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Outline of Transactions for Funds-Supplying Operations against Pooled Collateral at All Offices and Funds-Supplying Operations against Pooled Collateral at the Head Office

As of October 13, 2015
Bank of Japan
Financial Markets Department

I. Introduction

This document is an outline of funds-supplying operations against pooled collateral at all offices and funds-supplying operations against pooled collateral at the Head Office. The Bank of Japan conducts these operations based on the "Principal Terms and Conditions for Funds-Supplying Operations against Pooled Collateral." Please note that the following information may change in the future.

II. Principles

A. Location of operations

The Bank's Head Office (Operations Department) or its branches for funds-supplying operations against pooled collateral at all offices.

The Bank's Head Office (Operations Department) for funds-supplying operations against pooled collateral at the Head Office.

B. Collateral

Collateral accepted under the basic rules concerning collateral as agreed between the Bank and its counterparties.

C. Form of loans

Loans shall be provided in the form of electronic lending.

D. Loan rates and collection of interest

1. Interest rates on loans

Interest rates on loans shall be determined by one of the following methods.

  1. a. Variable-rate method
    Interest rates on loans shall be determined by multiple-rate competitive auctions under the conventional method.
  2. b. Fixed-rate method
    Interest rates on loans shall be the Bank's target for the uncollateralized overnight call rate stipulated in the guideline for money market operations on the loan disbursement date.

2. Collection of interest

Interest rates on loans shall be calculated based on the rate determined by the method described in subsection 1 for the number of days from the day following the loan disbursement date to the maturity date, and the interest shall be collected after the loan reaches maturity.

III. Auction

A. Notification of auction guidelines (offer)

When conducting funds-supplying operations against pooled collateral at all offices and funds-supplying operations against pooled collateral at the Head Office, the Bank selects auction participants from eligible counterparties and notifies them of the following matters through the Bank of Japan Financial Network System (BOJ-NET).

  1. (a) Method for determining loan rates (variable-rate method or fixed-rate method)
  2. (b) Total amount of offer
  3. (c) Loan disbursement date
  4. (d) Maturity date
  5. (e) Bid-submission cut-off date and time
  6. (f) Loan rate (only for the fixed-rate method)
  7. (g) Other matters deemed necessary by the Bank

B. Submission of bids

By the bid-submission cut-off date and time notified in subsection A, auction participants, through the BOJ-NET, notify the Bank (1) for multiple-rate competitive auctions their desired loan rates, desired amount of loans per desired loan rates, and the total amount; and (b) for the fixed-rate method, their desired amount of loans.

C. Acceptance of bids (notification of respective results to auction participants)

The Bank, after receiving bids as described in section B, accepts bids by (a) for multiple-rate competitive auctions, starting with the highest desired loan rate and continuing down until the total amount of bids accepted reaches the amount offered; and (b) for the fixed-rate method, the desired amount of loans. However, the Bank reserves the right to reject all or some of bids which a counterparty submits when deemed appropriate.

For example, for the fixed-rate method, if the total desired amount of loans by auction participants is greater than the total amount of offer, loans will be allocated on a pro rata basis.

When accepting bids, the Bank, through the BOJ-NET, notifies (a) for multiple-rate competitive auctions, the amount of loans and loan rates used for calculating interest rates on loans; and (b) for the fixed-rate method, the amount of loans to auction participants as described in subsection B. Here and hereinafter, those who receive such notifications will be referred to as borrowers.

IV. Disbursement of loans

A. Disbursement of loans

1. Submission of collateral

Borrowers submit collateral valued higher than the interest rates payable on loans, calculated based on the number of days from the day following the loan disbursement date to the maturity date, added to the amount of loans, by the loan disbursement date notified in section III. A and the time determined by the Bank.

2. Request for disbursement of loans

Borrowers request loan disbursement by the settlement date notified in section III. A and the time determined by the Bank.

3. Disbursement of loans

Based on subsections 1 and 2, the Bank disburses loans when it receives requests from borrowers who have submitted collateral.

The Bank disburses loans to borrowers on the loan disbursement date notified in section III. A.

B. Repayment of loans

In addition to loan amounts, borrowers shall repay loan interest to the Bank, calculated based on the number of days from the day following the loan disbursement date to the maturity date, by the maturity date notified in section III. A and the time determined by the Bank.

Borrowers shall repay loans to the Bank on the maturity date notified in section III. A.

V. Operation Timetable

Please refer to the "Operation Timetable" for the timetable of operations described in section III and IV.