SMFG (consolidated)  SMBC (nonconsolidated) SMBC (consolidated)  ■ Back-Testing Results (Trading Book)  4.0 3.0 2.0 4.0 2.0 1.0 3.0 -4.0 -3.0 -2.0 -1.0 0 0 1.0 Actual Profit or Loss (¥ billion) VaR (¥ billion) 4.0 3.0 2.0 4.0 2.0 1.0 3.0 -4.0 -3.0 -2.0 -1.0 0 0 1.0 Actual Profit or Loss (¥ billion) VaR (¥ billion) To minimize the impact of crises on the SMBC’s funding, SMBC  manages highly liquid supplementary funding sources, whereby  SMBC maintains high quality liquid assets, such as U.S. treasuries  and has emergency borrowing facilities. In addition, for emergency situations, there are contingency  plans in place for addressing funding liquidity risk that include an  action plan with measures for reducing funding gap limits and  guidelines. The market occasionally undergoes extreme fluctuations that  exceed projections. To manage market risk, therefore, it is impor- tant to run simulations of unforeseen situations that may occur in  financial markets (stress testing). The bank conducts stress tests  on a monthly basis assuming various scenarios, and has measures  in place for irregular events. In the event the economic value of a bank declines by more than  20% of the sum of Tier I and Tier II capital (“outlier ratio”) as a result  of interest rate shocks, the bank falls into the category of “outlier  bank,” as stipulated under the Second Pillar of Basel II. As of March 31, 2011, the outlier ratio was around 8%, sub- stantially below the 20% criterion. The Corporate Risk Management Department establishes limits on  allowable risk for strategic equity investments, and monitors the  observance of those limits in order to control stock price fluctuation  risk. SMBC has been reducing its strategic equity investments and  the outstanding amount is now significantly below the amount  of Tier I capital, the maximum level permitted under the Act on  Financial Institutions (,etc.)’, Limits for Share, etc. Holdings. At SMBC, liquidity risk is regarded as one of the major risks.  SMBC’s liquidity risk management is based on a framework con- sisting of setting funding gap limits and guidelines, maintaining  highly liquid supplementary funding sources, and establishing  contingency plans.  So as not to be overly dependent on short-term market-based  funding to cover cash outflows, SMBC sets funding gap limits and  guidelines. The funding gap limits and guidelines are set Bank-wide  and for each region, taking into account cash management plans,  external environment, funding status, characteristics of local cur- rency and other factors. Additionally, a risk limit is set by currency as  needed to achieve more rigorous management. Note: “Decline in economic value” is the decline of present value after interest rate  shocks (1st and 99th percentile of observed interest rate changes using a  1-year holding period and 5 years of observations). SMFG  2011 41 SMBC Portfolio TOPIX Nikkei Average 25 (%) 0 5 10 15 20 (March 31, 2011) Fisheries/Farming/Forestry Mining Construction Food Products Textiles Pulp/Paper Pharmaceuticals Petroleum/Coal Rubber Products Glass/Minerals Steel Nonferrous Metals Metal Products Machinery Electric Machinery Transport Machinery Precision Machinery Other Products Electricity/Gas Utilities Overland Transport Marine Transport Air Transport Warehousing/Distribution Telecommunications Wholesale Retail Banking Securities/Commodity Futures Trading Insurance Other Financial Real Estate Services Chemicals (Billions of yen) SMBC (consolidated) SMBC (nonconsolidated) March 31, 2010 March 31, 2011 March 31, 2010 March 31, 2011 Total 532.7 696.4 490.8 660.3 Impact of Yen  interest rates 396.7 530.5 357.9 497.4 Impact of U.S. dollar  interest rates 90.3 141.9 88.6 139.6 Impact of Euro  interest rates 33.2 16.0 32.8 15.6 Percentage of Tier I + Tier II 6.1% 7.8% 5.8% 7.7% ■  Composition, by Industry, of Listed Equity Portfolio (e) Managing Risk of Stocks Held for Strategic Purposes (2) Liquidity Risk Management (d) Outlier Framework (c) Stress Testing ■  Decline in Economic Value Based on Outlier Framework 4.0 3.0 2.0 4.0 3.0 2.0 1.0 -4.0 -3.0 -2.0 -1.0 0 0 1.0 Actual Profit or Loss (¥ billion) VaR (¥ billion)