Aozora Bank (the “Bank” hereafter) shall appropriately manage transactions carried out in the Bank Group in which conflict of interest may exist in a bid to prevent from unreasonable damage on interests of customers. This policy is to set forth and publish a summary of the Bank’s management system for conflict of interest as to procedures and methods for extracting, identifying and managing material conflict of interest.
The conflict of interest that are covered under this policy exist in the following two relationships:
(1) A conflict of interest between a customer and the Bank or the Bank Group
(2) A conflict of interest between a customer and another customer
The Bank and the Bank Group shall categorize transactions in which conflict of interest may exist. In the case that business Groups, including the Bank Group companies, carry out a transaction, the business Groups shall determine and identify whether the transaction does not unreasonably damage interests of customers in light of the types and examples of the transactions in which conflict of interest may exist. In addition, the business Groups shall, as necessary, make inquires about whether or not conflict of interest exist to the Legal & Compliance Division, the supervising division of managing conflict of interest, and hold a prior consultation about the necessity of managing conflict of interest and their methods with the division.
When judging whether one transaction is applicable to the transactions in which conflict of interest may exist, the Bank and the Bank Group shall review whether or not the transaction corresponds to the following types. The examples of the transactions are only exemplification, and actually managed transactions are not limited to them. Effects on the Bank Group’s reputation shall also be taken into consideration.
| [Type I] | A case where there is a possibility that the Bank or the Bank’s related parties will gain an economic benefit or prevent an economic loss in a transaction with a customer that should be protected, at the expense of the customer. | |
| (Example of the transaction) | A case where the bank provide loan to purchase in soliciting securities which is issued or syndicated by the Bank or the Bank’s related parties. | |
| (Example of the transaction) | A case where the bank collects loan from a borrower who issues bond which the Aozora Securiteis Company serves bond underwriting. | |
| [Type II] | A case that prioritizes an interest of another customer rather than that of a customer that should be protected | |
| (Example of the transaction) | A case where providing advice of M&A or financing to several customers that are in the relation of mutual competition or conflict. | |
| (Example of the transaction) | A case where the Bank’s customer plans the hostile buyout against a customer, whose main or quasi-main bank is the Aozora Bank, and the Bank gives advice to the purchase side. | |
| [Type III] | A case of carrying out a transaction that competes with a customer that should be protected | |
| (Example of the transaction) | A case where the Bank holds two positions--agent and lender--in a syndicated loan, and proceeds with requesting additional security of proper lending and preferential collection. | |
| (Example of the transaction) | A case where the Bank trades certain securities in propritary account based on information of prospective transactions. | |
| [Type IV] | A case of carrying out a transaction that gains an interest by means of use, etc. of non-public information on a customer that should be protected | |
| (Example of the transaction) | A case where the Bank trades securities issued by a company to which the bank has employees in a position to affect on its officers or other important policies. | |
| (Example of the transaction) | A case where a speculative (not hedging) transaction related to the credit risk of a nonperforming asset is carried out despite the existence of credit information on the said asset. | |
| [Type V] | Other cases where interests of customers may unreasonably be damaged. | |
When the Bank Group identifies a transaction that becomes a conflict of interest, the Bank Group shall appropriately ensure the protection of the said customer by using the following methods and other means:
- Method for separating groups that are related to the transaction
- Method for changing trade conditions or methods
- Method for suspending (the other) transaction
- Method for appropriately disclosing to the customer the matter that the interest of the customer may unreasonably be damaged to the extent that does not violate confidentiality obligations
The Bank, Aozora Trust Bank, Ltd., Aozora Securities Co., Ltd., Aozora Asia Pacific Finance Limited, and other subsidiaries that are engaged in financial business, financial instruments exchange business and insurance business (currently the three subsidiaries mentioned above only) shall be covered under the management.
6.1 Customer Protection Committee
The Customer Protection Committee shall examine and approve rules concerning the management system for conflict of interest and material concerned transactions based on delegation from the Board of Directors and the Management Committee.
6.2 Conflict Management Supervisor
The Board of Directors shall appoint the Head of Compliance & Governance as Conflict Management Supervisor who is independent from the business Groups.
6.3 Supervising division of managing conflict of interest
The Legal & Compliance Division independent from the business Groups shall act as the supervising division of managing conflict of interest, and build and manage the management system for conflict of interest, including the development of Policies and Procedures, training, etc., under the direction and supervision of the Conflict Management Supervisor.
Upon receipt of an inquiry or a consultation request from a business Group about a transaction in which a conflict of interest may exist, the supervising division shall examine the nature of the conflict of interest and give instructions and advice about how to manage the matter, and retain the records which are compiled from the business Group and whose appropriateness of the transaction is examined, for five (5) years or more. The supervising division shall also endeavor to make improvements by analyzing complaints, etc. about conflict of interest.
6.4 Business Groups
The business Groups shall determine and implement how to manage transactions in which conflict of interest may exist in accordance with the types and management standards set forth by the supervising division of managing conflict of interest, or upon a prior consultation with the supervising division of managing conflict of interest if necessary, and shall report the management methods to the supervising division of managing conflict of interest.
6.5 Internal Audit
The Internal Audit Division shall examine the management system for conflict of interest on a regular basis.
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