A group interview in regard to Shinsei Bank's corporate governance was conducted among Mr. Ernest M. Higa, Outside Director, Mr. Hideyuki Kudo, President and Chief Executive Officer, and Mr. Shigeki Toma, Advisor to Shinsei Bank (the previous President and Chief Executive Officer), with Mr. Ken Takamiya, a bank sector analyst at Nomura Securities Co., Ltd., serving as the moderator. (Interview was conducted in April 2015)

Special Feature : President's Conversation with Investor

From left

Shigeki Toma
Advisor, Shinsei Bank
Hideyuki Kudo
President & CEO, Shinsei Bank
Ken Takamiya(Moderator)
Bank Sector Analyst Nomura Securities Co., Ltd.
Ernest M. Higa
Outside Director, Shinsei Bank

Toma:The Board examined a number of internal and external candidates in the given timeframe, taking into account the current situation of the Bank, and unanimously selected the best person for the job out of the potential candidates. I personally feel that the Board had smooth discussions and that my position is being taken over by a strong successor.

Higa:The Board engaged in extensive discussions, and while there were differing opinions in the beginning, a consensus started to develop as discussions amongst the Directors progressed, ultimately leading to the selection of Mr.Kudo as Mr.Toma's successor. It was the first time I participated in a debate for this kind of succession, but I can say that our discussions in examining the internal and external candidates were exhaustive. A consensus was reached not because we were drawn to a particular person's opinion, but by sharing the views held by each member of the Board, and I believe that we have ensured the accountability and transparency that was required.

Takamiya:Mr.Kudo, now that you will be assuming the responsibility of Management, what is the function you would wish for such a reliable but strict Board to perform?

Kudo:I believe that the Bank's Board has very advanced governance in place in that its discussions revolve around the Outside Directors. Additionally, as none of the Outside Directors have a background in Japanese commercial banks, they possess diverse views and perspectives, many of which I find to be deeply insightful. Mr.Higa, for instance, is highly sensitive to reputational risks (risks in general related to the reputation of the company) due to his experience in business which maintains direct contact with individual customers. Although one of the Board's functions is to monitor the execution of business, the functions of Shinsei Bank's Board goes beyond that and engages in diverse discussions including providing constructive advice for the improvement of corporate value. There is great value in introducing new viewpoints in Management, and I look forward to the Board continuing that function.

Higa:Shinsei Bank is headed in a good direction in many aspects. What is important from here is to develop further growth strategies.

Toma:Some of the many initiatives we engaged in are beginning to take shape, while some are not. I hope that the Bank will consider these successes and failures once more and move forward as we look at those initiatives as it decides upon its future strategy. FY2015 is the final year of the Second MTMP, and as the Third MTMP will start in FY2016, these plans will become the pillars of the Bank. I hope that the plans developed will be able to fully refl ect the values of the Bank. Mr.Kudo is 15 years younger than I am, so I expect he will be able to assume his role with great enthusiasm and vigor. As for the Board, I expect the Outside Directors to continue to unhesitatingly point out any issues to him.

Takamiya:The message I pick up from my discussions with investors about Shinsei Bank is that your balance sheet is much improved, revenues are considerably more stable, and the issue now is building sustainable revenue drivers in the extremely competitive Japanese financial industry. In what direction does the new Management wish to drive Shinsei Bank?

Kudo:What we plan to do, based upon a thorough understanding of our management resources, strengths and weaknesses, and the Bank's current situation, is to identify where the world's needs exist and where the potential for our growth is, as well as the key areas in which we can fully establish our presence. As Mr.Toma has just said, we have engaged in many areas through trial and error, and since we now know that some will materialize and while others may not, we will narrow them down to reallocate our management resources. By doing so, the market will better understand the distinct role of our Bank. With respect to the Board, I believe the Management will be confronted with extremely tough discussions, although I consider these will contribute to the Bank positively. I would even say that it is due to such discussions that we are able to develop interesting ideas, and I therefore would like the Outside Directors to fully express anything they believe to be of importance, not only in regular Board meetings, but at any opportunity, so that we can incorporate new insights in our management.

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