Chiba Bank : Corporate Governance Report

Corporate Governance Report

Last Update: July 1, 2022

The Chiba Bank, Ltd.

Tsutomu Yonemoto, President Contact: Planning Department, Corporate Planning Division Securities Code: 8331 https://www.chibabank.co.jp/english/

The corporate governance of The Chiba Bank, Ltd. ("the Bank") is described below.

1. Basic Stance on Corporate Governance, Capital Structure, Corporate Profile, and

Other Basic Information

1. Basic Stance

The Bank bases all of its corporate activities on "The Chiba Bank Group's Corporate Code of Conduct," which includes "establishing unwavering trust," "providing high quality financial services," "contributing to the regional economy and society," "thorough compliance with laws, rules and other fundamental principles," "transparent management," "respect for human rights," "Responsibility for the realization of the sustainable society," "opposition to antisocial forces and prevention of money laundering." Under the medium term management plan "NEXT STEP 2023 - connect and go beyond, for the future -"(FY2020-FY2022), we have committed "we will realize sustainable management" as a basic policy, and we are working to advance the level of corporate governance.

The Bank shall abide by and achieve these principles as it strives to further strengthen and enhance corporate governance, thereby contributing to realizing sustainable regional communities through appropriate cooperation with diverse stakeholders, while achieving sustainable growth and enhancing corporate value over the medium- to long-term.

The Policy on Corporate Governance is posted on the Bank's website.

(https://www.chibabank.co.jp/english/corporate/governance/pdf/20190701_01.pdf)

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] The Bank complies with all of the principles of the Corporate Governance Code.

[Disclosure Based on the Principles of the Corporate Governance Code] [Principle 1.4] Cross-shareholdings

• Policy on Cross-shareholdings

The Bank's basic policy is to maintain cross-shareholdings on a limited basis if a meaningful rationale for holding the shares is recognized, such as maintaining and expanding transactions and relationship with clients, etc. as a regional financial institution, while reducing overall cross-shareholdings after having sufficient dialogue with clients, etc. from the perspective of controlling the risk of holding shares and capital efficiency, etc.

The quantitative effect of holding listed shares is determined using indicators that are calculated by deducting deemed reserves and capital costs for such shareholdings from the profit from loans and deposits, fees and commissions, and dividend income for each business partner. The Board of Directors verifies the validity of the rationale for cross-shareholdings every year based on the economic rationale of cross-shareholding for each issuer of the cross-held shares and projections of future share value, taking into consideration the financial structure and the business performance of the issuers of the cross-held shares.

For the current fiscal year, validations were made using March 31, 2022 as the base date.

• Standards for Exercising Voting Rights

When exercising voting rights for cross-held shares, the Bank decides whether to vote for or against proposals in a comprehensive manner, from the perspective of enhancing the corporate value of the Bank and the issuer of those shares, taking account of the status of governance at the issuer. For important proposals shown below, which may have significant impact on the medium- to long-term enhancement of corporate

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value of the issuer of cross-held shares and the economic interests of the Bank, the Bank engages in dialogue, etc. with the issuer as required to decide whether to vote for or against those proposals.

• Proposal for appropriation of surplus (when appropriation significantly lacks balance with financial soundness and retained earnings)
• Proposal for revising Directors' remuneration
• Proposals for the election of Directors and Audit & Supervisory Board Members, and proposals for the payment of retirement benefits (on occasions where scandals occur at the issuer or the issuer has posted an operating loss for certain consecutive periods, etc.)
• Proposals for organizational restructuring
• Proposals for anti-takeover measures, etc.

[Principle 1.7] Related Party Transactions

The Bank has set forth the following procedures to prevent transactions between the Bank and Directors, etc. of the Bank from harming shareholders' interests.

In accordance with the Bank's Board of Directors Regulations, the Bank requires Directors to obtain prior approval of the Board of Directors for competitive transactions by Directors and important transactions between the Bank and Directors.

After the completion of such transactions, the Board of Directors receives reports of the results of the transaction and monitors the status thereof.

[Supplementary Principle 2.4.1] Ensuring Diversity in the Promotion of Core Human Resources

Please refer to " III. Implementation of Measures for Shareholders and Other Stakeholders," "3. Measures to Ensure Due Respect for Stakeholders" described below regarding the human resources development policy and internal environmental policy for ensuring and achieving diversity in its core human resources.

[Principle 2.6] Roles as Asset Owner of Corporate Pension Fund

The Bank has established a corporate pension fund (the "fund") to conduct management, payment, and other related administration of pension assets related to the defined benefit pension plan.

The Bank allocates personnel with professional experience of asset management to the Fund Secretariat so that the fund can perform functions expected of an asset owner, such as deciding on concrete management methods and proactively considering risk control, etc.

Important matters such as modifications of terms, the budget for each fiscal year, business reports, financial reports, and management of the pension fund are decided by resolutions of the fund's Board of Representatives consisting of members selected by the employer (the Bank) and those chosen by the beneficiaries, each accounting for half of the Board, to appropriately control conflicts of interest between the beneficiaries of the corporate pension fund and the company. In addition, the Bank has established a system to ensure appropriate management of the pension finances by taking measures including deliberating the allocation of portfolio assets, strategies for newly added funds, and other matters at the Asset Management Committee, which consists of persons with expertise in human resources, finance, risk management, market operations, etc. The fund has announced that it accepts the Japanese Stewardship Code, and requires that investment trustees strive to increase the corporate value of investee companies and increase medium-tolong-term investment returns in accordance with the Code.

[Principle 3.1] Enhancing Disclosure

1. Basic management policy and management strategy
   • Basic management policy
   The Chiba Bank Group's mission as a regional financial institution based in Chiba Prefecture is to contribute to the sustainable development of regional economies through the provision of the latest financial services as a partner for customers and regional communities. The entire Chiba Bank Group intends to continue to maintain this stance going forward and engage in activities that will enhance customer satisfaction, including the provision of high-quality financial products and services while actively contributing to the development of regional communities. Through these activities, we strive to win the support of shareholders and investors.

• Medium term management strategy

Under the medium term management plan, "NEXT STEP 2023 - connect and go beyond, for the future -," the Chiba Bank Group has the vision of "enhancing customer experience by deepening financial functions and

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creating new models for regional finance."

To achieve that, we are working as one on each strategy and measure based on four basic policies of "we will continue to evolve closely with our customers," "we will continue to create new value for our customers' future," "we will advance alliance strategies" and "we will realize sustainable management."

Details of the medium term management plan are posted on the Bank's website. https://www.chibabank.co.jp/english/corporate/plan/

(ii) Basic stance and basic policy on corporate governance

The basic stance on corporate governance is described in "I 1. Basic Stance" in this report. In accordance with the Basic Stance, the Bank positions establishment of appropriate supervisory systems and efficient business execution structure as its basic policies.

1. Policy and procedures for determination of remuneration 1. Basic concept

While emphasizing its soundness as a financial institution, the Bank adopt a system of executive remuneration that contributes to the enhancement of management awareness and business performance through further sharing of value with shareholders.

The remuneration system for Directors and the percentage of remuneration by type are considered by the Appointment, Remuneration and Corporate Advisory Committee, the majority of which comprise independent Outside Directors, as appropriate in response to changes in the business environment, with reference to companies of similar size to the Bank and related industries and business categories.

In order to ensure transparency, fairness, and rationality, the remuneration for Directors is determined by the Board of Directors in accordance with the remuneration rules determined by the Board of Directors after the deliberation by the Appointment, Remuneration and Corporate Advisory Committee.

Please refer to [Director Remuneration] described in this report regarding policies for determining the compensation structure, content, and the content of individual director compensation.

1. Policies and procedures for appointment and dismissal of senior managements and nomination of candidates for Directions and Audit & Supervisory Board Members

• Selection of candidates for internal Directors (meaning Directors other than Outside Directors; the same shall apply hereafter.)

Candidates for internal Directors are determined by the Board of Directors, following deliberations by the Appointment, Remuneration and Corporate Advisory Committee, the majority of which comprise independent Outside Directors, based on the President's recommendations of persons who, based on a deep understanding of the Bank's basic management policy, possess knowledge and experience to enable the appropriate, fair, and efficient execution of bank business management, as well as sufficient social trust, with the aim of achieving our management strategy.

Representative Directors are determined by the Board of Directors following deliberations by the Appointment, Remuneration and Corporate Advisory Committee on persons suitable for representing the Bank selected from among internal Directors. In the event of occurrence of a serious obstacle to the execution of duties as a Representative Director or when a Representative Director falls under reasons for disqualification*, dismissal of such Representative Director shall be determined by the Board of Directors following deliberations by the Appointment, Remuneration and Corporate Advisory Committee.

*Reasons for disqualification

• • The Representative Director is deemed to have a relationship with antisocial forces
  • The Representative Director is deemed to have violated laws, regulations, or internal regulations
• Nomination of candidates for Outside Directors

Candidates for Outside Directors are determined by the Board of Directors, following deliberations by the Appointment, Remuneration and Corporate Advisory Committee, the majority of which comprise independent Outside Directors, based on the President's recommendations of persons who possess specialist knowledge and experience in areas other than the Bank's business operations and are deemed capable of contributing to the Bank's sustainable growth and corporate value enhancement over the medium to long term based on their insights.

• Nomination of candidates for Audit & Supervisory Board Members
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Candidates for Audit & Supervisory Board Members are determined at a meeting of the Board of Directors that is participated by independent Outside Directors, following deliberations by the Appointment, Remuneration and Corporate Advisory Committee and consent by the Audit & Supervisory Board, based on the President's recommendations of persons who possess knowledge and experience to enable the appropriate, fair, and efficient performance of audits on the execution of duties by Directors, as well as sufficient social trust.

1. Reasons for Appointment and dismissal of senior managements and selection, dismissal and nomination of candidates for Directors and Audit & Supervisory Board Members

• Candidates for Directors (elected as Directors at the 116th Annual General Meeting of Shareholders held on June 28, 2022)

• Tadayoshi Shinozaki (Re-nominated)

Tadayoshi Shinozaki has the knowledge and experience necessary to perform the business administration of a bank in an appropriate, fair and efficient manner because he has served in various important positions including General Manager of London Branch, General Manager of Treasury Division, and General Manager of Corporate Planning Division, and has been Director since June 2018. As he has properly executed the duties of Director, the Bank has nominated him as a candidate for Director.

• Norio Takatsu (Re-nominated)

Norio Takatsu has the knowledge and experience necessary to perform the business administration of a bank in an appropriate, fair and efficient manner because he has served in various important positions including General Manager of EDP System Division, and has been Director since June 2016. As he has properly executed the duties of Director, the Bank has nominated him as a candidate for Director.

• Takahide Kiuchi (Re-nominated)

Takahide Kiuchi has a high level of expertise gained through his career in Japan and other countries as an economist at Nomura Research Institute, Ltd. and Nomura Securities Co., Ltd. The Bank determined that the corporate value of the Bank would increase over the mid- to long-term through further enhancement of the decision-making function and the supervisory function of the board of directors by leveraging his knowledge and experience in the management of the Bank.

As he also has experience in deliberating monetary policies as a member of the Policy Board, the highest decision-making body of Bank of Japan, the Bank expects that he will supervise the execution of duties by Directors and provide them with advice from an expert's viewpoint, and has thus nominated him as a candidate for Outside Director.

He does not have experience of engaging in the business management of a company; however, for the reasons above, the Bank believes that he will appropriately perform his duties as an Outside Director and has thus nominated him as a candidate for the position.

He will have served as Outside Director of the Bank for a period of two years as of the conclusion of this Annual General Meeting of Shareholders.

[Supplementary Principle 3.1.3] Measures for Sustainability

• Measures for Sustainability

The Bank Group are working to achieve "Sustainable Management" aimed at balancing social value and economic value in the long term, based on "the Chiba Bank Group Sustainability Policy." We, as a unified group, proactively promote measures that contribute to solving social issues through its business activities, focusing on five materiality (key) issues identified in "the Chiba Bank Group Declaration on SDGs."

The Bank announced its endorsement to the TCFD recommendations in December 2019, and we are disclosing information in line with "Governance," "Strategy (physical risks and transition risks)," "Risk Management," and "Indicators and Targets" regarding risks and opportunities associated with climate change, which TCFD recommends. In March 2022, the Bank declared its intention to achieve "carbon neutral by FY2030" and announced that CO2 emissions (SCOPE1 + SCOPE2) will be virtually zero by FY2030.

Please refer to the Integrated Report for disclosures on measures solving social issues for sustainable management and the impacts of climate change based on TCFD recommendations.

Websites (Japanese only) (https://www.chibabank.co.jp/company/sustainability/)

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Integrated Report

(https://www.chibabank.co.jp/english/ir/library/annual_report/pdf/2021/an_21_whole.pdf)

• Investment in human capital and intellectual property

In order to continuously provide valuable products and services to our customers in the region, the Chiba Bank Group makes maximum use of its financial capital, such as its asset size and profitability, which are among the highest in the regional banking industry; social capital, such as its strong business bases and the growth potential of Chiba Prefecture, human capital, such as its highly specialized employees, and intellectual property, such as the comprehensive financial services provided by the Group as a whole. These capitals are "strength of the Chiba Bank Group" for realization of "Sustainable Management."

(1) Human capital

In order to develop human resources that can contribute to the sustainable development of the regional economy, which is stated in the medium term management plan, the Bank offers various human resource development programs, including in digital and global fields, as well as systems and training to promote the success of diverse human resources. We support the realization of the careers that each employee aims for and develop human resource to increase corporate value. To develop human resources with specialized fields, we have established a " Human Resource Framework for Development " and are strengthening dispatch to headquarters trainees and external companies, etc. In addition, we are promoting the systematic development and recruitment of DX human resources based on the DX Strategy, which is an important strategy and trying to develop and ensure specialist human resources by establishing "the DX Certification System." Please refer to the Integrated Report for details.

Integrated Report

(https://www.chibabank.co.jp/english/ir/library/annual_report/pdf/2021/an_21_whole.pdf)

1. Intellectual property

In order to create new value beyond the framework of banking, based on the changes of customers' needs and environment, in addition to the various know-how accumulated within the Bank Group, we are promoting the use of intellectual property, such as measures for new businesses through collaboration with alliance banks, collaborating with external businesses that have contact with many customers, both finance and non-finance businesses.

In addition, the use of human capital and intellectual property is reported to and overseen by the Board of Directors as appropriate.

[Supplementary Principle 4.1.1] Scope of Delegation to the Management

In addition to matters stipulated in laws and regulations, the Board of Directors decides on matters related to the formulation of the medium term management plan and important business measures in light of the plan pursuant to Board of Directors Regulations, etc.

Matters related to business execution operations other than those subject to resolutions by the Board of Directors are decided by Representative Directors. In addition, pursuant to internal regulations, authority for business execution operations is delegated to Executive Officers, etc. within an appropriate scope, and the Board of Directors supervise the execution status.

[Supplementary Principle 4.1.3] Succession Planning

Successors to the Representative Directors are determined by the Board of Directors following deliberations by the Appointment, Remuneration and Corporate Advisory Committee, the majority of which comprise independent Outside Directors, in view of desired personnel requirements, personnel training policy and plan, as well as the status of training, etc. The status of deliberation is reported, as appropriate, to the Board of Directors.

• Desired personalities of candidates (nomination policy)

Images of desired personalities of candidates are deliberated by the Appointment, Remuneration and Corporate Advisory Committee in view of qualities and abilities required as management, as well as the business environment surrounding our group and the direction of its future business strategies, and are shared by the Board of Directors. Whether to review the images of desired candidates for successors or not in accordance with changes in the business environment, etc. is deliberated as appropriate.

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