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Amendments to Guidelines on Eligible Collateral

March 20, 2002
Bank of Japan

At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided to amend Guidelines on Eligible Collateral (Policy Board Decision on October 13, 2000) as shown in Attachment to broaden the range of eligible collateral to include loans to the Deposit Insurance Corporation as well as loans to the Government's Special Account for the Allotment of Local Allocation Tax and Local Transfer Tax. The decision was made in accordance with the paragraph 3 (4) of On Today's Decision at the Monetary Policy Meeting, which was decided at the Monetary Policy Meeting held on February 28, 2002 and immediately announced.

Following today's decision, the Bank will start to accept loans to the Deposit Insurance Corporation as well as loans to the Government's Special Account for the Allotment of Local Allocation Tax and Local Transfer Tax on March 26, 2002 as eligible collateral.


Attachment

Amendments to Guidelines on Eligible Collateral

  • Paragraph 2 (3) shall be amended as below.

(3) Utilizing Market Information

To utilize market mechanism, the Bank shall make effective use of market information, such as ratings by rating agencies in assessing the eligibility of collateral, market prices in calculating collateral prices, and public information in evaluating the creditworthiness of corporate bonds, bills drawn by companies (including commercial paper other than asset-backed commercial paper), loans on deeds to companies (hereinafter collectively referred to as"corporate debt obligations"), asset-backed securities, and asset-backed commercial paper.

  • Paragraph 4 (3) shall be amended as below.

(3) Procedures for Eligibility Assessment

As for collateral other than government bonds, financing bills, government-guaranteed bonds,and municipal bonds issued through public offering, loans on deeds to the Government's Special Account for the Allotment of Local Allocation Tax and Local Transfer Tax, and loans on deeds to the Deposit Insurance Corporation with government guarantee, the Bank shall assess the eligibility upon request of a financial institution that maintains a current account with the Bank (such institution hereinafter referred to as the"counterpart financial institution"). In the case of corporate debt obligations, the creditworthiness of obligors shall be evaluated in accordance with Guidelines on Credit Ratings of Corporations Companies (Policy Board Decision on October 13, 2000).

  • Paragraph 5 (1) shall be amended as below.

(1) Debt Obligations Issued by Counterpart Financial Institutions

Debt obligations issued by counterpart financial institutions (excluding those guaranteed by the government -guaranteed bonds) and those guaranteed by counterpart financial institutions (excluding those deemed eligible without such guarantee) shall be ineligible; provided, however, that the foregoing shall not apply to debt obligations secured by eligible collateral in a manner the Bank deems appropriate, and to debt obligations for which the counterpart financial institution has become the obligor as the endorser of the bill.


Table 1

Categories of Collateral and Collateral Prices
1.-9. (No change)
10. Bills Drawn by Companies and Special Purpose
Companies
(Including Commercial Paper)
95% of face value
11. Loans on Deeds to Companies 80% of outstanding principal balance
12. Loans on Deeds to the Government's Special Account for the Allotment of Local Allocation Tax and Local Transfer Tax 80% of outstanding principal balance
13. Loans on Deeds to the Deposit Insurance
Corporation with Government Guarantee
80% of outstanding principal balance
(Collateral eligible until 31 March, 2002)
14. (No change)

(Special Provision)

(No change)


Table 2

Eligibility Standards for Each Category of Collateral
Collateral Category Eligibility Standard
Government Bonds - Foreign Government Bonds
International Financial Institution Bonds
(No change)
Bills Drawn by Companies and
Special Purpose Companies

(Including Commercial Paper)
(No change)
Loans on Deeds to Companies (No change)
Loans on Deeds to the Government's Special Account for the Allotment of Local Allocation Tax and Local Transfer Tax
Loans on Deeds to the Deposit Insurance Corporation with Government Guarantee
Loans on deeds with an original maturity of up to 5 years. Where an original maturity is longer than 5 years but the maturity date comes within 60 months after the month of issuance, the loan is also considered to satisfy this requirement.
No change
(Special Provision) (No change)

(Supplementary Provision)

These amendments shall become effective on March 26, 2002.