Corporate Governance

Basic Approach to Corporate Governance

At Rakuten Bank, we are aware that maximizing corporate value while also meeting our public responsibilities as a bank is fundamental to the concept of corporate governance. Therefore, we have established a corporate management framework that strengthens corporate governance while maintaining efficient and fair decision-making and business management systems utilizing transparent and sound management policy decision-making processes, strengthened mutual supervision provisions, a clearly defined compliance framework and clear disclosure mechanisms.

Corporate Governance Structure

To ensure transparent and sound management policy decision-making processes and establish appropriate, efficient, and fair decision-making and business operation processes, the Bank has adopted the structure of a company with an Audit and Supervisory Board based on the determination that auditing the Board of Directors from an independent standpoint by the Audit and Supervisory Board Members and the Audit and Supervisory Board is effective in ensuring the appropriateness of business execution. The Board of Directors consists of five members, including three Outside Directors who have extensive business experience and are capable of evaluating and auditing the business results from an objective point of view. The independent Audit and Supervisory Board consists of four members, including three Outside Audit and Supervisory Board Members, comprising highly experienced specialists possessing extensive knowledge from the finance industry to effectively monitor and audit management.

Structure Chart

Meeting Body	Role
Board of Directors	Monitors Bank management, resolves statutory matters, determines basic policies, exchanges opinions from broad perspectives, and establishes a management control framework in an effort to enhance the fairness and transparency of business execution.
Audit and Supervisory Board	Receives reports on, discusses, and resolves important matters related to audits. Also meets regularly with the President & CEO to exchange opinions on issues to be addressed by the Bank, risks surrounding the Bank, the state of the audit environment for Audit and Supervisory Board Members, and important audit issues, in an effort to deepen mutual recognition and trust with the President & CEO.
Management Conference	Serves as a deliberative body for matters to be resolved by the Board of Directors, a business execution body based on business operation policies decided by the Board of Directors, and a prior consultation body for matters authorized by the President under the authority of the Board of Directors to facilitate decision-making and provide information necessary for management monitoring with regard to proposals submitted to the Board of Directors.
Special Advisory Committee	Comprising independent officers (Outside Directors and Outside Audit and Supervisory Board Members having no conflicts of interest with general shareholders), determines management policies based on requests from the Rakuten Group pertaining to Group business strategy, and in the event of interrelated personnel matters between the Bank group and Rakuten Group, or any transactions with the Rakuten Group, examines the appropriateness of the arm's length rule, conflict-of-interest and other transactions from the perspective of ensuring sound and appropriate management of bank business, as well as the necessity and appropriateness of such rules from the perspective of protecting minority shareholders.

Board of Directors Efficacy Assessment

To further improve the Board of Directors'efficacy with the aim of ascertaining matters that require consideration going forward, the Company conducted a survey on the Board of Directors’ operation targeting all directors and Audit & Supervisory Board Members in April 2024 to assess the overall efficacy of the Board of Directors. The results of this survey were reported to the Board of Directors in May 2024, which confirmed that the Company’s Board of Directors is generally effective. We will make additional improvements to further enhance the efficacy of the Board of Directors.

Policy for Determining Director Compensation

1. Basic Policy

With an awareness of our social responsibility and public role as a bank, the executive compensation system is designed in line with our management philosophy of working to win the unshakable trust of society and firmly　establish our value through our commitment to sound and efficient business operations based on a high level of self-discipline.
Compensation levels are determined on the basis of economic and social conditions, industry trends, and the Bank’s business environment and performance, among other factors, to ensure appropriateness as an incentive for directors to maximize their roles, as well as compensation commensurate with responsibilities and achievements.

2. Compensation Structure

Executive director compensation consists of fixed compensation (basic compensation) and variable compensation (performance-linked compensation and non-monetary compensation (Stock Options)). To achieve sustainable growth through the achievement of management targets and enhance corporate value over the medium to long term, the Company has adopted a compensation system in which variable compensation (performance-linked compensation and non-monetary compensation (Stock Options)) accounts for a higher proportion of overall compensation.
Non-executive directors receive fixed compensation in light of their role in supervising the Company's management from an objective and independent standpoint. The policies for determining each type of compensation are as follows.

3. Compensation Determination Process

The specific amount of compensation for each director is determined by a resolution of the Board of Directors and authorized by the President & CEO. All Outside Directors review and determine the proposed compensation for each director within the maximum scope of compensation approved by the Shareholders Meeting and in accordance with the intent of the policy for determining director compensation.The President & CEO determines compensation for each director, respecting to the maximum extent possible the compensation proposals for each director reviewed and determined by all Outside Directors.

Appointment of Directors and Audit and Supervisory Board Members

In recommending director candidates, the Board of Directors, in accordance with the intent of the Banking Act, selects individuals who are highly insightful and socially credible. It is the Board's policy to nominate a majority of Outside Directors.　In selecting candidates for Audit and Supervisory Board Members, the Audit and Supervisory Board carefully considers candidate qualifications as Audit and Supervisory Board Members, taking into consideration factors including the candidate’s ability to serve out their full term of office, ensure independence from business executors, and maintain a fair and unbiased perspective. Further, when nominating a candidate from the Rakuten Group, the Special Advisory Committee is consulted in advance to determine whether there are any obstacles to the sound and appropriate management of Bank business, as well as to protect minority shareholders, as interrelated personnel matters between the Bank group and the Rakuten Group.

Reasons for Appointment of Outside Directors

Name	Independent Director*	Reasons for appointment
Eiji Ebinuma	○	Possesses professional knowledge and experience as an attorney, as well as a wealth of experience and insight, including that gained as Counselor of the Human Resources Planning Department at Mizuho Holdings, Inc. and General Manager of the President's Office and General Planning Office at Olympic Corporation. Appointed as an Outside Director to receive advice and opinions from an objective perspective based on the aforementioned knowledge and experience, which will be incorporated to further enhance our corporate governance.
Michio Kayano	○	Possesses a wealth of experience and insight gained as Deputy General Manager of the Information Systems Planning Department of Sumitomo Mitsui Banking Corporation, and as Director and Senior Managing Executive Officer of The Japan Research Institute, Limited. Appointed as an Outside Director to incorporate this experience and insight and further enhance our corporate governance.
Masatsugu Nagato	○	Held important positions such as Director and President and Representative Executive Officer of Japan Post Bank Co., Ltd. and Japan Post Holdings Co., Ltd. Appointed as an Outside Director to incorporate this experience and insight and further enhance our corporate governance.

Reasons for Appointment of Outside Audit and Supervisory Board Members

Name	Independent Audit and Supervisory Board Member*	Reasons for appointment
Shinnosuke Yamada	○	Possesses a wealth of experience and insight gained as a certified public accountant, Chairman of the employee meeting of KPMG AZSA LLC, Director (Audit Committee Member) of T&D Holdings, Inc., and outside corporate auditor of EXIO Group, Inc. Appointed as an Outside Audit and Supervisory Board Member to incorporate this experience and insight and further enhance our corporate governance.
Tadamichi Shibano	○	Possesses a wealth of experience and insight gained as Manager of the Internal Audit Department of Mitsui knowledge Industry Co., Ltd. and as a full-time auditor of Kit Co., Ltd. Appointed as an Outside Audit and Supervisory Board Member to incorporate this experience and insight and further enhance our corporate governance.
Toru Mimura	○	Held important positions such as Director and President and Representative Executive Officer of Japan Post Bank Co., Ltd. and Japan Post Holdings Co., Ltd. Appointed as an Outside Director to incorporate this experience and insight and further enhance our corporate governance.

Skills Matrix of Directors and Audit and Supervisory Board Members

Board of Directors and Audit and Supervisory Board Meetings and Attendance by Outside Directors and Outside Audit and Supervisory Board Members

Policy on Director and Audit and Supervisory Board Member Training

Rakuten Bank provides opportunities for directors and Audit and Supervisory Board Members to acquire knowledge and information necessary for executing their duties, enabling them to properly fulfill their roles. Specifically, newly appointed executives have always received operational explanations from divisional general managers pertaining to the division under their jurisdiction, while the President & CEO, Outside Directors, and Outside Audit and Supervisory Board Members are, in principle, provided with opportunities to Auditors exchange opinions individually after regular Board of Directors meetings to continuously support the acquisition of information and knowledge necessary to fulfill executive roles upon appointment. The Bank also bears the cost of outside seminars and other self-study required to fulfill expected roles.

Guidelines Concerning Measures to Protect Minority Shareholders in Transactions with Controlling Shareholders

Rakuten Bank has entered into a Basic Management Agreement with Rakuten Group, Inc., its parent company, which is intended to define the basic relationship between the two companies. The Agreement stipulates that the Bank will respect the management independence required of it as a bank in the public interest and the independence required of it as a listed subsidiary. It further stipulates that Rakuten Group, Inc. respects that the Bank will proactively appoint directors from outside the Rakuten Group, respect that the Bank will establish a system of appropriate governance checks, and respect the Bank’s personnel rights over its employees. The Agreement does not provide for prior approval or prior consultation with Rakuten Group, Inc. Reports from the Bank to its parent company are provided to the extent necessary and legal in accordance with the Agreement. Additionally, the Agreement stipulates that Rakuten Group, Inc. will take necessary measures to ensure the sound and proper management of the Bank business in the event of a deterioration in Bank business conditions, and that Rakuten Group, Inc. will not request capital contributions, loans or other support from the Bank in the event of a deterioration in Rakuten Group, Inc. business conditions.
Further, when conducting transactions or other businesses with the Rakuten Group, Inc., as mentioned above, the Special Advisory Committee examines the appropriateness of the arm’s length rule, conflict-of-interest and other transactions from the perspective of ensuring sound and appropriate management of Bank business, as well as the necessity and appropriateness of such rules from the perspective of protecting minority shareholders.

Cooperation among Audit and Supervisory Board Members, Accounting Auditors, and the Internal Audit Department

The head of the Internal Audit Department participates in monthly Audit and Supervisory Board meetings, during which internal audits are reported and opinions are exchanged as needed. Audit and Supervisory Board Members, the head of the Internal Audit Department, and Department staff also exchange opinions on audits by Audit and Supervisory Board Members and internal audits on a daily basis.Audit and Supervisory Board Members and the Internal Audit Department exchange audit plans and explain and report on them, sharing information on the audit environment and other issues specific to the Bank.The Bank’s accounting audits are conducted by ERNST & YOUNG SHINNIHON LLC. The Bank exchanges opinions, shares information, and provides the results of internal audits and audits by Audit and Supervisory Board Members with the accounting auditors as necessary.Audit and Supervisory Board Members and accounting auditors exchange audit plans, explain and provide reports as necessary, and share information on the audit environment and other issues specific to the Bank.In addition, three-way audit meetings are held comprising Audit and Supervisory Board Members, accounting auditors, and the Internal Audit Department, where opinions are exchanged among the three parties.

Dialogue with Shareholders

We discloses timely and appropriate information to shareholders and investors in accordance with the Banking Act, the Financial Instruments and Exchange Act, and the timely disclosure rules set by the Tokyo Stock Exchange.
We also aims to enhance corporate value by disclosing information fairly to all stakeholders, including customers, business partners, and employees. The following measures are implemented to achieve this:

• 1.　The officer in charge of the Planning Department oversees general dialogue with shareholders, supported by the IR team and other departments such as planning, finance, legal, general affairs, and human resources, ensuring close coordination and information sharing.
• 2.　In addition to individual meetings with shareholders, the Company provides opportunities to explain business performance and strategies through the General Shareholders’ Meeting, financial results briefings, small meetings for analysts, and individual meetings with institutional investors. The Company also strives to provide fair and prompt information through live and on-demand streaming of financial results briefings. Furthermore, the Company enhances information provision by disclosing financial results summaries, financial results reference materials, timely disclosure materials, and press releases on its website, as well as IR-related materials such as the Notice of General Shareholders'Meeting.
• 3.　Opinions and feedback from shareholders obtained through dialogue are shared with the President, relevant directors, departments, and the Board of Directors as necessary to ensure information sharing and utilization.
• 4.　The Rakuten Group Code of Ethics stipulates the proper use and management of information related to the Group, including the Company, and its customers. The Company strictly manages material facts and related parties to prevent insider trading and conducts awareness-building activities for employees. To ensure fairness and prevent the leakage of financial results information, the Company sets a “quiet period” of four weeks before the announcement of quarterly results for both the Company and its parent company, during which no external comments or responses to inquiries about financial results are made. However, this does not apply to inquiries about already disclosed facts or the occurrence of material facts requiring timely or statutory disclosure during this period.

Status of Dialogue with Shareholders

We disclose information regarding the status of dialogues between the management and shareholders.

• Status of Dialogue with Shareholders