Overview of the "Special Deposit Facility to Enhance the Resilienceof the Regional Financial System"
1. Background The business environment surrounding regional financial institutions has
become more severe due to the impact of COVID-19, in addition to structural
factors such as the shrinking population and a continued low interest rateenvironment.
 On this basis, the Bank of Japan decided to introduce the Special Deposit
Facility to Enhance the Resilience of the Regional Financial System (SpecialDeposit Facility) to encourage regional financial institutions' initiatives tostrengthen their business foundations so that they may firmly support theirrespective regions into the future.

2. Outline of the facility
 For regional financial institutions that strengthen their business foundations
while supporting regional economies, their excess reserve balances shall be
remunerated at +0.1 percent per annum.

 A three-year temporary measure for the fiscal years ending (FYE) March
2021-2023.

(1) Eligible financial institutions
 Regional banks and shinkin banks that have current accounts at the Bank.
─ The Bank shall allow financial cooperatives that do not have current
accounts at the Bank (some shinkin banks, credit unions, labor banks,and agricultural and fishery cooperatives, etc.) to use the facility via theircentral organizations under the special rules for financial cooperatives.1(2) Requirements for special remuneration
 Eligible financial institutions shall be committed to contributing to sustainable
development of regional economies and meet any of the following.
(i) To strengthen business foundations to a designated degree (hereinafterreferred to as the "OHR requirement")
Special Rules for Member Financial Institutions of Central Organizations of Financial
Cooperatives to Use the Special Deposit Facility to Enhance the Resilience of the Regional
Financial System.
11─ For each of the FYE March 2021-2023, each eligible financial institution'soverhead ratio (OHR, or the ratio of overhead costs to gross operatingprofits) shall improve in line with the figures in the table below comparedto the OHR for the FYE March 2020 (on a consolidated and holding
company basis).(Note)

OHR changes
to be satisfied

FYE March
2021

FYE March
2022

FYE March2023-1% or lower-3% or lower-4% or lower(Note) To incentivize eligible financial institutions to strengthen business foundations when they face huge
downward pressure on gross operating profits in the future, due to economic stagnation, a relief measure
shall be introduced. Namely, the OHR requirement shall be deemed to be met if each financial institution's
overhead costs decrease by a percentage equal to or lower than a certain threshold compared to thosefor the FYE March 2020. Such threshold shall be -2% for FYE March 2021, -4% for FYE March 2022, and-6% for FYE March 2023.

(ii) To make an institutional decision on mergers, business integration, orcertain forms of acquisitions toward strengthening business foundations(hereinafter referred to as the "consolidation requirement")─ Institutional decisions between November 10, 2020 and the end of
March 2023 on mergers, business integration, or certain forms ofacquisitions shall be eligible if they are evaluated by the Bank ascontributing factors to strengthening business foundations. However, if
two or more institutional decisions on mergers, business integration, orcertain forms of acquisitions are made between the same parties during
the aforementioned period, special remuneration shall be applied only tothe first one.
─ In principle, the term "institutional decisions" specifically refers todecisions at shareholder meetings (general meetings for shinkin banks,etc.).

(3) Duration of special remuneration
 For each of the requirements, special remuneration shall be paid as follows.
(i) The OHR requirement: special remuneration shall be paid for one year
after the Bank confirms that the eligible financial institution meets therequirement for each of the FYE March 2021-2023
─ If eligible financial institutions that do not meet the OHR requirement for
FYE March 2021 and/or 2022 meet the requirement in the subsequentfiscal year(s) (FYE March 2023 at the latest), the Bank shall pay in thesubsequent fiscal year(s) the amount equivalent to special
remunerations for the past fiscal year(s).
2(ii) The consolidation requirement: special remuneration shall be paid forthree years after the Bank confirms that the eligible financial institution
meets the requirement
─ Payments of special remuneration shall not overlap, even if eligible
financial institutions meet the requirement multiple times or meet it after
meeting the OHR requirement.

(4) Outline of the special rules for financial cooperatives
 Requirements for and duration of special remuneration shall be the same as
those in the principal terms and conditions.2
 Special remuneration shall be paid to each central organization. Central
organizations shall pay all of the relevant amounts to their member financial
institutions that meet the requirements (hereinafter referred to as the"eligible member financial institutions").
─ The eligible amount for special remuneration shall be calculated bymultiplying each central organization's excess reserve balances by thefollowing ratio.
The amount outstanding of deposits held at a central organization
by its eligible member financial institutions
The amount outstanding of deposits held at the central organizationby all of its member financial institutions
 Each central organization shall monitor its member financial institutions'
implementation status of the requirements if they wish to use the facility.

3. Implementation Schedule Provided that the Bank obtains necessary government authorization, it plans
to implement the facility around the beginning of March 2021.

Principal Terms and Conditions of the Special Deposit Facility to Enhance the Resilience of theRegional Financial System.
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