Ultimate objective	• Securing a stable earnings foundation
Key goals	• To concentrate managerial resources in selected areas • To extensively reconstruct the Bank’s business processes
Target brand image	• Bank of the Ryukyus — the “loan experts”

Making business transformation a reality

  The three Innovations behind Speed 2002

(Note): Speed 2001, the bank' s medium-term management plan launched in 2001 has been changed to Speed 2002.

The Bank has formulated a new medium-term management plan, entitled Speed 2001, covering the period from April 2001 to March 2003. The plan is designed to help the Bank survive and prosper amid turbulent changes in the financial services industry. The plan calls for us to fulfill our responsibilities as the leading bank in Okinawa Prefecture. This means quickly and steadily implementing a number of strategies to help the Bank respond appropriately to the financial needs of the local community and thus secure a stable earnings foundation.

The main objective of the plan is to secure a stable earnings foundation. In pursuit of this objective, we will focus on repaying public funds at the earliest possible time while reinforcing our core banking businesses, with particular emphasis on lending operations. In the process, we will establish loan operations as the Bank’s specialty field and promote the Bank’s image as an expert in the field of lending.

We plan to combine unsecured consumer loans and smaller sized loans to businesses into a single category called Small Loans. By pushing decisively ahead with this type of consolidation, we will expand the scope of the Bank’s loan services to consumers, sole proprietors and small businesses.

Some definitive aspects of this measure include the introduction and active use of an automated scoring system to speed up credit screening procedures for unsecured consumer loans, and the broadening of the Small Loans category itself by making optimal use of a business-tailored automated credit screening system to market unsecured business loans and other new financial products. We also intend to concentrate collateral inspection, document management and other back-office operations currently carried out at our business branches at a single “Clerical Work Management Center,” located at the Bank’s main office. This move will bring greater clerical efficiency to our business branches while contributing to the establishment of a system that will allow our financing divisions to sharpen their focus solely on business promotion activities.

Taking necessary steps to improve profitability is a must, which is why the Bank must be certain that it always charges a fair and accurate fee for the services it offers, whether the service in question is related to loans and deposits or the fees and commissions business. The focus, in other words, is on appropriate pricing.

In the case of loans, this means establishing an interest rate adjustment system (or interest rate guidelines for borrowers) that accurately reflects credit risk as well as the condition of loan collateral, to ensure that the Bank is prepared for possible loan loss. In the case of customers seeking to borrow without collateral, these guidelines still make loans possible by allowing the Bank to set an appropriate level of interest, which in turn permits Ryugin to move actively ahead with expanding the scope of its transactions with small and medium-sized enterprises and venture companies.

Where deposits are concerned, this measure will help the Bank to reevaluate fund procurement costs by providing depositors with interest rates that are more closely tailored to the scale of the deposits they make.

In revenues from the fees and commissions business, too, on the premise that costs for these services should be modified to provide a profit to the Bank, we are discussing ways to adjust service charges for local governments and other customers who are currently exempt from such charges or pay greatly reduced rates.

By providing a thorough, detailed level of support to borrowers, we will prevent the occurrence of additional bad debt while assisting customers grappling with various management issues in enhancing their overall financial position, all of which leads to improved borrower classification and a better overall loan portfolio for the Bank, as well as reductions in its non-performing loans subject to mandatory disclosure.

Moreover, by taking full advantage of the Small and Medium Enterprise Management Consultants on staff, the Bank can lend a helping hand to customers dealing with difficult management issues, while thoroughly implementing guidance for improving credit screening, collateral inspection and asset management skills at our branches--all of which will lead to better asset quality, improved asset management and reduction in the Bank’s non-performing loans.