Report Regarding Consolidated Liquidity Coverage Ratio and Consolidated Net Stable Funding Ratio Situation of Soundness in Liquidity Management as of [PDF:309KB]

July 29, 2022

Daiwa Securities Group Inc.

Report Regarding Consolidated Liquidity Coverage Ratio

and Consolidated Net Stable Funding Ratio

Situation of Soundness in Liquidity Management as of Fourth Quarter in Fiscal Year 2021

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 liquidity management as of the fourth quarter in fiscal year 2021.

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Table of Contents
Key Metrics (at consolidated group level) ...............................................................................................................	3
Disclosure of Consolidated Liquidity Risk Management........................................................................................	4
1.	Overview of Liquidity Risk Management Policy and Procedure..........................................................................	4
2.	Liquidity Risk Management Indicators and other issues related to consolidated Liquidity Management.................	4
Qualitative Disclosure (Consolidated) .....................................................................................................................	5
1.	Qualitative disclosure of consolidated Liquidity Coverage Ratio..........................................................................	5
2.	Qualitative disclosure of consolidated Net Stable Funding Ratio..........................................................................	6
Quantitative Disclosure (Consolidated)...................................................................................................................	7
1.	Quantitative disclosure of consolidated Liquidity Coverage Ratio........................................................................	7
2.	Quantitative disclosure of consolidated Net Stable Funding Ratio........................................................................	8

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Key Metrics (at consolidated group level)

KM1: Key Metrics

（Unit :1 Million Yen,%）

		Fourth Quarter in	Third Quarter in	Second Quarter in	First Quarter in	Fourth Quarter in
		Fiscal Year 2021	Fiscal Year 2021	Fiscal Year 2021	Fiscal Year 2021	Fiscal Year 2020
Consolidated liquidity coverage ratio
15	Total high quality liquid	2,642,117	2,615,330	2,666,490	2,673,653	2,760,821
assets
16	Total net cash outflows	1,772,313	1,797,829	1,709,909	1,749,312	1,712,430
17	Consolidated liquidity	149.0%	145.4%	155.9%	152.8%	161.2%
coverage ratio
Consolidated net stable funding ratio
18	Total available stable	8,480,413	8,267,404	8,815,759
funding
19	Total required stable	5,713,587	5,457,139	5,490,069
funding
20	Consolidated net stable	148.4%	151.4%	160.5%
funding ratio

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Disclosure of Consolidated Liquidity Risk Management

1. Overview of Liquidity Risk Management Policy and Procedure

Daiwa Securities Group Inc. ("the Group")'s funding activities focus on the principle of maintaining a sufficient level of liquidity in a stable and efficient manner to ensure continuous business operations.

The treasury department is designated as a division to manage the Group's funding and takes action proactively to secure a stable funding amount during ordinary times in order to prevent business operations being disrupted in the event of severe changes occurring in the markets, and also manages to diversify maturities and sources of the procurement funds assuming a liquidity crisis when new funding or roll-over is difficult.

The risk management department is designated as a division to manage the Group's liquidity risk and monitors the liquidity risk and reports to the board daily by utilizing the risk appetite indicators and liquidity stress test.

The Group strives to construct an appropriate liquidity risk management structure to be able to grasp the situation of the liquidity risk in a timely manner. In addition, the Group developed a contingency funding plan in order to make an appropriate response when liquidity risk become evident.

2. Liquidity Risk Management Indicators and other issues related to consolidated Liquidity Management

1. Risk appetite indicators

The Group defines the Liquidity Coverage Ratio and Net Stable Funding Ratio as liquidity risk appetite indicators at the board.

1. Liquidity Stress Test

The Group defines various stress scenarios and monitors daily that the liquidity portfolio covers the cash outflow prediction in the case where a certain amount of unsecured funding comes to maturity and stress occurs at the same time. Thus, even in the case where unsecured funding is not available for one year, the Group can continue its business operations.

1. Early Warning Indicator ("EWI")

The Group sets certain thresholds for the indicators and monitors them as EWI to detect quickly if a liquidity risk becomes evident, and seeks to manage the forward-looking funding and liquidity risk.

1. Contingency Funding Plan

The Group recognizes that the occurrence of liquidity risk will have a direct impact on the business failure of financial institutions. Therefore, the Group defines a contingency funding plan in order to make an appropriate response during the time of liquidity crisis. The plan specifies policies of reporting lines and of the securement of funding according to the level of the tightness of the stress due to the internal factors such as the deterioration of the Group's credit, and/or the external factors such as a disturbance in the financial markets.

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Qualitative Disclosure (Consolidated)

1. Qualitative disclosure of consolidated Liquidity Coverage Ratio

1. Changes in consolidated Liquidity Coverage Ratio over previous quarter

The Group's total High Quality Liquid Asset (HQLA) was 2,642,117 million yen, an increase of 26,787 million yen from the previous quarter.

Cash outflows related to unsecured wholesale funding were 1,598,964 million yen, an increase of 108,844 million yen from the previous quarter, Cash outflows related to other contractual funding obligations were 973,870 million yen, a decrease of 170,052 million yen, and Cash outflows related to other contingent funding obligations were 222,006 million yen, an increase of 34,419 million yen, thus total net cash outflows were 1,772,313 million yen, a decrease of 25,516 million yen.

As a result of the above-mentioned conditions, the Group's consolidated Liquidity Coverage Ratio was 149.0%, an increase of 3.6 percent. For the past two years, changes in the ratio have been relatively stable.

1. Evaluation of the Group's consolidated Liquidity Coverage Ratio

The Group defines "The Rule of Regulatory Liquidity Management", and not only manages to keep the Liquidity Coverage Ratio above the regulatory limit, but also sets an internal alert level, and periodically reviews whether the ratio is above the internal alert level.

The Group's consolidated Liquidity Coverage Ratio is sufficiently above the minimum requirement.

1. Composition of HQLA

There is no significant change in the composition of HQLA over the previous quarter.

1. Other issues related to the consolidated Liquidity Coverage Ratio
   There is no significant item for disclosure.

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