Our Stance on Corporate Governance The SMFG Corporate Governance System The SMBC Corporate Governance System  SMFG and its Group companies follow the SMFG management  philosophy as a universal guide for Group management and  position this philosophy as the anchor for corporate action. To  implement the ideas contained in our Group philosophy, we  believe one of the issues with highest priority is strengthening  and improving our corporate governance system.  SMFG employs the “corporate auditor” governance model in  which statutory auditors oversee the execution of business by  the directors. At SMFG, we have six corporate auditors, three of  whom are outside auditors. The auditors monitor the execution  of business operations of SMFG and its subsidiaries by attend- ing meetings of the Board of Directors and listen to reports on  operations from the directors and others. They also examine  documents relating to important decisions and receive reports  from the internal audit departments, representatives of subsid- iaries of SMFG, and the CPAs.  three major Group companies, namely, SMFG Card & Credit,  Inc., Sumitomo Mitsui Finance and Leasing Co., Ltd., and The  Japan Research Institute, Limited, the SMFG director in charge  of each of these subsidiaries serves as a director (and can be  an outside director) of these companies.  Furthermore, to maintain the soundness of management,  SMFG has established internal control systems to ensure the  proper conduct of company operations following the Japanese  Company Law. Designing and implementing an internal control  system, to strengthen management systems, is regarded as  a major issue, and initiatives are under way to enhance such  internal control systems. SMBC employs the corporate auditor governance model. Of  the six statutory auditors appointed, three are from outside the  bank. To ensure sound and transparent management, SMBC  separates the two functions of management decision-making at  the operational level and the overall supervision of the conduct  of duties by the management of the bank. For this purpose,  the bank employs a system under which executive officers are  responsible for operational duties, while the supervisory func- tions are performed principally by the Board.  The chairman of the bank serves as the chairman of the  Board of Directors, and, to clearly separate his functions from  those of the president of the bank, who is responsible for the  overall supervision of the bank’s activities, the chairman does  not simultaneously serve as an executive officer and is primarily  responsible for supervising management’s execution of their  duties. As at SMFG and to ensure a robust supervisory func- tion, outside directors are appointed to the Board of Directors.  At SMBC, three outside directors currently serve on the Board,  which has a total membership of sixteen.  The chairman of SMFG serves as the chairman of the Board  of Directors of SMFG. This separates the role of the president,  whose responsibility is the overall supervision of business  activities of SMFG and other Group companies, from the role of  supervising management. To enhance the effectiveness of the  Board, we have appointed outside directors and formed four  governance committees: namely, the Auditing Committee, the  Risk Management Committee, the Compensation Committee,  and the Nominating Committee. Outside directors have been  appointed to all four of these committees to provide for cor- porate governance from an objective perspective. As the need  for objectivity is particularly acute in the case of the Auditing  Committee and the Compensation Committee, outside directors  serve as the chairmen of these committees. To ensure that the  execution of the Group’s business operations is in conformity  both with legal regulations and generally accepted practices,  the outside directors have been selected from among the ranks  of specialists (including CPAs, lawyers, and consultants).  Executive officers are appointed by the Board to manage  the operation of SMBC’s businesses. As of June 30, 2011,  SMBC has 73 executive officers, including the president, and 11  serve concurrently as directors. The Management Committee  of SMBC is the highest decision-making body at the opera- tional level and is under the direct supervision of the Board of  Directors. The president chairs this committee and selects its  members from the executive officers. The committee members  consider important management issues based on policies set  by the Board of Directors, and the president has the authority  to make the final decision after considering the committee’s  recommendations.  The president designates certain members of the  Management Committee to be Authorized Management  Committee members in charge of particular Head Office depart- ments or units. All of these designated individuals are in charge  of implementing the directives of the Management Committee  within the businesses they oversee.  SMFG has created the Management Committee to serve as  the top decision-making body, and it is under the direct supervi- sion of the Board of Directors and chaired by the president of  SMFG. This committee is composed of directors chosen by the  president. Its role is to consider important matters related to  the execution of business and to make decisions for or against  the execution of matters in accord with the basic policies of the  Board of Directors. SMFG also has a Group Strategy Committee  that serves as a forum for the top managers of SMFG and all  other Group companies to exchange opinions and information  on their respective business plans. To enable SMFG to monitor  the execution of day-to-day business operations at SMBC, 10  SMFG directors (including three outside directors) of the total of  12 SMFG directors (including three outside directors) also serve  as directors of SMBC. To monitor the conduct of operations at  SMFG  2011 50 Corporate Governance