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Message from the Outside Director

  • Hidehiko SatoMember of Nominating Committee
    Member of Audit Committee
  • Kimie IwataMember of Nominating Committee
    Member of Compensation Committee
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    Resona Should and Is Qualified to Aim for
    "Retail No. 1"

    Hidehiko Sato

    Member of Nominating Committee
    Member of Audit Committee

    Resona Should and Is Qualified to Aim for "Retail No. 1"

    画像

    Hidehiko Sato

    Member of Nominating Committee
    Member of Audit Committee

    • *This is a long version of the Message from Outside Directors published in the Resona Group Integrated Report 2021 (issued in August 2021).

    It's been a year since the appointment of President Minami. Please share your impressions of his leadership.

    The appointment of Mr. Minami followed about two years of discussion by the Nominating Committee. This discussion was based on our belief that the banking industry is facing a growing call for a major shift from the current business model. Specifically, banks are no longer allowed to narrowly focus on accumulating deposits and extending investment and financing; now they must innovate and break away from traditional models. In addition, although banks have introduced IT technologies, this has been mainly aimed at upgrading their accounting-related systems. It has now become almost imperative to update the entire range of banking operations via the use of these technologies. Also, the entry of new players into the banking industry is pressing banks further to reassess the worth of their conventional models. Accordingly, creating a management team capable of helping the Group navigate amid these circumstances was the foremost objective of the selection process.

    Secondly, committee members deliberated on how to better position Resona Holdings, as a holding company, to exercise solid governance not only over its Group banks but also over other subsidiaries.

    Third and lastly, we aimed to help the Group secure a synergetic improvement in its overall functions in the course of such undertakings as the integration of Kansai Mirai Financial Group (KMFG).

    With an eye to getting on board with the emerging industry trends discussed above, on multiple occasions the Board of Directors has discussed these matters, including proposals from the Chairman and other directors. Based on the Board's conclusions, the Nominating Committee engaged in a two-year discussion about the creation of an optimal management team capable of overcoming the challenges lying ahead.

    Among the questions the committee deliberated was, in light of the pressing need to secure capabilities to navigate the aforementioned business environment, whether or not to maintain a separate office of president of Resona Holdings, as this position was being concurrently filled by the president of Resona Bank. When considering the separation of these two functions, we naturally began scrutinizing the structural appropriateness of the Company's Board of Directors and intensively discussed this matter.

    To date, the Resona Group has been preparing well-thought-out succession plans, with outside directors being directly and deeply involved in the preparation of such plans as well as the selection of president and director candidates.

    Giving due consideration to the above-described factors, we conducted interviews with candidates, including presidential candidates, whom we met with twice a year. In the end, we determined that Mr. Minami was the optimal candidate for the president of Resona Holdings in light of the business environment in this IT era, as he was considered best capable of spearheading the Omni-Channel Strategy and equipped with deeper knowledge of a broad range of IT technologies.

    We think that since assuming the office of president, Mr. Minami has been handling business management exactly as expected. Furthermore, the way he works in tandem with subsidiary bank presidents seems to be more successful than anticipated. This is, we believe, thanks to his competencies and personality as well as proactive cooperation by the latter.

    Could you specifically explain the separation of the roles of Resona Holdings and subsidiary banks?

    Basically, the relationship between the former and the latter has not changed. However, due to the inclusion of KMFG into the Group umbrella, overall management emphasis needs to shift from exercising supervision primarily over Resona Bank. We are currently discussing how to optimally allocate the weighting of our supervision among said bank, Saitama Resona Bank and the other subsidiary banks. This inclusive approach has resulted in major changes in management's perspective regarding and interest in non-bank subsidiaries.

    For example, the Group founded Resona Asset Management while, in the field of trust management, an area of strength for Resona, releasing the fund wrap. As the Group takes on challenges arising from the changes I described earlier, its asset management capabilities are expected to lend it a significant driving force. With regard to the settlement service, which is similarly undergoing major changes, Resona Card will play an increasingly important role. As such, the functions offered by Group companies other than banks will grow in significance.

    Do you think that the COVID-19 pandemic has changed the qualities necessary in top management?

    I don't see changes in terms of qualities, but I have noticed changes in the role and stance required of leaders. Banks must reinforce their stance of providing greater support than ever to customers facing extremely difficult circumstances while also finding ways to weather such circumstances themselves. In the face of this challenge, the question becomes whether top management will retreat to a bearish stance or redouble their resolve, demonstrating a steadfast stance to all employees.

    Resona's top management have clearly demonstrated a stance of resolutely riding out the storm. To the outside world, it may sometimes seem like banks provide support when business is good, but that this support dries up when things get harder. During the COVID-19 pandemic, Resona's leadership has been firm in its management policy of making sure its support for customers does not flag.

    Please explain the features of the Resona Group's governance approach aimed at supporting and nurturing top management.

    The majority of today's domestic banks were formed via numerous rounds of mergers and Resona is no exception. Surprisingly, however, when assessing employees, Resona's corporate culture places little weight on which pre-merger entities they once belonged to. Resona thus stands out in comparison with several other corporations in which I have held officer positions. Such has been the case since I took office as one of Resona's outside directors six years ago. After going through a number of interviews with officers in the course of preparing succession plans, I was left with the impression that Resona's officers have little or no inclination to introduce the customs of their former workplaces to their positions, a stark contrast to many officers at other merged banks.

    I suspect that their shared experience of the "Resona Shock" is one reason behind the absence of sectionalism among them. Also, the Group's headquarters is arranged so as to focus on instilling a sense of unity among officers by ensuring that all of them operate on the same floor, no matter if they work for Resona Holdings or a Group bank. In sum, the Group's culture has a significant unifying power and, therefore, its governance approach has been centered on taking full advantage of this strength.

    In addition, the Resona Group adopted a company with a nominating committee system from its earliest years and was, I believe, the first in the domestic banking industry to do so. With outside directors fulfilling a central role in the Board of Directors' operations, the Group has thus become an organization that attaches significant value to the recommendations of its committees. This governance structure also ensures that outside directors are clearly aware of what is expected of them. Moreover, in line with the succession plans, outside directors interview officer candidates on multiple occasions every year. These practices exert a positive effect in terms of diluting personal attachments to the culture of pre-merger organizations as well as maintaining the fairness of candidate selection.

    Moreover, the Group's management pays significant attention to employee awareness and is clearly committed to taking heed of results of employee awareness surveys to improve its business initiatives and organizational management. The most distinctive feature of Resona's governance approach lies in its focus on taking advantage of findings from robust interactions between officers, outside directors and employees.

    How are you leveraging your own experience and skills in your role as an outside director?

    Like the National Police Agency, important aspects of a bank's operations are controlled at the national level. I try to offer my views with a focus on the traits inherent to an organization of this structure. I pay particular attention to the pitfalls that such organizations tend to encounter when they, for example, issue directives from the center—the specific characteristics of people around the country vary by region, so it is important to think of how such instructions will be received across the nation. At the same time, the reports that reach leadership in such an organization aren't necessarily entirely frank and straightforward. I therefore pay attention to how the overall organization and or units within it are being portrayed and understood as I listen to reports and offer opinions at Board of Directors meetings.

    A leader must be able to think through and understand the ways that their organization operates. During my career with the National Police Agency, I strove to give instructions based on this sense. I apply this approach to observing the workings of Resona, as well.

    In the National Police Agency, we were constantly responding to sudden, unpredictable incidents. Sudden issues that require responses arise all the time at a bank, too. In receiving reports on such issues and offering my views, I focus on determining what is important, what potential hazards we need to be aware of, and what management's first response should be.

    In addition, with the police, there is no labor union or other organizational base for employees, and because of this, I learned the importance of adequately considering employees and their points of view. I therefore strongly agreed with the importance that Resona places on the results of employee awareness surveys and forcefully advocated for their deeper analysis, with feedback on results for employees and more concrete steps to meet employee expectations and requests.

    I spent most of my time in the National Policy Agency in criminal investigation divisions and was involved in numerous investigations of corporate incidents. Many such cases involved problems with management. As such, compliance on the part of the president and others at that level is crucial. I strongly feel that to ask that employees maintain compliance, top management must first practice compliance themselves. I frequently remind the president and other members of top management of this.

    On a related note, I have keenly felt the tremendous importance of internal reporting systems. Major incidents are almost always discovered through reporting from within the organization. I think that, in many of the cases I worked on, if internal reports had been dealt with effectively within the organization, they could have avoided the need to inform the police and prosecutors, or the mass media. Unfortunately, many organizations do not effectively respond to such opinions from within. I think that the level of employee confidence in Resona's internal reporting systems is not yet high enough, and it is an area that I strive to monitor closely.

    Thinking through and understanding the workings of the organization, as you mentioned, is an extremely important function of the Board of Directors, as well. How can the Board of Directors effectively fulfill that function?

    Resona is a company with a nominating committee, enabling important discussions at the committee level. As such, in addition to the Board of Directors, I think the role of each committee is extremely significant in this regard.

    This function is especially crucial for the Audit Committee. The Audit Committee holds meetings with the presidents of Resona Holdings and Group subsidiaries twice a year and receives frequent reports from the executive officers, which it uses to understand what is happening throughout the larger organization and where things are heading. The chairperson of the Audit Committee reports in detail on the activities of the Audit Committee to the president, which informs the discussions of the Board of Directors.

    With regard to succession plans, which you have touched on several times, what is your personal policy for selecting next-generation leaders?

    As a matter of fact, it is the president himself who is best positioned to assess the competencies of each officer candidate and acting officer. Although we can make presumptive assessments, we outside directors are not in charge of business execution and thus not so well-positioned to accurately assess their competencies. With this in mind, I interview with each individual based on input from the president regarding his/her competencies and ask questions to confirm whether my presumptions are correct. In the course of this process, I focus on personality because corporate leaders must be individuals capable of withstanding loneliness while also being good listeners capable of heeding feedback from their staff. These qualities really matter. I assume that outside directors' policies for the selection of future leaders differ greatly by individual. In fact, having different perspectives is a good thing. After these interviews, all Nominating Committee members exchange their opinions. I think this process serves as a fool-proof mechanism that prevents the wrong persons from being selected.

    Amid growing uncertainty caused by the COVID-19 pandemic, what issues should Resona focus on going forward?

    While the banking industry has broken out of the old model of industry-wide uniformity of services and fees, it seems to me that there is still a strong tendency for banks to follow the crowd. Given the challenging state of Japan's overall economy due the pandemic, I think that banks cannot thrive simply by following the crowd, nor should they attempt to. Rather, I think that banks may have to leverage their specific characteristics and strengths, with management courageously blazing a trail forward and the entire organization backing such efforts.

    For example, as part of its July 2020 organizational reforms, Resona Bank established a Growth Strategy Office, and it has been forcefully advancing support for customers. I hope to see such efforts implemented not timidly, but from a stance of steadfastly providing the support needed. To truly support individuals, small business owners and companies, continuing such management going forward will be crucial.

    What aspects of making KMFG a wholly owned subsidiary do you think will be important in this time of change?

    There were many factors that went into it, but in terms of deepening ties with struggling regional banks, I think making KMFG a wholly owned subsidiary was a good way of getting ahead of the curve on a major shift that is occurring in the banking industry. In addition to the differences between Tokyo and Kansai, there are differences in the cultures, economic conditions and overall characters of the companies. The Board of Directors discussed this many times. It was strongly felt that, if the two companies were to integrate their management, they should do so in a way that leverages their unique geographic, economic and cultural characteristics, and that integration must not impair any of these. These are extremely important factors when it comes to changing their management and structures and integrating management. I think that it is precisely because Resona—with its history of numerous previous mergers—approached integration in this way that it was able to avoid being bogged down by personal attachments to the pre-integration banks. Doing so is essential to realizing the fruits of the integration. Mutually leveraging the characteristics of both sides is crucial. With regard to KMFG, the initial concerns on the Resona side are now almost entirely gone.

    Did the Board of Directors discuss the issue quite a lot?

    In addition to the things I just mentioned, KMFG's overhead ratio is undeniably high. The optimal level for this ratio and how we could rationalize operations were thus one topic of discussion.

    Another was that, since we were going to the effort of integrating, we wanted to make proactive use of the unique resources and functions that Resona offers, such as trusts, fund wraps and the Group App, on a unified, Group-wide basis. We talked a lot about how Resona Holdings could provide maximum support so that Kansai Mirai Bank and Minato Bank could use such resources and functions to the fullest.

    Please share your thoughts on what the Group's Board of Directors must look like in the future. Also, what is your vision regarding how you aim to contribute to its operations?

    Today, the modus operandi of boards of directors is a subject of intensive public debate. I personally believe that modes of corporate governance should differ as much as needed by organization, as each is different in terms of history, form of business, size and workforce composition. I therefore think that the optimal modus operandi of a board of directors must be unique to each company—there is no one-size-fits-all solution. In terms of governance, although the Resona Group weights Resona Bank the heaviest, the Group also focuses on supervising two other flagship entities, namely, Saitama Resona Bank and KMFG, while overseeing non-bank subsidiaries with an eye to supporting their growth and helping them become major earnings pillars. With this in mind, the Board of Directors must continually deliberate on how it should function in light of ever-changing circumstances, as the decision-making body of the holding company.

    What do you is the key to a well-functioning Board of Directors?

    There are many factors, but the function fulfilled by Chairman of the Board is a big one. The Chairman's role is to select matters for discussion and appropriately advance Board proceedings. As long as the Chairman is effectively fulfilling this role, the Board of Directors will function adequately.

    I think that the proceedings of the Board of Directors are currently being managed well. Some feel that the Chairman of the Board should be an outside director, but Resona's Chairman is a director who is not concurrently an executive officer, and this functions effectively. If problems with this function were to arise, I think that we would then need to discuss who, including from among the outside directors, would be the best candidate for Chairman. Organizationally speaking, this is the greatest factor in ensuring that the Board of Directors functions effectively.

    Lastly, do you have any messages to share with readers?

    Let me share my personal take on two subjects. First, Resona is pursuing the goal of becoming "Retail No. 1" and I believe that this goal exactly indicates the right direction for the Group. Not only that, I am also confident that the Group is capable of accomplishing this target and am proud of being a part of such a banking group. As long as its officers and employees work as one to pursue this shared goal, the Resona Group will remain one of best banks of choice in Japan.

    Looking at the current status of the banking industry, regional banks are strongly focused on serving their respective market regions. On the other hand, mega banks are shifting their management priorities to securing solid footholds in markets overseas. In this light, Resona remains largely focused on serving domestic customers while, unlike other regional banks, being capable of delivering its services to a broad range of regions nationwide. This makes Resona a particularly unique bank, perhaps the only bank in Japan to be focused on serving Japanese people at large. This is exactly why I believe that Resona should and is best qualified to aim for "Retail No. 1."

    Secondly, in line with the medium-term management plan (MMP), Resona announced its commitment to "starting from issues confronting customers" to provide new value. This approach has significant similarities with the Sampo Yoshi ("good for the seller, good for the buyer and good for society") merchant philosophy that Ohmi merchants originated centuries ago. As such, Resona aims to practice a management approach that brings benefits to customers, their communities, employees, shareholders and all other stakeholders. Resona has a large customer base in Saitama Prefecture, and Eiichi Shibusawa, an early Japanese business leader whose life history has recently been attracting public attention, was also from this prefecture. He was known to be an advocate of "moral capitalism," and this concept, too, overlaps Resona's approach. I would like the general public to know that Resona is committed to helping customers address issues confronting them and is determined to support them especially when things get difficult. Previously, banks might have been perceived as cold, bureaucratic organizations by some. However, Resona is striving to become a banking group that always extends genuine empathies to customers and acts in their best interest.

    I find my involvement in these endeavors as an outside director to be quite rewarding. Unless we outside directors find our duties rewarding, the Group cannot ensure that its customers feel the true value of its services. I would really like you to help deepen their understanding of what Resona aims to be.

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    Expecting Resona to Step Up Its Forward-Looking Stance toward ESG

    Kimie Iwata

    Member of Nominating Committee
    Member of Compensation Committee

    Expecting Resona to Step Up Its Forward-Looking Stance toward ESG

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    Kimie Iwata

    Member of Nominating Committee
    Member of Compensation Committee

    • *This is a long version of the Message from Outside Directors published in the Resona Group Integrated Report 2021 (issued in August 2021).

    Please share your impressions of Mr. Minami's leadership during the year since he assumed the office of the president.

    Although, basically, Mr. Minami has been following the management approach practiced by Mr. Higashi, his predecessor, he is different in two respects. First, as you already know, Mr. Minami has been tackling issues arising from the COVID-19 pandemic. He has been focused on formulating emergency measures to prevent the spread of the virus as well as achieving the goals of the MMP even in the face of fallout from the disease outbreak. His approach is aligned with the business environment in which the risk of COVID-19 infection continues to stand while giving an eye to the post-pandemic world. No other leader at Resona Holdings has handled such a situation.

    Second, his leadership in digital transformation (DX) is noteworthy. Today's financial industry needs to tackle the profound challenge of promoting DX. A bank's survival largely hinges on success in DX. Even before he assumed the office of the president, Mr. Minami had been spearheading DX and taken on the task of pushing ahead with the digital-driven structural reform of existing operations, including back-office operations, while providing new customer value through digitalization. DX is extremely important in terms of reducing costs and raising top-line revenue, and Mr. Minami has dedicated himself to both endeavors. I guess that digital technology is an area of personal strength, as his current leadership in DX as the president is clearly visible. For example, he launched and is assiduously leading several cross-functional teams tasked with developing new business via collaboration with partners from non-financial sectors, an initiative that Resona had not been involved in previously.
    There were several other candidates deemed capable as leaders but only if they were to be assigned the simple task of maintaining traditional banking operations. However, Resona needed a new leader capable of pushing ahead with major, unconventional types of DX-driven reforms. That is why we determined that Mr. Minami was the best candidate.

    Please share your views on the features of Resona's governance approach.

    I personally believe that Resona's corporate governance practices are of a significantly high standard. Leveraging my experience as a corporate manager at Shiseido, I have held outside director and other positions at several companies, all of which were at the vanguard in terms of corporate governance. In my opinion, Resona stands out due to the sophistication of its governance system. This is thanks to its drastic shift to cutting-edge governance practices following the injection of public funds in 2003, a critical period that prompted the Group to implement every measure to rebuild its standing as an excellent company. When I took my current position, it had been almost a couple of decades since this shift, and Resona had already succeeded in adopting new governance practices.

    All of the other companies I have worked with until now have been companies with boards of directors, so Resona was my first company with a nominating committee. I was very interested to learn about the way governance functions at a company with a nominating committee when I came onboard. The first thing I sensed when I did was that oversight and execution are robustly separated, and the Board of Directors, with a majority outside directors, is well set up to effectively provide oversight and monitoring. Under the Board of Directors are three committees, and I sat on the Nominating Committee and Compensation Committee. The Nominating Committee's activities go beyond mere formality, with discussions starting from the basics and the committee playing a central role in deciding how to develop top management and who among top management to appoint to specific positions. The Compensation Committee also examines everything from zero, thoroughly discussing the system of officer compensation and compensation levels. Serving on these committees, I felt that governance based on the company with a nominating committee structure had firmly taken root.

    In addition, participating in the Nominating Committee took much more of my time than I expected. Outside directors are very strongly expected to be deeply involved in officer training and selection processes—for example, I took part in various trainings for officers and met with officers and officer candidates. I even had to work on weekends several times during the year.

    While there may still be plenty of room for improvement, I think that, fundamentally, Resona maintains a high standard of governance.

    How do you bring to bear your experience and skills as a corporate manager?

    I was in corporate management at Shiseido for almost a decade. Prior to that, I had long been a public servant. At Resona Holdings, I strive as an outside director to build mutual trust with executives while taking great care not to get too comfortable and cozy. Maintaining this balance, I bring my value systems, experience and knowledge to bear to contribute my unrestrained opinions and sometimes express harsh objections against or offer alternatives to what is proposed in agenda items. This is one thing I am proud of. At Shiseido, I was mainly charged with human resource strategies and CSR, the latter of which is now being called ESG.

    In particular, I have amassed considerable experience related to the empowerment of women and other diversity-related endeavors as well as in implementing countermeasures against excessive overtime and promoting work style reforms. I offer my opinions on these issues in an especially proactive manner.

    I also focus on contributing my advice with regard to ESG issues as I personally believe that a corporation's serious pursuit of solutions for issues society is now confronting will naturally help it discover new business opportunities and achieve growth in tandem with society.

    Resona is a very progressive company in terms of addressing ESG issues, including the empowerment of women and work style reforms. I find my duty quite rewarding when I exchange opinions and strive together for even better solutions in tandem with individuals who are hard at work as part of a pioneering company like Resona, which is representative of not only the financial industry but also Japan's business sector at large.

    Could you explain what makes Resona's approach to ESG different from that of its peers?

    I suspect that the answer to this question also dates back to the "Resona Shock." In recent years, Resona has been chosen to receive various awards and granted high rankings. This is, I believe, because of a corporate culture that values stakeholders and is focused on delivering solutions to issues they are confronting. This culture is a built-in component of Resona's Corporate Mission, the Resona Way and its current MMP. In contrast to many other companies that tend to handle business plans and ESG issues separately, Resona is successful in handling both in an integrated manner. I especially appreciate the catchphrase "Customers' happiness is our pleasure," which represents a fundamental stance upheld by Resona. I have seen a great number of Group officers and employees striving in the course of their daily operations to embody this catchphrase with a sense of ownership. Thus, Resona's strength in the ESG field is derived from an approach deeply embedded in its corporate culture.

    As DX changes the economy and society faces a new normal brought about by the pandemic, what do you see as the role of financial institutions?

    For one thing, the financial sector is now expected to advance ESG initiatives in coordination with corporate and individual customers. This is especially true with regard to addressing environmental problems. The Resona Group's efforts to reduce the environmental impact of its business activities and achieve zero emissions are today viewed as just par for the course. Going beyond this, it will be important to find ways to, for example, support small and medium-sized enterprises (an area of strength for Resona) in their environmental initiatives through finance, investment and consulting. I think that Resona will need to push much further in honing and advancing distinctive initiatives.

    Please share your thoughts on Resona's diversity initiatives.

    I consider both Resona Bank and Saitama Resona Bank to be top-tier corporations in Japan in terms of empowering women and promoting diversity. These banks were chosen to receive awards from the Japanese government in recognition of their efforts to help women achieve career success. The main reason for this accomplishment is the 2003 injection of public funds. Back then, Resona had determined that empowering women to serve as key members of its workforce was essential to rebuilding its standing. Thus, due to the "Resona Shock," Resona happened to launch efforts aimed at empowering women ahead of other companies. In a sense, Resona was kind of lucky. Currently, many other corporations are struggling to secure a sufficient number of female managers despite the growing presence of younger employees in their 20s and 30s. In contrast, the above two banks have been at the vanguard of empowerment efforts, with the ratio of female managers surpassing 30% at both.

    However, I have to also note that the Resona Group is only halfway to its goal for diversity. For example, Kansai Mirai Bank and Minato Bank, both of which are KMFG subsidiaries, are currently lagging far behind their exemplary peers. Also, I would like all other Group companies, including non-bank subsidiaries, to live up to even higher levels in terms of diversity.

    In addition, even Resona Bank and Saitama Resona Bank have only a small number of female officers. Despite the growing number of female managers, the Group has thus far been unsuccessful in nurturing female officers. Although there are some female outside directors, including myself, no female director has been appointed from among the employees. Also, the number of women in executive positions is very low. Therefore, Resona should work to remove barriers inhibiting female managers from assuming even higher positions and being appointed as officers. This is the next step Resona should take. I know it is no easy task, but I really want Resona Bank and Saitama Resona Bank to achieve this at the earliest possible date.

    What methodologies do you recommend to help Resona empower women to take these positions?

    Regardless of gender, businesspeople need first to be encouraged to gain robust experience. The successful development of personal competencies is largely dependent on gaining solid business experience. This also applies to career development. Moreover, when it comes to identifying leader candidates, finding individuals who can properly and flawlessly handle the tasks being assigned is not enough. Rather, candidates must be pushed to gain new experience in unfamiliar fields or entrusted with tasks requiring higher competencies. They should be deliberately placed in positions involving challenging duties. The Group must approach human resource management in this way.

    Secondly, the Group should be bold in its promotion of young individuals. Irrespective of age and, of course, regardless of gender, those deemed promising must be promoted at a faster pace. Such individuals should experience corporate management while they are young. As the Group has a robust pool of young female employees, taking this approach will naturally enable it to increase the ratio of women in higher positions. In any case, the development of leader candidates cannot be accomplished overnight and requires patience.

    What kind of issues did the Board of Directors discuss regarding making KMFG a wholly owned subsidiary?

    When I took office, KMFG was not yet a wholly owned subsidiary. From the perspective of Resona Holdings, there was a greater sense of distance from KMFG compared with Resona Bank or Saitama Resona Bank. For example, Resona Bank and Saitama Resona Bank were always included in materials for Board of Directors meetings, but Kansai Mirai Bank and Minato Bank were sometimes absent; there was a difference in the level of information coming in. Several times at Board of Directors meetings, I asked why information on KMFG was not included and expressed that it ought to be provided in the same format as that for Resona Bank and Saitama Resona Bank. This became a topic of discussion involving other directors.

    Looking back, there was no opposition to making KMFG a wholly owned subsidiary. Rather, discussion centered on what effects integration could offer and how quickly they could be achieved. One issue was that, as the foundation for realizing integration effects, we needed to integrate our IT systems as quickly as possible. Although this was progressing smoothly, the issue became quickly completing the integration of the systems of Minato Bank, which had not yet begun. Another area of discussion was the standardization of service and enhancement of financial services, including such questions as whether the two banks under KMFG could offer financial products developed by Resona Bank and Saitama Resona Bank and how trust operations would be handled.

    We also discussed, many times, how to best consolidate our branch locations and streamline personnel allocation from the perspective of cost reduction. We are now aiming even higher than initially planned as we work to achieve integration effects.

    In addition to such rationalization efforts, in terms of human resource utilization, we are actively moving people, including officers, between banks so that they will gain experience in different organizations. Going forward, the four banks will advance officer development and evaluation in a unified manner as much as possible.

    Through these and other efforts, we have already begun many initiatives aimed at maximizing integration effects, and the results are beginning to show.

    How would you evaluate the progress of integration, including speed, so far?

    There are certain aspects that I would like to move faster, such as system integration and consolidation. However, we have also been discussing possible ways of realizing integration effects even without using such systems. Propelled in part by the COVID-19 pandemic, everyone has been working hard to achieve the effects of integration with KMFG faster than originally anticipated in the hope of cancelling out the negative effects of the pandemic. Given this, I think that we are making steady progress.

    What issues do you believe the Board of Directors must take on going forward?

    Every year, we strive to identify issues the Board must address via the self-evaluation of its effectiveness. We repeat the cycle of discovering and resolving such issues in an effort to enhance the quality of the Board's operations.

    Looking at specific issues, the Board of Directors' composition and the selection of agenda items discussed by it have been the matter of ongoing deliberation. Although the average length of each Board of Directors meeting is around three hours, we consider it important to ensure the optimal selection of agenda items and determine their priorities in light of the limited time available for discussion.

    We must also deliberate the composition of the Board on an ongoing basis. Given changes in the operating environment and the evolving nature of challenges confronting the Group, we are striving to secure an optimal composition by regularly engaging in discussion aimed at determining the type of individuals who are best for Resona as new director candidates and the backgrounds they must have while assessing who is likely to retire from director positions and when. In the course of this discussion, we envision our ideals for the Board of Directors. In my opinion, Resona Holdings' Board of Directors is on a steady path toward achieving such a composition.

    When it comes to selecting agenda items, we strive to employ a broad perspective when determining the long-term direction of the Resona Group and management strategies that take into account the optimization of the entire Group while exercising sufficient monitoring of business execution. I believe that success of individual business initiatives ultimately hinges on efforts undertaken by each subsidiary, so our role as directors is to determine management's general direction. To this end, after the closure of official Board meetings we directors usually spend some time discussing matters that have yet to mature into issues requiring a decision from the Board. Anyway, the Board should always strive to discuss matters from long-term and broader perspectives.

    Lastly, please share any messages you may have for readers.

    Resona's integrated report consists not only of financial information but includes a comprehensive range of ESG information, and it has been prepared to help readers deepen their understanding of the Group's current management policies and its strengths.

    Currently, Resona's management team enjoys a growing number of engagement opportunities for robust discussions with investors. Engagement doesn't only mean participating in dialogues. Rather, engagement should involve the exchange of ideas regarding how to improve the Group's corporate value. I would like investors to utilize the integrated report as a material for facilitating such engagement.