19 2018 ANNUAL REPORT Financial market was extremely volatile in 2018. The S&P 500 fell by 6.2% in 2018 and it was the worst year since 2008. Capital outflow from emerging markets reached climax last summer when the Turkish lira and other emerging currencies plunged dramatically. The oil market was also volatile as the WTI oil prices rose above $75 per barrel in October and fell under $45 in December. In the Eurozone, Italian government bond yield rose remarkably and the gap against German government bond yield widened as the Italian coalition government submitted expansionary budget plan to the European Commission. With regards to the monetary policy by each central bank, the US FED has continued its rate hike cycle throughout 2018. The FED raised policy rates four times, 100bp in total, in 2018. We expect that there will be a few rate hikes by the FRB in 2019. The ECB also terminated net asset purchase at the end of 2018 but stated that policy rates would remain unchanged at least until summer in 2019. The ECB could start raising policy rates by the end of 2019 if inflation accelerates gradually. Risks to the global growth forecast are now skewed to the downside. A further escalation of the trade war between the US and China could negatively affect the global trade volume and the world economy. Continuous withdrawal of financial stimulus by advanced economies’ central banks could cause a large scale of capital flight from emerging markets again. In Europe, we need to closely monitor the Brexit negotiations amid rising risk of the ‘no-deal Brexit’. Populist parties are gaining ground in various European countries and political uncertainty could raise volatility in financial markets. That could also weigh down the economic growth in Europe. In Japan, economy could be weaker than expected after the consumption tax hike in October. Furthermore, rising geopolitical tensions could hurt global market sentiment and confidence, burdening economic activity. Overall, uncertainties and downside risks are growing globally in recent quarters. In summary, we believe that for the majority of our customers, 2019 will remain a challenging year with only moderate improvement in overall financial performance. Given uncertainties about the post-Brexit environment and the political situations in other European countries, it is unclear how much our customers will increase investments in their European operations. 3.3 Management Board As a result of organizational harmonization of titles within MBE and other Mizuho offices in the region, the titles of the Management Board changed per 1 July 2018. Mr. Saito was given the title Chief Executive Officer and Member of the Management Board. Mr. Pöhland was assigned Chief Risk and Financial Officer and Member of the Management Board. For Mr. Katayama, the title remained Chief Business Officer and Member of the Management Board. The Management Board promotes good corporate governance and cultural awareness, which stimulates a harmonious way of decision-making. Two Management Board positions are filled by Japanese expatriates and the third position is filled in on the basis of a local and indefinite contract. Given the small size of the organization, we do not anticipate extending the size of our Management Board at this time. Our Management Board members have thorough vknowledge and experience in the banking business as well as international experience gained in foreign countries. We are well aware of MBE’s role in the banking sector, as well as the interests of relevant stakeholders among which include customers, employees, our shareholder and regulators. Our engagement is, among other things, reflected in contributions to organizations outside of MBE. Next to being MBE’s Chairman, in 2018 Mr. Saito has been Chairman of the Japanese Chamber of Commerce and Industry in the Netherlands (JCC), Member of the Executive Board of the Dutch & Japanese Trade Federation (DUJAT), and Advisory Board Member of the International Business Foundation Amsterdam (IBFA). Mr. Pöhland is a member of the Executive Board of the Foreign Bankers’ Association based in Amsterdam.