Temporary Rules regarding the Eligibility Standards for Debt of Companies in Disaster Areas of the 2016 Kumamoto Earthquake (Invalid)

April 28, 2016

Revision:September 21, 2016
January 31, 2017
January 23, 2018
January 23, 2019

1. Purpose

With the aim of securing sufficient financing capacity of financial institutions in disaster areas of the 2016 Kumamoto Earthquake, in addition to the "Guidelines on Eligible Collateral" (Policy Board Decision on October 13, 2000) and the "Guidelines on Credit Ratings of Companies" (Policy Board Decision on October 13, 2000), the Bank shall apply the temporary rules with regard to the eligibility standards and collateral prices of debt of companies with business offices in disaster areas that are submitted by financial institutions with business offices in disaster areas.

• Definitions in the temporary rules

• Financial institutions:
  Financial institutions as defined in Article 37, Paragraph 1 of the Bank of Japan Act, Act No. 89, 1997.
• Disaster areas:
  Areas designated under the Disaster Relief Act, Act No. 118, 1947, with regard to the 2016 Kumamoto Earthquake.

2. Application

(1) Eligible Financial Institutions

Financial institutions with current accounts at the Bank and that have business offices in disaster areas that conduct lending.

(2) Eligible Collateral

For debtors (drawees in case of bills) stipulated in the following paragraphs, categories of eligible collateral shall be as stipulated in each respective paragraph.

1. (a) Companies with Business Offices in Disaster Areas
   Corporate bonds, bills, electronically recorded monetary claims, and loans on deeds
2. (b) Municipal Governments in Disaster Areas (including prefectures or cities with all or some of the cities, wards, towns, or villages that are designated as disaster areas, hereinafter the same)
   Electronically recorded monetary claims and loans on deeds
3. (c) Entities Owned by Municipal Governments in Disaster Areas (entities that are wholly-owned by municipal governments in disaster areas and have business offices in disaster areas, hereinafter the same)
   Electronically recorded monetary claims and loans on deeds

3. Eligibility Standards

For collateral stipulated in 2. (2), the Bank shall, except when the collateral satisfies the standards stipulated in the Table of the "Guidelines on Eligible Collateral," apply the following eligibility standards. However, the Bank may make exceptions where it considers it inappropriate to accept items as collateral.

(1) Debt of Companies with Business Offices in Disaster Areas

Corporate bonds

Publicly-offered straight bonds rated BBB or higher by an eligible rating agency (including those issued by a company rated BBB or higher, those fully guaranteed by a company rated BBB or higher, and those guaranteed by a company whose non-guaranteed bonds issued are rated BBB or higher) and are deemed eligible in light of creditworthiness and other relevant factors.

Bills

Bills satisfying the following requirements:

1. (a) Bills drawn by debtors that are classified as "normal" borrowers in the latest self-assessment by the financial institution submitting the collateral.
2. (b) Bills with an original maturity of up to 1 year.

Electronically Recorded Monetary Claims

Electronically recorded monetary claims satisfying the following requirements:

1. (a) Electronically recorded monetary claims for which electronic records are made by eligible recording institutions.
2. (b) Electronically recorded monetary claims on debtors satisfying either of the following requirements:
   1. i) Debtors that are classified as "normal" borrowers in the latest self-assessment by the financial institution submitting the collateral (electronically recorded monetary claims on debtors satisfying (a), this proviso, and (c), together with those stipulated in (3) shall hereinafter be referred to as "electronically recorded monetary claims on normal-class borrowers").
   2. ii) Debtors that are rated BBB or higher by an eligible rating agency (including cases where non-guaranteed bonds issued by the debtor are rated BBB or higher) and are deemed eligible in light of creditworthiness and other relevant factors.
3. (c) Electronically recorded monetary claims with a residual maturity of up to 10 years (including those with a maturity date falling in the same month of the tenth year).

Loans on deeds

Loans on deeds satisfying the following requirements:

1. (a) Loans on deeds to debtors satisfying either of the following requirements:
   1. i) Debtors that are classified as "normal" borrowers in the latest self-assessment by the financial institution submitting the collateral (loans on deeds to debtors satisfying this proviso and (b), together with those stipulated in (3) shall hereinafter be referred to as "loans on deeds to normal-class borrowers").
   2. ii) Debtors that are rated BBB or higher by an eligible rating agency (including cases where non-guaranteed bonds issued by the debtor are rated BBB or higher) and are deemed eligible in light of creditworthiness and other relevant factors.
2. (b) Loans on deeds with a residual maturity of up to 10 years (including those with a maturity date falling in the same month of the tenth year).

(2) Debt of Municipal Governments in Disaster Areas

Electronically Recorded Monetary Claims

Electronically recorded monetary claims satisfying the following requirements:

1. (a) Electronically recorded monetary claims for which electronic records are made by eligible recording institutions.
2. (b) Electronically recorded monetary claims with a residual maturity of up to 10 years (including those with a maturity date falling in the same month of the tenth year).

Loans on Deeds

Loans on deeds with a residual maturity of up to 10 years (including those with a maturity date falling in the same month of the tenth year).

(3) Debt of Entities Owned by Municipal Governments in Disaster Areas

Electronically Recorded Monetary Claims

Electronically recorded monetary claims satisfying the following requirements:

1. (a) Electronically recorded monetary claims for which electronic records are made by eligible recording institutions.
2. (b) Electronically recorded monetary claims on debtors that are classified as "normal" borrowers in the latest self-assessment by the financial institution submitting the collateral.
3. (c) Electronically recorded monetary claims with a residual maturity of up to 10 years (including those with a maturity date falling in the same month of the tenth year).

Loans on Deeds

Loans on deeds satisfying the following requirements:

1. (a) Loans on deeds to debtors that are classified as "normal" borrowers in the latest self-assessment by the financial institution submitting the collateral.
2. (b) Loans on deeds with a residual maturity of up to 10 years (including those with a maturity date falling in the same month of the tenth year).

4. Collateral Prices

Collateral prices prescribed in 2. (2) shall be calculated according to 3. (2) and (3) of the "Guidelines on Eligible Collateral," except when the collateral satisfies the standards stipulated in the Table of the "Guidelines on Eligible Collateral."

5. Special Provisions regarding Bills, Electronically Recorded Monetary Claims on Normal-Class Borrowers, and Loans on Deeds to Normal-Class Borrowers

(1) Maximum Amount of Collateral

For each counterparty, the total amount of bills, electronically recorded monetary claims on normal-class borrowers, and loans on deeds to normal-class borrowers submitted to the Bank pursuant to the eligibility standards stipulated in 3. (1) and (3) shall not exceed the amount calculated by multiplying the total amount of collateral submitted to the Bank, and the percentage set pursuant to the relevant rules of the Bank, which shall not exceed 50 percent.

(2) Evaluation of Creditworthiness

The Bank shall not apply 4. (3) of the "Guidelines on Eligible Collateral" in evaluating the creditworthiness of debtors of bills, electronically recorded monetary claims on normal-class borrowers, and loans on deeds to normal-class borrowers pursuant to the eligibility standards stipulated in 3. (1) and (3).

Supplementary Provision

1. The temporary rules shall become effective as soon as the preparatory work to accept eligible debt of companies in disaster areas as collateral is completed, and a specific effective date shall be determined by the Governor.
2. The temporary rules shall be valid through April 30, 2021.