Claim Acquisition and Bridge Bank Operations

Role of RCC as a Bridge Bank

In November 2011, a bridge function agreement was made between the DICJ and RCC, under which RCC became the only "Bridge Agreement Bank" in Japan, as stipulated in Article 15-2, Paragraph 3 of the Supplementary Provisions of the Deposit Insurance Act.
Under the currently envisaged resolution scheme, if no assuming financial institution immediately emerges at the time of a financial institution's failure, RCC, as sponsor, will enter into a "Basic Agreement on Business Transfer" (hereinafter referred to as the "Basic Agreement") with the failed financial institution immediately after its failure, and agrees to provide financial support and to assume part of its business.
In the instance where of financial institution failing after Friday  business hours and resolution being carried out using RCC's bridge bank function, RCC's role as a bridge agreement bank is as follows:

  1. Immediately after the DICJ is appointed as financial administrator, and based on an application from the administrator, the Commissioner of the FSA will decide that RCC, as a bridge bank, shall assume operations from the failed financial institution through business transfer, etc.
    Upon this decision, RCC will conduct bridge bank operations under the management of the DICJ.
  2. RCC will conclude the Basic Agreement with the failed financial institution on the night of the failure.
    After the conclusion of the Basic Agreement, the failed financial institution will file a petition with the court for commencement of civil rehabilitation proceedings.
  3. As sponsor, RCC receives a request from the failed financial institution for financial support necessary for the resumption of operations and remits funds to the designated account of the failed financial institution on Monday morning.
    The failed financial institution will then resume operations such as repayment of insured deposits, settlement services, and lending operations.
  4. The Financial Administrator will prepare for business transfer to the bridge bank, including the classification of loan assets, while RCC undertakes administrative procedures for business transfer, coordination with relevant external parties, and preparations and procedures related to asset acquisition.
  5. Approximately six months after the failure, RCC will acquire part of the business of the failed financial institution (insured deposits, sound loan assets).
    Assets not transferred to the bridge bank are sold to RCC or investors, etc.
  6. After assuming the business from the failed financial institution, RCC will conduct operations such as deposit transactions and lending in accordance with operational guidelines prepared by the DICJ and approved by the Commissioner of the FSA.
  7. After the final assuming financial institution is determined, RCC will re-transfer the deposits and loan assets, etc., to the assuming financial institution.
    Such re-transfer must be completed within two years from the date of the disposition placing the institution under administration (extendable by one year in unavoidable circumstances).

Since the bridge bank function was conferred upon RCC, fortunately, no financial institution failures have occurred in Japan. However, the environment surrounding the financial sector is becoming increasingly severe, and preparedness for contingencies remains essential. Even in the event of a sudden financial institution failure in the future, RCC's mission is to maintain a framework capable of properly executing its asset purchase and succession operations and to remain constantly prepared in order to ensure the stability of Japan's financial system.

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