Establishment of a Temporary Lending Facility to Support Firms' Financing Activities
(for immediate release)
November 27, 1998
Bank of Japan
The Monetary Policy Meeting of the Policy Board of the Bank of Japan has today decided to establish a temporary lending facility to support firms' financing activities and decided Principal Terms and Conditions on this facility as attached.
This decision was made in line with "Introduction of New Measures for Money Market Operations in Response to the Recent Situations in Firms' Financing Activities" decided at the Monetary Policy Meeting of the Policy Board on November 13, 1998.
Principal Terms and Conditions on a Temporary Lending Facility to Support Firms' Financing Activities
In light of the recent situations concerning firms' financial activities, these principal terms and conditions prescribe the fundamental matters that are necessary for establishing a lending facility to refinance a specified portion of the increase in loans provided by each financial institution with the aim of supporting firms' financing activities.
2. Terms and Conditions
- (1) Locations providing loans
The loans shall be provided at the head office (Operations Department) and branches of the Bank of Japan.
- (2) Financial institutions eligible for this lending facility
Financial institutions eligible for this lending facility include banks, long-term credit banks, branches of foreign banks, shinkin banks, the Zenshinren Bank, the National Federation of Credit Cooperatives, the National Federation of Labor Credit Associations and the Norinchukin Bank which wish to use this lending facility (hereinafter referred to as "facility user") and which will have concluded loans-on-bills agreements with the Bank of Japan as of December 2, 1998 (including those that maintain current deposits at the Bank of Japan and have already requested to conclude loans-on-bills agreements with the Bank of Japan as of the same date prescribed above).Notwithstanding the preceding sentence, the Resolution and Collection Bank and the Kii Deposit Management Bank shall not be eligible for this lending facility.
- (3) Form of loans
The Bank of Japan shall provide loans in the form of lending on bills.
- (4) Dates for the provision of loans
Loans shall be provided by the Bank of Japan on December 21, 1998, January 20, 1999, February 22, 1999 and March 23, 1999, given that loans provided on December 21, 1998 shall be made only to facility users whose average outstanding loans in November 1998 have increased compared to outstanding loans as of the end of September 1998.
- (5) Lending period
All the loans prescribed in (4) shall be due and collectible on April 15, 1999, given that loans provided on December 21, 1998 shall be rolled over three months after their provision.
- (6) Amount of loans
The amount of loans provided by the Bank of Japan shall be determined subject to the limits prescribed in (7) and shall not exceed collateral value.
- (7) Loan limits
- a. Temporary limit on loans
A limit on loans provided on December 21, 1998 shall be set for each facility user as equivalent to half of the increase in loans of each facility user's average outstanding loans in November 1998 compared to its outstanding loans as of the end of September 1998.
- b. Definite limit on loans
A definite limit on loans provided on and after January 20, 1999 shall be set for each facility user as equivalent to half of the increase in loans of each facility user's average outstanding loans in December 1998 compared to its outstanding loans as of the end of September 1998, provided that the temporary limitation on loans shall be applicable to those whose definite limit is under their temporary limit.
- a. Temporary limit on loans
- (8) Collateral
Collateral shall be composed of private corporations' debt obligations ("bills <including CPs>, corporate bonds and loans on deeds") and Japanese Government bonds that are eligible for lending on bills by the Bank of Japan.Collateral shall secure all claims of the Bank of Japan that arise from this lending facility, provided that for the financial institutions listed in the attachment 2, the collateral value of private corporations' debt obligations must be more than 50% of the outstanding loans provided to them by the Bank of Japan.
- (9) Applied interest rate
The applied interest rate shall be 0.5%.
These Principal Terms and Conditions shall become effective on November 27, 1998 and be abolished on April 30, 1999.
The financial institutions whose collateral value of private corporations' debt obligations must be more than 50% of the amount of loans provided to them by the Bank of Japan are as follows;
Daiichi-Kangyo Bank, Sakura Bank, Fuji Bank, Tokyo-Mitsubishi Bank, Asahi Bank, Sanwa Bank, Sumitomo Bank, Daiwa Bank, Tokai Bank, Mitsui Trust Bank, Mitsubishi Trust bank, Yasuda Trust Bank, Toyo Trust Bank, Chuo Trust Bank, Nippon Trust Bank, Sumitomo Trust Bank, Industrial Bank of Japan, Long -term Credit Bank of Japan, Nippon Credit Bank, Norinchukin Bank