December 25, 2020
Bank of Japan

Establishment of the "Principal Terms and Conditions of the Special Deposit
Facility to Enhance the Resilience of the Regional Financial System"

At a regular board meeting held today, the Policy Board of the Bank of Japandecided upon the following with the aim of strengthening the business foundations ofregional financial institutions so that they may firmly support regional economies into
the future and smoothly fulfill their financial intermediation function.

(1) The Bank shall establish the "Principal Terms and Conditions of the Special
Deposit Facility to Enhance the Resilience of the Regional Financial System"(see Attachment 1).

(2) The Bank shall establish the "Special Rules for Member Financial Institutionsof Central Organizations of Financial Cooperatives to Use the Special Deposit
Facility to Enhance the Resilience of the Regional Financial System" (seeAttachment 2).

(3) The Bank shall seek, from the Minister of Finance and the Commissioner ofthe Financial Service Agency, authorization regarding the implementation of (1)and (2), in accordance with Article 43, Paragraph 1 and Article 61-2 of the Bankof Japan Act (Act No.89, 1997).

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Attachment 1
Principal Terms and Conditions of the Special Deposit Facility to Enhance
the Resilience of the Regional Financial System1

1. Purpose
These Terms and Conditions prescribe the principles of remuneration on
current account balances at the Bank of Japan (hereinafter referred to as"special remuneration") with the aim of strengthening the business foundationsof regional financial institutions so that they may firmly support regional
economies into the future and smoothly fulfill their financial intermediation
function.
2. Eligible InstitutionsRegional banks (member banks of the Regional Banks Association of Japan or
the Second Association of Regional Banks) or shinkin banks that have current
accounts at the Bank and wish to use the "Special Deposit Facility to Enhance
the Resilience of the Regional Financial System" (hereinafter referred to as"the Special Deposit Facility").
3. Requirements for Special Remuneration
Special remuneration shall be paid to eligible financial institutions that shallmeet all of the following requirements in (1)-(3).
(1) Being committed to contributing to sustainable development of regional
economies(2) To meet either (a) or (b) in the following:

The English translation has been prepared by the Bank's staff based on the Japaneseoriginal and is an unofficial translation. The translation is to be used solely as referencematerial to aid in the understanding of the Japanese original.
1(a) Meet either of the requirements stipulated in (i) or (ii) below bystrengthening business foundations to a designated degree. For those that
do not meet the requirement for the overhead ratio (OHR, or the ratio ofoverhead costs to gross operating profits) stipulated in (i) or those that donot meet the requirement for overhead costs stipulated in (ii) for fiscal 2020
or 2021, if those financial institutions meet the requirement stipulated in (i)or (ii) in fiscal 2021 or 2022, requirements are deemed to have been met in
the previous fiscal year[s].
(i) For each of fiscal 2020-2022, each eligible financial institution's OHR,calculated by the method stipulated by the Bank, shall decrease by apercentage equal to or greater than a certain threshold compared to theOHR for fiscal 2019, 1 percent for fiscal 2020, 3 percent for fiscal 2021,
and 4 percent for fiscal 2022.
(ii) For each of fiscal 2020-2022, each eligible financial institution's
overhead costs, calculated by the method stipulated by the Bank, shalldecrease by a percentage equal to or greater than a certain thresholdcompared to the overhead costs for fiscal 2019, 2 percent for fiscal 2020,
4 percent for fiscal 2021, and 6 percent for fiscal 2022.
(b) Make institutional decisions (decisions at shareholder meetings or
general meetings, or those deemed to have similar characteristics) between
November 10, 2020 and March 31, 2023 to carry out mergers, businessintegration, or certain forms of acquisitions. However, if two or more
institutional decisions on mergers, business integration, or certain forms ofacquisitions are made between the same parties during the aforementioned
period, special remuneration shall be applied to the first one. Such mergers,
business integration, or certain forms of acquisitions shall be evaluated by
the Bank as contributing factors to strengthening business foundations.
(3) There being no special circumstances in which such remunerations aredeemed inappropriate

4. Eligible Amount for Special Remuneration(1) The amount (excluding the case where such amount is negative, hereinafter"eligible amount for special remuneration") during the reserve maintenanceperiod for special remuneration (a month stipulated in Article 7, Paragraph
3 of the Law Concerning Reserve Deposit Requirement System [LawNo.135, 1957], the same hereafter) derived by deducting the amount ofrequired reserve (defined in Article 2, Paragraph 2 of Law No.135, 1957, thesame hereafter) of each eligible financial institution from the averageamount outstanding of their current account balances.
(2) Notwithstanding (1), the Bank shall set for each eligible financial institution
a limit to the eligible amount for special remuneration, with the aim ofensuring appropriate operation of the Special Deposit Facility andconducting money market operations smoothly.
(3) The limit for each financial institution, stipulated in (2), shall be the higher ofthe following.
(a) The amount calculated by multiplying the amount of each eligible
financial institution's balances for the designated maintenance period
derived by deducting their required reserve balances from the averageamounts outstanding of their current account balances (excluding the casewhere such amount is negative) pursuant to the relevant rules of the Bank,by the rate decided in light of the development of the overall amountoutstanding of the current account balances at the Bank pursuant to therelevant rules of the Bank.
(b) The total of the amounts stipulated in the "Principal Terms andConditions of Complementary Deposit Facility" (Policy Board Decision onJanuary 29, 2016) Paragraph 4. (2) and (3) of each eligible financialinstitution.

5. Interest Rate
The interest rate applied to the eligible amount for special remuneration shallbe +0.1 percent per annum.
6. Relevant Period for the Special Remuneration(1) Eligible financial institutions that meet the requirements stipulated in
Paragraph 3. (2) (a) shall be remunerated for one year, starting from thereserve maintenance period after the reserve maintenance period in which
the Bank's eligibility evaluations complete.
(2) Eligible financial institutions that meet the requirements stipulated in
Paragraph 3. (2) (b) shall be remunerated for three years, starting from thereserve maintenance period after the reserve maintenance period in which
the Bank's eligibility evaluations complete.
(3) Notwithstanding (1) and (2), in the case where eligible financial institutions
that meet the requirements stipulated in Paragraph 3. (2) (a) or (b) newly
meet the requirements stipulated in (b) during the ongoing period relevant
for the special remuneration, that period shall expire on the last day of thereserve maintenance period in which the Bank's new eligibility evaluations
complete.
7. Monitoring the Implementation Status
The Bank shall continuously monitor eligible financial institutions'
implementation status of the requirements stipulated in Paragraph 3.
8. Exception
If the Bank specifically deems it necessary in order to ensure appropriate
operation of the Special Deposit Facility and to conduct money market
operations smoothly, in accordance with the purpose of the Special Deposit
Facility, the Bank can make exceptions to the terms and conditions stipulated
from Paragraph 2. to Paragraph 7. above.

(Supplementary Provision)
These terms and conditions shall become effective on a date determined by
the governor after the Bank obtains authorization from the Minister of Financeand the Commissioner of the Financial Services Agency in accordance with
Article 43, Paragraph 1 and Article 61-2 of the Bank of Japan Act (Act No. 89,1997) provided that the Bank obtains such authorization, and shall be valid until
the date when the period of special remuneration for all eligible financial
institutions and member financial institutions ("member financial institutions"stipulated in the "Special Rules for Member Financial Institutions of Central
Organizations of Financial Cooperatives to Use the Special Deposit Facility toEnhance the Resilience of the Regional Financial System" [Policy Board
Decision on December 25, 2020]) ends. These terms and conditions shall beapplied to the treatment of the special remuneration that is made on or after thedate when the period of special remuneration ends.

Attachment 2
Special Rules for Member Financial Institutions of Central Organizations ofFinancial Cooperatives to Use the Special Deposit Facility to Enhance theResilience of the Regional Financial System1

1. Purpose
The Bank of Japan established special rules that supplement the "PrincipalTerms and Conditions of the Special Deposit Facility to Enhance the Resilienceof the Regional Financial System" (Policy Board Decision on December 25,2020, hereinafter referred to as the "Principal Terms and Conditions"). The
special rules shall be applied when member financial institutions of central
organizations of financial cooperatives (the Shinkin Central Bank, the Shinkumi
Federation Bank, the Rokinren Bank, and the Norinchukin Bank, hereinafterthe same) without a current account at the Bank (hereinafter referred to as"member financial institutions") wish to use the "Special Deposit Facility toEnhance the Resilience of the Regional Financial System" (hereinafter referredto as "the Special Deposit Facility") under the Principal Terms and Conditionsthrough central organizations of financial cooperatives.
2. Methods for Special Remuneration
Special remuneration, which is applied in the case where member financial
institutions of central organizations of financial cooperatives that wish to use
the Special Deposit Facility are evaluated as meeting the requirements
stipulated in Paragraph 3. of the Principal Terms and Conditions, shall be madeby the Bank to the current accounts of central organizations of financialcooperatives. Central organizations of financial cooperatives shall then pay thefull amount equivalent to the special remuneration to their member financial
institutions that are approved to have met the requirements stipulated in
Paragraph 3. of the Principal Terms and Conditions (hereafter "eligible member
financial institutions").
The English translation has been prepared by the Bank's staff based on the Japaneseoriginal and is an unofficial translation. The translation is to be used solely as referencematerial to aid in the understanding of Japanese original.
13. Eligible Amount for Special Remuneration(1) The eligible amount of special remuneration shall be obtained by thefollowing method. The share of deposits of eligible member financial
institutions in their immediate superior financial institutions (centralorganizations of financial cooperatives or, of the member financial
institutions, those that accept deposits from other member financial
institutions, hereinafter the same) to the total of deposits that immediatesuperior financial institutions receive from all of their member financial
institutions (deposits of member financial institutions funded from othermember financial institutions shall be excluded; for central organizations offinancial cooperatives that have deposits from financial institutions holding
current accounts at the Bank, the amount of those deposits shall beincluded) shall be calculated pursuant to the relevant rules of the Bank. The
share shall then be multiplied by the amount (excluding the case where suchamount is negative, hereinafter "calculated amount") during the reserve
maintenance period for special remuneration (a month stipulated in Article
7, Paragraph 3 of the Law Concerning Reserve Deposit Requirement
System [Law No.135, 1957]) derived by deducting the amount of required
reserve (defined in Article 2, Paragraph 2 of Law No.135, 1957) of eachcentral organization of financial cooperatives from the average amountoutstanding of their current account balances.
(2) Notwithstanding (1), the Bank shall set for each central organization offinancial cooperatives a limit to the calculated amount, according toParagraph 4. (2) and (3) of the Principal Terms and Conditions.
4. Monitoring the Implementation Status by Central Organizations of FinancialCooperatives(1) According to Paragraph 7. of the Principal Terms and Conditions, central
organizations of financial cooperatives shall continuously monitor theimplementation status of the requirements stipulated in Paragraph 3. of thePrincipal Terms and Conditions of member financial institutions that wish touse the facility.

(2) In addition to (1), central organizations of financial cooperatives shall takemeasures with their member financial institutions necessary for
implementation and proper operations of the Special Deposit Facility incompliance with the aim of the facility and in response to the Bank'srequests.
5. Exception
The Bank can implement necessary measures, such as suspension of special
remuneration under the special rules, in case central organizations of financial
cooperatives and member financial institutions are inconsistent with the specialrules.
(Supplementary Provision)
These special rules shall become effective on a date determined by thegovernor after the Bank obtains authorization from the Minister of Finance andthe Commissioner of the Financial Services Agency in accordance with Article
43, Paragraph 1 and Article 61-2 of the Bank of Japan Act (Act No. 89, 1997)
provided that the Bank obtains such authorization, and shall be invalid on thedate when the Principal Terms and Conditions become invalid. These terms
and conditions shall be applied to the treatment of the special remuneration thatis made on or after the date when the period of such special remuneration ends.