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Outline of Transactions for U.S. Dollar Funds-Supplying Operations against Pooled Collateral

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

I.  Introduction

This document is an outline of U.S. Dollar (USD) funds-supplying operations against pooled collateral, which the Bank of Japan conducts based on the "Principal Terms and Conditions for U.S. Dollar Funds-Supplying Operations against Pooled Collateral" (established on May 10, 2010). Please note that the following information may change in the future.

II.  Principles

A.  Location of operations

The Bank's Head Office.

B.  Collateral

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

The yen-denominated amount for which the counterparty shall pledge eligible collateral shall be obtained by multiplying a yen-denominated loan value based on the USD/yen spot exchange rate prevailing in the market by 1.13 for a loan with a duration of up to one month and by 1.25 for a loan with a duration of more than one month and up to three months.

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 the Federal Reserve Bank of New York (FRBNY).

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 USD funds-supplying operations against pooled collateral, 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) Loan disbursement date (Eastern Standard Time)
  2. (b) Maturity date (Eastern Standard Time)
  3. (c) Bid-submission cut-off date and time
  4. (d) Loan rate
  5. (e) Other matters deemed necessary by the Bank

B.  Submission of bids

Auction participants notify the Bank of the necessary matters through the BOJ-NET by the bid-submission cut-off date and time notified in subsection A.

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

The Bank, after receiving bids as described in subsection B, accepts the notified amount of bids. However, the Bank reserves the right to reject all or some of bids which a counterparty submits when deemed appropriate.

When accepting bids, the Bank, through the BOJ-NET etc., notifies auction participants who have submitted bids as described in subsection B of matters such as the amount of loans in USD and the benchmark yen value of collateral. 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 benchmark yen value of the collateral notified in section III. C by the date and time determined by the Bank.

2.  Disbursement of loans

After confirming that borrowers have submitted collateral as described in subsection 1, the Bank disburses loans to the borrowers through USD accounts held at the FRBNY, which each party should specify in advance.

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, on the maturity date notified in section III. A and through methods described in subsection 2.

V.  Operation Timetable

Timetable and schedule related to the operations described in section III will be released prior to the offer.