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Free AccessMNI POLICY: BOJ Won't Take Credit Risk On New Loan Facility
-- BOJ Hopes Added Rate For Commercial Banks To Ease Risk Fears
By Hiroshi Inoue
TOKYO (MNI) - The Bank of Japan will not take any credit onto its own book
for loans extended by commercial banks under new lending schemes, but believes
the payment of a small interest rate above the rate banks can borrow funds will
help get them to extend credit to firms in need of funds.
BOJ officials are still trying to work out the fine details of the new
lending facility, including whether or not to set an upper limit of the new
scheme, to lower the loan-to-value ratio or to include bridge financing that is
underpinned by the Financial Services Agency.
The FSA has been urging financial institutions to support smaller firms
through bridge financing as it takes some time for them to gather the paper work
to apply for credit guarantee loans and the BOJ is n ow considering bringing
that scheme into the new facility.
Financial institutions are examining eligible loans after accepting
applications from struggling smaller firms hit by the spread of the coronavirus,
forcing stores to close and slamming the brakes on spending.
Under the existing conditions, the BOJ cannot grasp the scale of actual
loan demand immediately and bank officials are surveying financial institutions
to examine demand for the new lending facility.
The BOJ has already said that the interest rate on loans under the new
scheme will be zero percent, adding it will pay 0.1% interest to banks' on the
balance of all loans extended to companies, which it hopes will overcome any
credit and rising credit cost concerns lenders have
--SOLE PROPRIETOR
BOJ Governor Haruhiko Kuroda has said that the BOJ may consider
incorporating loans to sole proprietors into the new lending facility and the
bank may hold an early policy meeting to get the new facilities in place
quickly.
The BOJ want to get lending to sole proprietor and smaller firms that will
benefit from zero guarantee fees and zero interest rates as based on the target
requirements set by the government, with loans to be up to JPY 30 million in
size and for up to 5 years in length.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: MMJBJ$,M$A$$$,M$J$$$,MT$$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.