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Basic Policy on the Eligibility as Collateral of Asset-Backed Securities and Debt Obligations Issued by Financial Institutions that Maintain Current Accounts with BOJ

September 21, 1999
Bank of Japan

The Monetary Policy Meeting of the Policy Board of the Bank of Japan has today decided basic policy on the eligibility as collateral and as instruments to be discounted or purchased of asset-backed securities and debt obligations issued by financial institutions that maintain current accounts with BOJ. The text of the basic policy is described in the attached.

Attachment

1. The Bank of Japan shall accept eligible asset-backed securities as collateral for the Bank's credit. However, the Bank shall, for the time being, accept such securities as collateral only for "bill purchasing operations utilizing corporate bonds and loans on deeds." The Bank shall, following decision by the Policy Board, announce further details when ready.

2. Debt obligations described below, that are issued by financial institutions maintaining current accounts with the Bank (hereinafter referred to as "counterpart financial institutions"), shall be excluded from the Bank's eligible collateral and instruments to be discounted or purchased in the Bank's money market operations so that the Bank's judgment on any particular financial institution's creditworthiness shall not be disclosed and such debt obligations taken as collateral or obtained in money market operations shall not be redeemed by proceeds from the Bank's credit itself. Notwithstanding the preceding, debt obligations such as master bills (issued by counterpart financial institutions and purchased by the Bank in bill purchase operations) and other similar instruments against which eligible collateral is positioned in a specified way, as well as bills endorsed by counterpart financial institutions, shall remain eligible.

  1. (1) Interest-bearing bank debentures and discount bank debentures
    The Bank shall consider them eligible until the end of March 2001, taking into account, among other things, the current situation that these debentures are widely utilized as collateral in the domestic exchange settlement system.
  2. (2) Commercial paper (hereinafter referred to as "CP") issued by securities firms or securities finance firms that are counterpart financial institutions
    CP purchased by the Bank by the end of March 2000 shall remain eligible, taking into account, among other things, the current situation where such CP is widely purchased in the Bank's repo operations.
  3. (3) CP issued by depository institutions that are counterpart financial institutions
  4. (4) Corporate bonds issued by depository institutions that are counterpart financial institutions
  5. (5) Other than those instruments prescribed in (1), (2), (3) and (4)above, bills (excluding CP), CP, bonds, loans on deeds and other debt obligations issued by counterpart financial institutions
    Quasi-commercial bills and government-guaranteed bonds that the Bank determines eligible in separate setting of rules shall remain as such.
  6. (6) Debt obligations guaranteed by counterpart financial institutions
    Debt obligations to be collateralized, discounted, or purchased by the Bank that would be deemed eligible but for the guarantee shall remain eligible.

3. The Bank will continue examining the eligibility of bills (excluding CP), CP, bonds, loans on deeds, and other debt obligations that are issued or guaranteed by affiliates (including parent companies and subsidiaries) of counterpart financial institutions and come to a decision around this time next year.