Administrative Actions on Aozora Bank, Ltd.(1)

1.Aozora Bank, Ltd. [hereinafter referred to as “Aozora”] booked a net deficit (loss) for the business year ended in March 2009, falling considerably short of its profit targets for the year, set in the Business Revitalization Plan. In addition, there was not sufficient sign of improvement in business operations, despite the issuance of a Business Improvement Order [July 25, 2008] based on Article 20, Paragraph 2 of the Act on Emergency Measures for Early Strengthening of Financial Functions [hereinafter referred to as "the Early Strengthening Act"] and Article 26, Paragraph 1 of the Banking Act in the business year ended in March 2008.

As for Aozora's securities-related losses and a rise in credit costs, both stemming from its investment and financing operations at home and abroad, the Financial Services Agency [hereinafter referred to as “FSA”] recognizes that they were in part due to changes in financial market conditions at home and abroad. However, the FSA also recognizes that Aozora should have improved its risk management and business judgment concerning its investment and financing as well as business operations at home and abroad.

The FSA recognized the need to take administrative actions on Aozora in order to ensure the fulfillment of the bank's Business Revitalization Plan, pursuant to the provision of Article 20, Paragraph 2 of the Act on the Early Strengthening Act. Therefore, the FSA today issued a Business Improvement Order to Aozora based on Article 20, Paragraph 2 of the Early Strengthening Act and and Article 26, Paragraph 1 of the Banking Act.

2.The contents of the Business Improvement Order are as follows.

• [1]Aozora must review the Business Improvement Plan created after the issuance of the Business Improvement Order [July 25, 2008] based on Article 20, Paragraph 2 of the Early Strengthening Act and Article 26, Paragraph 1 of the Banking Act, and submit a Business Improvement Plan to the FSA by September 11, 2009. The plan should contain measures to establish a responsible business setup for the improvement of its operations and fundamentally improve Aozora's profitability.

  In formulating the above Business Improvement Plan, based on the grounds for the actions above, Aozora must incorporate effective and specific measures to establish a sustainable and stable revenue base by enhancing its risk management and corporate governance.

  • (Note) In formulating the above Business Improvement Plan, Aozora must pay attention to section 1.(2) of “To improve Corporate Governance of Capital Injected Major Banks with Public Funds”(April 4,2003,by the FSA) and renewed attention to the facilitation of credit provisions stipulated under Article 5, Paragraph 1, item (iv) of the Early Strengthening Act.

• [2]Aozora must implement the new Business Improvement Plan steadily.

• [3]Aozora must report to the FSA on the progress made in implementing the plan within two months after the end of every quarter, starting from the end of September 2009, until it is confirmed that the plan has been fully implemented.