6) Contingency Funding Plan
We have developed a detailed Contingency Funding Plan(CFP) to integrate liquidity risk control into our comprehensive risk
management strategy and to enhance the quantitative aspects of our liquidity risk control procedures. As a part of our CFP, we have developed an approach for analyzing and quantifying the impact of any liquidity crisis. This allows us to estimate
the likely impact of both Nomura-specific and market-wide events; and specifies the immediate action to be taken to mitigate any risk. The CFP lists details of key internal and external parties to be contacted and the processes by which information
is to be disseminated. This has been developed at a legal entity level in order to capture specific cash requirements at the local levelit assumes that our parent company does not have access to cash that may be trapped at a subsidiary level
due to regulatory, legal or tax constraints. We periodically test the effectiveness of our CFP for different Nomura-specific and market-wide events. We also have access to central banks including, but not exclusively, the Bank of Japan, which
provide financing against various types of securities. These operations are accessed in the normal course of business and are an important tool in mitigating contingent risk from market disruptions.
Liquidity Regulatory Framework
In 2008,
the Basel Committee published Principles for Sound Liquidity Risk Management and Supervision. To complement these principles, the Committee has further strengthened its liquidity risk management framework by developing two minimum
standards for funding liquidity. These standards have been developed to achieve two separate but complementary objectives.
The first
objective is to promote short-term resilience of a financial institutions liquidity risk profile by ensuring that it has sufficient high-quality liquid assets to survive a significant stress scenario lasting for 30 days. The Committee
developed the Liquidity Coverage Ratio (LCR) to achieve this objective.
The second objective is to promote resilience over a
longer time horizon by creating additional incentives for financial institutions to fund their activities with more stable sources of funding on an ongoing basis. The Net Stable Funding Ratio (NSFR) has a time horizon of one year and has
been developed to provide a sustainable maturity structure of assets and liabilities.
These two standards are comprised mainly of specific
parameters which are internationally harmonized with prescribed values. Certain parameters, however, contain elements of national discretion to reflect jurisdiction-specific conditions.
In Japan, the regulatory notice on the LCR, based on the international agreement issued by the Basel Committee with necessary national
revisions, was published by Financial Services Agency. The notices have been implemented since the end of March 2015 with phased-in minimum standards. Average of Nomuras LCRs for the three months ended December 31, 2023 was 191.5%, and
Nomura was compliant with requirements of the above notices. As for the NSFR, the revision of the liquidity regulatory notice was published by FSA (on March 31, 2021) and it has been implemented from the end of September 2021. Nomuras
NSFR as of December 31, 2023 was compliant with the regulatory requirements.
Cash Flows
Cash, cash equivalents, restricted cash and restricted cash equivalents balance as of December 31, 2022 and as of
December 31, 2023 were ¥3,396.0 billion and ¥4,337.3 billion, respectively. Cash flows from operating activities for the nine months ended December 31, 2022 were outflows of ¥1,036.5 billion primarily due to an increase in
Trading assets and private equity and debt investments and the comparable period in 2023 were inflows of ¥580.6 billion primarily due to a decrease in Securities purchased under agreements to resell, net of securities sold under
agreements to repurchase. Cash flows from investing activities for the nine months ended December 31, 2022 were inflows of ¥136.4 billion primarily due to a decrease in Non-trading debt securities, net and the comparable period
in 2023 were outflows of ¥740.1 billion primarily due to an increase in Non-trading loans receivable, net. Cash flows from financing activities for the nine months ended December 31, 2022 were inflows of ¥834.4 billion primarily
due to an increase in Long-term borrowings and the comparable period in 2023 were inflows of ¥582.1 billion primarily due to an increase in Long-term borrowings.
We have revised certain prior period amounts of Cash flows from operating activities and Cash flows from investing
activities to conform to the current period presentation. See Item 4. Financial Information, 1. Consolidated Financial Statements, Note 1 Basis of accounting for further information.
Balance Sheet and Financial Leverage
Total
assets as of December 31, 2023, were ¥54,752.7 billion, an increase of ¥6,980.9 billion compared with ¥47,771.8 billion as of March 31, 2023, primarily due to increases in Trading assets and Securities purchased under
agreements to resell. Total liabilities as of December 31, 2023, were ¥51,392.1 billion, an increase of ¥6,844.4 billion compared with ¥44,547.7 billion as of March 31, 2023, primarily due to an increase in Securities
sold under agreements to repurchase. NHI shareholders equity as of December 31, 2023, was ¥3,279.5 billion, an increase of ¥131.0 billion compared with ¥3,148.6 billion as of March 31, 2023, primarily due to an
increase in Accumulated other comprehensive income.
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