{"url_path":"/sec/mfg/10-k/2026/item-11","section_key":"item-11","section_title":"Item 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT CREDIT, MARKET AND OTHER RISK","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-06-26","source_url":"https://www.sec.gov/Archives/edgar/data/1335730/0001193125-26-283791-index.html","accession_number":"0001193125-26-283791","cik":"0001335730","ticker":"MFG","issuer_name":"MIZUHO FINANCIAL GROUP INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/1335730/0001193125-26-283791-index.html","primary_entity_key":"0001335730","primary_entity_name":"MIZUHO FINANCIAL GROUP INC"},"word_count":8038,"has_tables":true,"body_markdown":"ITEM 11.\n\nQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT CREDIT, MARKET AND OTHER RISK\n\nAmid the growing diversity and complexity of banking operations, financial institutions are exposed to various risks, including credit, market, operations, information technology, legal, settlement and other risks. We recognize risk management, including the need to tailor our operations in accordance with such risks, as a key component of our overall management strategy. In order to implement our business strategy while maintaining our financial stability, we maintain comprehensive risk management and control measures. Mizuho Financial Group maintains basic policies for risk management established by our Board of Directors that are applicable to the entire Mizuho group. These policies clearly define the kinds of risks to be managed, set forth the organizational structure and provide for the human resources training necessary for appropriate levels of risk management. The policies also provide for audits to measure the effectiveness and suitability of the risk management structure. In line with these basic policies, we maintain various measures to strengthen and enhance the sophistication of our risk management system.\n\nAll yen figures and percentages in this item are truncated. Accordingly, the total of each column of figures may not be equal to the total of the individual items.\n\nOverview of Risk Management\n\nRisk Management Structure\n\nEach of our subsidiaries adopts appropriate risk management measures for its business based on the size and nature of its risk exposures, while Mizuho Financial Group controls risk management for the Mizuho group as a whole. At Mizuho Financial Group, the Risk Management Committee, which is one of the Business Policy Committees of Mizuho Financial Group and chaired by the Group Chief Risk Officer (Group CRO), provides integrated monitoring and management of the overall risk for the Mizuho group. The Group Chief Risk Officer (Group CRO) reports the risk management situation to our Board of Directors, the Risk Committee and the Executive Management Committee, etc., on a regular basis and as needed. Mizuho Financial Group regularly receives reports and applications concerning the risk management situation from our principal banking subsidiaries and other core group companies and gives them appropriate instructions concerning risk management. Our principal banking subsidiaries and other core group companies each maintain their own systems for managing various types of risk, receiving reports on the status of risk at their respective subsidiaries, and give them appropriate instructions concerning risk management as necessary.\n\nBasic Approach\n\nWe classify the risks arising from the group’s businesses into different types of risk such as credit risk, market risk, liquidity risk, operational risk, reputational risk and model risk according to their risk factors, and manage each type of risk depending on its characteristics. Furthermore, each group entity manages such risks according to the characteristics of its business operations (i.e., management of risks associated with settlement and trust businesses, etc.). In addition to managing each type of risk individually, we have established a comprehensive risk management structure to identify and evaluate overall risk and to keep risk within limits that are managerially acceptable. In line with the basic policies relating to overall risk management laid down by Mizuho Financial Group, companies within the Mizuho group identify risk broadly and take a proactive and sophisticated approach to risk management.\n\nRisk Capital Allocation\n\nWe endeavor to obtain a clear grasp of the group’s risk exposure using a unified measurement standard and have implemented measures to control such risks within the group’s financial base in accordance with the risk capital allocation framework. More specifically, we allocate risk capital to our principal banking subsidiaries, including their respective subsidiaries, and other core group companies to control risk within the limits set for\n\n \n\n164\n\neach company. We also control risk within managerially acceptable limits by working to ensure that the overall risk we hold on a consolidated basis does not exceed our financial strength. To ensure the ongoing financial soundness of Mizuho Financial Group, our principal banking subsidiaries and other core group companies, we regularly monitor the manner in which risk capital is being used in order to obtain a proper grasp of the risk profile within this framework. Reports are also submitted to the Board of Directors and other committees of each company. Risk capital is allocated by risk category to Mizuho Bank, Mizuho Trust & Banking, Mizuho Securities and Mizuho Americas and is managed based on established frameworks.\n\nStress Testing\n\nTo verify the appropriateness of the Mizuho group’s risk appetite and the adequacy of its business plans, and to support the assessment of the group’s internal capital adequacy, we carry out stress testing on our entire portfolio by measuring and assessing the impacts on our capital ratio and financial performance of the stress events assumed in the scenarios set by the group. Stress testing is carried out based on scenarios formulated in light of current economic conditions, the future outlook, and vulnerabilities in the group’s business and financial structure, to confirm that the required capital ratio and financial performance can be secured on the occurrence of any of the assumed stress events. When our capital ratio or financial performance falls below the required level, we will consider and carry out a revision of our risk appetite and business plans. Moreover, we have established a robust risk management framework under which stress testing is respectively carried out for each risk category, including liquidity risk and market risk. Through such stress testing, we deepen our understanding of the distinctive features of our businesses and portfolios, and proactively determine action to be taken if a stress event happens. In this way, we are committed to enhancing our risk management capabilities on a continued basis.\n\n \n\n165\n\nThe following diagram shows our risk management structure:\n\n \n\n \n\n \n\n166\n\nCredit Risk Management\n\nBasic Approach\n\nWe define credit risk as the Mizuho group’s exposure to the risk of losses that may be incurred due to a decline in, or total loss of, the value of assets (including off-balance-sheet instruments), which may arise from future events or the possible default, etc., of customers or issuers of bonds and stocks. Mizuho Financial Group manages credit risk for the group as a whole. Specifically, Mizuho Financial Group establishes the group’s fundamental credit risk policy to manage major group companies, and monitors and manages the credit risks of the group as a whole.\n\nCredit Risk Management Structure\n\nOur President & Group CEO determines the Mizuho group’s basic matters pertaining to credit risk management. In addition, the Risk Management Committee broadly discusses and coordinates matters relating to basic policies and operations in connection with credit risk management and matters relating to credit risk monitoring for the Mizuho group. Under the control of the Group Chief Risk Officer (Group CRO), the Credit Risk Management Department monitors, analyzes and submits suggestions concerning credit risk, and formulates and executes plans in connection with basic matters pertaining to credit risk management.\n\nOur principal banking subsidiaries and other core group companies manage their credit risk according to the scale and nature of their exposures in line with basic policies set forth by Mizuho Financial Group. The President & CEO of each company determines key matters pertaining to credit risk management.\n\nThe Balance Sheet & Risk Management Committee and the Credit Committee, each of which is a Business Policy Committee of our principal banking subsidiaries, are responsible for discussing and coordinating overall management of their individual credit portfolios and transaction policies towards obligors. The respective Chief Risk Officers (CRO) of our principal banking subsidiaries are responsible for matters relating to planning and implementing credit risk management. The Credit Risk Management Departments of our principal banking subsidiaries are in charge of planning and administering credit risk management and conducting credit risk measuring and monitoring. Such departments regularly present reports regarding their risk management situation to Mizuho Financial Group. Each credit department of our principal banking subsidiaries is responsible for matters related to credit and manages credit risks primarily from the perspective of individual credit extension. The credit departments of our principal banking subsidiaries determine policies and approve/disapprove individual transactions in terms of credit review, credit management and collection from obligors in accordance with the lines of authority set forth respectively by our principal banking subsidiaries. The Group Chief Audit Executive (CAE) of our principal banking subsidiaries is responsible for important matters related to internal audit operations. In addition, the Internal Audit Department, established by our principal banking subsidiaries within internal audit groups independent of the business departments, is responsible for examining the appropriateness of credit risk management.\n\nCredit Risk Management Method\n\nThe Mizuho group’s credit risk management adopts a unified approach to ensure that future credit risk measurements will be maintained at an appropriate level based on the group’s business and financial strategies. Our credit risk management comprises two components: “credit portfolio management;” and “individual credit management.”\n\nFor “credit portfolio management,” we use statistical methods to manage potential losses from our credit portfolio so that we can take appropriate actions before or after credit risks are taken/realized. For “individual credit management,” we manage the process for each credit transaction from execution through collection, based on the assessment of the customer/obligor’s credit quality. Through this approach, we mitigate losses in the face of a credit event.\n\n \n\n167\n\nCredit Portfolio Management\n\nRisk Measurement\n\nWe use statistical methodologies that involve a risk measurement system (enterprise value corporate valuation model, holding period of one year) to manage the possibility of losses by measuring the expected average loss for a one-year risk horizon (“Expected Loss”) and the maximum loss within a certain confidence interval (“credit VAR”). The difference between Expected Loss and credit VAR is measured as the credit risk amount (“Unexpected Loss”). The risk measurement system covers the following account items reported by each Mizuho Financial Group company: credit transactions including loans and discounts; securities; obligors’ liabilities for acceptances and guarantees; deposits and foreign exchange; derivatives including swaps and options; off-balance-sheet items including commitments; and other assets involving credit risk.\n\nIn establishing transaction spread guidelines for credit transactions, we aim to ensure an appropriate return from the transaction in light of the level of risk by utilizing credit cost data as a reference. Also, we monitor our credit portfolio from various perspectives and set guidelines noted below so that losses incurred through a hypothetical realization of the full credit VAR would be within the amount of risk capital and loan loss reserves.\n\nRisk Control Methods\n\nOur principal banking subsidiaries have established guidelines to manage “credit concentration risk,” which stems from granting excessive credit to certain corporate groups. Our principal banking subsidiaries also set the credit limit based on verification of status of capital adequacy. In cases where the limit is exceeded, our principal banking subsidiaries will formulate a handling policy and/or action plan. In addition to the above, our principal banking subsidiaries monitor total credit exposure, credit exposure per rating, credit concentration per corporate group, geographic area and business sector to make a periodical report to the Balance Sheet & Risk Management Committee and the Credit Committee.\n\nIndividual Credit Management\n\nCredit Codes\n\nThe basic code of conduct for all of our officers and employees engaged in the credit business is set forth in our credit code. Seeking to fulfill the bank’s mission and social responsibilities, our basic policy for credit business is determined in light of fundamental principles focusing on public welfare, safety, growth and profitability.\n\nInternal Rating System\n\nOne of the most important elements of the risk management infrastructure of our principal banking subsidiaries is the use of an internal rating system that consists of credit ratings and pool allocations. Credit ratings consist of obligor ratings which represent the level of credit risk of the obligor, and transaction ratings which represent the possibility of ultimately incurring losses related to each individual claim by taking into consideration the nature of any collateral or guarantee and the seniority of the claim. In principle, obligor ratings apply to all obligors and are subject to regular reviews at least once a year to reflect promptly the fiscal period end financial results of the obligors, as well as special reviews as required whenever an obligor’s credit standing changes. This enables our principal banking subsidiaries to monitor both individual obligors and the status of the overall portfolio in a timely manner. Because we consider obligor ratings to be an initial phase of the self-assessment process regarding the quality of our loans and off-balance-sheet instruments, such obligor ratings are closely linked to the obligor classifications and are an integral part of the process for determining the provision for credit losses on loans and charge-offs in our self-assessment of loans and off-balance-sheet instruments.\n\nTo assign obligor ratings, we have a quantitative evaluation system (rating model) in place to enable proper assessment of an obligor’s credit standing. The system gives a quantitative rating to an obligor based on obligor-\n\n \n\n168\n\nspecific characteristics such as type of business (corporation or individual) and geography (in Japan or outside Japan). We categorize our rating models for companies in Japan into those for large companies and those for small and medium-sized companies. The former consist of 13 models according to industry-specific factors, while the latter consist of three models. For companies outside Japan, we utilize nine models.\n\nThese were developed by the Credit Risk Management Department based on a statistical methodology and approved by the Chief Risk Officer (CRO).\n\nPool allocations are applied to small claims that are less than a specified amount by pooling obligors and claims with similar risk characteristics and assessing and managing the risk for each such pool. Our principal banking subsidiaries efficiently manage credit risk and credit screening by dispersing a sufficient number of small claims within each pool. Our principal banking subsidiaries generally review the appropriateness and effectiveness of our approach to obligor ratings and pool allocations once a year in accordance with predetermined procedures, which is audited by the Internal Audit Group.\n\nMizuho Financial Group defines a Restructured Loan as a loan extended to a Watch Obligor when the following conditions are met: an obligor is experiencing financial difficulties; and lending conditions were amended favorably to the obligor such as allowing interest rate reduction, postponement of principal repayment/interest payment, debt forgiveness, etc.\n\nAn overdue loan is defined as a loan for a Watch Obligor of which the loan principal or interest is overdue for three months or more following the contractual payment date.\n\nSelf-assessment, Provision for Credit Losses on Loans and Off-Balance-Sheet Instruments and Charge-Offs\n\nWe conduct self-assessment of assets to ascertain the status of assets both as an integral part of credit risk management and in preparation for appropriate accounting treatment, including provision for credit losses on loans and off-balance-sheet instruments and charge-offs. During the process of self-assessment, obligors are categorized into certain groups taking into consideration their financial condition and their ability to make payments, and credit ratings are assigned to all obligors, in principle, to reflect the extent of their credit risks. The related assets are then categorized into certain classes based on the risk of impairment. This process allows us to identify and control the actual quality of assets and determine the appropriate accounting treatment, including provision for credit losses on loans and off-balance-sheet instruments and charge-offs. Specifically, the Credit Risk Management Department of each of our principal subsidiaries is responsible for the overall control of the self-assessment of assets of the respective banking subsidiaries, cooperating with the administrative departments specified for each type of asset, including loan portfolios and securities, in executing and managing self-assessments. In our assessment of the probability of obligor bankruptcy, we deem an obligor that is rated as being insolvent or lower as being bankrupt.\n\nCredit Review\n\nPrevention of new nonaccrual loans through routine credit management is important in maintaining the quality of our overall loan assets. Credit review involves analysis and screening of each potential transaction within the relevant business department. In case the screening exceeds the authority of the department, the credit department in charge at the headquarters carries out the review. We have specialist departments for different industries, business sizes and regions, which carry out timely and specialized examinations based on the characteristics of the obligor and its market, and provide appropriate advice to the business department. In addition, in the case of obligors with low credit ratings and high downside risks, the business department and credit department jointly clarify their credit policy and in appropriate cases assist the obligors at an early stage in working towards credit soundness.\n\n \n\n169\n\nMarket Risk Management\n\nBasic Approach\n\nWe define market risk as the risk of losses incurred by the group due to fluctuations in interest rates, stock prices, foreign exchange rates, etc. Market risk includes market liquidity risk; i.e., the risk that we will suffer a loss due to market disruptions or other disorders that prevent us from conducting transactions in the market or require us to pay significantly higher prices than normal to conduct transactions. Mizuho Financial Group manages market risk for the Mizuho group as a whole. Specifically, Mizuho Financial Group establishes the fundamental risk management policy for the entire group, manages the market risk of our principal banking subsidiaries and other core group companies and monitors how the group’s market risk is being managed as a whole.\n\nMarket Risk Management Structure\n\nOur President & Group CEO determines basic matters pertaining to market risk management policies. The Risk Management Committee of Mizuho Financial Group broadly discusses and coordinates matters relating to basic policies in connection with market risk management, market risk operations and market risk monitoring. Under the control of the Group Chief Risk Officer (Group CRO), the Risk Management Department of Mizuho Financial Group is responsible for formulating and implementing plans related to market risk management through monitoring, reporting and analyzing market risk, making proposals, and setting limits and guidelines.\n\nThe Risk Management Department submits reports regarding status of market risk to our Board of Directors and other relevant committees on a regular basis. For the purpose of managing the market risk of our principal banking subsidiaries and other core group companies, the Department regularly receives reports from each of them to properly identify and manage their market risk. These subsidiaries and core group companies, which account for most of the Mizuho group’s exposure to market risk, establish their basic policies based on ours, and the President & CEO of each company determines important matters relating to market risk management.\n\nMarket Risk Management Method\n\nTo manage market risk, we set limits that correspond to risk capital allocations according to the risk profile of each of our principal banking subsidiaries and other core group companies and thereby prevent the overall market risk we hold from exceeding our financial strength represented by capital, etc. The amount of risk capital allocated to market risk corresponds to value-at-risk (the “VAR”) and additional costs that may arise in order to close relevant positions.\n\nSetting Limits\n\nWhen the said limits are set, various factors are taken into account, including business strategies, historical limit usage ratios, risk-bearing capacity (profits, equity capital and risk management framework), profit targets and the market liquidity of the products involved. The limits are determined after being discussed and coordinated by the Risk Management Committee. For trading and banking activities, we set limits for VAR and for losses. For banking activities, we set position limits based on interest rate sensitivity (10 BPV) as needed. An excess over any of these limits is immediately reported and addressed according to a pre-determined procedure.\n\nMonitoring\n\nTo provide a system of mutual checks and balances in market operations, we have established middle offices specializing in risk management that are independent of front offices which engage in market transactions and of back offices which are responsible for book entries and settlements. When VAR is not adequate to control risk, the middle offices manage risk using additional risk indices, carry out stress testing and set stop loss limits as needed. We monitor market liquidity risk for individual financial products in the market while taking turnover and other factors into consideration.\n\n \n\n170\n\nValue-at-Risk\n\nWe use the VAR method, supplemented with stress testing, as our principal tool to measure market risk. The VAR method measures the maximum possible loss that could be incurred due to market movements within a certain time period (or holding period) and degree of probability (or confidence interval).\n\nTrading Activities\n\nVAR figures for our trading activities are based on the following:\n\n \n\n \n•\n \n\nhistorical simulation method;\n\n \n\n \n•\n \n\nconfidence interval: one-tailed 99.0%;\n\n \n\n \n•\n \n\nholding period of one day; and\n\n \n\n \n•\n \n\nhistorical observation period of three years.\n\nThe following tables show the VAR figures for our trading activities by risk category for the fiscal years ended March 31, 2024, 2025 and 2026 and as of March 31, 2024, 2025 and 2026:\n\n \n\n \n  \nFiscal year ended March 31, 2024\n \n  \nAs of\nMarch 31, 2024\n \n\nRisk category\n\n  \nDaily average\n \n  \nMaximum\n \n  \nMinimum\n \n\n \n  \n(in billions of yen)\n \n\nInterest rate\n\n  \n¥\n4.4\n \n  \n¥\n9.1\n \n  \n¥\n2.7\n \n  \n¥\n3.3\n \n\nForeign exchange\n\n  \n \n0.9\n \n  \n \n1.9\n \n  \n \n0.2\n \n  \n \n0.6\n \n\nEquities\n\n  \n \n2.0\n \n  \n \n4.6\n \n  \n \n0.3\n \n  \n \n0.5\n \n\nCommodities\n\n  \n \n0.3\n \n  \n \n0.5\n \n  \n \n0.1\n \n  \n \n0.4\n \n\n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n\nTotal\n\n  \n¥\n5.6\n \n  \n¥\n9.2\n \n  \n¥\n3.3\n \n  \n¥\n3.4\n \n\n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n\n \n\n \n  \nFiscal year ended March 31, 2025\n \n  \nAs of\nMarch 31, 2025\n \n\nRisk category\n\n  \nDaily average\n \n  \nMaximum\n \n  \nMinimum\n \n\n \n  \n(in billions of yen)\n \n\nInterest rate\n\n  \n¥\n2.5\n \n  \n¥\n3.7\n \n  \n¥\n1.9\n \n  \n¥\n2.6\n \n\nForeign exchange\n\n  \n \n1.0\n \n  \n \n3.0\n \n  \n \n0.2\n \n  \n \n1.5\n \n\nEquities\n\n  \n \n1.0\n \n  \n \n2.4\n \n  \n \n0.4\n \n  \n \n0.7\n \n\nCommodities\n\n  \n \n0.2\n \n  \n \n0.4\n \n  \n \n0.0\n \n  \n \n0.1\n \n\n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n\nTotal\n\n  \n¥\n5.5\n \n  \n¥\n9.7\n \n  \n¥\n3.0\n \n  \n¥\n5.0\n \n\n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n\n \n\n \n  \nFiscal year ended March 31, 2026\n \n  \nAs of\nMarch 31, 2026\n \n\nRisk category\n\n  \nDaily average\n \n  \nMaximum\n \n  \nMinimum\n \n\n \n  \n(in billions of yen)\n \n\nInterest rate\n\n  \n¥\n3.0\n \n  \n¥\n4.9\n \n  \n¥\n1.8\n \n  \n¥\n2.6\n \n\nForeign exchange\n\n  \n \n0.7\n \n  \n \n2.9\n \n  \n \n0.1\n \n  \n \n0.4\n \n\nEquities\n\n  \n \n2.4\n \n  \n \n8.4\n \n  \n \n0.3\n \n  \n \n0.3\n \n\nCommodities\n\n  \n \n0.3\n \n  \n \n0.9\n \n  \n \n0.0\n \n  \n \n0.1\n \n\n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n\nTotal\n\n  \n¥\n6.8\n \n  \n¥\n11.7\n \n  \n¥\n4.3\n \n  \n¥\n4.3\n \n\n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n  \n\n \n\n \n\n \n\n \n\n171\n\nThe following graph shows VAR figures for our trading activities for the fiscal year ended March 31, 2026:\n\n(VAR: billions of yen)\n\nThe following table shows VAR figures for our trading activities for the fiscal years indicated:\n\n \n\n \n  \nFiscal years ended March 31,\n \n\n \n  \n2024\n \n  \n2025\n \n  \n2026\n \n  \nChange\n \n\n \n  \n(in billions of yen)\n \n\nAs of fiscal year end\n\n  \n¥\n3.4\n \n  \n¥\n5.0\n \n  \n¥\n4.3\n \n  \n¥\n(0.6\n) \n\nMaximum\n\n  \n \n9.2\n \n  \n \n9.7\n \n  \n \n11.7\n \n  \n \n1.9\n \n\nMinimum\n\n  \n \n3.3\n \n  \n \n3.0\n \n  \n \n4.3\n \n  \n \n1.3\n \n\nAverage\n\n  \n \n5.6\n \n  \n \n5.5\n \n  \n \n6.8\n \n  \n \n1.2\n \n\nNon-trading Activities\n\nThe VAR figures for our banking activities are based on the same conditions as those of trading activities, but the holding period is one month. In addition, as for risk management of banking activities, it is important to properly measure interest rate risk so that we calculate interest rate risk using appropriate methods such as recognizing demand deposits as “core deposits.”\n\n \n\n172\n\nThe following graph shows the VAR figures for our banking activities excluding our cross-shareholdings portfolio for the fiscal year ended March 31, 2026:\n\n(VAR: billions of yen)\n\n \n\nThe following table shows the VAR figures for our banking activities for the fiscal years indicated:\n\n \n\n \n  \nFiscal years ended March 31,\n \n\n \n  \n 2024 \n \n  \n 2025 \n \n  \n 2026 \n \n  \n Change \n \n\n \n  \n(in billions of yen)\n \n\nAs of fiscal year end\n\n  \n¥\n319.0\n \n  \n¥\n200.4\n \n  \n¥\n300.1\n \n  \n¥\n99.6\n \n\nMaximum\n\n  \n \n336.5\n \n  \n \n279.7\n \n  \n \n341.9\n \n  \n \n62.2\n \n\nMinimum\n\n  \n \n185.9\n \n  \n \n181.1\n \n  \n \n201.5\n \n  \n \n20.3\n \n\nAverage\n\n  \n \n281.2\n \n  \n \n219.3\n \n  \n \n274.8\n \n  \n \n55.4\n \n\nVAR is a commonly used market risk management technique. However, VAR models have the following shortcomings:\n\n \n\n \n•\n \n\nBy its nature as a statistical approach, VAR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a good indicator of future events, particularly potential future events that are extreme in nature.\n\n \n\n \n•\n \n\nVAR may underestimate the probability of extreme market movements.\n\n \n\n \n•\n \n\nThe use of a 99.0% confidence level neither takes account of, nor makes any statement about, any losses that might occur beyond this confidence level.\n\n \n\n \n•\n \n\nVAR does not capture all complex effects of various risk factors on the value of positions and portfolios and could underestimate potential losses.\n\n \n\n173\n\nCross-shareholdings Portfolio Management Activities\n\nWe take the market risk management approach with use of VAR and risk indices for cross-shareholdings portfolio management activities to properly manage stock price risk. Specifically, we monitor VAR measurements and the state of risk capital on a daily basis. Moreover, in order to control stock price risk, we are reducing our cross-shareholdings through careful negotiations with counterparties.\n\nBack Testing\n\nIn order to evaluate the effectiveness of market risk measurements calculated using the VAR method, we carry out regular back tests to compare VAR with assumptive or actual profits and losses.\n\nStress Testing\n\nBecause the VAR method is a market risk measurement method based on statistical assumptions, we conduct regular stress testing to simulate the levels of losses that could be incurred in cases where the market moves suddenly to levels that exceed these assumptions.\n\nLiquidity Risk Management\n\nBasic Approach\n\nWe define liquidity risk as the risk of losses arising from funding difficulties due to deterioration of our financial position that make it difficult for us to raise necessary funds or force us to raise funds at significantly higher interest rates than usual. Mizuho Financial Group manages liquidity risks for the Mizuho group as a whole. Specifically, Mizuho Financial Group establishes a fundamental liquidity risk management policy for the entire group, manages the liquidity risk of our principal banking subsidiaries and other core group companies and monitors how the group’s liquidity risk is being managed as a whole.\n\nLiquidity Risk Management Structure\n\nOur President & Group CEO determines the basic matters pertaining to liquidity risk management policies. The Risk Management Committee of Mizuho Financial Group broadly discusses and coordinates matters relating to the basic policies in connection with liquidity risk management, operations and monitoring, as well as proposing responses to emergencies such as sudden market changes. Our Group Chief Risk Officer (Group CRO) is responsible for matters relating to liquidity risk management planning and operations. Our Risk Management Department is responsible for monitoring, reporting and analyzing liquidity risk, making proposals in connection with liquidity risk and formulating and implementing plans relating to liquidity risk management. In addition, our Group Chief Financial Officer is responsible for matters relating to the planning and operation of funds management, and the Financial Planning Department is responsible for its monitoring and also for planning and implementing measures relating to funds management to maintain appropriate funding liquidity. Reports on the status of and other factors relating to cash funding management are submitted to our Board of Directors, the Risk Committee, the Executive Management Committee, our President & Group CEO and the Business Policy Committees, respectively, on a regular basis.\n\nWe appropriately identify and manage liquidity risk of our principal banking subsidiaries and other core group companies through regular reports from each company. Each company, which is a major source of liquidity risk in our group, also establishes their own basic policies on liquidity risk management to properly identify and manage liquidity risk. The President & CEO of each company determines important matters pertaining to liquidity risk management.\n\nLiquidity Risk Management Method\n\nWe mainly manage liquidity risk through the frameworks of “Liquidity Categorization” and “Liquidity Risk Management Indicators.”\n\n \n\n174\n\nLiquidity Categorization\n\nWe and our principal banking subsidiaries and other core group companies have established a framework of assessing the levels of liquidity risks by categorizing them into “Normal,” “Anxious” and “Crisis” to reflect the funding conditions. The liquidity categorizations applied to the principal banking subsidiaries and other core companies are set to be the same as, or more stringent than, our own liquidity categorization. In addition, we set Early Warning Indicators (“EWIs”) and conduct monitoring on a daily basis to manage funding conditions. The EWIs include stock prices, credit ratings, amount of liquidity reserve assets such as Japanese government bonds, our funding situations and others.\n\nLiquidity Risk Management Indicators\n\nAs for Japanese yen, we set limits on funds raised in the market for each of our principal banking subsidiaries and other core group companies based on a number of time horizons taking into account the characteristics and strategies of each company. As for foreign currencies, we conduct daily stress tests based on a combination of market-wide factors and idiosyncratic factors of the group for each company to verify the sufficiency of liquidity reserve assets and the effectiveness of our liquidity contingency funding plans.\n\nThe thresholds for Liquidity Risk Management Indicators are discussed and coordinated by the Risk Management Committee, and determined by the committee chair. A violation of threshold is immediately reported and addressed in accordance with pre-determined procedures.\n\nOperational Risk Management\n\nBasic Approach\n\nWe define operational risk as the risk of loss that we may incur resulting from inadequate or failed internal processes, people and systems or from external events. We control operational risk management for the Mizuho group as a whole. Considering that operational risk includes information technology risk, operations risk, legal risk, human resources risk, tangible asset risk and regulatory change risk, we have separately determined the fundamental risk management policies for these different types of risk. We manage the operational risk associated with our principal banking subsidiaries and other core group companies while monitoring the state of group-wide operational risk.\n\nOperational Risk Management Structure\n\nOur President & Group CEO determines basic matters pertaining to operational risk management policies. The Risk Management Committee of Mizuho Financial Group broadly discusses and coordinates matters relating to basic policies in connection with operational risk management, operational risk operations and operational risk monitoring. The Group Chief Risk Officer (Group CRO) is responsible for matters relating to operational risk management planning and operations. The Risk Management Department of Mizuho Financial Group is responsible for monitoring market risk, reporting and analyzing making proposals, setting limits and guidelines, and formulating and implementing plans relating to operational risk management.\n\nOur principal banking subsidiaries and core group companies establish their basic policies on operational risk management, and the President & CEO of each company determines important matters relating to operational risk management.\n\nOperational Risk Management Method\n\nTo manage operational risk, we set common rules for data gathering to develop various databases shared by the group and measure operational risk on a regular basis, applying business indicators based on financial statements and internal loss data related to operational risk appropriately.\n\n \n\n175\n\nWe have established and are strengthening management methods and systems to appropriately identify, assess, measure, monitor and control the operational risks that arise from the growing sophistication and diversification of financial operations and developments relating to information technology by utilizing Control Self-Assessments (as described below) and improving quantitative management of operational risk.\n\nThe status of operational risk management that we identified, assessed and measured through the aforementioned method is reported to the Risk Management Committee, the Executive Management Committee, and our President & CEO, respectively, on a regular basis.\n\nControl Self-Assessment\n\nWe aim for an autonomous risk management process, where the departments managing the business/operation take the initiative in identifying risks inherent in the business/operation by recognizing its own business/operation environment, and assessing and perceiving the risks that remain despite internal controls. Based on the assessments and risks perceived, they control such risks by setting and implementing necessary risk reduction measures.\n\nDefinition of Risks and Risk Management Methods\n\nAs shown in the table below, we have defined each component of operational risk, and we apply appropriate risk management methods in accordance with the scale and nature of each risk.\n\n \n\n \n  \n\nDefinition\n\n  \n\nPrincipal Risk Management Methods\n\nInformation Technology Risk\n  \nRisk that, in the development and operation of information systems, disruptions or malfunctions arising from disasters or system failures, cybersecurity-related defects or unauthorized activities, or delays or inadequacies in the use of IT could have a material adverse effect on service delivery, payment functions and other operations, or hinder the execution of strategies, resulting in losses to customers and losses to the Mizuho group.\n  \n\n•\n\nIdentify and evaluate the risk by setting specific standards that need to be complied with and implementing measures tailored based on evaluation results to reduce the risk.\n\n•\n\nEnsure ongoing project management in systems development, resource allocation, schedule/process control, quality management, and the evaluation of the suitability of technologies.\n\n•\n\nEnhance the effectiveness of emergency response by establishing and maintaining backup systems and conducting incident/outage response drills.\n\n•\n\nAssess alignment with management strategy and monitor investment effectiveness (e.g., ROI).\n\n \n\nCybersecurity Risk\n  \nRisk that Mizuho group may incur tangible or intangible losses due to cybersecurity-related problems that occur at the group and/or at its clients, along with organizations, etc., that have a business relationship with the group, such as outside vendors and goods/services suppliers.\n  \n\n•\n\nIdentify vulnerabilities, strengthen monitoring systems and incident response capabilities, and establish a robust governance structure.\n\n•\n\nEnhance the sophistication of cybersecurity management systems on a group-wide, global-wide, and third-party basis through these measures.\n\n \n\n \n\n176\n\n \n  \n\nDefinition\n\n  \n\nPrincipal Risk Management Methods\n\nOperations Risk\n  \nRisk that customers may incur losses or the group may incur losses due to the disruption of services to customers or major incidents affecting settlement systems, etc., as a result of inadequate operations caused by fraudulent acts, errors or negligence, etc., of senior executives or employees, or inadequacies in the operational structure itself.\n  \n\n•\n\nEstablish clearly defined procedures for handling operations.\n\n•\n\nPeriodically check the status of operational processes.\n\n•\n\nConduct training and development programs by the headquarters.\n\n•\n\nIntroduce information technology, office automation and centralization for operations.\n\n \n\nLegal Risk\n  \nRisk that the group may incur losses due to violation of laws and regulations, breach of contract, entering into improper contracts or other legal factors.\n  \n\n•\n\nReview and confirm legal issues, including the legality of material decisions, agreements and external documents, etc.\n\n•\n\nCollect and distribute legal information and conduct internal training programs.\n\n•\n\nAnalyze and manage issues related to lawsuits.\n\n \n\nHuman Resources Risk\n  \nRisk of damages to employees due to inappropriate working conditions, workplaces or safety conditions, and that the group may suffer tangible and/or intangible losses due to not being able to build an adequate human resources portfolio resulting from human capital losses following outflow of human resources and decline in abilities and skills, and/or not being able to make extensive use of human capital following a decline in employee engagement.\n  \n\nUnderstand the status of:\n\n•\n\nHuman resources outflow (status of voluntary resignations, mid-career hiring).\n\n•\n\nWorking environments (status of work-related injuries, harassment/bullying incidents, employee engagement).\n\n•\n\nSecuring human resources (status of maintaining adequate human resources with specific abilities and/or skills).\n\n \n\nTangible Asset Risk\n  \nRisk that the group may incur losses from damage to tangible assets or a decline in the quality of the working environment as a result of disasters, criminal actions or defects in asset maintenance.\n  \n\n•\n\nManage the planning and implementation of construction projects related to the repair and replacement of facilities.\n\n•\n\nIdentify and evaluate the status of damage to tangible assets caused by natural disasters, etc., and respond appropriately to such damage.\n\n \n\nRegulatory Change Risk\n  \nRisk that the group may incur losses due to changes in various regulations or systems, such as those related to law, taxation and accounting.\n  \n\n•\n\nUnderstand important changes in regulations or systems that have significant influence on our business operations or financial condition in a timely and accurate manner.\n\n•\n\nAnalyze degree of influence of regulatory changes and establish countermeasures.\n\n•\n\nContinuously monitor our regulatory change risk management mentioned above.\n\n \n\n177\n\nWe also recognize and manage “Information Security Risk” and “Compliance Risk,” which constitute a combination of more than one of the above components of operational risk, as operational risk.\n\nMeasurement of operational risk equivalent\n\nWe have adopted the Standardized Measurement Approach (“SMA”) for the calculation of operational risk equivalent in association with capital adequacy ratios based on the Basel Regulation.\n\nThe measurement results under the SMA are used not only as the operational risk equivalent in the calculation of capital adequacy ratios based on the Basel Regulation, but also, for internal management purposes, as the operational risk amount that is calculated by applying a set multiplier to the operational risk equivalent.\n\nReputational Risk Management\n\nBasic Approach\n\nWe define reputational risk as “the risk that the Mizuho group may incur tangible or intangible losses due to an adverse effect to our reputation or Mizuho’s brand when all services provided by and all activities conducted by the Mizuho group, officers and employees, are recognized as deviating from the expectations and requirements of stakeholders, including clients, employees, the economy, and society”.\n\nWe supervise reputational risk management for the Mizuho group. Specifically, we establish the group’s basic policies pertaining to reputational risk management, manage core group companies, and monitor how the group’s reputational risks are being managed as a whole.\n\nReputational Risk Management Structure\n\nOur President & Group CEO determines the Mizuho group’s basic matters pertaining to reputational risk management. In addition, the Risk Management Committee comprehensively deliberate and coordinate basic policies pertaining to reputational risk management, and matters relating to operations and monitoring. The Group Chief Strategy Officer (Group CSO) is responsible for matters relating to planning and operation of reputational risk management. The Public Relations Office conducts monitoring and reporting of reputational risks and analyses and suggestions thereof, and carries out planning and promotion of basic matters pertaining to reputational risk management.\n\nReports on the reputational risk situations, etc. are made on a regular basis to the Group Chief Strategy Officer (Group CSO) and the Business Policy Committees. Regarding the reputational risk management of the core group companies, we identify and manage reputational risks appropriately by receiving their reports on a regular basis. In particular, individual companies which account for a large part of the group’s reputational risks establish their own basic policies, and the President & CEO of the individual company determines important matters pertaining to reputational risk management.\n\nReputational Risk Management Method\n\nWe control reputational risks by carrying out centralized monitoring and management of the information that is deemed to have a great impact on our group management, and creating an appropriate management structure suited to the scale and nature of risks, etc.\n\nWe endeavor to prevent the realization of reputational risks beforehand and minimize losses by identifying reputational risks earlier and responding appropriately in terms of urgency and impact.\n\n \n\n178\n\nModel Risk Management\n\nBasic Approach\n\nWe define model risk as the risk of the Mizuho group incurring tangible and intangible losses due to decision-making based on an inadequate or failed model and/or inappropriate use of a model.\n\nIn recent years, against the backdrop of the wider and more complex business operations of financial institutions and technological innovations such as artificial intelligence, the opportunities to use models in the operations of financial institutions have been expanding, and their materiality and impact have been increasing. Under such circumstances, there is a growing need to manage model risk by focusing on the risk of tangible and intangible losses arising from decisions based on improper development and inappropriate use of these models.\n\nWe supervise model risk management for the Mizuho group and are promoting comprehensive and effective model risk management throughout the group. Specifically, we have completed preparations for a group-wide, global model risk management framework covering all business categories, including bank, trust bank, and securities business, and covering all of the regions of Japan, the Americas, Europe and Asia-Pacific. Furthermore, with the commitment of the senior management, we have introduced a framework to visualize and manage the status of model risk, and we continue to promote effective model risk management on a risk-based approach.\n\nModel Risk Management Structure\n\nOur President & Group CEO determines the Mizuho group’s basic matters pertaining to model risk management. In addition, the Risk Management Committee comprehensively deliberate and coordinate basic policies pertaining to model risk management, and matters relating to administration and monitoring. Our Group Chief Risk Officer (Group CRO) is responsible for matters relating to planning and administration of model risk management. The Risk Management Department is responsible for monitoring model risks, making reports, analyses, and proposals, etc., and makes and promotes plans for model risk management. We manage model risk situations for the entire group based on the reports received from the core group companies on their model risk management. In particular, individual companies which are determined to be highly susceptible to model risks establish their own basic policies, and each of the President & CEO of each company determines important matters pertaining to model risk management.\n\nModel Risk Management Method\n\nOur model risk management is carried out through model testing, monitoring, etc., by the first line of defense, which consists of model owners, users, developers, etc., and through model validation, etc., by the second line of defense, which controls model risk via reviewing and challenging the first line of defense in every step of model identification, development, use, change, and exit. Furthermore, we carry out model risk management based on a risk-based approach with weighting according to the materiality and impact of the models.\n\nThird Party Risk Management\n\nBasic Approach\n\nWe define third party risk as any risk arising in Mizuho Financial Group and/or the Mizuho group due to a third party entity having a business contractual relationship with the Mizuho Financial Group and our group, and categorize it as a compound risk consisting of market risk, credit risk, liquidity risk and operational risk and so forth.\n\n \n\n179\n\nIn light of the importance of relationships with third parties in the Mizuho group’s operations, we recognize risks related to third parties as our own risks for us and the Mizuho group, and we ensure sound and appropriate business operations, including the proper execution of operations through third parties, by appropriately identifying, evaluating and responding to risks, from the perspectives of sound management, appropriate business operations, customer protection and business continuity, etc. We oversee the third party risk management of the Mizuho group.\n\nThird Party Risk Management Structure\n\nOur President & Group CEO determines basic matters related to third party risk management. The Risk Management Committee comprehensively discusses and coordinates matters relating to basic policies in connection with third party risk management, operations and monitoring. The Group Chief Risk Officer (Group CRO) is responsible for matters relating to third party risk management planning and operations. The Risk Management Department is responsible for monitoring third party risk and reporting and analyzing and making proposals, etc., and formulates and promotes plans relating to third party risk management.\n\nWe ascertain the status of third party risk management of the entire Mizuho group based on the reports and other information from the core group companies. The companies that we determined to require considerable management because the scale and nature of their third party risk can seriously affect the entire group set forth basic policies and determine the important matters related to third party risk management through the President & CEO of each company.\n\nThird Party Risk Management Method\n\nWe carry out third party risk management through appropriate contracts with third parties, evaluation and monitoring of third parties, management of concentration in specific third parties, and so forth. We consistently report on the status of these management activities to the Risk Management Committee, the Executive Management Committee, our President & Group CEO, and other relevant parties on a regular basis.\n\nCompliance\n\nAs a provider of economic and social infrastructure, we remain conscious of the importance of our social responsibilities and public mission at all times. We define compliance as “not only observing all applicable laws, regulations, and rules by all directors, executive officers, and employees of us, but also conducting fair and honest business activities that conform to commonly accepted social standards ” and view ongoing compliance as one of the basic principles of sound business management. Each of our group companies maintains its own compliance structure in line with the basic policies established by Mizuho Financial Group.\n\nCompliance Structure\n\nThe chief executive officers of Mizuho Financial Group, Mizuho Bank, Mizuho Trust & Banking and Mizuho Securities generally oversee compliance matters of their respective companies, and the chief compliance officers, etc., also head their respective compliance committees at which important matters concerning compliance are discussed. The four companies also have compliance divisions under their respective chief compliance officers. These divisions are responsible for compliance planning and implementation and control overall compliance management at their respective companies. At the organizational unit level (such as branches and divisions) at each of the four companies, the head of the unit is responsible for guidance and implementation related to compliance matters within such unit, and the compliance officer or the compliance administrator at each unit reviews the status of compliance within such unit.\n\nOther core group companies have also established compliance structures tailored to the characteristics of their respective businesses.\n\n \n\n180\n\nMizuho Financial Group monitors the status of compliance of the Mizuho group through reports submitted by our principal banking subsidiaries and other core group companies and adopts appropriate responses when necessary.\n\nCompliance at subsidiaries of our principal banking subsidiaries and other core group companies is monitored and managed by their respective parents.\n\nCompliance Activities\n\nWe have established the “Mizuho Code of Conduct,” which sets forth clear and concrete standards of behavior to be followed when implementing the precepts of our corporate identity. Furthermore, each of our core group companies has also prepared its own Conduct Guidelines for Compliance for executives and employees as behavioral guidelines for ensuring thoroughgoing compliance.\n\nMizuho ensures that all directors, executive officers and employees are fully acquainted with both the Code of Conduct and the relevant Conduct Guidelines for Compliance through ongoing training and messages from management.\n\nWe monitor levels of compliance through self-assessments conducted by individual organizational units and through monitoring conducted by the compliance division of each group company.\n\nEvery fiscal year, each of our group companies establishes a compliance program, which contains concrete measures for compliance enforcement such as measures related to the management of the compliance framework, training and assessments. Progress regarding the implementation of the compliance program is monitored every six months.\n\nInternal Audit\n\nInternal audit refers to the series of activities, ranging from the objective and comprehensive evaluation of the effectiveness and appropriateness of each process relating to governance, risk management and control, to providing recommendations and corrective guidance, etc., toward the resolution of problems, under the supervision of the Board of Directors, with organizational independence ensured. Through these series of activities, internal audit assists the board of directors of each of our group companies to fulfill their role to supervise management efficiently and effectively.\n\nIn line with the Basic Policy for Internal Audit established by Mizuho Financial Group, our principal banking subsidiaries and other core group companies conduct internal audits, which include the internal auditing of their respective subsidiaries. In addition, with respect to the management of risks applicable across the Mizuho group, we coordinate internal audits throughout the group to assess the risk management status of the group as a whole.\n\nInternal Audit Management Structure\n\nMizuho Financial Group\n\nOur Internal Audit Group is independent from our other departments and business processes at Mizuho Financial Group. The Internal Audit Group conducts internal audits of Mizuho Financial Group, and monitors and manages internal audits at our principal banking subsidiaries and other core group companies based on reports submitted by such subsidiaries. The Group CAE reports functionally to the Board of Directors and the Audit Committee on important matters related to internal audits. Also, as the person in charge of internal audit, the Group CAE reports administratively on the status of internal audit operational management to the Group CEO directly or through the Internal Audit Committee.\n\n \n\n181\n\nMizuho Bank and Mizuho Trust & Banking\n\nAt both Mizuho Bank and Mizuho Trust & Banking, their respective Internal Audit Groups are independent from their respective other departments and business processes. The progress of individual audits and plans are to be reported to their respective Audit & Supervisory Committees, and their respective Internal Audit Groups respond to requests for inspections, and receive specific instructions, from their respective Audit & Supervisory Committees. In addition, they have also established their respective Internal Audit Committees which discuss and make decisions on all important matters regarding their respective internal audits.\n\nBoth banks have established their respective internal audit departments to conduct internal audits at their respective domestic and overseas business offices, head office departments and group companies. Specifically, the internal audit departments assess the suitability and effectiveness of business activities associated with compliance and risk management.\n\nOther Core Group Companies\n\nOther core group companies have also established effective and efficient internal audit structures adapted to the characteristics of their respective businesses."}