Measures to Facilitate Smooth Corporate Financing
December 17, 2002
Bank of Japan
- At the Monetary Policy Meeting (MPM) held today, the Bank of Japan decided to take the following measures to secure smooth corporate financing. These are the outcome of the deliberations to follow up the discussion at the MPM on October 30.
- a) Acceptance of a broader range of loans on deeds as eligible collateral
Loans on deeds with original maturity of more than five years and up to ten years will be accepted as eligible collateral. In addition, collateral value ratios will be raised for loans on deeds with original maturity of three years and less.
- b) Relaxation of standards for ABCP as eligible collateral
As an exceptional and temporary measure effective until the end of March 2005, the asset-backed commercial paper (ABCP) guaranteed by the Bank's counterparty financial institutions will be accepted as eligible collateral and be eligible for Bank's market operations to purchase commercial paper under the repurchase agreement.
- By providing markets with ample funds, the Bank removes concern about liquidity financing, thereby contributing to the promotion of a favorable environment for financial institutions to extend loans. In addition, the Bank is playing its part in securing smooth corporate financing by accepting corporate debts as eligible collateral and conducting market operations to purchase commercial paper under the repurchase agreement.
- The Bank expects that today's decision will make it easier for financial institutions to refinance ABCP and loans on deeds to business firms, thereby facilitating smooth corporate financing as well as the development of the ABCP market. The Bank also expects that various institutional frameworks will be reviewed to promote the development of markets for securitized products, such as ABCP and asset-backed securities.
- The Bank will continue to closely monitor developments in corporate financing including the impact of acceleration in the disposal of the non-performing loans.