Report Regarding Consolidated Capital Adequacy Ratio and Consolidated Leverage Ratio Situation of Soundness in Management as of March 31, 2022 [PDF:2,283KB]

July 29, 2022

Daiwa Securities Group Inc.

Report Regarding Consolidated Capital Adequacy Ratio

and Consolidated Leverage Ratio

Situation of Soundness in Management as of March 31, 2022

In accordance with the Financial Instruments and Exchange Act Article 57-17, "Notification, etc., of Documents Describing Status of Soundness in Management", Daiwa Securities Group Inc. reports the situation of soundness in management as of March 31, 2022.

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Table of Contents
Table of Contents........................................................................................................................................................................	2
Key Metrics (at consolidated group level)............................................................................................................................	3
Composition of Capital Disclosure .......................................................................................................................................	4
Qualitative Disclosure (Consolidated) ..................................................................................................................................	7
1.	Scope of consolidation............................................................................................................................................	7
2.	Overview of capital adequacy assessment methods.......................................................................................	9

3. Overview of the risk characteristics, and the policies, procedures and structure of the Group-wide

risk management..........................................................................................................................................................	10
4. Credit risk..............................................................................................................................................................	17

5. Overview of the risk characteristics and the policies, procedures and structure for Credit Risk Mitigation (hereunder CRM) techniques (excluding credit risk mitigation-related derivative and

repo-style transactions)................................................................................................................................................

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6. Overview of the risk characteristics and the policies, procedures and structure for the counterparty credit risk management of derivative and repo-style transactions (including CRM-related transactions)18

7.	Securitization exposures.....................................................................................................................................	19
8.	Market risk ...........................................................................................................................................................	20
9.	Operational risk ...................................................................................................................................................	22

10. Overview of the risk characteristics and the policies, procedures and structure for the exposure of

the investments or equities subject to credit risk...................................................................................................	22
11.	Interest rate risk..............................................................................................................................................	23
12.	Reconciliation of regulatory capital to balance sheet ...............................................................................	24

13. Main sources of differences between regulatory exposure amounts and carrying values in

financial statements .....................................................................................................................................................	26
Quantitative Disclosure (Consolidated)..............................................................................................................................	27

1. List of the Group's subsidiaries applicable to "significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation", the capital of

which is less than the capital requirement, as well as the total amount of deficit..........................................	27
2.	Credit risk (excluding counterparty credit risk and securitization) ..........................................................	27
3.	Amount of exposure by approaches for banks' equity investments in funds...........................................	29
4.	Other quantitative disclosures..........................................................................................................................	30
Consolidated Leverage Ratio..............................................................................................................................................	55
1.	Composition of consolidated leverage ratio ....................................................................................................	55
2.	Reasons for significant differences in the consolidated leverage ratio over previous year ...................	55
Overview of Main Features of Regulatory Capital Instruments......................................................................................	56

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Key Metrics (at consolidated group level)

KM1: Key metrics

(Millions of yen , %)

Basel III
template		March 2022	December 2021	September 2021	June 2021	March 2021
number
Available capital (amounts)
1	Common Equity Tier 1 (CET1)	1,189,895	1,166,908	1,148,768	1,152,962	1,123,656
2	Tier 1	1,360,623	1,337,697	1,314,659	1,327,893	1,305,210
3	Total capital	1,360,623	1,337,697	1,314,659	1,327,893	1,305,210
Risk-weighted assets (amounts)
4	Total risk-weighted assets	6,879,435	6,800,516	6,514,283	6,271,241	6,008,356
(RWA)
Capital ratio
5	CET1 ratio (%)	17.29%	17.15%	17.63%	18.38%	18.70%
6	Tier 1 ratio (%)	19.77%	19.67%	20.18%	21.17%	21.72%
7	Total capital ratio (%)	19.77%	19.67%	20.18%	21.17%	21.72%
Additional CET1 buffer requirements as a percentage of RWA
	Capital conservation buffer
8	requirement (2.5% from 2019)	2.50%	2.50%	2.50%	2.50%	2.50%
	(%)
9	Countercyclical buffer	0.00%	0.00%	0.00%	0.00%	0.00%
requirement (%)
10	Bank G-SIB and/or D-SIB	0.50%	0.50%	0.50%	0.50%	0.50%
additional requirements (%)
	Total of bank CET1 specific
11	buffer requirements (%)	3.00%	3.00%	3.00%	3.00%	3.00%
	(row 8 + row 9 + row 10)
	CET1 available after meeting the
12	bank's minimum capital	11.77%	11.67%	12.18%	13.17%	13.72%
	requirements (%)
Leverage ratio
13	Total leverage ratio exposure	20,641,305	19,588,138	18,239,765	18,785,385	18,916,695
measure
	Leverage ratio (%) including the
14	impact of any	6.59%	6.82%	7.20%	7.06%	6.89%
applicable temporary exemption
	of central bank reserves

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Composition of Capital Disclosure

CC1: Composition of regulatory capital

					(Millions of yen , %)
Basel III				Group Consolidated	Cross-referenced to
template		Items
		Quarter-End	CC2
number
Common Equity Tier 1 capital: Instruments and reserves	(1)
1a+2-1c-26	Shareholders' equity		1,263,083
1a		Common stock and capital surplus		477,848	(i),(j)
2		Retained earnings		943,143	(k)
1c		Treasury stock (Δ)		134,175	(l),(m)
26		Planned distributions (Δ)		23,732
		Others		-
1b	Stock subscription rights		9,109	(p)
3	Accumulated other comprehensive income (and other reserves)		86,885	(o)
5	Minority interest after adjustments		-
6	Common Equity Tier 1 capital before regulatory adjustments	(a)	1,359,078
Common Equity Tier 1 capital: regulatory adjustments	(2)
8+9	Intangible assets other than mortgage-servicing rights (net of related tax liability)		156,070
8		Goodwill (net of related tax liability)		52,499	(e),(g)
9		Other intangibles other than mortgage-servicing rights(net of related tax liability)		103,571	(f)
10	Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related	204	(d),(h)
tax liability)
11	Cash-flow hedge reserve		(6,134)	(n)
12	Shortfall of allowance to expected losses		-
13	Securitization gain on sale (as set out in paragraph 562 of Basel II framework)		-
14	Gains and losses due to changes in own credit risk on fair valued liabilities		437
15	Defined-benefit pension fund net assets		-
16	Investments in own shares (if not already netted off paid-in capital on reported balance sheet)		190	(b)
17	Reciprocal cross-holdings in common equity		-
	Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory
18	consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued share capital	18,413	(a),(b),(c),(g)
	(amount above 10% threshold)
19+20+21	Amount exceeding the 10% threshold		-
19		Significant investments in the common stock of banking, financial and insurance entities that are outside the	-
	scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold)
20		Mortgage servicing rights (amount above 10% threshold)		-
21		Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax		-
	liability)
22	Amount exceeding the 15% threshold		-
23		of which: significant investments in the common stock of financials		-
24		of which: mortgage servicing rights		-
25		of which: deferred tax assets arising from temporary differences		-
27	Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover		-
deductions
28	Total regulatory adjustments to Common equity Tier 1	(b)	169,182
Common Equity Tier 1 capital
29	Common Equity Tier 1 capital (CET1) ((a) - (b))	(c)	1,189,895

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						(Millions of yen , %)
Basel III				Group Consolidated	Cross-referenced to
template		Items
		Quarter-End	CC2
number
Additional Tier 1 capital: instruments	(3)
30	31a	Shareholders' equity		-
	31b	Stock subscription rights		-
	32	Liabilities		147,800
		Instruments issued by Special Purpose Companies		-
	34-35	Minority interest after adjustments		38,437	(q)
	33+35	Tier 1 capital under Basel II included in Additional Tier 1 capital under transitional Basel III rules		-
	33		Capital instruments issued by Daiwa Securities Group Inc. and its Special Purpose Companies		-
	35		Capital instruments issued by consolidated subsidiaries and affiliates (excluding Special Purpose Companies	-
		of Daiwa Securities Group Inc.)
	36	Additional Tier 1 capital before regulatory adjustments	(d)	186,237
Additional Tier 1 capital: regulatory adjustments
	37	Investments in own Additional Tier 1 instruments		-
	38	Reciprocal cross-holdings in Additional Tier 1 instruments		-
		Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory
	39	consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued common		6,258	(a),(b),(c),(g)
		share capital of the entity (amount above 10% threshold)
	40	Significant investments in the capital of banking, financial and insurance entities that are outside the scope of		-
	regulatory consolidation (net of eligible short positions)
	42	Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions		9,251
	43	Total regulatory adjustments to Additional Tier 1 capital	(e)	15,509
Additional Tier 1 capital
	44	Additional Tier 1 capital ((d) - (e))	(f)	170,727
Tier 1 capital
	45	Tier 1 capital ((c) + (f))	(g)	1,360,623
Tier 2 capital: instruments and allowance	(4)
		Shareholders' equity		-
	46	Stock subscription rights		-
	Liabilities		-
		Capital instruments issued by Special Purpose Companies		-
	48-49	Minority interest after adjustments		9,044	(q)
	47+49	Tier 2 capital under Basel II included in Tier 2 capital under transitional Basel III rules		-
	47		Capital instruments issued by Daiwa Securities Group Inc. and its Special Purpose Companies		-
	49		Capital instruments issued by consolidated subsidiaries and affiliates (excluding Special Purpose Companies	-
		of Daiwa Securities Group Inc.)
	50	General allowance included and eligible allowance in Tier 2 capital		-
	50a		General allowance		-
	50b		Eligible allowance		-
	51	Tier 2 capital before regulatory adjustments	(h)	9,044

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