4. Increasing our capital ratio

While continuing to struggle with large amounts of credit costs from its start, SMBC was challenged by a new issue associated with the full-scale application of the ''Accounting Standards for Financial Instruments'' in fiscal year 2001, which required the difference of valuation between the market value and the book value of marketable securities categorized as “other securities holdings” such as cross-holding stocks to be counted in the shareholders' equity section. This could result in decreased surplus cash to be allocated for dividend payouts, which would affect the ブックメーカーサッカー’s dividend policy. To address this issue, SMBC transferred some amount of capital reserves and the entire amount of earnings reserves to the capital surplus posted for the fiscal year 2001. In addition, the ブックメーカーサッカー sold the head office building in Otemachi to increase surplus cash.

SMFG recognized that increasing the capital ratio had become an ever-pressing management issue since the launch of SMBC. Among the actions taken to address this problem were an issuance of convertible preferred stock worth 150.3 billion yen to Goldman Sachs, which had a close relationship with the former Sumitomo ブックメーカーサッカー, in February 2003, and another issuance of the same type of stock worth 345.0 billion yen to foreign investors in March 2004. This enabled SMFG to compensate for a loss in equity capital resulting from a net loss posted for the fiscal year ended March 31, 2003 and kept the capital ratio above 10% after paying out dividends of preferred stock.