”One-day VaR data using the new confidence level of 95% for the fiscal year ended March 31, 2022 is presented below. The following graph shows the daily VaR over the last sixfour quarters for substantially all of Nomura’s trading positions:
The following tables show the VaR as of each of the dates indicated for substantially all of Nomura’s trading positions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less: Diversification Benefit | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | For the twelve months ended | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | ¥ | 1.4 | | | | | 2.3 | | | | | 0.9 | | | | | | | | | | 4.6 | | Less: Diversification Benefit | | | (1.9 | ) | | | | | | | | ¥ | 2.7 | | | | | | |
(1) | Represents the maximum, average and minimum VaR based on all daily calculations for the twelve monthsfiscal year ended March 31, 2018, March 31, 2019, and March 31, 2020.2022. |
Total VaR increased to ¥253.12 billion as of March 31, 2020 from ¥4.49 billion as of March 31, 2019. VaR relating to foreign exchange risk increased to ¥50.83 billion as of March 31, 2020, compared to ¥1.88 billion as
118VaR metrics: 99% Confidence Interval
As described above, Nomura has decided to change the confidence level used to calculate its disclosedone-day VaR from 99% to 95%. See “—VaR Methodology Assumption.”One-day VaR data calculated using the previous confidence level of 99% for the fiscal year ended March 31, 2022, together with comparative data for the previous fiscal year, is presented below. The following graph shows the daily VaR over the last six quarters for substantially all of Nomura’s trading positions:
The following tables show the VaR as of each of the dates indicated for substantially all of Nomura’s trading positions: | | | | | | | | | | | | | | | | | | |
| | |
| | | | ¥ | 93.4 | | | ¥ | 1.7 | | | | | 8.6 | | | | 3.5 | | | | | 4.2 | | | | 1.3 | | | | | | | | | | | | | | 106.2 | | | | 6.5 | | Less: Diversification Benefit | | | (12.8 | ) | | | (1.7 | ) | | | | | | | | | | | | ¥ | 93.4 | | | ¥ | 4.8 | | | | | | | | | | |
| | | | | | | | | | | | | | | For the twelve months ended | | | |
| | |
| | | | ¥ | 93.4 | | | ¥ | 89.7 | | | | | 13.6 | | | | 8.2 | | | | | 7.1 | | | | 4.0 | |
(1) | Represents the maximum, average and minimum VaR based on all daily calculations for the fiscal years ended March 31, 2021 and March 31. 2022. |
Total VaR as of March 31, 2019.2022 was ¥2.7 billion, comprising VaR relating to equity risk increased to ¥88.82was ¥1.4 billion, as of March 31, 2020, compared to ¥1.07 billion as of March 31, 2019. VaR relating to interest rate risk increased to ¥223.54was ¥2.3 billion, as of March 31, 2020, compared to ¥2.85 billion as of March 31, 2019. Totaland VaR decreased to ¥4.49 billion as of March 31, 2019 from ¥6.38 billion as of March 31, 2018. VaR relating to foreign exchange risk decreased to ¥1.88was ¥0.9 billion as of March 31, 2019, compared to ¥3.20 billion as of March 31, 2018. VaR relating to equity risk decreased to ¥1.07 billion as of March 31, 2019, compared to ¥1.21 billion as of March 31, 2018. VaR relating to interest rate risk decreased to ¥2.85 billion as of March 31, 2019, compared to ¥3.10 billion as of March 31, 2018.in each case using the 95% confidence interval.
Nomura conducts market risk stress testing since VaR and sensitivity analysis have limited ability to capture all portfolio risks or tail risks. Stress testing for market risk is conducted regularly, using various scenarios based upon features of trading strategies. Nomura conducts stress testing not only at eachthe desk level, but also at the Nomura Group level with a set of common global scenarios in order to capturereflect the impact of market fluctuations on the entire Nomura Group. A major market risk in Nomura’s non-trading portfolio relates to equity investments held for operating purposes and on a long-term basis. Equity investments held for operating purposes are minority stakes in the equity securities of unaffiliated Japanese financial institutions and corporations held in order to promote existing and potential business relationships. This non-trading portfolio is exposed mainly to volatility in the Japanese stock market. One method that can estimate the market risk in this portfolio is to analyze market sensitivity based on changes in the TOPIX, which is a leading index of prices of stocks on the First Section of the Tokyo Stock Exchange. Nomura uses regression analysis covering the previous 90 days which tracks and compares fluctuations in the TOPIX and the fair value of Nomura’s equity investments held for operating purposes, which allows to determine a correlation factor. Based on this analysis for each 10% change in the TOPIX, the fair value of Nomura’s operating equity investments held for operating purposes can be expected to change by 10,0439,800 million at the end of March 20192021 and 7,65810,912 million at the end of March 2020.2022. The TOPIX closed at 1,591.641,954.00 points at
the end of March 2021 and at 1,946.40 points at the end of March 2019 and at 1,403.04 points at the end of March 2020.2022. This simulation analyzes data for the entire portfolio of equity investments held for operating purposes at Nomura and therefore actual results may differ from Nomura’s expectations because of price fluctuations of individual equities. Credit risk is the risk of loss arising from an obligor’s default, insolvency or administrative proceeding which results in the obligor’s failure to meet its contractual obligations in accordance with agreed terms. This includes both on and off-balance sheet exposures. It is also the risk of loss arising through a CVA associated with deterioration in the creditworthiness of a counterparty. Nomura manages credit risk on a global basis and on an individual Nomura legal entity basis. Credit Risk Management Framework The measurement, monitoring and management of credit risk at Nomura are governed by a set of global policies and procedures. Credit Risk Management (“CRM”), a global function within the Risk Management Division, is responsible for the implementation and maintenance of these policies and procedures. These policies are authorized by the GIRMCGRMC and/or Global Risk Strategic Committee, (“GRSC”), prescribe the basic principles of credit risk management and set delegated authority limits, which enables CRM personnel to set credit limits.
Credit risk is managed by CRM together with various global and regional risk committees. This ensureshelps to ensure transparency of material credit risks and compliance with established credit limits, the approval of material extensions of credit and the escalation of risk concentrations to appropriate senior management. Credit Risk Management Process CRM operates as a credit risk control function within the Risk Management Division, reporting to the CRO. The process for managing credit risk at Nomura includes: Evaluation of likelihood that a counterparty defaults on its payments and obligations; Assignment of internal ratings to all active counterparties; Approval of extensions of credit and establishment of credit limits; Measurement, monitoring and management of Nomura’s current and potential future credit exposures; Setting credit terms in legal documentation; and Use of appropriate credit risk mitigants including netting, collateral and hedging. The scope of credit risk management includes counterparty trading and various debt or equity instruments including loans, private equity investments, fund investments, investment securities and any other as deemed necessary from a credit risk management perspective. The evaluation of counterparties’ creditworthiness involves a thorough due diligence and analysis of the business environments in which they operate, their competitive positions, management and financial strength and flexibility. Credit analysts also take into account the corporate structure and any explicit or implicit credit support. CRM evaluates credit risk not only by counterparty, but also by counterparty group. Following the credit analysis, CRM estimates the probability of default of a given counterparty or obligor through an alphanumeric ratings scale similar to that used by rating agencies and a corresponding numeric scale. Credit analysts are responsible for assigning and maintaining the internal ratings, ensuring that each rating is reviewed and approved at least annually.
Nomura’s internal rating system employs a range of ratings models to ensureachieve global consistency and accuracy. These models are developed and maintained by the Risk Methodology Group. Internal ratings represent a critical component of Nomura’s approach to managing counterparty credit risk. They are frequently used as key factors in: Establishing the amount of counterparty credit risk that Nomura is willing to take to an individual counterparty or counterparty group (setting of credit limits); Determining the level of delegated authority for setting credit limits (including tenor); The frequency of credit reviews (renewal of credit limits); Reporting counterparty credit risk to senior management within Nomura; and Reporting counterparty credit risk to stakeholders outside of Nomura. The Credit Risk Control Unit is a function within the Risk Model Validation Group (“MVG”RMVG”) which is independent of CRM. It ensuresseeks to ensure that Nomura’s internal rating system is properly reviewed and validated, reporting anyand that breaks or issues are reported to senior management for timely resolution. The unit is responsible for ensuring that the system remains accurate and predictive of risk and provides periodic reporting on the system to senior management.
For regulatory capital calculation purposes, Nomura has been applying the Foundation Internal Rating Based Approach in calculating credit risk-weighted assets since the end of March 2011. The Standardized Approach is applied to certain business units or asset types, which are considered immaterial to the calculation of credit risk-weighted assets. Internal ratings are mapped to the probabilities of default (“PD”) which in turn are used for calculating credit risk-weighted assets. PDs are estimated annually by the Risk Methodology Group and validated by the Credit Risk Control Unit through testing of conservativeness and backtesting of PDs used in calculations. Credit Limits and Risk Measures Internal ratings form an integral part in the assignment of credit limits to counterparties. Nomura’s credit limit framework is designed to ensure that Nomura takes appropriate credit risk in a manner that is consistent with its overall risk appetite. Global Credit policies define the delegated authority matrices that establish the maximum aggregated limit amounts and tenors that may be set for any single counterparty group based on their internal rating. Nomura’s main type of counterparty credit risk exposures arise from derivatives transactions or securities financing transactions. Credit exposures against counterparties are managed by means of setting credit limits based upon credit analysis of individual counterparty. Credit risk is managed daily through the monitoring of credit exposure against approved credit limits and the ongoing monitoring of the creditworthiness of Nomura’s counterparties. Any changeChanges in circumstancecircumstances that altersalter Nomura’s risk appetite for any particular counterparty, sector, industry or country isare reflected in changes to the internal rating and credit limit as appropriate. Nomura’s global credit risk management systems record all credit limits and capture credit exposures to Nomura’s counterparties allowing CRM to measure, monitor and manage utilization of credit limits, ensure appropriate reporting and escalation of any limit breaches. For derivatives and securities financing transactions, Nomura measures credit risk primarily by way of a Monte Carlo-based simulation model that determines a Potential Exposure profile at a specified confidence level. The exposure calculation model used for counterparty credit risk management has also been used for the Internal Model Method based exposure calculation for regulatory capital reporting purposes since the end of December 2012. Loans and lending commitments are measured and monitored on both a funded and unfunded basis.
Wrong Way Risk (“WWR”) occurs when exposure to a counterparty is highly correlated with the deterioration of creditworthiness of that counterparty. Nomura has established global policies that govern the management of any WWR exposures. Stress testing is used to support the assessment of any WWR embedded within existing portfolios and adjustments are made to credit exposures and regulatory capital, as appropriate. Stress Testing is an integral part of Nomura’s management of credit risk. Regular stress tests are used to support the assessment of credit risks by counterparties, sectors and regions. The stress tests include potential concentrations that are highlighted as a result of applying shocks to risk factors, probabilities of default or rating migrations. Nomura utilizes financial instruments, agreements and practices to assist in the management of credit risk. Nomura enters into legal agreements, such as the International Swap and Derivatives Association, Inc. (“ISDA”) agreements or equivalent (referred to as “Master Netting Agreements”), with many of its counterparties. Master Netting Agreements allow netting of receivables and payables and reduce losses potentially incurred as a result
of a counterparty default. Further reduction in credit risk is achieved through entering into collateral agreements that allow Nomura to obtain collateral from counterparties either upfront or contingent on exposure levels, changes in credit rating or other factors. Credit Risk to Counterparties in Derivatives Transaction The credit exposures arising from Nomura’s trading-related derivatives as of March 31, 20202022 are summarized in the table below, showing the positive fair value of derivative assets by counterparty credit rating and by remaining contractual maturity. The credit ratings are internally determined by Nomura’s CRM. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 50 | | | ¥ | 25 | | | ¥ | 5 | | | ¥ | 4 | | | ¥ | 39 | | | ¥ | (107 | ) | | ¥ | 16 | | | ¥ | 2 | | | ¥ | 14 | | | | | 571 | | | | 325 | | | | 252 | | | | 74 | | | | 578 | | | | (1,454 | ) | | | 346 | | | | 75 | | | | 271 | | | | | 843 | | | | 846 | | | | 324 | | | | 194 | | | | 868 | | | | (2,658 | ) | | | 417 | | | | 239 | | | | 178 | | | | | 285 | | | | 239 | | | | 121 | | | | 67 | | | | 518 | | | | (838 | ) | | | 392 | | | | 91 | | | | 301 | | | | | 166 | | | | 79 | | | | 62 | | | | 20 | | | | 46 | | | | (170 | ) | | | 203 | | | | 295 | | | | 0 | | | | | 33 | | | | 51 | | | | 90 | | | | 50 | | | | 363 | | | | (648 | ) | | | (61 | ) | | | 46 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 1,948 | | | ¥ | 1,565 | | | ¥ | 854 | | | ¥ | 409 | | | ¥ | 2,412 | | | ¥ | (5,875 | ) | | ¥ | 1,313 | | | ¥ | 748 | | | ¥ | 764 | | | | | 352 | | | | 46 | | | | 1 | | | | 0 | | | | 0 | | | | (158 | ) | | | 241 | | | | 234 | | | | 7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 2,300 | | | ¥ | 1,611 | | | ¥ | 855 | | | ¥ | 409 | | | ¥ | 2,412 | | | ¥ | (6,033 | ) | | ¥ | 1,554 | | | ¥ | 982 | | | ¥ | 771 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Represents netting of derivative liabilities against derivatives assets entered into with the same counterparty across different maturity bands. Derivative assets and derivative liabilities with the same counterparty in the same maturity band are net within the relevant maturity band. Cash collateral netting against net derivative assets in accordance with ASC 210-20 “ ” and ASC 815 “ ” is also included. |
(2) | “Other” comprises unrated counterparties and certain portfolio level valuation adjustments not allocated to specific counterparties. |
(3) | Zero balances represent instances where total collateral received is in excess of the total fair value; therefore, Nomura’s credit exposure is zero. |
At Nomura, country risk is defined as the risk of loss arising from country-specific events (such as political, economic, legal and other events) that affect counterparties and/or issuers within that country, causing those counterparties and/or issuers to be unable to meet financial obligations. Nomura’s country risk framework acts as a complement to other risk management areas and encompasses a number of tools including, but not limited to, country limits, which restrict credit exposure concentration to any given country. Other tools to manage country risk include country ratings as well as country risk policies and procedures that describe responsibilities and delegation for decision-making.
Nomura’s credit portfolio remains well-diversified by country and concentrated towards highly-rated countries. Over 95% of the exposure was from investment-grade rated countries. The breakdown of top 10 country exposures is as follows: | | | | | | | | | Top 10 Country Exposures (1) | | | | | | (As of March 31, 2020) 2022) | | | | | 3,384 | | | | | 2,971 | | | | | 1,130 | | | | | 589 | | | | | 231 | | | | | 186 | | | | | 171 | | | | | 170 | | | | | 164 | | | | | | | | | | | | | | | 136 | |
(1) | The table represents the Top 10 country exposures as of March 31, 20202022 based on country of risk, combining counterparty and inventory exposures |
| - | | Counterparty exposures include cash and cash equivalents held at banks; the outstanding default fund and initial margin balances posted by Nomura to central clearing counterparties as legally required under its direct and affiliate clearing memberships; the aggregate exposure by counterparty of derivative transactions and securities financing transactions (net of collateral where the collateral is held under a legally enforceable margin agreement); and the fair value of total commitment amount less any applicable reserves |
| - | | Inventory exposures are the market value of debt and equity securities, and equity and credit derivatives, using the net of long versus short positions. |
Since the war in Ukraine began in February 2022, Nomura has been actively monitoring the impact of the conflict on the Ukraine and Russian economies, as well as on other financial markets. As of March 31, 2022, the total direct exposure of Nomura to Ukraine and Russia was not significant. Operational Risk Management Operational risk is the risk of financial loss or non-financial impact arising from inadequate or failed internal processes, people and systems, or from external events. Operational risk includes in its definition
Compliance, Legal, IT and Cyber Security, Fraud, Third Party and other non-financial risks. Operational risk does not include strategic risk and reputational risk, however, some operational risks can lead to reputational issues and as such operational and reputational risks may be closely linked. The Three Lines of Defense
Nomura adopts the industry standard “Three Lines of Defense” for the management of operational risk, comprising the following elements:
| 1) | 1st Line of Defense: The business which owns and manages its risks |
| 2) | 2nd Line of Defense: The Operational Risk Management (“ORM”) function, whichco-ordinates
the Operational Risk Management Framework and its implementation |
| 3) | 3rd Line of Defense: Internal Audit, who provide independent assurance |
Operational Risk Management Framework
An Operational Risk Management Framework has been established in order to allow Nomura to identify, assess, manage, monitor and report on operational risk. The GIRMC,GRMC, with delegated authority from the EMB has formal oversight over the management of operational risk. This framework is set out below: Infrastructure of the framework Policy framework: Sets standards for managing operational risk and details how to monitor adherence to these standards. Training and awareness: Action taken by ORM to improve business understanding of operational risk. Event Reporting: This process is used to identify and report any event which resulted in or had the potential to result in a loss or gain or other impact associated with inadequate or failed internal processes, people and systems, or from external events. Risk and Control Self-Assessment (“RCSA”(the “RCSA”): This process is used to identify the inherent risks the business faces, the key controls associated with those risks and relevant actions to mitigate the residual risks. Global ORM are responsible for developing the RCSA process and supporting the business in its implementation. Key Risk Indicators (“KRI”(the “KRI”): KRIs are metrics used to monitor the business’ exposure to operational risk and trigger appropriate responses as thresholds are breached. Scenario Analysis: The process used to assess and quantify potential high impact, low likelihood operational risk events. During the process actions may be identified to enhance the control environment which are then tracked via the Operational Risk Management Framework. Analysis and reporting: A key aspect of ORM’s role is to analyze, report, and challenge operational risk information provided by business units, and work with business units to develop action plans to mitigate risks. Operational risk capital calculation: Calculate operational risk capital as required under applicable Basel standards and local regulatory requirements. Regulatory Capital Calculation for Operational Risk Nomura uses the Standardized Approach for calculating regulatory capital for operational risk. This involves using a three-year average of gross income allocated to business lines, which is multiplied by a fixed percentage (“Beta(the “Beta Factor”) determined by the FSA, to establish the amount of required operational risk capital.
Nomura uses consolidated net revenue as gross income, however for certain consolidated subsidiaries, gross operating profit is used as gross income. Gross income allocation is performed by mapping the net revenue of each business segment as defined in Nomura’s management accounting data to each business line defined in the Standardized Approach as follows: | | | | | | | | | | | | | | | Retail deposit and loan-related services | | | | | | | Deposit and loan-related services except for Retail Banking business | | | | | | | Payment and settlement services for clients’ transactions | | | | | | | Securities-related services mainly for individuals | | | | | | | | | | | | | | M&A, underwriting, secondary and private offerings, and other funding services for clients | | | | | | | Agency services for clients such as custody | | | | | | | Fund management services for clients | | | | |
Nomura calculates the required amount of operational risk capital for each business line by multiplying the allocated annual gross income amount by the appropriate Beta Factor defined above. The operational risk capital for any gross income amount not allocated to a specific business line is determined by multiplying such unallocated gross income amount by a fixed percentage of 18%. The total operational risk capital for Nomura is calculated by aggregating the total amount of operational risk capital required for each business line and unallocated amount and by determining a three-year average. Where the aggregated amount for a given year is negative, then the total operational risk capital amount for that year will be calculated as zero. In any given year, negative amounts in any business line are offset against positive amounts in other business lines. However, negative unallocated amounts are not offset against positive amounts in other business lines and are calculated as zero. Operational risk capital is calculated at the end of September and March each year. Model Risk is the risk of financial loss, incorrect decision making, or damage to the firm’s credibility arising from Model errors or incorrect or inappropriate Model application. To effectively manage the Firm’s Model Risk, Nomura has established a Model Risk Management Framework to govern the development, ownership, validation, approval, usage, ongoing monitoring, and periodic review of the Firm’s Models. The framework is supported by a set of policies and procedures that articulate process requirements for the various elements of the model lifecycle, including monitoring of model risk with respect to the Firm’s appetite. New models and material changes to approved models must be independently validated prior to official use. Thresholds to assess the materiality of model changes are defined in Model Risk Management’s procedures. During independent validation, validation teams analyze a number of factors to assess a model’s suitability, identify model limitations, and quantify the associated model risk, which is ultimately mitigated through the imposition of approval conditions, such as usage conditions, model reserves and capital adjustments. Approved models are subject to Model Risk Management’s annualre-approval periodic review process and ongoing performance monitoring to assess their continued suitability. Appropriately delegated Model Risk Management Committees provide oversight, challenge, governance, and ultimate approval of validated Models.
Funding and Liquidity Risk Management For further information on funding and liquidity risk management, see Item 5.B. “ Liquidity and Capital Resources—Funding and Liquidity Management ” in this annual report. Risk Measures and Controls The establishment of robust limit monitoring and management is central to appropriate monitoring and management of risk. The limit management frameworks incorporate clear escalation policies to ensurefacilitate approval of limits at appropriate levels of seniority. The Risk Management Division, the Finance Division and the LCC Division are responsible for operation of these limit frameworks including approval, monitoring, and reporting as required. Business units are responsible for complying with the agreed limits. Limits apply across a range of quantitative measures of risk and across market and credit risks. New Business Risk Management The new business approval process represents the starting point for new business in Nomura and exists to support management decision-making and ensure that risks associated with new products and transactions are identified and managed appropriately. The new business approval process consists of two components: | 1)(1) | Transaction committees are in place to provide formal governance over the review and decision-making process for individual transactions. |
| 2)(2) | The new product approval process allows business unit sponsors to submit applications for new products and obtain approval from relevant departments prior to execution of the new products. The process is designed to capture and assess risks across various risk classes as a result of the new product or business. |
The new business approval process continues to seek assuring the sound and effective management to better meet the various changes observed in the market environment. Stress testing performed at the Nomura Group providesseeks to provide comprehensive coverage of risks across different hierarchical levels, and covers different time horizons, severities, plausibilities and stress testing methodologies. The results of stress tests are used in capital planning processes, capital adequacy assessments, liquidity adequacy assessments, recovery and resolution planning, assessments of whether risk appetite is appropriate, and in routine risk management. Stress tests are run on a regular basis or on an ad hoc basis as needed, for example, in response to material changes in the external environment and/or in the Nomura Group risk profile. The results of stress tests with supporting detailed analysis are reported to senior management and other stakeholders as appropriate for the stress test being performed. Stress testing is categorized either as sensitivity analysis or scenario analysis and may be performed on a Nomura Group-wide basis or at more granular levels. Sensitivity analysis is used to quantify the impact of a market move in one or two associated risk factors (for example, equity prices, equity volatilities) in order primarily to capture those risks which may not be readily identified by other risk models; Scenario analysis is used to quantify the impact of a specified event across multiple asset classes and risk classes. This is a primary approach used in performing stress testing at the different hierarchical levels of the Nomura Group;
Scenario analysis includes following examples. Nomura Group establishes several stress scenarios to validate risk appetite for capital and liquidity soundness, taking into account the business environment, business’s risk profile, economic environment and forecasts. Group-wide stress to assess the capital adequacy of the Nomura Group under severe but plausible market scenarios is conducted on a quarterly basis at a minimum; and Reverse stress testing, a process of considering the vulnerabilities of the firm and hence how it may react to situations where it becomes difficult to continue its business, and reviewing the results of that analysis, is conducted on an annual basis at a minimum. Stress testing is an integral part of the Nomura Group’s overall governance and is used as a tool for forward-looking risk management, decision-making and enhancing communication amongst Corporate Functions, Business Divisions, and senior management. Item 12. Description of Securities Other Than Equity Securities
D. American Depositary Shares Fees payable by ADR Holders The following table shows the fees and charges that a holder of the Company’s ADR may have to pay, either directly or indirectly: | | | | | Amount of Fee (U.S. Dollars) | Taxes and other governmental charges | | As applicable. The depositary may offset any taxes or governmental charges it is obligated to withhold, if applicable, against the proceeds from sale of the property received. | | | | Transfers of the Company’s shares to or from the name of the depositary (or its nominee) or the Custodian (or its nominee) in connection with deposits or withdrawals | | Such registration fees as may be in effect for the registration of transfers of the Company’s shares on the Company’s share register (or any entity that presently carries out the duties of registrar). | | | | Cable, telex and facsimile transmission expenses | | | | | | Expenses incurred by the depositary in the conversion of foreign currency | | | | | | Execution and delivery of Receipts in connection with deposits, stock splits or exercise of subscription rights | | $5.00 or less per 100 ADSs (or portion thereof). | | | | Surrender of Receipts in connection with a withdrawal or termination of the Deposit Agreement | | $5.00 or less per 100 ADSs (or portion thereof). | | | | Any cash distribution pursuant to the Deposit Agreement, including, but not limited to, cash distribution(s) made in connection with cash dividends; distributions in securities, property or subscription rights; and stock splits. | | $.02 or less per ADS (or portion thereof). Only the cash amounts net of this fee, if applicable, are distributed. | | | | Distribution by the depositary of securities (other than common shares of the Company) that accrued on the underlying shares to owners of the Receipts | | Treating for the purpose of this fee all such securities as if they were common shares of the Company, $5.00 or less per 100 ADSs (or portion thereof). | | | | General depositary services | | $.02 or less per ADS (or portion thereof), accruing on the last day of each calendar year, except where the fee for cash distribution described above was assessed during that calendar year. | | | | Any other charge payable by the depositary, any of the depositary’s agents, including the Custodian, or the agents of the depositary’s agents in connection with the servicing of the Company’s shares or other deposited securities | | |
Fees paid to Nomura by the depositary The Bank of New York Mellon, as depositary, has agreed to pay all its standard administration and maintenance expenses for providing services to the registered shareholders and up to 100,000 non-registered shareholders of ADRs. From April 1, 20192021 to March 31, 2020,2022, the Bank of New York Mellon has waived a total of $159,315.68$180,935.37 in fees (including $28,435.84$50,288.75 in connection with the expenses related to the Annual General Meeting of Shareholders) associated with the administration of the ADR program and administrative fees for routine corporate actions and for providing investor relations information services.
Item 13. Defaults, Dividend Arrearages and Delinquencies Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds Item 15. Controls and Procedures Disclosure Controls and Procedures. Our Disclosure Committee is responsible for the establishment and maintenance of our disclosure controls and procedures. As of March 31, 2020,2022, an evaluation was carried out under the supervision and with the participation of our management, including our Group Chief Executive Officer and Chief Financial Officer, and the Disclosure Committee, of the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, our Group Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2020,2022, our disclosure controls and procedures were effective. 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 Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). Our management, with the participation of our Group Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting using the criteria set forth in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of March 31, 2020.2022. Our independent registered public accounting firm, Ernst & Young ShinNihon LLC, has issued an attestation report on the effectiveness of our internal control over financial reporting, which appears on page F-6F-5
of this annual report. Changes in Internal Control Over Financial Reporting. Our management also carried out an evaluation, with the participation of our Group Chief Executive Officer and Chief Financial Officer, of changes in our internal control over financial reporting during the year ended March 31, 2020.2022. Based upon that evaluation, there was no change in our internal control over financial reporting during the year ended March 31, 20202022 that has materially affected, or is reasonably likely to affect, our internal control over financial reporting. We have implemented remote work arrangements over a significant portion of our workforce in response to theCOVID-19
pandemic and announced a delay in the announcement of our results for the fiscal year ended March 31, 2020 due to a delay in the necessary procedures caused by the pandemic. Nevertheless, we completed such procedures and announced our results well within the timeframes applicable to us by law and/or stock exchange rule, and we do not believe that the shift to remote work has had or is likely to have a material affect on our internal control over financial reporting, although we are continually monitoring and assessing the impact of the pandemic on our internal control over financial reporting.Item 16A. Audit Committee Financial Expert The Company’s Board of Directors has determined that Mr. Noriaki Shimazaki, a member of the Audit Committee, qualifies as an “audit committee financial expert” as such term is defined by the General Instructions
for Item 16A of Form 20-F. Additionally, Mr. Noriaki Shimazaki meets the independence requirements applicable to him under Section 303A.06 of the NYSE Listed Company Manual. For a description of his business experience, see Item 6.A “Directors and Senior Management—Directors” in this annual report. We adopted onIn December 2019, we adopted a new code of ethics (as defined in Item 16B of Form 20-F) consisting of the “Nomura Group Code of Conduct 2020”Conduct” and the “Nomura Group Code of Ethics for Financial Professionals”, which
replaced our prior code of ethics. The Code of Conduct is periodically reviewed to better respond to the changes in the social and economic conditions and to the expectations of our stakeholders. In March 2022, we revised the previous version of “Nomura Group Code of Conduct” and added a new section on managing risks appropriately, to instill a robust risk culture within the Company, while maintaining the overall structure of the previous version. A copy of the “Nomura Group Code of Conduct 2022” is attached to this annual report as Exhibit 11.1 and a copy of the “Nomura Group Code of Ethics for Financial Professionals” to replace the prior code of ethics. The new code of ethics presents ethics rules and requirements with more visual aids than the previous code of ethics without substantively altering the rules and requirements. A copy of the code of ethics is attached as Exhibit 11.1 and Exhibit 11.2 to this annual report.report as Exhibit 11.2. Item 16C. Principal Accountant Fees and Services Ernst & Young ShinNihon LLC has been our principal accountant for the last eighteentwenty fiscal years. The table set forth below contains the aggregate fees billed for each of the last two fiscal years by our principal accountant in each of the following categories: (i) Audit Fees, which are fees for professional services for the audit or review of our financial statements or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years, (ii) Audit-Related Fees, which are fees for assurance and related services that are related to the performance of the audit or review of our financial statements and are not reported as Audit Fees, (iii) Tax Fees, which are fees for professional services provided for tax compliance, tax advice and tax planning, and (iv) All Other Fees, which are fees for products and services other than Audit Fees, Audit-Related Fees and Tax Fees, such as advisory services concerning risk management and regulatory matters. | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 3,532 | | | ¥ | 3,915 | | | | | 144 | | | | 103 | | | | | 137 | | | | 143 | | | | | 26 | | | | 106 | | | | | | | | | | | | | ¥ | 3,839 | | | ¥ | 4,267 | | | | | | | | | | |
Audit-Related Fees included fees for consultations on accounting issues relating to our business. Tax Fees included fees for services relating to tax planning and compliance. All Other Fees included fees for services relating to advice with respect to regulations and disclosures under the Financial Instruments and Exchange Act in connection with our underwriting business. In accordance with the regulations of the Securities and Exchange Commission issued pursuant to Sections 202 and 208 of the Sarbanes-Oxley Act of 2002, our Audit Committee has adopted a pre-approval policy regarding the engagements of our principal accountant. Under the pre-approval policy, there are two types of pre-approval procedures, “General Pre-Approval” and “Specific Pre-Approval.” Under “General Pre-Approval,” our CFO in conjunction with our principal accountant must make a proposal to our Audit Committee for the types of services and estimated fee levels of each category of services to be generally pre-approved. Such a proposal must be made at least annually. The Audit Committee will discuss the proposal and if necessary, consult with outside professionals as to whether the proposed services would impair the independence of our principal accountant. If such proposal is accepted, the Audit Committee will inform our CFO and principal accountant of the services that have been pre-approved and are included in a “General Pre-Approved List.” Our Audit Committee is informed of each such service that is provided.
Under “Specific Pre-Approval,” if any proposed services are not on the General Pre-Approved List, our CFO is required to submit an application to the Audit Committee for such services. After reviewing the details and estimated fee levels for each engagement and if necessary, consulting with outside professionals as to whether the proposed services would impair the independence of the principal accountant, the Audit Committee
may make a specific pre-approval decision on these services. Also, if any approved services in the General Pre-Approved List exceed the fee levels prescribed on the List, our CFO is required to submit an application to the Audit Committee for new fee levels for such services. The Audit Committee may make a pre-approval decision after reviewing the details of the services and the estimated fee levels for each engagement. None of the services described in the first paragraph under this Item 16C were waived from the pre-approval requirement pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X. Item 16D. Exemptions from the Listing Standards for Audit Committees Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers During the year ended March 31, 2020,2022, we acquired 19,48120,237 shares of the Company’s common stock by means of repurchase of shares constituting less than one unit upon the request of the holders of those shares and 300,000,00080,000,000 shares under a share buyback program in accordance with Article 459-1 of the Companies Act. For an explanation of the right of our shareholders to demand such repurchases by us, see “ Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934 ” which is an exhibit to this annual report. As of March 31, 2020,2022, we had 3,038,937,4933,018,168,134 outstanding shares of our common stock excluding 454,625,108215,394,467 shares held as treasury stock. The following table sets forth certain information with respect to our purchases of shares of our common stock during the year ended March 31, 2020.2022. | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | | | | 848 | | | ¥ | 582 | | | | — | | | | — | | | | | 1,400 | | | | 585 | | | | — | | | | — | | | | | 2,856 | | | | 588 | | | | — | | | | — | | | | | 1,801 | | | | 558 | | | | — | | | | — | | | | | 1,500 | | | | 538 | | | | — | | | | — | | | | | 1,844 | | | | 559 | | | | — | | | | — | | | | | 1,794 | | | | 554 | | | | — | | | | — | | | | | 27,876,415 | | | | 490 | | | | 27,875,100 | | | | 52,124,900 | | | | | 52,127,248 | | | | 498 | | | | 52,124,900 | | | | — | | | | | 1,555 | | | | 516 | | | | — | | | | — | | | | | 1,655 | | | | 532 | | | | — | | | | — | | | | | 1,321 | | | | 513 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | 80,020,237 | | | ¥ | 496 | | | | 80,000,000 | | | | — | | | | | | | | | | | | | | | | | | |
On June 18, 2019,October 29, 2021, a resolution of the Board of Directors authorized the Company to purchase up to 300,000,00080,000,000 shares of our common stock or to a maximum of ¥150¥50 billion during the period from June 19, 2019November 16, 2021 through March 31, 2020.2022.
Nomura recognizes the need to set out flexible financial strategies that allow the Board of Directors to respond quickly to any changes in the business environment and is looking into implementing further share buybacks. Details will be announced when finalized.
On April 26, 2022, we announced a resolution of the Board of Directors to establish a share buyback program in accordance with Article459-1 of the Companies Act. The period of repurchase under the program is from May 17, 2022 to March 31, 2023, and we are authorized to purchase up to 50,000,000 shares of our common stock or to a maximum of ¥30 billion. As of May 31, 2020, 3,055,764,3702022, 3,031,572,813 shares of common stock were outstanding, excluding 437,798,231201,989,788 shares held as treasury stock. Item 16F. Change in Registrant’s Certifying Accountant Item 16G. Corporate Governance Companies listed on the NYSE must comply with certain standards regarding corporate governance under Section 303A of the NYSE Listed Company Manual. However, listed companies that are foreign private issuers, such as the Company, are permitted to follow home country practice in lieu of certain provisions of Section 303A. The following table shows the significant differences between the corporate governance practices followed by U.S. listed companies under Section 303A of the NYSE Listed Company Manual and those followed by the Company. The information set forth below is current as of the date of this annual report. | | | Corporate Governance Practices Followed by NYSE-listed U.S. Companies | | Corporate Governance Practices Followed by the Company | A NYSE-listed U.S. company must have a majority of Directors meeting the independence requirements under Section 303A of the NYSE Listed Company Manual. | | Under the Companies Act, a company which adopts the Company with Three Board Committees structure is not required to have a majority of outside directors, but is required to have a majority of outside directors on each of the audit, nomination and compensation committees. The Company currently has sixeight outside directors among its tentwelve Directors. | | | | A NYSE-listed U.S. company must have an audit committee that satisfies the requirements under Section 303A of the NYSE Listed Company Manual, including those imposed by Rule 10A-3 under the U.S. Securities Exchange Act of 1934. The audit committee must be composed entirely of independent directors and have at least three members. | | The Company has an Audit Committee consisting of threefour Directors, twothree of whom are outside directors in compliance with the requirements under the Companies Act. All threefour Audit Committee members are independent directors under Rule 10A-3 under the U.S. Securities Exchange Act of 1934 with one member qualified as audit committee financial expert. | | | | A NYSE-listed U.S. company must have a nominating/corporate governance committee with responsibilities described under Section 303A of the NYSE Listed Company Manual. The nominating/corporate governance committee must be composed entirely of independent directors. | | The Company has a Nomination Committee consisting of three Directors, two of whom are outside directors and the chairman is an outside director in compliance with the requirements under the Companies Act. | | | | A NYSE-listed U.S. company must have a compensation committee composed entirely of independent directors. Compensation committee members must satisfy the additional independence | | The Company has a Compensation Committee consisting of three Directors, two of whom are outside directors and the chairman is an outside |
| | | Corporate Governance Practices Followed by NYSE-listed U.S. Companies | | Corporate Governance Practices Followed by the Company | members must satisfy the additional independence requirements under Section 303A.02(a)(ii) of the NYSE Listed Company Manual. A compensation committee must also have authority to retain or obtain the advice of compensation and other advisers, subject to prescribed independence criteria that the committee must consider prior to engaging any such adviser. | | director in compliance with the requirements under the Companies Act. | | | | A NYSE-listed U.S. company must generally obtain shareholder approval with respect to any equity compensation plan. | | Under the Companies Act, Restricted Stock Unit (“RSU”) and Stock Acquisition Right (“SAR”) awards are deemed to be compensation for the services performed by the Company’s Directors and Executive Officers and do not require shareholders’ approval. The Compensation Committee establishes the policy with respect to the determination of the individual compensation of each of the Company’s Directors and Executive Officers (including RSU and SAR awards as equity compensation) and makes determinations in accordance with that compensation policy. | | | | A NYSE-listed U.S. company must adopt and disclose corporate governance guidelines. | | Under the Companies Act, the Company is not required to adopt and disclose corporate governance guidelines. However, in response to Japan’s Corporate Governance Code, which was incorporated into the Tokyo Stock Exchange’s Securities Listing Regulations, the Company has established and publicly disclosed the “Nomura Holdings Corporate Governance Guidelines.” | | | | The non-management directors of a NYSE-listed U.S. company must meet at regularly scheduled executive sessions without management. | | Under the Companies Act, outside directors of the Company are not required to meet at regularly scheduled executive sessions without management. However, in accordance with the “Nomura Holdings Corporate Governance Guidelines,” outside directors hold meetings consisting solely of outside directors in order to discuss matters such as the business and corporate governance of the Company. | | | | A NYSE-listed U.S. company must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. | | Under the Companies Act, the Company is not required to adopt and disclose a code of business conduct and ethics for directors, officers or employees. However, the Company has adopted the “Nomura Group Code of Conduct”. Please see Item 16B of this annual report for further information regarding the “Nomura Group Code of Conduct.” |
Item 16H. Mine Safety Disclosure Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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 information required by this item is set forth in our consolidated financial statements included in this annual report.
| | | | | | | | Articles of Incorporation of Nomura Holdings, Inc. (English translation) (filed on June 25, 2015 as an exhibit to the Annual Report on Form20-F
(File No. 001-15270)
and incorporated herein by reference) | | | | | | Share Handling Regulations of Nomura Holdings, Inc. (English translation) (filed on June 25, 2015 as an exhibit to the Annual Report on Form 20-F (File No. 001-15270) and incorporated herein by reference) | | | | | | Regulations of the Board of Directors of Nomura Holdings, Inc. (English translation) | | | | | | Regulations of the Nomination Committee of Nomura Holdings, Inc. (English translation) (filed on June 23, 2016 as an exhibit to the Annual Report on Form 20-F (File No. 001-15270) and incorporated herein by reference) | | | | | | Regulations of the Audit Committee of Nomura Holdings, Inc. (English translation) | | | | | | Regulations of the Compensation Committee of Nomura Holdings, Inc. (English translation) (filed on June 27, 2012 as an exhibit to the Annual Report on Form 20-F (File No. 001-15270) and incorporated herein by reference) | | | | | | Form of Deposit Agreement among Nomura Holdings, Inc., The Bank of New York Mellon as depositary and all owners and holders from time to time of American Depositary Receipts, including the form of American Depositary Receipt (filed on April 28, 2010 as an exhibit to the Registration Statement on Form F-6 (File No. 333-166346) and incorporated herein by reference) | | | | | | Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934 (filed on June 25, 2019 as an exhibit to the Annual Report on Form20-F
(File No. 001-15270)
and incorporated herein by reference) | | | | | | Limitation of Liability Agreement (filed on June 30, 2011 as an exhibit to the Annual Report on Form20-F
(File No. 001-15270)
and incorporated herein by reference)(1)
| | | | 4.1 | | Form of Limitation of Liability Agreement (English translation) (filed on June 25, 2015 as an exhibit to the Annual Report on Form20-F(1)
(File No. 001-15270)
and incorporated herein by reference)(2)
| | | | | | Limitation of Liability Agreement (filed on June 25, 2015 as an exhibit to the Annual Report on Form20-F
(File No. 001-15270)
and incorporated herein by reference)(3)
| | | | | | Subsidiaries of Nomura Holdings, Inc.—See Item 4.C. “ ” in this annual report. | | | | | | Nomura Group Code of Conduct 20202022 (English translation) | | | | | | Nomura Group Code of Ethics for Financial Professionals (English translation) (filed on June 30, 2020 as an exhibit to the Annual Report on Form20-F (FileNo. 001-15270) and incorporated herein by reference) | | | | | | Certification of the principal executive officer required by 17 C.F.R. 240. 13a-14(a) | | | | | | Certification of the principal financial officer required by 17 C.F.R. 240. 13a-14(a) | | | | | | Certification of the chief executive officer required by 18 U.S.C. Section 1350 | | | | | | Certification of the chief financial officer required by 18 U.S.C. Section 1350 | | | | | | Consent of Ernst & Young ShinNihon LLC, with respect to its report on the audit of the financial statements included in this annual reportan independent registered public accounting firm | | | 17.1 | | Subsidiary Issuer of Registered Guaranteed Securities | | | | | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | | | | | Inline XBRL Taxonomy Extension Schema Document | | | | | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | | Inline XBRL Taxonomy Extension Label Linkbase Document |
| | | | | | | | | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | The cover page for the Company’s Annual Report on Form 20-F for the year ended March 31, 2020,2022, has been formatted in Inline XBRL |
(1) | The Company and Michael Lim Choo Sanhas entered into a Limitation of Liability AgreementAgreements substantially in the form of this exhibit.exhibit with all of its outside directors and director Shoji Ogawa. |
(2) | The Company and each of Hiroshi Kimura, Noriaki Shimazaki, Hisato Miyashita, Mari Sono and Kazuhiko Ishimura entered into a Limitation of Liability Agreement substantially in the form of this exhibit. |
(3) | The Company and Laura Simone Unger entered into a Limitation of Liability Agreement substantially in the form of this exhibit. |
The Company has not included as exhibits certain instruments with respect to our long-term debt. The amount of debt authorized under each such debt instrument does not exceed 10% or our total assets. We will furnish a copy of any such instrument to the SEC upon request.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS | | | | | | | | | | | | | | Consolidated Financial Statements of Nomura Holdings, Inc.: | | | | | | | | | | | | | F-2 | | | | | | | | | | F-6 | | | | | | | | | | F-9 | | | | | | | | | | F-10 | | | | | | | | | | F-11 | | | | | | | | | | F-13 | | | | | | | | | | F-15 | |
Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Nomura Holdings, Inc. (the Company) as of March 31, 20202022 and 2019,2021, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended March 31, 2020,2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at March 31, 20202022 and 2019,2021, and the consolidated results of its operations, and its cash flows for each of the three years in the period ended March 31, 2020,2022, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2020,2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated June 30, 202024, 2022 expressed an unqualified opinion thereon. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’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 Company 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. The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| | | | | Valuation—Less Liquid Financial InstrumentsFair value of less liquid financial instruments
| | | | Description of the Matter | | The Company holds investment positions in the fixed income and equity markets bothfinancial instruments for trading, customer facilitation and customer facilitation. Theinvestment purposes. As disclosed in Note 2 to the consolidated financial statements as of March 31, 2022, the Company had JPY 949¥1,038 billion and JPY 668¥826 billion of financial instruments assets and liabilities, respectively, categorized within Level 3 of the fair value hierarchy. In determining the fair value of these financial instruments, the Company used valuation models and unobservable valuation inputs which reflect theirits assumptions and specific data. These inputs are significant to the fair value of the financial instruments and are supported by little or no market activity as of March 31, 2020.2022. The methodologiesvaluation techniques applied by management to determine the fair value of such instruments are described in Note 2 to the consolidated financial statements. Auditing the fair value of the Company’s Level 3 financial instruments was complex and highly judgmental due to the subjectivity of the judgments used and estimations made by management in determining the fair value for these financial instruments especially considering the impact ofCOVID-19
on global financial markets.instruments. In particular, to value certain financial instruments, management used a variety of valuation techniques which involved certain underlying valuation assumptions and significant unobservable valuation inputs, including weighted average cost of capital (WACC),WACC, growth rates, liquidity discounts, market multiples including enterprise value over earnings beforediscount, volatilities, correlations, credit spreads, interest taxes, depreciation,rates, recovery rates, loss severities, prepayment rates, default probabilities, yields and amortization (EV/ EBITDA) ratios, volatilities and correlations which are significant to the value of these investments.repo rates. | | | | How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risk of material misstatement relating to management’s assessment of the valuation models and significant unobservable inputs and estimates includedused in fair value measurement. This included the testing of model validation controls by various departments within the Company. It also included the testing of model performance and suitability controls as a result of significant market volatility due to the impact ofCOVID-19.
Our audit procedures to evaluate the valuation methodologiestechniques used by the Company included, among others, testing valuation models and significant unobservable inputs, estimates and the mathematical accuracy of the Company’s valuation models.inputs. We independently developed fair value estimates and compared them to the Company’s results, andfor which we involved our valuation specialists to assist with the application of these procedures and compared them to the Company’s results, on a sample basis. We also agreed significant unobservable inputs and underlying data used in the Company’s valuationsvaluation models to agreements, information available from third party sources and market data, where available. We evaluated subsequent events and transactions and considered whether they corroborate or contradict the Company’s year-end valuations. | | | | | | Income Taxes—Valuation AllowanceContingencies for investigations, lawsuits and other legal proceedings
| | | | Description of the Matter | | As disclosed in Note 16 to the consolidated financial statements at March 31, 2020, the Company had deferred tax assets of JPY 151 billion, net of a JPY 388 billion valuation allowance. The gross deferred tax assets are reduced by a valuation allowance if, based upon the weight of all available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. Auditing management’s analysis of the assessment for realizing the deferred tax asset was complex and highly judgmental because the assessment process involves significant judgment. For example, assumptions used may be affected by future market events, economic conditions and decisions made by the management, including the impact associated with rebuilding the business platform andCOVID-19.
These assumptions feed into the revenue and cost projections used to assess whether the deferred tax assets will be realized. |
| | | How We Addressed the Matter in Our Audit
| | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement relating to management’s assessment for realizing the deferred tax assets. This included controls over management’s projections of future taxable income, that included the impact of rebuilding the business platform andCOVID-19,
and the future reversal of existing taxable temporary differences, and management’s identification and use of available tax planning strategies.Our audit procedures to evaluate the realizability of deferred tax assets included, among others, inspecting the supporting documents and meeting minutes of the Board of Directors and Executive Management Board, and assessing whether management’s estimate of future taxable income and schedule of future deductible temporary differences to be reversed are consistent with the business plan. We evaluated the reasonableness of assumptions used by the Company to develop the projections of future taxable income and tested the completeness and accuracy of the underlying data used in its projections. For example, we compared the projections of future taxable income with the actual results of prior periods, as well as management’s consideration of current industry and economic trends with the corresponding actual results and evaluated the sensitivity of the outcomes by making reasonably possible changes in the assumptions of the projections.
| | | | | | Provisions for conduct and litigation
| | | | Description of the Matter
| | As disclosed in Note 21 to the consolidated financial statements, the Company is involved in investigations, lawsuits and other legal proceedings. As disclosed in Note 20 to the consolidated financial statements as of March 31, 2022, the Company has recorded litigation provision of ¥76,866 million in respect of outstanding and unsettled investigations, lawsuits and other legal proceedings and for those cases where the loss is considered probable and an estimate of the range of reasonably possible losses can be made, the Company estimates that the total aggregate reasonably possible maximum loss in excess of amounts recognized as a liability (if any) against these cases is approximately ¥61 billion. Legal expenses of ¥63,338 million were recorded for the year ended March 31, 2022 in respect of outstanding and unsettled investigations, lawsuits and other legal proceedings.The Company recognizes a liability for those contingencies for which it is probable that a liability hashad been incurred at the date of the consolidated financial statements and the amount is reasonably estimable. As part of this, management performs an assessment of the materiality of contingencies where a loss is either reasonably possible or it is reasonably possible that an exposure to loss exists in excess of the amount accrued. This includes the amounts at which the Company is willing to settle for any loss contingency. If it is reasonably possible that such a loss or an additional loss may have been incurred and the effect on the consolidated financial statements is material, the Company discloses the nature of the loss contingency and an estimate |
| | | | | of the possible loss or range of loss or a statement that such an estimate cannot be made within the notes to the consolidated financial statements. | | | | | Auditing management’s determination of whether a loss contingency is probable and reasonably estimable, reasonably possible or remote, and the related disclosures, is highly subjective, complex and requires significant judgment. Management judgment is needed to determine whether an obligation exists and a loss contingency should be recorded at March 31, 2020.2022. This includes judgment in the determination of whether an outflow in respect of identified loss contingency is probable and can be estimated reliably. In addition, management judgment is needed to determine if an estimated loss is only reasonably possible rather than probable. | | | | How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement relating to management’s assessment for timely identification of contingencies that may arise out of lawsuits and regulatory investigations including the Company’s assessment of whether they are probable or reasonably possible and the associated measurement of the best estimate. | | | Our audit procedures to test the assessment of the probability of incurrence of a loss and whether the loss was reasonably estimable included, among others, reading the minutes of the meetings of the Board of Directors and Executive Management Board, and reading relevant regulatory and legal correspondence to assess developments in significant matters, requesting and receiving internal and external legal counsel confirmation letters, meeting with internal and external legal counsel to discuss the allegations and obtaining a representation letter fromevaluating management’s assessment regarding whether an unfavorable outcome is probable or reasonably possible and the Company’s management.associated measurement of the best estimate. In addition, our audit procedures to test the measurement of the loss contingency and the disclosure of the reasonably possible additionalmaximum loss in excess of amounts |
| | | | | recognized as a liability included, among others, evaluating the method of measuring the contingency, testing the accuracy and completeness of the underlying data, reading correspondence received from internal and external counsel and inspecting evidence of approval from the individuals with the authority to determine the amount the Company is willing to settle that are used to determine a provision or a range of reasonably possible lossloss. We evaluated subsequent events and performing a search for newconsidered whether they corroborate or contrary evidence affectingcontradict the estimate.Company’syear-end assessments. |
/s/ Ernst & Young ShinNihon LLC We have served as the Company’s auditor for SEC reporting purposes since 2002, and as its Japanese statutory auditor since 1973, which includes the years we served as joint auditors between 1978 and 2002.
Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Opinion on Internal Control over Financial Reporting We have audited Nomura Holdings, Inc.’s internal control over financial reporting as of March 31, 2020,2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Nomura Holdings, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of March 31, 2020,2022, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Nomura Holdings, Inc. (the Company) as of March 31, 20202022 and 2019,2021, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended March 31, 2020,2022, and the related notes and our report dated June 30, 202024, 2022 expressed an unqualified opinion thereon. The Company’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 Company’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 Company 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/ Ernst & Young ShinNihon LLC
CONSOLIDATED BALANCE SHEETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | ¥ | | | | ¥ | | | | | | | | | | | | Deposits with stock exchanges and other segregated cash | | | | | | | | | | | | | | | | | | Total cash and cash deposits | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans receivable (including ¥664,585 million and ¥805,141 million measured at fair value by applying the fair value option as of March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | Receivables from customers (including ¥8,318 million and ¥11 million measured at fair value by applying the fair value option as of March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | Receivables from other than customers | | | | | | | | | Allowance for doubtful accounts | | | | ) | | | | ) | | | | | | | | | | Total loans and receivables | | | | | | | | | | | | | | | | | | Collateralized agreements: | | | | | | | | | Securities purchased under agreements to resell (including ¥647,545 million and ¥548,043 million measured at fair value by applying the fair value option as of March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | | | | | | | | | | | | | | | | | | | Total collateralized agreements | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments: | | | | | | | | | Trading assets (including securities pledged as collateral of ¥5,200,360 million and ¥5,332,640 million as of March 31, 2019 and March 31, 2020, respectively; including ¥10,273 million and ¥12,407 million measured at fair value by applying the fair value option as of March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | Private equity and debt investments (including ¥4,047 million and ¥6,395 million measured at fair value by applying the fair value option in March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | | | | | | | | | | Total trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | Office buildings, land, equipment and facilities (net of accumulated depreciation and amortization of ¥416,052 million and ¥397,114 million as of March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | Non-trading debt securities | | | | | | | | | Investments in equity securities | | | | | | | | | Investments in and advances to affiliated companies | | | | | | | | | Other (including ¥151,233 million and ¥144,756 million measured at fair value by applying the fair value option as of March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | ¥ | 3,509,754 | | | ¥ | 3,316,238 | | | | | 281,422 | | | | 320,754 | | Deposits with stock exchanges and other segregated cash | | | 373,559 | | | | 426,519 | | | | | | | | | | | Total cash and cash deposits | | | 4,164,735 | | | | 4,063,511 | | | | | | | | | | | | | | | | | | | | Loans receivable (includ es ¥818,523 and ¥1,210,590 at fair value ) | | | 2,943,472 | | | | 3,579,727 | | Receivables from customers (includ es ¥163,388 and ¥86,839 at fair value ) | | | 459,090 | | | | 417,661 | | Receivables from other than customers (includes ¥ 0nil and ¥10,362 at fair value) | | | 793,669 | | | | 1,069,660 | | Allowance for credit losses | | | (53,784 | ) | | | (66,346 | ) | | | | | | | | | | Total loans and receivables | | | 4,142,447 | | | | 5,000,702 | | | | | | | | | | | Collateralized agreements: | | | | | | | | | Securities purchased under agreements to resell (includ es ¥366,506 and ¥297,653 at fair value ) | | | 10,775,078 | | | | 11,879,312 | | | | | 5,264,360 | | | | 4,997,129 | | | | | | | | | | | Total collateralized agreements | | | 16,039,438 | | | | 16,876,441 | | | | | | | | | | | Trading assets and private equity and debt investments: | | | | | | | | | Trading assets (includes assets pledged of ¥ 5,587,555 and ¥4,643,412 ; includes ¥ 10,122 and ¥14,328 at fair value ) | | | 15,674,354 | | | | 15,230,817 | | Private equity and debt investments (includ es ¥3,599 and ¥10,770 at fair value ) | | | 63,825 | | | | 65,193 | | | | | | | | | | | Total trading assets and private equity and debt investments | | | 15,738,179 | | | | 15,296,010 | | | | | | | | | | | | | | | | | | | | Office buildings, land, equipment and facilities (net of accumulated depreciation and amortization of ¥395,429 and ¥426,081 ) | | | 464,449 | | | | 419,047 | | Non-trading debt securities (includes assets pledged of ¥ 9,427 and ¥ 17,823 ) | | | 426,758 | | | | 484,681 | | Investments in equity securities (includes assets pledged of ¥ 0nil and ¥ 606) | | | 126,649 | | | | 133,897 | | Investments in and advances to affiliated companies (includes assets pledged of ¥ 0nil and ¥ 5,038) | | | 364,393 | | | | 364,281 | | Other (includ es ¥171,482 and ¥169,080 at fair value) | | | 1,049,432 | | | | 773,586 | | | | | | | | | | | | | | 2,431,681 | | | | 2,175,492 | | | | | | | | | | | | | ¥ | 42,516,480 | | | ¥ | 43,412,156 | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEETS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Short-term borrowings (including ¥362,612 million and ¥376,910 million measured at fair value by applying the fair value option as of March 31, 2019 and March 31, 2020, respectively) | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | Payables to other than customers | | | | | | | | | Deposits received at banks (including ¥—million and ¥14,392 million measured at fair value by applying the fair value option as of March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | | | | | | | | | | Total payables and deposits | | | | | | | | | | | | | | | | | | Collateralized financing: | | | | | | | | | Securities sold under agreements to repurchase (including ¥159,430 million and ¥111,609 million measured at fair value by applying the fair value option as of March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | Securities loaned (including ¥131,677 million and ¥105,968 million measured at fair value by applying the fair value option as of March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | | | | | | | | | | | | | | | | | | | Total collateralized financing | | | | | | | | | | | | | | | | | | | | | | | | | | | Other liabilities (including ¥15,011 million and ¥9,183 million measured at fair value by applying the fair value option as of March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | Long-term borrowings (including ¥3,576,293 million and ¥3,707,643 million measured at fair value by applying the fair value option as of March 31, 2019 and March 31, 2020, respectively) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commitments and contingencies (Note 21) | | | | | | | | | | | | | | | | | | Nomura Holdings, Inc. (“NHI”) shareholders’ equity: | | | | | | | | | | | | | | | | | | No par value shares; Authorized—6,000,000,000 shares as of March 31, 2019 and March 31, 2020 Issued—3,493,562,601 shares as of March 31, 2019 and March 31, 2020 Outstanding 3,310,800,799 shares as of March 31, 2019 and 3,038,587,493 shares as of March 31, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated other comprehensive income | | | | ) | | | | ) | | | | | | | | | | Total NHI shareholders’ equity before treasury stock | | | | | | | | | Common stock held in treasury, at cost 182,761,802 shares as of March 31, 2019 and 454,975,108 shares as of March 31, 2020 | | | | ) | | | | ) | | | | | | | | | | Total NHI shareholders’ equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities and equity | | ¥ | | | | ¥ | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Short-term borrowings (includ es ¥634,714 and ¥710,629 at fair value) | | ¥ | 1,368,098 | | | ¥ | 1,050,141 | | | | | | | | | | | | | | 1,454,755 | | | | 1,522,961 | | Payables to other than customers | | | 1,773,699 | | | | 1,636,725 | | Deposits received at banks (includ es ¥49,874 and ¥71,156 at fair value) | | | 1,342,464 | | | | 1,760,679 | | | | | | | | | | | Total payables and deposits | | | 4,570,918 | | | | 4,920,365 | | | | | | | | | | | Collateralized financing: | | | | | | | | | Securities sold under agreements to repurchase (includ es ¥224,056 and ¥411,847 at fair value) | | | 13,360,429 | | | | 12,574,556 | | Securities loaned (includ es ¥128,886 and ¥104,606 at fair value) | | | 1,380,629 | | | | 1,567,351 | | | | | 392,515 | | | | 396,291 | | | | | | | | | | | Total collateralized financing | | | 15,133,573 | | | | 14,538,198 | | | | | | | | | | | | | | 9,473,261 | | | | 9,652,118 | | Other liabilities (includ es ¥44,708 and ¥52,110 at fair value) | | | 1,239,167 | | | | 1,020,225 | | Long-term borrowings (includ es ¥4,098,457 and ¥4,557,326 at fair value) | | | 7,975,012 | | | | 9,258,306 | | | | | | | | | | | | | | 39,760,029 | | | | 40,439,353 | | | | | | | | | | | Commitments and contingencies (Note 20) | | | 0 | | | | 0 | | | | | | | | | | | Nomura Holdings, Inc. (“NHI”) shareholders’ equity: | | | | | | | | | | | | | | | | | | No par value shares; Authorized—6,000,000,000 shares Issued—3,233,562,601 shares Outstanding—3,063,155,434 and 3,017,804,012 share s | | | 594,493 | | | | 594,493 | | | | | 696,122 | | | | 697,507 | | | | | 1,533,713 | | | | 1,606,987 | | Accumulated other comprehensive income | | | (38,144 | ) | | | 127,973 | | | | | | | | | | | Total NHI shareholders’ equity before treasury stock | | | 2,786,184 | | | | 3,026,960 | | Common stock held in treasury, at cost—170,407,167 and 215,758,589 shares | | | (91,246 | ) | | | (112,355 | ) | | | | | | | | | | Total NHI shareholders’ equity | | | 2,694,938 | | | | 2,914,605 | | | | | | | | | | | | | | 61,513 | | | | 58,198 | | | | | 2,756,451 | | | | 2,972,803 | | | | | | | | | | | Total liabilities and equity | | ¥ | 42,516,480 | | | ¥ | 43,412,156 | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
The following table presents the classification of consolidated variable interest entities’ (“VIEs”) assets and liabilities included in the consolidated balance sheets above. The assets of a consolidated VIE may only be used to settle obligations of that VIE. Creditors do not typically have any recourse to Nomura beyond the assets held in the VIEs. See Note 6 “ Securitizations and Variable Interest Entities ” for further information. | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | Trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 13 | | | ¥ | 62 | | Trading assets and private equity and debt investments | | | 984 | | | | 1,024 | | | | | 77 | | | | 125 | | | | | | | | | | | | | ¥ | 1,074 | | | ¥ | 1,211 | | | | | | | | | | | | | ¥ | 2 | | | ¥ | 0 | | | | | 2 | | | | 6 | | | | | 837 | | | | 892 | | | | | | | | | | | | | ¥ | 841 | | | ¥ | 898 | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 308,805 | | | ¥ | 376,897 | | | ¥ | 332,344 | | Fees from investment banking | | | 103,222 | | | | 108,681 | | | | 149,603 | | Asset management and portfolio service fees | | | 238,202 | | | | 230,047 | | | | 269,985 | | | | | 356,609 | | | | 310,040 | | | | 368,799 | | Gain (loss) on private equity and debt investments | | | (93 | ) | | | 12,734 | | | | 30,768 | | | | | 794,472 | | | | 356,466 | | | | 284,222 | | Gain (loss) on investments in equity securities | | | (14,726 | ) | | | 14,053 | | | | 5,446 | | | | | 165,991 | | | | 208,317 | | | | 152,832 | | | | | | | | | | | | | | | | | | 1,952,482 | | | | 1,617,235 | | | | 1,593,999 | | | | | 664,653 | | | | 215,363 | | | | 230,109 | | | | | | | | | | | | | | | | | | 1,287,829 | | | | 1,401,872 | | | | 1,363,890 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Compensation and benefits | | | 479,420 | | | | 507,906 | | | | 529,506 | | Commissions and floor brokerage | | | 106,123 | | | | 111,550 | | | | 105,204 | | Information processing and communications | | | 170,317 | | | | 178,835 | | | | 184,319 | | Occupancy and related depreciation | | | 72,986 | | | | 72,367 | | | | 69,742 | | Business development expenses | | | 31,885 | | | | 13,520 | | | | 15,641 | | | | | 178,837 | | | | 287,023 | | | | 232,855 | | | | | | | | | | | | | | | Total non-interest expenses | | | 1,039,568 | | | | 1,171,201 | | | | 1,137,267 | | | | | | | | | | | | | | | Income before income taxes | | | 248,261 | | | | 230,671 | | | | 226,623 | | | | | | | | | | | | | | | | | | 28,894 | | | | 70,274 | | | | 80,090 | | | | | | | | | | | | | | | | | ¥ | 219,367 | | | ¥ | 160,397 | | | ¥ | 146,533 | | | | | | | | | | | | | | | Less: Net income attributable to noncontrolling interests | | | 2,369 | | | | 7,281 | | | | 3,537 | | | | | | | | | | | | | | | Net income attributable to NHI shareholders | | ¥ | 216,998 | | | ¥ | 153,116 | | | ¥ | 142,996 | | | | | | | | | | | | | | | | | | | | | Per share of common stock: | | | | | | | | | | | | | | | | | | | | | | | | | | Net income attributable to NHI shareholders per share | | ¥ | 67.76 | | | ¥ | 50.11 | | | ¥ | 46.68 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income attributable to NHI shareholders per share | | ¥ | 66.20 | | | ¥ | 48.63 | | | ¥ | 45.23 | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 219,367 | | | ¥ | 160,397 | | | ¥ | 146,533 | | Other comprehensive income (loss): | | | | | | | | | | | | | Change in cumulative translation adjustments: | | | | | | | | | | | | | Change in cumulative translation adjustments | | | (45,000 | ) | | | 46,821 | | | | 122,468 | | | | | 591 | | | | (1,287 | ) | | | (946 | ) | | | | | | | | | | | | | | | | | (44,409 | ) | | | 45,534 | | | | 121,522 | | | | | | | | | | | | | | | Defined benefit pension plans: | | | | | | | | | | | | | Pension liability adjustment | | | 7,843 | | | | 20,720 | | | | (404 | ) | | | | 693 | | | | (1,626 | ) | | | 78 | | | | | | | | | | | | | | | | | | 8,536 | | | | 19,094 | | | | (326 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 48,295 | | | | (91,666 | ) | | | 60,777 | | | | | (9,779 | ) | | | 15,943 | | | | (12,930 | ) | | | | | | | | | | | | | | | | | 38,516 | | | | (75,723 | ) | | | 47,847 | | | | | | | | | | | | | | | Total other comprehensive income (loss) | | | 2,643 | | | | (11,095 | ) | | | 169,043 | | | | | | | | | | | | | | | | | | 222,010 | | | | 149,302 | | | | 315,576 | | Less: Comprehensive income attributable to noncontrolling interests | | | 2,067 | | | | 8,225 | | | | 6,463 | | | | | | | | | | | | | | | Comprehensive income attributable to NHI shareholders | | ¥ | 219,943 | | | ¥ | 141,077 | | | ¥ | 309,113 | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOMECHANGES IN EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | Fees from investment banking | | | | | | | | | | | | | Asset management and portfolio service fees | | | | | | | | | | | | | | | | | | | | | | | | | | Gain (loss) on private equity and debt investments | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | Gain (loss) on investments in equity securities | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Compensation and benefits | | | | | | | | | | | | | Commissions and floor brokerage | | | | | | | | | | | | | Information processing and communications | | | | | | | | | | | | | Occupancy and related depreciation | | | | | | | | | | | | | Business development expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total non-interest expenses | | | | | | | | | | | | | | | | | | | | | | | | | | Income (loss) before income taxes | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | Less: Net income attributable to noncontrolling interests | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to NHI shareholders | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | Per share of common stock: | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to NHI shareholders per share | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to NHI shareholders per share | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | ¥ | 594,493 | | | ¥ | 594,493 | | | ¥ | 594,493 | | | | | | | | | | | | | | | | | | 594,493 | | | | 594,493 | | | | 594,493 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | | 687,761 | | | | 683,232 | | | | 696,122 | | Stock-based compensation awards | | | (4,326 | ) | | | 11,775 | | | | 1,421 | | Changes in ownership interests in subsidiaries | | | (203 | ) | | | 0— | | | | 0— | | Changes in an affiliated company’s interests in its subsidiary | | | 0— | | | | 1,115 | | | | 0— | | Changes in an affiliated company’s interests | | | — | | | | — | | | | (36 | ) | | | | | | | | | | | | | | | | | 683,232 | | | | 696,122 | | | | 697,507 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | | 1,486,825 | | | | 1,645,451 | | | | 1,533,713 | | Cumulative effect of change in accounting principle (1) | | | 5,592 | | | | (18,200 | ) | | | 0— | | Net income attributable to NHI shareholders | | | 216,998 | | | | 153,116 | | | | 142,996 | | | | | (63,670 | ) | | | (107,104 | ) | | | (67,007 | ) | Gain (loss) on sales of treasury stock | | | (294 | ) | | | (346 | ) | | | (2,715 | ) | Cancellation of treasury stock | | | 0— | | | | (139,204 | ) | | | 0— | | | | | | | | | | | | | | | | | | 1,645,451 | | | | 1,533,713 | | | | 1,606,987 | | | | | | | | | | | | | | | Accumulated other comprehensive income (loss) | | | | | | | | | | | | | Cumulative translation adjustments | | | | | | | | | | | | | Balance at beginning of year | | | 17,833 | | | | (26,274 | ) | | | 18,316 | | Net change during the year | | | (44,107 | ) | | | 44,590 | | | | 118,596 | | | | | | | | | | | | | | | | | | (26,274 | ) | | | 18,316 | | | | 136,912 | | | | | | | | | | | | | | | Defined benefit pension plans | | | | | | | | | | | | | Balance at beginning of year | | | (71,107 | ) | | | (62,571 | ) | | | (43,477 | ) | Pension liability adjustment | | | 8,536 | | | | 19,094 | | | | (326 | ) | | | | | | | | | | | | | | | | | (62,571 | ) | | | (43,477 | ) | | | (43,803 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | | 24,224 | | | | 62,740 | | | | (12,983 | ) | | | | 38,516 | | | | (75,723 | ) | | | 47,847 | | | | | | | | | | | | | | | | | | 62,740 | | | | (12,983 | ) | | | 34,864 | | | | | | | | | | | | | | | | | | (26,105 | ) | | | (38,144 | ) | | | 127,973 | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
(1) | Represents the adjustments to initially apply Accounting Standards Update ASU2016-02, “” for the year ended March 31, 2020 and ASU2016-13, “Measurement of Credit Losses on Financial Instruments ” for the year ended March 31, 2021. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECHANGES IN EQUITY—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | Other comprehensive income (loss): | | | | | | | | | | | | | Change in cumulative translation adjustments: | | | | | | | | | | | | | Change in cumulative translation adjustments | | | | ) | | | | | | | | ) | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | Defined benefit pension plans: | | | | | | | | | | | | | Pension liability adjustment | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net unrealized gain (loss) on non-trading securities | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive income (loss) | | | | ) | | | | | | | | | | | | | | | | | | | | | | Comprehensive income (loss) | | | | | | | | ) | | | | | Less: Comprehensive income (loss) attributable to noncontrolling interests | | | | ) | | | | | | | | | | | | | | | | | | | | | | Comprehensive income (loss) attributable to NHI shareholders | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common stock held in treasury | | | | | | | | | | | | | Balance at beginning of year | | | (108,968 | ) | | | (243,604 | ) | | | (91,246 | ) | Repurchases of common stock | | | (150,009 | ) | | | (11 | ) | | | (39,650 | ) | | | | 0 | | | | 0 | | | | 0 | | Common stock issued to employees | | | 15,373 | | | | 13,165 | | | | 18,541 | | Cancellation of treasury stock | | | 0— | | | | 139,204 | | | | 0— | | | | | | | | | | | | | | | | | | (243,604 | ) | | | (91,246 | ) | | | (112,355 | ) | | | | | | | | | | | | | | Total NHI shareholders’ equity | | | | | | | | | | | | | | | | 2,653,467 | | | | 2,694,938 | | | | 2,914,605 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | | 49,732 | | | | 77,797 | | | | 61,513 | | | | | (1,483 | ) | | | (1,416 | ) | | | (1,421 | ) | Net income attributable to noncontrolling interests | | | 2,369 | | | | 7,281 | | | | 3,537 | | Accumulated other comprehensive income (loss) attributable to noncontrolling interests | | | | | | | | | | | | | Cumulative translation adjustments | | | (302 | ) | | | 944 | | | | 2,926 | | Purchase/sale (disposition) of subsidiary shares, etc., net | | | 18,264 | | | | 673 | | | | 1,307 | | Other net change in noncontrolling interests | | | 9,217 | | | | (23,766 | ) | | | (9,664 | ) | | | | | | | | | | | | | | | | | 77,797 | | | | 61,513 | | | | 58,198 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 2,731,264 | | | ¥ | 2,756,451 | | | ¥ | 2,972,803 | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | | | | | | | | | | | | Stock-based compensation awards | | | | ) | | | | | | | | ) | Changes in ownership interests in subsidiaries | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | | | | | | | | | | | | Cumulative effect of change in accounting principle (1) | | | | | | | | | | | | | Net income (loss) attributable to NHI shareholders | | | | | | | | ) | | | | | | | | | ) | | | | ) | | | | ) | Gain (loss) on sales of treasury stock | | | | ) | | | | ) | | | | ) | Cancellation of treasury stock | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated other comprehensive income (loss) | | | | | | | | | | | | | Cumulative translation adjustments | | | | | | | | | | | | | Balance at beginning of year | | | | | | | | ) | | | | | Net change during the year | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | Defined benefit pension plans | | | | | | | | | | | | | Balance at beginning of year | | | | ) | | | | ) | | | | ) | Pension liability adjustment | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | |
(1) | Represents the adjustment to initially apply Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers
” for the year ended March 31, 2019 and ASU 2016-02, “” for the year ended March 31, 2020. |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common stock held in treasury | | | | | | | | | | | | | Balance at beginning of year | | | | ) | | | | ) | | | | ) | Repurchases of common stock | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | Common stock issued to employees | | | | | | | | | | | | | Cancellation of treasury stock | | | | | | | | | | | | | Other net change in treasury stock | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | Total NHI shareholders’ equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | | | | | | | | | | | | | | | | ) | | | | ) | | | | ) | Net income attributable to noncontrolling interests | | | | | | | | | | | | | Accumulated other comprehensive income (loss) attributable to noncontrolling interests | | | | | | | | | | | | | Cumulative translation adjustments | | | | | | | | | | | | ) | Net unrealized gain (loss) on non-trading securities | | | | ) | | | | | | | | | Purchase/sale (disposition) of subsidiary shares, etc., net | | | | ) | | | | | | | | | Other net change in noncontrolling interests | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from operating activities: | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | | | | | | | | | | | Depreciation and amortization | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Gain) loss on investments in equity securities | | | | ) | | | | | | | | | (Gain) loss on investments in subsidiaries and affiliates | | | | ) | | | | | | | | ) | Equity in earnings of affiliates, net of dividends received | | | | ) | | | | ) | | | | ) | Loss on disposal of office buildings, land, equipment and facilities | | | | | | | | | | | | ) | | | | | | | | | | | | | ) | Changes in operating assets and liabilities: | | | | | | | | | | | | | | | | | ) | | | | | | | | ) | Deposits with stock exchanges and other segregated cash (2) | | | | ) | | | | | | | | ) | Trading assets and private equity and debt investments (1) | | | | ) | | | | | | | | ) | | | | | | | | | ) | | | | | Securities purchased under agreements to resell, net of securities sold under agreements to repurchase | | | | ) | | | | ) | | | | | Securities borrowed, net of securities loaned | | | | | | | | | | | | | | | | | | | | | | | | | | Loans and receivables, net of allowance for doubtful accounts (1) | | | | ) | | | | | | | | ) | | | | | | | | | ) | | | | | | | | | ) | | | | ) | | | | | Accrued income taxes, net | | | | ) | | | | | | | | ) | | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | Net cash used in operating activities (2) | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | | | Payments for purchases of office buildings, land, equipment and facilities | | | | ) | | | | ) | | | | ) | Proceeds from sales of office buildings, land, equipment and facilities | | | | | | | | | | | | | Payments for purchases of investments in equity securities | | | | ) | | | | | | | | | Proceeds from sales of investments in equity securities | | | | | | | | | | | | | Decrease (increase) in loans receivable at banks, net | | | | ) | | | | ) | | | | | Decrease (increase) in non-trading debt securities, net | | | | | | | | | | | | ) | Business combinations or disposals, net | | | | ) | | | | | | | | ) | Decrease (increase) in investments in affiliated companies, net | | | | | | | | ) | | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | Net cash provided by (used in) investing activities | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | Increase in long-term borrowings | | | | | | | | | | | | | Decrease in long-term borrowings | | | | ) | | | | ) | | | | ) | Increase in short-term borrowings, net | | | | | | | | | | | | | Increase (decrease) in deposits received at banks, net | | | | ) | | | | | | | | ) | Proceeds from sales of common stock held in treasury | | | | | | | | | | | | | Payments for repurchases of common stock held in treasury | | | | ) | | | | ) | | | | ) | Payments for cash dividends | | | | ) | | | | ) | | | | ) | Contribution from noncontrolling interests | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by financing activities | | | | | | | | | | | | | | | | | | | | | | | | | | Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents (2) | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents (2) | | | | ) | | | | | | | | | Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year (2) | | | | | | | | | | | | | | | | | | | | | | | | | | Cash, cash equivalents, restricted cash and restricted cash equivalents at end of year (2) | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | Supplemental information: | | | | | | | | | | | | | Cash paid during the year for | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
(1) | Due to changes in accounting policy which Nomura adopted on April 1, 2018, certain reclassifications of amounts previously reported have been made to conform to the current year presentation. See Note 1“Summary of accounting policies: New accounting pronouncements adopted during the current year”
in our consolidated financial statements included in this annual report. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from operating activities: | | | | | | | | | | | | | | | ¥ | 219,367 | | | ¥ | 160,397 | | | ¥ | 146,533 | | Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | | | | | | | | | | | Depreciation and amortization | | | 63,583 | | | | 63,846 | | | | 59,524 | | | | | 12,694 | | | | 28,251 | | | | 27,941 | | (Gain) loss on investments in equity securities | | | 14,726 | | | | (14,053 | ) | | | (5,446 | ) | (Gain) loss on investments in subsidiaries and affiliates | | | (72,841 | ) | | | 45,086 | | | | (79,396 | ) | Equity in earnings of affiliates, net of dividends received | | | (20,342 | ) | | | (15,716 | ) | | | (20,235 | ) | Gain on disposal of office buildings, land, equipment and facilities | | | (3,957 | ) | | | (64,730 | ) | | | (3,490 | ) | | | | (23,911 | ) | | | (21,113 | ) | | | 3,106 | | Changes in operating assets and liabilities: | | | | | | | | | | | | | | | | (33,029 | ) | | | 43,560 | | | | (23,064 | ) | Deposits with stock exchanges and other segregated cash | | | (97,424 | ) | | | 13,878 | | | | (18,408 | ) | Trading assets and private equity and debt investments | | | (2,754,743 | ) | | | 1,468,357 | | | | 1,254,261 | | | | | 428,997 | | | | 777,741 | | | | (284,747 | ) | Securities purchased under agreements to resell, net of securities sold under agreements to repurchase | | | 2,224,371 | | | | (1,453,871 | ) | | | (2,220,493 | ) | Securities borrowed, net of securities loaned | | | 291,777 | | | | (1,242,489 | ) | | | 595,116 | | | | | 301,019 | | | | (326,450 | ) | | | 2,120 | | Loans and receivables, net of allowance for credit losses | | | (1,358,242 | ) | | | 1,145,429 | | | | (412,429 | ) | | | | 788,007 | | | | (33,994 | ) | | | (247,980 | ) | | | | 16,202 | | | | 15,840 | | | | (1,865 | ) | Accrued income taxes, net | | | (2,787 | ) | | | 55,712 | | | | (37,639 | ) | | | | (9,410 | ) | | | 20,089 | | | | (102,119 | ) | | | | | | | | | | | | | | Net cash provided by (used in) operating activities | | | (15,943 | ) | | | 665,770 | | | | (1,368,710 | ) | | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | | | Payments for purchases of office buildings, land, equipment and facilities | | | (206,745 | ) | | | (119,875 | ) | | | (111,331 | ) | Proceeds from sales of office buildings, land, equipment and facilities | | | 209,197 | | | | 49,642 | | | | 94,985 | | Payments for purchases of investments in equity securities | | | 0— | | | | 0— | | | | (300 | ) | Proceeds from sales of investments in equity securities | | | 13,323 | | | | 6,502 | | | | 2,502 | | Decrease (increase) in loans receivable at banks, net | | | 43,920 | | | | (83,412 | ) | | | (112,782 | ) | Decrease (increase) in non-trading debt securities, net | | | (2,359 | ) | | | 38,409 | | | | (51,065 | ) | Business combinations or disposals, net | | | (2,484 | ) | | | (11,152 | ) | | | 0— | | Decrease (increase) in investments in affiliated companies, net | | | 160,799 | | | | (9,182 | ) | | | 103,437 | | | | | 685 | | | | (9,958 | ) | | | 29,253 | | | | | | | | | | | | | | | Net cash provided by (used in) investing activities | | | 216,336 | | | | (139,026 | ) | | | (45,301 | ) | | | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | Increase in long-term borrowings | | | 2,364,260 | | | | 2,067,725 | | | | 3,895,059 | | Decrease in long-term borrowings | | | (2,402,621 | ) | | | (2,068,695 | ) | | | (2,670,106 | ) | Increase (decrease) in short-term borrowings, net | | | 656,205 | | | | (325,237 | ) | | | (475,509 | ) | Increase (decrease) in deposits received at banks, net | | | (93,260 | ) | | | 126,177 | | | | 448,099 | | Proceeds from sales of common stock held in treasury | | | 285 | | | | 215 | | | | 11 | | Payments for repurchases of common stock held in treasury | | | (150,009 | ) | | | (11 | ) | | | (39,650 | ) | Payments for cash dividends | | | (58,416 | ) | | | (76,358 | ) | | | (70,714 | ) | Transactions with noncontrolling interests, net | | | 15,618 | | | | 6,257 | | | | (16,475 | ) | | | | | | | | | | | | | | Net cash provided by (used in) financing activities | | | 332,062 | | | | (269,927 | ) | | | 1,070,715 | | | | | | | | | | | | | | | Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents | | | (27,277 | ) | | | 60,884 | | | | 149,693 | | | | | | | | | | | | | | | Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents | | | 505,178 | | | | 317,701 | | | | (193,603 | ) | Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year | | | 2,687,132 | | | | 3,192,310 | | | | 3,510,011 | | | | | | | | | | | | | | | Cash, cash equivalents, restricted cash and restricted cash equivalents at end of year | | ¥ | 3,192,310 | | | ¥ | 3,510,011 | | | ¥ | 3,316,408 | | | | | | | | | | | | | | | Supplemental information: | | | | | | | | | | | | | Cash paid during the year for— | | | | | | | | | | | | | | | ¥ | 677,160 | | | ¥ | 222,024 | | | ¥ | 225,679 | | | | | | | | | | | | | | | | | ¥ | 55,592 | | | ¥ | 35,675 | | | ¥ | 114,623 | | | | | | | | | | | | | | |
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued) (2) | In accordance with ASU2016-18
which Nomura adopted on April 1, 2018, certain reclassification of amounts previously reported as cash, cash equivalents, restricted cash and restricted cash equivalents for the years ended March 31, 2018 have been made to conform to the current year presentation. |
The following table presents a reconciliation of cash and cash equivalents , and restricted cash and restricted cash equivalents reported in depositsDeposits with stock exchanges and other segregated cash
within the consolidated balance sheets to the total of the same such amounts shown in the statements of cash flows above. Restricted cash and restricted cash equivalents are amounts where access, withdrawal or usage by Nomura is substantively prohibited by a third party entity outside of the Nomura group. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents reported in Cash and cash equivalents | | ¥ | | | | ¥ | | | | ¥ | | | Restricted cash and restricted cash equivalents reported in Deposits with stock exchanges and other segregated cash | | | | | | | | | | | | | | | | | | | | | | | | | | Total cash, cash equivalent, restricted cash and restricted cash equivalents | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents reported in Cash and cash equivalents | | ¥ | 3,191,889 | | | ¥ | 3,509,754 | | | ¥ | 3,316,238 | | Restricted cash and restricted cash equivalents reported in Deposits with stock exchanges and other segregated cash | | | 421 | | | | 257 | | | | 170 | | �� | | | | | | | | | | | | | Total cash, cash equivalent, restricted cash and restricted cash equivalents | | ¥ | 3,192,310 | | | ¥ | 3,510,011 | | | ¥ | 3,316,408 | | | | | | | | | | | | | | |
Total amount ofright-of-use assets recognized for the years ended March 31, 2020, 2021 and 2022 were ¥18,026 million, ¥41,279 million and ¥32,208 million, respectively. The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of accounting policies: Nomura Holdings, Inc. (“Company”) and its broker-dealer, banking and other financial services subsidiaries provide investment, financing and related services to individual, institutional and government clients on a global basis. The Company and other entities in which it has a controlling financial interest are collectively referred to as “Nomura” within these consolidated financial statements. Nomura operates its business through various divisions based upon the nature of specific products and services, its main client base and its management structure. On April 1, 2021, the Asset Management Division and the Merchant Banking Division were combined and the Investment Management Division was established. Nomura reports operating results through 3 business segments: Retail, AssetInvestment Management, and Wholesale. In its Retail segment, Nomura provides investment consultation services mainly to individual clients in Japan. In its AssetInvestment Management segment, Nomura developsmainly provides various investment management services such as establishing and managesmanaging investment trusts, discretionary investment services for domestic and providesoverseas investors, investment advisory services.and management for investment corporation and for funds for institutional investors, and management of Tokumei kumiai (silent partnerships). In its Wholesale segment, Nomura engages in the sales and trading of debt and equity securities, foreign exchange contracts and derivatives and currencies on a global basis,globally, and provides investment banking services such as the underwriting and distribution of debt and equity securities as well as mergers and acquisitions and financial advice.advisory. The accounting and financial reporting policies of the Nomura conform to accounting principles generally accepted in the United States (“U.S. GAAP”) as applicable to broker-dealers. These consolidated financial statements include the financial statements of the Company and other entities in which it has a controlling financial interest. Nomura initially determines whether it has a controlling financial interest in an entity by evaluating whether the entity is a variable interest entity (“VIE”) under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 810 “ ” (“ASC 810”). VIEs are entities in which equity investors do not have the characteristics of a controlling financial interest or which do not have sufficient equity at risk for the entityentities to finance itstheir activities without additional subordinated financial support. Nomura consolidates VIEs where Nomura is the primary beneficiary, which is where (1) Nomura holds variable interests that providehas power overto direct the most significant activities of the VIE that is most significantly impact the VIE’s economic performance; and (2) through Nomura’s interest in the VIE, the right to receive benefits or the obligation to absorb losses meeting a significance test,that could potentially be significant to the VIE, provided that Nomura is not acting as a fiduciary for other interest holders. For entities other than VIEs, Nomura is generally determined to have a controlling financial interest in an entity when it owns a majority of the voting interests. Equity investments in entities in which Nomura has significant influence over operating and financial decisions (generally defined as a holding of 20 to 50 percent of the voting stock of a corporate entity, or at least 3 percent of a limited partnership) are accounted for under the equity method of accounting (“equity method investments”) and reported within Investments in and advances to affiliated companies or at fair value by electing the fair value option permitted by ASC 825 “825“” (“(“ASC 825”) and reported within ,Private equity and debt investments or Other financial investments are generally reported within.in consolidated balance sheets depending on the nature and purpose of the investments.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Equity investments in which Nomura has neither control nor significant influence are carried at fair value, with changes in fair value recognized through the consolidated statements of income and reported withinTrading assets, Private equity and debt investments or the consolidated statements of comprehensive income.Other assets in consolidated balance sheets depending on the nature or purpose of the investments.Certain consolidated entities in which Nomura has a financial interest are investment companies under ASC 946 ““Financial Services—Services ” (“ASC 946”). These entities carryNomura carries all of their investments at fair value, with changes in fair value recognized through the consolidated statements of income.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company’s principal subsidiaries include Nomura Securities Co., Ltd. (“NSC”), Nomura Securities International, Inc. (“NSI”), Nomura International plc (“NIP”) and Nomura Financial Products & Services, Inc. (“NFPS”). All material intercompany transactions and balances have been eliminated on consolidation. Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. Use of estimates— estimates—CriticalNomura uses accounting estimates are those that are the most important accounting estimates used to prepare these consolidated financial statements and whichthey require the most difficult, subjective and complex judgments by management. Such estimates determined by management to be material include estimates regarding the fair value of financial instruments the outcome ofand litigation and tax examinations, the recovery of the carrying value of goodwill, the allowance for doubtful accounts, the realization of deferred tax assets, the impairment of equity method investments and other non-financial assets and other matters that affect the reported amounts of assets and liabilities as well as the disclosures in these consolidated financial statements.provisions. Estimates, by their nature, are based on underlying assumptions which require management judgment and depend on the extent of available information. Actual results in future periods may differ from current estimates, which could have a material impact on these consolidated financial statements.
The COVID-19 pandemic has impacted some of the critical accounting estimates used in these consolidated financial statements during the year ended March 31, 2020 and is expected to continue to impact these estimates in future periods. Assumptions around how long the COVID-19 pandemic will last and how long the economies and financial markets in the key jurisdictions in which Nomura and its clients operate will take to recover has, and will continue to, affect these estimates. The key assumptions and estimates impacted by COVID-19 include:
The ability of clients to perform on their contractual obligations to Nomura arising from financial instruments for determination of fair value measurements or allowances for doubtful accounts;
The volatility and dislocation in global financial markets for determination of fair value measurements;
The expected duration of declines in global equity markets for determination of fair value measurements and impairment of equity method investments;
The future use of non-financial assets within Nomura for determination of whether impairments are required; and
The future profitability of Nomura to realize deferred tax assets.
Various references are made throughout the notes to these consolidated financial statements where critical accounting estimates based on management judgment have been made, the nature of the estimates, the underlying assumptions made by management used to derive those estimates and how the COVID-19 pandemic, has and is expected to continue to impact these estimates and thereforeaffect the amounts reported in these consolidated financial statements. Fair value of financial instruments—instruments—
A significant amount of Nomura’s financial assets and financial liabilities are carried at fair value, with changes in fair value recognized through the consolidated statements of income and/ or the consolidated statements of comprehensive income. Use of a fair value measurement is either specifically required under U.S. GAAP or Nomura makes an election to use a fair value measurement for certain eligible items under the fair value option.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Other financial assets and financial liabilities are carried at fair value on a nonrecurring basis, where the primary measurement basis is not fair value. Fair value is only used in specific circumstances after initial recognition, such as to measure impairment. In both cases, fair value is generally determined in accordance with ASC 820 “ Fair Value Measurements and Disclosures ” (“ASC 820”) which defines fair value as the amount that would be exchanged to sell a financial asset or transfer a financial liability in an orderly transaction between market participants at the measurement date. It assumes that the transaction occurs in Nomura’s principal market, or in the absence of a principal market, the most advantageous market for the relevant financial asset or financial liability. See Note 2 “ ” for further information regarding how Nomura estimates fair value for specific types of financial instruments used in the ordinary course of business.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The fair valuevalues of financial assets and financial liabilities of consolidated VIEs which meet the definition of collateralized financing entities are both measured using the more observable fair value of the financial assets and financial liabilities. Allowance for current expected credit losses— Management recognizes allowance for current expected credit losses on financial assets not carried at fair value and certainoff-balance sheet financial instruments including unfunded loan commitments not carried at fair value in accordance with ASC 326,“Financial Instruments—Credit Losses” (“ASC 326”) which Nomura initially adopted on April 1, 2020. Prior to such date, allowances for credit losses were recognized for incurred losses rather than expected credit losses based on management’s estimate of probable losses incurred within these financial assets andoff-balance sheet financial instruments. Current expected credit losses are calculated over the expected life of the financial instruments in scope of the requirements on an individual or a portfolio basis, considering all relevant, reasonable supportable information available about the collectability of cash flows, including information about past events, current conditions and future forecasts. Accrued interest receivables are excluded from the amortized cost basis of financing receivables when calculating current expected credit losses. The methodology used by Nomura to determine allowances for current expected credit losses in accordance with the CECL impairment model primarily depends on the nature of the financial instrument and whether certain practical expedients permitted by ASC 326 are applied by Nomura. Allowances for current expected credit losses against recognized financial instruments are reported in the consolidated balance sheets withinAllowances for current expected credit losses while allowances for current expected credit losses againstoff-balance sheet financial instruments are reported in the consolidated balance sheets withinliabilities. All movements in the allowances are reported in the consolidated statements of income within See Note 7for further information including how allowance for current expected credit losses are calculated. Transfers of financial assets— Nomura accounts for the transfer of a financial asset as a sale when Nomura relinquishes control over the asset by meeting the following conditions: (a) the asset has been isolated from the transferor (even in bankruptcy or other receivership), (b) the transferee has the right to pledge or exchange the asset received, or if the transferee is an entity whose sole purpose is to engage in securitization or asset-backed financing activities, if, the holders of its beneficial interests have the right to pledge or exchange the beneficial interests held and (c) the transferor has not maintained effective control over the transferred asset. In connection with its securitization activities, Nomura utilizes special purpose entities (“SPEs”) to securitize commercial and residential mortgage loans, government and corporate securities andor other types of financial assets. Nomura’s involvement with SPEs includes structuring and underwriting, distributing and selling debt instruments and beneficial interests issued by SPEs to investors. Nomura derecognizes financial assets transferred in securitizations provided that Nomura has relinquished control over such assets and does not consolidate the SPE. Nomura may obtain or retain an interest in the financial assets, including residual interests in the SPEs dependent upon prevailing market conditions. Any such interests are accounted for at fair value and reported within in the consolidated balance sheets with the change in fair value reported within in the consolidated statements of income.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Foreign currency translation— The financial statements of the Company’s subsidiaries and operations are measured using their functional currency which is the currency of the primary economic environment in which the entity operates. All assets and liabilities of subsidiaries and operations which have a functional currency other than Japanese Yen are translated into Japanese Yen at exchange rates in effect at the balance sheet date, and all revenue and expenses are translated at the average exchange rates for the respective years and the resulting translation adjustments are accumulated and reported within Accumulated other comprehensive income in NHI shareholders’ equity. Foreign currency assets and liabilities are translated at exchange rates in effect at the balance sheet date and the resulting translation gains or losses are credited or charged to the consolidated statements of income.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Revenue from services provided to clients— Nomura earns revenue through fees and commissions from providing financial services to customersclients across all three business divisions. These services primarily include trade execution and clearing services, distribution of fund unit services, financial advisory services, underwriting and distribution services and asset management services, underwriting services, syndication services and distribution services. Revenues are recognized when or as the customerclient obtains control of the service provided by Nomura which depends on when each of the key distinct substantive promises made by Nomura within the contract with the customerclient (“performance obligations”) are satisfied. Such performance obligations are generally satisfied at a particularly point in time or, if certain criteria are met, over a period of time. Revenues from providing trade executiondistribution of fund units and clearing services are reported in the consolidated statements of income within Revenue—Commissions,Revenue
revenues from financial advisory services, underwriting services and syndication services are reported inRevenue—Fees from investment banking—
andrevenues from asset management services are reported in Asset management and portfolio service fees .and revenues from financial advisory services, underwriting and distribution services are reported inFees from investment banking .Costs to obtain or fulfill the underlying contract to provide services to a customerclient are deferred as assets if certain criteria are met. These deferred costs, which are reported in the consolidated balance sheets within are released to the consolidated statements of income when the related revenue from providing the service is also recognized or earlier if there is evidence that the costs are not recoverable and therefore impaired. Trading assets and trading liabilities —liabilities—Trading assets and Trading liabilities primarily comprise debt securities, equity securities and derivativesderivative assets which are recognized on the consolidated balance sheets on a trade date basis and loans which are recognized on the consolidated balance sheets on a settlement date basis. Financial assets are classified as being held for trading when any of the following criteria are met: The financial assets are originated or acquired with the intention to generate profit through sale of the financial assets in the short-term; The financial assets are part of a portfolio of identified financial instruments that are managed together for the purposes of short-term profit or arbitrage profit-taking; or The financial assets are derivative assets. primarily comprise short sales of securities and derivative liabilities, which are recognized on the consolidated balance sheets on a trade date basis. Trading assets and liabilities are carried at fair value and changes in fair value are generally reported within in the consolidated statements of income.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Certain nonderivative trading liabilities are held to economically hedge the price risk of investments in equity securities held for operating purposes. Changes in fair value of these trading liabilities are reported within Revenue—Gain (loss) on investments in equity securities in the consolidated statements of income. Collateralized agreements and collateralized financing— Collateralized agreements consist of reverse repurchase agreements disclosed as Securities purchased under agreements to resell and securities borrowing transactions disclosed as . consists of repurchase agreements disclosed as Securities sold under agreements to repurchase , securities lending transactions disclosed as and certain other secured borrowings. Reverse repurchase and repurchase agreements principally involve the buying or selling of securities under agreements with clients to resell or repurchase these securities to or from those clients, respectively. These transactions are generally accounted for as collateralized agreements or collateralized financing transactions and are recognized in the consolidated balance sheets at the amount for which the securities were originally acquired or sold. Certain reverse repurchase and repurchase agreements are carried at fair value through election of the fair value option. No allowance for credit losses is generally recognized against reverse repurchase agreements due to the strict collateralization requirements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Nomura also enters into Gensaki Repo transactions which are the standard type of repurchase agreement used in Japanese financial markets. Gensaki Repo transactions contain margin requirements, rights of security substitution, and certain restrictions on the client’s right to sell or repledge the transferred securities. Gensaki Repo transactions are accounted for as collateralized agreements or collateralized financing transactions and are recognized on the consolidated balance sheets at the amount that the securities were originally acquired or sold. Securities borrowing and lending transactions are generally accounted for as collateralized agreements and collateralized financing transactions, respectively. These transactions are generally cash collateralized and are recognized on the consolidated balance sheets at the amount of cash collateral advanced or received. Allowances for current expected credit losses recognized against securities borrowing transactions are not significant due to an ongoing monitoring of collateral and the short expected life of these transactions. Where Nomura acts as lenders in securities borrowing and lending transactions and receives securities that can be sold or pledged as collateral, Nomura recognizes the securities received at fair value withinand the obligation to return those securities as a liability within See Note 7for further information including how allowances for current expected credit losses under ASC 326 are determined and the impact of theCOVID-19 pandemic on the approach to calculation of current expected credit losses during the years ended March 31, 2021 and 2022. Offsetting of collateralized agreements and collateralized financings Reverse repurchase agreements and repurchase agreements (including Gensaki Repo transactions) accounted for as collateralized agreements and collateralized financing transactions, respectively, entered into with the same counterparty and documented under a master netting agreement are offset in the consolidated balance sheets where the specific criteria defined by ASC 210-20 “ ” (“ASC 210-20”) are met. These criteria include requirements around the maturity of the transactions, the underlying systems on which the collateral is settled, associated banking arrangements and the legal enforceability of close-out and offsetting rights under the master netting agreement. Securities borrowing and lending transactions are generally accounted for as collateralized agreements and collateralized financing transactions, respectively. These transactions are generally cash collateralized and are recognized on the consolidated balance sheets at the amount of cash collateral advanced or received. No allowance for credit losses is generally recognized against Similarly, securities borrowing transactions due to the strict collateralization requirements.
Securities borrowing and lending transactions accounted for as collateralized agreements and collateralized financing transactions, respectively, entered into with the same counterparty and documented under a master netting agreement are also offset in the consolidated balance sheets where the specific criteria defined by ASC 210-20 are met.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) consist primarily of secured borrowings from financial institutions and central banks in the inter-bank money market, and are carried at contractual amounts due. Trading balances of secured borrowings consist of liabilities related to transfers of financial assets that are accounted for as secured financing transactions rather than sales under ASC 860 “ ” (“ASC 860”) and are reported in the consolidated balance sheets within . The fair value option is generally elected for these transactions, which are carried at fair value on a recurring basis. See Note 7 “6 “Securitizations and Variable Interest EntitiesEntities” ” and Note 11 “” for further information regarding these transactions. All Nomura-owned securities pledged to counterparties where the counterparty has the right to sell or repledge the securities, including collateral transferred under Gensaki Repo transactions, are reported parenthetically within Trading assets as Securities pledged as collateral in the consolidated balance sheets. See Note 5 ““Collateralized transactionstransactions” ” for further information. Nomura uses a variety of derivative financial instruments,derivatives, including futures, forwards, swaps and options, for both trading and non-trading purposes. All freestandingFreestanding financial instruments which meet the accounting definition of derivatives are carried at fair value in the consolidated balance sheets and reported within Trading assets or Trading liabilities depending on whether fair value at the balance sheet date is positive or negative, respectively. Certain derivatives embedded in hybrid financial instruments such as structured notes and certificates of deposit are bifurcated from the host contract and are also carried at fair value in the consolidated balance sheets and reported within Short-term borrowings or Long-term borrowings depending on the maturity of the underlying host contract.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Changes in fair value are recognized either through the consolidated statements of income or the consolidated statements of comprehensive income depending on the purpose for which the derivatives are used. Derivative assets and liabilities with the same counterparty documented under a master netting agreement are offset in the consolidated balance sheets where the specific criteria defined by ASC210-20
and ASC 815 “” (“ASC 815”) are met. These criteria include requirements around the legal enforceability of suchclose-out
and offset rights under the master netting agreement. In addition, fair value amounts recognizedused for the right to reclaim cash collateral (a receivable) and the obligation to return cash collateral (a payable) are also offset against net derivative liabilities and net derivative assets, respectively, where certain additional criteria are met.Exchange traded and centrally cleared OTC derivatives typically involve daily variation margin payments and receipts which reflect changes in the fair value of the related derivative. Such variation margin amounts are accounted for as either a partial settlement of the derivative or as a separate cash collateral receivable or payable depending on the legal form of the arrangement.trading purposes
Derivative financial instrumentsDerivatives used for trading purposes, including bifurcated embedded derivatives, are carried at fair value with changes in fair value reported in the consolidated statements of income within . Derivatives held forNon-tradingnon-trading purposes In addition to its trading activities, Nomura uses derivative financial instrumentsderivatives for other than trading purposes such as to manage risk exposures arising from recognized assets and liabilities, forecasted transactions and firm commitments. Certain derivatives usedDerivatives held for non-trading purposes arecomprise derivatives formally designated as fair value andor net investment hedges under ASC 815.815 “” (“ASC 815”) or economic expense hedges as follows:Nomura designates certain derivative financial instruments as fair value hedges of interest rate risk and foreign exchange risk arising from specific financial liabilities and foreign currency denominated non-trading debt securities, respectively. These derivatives are effective in reducing the risk associated with the exposure being hedged and they are highly correlated with changes in the fair value of the underlying hedged items, both at inception and
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) throughout the life of the hedging relationship. Changes in fair value of the hedging derivatives are reported together with those of the hedged financial assets and liabilities through the consolidated statements of income within and —, respectively. Derivative financial instruments designatedNet investment hedges
Nomura designates certain derivatives as hedges of the net investment in foreign operations related to specific subsidiaries with non-Japanese Yen functional currencies. When determining the effectiveness of net investment hedges, the effective portion of the change in fair value of the hedging derivative is determined by changes in spot exchange rates. Changes in fair value of the hedging derivatives attributable to changes in the difference between the forward rate and spot rate is excluded from the measurement of hedge effectiveness and are reported in the consolidated statements of income within . All other movements in fair value of highly effective net investment hedging derivatives are reported through NHI shareholders’ equity within Accumulated other comprehensive income (loss) . Nomura designates certain derivatives as economic expense hedges to manage equity price risk or foreign currency risk of certain expenses arising from forecasted transactions or firm commitments. Changes in fair value of these derivatives are reported in the same line item in the consolidated statements of income where expenses arising from the hedged transactions are reported. Offsetting of derivatives Derivative assets and liabilities with the same counterparty documented under a legally enforceable master netting agreement and the related cash collateral receivables and payables are presented on a net basis in the consolidated balance sheets where the specific criteria defined by ASC210-20 and ASC 815 are met. Exchange traded and centrally cleared OTC derivatives typically involve daily variation margin payments and receipts which reflect changes in the fair value of the related derivatives. Such variation margin amounts are accounted for as either a partial settlement of the derivative or as a separate cash collateral receivable or payable depending on the legal form of the arrangement with the relevant central clearing counterparty. See Note 3 “ Derivative instrumentsDerivatives and hedging activities
” for further information.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Loans receivable are loans which management intends to hold for the foreseeable future. Loans receivable are either carried at fair value or at amortized cost. Interest earned on loans receivable is generally reported in the consolidated statements of income within . Loans receivable carried at fair value Certain loans which are risk managed on a fair value basis are carried at fair value through election of the fair value option. Nomura makes this election to mitigate volatility in the consolidated statements of income caused by the difference in measurement basis that would otherwise exist between the loans and the derivatives used to risk manage those loans. Changes in the fair value of loans receivable carried at fair value are reported in the consolidated statements of income within .
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Loans receivable carried at amortized cost Loans receivable which are not carried at fair value are carried at amortized cost. Amortized cost represents cost adjusted for deferred fees and direct costs, unamortized premiums or discounts on purchased loans and after deducting any applicable allowanceallowances for current expected credit losses when loans receivable are identified as impaired.under ASC 326 which Nomura initially adopted from April 1, 2020. Loan origination fees, net of direct origination costs, are amortized to as an adjustment to yield over the life of the loan. Net unamortized deferred fees and costs were immaterial as of March 31, 2019 and March 31, 2020.Modifications of loans receivable where the borrower is in financial difficulty and Nomura has granted a financial concession are typically accounted for as troubled debt restructurings (“TDRs”) and the loan receivable classified as impaired with recognition of an appropriate allowance for credit losses. However, consistent. Consistent with guidance issued by U.S. banking regulators in March 2020 as a result of the COVID-19 pandemic, certain modifications of loans receivable which meetmet the above criteria havewere not been accounted for TDRs nor the loan classified as impaired providerprovided the borrower was current with payments prior to the COVID-19 pandemic, the nature of the concession iswas short-term and only permitspermitted a payment delay, waiver of fees or extension of repayment terms. Such guidance has no longer been applied by Nomura since October 1, 2020.See Note 7 “ ” for further information including how allowances for current expected credit losses under ASC 326 are determined and the impact of the COVID-19 pandemic on the approach.determined.Receivables from customers include amounts receivable on client securities transactions, amounts receivable from customers clients for securities failed to deliver securities and receivables for commissions.commissions receivable.Receivables from other than customers customers
include amounts receivable from brokers and dealers for securities failed to deliver securities, margin deposits, cash collateral receivables for derivative transactions, and net receivables arising from unsettled securities transactions. The net receivable arising from unsettled securities transactions reported within Receivables from other than customers was ¥345,850 ¥0nil million and ¥680,727 million¥0nil as of March 31, 20192021 and March 31, 2020,2022, respectively. These amounts are carried at contractual amounts due less any applicable allowance for current expected credit losses recognized under ASC 326 which reflects management’s best estimate of probable losses incurred within these receivables which have been specifically identified as impaired. The allowance Nomura initially adopted from April 1, 2020. See Note 7 “for further information including how allowances for current expected credit losses is reported in the consolidated balance sheets withinAllowance for doubtful accounts
. F-22 under ASC 326 are determined.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unfunded loan commitments written by Nomura are accounted for as either off-balance sheet instruments, or are carried at fair value on a recurring basis either as trading instruments or through election of the fair value option. These loan commitments are generally accounted for in a manner consistent with the accounting for the loan receivable upon funding. Where the loan receivable will be classified as a trading asset or will be elected for the fair value option, the loan commitment is also generally held at fair value, with changes in fair value reported in the consolidated statements of income within . Loan commitment fees integral to the loan commitment are recognized as part of the fair value of the commitment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) For loan commitments where the loan will be held for the foreseeable future and will not be elected for the fair value option, Nomura recognizes anallowances for current expected credit losses in accordance with ASC 326which Nomura initially adopted from April 1, 2020. As of March 31, 2020, the allowance for incurred credit losses which is reported withinin the consolidated balance sheets which reflectsreflected management’s best estimate of probable losses expected incurred within thefor these loan commitments which have been specifically classified as impaired. commitments. Loan commitment fees are generally deferred and recognized over the term of the loan when funded as an adjustment to yield. If drawdown of the loan commitment is considered remote, loan commitment fees are recognized over the commitment period as service revenue. See Note 7“Financing receivables” for further information including how allowances for current expected credit losses under ASC 326 are determined. include amounts payable on client securities transactions and are generally measured at contractual amounts due. Payables to other than customers include payables to brokers and dealers for securities, failed to receive, cash collateral payable for derivative transactions, certain collateralized agreements and financing transactions and net payables arising from unsettled securities transactions. Amounts are measured at contractual amounts due. The net payable arising from unsettled securities transactions reported withinPayables to other than customers was ¥205,211 and ¥67,258 million as of March 31, 2021 and March 31, 2022, respectively. Deposits received at banks represent amounts held on deposit within Nomura’s banking subsidiaries and are measured at contractual amounts due. Office buildings, land, equipment and facilities— Office buildings, land, equipment and facilities, owned and held for use by Nomura are stated at cost, net of accumulated depreciation and amortization, except for land, which is stated at cost. Significant renewals and additions are capitalized at cost. Maintenance, repairs and minor renewals are expensed as incurred in the consolidated statements of income. Leases and subleases entered into by Nomura as either lessor or lessee are classified as either operating or finance leases on inception date in accordance with ASC 842 “” (“ASC842”) which Nomura adopted from April 1, 2019. On lease commencement date, Nomura as lessee recognizes (“ROU”) assets and lease liabilities which are reported within Other assets—Office buildings, land, equipment and facilities and , respectively in the consolidated balance sheets. Lease liabilities are initially measured at present value of the future minimum lease payments over the expected lease term. The future minimum lease payments are discounted using a relevant Nomura incremental
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
borrowing rate as derived from information available at lease commencement date. The expected lease term is generally determined based on the contractual maturity of the lease, and adjusted for periods covered by options to extend or terminate the lease when Nomura is reasonably certain to exercise those options. ROU assets are initially measured at the amount of lease liabilities, and adjusted for any prepaid lease payments, initial direct costs incurred and any lease incentives received. After lease commencement date, for operating leases Nomura as lessee recognizes lease expense over the lease term generally on a straight-line basis within Occupancy and related depreciation or
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) processing and communications in the consolidated statements of income. While for finance leases, Nomura recognizes amortization charges of ROU assets over the lease term and interest expense on finance lease liabilities. The following table presents a breakdown of owned and leased office buildings, land,equipment
and facilities as of March 31, 2019 and 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating lease ROU assets | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | |
Depreciation and amortization charges of owned assets are generally computed using the straight-line method and recognized over the estimated useful lives of each asset. The estimated useful life of an asset takes into consideration technological change, normal deterioration and actual physical usage by Nomura. Leasehold improvements are depreciated over the shorter of their useful life or the term of thecorresponding lease. The estimated useful lives for significant asset classes are as follows: Depreciation and amortization charges of depreciable assets are reported withinNon-interest expenses—Information processing and communications
in the amount of¥58,300 million, ¥45,818 million,and
¥47,653 million, and inNon-interest expenses—Occupancy and related depreciation
in the amount of¥13,279 million, ¥12,106 million, and ¥15,930 million for the years ended March 31, 2018, 2019 and 2020, respectively.Long-lived assets, including ROU assets and software assets but excluding goodwill and indefinite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the estimated future undiscounted cash flows generated by the asset is less than the carrying amount of the asset, a loss is recognized to the extent that the carrying value exceeds its fair value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
See Note 8 “Leases”“” for further information. Investments in equity securities— Nomura holds minority stakes in the equity securities of unaffiliated Japanese financial institutions and corporations in order to promote existing and potential business relationships. These companies often have similar investments in Nomura. Such cross-holdings are a customary business practice in Japan and provide a way for companies to manage shareholder relationships. These investments, which Nomura refers to as being held for operating purposes, are carried at fair value and reported within Investments in equity securities in the consolidated balance sheets, with changes in fair value reported within Gain (loss) on investments in equity securities in the consolidated statements of income. These investments comprise listed and unlisted equity securities in the amounts of ¥97,904 million and ¥40,543 million, respectively, as of March 31, 2019 and ¥74,755 million and ¥37,420 million, respectively, as of March 31, 2020.Other non-trading debt and equity securities— Certain non-trading subsidiaries within Nomura hold debt securities and minority stakes in equity securities for non-trading purposes. Non-trading securities held by non-trading subsidiaries are carried at fair value and reported within Non-trading debt securities and in the consolidated balance sheets with changes in fair value reported within in the consolidated statements of income. Realized gains and losses on non-trading securities are reported within in the consolidated statements of income. Short-term and long-term borrowings— Short-term borrowings are defined as borrowings which are due on demand, which have a contractual maturity of one year or less at issuance date, or which have a longer contractual maturity but which contain
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) features outside of Nomura’s control that allows the investor to demand redemption within one year from original issuance date. Short-term and long-term borrowings primarily consist of commercial paper, bank borrowings, and certain structured notes issued by Nomura and SPEs consolidated by Nomura, and financial liabilities recognized in transfers of financial assets which are accounted for as financings rather than sales under ASC 860 (“secured financing transactions”). Of these financial liabilities, certain structured notes and secured financing transactions are accounted for at fair value on a recurring basis through election of the fair value option. Other short and long-term borrowings are carried at amortized cost. Structured notes are debt securities which contain embedded features (often meeting the accounting definition of a derivative) that alter the return to the investor from simply receiving a fixed or floating rate of interest to a return that depends upon some other variable(s) such as an equity or equity index, commodity price, foreign exchange rate, credit rating of a third party or more complex interest rate calculation. Structured borrowings are borrowings that have similar characteristics as structured notes. All structured notes issued by Nomura and certain structured borrowings issued by Nomura on or after April 1, 2018 are carried at fair value on a recurring basis through election of the fair value option. This blanket election for structured notes and certain structured borrowings are made primarily to mitigate the volatility in the consolidated statements of income caused by differences in the measurement basis for structured notes and the derivatives used to risk manage those positions and to generally simplify the accounting Nomura applies to these financial instruments.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Changes in the fair value of structured notes elected for the fair value option except for those related to structured notes and attributable to Nomura’s own creditworthiness, are reported within in the consolidated statements of income.income, except for those attributable to Nomura’s own creditworthiness which are reported withinOther comprehensive income in the consolidated balance sheets. See Note 11 “ ” for further information. Deferred tax assets and liabilities are recognized to reflect the expected future tax consequences of operating loss carryforwards, tax credit carryforwards and temporary differences between the carrying amounts for financial reporting purposes and the tax bases of assets and liabilities based upon enacted tax laws and tax rates. Nomura recognizes deferred tax assets to the extent it believes that it is more likely than not that a benefit will be realized. A valuation allowance is established against deferred tax assets for tax benefits available to Nomura that are not deemed more likely than not to be realized. Deferred tax assets and deferred tax liabilities that relate to the same tax-paying component within a particular tax jurisdiction are offset in the consolidated balance sheets. Net deferred tax assets and net deferred tax liabilities are reported within and in the consolidated balance sheets. Nomura recognizes and measures unrecognized tax benefits based on Nomura’s estimate of the likelihood, based on technical merits, that tax positions will be sustained upon examination based on the facts and circumstances and information available at the end of each period. Nomura adjusts the level of unrecognized tax benefits when there is more information available, or when an event occurs requiring a change. The reassessment of unrecognized tax benefits could have a material impact on Nomura’s effective tax rate in the period in which it occurs. Nomura recognizesreports income tax-related interest and penalties within in the consolidated statements of income.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) See Note 1615 “ ” for further information. Stock-based and other compensation awards— Stock-based awards issued by Nomura to senior management and other employees are classified as either equity or liability awards depending on the terms of the award. Stock-based awards such as Stock Acquisition Rights (“SARs”) and Restricted Stock Units (“RSUs”) which are expected to be settled by the delivery of the Company’s common stock are classified as equity awards. For these awards, total compensation cost is generally fixed at the grant date and measured using the grant-date fair value of the award, net of any amount the employee is obligated to pay and estimated forfeitures. Stock-based awards such as Notional Stock Units (“NSUs”) and Collared Notional Stock Units (“CSUs”) which are expected to be settled in cash are classified as liability awards. Other awards such as Notional Index Units (“NIUs”) which are linked to a world stock index quoted by Morgan Stanley Capital International and which are expected to be cash settled are also effectively classified as liability awards. Liability awards are remeasured to fair value at each balance sheet date, net of estimated forfeitures with the final measurement of cumulative compensation cost equal to the settlement amount.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For both equity and liability awards, fair value is determined either by using option pricing models, the market price of the Company’s common stock or the price of the third party index, as appropriate. Compensation cost is recognized in the consolidated statements of income over the requisite service period, which generally is equal to the contractual vesting period. Where an award has graded vesting, compensation expense is recognized using the accelerated recognition method. Certain deferred compensation awards granted since May 2013 include “Full Career Retirement” (“FCR”) provisions which permit recipients of the awards to continue to vest in the awards upon voluntary termination or by claiming FCR during a pre-defined election window if certain criteria based on corporate title and length of service within Nomura are met. The requisite service period for these awards ends on the earlier of the contractual vesting date and the date that the recipients become eligible for or claim FCR. See Note 14 “ Deferred compensation awards ” for further information. The computation of basic earnings per share is based on the weighted average number of shares outstanding during the year. Diluted earnings per share reflects the assumed conversion of all dilutive securities based on the most advantageous conversion rate or exercise price available to the investors, and assuming conversion of convertible debt under the if-converted method. See Note 12 “ ” for further information. Cash and cash equivalents— Nomura defines cash and cash equivalents as cash on hand and demand deposits with banks. Goodwill and intangible assets— Goodwill is recognized upon completion of a business combination as the difference between the purchase price and the fair value of the net assets acquired. Subsequent to initial recognition, goodwill is not amortized but
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) is tested for impairment at a reporting unit level during the fourth quarter of each fiscal year, or more frequently during earlier interim periods if events or circumstances indicate there may be impairment. Nomura’s reporting units are at the same level as or one level below its business segments. Nomura tests goodwill of each separate reporting unit by initially qualitatively assessing whether events and circumstances indicate that it is more likely than not (i.e. , greater than 50% ) likelihood) that a reporting unit’s fair value is less than its carrying amount. If such assessment indicates fair value is not less than the carrying value, the reporting unit is deemed not to be impaired and no further analysis is required. If it is more likely than not that the fair value of the reporting unit is below its carrying value, a quantitative two-step
impairment test is then performed. Following the adoption of ASU2017-04 In“Simplifying the first step,Test for Goodwill Impairment”
effective from April 1, 2020, a goodwill impairment loss is now recognized through earnings as the currentexcess of the carrying amount of a reporting unit, including goodwill, over its fair value but limited to the total amount of goodwill allocated to the reporting unit. Prior to such date, an impairment loss was only recognized if the estimated implied fair value of the reporting unitgoodwill is compared withbelow its carrying value, including goodwill. If the fair value is less than the carrying value, then a second step is performed. In the second step, the implied current fair value of the reporting unit’s goodwill is determined by comparing the fair value of the reporting unit to the fair value of the net assets of the reporting unit, as if the reporting unit were being acquired in a business combination. An impairment loss is recognized if the carrying value of goodwill exceeds its implied current fair
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Intangible assets not subject to amortization (“indefinite-lived intangible assets”) are tested for impairment on an individual asset basis during the fourth quarter of each fiscal year, or more frequently during earlier interim periods if events or circumstances indicate there may be impairment. Similar to goodwill, Nomura tests an indefinite-lived intangible asset by initially qualitatively assessing whether events or circumstances indicate that it is more likely than not that the fair value of the intangible asset is less than its carrying amount. If such assessment indicates fair value is not less than the carrying value, the intangible asset is deemed not to be impaired and no further analysis is required. If it is more likely than not that the fair value of the intangible asset is below its carrying value, the current estimated fair value of the intangible asset is compared with its carrying value. An impairment loss is recognized if the carrying value of the intangible asset exceeds its estimated fair value. Intangible assets with finite lives (“finite-lived intangible assets”) are amortized over their estimated useful lives and tested for impairment either individually or with other assets (“asset group”) when events and circumstances indicate that the carrying value of the intangible asset (or asset group) may not be recoverable. A finite-lived intangible asset is impaired when its carrying amount or the carrying amount of the asset group exceeds its fair value. An impairment loss is recognized only if the carrying amount of the intangible asset (or asset group) is not recoverable and exceeds its fair value. For both goodwill and intangible assets, to the extent an impairment loss is recognized, the loss establishes a new cost basis for the asset which cannot be subsequently reversed. See Note 10 “ —Office buildings, land, equipment and facilities and Other / Other liabilities ” for further information. Nomura’s equity method investments are tested in their entirety for other-than-temporary impairment when there is an indication of impairment. The underlying assets associated with the equity method investments, including goodwill, are not tested separately for impairment. Costs associated with an exit activity are recognized at fair value in the period in which the liability is incurred. Such costs includeone-time
termination benefits provided to employees, costs to terminate certain contracts and costs to relocate employees. Termination benefits provided to employees as part of ongoing benefit arrangements are recognized as liabilities at the earlier of the date an appropriately detailed restructuring plan is approved by regional executive management or the terms of the involuntary terminations are communicated to employees potentially affected. Contractual termination benefits included in an employee’s contract of employment that is triggered by the occurrence of a specific event are recognized during the period in which it is probable that Nomura has incurred a liability and the amount of the liability can be reasonably estimated. Aone-time
termination benefit is established by a plan of termination that applies to a specified termination event and is recognized when an appropriately detailed restructuring plan is approved by regional executive management and the terms of the involuntary terminations are communicated to those employees potentially affected by the restructuring.See Note 15“Restructuring initiatives
” for further information.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Nomura provides certain eligible employees with various benefit plans, including pensions and other post-retirement benefits. These benefit plans are classified as either defined benefit plans or defined contribution plans. Plan assets and benefit obligations, as well as the net periodic benefit cost of a defined benefit pension or post-retirement benefit plan, are recognized based on various actuarial assumptions such as discount rates,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) expected return on plan assets and future compensation levels at the balance sheet date. Actuarial gains and losses in excess of 10% of the greater of the projected benefit obligation or the fair value of plan assets and unrecognized prior service costs or credits are amortized to net periodic benefit cost on a straight-line basis over the average remaining service life of active employees expected to receive benefits. The overfunded or underfunded status of a plan is reported within or in the consolidated balance sheets, and changes in funded status are reflected in net periodic benefit cost and Other comprehensive income (loss) on a basis in the consolidated statements of comprehensive income. The net periodic pension and other benefit cost of defined contribution plans is recognized within Compensation and benefits in the consolidated statements of income when the employee renders service to Nomura, which generally coincides with when contributions to the plan are made. See Note 13 “ ” for further information.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
New accounting pronouncements adopted during the current year— The following table presents a summary ofNo new accounting pronouncements relevant to Nomura which have beenwere adopted during the year ended March 31, 2020:2022.
However, Nomura has elected to apply certain practical reliefs provided by the following new accounting pronouncements during the year ended March 31, 2022: | | | | | | | | | | | | | Effect on these consolidated statements
| | | •
Replaces ASC 840 “”, the current guidance on lease accounting, and revised the definition of a lease.•
Requires all lessees to recognize a right of use asset and corresponding lease liability on balance sheet.•
Lessor accounting is largely unchanged from current guidance.•
Simplifies the accounting for sale leaseback and“build-to-suit”
leases.•
Requires extensive new qualitative and quantitative footnote disclosures on lease arrangements. | | Modified retrospective adoption from April 1, 2019.(2)
| | ¥169,277 million increase inOther Asset—Office buildings, land, equipment, and facilities
, and ¥163,685 million increase inas a result of recognizing operating leases on the consolidated balance sheet as of April 1, 2019.¥5,592 million increase inas of April 1, 2019 mainly due to changes in certain lease classifications.See Note 8 “Leases” where the amended disclosures have been made.
|
(1) | As subsequently amended by ASU2018-01
“Land Easement Practical Expedient for Transition to Topic 842
”, ASU2018-10
“Codification Improvements to Topic 842, Leases
”, ASU2018-11
“Leases (Topic 842): Targeted Improvements
”, ASU2018-20
“Leases (Topic 842): Narrow-Scope Improvements for Lessors
”, and ASU2019-01
“Leases (Topic 842): Codification Improvements.
” |
(2) | Nomura used certain practical expedients permitted by ASC 842 including adopting the new requirements through a cumulative-effect adjustment to retained earnings on adoption date. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Future accounting developments—
The following table presents a summary of new authoritative accounting pronouncements relevant to Nomura which will be adopted on or after April 1, 2020 and which may have a material impact on these financial statements:
| | | | | | | | | | | Adoption date and method of | | Effect on these consolidated statements | “ Measurement of Credit Losses on Financial Instruments
”(3)Reference rate reform”
| | • Introduces a new model for recognition Provides temporary optional expedients and measurementexceptions to the application of credit losses againstgenerally accepted accounting principles to certain financial instruments such as loans, debt securitiescontract and receivables which are not carried at fair value with changes in fair value recognized through earnings. The model also applies to off balance sheet credit exposures such as written loan commitments, standby letters of credit and issued financial guarantees not accounted for as insurance, which are not carried at fair value through earnings.hedge relationships affected by reference rate reform.• Contract modifications solely related to the replacement of reference rate are eligible for relief from modification accounting requirements and accounted for as a continuation of the existing contract. • Allows various optional expedients and elections to allow hedging relationships affected by reference rate reform would continue uninterrupted during the reference rate transition if certain criteria are met. | | The expedients and exceptions provided by the ASU are permitted to be adopted any time until December 31, 2022. | | Nomura has elected to apply the relief to certain contract modifications beginning from the year ended March 31, 2022. These modifications have not had a material impact on these consolidated financial statements.
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Future accounting developments— The following table presents a summary of new authoritative accounting pronouncements relevant to Nomura which will be adopted on or after April 1, 2022 and which may have a material impact on these consolidated financial statements: | | | | | | | | | Summary of new model basedguidance | | Expected adoption date and method of adoption | | Effect on lifetimethese consolidated statements | ASU2022-02 “Financial instruments—Credit losses (Topic 326): Troubled debt restructurings and vintage disclosures” | | • Eliminates specific recognition and measurement guidance for troubled debt restructurings (“TDRs”). Single guidance to be applied to all modifications when determining whether a modification results in a new receivable or a continuation of an existing receivable; • Requires to use a discounted cash flow (“DCF”) or reconcilable method for measurement of current expected credit losses (CECL)for modified receivables is removed; where a DCF method is used for the measurement, toan effective interest rate (EIR) derived from the modified contractual terms should be recognized at the time anapplied; in-scope
instrument is originated, acquired or issued.• Enhances disclosures by creditors for modifications of receivables from debtors experiencing financial difficulty in the form of principal forgiveness, an interest rate reduction, other-than-insignificant payment delay or term extension; Replaces existing incurred credit losses model under current GAAP.• Permits electing Augments the fair value optioncurrent requirements for certain financial instruments on adoption date.public business entity creditors to disclose current-period gross write-offs •
Requires enhanced qualitative and quantitative disclosures around credit risk, | | Nomura tentatively plans to adopt the methodology used to estimate and monitor expected credit losses and changes in estimates of expected credit losses.amendments from April 1, 2023 | | Modified retrospective adoption from April 1, 2020.
| | ForNo material financial instruments subject to CECL, ¥1,972 millionimpact expected unless a significant number of TDRs occur in the future.
increase inAllowance for doubtful accounts
, ¥638 million increase inOther liabilities
, ¥72 million increase ofDeferred tax assets
and cumulative effect adjustment to decrease
earnings
, net of tax, of ¥2,538 million as of April 1, 2020.For financial instruments elected for the FVO, ¥9,774 million decrease in, ¥5,888 millionliabilities
and cumulative effect adjustment to decreaseearnings
netCertain disclosures about modification of tax, of ¥15,662 million as of April 1, 2020.receivables and write-offs will be updated or removed. Allowances for credit losses as determined on adoption date under the new model increased as a result of the COVID-19 pandemic because of the increased credit risk caused by the impact of the pandemic on borrowers. Fair value measurements used
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | date and method of adoption
| | Effect on these consolidated statements | | | | | | | on adoption date were also lower because of increased credit risk
and impact on financial markets caused by the pandemic.
| | | by year of origination (i.e., the vintage year) for financing receivables and net investments in leases. | | | | | “Simplifying the Accounting for Income Taxes
” | | •
Simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740, such as the exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment and the exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary.•
Requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as anon-income—
based tax.•
Makes other minor amendments for simplification and clarification of income taxes accounting. | | Effective from April 1, 2021.(4)
•
Modified retrospective adoption for the amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries.•
Full or modified retrospective adoption for the amendments related to franchise taxes that are partially based on income.•
Prospective adoption for all other amendments. | | Currently evaluating the potential impact.
|
(3) | As subsequently amended by ASU2018-19
“Codification Improvements to Topic 326, Financial Instruments—Credit Losses
”, ASU2019-04
“Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments
”, ASU2019-05
“Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief.
” and ASU 2019-09
“Codification Improvements to Topic 326, Financial Instruments—Credit Losses”
andASU2019-10
“Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates”.
|
(4) | Unless Nomura early adopts which is under evaluation. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2. Fair value measurements: The fair value of financial instruments A significant amount of Nomura’s financial instruments are is measured at fair value. Financial assets measured at fair value on a recurring basis are reported in the consolidated balance sheets within Trading assets and private equity and debt investments, Loans and receivables, Collateralized agreements and . Financial liabilities measured at fair value on a recurring basis are reported within Trading liabilities, Short-term borrowings, Payables and deposits, Collateralized financing, Long-term borrowings and Other financial assets and financial liabilities are measured at fair value on a nonrecurring basis, where the primary measurement basis is not fair value but where fair value is used in specific circumstances after initial recognition, such as to measure impairment. In all cases, fair value is determined in accordance with ASC 820 “ Fair Value Measurements and Disclosures ” (“ASC 820”) which defines fair value as the amount that would be exchanged to sell a financial asset or transfer a financial liability in an orderly transaction between market participants at the measurement date. It assumes that the transaction occurs in the principal market for the relevant financial assets or financial liabilities, or in the absence of a principal market, the most advantageous market. Fair value is usually determined on an individual financial instrument basis consistent with the unit of account of the financial instrument. However, certain financial instruments managed on a portfolio basis are valued as a portfolio, namely based on the price that would be received to sell a net long position (i.e., a net financial asset) or transfer a net short position (i.e., a net financial liability) consistent with how market participants would price the net risk exposure at the measurement date. Financial assets measured at fair value also include investments in certain funds where, as a practical expedient, fair value is determined on the basis of net asset value per share (“NAV per share”) if the NAV per share is calculated in accordance with certain industry standard principles. Increases and decreases in the fair value of assets and liabilities will significantly impact Nomura’s position, performance, liquidity and capital resources. As explained below, valuation techniques applied contain inherent uncertainties and Nomura is unable to predict the accurate impact of future developments in the market. The valuation of financial instruments is more difficult during periods of market stress as a result of greater volatility and reduced price transparency, which has been the casesuch as during the COVID-19 pandemic in 2020 and 2021 and during the invasion of Ukraine by the Russian Federation in 2022, and may therefore require the greater use of judgement in the determination of fair value. Where appropriate, Nomura uses economic hedging strategies to mitigate its risk, although these hedges are also subject to unpredictable movements in the market.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Valuation methodology for financial instruments carried at fair value on a recurring basis The fair value of financial instruments is based on quoted market prices including market indices, broker or dealer quotations or an estimation by management of the expected exit price under current market conditions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Various financial instruments, including cash instruments and (“OTC”) contracts, have bid and offer prices that are observable in the market. These are measured at the point within the bid-offer range which best represents Nomura’s estimate of fair value. Where quoted market prices or broker or dealer quotations are not available, prices for similar instruments or valuation pricing models are considered in the determination of fair value. Where quoted prices are available in active markets, no valuation adjustments are taken to modify the fair value of assets or liabilities marked using such prices. Other instruments may be measured using valuation techniques, such as valuation pricing models incorporating observable valuation inputs, unobservable parameters or a combination of both. Valuation pricing models use valuation inputs which would be considered by market participants in valuing similar financial instruments. Valuation pricing models and their underlying assumptions impact the amount and timing of unrealized and realized gains and losses recognized, and the use of different valuation pricing models or underlying assumptions could produce different financial results. Valuation uncertainty results from a variety of factors, including the valuation technique or model selected, the quantitative assumptions used within the valuation model, the inputs into the model, as well as other factors. Valuation adjustments are used to reflect the assessment of this uncertainty. Common valuation adjustments include model reserves, credit adjustments, close-out adjustments, and other appropriate instrument-specific adjustments, such as those to reflect transfer or sale restrictions. The level of adjustments is largely judgmental and is based on an assessment of the factors that management believe other market participants would use in determining the fair value of similar financial instruments. The type of adjustments taken, the methodology for the calculation of these adjustments, and the valuation inputs for these calculations are reassessed periodically to reflect current market practice and the availability of new information. For example, the fair value of certain financial instruments includes adjustments for credit risk; both with regards to counterparty credit risk on positions held and Nomura’s own creditworthiness on positions issued. Credit risk on financial assets is significantly mitigated by credit enhancements such as collateral and netting arrangements. Any net credit exposure is measured using available and applicable valuation inputs for the relevant counterparty. The same approach is used to measure the credit exposure on Nomura’s financial liabilities as is used to measure counterparty credit risk on Nomura’s financial assets. Such valuation pricing models are calibrated to the market on a regular basis and inputs used are adjusted for current market conditions and risks. The Valuation Model Validation Group (“VMVG”) within Nomura’s Risk Management Department reviews pricing models and assesses model appropriateness and consistency independently of the front office. The model reviews consider a number of factors about a model’s suitability for valuation and sensitivity of a particular product. Valuation models are calibrated to the market on a periodic basis by comparison to observable market pricing, comparison with alternative models and analysis of risk profiles. As explained above, any changes in fixed income, equity, foreign exchange and commodity markets can impact Nomura’s estimates of fair value in the future, potentially affecting trading gains and losses. Where financial contracts have longer maturity dates, Nomura’s estimates of fair value may involve greater subjectivity due to the lack of transparent market data.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
All financial instruments measured at fair value, including those measured at fair value using the fair value option, have been categorized into a three-level hierarchy (“fair value hierarchy”) based on the transparency of
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) valuation inputs used by Nomura to estimate fair value. A financial instrument is classified in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement of the financial instrument. The three levels of the fair value hierarchy are defined as follows, with Level 1 representing the most transparent inputs and Level 3 representing the least transparent inputs: Observable valuation inputs that reflect quoted prices (unadjusted) for identical financial instruments traded in active markets at the measurement date. Valuation inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the financial instrument. Unobservable valuation inputs which reflect Nomura assumptions and specific data. The availability of valuation inputs observable in the market varies by product and can be affected by a variety of factors. Significant factors include, but are not restricted to the prevalence of similar products in the market, especially for customized products, how established the product is in the market, for example, whether it is a new product or is relatively mature, and the reliability of information provided in the market which would depend, for example, on the frequency and volume of current data. A period of significant change in the market may reduce the availability of observable data. Under such circumstances, financial instruments may be reclassified into a lower level in the fair value hierarchy. Significant judgments used in determining the classification of financial instruments include the nature of the market in which the product would be traded, the underlying risks, the type and liquidity of market data inputs and the nature of observed transactions for similar instruments. Where valuation models include the use of valuation inputs which are less observable or unobservable in the market, significant management judgment is used in establishing fair value. The valuations for Level 3 financial instruments, therefore, involve a greater degree of judgment than those valuations for Level 1 or Level 2 financial instruments and has become more prevalent during the COVID-19 pandemic. Certain criteria management use d to determine whether a market is active or inactive include the number of transactions, the frequency that pricing is updated by other market participants, the variability of price quotes among market participants, and the amount of publicly available information.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following tables present the amounts of Nomura’s financial instruments measured at fair value on a recurring basis as of March 31, 20192021 and 20202022 within the fair value hierarchy. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments (2) | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Private equity and debt investments (4) | | | | | | | | | | | | | | | | | | | | | Japanese government securities | | | | | | | | | | | | | | | | | | | | | Japanese agency and municipal securities | | | | | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | | | | | | Bank and corporate debt securities and loans for trading purposes | | | | | | | | | | | | | | | | | | | | | Commercial mortgage-backed securities (“CMBS”) | | | | | | | | | | | | | | | | | | | | | Residential mortgage-backed securities (“RMBS”) | | | | | | | | | | | | | | | | | | | | | Issued/Guaranteed by government sponsored entity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Real estate-backed securities | | | | | | | | | | | | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other (5) | | | | | | | | | | | | | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Collateralized agreements (8) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-trading debt securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Japanese government securities | | | | | | | | | | | | | | | | | | | | | Japanese agency and municipal securities | | | | | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | | | | | | Bank and corporate debt securities | | | | | | | | | | | | | | | | | | | | | Residential mortgage-backed securities (“RMBS”) | | | | | | | | | | | | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other (5) | | | | | | | | | | | | | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities (6) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | Total derivative liabilities | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Payables and deposits (10) | | | | | | | | | | | | | | | | | | | | | Collateralized financing (8) | | | | | | | | | | | | | | | | | | | | | Long-term borrowings (9)(11)(12) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments (2) | | | | | | | | | | | | | | | | | | | | | | | ¥ | 2,338 | | | ¥ | 968 | | | ¥ | 16 | | | ¥ | 0— | | | ¥ | 3,322 | | Private equity and debt investments (5) | | | 0— | | | | 0— | | | | 58 | | | | 0— | | | | 58 | | Japanese government securities | | | 1,637 | | | | 0— | | | | 0— | | | | 0— | | | | 1,637 | | Japanese agency and municipal securities | | | 0— | | | | 76 | | | | 2 | | | | 0— | | | | 78 | | Foreign government, agency and municipal securities | | | 2,838 | | | | 1,987 | | | | 12 | | | | 0— | | | | 4,837 | | Bank and corporate debt securities and loans for trading purposes | | | 0— | | | | 1,259 | | | | 135 | | | | 0— | | | | 1,394 | | Commercial mortgage-backed securities (“CMBS”) | | | 0— | | | | 0 | | | | 8 | | | | 0— | | | | 8 | | Residential mortgage-backed securities (“RMBS”) | | | 0— | | | | 2,387 | | | | 6 | | | | 0— | | | | 2,393 | | Issued/Guaranteed by government sponsored entity | | | 0— | | | | 2,325 | | | | 0— | | | | 0— | | | | 2,325 | | | | | 0— | | | | 62 | | | | 6 | | | | 0— | | | | 68 | | Real estate-backed securities | | | 0— | | | | 0 | | | | 106 | | | | 0— | | | | 106 | | Collateralized debt obligations (“CDOs”) and other (6) | | | 0— | | | | 36 | | | | 23 | | | | 0— | | | | 59 | | Investment trust funds and other | | | 573 | | | | 29 | | | | 0 | | | | 0— | | | | 602 | | | | | | | | | | | | | | | | | | | | | | | Total trading assets and private equity and debt investments | | | 7,386 | | | | 6,742 | | | | 366 | | | | 0— | | | | 14,494 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9 | | | | 1,318 | | | | 75 | | | | 0— | | | | 1,402 | | | | | 29 | | | | 9,577 | | | | 26 | | | | 0— | | | | 9,632 | | | | | 4 | | | | 427 | | | | 24 | | | | 0— | | | | 455 | | Foreign exchange contracts | | | 0 | | | | 4,479 | | | | 37 | | | | 0— | | | | 4,516 | | | | | 1 | | | | 0 | | | | 0— | | | | 0— | | | | 1 | | | | | 0— | | | | 0— | | | | 0— | | | | (14,786 | ) | | | (14,786 | ) | | | | | | | | | | | | | | | | | | | | | | | | | 43 | | | | 15,801 | | | | 162 | | | | (14,786 | ) | | | 1,220 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 7,429 | | | ¥ | 22,543 | | | ¥ | 528 | | | ¥ | (14,786 | ) | | ¥ | 15,714 | | | | | | | | | | | | | | | | | | | | | | | | | | 0— | | | | 878 | | | | 104 | | | | 0— | | | | 982 | | Collateralized agreements (9) | | | 0— | | | | 349 | | | | 18 | | | | 0— | | | | 367 | | | | | | | | | | | | | | | | | | | | | | | Non-trading debt securities | | | 123 | | | | 304 | | | | 0— | | | | 0— | | | | 427 | | | | | 353 | | | | 173 | | | | 185 | | | | 0— | | | | 711 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 7,905 | | | ¥ | 24,247 | | | ¥ | 835 | | | ¥ | (14,786 | ) | | ¥ | 18,201 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 2,341 | | | ¥ | 20 | | | ¥ | 0 | | | ¥ | 0— | | | ¥ | 2,361 | | Japanese government securities | | | 1,039 | | | | 0— | | | | 0— | | | | 0— | | | | 1,039 | | Japanese agency and municipal securities | | | 0— | | | | 1 | | | | 0— | | | | 0— | | | | 1 | | Foreign government, agency and municipal securities | | | 2,912 | | | | 1,172 | | | | 1 | | | | 0— | | | | 4,085 | | Bank and corporate debt securities | | | 0— | | | | 230 | | | | 5 | | | | 0— | | | | 235 | | Residential mortgage-backed securities (“RMBS”) | | | 0— | | | | 0 | | | | 0— | | | | 0— | | | | 0 | | Collateralized debt obligations (“CDOs”) and other (6) | | | 0— | | | | 0 | | | | 1 | | | | 0— | | | | 1 | | Investment trust funds and other | | | 243 | | | | 13 | | | | 0 | | | | 0— | | | | 256 | | | | | | | | | | | | | | | | | | | | | | | Total trading liabilities | | | 6,535 | | | | 1,436 | | | | 7 | | | | 0— | | | | 7,978 | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities (7) | | | | | | | | | | | | | | | | | | | | | | | | 1 | | | | 2,112 | | | | 116 | | | | 0— | | | | 2,229 | | | | | 21 | | | | 8,948 | | | | 69 | | | | 0— | | | | 9,038 | | | | | 3 | | | | 458 | | | | 62 | | | | 0— | | | | 523 | | Foreign exchange contracts | | | 0— | | | | 4,380 | | | | 22 | | | | 0— | | | | 4,402 | | | | | 0 | | | | 0 | | | | 0— | | | | 0— | | | | 0 | | | | | 0— | | | | 0— | | | | 0— | | | | (14,697 | ) | | | (14,697 | ) | | | | | | | | | | | | | | | | | | | | | | Total derivative liabilities | | | 25 | | | | 15,898 | | | | 269 | | | | (14,697 | ) | | | 1,495 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 6,560 | | | ¥ | 17,334 | | | ¥ | 276 | | | ¥ | (14,697 | ) | | ¥ | 9,473 | | | | | | | | | | | | | | | | | | | | | | | Short-term borrowings (10) | | ¥ | 0— | | | ¥ | 532 | | | ¥ | 103 | | | ¥ | 0— | | | ¥ | 635 | | Payables and deposits (10)(11) | | | 0— | | | | 49 | | | | 1 | | | | 0— | | | | 50 | | Collateralized financing (9) | | | 0— | | | | 352 | | | | 1 | | | | 0— | | | | 353 | | Long-term borrowings (10)(12)(13) | | | 5 | | | | 3,546 | | | | 547 | | | | 0— | | | | 4,098 | | | | | 231 | | | | 179 | | | | 35 | | | | 0— | | | | 445 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 6,796 | | | ¥ | 21,992 | | | ¥ | 963 | | | ¥ | (14,697 | ) | | ¥ | 15,054 | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments (2) | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Private equity and debt investments (4) | | | | | | | | | | | | | | | | | | | | | Japanese government securities | | | | | | | | | | | | | | | | | | | | | Japanese agency and municipal securities | | | | | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | | | | | | Bank and corporate debt securities and loans for trading purposes | | | | | | | | | | | | | | | | | | | | | Commercial mortgage-backed securities (“CMBS”) | | | | | | | | | | | | | | | | | | | | | Residential mortgage-backed securities (“RMBS”) | | | | | | | | | | | | | | | | | | | | | Issued/Guaranteed by government sponsored entity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Real estate-backed securities | | | | | | | | | | | | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other (5) | | | | | | | | | | | | | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Collateralized agreements (8) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-trading debt securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Japanese government securities | | | | | | | | | | | | | | | | | | | | | Japanese agency and municipal securities | | | | | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | | | | | | Bank and corporate debt securities | | | | | | | | | | | | | | | | | | | | | Residential mortgage-backed securities (“RMBS”) | | | | | | | | | | | | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other (5) | | | | | | | | | | | | | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities (6) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | Total derivative liabilities | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Payables and deposits (10) | | | | | | | | | | | | | | | | | | | | | Collateralized financing (8) | | | | | | | | | | | | | | | | | | | | | Long-term borrowings (9)(11)(12) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments (2) | | | | | | | | | | | | | | | | | | | | | | | ¥ | 2,100 | | | ¥ | 1,041 | | | ¥ | 14 | | | ¥ | 0— | | | ¥ | 3,155 | | Private equity and debt investments (5) | | | 22 | | | | | | | | 32 | | | | | | | | 54 | | Japanese government securities | | | 1,730 | | | | | | | | | | | | | | | | 1,730 | | Japanese agency and municipal securities | | | | | | | 184 | | | | 2 | | | | | | | | 186 | | Foreign government, agency and municipal securities | | | 3,220 | | | | 2,010 | | | | 10 | | | | | | | | 5,240 | | Bank and corporate debt securities and loans for trading purposes | | | | | | | 1,134 | | | | 220 | | | | | | | | 1,354 | | Commercial mortgage-backed securities (“CMBS”) | | | | | | | 0 | | | | 7 | | | | | | | | 7 | | Residential mortgage-backed securities (“RMBS”) | | | | | | | 1,450 | | | | 8 | | | | | | | | 1,458 | | Issued/Guaranteed by government sponsored entity | | | | | | | 1,376 | | | | | | | | | | | | 1,376 | | | | | | | | | 74 | | | | 8 | | | | | | | | 82 | | Real estate-backed securities | | | | | | | 58 | | | | 79 | | | | | | | | 137 | | Collateralized debt obligations (“CDOs”) and other (6) | | | | | | | 34 | | | | 26 | | | | | | | | 60 | | Investment trust funds and other | | | 293 | | | | 23 | | | | 0 | | | | | | | | 316 | | | | | | | | | | | | | | | | | | | | | | | Total trading assets and private equity and debt investments | | | 7,365 | | | | 5,934 | | | | 398 | | | | | | | | 13,697 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3 | | | | 874 | | | | 97 | | | | | | | | 974 | | | | | 120 | | | | 11,755 | | | | 63 | | | | | | | | 11,938 | | | | | 12 | | | | 398 | | | | 33 | | | | | | | | 443 | | Foreign exchange contracts | | | | | | | 4,777 | | | | 29 | | | | | | | | 4,806 | | | | | 1 | | | | 0 | | | | | | | | | | | | 1 | | | | | | | | | | | | | | | | | (16,608 | ) | | | (16,608 | ) | | | | | | | | | | | | | | | | | | | | | | | | | 136 | | | | 17,804 | | | | 222 | | | | (16,608 | ) | | | 1,554 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 7,501 | | | ¥ | 23,738 | | | ¥ | 620 | | | ¥ | (16,608 | ) | | ¥ | 15,251 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,103 | | | | 205 | | | | | | | | 1,308 | | Collateralized agreements (9) | | | | | | | 282 | | | | 16 | | | | | | | | 298 | | | | | | | | | | | | | | | | | | | | | | | Non-trading debt securities | | | 117 | | | | 367 | | | | | | | | | | | | 484 | | | | | 146 | | | | 136 | | | | 197 | | | | | | | | 479 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 7,764 | | | ¥ | 25,626 | | | ¥ | 1,038 | | | ¥ | (16,608 | ) | | ¥ | 17,820 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 1,796 | | | ¥ | 8 | | | ¥ | 0 | | | ¥ | | | | ¥ | 1,804 | | Japanese government securities | | | 1,098 | | | | | | | | | | | | | | | | 1,098 | | Japanese agency and municipal securities | | | | | | | 0 | | | | | | | | | | | | 0 | | Foreign government, agency and municipal securities | | | 3,451 | | | | 1,328 | | | | 0 | | | | | | | | 4,779 | | Bank and corporate debt securities | | | | | | | 222 | | | | 3 | | | | | | | | 225 | | Residential mortgage-backed securities (“RMBS”) | | | | | | | 0 | | | | | | | | | | | | 0 | | Collateralized debt obligations (“CDOs”) and other (6) | | | | | | | 3 | | | | 0 | | | | | | | | 3 | | Investment trust funds and other | | | 76 | | | | 0 | | | | 0 | | | | | | | | 76 | | | | | | | | | | | | | | | | | | | | | | | Total trading liabilities | | | 6,421 | | | | 1,561 | | | | 3 | | | | | | | | 7,985 | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities (7) | | | | | | | | | | | | | | | | | | | | | | | | 2 | | | | 1,368 | | | | 87 | | | | | | | | 1,457 | | | | | 60 | | | | 10,826 | | | | 74 | | | | | | | | 10,960 | | | | | 14 | | | | 434 | | | | 66 | | | | | | | | 514 | | Foreign exchange contracts | | | 0 | | | | 4,795 | | | | 19 | | | | | | | | 4,814 | | | | | 0 | | | | 1 | | | | | | | | | | | | 1 | | | | | | | | | | | | | | | | | (16,079 | ) | | | (16,079 | ) | | | | | | | | | | | | | | | | | | | | | | Total derivative liabilities | | | 76 | | | | 17,424 | | | | 246 | | | | (16,079 | ) | | | 1,667 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 6,497 | | | ¥ | 18,985 | | | ¥ | 249 | | | ¥ | (16,079 | ) | | ¥ | 9,652 | | | | | | | | | | | | | | | | | | | | | | | Short-term borrowings (10) | | ¥ | | | | ¥ | 653 | | | ¥ | 58 | | | ¥ | | | | ¥ | 711 | | Payables and deposits (10)(11) | | | | | | | 63 | | | | 8 | | | | | | | | 71 | | Collateralized financing (9) | | | | | | | 516 | | | | | | | | | | | | 516 | | Long-term borrowings (10)(12)(13) | | | 23 | | | | 4,055 | | | | 479 | | | | | | | | 4,557 | | | | | 32 | | | | 155 | | | | 32 | | | | | | | | 219 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 6,552 | | | ¥ | 24,427 | | | ¥ | 826 | | | ¥ | (16,079 | ) | | ¥ | 15,726 | | | | | | | | | | | | | | | | | | | | | | |
(1) | Represents the amount offset under counterparty netting of derivative assets and liabilities as well as cash collateral netting against net derivatives. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (2) | Certain investments that are measured at fair value using net asset value per share as a practical expedient have not been classified in the fair value hierarchy. As of March 31, 20192021 and March 31, 2020,2022, the fair values of these investments which are included in Trading assets and private equity and debt investments were ¥36¥24 billion and ¥26¥45 billion, respectively. As of March 31, 20192021 and March 31, 2020,2022, the fair values of these investments which are included in were ¥2¥4 billion and ¥6¥3 billion, respectively. |
(3) | Includes equity investments that would have been accounted for under the equity method had Nomura not chosen to elect the fair value option. |
(4) | Includes equity investments which comprise listed and unlisted equity securities held for operating purposes in the amounts of ¥93,230 million and ¥33,419 million, respectively, as of March 31, 2021 and ¥101,503million and ¥32,394million, respectively, as of March 31, 2022. |
(5) | Private equity and debt investments are typicallyinclude private non-traded financial instruments including ownership orminority private equity and venture capital equity investments and other forms of junior capital (suchdebt investments such as mezzanine loan). Includesdebt held fornon-trading purposes, and post-IPO investments. Also include minority equity investments that would have been accounted for under the equity method had Nomura not chosen to elect the fair value option.option to these investments as permitted under ASC 825. |
(5)(6) | Includes collateralized loan obligations (“CLOs”) and asset-backed securities (“ABS”) such as those secured on credit card loans, auto loans and student loans. |
(6) | Each derivative classification includes derivatives with multiple risk underlyings. For example, interest rate contracts include complex derivatives referencing interest rate risk as well as foreign exchange risk or other factors such as prepayment rates. Credit contracts include credit default swaps as well as derivatives referencing corporate and government debt securities. |
(7) | Derivatives which contain multiple types of risk are classified based on the primary risk type of the instrument. |
(8) | Includes loans and receivables for which the fair value option has been elected. |
(8)(9) | Includes collateralized agreements or collateralized financing for which the fair value option has been elected. |
(9)(10) | Includes deposits received at banks and structured notes for which the fair value option has been elected.
|
(10)(11) | Includes embedded derivatives bifurcated from deposits received at banks. If unrealized gains are greater than unrealized losses, deposits are reduced by the excess amount. |
(11)(12) | Includes embedded derivatives bifurcated from issued structured notes. If unrealized gains are greater than unrealized losses, borrowings are reduced by the excess amount. |
(12)(13) | Includes liabilities recognized from secured financing transactions that are accounted for as financings rather than sales. Nomura elected the fair value option for these liabilities. |
(13)(14) | Includes loan commitments for which the fair value option has been elected. |
Valuation techniques by major class of financial instrument The valuation techniques used by Nomura to estimate fair value for major classes of financial instruments, together with the significant inputs which determine classification in the fair value hierarchy, are as follows. and equity securities reported within —Equities and equity securities reported within include direct holdings of both listed and unlisted equity securities, and fund investments. The fair value of listed equity securities is determined using quoted prices for identical securities from active markets where available. These valuations should be in line with market practice and therefore can be based on bid prices or mid-market prices. Nomura determines whether the market is active depending on the sufficiency and frequency of trading activity. Where these securities are classified in Level 1 of the fair value hierarchy, no valuation adjustments are made to fair value. Listed equity securities traded in inactive markets are also generally valued using the exchange price and are classified in Level 2. Whilst rare in practice, Nomura may apply a discount or liquidity adjustment to the exchange price of a listed equity security traded in an inactive market if the exchange price is not considered to be an appropriate representation of fair value. These adjustments are determined by individual security and are not determined or influenced by the size of holding. The amount of such adjustments made to listed equity securities traded in inactive markets was ¥nil as of March 31, 20192021 and 2020,2022, respectively. The fair value of unlisted equity securities is determined using the same methodologyvaluation technique as private equity and debt investments described below and are usually classified in Level 3 because significant valuation inputs such as liquidity discounts and credit spreads are unobservable. Private equity and debt investments The determination of fair value of unlisted private equity and debt investments requires significant management judgment because the investments, by their nature, have little or no price transparency. Private equity and debt investments are initially carried at cost as an approximation of fair value. Adjustments to carrying value are made if there is third-party evidence of a change in value. Adjustments are also made, in the absence of third-party transactions, if it is determined that the expected exit price of the investment is different from carrying value. In reaching that determination, Nomura primarily uses either a discounted cash flow (“DCF”) or market multiple valuation technique. A DCF valuation technique incorporates estimated future cash flows to be generated from the underlying investee, as adjusted for an appropriate growth
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) rate discounted at a weighted average cost of capital (“WACC”). Market multiple valuation techniques include comparables such as Enterprise Value/earnings before interest, taxes, depreciation and amortization (“EV/EBITDA”) ratios, Price/Earnings (“PE”) ratios, Price/Book ratios, Price/Embedded Value ratios and other multiples based on relationships between numbers reported in the financial statements of the investee and the price of comparable companies. A liquidity discount may also be applied to either a DCF or market multiple valuation to reflect the specific characteristics of the investee. The liquidity discount includes considerations for various uncertainties in the model and inputs to valuation. Where possible these valuations are compared with the operating cash flows and financial performance of the investee or properties relative to budgets or projections, price/earnings data for similar quoted companies, trends within sectors and/or regions and any specific rights or terms associated with the investment, such as conversion features and liquidation preferences. Private equity and debt investments are generally classified in Level 3 since the valuation inputs such as those mentioned above are usually unobservable. Government, agency and municipal securities The fair value of Japanese and other G7 government securities is primarily determined using quoted market prices, executable broker or dealer quotations, or alternative pricing sources. These securities are traded in active markets and therefore are classified within Level 1 of the fair value hierarchy. Non-G7 government securities, agency securities and municipal securities are valued using similar pricing sources but are generally classified in Level 2 as they are traded in inactive markets. Certain non-G7 securities may be classified in Level 1 because they are traded in active markets. Certain securities may be classified in Level 3 because they are traded infrequently and there is not sufficient information from comparable securities to classify them in Level 2. These are valued using DCF valuation techniques which include significant unobservable valuation inputs such as credit spreads of the issuer. Bank and corporate debt securities The fair value of bank and corporate debt securities is primarily determined using DCF valuation techniques but also using broker or dealer quotations and recent market transactions of identical or similar debt securities, if available. Consideration is given to the nature of the broker and dealer quotations, namely whether these are indicative or executable, the number of available quotations and how these quotations compare to any available recent market activity or alternative pricing sources. The significant valuation inputs used for DCF valuations are yield curves, asset swap spreads, recovery rates and credit spreads of the issuer. Bank and corporate debt securities are generally classified in Level 2 of the fair value hierarchy because these valuation inputs are usually observable or market-corroborated. Certain bank and corporate debt securities will be classified in Level 3 because they are traded infrequently and there is insufficient information from comparable securities to classify them in Level 2, or credit spreads or recovery rates of the issuer used in DCF valuations are unobservable. Commercial mortgage-backed securities (“CMBS”) and Residential mortgage-backed securities (“RMBS”) The fair value of CMBS and RMBS are primarily determined using DCF valuation techniques but also using broker or dealer quotations and recent market transactions of identical or similar securities, if available. Consideration is given to the nature of the broker and dealer quotations, namely whether these are indicative or executable, the number of available quotations and how these quotations compare to any available recent market activity or alternative pricing sources. The significant valuation inputs include yields, prepayment rates, default probabilities and loss severities. CMBS and RMBS securities are generally classified in Level 2 because these valuation inputs are observable or market-corroborated. Certain CMBS and RMBS positions will be classified in Level 3 because they are traded infrequently and there is insufficient information from comparable securities to classify them in Level 2, or one or more of the significant valuation inputs used in DCF valuations are unobservable. Real estate-backed securities The fair value of real estate-backed securities is determined using broker or dealer quotations, recent market transactions or by reference to a comparable market index. Consideration is
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) given to the nature of the broker and dealer quotations, namely whether these are indicative or executable, the number of available quotations and how these quotations compare to any available recent market activity or alternative pricing sources. Where all significant inputs are observable, the securities will be classified in Level 2. For certain securities, no direct pricing sources or comparable securities or indices may be available. These securities are valued using DCF or valuation techniques and are classified in Level 3 as the valuation includes significant unobservable valuation inputs such as yields or loss severities. Collateralized debt obligations (“CDOs”) and other The fair value of CDOs is primarily determined using DCF valuation techniques but also using broker or dealer quotations and recent market transactions of identical or similar securities, if available. Consideration is given to the nature of the broker and dealer quotations, namely whether these are indicative or executable, the number of available quotations and how these quotations compare to any available recent market activity or alternative pricing sources. The significant valuation inputs used include market spread data for each credit rating, yields, prepayment rates, default probabilities and loss severities. CDOs are generally classified in Level 2 of the fair value hierarchy because these valuation inputs are observable or market-corroborated. CDOs will be classified in Level 3 where one or more of the significant valuation inputs used in the DCF valuations are unobservable. Investment trust funds and other The fair value of investment trust funds is primarily determined using NAV per share. Publicly traded funds which are valued using a daily NAV per share are classified in Level 1 of the fair value hierarchy. For funds that are not publicly traded but Nomura has the ability to redeem its investment with the investee at NAV per share on the balance sheet date or within the near term, the investments are classified in Level 2. Investments where Nomura does not have the ability to redeem in the near term or does not know when it can redeem are classified in Level 3. The fair value of certain other investments reported within Investment trust funds and other is determined using DCF valuation techniques. These investments are classified in Level 3 as the valuation includes significant unobservable valuation inputs such as credit spreads of issuer and correlation. Nomura enters into both exchange-traded and OTC equity derivative transactions such as index and equity options, equity basket options and index and equity swaps. Where these derivatives are traded in active markets and the exchange price is representative of fair value, the fair value of exchange-traded equity derivatives is determined using an unadjusted exchange price and classified in Level 1 of the fair value hierarchy. The fair value of exchange-traded equity derivatives which are traded in inactive markets or where the exchange price is not representative of fair value is determined using a model price and are classified in Level 2. The fair value of OTC equity derivatives is determined through option models such as Black-Scholes and Monte Carlo simulation. The significant valuation inputs used include equity prices, dividend yields, volatilities and correlations. Valuation adjustments are also made to model valuations in order to reflect counterparty credit risk on derivative assets and Nomura‘s own creditworthiness on derivative liabilities. OTC equity derivatives are generally classified in Level 2 because all significant valuation inputs and adjustments are observable or market-corroborated. Certain less liquid vanilla or more complex equity derivatives are classified in Level 3 where dividend yield, volatility or correlation valuation inputs are significant and unobservable. Nomura enters into both exchange-traded and OTC interest rate derivative transactions such as interest rate swaps, currency swaps, interest rate options, forward rate agreements, swaptions, caps and floors. Where these derivatives are traded in active markets and the exchange price is representative of fair value, the fair value of exchange-traded interest rate derivatives is determined using an unadjusted exchange price and classified in Level 1 of the fair value hierarchy. The fair value of exchange-traded interest rate derivatives which are traded in inactive markets or where the exchange price is not representative of fair value is determined using a model price and are classified in Level 2. The fair value of OTC interest rate
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) derivatives is determined through DCF valuation techniques as well as option models such as Black-Scholes and Monte Carlo simulation. The significant valuation inputs used include interest rates, forward foreign exchange (“FX”) rates, volatilities and correlations. Valuation adjustments are also made to model valuations in order to reflect counterparty credit risk on derivative assets and Nomura‘s own creditworthiness on derivative liabilities. OTC interest rate derivatives are generally classified in Level 2 because all significant valuation inputs and adjustments are observable or market-corroborated. Certain less liquid vanilla or more complex OTC interest rate derivatives are classified in Level 3 where interest rate, volatility or correlation valuation inputs are significant and unobservable. Nomura enters into OTC credit derivative transactions such as credit default swaps and credit options on single names, indices or baskets of assets. The fair value of OTC credit derivatives is determined through DCF valuation techniques as well as option models such as Black-Scholes and Monte Carlo simulation. The significant valuation inputs used include interest rates, credit spreads, recovery rates, default probabilities, volatilities and correlations. Valuation adjustments are also made to model valuations in order to reflect counterparty credit risk on derivative assets and Nomura’s own creditworthiness on derivative liabilities. OTC credit derivatives are generally classified in Level 2 of the fair value hierarchy because all significant valuation inputs and adjustments are observable or market-corroborated. Certain less liquid vanilla or more complex OTC credit derivatives are classified in Level 3 where credit spread, recovery rate, volatility or correlation valuation inputs are significant and unobservable. Foreign exchange contracts —Nomura enters into both exchange-traded and OTC foreign exchange derivative transactions such as foreign exchange forwards and currency options. The fair value of exchange-traded foreign exchange derivatives which are traded in inactive markets or where the exchange price is not representative of fair value is determined using a model price and are classified in Level 2. The fair value of OTC foreign exchange derivatives is determined through DCF valuation techniques as well as option models such as Black-Scholes and Monte Carlo simulation. The significant valuation inputs used include interest rates, forward FX rates, spot FX rates and volatilities. Valuation adjustments are also made to model valuations in order to reflect counterparty credit risk on derivative assets and Nomura’s own creditworthiness on derivative liabilities. OTC foreign exchange derivatives are generally classified in Level 2 because all significant valuation inputs and adjustments are observable or market-corroborated. Certain foreign exchange derivatives are classified in Level 3 where interest rates, volatility or correlation valuation inputs are significant and unobservable. Nomura includes valuation adjustments in its estimation of fair value of certain OTC derivatives relating to funding costs associated with these transactions to be consistent with how market participants in the principal market for these derivatives would determine fair value. —The fair value of loans and receivables carried at fair value either as trading assets or through election of the fair value option is primarily determined using DCF valuation techniques as quoted prices are typically not available. The significant valuation inputs used are similar to those used in the valuation of corporate debt securities described above. Loans and receivables are generally classified in Level 2 of the fair value hierarchy because all significant valuation inputs are observable. Certain loans and receivables, however, are classified in Level 3 because they are traded infrequently and there is not sufficient information from comparable securities to classify them in Level 2 or credit spreads of the issuer or recovery rates used in DCF valuations are significant and unobservable. Collateralized agreements and —The primary types of collateralized agreement and financing transactions carried at fair value are reverse repurchase and repurchase agreements elected for the fair value option. The fair value of these financial instruments is primarily determined using DCF valuation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
techniques. The significant valuation inputs used include interest rates and collateral funding spreads such as
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) general collateral or special rates. Reverse repurchase and repurchase agreements are generally classified in Level 2 of the fair value hierarchy because these valuation inputs are usually observable. Non-trading debt securities —These are debt securities held by certain non-trading subsidiaries in the group and are valued and classified in the fair value hierarchy using the same valuation techniques used for other debt securities classified as Government, agency and municipal securities and Bank and corporate debt securities described above. and long-term borrowings (“Structured notes”) —Structured notes are debt securities issued by Nomura or by consolidated variable interest entities (“VIEs”) which contain embedded features that alter the return to the investor from simply receiving a fixed or floating rate of interest to a return that depends upon some other variables, such as an equity or equity index, commodity price, foreign exchange rate, credit rating of a third party or a more complex interest rate (i.e., an embedded derivative). The fair value of structured notes is determined using a quoted price in an active market for the identical liability if available, and where not available, using a mixture of valuation techniques that use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, similar liabilities when traded as assets, or an internal model which combines DCF valuation techniques and option pricing models, depending on the nature of the embedded features within the structured note. Where an internal model is used, Nomura estimates the fair value of both the underlying debt instrument and the embedded derivative components. The significant valuation inputs used to estimate the fair value of the debt instrument component include yield curves, prepayment rates, default probabilities and loss severities. The significant valuation inputs used to estimate the fair value of the embedded derivative component are the same as those used for the relevant type of freestanding OTC derivative discussed above. A valuation adjustment is also made to the entire structured note in order to reflect Nomura’s own creditworthiness. This adjustment is determined based on recent observable secondary market transactions and executable broker quotes involving Nomura debt instruments and is therefore typically treated as a Level 2 valuation input. Structured notes are generally classified in Level 2 of the fair value hierarchy as all significant valuation inputs and adjustments are observable. Where any unobservable valuation inputs are significant, such as yields, prepayment rates, default probabilities, loss severities, volatilities and correlations used to estimate the fair value of the embedded derivative component, structured notes are classified in Level 3. Long-term borrowings (“Secured financing transactions”) —Secured financing transactions are liabilities recognized when a transfer of a financial asset does not meet the criteria for sales accounting under ASC 860 “ ” (“ASC 860”) and therefore the transaction is accounted for as a secured borrowing. These liabilities are valued using the same valuation techniques that are applied to the transferred financial assets which remain on the consolidated balance sheets and are therefore classified in the same level in the fair value hierarchy as the transferred financial assets. These liabilities do not provide general recourse to Nomura and therefore, no adjustment is made to reflect Nomura’s own creditworthiness. Level 3 financial instruments The valuation of Level 3 financial assets and liabilities is dependent on certain significant valuation inputs which are unobservable. Common characteristics of an inactive market include a low number of transactions of the financial instrument, stale or non-current price quotes, price quotes that vary substantially either over time or among market makers, non-executable broker quotes or little publicly released information. If corroborative evidence is not available to value Level 3 financial instruments, fair value may be measured using other equivalent products in the market. The level of correlation between the specific Level 3 financial
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) instrument and the available benchmark instrument is considered as an unobservable valuation input. Other techniques for determining an appropriate value for unobservable valuation input may consider information such as consensus pricing data among certain market participants, historical trends, extrapolation from observable market data and other information Nomura would expect market participants to use in valuing similar instruments. Use of reasonably possible alternative valuation input assumptions to value Level 3 financial instruments will significantly influence fair value determination. Ultimately, the uncertainties described above about input assumptions imply that the fair value of Level 3 financial instruments is a judgmental estimate. The specific valuation for each instrument is based on management’s judgment of prevailing market conditions, in accordance with Nomura’s established valuation policies and procedures.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Quantitative and qualitative information regarding significant unobservable valuation inputs The following tables present quantitative and qualitative information about the significant unobservable valuation inputs used by Nomura to measure the fair value of financial instruments classified in Level 3 as of March 31, 20192021 and 2020.2022. These financial instruments will also typically include observable valuation inputs (i.e., Level 1 or Level 2 valuation inputs) which are not included in the table and are also often hedged using financial instruments which are classified in Level 1 or Level 2 of the fair value hierarchy. Changes in each of these significant unobservable valuation inputs used by Nomura will impact upon the fair value measurement of the financial instrument. The following tables also thereforeillustrate qualitatively summarize how an increase in those significant unobservable valuation inputs to a different amount might result in a higher or lower fair value measurement at the reporting date and summarize the interrelationship between significant unobservable valuation inputs where more than one is used to measuredetermine fair value. The impactvalue measurement of the COVID-19 pandemic on financial markets has been considered in determining which valuation inputs are used to measure fair value.instruments. | | | | | | | | | | | | | | | | | | | | Fair value in billions of yen | | | | unobservable valuation input | | | | | | Impact of increases in significant unobservable valuation inputs (3)(4) | | Interrelationships between valuation inputs (5) | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | Bank and corporate debt securities and loans for trading purposes | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | Residential mortgage backed securities (“RMBS”) | | | | | | Yields Prepayment rates Loss severities | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | Real estate-backed securities | | | | | | | | | | | | Lower fair value Lower fair value | | No predictable interrelationship | | | | | | | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other | | | | | | Prepayment rates Default probabilities Loss severities | | | | | | Lower fair value Lower fair value Lower fair value Lower fair value | | Change in default probabilities typically accompanied by directionally similar change in loss severities and opposite change in prepayment rates | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Fair value in billions of yen | | | | | unobservable valuation input | | | | | | Impact of increases in significant unobservable valuation | | | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | ¥ | 16 | | | DCF | | Liquidity discounts | | 75.0% | | 75.0% | | Lower fair value | | Not applicable | | | | | | | | | | | | | | | | | | Private equity and debt investments | | | | | | | | WACC Growth rates Credit spreads | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | Market multiples | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Bank and corporate debt securities and loans for trading purposes | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Commercial mortgage backed securities (“CMBS”) | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Residential mortgage backed securities (“RMBS”) | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Real estate-backed securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | Fair value in billions of yen | | | | unobservable valuation input | | | | | | Impact of increases in significant unobservable valuation inputs (3)(4) | | Interrelationships between valuation inputs (5) | | | | | | | | | | | | | | | | | | | | | | Dividend yield Volatilities Correlations | | 0.0 – 8.0% 6.7 – 74.2% (0.80) – 0.98 | | | | Higher fair value Higher fair value Higher fair value | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | Interest rates Volatilities Volatilities Correlations | | 10.6 – 15.2% 24.2 – 66.8 bp (0.76) – 1.00 | | | | Higher fair value Higher fair value Higher fair value Higher fair value | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | Credit spreads Recovery rates Volatilities Correlations | | 0.0 – 100.6% 16.2 – 83.0% 0.27 – 0.75 | | | | Higher fair value Higher fair value Higher fair value Higher fair value | | No predictable interrelationship | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | Interest rates Volatilities Volatilities Correlations | | (0.4) – 2.4% 1.7 – 35.5% 209.0 – 245.0 bp (0.25) – 0.80 | | | | Higher fair value Higher fair value Higher fair value Higher fair value | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Collateralized agreements | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | WACC Growth rates Liquidity discounts | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | EV/EBITDA ratios PE Ratios Price/Book ratios Liquidity discounts | | | | | | Higher fair value Higher fair value Higher fair value | | Generally changes in multiples result in a corresponding similar directional change in a fair value measurement, assuming earnings levels remain constant. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6.7 – 54.5% (0.75) – 0.91 | | | | Higher fair value Higher fair value | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | Volatilities Volatilities Correlations | | 6.7 – 54.5% 32.5 – 60.9 bp (0.75) – 0.98 | | | | Higher fair value Higher fair value Higher fair value | | No predictable interrelationship | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Fair value in billions of yen | | | | | unobservable valuation input | | | | | | Impact of increases in significant unobservable valuation | | | Collateralized debt obligations (“CDOs”) and other | | | | | | | | | | | | | | | | Change in default probabilities typically accompanied by directionally similar change in loss severities and opposite change in prepayment rates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | (41) | | | Option models | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | (38) | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Collateralized agreements | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 185 | | | DCF | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | Market multiples | | | | | | | | | | Generally changes in multiples result in a corresponding similar directional change in a fair value measurement, assuming earnings levels remain constant. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bank and corporate debt securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | Fair value in billions of yen | | | | unobservable valuation input | | | | | | Impact of increases in significant unobservable valuation inputs (3)(4) | | Interrelationships between valuation inputs (5) | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Private equity and debt investments | | | | | | Growth rates Liquidity discounts | | 7.0 – 13.5% 0.0 – 1.0% 5.0 – 30.0% | | | | Lower fair value Higher fair value Lower fair value | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | EV/EBITDA ratios PE Ratios Liquidity discounts | | | | | | Higher fair value Higher fair value Lower fair value | | No predictable interrelationship | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | Credit spreads Recovery rates | | | | | | Lower fair value Higher fair value | | No predictable interrelationship | | | | | | | | | | | | | | | | Bank and corporate debt securities and loans for trading purposes | | | | | | Credit spreads Recovery rates | | | | | | Lower fair value Higher fair value | | No predictable interrelationship | | | | | | | | | | | | | | | | Residential mortgage backed securities (“RMBS”) | | | | | | Yields Prepayment rates Loss severities | | 0.0 – 30.8% 7.1 – 15.0% 0.0 – 100.0% | | | | Lower fair value Lower fair value Lower fair value | | No predictable interrelationship | | | | | | | | | | | | | | | | Real estate-backed securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other | | | | | | Yields Prepayment rates Default probabilities Loss severities | | 6.4 – 56.8% 20.0% 2.0% 0.0 – 100.0% | | | | Lower fair value Lower fair value Lower fair value Lower fair value | | Change in default probabilities typically accompanied by directionally similar change in loss severities and opposite change in prepayment rates | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Fair value in billions of yen | | | | | unobservable valuation input | | | | | | Impact of increases in significant unobservable valuation | | Interrelationships between valuation | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | ¥ | 14 | | | DCF | | Liquidity discounts | | 75.0% | | 75.0% | | Lower fair value | | Not applicable | | | | | | | | | | | | | | | | | | Private equity and debt investments | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | Market multiples | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Bank and corporate debt securities and loans for trading purposes | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Commercial mortgage backed securities (“CMBS”) | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Residential mortgage backed securities (“RMBS”) | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Real estate-backed securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other | | | | | | | | Yields Prepayment rates Default probabilities Loss severities | | | | | | | | Change in default probabilities typically accompanied by directionally similar change in loss severities and opposite change in prepayment rates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 10 | | | Option models | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | Fair value in billions of yen | | | | unobservable valuation input | | | | | | Impact of increases in significant unobservable valuation inputs (3)(4) | | Interrelationships between valuation inputs (5) | | | | | | | | | | | | | | | | | | | | | | Dividend yield Volatilities Correlations | | 0.0 – 18.7% 12.2 – 144.7% (0.85) – 0.97 | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | Interest rates Volatilities Volatilities Correlations | | (0.1) – 2.0% 8.8 – 13.8% 24.6 – 119.4 bp (1.00) – 0.98 | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | Credit spreads Recovery rates Volatilities Correlations | | 0.1 – 28.4% 0.0 – 105.4% 50.0 – 83.0% 0.16 – 0.82 | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | Interest rates Volatilities Volatilities Correlations | | (0.1) – 0.8% 2.0 – 23.9% 19.2 – 50.7 bp (0.25) – 0.80 | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | Credit spreads Recovery rates | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | Collateralized agreements | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | WACC Growth rates Liquidity discounts | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | 3.9 – 10.3 x 6.3 – 20.7 x 0.3 – 1.3 x 10.0 – 40.0% | | | | | | Generally changes in multiples result in a corresponding similar directional change in a fair value measurement, assuming earnings levels remain constant. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Volatilities Correlations | | 12.6 – 76.4% (0.72) – 0.94 | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | Volatilities Volatilities Correlations | | 8.6 – 76.4% 30.0 – 103.2 bp (1.00) – 0.98 | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Fair value in billions of yen | | | | | unobservable valuation input | | | | | | Impact of increases in significant unobservable valuation | | Interrelationships between valuation | | | | (33) | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | Collateralized agreements | | | 16 | | | DCF | | Repo rate | | 2.8 – 6.0% | | 3.6% | | Lower fair value | | Not applicable | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 197 | | | DCF | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | Market multiples | | | | | | | | | | Generally changes in multiples result in a corresponding similar directional change in a fair value measurement, assuming earnings levels remain constant. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bank and corporate debt securities | | | 3 | | | DCF | | Recovery rates | | 3.9 – 97.0% | | 84.1% | | Higher fair value | | Not applicable | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | 8 | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | No predictable interrelationship | | | | | | | | | | | | | | | | | | | | | 32 | | | DCF | | Recovery rates | | 90.0% | | 90.0% | | Higher fair value | | Not applicable | | | | | | | | | | | | | | | | | |
(1) | Range information is provided in percentages, coefficients and multiples and represents the highest and lowest level significant unobservable valuation input used to value that type of financial instrument. A wide dispersion in the range does not necessarily reflect increased uncertainty or subjectivity in the valuation input and is typically just a consequence of the different characteristics of the financial instruments themselves. |
(2) | Weighted average information for non-derivativenon-derivatives
instruments is calculated by weighting each valuation input by the fair value of the financial instrument. |
(3) | Nomura has not provided weighted average information for derivatives as unlike cash products the risk on such products is distinct from the balance sheet value and is subject to netting. |
(4) | The above table only considers the impact of an increase in each significant unobservable valuation input on the fair value measurement of the financial instrument. However, a decrease in the significant unobservable valuation input would have the opposite effect on the fair |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | value measurement of the financial instrument. For example, if an increase in a significant unobservable valuation input would result in a lower fair value measurement, a decrease in the significant unobservable valuation input would result in a higher fair value measurement. |
(5) |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(4) | The impact of an increase in the significant unobservable valuation input on the fair value measurement for a derivative assumes Nomura is long risk to the input e.g., long volatility. Where Nomura is short such risk, the impact of an increase would have a converse effect on the fair value measurement of the derivative. |
(5)(6) | Consideration of the interrelationships between significant unobservable valuation inputs is only relevant where more than one unobservable valuation input is used to determine the fair value measurement of the financial instrument. |
(6)(7) | Valuation technique(s)techniques and unobservable valuation inputs in respect of equity securities reported within in the consolidated balance sheets. |
Qualitative discussion of the ranges of significant unobservable valuation inputs The following comments present qualitative discussion about the significant unobservable valuation inputs used by Nomura for financial instruments classified in Level 3. The significant unobservable valuation inputs are dividend yield, volatilities and correlations. The range of dividend yields varies as some companies do not pay any dividends, for example due to a lack of profits or as a policy during a growth period, and hence have a zero dividend yield while others may pay high dividends, for example to return money to investors. The range of volatilities is wide as the volatilities of shorter-dated equity derivatives or those based on single equity securities can be higher than those of longer-dated instruments or those based on indices. Correlations represent the relationships between one input and another (“pairs”) and can either be positive or negative amounts. The range of correlations moves from positive to negative because the movement of some pairs is very closely related and in the same direction causing highly positive correlations while others generally move in opposite directions causing highly negative correlations with pairs that have differing relationships throughout the range. The significant unobservable valuation inputs are interest rates, volatilities and correlations. The range of interest rates is due to interest rates in different countries/currencies being at different levels with some countries having extremely low levels and others being at levels that while still relatively low are less so.levels. The range of volatilities is wide as volatilities can be higher when interest rates are at extremely low levels, and also because volatilities of shorter-dated interest rate derivatives are typically higher than those of longer-dated instruments. The range of correlations moves from positive to negative because the movement of some pairs is very closely related and in the same direction causing highly positive correlations while others generally move in opposite directions causing highly negative correlations with pairs that have differing relationships through the range. All significant unobservable valuation inputs are spread across the ranges. The significant unobservable valuation inputs are credit spreads, recovery rates, volatilities and correlations. The range of credit spreads reflects the different risk of default present within the portfolio. At the low end of the range, underlying reference names have a very limited risk of default whereas at the high end of the range, underlying reference names have a much greater risk of default. The range of recovery rates varies primarily due to the seniority of the underlying exposure with senior exposures having a higher recovery than subordinated exposures. The range of volatilities is wide as the volatilities of shorter-dated credit contracts are typically higher than those of longer-dated instruments. The correlation range is positive since credit spread moves are generally in the same direction. Highly positive correlations are those for which the movement is very closely related and in the same direction, with correlation falling as the relationship becomes less strong. Foreign exchange contracts The significant unobservable valuation inputs are interest rates, volatilities and correlations. The range of interest rates is due to interest rates in different countries/currencies
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) being at different levels with some countries having extremely low levels and others being at levels that while still relatively low are less so. The range of volatilities is mainly due to the lower end of the range arising from
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
currencies that trade in narrow ranges e.g.(e.g. versus the U.S. DollarDollar) while the higher end comes from currencies with a greater range of movement such as emerging market currencies. The range of correlations moves from positive to negative because the movement of some pairs is very closely related and in the same direction causing highly positive correlations while others generally move in opposite directions causing highly negative correlations with pairs that have differing relationships through the range. Short-term borrowings and Long-term borrowings The significant unobservable valuation inputs are yields, prepayment rates, default probabilities, loss severities, volatilities and correlations. The range of volatilities is wide as the volatilities of shorter-dated instruments are typically higher than those in longer-dated instruments. The range of correlations moves from positive to negative because the movement of some pairs is very closely related and in the same direction causing highly positive correlations while others generally move in opposite directions causing highly negative correlations with pairs that have differing relationships through the range. Movements in Level 3 financial instruments The following tables present gains and losses as well as increases and decreases of financial instruments measured at fair value on a recurring basis which Nomura classified in Level 3 for the years ended March 31, 20192021 and 2020.2022. Financial instruments classified in Level 3 are often hedged with instruments within Level 1 or Level 2 of the fair value hierarchy. The gains or losses presented below do not reflect the offsetting gains or losses for these hedging instruments. Level 3 financial instruments are also measured using both observable and unobservable valuation inputs. Fair value changes presented below, therefore, reflect realized and unrealized gains and losses resulting from movements in both observable and unobservable valuation inputs.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) For the years ended March 31, 20192021 and 2020,2022, gains and losses related to Level 3 assets and liabilities did not have a material impact on Nomura’s liquidity and capital resources management. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2021 | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 14 | | | ¥ | 5 | | | ¥ | — | | | ¥ | 23 | | | ¥ | (29 | ) | | ¥ | — | | | ¥ | 1 | | | ¥ | 2 | | | ¥ | 0 | | | ¥ | 16 | | Private equity and debt investments | | | 31 | | | | 11 | | | | — | | | | 19 | | | | (4 | ) | | | — | | | | 1 | | | | — | | | | — | | | | 58 | | Japanese agency and municipal securities | | | 2 | | | | 0 | | | | — | | | | 0 | | | | 0 | | | | — | | | | — | | | | 0 | | | | 0 | | | | 2 | | Foreign government, agency and municipal securities | | | 8 | | | | 1 | | | | — | | | | 21 | | | | (16 | ) | | | — | | | | 0 | | | | 5 | | | | (7 | ) | | | 12 | | Bank and corporate debt securities and loans for trading purposes | | | 228 | | | | 1 | | | | — | | | | 66 | | | | (165 | ) | | | — | | | | 9 | | | | 31 | | | | (35 | ) | | | 135 | | Commercial mortgage-backed securities (“CMBS”) | | | 1 | | | | 1 | | | | — | | | | 6 | | | | 0 | | | | — | | | | 0 | | | | 0 | | | | 0 | | | | 8 | | Residential mortgage-backed securities (“RMBS”) | | | 62 | | | | 0 | | | | — | | | | 12 | | | | (46 | ) | | | — | | | | 1 | | | | — | | | | (23 | ) | | | 6 | | Real estate-backed securities | | | 94 | | | | (5 | ) | | | — | | | | 170 | | | | (155 | ) | | | — | | | | 2 | | | | — | | | | 0 | | | | 106 | | Collateralized debt obligations (“CDOs”) and other | | | 32 | | | | 0 | | | | — | | | | 102 | | | | (104 | ) | | | — | | | | 0 | | | | 0 | | | | (7 | ) | | | 23 | | Investment trust funds and other | | | 0 | | | | 0 | | | | — | | | | 16 | | | | (16 | ) | | | — | | | | 0 | | | | 0 | | | | — | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading assets and private equity and debt investments | | | 472 | | | | 14 | | | | — | | | | 435 | | | | (535 | ) | | | — | | | | 14 | | | | 38 | | | | (72 | ) | | | 366 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19 | | | | (43 | ) | | | — | | | | — | | | | — | | | | (26 | ) | | | 0 | | | | 20 | | | | (11 | ) | | | (41 | ) | | | | (54 | ) | | | 16 | | | | — | | | | — | | | | — | | | | (6 | ) | | | 1 | | | | (3 | ) | | | 3 | | | | (43 | ) | | | | (1 | ) | | | (19 | ) | | | — | | | | — | | | | — | | | | (14 | ) | | | (1 | ) | | | (4 | ) | | | 1 | | | | (38 | ) | Foreign exchange contracts | | | 7 | | | | 20 | | | | — | | | | — | | | | — | | | | (15 | ) | | | 1 | | | | (2 | ) | | | 4 | | | | 15 | | | | | (29 | ) | | | (26 | ) | | | — | | | | — | | | | — | | | | (61 | ) | | | 1 | | | | 11 | | | | (3 | ) | | | (107 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 443 | | | ¥ | (12 | ) | | ¥ | — | | | ¥ | 435 | | | ¥ | (535 | ) | | ¥ | (61 | ) | | ¥ | 15 | | | ¥ | 49 | | | ¥ | (75 | ) | | ¥ | 259 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 96 | | | ¥ | 2 | | | ¥ | — | | | ¥ | 42 | | | ¥ | (69 | ) | | ¥ | — | | | ¥ | 7 | | | ¥ | 41 | | | ¥ | (15 | ) | | ¥ | 104 | | Collateralized agreements | | | 15 | | | | (1 | ) | | | — | | | | — | | | | (1 | ) | | | — | | | | 0 | | | | 5 | | | | — | | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 168 | | | | 47 | | | | 0 | | | | 4 | | | | (39 | ) | | | — | | | | 5 | | | | — | | | | 0 | | | | 185 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 722 | | | ¥ | 36 | | | ¥ | 0 | | | ¥ | 481 | | | ¥ | (644 | ) | | ¥ | (61 | ) | | ¥ | 27 | | | ¥ | 95 | | | ¥ | (90 | ) | | ¥ | 566 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 0 | | | ¥ | 0 | | | ¥ | — | | | ¥ | 1 | | | ¥ | (1 | ) | | ¥ | 0 — | | | ¥ | 0 | | | ¥ | 0 | | | ¥ | 0 | | | ¥ | 0 | | Foreign government, agency and municipal securities | | | 0 | | | | 0 | | | | — | | | | 0 | | | | 0 | | | | 0 — | | | | 1 | | | | — | | | | — | | | | 1 | | Bank and corporate debt securities | | | 1 | | | | 0 | | | | — | | | | 4 | | | | (1 | ) | | | 0 — | | | | 0 | | | | 2 | | | | (1 | ) | | | 5 | | Collateralized debt obligations (“CDOs”) and other | | | 1 | | | | 1 | | | | — | | | | 11 | | | | (10 | ) | | | 0 — | | | | 0 | | | | — | | | | — | | | | 1 | | Investment trust funds and other | | | 0 | | | | 0 | | | | — | | | | 0 | | | | 0 | | | | 0 — | | | | 0 | | | | — | | | | — | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading liabilities | | ¥ | 2 | | | ¥ | 1 | | | ¥ | — | | | ¥ | 16 | | | ¥ | (12 | ) | | ¥ | 0 — | | | ¥ | 1 | | | ¥ | 2 | | | ¥ | (1 | ) | | ¥ | 7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 29 | | | | (5 | ) | | | 0 | | | | 220 | | | | (137 | ) | | | 0 — | | | | 0 | | | | 13 | | | | (27 | ) | | | 103 | | | | | 1 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 — | | | | — | | | | 1 | | | | (1 | ) | | | 1 | | | | | — | | | | (1 | ) | | | — | | | | — | | | | — | | | | — | | | | 0 | | | | — | | | | — | | | | 1 | | | | | 409 | | | | (35 | ) | | | (1 | ) | | | 343 | | | | (284 | ) | | | 0 — | | | | 0 | | | | 111 | | | | (68 | ) | | | 547 | | | | | 0 | | | | (2 | ) | | | — | | | | 33 | | | | 0 | | | | 0 — | | | | 0 | | | | 1 | | | | (1 | ) | | | 35 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 441 | | | ¥ | (42 | ) | | ¥ | (1 | ) | | ¥ | 612 | | | ¥ | (433 | ) | | ¥ | 0 — | | | ¥ | 1 | | | ¥ | 128 | | | ¥ | (98 | ) | | ¥ | 694 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Japanese agency and municipal securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bank and corporate debt securities and loans for trading purposes | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial mortgage-backed securities (“CMBS”) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential mortgage-backed securities (“RMBS”) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | | | | | | | Real estate-backed securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Collateralized agreements | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bank and corporate debt securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | Private equity and debt investments | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | ) | | | | | | | | | | | | | Japanese agency and municipal securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | ) | | | | | Bank and corporate debt securities and loans for trading purposes | | | | | | | | ) | | | | | | | | | | | | ) | | | | | | | | ) | | | | | | | | ) | | | | | Commercial mortgage-backed securities (“CMBS”) | | | | | | | | ) | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | Residential mortgage-backed securities (“RMBS”) | | | | | | | | ) | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | ) | | | | | Real estate-backed securities | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | ) | | | | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other | | | | | | | | ) | | | | | | | | | | | | ) | | | | | | | | ) | | | | | | | | ) | | | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading assets and private equity and debt investments | | | | | | | | ) | | | | | | | | | | | | ) | | | | | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | ) | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | ) | | | | | | | | ) | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | ) | Foreign exchange contracts | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | ) | | ¥ | | ) | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | ) | | ¥ | | | Collateralized agreements | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | ) | | ¥ | | ) | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bank and corporate debt securities | | | | | | | | ) | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading liabilities | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | ) | | | | | | | | ) | | | | | | | | | | | | | ) | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2022 | | | |
| | |
| | |
| | | | | |
| | | | | |
| | |
| | |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 16 | | | ¥ | 3 | | | ¥ | — | | | ¥ | 2 | | | ¥ | (9 | ) | | ¥ | — | | | ¥ | 1 | | | ¥ | 3 | | | ¥ | (2 | ) | | ¥ | 14 | | Private equity and debt investments | | | 58 | | | | 2 | | | | — | | | | 14 | | | | (30 | ) | | | — | | | | 1 | | | | — | | | | (13 | ) | | | 32 | | Japanese agency and municipal securities | | | 2 | | | | 0 | | | | — | | | | 0 | | | | 0 | | | | — | | | | — | | | | — | | | | — | | | | 2 | | Foreign government, agency and municipal securities | | | 12 | | | | 1 | | | | — | | | | 13 | | | | (16 | ) | | | — | | | | 0 | | | | 2 | | | | (2 | ) | | | 10 | | Bank and corporate debt securities and loans for trading purposes | | | 135 | | | | (3 | ) | | | — | | | | 207 | | | | (194 | ) | | | — | | | | 16 | | | | 89 | | | | (30 | ) | | | 220 | | Commercial mortgage-backed securities (“CMBS”) | | | 8 | | | | 0 | | | | — | | | | 0 | | | | (1 | ) | | | — | | | | 0 | | | | — | | | | 0 | | | | 7 | | Residential mortgage-backed securities (“RMBS”) | | | 6 | | | | 0 | | | | — | | | | 5 | | | | (4 | ) | | | — | | | | 1 | | | | 0 | | | | — | | | | 8 | | Real estate-backed securities | | | 106 | | | | 4 | | | | — | | | | 370 | | | | (395 | ) | | | — | | | | 10 | | | | — | | | | (16 | ) | | | 79 | | Collateralized debt obligations (“CDOs”) and other | | | 23 | | | | (4 | ) | | | — | | | | 96 | | | | (89 | ) | | | — | | | | 1 | | | | — | | | | (1 | ) | | | 26 | | Investment trust funds and other | | | 0 | | | | 0 | | | | — | | | | 16 | | | | (16 | ) | | | — | | | | 0 | | | | 0 | | | | — | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading assets and private equity and debt investments | | | 366 | | | | 3 | | | | — | | | | 723 | | | | (754 | ) | | | — | | | | 30 | | | | 94 | | | | (64 | ) | | | 398 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (41 | ) | | | 43 | | | | — | | | | — | | | | — | | | | 3 | | | | (1 | ) | | | (31 | ) | | | 37 | | | | 10 | | | | | (43 | ) | | | (7 | ) | | | — | | | | — | | | | — | | | | 13 | | | | 0 | | | | 14 | | | | 12 | | | | (11 | ) | | | | (38 | ) | | | 6 | | | | — | | | | — | | | | — | | | | 2 | | | | (2 | ) | | | (2 | ) | | | 1 | | | | (33 | ) | Foreign exchange contracts | | | 15 | | | | (1 | ) | | | — | | | | — | | | | — | | | | (4 | ) | | | 1 | | | | 0 | | | | (1 | ) | | | 10 | | | | | (107 | ) | | | 41 | | | | — | | | | — | | | | — | | | | 14 | | | | (2 | ) | | | (19 | ) | | | 49 | | | | (24 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 259 | | | ¥ | 44 | | | ¥ | — | | | ¥ | 723 | | | ¥ | (754 | ) | | ¥ | 14 | | | ¥ | 28 | | | ¥ | 75 | | | ¥ | (15 | ) | | ¥ | 374 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 104 | | | ¥ | 18 | | | ¥ | — | | | ¥ | 95 | | | ¥ | (89 | ) | | ¥ | — | | | ¥ | 16 | | | ¥ | 73 | | | ¥ | (12 | ) | | ¥ | 205 | | Collateralized agreements | | | 18 | | | | (1 | ) | | | — | | | | 2 | | | | (5 | ) | | | — | | | | 2 | | | | — | | | | — | | | | 16 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 185 | | | | (2 | ) | | | 0 | | | | 2 | | | | (1 | ) | | | — | | | | 14 | | | | 0 | | | | (1 | ) | | | 197 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 566 | | | ¥ | 59 | | | ¥ | 0 | | | ¥ | 822 | | | ¥ | (849 | ) | | ¥ | 14 | | | ¥ | 60 | | | ¥ | 148 | | | ¥ | (28 | ) | | ¥ | 792 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 0 | | | ¥ | 0 | | | ¥ | — | | | ¥ | 0 | | | ¥ | 0 | | | ¥ | 0 — | | | ¥ | 0 | | | ¥ | — | | | ¥ | 0 | | | ¥ | 0 | | Foreign government, agency and municipal securities | | | 1 | | | | 0 | | | | — | | | | 0 | | | | (1 | ) | | | 0 — | | | | 0 | | | | — | | | | — | | | | 0 | | Bank and corporate debt securities | | | 5 | | | | 0 | | | | — | | | | 5 | | | | (6 | ) | | | 0 — | | | | (1 | ) | | | 8 | | | | (8 | ) | | | 3 | | Collateralized debt obligations (“CDOs”) and other | | | 1 | | | | 0 | | | | — | | | | 2 | | | | (3 | ) | | | 0 — | | | | 0 | | | | 0 | | | | — | | | | 0 | | Investment trust funds and other | | | 0 | | | | 0 | | | | — | | | | 0 | | | | 0 | | | | 0 — | | | | 0 | | | | — | | | | — | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total trading liabilities | | ¥ | 7 | | | ¥ | 0 | | | ¥ | — | | | ¥ | 7 | | | ¥ | (10 | ) | | ¥ | 0 — | | | ¥ | (1 | ) | | ¥ | 8 | | | ¥ | (8 | ) | | ¥ | 3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 103 | | | | (8 | ) | | | 0 | | | | 152 | | | | (136 | ) | | | 0 — | | | | 1 | | | | 15 | | | | (85 | ) | | | 58 | | | | | 1 | | | | 0 | | | | 0 | | | | 2 | | | | — | | | | 0 — | | | | — | | | | 7 | | | | (2 | ) | | | 8 | | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1 | ) | | | — | | | | | 547 | | | | (6 | ) | | | 2 | | | | 487 | | | | (409 | ) | | | 0 — | | | | 1 | | | | 41 | | | | (192 | ) | | | 479 | | | | | 35 | | | | (26 | ) | | | — | | | | 1 | | | | (36 | ) | | | 0 — | | | | 6 | | | | 0 | | | | 0 | | | | 32 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 694 | | | ¥ | (40 | ) | | ¥ | 2 | | | ¥ | 649 | | | ¥ | (591 | ) | | ¥ | 0 — | | | ¥ | 7 | | | ¥ | 71 | | | ¥ | (288 | ) | | ¥ | 580 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes gains and losses reported primarily within Net gain on trading, Gain on private equity and debt investments, and also within Gain (loss) on investments in equity securities, Revenue—Revenue and Non-interest expenses— expensesOther, Interest and dividends and in the consolidated statements of income. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(2) | Amounts reported in include increases in trading liabilities while include decreases in trading liabilities. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (3) | Each derivative classification includes derivatives withDerivatives which contain multiple types of risk underlyings. For example, interest rate contracts include complex derivatives referencing interest rateare classified based on the primary risk as well as foreign exchange risk or other factors such as prepayment rates. Credit contracts include credit default swaps as well as derivatives referencing corporate and government debt securities.type of the instrument. |
(4) | Amounts of gains and losses on these transfers which were recognized in the period when the occurred were not significant for the yearsyear ended March 31, 20192021 and 2020.March 31, 2022. |
(5) | indicate certain valuation inputs of a financial instrument become unobservable or significant. indicate certain valuation inputs of a financial instrument become observable or insignificant. See Quantitative and qualitative information regarding significant unobservable Valuation inputs above for the valuation inputs of each financial instruments. |
Unrealized gains and losses recognized for Level 3 financial instruments The following table presents the amounts of unrealized gains (losses) for the years ended March 31, 20192021 and 2020,2022, relating to those financial instruments which Nomura classified in Level 3 within the fair value hierarchy and that were still held by Nomura at the relevant consolidated balance sheet date. | | | | | | | | | | | | | | | | | | | | Unrealized gains/(losses) (1) | | | | | | | | | | | Trading assets and private equity and debt investments | | | | | | | | | | | ¥ | | ) | | ¥ | | ) | Private equity and debt investments | | | | ) | | | | | Japanese agency and municipal securities | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | ) | Bank and corporate debt securities and loans for trading purposes | | | | | | | | ) | Commercial mortgage-backed securities (“CMBS”) | | | | | | | | ) | Residential mortgage-backed securities (“RMBS”) | | | | | | | | ) | Real estate-backed securities | | | | | | | | | Collateralized debt obligations (“CDOs”) and other | | | | ) | | | | ) | Investment trust funds and other | | | | | | | | | | | | | | | | | | Total trading assets and private equity and debt investments | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | ) | | | | ) | | | | | ) | | | | | Foreign exchange contracts | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | ¥ | | ) | | ¥ | | ) | | | | | | | | | | | | | | | | | | ) | Collateralized agreements | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | ¥ | | ) | | ¥ | | ) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unrealized gains / (losses) (1) | | | | | | | | | | | Trading assets and private equity and debt investments | | | | | | | | | | | ¥ | 4 | | | ¥ | 2 | | Private equity and debt investments | | | 12 | | | | 1 | | Japanese agency and municipal securities | | | 0 | | | | 0 | | Foreign government, agency and municipal securities | | | 1 | | | | 0 | | Bank and corporate debt securities and loans for trading purposes | | | (1 | ) | | | (2 | ) | Commercial mortgage-backed securities (“CMBS”) | | | 0 | | | | 0 | | Residential mortgage-backed securities (“RMBS”) | | | 0 | | | | 0 | | Real estate-backed securities | | | (3 | ) | | | 1 | | Collateralized debt obligations (“CDOs”) and other | | | (3 | ) | | | (7 | ) | Investment trust funds and other | | | 0 | | | | 0 | | | | | | | | | | | Total trading assets and private equity and debt investments | | | 10 | | | | (5 | ) | | | | | | | | | | | | | | | | | | | | | | (66 | ) | | | 46 | | | | | 16 | | | | 0 | | | | | (21 | ) | | | 5 | | Foreign exchange contracts | | | 19 | | | | (13 | ) | | | | | | | | | | | | | (52 | ) | | | 38 | | | | | | | | | | | | | ¥ | (42 | ) | | ¥ | 33 | | | | | | | | | | | | | | (3 | ) | | | 16 | | Collateralized agreements | | | (1 | ) | | | 0 | | | | | | | | | | | | | | 41 | | | | (2 | ) | | | | | | | | | | | | ¥ | (5 | ) | | ¥ | 47 | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | Unrealized gains/(losses) (1) | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | Foreign government, agency and municipal securities | | | | | | | | | Bank and corporate debt securities | | | | | | | | ) | Collateralized debt obligations (“CDOs”) and other | | | | | | | | | | | | | | | | | | Total trading liabilities | | ¥ | | | | ¥ | | ) | | | | | | | | | | | | | | ) | | | | | | | | | ) | | | | | | | | | ) | | | | | | | | | | | | | | | | ¥ | | ) | | ¥ | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unrealized gains / (losses) (1) | | | | | | | | | | | | | | | | | | | | | | ¥ | 0 | | | ¥ | 0 | | Foreign government, agency and municipal securities | | | 0 | | | | 0 | | Bank and corporate debt securities | | | 0 | | | | 0 | | Collateralized debt obligations (“CDOs”) and other | | | 0 | | | | 0 | | | | | | | | | | | Total trading liabilities | | ¥ | 0 | | | ¥ | 0 | | | | | | | | | | | | | | 4 | | | | 2 | | | | | 0 | | | | 0 | | Collateralized financing (3) | | | 0 | | | | 0— | | | | | (17 | ) | | | 18 | | | | | 5 | | | | (7 | ) | | | | | | | | | | | | ¥ | (8 | ) | | ¥ | 13 | | | | | | | | | | |
(1) | Includes gains and losses reported within Net gain on trading, Gain on private equity and debt investments , and also within Gain on investments in equity securities, Revenue—Revenue and Non-interest expenses— expenses—Other, Interest and dividends and in the consolidated statements of income. |
(2) | Each derivative classification includes derivatives withDerivatives which contain multiple types of risk underlyings. For example, interest rate contracts include complex derivatives referencing interest rateare classified based on the primary risk as well as foreign exchange risk or other factors such as prepayment rates. Credit contracts include credit default swaps as well as derivatives referencing corporate and government debt securities.type of the instrument. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(3) | Includes changes in unrealized gains and losses inOther comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period. They were ¥0 billion and ¥5 billion for the years ended March 31, 2021 and 2022. |
Investments in investment funds that calculate NAV per share In the normal course of business, Nomura invests in non-consolidated funds which meet the definition of investment companies or are similar in nature and which do not have readily determinable fair values. For certain of these investments, Nomura uses NAV per share as the basis for valuation as a practical expedient. Some of these investments are redeemable at different amounts from NAV per share.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following tables present information on these investments where NAV per share is calculated or disclosed as of March 31, 20192021 and 2020.2022. Investments are presented by major category relevant to the nature of Nomura’s business and risks. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (if currently eligible) (2) | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (if currently eligible) (2) | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
(if currently eligible) (2) | | | | | | | ¥ | 2 | | | ¥ | 0— | | | | Monthly | | | | Same day-30 days | | | | | 4 | | | | 2 | | | | 0— | | | | 0— | | | | | 18 | | | | 21 | | | | 0— | | | | 0— | | | | | 4 | | | | 1 | | | | 0— | | | | 0— | | | | | | | | | | | | | | | | | | | | | ¥ | 28 | | | ¥ | 24 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
(if currently eligible) (2) | | | | | | | ¥ | 12 | | | ¥ | 1 | | | | Monthly | | | | Same day- 30 days | | | | | 10 | | | | 10 | | | | 0— | | | | 0— | | | | | 22 | | | | 19 | | | | 0— | | | | 0— | | | | | 4 | | | | 1 | | | | 0— | | | | 0— | | | | | | | | | | | | | | | | | | | | | ¥ | 48 | | | ¥ | 31 | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | The contractual amount of any unfunded commitments Nomura is required to make to the entities in which the investment is held. |
(2) | The range in frequency with which Nomura canis permitted to redeem investments. |
(3) | The range in notice period required to be provided before redemption is possible. |
These investments include funds of funds that invest in multiple asset classes. The fair values of these investments are determined using NAV per share. Although most of these funds can be redeemed within six months, certain funds cannot be redeemed within six months due to contractual, liquidity or gating issues. The redemption period is unknown for certain suspended or liquidating funds. Some of these investments contain restrictions against transfers of the investments to third parties. These investments include primarily start-up funds. The fair values of these investments are determined using NAV per share. Most of these funds cannot be redeemed within six months. The redemption period is
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
unknown for certain suspended or liquidating funds. Some of these investments contain restrictions against transfers of the investments to third parties. These investments are made mainly in various sectors in Europe, U.S. and Japan. The fair values of these investments are determined using NAV per share. Redemption is restricted for most of these investments. The
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) redemption period is unknown for certain suspended or liquidating funds. Some of these investments contain restrictions against transfers of the investments to third parties. These are investments in commercial and other types of real estate. The fair values of these investments are determined using NAV per share. Redemption is restricted for most of these investments. The redemption period is unknown for certain suspended or liquidating funds. Some of these investments contain restrictions against transfers of the investments to third parties. Fair value option for financial assets and financial liabilities Nomura measures certain eligible financial assets and liabilities at fair value through the election of the fair value option permitted by ASC 815 “ ” and ASC 825 “ Financial InstrumentsInstruments. .” When Nomura elects the fair value option for an eligible item, changes in that item’s fair value are recognized through earnings. Election of the fair value option is generally irrevocable unless an event occurs that gives rise to a new basis of accounting for that instrument. The financial assets and financial liabilities primarily elected for the fair value option by Nomura, and the reasons for the election, are as follows: Equity method investments reported within Trading assets and private equity and debt investments and held for capital appreciation or current income purposes which Nomura generally has an intention to exit rather than hold indefinitely. Nomura elects the fair value option to more appropriately represent the purpose of these investments in these consolidated financial statements. Loans receivable andReceivables from customers reported within which are risk managed on a fair value basis and loan commitments related to loans receivable for which the fair value option will be elected upon funding. Nomura elects the fair value option to mitigate volatility through earnings caused by the difference in measurement basis that otherwise would arise between loans and the derivatives used to risk manage those instruments. Reverse repurchase and repurchase agreements reported within Collateralized agreements and which are risk managed on a fair value basis. Nomura elects the fair value option to mitigate volatility through earnings caused by the difference in measurement basis that otherwise would arise between the reverse repurchase and repurchase agreements and the derivatives used to risk manage those instruments. All structured notes issued on or after April 1, 2008 reported within or . Nomura elects the fair value option for those structured notes primarily to mitigate the volatility through earnings caused by differences in the measurement basis for structured notes and the derivatives Nomura uses to risk manage those positions. Nomura also elects the fair value option for certain notes issued by consolidated VIEs for the same purpose and for certain structured notes issued prior to April 1, 2008. Certain subsidiaries elect the fair value option for structured loans and straight bonds.
vanilla debt securities issued by those subsidiaries. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Certain structured deposit issuances reported within Deposits received at banks. Nomura elects the fair value option for those structured deposits primarily to mitigate the volatility through earnings caused by differences in the measurement basis for structured deposits and the derivatives Nomura uses to risk manage those positions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Financial liabilities reported within recognized in transactions which are accounted for as secured financing transactions under ASC 860. Nomura elects the fair value option for these financial liabilities to mitigate volatility through earnings that otherwise would arise had this election not been made. Even though Nomura usually has little or no continuing economic exposure to the transferred financial assets, they remain on the consolidated balance sheets and continue to be carried at fair value, with changes in fair value recognized through earnings. Financial reinsurance contracts reported within . Nomura elects the fair value option to mitigate income volatility caused by the difference in measurement basis that would otherwise exist. Changes in the fair value of the reinsurance contracts carried at fair value are reported in the consolidated statements of income. On April 1, 2020, Nomura also elected the fair value option for certain loans and loan commitments originated or purchased by the Wholesale division as part of its adoption of ASC 326. This election was made to allow these positions to be more appropriately risk managed on a prospective basis through the impact of theCOVID-19 pandemic at such time. Risk management for this purpose has included hedging these positions and also selling certain positions within the portfolio as and when active markets and buyers returned. These positions elected for the FVO were selected primarily based on the activity of the borrower, internal credit rating and from a credit and market risk perspective. The impact of this election was to reduce the carrying value of recognized loans receivable as reported withinby ¥9,774 million as of April 1, 2020 as the fair value of these positions was below carrying value at such date. Similarly, a liability of ¥5,888 million was recognized and reported withinfor loan commitments at such date as the fair value of these positions was negative. In both cases, fair value was below carrying value or negative primarily as a result of the volatile credit markets and impact of theCOVID-19 pandemic on credit spreads at such date. The total difference between carrying value and fair value of ¥15,662 million, net of tax, was recognized in openingas a cumulative effect adjustment on April 1, 2020. Subsequent changes in fair value after April 1, 2020 have been recognized in earnings and reported withinRevenue—Net gain on trading . In March 2021, Nomura also elected the fair value option for certain claims receivable arising from the U.S. Prime Brokerage Event. This election was made as these receivables will be prospectively managed on a fair value basis. The receivables are reported withinwith any subsequent changes in fair value recognized in earnings and reported withinRevenue—Net gain on trading. See Note.23 “U.S. Prime Brokerage Event ” for further information on this event. Interest and dividends arising from financial instruments for which the fair value option has been elected are recognized within Interest and dividends, Interest expense or Revenue—Net gain on trading .
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents gains (losses) due to changes in fair value for financial instruments measured at fair value using the fair value option for the years ended March 31, 2018, 20192020, 2021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments (2) | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | Private equity and debt investments | | | | ) | | | | | | | | ) | | | | | ) | | | | ) | | | | | Collateralized agreements (3) | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | ¥ | | ) | | ¥ | | ) | | ¥ | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | ) | | ¥ | | | | ¥ | | | Collateralized financing (3) | | | | | | | | | | | | ) | Long-term borrowings (4)(5) | | | | ) | | | | ) | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | ) | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading assets and private equity and debt investments (2) | | | | | | | | | | | | | | | ¥ | 1 | | | ¥ | 2 | | | ¥ | 1 | | Private equity and debt investments | | | (1 | ) | | | 0 | | | | 6 | | | | | 2 | | | | 7 | | | | 39 | | Collateralized agreements (3) | | | 4 | | | | 5 | | | | (1 | ) | | | | (16 | ) | | | 51 | | | | (3 | ) | | | | | | | | | | | | | | | | ¥ | (10 | ) | | ¥ | 65 | | | ¥ | 42 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 64 | | | ¥ | (83 | ) | | ¥ | 60 | | | | | 0 | | | | 3 | | | | 4 | | Collateralized financing (3) | | | (2 | ) | | | 9 | | | | 3 | | Long-term borrowings (4)(5) | | | 58 | | | | (194 | ) | | | 275 | | | | | 2 | | | | 3 | | | | 4 | | | | | | | | | | | | | | | | | ¥ | 122 | | | ¥ | (262 | ) | | ¥ | 346 | | | | | | | | | | | | | | |
(1) | Includes gains and losses reported primarily within Revenue—Net gain on trading and in the consolidated statements of income. |
(2) | Includes equity investments that would have been accounted for under the equity method had Nomura not chosen to elect the fair value option. |
(3) | Includes reverse repurchase and repurchase agreements. |
(4) | Includes structured notes and other financial liabilities. |
(5) | Includes secured financing transactions arising from transfers of financial assets which did not meet the criteria for sales accounting. |
(6) | Includes unfunded written loan commitments. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of March 31, 20192021 and 2020,2022, Nomura held an economic interest of 39.52%39.27% and 39.19%39.21% in American Century Companies, Inc., respectively. The investment is measured at fair value on a recurring basis through election of the fair value option and is reported within in the consolidated balance sheets There was no significant impact on financial assets for which the fair value option was electedChanges in gains and losses attributable to instrument-specific credit risk.risk of loans and receivables elected for the FVO during the year ended March 31, 2022 were primarily due to a recovery of increasing in the estimated fair value of certain transactions with a U.S. client in connection with the U.S. Prime Brokerage Event elected to be measured at fair value and not significant from others. See Note 23 “U.S. Prime Brokerage Event ” for further information on this event. Nomura calculates the impact of changes in its own creditworthiness on certain financial liabilities for which the fair value option is elected by DCF valuationrevaluation techniques using a rate which incorporates observable changes in its credit spread.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents changes in the valuation adjustment for Nomura’s own credit worthiness appliedcreditworthiness recognized in other comprehensive income during the years pertaining to certain financial liabilities for which the fair value option has been elected recognized in other comprehensive income during the years and cumulatively, and amounts reclassified to earnings from accumulated other comprehensive income on early settlement of such financial liabilities during the years ended March 31 2019 , 2021and 2020. In the year ended March 31, 2020, the credit balance recognized in accumulated other comprehensive income related to Nomura’s own credit on certain financial liabilities increased, primarily due to a significant widening of spreads driven by the financial market turmoilof theCOVID-19
global pandemic. | | | | | | | | | | | | | | | | | | | | | | | | Changes recognized as a credit (debit) to other comprehensive income | | ¥ | | | | ¥ | | | Credit (debit) amounts reclassified to earnings | | | | ) | | | | ) | Cumulative credit (debit) balance recognized in accumulated other comprehensive income | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Changes recognized as a credit (debit) to other comprehensive income | | ¥ | (88 | ) | | ¥ | 60 | | Credit (debit) amounts reclassified to earnings | | | (10 | ) | | | 1 | | Cumulative credit (debit) balance recognized in accumulated other comprehensive income | | | (11 | ) | | | 49 | |
As of March 31, 2019,2021, the fair value of the aggregate unpaid principal balance (which is contractually principally protected) of for which the fair value option was elected was ¥0 ¥219 billion moreless than the principal balance of such . A significant portion of the principal balance relates to receivables recognized for claims in connection with the U.S. prime brokerage event in March 2021. See Note.23“U.S. Prime Brokerage Event” for further information on this event. There were nofor which the fair value option was elected that were 90 days or more past due.The fair value of the aggregate unpaid principal balance (which is contractually principally protected) of for which the fair value option was elected was ¥50 ¥45 billion less than the principal balance of such . There were nofor which the fair value option was elected that were 90 days or more past due.As of March 31, 2020,2022, the fair value of the aggregate unpaid principal balance (which is contractually principally protected) of for which the fair value option was elected was ¥8 ¥267 billion less than the principal balance of such . A significant portion of the principal balance relates to receivables recognized for claims in connection with the U.S. prime brokerage event in March 2021. See Note.23“U.S. Prime Brokerage Event” for further information on this event. The unpaid principal balance offor which the fair value option was elected that were 90 days or more past due was ¥278 billion.The fair value of the aggregate unpaid principal balance (which is contractually principally protected) of for which the fair value option was elected was ¥27 ¥212 billion less than the principal balance of such . There were nofor which the fair value option was elected that were 90 days or more past due.Investment by Investment companies Nomura carries all of investments by investment companies under ASC 946 “ Financial Services—Investment Companies ” (“ASC 946”) at fair value, with changes in fair value recognized through the consolidated statements of income. During the year ended March 31, 2020, N-MEZ Investment Business Limited Partnership 1 was added as an investment company under ASC 946.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Concentrations of credit risk Concentrations of credit risk may arise from trading, securities financing transactions and underwriting activities, and may be impacted by changes in political or economic factors. Nomura has credit risk concentrations on bondsdebt securities issued by the Japanese Government, U.S. Government, British Government (“U.K.”), Governments within the European Union (“EU”), their states and municipalities, and their agencies.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) These concentrations generally arise from taking trading positions and are reported within in the consolidated balance sheets. Government, agency and municipal securities, including Securities pledged as collateral , represented 16%15% of total assets as of March 31, 20192021 and 16% as of March 31, 2020.2022.The following tables present geographic allocations of Nomura’s trading assets related to government, agency and municipal securities as of March 31, 20192021 and 2020.2022. See Note 3 “ Derivative instruments and hedging activities ” for further information regarding the concentration of credit risk for derivatives. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Government, agency and municipal securities | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Government, agency and municipal securities | | ¥ | 1,715 | | | ¥ | 1,888 | | | ¥ | 2,329 | | | ¥ | 620 | | | ¥ | 6,552 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Government, agency and municipal securities | | ¥ | 1,916 | | | ¥ | 2,368 | | | ¥ | 2,151 | | | ¥ | 721 | | | ¥ | 7,156 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Government, agency and municipal securities | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | |
(1) | Other than above, there were ¥318¥299 billion and ¥321¥331 billion of government, agency and municipal securities reported within Non-trading debt securities in the consolidated balance sheets as of March 31, 20192021 and 2020,2022, respectively. These securities are primarily Japanese government, agency and municipal securities. |
Estimated fair value of financial instruments not carried at fair value Certain financial instruments are not carried at fair value on a recurring basis in the consolidated balance sheets since they are neither held for trading purposes nor are elected for the fair value option. These are typically carried at contractual amounts due or amortized cost. The carrying value of the majority of the financial instruments detailed below will approximateapproximates their fair value since they are short-term in nature and contain minimal credit risk. These financial instruments include financial assets reported within Cash and cash equivalents, Time deposits, Deposits with stock exchanges and other segregated cash, Receivables from customers, Receivables from other than customers, Securities purchased under agreements to resell and and financial liabilities reported within Short-term borrowings, Payables to customers, Payables to other than customers, Deposits received at banks, Securities sold under agreements to repurchase, Securities loaned and in the consolidated balance sheets. The estimated fair values of other financial instruments which are longer-term in nature or may contain more than minimal credit risk may be different to their carrying value. Financial assets of this type primarily include certain loans which are reported within while financial liabilities primarily include long-term borrowings which are reported within .
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following tables present carrying values, fair values and classification within the fair value hierarchy for certain classes of financial instrument of which a portion of the ending balance was carried at fair value as of March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | Deposits with stock exchanges and other segregated cash | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Securities purchased under agreements to resell | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Deposits received at banks | | | | | | | | | | | | | | | | | | | | | Securities sold under agreements to repurchase | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | Deposits with stock exchanges and other segregated cash | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Securities purchased under agreements to resell | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Deposits received at banks | | | | | | | | | | | | | | | | | | | | | Securities sold under agreements to repurchase | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | ¥ | 3,510 | | | ¥ | 3,510 | | | ¥ | 3,510 | | | ¥ | | | | ¥ | | | | | | 281 | | | | 281 | | | | 0— | | | | 281 | | | | | | Deposits with stock exchanges and other segregated cash | | | 374 | | | | 374 | | | | 0— | | | | 374 | | | | | | | | | 2,937 | | | | 2,937 | | | | 0— | | | | 2,120 | | | | 817 | | Securities purchased under agreements to resell | | | 10,775 | | | | 10,775 | | | | 0— | | | | 10,757 | | | | 18 | | | | | 5,264 | | | | 5,264 | | | | 0— | | | | 5,264 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 23,141 | | | ¥ | 23,141 | | | ¥ | 3,510 | | | ¥ | 18,796 | | | ¥ | 835 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 1,368 | | | ¥ | 1,368 | | | ¥ | — | | | ¥ | 1,265 | | | ¥ | 103 | | Deposits received at banks | | | 1,342 | | | | 1,343 | | | | | | | | 1,342 | | | | 1 | | Securities sold under agreements to repurchase | | | 13,360 | | | | 13,360 | | | | | | | | 13,360 | | | | 0 | | | | | 1,381 | | | | 1,381 | | | | | | | | 1,381 | | | | | | | | | 393 | | | | 393 | | | | | | | | 393 | | | | | | | | | 7,975 | | | | 7,978 | | | | 5 | | | | 7,370 | | | | 603 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 25,819 | | | ¥ | 25,823 | | | ¥ | 5 | | | ¥ | 25,111 | | | ¥ | 707 | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | ¥ | 3,316 | | | ¥ | 3,316 | | | ¥ | 3,316 | | | ¥ | | | | ¥ | | | | | | 321 | | | | 321 | | | | | | | | 321 | | | | | | Deposits with stock exchanges and other segregated cash | | | 427 | | | | 427 | | | | | | | | 427 | | | | | | | | | 3,515 | | | | 3,515 | | | | | | | | 2,461 | | | | 1,054 | | Securities purchased under agreements to resell | | | 11,879 | | | | 11,879 | | | | | | | | 11,863 | | | | 16 | | | | | 4,997 | | | | 4,994 | | | | | | | | 4,994 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 24,455 | | | ¥ | 24,452 | | | ¥ | 3,316 | | | ¥ | 20,066 | | | ¥ | 1,070 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 1,050 | | | ¥ | 1,050 | | | ¥ | | | | ¥ | 993 | | | ¥ | 57 | | Deposits received at banks | | | 1,761 | | | | 1,761 | | | | | | | | 1,752 | | | | 9 | | Securities sold under agreements to repurchase | | | 12,575 | | | | 12,575 | | | | | | | | 12,575 | | | | 0 | | | | | 1,567 | | | | 1,568 | | | | | | | | 1,568 | | | | | | | | | 396 | | | | 396 | | | | | | | | 396 | | | | | | | | | 9,258 | | | | 9,236 | | | | 23 | | | | 8,688 | | | | 525 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 26,607 | | | ¥ | 26,586 | | | ¥ | 23 | | | ¥ | 25,972 | | | ¥ | 591 | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes financial instruments which are carried at fair value on a recurring basis. |
(2) | Carrying values are shown after deducting relevant allowances for credit losses. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Assets and liabilities measured at fair value on a nonrecurring basis In addition to financial instruments carried at fair value on a recurring basis, Nomura also measures other financial and non-financial assets and liabilities at fair value on a nonrecurring basis, where the primary measurement basis is not fair value. Fair value is only used in specific circumstances after initial recognition such as to measure impairment. As of March 31, 2019, goodwill allocated to2021, the Wholesale segment wasequity method investment in Nomura Real Estate Holdings, Inc., one of Nomura’s affiliated companies, is measured at fair value on a nonrecurring basis. The relevant goodwill, whichinvestment that is reported within Other assets—OtherInvestments in and advances to affiliated companies
in the consolidated balance sheets was wholly impaired. Fair value was determined using a DCF valuation technique and consequently, this nonrecurringimpaired by ¥47,661 million. The fair value measurementused to measure the other than temporary impairment was determined using valuation inputsthe quoted market price as of March 31, 2021 which would be classified in Level 31 of the fair value hierarchy. See Note 10 19 “ Other assets—Other/Other liabilitiesAffiliated companies and other equity-method investees
” for further information. As of March 31, 2020,2022, there were no significant amount of assets and or liabilities which were measured at fair value on a nonrecurring basis. 3. Derivative instruments and hedging activities: Nomura uses a variety of derivative financial instruments,derivatives, including futures, forwards, options and swaps, for both trading and non-trading purposes. Derivatives used for trading purposes In the normal course of business, Nomura enters into transactions involving derivative financial instrumentsderivatives to meet client needs, for trading purposes, and to reduce its own exposure to loss due to adverse fluctuations in interest rates, currency exchange rates and market prices of securities. These financial instruments include contractual agreements such as commitments to swap interest payment streams, exchange currencies or purchase or sell securities and other financial instruments on specific terms at specific future dates. Nomura maintains active trading positions in a variety of derivative financial instruments.derivatives. Most of Nomura’s trading activities are client oriented. Nomura utilizes a variety of derivative financial instrumentsderivatives as a means of bridging clients’ specific financial needs and investors’ demands in the securities markets. Nomura also actively trades securities and various derivatives to assistfacilitate its clients in adjusting their risk profiles as markets change. In performing these activities, Nomura carries an inventory of capital markets instruments and maintains its access to market liquidity by quoting bid and offer prices to and trading with other market makers. These activities are essential to provide clients with securities and other capital market products at competitive prices. Futures and forward contracts are commitments to either purchase or sell securities, foreign currencyexchange contracts or other capital market instruments at a specific future date for a specified price and may be settled in cash or through delivery. Foreign exchange contracts include spot and forward contracts and involve the exchange of two currencies at a rate agreed by the contracting parties. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movements in market prices. Futures contracts are executed through regulated exchanges which clear and guarantee performance of counterparties. Accordingly, credit risk associated with futures contracts is considered minimal. In contrast, forward contracts are generally negotiated between two counterparties and, therefore, are subject to the performance of the related counterparties.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Options are contracts that grant the purchaser, for a premium payment, the right to either purchase or sell a financial instrument at a specified price within a specified period of time or on a specified date from or to the
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) writer of the option. The writer of options receives premiums and bears the risk of unfavorable changes in the market price of the financial instruments underlying the options. Swaps are contractual agreements in which two counterparties agree to exchange certain cash flows, at specified future dates, based on an agreed contract. Certain agreements may result in combined interest rate and foreign currencyexchange exposures. Entering into swap agreements may involve the risk of credit losses in the event of counterparty default. To the extent these derivative financial instrumentsderivatives are economically hedging financial instruments or securities positions of Nomura, the overall risk of loss may be fully or partly mitigated by the hedged position. Nomura seeks to minimize its exposure to market risk arising from its use of these derivative financial instrumentsderivatives through various control policies and procedures, including position limits, monitoring procedures and hedging strategies whereby Nomura enters into offsetting or other positions in a variety of financial instruments. Derivatives used for non-trading purposes Nomura’s principal objectives in using derivatives for non-trading purposes are to manage interest rate risk, to modify the interest rate characteristicsrisk profile of certain financial liabilities, to manage foreign exchange risk of certain foreign currency denominated debt securities, to manage net investment exposure to fluctuations in foreign exchange rates arising from certain foreign operations and to mitigate equity price risk arising from certain stock-based compensation awards given to employees. Credit risk associated with derivatives utilized for non-trading purposes is controlled and managed in the same way as credit riskthat associated with derivatives utilizedused for trading purposes. Nomura designates certain derivative financial instrumentsderivatives as fair value hedges of interest rate risk arising from specific financial liabilities and foreign currency risk arising from specific foreign currency denominated debt securities. These derivatives are effective in reducing the risk associated with the exposure being hedged and are highly correlated with changes in the fair value and foreign currency rates of the underlying hedged items, both at inception and throughout the life of the hedging relationship. Changes in fair value of the hedging derivatives are reported together with those of the hedged liabilities and assets through the consolidated statements of income within and , respectivelyrespectively.Derivative financial instrumentsNomura designates certain derivatives designated as hedges of theits net investment in foreign operations relaterelating to specific subsidiaries withwhich havenon-Japanese Yen functional currencies. When determining the effectiveness of net investment hedges, the effective portion of the change in fair value of the hedging derivative is determined by changes in spot exchange rates. Changes in fair value of the hedging derivatives attributable to changes in the difference between the forward rate and spot rate are excluded from the measurement of hedge effectiveness and are reported in the consolidated statements of income within Revenue—OtherRevenue-Other
. All other movements in the fair value of highly effective net investment hedging derivatives are reported through NHI shareholders’ equity within Accumulated other comprehensive income (loss) .
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Concentrations of credit risk for derivatives The following tables present Nomura’s significant concentration of exposures to credit risk in OTC derivatives with financial institutions including transactions cleared through central counterparties as of
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 20192021 and 2020.2022. The gross fair value of derivative assets represents the maximum amount of loss due to credit risk that Nomura would incur if the counterparties of Nomura failed to perform in accordance with the terms of the instruments and any collateral or other security Nomura held in relation to those instruments proved to be of no value. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | ¥ | 13,474 | | | ¥ | (11,473 | ) | | ¥ | (1,500 | ) | | ¥ | 501 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 15,667 | | | ¥ | (13,193 | ) | | ¥ | (1,669 | ) | | ¥ | 805 | |
The following tables quantify the volume of Nomura’s derivative activitypositions as of March 31, 20192021 and 20202022 through a disclosure of notional amounts, in comparison with the fair value of those derivatives. All amounts are disclosed on a gross basis, prior to counterparty nettingoffsetting of derivative assets and liabilities and cash collateral nettingoffsetting against net derivatives. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives used for trading and non-trading purposes (2)(3) : | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | Derivatives designated as hedging instruments: | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives used for trading and non-trading purposes (2)(3) : | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | Derivatives designated as hedging instruments: | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
(1) | Includes the amount of embedded derivatives bifurcated in accordance with ASC 815. |
(2) | Each derivative classification includes derivatives referencing multiple risk components. For example, interest rate contracts include complex derivatives referencing interest rate risk as well as foreign exchange risk or other factors such as prepayment rates. Credit contracts include credit default swaps as well as derivatives referencing corporate and government securities. |
(3) | As of March 31, 2019 and 2020, the amounts reported include derivatives used fornon-trading
purposes which are not designated as fair value or net investment hedges. These amounts have not been separately presented since such amounts were not significant. |
risk are classified in the table based on the primary risk type of the instrument. Changes in the fair value of derivatives are recognized either through earnings or other comprehensive income depending on the purpose for which the derivatives are used. | | | | | | | | | | | | | | | | | | | | | | | | | | | �� | | | | |
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| | | | | | | | | | | | Derivatives used for trading and non-trading purposes (2) : | | | | | | | | | | | | | | | ¥ | 40,396 | | | ¥ | 1,402 | | | ¥ | 2,229 | | | | | 2,524,407 | | | | 9,617 | | | | 9,023 | | | | | 38,850 | | | | 455 | | | | 523 | | Foreign exchange contracts | | | 351,662 | | | | 4,511 | | | | 4,402 | | | | | 334 | | | | 1 | | | | 0 | | | | | | | | | | | | | | | | | ¥ | 2,955,649 | | | ¥ | 15,986 | | | ¥ | 16,177 | | | | | | | | | | | | | | | Derivatives designated as formal fair value or net investment accounting hedges: | | | | | | | | | | | | | | | ¥ | 1,168 | | | ¥ | 15 | | | ¥ | 14 | | Foreign exchange contracts | | | 130 | | | | 5 | | | | 0— | | | | | | | | | | | | | | | | | ¥ | 1,298 | | | ¥ | 20 | | | ¥ | 14 | | | | | | | | | | | | | | | | | ¥ | 2,956,947 | | | ¥ | 16,006 | | | ¥ | 16,191 | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives used for trading and non-trading purposes (2) : | | | | | | | | | | | | | | | ¥ | 34,526 | | | ¥ | 974 | | | ¥ | 1,457 | | | | | 2,769,546 | | | | 11,938 | | | | 10,865 | | | | | 37,572 | | | | 443 | | | | 514 | | Foreign exchange contracts | | | 314,763 | | | | 4,804 | | | | 4,814 | | | | | 300 | | | | 1 | | | | 1 | | | | | | | | | | | | | | | | | ¥ | 3,156,707 | | | ¥ | 18,160 | | | ¥ | 17,651 | | | | | | | | | | | | | | | Derivatives designated as formal fair value or net investment accounting hedges: | | | | | | | | | | | | | | | ¥ | 2,166 | | | ¥ | | | | ¥ | 88 | | Foreign exchange contracts | | | 145 | | | | 2 | | | | | | | | | | | | | | | | | | | | | ¥ | 2,311 | | | ¥ | 2 | | | ¥ | 88 | | | | | | | | | | | | | | | | | ¥ | 3,159,018 | | | ¥ | 18,162 | | | ¥ | 17,739 | | | | | | | | | | | | | | |
(1) | Includes the amount of embedded derivatives bifurcated in accordance with ASC 815. |
(2) | As of March 31, 2021 and 2022, the amounts reported include derivatives used fornon-trading purposes other than those designated as fair value or net investment accounting hedges. These amounts have not been separately presented since such amounts were not significant. |
Offsetting of derivatives Counterparty credit risk associated with derivative financial instrumentsderivatives is controlled by Nomura through credit approvals, limits and monitoring procedures. To reduce the risk of loss, Nomura requires collateral, principally cash collateral and government securities, for certain derivative transactions. In certain cases, Nomura may agree for such collateral to be posted to a third-party custodian under a control agreement that enables Nomura to take control of such collateral in the event of counterparty default. From an economic standpoint, Nomura evaluates default risk exposure net of related collateral. Furthermore, OTC derivative transactions are typically documented under industry standard master netting agreements which reducemitigate Nomura’s credit exposure to counterparties as they permit theclose-out counterparties. A master netting agreement is a single agreement with a counterparty that permits multiple transactions governed by that agreement to be terminated or accelerated and offset of transactions and collateral amountssettled through a single payment in a single currency in the event of a default of the counterparty. counterparty(“close-out and offsetting rights”).For certain OTC centrally-cleared and exchange-traded derivatives, the clearing or membership agreements entered into by Nomura provide similar rights to Nomura in the event of default of the relevant central clearing party or exchange. In order to support the enforceability of theclose-out
and offsetting rights within these agreements, Nomura generally seeks to obtain an external legal opinion.opinion in order to ascertain the enforceability of suchclose-out and offsetting rights within these agreements. For certain types of counterparties andand/ or in certain jurisdictions, Nomura may enter into derivative transactions which are not documented under a master netting agreement. Similarly, evenEven when derivatives are
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
documented under such agreements, Nomura may not have yet sought evidence,obtained, or may not be able to obtain evidence to determine with sufficient certainty that close-out and offsetting rights within such agreements are legally enforceable. This may be the case where the relevant local laws specificallyexplicitly prohibit the enforceability of such close-out and offsetting rights, or
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) where the local laws are complex, ambiguous or silent on the enforceability of such rights. This may include derivative transactions executed with certain foreign governments, agencies, municipalities, central clearing counterparties, exchanges and pension funds. Nomura considers the enforceability of a master netting agreement in determining how credit risk arising from transactions with a specific counterparty is hedged, how counterparty credit exposures are calculated and applied to credit limits and the extent and nature of collateral requirements from the counterparty. Derivative assets and liabilities with the same counterparty and the related cash collateral receivables and payables documented under aan enforceable master netting agreement are offset inpresented on a net basis on the consolidated balance sheets where the specific criteria defined by ASC 210-20 “” (“ASC210-20”)
and ASC 815 are met. These criteria include requirements around the legal enforceability of suchclose-out
and offset rights under the master netting agreement. In addition, fair value amounts recognized for the right to reclaim cash collateral (a receivable) and the obligation to return cash collateral (a payable) are also offset against net derivative liabilities and net derivative assets, respectively where certain additional criteria are met.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents information about offsetting of derivatives and related cash collateral amounts inon the consolidated balance sheets as of March 31, 20192021 and 20202022 by type of derivative contract, together with the extentand additional amounts permitted to whichbe offset legally by Nomura under enforceable master netting agreements, entered into with counterparties, central clearing counterparties or exchanges permit additional offsetting of derivatives and collateralexchange rules in the event of counterparty default.default but not offset on the consolidated balance sheets due to one or more of the criteria defined by ASC210-20 and ASC 815 are not met. Derivative transactions which are not documented under a master netting agreement or are documented under a master netting agreement for which Nomura does not have sufficient evidence of enforceability ofclose-out and offsetting rights are not offset in the following table. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total gross derivative balances (2) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Less: Amounts offset in the consolidated balance sheets (3) | | | | ) | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | Total net amounts reported on the face of the consolidated balance sheets (4) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | |
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| | | | | | | | | | | | | | | | | | | | | ¥ | 904 | | | ¥ | 1,439 | | | ¥ | 709 | | | ¥ | 1,054 | | | | | 498 | | | | 790 | | | | 265 | | | | 403 | | | | | | | | | | | | | | | | | | | | | | 8,456 | | | | 7,871 | | | | 9,486 | | | | 8,584 | | | | | 1,147 | | | | 1,146 | | | | 2,332 | | | | 2,309 | | | | | 29 | | | | 20 | | | | 120 | | | | 60 | | | | | | | | | | | | | | | | | | | | | | 169 | | | | 251 | | | | 208 | | | | 276 | | | | | 282 | | | | 269 | | | | 223 | | | | 224 | | | | | 4 | | | | 3 | | | | 12 | | | | 14 | | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | 4,516 | | | | 4,402 | | | | 4,806 | | | | 4,814 | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 0 | | | | 1 | | | | 1 | | | | | 1 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | Total gross derivative balances (2) | | ¥ | 16,006 | | | ¥ | 16,191 | | | ¥ | 18,162 | | | ¥ | 17,739 | | Less: Amounts offset in the consolidated balance sheets (3) | | | (14,786 | ) | | | (14,697 | ) | | | (16,608 | ) | | | (16,079 | ) | | | | | | | | | | | | | | | | | | Total net amounts reported on the face of the consolidated balance sheets (4) | | ¥ | 1,220 | | | ¥ | 1,494 | | | ¥ | 1,554 | | | ¥ | 1,660 | | Less: Additional amounts not offset in the consolidated balance sheets (5) | | | | | | | | | | | | | | | | | Financial instruments and non-cash collateral | | ¥ | (240 | ) | | ¥ | (310 | ) | | ¥ | (432 | ) | | ¥ | (134 | ) | | | | | | | | | | | | | | | | | | | | ¥ | 980 | | | ¥ | 1,184 | | | ¥ | 1,122 | | | ¥ | 1,526 | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Less: Additional amounts not offset in the consolidated balance sheets (5) | | | | | | | | | | | | | | | | | Financial instruments and non-cash collateral | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | ) | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | |
(1) | Includes the amount of embedded derivatives bifurcated in accordance with ASC 815. |
(2) | Includes all gross derivative asset and liability balances irrespective of whether they are transacted under a master netting agreement or whether Nomura has obtained sufficient evidence of enforceability of the master netting agreement. As of March 31, 2019,2021, the gross balance of derivative assets and derivative liabilities which are not documented under master netting agreements or are documented under master netting agreements for which Nomura has not yet obtained sufficient evidence of enforceability was ¥277 ¥392 billion and ¥374¥589 billion, respectively. As of March 31, 2020,2022, the gross balance of such derivative assets and derivative liabilities was ¥1,013¥458 billion and ¥1,046¥671 billion, respectively.
|
(3) | Represents amounts offset through counterparty nettingoffsetting of derivative assets and liabilities as well as cash collateral nettingoffsetting against net derivatives under master netting and similar agreements for which Nomura has obtained sufficient evidence of enforceability in accordance with ASC 815. As of March 31, 2019,2021, Nomura offset a total of ¥1,259¥1,594 billion of cash collateral receivables against net derivative liabilities and ¥1,626¥1,683 billion of cash collateral payables against net derivative assets. As of March 31, 2020,2022, Nomura offset a total of ¥1,679¥1,431 billion of cash collateral receivables against net derivative liabilities and ¥1,940¥1,960 billion of cash collateral payables against net derivative assets. |
(4) | Net derivative assets and net derivative liabilities are generally reported within Trading assets and private equity investments—and debt investments and , respectively in the consolidated balance sheet. Bifurcated embedded derivatives are reported within or depending on the maturity of the underlying host contract. |
(5) | Represents amounts which are not permitted to be offset on the face of the consolidated balance sheets in accordance with ASC 210-20 and ASC 815 but which provide Nomura with a legally enforceable right of offset in the event of counterparty default. Amounts relating to derivative and collateral agreements where Nomura has not yet obtained sufficient evidence of enforceability of such offsetting rights are excluded. As of March 31, 2019,2021, a total of ¥140¥283 billion of cash collateral receivables and ¥407¥572 billion of cash collateral payables, including amounts reported in the table, have not been offset against net derivatives. As of March 31, 2020,2022, a total of ¥374¥359 billion of cash collateral receivables and ¥540¥652 billion of cash collateral payables, including amounts reported in the table, have not been offset against net derivatives. |
For information on offsetting of collateralized transactions, see Note 5 “Collateralized transactions ”. Derivatives used for trading purposes Derivative financial instruments used for trading purposes, including bifurcated embedded derivatives, are carried at fair value with changes in fair value recognized through the consolidated statements of income within Revenue—Net gain on trading .
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents amounts included in the consolidated statements of income for the years ended March 31, 2018, 2019, 2020, 2021 and 2022 related to derivatives used for trading and non-trading purposes by typetypes of underlying derivative contract. Derivatives which contain multiple types of risk are classified in the table based on the primary risk type of instrument. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives used for trading and non-trading purposes (1)(2) : | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | ) | | | | | | | | ) | | | | | | | | | ) | | | | ) | Foreign exchange contracts | | | | | | | | ) | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives used for trading and non-trading purposes (1) : | | | | | | | | | | | | | | | ¥ | 93 | | | ¥ | 26 | | | ¥ | (36 | ) | | | | (192 | ) | | | 254 | | | | 198 | | | | | (118 | ) | | | (90 | ) | | | (118 | ) | Foreign exchange contracts | | | 57 | | | | (11 | ) | | | 27 | | | | | (1 | ) | | | 50 | | | | 87 | | | | | | | | | | | | | | | | | ¥ | (161 | ) | | ¥ | 229 | | | ¥ | 158 | | | | | | | | | | | | | | |
(1) | Each derivative classification includes derivatives referencing multiple risk components. For example, interest rates contracts include complex derivatives referencing interest rate risk as well as foreign exchange risk or other factors such as prepayment rates. Credit contracts include credit default swaps as well as derivatives referencing corporate and government securities. |
(2) | Includes net gains (losses) on derivatives used for non-trading purposes which are not designated as fair value or net investment hedges. For the yearsyear ended March 31, 2018, 2019 and 2020, these amounts havewere not been separately presented assignificant. For the year ended March 31, 2021, net gains (losses)losses for thesenon-trading derivatives were ¥3 billion. For the year ended March 31, 2022, these amounts were not significant. |
Nomura issues Japanese Yen and foreign currency denominated debt with both fixed and floating interest rates. Nomura generally enters into swap agreements to convert fixed rate interest payments on its debt obligations to a floating rate and applies fair value hedge accounting to these instruments. In conjunction with the abolition of LIBOR, Nomura terminated the hedging instruments that reference LIBOR and began new hedging transactions. The cancelled hedging transactions are accounted for as termination of hedge accounting. The following table presents the carrying value of the hedged items that are currently designated in a hedging relationship andby line items in the consolidated balance sheets where the hedged item is reported, the related cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items and the cumulative amount of fair value hedging adjustment remaining for the liabilities which hedge accounting has been discontinued as of March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | | | Line items in the statement of financial position in which the hedged item is included: | | | | Carrying amount of the hedged liabilities | | | Cumulative gains/(losses) of fair value hedging adjustment included in the carrying amount of the hedged liabilities | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance sheet line item in which the hedged item is included: | | Carrying amount of the hedged assets/liabilities | | | Cumulative gains of fair value hedging adjustment included in the carrying amount of the hedged assets/liabilities | | | Cumulative amount of fair value hedging adjustment remaining for the liabilities which hedge accounting has been discontinued | | | | | | | | | | | | | | | | | | | | | | | ¥ | 1,164 | | | ¥ | 2,075 | | | ¥ | 2 | | | ¥ | 90 | | | ¥ | 0 | | | ¥ | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 1,164 | | | ¥ | 2,075 | | | ¥ | 2 | | | ¥ | 90 | | | ¥ | 0 | | | ¥ | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Hedging derivatives designated as fair value hedges are carried at fair value attributable to the hedged risk, which is recognized in the consolidated statements of income within and , respectively together with the change in fair value of the hedged items.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents amounts included in the consolidated statements of income for the years ended March 31, 2018, 20192020, 2021 and 20202022 related to derivatives designated as fair value hedges by type of underlying derivative contract and the nature of the hedged item. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives designated as hedging instruments: | | | | | | | | | | | | | | | ¥ | | ) | | ¥ | | | | ¥ | | ) | Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | Non-trading debt securities | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | ) | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives designated as fair value hedging instruments: | | | | | | | | | | | | | | | ¥ | (26 | ) | | ¥ | 29 | | | ¥ | 85 | | | | | | | | | | | | | | | | | ¥ | (26 | ) | | ¥ | 29 | | | ¥ | 85 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Hedged items in fair value hedges: | | | | | | | | | | | | | | | ¥ | 26 | | | ¥ | (29 | ) | | ¥ | (85 | ) | | | | | | | | | | | | | | | | ¥ | 26 | | | ¥ | (29 | ) | | ¥ | (85 | ) | | | | | | | | | | | | | |
Nomura designates certain foreign currency forwards, etc.,derivatives, as hedges of net investments in certain subsidiariesforeign operations with significant foreign exchange risks and applies hedge accounting to these instruments. Accordingly, foreign exchange gains (losses)and losses arising from the derivative contractsderivatives and non-derivative financial productsinstruments designated as hedges, except for the portion excluded from effectiveness assessment, are recognized through the consolidated statements of comprehensive income within Other comprehensive income (loss)—Change in cumulative translation adjustments, net of tax . This is offset by the foreign exchange adjustments arising from consolidation of the relevant foreign subsidiaries. The following table presents gains (losses) from derivatives designated as net investment hedges included in the consolidated statements of comprehensive income for the years ended March 31, 2018, 20192020, 2021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange contracts | | ¥ | | ) | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net investment hedging instruments: | | | | | | | | | | | | | Foreign exchange contracts | | ¥ | 2 | | | ¥ | (7 | ) | | ¥ | 7 | | | | | | | | | | | | | | | | | ¥ | 2 | | | ¥ | (7 | ) | | ¥ | 7 | | | | | | | | | | | | | | |
The portion of gains (losses) representing the amount excluded from the assessment of hedge effectiveness are recognized withinRevenue—Net gain on trading and Revenue (1) | The portion of gains (losses) representing the amount of hedge ineffectiveness and the amount excluded from the assessment of hedge effectiveness are recognized withinin the consolidated statements of income. The amount of gains (losses) was not significant during the years ended March 31, 2018, 2019 and 2020. |
in the consolidated statements of income. The amount of gains (losses) was not significant during the years ended March 31, 2020, 2021 and 2022. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Derivatives containing credit risk related contingent features Nomura enters into certain OTC derivatives and other agreements containing credit-risk-related contingent features. These features would require Nomura to post additional collateral or settle the instrument upon occurrence of a credit event, the most common of which would be a downgrade in the Company’s long-term credit rating.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The aggregate fair value of all derivative instrumentsderivatives with credit-risk-related contingent features that are in a liability position as of March 31, 2019,2021, was ¥486¥727 billion with related collateral pledged of ¥410¥583 billion. In the event of a one-notch downgrade to Nomura’s long-term credit rating in effect as of March 31, 2019,2021, the aggregate fair value of assets that would have been required to be posted as additional collateral or that would have been needed to settle the instruments immediately was ¥3approximately ¥2 billion. The aggregate fair value of all derivative instrumentsderivatives with credit-risk-related contingent features that are in a liability position as of March 31, 2020,2022 was ¥750¥638 billion with related collateral pledged of ¥635¥421 billion. In the event of a one-notch downgrade to Nomura’s long-term credit rating in effect as of March 31, 2020,2022, the aggregate fair value of assets that would have been required to be posted as additional collateral or that would have been needed to settle the instruments immediately was ¥3approximately ¥1 billion. Credit derivatives are derivative instrumentsderivatives in which one or more of their underlyingsunderlying reference assets of the instrument are related to the credit risk of a specified entity (or group of entities) or an index based on the credit risk of a group of entities that expose the seller of credit protection to potential loss from credit risk related events specified in the contract. Written credit derivatives are instruments or embedded features where Nomura assumes third party credit risk, either as guarantor in a guarantee-type contract, or as the party that provides credit protection in an option-type contract, credit default swap, or any other credit derivative contract. Nomura enters into credit derivatives as part of its normal trading activities as both purchaser andand/ or seller of protection for credit risk mitigation, proprietary trading positions and for client transactions. The most significantcommon type of credit derivatives used by Nomura are single-name credit default swaps where settlement of the derivative is based on the credit risk of a single third party. Nomura also writes credit derivatives linked to the performance of credit default indices and issues other credit risk related portfolio products. Nomura would have to perform under a credit derivative contract if a credit event as defined in the respective contract occurs. Typical credit events include bankruptcy, failure to pay and restructuring of obligations of the underlying reference asset. Credit derivative contractsderivatives written by Nomura are either cash or physically settled. In cash-settled instruments, once payment is made upon an event of a default, the contract usually terminates with no further payments due. Nomura generally has no right to assume the reference assets of the counterparty in exchange for payment, nor does Nomura usually have any direct recourse to the actual issuers of the reference assets to recover the amount paid. In physically settled contracts, upon a default event, Nomura takes delivery of the reference asset in return for payment of the full notional amount of the contract. Nomura actively monitors and manages its credit derivative exposures. Where protection is sold, risks may be mitigated by purchasing credit protection from other third parties either on identical underlying reference
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
assets or on underlying reference assets with the same issuer which would be expected to behave in a correlated fashion. The most common form of recourse provision to enable Nomura to recover from third parties any amounts paid under a written credit derivative is therefore not through the derivative itself but rather through the separate purchase of separate credit derivativesderivative protection with identical or correlated underlyings.underlying reference assets.
Nomura quantifies the valueNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The extent of these purchased credit protection contracts is quantified in the following tables inunder the column titled “Purchased Credit Protection”.Protection.” These amounts represent purchased credit protection with identical underlyingsunderlying reference assets to the written credit derivative contractsderivatives which act as a hedge against Nomura’s exposure.exposures. To the extent Nomura is required to pay out under the written credit derivative, a similar amount would generally become due to Nomura under the purchased hedge. credit protection.CreditWritten credit derivatives have a stated notional amount which represents the maximum payment Nomura may be required to make under the contract.written credit derivative. However, this is generally not a true representation of the amount Nomura will actually pay under these contracts as in addition to purchased credit protection,there are other risk mitigating factors reducethat affect the likelihood and amount of any payment obligations under the contracts, including:
The probabilityProbability of default
: Nomura values credit derivatives by taking into account of the probability that the underlying reference asset will default and that Nomura will be required to make payments under the contract. Based on historical experience and Nomura’s assessment of the market, Nomura believes that the probability that all reference assets on which Nomura provides protection will default in a single period is remote. The disclosed notional amount,amounts are therefore, significantly overstateshigher than Nomura’s realistic exposure onactual exposures to these contracts. contracts as a whole.The recoveryRecovery value on the underlying asset
: In the case of athe occurrence of an event of default, Nomura’s liability on a contractwritten credit derivative is limited to the difference between the notional amount and the recovery value of the underlying reference asset.asset under default. While the recovery value on a defaulted asset may be minimal in certain cases, this does reduce amounts paid on these contracts. Nomura holds assets as collateral in relation to written credit derivatives. However, these amounts do not enable Nomura to recover any amounts paid under the credit derivative but rather mitigate the risk of economic loss arising from a counterparty defaulting against amounts due to Nomura under the contract. Collateral requirements are determined on a counterparty level rather than individual contract, and also generally cover all types of derivative contracts rather than just credit derivatives.
The following tables present information about Nomura’s written credit derivatives and purchased credit protection with identical underlyingsunderlying reference assets as of March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maximum potential payout/Notional | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Single-name credit default swaps | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | Other credit risk related portfolio products | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Credit-risk related options and swaptions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maximum potential payout/Notional | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Single-name credit default swaps | | ¥ | (80 | ) | | ¥ | 7,035 | | | ¥ | 1,318 | | | ¥ | 2,297 | | | ¥ | 2,642 | | | ¥ | 778 | | | ¥ | 5,452 | | Credit default swap indices | | | (246 | ) | | | 10,235 | | | | 1,271 | | | | 4,065 | | | | 3,989 | | | | 910 | | | | 7,737 | | Other credit risk related portfolio products | | | 10 | | | | 396 | | | | 73 | | | | 180 | | | | 131 | | | | 12 | | | | 280 | | Credit-risk related options and swaptions | | | 0 | | | | 39 | | | | 0— | | | | 0— | | | | 39 | | | | 0— | | | | 33 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | (316 | ) | | ¥ | 17,705 | | | ¥ | 2,662 | | | ¥ | 6,542 | | | ¥ | 6,801 | | | ¥ | 1,700 | | | ¥ | 13,502 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maximum potential payout/Notional | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Single-name credit default swaps | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other credit risk related portfolio products | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Credit-risk related options and swaptions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maximum potential payout/Notional | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Single-name credit default swaps | | ¥ | 19 | | | ¥ | 7,708 | | | ¥ | 1,339 | | | ¥ | 2,915 | | | ¥ | 2,448 | | | ¥ | 1,006 | | | ¥ | 5,688 | | Credit default swap indices | | | (140 | ) | | | 10,015 | | | | 2,045 | | | | 4,189 | | | | 3,257 | | | | 524 | | | | 7,494 | | Other credit risk related portfolio products | | | 19 | | | | 419 | | | | 56 | | | | 286 | | | | 63 | | | | 14 | | | | 293 | | Credit-risk related options and swaptions | | | 0 | | | | 115 | | | | 0— | | | | 0— | | | | 88 | | | | 27 | | | | 68 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | (102 | ) | | ¥ | 18,257 | | | ¥ | 3,440 | | | ¥ | 7,390 | | | ¥ | 5,856 | | | ¥ | 1,571 | | | ¥ | 13,543 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Carrying value amounts are shown on a gross basis prior to cash collateral or counterparty netting.offsetting. Asset balances represent positive fair value amounts caused by tightening of credit spreads of underlyings since inception of the credit derivative contracts.derivatives. |
The following tables present information about Nomura’s written credit derivatives by external credit rating of the underlying asset. RatingsCredit ratings are based on S&P Global Ratings (“S&P”), or if not rated by S&P, based on Moody’s Investors Service. If credit ratings from either of these agencies are not available, the credit ratings are based on Fitch Ratings Ltd. or Japan Credit Rating Agency, Ltd. For credit default indices, the credit rating is determined by taking the weighted average of the external credit ratings given for each of the underlying reference entities comprising the portfolio or index. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maximum potential payout/Notional | | | | | | | | | | | | | | | | | | | | | | | | Single-name credit default swaps | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other credit risk related portfolio products | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Credit-risk related options and swaptions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maximum potential payout/Notional | | | | | | | | | | | | | | | | | | | | | | | | Single-name credit default swaps | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other credit risk related portfolio products | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Credit-risk related options and swaptions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maximum potential payout/Notional | | | | | | | | | | | | | | | | | | | | | | | | Single-name credit default swaps | | ¥ | 198 | | | ¥ | 1,218 | | | ¥ | 1,887 | | | ¥ | 2,098 | | | ¥ | 753 | | | ¥ | 881 | | | ¥ | 7,035 | | Credit default swap indices | | | 114 | | | | 128 | | | | 1,880 | | | | 6,294 | | | | 1,415 | | | | 404 | | | | 10,235 | | Other credit risk-related portfolio products | | | 0— | | | | 0— | | | | 4 | | | | 237 | | | | 58 | | | | 97 | | | | 396 | | Credit risk-related options and swaptions | | | 0— | | | | 0— | | | | 0— | | | | 32 | | | | 7 | | | | 0— | | | | 39 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 312 | | | ¥ | 1,346 | | | ¥ | 3,771 | | | ¥ | 8,661 | | | ¥ | 2,233 | | | ¥ | 1,382 | | | ¥ | 17,705 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maximum potential payout/Notional | | | | | | | | | | | | | | | | | | | | | | | | Single-name credit default swaps | | ¥ | 192 | | �� | ¥ | 1,485 | | | ¥ | 2,164 | | | ¥ | 2,057 | | | ¥ | 869 | | | ¥ | 941 | | | ¥ | 7,708 | | Credit default swap indices | | | 105 | | | | 215 | | | | 3,369 | | | | 5,012 | | | | 988 | | | | 326 | | | | 10,015 | | Other credit risk-related portfolio products | | | 0— | | | | 0— | | | | 28 | | | | 226 | | | | 47 | | | | 118 | | | | 419 | | Credit risk-related options and swaptions | | | 0— | | | | 0— | | | | 61 | | | | 27 | | | | 27 | | | | 0— | | | | 115 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 297 | | | ¥ | 1,700 | | | ¥ | 5,622 | | | ¥ | 7,322 | | | ¥ | 1,931 | | | ¥ | 1,385 | | | ¥ | 18,257 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (1) | “Other”Other includes credit derivatives where the credit rating of the underlying reference asset is below investment grade or where a credit rating is unavailable. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Derivatives entered into in contemplation of sales of financial assets Nomura enters into transactions which involve both the transfer of financial assets to a third party counterparty and a separate agreement entered contemporaneously with the same counterparty entered into in contemplation of the initial transfer through which Nomura retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. These transactions primarily include sales of securities with bilateral OTC total return swaps or other derivative agreements which are in-substance total return swaps. These transactions are accounted for as sales of the securities with the derivative accounted for separately if the criteria for derecognition of the securities under ASC 860 are met. Where the derecognition criteria are not met, the transfer and separate derivative are accounted for as a single collateralized financing transaction which is reported within Long-term borrowings—Trading balances of securedborrowings orin the consolidated balance sheets. For the year ended March 31, 2021, certain transactions which involve sales of securities and total return swaps were accounted for as sales. As of the date of transfer, the carrying amount of the securities and the amount of gross cash proceeds from the sales were ¥69,405 million and ¥69,535 million, respectively. As of March 31, 2020 there2021, the fair value of the securities derecognized by Nomura and the gross liability balances of the derivatives arising from the transactions were no outstanding¥67,773 million and ¥1,539 million respectively. For the year ended March 31, 2022, certain transactions which involve sales withof securities and total return swap orin-substance
total return swap transactionsswaps were accounted for as sales. As of the date of transfer, the carrying amount of the securities and the amount of gross cash proceeds from the sales rather than collateralized financing transactions.were ¥69,405 million and ¥69,535 million, respectively. As of March 31, 2022, the fair value of the securities derecognized by Nomura and the gross liability balances of the derivatives arising from the transactions were ¥63,994 million and ¥5,319 million, respectively. 4. Revenue from services provided to customers RevenuesRevenue by types of service
The following table presents revenue earned by Nomura from providing services to customers by relevant line item in Nomura’sthe consolidated statementstatements of income for the yearyears ended March 31, 20192020, 2021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | Fees from investment banking | | | | | | | | | Asset management and portfolio service fees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 308,805 | | | ¥ | 376,897 | | | ¥ | 332,344 | | Fees from investment banking | | | 103,222 | | | | 108,681 | | | | 149,603 | | Asset management and portfolio service fees | | | 238,202 | | | | 230,047 | | | | 269,985 | | | | | 49,901 | | | | 44,235 | | | | 38,863 | | | | | | | | | | | | | | | | | ¥ | 700,130 | | | ¥ | 759,860 | | | ¥ | 790,795 | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) represent revenue principally from trade execution, and clearing services and distribution of fund units provided by both the Wholesale and Retail divisions generated approximately equally across the divisions. The following table shows a breakdown offor the years ended March 31, 2020, 2021 and Wholesale Divisions.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Brokerage commissions | | ¥ | 196,491 | | | ¥ | 262,286 | | | ¥ | 236,353 | | Fund unit distribution fees | | | 66,664 | | | | 68,794 | | | | 43,695 | | Other commissions | | | 45,650 | | | | 45,817 | | | | 52,296 | | | | | | | | | | | | | | | | | ¥ | 308,805 | | | ¥ | 376,897 | | | ¥ | 332,344 | | | | | | | | | | | | | | |
Fees from investment banking represent revenues from financial advisory, underwriting and syndication servicesdistribution primarily from the Wholesale followed by Retail.division, and to a lesser extent, the Retail division. The following table shows the breakdown ofFees from investment banking for the years ended March 31, 2020, 2021 and 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity underwriting and distribution fees | | ¥ | 13,958 | | | ¥ | 30,647 | | | ¥ | 33,113 | | Debt underwriting and distribution fees | | | 25,546 | | | | 23,120 | | | | 29,812 | | | | | 41,646 | | | | 37,760 | | | | 64,240 | | Other fees | | | 22,072 | | | | 17,154 | | | | 22,438 | | | | | | | | | | | | | | | | | ¥ | 103,222 | | | ¥ | 108,681 | | | ¥ | 149,603 | | | | | | | | | | | | | | |
Asset management and portfolio service fees represent revenues from asset management services primarily from the AssetInvestment Management Division followed by Retail.represents sundry revenues allocateddivision, and to Other in Nomura’s segmental reporting.a lesser extent, the Retail division.
The following table shows the breakdown ofAsset management and portfolio service fees for the years ended March 31, 2020, 2021 and 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 159,494 | | | ¥ | 150,218 | | | ¥ | 171,056 | | | | | 62,619 | | | | 63,215 | | | | 79,572 | | | | | 16,089 | | | | 16,614 | | | | 19,357 | | | | | | | | | | | | | | | | | ¥ | 238,202 | | | ¥ | 230,047 | | | ¥ | 269,985 | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents summary information regarding the key methodologies, assumptions and judgments used in recognizing revenue for each of the primary types of service provided to customers, including the nature of underlying performance obligations within each type of service and whether those performance obligations are satisfied at a point in time or over a period of time. For performance obligations recognized over time, information is also provided to explain the nature of the input or output method used to recognize revenue over time. | | | | | Type of service provided to
| | Overview of key services provided
| | Key revenue recognition policies, assumptions and
| Trade execution and clearing services
| | •
Buying and selling of securities on behalf of customers•
Clearing of securities and derivatives on behalf of customers | | •
Execution and clearing commissions recognized at a point in time, namely trade date.•
Commissions recognized net of soft dollar credits provided to customers where Nomura is acting as agent in providing investment research and similar services to the customer. | | | | | | Financial advisory services
| | •
Provision of financial advice to customers in connection with a specific forecasted transaction or transactions•
Provision of financial advice not in connection with a specific forecasted transaction or transactions such as general corporate intelligence and similar research•
Issuance of fairness opinions•
Structuring complex financial instruments for customers | | •
Fees contingent on the success of an underlying transaction are variable consideration recognized when the underlying transaction has been completed since only at such point is it probable that a significant reversal of revenue will not occur.•
Retainer and milestone fees are recognized either over the period to which they relate or are deferred until consummation of the underlying transaction depending on whether the underlying performance obligation is satisfied at a point in time or over time.•
Judgment is required to make this determination with factors influencing this determination including, but not limited to, whether the fee is in connection with an engagement designed to |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | Type of service provided to | | Overview of key services provided | | Key revenue recognition policies, assumptions and | | | Trade execution, clearing services and distribution of fund units | | • Buying and selling of securities on behalf of customers • Distribution of fund units • Clearing of securities and derivatives on behalf of customers | | • Trade execution and clearing commissions recognized at a point in time, namely trade date. • Distribution fees are recognized at a point in time when the fund units have been sold to third party investors. • Commissions recognized net of soft dollar credits provided to customers where Nomura is acting as agent in providing investment research and similar services to the customer. | | | | Financial advisory services | | • Provision of financial advice to customers in connection with a specific forecasted transaction or transactions such as mergers and acquisitions • Provision of financial advice not in connection with a specific forecasted transaction or transactions such as general corporate intelligence and similar research • Issuance of fairness opinions • Structuring complex financial instruments for customers | | • Fees contingent on the success of an underlying transaction are variable consideration recognized when the underlying transaction has been completed since only at such point is it probable that a significant reversal of revenue will not occur. • Retainer and milestone fees are recognized either over the period to which they relate or are deferred until consummation of the underlying transaction depending on whether the underlying performance obligation is satisfied at a point in time or over time. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | Type of service provided to | | Overview of key services provided | | Key revenue recognition policies, assumptions and | | | | | • Judgment is required to make this determination with factors influencing this determination including, but not limited to, whether the fee is in connection with an engagement designed to achieve a specific transaction or outcome for the customer (such as the purchase or sale of a business), the nature and extent of benefit to be provided to the customer prior to, and in addition to such specific transaction or outcome and the fee structure for the engagement. • Retainer and milestone fees recognized over time are normally recognized on a straight-line basis over the term of the contract based on time elapsed. | | | | | | Asset management services
| | •
Management of funds, investment trusts and other investment vehicles•
Provision of investment advisory services•
Distribution of fund units•
Providing custodial and administrative services to customers | | •
Management fees earned by Nomura in connection with managing a fund, investment trust or other vehicle generally recognized on a straight-line basis based on time elapsed.•
Performance-based fees are variable consideration recognized when the performance metric has been determined since only at such point is it probable that a significant reversal of revenue will not occur.•
Distribution fees are recognized at a point in time when the fund units have been sold to third party investors.•
Custodial and administrative fees recognized on a straight-line basis over time based on time elapsed. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | Type of service provided to
| | Overview of key services provided
| | Key revenue recognition policies, assumptions and
| | | | | | Underwriting and syndication services | | • Underwriting of debt, equity and other financial instruments on behalf of customers • Distributing securities on behalf of issuers • Arranging loan financing for customers • Syndicating loan financing on behalf of customerscustomer | | • Underwriting and syndication revenuesfees are recognized at a point in time when the underlying transaction is complete. • Commitment fees where drawndraw down of the facility is deemed remote recognized on a straight-line basis over the life of the facility based on time elapsed. • Underwriting and syndication costs recognized either as a reduction of revenue or on a gross basis depending on whether Nomura is acting as principal or agent for such amounts. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | Type of service provided to | | Overview of key services provided | | Key revenue recognition policies, assumptions and | | | | Asset management services | | • Management of funds, investment trusts and other investment vehicles • Provision of investment advisory services • Provision of custodial and administrative services to customers | | • Management fees earned by Nomura in connection with managing a fund, investment trust or other vehicle generally are recognized on a straight-line basis based on time elapsed. • Performance-based fees are variable consideration recognized when the performance metric has been determined since only at such point is it probable that a significant reversal of revenue will not occur. • Custodial and administrative fees are recognized on a straight-line basis over time based on time elapsed. |
Where revenue is recognized at a point onin time, payments of fees are typically received at the same time as when the performance obligation is satisfied, or within several days or months after satisfying a performance obligation. In relation to revenue recognized over time, payments of fees are typically received every month, three monthssettled monthly, quarterly or six months.semi-annually. The underlying contracts entered into by Nomura in order to provideconnection with the services described above typically do not have significant financing components within the contracts either provided to or from Nomura.components. If such components did not exist in a contract, Nomura has made an accounting policy permitted by ASC 606 “ Revenue from Contracts with Customers ” (“ASC 606”) not to adjust for the effects of a significant financing component where the financing is effectively for a period of one year or less. Such contracts also typically do not contain any rights of return or similar features for the customer.customerCustomer contract balances When Nomura or the customer performs in accordance with the terms of a customer contract, a contract asset, customer contract receivable or contract liability is recognized in Nomura’s consolidated balance sheet. A contract asset represents accrued revenue recognized by Nomura for completingcompletion or partially completingcompletion of a performance obligation, namely a right of Nomura to receive consideration for providing the service to the customer, which is conditionedconditional on somethingfactors or events other than the passage of time. A customer contract receivable is an unconditional right of Nomura to receive consideration in exchange for providing the service.services provided. Both contract assets and customer contract receivables are reported in Receivables from Customers within Nomura’s consolidated balance sheet. A contract liability is any liability recognized in connection with a customer contract, including obligations to provide refunds andrefund or obligations to provide a service in the future for which consideration has already been received or is due to be received. Contract liabilities are reported in within Nomura’s consolidated balance sheet.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents the balances of customer contract receivables contract assets and contract liabilities in scope of ASC 606 as of March 31, 2019 and 2020.606. The amount of contract assets as of March 31, 20192021 and 2020 were immaterial.2022 was not significant. | | | | | | | | | | | | | | | | | | | | Customer contract receivables | | ¥ | | | | ¥ | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Customer contract receivables | | ¥ | 85,205 | | | ¥ | 88,621 | | | | | 3,497 | | | | 3,834 | |
(1) | Contract liabilities primarily rise from investment advisory services and are recognized in connection withover the term of the contract based on time elapsed. |
The balance of contract liabilities as of March 31, 20182020 were recognized as revenue for the year ended March 31, 2019.2021. Nomura recognized ¥1,334 million of revenue from performance obligations satisfied in previous periods for the year ended
March 31, 2019.The balance of contract liabilities as of March 31, 2019 were recognized as revenue for the year ended March 31, 2020. Nomura recognized ¥744¥1,565 million of revenue from performance obligations satisfied in previous periods for the year ended March 31, 2020.2021. The balance of contract liabilities as of March 31, 2021 were recognized as revenue for the year ended March 31, 2022. Nomura recognized ¥8,108 million of revenue from performance obligations satisfied in previous periods for the year ended March 31, 2022.
Transaction price allocated to the remaining performance obligations obligationsIn the ordinary course of business, Nomura may enter into customer contracts where the performance obligations are wholly or partially unsatisfied as of fiscal year ends. The total transaction prices allocated to the remaining unsatisfied performance obligations within these customer contracts were ¥1,187 million as of March 31, 2021 and ¥1,350 million as of March 31, 2022. As permitted by ASC 606, Nomura has chosenelected not to disclose information about remaining performance obligations that have original expected durationsan individual estimated contract period of one year or less as of March 31, 2019 and 2020. Nomura retains no significant transactions for which individual estimated contract period exceeds one year.less. In addition, considerations arising from contracts with customers do not comprise any significant amount that is not included in transaction price.
As permitted by ASC 340 “ Other Assets and Deferred Costs, ” Nomura has elected to expense all costs to obtain customer contracts where such amounts would be otherwise expensed within one year or less. As a result, the amount of deferred costs to obtain or fulfill customer contracts as of March 31, 20192021 and 2020 were2022 was not significant. 5. Collateralized transactions: Nomura enters into collateralized transactions, including reverse repurchase agreements, repurchase agreements, securities borrowing transactions, securities lending transactions, other secured borrowings and similar transactions mainly to meet clients’ financing needs, finance trading inventory positions and obtain securities for settlements.settlement. Reverse repurchase agreements, repurchase agreements, securities borrowing transactions and securities lending transactions are typically documented under industry standard master netting agreements which reducemitigate Nomura’s credit exposure to counterparties as they permit theclose-out
and offset of transactions and collateral amounts in the event of default of the counterparty.counterparties. For certain centrally-cleared reverse repurchase and repurchase agreements, the clearing or membership agreements entered into by Nomura provide similar rights to Nomura in the event of default of the relevant central clearing counterparty. In order to support the enforceability of theclose-out
and offsetting rights within these agreements, Nomura generally seeks to obtain an external legal opinion.opinion in order to ascertain the enforceability of suchclose-out and offsetting rights within these agreements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) For certain types of counterparty and in certain jurisdictions, Nomura may enter into reverse repurchase agreements, repurchase agreements, securities borrowing and securities lending transactions with certain types of counterparty and in certain jurisdictions which are not documented under a master netting agreement. Similarly, evenEven when these transactions are documented under such master netting agreements, Nomura may not have yet sought evidence,obtained, or may not be able to obtain, evidence to determine with sufficient certainty that the close-out and offsetting rights in the agreements are legally enforceable. This may be the case where relevant local laws specificallyexplicitly prohibit such close-out and offsetting rights, or where local laws are complex, ambiguous or silent on the enforceability of such rights. This may include reverse repurchase agreements, repurchase agreements, securities borrowing and securities lending transactions executed with certain foreign governments, agencies, municipalities, central clearing counterparties, agent banks and pension funds. Nomura considers the enforceability of a master netting agreement in determining how credit risk arising from transactions with a specific counterparty is hedged, how counterparty credit exposures are calculated and applied to credit limits and the extent and nature of collateral requirements from the counterparty. In all of these transactions, Nomura either receives or provides collateral, including Japanese and non-Japanese government, agency, mortgage-backed, bank and corporate debt securities and equities. In most cases, Nomurathe party receiving the collateral is permittedfree to usesell or repledge the securities received to enter intothrough repurchase agreements, enter into securities lending transactions or to cover short positions with counterparties.positions. In repurchase and reverse repurchase agreements, the value of collateral typically exceeds the amount of cash transferred. Collateraltransferred, where collateral is generally in the form of securities. Securities borrowing transactions generally require Nomura to provide the counterparty with collateral in the form of cash or other securities. For securities lending transactions, Nomura generally receives collateral in the form of cash or other securities. Nomura monitors the market value of the securities either received from or provided to the counterparty. Additional cash or securities are exchanged as necessary, to ensure that such transactions are adequately collateralized throughout the life of the transactions. Offsetting of certain collateralized transactions Reverse repurchase agreements and repurchase agreements, securities borrowing and lending transactions with the same counterparty documented under a master netting agreement are offset in the consolidated balance sheets where the specific criteria as defined by ASC 210-20 are met. These criteria include requirements around the maturity of the transactions, the underlying systems on which the collateral is settled, associated banking arrangements and the legal enforceability of close-out and offsetting rights under therelevant master netting agreement.agreements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following tables present information about offsetting of these transactions in the consolidated balance sheets as of March 31, 20192021 and 2020,2022, together with the extent to which master netting agreements entered into with counterparties and central clearing parties permit additional offsetting in the event of counterparty default. Transactions which are not documented under a master netting agreement or are documented under a master netting agreement for which Nomura does not have sufficient evidence of enforceability are not offset in the following tables. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Less: Amounts offset in the consolidated balance sheets (2) | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | Total net amounts of reported on the face of the consolidated balance sheets (3) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | Less: Additional amounts not offset in the consolidated balance sheets (4) | | | | | | | | | | | | | | | | | Financial instruments and non-cash collateral | | | | ) | | | | ) | | | | ) | | | | ) | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Less: Amounts offset in the consolidated balance sheets (2) | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | Total net amounts of reported on the face of the consolidated balance sheets (3) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | Less: Additional amounts not offset in the consolidated balance sheets (4) | | | | | | | | | | | | | | | | | Financial instruments and non-cash collateral | | | | ) | | | | ) | | | | ) | | | | ) | | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | | | ¥ | 31,568 | | | ¥ | 5,241 | | | ¥ | 34,154 | | | ¥ | 1,781 | | Less: Amounts offset in the consolidated balance sheets (2) | | | (20,793 | ) | | | 0— | | | | (20,794 | ) | | | 0— | | | | | | | | | | | | | | | | | | | Total net amounts of reported on the face of the consolidated balance sheets (3) | | ¥ | 10,775 | | | ¥ | 5,241 | | | ¥ | 13,360 | | | ¥ | 1,781 | | | | | | | | | | | | | | | | | | | Less: Additional amounts not offset in the consolidated balance sheets (4) | | | | | | | | | | | | | | | | | Financial instruments and non-cash collateral | | | (9,390 | ) | | | (3,211 | ) | | | (9,448 | ) | | | (1,488 | ) | | | | (1 | ) | | | 0— | | | | (1 | ) | | | 0— | | | | | | | | | | | | | | | | | | | | | ¥ | 1,384 | | | ¥ | 2,030 | | | ¥ | 3,911 | | | ¥ | 293 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | | | ¥ | 31,365 | | | ¥ | 4,994 | | | ¥ | 32,061 | | | ¥ | 1,734 | | Less: Amounts offset in the consolidated balance sheets (2) | | | (19,486 | ) | | | 0— | | | | (19,486 | ) | | | 0— | | | | | | | | | | | | | | | | | | | Total net amounts of reported on the face of the consolidated balance sheets (3) | | ¥ | 11,879 | | | ¥ | 4,994 | | | ¥ | 12,575 | | | ¥ | 1,734 | | | | | | | | | | | | | | | | | | | Less: Additional amounts not offset in the consolidated balance sheets (4) | | | | | | | | | | | | | | | | | Financial instruments and non-cash collateral | | | (9,370 | ) | | | (3,372 | ) | | | (9,114 | ) | | | (1,524 | ) | | | | (8 | ) | | | 0— | | | | (12 | ) | | | 0— | | | | | | | | | | | | | | | | | | | | | ¥ | 2,501 | | | ¥ | 1,622 | | | ¥ | 3,449 | | | ¥ | 210 | | | | | | | | | | | | | | | | | | |
(1) | IncludesInclude all recognized balances irrespective of whether they are transacted under a master netting agreement or whether Nomura has obtained sufficient evidence of enforceability of the master netting agreement. Amounts include transactions carried at fair value through election of the fair value option. As of March 31, 2019,2021, the gross balance of reverse repurchase agreements and repurchase agreements which were not transacted under master netting agreements or are documented under master netting agreements for which Nomura has not yet obtained sufficient evidence of enforceability was ¥749amounted to ¥480 billion and ¥3,575 ¥2,653 billion, respectively. As of March 31, 2019,2021, the gross balance of securities borrowing transactions and securities lending transactions which were not transacted under master netting agreements or are documented under master netting agreements for which Nomura has not yet obtained sufficient evidence of |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | enforceability amounted to ¥1,947 billion and ¥213 billion, respectively. As of March 31, 2022, the gross balance of reverse repurchase agreements and repurchase agreements which were not transacted under master netting agreements or are documented under master netting agreements for which Nomura has not yet obtained sufficient evidence of enforceability amounted to ¥793 billion and ¥2,453 billion, respectively. As of March 31, 2022, the gross balance of securities borrowing transactions and securities lending transactions which were not transacted under master netting agreements or are documented under master netting agreements for which Nomura has not yet obtained sufficient evidence of enforceability was ¥1,398amounted to ¥1,511 billion and ¥209 billion, respectively. As of March 31, 2020, the gross balance of |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| reverse repurchase agreements and repurchase agreements which were not transacted under master netting agreements or are documented under master netting agreements for which Nomura has not yet obtained sufficient evidence of enforceability was ¥627 billion and ¥6,356 billion, respectively. As of March 31, 2020, the gross balance of securities borrowing transactions and securities lending transactions which were not transacted under master netting agreements or are documented under master netting agreements for which Nomura has not yet obtained sufficient evidence of enforceability was ¥998 billion and ¥138¥158 billion, respectively. |
(2) | RepresentsRepresent amounts offset through counterparty netting under master netting andor similar agreements for which Nomura has obtained sufficient evidence of enforceability in accordance with ASC 210-20. Amounts offset include transactions carried at fair value through election of the fair value option. |
(3) | Reverse repurchase agreements and securities borrowing transactions are reported within Collateralized agreements—agreements Securities purchased under agreements to resell and Collateralized agreements—agreements in the consolidated balance sheets, respectively. Repurchase agreements and securities lending transactions are reported within Collateralized financing—financing Securities sold under agreements to repurchase and Collateralized financing—financing in the consolidated balance sheets, respectively. Amounts reported under securities lending transactions also include transactions where Nomura lends securities and receives securities that can be sold or pledged as collateral. Nomura recognizes the securities received at fair value and a liability for the same amount, representing the obligation to return those securities. The liability is reported within in the consolidated balance sheets. |
(4) | RepresentsRepresent amounts which are not permitted to be offset on the face of the balance sheet in accordance with ASC 210-20 but which provide Nomura with the right of offset in the event of counterparty default. Amounts relating to agreements where Nomura has not yet obtained sufficient evidence of enforceability of such offsetting rights are excluded. |
For information on offsetting of derivatives, see Note 3 “Derivative instruments and hedging activities Maturity analysis of repurchase agreements and securities lending transactions The following table presents an analysis of the total carrying value of liabilities recognized in the consolidated balance sheets for repurchase agreements and securities lending transactions by remaining contractual maturity of the agreement as of March 31, 2020.2021 and 2022. Amounts reported are shown prior to counterparty netting in accordance with ASC 210-20. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Securities lending transactions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total gross recognized liabilities (2) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | |
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| | | | | | | ¥ | 13,837 | | | ¥ | 16,452 | | | ¥ | 1,991 | | | ¥ | 1,590 | | | ¥ | 284 | | | ¥ | 34,154 | | Securities lending transactions | | | 872 | | | | 351 | | | | 291 | | | | 266 | | | | 1 | | | | 1,781 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total gross recognized liabilities (2) | | ¥ | 14,709 | | | ¥ | 16,803 | | | ¥ | 2,282 | | | ¥ | 1,856 | | | ¥ | 285 | | | ¥ | 35,935 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | | | | |
| | | | | | | ¥ | 12,266 | | | ¥ | 15,454 | | | ¥ | 2,220 | | | ¥ | 1,611 | | | ¥ | 510 | | | ¥ | 32,061 | | Securities lending transactions | | | 992 | | | | 242 | | | | 200 | | | | 277 | | | | 23 | | | | 1,734 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total gross recognized liabilities (2) | | ¥ | 13,258 | | | ¥ | 15,696 | | | ¥ | 2,420 | | | ¥ | 1,888 | | | ¥ | 533 | | | ¥ | 33,795 | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (1) | Open transactions do not have an explicit contractual maturity date and are terminable on demand by Nomura or the counterparty. |
(2) | Repurchase agreements and securities lending transactions are reported within Collateralized financing—financing Securities sold under agreements to repurchase and Collateralized financing—financing in the consolidated balance sheets, respectively. Amounts reported for securities lending transactions also include transactions where Nomura lends securities and receives securities that can be sold or pledged as collateral. Nomura recognizes the securities received at fair value and a liability for the same amount, representing the obligation to return those securities. The liability is reported within in the consolidated balance sheets. The total gross recognized liabilities reported for repurchase agreements and securities lending transactions are consistent with the total gross balances reported in the offsetting disclosures above. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Securities transferred in repurchase agreements and securities lending transactions The following table presents an analysis of the total carrying value of liabilities recognized in the consolidated balance sheets for repurchase agreements and securities lending transactions by class of securities transferred by Nomura to counterparties as of March 31, 2020.2021 and 2022. Amounts reported are shown prior to counterparty netting in accordance with ASC 210-20. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equities and convertible securities | | ¥ | | | | ¥ | | | | ¥ | | | Japanese government, agency and municipal securities | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | Bank and corporate debt securities | | | | | | | | | | | | | Commercial mortgage-backed securities (“CMBS”) | | | | | | | | | | | | | Residential mortgage-backed securities (“RMBS”) (1) | | | | | | | | | | | | | Collateralized debt obligations (“CDOs”) and other | | | | | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | | | | | | | | | Total gross recognized liabilities (2) | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
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| | |
| | | | | Equities and convertible securities | | ¥ | 724 | | | ¥ | 1,600 | | | ¥ | 2,324 | | Japanese government, agency and municipal securities | | | 1,168 | | | | 0 | | | | 1,168 | | Foreign government, agency and municipal securities | | | 27,531 | | | | 8 | | | | 27,539 | | Bank and corporate debt securities | | | 1,926 | | | | 117 | | | | 2,043 | | Commercial mortgage-backed securities (“CMBS”) | | | 6 | | | | 0— | | | | 6 | | Residential mortgage-backed securities (“RMBS”) (1) | | | 2,532 | | | | 0— | | | | 2,532 | | Collateralized debt obligations (“CDOs”) and other | | | 223 | | | | 0— | | | | 223 | | Investment trust funds and other | | | 44 | | | | 56 | | | | 100 | | | | | | | | | | | | | | | Total gross recognized liabilities (2) | | ¥ | 34,154 | | | ¥ | 1,781 | | | ¥ | 35,935 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | Equities and convertible securities | | ¥ | 384 | | | ¥ | 1,508 | | | ¥ | 1,892 | | Japanese government, agency and municipal securities | | | 879 | | | | 1 | | | | 880 | | Foreign government, agency and municipal securities | | | 26,436 | | | | 17 | | | | 26,453 | | Bank and corporate debt securities | | | 2,322 | | | | 175 | | | | 2,497 | | Commercial mortgage-backed securities (“CMBS”) | | | 1 | | | | 0— | | | | 1 | | Residential mortgage-backed securities (“RMBS”) (1) | | | 1,846 | | | | 0— | | | | 1,846 | | Collateralized debt obligations (“CDOs”) and other | | | 157 | | | | 0— | | | | 157 | | Investment trust funds and other | | | 36 | | | | 33 | | | | 69 | | | | | | | | | | | | | | | Total gross recognized liabilities (2) | | ¥ | 32,061 | | | ¥ | 1,734 | | | ¥ | 33,795 | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (1) | Includes ¥4,021 ¥2,170 billion of U.S. government sponsored agency mortgage pass through securities and collateralized mortgage obligations.obligations as of March 31, 2021. Includes ¥1,404 billion of U.S. government sponsored agency mortgage pass through securities and collateralized mortgage obligations as of March 31, 2022. |
(2) | Repurchase agreements and securities lending transactions are reported within Collateralized financing—financing Securities sold under agreements to repurchase and Collateralized financing—financing in the consolidated balance sheets, respectively. Amounts reported for securities lending transactions also include transactions where Nomura lends securities and receives securities that can be sold or pledged as collateral. Nomura recognizes the securities received at fair value and a liability for the same amount, representing the obligation to return those securities. The liability is reported within in the consolidated balance sheets. The total gross recognized liabilities reported for repurchase agreements and securities lending transactions are consistent with the total gross balances reported in the offsetting disclosures above. |
Collateral received by Nomura The following table presents the fair value of securities received as collateral, securities borrowed with collateral and securities borrowed without collateral, which Nomura is permitted to sell or repledge, and the portion that has been sold or repledged as of March 31, 20192021 and 2020. | | | | | | | | | | | | | | | | | | | | | | | | The fair value of securities received as collateral, securities borrowed as collateral and securities borrowed without collateral where Nomura is permitted by contract or custom to sell or repledge the securities | | ¥ | | | | ¥ | | | The portion of the above that has been sold (reported within in the consolidated balance sheets) or repledged | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | The fair value of securities received as collateral, securities borrowed as collateral and securities borrowed without collateral where Nomura is permitted by contract or custom to sell or repledge the securities | | ¥ | 50,466 | | | ¥ | 48,234 | | The portion of the above that has been sold (as reported within in the consolidated balance sheets) or repledged | | | 38,342 | | | | 36,146 | |
Collateral pledged by Nomura Nomura pledges firm-ownedowned securities and other financial assets to collateralize repurchase transactions, other secured financings and derivative transactions. Pledged securities that can be sold or repledged by the transferee, including Gensaki Repo transactions, are reported in parentheses as Securities pledged as collateral within ,Non-trading debt securities, Investments in equity securities andInvestments in and advances to affiliated companies in the consolidated balance sheets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents the carrying amounts of financial assets recognized in the consolidated balance sheets which have been pledged as collateral, primarily to stock exchanges and clearing organizations, without allowing the secured party the right to sell or repledge them by type of asset as of March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equities and convertible securities | | ¥ | | | | ¥ | | | Government and government agency securities | | | | | | | | | Bank and corporate debt securities | | | | | | | | | Commercial mortgage-backed securities (“CMBS”) | | | | | | | | | Residential mortgage-backed securities (“RMBS”) | | | | | | | | | Collateralized debt obligations (“CDOs”) and other (1) | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | Non-trading debt securities | | | | | | | | | Investments in and advances to affiliated companies | | ¥ | | | | ¥ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equities and convertible securities | | ¥ | 239,393 | | | ¥ | 368,235 | | Government and government agency securities | | | 1,064,164 | | | | 1,178,011 | | Bank and corporate debt securities | | | 32,262 | | | | 27,899 | | Residential mortgage-backed securities (“RMBS”) | | | 1,790,395 | | | | 868,183 | | Collateralized debt obligations (“CDOs”) and other (1) | | | 32,081 | | | | 9,548 | | Investment trust funds and other | | | 43,805 | | | | 36,661 | | | | | | | | | | | | | ¥ | 3,202,100 | | | ¥ | 2,488,537 | | | | | | | | | | | Non-trading debt securities (2) | | | 115,659 | | | | 163,445 | | Investments in and advances to affiliated companies (3) | | ¥ | 4,136 | | | ¥ | 12,832 | |
(1) | Includes CLOs and ABS such as those secured on credit card loans, auto loans and student loans. |
(2) | Non-trading debt securities are primarily Japanese municipal securities. |
(3) | Investments in and advances to affiliated companies primarily comprise shares in NRI.
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The following table presents the carrying amount of financial and non-financial assets recognized in the consolidated balance sheets, other than those disclosed above, which are subject to lien as of March 31, 20192021 and 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | Trading assets and private equity and debt investments | | | | | | | | | Office buildings, land, equipment and facilities | | | | | | | | | Non-trading debt securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | |
2022. | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 114,051 | | | ¥ | 235,875 | | Trading assets and private equity and debt investments | | | 1,344,361 | | | | 1,416,279 | | Office buildings, land, equipment and facilities | | | 5,076 | | | | 4,841 | | Non-trading debt securities | | | 1,047 | | | | 2,827 | | Investments in and advances to affiliated companies | | | 0— | | | | 3 | | | | | 5,823 | | | | 497 | | | | | | | | | | | | | ¥ | 1,470,358 | | | ¥ | 1,660,322 | | | | | | | | | | |
Assets in the above table were primarily pledged for secured borrowings, including other secured borrowings, collateralized borrowings of consolidated VIEs, trading balances of secured borrowings, and derivative transactions. See Note 11 “ ” for further information regarding trading balances of secured borrowings.borrowings
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
. 6. Securitizations and Variable Interest Entities: Nomura utilizes special purpose entities (“SPEs”) to securitize commercial and residential mortgage loans, government agency and corporate securities and other types of financial assets. Those SPEs are incorporated as
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) stock companies, Tokumei kumiai (silent partnerships), Cayman special purpose companies (“SPCs”) or trust accounts. Nomura’s involvementinvolvements with these SPEs includes structuring SPEs, underwriting, distributing and selling debt instruments and beneficial interests issued by SPEs to investors. Nomura accounts for the transfer of financial assets in accordance with ASC 860. This statement requires that Nomura accounts for the transfer of financial assets as a sale when Nomura relinquishes control over the assets. ASC 860 deems control to be relinquished when the following conditions are met: (a) the assets have been isolated from the transferor (even in bankruptcy or other receivership), (b) the transferee has the right to pledge or exchange the assets received, or if the transferee is an entity whose sole purpose is to engage in securitization or asset-backed financing activities, the holders of its beneficial interests have the right to pledge or exchange the beneficial interests, and (c) the transferor has not maintained effective control over the transferred assets. Where Nomura may retainretains an interest in the financial assets, including residual interests in the SPEs. AnySPEs, any such interests are accounted formeasured at fair value and reported within in Nomura’s consolidated balance sheets, with the change in fair value reported within Revenue-Net gain on trading . Fair value for retained interests in securitized financial assets is determined by using observable prices; or in cases where observable prices are not available for certain retained interests, Nomura estimates fair value generally based on the present value of expected future cash flows using its best estimates of the key assumptions, including forecasted credit losses, prepayment rates, forward yield curves and discount rates commensurate with the risks involved. Nomura may also enter into derivative transactions in relation to the assets transferred to an SPE. As noted above, Nomura may have continuing involvement with SPEs to which Nomura transferred assets. For the years ended March 31, 20192021 and 2020,2022, Nomura received cash proceeds from SPEs in new securitizations of ¥174¥297 billion and ¥202¥464 billion, respectively, and the associated gain (loss) on sale was not significant.¥19 billion and ¥9 billion, respectively. For the years ended March 31, 20192021 and 2020,2022, Nomura received debt securities issued by these SPEs with an initial fair value of ¥1,308¥2,799 billion and ¥1,769¥1,890 billion, respectively, and cash inflows from third parties on the sale of those debt securities of ¥991¥2,564 billion and ¥1,245¥1,759 billion, respectively. The cumulative balance of financial assets transferred to SPEs with which Nomura has continuing involvement was ¥4,488¥5,323 billion and ¥4,177¥5,829 billion as of March 31, 20192021 and 2020,2022, respectively. Nomura’s retained interests were ¥138¥160 billion and ¥163¥131 billion as of March 31, 20192021 and 2020,2022, respectively. For the years ended March 31, 20192021 and 2020,2022, Nomura received cash flows of ¥20¥27 billion and ¥24¥39 billion, respectively, from the SPEs on the retained interests held in the SPEs. Nomura does not provide any financial support to SPEs beyond its contractual obligations as of March 31, 20192021 and 2020.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)2022.
The following tables present the fair value of retained interests which Nomura has continuing involvement in SPEs and their classification in the fair value hierarchy, categorized by the type of transferred assets as of March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Government, agency and municipal securities | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Bank and corporate debt securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Government, agency and municipal securities | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Bank and corporate debt securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | Government, agency and municipal securities | | ¥ | | | | ¥ | 154 | | | ¥ | | | | ¥ | 154 | | | ¥ | 154 | | | ¥ | | | Bank and corporate debt securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6 | | | | 6 | | | | 0 | | | | 6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | 154 | | | ¥ | 6 | | | ¥ | 160 | | | ¥ | 154 | | | ¥ | 6 | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Government, agency and municipal securities | | ¥ | | | | ¥ | 124 | | | ¥ | | | | ¥ | 124 | | | ¥ | 124 | | | ¥ | | | Bank and corporate debt securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7 | | | | 7 | | | | 2 | | | | 5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | 124 | | | ¥ | 7 | | | ¥ | 131 | | | ¥ | 126 | | | ¥ | 5 | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of March 31, 2020,2021 and 2022, predominantly all of the retained interests held by Nomura were valued using observable prices. The initial fair value of these retained interests are mostly level 2 in the fair value hierarchy. The following table presents the type and carrying value of financial assets included within andwhich have been transferred to SPEs but which do not meet the criteria for derecognition under ASC 860 as of March 31, 20192021 and 2020.2022. These transfers are accounted for as secured financing transactions and generally reported within The assets are pledged as collateral of the associated liabilities and cannot be removed unilaterally by Nomura and the liabilities are non-recourse to Nomura. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans for trading purposes | | ¥ | 106 | | | ¥ | 19 | | | | | 0— | | | | 203 | | | | | | | | | | | | | ¥ | 106 | | | ¥ | 222 | | | | | | | | | | | | | | | | | | | | | | ¥ | 106 | | | ¥ | 222 | | | | | | | | | | |
Variable Interest Entities (“VIEs”) In the normal course of business, Nomura acts as a transferor of financial assets to VIEs, and underwriter, distributor, and seller of repackaged financial instruments issued by VIEs in connection with its securitization and equity derivative activities. Nomura retains, purchases and sells variable interests in VIEs in connection with its market-making, investing and structuring activities.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
If Nomura has an interest inpower to direct the activities of a VIE that provides Nomura with control overmost significantly impact the most significant activities ofVIE’s economic performance, and through Nomura’s interest in the VIE, andNomura has the right to receive benefits or the obligation to absorb losses that could be potentially significant to the VIE, Nomura is the primary beneficiary of the VIE and must consolidate the entity, provided that Nomura does not meet separate tests confirming that it is actingact as a fiduciary for other interest holders. Nomura’s consolidated VIEs include those that were created to market structured securities to investors by repackaging corporate convertible securities, mortgages and mortgage-backed securities. Certain VIEs used in connection with Nomura’s aircraft leasing business as well as other purposes are consolidated. Nomura also consolidates certain investment funds which are VIEs, and for which Nomura is the primary beneficiary.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The power to makedirect the most significant decisionsactivities may take a number of different forms in different types of VIEs. For transactions such as securitizations, investment funds, and CDOs, Nomura generally considers collateral management and servicing to represent the power to make the most significant decisions.decisions, unless such roles are deemed to be a fiduciary relationship. Accordingly, Nomura does not consolidate such types of VIEs for which it does not act as collateral manager or servicer unless Nomura has the unilateral right to replace the collateral manager or servicer or to require liquidation of the entity. For many transactions, such as where VIEs are used for re-securitizations of residential mortgage-backed securities, there are no significant economic decisions made on an ongoing basis and no single investor has the unilateral ability to liquidate the VIE. In thesethose cases, Nomura focuses its analysis on decisions made prior tothe party who has the sole discretion in the initial closingdesign of the transaction,VIE, and considers factors such as the nature of the underlying assets held by the VIE, the involvementextent of third party investorsinvestors’ involvement in the design of the VIE, the size of initial third party investment and the amount and level of any subordination of beneficial interests issued by the VIE which will be held by Nomura and any third party investors. Nomura has sponsored numerous re-securitization transactions and in many cases has determined that it is not the primary beneficiary on the basis that control overpower to direct the most significant decisionsactivities relating to these entities are shared with third party investors. In some cases, however, Nomura has consolidated suchcertain VIEs for example, where it was determined that third party investors were not involved in the design of the VIEs, including where the size of third party investment was not significantinsignificant at inception of the transaction.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the classification of consolidated VIEs’ assets and liabilities in these consolidated financial statements as of March 31, 20192021 and 2020.2022. Most of these assets and liabilities are related to consolidated SPEsVIEs which securitize corporate convertible securities, mortgages and mortgage-backed securities. The assets of a consolidated VIE may only be used to settle obligations of that VIE. Creditors do not typically have any recourse to Nomura beyond the assets held in the VIEs.Nomura. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | Private equity and debt investments | | | | | | | | | Office buildings, land, equipment and facilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | Consolidated VIE liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | ¥ | 13 | | | ¥ | 62 | | | | | | | | | | | | | | 524 | | | | 555 | | | | | 414 | | | | 443 | | | | | 20 | | | | 21 | | Investment trust funds and other | | | 4 | | | | 0— | | | | | 1 | | | | 1 | | Private equity and debt investments | | | 21 | | | | 4 | | Office buildings, land, equipment and facilities | | | 51 | | | | 10 | | | | | 26 | | | | 115 | | | | | | | | | | | | | ¥ | 1,074 | | | ¥ | 1,211 | | | | | | | | | | | Consolidated VIE liabilities | | | | | | | | | | | | | | | | | | | | | 2 | | | | 0 | | | | | | | | | | | | | | 74 | | | | 95 | | | | | 763 | | | | 797 | | | | | 2 | | | | 6 | | | | | | | | | | | | | ¥ | 841 | | | ¥ | 898 | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) On a quarterly basis, Nomura continuously reassesses its initial evaluation of whether it is the primary beneficiary of a VIE based on current facts and circumstances as long as it has any continuing involvement with the VIE. This determination is based upon an analysisVIEs and evaluates the impact of the design of the VIE, including the VIE’s structure and activities, the power to make significant economic decisions held by Nomura and by other parties, and theany changes in governing documents and/or variable interests ownedheld by Nomura and other parties. Nomura also holds variable interests in VIEs where Nomura is not the primary beneficiary. Nomura’s variable interests in such VIEs include senior and subordinated debt, residual interests, and equity interests associated with commercial and residential mortgage-backed and other asset-backed securitizations and structured financings, equity interests in VIEs which were formed primarily to acquire high yield leveraged loans and other lower investment grade debt obligations, residual interests in operating leases for aircraft held by VIEs, and loans and investments in VIEs that acquire operating businesses. The following tables present the carrying amount of variable interests of unconsolidated VIEs and maximum exposure to loss associated with these variable interests as of March 31, 20192021 and 2020.2022. Maximum exposure to loss does not reflect Nomura’s estimate of the actual losses that could result from adverse changes, nor does it reflect the economic hedges Nomura enters into to reduce its exposure. The risks associated with VIEs
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
in which Nomura is involved are limited to the amount recorded in the consolidated balance sheets and the amount of any undrawn commitments and financial guarantees.guarantees issued. | | | | | | | | | | | | | | | | | | | | | | | Carrying amount of variable interests | | | | | | | | | | | | Trading assets and liabilities | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | Private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commitments to extend credit and other guarantees | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Carrying amount of variable interests | | |
| | | | | | | | | Trading assets and liabilities | | | | | | | | | | | | | | | ¥ | 30 | | | ¥ | | | | ¥ | 30 | | | | | 60 | | | | | | | | 60 | | | | | 2,362 | | | | | | | | 2,362 | | Investment trust funds and other | | | 195 | | | | | | | | 195 | | Private equity and debt investments | | | 3 | | | | | | | | 3 | | | | | 556 | | | | | | | | 556 | | | | | 19 | | | | | | | | 19 | | Commitments to extend credit and other guarantees | | | | | | | | | | | 110 | | | | | | | | | | | | | | | | | ¥ | 3,225 | | | ¥ | | | | ¥ | 3,335 | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | Carrying amount of variable interests | | |
| | | | | | | | | Trading assets and liabilities | | | | | | | | | | | | | | | ¥ | 26 | | | ¥ | | | | ¥ | 26 | | | | | 61 | | | | | | | | 61 | | | | | 1,432 | | | | | | | | 1,432 | | Investment trust funds and other | | | 191 | | | | | | | | 191 | | Private equity and debt investments | | | 22 | | | | | | | | 22 | | | | | 940 | | | | | | | | 940 | | | | | 10 | | | | | | | | 10 | | Commitments to extend credit and other guarantees | | | | | | | | | | | 256 | | | | | | | | | | | | | | | | | ¥ | 2,682 | | | ¥ | | | | ¥ | 2,938 | | | | | | | | | | | | | | |
The above does notinclude certain repurchase agreement financings provided to third parties or Nomura sponsored VIEs. | | | | | | | | | | | | | | | | | | | | | | | Carrying amount of variable interests | | | | | | | | | | | | Trading assets and liabilities | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment trust funds and other | | | | | | | | | | | | | Private equity and debt investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commitments to extend credit and other guarantees | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
7. Financing receivables: In the normal course of business, Nomura extends financing to clients primarily in the form of loansloan receivables, loan commitments and collateralized agreements such as reverse repurchase agreements and securities borrowing transactions. These financing receivables are recognized as assets on Nomura’s consolidated balance sheets at fair value or on amortized cost basis and provide a contractual right to receive money either on demand or on future fixed or determinable dates. The carrying value of financing receivables measured on an amortized cost basis is adjusted for an allowance for current expected credit losses where appropriate. As of April 1, 2020 Nomura adopted new guidance for determination of such allowances defined by ASC 326 “” (“ASC 326”) which requires recognition of allowances based on current expected credit losses rather incurred credit losses as required by previous authoritative guidance. See Note 1 “Basis of accounting—New accounting ” in these consolidated financial statements for guidance on the impact of the current expected credit loss (“CECL”) impairment model introduced by ASC 326 on Nomura on initial adoption. Collateralized agreements Collateralized agreements consist of reverse repurchase agreements reported as Securities purchased under agreements to resell and securities borrowing transactions reported as in the consolidated balance sheets, including those executed under Gensaki Repo agreements. Reverse repurchase agreements and securities borrowing transactions principally involve the buying of government and government agency securities
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
from customers under agreements that also require Nomura to resell these securities to those customers, or borrowing these securities with cash andnon-cash collateral. Nomura monitors the value of the underlying securities on a daily basis to the related receivables, including accrued interest, and requests or returns additional collateral when appropriate. ReverseExcept for those where we apply the fair value option, reverse repurchase agreements are generally recognized in the consolidated balance sheets at the amount for which the securities were originally acquired with applicable accrued interest. Securities borrowing transactions are generally
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) recognized in the consolidated balance sheets at the amount of cash collateral advanced. No allowanceAllowances for current expected credit losses is generally recognized against these transactions due tocollateralized agreements are not significant either because of application of practical expedients permitted by ASC 326 based on the strict collateralization requirements.requirements and ongoing monitoring of the collateral levels or the short expected life of the financial instruments. The key types of loans receivable recognized by Nomura are loans at banks, short-term secured margin loans, inter-bank money market loans and corporate loans. Loans at banks include both retail and commercial secured loans and traditional unsecured loans mainly extended by licensed banking entities within Nomura such as The Nomura Trust & Banking Co., Ltd. and Nomura Bank International plc. For bothWhere retail and commercial loans are secured by real estate or securities, Nomura is exposed to the risk of a decline in the value of the underlying collateral. Loans at banks also include unsecured commercial loans provided to investment banking clients for relationship purposes. For unsecured commercial loans, Nomura is exposed to risk of default of the counterparty, although these counterparties usually have high or good credit ratings. Where loans are secured by guarantees, Nomura is also exposed to the risk of default by the guarantor. Short-term secured margin loans are margin loans provided to clients in connection with securities brokerage business.business in retail and wealth management services. These loans provide funding for clients in order to purchase securities. Nomura requests initial margin in the form of acceptable collateral securities or deposits against these loans and holds the purchased securities as collateral through the life of the loans. If the value of the securities declines by more than specified amounts, Nomura can make additional frequent margin calls in order to maintain a specified ratio of (“LTV”) ratio. For these reasons,These clients are required and reasonably expected to continue to replenish the risk to Nomuraamount of providing thesecollateral as required by Nomura. Allowances for current expected losses against Short-term secured margin loans is limited.are therefore usually not significant.Inter-bank money market loans are loans to financial institutions in the inter-bank money market, where overnight and intra-day financings are traded through money market dealers. The risk to Nomura of making these loans is not significantlimited as only qualified financial institutions can participate in these markets and these loans are usually overnight or short-term in nature. Allowances for current expected losses against inter-bank money market loans are therefore usually not significant.Corporate loans are primarily commercial loans provided to corporate clients extended bynon-licensed
banking entities within Nomura.excluding those classified as Loans at banks. Corporate loans include loans secured by real estate or securities, as well as unsecured commercial loans provided to investment banking clients for relationship purposes. The risk to Nomura of making these loans is similar to those risks arising from commercial loans reported in loans at banks.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following tables present a summary of loans receivable reported within or Investments in and advances Advances to affiliated companies
in the consolidated balance sheets as of March 31, 2019,2021, and 20202022 by portfolio segment. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | Short-term secured margin loans | | | | | | | | | | | | | Inter-bank money market loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | | | | | | | | | | | | | | | ¥ | 605,200 | | | ¥ | — | | | ¥ | 605,200 | | Short-term secured margin loans | | | 436,221 | | | | — | | | | 436,221 | | Inter-bank money market loans | | | 1,289 | | | | — | | | | 1,289 | | | | | 1,082,239 | | | | 818,523 | | | | 1,900,762 | | | | | | | | | | | | | | | | | ¥ | 2,124,949 | | | ¥ | 818,523 | | | ¥ | 2,943,472 | | | | | | | | | | | | | | | Advances to affiliated companies | | | 1,000 | | | | — | | | | 1,000 | | | | | | | | | | | | | | | | | ¥ | 2,125,949 | | | ¥ | 818,523 | | | ¥ | 2,944,472 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | Short-term secured margin loans | | | | | | | | | | | | | Inter-bank money market loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | | | | | | | | | | | | | | | ¥ | 717,992 | | | ¥ | — | | | ¥ | 717,992 | | Short-term secured margin loans | | | 442,600 | | | | — | | | | 442,600 | | Inter-bank money market loans | | | 2,196 | | | | — | | | | 2,196 | | | | | 1,206,349 | | | | 1,210,590 | | | | 2,416,939 | | | | | | | | | | | | | | | | | ¥ | 2,369,137 | | | ¥ | 1,210,590 | | | ¥ | 3,579,727 | | | | | | | | | | | | | | | Advances to affiliated companies | | | 1,000 | | | | — | | | | 1,000 | | | | | | | | | | | | | | | | | ¥ | 2,370,137 | | | ¥ | 1,210,590 | | | ¥ | 3,580,727 | | | | | | | | | | | | | | |
(1) | Includes loans receivable and loan commitments carried at fair value through election of the fair value option. |
There were no significant purchases nor sales of loans receivable during the year ended March 31, 2019.2021. During the same period, there were no significant reclassifications of loans receivable to or from trading assets. There were no significant purchases nor sales of loans receivable during the year ended March 31, 2020.2022. During the same period, there were no significant reclassifications of loans receivable to or from trading assets. Allowance for credit losses
Management establishes an allowance for credit losses againstNet unamortized deferred fees and costs related to loans receivable carried at amortized cost were immaterial as of March 31, 2021 and March 31, 2022.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Allowance for current expected credit losses Following adoption of ASC 326 on April 1, 2020, Management has established an allowance for current expected credit losses using the CECL impairment model against the following types of financial instruments, including financing receivables, which reflectsare not measured at fair value on a recurring basis, to reflect the net amount Nomura expects to collect: Loans receivable and written unfunded loan commitments; Collateralized agreements such as reverse repos and securities borrowing transactions; Customer contract assets and receivables; and Other receivables including margin receivables, security deposits, default fund contributions to central clearing counterparties and net investments in finance leases. Current expected credit losses for an individual or portfolio of financial instrument are measured at each Nomura reporting date based on expected credit losses over the remaining expected life of the financial instruments that consider forecast of future economic conditions in addition to information about past events and current conditions. Key macroeconomic inputs to our weighted average forecasts of three years include GDP and credit spreads. The risk of loss is considered, even when that risk of loss is remote. While management has based its estimate of the allowance for current expected credit losses on the best information available, future adjustments to the allowance may be necessary as a result of changes in the economic environment or variances between actual results and original assumptions. Nomura has elected to exclude accrued interest receivable from the amortized cost basis of financial instruments used to measure expected credit losses. The amount of accrued interest receivable as of March 31, 2021 and March 31, 2022 was not significant. The methodology used by Nomura to determine allowances for current expected credit losses in accordance with the CECL impairment model primarily depends on the nature of the financial instrument and whether certain practical expedients permitted by ASC 326 are applied by Nomura. Financial instruments subject to the CECL impairment model are charged off when Nomura has deemed the loan or receivable as uncollectible, namely management believes there is no reasonable expectation of collecting future contractual cash flows and all commercially reasonable means of recovering outstanding principle and interest balances have been exhausted.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table summarizes the methodology used for each significant type of financial instrument subject to the CECL impairment model and the key assumptions used which have impacted the measurement of current expected credit losses during the year ended March 31, 2022. | | | | | Methodology to determine current expected credit losses | Loans, written loan commitments and certain deposits | | • Full loss rate model developed by Nomura’s Risk department • Measures expected credit losses based on probability of default (PD), Loss Given Default (LGD) and Exposure at Default (EAD) inputs. • PD inputs incorporate forward-looking scenarios used by Nomura for internal risk management and capital purposes. • Immediate reversion method used for periods beyond which reasonable and supportable forecast is not available. • For financial instruments which have defaulted or are probable of defaulting, expected credit losses measured using discounted cash flow analyses or, where the financial instrument is collateral dependent, based on any shortfall of fair value of the underlying collateral. | | | Collateralized agreements, short-term secured margin loans and cash prime brokerage loans | | • For reverse repos and short-term secured margin loans and cash prime brokerage loans where frequent margining is required and the counterparty has ability to replenish margin, as permitted by a practical expedient provided by ASC 326 expected credit losses are limited to difference between carrying value of the reverse repo or margin loan and fair value of underlying collateral. • Securities borrowing transactions typically have very short expected lives and are collateralized and therefore expected credit losses are generally determined qualitatively to be insignificant based on historical experience and consistent monitoring of collateral. | | | Customer contract assets and receivables | | • Expected credit losses typically based on ageing analysis where loss rates are applied to the carrying value based on historical experience, the current economic climate and specific information about the ability of the client to pay. |
Prior to adoption of ASC 326, allowances for credit losses recognized against financial instruments measured at amortized cost were based on amounts which reflected management’s best estimate of probable losses incurred. The allowance for credit losses against loans, which is reported in the consolidated balance sheets withinAllowance for doubtful accounts
, comprises comprised two components: Acomponents, namely a specific component for loansfinancial instruments which have been individually evaluated for impairment; and
A a general component for loansfinancial instruments which, while not individually evaluated for impairment, have been collectively evaluated for impairment based on historical loss experience.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The specific component of the allowance reflects probable losses incurred within loansfinancial instruments which have been individually evaluated for impairment. A loan is defined as being impaired when, based on current information and events, it is probable that all amounts according to the contractual terms of the loan agreement will not be collected. Factors considered by management in determining impairment include an assessment of the ability of borrowers to pay by considering various factors such as the nature of the loan, prior credit loss experience, current economic conditions, the current financial situation of the borrower and the fair value of any underlying collateral. Loans that experience insignificant payment delays or insignificant payment shortfalls are not classified as impaired. Impairment iswas measured on a loan by loan basis by adjusting the carrying value of the loanfinancial instrument to either the present value of expected future cash flows discounted at the loan’sfinancial instrument’s effective interest rate, the loan’san observable market price, or the fair value of the collateral if the loanfinancial instrument is collateral dependent.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The general component of the allowance iswas for loansfinancial instruments not individually evaluated for impairment and includes judgment about collectability based on available information at the balance sheet date and the uncertainties inherent in those underlying assumptions. The allowance iswas based on historical loss experience adjusted for qualitative factors such as current economic conditions. As a result of the COVID-19 pandemic, determination of whether certain loans were impaired as of March 31, 2020 was increasingly judgmental when compared to prior years. When applying the factors discussed above to make this determination, additional consideration was given to how the COVID-19 pandemic would affect a borrower’s ability both to pay in the short-term while governments imposed lockdowns and similar restrictions on trading, and in the longer-term once the restrictions were lifted and economies were expected to improve. Various assumptions were made around the length and severity of the impact of the pandemic and the ability and timing of borrowers to recover.
As of April 1, 2020 Nomura will adopt new guidance for determination of allowances for credit losses defined by ASC 326 “Financial Instruments—Credit Losses
” (“ASC 326”) which requires recognition of allowances for current expected credit losses rather than incurred losses. Specific determination of whether a loan is impaired to trigger recognition of an allowance for credit losses will no longer be required but the same factors will still be used to determine the appropriate allowance as required under the new guidance. See Note 1 “Summary accounting policies—Future accounting developments” in these consolidated financial statements for further guidance on the expected impact of ASC 326 on Nomura.Loans arecharged-off
when Nomura determines that the loans are uncollectible. This determination is based on factors such as the occurrence of significant changes in the borrower’s financial position such that the borrower can no longer pay the obligation or that the proceeds from collateral will not be sufficient to pay the loans.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following tables presenttable presents changes in the total allowance for incurred credit losses for the years ended March 31, 2018, 2019 and 2020.2020 as determined using legacy U.S. GAAP guidance in effect prior to ASC 326. The total allowance for incurred credit losses increased as of March 31, 2020 when compared to March 31, 2019 primarily as a result of specific impairments identified in March 2020 as a result of the COVID-19 pandemic. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2018 | | | | Allowance for credit losses against loans | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Provision for credit losses | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2019 | | | | Allowance for credit losses against loans | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | ) | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2020 | | | | Allowance for credit losses against loans | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | ) | | | | ) | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2020 | | | | Allowance for current expected credit losses against loans | | |
| | | Total allowance for current expected credit losses | | | |
| | |
| | |
| | | | | | | ¥ | 1,052 | | | ¥ | 370 | | | ¥ | 868 | | | ¥ | 2,290 | | | ¥ | 1,879 | | | ¥ | 4,169 | | Provision for credit losses | | | 512 | | | | — | | | | 7,125 | | | | 7,637 | | | | 1,451 | | | | 9,088 | | | | | — | | | | — | | | | — | | | | — | | | | (162 | ) | | | (162 | ) | | | | — | | | | (18 | ) | | | (49 | ) | | | (67 | ) | | | (16 | ) | | | (83 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 1,564 | | | ¥ | 352 | | | ¥ | 7,944 | | | ¥ | 9,860 | | | ¥ | 3,152 | | | ¥ | 13,012 | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | IncludesPrimarily includes the effect of foreign exchange movements.movements and recoveries collected.
|
F-90The following table presents changes in the allowance for current expected credit losses for the year ended March 31, 2021 and 2022 as determined using the CECL impairment model defined by ASC 326. The allowance increased as of March 2022 when compared to March 2021 primarily as a result of additional credit losses arising in connection with the U.S. Prime Brokerage Event in March 2021. See Note 23. “U.S. Prime Brokerage Event” for further information on this event. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2021 | | | | Allowance for current expected credit losses against loans | | | | | | Total allowance for current expected credit losses | | | | | | | | | | | | | | | Opening balance prior to CECL adoption (1) | | | 1,564 | | | | 352 | | | | 7,944 | | | | 9,860 | | | | 3,152 | | | | 13,012 | | Impact of CECL adoption (2) | | | 232 | | | | — | | | | 1,738 | | | | 1,970 | | | | 2 | | | | 1,972 | | Opening balance after CECL adoption | | | 1,796 | | | | 352 | | | | 9,682 | | | | 11,830 | | | | 3,154 | | | | 14,984 | | Provision for credit losses (4) | | | (196 | ) | | | — | | | | 38,211 | | | | 38,015 | | | | 1,060 | | | | 39,075 | | | | | (318 | ) | | | (363 | ) | | | (0 | ) | | | (681 | ) | | | (1,600 | ) | | | (2,281 | ) | | | | — | | | | 11 | | | | 92 | | | | 103 | | | | 1,903 | | | | 2,006 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 1,282 | | | ¥ | — | | | ¥ | 47,985 | | | ¥ | 49,267 | | | ¥ | 4,517 | | | ¥ | 53,784 | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following tables present the allowance for credit losses against loans and loans by impairment methodology and type of loans as of March 31, 2019 and 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance by impairment methodology | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total allowance for credit losses | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans by impairment methodology | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2022 | | | | Allowance for current expected credit losses against loans | | |
| | | Total allowance for current expected credit losses | | | |
| | |
| | |
| | | | | | | | 1,282 | | | | — | | | | 47,985 | | | | 49,267 | | | | 4,517 | | | | 53,784 | | | | | 1,161 | | | | — | | | | 11,079 | | | | 12,240 | | | | 113 | | | | 12,353 | | | | | — | | | | — | | | | — | | | | — | | | | (1,231 | ) | | | (1,231 | ) | | | | (9 | ) | | | — | | | | 3,289 | | | | 3,280 | | | | (1,840 | ) | | | 1,440 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 2,434 | | | ¥ | — | | | ¥ | 62,353 | | | ¥ | 64,787 | | | ¥ | 1,559 | | | ¥ | 66,346 | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Closing balance recognized on March 31, 2020 as determined using legacy U.S. GAAP guidance in effect prior to the adoption of ASC 326.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance by impairment methodology | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | — | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total allowance for credit losses | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans by impairment methodology | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | |
(2) | The adjusted opening balance recognized on April 1, 2020 on adoption of the CECL impairment model under ASC 326. |
(3) | Includes amounts recognized against collateralized agreements, customer contract assets and receivables and other receivables. |
(4) | Following default by a U.S. client in connection with the U.S. Prime Brokerage Event in March 2021, a provision for losses of ¥41,561 million was recognized. During year ending March 2022, an additional provision for losses of ¥9,289 million was recognized during the quarter ended June 30, 2021, which was subsequently partially offset by a release in the allowance of ¥2,535million during the quarter ended March 31, 2022. See Note 23 “U.S. Prime Brokerage Event” for further information on this event. |
(5) | Primarily includes the effect of foreign exchange movements and recoveries collected. |
Loan impairment and troubledTroubled debt restructurings
In the ordinary course of business, Nomura may choose to modifyrestructure a loan classified as held for investment either because of financial difficulties of the borrower, or simply as a result of market conditions or relationship reasons. TDRA troubled debt restructuring (“TDR”) occurs when Nomura as lender,(as lender) for economic or legal reasons related to the borrower’s financial difficulties grants a concession to the borrower that Nomura would not otherwise consider. Any loan being modified under a TDR will generally already be identified as impaired with an applicable allowance forExpected credit losses recognized. If not (for example if the loan is collectively assessed for impairment with other loans), the modification of the loan under a TDR will immediately result in the loan as being classified as impaired. An impairment loss for a loan modificationbeing restructured under a TDR which only involvesinvolve modification of the loan’s terms (rather than receipt of assets in full or partial settlement) is calculated in the same way as any other impaired loan.typically determined using a discounted cash flow analysis. Assets received in full or partial satisfaction of a loan in a TDR are recognized at fair value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of March 31, 2020 and since such date, discussionsDiscussions continue with various borrowers to modify the existing contractual terms of certain loans. These modifications where the borrower is deemed to be in financial difficulty and Nomura has, or expects to, grant a financial concession would typically be accounted for and reported as a TDR and the loan classified as impaired. However, consistent with guidance issued by US banking regulators in March 2020 as a result of the COVID-19 pandemic, modifications which meet the above criteria have not been accounted for TDRs nor the loan classified as impaired as of March 31, 2020 provided the borrower was current with payments prior to the COVID-19 pandemic, the nature of the concession is short-term and only permits a payment delay, waiver of fees or extension of repayment terms.
As of March 31, 2019, the amount of loans which were classified as impaired but against which no allowance for credit losses had been recognized was not significant. For impaired loans with a related allowance, the amount of recorded investment, the total unpaid principal balance and the related allowance was not significant.
As of March 31, 2020, the amount of loans which were classified as impaired but against which no allowance for credit losses had been recognized was not significant. For impaired loans with a related allowance, the amount of recorded investment and the total unpaid principal balance were ¥14,678 million. The related allowance was ¥8,282 million.TDR.
The amounts of TDRs which occurred during the years ended March 31, 20192021 and 20202022 were not significant.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Nonaccrual and past due loans Loans which are individually evaluated as impaired are also placed on a nonaccrual status. When itstatus if interest is deemed uncollectible. Nomura policy is to define interest as being uncollectible if the borrower is determined to suspendbe in financial difficulty or an interest accrual asor principal payment on the loans is 90 days or more past due. Where a result of an assessment,loan is placed on a nonaccrual status, any accrued but unpaid interest receivable reversed and no further accrual of interest is reversed. permitted. Interest income is subsequent recognized when a cash payment is received from the borrower using the cash basis method. Loans are generally only returned to an accrual status if the loan is brought contractually current, i.e., all overdue principal and interest amounts are paid. In limited circumstances, a loan which has not been brought contractually current will also be returned to an accrual status if all principal and interest amounts contractually due are reasonably assured of repayment within a reasonable period of time or there has been a sustained period of repayment performance by the borrower. Loans which have been modified, or are in the process of being modified, through modifications which do not meet the definition of a TDR through application of the interagency guidance referred to above have not been placed on a non-accrual status as of March 31, 2020.
As of March 31, 2019, the amount2021, there were ¥204,404 million of loans which were placed on a nonaccrual status, was not significant.primarily secured corporate loans. Corporate loans on anon-accrual status include loans relating to a U.S. client in connection with the U.S. Prime Brokerage Event in March 2021. The amount of loans which were 90 days past due was not significant. As of March 31, 2020,2022, there were ¥14,658 ¥62,289 million of loans which were placed on a nonaccrual status, primarily secured and unsecured corporate loans. Corporate loans on anon-accrual status as of March 31, 2022 include loans relating to a U.S. client in connection with the U.S. Prime Brokerage Event in March 2021. The amount of loans which were 90 days past due wasbut were not significant. Once a loan is impaired and placed on a nonaccrual status interest income is subsequently recognized using the cash basis method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
was not significant. Credit quality indicators Nomura is exposed to credit risks deriving fromdue to a decline in the value of loans or a default caused by deterioration of creditworthiness or bankruptcy of the obligor.borrower. Nomura’s risk management framework for such credit risks is based on a risk assessment through an internal rating process, in depth pre-financing credit analysis of each individual loan and continuous post-financing monitoring of obligor’sthe borrower’s creditworthiness.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following tables present an analysis of each class of loans not carried at fair value using Nomura’s internal ratings or equivalent credit quality indicators applied by subsidiaries by years of origination as of March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | Short-term secured margin loans | | | | | | | | | | | | | | | | | | | | | Unsecured inter-bank money market loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unsecured corporate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | Short-term secured margin loans | | | | | | | | | | | | | | | | | | | | | Unsecured inter-bank money market loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unsecured corporate loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 54,179 | | | ¥ | 115,003 | | | ¥ | 17,106 | | | ¥ | 12,450 | | | ¥ | 4,240 | | | ¥ | 17,634 | | | ¥ | 0— | | | ¥ | 220,612 | | | | | 75,680 | | | | 115,131 | | | | 3,864 | | | | 2,324 | | | | 0— | | | | 5,484 | | | | 0— | | | | 202,483 | | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | | 0— | | | | 61,185 | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 61,185 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total secured loans at banks | | ¥ | 129,859 | | | ¥ | 291,319 | | | ¥ | 20,970 | | | ¥ | 14,774 | | | ¥ | 4,240 | | | ¥ | 23,118 | | | ¥ | 0— | | | ¥ | 484,280 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unsecured loans at banks: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 9,101 | | | ¥ | 22,955 | | | ¥ | 27,863 | | | ¥ | 17,563 | | | ¥ | 8,484 | | | ¥ | 34,719 | | | ¥ | 0— | | | ¥ | 120,685 | | | | | 0— | | | | 0— | | | | 235 | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 235 | | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total unsecured loans at banks | | ¥ | 9,101 | | | ¥ | 22,955 | | | ¥ | 28,098 | | | ¥ | 17,563 | | | ¥ | 8,484 | | | ¥ | 34,719 | | | ¥ | 0— | | | ¥ | 120,920 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Short-term secured margin loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | | 170,514 | | | | 141 | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 265,566 | | | | 436,221 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total short-term secured margin loans | | ¥ | 170,514 | | | ¥ | 141 | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 265,566 | | | ¥ | 436,221 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unsecured inter-bank money market loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 1,289 | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 1,289 | | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total unsecured inter-bank money market loans | | ¥ | 1,289 | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 1,289 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 33,965 | | | ¥ | 261,182 | | | ¥ | 45,880 | | | ¥ | 9,817 | | | ¥ | 6,406 | | | ¥ | 27,672 | | | ¥ | 97 | | | ¥ | 385,019 | | | | | 20,093 | | | | 102,941 | | | | 34,435 | | | | 29,869 | | | | 13,067 | | | | 17,573 | | | | 173,178 | | | | 391,156 | | | | | 197,859 | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 197,859 | | | | | 0— | | | | 39 | | | | 40 | | | | 11 | | | | 30 | | | | 4,697 | | | | 428 | | | | 5,245 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total secured corporate loans | | ¥ | 251,917 | | | ¥ | 364,162 | | | ¥ | 80,355 | | | ¥ | 39,697 | | | ¥ | 19,503 | | | ¥ | 49,942 | | | ¥ | 173,703 | | | ¥ | 979,279 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unsecured corporate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | | | 84 | | | | 0— | | | | 450 | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 534 | | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | | 1 | | | | 191 | | | | 8 | | | | 97,212 | | | | 0— | | | | 5,014 | | | | 0— | | | | 102,426 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total unsecured corporate loans | | ¥ | 85 | | | ¥ | 191 | | | ¥ | 458 | | | ¥ | 97,212 | | | ¥ | 0— | | | ¥ | 5,014 | | | ¥ | 0— | | | ¥ | 102,960 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Advances to affiliated companies | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | AAA-BBB | | ¥ | 1,000 | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 1,000 | | BB-CCC | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | CC-D | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | Others | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | | | 0— | | Total advances to affiliated companies | | ¥ | 1,000 | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 1,000 | | | | ¥ | 563,765 | | | ¥ | 678,768 | | | ¥ | 129,881 | | | ¥ | 169,246 | | | ¥ | 32,227 | | | ¥ | 112,793 | | | ¥ | 439,269 | | | ¥ | 2,125,949 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Relate to collateralized exposures where a specified ratio of LTV is maintained. |
(2) | Includes loans of ¥197,859 million to a U.S. client in connection with the U.S. Prime Brokerage Event. See Note. 23“U.S. Prime Brokerage Event” for further information on this event. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 106,554 | | | ¥ | 126,834 | | | ¥ | 8,325 | | | ¥ | 17,308 | | | ¥ | 9,213 | | | ¥ | 12,729 | | | ¥ | | | | ¥ | 280,963 | | | | | 80,167 | | | | 169,655 | | | | 1,693 | | | | 638 | | | | 587 | | | | 6,779 | | | | | | | | 259,519 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 82,304 | | | | | | | | | | | | | | | | | | | | | | | | 82,304 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total secured loans at banks | | ¥ | 186,721 | | | ¥ | 378,793 | | | ¥ | 10,018 | | | ¥ | 17,946 | | | ¥ | 9,800 | | | ¥ | 19,508 | | | ¥ | | | | ¥ | 622,786 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unsecured loans at banks: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 6,000 | | | ¥ | 18,175 | | | ¥ | 12,703 | | | ¥ | 20,565 | | | ¥ | 9,982 | | | ¥ | 25,841 | | | ¥ | | | | ¥ | 93,266 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,940 | | | | | | | | | | | | | | | | 1,940 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total unsecured loans at banks | | ¥ | 6,000 | | | ¥ | 18,175 | | | ¥ | 12,703 | | | ¥ | 22,505 | | | ¥ | 9,982 | | | ¥ | 25,841 | | | ¥ | | | | ¥ | 95,206 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Short-term secured margin loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 169,195 | | | | 23,238 | | | | | | | | | | | | | | | | | | | | 250,167 | | | | 442,600 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total short-term secured margin loans | | ¥ | 169,195 | | | ¥ | 23,238 | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | 250,167 | | | ¥ | 442,600 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unsecured inter-bank money market loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 2,196 | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | 2,196 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total unsecured inter-bank money market loans | | ¥ | 2,196 | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | 2,196 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | 52,545 | | | ¥ | 86,910 | | | ¥ | 20,710 | | | ¥ | 3,258 | | | ¥ | 52,496 | | | ¥ | 9,916 | | | ¥ | 225,835 | | | | | 86,300 | | | | 307,636 | | | | 14,718 | | | | 131,266 | | | | 115,494 | | | | 30,085 | | | | 92,039 | | | | 777,538 | | | | | | | | | 57,524 | | | | | | | | | | | | | | | | | | | | | | | | 57,524 | | | | | 455 | | | | 20 | | | | 25 | | | | 26 | | | | 10 | | | | 101 | | | | 96 | | | | 733 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total secured corporate loans | | ¥ | 86,755 | | | ¥ | 417,725 | | | ¥ | 101,653 | | | ¥ | 152,002 | | | ¥ | 118,762 | | | ¥ | 82,682 | | | ¥ | 102,051 | | | ¥ | 1,061,630 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unsecured corporate loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | 11,621 | | | | 20,516 | | | | | | | | 1,989 | | | | | | | | | | | | | | | | 34,126 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 438 | | | | 191 | | | | | | | | 109,959 | | | | 5 | | | | | | | | 110,593 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total unsecured corporate loans | | ¥ | 11,621 | | | ¥ | 20,954 | | | ¥ | 191 | | | ¥ | 1,989 | | | ¥ | 109,959 | | | ¥ | 5 | | | ¥ | | | | ¥ | 144,719 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Advances to affiliated companies | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | 1,000 | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | 1,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total advances to affiliated companies | | ¥ | | | | ¥ | 1,000 | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | 1,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 462,488 | | | ¥ | 859,885 | | | ¥ | 124,565 | | | ¥ | 194,442 | | | ¥ | 248,503 | | | ¥ | 128,036 | | | ¥ | 352,218 | | | ¥ | 2,370,137 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (1) | Relate to collateralized exposures where a specified ratio of LTV is maintained. |
(2) | Includes loans of ¥57,524 million to a U.S. client in connection with the U.S. Prime Brokerage Event. See Note. 23“U.S. Prime Brokerage Event” for further information on this event. |
The following table presents a definition of each of the internal ratings used in the Nomura Group. | | | | | | | | Highest credit quality. An obligor or facility has extremely strong capacity to meet its financial commitments. ‘AAA range’ is the highest credit rating assigned by Nomura. Extremely low probability of default. | | | | | | Very high credit quality category. An obligor or facility has very strong capacity to meet its financial commitments. Very low probability of default but above that of ‘AAA range.’ | | | | | | High credit quality category. An obligor or facility has strong capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than those in higher-rated categories. Low probability of default but higher than that of ‘AA range.’ | | | | | | Good credit quality category. An obligor or facility has adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to meet its financial commitments. Medium probability of default but higher than that of ‘A range.’ | | | | | | Speculative credit quality category. An obligor or facility is less vulnerable in the near term than other lower-ratings. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions which could lead to the inadequate capacity to meet its financial commitments. Medium to high probability of default but higher than that of ‘BBB range.’ | | | | | | Highly speculative credit quality category. An obligor or facility is more vulnerable than those rated ‘BB range’, but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the issuer’s or obligor’s capacity or willingness to meet its financial commitments. High probability of default—more than that of ‘BB range.’ | | | | | | Substantial credit risk. An obligor or facility is currently vulnerable, and is dependent upon favorable business, financial, and economic conditions to meet its financial commitments. Strong probability of default—more than that of ‘B range.’ | | | | | | Default category. An obligor or facility is currently highly vulnerable to nonpayment (default category). nonpayment. | | | | | | Default category. An obligor or facility is currently extremely vulnerable to nonpayment (default category). nonpayment. | | | | | | Failure of an obligor to make payments in full and on time of any financial obligations, markedly disadvantageous modification to a contractual term compared with the existing obligation, bankruptcy filings, administration, receivership, liquidation or other winding-up or cessation of business of an obligor or other similar situations. |
Nomura reviews internal ratings at least once a year by using available credit information of borrowers (obligors)obligors including financial statements and other information. Internal ratings are also reviewed more frequently for high-risk obligors or problematic exposures and upon the occurrence ofany significant regional or global credit events. As a result of the COVID-19 pandemic, the internal ratingsevent of obligors in particular jurisdictions and sectors impacted by the pandemic were reviewed and updated in March and April 2020.will trigger an immediate credit review process.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Nomura leases office buildings and aircrafts in Japan and overseas either as head lessor or through subleases. These leases and subleases are primarily classified as operating leases. The related assets are stated at cost, net of accumulated depreciation, except for land, which is stated at cost in the consolidated balance sheets and reported within Other assets-Office buildings, land, equipment and facilities. The following table presents the types of assets which Nomura leases under operating leases: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | ) | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | |
| | |
| | | | ¥ | 354 | | | ¥ | (288 | ) | | ¥ | 66 | | | ¥ | 354 | | | ¥ | (292 | ) | | ¥ | 62 | | | | | 39,736 | | | | (1,382 | ) | | | 38,354 | | | | 10,373 | | | | (688 | ) | | | 9,685 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 40,090 | | | ¥ | (1,670 | ) | | ¥ | 38,420 | | | ¥ | 10,727 | | | ¥ | (980 | ) | | ¥ | 9,747 | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Cost, accumulated depreciation and net carrying amounts include amounts relating to real estate utilized by Nomura. |
Nomura recognized lease income of ¥1,377¥2,732 million, ¥2,292¥1,878 million and ¥2,732¥3,653 million for the years ended March 31, 2018, 20192020, 2021 and 2020,2022, respectively. These are included in the consolidated statements of income within . The following table presents an analysis of future undiscounted lease payments to be receivedreceivable in connection with noncancellable operating leases entered into by Nomura as lessor over the remaining lease term as of March 31, 2020.2022. Amounts in connection with finance leases were not significant. | | | | | | | | | | | | | | | | | | | | | | | ¥ | 1,013 | | | | | 986 | | | | | 986 | | | | | 986 | | | | | 986 | | | | | 4,883 | | | | | | | | | ¥ | 9,840 | | | | | | |
Nomura enters into leases of office space, residential facilities for employees, motor vehicles, equipment and technology assets in the ordinary course of business in both Japan and overseas as lessee. These
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
arrangements predominantly consist of operating leases. Separately Nomura subleases certain real estate and
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) equipment through operating lease arrangements. Nomura has adopted ASC 842 “” with effect from April 1, 2019. The total carrying valuevalues of (“ROU”) assets recognized in connection with operating leases as of March 31, 2020 was¥170,782 million.2021 and 2022 were ¥185,085 million and ¥175,422 million, respectively. The total carrying valuevalues of ROU asset recognized in connection with finance leases as of March 31, 2020 was2021 and 2022 were not significant. These lease assets are reported within Other assets—Officeassets-Office buildings, land, equipment and facilities in the consolidated balance sheets. Rental expenses, net of sublease rental income, for the years ended March 31, 2018 and 2019 under noncancellable operating lease agreements were ¥44,202 million and ¥44,564 million, respectively. The amount of capital lease assets as of March 31, 2019 was ¥26,561 million and accumulated depreciations on such capital lease assets as of March 31, 2019 was ¥8,272 million, which were reported withinOther Assets—Office buildings, land, equipment and facilities
in the consolidated balance sheets. Certain leases contain renewal options or escalation clauses providing for increased rental payments based upon maintenance, utilities and tax increases.The
following table presents income and expense amounts recognized through the consolidated statements of income for leases where Nomura is acting as lessee for the year ended March 31, 2020.2020, 2021 and 2022. Amounts forrecognized in the consolidated statements of income in respect of finance lease cost, short-term lease cost, variable lease cost and net gains (losses) on qualifying sale and leaseback transactions were not significant toduring the consolidated statements of income for the yearyears ended March 31, 2020, 2021 and 2022. .
| | | | | | | | | | | | | | | | | | | | ¥ | | | | | | | | Other income and expenses:
| | | | | | | ¥ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 48,475 | | | ¥ | 49,168 | | | ¥ | 47,643 | | | | | | Other income and expenses: | | | | | | | | | | | | | | | ¥ | 5,377 | | | ¥ | 4,638 | | | ¥ | 3,464 | |
(1) | Gross sublease income represents income from subleases separate from lease payments made by Nomura on the head lease as lessee. |
Lease cash flow information Lease payments made in cash in connection with operating leases are classified as operating activity in the consolidated statements of cash flows. The initial recognition of ROU assets and lease liabilities on lease commencement date represents noncash transactions. The following table presents cash payments made by Nomura as lessee which meet the definition of lease payments and therefore have been included in the measurement of operating lease liabilities recorded under operating cash flows and the total amount of ROU assets and lease liabilities recognized during the yearyears ended March 31, 2020, 2021 and 2022. | | | | | | | Millions of yen | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating cash flows for operating leases | | ¥ | 47,212 | | | ¥ | 47,584 | | | ¥ | 46,565 | | ROU assets recognized in connection with new operating leases | | ¥ | 18,026 | | | ¥ | 41,279 | | | ¥ | 32,208 | |
| | | | | | Operating cashflows
for operating leases | | ¥ | | | ROU assets recognized in connection with new operating leases
| | ¥ | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Maturity analysis of lease liabilities The following table presents an analysis of future undiscounted lease payments under operating leases entered into by Nomura as lessee over the remaining lease term as of March 31, 20202022 and also represents a reconciliation between total of such lease payments and the discounted carrying value of operating lease liabilities recognized in the consolidated balance sheets as of March 31, 2020.2022. Finance lease liabilities were not significant as of March 31, 2020.2022. These lease liabilities are reported within in the consolidated balance sheetssheets.. | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 44,493 | | | | | 32,034 | | | | | 25,850 | | | | | 23,507 | | | | | 19,254 | | | | | 63,902 | | | | | | | Total undiscounted lease payments | | ¥ | 209,040 | | Less: Impact of discounting | | | 10,909 | ) | | | | | | Lease liabilities as reported in the consolidated balance sheets | | ¥ | 198,131 | | | | | | |
The following table presents the weighted-average discount rate used to measure lease liabilities and the weighted-average remaining lease term of operating leases as of March 31, 2020.2021 and 2022. | | | | | | | | | | | | | Weighted-average discount rate used to measure lease liabilities
| | | | | Weighted-average remaining lease term
| | | | |
| | | | | | | | | | | | | | | | | | Weighted-average discount rate used to measure lease liabilities | | 1.4% | | 1.4% | Weighted-average remaining lease term | | 7.6 years | | 7.2 years |
9. Business combinations: On April 1, 2020, Nomura acquired 100% of Greentech Capital, LLC (“Greentech”), a leading M&A advisory boutique in sustainable technology and infrastructure in the United States. The acquisition of Greentech comprises an initial cash payment and additional contingent payments based on future performance of the company. The transaction has been accounted for as a business combination under ASC 805 “Business combinations ” and consideration for the purchase as used to determine goodwill was ¥
12,389 ¥12,389 million which includes the estimated fair value of contingent payments accounted for as contingent consideration on acquisition date. Changes in the fair value of contingent consideration are recognized in the consolidated statements of income until the contingency is resolved. Contingent payments linked to future employment of employees of Greentech are recognized in the consolidated statements of income as compensation expense over the relevant service period and when payment of those amounts becomes probable. The operating results and cash flows of Greentech was reflected to Nomura’s consolidated financial statements from April 1, 2020. The assets acquired and liabilities assumed as of the acquisition date were not material to Nomura’s consolidated balance sheet.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 10. Other assets—Office buildings, land, equipment and facilities and Other / Other liabilities: Office buildings, land, equipment and facilities The following table presents a breakdown of owned and leased office buildings, land, equipment and facilities as of March 31, 2021 and 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 39,233 | | | ¥ | 39,118 | | | | | 76,725 | | | | 60,025 | | | | | 59,614 | | | | 31,895 | | | | | 103,385 | | | | 104,609 | | | | | 407 | | | | 7,978 | | Operating lease ROU assets | | | 185,085 | | | | 175,422 | | | | | | | | | | | | | ¥ | 464,449 | | | ¥ | 419,047 | | | | | | | | | | |
Depreciation and amortization charges of depreciable assets are reported withinNon-interest expenses—Information processing and communications in the amount of ¥47,653 million, ¥49,343 million, and ¥46,111 million, and inNon-interest expenses—Occupancy and related depreciation in the amount of ¥15,930 million, ¥14,503 million, and ¥13,412 million for the years ended March 31, 2020, 2021 and 2022, respectively. As of March 31, 2021, Nomura has classified buildings with a carrying value of ¥12,311 million as being held for sale and reported within Other assets—Office buildings, land, equipment and facilities in the consolidated balance sheet. Held-for-sale assets are carried at the lower of the carrying amount and fair value less cost to sell. During the year ended March 31, 2021, no gain or loss associated with the sale of held-for-sale assets was recognized through earnings. The sale was subsequently completed during the quarter ended June 30, 2021 with no material gain or loss recognized through earnings.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Other assets—Other / Other liabilities:liabilities The following table presents components of and in the consolidated balance sheets as of March 31, 20192021 and 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Securities received as collateral | | ¥ | | | | ¥ | | | Goodwill and other intangible assets | | | | | | | | | | | | | | | | | | Investments in equity securities for other than operating purposes (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | Obligation to return securities received as collateral | | ¥ | | | | ¥ | | | | | | | | | | | | Other accrued expenses and provisions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | |
2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Securities received as collateral | | ¥ | 399,975 | | | ¥ | 166,352 | | Goodwill and other intangible assets | | | 29,040 | | | | 30,007 | | | | | 30,433 | | | | 15,562 | | Investments in equity securities for other than operating purposes (1) | | | 270,246 | | | | 249,448 | | | | | 18,741 | | | | 17,165 | | | | | 300,997 | | | | 295,052 | | | | | | | | | | | | | ¥ | 1,049,432 | | | ¥ | 773,586 | | | | | | | | | | | | | | | | | | | | Obligation to return securities received as collateral | | ¥ | 399,975 | | | ¥ | 166,352 | | | | | 60,275 | | | | 34,158 | | Other accrued expenses and provisions | | | 424,961 | | | | 457,511 | | | | | 353,956 | | | | 362,204 | | | | | | | | | | | | | ¥ | 1,239,167 | | | ¥ | 1,020,225 | | | | | | | | | | |
(1) | Includes marketable and non-marketable equity securities held for other than trading or operating purposes. These investments comprise of listed equity securities and unlisted equity securities of ¥45,712¥30,912 million and ¥129,303¥239,334 million respectively, as of March 31, 2019,2021, and ¥32,545¥13,572 million and ¥109,310 ¥235,877 million respectively, as of March 31, 2020. These2022. In principle, these securities are carried at fair value, with changes in fair value recognized and reported within in the consolidated statements of income. It also includes equity securities without a readily determinable fair value of ¥65,365 million as of March 31, 2021 and 2022 respectively. |
(2) | AsIncludes a resultliability of adopting ASU 2016-02 ¥62,889 million and ¥76,866 million as of April 1, 2019, operatingMarch 31, 2021 and 2022 respectively, in respect of outstanding and unsettled investigations, lawsuits and other legal proceedings where loss is considered probable and the amount of such loss can be reasonably estimated. See Note 20“Commitments, contingencies and guarantees” for further information. |
(3) | Operating lease liabilities are presented through Other liabilities—Otherliabilities .—Other. See Note 8 “Leases”“” for further information. |
is recognized upon completion of a business combination as the difference between the purchase price and the fair value of the net assets acquired. Subsequent to initial recognition, goodwill is not amortized but is tested for impairment during the fourth quarter of each fiscal year, or more often if events or circumstances, such as adverse changes in the business climate, indicate there may be impairment. Impairment testing of goodwill is inherently subjective and often requires management judgment to determine when to perform an impairment test, whether qualitatively the fair value of a reporting unit exceeds its carrying value and also to estimate the fair value of a reporting unit when a quantitative impairment test is required. An annual goodwill impairment test was performed in the fourth quarter.quarter ended March 31, 2021 and 2022. Whilst determination of fair value of the reporting unit was more subjective because of the impact of the COVID-19 pandemic, the estimated fair value of the reporting unit exceeded carrying value and therefore no impairment loss was recognized.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) pandemic, the estimated fair value of the reporting unit is expected to exceed carrying value and therefore no impairment loss was recognized. The following table presents changes in goodwill, which are reported in the consolidated balance sheets within for the years ended March 31, 20192021 and 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2021 | | | | | | | | | | | | | |
| | |
| | |
| | | | | | | | | | | |
| | |
| | |
| | | | ¥ | 92,814 | | | ¥ | (92,814 | ) | | ¥ | 0— | | | ¥ | 12,078 | | | ¥ | 0— | | | ¥ | 402 | | | ¥ | 105,294 | | | ¥ | (92,814 | ) | | ¥ | 12,480 | | | | | 472 | | | | 0— | | | | 472 | | | | 189 | | | | 0— | | | | 4 | | | | 665 | | | | 0— | | | | 665 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 93,286 | | | ¥ | (92,814 | ) | | ¥ | 472 | | | ¥ | 12,267 | | | ¥ | 0— | | | ¥ | 406 | | | ¥ | 105,959 | | | ¥ | (92,814 | ) | | ¥ | 13,145 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2022 | | | | | | | | | | | | | |
| | |
| | |
| | | | | | | | | | | |
| | |
| | |
| | | | ¥ | 105,294 | | | ¥ | (92,814 | ) | | ¥ | 12,480 | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 1,260 | | | ¥ | 106,554 | | | ¥ | (92,814 | ) | | ¥ | 13,740 | | | | | 665 | | | | 0— | | | | 665 | | | | 0— | | | | 0— | | | | 2 | | | | 667 | | | | 0— | | | | 667 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 105,959 | | | ¥ | (92,814 | ) | | ¥ | 13,145 | | | ¥ | 0— | | | ¥ | 0— | | | ¥ | 1,262 | | | ¥ | 107,221 | | | ¥ | (92,814 | ) | | ¥ | 14,407 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Includes currency translation adjustments. |
(2) | For the year ended March 31, 2019,2021, Nomura recognized impairment losses on goodwill as a result of ¥81,372 million withinacquiring 100% of the ownership interests in Greentech Capital, LLC which has been allocated in its entirety to the Wholesale segment. Nomura performed an impairment test based on Wholesale performancedivision for segmental reporting and changes in the operating environment, and impaired goodwill within the Wholesale segment. As a result, the balance of goodwill within the Wholesale segment as of March 31, 2019 was ¥nil. These impairment losses were recorded withinreporting unit purposes. See Note 9 “Non-interest expense—OtherBusiness Combination
in the consolidated statements of income. The fair values were determined based on a DCF method.”for further information. |
During the fourth quarter,fiscal year ended March 31, 2021 and 2022, management considered but determined the COVID-19 pandemic did not indicate that certain finite-lived intangible assets were impaired. As a result, a formal impairment test over the relevant asset groups which include these intangible assets was not required. The following table presents finite-lived intangible assets by type as of March 31, 20192021 and 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | ) | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
| | |
| | | | ¥ | 64,357 | | | ¥ | (57,680 | ) | | ¥ | 6,677 | | | ¥ | 67,492 | | | ¥ | (61,715 | ) | | ¥ | 5,777 | | | | | 1,842 | | | | (1,234 | ) | | | 608 | | | | 2,000 | | | | (1,522 | ) | | | 478 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 66,199 | | | ¥ | (58,914 | ) | | ¥ | 7,285 | | | ¥ | 69,492 | | | ¥ | (63,237 | ) | | ¥ | 6,255 | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Amortization expenses for the years ended March 31, 2018, 20192020, 2021 and 20202022 were ¥3,324¥1,662 million, ¥2,504¥2,296 million and ¥1,662¥1,717 million, respectively. Estimated amortization expenses for the next five years are shown below. The am ountsamounts of indefinite-lived intangibles, which primarily includes trademarks, were ¥
8,853¥8,609 million and ¥ 8,696¥9,345 million as of March 31, 20192021 and 2020,2022, respectively. An annual impairment test was performed in the fourth quarter ended March 31, 2021 and 2022 against these intangibles. Whilst determination of fair value of these intangibles was more subjective because of the impact of the COVID-19 pandemic, the estimated fair value of each intangible exceeded carrying value and therefore no impairment loss was recognized. Nomura recognizes an obligation related to restoration of the existing rental buildings at the time of leaving, as Asset Retirement Obligations (“ARO”) on real estate leasehold contracts. The following table presents changes in ARO, which are reported in the consolidated balance sheets withinfor the years ended March 31, 2021 and 2022. | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | ¥ | 6,625 | | | ¥ | 14,485 | | Liabilities incurred during the current period | | | 1,846 | | | | 319 | | Liabilities settled during the current period | | | (97 | ) | | | (564 | ) | Revision in estimated cash flows (1) | | | 6,111 | | | | 0— | | | | | | | | | | | | | ¥ | 14,485 | | | ¥ | 14,240 | | | | | | | | | | |
(1) | During the fiscal year ended March 31, 2021, as a result of the rights conversion of the Tokyo Nihonbashi district redevelopment project, the estimate of future cash flows for the ARO associated with our properties has been changed. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents short-term and long-term borrowings of Nomura as of March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | Short-term borrowings (1) : | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | Long-term borrowings from banks and other financial institutions (2) | | ¥ | | | | ¥ | | | Bonds and notes issued (3) : | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-Japanese yen denominated | | | | | | | | | Floating-rate obligations: | | | | | | | | | | | | | | | | | | Non-Japanese yen denominated | | | | | | | | | Index / Equity-linked obligations: | | | | | | | | | | | | | | | | | | Non-Japanese yen denominated | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading balances of secured borrowings | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Short-term borrowings (1) : | | | | | | | | | | | ¥ | 460,014 | | | ¥ | 131,915 | | | | | 294,052 | | | | 205,857 | | | | | 614,032 | | | | 712,369 | | | | | | | | | | | | | ¥ | 1,368,098 | | | ¥ | 1,050,141 | | | | | | | | | | | | | | | | | | | | Long-term borrowings from banks and other financial institutions (2) | | ¥ | 2,878,676 | | | ¥ | 3,196,144 | | Bonds and notes issued (3) : | | | | | | | | | | | | | | | | | | | | | 583,148 | | | | 765,412 | | Non-Japanese yen denominated | | | 1,917,166 | | | | 2,486,305 | | Floating-rate obligations: | | | | | | | | | | | | 876,844 | | | | 917,362 | | Non-Japanese yen denominated | | | 327,595 | | | | 329,876 | | Index / Equity-linked obligations: | | | | | | | | | | | | 906,332 | | | | 942,585 | | Non-Japanese yen denominated | | | 361,916 | | | | 350,672 | | | | | | | | | | | | | | 4,973,001 | | | | 5,792,212 | | | | | | | | | | | | | | 7,851,677 | | | | 8,988,356 | | | | | | | | | | | Trading balances of secured borrowings | | | 123,335 | | | | 269,950 | | | | | | | | | | | | | ¥ | 7,975,012 | | | ¥ | 9,258,306 | | | | | | | | | | |
(1) | Includes secured borrowings of ¥173,690¥55,569 million as of March 31, 20192021 and ¥170,290¥92,580 million as of March 31, 2020.2022. |
(2) | Includes secured borrowings of ¥65,517¥118,106 million as of March 31, 20192021 and ¥72,543¥79,843 million as of March 31, 2020.2022. |
(3) | Includes secured borrowings of ¥910,224¥788,618 million as of March 31, 20192021 and ¥774,319¥761,620 million as of March 31, 2020.2022. |
Trading balances of secured borrowings These are liabilities recognized when a transfer of a financial asset does not meet the criteria for sales accounting under ASC 860 and therefore the transaction is accounted for as a secured borrowing. These borrowings are part of Nomura’s trading activities intended to generate profits from the distribution of financial products secured by those financial assets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Long-term borrowings consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | | Debt issued by the Company | | ¥ | | | | ¥ | | | Debt issued by subsidiaries—guaranteed by the Company | | | | | | | | | Debt issued by subsidiaries—not guaranteed by the Company (1) | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Debt issued by the Company | | ¥ | 3,003,810 | | | ¥ | 3,679,955 | | Debt issued by subsidiaries—guaranteed by the Company | | | 2,398,932 | | | | 2,124,904 | | Debt issued by subsidiaries—not guaranteed by the Company (1) | | | 2,572,270 | | | | 3,453,447 | | | | | | | | | | | | | ¥ | 7,975,012 | | | ¥ | 9,258,306 | | | | | | | | | | |
(1) | Includes trading balances of secured borrowings. |
As of March 31, 2019,2021, fixed-rate long-term borrowings mature between 20192021 and 2067 at interest rates ranging from 0.00% to 24.40%. Excluding perpetual subordinated debts, floating-rate obligations, which are generally based on LIBOR, mature between 20192021 and 20492051 at interest rates ranging from 0.00% to 6.78%8.01%. Index / Equity-linked obligations mature between 20192021 and 20492051 at interest rates ranging from 0.00% to 30.30%.43.80% As of March 31, 2020,2022, fixed-rate long-term borrowings mature between 20202022 and 2067 at interest rates ranging from 0.00% to 24.40%30.09%. Excluding perpetual subordinated debts, floating-rate obligations, which are generally based on T IBOR and LIBOR , mature between 20202022 and 20502051 at interest rates ranging from 0.00% to 5.00%7.74%. Index / Equity-linked obligations mature between 20202022 and 20502052 at interest rates ranging from 0.00% to 39.90%42.30%. Certain borrowing agreements contain provisions whereby the borrowings are redeemable at the option of the borrower at specified dates prior to maturity and include various equity-linked or other index-linked instruments. Nomura enters into swap agreements to manage its exposure to interest rates and foreign exchange rates. Principally, debt securities and notes issued are effectively converted to LIBOR-basedTokyo OverNight Average rate and Secured Overnight Financing Rate-based floating rate obligations through such swap agreements. The carrying value of the long-term borrowings includes adjustments to reflect fair value hedges. Following table presents the effective weighted-average interest rates of borrowings, including the effect of fair value hedges as of March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | % | | | | % | | | | | % | | | | % | | | | | % | | | | % | Floating-rate obligations | | | | % | | | | % | Index / Equity-linked obligations | | | | % | | | | % |
| | | | | | | | | | | | | | | | | | | | | | | 0.58 | % | | | 1.26 | % | | | | 0.82 | % | | | 1.09 | % | | | | 0.96 | % | | | 1.25 | % | Floating-rate obligations | | | 0.88 | % | | | 1.04 | % | Index / Equity-linked obligations | | | 0.30 | % | | | 0.79 | % |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Maturities of long-term borrowings The following table presents the aggregate annual maturities of long-term borrowings, including adjustments related to fair value hedges and liabilities measured at fair value, as of March 31, 2020:2022: | | | | | | | | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading balances of secured borrowings | | | | | | | | | | | | ¥ | | | | | | | |
| | | | | | | | | | | ¥ | 456,663 | | | | | 904,738 | | | | | 1,180,692 | | | | | 1,402,216 | | | | | 870,856 | | | | | 4,173,191 | | | | | | | | | | 8,988,356 | | | | | | | Trading balances of secured borrowings | | | 269,950 | | | | | | | | | ¥ | 9,258,306 | | | | | | |
As of March 31, 20192021 and 2020,2022, Nomura had unutilized borrowing facilities of ¥nil¥0nil and ¥nil,¥0nil, respectively. As of March 31, 20192021 and 2020,2022, subordinated borrowings were ¥418,200¥354,500 million and ¥318,200¥414,500 million, respectively. Basic and diluted earnings per share (“EPS”) are presented on the face of the consolidated statements of income. Basic EPS is calculated by dividing net income (loss) attributable to NHI shareholders by the weighted average number of the Company’s common shares outstanding during the year. The calculation of diluted EPS is similar to basic EPS, except that the weighted average number of the Company’s common shares is adjusted to reflect all dilutive instruments where the Company’s common shares are potentially deliverable during the year. In addition, net income (loss) attributable to NHI shareholders is adjusted for any change in income or loss that would result from the assumed conversion of dilutive instruments issued by subsidiaries and affiliates.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents a reconciliation of the amounts and the numbers used in the calculation of net income (loss) attributable to NHI shareholders per share (basic and diluted) for the years ended March 31, 2018, 20192020, 2021 and 2020.2022. | | | | | | | | | | | | | | | except per share data presented in yen | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to NHI shareholders | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | Weighted average number of shares outstanding | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to NHI shareholders per share | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to NHI shareholders | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | | Weighted average number of shares outstanding | | | | | | | | | | | | | | | | | | | | | | | | | | Net income (loss) attributable to NHI shareholders per share | | ¥ | | | | ¥ | | ) | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
except per share data presented in yen | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income attributable to NHI shareholders | | ¥ | 216,998 | | | ¥ | 153,116 | | | ¥ | 142,996 | | | | | | | | | | | | | | | Weighted average number of shares outstanding | | | 3,202,369,845 | | | | 3,055,525,640 | | | | 3,063,524,091 | | | | | | | | | | | | | | | Net income attributable to NHI shareholders per share | | ¥ | 67.76 | | | ¥ | 50.11 | | | ¥ | 46.68 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income attributable to NHI shareholders | | ¥ | 216,890 | | | ¥ | 153,064 | | | ¥ | 142,861 | | | | | | | | | | | | | | | Weighted average number of shares outstanding | | | 3,276,510,404 | | | | 3,147,338,609 | | | | 3,158,708,013 | | | | | | | | | | | | | | | Net income attributable to NHI shareholders per share | | ¥ | 66.20 | | | ¥ | 48.63 | | | ¥ | 45.23 | | | | | | | | | | | | | | |
Net income (loss) attributable to NHI shareholders was adjusted to reflect the decline in Nomura’s equity share of earnings of subsidiaries and affiliates for the years ended March 31, 2018, 20192020, 2021 and 20202022 arising from options to purchase common shares issued by subsidiaries and affiliates. The weighted average number of shares used in the calculation of diluted EPS reflects the increase in potential issuance of the Company’s common shares arising from stock-based compensation plans by the Company and affiliates, which would have minimal impact on EPS for the years ended March 31, 2018, 20192020, 2021 and 2020.2022. Antidilutive stock options and other stock-based compensation plans to purchase or deliver 13,035,600, 104,496,00015,452,900, 12,398,500 and 15,452,9009,716,800 of the Company’s common shares were not included in the computation of diluted EPS for the years ended March 31, 2018, 20192020, 2021 and 2020,2022, respectively. On May 27
, 2020,19, 2022, the Company adopted a resolution to grant Restricted Stock Units (“RSUs”). See Note 14 “ Deferred compensation awards ” for further information. On April 26, 2022, the Company adopted a resolution to set up a share buyback program. See Note 17 “” for further information. 13. Employee benefit plans: Nomura provides various pension plans and other post-retirement benefits which cover certain eligible employees worldwide. In addition, Nomura provides health care benefits to certain active and retired employees through its Nomura Securities Health Insurance Society (“NSHIS”).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Defined benefit pension plans— The Company and certain subsidiaries in Japan (“Japanese entities”) have contributory funded benefit pension plans for eligible employees. The benefits are paid as annuity payments subsequent to retirement or as
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
lump-sum payments at the time of retirement based on a combination of years of service, age at retirement and employee’s choice. The benefits under the plans are calculated based upon position, years of service and reason for retirement. In addition to the plans described above, certain Japanese entities also have unfunded lump-sum payment plans. Under these plans, employees with at least two years of service are generally entitled to lump-sum payments upon termination of employment. The benefits under the plans are calculated based upon position, years of service and the reason for retirement. Nomura’s funding policy is to contribute annually the amount necessary to satisfy local funding standards. In December 2008, certain contributory funded benefit pension plans and unfunded lump-sum payment plans were amended and “Cash balance pension plans” were introduced. Participants receive an annual benefit in their cash balance pension plan accounts, which is computed based on compensation of the participants, adjusted for the changes in market interest rate. Interest rate applicable to cash balance pension plans is set inIn April of each fiscal year based on Japanese Yen LIBOR 12 months. The interest rate which was applied to the year ended March 31, 2020 was 0.09033%.
InApril
2020, certain Japanese entities amended their pension plans. Certain defined benefit pension plans and unfunded lump-sum payment plans were either closed for additional funding or abolished. Defined contribution pension plans and cash balance pension plans have replaced them for future contributions .contributions.Certain overseas subsidiaries have various local defined benefit plans covering certain employees. Nomura recognized an asset for surplus pension benefits for these plans amounting to ¥12,762¥8,912 million and ¥13,949¥7,911 million as of March 31, 20192021 and 2020,2022, respectively. Net periodic benefit cost The following table presents the components of net periodic benefit cost for defined benefit plans of Japanese entities for the years ended March 31, 2018, 20192020, 2021 and 2020.2022. Nomura’s measurement date is March 31 for defined benefit plans of Japanese entities. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | Expected return on plan assets | | | | ) | | | | ) | | | | ) | Amortization of net actuarial losses | | | | | | | | | | | | | Amortization of prior service cost | | | | ) | | | | ) | | | | ) | | | | | | | | | | | | | | Net periodic benefit cost | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 12,079 | | | ¥ | 6,721 | | | ¥ | 6,452 | | | | | 1,766 | | | | 1,786 | | | | 2,042 | | Expected return on plan assets | | | (6,038 | ) | | | (5,826 | ) | | | (6,055 | ) | Amortization of net actuarial losses | | | 5,654 | | | | 5,519 | | | | 3,955 | | Amortization of prior service cost | | | (1,137 | ) | | | (1,521 | ) | | | (1,599 | ) | | | | | | | | | | | | | | Net periodic benefit cost | | ¥ | 12,324 | | | ¥ | 6,679 | | | ¥ | 4,795 | | | | | | | | | | | | | | |
Prior service cost is amortized on a straight-line basis over the average remaining service period of active participants. Gains and losses in excess of 10% of the greater of the projected benefit obligation or the fair value of plan assets are amortized over the average remaining service period of active participants, which is 14 years.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Benefit obligations and funded status The following table presents a reconciliation of changes in projected benefit obligation (“PBO”) and the fair value of plan assets, as well as a summary of the funded status of Japanese entities’ plans as of, and for the years ended March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | As of or for the year ended March 31 | | | | | | | | | Change in projected benefit obligation: | | | | | | | | | Projected benefit obligation at beginning of year | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | ) | | | | ) | Amendments of pension benefit plans | | | | | | | | ) | Acquisition, divestitures and other | | | | | | | | | | | | | | | | | | Projected benefit obligation at end of year | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | Fair value of plan assets at beginning of year | | ¥ | | | | ¥ | | | Actual return on plan assets | | | | | | | | ) | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | Fair value of plan assets at end of year | | ¥ | | | | ¥ | | | | | | | | | | | | Funded status at end of year | | | | ) | | | | ) | | | | | | | | | | Amounts recognized in the consolidated balance sheets | | ¥ | | ) | | ¥ | | ) | | | | | | | | | |
| | | | | | | | | | | | | | | As of or for the year ended March 31 | | | | | | | | | Change in projected benefit obligation: | | | | | | | | | Projected benefit obligation at beginning of year | | ¥ | 303,523 | | | ¥ | 295,810 | | | | | 6,721 | | | | 6,452 | | | | | 1,786 | | | | 2,042 | | | | | (3,593 | ) | | | 1,433 | | | | | (12,656 | ) | | | (12,683 | ) | Acquisition, divestitures and other | | | 29 | | | | (15 | ) | | | | | | | | | | Projected benefit obligation at end of year | | ¥ | 295,810 | | | ¥ | 293,039 | | | | | | | | | | | | | | | | | | | | Fair value of plan assets at beginning of year | | ¥ | 225,744 | | | ¥ | 234,747 | | Actual return on plan assets | | | 19,126 | | | | 5,464 | | | | | 825 | | | | 815 | | | | | (10,948 | ) | | | (9,565 | ) | | | | | | | | | | Fair value of plan assets at end of year | | ¥ | 234,747 | | | ¥ | 231,461 | | | | | | | | | | | Funded status at end of year | | | (61,063 | ) | | | (61,578 | ) | | | | | | | | | | Amounts recognized in the consolidated balance sheets | | ¥ | (61,063 | ) | | ¥ | (61,578 | ) | | | | | | | | | |
The accumulated benefit obligation (“ABO”) was ¥315,423¥295,810 million and ¥303,523¥293,039 million as of March 31, 20192021 and 2020,2022, respectively. In April 2020, defined contribution pension plans and cash balance pension plans were adopted for future contributions following the amendments of pension benefit plans. Certain contributory defined benefit pension plans were closed for additional funding and will be managed within the accumulated funds. Unfunded lump-sum payment plans were abolished and transferred to cash balance plans with the calculated amount of lump-sum retirement payment as of the amendment date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents the PBO, ABO and fair value of plan assets for Japanese entities’ plans with ABO and PBO in excess of plan assets as of March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | Plans with ABO in excess of plan assets: | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | Fair value of plan assets | | | | | | | | | Plans with PBO in excess of plan assets: | | | | | | | | | | | ¥ | | | | ¥ | | | | | | | | | | | | Fair value of plan assets | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Plans with ABO in excess of plan assets: | | | | | | | | | | | ¥ | 61,063 | | | ¥ | 62,457 | | | | | 61,063 | | | | 62,457 | | Fair value of plan assets | | | 0— | | | | 0— | | Plans with PBO in excess of plan assets: | | | | | | | | | | | ¥ | 61,063 | | | ¥ | 62,457 | | | | | 61,063 | | | | 62,457 | | Fair value of plan assets | | | 0— | | | | 0— | |
The following table presents pre-tax amounts of Japanese entities’ plans deferred in Accumulated other comprehensive income (loss) that have not yet been recognized as components of net periodic benefit cost during the year ended March 31, 2020.2022.Pre-tax amounts of Japanese entities’ plans in accumulated other comprehensive income which are expected to be recognized as components of net periodic benefit cost over the next fiscal year are as follows. The following table presents the weighted-average assumptions used to determine projected benefit obligations of Japanese entities’ plans as of March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | % | | | | % | Rate of increase in compensation levels | | | | % | | | | % |
| | | | | | | | | | | | | | | | | | | | | | | 0.7 | % | | | 0.8 | % | Rate of increase in compensation levels | | | 0.3 | % | | | 0.3 | % | | | | 2.9 | % | | | 2.9 | % |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents the weighted-average assumptions used to determine the net periodic benefit cost of Japanese entities’ plans as of March 31, 2018, 20192020, 2021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | % | | | | % | | | | % | Rate of increase in compensation levels | | | | % | | | | % | | | | % | Expected long-term rate of return on plan assets | | | | % | | | | % | | | | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 0.6 | % | | | 0.6 | % | | | 0.7 | % | Rate of increase in compensation levels | | | 1.6 | % | | | 0.3 | % | | | 0.3 | % | Expected long-term rate of return on plan assets | | | 2.6 | % | | | 2.6 | % | | | 2.6 | % | | | | 3.3 | % | | | 3.0 | % | | | 2.9 | % |
Nomura generally determines the discount rates for its defined benefit plans by referencing indices for long-term, high-quality debt securities and ensuring that the discount rate does not exceed the yield reported for those indices after adjustment for the duration of the plans’ liabilities. Nomura uses the expected long-term rate of return on plan assets to compute the expected return on assets. Nomura’s approach in determining the long-term rate of return on plan assets is primarily based on historical financial market relationships that have existed over time with the presumption that this trend will generally remain constant in the future. Plan assets are managed with an objective to generate sufficient long-term value in order to enable future pension payouts. While targeting a long-term rate of return on plan assets, Nomura aims to minimize short-term volatility by managing the portfolio through diversifying risk. Based on this portfolio policy, the plan assets are invested diversely. The plan assets of domestic plans target to invest 15% 15in equities (including private equity investments), 44% 44in debt securities, 25% 25in life insurance company general accounts, and 16% 16in other investments. Investment allocations are generally reviewed and revised at the time of the actual revaluation that takes place every five years or when there is a significant change in the portfolio assumptions. For details of the levels of inputs used to measure the fair value of plan assets, see Note 2 “ Fair value measurementsmeasurements. ” .
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following tables present information about the fair value of plan assets of Japanese entities’ plans as of March 31, 20192021 and March 31, 20202022 within the fair value hierarchy. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Private equity and pooled investments (1) | | | | | | | | | | | | | | | | | Japanese government securities | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | | Bank and corporate debt securities | | | | | | | | | | | | | | | | | Investment trust funds and other (2)(3) | | | | | | | | | | | | | | | | | Life insurance company general accounts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Private equity and pooled investments (1) | | | | | | | | | | | | | | | | | Japanese government securities | | | | | | | | | | | | | | | | | Foreign government, agency and municipal securities | | | | | | | | | | | | | | | | | Bank and corporate debt securities | | | | | | | | | | | | | | | | | Investment trust funds and other (2)(3) | | | | | | | | | | | | | | | | | Life insurance company general accounts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Private equity and pooled investments (1) | | ¥ | 0— | | | ¥ | 614 | | | ¥ | 33,384 | | | ¥ | 33,998 | | Japanese government securities | | | 21,047 | | | | 0— | | | | 0— | | | | 21,047 | | Investment trust funds and other (2)(3) | | | 0— | | | | 24,581 | | | | 36,335 | | | | 60,916 | | Life insurance company general accounts | | | 0— | | | | 72,106 | | | | 0— | | | | 72,106 | | | | | 0— | | | | 35,857 | | | | 0— | | | | 35,857 | | | | | | | | | | | | | | | | | | | | | ¥ | 21,047 | | | ¥ | 133,158 | | | ¥ | 69,719 | | | ¥ | 223,924 | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Private equity and pooled investments (1) | | ¥ | 0— | | | ¥ | 740 | | | ¥ | 29,081 | | | ¥ | 29,821 | | Japanese government securities | | | 20,469 | | | | 0— | | | | 0— | | | | 20,469 | | Investment trust funds and other (2)(3) | | | 0— | | | | 19,842 | | | | 27,575 | | | | 47,417 | | Life insurance company general accounts | | | 0— | | | | 73,314 | | | | 0— | | | | 73,314 | | | | | 0— | | | | 33,575 | | | | 0— | | | | 33,575 | | | | | | | | | | | | | | | | | | | | | ¥ | 20,469 | | | ¥ | 127,471 | | | ¥ | 56,656 | | | ¥ | 204,596 | | | | | | | | | | | | | | | | | | |
(1) | Includes corporate type equity investments. |
(2) | Includes mainly debt investment funds. Hedge funds and real estate funds are also included. |
(3
)(3) | Certain assets that are measured at fair value using net asset value per share as a practical expedient have not been classified in the fair value hierarchy. As of March 31, 2019 2021 and March 31,2020
,2022, the fair values of these assets were ¥6,462¥10,823 million and ¥6,401¥26,865 million, respectively. |
The fair value of plan assets of non-Japanese entities’ plans as of March 31, 20192021 was ¥3,711¥1,543 million, ¥167¥2,192 million and ¥38,991¥39,572 million which were classified in Level 1, Level 2 and Level 3 of the fair value hierarchy, respectively. The fair value of plan assets of non-Japanese entities’ plans as of March 31, 20202022 was ¥1,766¥1,543 million, ¥1,522¥2,181 million and ¥37,703¥36,129 million which were classified in Level 1, Level 2 and Level 3 of the fair value hierarchy, respectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
See Note 2 “ ” for further information regarding how Nomura estimates fair value for specific types of financial instruments. The following tables present information about plan assets of Japanese entities’ plans for which Nomura has utilized significant Level 3 valuation inputs to estimate fair value. | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2019 | | | | | | | | | | | | | | | | | | Private equity and pooled investments | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | Investment trust funds and other | | | | | | | | | | | | | | | | | | | | | | | �� | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2020 | | | | | | | | | | | | | | | | | | Private equity and pooled investments | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | Investment trust funds and other | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2021 | | | | | | |
| | |
| | |
| | |
| | Private equity and pooled investments | | ¥ | 23,465 | | | ¥ | 11,225 | | | ¥ | (1,306 | ) | | ¥ | 33,384 | | Investment trust funds and other | | | 41,616 | | | | 2,925 | | | | (8,206 | ) | | | 36,335 | | | | | | | | | | | | | | | | | | | | | ¥ | 65,081 | | | ¥ | 14,150 | | | ¥ | (9,512 | ) | | ¥ | 69,719 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2022 | | | | | | | | | | | | | | | | | | Private equity and pooled investments | | ¥ | 33,384 | | | ¥ | 1,374 | | | ¥ | (5,677 | ) | | ¥ | 29,081 | | Investment trust funds and other | | | 36,335 | | | | (532 | ) | | | (8,228 | ) | | | 27,575 | | | | | | | | | | | | | | | | | | | | | ¥ | 69,719 | | | ¥ | 842 | | | ¥ | (13,905 | ) | | ¥ | 56,656 | | | | | | | | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) fair value of Level 3 plan assets of non-Japanese entities’ plans, mainly consisting of annuities, was ¥38,991¥ 39,572 million and ¥37,703¥ 36,129 million as of March 31, 20192021 and 2020,2022, respectively. The amount of unrealized profit (loss) of Level 3 assets was ¥4,358 ¥ (2,039)million and ¥2,509 ¥ (4,060)million as of March 31, 20192021 and 2020,2022, respectively. The amounts of gains and losses, purchases and sales other than above, transfers between Level 1 or Level 2 and Level 3 relating to these assets during the years ended March 31, 20192021 and 20202022 were not significant. Following the amendments of pension benefit plans in Japanese entities, certain contributory funded benefit pension plans were closed for additional funding and will be managed within the accumulated funds. The following table presents the expected benefit payments of Japanese entities’ plans during the next five fiscal years and in aggregate for the five fiscal years thereafter.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
| | | | | | | | | | | ¥ | 14,517 | | | | | 14,394 | | | | | 15,159 | | | | | 14,528 | | | | | 13,993 | | | | | 62,226 | |
Defined contribution pension plans— In addition to defined benefit pension plans, the Company, NSC and other Japanese and non-Japanese subsidiaries have defined contribution pension plans. Nomura contributed ¥3,627¥3,585 million, ¥3,614¥6,478 million and ¥3,585¥6,709 million to defined contribution pension plans for Japanese entities’ plans for the years ended March 31, 2018, 20192020, 2021 and 2020,2022, respectively. The contributions to overseas defined contribution pension plans were ¥9,265¥8,497 million, ¥9,293¥8,035 million and ¥8,497¥9,215 million for the years ended March 31, 2018, 20192020, 2021 and 2020,2022, respectively. The Company and certain subsidiaries provide certain health care benefits to both active and retired employees through NSHIS. The Company and certain subsidiaries also sponsor certain health care benefits to retired employees (“Special Plan”) and who participate in the Special Plan on a pay-all basis, i.e., by requiring a retiree contribution based on the estimated per capita cost of coverage. The Special Plan is a multi-employer post-retirement plan because it is jointly administered by NSHIS and the Japanese government, and the funded status of it is not computed separately. Therefore, although the Company and certain subsidiaries contribute some portion of the cost of retiree health care benefits not covered through retiree contributions, the Company and certain subsidiaries do not reserve for future costs. The health care benefit costs, which are equivalent to the required contribution, amounted to ¥8,082¥9,308 million, ¥9,828¥9,463 million and ¥9,308 ¥10,035 million for the years ended March 31, 2018, 20192020, 2021 and 2020,2022, respectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 14. Deferred compensation awards: issues deferred compensation awards to senior management and employees, certain of which are linked to the price of the Company’s common stock, in order to retain and motivate key staff. These stock-based compensation awards comprise Restricted Stock Unit (“RSU”) awards, Plan A and Plan B Stock Acquisition Right (“SAR”) awards, Notional Stock Unit (“NSU”) awards, and Collared Notional Stock Unit (“CSU”) awards. SAR Plan A awards are awards of stock options while RSU awards, SAR Plan B awards, NSU awards and CSU awards are analogous to awards of restricted common stock. The Company also issues other deferred compensation awards, namely Notional Indexed Unit (“NIU”) awards which are linked to a world stock index quoted by Morgan Stanley Capital International. Certain deferred compensation awards include “Full Career Retirement” (“FCR”) provisions which permit recipients of the awards to continue to vest in the awards upon voluntary termination of employment if certain criteria based on corporate title and length of service within Nomura are met. The requisite service period for these awards ends on the earlier of the contractual vesting date and the date that the recipients become eligible for or claim FCR. Unless indicated below, deferred compensation awards are generally reduced, forfeited or clawed back in the event of termination of employment, material restatements of financial statements, material conduct issues, material damage to Nomura’s business or reputation, material downturns in the performance of the Nomura group and/or a material failure of risk management.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company introduced RSU awards in the fiscal year ended March 31, 2018, and granted the first RSU awards in May 2018. For each RSU award, one common stock of the Company is delivered. The awards generally have a graded vesting period over three years with an extending vesting period of up to seven years for certain senior management and employees in order to meet local regulatory requirements based on the role they perform within Nomura. The grant date fair value per award is determined using the price of the Company’s common stock. The following table presents activity relating to RSU awards for the year ended March 31, 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | Outstanding as of March 31, 2019 | | | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | Outstanding as of March 31, 2020 | | | | | | ¥ | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | |
| | |
| | Outstanding as of March 31, 2021 | | | 115,287,730 | | | ¥ | 427 | | | | 1.0 | | | | | 64,439,400 | | | | 507 | | | | | | | | | (9,223,711 | ) | | | 468 | | | | | | | | | (48,384,029 | ) | | | 427 | | | | | | | | | | | | | | | | | | | Outstanding as of March 31, 2022 | | | 122,119,390 | | | ¥ | 466 | | | | 1.0 | | | | | | | | | | | | | | |
The weighted-average grant date fair value per award for the year ended March 31, 20192021 and 20202022 was ¥530¥418 and ¥365,¥507, respectively.
There were no vested RSU awards nor delivered shares during the year ended March 31, 2019.
The total intrinsic value of RSU awards vested during the year ended March 31, 2020 2022 was ¥6,613¥28,076 million. The total of 9,926,38529,972,792 shares was delivered during the year ended March 31, 20202022 and its intrinsic value was ¥ 6,231¥28,704 million. The aggregate intrinsic value of RSU awards outstanding as of March 31, 20202022 was ¥28,997¥62,916 million.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) of March 31 2020,, 2022, total unrecognized compensation cost relating to RSU awards was ¥3,681¥ 8,700 million which is expected to be recognized over a weighted average period of 1.6 1.8years. The Company issues SAR Plan A awards linked to the price of the Company’s common stock pursuant to several stock option plans. These awards vest and are exercisable into the Company’s common stock approximately two years after grant date and expire approximately seven years after grant date. The exercise price is generally not less than the fair value of the Company’s common stock on grant date. These awards are subject to the above reduction and forfeiture provisions but are not subject to claw back.
The grant date fair value of SAR Plan A awards is estimated using a Black-Scholes option-pricing model and using the following assumptions:
Expected volatilities based on historical volatility of the Company’s common stock;
Expected dividend yield based on the current dividend rate at the time of grant;
Expected lives of the awards determined based on historical experience; and
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Expected risk-free interest rate based on Japanese Yen swap rate with a maturity equal to the expected lives of the options.
The weighted-average grant date fair value of SAR Plan A awards granted during the years ended March 31, 2018 and 2019 was ¥110 and ¥79 per share, respectively. There was 0 SAR Plan A award granted during the year ended March 31, 2020. The weighted-average assumptions used in each of these years were as follows.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | % | | | | % | | | | % | | | | | % | | | | % | | | | % | Expected lives (in years) | | | | | | | | | | | | | | | | | % | | | | % | | | | % |
The following table presents activity relating to SAR Plan A awards for the year ended March 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | Outstanding as of March 31, 2019 | | | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | ) | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | Outstanding as of March 31, 2020 | | | | | | ¥ | | | | | | | | | | | | | | | | | | | | Exercisable as of March 31, 2020 | | | | | | ¥ | | | | | | | | | | | | | | | | | | | |
The total intrinsic value of SAR Plan A awards exercised during the years ended March 31, 2018, 2019 and 2020 was ¥450 million, ¥241 million and ¥139 million, respectively.
The aggregate intrinsic value of SAR Plan A awards outstanding and exercisable as of March 31, 2020 was both ¥nil, respectively.
As of March 31, 2020, total unrecognized compensation cost relating to SAR Plan A awards was ¥62 million which is expected to be recognized over a weighted average period of 0.6 years. The total fair value of SAR Plan A awards which vested during the years ended March 31, 2018, 2019 and 2020 was ¥nil, respectively.
The Company issues SAR Plan B awards linked to the price of the Company’s common stock pursuant to several stock unit plans. These awards vest and are exercisable into the Company’s common stock, have an exercise price of ¥1 per share and graded vesting generally over three years with certain longer vesting or holding periods where required under local regulations. The grant date fair value of SAR Plan B awards is determined using the price of the Company’s common stock.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table presents activity relating to SAR Plan B awards for the year ended March 31, 2020.2022. No new SAR Plan B awards have been granted since April 1, 2018. | | | | | | | | | | | | | | | | | | | | | | | Outstanding as of March 31, 2019 | | | | | | ¥ | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | ) | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | Outstanding as of March 31, 2020 | | | | | | ¥ | | | | | | | | | | | | | | | | | | | | Exercisable as of March 31, 2020 | | | | | | ¥ | | | | | | | | | | | | | | | | | | | |
The weighted-average grant date fair value per share for the years ended March 31, 2018 was ¥588. No SAR Plan B award was granted for the year ended March 31, 2019 and 2020.
| | | | | | | | | | | | | | |
| | |
| | |
| | Outstanding as of March 31, 2021 | | | 12,967,100 | | | ¥ | 509 | | | | 2.7 | | | | | | | | | | | | | | | | | | (3,697,000 | ) | | | 535 | | | | | | | | | | | | | | | | | | | | | | (1,356,300 | ) | | | 397 | | | | | | | | | | | | | | | | | | | Outstanding as of March 31, 2022 | | | 7,913,800 | | | ¥ | 516 | | | | 2.3 | | | | | | | | | | | | | | | Exercisable as of March 31, 2022 | | | 6,831,500 | | | ¥ | 526 | | | | 1.8 | | | | | | | | | | | | | | |
The total intrinsic value of SAR Plan B awards exercised during the years ended March 31, 2018, 20192020, 2021 and 20202022 was ¥21,740¥7,640 million, ¥8,896¥4,878 million and ¥7,640¥2,547 million, respectively. The aggregate intrinsic value of SAR Plan B awards outstanding and exercisable as of March 31, 20202022 was ¥10,204¥4,069 million and ¥7,394¥3,513 million, respectively. As of March 31, 2020,2022, total unrecognized compensation cost relating to SAR Plan B awards was ¥30¥1 million which is expected to be recognized over a weighted average period of 1.7 years. The total fair value of SAR Plan B awards which vested during the years ended March 31, 2018, 20192020, 2021 and 20202022 was ¥17,539¥4,309 million, ¥10,757¥1,784 million and ¥4,309¥467 million, respectively. compensation expense recognized within Non-interest expenses— expensesCompensation and benefits in the consolidated statements of income relating to RSU SAR Plan A, and SAR Plan B awards for the years ended March 31, 2018, 20192020, 2021 and 20202022 was ¥9,650¥12,694 million, ¥21,814¥28,251 million and ¥12,694¥27,941 million, respectively. Cash received from the exercise of SAR Plan A and SAR Plan B awards during the year ended March 31, 20202022 was ¥285¥11 million and the tax benefit realized from exercise of these awards was ¥785¥206 million. Total related tax benefits recognized in the consolidated statements of income relating to RSU and SAR Plan Aand
SAR Plan B awards for the years ended March 31, 2018, 20192020, 2021 and 20202022 were ¥566¥13 million, ¥90 ¥0nilmillion and ¥13¥0nil million,
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) dilutive effect of outstanding deferred compensation plans is included in the weighted average number of shares outstanding used in diluted EPS computations. See Note 12 for further information. NSU and CSU awards are cash-settled awards linked to the price of the Company’s common stock. NSU awards replicate the key features of SAR Plan B awards described above but are settled in cash rather than exercisable into the Company’s common stock. CSU awards are similar to NSU awards but exposure to movements in the price of the Company’s common stock is subject to a cap and floor. Both types of award have graded vesting periods generally over three years with certain longer vesting periods where required by local regulations.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The fair value of NSU and CSU awards are determined using the price of the Company’s common stock. The following table presents activity related to NSU and CSU awards for the year ended March 31, 2020.2022. No new CSU awards have been granted since April 1, 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding as of March 31, 2019 | | | | | | ¥ | | | | | | | | ¥ | | | | | | | | | | | (1) | | | | | | | | | | | | | ) | | | | (2) | | | | ) | | | | (2) | | | | | ) | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | Outstanding as of March 31, 2020 | | | | | | ¥ | | (3) | | | | | | ¥ | | (3) | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | Outstanding as of March 31, 2021 | | | 19,951,962 | | | ¥ | 539 | | | | 1,867,400 | | | ¥ | 636 | | | | | 11,528,713 | | | | 575 | (1) | | | | | | | | | | | | (12,555,940 | ) | | | 577 | (2) | | | (929,732 | ) | | | 601 | (2) | | | | (926,410 | ) | | | | | | | (512 | ) | | | | | | | | | | | | | | | | | | | | | | Outstanding as of March 31, 2022 | | | 17,998,325 | | | ¥ | 445 | (3) | | | 937,156 | | | ¥ | 606 | (3) | | | | | | | | | | | | | | | | | |
(1) | Weighted-average price of the Company’s common stock used to determine number of awards granted. |
(2) | Weighted-average price of the Company’s common stock used to determine the final cash settlement amount of the awards. |
(3) | The price of the Company’s common stock used to remeasure the fair value of the remaining outstanding unvested awards as of March 31, 2020.2022. |
Total compensation expense recognized within Non-interest expenses— expensesCompensation and benefits in the consolidated statements of income relating to NSU and CSU awards for the years ended March 31, 2018, 20192020, 2021 and 20202022 was ¥24,286¥4,639 million, ¥5,077¥8,043 million and ¥4,639¥4,566 million, respectively. Total unrecognized compensation cost relating to NSU awards, based on the fair value of these awards as of March 31, 2020,2022, was ¥613¥280 million, which is expected to be recognized through the consolidated statements of income over a remaining weighted-average period of 0.91.1 years. The total fair value of NSU awards which vested during the years ended March 31, 2018, 20192020, 2021 and 20202022 was ¥17,103¥9,980 million, ¥11,481¥8,426 million and ¥9,980¥7,247 million, respectively. Total unrecognized compensation cost relating to CSU awards, based on the fair value of these awards as of March 31, 2020,2022, was ¥37¥0nil million which is expected to be recognized through the consolidated statements of income over a remaining weighted-average period of 2.0 years.. The total fair value of CSU awards which vested during the years ended March 31, 2018, 20192020, 2021 and 20202022 was ¥11,871¥3,445 million, ¥6,282¥576 million and ¥3,445¥559 million, respectively. In addition to the stock-based compensation awards described above, Nomura also grants NIU awards to senior management and employees. NIU awards are cash-settled awards linked to a world stock index quoted by Morgan Stanley Capital International, with graded vesting periods generally over three years with certain longer vesting periods where required by local regulations.
The fair value of NIU awards is determined using the price of the index.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents activity relating to NIU awards for the year ended March 31, 2020. No new NIU awards have been granted since April 1, 2018.
| | | | | | | | | | | | | | | | Outstanding as of March 31, 2019 | | | | | | $ | | | | | | | | | | | | | | | | ) | | | | (2) | | | | | ) | | | | | | | | | | | | | | Outstanding as of March 31, 2020 | | | | | | $ | | (3) | | | | | | | | | |
(1) | The price of each unit is determined using 1/1000th of the index price. |
(2) | Weighted-average index price used to determine the final cash settlement amount of the awards. |
(3) | Index price used to remeasure the total fair value of the remaining outstanding unvested awards as of March 31, 2020. |
Total compensation expense recognized withinNon-interest expenses—Compensation and benefits
in the consolidated statements of income relating to NIU awards for the year ended March 31, 2018, 2019 and 2020 was ¥8,697 million, ¥1,731 million and ¥237 million, respectively.Total unrecognized compensation cost relating to NIU awards, based on the fair value of these awards as of March 31, 2020, was ¥10 million which is expected to be recognized through the consolidated statements of income over a remaining weighted-average period of 2.0 years. The total fair value of NIU awards which vested during the years ended March 31, 2018, 2019 and 2020 was ¥7,669 million, ¥5,091 million and ¥2,795 million, respectively. Total tax benefits recognized in the consolidated statements of income for compensation expense relating to NSU, CSU and NIUCSU awards for the years ended March
31 2018, 2019 , 2020, 2021and 2020 2022were ¥779¥ 168 million, ¥220¥ 205 million and ¥168¥ 125 million, respectively. On May 27, 2020,19, 2022, the Company passed a resolution to grant RSU awards to certain senior management and employees. T
otal Total of 78,054,800100,057,000 RSU awards have been granted which generally have a graded vesting period from one to three years with an extending vesting period of up to seven years for certain senior management and employees in order to meet local regulatory requirements based on the role they perform within Nomura. In June2020On May 25, 2022, Nomura
, Nomura also granted NSU awards to senior management and employees in countries where RSU awards are less favorably treated from tax or other perspectives. These NSU awards have a total grant date fair value of ¥6 billion and vesting periods of up to seven years. 15. Restructuring initiatives: Nomura continues to experience a major structural shift such as a breakdown of the traditional investment banking business model, advances in digitization, and demographic shifts due to the shrinking population and aging society in Japan. To respond to the changing environment created by these shifts, Nomura implemented various restructuring initiatives during the year ended March 31, 2019 to swiftly reengineer its business platforms and change its business approach in order to achieve sustainable growth in any business environment. In particular, Nomura has restructured its management reporting framework to eliminate the concept of regions to
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
minimize duplication between businesses and region, reduce the number of corporate functions, downscale unprofitable and low growth businesses and reduce its activities in EMEA. During the year ended March 31, 2020, this restructuring initiative is almost completed.
As a result of these initiatives, Nomura recognized ¥10,348 million of severance costs reported withinNon-interest expenses—Compensation and benefits
in the consolidated statements of income during the year ended March 31, 2019 and within Nomura’s Wholesale and Other segments. As of March 31, 2019, these costs were reported as liabilities withinin the consolidated statements of financial position. Liabilities relating to these restructuring costs (including currency translation adjustments) were ¥507 million as of March 31, 2020 and ¥9,305 million were settled during the year ended March 31
, 2020.Nomura also recognized ¥4,390 million of branch consolidation costs reported withinNon-interest expenses—Occupancy and related depreciation
in the consolidated statements of income during the year ended March 31, 2020 and within Nomura’s Retail and Other segments. As of March 31, 2020, ¥813 million were reported as liabilities withinThe following table presents components of reported in the consolidated statements of income for the years ended March 31, 2018, 20192020, 2021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | 42,099 | | | ¥ | 73,534 | | | ¥ | 69,661 | | | | | 10,706 | | | | 17,853 | | | | 7,323 | | | | | | | | | | | | | | | | | | 52,805 | | | | 91,387 | | | | 76,984 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (23,512 | ) | | | (19,567 | ) | | | 1,561 | | | | | (399 | ) | | | (1,546 | ) | | | 1,545 | | | | | | | | | | | | | | | | | | (23,911 | ) | | | (21,113 | ) | | | 3,106 | | | | | | | | | | | | | | | | | ¥ | 28,894 | | | ¥ | 70,274 | | | ¥ | 80,090 | | | | | | | | | | | | | | |
The income tax benefit recognized from operating losses for the years ended March 31, 2018, 20192020, 2021 and 20202022 was ¥4,653¥1,195 million, ¥246¥97 million and ¥1,195¥6,007 million, respectively, which is included within deferred income tax expense above.
Company and its wholly-owned domestic subsidiaries have adopted the consolidated tax filing system permitted under Japanese tax law. The consolidated tax filing system only imposes a national tax. The effective statutory tax rate applicable to Nomura in Japan was approximately 31% as of March 31, 2018, March 31, 20192020, 2021 and March 31, 2020.2022, respectively. On March 27, 2020, the “Act to partially revise the Income Tax Act and Others ”(ActOthers” (Act No.8 of 2020) was enacted, effective for fiscal years beginning on or after April 1, 2022. As a result of the Act, the existing Consolidated Taxation system in Japan will be replaced with the Group Tax Sharing system. The Company does not expect any significant impact on its net deferred tax liabilities on adoption of the Act.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) On December 22, 2017, the Tax Cuts and Jobs Act (“the Act”) was enacted in the United States which significantly changes U.S. income tax law, including reducing the U.S. federal corporate income tax rate to 21%, broadening the U.S. tax base, introducing a territorial tax system and one time repatriation tax on U.S. entities for previously deferred earnings ofnon-U.S.investees, allowing full expensing of certain property assets and imposing certain additional taxes on payments made from U.S. entities to foreign related parties. As a result, Nomura recognized a reduction of ¥2,776 million in deferred tax liabilities and deferred tax expense during thefiscal year ended March 31, 2018. As a result of finalizing calculations around the impact from changes in certain assumptions and interpretations made by Nomura, certain actions to be taken by Nomura and additional guidance released by the U.S. tax authorities and other bodies after April 1, 2018, Nomura did not make any material adjustments to this estimate during the fiscal year ended March 31, 2019.
subsidiaries are subject to income taxes of the countries in which they operate. The relationship between income tax expense and pretax accounting income (loss) is affected by a number of items, including various tax credits, certain revenues not subject to income taxes, certain expenses not deductible for income tax purposes, changes in deferred tax valuation allowance and different enacted tax rates applicable to foreign subsidiaries. The following table presents a reconciliation of the effective income tax rate reflected in the consolidated statements of income to Nomura’s effective statutory tax rate for the years ended March 31, 2018, 20192020, 2021 and 2020.2022. The effective tax rate presented in the following table represents total income tax expense for the year as a percentage of Income (loss) before income taxes . For the years ended March 31, 2018 and 2020, where Nomura recognizedIncome before income taxes
for the years, reconciling items which increaseand therefore increase Nomura’s effective tax rate are shown as positive amounts. Conversely, reconciling items which reduceand reduce Nomura’s effective tax rate are shown as negative amounts. For the year ended March 31, 2019, Nomura recognizedand consequently, reconciling items shown in the table which increaseare presented as negative amounts and reconciling items which reduceare presented as positive amounts. | | | | | | | | | | | | | | | | | | | | | | | | | | | Nomura’s effective statutory tax rate | | | | % | | | | % | | | | % | | | | | | | | | | | | | | Changes in deferred tax valuation allowances | | | | ) | | | | ) | | | | ) | Additional taxable income | | | | | | | | ) | | | | | Non-deductible expenses (1) | | | | | | | | ) | | | | | | | | | ) | | | | | | | | ) | Dividends from foreign subsidiaries | | | | | | | | | | | | | Tax effect of undistributed earnings of foreign subsidiaries | | | | | | | | ) | | | | | Different tax rate applicable to income (loss) of foreign subsidiaries | | | | | | | | ) | | | | ) | Effect of changes in foreign tax laws | | | | | | | | | | | | ) | Effect of changes in domestic tax laws | | | | | | | | | | | | | Tax benefit recognized on the devaluation of investment in subsidiaries and affiliates | | | | | | | | | | | | ) | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | % | | | | )% | | | | % | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Nomura’s effective statutory tax rate | | | 31.0 | % | | | 31.0 | % | | | 31.0 | % | | | | | | | | | | | | | | Changes in deferred tax valuation allowances (3) | | | (0.3 | ) | | | 8.7 | | | | 18.0 | | Additional taxable income | | | 0.6 | | | | 0.7 | | | | 1.0 | | | | | 2.9 | | | | 7.1 | | | | 5.1 | | | | | (23.5 | ) | | | (4.5 | ) | | | (2.9 | ) | Dividends from foreign subsidiaries | | | 0.1 | | | | 0.0 | | | | 0.0 | | Tax effect of undistributed earnings of foreign subsidiaries | | | 0.2 | | | | 0.0 | | | | 0.1 | | Different tax rate applicable to income (loss) of foreign subsidiaries | | | (0.9 | ) | | | (4.0 | ) | | | 0.0 | | Effect of changes in foreign tax laws (3) | | | (0.9 | ) | | | 1.1 | | | | (14.4 | ) | Tax benefit recognized on the outside basis differences for investment in subsidiaries and affiliates (2) | | | (0.1 | ) | | | (8.7 | ) | | | 0.0 | | | | | 2.5 | | | | (0.9 | ) | | | (2.6 | ) | | | | | | | | | | | | | | | | | 11.6 | % | | | 30.5 | % | | | 35.3 | % | | | | | | | | | | | | | |
(1) | during the year ended March 31, 2019 included approximately ¥21 billion relating to goodwill impairment losses (which increased Nomura’s effective tax rate by 56.3%) and approximately ¥13 billion relating to litigation provisions and settlements (which increased Nomura’s effective tax rate by 34.0%). |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(2) | during the year ended March 31, 2020 includes approximately ¥53 ¥53 billion of the tax effect from non-taxable dividend income from affiliated Nomura companies, including deemed dividend (which decreased Nomura’s effective tax rate by 21.2%). 21.2% |
(2) | Tax benefit recognized on the outside basis differences for investment in subsidiaries and affiliates during the year ended March 31, 2021 of approximately ¥21 billion (which decreased Nomura’s effective tax rate by 9.1%) arises from the recognition of deferred tax assets from the decision and commitment of Nomura management to liquidate a certain wholly-owned subsidiary within Nomura in the foreseeable future. The valuation allowances of ¥3 billion have been recognized against these deferred tax assets, the impact of which are reported inChanges in deferred tax valuation allowances . for the same period. |
(3) | Finance Act 2021, enacted on June 10, 2021, increases the headline U.K. corporation tax rate from 19%to 25% onApril2023. Deferred tax assets and liabilities as of the balance sheet date are calculated by reference to the most appropriate enacted rates as of March 31, 2022. As a result of the change in closing deferred tax rate, Nomura recognized a movement inEffect of changes in foreign tax laws of ¥36 billion (which decreased Nomura’s effective tax rate by 16.0%), which was offset by a movement in Changes in deferred tax valuation allowances of ¥36 billion (which increased Nomura’s effective tax rate by 16.0%) during the year ended March 31, 2022. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) following table presents the significant components of deferred tax assets and liabilities as of March 31, 20192021 and 2020,2022, before offsetting of amounts which relate to the same tax-paying component within a particular tax jurisdiction. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation, amortization and valuation of fixed assets | | ¥ | | | | ¥ | | | Investments in subsidiaries and affiliates | | | | | | | | | Valuation of financial instruments | | | | | | | | | Accrued pension and severance costs | | | | | | | | | Other accrued expenses and provisions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross deferred tax assets | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | Total deferred tax assets | | | | | | | | | | | | | | | | | | | | | | | | | | | Investments in subsidiaries and affiliates | | | | | | | | | Valuation of financial instruments | | | | | | | | | Undistributed earnings of foreign subsidiaries | | | | | | | | | Valuation of fixed assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total deferred tax liabilities | | | | | | | | | | | | | | | | | | Net deferred tax assets (liabilities) | | ¥ | | ) | | ¥ | | ) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation, amortization and valuation of fixed assets | | ¥ | 22,770 | | | ¥ | 30,441 | | Investments in subsidiaries and affiliates | | | 20,220 | | | | 21,390 | | Valuation of financial instruments | | | 73,905 | | | | 102,021 | | Accrued pension and severance costs | | | 19,947 | | | | 20,492 | | Other accrued expenses and provisions | | | 60,280 | | | | 79,061 | | | | | 353,326 | | | | 370,481 | | | | | 52,251 | | | | 49,060 | | | | | 15,011 | | | | 15,425 | | | | | | | | | | | Gross deferred tax assets | | | 617,710 | | | | 688,371 | | | | | (428,014 | ) | | | (466,145 | ) | | | | | | | | | | Total deferred tax assets | | | 189,696 | | | | 222,226 | | | | | | | | | | | | | | | | | | | | Investments in subsidiaries and affiliates | | | 85,636 | | | | 91,040 | | Valuation of financial instruments | | | 40,807 | | | | 85,301 | | Undistributed earnings of foreign subsidiaries | | | 2,486 | | | | 2,745 | | Valuation of fixed assets | | | 23,521 | | | | 23,962 | | | | | 51,671 | | | | 48,519 | | | | | 5,546 | | | | 7,044 | | | | | | | | | | | Total deferred tax liabilities | | | 209,667 | | | | 258,611 | | | | | | | | | | | Net deferred tax assets (liabilities) | | ¥ | (19,971 | ) | | ¥ | (36,385 | ) | | | | | | | | | |
After offsetting deferred tax assets and liabilities which relate to the same tax-paying component within a particular tax jurisdiction, net deferred tax assets reported within in the consolidated balance sheets were ¥15,026¥30,433 million and ¥13,431¥15,562 million as of March 31, 20192021 and 2020,2022, respectively and net deferred tax liabilities reported within in the consolidated balance sheets were ¥84,569¥50,404 million and ¥66,907¥51,947 million as of March 31, 20192021 and 2020,2022, respectively.
As of March 31, 2020,2022, no deferred tax liabilities have been recognized for undistributed earnings of foreign subsidiaries totaling ¥19,171¥ 19,027 million which are not expected to be remitted in the foreseeable future. It is not practicable to determine the amount of income taxes payable in the event all such foreign earnings are repatriated.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table presents changes in total valuation allowances established against deferred tax assets for the years ended March 31, 2018, 20192020, 2021 and 2020.2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | ¥ | | | | ¥ | | | | ¥ | | | Net change during the year | | | | ) (1) | | | | (2) | | | | ) (3) | | | | | | | | | | | | | | | | ¥ | | | | ¥ | | | | ¥ | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of year | | ¥ | 444,916 | | | ¥ | 388,411 | | | ¥ | 428,014 | | Net change during the year | | | (56,505 | ) (1) | | | 39,603 | | | | 38,131 | | | | | | | | | | | | | | | | | ¥ | 388,411 | | | ¥ | 428,014 | | | ¥ | 466,145 | | | | | | | | | | | | | | |
(1) | Primarily includes a reduction of ¥80,459 million of valuation allowances of certain foreign subsidiaries mainly due to changes in tax laws in the U.S., an increase of ¥17,340 million related to Japanese subsidiaries and the Company because of an increase in valuation allowances related to operating loss carryforwards, and a reduction of ¥34,093 million of valuation allowances related to Japanese subsidiaries and the Company as a result of changes in the expected realization of deferred tax assets. In total, ¥97,212 million of allowances decreased for the year ended March 31, 2018. |
(2) | Primarily includes an increase of ¥11,843 million of valuation allowances of certain foreign subsidiaries mainly due to an increase in valuation allowances related to operating loss carryforwards, partially offset by a decrease of valuation allowances related to accrued expenses and provisions, an increase of ¥6,265 million related to Japanese subsidiaries and the Company because of an increase in valuation allowances related to operating loss carryforwards recognized in the current year, an increase of ¥14,976 million of valuation allowances related to Japanese subsidiaries and the Company as a result of changes in the expected realization of deferred tax assets, and a reduction of ¥10,448 million of valuation allowances related to expiration of operating loss carryforwards. In total, ¥22,636 million of allowances increased for the year ended March 31, 2019. |
(3) | Primarily includes a reduction of ¥59,330 million of valuation allowances of certain foreign subsidiaries mainly by expiration of loss carryforwards, an increase of ¥11,462 million of valuation allowances mainly due to a decrease of Valuationvaluation of financial instruments,and ar
eduction reduction of ¥8,637million related to Japanese subsidiaries and the Company mainly by utilization of loss carryforwards. In total, ¥56,505 million of allowances decreased for the year ended March 31, 2020. |
(2) | Primarily includes an increase of ¥48,883 million of valuation allowances of certain foreign subsidiaries mainly due to an increase in valuation allowances related to operating loss carryforwards, a reduction of ¥5,871 million of valuation allowances mainly due to an increase in valuation of financial instruments, and a reduction of ¥3,409 million of valuation allowances related to Japanese subsidiaries and the Company mainly due to an increase of valuation of financial instruments and a decrease of accrued pension and severance costs. In total, ¥39,603 million of allowances increased for the year ended March 31, 2021. |
(3) | Primarily includes an increase of ¥51,706 million of valuation allowances of certain foreign subsidiaries mainly due to an increase in operating loss carryforwards, and a reduction of ¥13,575 million of valuation allowances related to Japanese subsidiaries and the Company mainly due to a decrease of operating loss carryforwards. In total, ¥38,131 million of allowances increased for the year ended March 31, 2022. |
As of March 31, 2020,2022, total operating loss carryforwards were ¥1,770,629¥2,039,600 million, which included ¥511,293¥545,946 million relating to the Company and domestic subsidiaries, ¥548,544 ¥624,763 million relating to foreign subsidiaries in the United Kingdom, ¥416,254 U.K., ¥568,273 million relating to foreign subsidiaries in the United States, ¥225,108U.S., ¥272,066 million relating to foreign subsidiaries in Hong Kong, and ¥69,430¥28,552 million relating to foreign subsidiaries in other tax jurisdictions. Of this total amount, ¥901,463¥1,101,276 million can be carried forward indefinitely, ¥728,859¥838,753 million expires by March 31, 20292031 and ¥140,307¥99,571 million expires in later fiscal years. These numbers are presented before offset with any uncertain tax position discussed later.In determining the amount of valuation allowances to be established as of March 31, 2020,2022, Nomura considered all available positive and negative evidence around the likelihood that sufficient future taxable income will be generated to realize the deferred tax assets in the relevant tax jurisdiction of the Company, its domestic subsidiaries and foreign subsidiaries. In Japan and other tax jurisdictions where domestic and foreign subsidiaries have experienced cumulative operating losses in recent years, these losses provided the most verifiable negative evidence available and outweigh positive evidence. While Nomura has considered certain future tax planning strategies as a potential source of future taxable income, no such strategies have been relied upon as positive evidence resulting in a reduction of valuation allowances in any major tax jurisdiction in which Nomura operates as of March 31, 2018, 20192020, 2021 and 2020.2022. In
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
addition, valuation allowances have not been reduced in any of these periods as a result of changing the weighting applied to positive or negative evidence in any of the major tax jurisdictions in which Nomura operates.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The determination of whether deferred tax assets will be realized, and therefore whether a valuation allowance is required, is inherently subjective and often requires management judgment around the future profitability of Nomura entities, an interpretation of tax rules by courts and regulatory authorities and tax examinations by taxing authorities, and the appropriate weighting of positive and negative evidence around the likelihood that sufficient future taxable income will be generated to realize deferred tax assets in the relevant tax jurisdiction. Although estimating future taxable income was increasingly subjective due to uncertainty in future profitability of Nomura as a result of the COVID-19 pandemic, it did not result in a significant impact on the determination of realization of deferred tax assetsassets.Nomura’s unrecognized tax benefits were ¥4,367 million and ¥35,774 million as of March 31, 2020.2021 and 2022 respectively. Out of the balance as of March 31, 2022, ¥6,273 million, if recognized, would favorably impact the effective tax rate in the future periods. The remaining balance would not favorably impact the effective tax rate as it is expected to increase operating loss carryforwards and corresponding valuation allowance. The total amount of unrecognized tax benefits was not significant as of March 31, 2018, 2019 and 2020. The movement of the gross amounts in unrecognized tax benefits during the year ended March 31, 2022 was an increase of ¥31,406 million of which ¥29,501 million is presented as a reduction to the deferred tax asset for a utilization of net operating loss carryforward. There were also no significant movements of the gross amounts in unrecognized tax benefits for the years ended March 31, 2020 and 2021. There were also no significant movements of the amount of interest and penalties recognized due to unrecognized tax benefits during the years ended March 31, 2018, 20192020, 2021 and 2020.2022. Nomura is under continuousregular examination by the Japanese National Tax Agency and other taxing authorities in the major jurisdictions in which Nomura operates. Nomura regularly assesses the likelihood of additional assessments in each tax jurisdiction and the impact on the consolidated financial statements. It is reasonably possible that there may be a significantan increase or decrease in unrecognized tax benefits within 12 months of March 31, 2020.2022 depending on the outcome of the examinations. Quantification of an estimated range cannot be made at this time due to the uncertainty of the potential outcomes. However, Nomura does not expect that any change in the gross balance of unrecognized tax benefits would have a material effect on its financial condition. Nomura operates in multiple tax jurisdictions, and faces audits from various taxing authorities regarding many issues including, but not limited to, transfer pricing, the deductibility of certain expenses, foreign tax credits and other matters. The table below presents information regarding the earliest year in which Nomura remains subject to examination in the major jurisdictions in which Nomura operates as of March 31, 2020.2022. Under Hong Kong Special Administrative Region tax law, the statute of limitation does not apply if an entity incurs taxable losses and is therefore not included in the table. (1) | The earliest year in which Nomura remains subject to examination for transfer pricing issues is2014
. |
(1) The earliest year in which Nomura remains subject to examination for transfer pricing issues is 2016.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 17.16. Other comprehensive income (loss):
The following tables present changes in Accumulated other comprehensive income (loss) for the years ended March 31, 20192021 and 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended March 31, 2019 | | | | | | | | | | | | | | | | | | Cumulative translation adjustments (1) | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | | Pension liability adjustment (2) | | | | ) | | | | ) | | | | | | | | ) | | | | ) | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | | | ¥ | | ) | | | | | | | | | | | | | | | | | | | | | |
2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended March 31, 2021 | | | |
| | |
| | |
| | |
| | |
| | Cumulative translation adjustments | | ¥ | (26,274 | ) | | ¥ | 47,673 | | | ¥ | (3,083 | ) | | ¥ | 44,590 | | | ¥ | 18,316 | | Pension liability adjustment (1) | | | (62,571 | ) | | | 16,140 | | | | 2,954 | | | | 19,094 | | | | (43,477 | ) | Own credit adjustments (2) | | | 62,740 | | | | (65,741 | ) | | | (9,982 | ) | | | (75,723 | ) | | | (12,983 | ) | | | | | | | | | | | | | | | | | | | | | | | | ¥ | (26,105 | ) | | ¥ | (1,928 | ) | | ¥ | (10,111 | ) | | ¥ | (12,039 | ) | | ¥ | (38,144 | ) | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended March 31, 2022 | | | |
| | |
| | |
| | |
| | |
| | Cumulative translation adjustments | | ¥ | 18,316 | | | ¥ | 118,574 | | | ¥ | 22 | | | ¥ | 118,596 | | | ¥ | 136,912 | | Pension liability adjustment (1) | | | (43,477 | ) | | | (2,156 | ) | | | 1,830 | | | | (326 | ) | | | (43,803 | ) | Own credit adjustments (2) | | | (12,983 | ) | | | 46,816 | | | | 1,031 | | | | 47,847 | | | | 34,864 | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | (38,144 | ) | | ¥ | 163,234 | | | ¥ | 2,883 | | | ¥ | 166,117 | | | ¥ | 127,973 | | | | | | | | | | | | | | | | | | | | | | |
(1) | Change in cumulative translation adjustments, net of tax in other comprehensive income (loss) for the year ended March 31, 2019 includes reclassification adjustment of ¥6,956 million for loss due to substantially complete liquidation of an investment in a foreign entity. The adjustment is recognized inNon-interest expenses-Other
. |
(2) | See Note 13 “ ” for further information. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended March 31, 2020 | | | | | | | | | | | | | | | | | | Cumulative translation adjustments | | ¥ | | | | ¥ | | ) | | ¥ | | | | ¥ | | ) | | ¥ | | ) | Pension liability adjustment (1) | | | | ) | | | | | | | | | | | | | | | | ) | | | | | | | | | | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ¥ | | ) | | ¥ | | ) | | ¥ | | | | ¥ | | | | ¥ | | ) | | | | | | | | | | | | | | | | | | | | | |
(2) | See Note 2 “” for further information. |
(1) | See Note 13 “Employee benefit plans
” for further information. |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following tables present significant reclassifications out of Accumulated other comprehensive income (loss) for the years ended March 31, 20192021 and 2020.2022. | | | | | | | | | | | | | | | | For the year ended March 31 | | | | | | | | | Affected line items in consolidated | | | comprehensive income (loss) | | | comprehensive income (loss) | | Cumulative translation adjustments: | | | | | | | | | | | | | ¥ | | ) | | ¥ | | ) | | Revenue Other / Non-interest expenses Other | | | | | | | | | | | | | | | | | | | | | | | | | | | ) | | | | ) | | | | | | | | | | | | | | | | | | | | | | | | Net income attributable to noncontrolling interests | | | | | | | | | | | | | | ¥ | | ) | | ¥ | | ) | | Net income (loss) attributable to NHI shareholders | | | | | | | | | | | |
| | | | | | | | | | | | | | | | For the year ended March 31 | | | | | | | | | Affected line items in consolidated | | |
comprehensive income (loss) | | |
comprehensive income (loss) | | Cumulative translation adjustments: | | | | | | | | | | | | | ¥ | 3,083 | | | ¥ | (21 | ) | | RevenueOther / Non-interest expensesOther | | | | — | | | | (1 | ) | | Income tax expense | | | | | | | | | | | | | | | 3,083 | | | | (22 | ) | | Net income (loss) | | | | | | | | | | | | | | | — | | | | 0— | | | Net income attributable to noncontrolling interests | | | | | | | | | | | | | | ¥ | 3,083 | | | ¥ | (22 | ) | | Net income (loss) attributable to NHI shareholders | | | | | | | | | | | | | | | | | | | For the year ended March 31 | | | | | | | | | Affected line items in consolidated | | |
comprehensive income (loss) | | |
comprehensive income (loss) | | Pension liability adjustment: | | | | | | | | | | | | | ¥ | (4,167 | ) | | ¥ | (2,585 | ) | | Non-interest expenses Compensation and benefits / | | | | 1,213 | | | | 755 | | | Income tax expense | | | | | | | | | | | | | | | (2,954 | ) | | | (1,830 | ) | | Net income (loss) | | | | | | | | | | | | | | | — | | | | 0— | | | Net income attributable to noncontrolling interests | | | | | | | | | | | | | | ¥ | (2,954 | ) | | ¥ | (1,830 | ) | | Net income (loss) attributable to NHI shareholders | | | | | | | | | | | |
|
|