4.A.   HISTORY AND DEVELOPMENT OF THE COMPANY Legal and Commercial Name Our legal name is Sumitomo Mitsui Financial Group, Inc. Our commercial name is Sumitomo Mitsui Financial Group. Date of Incorporation We were established in December 2002. Domicile and Legal Form We are a joint stock corporation incorporated with limited liability under the laws of Japan. Our address is: Sumitomo Mitsui Financial Group, Inc., 1-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-0005, Japan. Our telephone number is: +81-3-3282-8111. History and Development We were established in December 2002 as a holding company for the SMBC Group through a statutory share transfer (kabushiki-iten) of all of the outstanding equity securities of the former SMBC in exchange for our newly issued securities. Upon our formation and completion of the statutory share transfer, the former SMBC 23 Table of Contents became our direct, wholly-owned subsidiary. SMBC was established in March 2003 through the merger of the former SMBC with Wakashio Bank, which was established in 1996 as a subsidiary of Sakura Bank. The former SMBC was established in April 2001 through the merger of Sumitomo Bank and Sakura Bank, which was established through the merger of Taiyo Kobe Bank and Mitsui Bank in 1990. Mitsui and Sumitomo started their banking businesses in 1876 and 1895, respectively. The origins of both banking businesses can be traced back to the seventeenth century. Information Concerning the Principal Capital Expenditures and Divestitures In November 2021, we acquired a 74.9% equity interest in Fullerton India Credit Company Limited (“Fullerton India”) for ¥230 billion, which became our subsidiary. Fullerton India has a pan-India distribution network and offers unsecured loans and loans against property to mainly small and medium-sized enterprises and individual customers. Fullerton India changed its name to SMFG India Credit Company Limited in May 2023. Subsequently, in March 2024, we acquired the remaining 25.1% equity interest in SMFG India Credit Company Limited for ¥103 billion and made it our wholly-owned subsidiary. Public Takeover Offers Not applicable. Available Information The SEC maintains a website at https://www.sec.gov that contains reports and proxy information regarding issuers that file electronically with the SEC. Some of the information may also be found on our website at https://www.smfg.co.jp/english/. 4.B. BUSINESS OVERVIEW Overview We are the holding company for the SMBC Group. The SMBC Group is comprised of SMBC, SMBC Trust Bank Ltd. (“SMBC Trust Bank”), Sumitomo Mitsui Finance and Leasing Company, Limited (“SMFL”), SMBC Nikko Securities Inc. (“SMBC Nikko Securities”), Sumitomo Mitsui Card Company, Limited (“Sumitomo Mitsui Card”), SMBC Consumer Finance Co., Ltd. (“SMBC Consumer Finance”), The Japan Research Institute, Limited (“The Japan Research Institute”), Sumitomo Mitsui DS Asset Management Company, Limited (“SMDAM”) and other subsidiaries and affiliates. We are one of the three largest financial groups in Japan and offer a diverse range of financial services, including commercial banking, leasing, securities, consumer finance and other services. Refer to “Item 4.C. Organizational Structure.” With the aim of enhancing our corporate group’s brand value, we announced that “SMBC” would be designated as our corporate group’s master brand from April 2018. In line with this change, our corporate group, which was formerly referred to as the “Sumitomo Mitsui Financial Group” or its acronym “SMFG,” is now referred to as the “SMBC Group.” “Sumitomo Mitsui Financial Group” continues to be used as the holding company’s name. Our Mission, Vision and Values Our “Mission” is a universal guide for our group management and positioned as the anchor for our corporate action. We also set forth our “Vision” of the mid to long term goals and “Five Values” as the core values to be shared by all executives and employees. On April 1, 2026, we revised our Vision with a view to the next decade and set out “Globally connected. Rooted in Japan. Your most trusted partner.” “Globally connected” reflects our determination to support 24 Table of Contents customers by connecting cross-border business activities and capital flows, and through that role, to become a player on par with the world’s leading institutions. With “Rooted in Japan,” we aim to contribute most meaningfully to Japan’s growth, to build a solid business foundation by fully demonstrating execution excellence in our home market, and to expand our businesses globally by leveraging that strength. In addition, building on the trust we have established over the years, we continue to deliver new value unique to SMBC Group that goes beyond the traditional boundaries of finance, and strive to become the “most trusted partner” that exceeds expectations from our stakeholders. After the revision, our Mission, Vision and Five Values are as follows. Mission • We grow and prosper together with our customers, by providing services of greater value to them. • We aim to maximize our shareholders’ value through the continuous growth of our business. • We create a work environment that encourages and rewards diligent and highly-motivated employees. • We contribute to a sustainable society by addressing environmental and social issues. Vision • Globally connected. Rooted in Japan. Your most trusted partner. Five Values • Integrity: As a professional, always act with sincerity and a high ethical standard. • Customer First: Always look at it from the customer’s point of view, and provide value based on their individual needs. • Proactive & Innovative: Embrace new ideas and perspectives, don’t be deterred by failure. • Speed & Quality: Differentiate ourselves through the speed and quality of our decision-making and service delivery. • Team “SMBC Group”: Respect and leverage the knowledge and diverse talent of our global organization, as a team. SMBC Group’s Approach and Initiatives Towards Sustainability SMBC Group’s Approach Towards Sustainability and Our Priority Issues We consider climate change, human capital, compliance and cybersecurity to be priority issues in sustainability. For information on the governance aspects, see “Item 6.C. Board Practices,” for information on the risks associated with these issues, see “Item 3.D. Risk Factors,” and “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk,” and for information on cybersecurity, see “Item 16K. Cybersecurity.” Governance The supervision and execution concerning risks and opportunities of priority issues in sustainability (climate change, human capital, compliance and cybersecurity) are operated through a robust governance structure. 25 Table of Contents Supervisory structure The board of directors is responsible for the oversight of material sustainability-related risks and opportunities. Based on the perspective of making timely and appropriate responses to material sustainability-related risks and opportunities, the board of directors deliberates and decides on basic management policies and other matters, and supervises the execution of duties by corporate executive officers and directors. In principle, the board of directors meets once a month, and holds meetings from time to time as necessary. The board of directors appropriately exercises its supervisory function by receiving reports on the status of the execution of duties from each internal committee without delay, and on the status of business execution from corporate executive officers, including the Group CxO, in a timely manner. In addition, the nominating committee, the compensation committee, and the audit committee conduct deliberations and supervision in accordance with their respective authorities governed by applicable laws and ordinances, and internal rules. Furthermore, the risk committee and the sustainability committee, which we voluntarily established, deliberate on matters set forth in the internal rules, and report to, and advise the board of directors. Execution structure Under the board of directors, the Management Committee functions as the top decision-making body with respect to business administration and management supervision of SMBC Group companies, including measures aimed at achieving sustainability. Strategy We define three time horizons over which the effects of sustainability-related risks and opportunities could reasonably be expected to materialize: “short-term” (less than one year), “medium-term” (one to three years), and “long-term” (more than three years). These time horizons play an important role in our strategic decision-making. The short-term period aligns with our annual business plan and is used to formulate specific measures for daily business operations and achievements of yearly targets. The medium-term period aligns with our medium-term management plan and is used to formulate strategic measures aimed at sustainable growth and enhancing competitiveness. This period allows us to respond to the changing market environment and make flexible adjustments to our strategies. The long-term period is the period from the next medium-term management plan onwards and serves as a guideline for achieving long-term targets toward the realization of our Vision. Climate Change Our transition plan, which systematizes strategies, future targets, and action plans related to climate-related risks and opportunities (the “Transition Plan”), has been established through the Management Committee and the board of directors including the sustainability committee. The Transition Plan is formulated through comprehensive consideration of various climate change scenarios and the results of risk analyses based on them. The progress of the Transition Plan is regularly reported to the Management Committee and the board of directors, which oversee its implementation. Furthermore, for the realization of the Transition Plan, it is necessary that companies can engage in transition efforts through progress in the development of decarbonization technologies and related laws and markets, and that adequate financing is available to support these initiatives. We review these developments and review the Transition Plan if necessary based on the monitoring results. 26 Table of Contents Enhancing Risk Analysis. To address the risk of deterioration in customer performance related to climate change, we have conducted scenario analyses and worked to expand the scope of our climate scenario analyses. In the scenario analyses, there are uncertainties regarding both scenarios themselves and the measurement methods used. Therefore, we continue to refine our analytical methods and, if risks are expected to materialize, encourage customers to take appropriate action while striving to reduce our own risks. Policies for Specific Businesses and Sectors. We have established policies for certain industry sectors considering environment and social factors, which are independently developed based on our internal risk management principles and in accordance with applicable legal requirements and policies. Portfolio Management. We have set the medium-term sectoral emission targets. In addition to setting the medium-term target, having determined our risk appetite for climate-related risks, we set and manage sectoral emissions as a Risk Appetite Measures. Environmental and Social Due Diligence. SMBC assesses risks from both environmental and social perspectives for corporate and project-related matters and uses the assessment results as a factor in credit decisions. SMBC also engages with customers based on those results. Reducing Operational GHG Emissions. We have set a target of achieving net zero GHG emissions in SMBC Group-wide operations by 2030. Risk-Taking in New Energy and New Technologies. There are various challenges in the practical application of new energy and new technologies essential for decarbonization and many projects fall into a funding gap during the expansion phase. We aim to contribute to accelerating the social implementation of new energy and technologies by actively providing risk capital during phases where funding tends to be insufficient. Supporting Transition. We have supported our customers’ medium- to long-term transition and technological innovation by engaging in dialogues with customers about practical challenges and solutions for transition support. Human Capital Human resource strategy requires a medium- to long-term perspective. Based on the risks currently anticipated, we believe that the key issues can be grouped into three areas: “Talent,” “Culture,” and “Platform.” In our medium-term management plan through March 2029, we define the following three priority human resource strategies based on these perspectives: (1) Securing professional talent and cultivating strong individuals who grow autonomously; (2) Building teams that embody the “SMBC Group Talent Policy” and fostering a culture of continuous challenge; and (3) Establishing a foundation that maximizes organizational performance. In addition, we have set Human Capital ROI, which measures value created relative to investment in human capital, and Talent Policy Scores, which assess the extent to which the “SMBC Group Talent Policy” is being realized, as key goal indicators in the medium-term management plan to confirm the sustained improvement in the value created by employees and the effectiveness of human resource strategy. Securing professional talent and cultivating strong individuals who grow autonomously. To ensure a sufficient pool of professional talent, both in quality and quantity, across all areas necessary to advance our businesses, we focus on two areas: “Strategic talent acquisition and optimal deployment based on talent quality and quantity” and “Autonomous growth and future leader development.” Building teams that embody the “SMBC Group Talent Policy” and fostering a culture of continuous challenge. Amid rapid changes in the business environment, including shifts in management and increasing diversity in employee values, the importance of “people” remains unchanged. 27 Table of Contents In order for the SMBC Group’s environment to continue being a place where our employees with various backgrounds can grow and thrive with a sense of unity, our “SMBC Group Talent Policy,” established in April 2023 clearly identifies both “what we expect our employees to be” and our “Employee Value Proposition.” Our employees are expected to “Carry out their responsibilities as professionals,” “Respect others and pursue the best results as a team,” and “Carry on, stay bold even if challenging.” We provide an environment in which employees can express their individuality, contribute to customers and the greater society by leveraging our business foundations, and gain support in their career development and growth. In order to accomplish “Embedding a culture that reflects the ‘SMBC Group Talent Policy,’” we enhance internal and external communications. In addition, we work on “Building resilient and challenging teams” with the aim of transforming variety into organizational strength, leading to the creation of new value and the enhancement of our corporate value. Establishing a foundation that maximizes organizational performance. To achieve a robust organizational and management foundation that combines high reproducibility and productivity, we are pursuing the following initiatives: “Establishing productivity-enhancing systems and a competitive human resource framework” and “Establishing an agile, trusted, and stable human resource operating structure.” Compliance To address the risks of legal and regulatory violations and reputational harm arising from inadequate responses to financial and other laws and regulations, including anti-money laundering, countering the financing of terrorism and economic sanctions regulations, and to fulfill our social responsibilities and ensure sustainable business operations, we have established a robust framework that includes the following perspectives. Strengthening of the Compliance Framework. SMBC Group has set forth its “Behavioral Guidelines on Compliance and Risk,” a framework for all SMBC Group employees to exhibit behaviors and actions ensuring adherence to compliance and risk while striving for sustainable business growth and enhancing our corporate and social value. Customer Information Management. We have established SMBC Group policies that set forth guidelines for the SMBC Group companies regarding the proper protection and use of customer information. SMBC Group companies adhere to these policies in developing frameworks for managing customer information. Anti-Bribery and Corruption. As a basic policy for the prevention of bribery and corruption, we have formulated the “Management’s Commitment to the Prevention of Bribery and Corruption,” which requires each SMBC Group company to establish a management framework. Measures for Anti-Money Laundering, Countering the Financing of Terrorism and Adhering to Economic Sanctions. We strictly comply with anti-money laundering, countering the financing of terrorism and economic sanctions regulations by establishing policies and by implementing effective internal control systems in each of SMBC Group companies to ensure that our operations are sound and appropriate. These policies and systems are implemented in accordance with the requirements of the relevant international organizations, and the laws and regulations of relevant countries including Japan in which we have operations. Response to Anti-Social Forces. We have established a basic policy stipulating that SMBC Group companies unite in establishing and maintaining a system that ensures that we do not have any connection with anti-social forces or related individuals. Internal Reporting System. To promote self-correction through the early detection and rectification of actions that may violate laws, regulations and internal rules, we have established the “SMBC Group Alarm Line,” an internal reporting system available to our internal stakeholders such as employees of SMBC Group 28 Table of Contents companies and employees that are dispatched by outside service providers who work at SMBC Group companies. We have set up both internal and external channels for this system and have made it widely known to them. Risk Management Risks associated with environmental and social issues are managed under the SMBC Group-wide risk management framework. Top Risks, identified as those that could significantly impact management, also include sustainability perspectives. Management of Climate-related Risks Identification of Climate-related Risks. From the perspective of environmental and social risks, we regard “Increase in disasters such as large-scale earthquakes, storms and floods,” and “Divide in policy, regulation and social norm on environment and human rights issues” as Top Risks. We define “environmental and social risks” as risks that environmental and social factors become risk drivers and transmit through various pathways to each risk category, ultimately resulting in losses to the SMBC Group, which include climate-related risks, nature-related risks and human rights risks, and we identify them as risks to be managed. Based on our definition, regarding climate-related risks, while referring to guidance from financial authorities and others, we systematically organize the transmission channels from climate-related risk drivers, namely physical and transition risks, to each risk category within the SMBC Group, such as credit risk, market risk, and operational risk. Regarding these risks, based on the evaluation of their likelihood and potential impact, we identify material risks such as: “deterioration in customer performance (credit risk associated with acute and chronic physical risks as well as transition risks).” Assessment of Climate-related Risks. We conduct a systematic assessment of the identified climate-related risks. Specifically, we evaluate the impacts of physical and transition risks on our operations through risk analysis by sector and scenario analysis using multiple climate scenarios. Based on the results of these analyses, we incorporate the findings into the enhancement of our sector-specific risk management and strategies. Monitoring of Climate-related Risks. We set sectoral emissions as one of the Risk Appetite Measures that function as benchmarks for risks that we are considering taking and for risk/return, and conduct regular monitoring. In case of any issues with the management of these measures, the Credit & Investment Planning Department, the Sustainability Planning Department and the business units discuss countermeasures and report to the Group Chief Financial Officer (“CFO”), Group Chief Strategy Officer (“CSO”), Group Chief Risk Officer (“CRO”), and Group Chief Sustainability Officer (“CSuO”). Identification, Assessment, Prioritization, and Monitoring of Climate-related Opportunities. We formulate strategies (basic policies) aimed at creating social value, including climate-related opportunities, based on discussions at the Management Committee, the Sustainability Committee, and other relevant bodies. Management of Human Capital Related Risks We identify risks that threaten to significantly impact management as Top Risks. From the perspective of risks related to human capital, we position “difficulty in securing human resources” as one of our Top Risks. For risks related to human capital, we monitor indicators linked to each relevant initiative, including progress against targets and any rapid short-term changes, and take countermeasures as necessary. 29 Table of Contents Management of Compliance Related Risks From the perspective of risks related to compliance, we regard “misconduct damaging customer protection and market integrity” and “inadequate preparedness for the anti-money laundering and countering the financing of terrorism framework” as Top Risks. Scenario analysis is not utilized in the identification of these risks. We conduct annual assessments of inherent compliance-related risks and evaluate the status of the compliance framework at SMBC Group companies. For areas identified as high risk based on the results of the assessments, we promote initiatives to enhance the level of sophistication of our compliance framework in the compliance program for the following fiscal year. In addition, for material compliance matters, we set indicators and thresholds, and conduct monitoring on a monthly and quarterly basis. We regularly report these initiatives to the Compliance Committee, as well as to management and the board of directors, to strengthen governance. Description of Operations and Principal Activities Wholesale Business Unit The Wholesale Business Unit provides comprehensive solutions primarily for corporate clients in Japan that respond to wide-ranging client needs in relation to financing, investment management, risk hedging, settlement, M&A and other advisory services, digital services and leasing services. This business unit mainly consists of the wholesale businesses of SMBC, SMBC Trust Bank, SMFL, SMBC Nikko Securities and Sumitomo Mitsui Card, which merged with SMBC Finance Service Co., Ltd. (“SMBC Finance Service”), formerly a wholly-owned subsidiary of Sumitomo Mitsui Card, in April 2024. Financing and Investment Management The Wholesale Business Unit provides financing services that include bilateral loans, syndicated loans, commitment lines, structured finance, project finance, nonrecourse loans to and investments in corporate customers directly or through private equity funds, securitization, debt and equity underwriting and corporate bond trustee and registrar services. The Wholesale Business Unit also provides investment management services such as deposits and investment trusts. In addition, this business unit offers a wide range of securities products to corporate clients through SMBC and SMBC Nikko Securities. Risk Hedging The Wholesale Business Unit provides various risk hedging services including forward exchange contracts and derivatives to meet our customers’ demand for hedging risks such as interest rate risk or foreign exchange rate risk in their transactions. This business unit also provides guarantee services including stand-by credit, performance bond and credit guarantee services. Settlement The Wholesale Business Unit offers a variety of products and services including remittance, cash management, trade finance for export and import activities and supply chain finance to optimize customers’ cash flows and business flows. In addition, this business unit provides comprehensive settlement services including credit card issuing, merchant acquiring, collection outsourcing and factoring services for corporate customers through Sumitomo Mitsui Card. 30 Table of Contents M&A and Other Advisory Services The Wholesale Business Unit responds to customers’ diversifying business strategies and management issues by providing solutions custom-tailored to their business characteristics and growth stage. The Wholesale Business Unit caters to large corporate clients in their global business activities by leveraging the collective strength of SMBC Group companies. For example, SMBC and SMBC Nikko Securities support the entire deal process of cross-border M&A projects on a collaborative basis. In addition, SMBC and SMBC Nikko Securities further strengthen their capabilities to support customers’ global expansion by leveraging the strategic capital and business alliance with Jefferies Financial Group, Inc., a U.S. investment bank and financial services company. For mid-sized companies and small and medium-sized enterprises, the Wholesale Business Unit provides a wide range of financial services including direct investment, LBO financing, debt restructuring, support for initial public offering and M&A advisory to enhance our customers’ corporate value, working in conjunction with private equity funds as necessary. In real estate and related businesses, this business unit provides a full lineup of services including brokerage and asset management by SMBC Trust Bank and funding support mainly by SMBC. For start-up companies, the Wholesale Business Unit offers support in accordance with clients’ stage of growth such as management consulting, venture investment, financing and support for initial public offerings. For clients considering business overseas, the Wholesale Business Unit provides tailored information on local laws and regulations and on Japanese companies already present in target countries. For clients who already have business overseas, each SMBC Group company collaborates to provide high quality solutions in areas such as business expansion and reorganization. Digital Services The Wholesale Business Unit supports customers’ digitalization and new business creation efforts, reflecting growing needs for our customers’ digital innovation and digital transformation not only among large enterprises but also among mid-sized companies and small and medium-sized enterprises. For example, this business unit provides tailor-made solution proposals, corporate digital platform services, cashless payments and online business matching services. In May 2025, we launched “Trunk,” a digital comprehensive financial service for corporate clients, centered on online accounts and business cards, offering money-related services in an integrated manner, such as streamlining accounting operations, visualizing funds, and supporting cash management. “Trunk” is designed not only to expand conventional functions for accounts and settlements, but also to provide a variety of features, emphasizing the ability to use them quickly and remotely at any time. Leasing The Wholesale Business Unit provides a wide range of leasing services including equipment, operating and leveraged leasing mainly through SMFL, one of the major leasing companies in Japan. We have a 50% equity interest in SMFL while the remaining 50% is held by Sumitomo Corporation (“Sumitomo Corp”), a non-affiliate, which makes SMFL our joint venture with Sumitomo Corp. Retail Business Unit The Retail Business Unit provides financial services to consumers residing in Japan and mainly consists of the retail businesses of SMBC, SMBC Trust Bank, SMBC Nikko Securities, Sumitomo Mitsui Card and SMBC 31 Table of Contents Consumer Finance. This business unit offers a wide range of products and services for consumers, including wealth management services, settlement services, consumer finance and housing loans, in order to address the financial needs of all individual customers. Wealth Management The Retail Business Unit offers a variety of wealth management services to high-net-worth customers as well as customers with needs for asset building in the mass affluent and mass segments. The financial products and services that this business unit offers include deposit products such as time deposits and foreign currency deposits, investment trusts, equities, bonds, insurance products and trust services. In order to meet high-net-worth customers’ diverse needs for asset management, including asset succession, SMBC, SMBC Trust Bank and SMBC Nikko Securities are promoting greater collaboration by leveraging SMBC’s broad client base and high advisory capabilities of SMBC Trust Bank and SMBC Nikko Securities. In addition, we are appointing dedicated staff to high-net-worth customers to give them access to outstanding advice and service. Settlement The Retail Business Unit conducts credit card, installment and transaction businesses and provides customers with secure and convenient payment methods and offers a variety of settlement and finance services to meet diverse customer needs through Sumitomo Mitsui Card. Sumitomo Mitsui Card is a leading company in Japan’s credit card industry, having introduced the Visa brand into the Japanese market, and issues a variety of affiliated credit cards in cooperation with partners including, but not limited to, railway companies, airline companies, department stores and online retailers to satisfy both these partners’ and cardholders’ needs. Sumitomo Mitsui Card, together with GMO Payment Gateway, Inc. and Visa Worldwide Japan, Co., Ltd., also provides a next generation payment platform that enables one-stop support for multiple payment methods on a single device. Sumitomo Mitsui Card conducts credit card, installment (such as shopping credit and automobile loans) and solution (such as collection outsourcing and factoring) businesses. SMBC and Sumitomo Mitsui Card are leveraging their strengths to address cashless payment needs and integrate marketing and business operations. In April 2024, Sumitomo Mitsui Card merged with SMBC Finance Service which had been Sumitomo Mitsui Card’s wholly-owned subsidiary and conducted credit card, installment (such as shopping credit and automobile loans) and solution (such as collection outsourcing and factoring) businesses. This merger was made for the purpose of enhancing the overall strength of the companies and accelerating our group’s initiatives for cashless payment strategy to address all payment needs of both consumers and merchants. Consumer Finance The Retail Business Unit offers a variety of consumer loan products including unsecured card loan products mainly through SMBC, Sumitomo Mitsui Card and its wholly-owned subsidiary, SMBC Consumer Finance, to meet the wide range of individual customers’ demand for funds. Also, SMBC Consumer Finance guarantees certain consumer loans made by SMBC and other financial institutions. In April 2023, Sumitomo Mitsui Card acquired all shares of SMBC Mobit Co., Ltd. from SMBC Consumer Finance and made it a wholly-owned subsidiary and subsequently, in July 2023, Sumitomo Mitsui Card merged with SMBC Mobit Co., Ltd. This reorganization was made in anticipation of a merger to strengthen our response to the settlement driven financing needs associated with customer purchases, which are expected to continue to grow along with the growth of the cashless market in Japan. 32 Table of Contents Housing Loans The Retail Business Unit provides housing loans with a variety of terms and interest rates to meet diversified customer needs. Furthermore, this business unit offers a housing loan combined with an insurance policy that covers the repayment of the outstanding loan balance in the event the borrower is diagnosed with certain diseases. Housing loans are principally secured by collateral or supported by guarantees. The Retail Business Unit operations are mainly conducted through a large and well-developed branch network. We had a domestic network consisting of 455 SMBC branch offices, 26 SMBC Trust Bank branch offices, 102 SMBC Nikko Securities branch offices and 100 SMBC Consumer Finance unstaffed branch offices at March 31, 2026. For the convenience of individual customers, some SMBC branches operate on weekday evenings and provide wealth management services through arranging consultation sessions on weekends and national holidays. Further, consumer loan promotion offices of SMBC offer housing loan consultation on weekends. The Retail Business Unit also operates an extensive network of ATMs in Japan. SMBC offers its customers’ access to ATMs, some of which are SMBC’s ATMs and the majority of which are ATMs made available through arrangements with other ATM providers such as convenience store chains. At March 31, 2026, the number of SMBC’s ATMs was 3,909. In addition, SMBC Consumer Finance offers its customers’ access to 215 automatic contract machines and ATMs at March 31, 2026. This business unit also offers internet banking services for consumers. At March 31, 2026, SMBC’s internet banking services had approximately 23 million registered users. The users are able to transfer funds, perform balance inquiries, make time deposits and foreign currency deposits, and buy and sell investment trusts over the internet with smartphones and computers. Moreover, in the credit card business, there are approximately 42 million card holders of Sumitomo Mitsui Card at March 31, 2026. The Retail Business Unit is pursuing services tailored to the changing needs and behaviors of our customers by increasing the number of procedures that can be completed digitally or remotely, and expanding digital tools. In addition, through the development of joint branches shared by SMBC, SMBC Nikko Securities, and SMBC Trust Bank, we provide a one-stop service and achieve both greater convenience for customers and more efficient branch operations. The Retail Business Unit promotes digitalization in a variety of areas, including the promotion of the use of debit cards and credit cards that address cashless payment needs, a smartphone application that allows our customers to easily and seamlessly view information on transactions with SMBC and Sumitomo Mitsui Card, and an automated chat service utilizing artificial intelligence. In March 2023, we launched a new digital financial service, “Olive,” allowing retail customers to seamlessly access various financial services such as banking services, payment services, finance services, securities services and insurance services through our smartphone application. SMBC is developing the “STORE,” which is a new kind of physical store branch, where customers can handle day-to-day procedures at their convenience, in easily accessible commercial facilities. At the “STORE,” customers can handle various procedures, such as updating their bank account information, by using devices which are connected to our call center during extended hours, including weekday evenings, weekends and national holidays. Global Business Unit The Global Business Unit supports the global businesses of a diverse range of clients, such as Japanese companies operating overseas, non-Japanese companies, financial institutions, government agencies, public corporations and retail clients of various countries. This business unit mainly consists of the global businesses of SMBC, SMBC Trust Bank, SMFL, SMBC Nikko Securities and their foreign subsidiaries. At March 31, 2026, we had a global network of 143 overseas offices. 33 Table of Contents Banking Business The Global Business Unit provides a variety of tailored products and services to meet customer and market requirements, including loans, deposits, clearing services, trade finance, project finance, loan syndication, derivatives and global cash management services. SMBC seeks to meet customers’ needs globally, together with the network of our foreign subsidiaries such as SMBC Bank International plc, Sumitomo Mitsui Banking Corporation (China) Limited, PT Bank SMBC Indonesia Tbk (which changed its corporate name from PT Bank BTPN Tbk in October 2024), SMBC MANUBANK (which changed its corporate name from Manufacturers Bank in November 2023), SMBC Bank EU AG, SMFG India Credit Company Limited and our foreign associates, including ACLEDA Bank Plc, Vietnam Prosperity Joint-Stock Commercial Bank, VPBank SMBC Finance Company Limited and YES BANK Limited (“YES BANK”). In November 2021, we acquired a 74.9% equity interest in Fullerton India, which became our subsidiary. Fullerton India has a pan-India distribution network. This acquisition was made in order to gain a retail finance platform in India and further expand our business franchise in Asia. Fullerton India changed its name to SMFG India Credit Company Limited in May 2023. Subsequently, in March 2024, we acquired the remaining 25.1% equity interest in SMFG India Credit Company Limited and made it our wholly-owned subsidiary. In October 2023, SMBC acquired a 15.0% equity interest in Vietnam Prosperity Joint-Stock Commercial Bank, a commercial bank in Vietnam. As a result, Vietnam Prosperity Joint-Stock Commercial Bank became our associate. In May 2025, SMBC sold a part of its shares of The Bank of East Asia, Limited (“BEA”), our commercial banking associate in China. In addition, there were changes in the representation on BEA’s board of directors. As a result, BEA is no longer our associate. In September 2025, SMBC acquired a 24.2% equity interest in YES BANK, a private commercial bank in India, which became our associate. Subsequently, in October 2025, SMBC acquired an additional 0.7% equity interest in YES BANK. Through this investment, we aim to further accelerate our business in India. Securities and Derivatives Business In overseas markets, the Global Business Unit provides services such as equity and fixed income sales and trading, underwriting activities, Japanese stock brokerage, M&A advisory and derivatives through SMBC Nikko Capital Markets Limited, SMBC Bank EU AG, SMBC Nikko Securities America, Inc. and SMBC Capital Markets Inc., which are subsidiaries of SMBC in Europe, Middle East and Africa, and the United States. In addition, this business unit provides services such as equity and fixed income sales and trading, underwriting activities, Japanese stock brokerage, M&A advisory and derivatives through SMBC Nikko Securities (Hong Kong) Limited and SMBC Nikko Securities (Singapore) Pte. Ltd. Together with other SMBC Nikko Securities’ subsidiaries and affiliates, this business unit offers high quality financial services to clients on a global basis. Further, we have been strengthening strategic capital and business alliances with Jefferies Financial Group, Inc., a U.S. investment bank and financial services company, and expanding the business and regions covered by the collaboration. Leasing Business The Global Business Unit provides a variety of leasing services related to the construction machinery, transportation equipment, industrial machinery, medical equipment and other categories mainly through SMFL’s offices overseas. This business unit also offers aircraft leasing services through SMBC Aviation Capital Limited, a subsidiary of SMFL. 34 Table of Contents In December 2023, we transferred our entire interest in SMBC Rail Services LLC, our railcar operating leasing subsidiary in the United States, to a non-affiliate investment company. As a result, SMBC Rail Services LLC is no longer our subsidiary. Global Markets Business Unit The Global Markets Business Unit offers solutions through foreign exchange products, derivatives, bonds, stocks and other marketable financial products, and also undertakes asset liability management operations, which help comprehensively control balance sheet liquidity risks and market risks. This business unit consists of the Global Markets and Treasury Unit of SMBC, which was renamed from the Treasury Unit in April 2023 and the Global Markets Division of SMBC Nikko Securities. Asset Liability Management and Portfolio Management The Global Markets Business Unit maintains high profitability and stability by establishing a portfolio with highly liquid products and focusing on products for which investment appetite is high, and by carrying out portfolio rebalancing in a nimble and dynamic manner in response to changes in market conditions. Foreign Currency Funding To support our overseas businesses, this business unit strives to improve the stability of our foreign currency funding by diversifying funding methods and expanding the scope of investors we target. At the same time, this business unit keeps appropriate control of the balance sheet in response to international financial regulations. Sales and Trading The Global Markets Business Unit provides detailed information on market conditions and economic trends to address customers’ hedging and asset management needs, expands its product lineup in foreign exchange, derivative, bond, stock and other products and supplies timely solutions to increase customer satisfaction and SMBC Group earnings. In addition, this business unit encourages the use of electronic transactions such as its electronic foreign exchange execution platform available via the internet to respond to the needs of a wider range of customers. Other Major Business System Development, Data Processing, Management Consulting and Economic Research We provide financial consultation services relating to management reforms, IT, the planning and development of strategic information systems and outsourcing. We also conduct diverse activities including domestic and international economic research and analysis, policy recommendations and business incubation. We offer these services mainly through The Japan Research Institute. Asset Management We provide mutual funds and investment management services such as alternative investment strategy, customized portfolio products, and active investment strategy for a wide range of investors in order to aim to achieve sustainable long-term growth through SMDAM and TT International Asset Management Ltd. Management Policies In May 2023, we announced our medium-term management plan, “Plan for Fulfilled Growth” for the three-year period through March 2026. Under the medium-term management plan, we established the following three 35 Table of Contents core policies: “Create Social Value,” “Pursue Economic Value,” and “Rebuild Corporate Infrastructure,” in order to realize “Growth with Quality” by addressing the paradigm shift in our business environment and further evolving our initiatives by leveraging our consolidated capabilities. During the fiscal year ended March 31, 2026, the final year of the medium-term management plan, we advanced the final stage of initiatives based on the three core policies aiming for “Growth with Quality” as set out in the medium-term management plan. At the same time, we looked ahead to the next medium-term management plan and launched various measures. On April 1, 2026, we announced our new medium-term management plan for the three-year period through March 2029. In this medium-term management plan, we have set “Aim higher through bold transformation” as our basic policy for realizing our Vision. We seek to accelerate growth by capturing robust business opportunities both in Japan and overseas and we aim to further improve capital efficiency through evolving business models in strategic areas and the transformation of our business portfolio. We also continue to enhance the sophistication of our corporate infrastructure, aiming to reach global top-tier standards over the medium to long term, thereby supporting the development of globally competitive businesses. With respect to the social value creation, an area of focus since the previous medium-term management plan, we further expand our initiatives and seek to contribute to the realization of a society filled with happiness and well-being. In addition, based on the situation in which the effective use of technology has a major impact on the competitiveness of financial institutions, we intensively pursue IT transformation as a major management priority. By expanding IT investment and enhancing development capabilities, we aim to transform into an organization that fully leverages rapidly evolving technologies, including generative AI. Business Strategy In Japan, we aim to expand our customer base and pursue growth that outpaces our competitors by leveraging the competitive advantages of our digital platforms and providing integrated, group-wide solutions. In the overseas business, we aim to improve profitability by strengthening our presence in the capital markets through initiatives including the enhancement of our sales and trading business, the disciplined realization of returns on our investments in Asia, and the fundamental replacement of assets in our overseas corporate lending business. In addition, we focus on expanding capital-efficient, low-capital-intensive businesses such as asset management and transaction banking, on an integrated basis both in Japan and overseas. By prioritizing the allocation of management resources to these key strategic areas, we strive to achieve both earnings growth and higher return on tangible equity (“ROTE”). In transforming our business portfolio, we optimize resource allocation based on three principles: “Optimize (portfolio optimization),” “Capitalize (maximizing the impact of our business),” and “Build Next Core (laying the foundations for the next phase of growth),” with the aim of building a well-balanced portfolio that is well balanced in terms of profitability, growth, and stability. Corporate Infrastructure We foster a corporate culture that values trust and a challenger mindset, while enhancing our global management structure on a group basis and strengthening risk controls in response to changes in our business environment and the expansion of our business areas. In addition, we continue to strengthen our human capital to underpin the steady execution of our growth strategy and focus on maximizing our distinctive strength in execution excellence. IT Transformation We aim to undertake a fundamental reform of our IT infrastructure such as the accelerated migration to cloud-based architectures, while also reinforcing our IT-related planning and development capabilities by 36 Table of Contents increasing the number of specialized talent and implementing other related measures. In addition, to further accelerate AI adoption, we expand AI education opportunities for employees, while comprehensively reviewing products and operations in an integrated manner to establish AI-based business processes. Social Value Creation To clarify our vision for society and the direction of our initiatives, we established the “SMBC Group Statement on Social Value Creation.” We have also designated “Green Planet,” “Thriving People,” and “Fulfilled Growth” as our material issues. Under the new materiality, we seek to further elevate our social value creation efforts by promoting the proactive participation of each employee and further strengthening our initiatives through our core business activities. Revenues by Region The following table sets forth the percentage of our total operating income under IFRS for the fiscal years ended March 31, 2026, 2025 and 2024, based on the total operating income of our offices in the indicated regions. In Japan, we compete with other major Japanese banking groups and financial service providers. Outside Japan, we mainly compete with global financial institutions in the Americas, Europe and Middle East, and Asia and Oceania. For the fiscal year ended March 31, 2026 2025 2024 Region: Japan 43 % 29 % 36 % Foreign: Americas 26 % 34 % 29 % Europe and Middle East 12 % 9 % 10 % Asia and Oceania (excluding Japan) 19 % 28 % 25 % Total 100 % 100 % 100 % Seasonality Our business is not materially affected by seasonality. Sources and Availability of Raw Materials We are not reliant on any particular source of raw materials. Marketing Channels See “—Description of Operations and Principal Activities” for information on our marketing channels. Regulations in Japan Our businesses are subject to extensive regulation, including the effects of changes in the laws, regulations, policies, voluntary codes of practice and interpretations in Japan. On the other hand, deregulation of banking activities in Japan, and more generally of the Japanese financial system, has proceeded, which has made the Japanese banking industry highly competitive. 37 Table of Contents Supervisory and Regulatory Authorities Pursuant to the Banking Act, the Financial Services Agency of Japan has the authority in Japan to supervise banks, bank holding companies and banks’ principal shareholders, meaning bank shareholders having 20% (or 15% in some cases) or more of the voting rights of a bank. The Bank of Japan also has supervisory authority over banks in Japan based primarily on its contractual agreements and transactions with Japanese banks. Only companies licensed by the Prime Minister are defined as banks under the Banking Act, and licenses may be granted only to a kabushiki kaisha, a joint stock corporation, with paid-up capital of ¥2 billion or more. The Financial Services Agency of Japan The Prime Minister has supervisory authority over banks in Japan, which is generally delegated to the Financial Services Agency of Japan (“FSA”) except for matters prescribed by cabinet order. The Minister for Financial Services has the power to direct the FSA. Under the Banking Act, the FSA has supervisory control over banks, bank holding companies and banks’ principal shareholders in Japan, except for matters to which the Prime Minister retains authority. The FSA’s authority includes granting and revoking of operating licenses, and approving business activities such as becoming a principal shareholder, establishment of subsidiaries or overseas offices, mergers, corporate splits or business transfers, and dissolutions or discontinuations of business by existing banks, etc. The FSA may also instruct a Japanese bank to suspend its business or to remove directors if the bank violates laws, other regulations or their articles of incorporation or commits acts contrary to public policy. The FSA may also direct a Japanese bank in financial difficulty to take certain actions, such as holding certain property in Japan for the protection of depositors. Under the prompt corrective action (“PCA”) system, the FSA may take corrective actions in the case of capital deterioration of financial institutions. The Ministry of Finance and the FSA have introduced a number of regulatory measures into the banking sector in Japan to secure sound management of banks, as well as measures to increase the transparency of the regulatory process, such as bank holding company regulations, single customer credit limits, disclosure regulations, regulations regarding reserves for loan losses and inspections. The Banking Act authorizes the FSA to inspect banks and bank holding companies in Japan at any time and with any frequency. The FSA monitors the financial soundness of banks and the status and performance of their control systems and reviews their compliance with laws and regulations. The FSA had issued guidelines on its inspection of financial institutions called the Financial Inspection Manual. The Financial Inspection Manual itself did not have the force of law, but the FSA’s inspections of banks had been based on the Financial Inspection Manual, which emphasized the need for bank self-assessment rather than assessment based on the advice of the government authority and risk management by each bank instead of a mere assessment of its assets. In December 2017, the FSA published a report on its supervisory approaches and transformation, which was revised in June 2018. Based on the report, the FSA introduced its new supervisory approaches, which include expanding the scope of its supervisory approaches from a backward-looking, element-by-element compliance check to substantive, forward-looking and holistic analysis and judgment, leading to the FSA’s repeal of the Financial Inspection Manual in December 2019. Following an inspection, the FSA may exercise its authority over a bank under the Banking Act to suspend or terminate its banking business. The Ministry of Finance The Ministry of Finance conducts examinations of banks in relation to foreign exchange transactions under the Foreign Exchange and Foreign Trade Act of Japan (the “FEFTA”). 38 Table of Contents The Bank of Japan The Bank of Japan (“BOJ”) is the central bank of Japan and serves as the principal instrument for the execution of Japan’s monetary policy. The BOJ implements monetary policy mainly by adjusting its basic loan rate, open market operations and imposing deposit reserve requirements. All banks in Japan maintain deposits with the BOJ and rely substantially upon obtaining borrowings from and rediscounting bills with the BOJ. Moreover, most banks in Japan maintain current accounts under agreements with the BOJ pursuant to which the BOJ can conclude a contract with SMBC concerning on-site examinations. BOJ supervision is intended to support the effective execution of monetary policy, while FSA supervision aims to maintain the sound operations of banks in Japan and promote the security of depositors. Through its examinations, the BOJ seeks to identify problems at an early stage and give corrective guidance where necessary. Regulations Regarding Capital Adequacy and Liquidity Capital Adequacy Requirement In 1988, the BCBS issued the Basel Capital Accord. The Basel Capital Accord sets minimum risk-weighted capital ratios for the purpose of maintaining sound management of banks which have international operations. The minimum risk-weighted capital ratio required was 8% on both a consolidated and nonconsolidated basis. In 2004, the BCBS issued the amended Basel Capital Accord (“Basel II”), which includes detailed measurement of credit risk, the addition of operational risk, a supervisory review process and market discipline through disclosure. These amendments did not change the minimum risk-weighted capital ratio of 8% applicable to banks with international operations (including SMBC). These rules took effect in Japan in 2007, and since 2008, banks have been able to apply the advanced IRB approach for credit risk and the advanced measurement approach for operational risk. In July 2009, the BCBS approved a final package of measures to enhance certain elements of the Basel II framework, which includes an increase of the risk weights of resecuritization instruments and revisions of certain trading book rules (referred to as “Basel 2.5”), and the FSA’s capital adequacy guidelines which reflect such framework have been applied in Japan from December 2011. In September 2009, the GHOS reached an agreement on several key measures to strengthen regulation of the banking sector, and in December 2009 the BCBS published a consultative document entitled “Strengthening the resilience of the banking sector” containing proposals on these measures centering on several core areas. The BCBS’ proposals focused on raising the quality, consistency and transparency of the regulatory capital base through measures including a requirement that the predominant form of Tier 1 capital must be common shares and retained earnings; limitations on the use of hybrid instruments with an incentive to redeem; a requirement that regulatory adjustments, including deductions of the amount of net deferred tax assets which rely on the future profitability of a bank, be applied to common equity generally; and a requirement for additional disclosure regarding regulatory capital levels. The BCBS’ proposals also cover the following key areas: • strengthening the risk coverage of the capital framework; • introducing a leverage ratio as a supplementary measure to the Basel II risk-based framework with a view to migrating to a Pillar 1 (minimum capital requirement) treatment based on appropriate review and calibration (for further information, see “Leverage Ratio” below); • introducing measures to promote the build-up of capital buffers in good times that can be drawn upon in periods of stress; and • introducing minimum liquidity standards for internationally active banks that include a 30-day liquidity coverage ratio requirement underpinned by a longer-term structural liquidity ratio (for further information, see “Liquidity Requirement” below). 39 Table of Contents In July 2010, the GHOS reached a broad agreement on the overall design of the BCBS’ capital and liquidity reform package. In addition, in August 2010, the BCBS issued for consultation a proposal to enhance the loss absorbency function of regulatory capital. In September 2010, the GHOS announced a substantial strengthening of existing capital requirements. The framework of the proposed reform was endorsed by the G-20 leaders at their Seoul summit in November 2010. These capital reforms were phased in from January 2013 to January 2019. The minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 4.5%, 6% and 8%, respectively, since January 2015. Moreover, banks have been required to hold a capital conservation buffer of 2.5% to withstand future periods of stress since January 2019. As a result, taking the capital conservation buffer into account, the minimum common equity requirement, the minimum Tier 1 capital requirement and the total minimum capital requirement have been 7%, 8.5% and 10.5%, respectively, since January 2019. In addition, a countercyclical buffer within a range of 0% to 2.5% of Common Equity Tier 1 capital has been implemented according to national circumstances. In December 2010, the BCBS published the new Basel III rules text. To reflect changes made by the BCBS, the FSA changed its capital adequacy guidelines. The FSA’s changes have mostly been applied from March 31, 2013, which generally reflect the main measures of the minimum capital requirements of the BCBS that started to be phased in on January 1, 2013 and have been fully applied from March 2019. The FSA’s changes which reflect capital buffer requirements under Basel III and the G-SIB capital surcharge described below have been applied from March 2016. In addition to the above-mentioned minimum capital requirements and capital buffer requirements under Basel III, organizations identified by the FSB as G-SIBs, which includes us, are required to maintain an additional 1% to 2.5% of Common Equity Tier 1 capital as a percentage of risk-weighted assets based on the organization’s size, interconnectedness, substitutability, complexity and cross-jurisdictional activity as determined by the FSB. The amount of G-SIB capital surcharge that has applied to us from 2019 based on the FSB’s determination is 1% of risk-weighted assets. The FSB updates its list of G-SIBs on an annual basis. G-SIBs are also subject to a global standard for TLAC, which establishes minimum requirements for loss-absorbing and recapitalization capacity available in resolution at G-SIBs, to ensure that they can be resolved in an orderly manner without putting public funds at risk. In November 2015, as part of its agenda to address risks arising from G-SIBs, the FSB published the FSB’s TLAC Standards. The FSB’s TLAC Standards define certain minimum requirements for instruments and liabilities so that if a G-SIB fails, it will have sufficient loss-absorbing and recapitalization capacity available to ensure that it can be resolved in an orderly manner which minimizes potential impact on financial stability, maintains the continuity of critical functions and avoids exposing public funds to loss. In March 2019, the FSA published the Japanese TLAC Standards. The Japanese TLAC Standards apply to Covered SIBs, which includes (i) Japanese G-SIBs, which are designated as G-SIBs by the FSA in accordance with the designation by the FSB, such as us, and (ii) any domestic systemically important bank in Japan (Japanese D-SIB) that has been deemed to be in particular need for a cross-border resolution arrangement and as having particular systemic significance to the Japanese financial system if it fails. The Japanese TLAC Standards were applied to Japanese G-SIBs from March 31, 2019. Under the FSB’s TLAC standards and the Japanese TLAC Standards, entities designated by the FSA as an entity that would enter into domestic resolution proceedings for Japanese G-SIBs, or the Domestic Resolution Entities, are required: • to meet certain minimum external TLAC requirements (being at least 16% of their risk-weighted assets from March 2019 and at least 18% of their risk-weighted assets from March 2022 as well as at least 6% of their Basel III leverage ratio denominator from March 31, 2019, at least 6.75% from March 31, 2022 and at least 7.10% from April 1, 2024, while excluding amounts of deposits to the BOJ from the total exposure for the purpose of calculation of the applicable Basel III leverage ratio denominator, taking into account exceptional macroeconomic conditions and other circumstances); and 40 Table of Contents • to cause any material subsidiaries or material sub-groups in Japan designated as systemically important by the FSA, or any foreign subsidiaries that are subject to TLAC or similar requirements by the relevant foreign authorities, to maintain a certain level of capital and debt that is recognized as having loss-absorbing and recapitalization capacity (“internal TLAC”). In addition, according to the Japanese TLAC Standards, Japanese G-SIBs are allowed to count Japan’s deposit insurance fund reserves in an amount equivalent to 2.5% of their risk-weighted assets from March 2019 and 3.5% of their risk-weighted assets from March 2022 as external TLAC. The Japanese TLAC Standards also prescribe a minimum TLAC requirement of at least 6% of the resolution group’s Basel III leverage ratio denominator from March 31, 2019, increasing to at least 6.75% from March 31, 2022, in accordance with the FSB’s TLAC Standards, for bank holding companies of Japanese G-SIBs including us. The minimum TLAC requirement under the Japanese TLAC Standards increased to 7.10% of the resolution group’s Basel III leverage ratio denominator from April 1, 2024, while excluding amounts of deposits to the BOJ from the total exposure for the purpose of calculation of the applicable Basel III leverage ratio denominator, taking into account exceptional macroeconomic conditions and other circumstances. In our case, the FSA designated SMFG as our Domestic Resolution Entity, which makes SMFG subject to the external TLAC requirements. The FSA also designated SMBC and SMBC Nikko Securities as our material subsidiaries in Japan, for which we are required to maintain a certain level of internal TLAC. In the FSA’s explanatory paper entitled “The FSA’s Approach to Introduce the TLAC Framework,” which was published in April 2016 and revised in April 2018, the FSA has identified Single Point of Entry (“SPE”) resolution, in which resolution powers are applied to the ultimate holding company of a banking group by a single national resolution authority, as the preferred strategy for resolving currently designated G-SIBs in Japan. Under a possible model for SPE resolution of Japanese G-SIBs described in the Japanese TLAC Standards, if, with respect to a material subsidiary of a Japanese G-SIB that is designated as systemically important by the FSA, the FSA issues to the Domestic Resolution Entity of the Japanese G-SIB an order concerning the restoration of financial soundness, including recapitalization of, and restoration of liquidity to, such material subsidiary, such material subsidiary’s internal TLAC instruments will be written off or, if applicable, converted into equity in accordance with the applicable contractual loss-absorption provisions of such internal TLAC instruments. The FSA may issue such an order pursuant to Article 52-33, Paragraph 1 of the Banking Act upon its determination that the material subsidiary is non-viable due to a material deterioration in its financial condition after recognizing that its liabilities exceed or are likely to exceed its assets, or that it has suspended or is likely to suspend payment of its obligations. Furthermore, as a disincentive for G-SIBs facing the maximum G-SIB capital surcharge to “increase materially their global systemic importance in the future,” an additional 1% capital surcharge could be applied. So long as we are identified as a G-SIB, we are also subject to stronger supervisory mandates and higher supervisory expectations for risk management functions, data aggregation capabilities, risk governance and internal controls. The substance of this heightened supervision has not yet been fixed, but we anticipate that at a minimum any rules will contain more stringent reporting requirements and impose common frameworks for data aggregation and internal risk management processes on G-SIBs. Because we have been identified as a G-SIB, we are also subject to, among other things, resolution-related requirements described in the FSB’s “Key Attributes of Effective Resolution Regimes for Financial Institutions.” In particular, the FSB has required the initial group of G-SIBs to have in place a recovery and resolution plan, including a group-level plan, containing various specified elements, to be subject to regular resolvability assessments. Under the Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc., issued by the FSA, as part of crisis management, financial institutions identified as G-SIBs must prepare and submit a recovery plan, which includes a description of events that would trigger implementation of the recovery plan and the analysis of the recovery options to the FSA, and the FSA must prepare the resolution plan for each G-SIB. 41 Table of Contents In December 2017, the GHOS endorsed the outstanding Basel III regulatory reforms. The endorsed reforms include the following elements: • a revised standardized approach for credit risk; • revisions to the internal ratings-based approach for credit risk, where the use of the most advanced internally modeled approaches for low-default portfolios will be limited; • revisions to the credit valuation adjustment framework, including the removal of the internally modeled approach and the introduction of a revised standardized approach; • a revised standardized approach for operational risk, which will replace the existing standardized approaches and the advanced measurement approach; • revisions to the measurement of the leverage ratio and a leverage ratio buffer for G-SIBs; and • revisions to the capital floor, under which banks’ risk-weighted assets must be no lower than 72.5% of total risk-weighted assets as calculated using only the standardized approaches under the revised Basel III framework, and a requirement that banks disclose their risk-weighted assets based on such standardized approaches. In March 2020, the GHOS endorsed a set of measures to provide additional operational capacity for banks and supervisors to respond to the immediate financial stability priorities resulting from the impact of the COVID-19 pandemic on the global banking system. According to the measures, the implementation timeline of the outstanding Basel III standards has been deferred by one year. The revised framework, other than revisions to the capital floor, were scheduled to take effect from January 1, 2023. The revisions to the capital floor were scheduled to be phased in from January 1, 2023, with an initial capital floor of 50%, and were scheduled to reach 72.5% by January 1, 2028. In March 2020, in light of the above changes, the FSA announced its plan to defer the implementation of Basel III standards in Japan by one year, to March 31, 2023. In September 2021, the FSA announced its plan to allow domestic banks which do not use internal models to calculate the amount of credit risk to delay the application of the Basel III standards in Japan for another year, to March 31, 2024. Furthermore, in March 2022, the FSA announced that it would defer the implementation of Basel III standards in Japan based on international developments and dialogue with stakeholders, (i) for domestic banks which use internal models to calculate the amount of credit risk and internationally active banks, including us, to March 31, 2024 and (ii) for domestic banks which do not use internal models to calculate the amount of credit risk to March 31, 2025 (in both cases, excluding banks that have notified the FSA that they wish to apply Basel III standards earlier). In April 2022 and November 2022, the FSA published amendments to the regulatory notices regarding credit risk, credit valuation adjustment risk, market risk and operational risk for implementation of the Basel III standards in Japan. Our securities subsidiaries in Japan are also subject to capital adequacy requirements under the FIEA. Under the requirements, securities firms must maintain a minimum capital adequacy ratio of 120% on a nonconsolidated basis and must file periodic reports with the Commissioner of the FSA or the Director-General of the appropriate Local Finance Bureau, and also publicly disclose their capital adequacy ratio on a quarterly basis. In addition, securities firms whose total assets exceed ¥1,000 billion are required to maintain this minimum capital adequacy ratio on a consolidated basis. This requirement on a consolidated basis is applied in addition to and in a manner similar to the requirements on a nonconsolidated basis referred to above. Failure to meet the capital adequacy requirements will trigger mandatory regulatory action. For example, in the case of the requirement on a nonconsolidated basis, a securities firm with a capital adequacy ratio of greater than 120%, but less than 140% will be required to file daily reports with the Commissioner of the FSA or the Director-General of the appropriate Local Finance Bureau. A securities firm with a capital adequacy ratio of less than 120% may be ordered to change its business conduct, place its property in trust or be subject to other supervisory orders, as the relevant authorities deem appropriate. A securities firm with a capital adequacy ratio of less than 100% may be subject to temporary suspension of all or part of its business operations or cancellation of its license to act as a securities broker and dealer. 42 Table of Contents The capital adequacy ratio for securities firms is defined as the ratio of adjusted capital to a quantified total of business risks, which include market risks, counterparty risks and operational risks (e.g., risks in carrying out daily business activities, such as administrative problems with securities transactions and clerical mistakes) quantified in the manner specified by a rule promulgated under the FIEA. Adjusted capital is defined as net worth less illiquid assets, as determined in accordance with Japanese GAAP. Net worth consists mainly of stated capital, additional paid-in capital, retained earnings, reserves for securities transactions, certain allowances for doubtful current accounts, net unrealized gains (losses) in the market value of investment securities, and subordinated debt. Illiquid assets generally include non-current market assets, certain deposits and advances, and prepaid expenses. Leverage Ratio In March 2015, the FSA published its leverage ratio guidelines which have been applied from March 31, 2015 to help ensure broad and adequate capture of both on- and off-balance sheet sources of leverage for internationally active banks. The FSA’s leverage ratio guidelines are based on the text of the leverage ratio framework and disclosure requirements issued by the BCBS in January 2014. In December 2017, the definition and requirements of the leverage ratio were revised as part of the revised Basel III reforms. Under the revised Basel III reforms, in addition to meeting the minimum leverage ratio, G-SIBs are required to meet a leverage ratio buffer, which takes the form of a Tier 1 capital buffer set at 50% of the applicable G-SIB capital surcharge. Various refinements were also made to the definition of the leverage ratio exposure measure. The leverage ratio requirements under the definition based on the framework issued by the BCBS in January 2014 were implemented as a Pillar 1 measurement from January 2018, and those under the revised definition and the leverage ratio buffer requirement for G-SIBs were implemented as a Pillar 1 measurement from January 1, 2023. In March 2019, the FSA published its guidelines for the leverage ratio applicable to banks and bank holding companies with international operations, which have been applied from March 2019. Under the FSA’s guidelines for the leverage ratio, banks and bank holding companies with international operations must maintain a leverage ratio of at least 3% on both a consolidated basis and a nonconsolidated basis for banks and on a consolidated basis for bank holding companies. In June 2020, the FSA published and implemented amendments to its guidelines for the leverage ratio, which mainly exclude deposits with the BOJ from the denominator for the calculation of the leverage ratio in order to maintain harmonization with the monetary policy implemented by the BOJ and the prudential regulations for banks and other financial institutions. In July 2022, the FSA published amendments to its guidelines for the leverage ratio. Under the amended guidelines, the leverage ratio buffer requirement for G-SIBs in Japan took effect from March 31, 2023, while the finalized definition of the leverage ratio exposure measure took effect from March 31, 2024, except for banks that had notified the FSA that they wished to apply amended requirements earlier. Furthermore, in November 2022, the FSA published amendments to its guidelines for the leverage ratio, which provided that, effective from April 1, 2024, the minimum leverage ratio is increased from 3% to 3.15%, the minimum leverage-based Total Loss-Absorbing Capacity ratio is increased from 6.75% to 7.10% and the leverage buffer applicable to G-SIBs is increased by 0.05%, while continuing to exclude amounts of deposits with the BOJ from the total exposure, taking into account exceptional macroeconomic conditions and other circumstances. Liquidity Requirement In October 2014, the FSA published its guidelines for the liquidity coverage ratio (“LCR”) applicable to banks and bank holding companies with international operations that have been applied from March 31, 2015. These guidelines are based on the full text of the LCR standard issued by the BCBS in January 2013. The LCR is intended to promote resilience to potential liquidity disruptions over a thirty-day horizon and help ensure that 43 Table of Contents global banks have sufficient, unencumbered, high-quality liquid assets to offset the net cash outflows they could encounter under an acute short-term stress scenario. Under the FSA’s LCR guidelines, banks and bank holding companies with international operations must maintain an LCR of at least 100% on both a consolidated basis and a nonconsolidated basis. The minimum LCR requirements have been 100% since March 31, 2019. In March 2021, the FSA published its guidelines for net stable funding ratio (“NSFR”) applicable to banks and bank holding companies with international operations that have been applied from September 30, 2021. These guidelines are based on the full text of the NSFR standard issued by the BCBS in October 2014. The NSFR is intended to require a minimum amount of stable sources of funding at a bank relative to the liquidity profiles of the bank’s assets, as well as the potential for contingent liquidity needs arising from off-balance sheet commitments, over a one-year horizon. Under the FSA’s NSFR guidelines, banks and bank holding companies with international operations must maintain an NSFR of at least 100% on both a consolidated basis and a nonconsolidated basis. The minimum NSFR requirements have been 100% from September 30, 2021. Self-Assessment, Reserves and Related Disclosure Financial institutions, including SMBC, are required to establish self-assessment programs to, among other things, analyze their assets giving due consideration to accounting principles and other applicable rules and to classify their assets into categories taking into account the likelihood of repayment and the risk of impairment to the value of the assets. These classifications determine whether an addition to or reduction in reserves or write-offs is necessary. Pursuant to the Japanese Institute of Certified Public Accountants (“JICPA”) guidelines, the outcome of each financial institution’s self-assessment leads to substantially all of a bank’s loans and other claims on customers being analyzed by classifying obligors into five categories: (1) normal borrowers; (2) borrowers requiring caution; (3) potentially bankrupt borrowers; (4) virtually bankrupt borrowers; and (5) bankrupt borrowers. The reserve for possible loan losses is then calculated based on the obligor categories. FSA guidelines require banks to classify their assets not only by the five categories of obligor but also by four categories of quality. SMBC has adopted its own internal guidelines for self-assessment which conform to guidelines currently in effect and comply with the PCA system requirements. Based on the results of the self-assessment discussed above, SMBC is required to establish a reserve for its loan portfolio in an amount SMBC considers adequate at a balance sheet date. Three categories of reserves SMBC establishes, for statutory purposes, along with the Accounting Standards for Banks issued by the Japanese Bankers Association, are a general reserve, a specific reserve and a reserve for specific overseas loan losses. The Banking Act and the Financial Reconstruction Act require banks to disclose their loans and their other problem assets. Under these laws, assets are classified into four categories: (1) bankrupt and quasi-bankrupt assets, (2) doubtful assets, (3) substandard assets and (4) normal assets. Doubtful assets generally correspond to the higher tier portion of the non-accrual loans (the borrowers of which are not, but have the potential to become, bankrupt). The substandard assets generally correspond to the total of the restructured loans and past due loans (three months or more). Bankrupt and quasi-bankrupt assets and doubtful assets also include non-loan assets. Prompt Corrective Action System Under the Prompt Corrective Action (“PCA”) system, the FSA may take corrective actions depending upon the extent of capital deterioration of a financial institution. The FSA may require a bank with international operations to submit and implement a capital reform plan, if; • the Common Equity Tier 1 risk-weighted capital ratio becomes less than 4.5% but not less than 2.25%; • the Tier 1 risk-weighted capital ratio becomes less than 6% but not less than 3%; 44 Table of Contents • the total risk-weighted capital ratio of a bank becomes less than 8% but not less than 4%; or • the leverage ratio becomes less than 3.15% but not less than 1.575%. The FSA may order a bank with international operations to (1) submit and implement a plan for improving its capital; (2) prohibit or restrict the payment of dividends to shareholders or bonuses to officers; (3) reduce assets or restrict any increase in assets; (4) prohibit or restrict the acceptance of deposits under terms less advantageous than ordinary terms; (5) reduce the business of some offices; (6) eliminate some offices other than the head office; (7) reduce or prevent the launching of non-banking businesses; or (8) take certain other actions, if; • the Common Equity Tier 1 risk-weighted capital ratio becomes less than 2.25% but not less than 1.13%; • the Tier 1 risk-weighted capital ratio becomes less than 3% but not less than 1.5%; • the total risk-weighted capital ratio of a bank declines to less than 4% but not less than 2%; or • the leverage ratio becomes less than 1.575% but not less than 0.7875% (in this case, the FSA may order a bank to take actions described in (1) and (3) to (8) of the paragraph above). The FSA may order a bank with international operations to conduct any one of the following: (1) a capital increase; (2) a substantial reduction in its business; (3) a merger; or (4) abolishment of its banking business, if; • the Common Equity Tier 1 risk-weighted capital ratio becomes less than 1.13% but not less than 0%; • the Tier 1 risk-weighted capital ratio becomes less than 1.5% but not less than 0%; • the total risk-weighted capital ratio of a bank declines to less than 2% but not less than 0%; or • the leverage ratio becomes less than 0.7875% but not less than 0%. The FSA may order the bank with international operations to suspend all or part of its business, if • the Common Equity Tier 1 risk-weighted capital ratio, Tier 1 risk-weighted capital ratio or the total risk-weighted capital ratio declines below 0%; or • the leverage ratio declines below 0%. The FSA may take actions similar to those described above to a bank holding company that holds a bank with international operations, if; • the Common Equity Tier 1 risk-weighted capital ratio of the bank holding company declines to levels below 4.5%, 2.25%, 1.3% or 0%; • the Tier 1 risk-weighted capital ratio of the bank holding company declines to levels below 6%, 3%, 1.5% or 0%; • the total risk-weighted capital ratio of the bank holding company declines to levels below 8%, 4%, 2% or 0%; or • the leverage ratio of the bank holding company declines to levels below 3.15%, 1.575%, 0.7875% or 0%. Prompt Warning System The prompt warning system currently in effect allows the FSA to take precautionary measures to maintain and promote the sound operation of financial institutions before those financial institutions become subject to the PCA system. These measures include requiring a financial institution to reform: (1) profitability, if deemed 45 Table of Contents necessary to improve profitability based upon a fundamental profit index; (2) credit risk management, if deemed necessary to reform management of credit risk based upon the degree of large credit concentration and other circumstances; (3) stability, if deemed necessary to reform management of market and other risks based upon, in particular, the effect of securities price fluctuations; and (4) cash flow management, if deemed necessary to reform management of liquidity risks based upon deposit trends and level of reserve for liquidity. Restrictions on Capital Distributions Under the FSA’s capital adequacy guidelines and guidelines for the leverage ratio and related ordinances, if a bank fails to maintain capital levels under the capital buffer requirements or the leverage buffer requirements, the FSA may order a bank to submit and implement a reasonable capital distribution constraint plan to restore the capital levels. This plan could include restrictions on capital distributions, such as dividends, share buybacks, discretionary payments on Additional Tier 1 capital instruments and bonuses, in such amount as determined depending on the degree of insufficiency of such requirements. Regulations for Stabilizing the Financial System Deposit Insurance System The Deposit Insurance Act was enacted to protect depositors when deposit-taking institutions fail to meet their obligations. The Deposit Insurance Corporation of Japan (“DIC”) implements the law and is supervised by the Prime Minister and the Minister of Finance. Subject to limited exceptions, the Prime Minister’s authority is delegated to the FSA Commissioner. From April 1, 2025 to March 31, 2026, the DIC received annual insurance premiums from member deposit-taking institutions amounting to 0.022% of deposits primarily for payment and settlement purposes and 0.014% of deposits for other deposits, and from April 1, 2026, they amounted to 0.018% and 0.011%, respectively. Premiums held by the DIC may be either deposited at deposit-taking institutions or used to purchase marketable securities. The insurance money may be paid out to depositors in case of a suspension of repayments of deposits, banking license revocation, dissolution or bankruptcy of a bank. Payouts are generally limited to a maximum of ¥10 million of principal amount together with any interest accrued with respect to each depositor. Only non-interest-bearing deposits that are redeemable upon demand and used by depositors primarily for payment and settlement functions are protected in full. City banks (including SMBC), regional banks (including member banks of the second association of regional banks), trust banks, credit associations, credit cooperatives, labor banks and JAPAN POST BANK Co., Ltd. (“Japan Post Bank”) participate in the deposit insurance system on a compulsory basis. The Deposit Insurance Act also provides a permanent system for resolving failed deposit-taking institutions. The basic method for resolving a failed deposit-taking institution under the Deposit Insurance Act is cessation of the business by paying insurance money to depositors up to the principal amount of ¥10 million plus accrued interest per depositor, or pay-off or transfer of the business to another deposit-taking institution, with financial assistance provided within the cost of pay-off. Under the Deposit Insurance Act, transfer of business is regarded as the primary method. In order to affect a prompt transfer of business, the following framework has been established: • a Financial Reorganization Administrator is appointed by the FSA Commissioner and takes control of the management and assets of the failed deposit-taking institution. The administrator is expected to diligently search for a deposit-taking institution which will succeed to the business of the failed institution; 46 Table of Contents • if no successor deposit-taking institution can be immediately found, a “bridge bank” will be established by the DIC for the purpose of temporarily maintaining the operations of the failed deposit-taking institution, and the bridge bank will seek to transfer the failed deposit-taking institution’s assets to another deposit-taking institution or dissolve the failed deposit-taking institution; and • in order to facilitate or encourage a deposit-taking institution to succeed to a failed business, financial aid may be provided by the DIC to any successor deposit-taking institution to enhance its capital after succession or to indemnify it for losses incurred as a result of the succession. Where it is anticipated that the failure of a deposit-taking institution may cause an extremely grave problem in maintaining the financial order in Japan or the region where the deposit-taking institution is operating, the following exceptional measures may be taken following deliberation by Japan’s Financial Crisis Response Council: • the DIC may subscribe for shares or other instruments issued by the relevant deposit-taking institution or the holding company thereof and require the institution to submit to the DIC a plan to reestablish sound management (Item 1 measures) (dai ichigo sochi); • once the deposit-taking institution fails, financial aid exceeding the cost of pay-off may be available to the institution (Item 2 measures) (dai nigo sochi); and • if the failed institution is a bank and the problem cannot be avoided by other measures, then the DIC may acquire all of the shares of the bank (Item 3 measures) (dai sango sochi). In order to fund the above-mentioned activities, the DIC may borrow from financial institutions or issue bonds which may be guaranteed by the Government of Japan. In addition, on June 12, 2013, a bill to amend the Deposit Insurance Act which includes establishment of a new orderly resolution regime of financial institutions was enacted and became effective on March 6, 2014. Financial institutions including banks, securities companies and insurance companies and their holding companies will be subject to the new resolution regime that includes, among others, the following features. Under the new resolution regime, where the Prime Minister recognizes that the failure of a financial institution which falls into either of (a) or (b) below may cause significant disruption in the financial markets or other financial systems in Japan if measures described in (a) (specified Item 1 measures) (tokutei dai ichigo sochi) or measures described in (b) (specified Item 2 measures) (tokutei dai nigo sochi) are not taken, the Prime Minister may confirm that any of the following measures need to be applied to the financial institution following deliberation by Japan’s Financial Crisis Response Council: (a) if the financial institution is not a financial institution whose liabilities exceed its assets, which means it is unable to fully perform its obligations with its assets, the DIC shall supervise the operation of business and management and disposal of assets of that financial institution, and may provide it with loans or guarantees necessary to avoid the risk of significant disruption in the financial systems in Japan, or subscribe for shares or subordinated bonds of, or lend subordinated loans to, the financial institution, taking into consideration the financial condition of the financial institution; (b) if the financial institution is a financial institution whose liabilities exceed or are likely to exceed its assets or which has suspended or is likely to suspend payment of its obligations, the DIC shall supervise the operation of business and management and disposal of assets of that financial institution and may provide financial aid necessary to assist a merger, business transfer, corporate split or other reorganization in respect to such failed financial institution; and if a measure set out in (b) above is determined to be taken with respect to a financial institution, the Prime Minister may order that the financial institution’s operations of business and management and disposal of assets 47 Table of Contents be placed under the special control of the DIC. The business or liabilities of the financial institution subject to the special supervision by the DIC as set forth above may also be transferred to a “bridge bank” established by the DIC for the purpose of the temporary maintenance and continuation of operations of, or repayment of the liabilities of, such financial institution, and the bridge bank will seek to transfer the financial institution’s business or liabilities to another financial institution or dissolve the financial institution. The financial aid provided by the DIC to assist a merger, business transfer, corporate split or other reorganization in respect to the financial institution set out in (b) above may take the form of a monetary grant, loan or deposit of funds, purchase of assets, guarantee or assumption of debts, subscription of preferred stock or subordinated bonds, subordinated loan, or loss sharing. The expenses for implementation of the measures for these crisis management operations will be borne by the financial industry; provided, however, the Government of Japan may provide subsidies to the DIC within the limit to be specified in the government budget in cases where it is likely to cause extremely serious hindrance to the maintenance of the credit system in Japan or significant turmoil in the financial market or other financial system of Japan if such expenses are to be borne only by the financial industry. In March 2014, the FSA made an announcement clarifying the requirement of loss absorbency at the point of non-viability for additional Tier 1 instruments and Tier 2 instruments under Basel III issued by banks and bank holding companies. According to the announcement, (i) additional Tier 1 instruments and Tier 2 instruments under Basel III issued by a bank must be written-down or converted into common shares when the Prime Minister of Japan confirms (nintei) that the above-described “Item 2 measures (dai nigo sochi),” “Item 3 measures (dai sango sochi),” or “specified Item 2 measures (tokutei dai nigo sochi)” need to be applied to the bank and (ii) additional Tier 1 instruments and Tier 2 instruments under Basel III issued by a bank holding company must be written-down or converted into common shares when the Prime Minister of Japan confirms (nintei) that the above-described “specified Item 2 measures (tokutei dai nigo sochi)” need to be applied to the bank holding company. The FSA also stated in the announcement that the trigger event for loss absorbency at the point of non-viability with respect to such instruments should be construed in accordance with the then effective financial crisis response framework for banks and bank holding companies that have failed or are likely to fail, since the purpose of such write-down or conversion required under Basel III is to ensure that all classes of these capital instruments fully absorb losses at the point of non-viability before taxpayers are exposed to loss. Special Measures Act Concerning Facilitation of Reorganization by Financial Institutions, Etc. Under the Special Measures Act Concerning Facilitation of Reorganization by Financial Institutions, Etc.: (1) for one year after the merger or transfer of the entire business of a deposit-taking institution, the maximum amount to be covered by the deposit insurance will be ¥10 million multiplied by the number of parties to the merger or business transfer; and (2) the procedures are simplified to a certain extent in connection with the transfer of an entire business or a merger with another deposit-taking institution by a deposit-taking institution that is made in accordance with a management base-strengthening plan that has been approved by the Government of Japan. Single Customer Credit Limit The Banking Act restricts the aggregate amount of credit and loans that may be extended to any single customer in order to avoid the excessive concentration of credit risks and promote the fair and extensive use of bank credit. The credit limit of bank holding companies, banks or bank groups for any single customer, is 25% of the Tier 1 capital of the bank holding company, bank or bank group, with certain adjustments. Restrictions on Activities of a Bank Holding Company Under the Banking Act, a bank holding company is required to enhance group management by measures including: establishment of a basic policy for such group, coordination of conflicts of interest among group 48 Table of Contents companies, development of a group compliance system and others. A bank holding company, with prior approval of the Government of Japan, is permitted to perform certain functions (such as “back office” or “middle office” functions) on behalf of its group companies, as specified by regulation. In general, a bank holding company is prohibited from carrying on any business other than the management of its subsidiaries and other incidental businesses. A bank holding company may have any of the following as a subsidiary: a bank, a securities company, an insurance company or a foreign subsidiary that engages in the banking, securities or insurance business. In addition, a bank holding company may have as a subsidiary any company that engages in finance-related business, such as a credit card company, a leasing company or an investment advisory company. Certain companies that are designated by ministerial ordinance as those that cultivate new business fields may also become a subsidiary of a bank holding company. Furthermore, a bank or a bank holding company, with prior approval of the government, is permitted to hold voting rights of companies conducting businesses that contribute to or are expected to contribute to the sophistication of the banking business or the enhancement of customer convenience by utilizing information technology or other technologies, regardless of the shareholding restriction. Restriction on Aggregate Shareholdings by a Bank The Act Concerning Restriction on Shareholdings by Banks requires Japanese banks and their qualified subsidiaries to limit the aggregate market value (excluding unrealized gains, if any) of their equity securities holdings to an amount equal to 100% of their consolidated Tier 1 capital, with adjustments, in order to reduce exposure to stock price fluctuations. Treasury shares, shares issued by subsidiaries, shares not listed on any stock exchange or not registered with any over-the-counter (“OTC”) market, shares held as trust assets, and shares acquired through debt-for-equity swaps in restructuring transactions are excluded from this limitation. In order to facilitate the disposition of shares of listed stocks held by banks while preventing adverse effects caused by sales of large amounts of shares in a short period of time, share purchases by the Banks’ Shareholdings Purchase Corporation of listed shares have been restarted from March 2009. Shareholding Restrictions Applicable to a Bank Holding Company and a Bank The provision of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade which prohibits banks from holding more than 5% of the voting rights of non-financial companies in Japan does not apply to bank holding companies. However, the Banking Act generally prohibits a bank holding company and its subsidiaries, on an aggregated basis, from holding more than 15% of the voting rights of certain types of companies which are not permitted to become subsidiaries of bank holding companies. Also, the Banking Act generally prohibits a bank and its subsidiaries, on an aggregated basis, from holding more than 5% of the voting rights of certain types of companies which are not permitted to become subsidiaries of banks. Examination and Reporting Applicable to Shareholders of a Bank The FSA may request the submission of reports or other materials from a bank and/or its bank holding company or inspect the bank and/or the bank holding company, if necessary, in order to secure the sound and appropriate operation of the business of a bank. Under the Banking Act, a person who desires to hold 20% (in some exceptional cases, 15%) or more of the voting rights of a bank is required to obtain advance approval of the FSA Commissioner. In addition, the FSA may request the submission of reports or materials from, or may conduct an inspection of, any principal shareholder who holds 20% (in some exceptional cases, 15%) or more of the voting rights of a bank if the FSA deems the action necessary in order to secure the sound and appropriate operation of the business of the bank. Under limited circumstances, the FSA may order the principal shareholder to take such measures as the FSA deems necessary. 49 Table of Contents Furthermore, any person who becomes a holder of more than 5% of the voting rights of a bank holding company or a bank must report the ownership of the voting rights to the Director General of the relevant local finance bureau within five business days. This requirement is separate from the significant shareholdings report required under the FIEA. In addition, a similar report must be made in respect of any subsequent change of 1% or more in any previously reported holding or in respect of any change in material matters set out in reports previously filed, with some exceptions. Regulations for Protection of Customers Protection of Personal Information The Act on the Protection of Personal Information and related rules, regulations and guidelines impose requirements on businesses that use databases containing personal information, including appropriate custody of personal information and restrictions on information sharing with third parties. Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto The Act on Provision of Financial Services and the Development of the Accessible Environment Thereto, which was renamed from the Act on the Provision of Financial Services in February 2024, protects consumers from incurring unexpected losses from the purchase of financial products. Under the Act, sellers of financial products have a duty to their potential customers to explain important matters (i.e., the nature and magnitude of risk involved) regarding the financial products that they sell. If a seller fails to comply with the duty, the loss in value of the purchased investment product due to the failure to explain is refutably presumed to be the amount of the customer’s loss. In addition, the Act established a registration scheme for “financial services intermediary businesses.” Through a single registration as a financial services intermediary business, registrants are able to provide intermediary services for each of banking, securities and insurance. The Act does not require any provider of financial services intermediary business to belong to a specific financial institution, but imposes certain regulations to protect customers, including limitations on the type of services that they may provide and prohibitions on the acceptance of assets of customers and lodging a security deposit. In November 2023, the Act was amended. A part of the amendment took effect from February 2024 and the Act was renamed as “Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto.” Act Concerning Protection of Depositors and Relief for Victims of Certain Types of Fraud The Act Concerning Protection of Depositors from Illegal Withdrawals Made by Forged or Stolen Cards requires financial institutions to establish internal systems to prevent illegal withdrawals of deposits made using forged or stolen bank cards. The law also requires financial institutions to compensate depositors for any amount illegally withdrawn using forged or stolen bankcards, subject to certain conditions. The Act Concerning Payment of Dividends for Relief of Damages from Funds in Account used in connection with Crimes requires that financial institutions take appropriate measures against various crimes including the closing of accounts used in connection with fraud and other crimes. The law also requires financial institutions to make, in accordance with specified procedures, payments from funds collected from the closed accounts to victims of certain crimes. Laws Prohibiting Money Laundering and Terrorist Financing Act on Prevention of Transfer of Criminal Proceeds Under the Act on Prevention of Transfer of Criminal Proceeds, which addresses money laundering and terrorism concerns, financial institutions and certain other entities, such as credit card companies, are required to perform customer identification, submit suspicious transaction reports and keep records of their transactions. 50 Table of Contents Foreign Exchange and Foreign Trade Act of Japan Under the FEFTA, financial institutions and certain other entities are required to confirm that necessary permission from the relevant authorities is obtained by the customer or obtain necessary permission itself, for certain transaction involving targets who are designated under the law and the relevant orders thereunder including North Korea or Iran. Act on Special Measures Concerning International Terrorist Assets-Freezing, etc. Conducted by the Government Taking into Consideration United Nations Security Council Resolution 1267, etc. Under the Act on Special Measures Concerning International Terrorist Assets-Freezing, etc. Conducted by the Government Taking into Consideration United Nations Security Council Resolution 1267, etc., conducting certain transactions including donating or lending of money, securities or real estates or refunding of deposit with International Terrorists, who are designated under the law, is generally prohibited. Other Regulations Related to Our Business Financial Instruments and Exchange Act of Japan The FIEA regulates the securities industry and most aspects of securities transactions in Japan, including public offerings, private placements and secondary trading of securities, ongoing disclosure by securities issuers, tender offers for securities, organization and operation of securities exchanges and self-regulatory organizations and registration of securities companies. The Prime Minister has the authority to regulate the securities industry and securities companies, which authority is delegated to the FSA Commissioner under the FIEA. The Securities and Exchange Surveillance Commission, an external agency of the FSA, is independent from the Agency’s other bureaus and is vested with authority to conduct day-to-day monitoring of the securities markets and to investigate irregular activities that hinder fair trading of securities, including inspection of securities companies as well as banks in connection with their securities business. Furthermore, the FSA Commissioner delegates certain authority to the Director General of the Local Finance Bureau to inspect local securities companies and their branches. A violation of applicable laws and regulations may result in various administrative sanctions, including revocation of registration or authorization, suspension of business or an order to discharge any Director or Executive Officer who has failed to comply with applicable laws and regulations. Securities companies are also subject to the rules and regulations of the Japanese stock exchanges and the Japan Securities Dealers Association, a self-regulatory organization of securities companies. Regulation of the Consumer Finance Business In order to resolve the problems of heavily indebted borrowers and to effect proper regulation of the consumer finance business, in June 2010, maximum legal interest rates were reduced to levels prescribed by the Interest Rate Restriction Act, ranging from 15% to 20%, and gray zone interest, which is interest on loans in excess of rates prescribed by the Interest Rate Restriction Act up to the 29.2% maximum rate permitted under the Contributions Act, was abolished. Judicial decisions have strictly interpreted the conditions under which consumer finance companies may retain gray zone interest. As a result, claims for refunds of gray zone interest increased substantially. Amendments to the Money Lending Business Act provide an additional upper limit on aggregate borrowings by an individual from all moneylenders over which moneylenders may not extend further loans, as well as stricter regulation and supervision of moneylender activities. Installment Sales Act In order to ensure the fairness of transactions with respect to installment and other sales, prevent damage to consumers and manage credit card numbers, the Installment Sales Act imposes requirements on those who conduct installment sales businesses. Especially for credit card companies, these requirements include: (1) coverage of installment sales under the regulations; (2) measures to prevent inappropriate extensions of credit 51 Table of Contents for certain credit transactions; (3) measures to prevent excessive lending for certain credit transactions that include requirements to investigate the payment ability of consumers by use of designated credit information organizations and prohibition of execution of credit agreements that exceed the payment ability of consumers; and (4) measures to protect certain information, such as credit numbers. Base Erosion and Profit Shifting (BEPS) In July 2013, the Organization for Economic Co-operation and Development (“OECD”) published the Action Plan on Base Erosion and Profit Shifting (“BEPS”) in order to prevent exploiting of gaps and mismatches in tax rules and artificial shifting of profits to low or no-tax locations. In October 2015, the OECD published the final package of measures for a comprehensive, coherent and coordinated reform of the international tax rules for 15 key areas. These measures would apply once they are implemented either in domestic laws or in the network of bilateral tax treaties. Some of the deliverables published by the OECD have been partially reflected in Japanese tax regulations by the tax reforms adopted from 2015 to 2026 and in certain several bilateral tax treaties to which Japan is a party through the implementation of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting in Japan. In October 2021, 136 countries agreed to the OECD/G20 Inclusive Framework on BEPS (“IF”), which stipulates a two-pillar solution. Pillar 2 is to ensure minimum level of taxation of at least 15% (global minimum taxation). In accordance with the IF, the Income Inclusion Rule (“IIR”) of Pillar 2 was introduced as part of Japan’s 2023 and 2024 tax reforms and it became effective for the fiscal year commencing on or after April 1, 2024. The IIR stipulates that a constituent entity (“CE”) of a multinational enterprise group (“MNE Group”) that meets the consolidated revenue threshold is subject to an additional tax if the effective tax rate in the low-tax jurisdiction for any CE of the MNE Group is below the minimum tax rate of 15%. The Qualified Domestic Minimum Top-up Tax (“QDMTT”) of Pillar 2 was also introduced as part of Japan’s 2025 tax reform and it became effective for the fiscal year commencing on or after April 1, 2026. The QDMTT operates to increase domestic tax liability to the minimum tax rate of 15% on certain qualifying profits earned by CEs that are either Japanese corporations or non-Japanese corporations having a permanent establishment within Japan. Common Reporting Standard (CRS) In order to prevent tax evasion and avoidance through offshore financial accounts, the OECD developed the Common Reporting Standard (“CRS”), which calls on jurisdictions to obtain information on financial accounts of non-residents from their financial institutions and automatically exchange that information with other jurisdictions. From the perspective of implementation of the exchange of information based on the CRS, the Act on Special Provisions of the Income Tax Act, the Corporation Tax Act and the Local Tax Act Incidental to Enforcement of Tax Treaties as well as the cabinet and ministerial ordinances thereunder were amended, and those who open a financial account with a financial institution located in Japan must submit a self-certification indicating the name of the jurisdiction of residence, etc. Each financial institution must report information pertaining to financial accounts of specific non-residents and the information is automatically exchanged with tax administrations of each jurisdiction on an annual basis. Economic Security Promotion Act In May 2022, the Act on the Promotion of Ensuring National Security through Integrated Implementation of Economic Measures (the “Economic Security Promotion Act”) was promulgated and became fully effective from May 2024. One of the purposes of the Economic Security Promotion Act is to ensure the stable provision of essential infrastructure services. For such purpose, certain designated essential infrastructure services providers are subject to prior filing and screenings by the Japanese government in relation to the installation and outsourcing of maintenance of critical facilities and the Japanese government may issue recommendations and orders based on the outcomes of such filings and screenings. These are to prevent critical facilities of essential infrastructure from being misused as a means to interfere with the stable provision of services from outside 52 Table of Contents Japan. In November 2023, SMBC, SMBC Nikko Securities and Sumitomo Mitsui Card were designated as such essential infrastructure service providers that are subject to such filing and screening requirements. Deregulation The developments toward deregulation of the financial system including those described below have made the Japanese banking industry highly competitive. Deregulation of Bank Engagement in the Securities Business The gradual relaxation of the restrictions under the Securities and Exchange Act allowed banks to engage in the following business lines, after taking appropriate registration measures with the FSA: • underwriting and dealing in Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, commercial paper and certain bonds issued by special purpose companies; • selling beneficiary certificates of investment trusts and securities issued by an investment company; and • dealing in listed or OTC securities or derivatives transactions as well as in the securities intermediary business. In addition, amendments to the FIEA and the Banking Act relating to firewalls and conflicts of interest between banks, securities companies and insurance companies became effective on June 1, 2009. The amendment relating to firewalls abolished the ban on certain officers and employees from holding concurrent posts in banks, securities companies and insurance companies, and relaxed restrictions on the transfer of non-public customer information. On the other hand, the amendment relating to conflicts of interest requires those financial institutions, including banks, to implement proper information management procedures and to develop appropriate internal systems to prevent customer interests from being unfairly harmed through trading by the companies or by other companies within their group. For example, the companies may be required to create information barriers between departments and monitor how it executes transactions with customers. On June 30, 2021, amendments to the Cabinet Office Ordinance under the FIEA became effective, which relaxed the firewall regulations. These amendments allowed the sharing of non-public information, etc. related to foreign company customers within a financial group. In addition, on June 22, 2022, further amendments to the Cabinet Office Ordinance under the FIEA became effective. These amendments expanded the relaxed firewall regulation and allowed non-public information, etc. of certain subject companies such as listed companies, etc. to be shared within a financial group without the consent of such companies, but required financial institutions to establish measures to respond to a request from relevant companies for suspension of sharing of such non-public information, etc. Deregulation of Insurance Products The gradual deregulation of the financial services industry permitted banks in Japan to offer an increased variety of insurance products, including pension-type insurance to the full range, as an agent. Privatization of Japan Post Holdings Co., Ltd.’s Subsidiaries In December 2014, under the Postal Privatization Act, Japan Post Holdings Co., Ltd. (“Japan Post Holdings”), a joint stock corporation that holds shares of operating companies, published a plan for the listing of Japan Post Holdings, Japan Post Bank, one of the world’s largest deposit-taking institutions, and Japan Post Insurance Co., Ltd. (“Japan Post Insurance”) and the gradual disposition of its shares of Japan Post Bank and Japan Post Insurance down to approximately 50% ownership. In November 2015, each of Japan Post Holdings, 53 Table of Contents Japan Post Bank and Japan Post Insurance publicly offered approximately 11% of their outstanding shares, respectively, and they were listed on the Tokyo Stock Exchange. In addition, Japan Post Holdings offered approximately 29% and 12% of Japan Post Bank’s outstanding shares in March 2023 and 2025, respectively. As a result, Japan Post Holdings’ ownership of Japan Post Bank’s outstanding shares fell below 50%, and Japan Post Bank is no longer required to receive prior approval of the Government of Japan to expand its business. Regulations in the United States As a result of our operations in the United States, the Company and SMBC are subject to extensive federal and state banking and securities supervision and regulation. The Company’s and SMBC’s activities in the United States are executed through various branches, representative offices and legal entities, including state-licensed SMBC branches in Los Angeles, San Francisco and New York, as well as representative offices and other operations based in Washington, D.C., Houston, Dallas, Silicon Valley, Charlotte, Jersey City and White Plains, New York. SMBC also controls a U.S. banking subsidiary, SMBC MANUBANK (formerly, Manufacturers Bank), and a U.S. broker-dealer subsidiary, SMBC Nikko Securities America, Inc. The Company and SMBC have established a U.S. bank holding company, SMBC Americas Holdings, Inc. (“SMBCAH”), a wholly-owned direct subsidiary of SMBC. SMBCAH is currently the holding company for SMBC MANUBANK, SMBC Nikko Securities America, Inc. and certain other U.S. subsidiaries. The establishment of SMBCAH enhances the Company’s and SMBC’s U.S. corporate governance capabilities by centralizing the supervision and management of our U.S. operations and bringing together our primary U.S.-based banking, securities, capital markets and other subsidiaries under the new holding company. SMBC’s New York branch is supervised by the Federal Reserve Bank of New York and the New York State Department of Financial Services, but its deposits are not insured (or eligible to be insured) by the Federal Deposit Insurance Corporation (“FDIC”). SMBC’s Los Angeles and San Francisco branches are supervised by the Federal Reserve Bank of San Francisco and the California Department of Financial Protection and Innovation (“DFPI”), but their deposits are not insured (or eligible to be insured) by the FDIC. SMBC MANUBANK is a California state-chartered bank with FDIC-insured deposits that is not a member of the Federal Reserve System. As such, SMBC MANUBANK is subject to regulation, supervision and examination by the FDIC and the California DFPI. The Company, SMBC and SMBCAH are bank holding companies by virtue of their ownership of SMBC MANUBANK, and as such are subject to the Bank Holding Company Act. The Company and SMBC are also subject to the Bank Holding Company Act due to SMBC maintaining branches in the United States. The Company, SMBC and SMBCAH are subject to regulation, supervision and examination by the Federal Reserve Board as their U.S. “umbrella supervisor,” and are required to serve as sources of financial strength to SMBC MANUBANK. Restrictions on Business Activities The Bank Holding Company Act prohibits, in principle, the bank holding company (here, the Company and SMBC) from engaging in, either directly or through their subsidiaries, activities outside of (i) banking activities, (ii) managing or controlling banks and other subsidiaries authorized under the Bank Holding Company Act, or (iii) activities closely related to banking, or managing or controlling banks as to be a proper incident thereto. However, if a bank holding company meets certain requirements and obtains the status of a financial holding company, it can also engage, either directly or through its nonbank subsidiaries, in the United States and abroad, in financial activities, either de novo or by acquisition, by providing after-the-fact notice to the Federal Reserve Board. In this regard, the following are examples of activities that are financial in nature under applicable regulations and do not necessarily reflect activities in which we currently engage. • Lending, exchanging, transferring, investing for others, or safeguarding money or securities. 54 Table of Contents • Insuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability, or death, or providing and issuing annuities, and acting as principal, agent, or broker for purposes of the foregoing, in any State. • Underwriting, dealing in, or making a market in securities. • Making merchant banking investments in non-financial companies for a limited period of time, as long as the financial holding company does not directly or indirectly manage the non-financial companies’ day-to-day activities, and the financial holding company’s banking subsidiaries engage only in permitted cross-marketing with the non-financial companies. Unless otherwise limited by the Federal Reserve Board, financial holding companies generally can engage in financial-in-nature activities by providing written notice describing the activity commenced or conducted by a company it acquires not later than 30 calendar days after commencing the activity or consummating an acquisition, as the case may be. The Company, SMBC and SMBCAH have all elected to be treated as financial holding companies. The Company, SMBC, SMBCAH and SMBC MANUBANK, as our U.S. insured depository institution subsidiary, are required to be “well capitalized” and “well managed,” including maintenance of examination ratings that are at least satisfactory, in order for the Company, SMBC, and SMBCAH to continue to be treated as financial holding companies. Failure to meet standards to maintain our status as a financial holding company may result in restrictions on our activities and may ultimately permit the Federal Reserve to take enforcement actions against us and restrict our ability to engage in activities defined to be financial in nature. In April 2019, SMBC and its New York branch entered into a written agreement with the Federal Reserve Bank of New York requiring SMBC and its New York branch to address certain deficiencies relating to the New York branch’s anti-money laundering and economic sanctions compliance program. SMBC and its New York branch had been required, among other things, to implement corrective measures and submit periodic progress reports to the Federal Reserve Bank of New York. The written agreement was terminated in September 2025. Currently, under the Bank Holding Company Act, we are subject to restrictions on our ability to engage in new activities or acquire shares or control of other businesses in the United States. Under the Bank Holding Company Act, the Company, SMBC and SMBCAH are also required to obtain the prior approval of the Federal Reserve Board before directly or indirectly acquiring the ownership or control of more than 5% of the outstanding shares of any class of voting securities of U.S. banks, certain other depository institutions and bank or depository institution holding companies. In addition, SMBC’s U.S. banking operations (including SMBC MANUBANK and SMBC’s U.S. branches) are also restricted from engaging in certain “tying” arrangements where a bank conditions the availability or price of one product on a requirement that the customer also obtain another product from the bank or an affiliate of the bank. Section 13 of the Bank Holding Company Act (codified at 12 U.S.C. 1851), known as the Volcker Rule, which was added by Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) imposes restrictions on the ability of banking entities such as the Company, SMBC, SMBCAH and SMBC MANUBANK and most of their affiliates, to engage as principal in proprietary trading activities, or sponsor, invest in, or retain investments in certain private equity, hedge or similar funds, subject to a number of exclusions and exemptions, including ones that limit the Volcker Rule’s extraterritorial reach. Other Prudential Restrictions SMBC’s U.S. branches and SMBC MANUBANK are subject to requirements and restrictions under U.S. federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be made and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of SMBC MANUBANK, and to a limited extent, SMBC’s New York and California branches. 55 Table of Contents In addition, under U.S. federal banking laws, state-chartered banks (such as SMBC MANUBANK) and state-licensed branches and agencies of foreign banks (such as SMBC’s New York branch) may not, as a general matter, engage as a principal in any type of activity not permissible for their federally chartered or licensed counterparts, unless (i) in the case of state-chartered banks, the FDIC determines that the additional activity would pose no significant risk to the FDIC’s Deposit Insurance Fund and is consistent with sound banking practices and (ii) in the case of state-licensed branches and agencies of foreign banks, the Federal Reserve Board determines that the additional activity is consistent with sound banking practices. The U.S. federal banking laws also subject state branches and agencies of foreign banks to the same single-borrower lending limits that apply to federal branches or agencies, which are substantially similar to the lending limits applicable to national banks. For SMBC’s U.S. branches, these single-borrower lending limits are based on the worldwide capital of SMBC. Under the International Banking Act, the Federal Reserve Board may terminate the activities of any U.S. office of a foreign bank if it determines (i) that the foreign bank is not subject to comprehensive supervision on a consolidated basis in its home country (unless the home country is making demonstrable progress toward establishing such supervision), (ii) that there is reasonable cause to believe that such foreign bank or its affiliate has violated the law or engaged in an unsafe or unsound banking practice in the United States and, as a result of such violation or practice, the continued operation of the U.S. office would be inconsistent with the public interest or with the purposes of federal banking laws, or (iii) for a foreign bank that presents a risk to the stability of the United States financial system, the home country of the foreign bank has not adopted, or made demonstrable progress toward adopting, an appropriate system of financial regulation to mitigate such risk. There are various qualitative and quantitative restrictions on the extent to which the Company and its subsidiaries can borrow or otherwise obtain credit from SMBC MANUBANK or engage in certain other transactions involving that subsidiary. In general, these transactions must be on terms that would ordinarily be offered by SMBC MANUBANK to unaffiliated entities, and credit transactions must be secured by designated amounts of specified collateral. In addition, certain transactions, such as certain purchases by SMBC MANUBANK from SMBC or its non-bank subsidiaries, are subject to volume limitations. Credit exposure arising from derivative transactions, securities borrowing and lending transactions, and repurchase/reverse repurchase agreements is subject to these collateral and volume transactions limitations. U.S. Financial Regulatory Reform Both the scope of the U.S. laws and regulations and the intensity of supervision have increased in recent years, including in response to recent high-profile failures of large state-chartered banks, which heightens the uncertainty about upcoming regulatory reforms and their potential impacts on our and SMBC’s business activities in the United States. We expect the Trump administration will seek to implement a regulatory reform agenda that is significantly different than that of the Biden administration, potentially impacting the rulemaking, supervision, examination, and enforcement priorities of the federal banking agencies. The Dodd-Frank Act provides a broad framework for addressing, among other issues, systemic risk oversight, bank capital standards, the resolution of failing systemically significant financial institutions, OTC derivatives, the ability of banking entities to engage in proprietary trading activities and invest in hedge funds and private equity funds, consumer and investor protection, and securitization. Under the Dodd-Frank Act, the Federal Reserve Board has imposed greater capital, leverage and liquidity requirements and other heightened prudential standards for bank holding companies and foreign banking organizations that exceed certain thresholds. In imposing heightened prudential standards on foreign banking organizations such as us and SMBC, the Federal Reserve Board is directed to take into account the principle of national treatment and equality of competitive opportunity, and the extent to which the non-U.S. bank holding company is subject to comparable home country standards. The Federal Reserve Board has adopted rules that apply enhanced prudential standards to large foreign banking organizations (“EPS Rules”), including us. The EPS Rules require certain foreign banking organizations, 56 Table of Contents such as us, to certify that they are subject to home country capital standards that are broadly consistent with the Basel capital framework, including Basel III; conduct home country capital stress tests that are comparable to U.S. standards; comply with certain liquidity requirements, including, among other things, a U.S. liquidity buffer requirement for its U.S. branches and agencies based on the results of internal liquidity stress testing; and establish a U.S. risk committee that periodically reviews the risk management policies and oversees the risk management framework of its U.S. operations. The EPS Rules also require foreign banking organizations with combined U.S. assets (excluding assets held by its U.S. branches and agencies) of $50 billion or more to establish a separately capitalized top-tier U.S. intermediate holding company. SMBCAH has prepared to become the intermediate holding company for this requirement. As part of the implementation of the EPS Rules, the Federal Reserve Board published a rule implementing single counterparty credit limits (“SCCL”) applicable to the U.S. operations of certain foreign banking organizations, such as us. The SCCL rule, being applied from July 1, 2021, in general imposes limitations on net credit exposures to individual counterparties (aggregated based on affiliation) as a percentage of Tier 1 capital. We may comply with the SCCL rule by certifying to the Federal Reserve Board that we comply with a home country regime (“Home Country SCCL”) on a consolidated basis that is consistent with the Large Exposures Framework published by the Basel Committee going forward. Japanese Home Country SCCL is intended to be consistent with the Large Exposures Framework, and we intend to comply with the Federal Reserve Board’s SCCL rule through substituted compliance. The Dodd-Frank Act removed a longstanding prohibition on the payment of interest on demand deposits that was applicable to banking entities such as SMBC MANUBANK and SMBC’s three branches in the United States. In addition, SMBC MANUBANK and SMBC’s three branches in the United States are subject to federal lending limits that take into account credit exposure arising from derivative transactions and securities lending, securities borrowing, and repurchase agreements and reverse repurchase agreements with counterparties as well as state lending limits. The Dodd-Frank Act also provides for an extensive framework for the regulation of OTC derivatives, including mandatory clearing, exchange trading and transaction reporting of certain OTC derivatives. In addition, certain entities are required to register with the CFTC as “swap dealers” or “major swap participants” or with the SEC as “security-based swap dealers” or “major security-based swap participants.” Our subsidiary, SMBC Capital Markets, Inc., is registered as a swap dealer. There are various mandatory clearing, trade execution and reporting requirements for swaps. We do not currently expect to register any entity with the SEC as a security-based swap dealer or major security-based swap participant. Furthermore, the Dodd-Frank Act required the SEC to establish rules requiring issuers with listed securities, which includes non-U.S. private issuers such as us, to establish a “clawback” policy to recoup previously awarded compensation in the event of an accounting restatement. In October 2022, the SEC adopted rules requiring stock exchanges, such as the NYSE on which our ADSs are listed, to establish new listing rules that set minimum standards for clawback policies to recover incentive-based compensation erroneously paid to current and former executive officers due to accounting restatements. The stock exchange listing rules became effective on October 2, 2023. The Dodd-Frank Act also expands the extraterritorial jurisdiction of U.S. courts over actions brought by the SEC or the United States with respect to violations of the antifraud provisions in the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. In August 2023, the U.S. federal banking agencies issued a joint NPR on long-term debt (“LTD”) requirements that would make limited amendments to the existing U.S. total loss-absorbing capacity (“TLAC”) rules and would extend the LTD and clean-holding company portions of the Federal Reserve’s existing TLAC rule for U.S. G-SIBs and U.S. intermediate holding companies of foreign G-SIBs to all large banking organizations with U.S.$100 billion or more in total assets (which would include SMBCAH, if SMBCAH became designated as our U.S. intermediate holding company for purposes of the Federal Reserve’s EPS Rule), subject to only a few amendments to the existing U.S. TLAC rule and with no material differences between the 57 Table of Contents TLAC and LTD requirements applicable to G-SIBs and non-G-SIBs. The timing and content of any final rule, and the potential effects of any final rule, remain uncertain. In March 2026, the U.S. federal bank regulatory agencies issued two Notices of Proposed Rulemaking (“NPRs”) for the implementation of the Final Basel III reforms in the U.S. If adopted as proposed, the first NPR would implement the most wide-ranging and significant changes to the U.S. capital rules since 2013, requiring Category I-II banking organizations and their depository institution subsidiaries to calculate risk-weighted assets under a new, more risk sensitive, approach, referred to as the “Expanded Risk-Based Approach.” The second NPR would implement significant revisions to the standardized approach, permit banking organizations to opt-into the Expanded Risk-Based Approach and require Category III and IV banking organizations to recognize certain items of accumulated other comprehensive income in regulatory capital, subject to a five-year phase-in period. If SMBCAH became designated as our U.S. intermediate holding company for purposes of the EPS Rules (because it passed the applicable asset threshold thereunder), then under the proposal, SMBCAH and its depository institution subsidiaries would be subject to minimum capital requirements and buffer requirements based on capital ratios determined under the revised standardized approach or, at SMBCAH’s option, the Expanded Risk-Based Approach. Laws Prohibiting Money Laundering and Terrorist Financing The Bank Secrecy Act/Anti-Money Laundering Regulation in the U.S. The Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001 (“PATRIOT Act”) and the Anti-Money Laundering Act of 2020 contains measures to prevent and detect the financing of terrorism and international money laundering by imposing significant compliance and due diligence obligations, creating crimes, providing for penalties and expanding the extraterritorial jurisdiction of the United States. The Bank Secrecy Act, as amended, imposes anti-money laundering compliance obligations on U.S. financial institutions, including the U.S. offices of foreign banks. The passage of the PATRIOT Act and other events have resulted in heightened scrutiny of compliance with the Bank Secrecy Act and anti-money laundering rules by federal and state regulatory and law enforcement authorities. U.S. Sanctions Targeting Iran Related Activities Starting in 2010, the U.S. government implemented various sanctions targeting non-U.S. parties that engage in specified Iran-related activities. Various statutes, Executive Orders and regulations, including the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (which, among other things, amended the Iran Sanctions Act of 1996), Section 1245 of the National Defense Authorization Act for Fiscal Year 2012, the Iran Threat Reduction and Syria Human Rights Act of 2012, and the Iran Freedom and Counter-Proliferation Act of 2012, authorize the imposition of sanctions on parties that engage in, among other things, certain activities relating to Iran’s energy, petroleum, metals, shipping or shipbuilding sectors or that facilitate “significant” transactions or provide “significant financial services” for certain Iran-linked individuals or entities or the Islamic Revolutionary Guard Corps. Persons engaged in targeted activities involving Iran face exposure to secondary sanctions or enforcement actions under U.S. law. It is SMBC’s policy not to conduct activities that are impermissible under secondary sanctions. Prior to the U.S. withdrawal from the JCPOA, the United States, along with the European Union, provided Iran with certain sanctions relief. On Implementation Day, the U.S. government revoked certain Iran-related Executive Orders, temporarily waived certain statutory provisions and removed various individuals and entities from the Specially Designated Nationals and Blocked Persons List (the “SDN List”) maintained by OFAC. However, certain U.S. secondary sanctions targeting Iran remained in effect, including those targeting significant transactions involving Iranian or Iran-related SDNs or the Islamic Revolutionary Guard Corps. In November 2018, following certain wind-down periods, the United States fully re-imposed sanctions (both primary and secondary) that had been waived or lifted under the JCPOA. On the same day, OFAC added back to 58 Table of Contents the SDN List a number of parties that had been removed on Implementation Day from the list. Persons engaged in targeted activities involving Iran face exposure to secondary sanctions or enforcement actions under U.S. law. It is SMBC’s policy not to conduct activities that are impermissible under secondary sanctions. Additionally, in 2019 and 2020, during his first term, President Trump issued further Iran-related Executive Orders, including orders authorizing sanctions with respect to additional sectors of the Iranian economy, including metals, mining, manufacturing, textiles, construction, and other sectors identified by the Secretary of the Treasury. Pursuant to one of these orders, Executive Order 13902, on October 8, 2020, the Secretary of the Treasury identified the financial sector of the Iranian economy as subject to sanctions and OFAC added 18 major Iranian banks to the SDN List. As a result of this action, non-U.S. financial institutions that engage in non-humanitarian transactions involving the listed 18 banks may be targeted by secondary sanctions. After a transition period in which certain countries, including Japan, were granted temporary “significant reduction exceptions” that permitted some purchases of oil from Iran to continue without risking sanctions, the United States also fully resumed efforts to reduce Iran’s crude oil sales, backed by the potential threat of correspondent account sanctions targeting foreign financial institutions. These exceptions expired in May 2019 without further extension. Additional Iran-related sanctions were imposed during both the first Trump administration and the Biden administration, and the European Union joined the United States to impose sanctions on Iranian individuals and entities in response to Iran’s treatment of protestors and provision of material support to Russia’s aggression against Ukraine. In February 2025, President Trump issued a National Security Presidential Memorandum (NSPM-2) that directed U.S. government agencies to implement a “maximum pressure” sanctions enforcement policy against Iran. During 2025 and the first half of 2026, the U.S. government sanctioned a number of Iranian and non-Iranian persons for involvement in the purchase or transportation of Iranian oil and other activities of concern in furtherance of this policy and in connection with military conflict between the United States and Iran in 2026. In June 2026, the United States and Iran entered into a Memorandum of Understanding (MoU) intended to terminate the military conflict and establish a framework for further negotiations. Under the MoU, the United States has agreed to temporarily refrain from imposing additional sanctions on Iran and to issue sanctions waivers permitting certain Iranian oil and related product sales, together with certain associated services, with further easing of sanctions potentially to follow subject to conclusion of a final agreement and Iranian adherence to its commitments under the MoU and any final agreement. The full scope and specific details of both the interim and potential permanent sanctions relief are uncertain at this time. U.S. Sanctions Relating to Russia and Ukraine In response to Russia’s aggression against Ukraine in February 2022, the U.S. government has imposed significant sanctions and export control measures targeting Russia. In broad terms, the U.S. restrictions enacted to date include: territorial embargoes on the Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine, prohibitions on trade in certain goods and services between the United States and Russia and new investment in Russia by U.S. persons, asset blocking sanctions on a number of Russian individuals and entities, restrictions on transactions involving certain Russian financial institutions and Russia’s Central Bank, National Wealth Fund, and Ministry of Finance, and restrictions on dealing in Russian sovereign debt and debt or equity of certain Russian companies. In December 2023, President Biden issued Executive Order 14114, which authorizes the imposition of sanctions on non-U.S. financial institutions that engage in significant transactions involving persons sanctioned by the U.S. government for operating in the technology, defense and related materiel, construction, aerospace, or manufacturing sectors of the Russian Federation economy or involving Russia’s military-industrial base. In June 2024, the U.S. Treasury Department announced that it was broadening the definition of Russia’s military-industrial base to include all persons blocked pursuant to Executive Order 14024, meaning that non-U.S. financial institutions risk being sanctioned for conducting or facilitating significant transactions, or providing any service, involving such blocked persons. While the Trump administration has signaled some openness to easing Russia-related sanctions in connection with efforts to reach a political resolution to the conflict in Ukraine, it is unclear when or if this may occur, and it is also possible that additional 59 Table of Contents or expanded sanctions may be imposed in the future. The 2022 and 2023 Russia-related sanctions are in addition to sanctions previously enacted by the U.S. government in response to Russia’s 2014 annexation of Crimea, including those under the U.S. Ukraine-/Russia-Related Sanctions Regulations, the Ukraine Freedom Support Act of 2014 (signed into law on December 18, 2014), as amended by the Countering America’s Adversaries Through Sanctions Act of 2017 (signed into law in August 2017) (the “UFSA” ), and “sectoral” sanctions on the financial, energy and defense sectors of the Russian economy. The UFSA mandates prohibitions or strict limitations on the opening or maintaining of correspondent or payable-through accounts in the United States by non-U.S. financial institutions determined by the U.S. government (i) to have knowingly engaged in on or after December 18, 2014 in significant transactions involving certain activities described in the Act, including those involving individuals or entities on whom sanctions are imposed pursuant to the Act for making a significant investment in a project for the extraction of deepwater, Arctic offshore or shale formation crude oil in Russia, or (ii) to have knowingly facilitated, on or after June 16, 2015, a significant financial transaction on behalf of any Russian individual or entity included on the SDN List pursuant to Ukraine-related sanction programs. U.S. Sanctions Relating to China The United States government has imposed sanctions and other restrictive measures, and taken other steps, in response to a number of concerns with the actions and policies of the Chinese government. In response to Chinese actions to limit the autonomy of Hong Kong, the U.S. government enacted the Hong Kong Autonomy Act (signed into law on July 14, 2020) which is implemented by Executive Order 13936. Among other things, the Act provides for the imposition of asset-blocking sanctions against any non-U.S. persons determined to be materially contributing to, have materially contributed to, or have attempted to materially contribute to the failure of the Government of China to meet its obligations under the Sino-British Joint Declaration or Hong Kong’s Basic Law. The Act also mandates the imposition of sanctions against non-U.S. financial institutions determined by the U.S. government to have knowingly conducted a significant transaction involving persons sanctioned under the Act. The U.S. State and Treasury Departments are required to periodically submit reports to Congress identifying non-U.S. persons and non-U.S. financial institutions sanctioned under the Act. To date, 39 foreign persons (principally Chinese and Hong Kong government and security officials) have been identified as subject to asset-blocking sanctions under the Act and Executive Order 13936. No non-U.S. financial institutions have been determined to be subject to sanctions under the Act. The U.S. government has indicated that it will contact any non-U.S. financial institution it believes to be engaged in sanctionable conduct under the Act prior to imposing sanctions against it. In response to concerns that companies linked to the Chinese military have used access to U.S. capital markets to improve Chinese military and intelligence capabilities, in November 2020, during his first term, President Trump issued Executive Order 13959, which was subsequently amended in January 2021 by Executive Order 13974. In June 2021, President Biden issued Executive Order 14032, which further amended Executive Order 13959 to rescind the Trump administration sanctions and replace them with similar restrictions applicable to a modified list of Chinese companies operating in the defense or surveillance technology sectors of the Chinese economy. As amended by Executive Order 14032, Executive Order 13959 prohibits U.S. persons from purchasing or selling publicly traded securities issued by the companies named in the Annex to or designated pursuant to the order, as well as publicly traded securities that are derivatives of or provide investment exposure to such securities. The amended order’s prohibitions became effective in August 2021 with respect to securities of or linked to companies named in the Annex to the order, and will take effect 60 days after the date of listing for companies named pursuant thereto. Executive Order 13959, as amended, provides a 365-day period from the date of the relevant company’s listing in or pursuant to the order during which U.S. persons may purchase or sell affected securities for purposes of divestment. In February 2025, President Trump issued a memorandum concerning his “America First Investment Policy” that, among other things, directed U.S. government agencies to evaluate whether additional sanctions pursuant to Executive Order 13959, as amended, are appropriate. The United States has also taken steps in response to concerns about Chinese actions in the Xinjiang Uyghur Autonomous Region (“Xinjiang”). Pursuant to the Global Magnitsky Human Rights Accountability Act and 60 Table of Contents Executive Order 13818, which authorize the imposition of sanctions against persons in any country determined to be involved in certain human rights abuses, the U.S. government has named a number of Chinese government officials and entities to the SDN List. The sanctioned entities include the Xinjiang Production and Construction Corps (“XPCC”) and its subsidiaries. In July 2020, several U.S. government agencies jointly published an advisory concerning risks and considerations for businesses with supply chain exposure to entities engaged in forced labor and other human rights abuses in Xinjiang. The advisory highlights legal, economic, and reputational risks to U.S. and non-U.S. companies with potential exposure in their supply chain to Xinjiang or to facilities outside Xinjiang that use labor or goods from that region and recommends that such businesses implement human rights-related due diligence policies and procedures. In December 2021, President Biden signed into law the Uyghur Forced Labor Prevention Act, which establishes a rebuttable presumption, effective June 21, 2022, that goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in Xinjiang may not be imported into the United States. In June 2022, U.S. government agencies published additional guidance concerning this restriction and on due diligence best practices. U.S. Sanctions Relating to Burma In February 2021, in response to the military coup in Burma, President Biden issued Executive Order 14014, which authorizes the imposition of sanctions, among others, against persons responsible for undermining democratic processes and institutions in Burma, Burmese government and military officials, and immediate family members of such persons, as well as Burmese government agencies or instrumentalities and entities operating in the defense sector of the Burmese economy or other sectors identified by the Secretary of the Treasury. Pursuant to the Order, OFAC has imposed sanctions on a number of Burmese government and military officials and their associates, as well as on state-owned gem, pearl, oil and lumber enterprises, state holding companies, certain state-owned banks, and certain persons operating in the jet fuel sector of the Burmese economy. Sanctions against additional individuals and entities are possible in the future. Foreign Account Tax Compliance Act Provisions of the U.S. tax law commonly referred to as the Foreign Account Tax Compliance Act (“FATCA”), which became effective on July 1, 2014, aim to prevent U.S. persons from hiding their financial assets or evading their U.S. federal income tax obligations by the use of offshore accounts. A foreign financial institution that has entered into an agreement with the U.S. Internal Revenue Service (“IRS”) pursuant to which it agrees to comply with FATCA, referred to as a “participating foreign financial institution” (“PFFI”), is required to perform specified due diligence, reporting and withholding functions (a “PFFI agreement”). Specifically, under FATCA, a PFFI is required to ascertain the U.S. status of customers through specified due diligence and report certain information annually to the IRS. In cases where customers are not compliant with FATCA, PFFIs are obligated to carry out specified reporting and withholding procedures as prescribed. The consequences for foreign financial institutions that are not compliant with FATCA include being subjected to a 30% withholding tax on certain withholdable payments from U.S. sources and reporting to the IRS. The United States entered into intergovernmental agreements or reached agreements in substance with more than 100 countries in furtherance of the objectives of FATCA, which modify the operation of FATCA with respect to financial institutions located in those countries. The United States and Japan have entered into an intergovernmental agreement to facilitate the implementation of FATCA pursuant to which Japanese financial institutions (such as us and certain of SMBC Group companies) are directed by the Japanese authorities to register with the IRS and fulfill obligations consistent with those required under a PFFI agreement. We are registered with the IRS as a PFFI. We are committed to complying with FATCA as a PFFI and abiding by the terms of our PFFI agreement with the IRS within the jurisdictions in which we operate and in accordance with the time frame set out by the IRS. We closely monitor FATCA developments and evolving industry practices to ensure continued compliance with FATCA. 61 Table of Contents Other Regulations in the United States In the United States, SMBC’s U.S.-registered broker-dealer subsidiary, SMBC Nikko Securities America, Inc. is regulated by the SEC. Broker-dealers are subject to regulations that cover all aspects of the securities business, including: • sales practices; • trade practices of broker-dealers; • use and safekeeping of customers’ funds and securities; • capital structure; • record-keeping; • the financing of customers’ purchases; and • the conduct of directors, officers and employees. In addition, SMBC Nikko Securities America, Inc. is a member of and regulated by the Financial Industry Regulatory Authority and is regulated by the individual state securities authorities in the states in which it operates. The U.S. government agencies and self-regulatory organizations, as well as state securities authorities in the United States having jurisdiction over SMBC’s U.S. broker-dealer affiliate, are empowered to conduct administrative proceedings that can result in, among other things, censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer or its associated persons, including directors, officers or employees. Regulations in Other Jurisdictions Elsewhere in the world, our operations are subject to regulation and control by local central banks and monetary authorities. Disclosure Pursuant to Section 13(r) of the Securities Exchange Act of 1934 Section 13(r) of the Securities Exchange Act of 1934, as amended, requires an issuer to disclose whether it or any of its affiliates knowingly engaged in certain activities or transactions relating to Iran or with individuals or entities designated by the U.S. government under specified Executive Orders, even if those activities are not prohibited by U.S. law and are conducted outside the United States by non-U.S. affiliates. During the fiscal year ended March 31, 2026, SMBC, an affiliate of SMFG engaged in activities subject to disclosure under Section 13(r). SMBC conducted these activities consistent with its internal policies and procedures, the policies and procedures of SMFG, and applicable laws and regulations, and to the extent they are not sanctionable under U.S. secondary sanctions. SMBC has discontinued activities that have become impermissible or subject to secondary sanctions as a result of changes in applicable laws and regulations. SMBC provided remittance and other settlement services in connection with customers’ trade transactions between Japan and Iran. These transactions principally involved the exportation of civilian commercial products including medical devices from Japan and were conducted with an Iranian bank owned by the Government of Iran. These transactions did not involve entities or other persons listed on the SDN List at the time of the transaction and did not involve the settlement of U.S. dollar-denominated payments cleared through U.S. banks. SMBC has informed SMFG that it intends to continue to engage in these types of transactions only to the extent permitted under applicable regulations and to the extent they are not sanctionable under U.S. secondary sanctions. For the fiscal year ended March 31, 2026, the gross revenue related to these transactions was ¥0.6 million, representing less than 0.0001% of SMFG’s total interest and fee income. SMFG does not allocate direct costs to interest and fee income and therefore does not calculate net profits with respect to these transactions. 62 Table of Contents SMBC has issued performance bonds and advance payment bonds that supported various projects, including the construction of petroleum plants in Iran. Some of these bonds had counterparties that were entities controlled by the Government of Iran. Some of these bonds have matured, and SMBC has not renewed and will not renew them unless permitted under applicable regulations and to the extent they are not sanctionable under U.S. secondary sanctions, but SMBC continues to have obligations under the matured performance bonds until they are returned or cancelled by the beneficiaries. SMBC has also received fees from its customers on whose behalf it issued the performance bonds. For the fiscal year ended March 31, 2026, the gross revenue relating to these transactions was ¥0.5 million, representing less than 0.0001% of SMFG’s total interest and fee income. As noted above, SMFG does not allocate direct costs to interest and fee income and therefore does not calculate net profits with respect to these transactions. SMBC has informed SMFG that it intends to continue to accept fee income from its customers for whose account the performance bonds were issued and to pay the relevant fees to the Iranian banks, to the extent authorized by the Ministry of Finance of Japan or otherwise permitted under applicable regulations, until the bonds are returned or cancelled. However, SMBC strongly urges the relevant customers to ask the beneficiaries to agree to return or cancel the matured performance bonds. SMBC has frozen the U.S. dollar accounts of all Iranian banks. SMBC has frozen Japanese yen accounts of government-owned Iranian banks, including an account for the Central Bank of Iran; all such accounts were frozen at the time of the designation of the relevant bank under Executive Order 13224 or 13902, as applicable. Certain transactions described in this disclosure were conducted through the use of one of such accounts prior to the designation of the relevant bank under Executive Order 13902. These transactions were conducted in accordance with Japanese law, and we do not believe that the transactions were sanctionable under U.S. sanctions that were in effect at the time the transactions occurred. SMBC has discontinued activities that have become impermissible or subject to secondary sanctions as a result of changes in applicable laws and regulations, including transactions involving the Central Bank of Iran whose account has been frozen. The gross revenue attributable to the accounts of government-owned Iranian banks for the fiscal year ended March 31, 2026, was ¥39.4 million, representing about 0.0005% of SMFG’s total interest and fee income. SMFG does not allocate direct costs to interest and fee income and therefore does not calculate net profits with respect to these transactions. SMBC has informed SMFG that it intends to continue to maintain the Iranian accounts described above only to the extent permitted under applicable laws and regulations and to the extent the activities are not targeted by secondary sanctions. Separately, a non-U.S. affiliate of SMFG has informed SMFG that two of its individual customers were placed on the SDN List pursuant to one of the specified Executive Orders during the fiscal year ended March 31, 2026. Pursuant to its policies and procedures, the affiliate took steps to promptly restrict the customers’ accounts, including by postponing transactions. Between the date of designation on the SDN List and prior to the customers’ accounts being restricted, the affiliate processed several domestic transactions for one of the customers, with an aggregate transaction amount of approximately ¥12 million. The transactions were conducted by the affiliate outside of the United States and resulted in no measurable gross revenue for SMFG, which accounts for the affiliate using the equity method. The affiliate informed SMFG that, while it is currently unable to terminate the relevant customer relationships under applicable local laws and regulations, any account activity, if arising, will be handled under strict control measures in accordance with regulatory requirements. The affiliate does not intend to facilitate any new transactions for these customers and intends to proceed with terminating such relationships when legally and practically feasible. As of the date of this annual report, to our knowledge, there is no other activity for the fiscal year ended March 31, 2026 that requires disclosure under Section 13(r) of the Securities Exchange Act of 1934. 63 Table of Contents 4.C. ORGANIZATIONAL STRUCTURE The following chart presents our corporate structure summary at March 31, 2026. (1) These companies are our associates or joint ventures. (2) Chart indicates the classification of SMBC Group companies into each of SMBC Group-wide business segments. 64 Table of Contents (3) The Japan Research Institute, Limited merged with JRI Holdings, Limited and Nikko Systems Solutions Ltd., our subsidiary, on April 1, 2026. (4) CCC MK HOLDINGS Co., Ltd. changed its corporate name to V POINT MARKETING Co., Ltd. on April 1, 2026. As the ultimate holding company of the SMBC Group, we are responsible for: • group strategy and management; • group resource allocation; • group financial accounting; • investor relations; • capital strategy; • group IT strategy; • HR management for group executives; • group risk management, internal control and compliance; • compensation schemes; and • efficiently harmonizing our operations on an SMBC Group-wide basis. Principal Subsidiaries Our principal subsidiaries at March 31, 2026 are shown in the list below. We consolidate all entities that we control. We control an entity when we are exposed, or have rights, to variable returns from our involvement with the entity and have the ability to affect those returns through our power over the entity. Principal domestic subsidiaries Company Name Proportion of Ownership Interest(1) Proportion of Voting Rights(1) Main Business (%) (%) Sumitomo Mitsui Banking Corporation 100.0 100.0 Commercial banking SMBC Trust Bank Ltd. 100.0 100.0 Trust Banking SMBC Guarantee Co., Ltd. 100.0 100.0 Credit guarantee SMBC Nikko Securities Inc. 100.0 100.0 Securities Sumitomo Mitsui Card Company, Limited 100.0 100.0 Credit card SMBC Consumer Finance Co., Ltd. 100.0 100.0 Consumer lending JRI Holdings, Limited(2) 100.0 100.0 Business management The Japan Research Institute, Limited(2) 100.0 100.0 System development, data processing, management consulting and economic research Sumitomo Mitsui DS Asset Management Company, Limited 50.1 50.1 Investment management, and investment advisory and agency CCC MK HOLDINGS Co., Ltd. (3) 80.0 80.0 Reward points programs and advertising and marketing services Alternative Investment Capital Limited 60.0 60.0 Investment management and investment advisory SMBC Venture Capital Co., Ltd. 100.0 100.0 Venture capital SMBC Consulting Co., Ltd. 98.3 98.3 Management consulting and information services Japan Pension Navigator Co., Ltd. 69.7 69.7 Operational management of defined contribution pension plans 65 Table of Contents (1) Percentages of proportion of ownership interest and proportion of voting rights have been truncated. (2) The Japan Research Institute, Limited merged with JRI Holdings, Limited and Nikko Systems Solutions Ltd., our subsidiary, on April 1, 2026. (3) CCC MK HOLDINGS Co., Ltd. changed its corporate name to V POINT MARKETING Co., Ltd. on April 1, 2026. Principal foreign subsidiaries Company Name Country of Incorporation Proportion of Ownership Interest(1) Proportion of Voting Rights(1) Main Business (%) (%) SMBC Bank International plc U.K. 100.0 100.0 Commercial banking Sumitomo Mitsui Banking Corporation (China) Limited China 100.0 100.0 Commercial banking PT Bank SMBC Indonesia Tbk Indonesia 98.5 91.0 (2) Commercial banking SMBC Americas Holdings, Inc. U.S.A. 100.0 100.0 Bank holding company SMBC MANUBANK U.S.A. 100.0 100.0 Commercial banking Banco Sumitomo Mitsui Brasileiro S.A. Brazil 100.0 100.0 Commercial banking JSC Sumitomo Mitsui Rus Bank Russia 100.0 100.0 Commercial banking SMBC Bank EU AG Germany 100.0 100.0 Commercial banking Sumitomo Mitsui Banking Corporation Malaysia Berhad Malaysia 100.0 100.0 Commercial banking SMBC Leasing and Finance, Inc. U.S.A. 100.0 100.0 Leasing SMBC Nikko Securities America, Inc. U.S.A. 100.0 100.0 Securities SMBC Nikko Capital Markets Limited U.K. 100.0 100.0 Securities SMBC Capital Markets, Inc. U.S.A. 100.0 100.0 Derivatives TT International Asset Management Ltd U.K. 100.0 100.0 Investment management, and investment advisory and agency SMFG India Credit Company Limited India 100.0 100.0 Financial services (1) Percentages of proportion of ownership interest and proportion of voting rights have been truncated. (2) During the fiscal year ended March 31, 2020, we disposed of a 3.7% equity interest in PT Bank SMBC Indonesia Tbk (formerly known as PT Bank BTPN Tbk) to a third-party investor. Subsequently, in the fiscal year ended March 31, 2024, we disposed of an additional 3.7% to other third-party investors. The disposals were undertaken to ensure that PT Bank SMBC Indonesia Tbk is compliant with the free float requirement under the Indonesia Stock Exchange’s Rule. We had also entered into a commercial arrangement where the economic exposure resulting from the disposals is being retained. Therefore, the disposals have not resulted in a decrease in our ownership interests. 4.D. PROPERTY, PLANT AND EQUIPMENT We own or lease the land and buildings in which we conduct our business. Most of the property that we operate in Japan is owned by us to be used by our branches. In contrast, our international operations are conducted out of leased premises. Our head office building in Marunouchi is leased from a third party. Our largest property is SMBC’s East Tower in Marunouchi, with a net carrying value of ¥161 billion, including the land and building, at March 31, 2026. 66 Table of Contents The following table shows the net carrying amount of our tangible fixed assets at March 31, 2026. At March 31, 2026 (In millions) Land ¥ 469,978 Buildings 353,564 Right of use assets 351,613 Others 195,415 Total ¥ 1,370,570 For further information, refer to Note 12 “Property, Plant and Equipment” to our consolidated financial statements included elsewhere in this annual report. The total area of land related to our material office and other properties at March 31, 2026 was approximately 531,000 square meters for owned land and approximately 13,000 square meters for leased land. We are not aware of any material environmental issues that may affect the utilization of our assets.