Amendment to Guidelines on Eligible Collateral and Temporary Rules of Eligibility Standards for Asset-backed Commercial Paper

(Acceptance of Dematerialized Commercial Paper as Eligible Collateral)

February 14, 2003
Bank of Japan

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At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan voted to approve acceptance of dematerialized commercial paper and dematerialized asset-backed commercial paper as eligible collateral (amendment to Guidelines on Eligible Collateral and Temporary Rules of Eligibility Standards for Asset-backed Commercial Paper).

The Law Concerning Book-entry Transfer of Corporate Bonds and Other Securities (hereinafter referred to as"the law") has enabled dematerialization and book-entry transfers of various types of securities including commercial paper. Under the law, the Japan Securities Depository Center Inc., a designated central securities depository, is scheduled to start operating the book-entry system for dematerialized commercial paper and dematerialized asset-backed commercial paper on March 31, 2003.

Regarding the amended Guidelines on Eligible Collateral and Temporary Rules of Eligibility Standards for Asset-backed Commercial Paper, seeAttachment 1and2respectively.

Attachment 1

Amendment to Guidelines on Eligible Collateral

Paragraph2.(3) shall be amended as follows.

(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,dematerialized commercial paper, bills drawn by companies, commercial paper (excluding asset-backed commercial paperincluding commercial paper other than asset-backed commercial paper ), loans on deeds to companies (hereinafter collectively referred to as"corporate debt obligations"), asset-backed securities,dematerialized asset-backed commercial paper, and asset-backed commercial paper.

Table 1 shall be amended as follows.

Table 1

Categories of Collateral and Collateral Prices

Table 2 shall be amended as follows.

Table 2

Eligibility Standards for Each Category of Collateral

Attachment 2

Amendment to Temporary Rules of Eligibility Standards forAsset-backed Commercial Paper

The title of these rules shall be amended as"Temporary Rules of Eligibility Standards for Asset-backed Commercial Paper and Dematerialized Asset-backed Commercial Paper".
Paragraph1. shall be amended as follows.

1. When assessing the eligibility of asset-backed commercial paperand dematerialized asset-backed commercial paper , the Bank shall not apply paragraph 5. of Guidelines on Eligible Collateral, which stipulates that the debt obligations guaranteed by the Bank's counterparty financial institutions and their affiliates shall be ineligible.

(Supplementary Provision)

These amendments shall become effective on a day when amendments to 'Guidelines on Eligible Collateral' inAttachment 1above become effective.