Prior to 1996, there was a system in Japan requiring issuers of domestic bonds, samurai bonds, and Euroyen bonds to obtain a rating of a certain level or higher from a designated rating company (eligible criteria).
SInce then the Ministry of Finance has used the designated rating company system for two purposes:
- AN ELIGIBILITY CRITERION FOR THE ISSUER REGISTRATION SYSTEM
A single A rating or better from multiple designated rating companies enables issuers to streamline the new bond issue notification procedures.
- FOR CALCULATION OF THE CAPITAL ADEQUACY RATIOS OF SECURITIES COMPANIES
Ratings are used in calculating market risk equivalents for the bonds held by securities companies as part of the process of calculating their capital adequacy ratios. Securities that have been rated BBB (equivalent) or better from designated rating companies have half the risk weighting of other securities.
The Ministry of Finance designates the rating companies whose rating it will accept to achieve some of its policy objectives. The rating companies so designated do not enjoy any special position, as they would with a special business license, nor do they fall under any accompanying regulatory or monitoring regimes.
|
