Special Feature : One-on-One Interview Page 2

We invited Mr. Hironari Nozaki, Managing Director of Citigroup Global Markets Japan Inc., to have a conversation with Mr. Toma, President and CEO of Shinsei Bank, on the overall assessment of the First Medium-Term Management Plan and notable aspects of the Second Medium-Term Management Plan. Mr. Nozaki is a top analyst of the banking sector.

Special Feature : One-on-One Interview Shigeki Toma (President and Chief Executive Officer) Hironari Nozaki (Managing Director of Citigroup Global Markets Japan Inc.)

The Second Medium-Term Management Plan

Nozaki: You have fixed the Bank's financial basis to a reasonable extent under the First MTMP. How have you positioned the Second MTMP?

Toma: Since I joined Shinsei Bank, I have always been thinking what the significance of our existence is, and I have wished to give shape to this. If we just do what other banks do, there is no meaning for us to exist, and we must therefore do something different from our competition. However, during the first three years under the First MTMP when our situation was shaky, we had to focus on eliminating the negative legacy and adjusting the discrepancy between our ideal and the existing organizational form. As a result, we were able to create a somewhat solid footing, and the underlying current of the Second MTMP is to clarify the meaning of our existence.

In the area of corporate loans, new business categories that match changes to the macro environment have been attracting attention such as healthcare, renewable energy, and new technology.

While our borrowers therefore are constantly changing, banks on the other hand are not changing at all. When I was a General Manager of a bank branch, if small- and mediumsized companies came asking for a loan, branch staff members would first ask, "What can you offer as collateral?" I used to tell them not to ask about collateral first, but to start looking at what these companies were doing and how much money they would need to realize their objectives. However, this attitude has not changed yet.

I think a bank needs to be a pacesetter who is enthusiastic about the technology or service its customer provides, and will provide loans once it is enthusiastic, and will not stop there but will continue to do business together. Customers with such advanced technology will expand into the global markets. I ask our employees to have a global perspective and always think about how such technology or service might take the world by storm.

Nozaki: That is exactly the concept of projects.

Toma: There are also many aspects that need to be improved in our retail business. Our housing loans have a large amount of assessment and are thus neither very flexible nor convenient.

Credit assessment is of course necessary, but we may be providing services based on the "product out (or product-oriented)" concept, offering customers products that we want to sell. Also, baby boomers have had a disastrous experience in the past due to the collapse of the Bubble Economy. We need to engage in businesses such as proposing an optimum, customized asset portfolio to people such as these. Some may say we cannot make much profit from this type of business, but I say we don't have to aim big. Instead, if we build a trusting relationship, we can sell our products, and we can make profit then. I always say that, bottom-line, we must stop proposing to our customers products and services that are convenient for us.

Nozaki: Not only banks but also financial institutions in general haven't been able to shake off the "product out" concept. Unless you adopt the "market in (or market-oriented)" concept to offer products and services that are wanted by customers, we cannot say we have a customer-oriented business. With respect to corporate loans, there are now very few opportunities for bankers to share their customersí dreams. In particular, younger bankers will miss out experiencing the true dynamism of corporate finance if they donít have such experiences.

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