Collateral/Settlement/Custody/InvestmentCustody and Investment
Custody and Investment
- The scope of eligible investment products for JSCC’s own assets is limited to deposit in settlement account, term deposit, JGBs, and government guaranteed bonds, in accordance with JSCC’s “Policies for Fund Management of Own Assets.”
- The custodians for deposit in settlement account and term deposit are limited to Fund Settlement Banks designated based on criteria specified by JSCC.
- JGBs and government guaranteed bonds are held in the customer accounts of the financial institutions from which JSCC purchased them. Even in the event of the default of such financial institutions, the customer account assets are protected by the “Act on Book-Entry Transfer of Company Bonds, Shares, etc.”
Clearing Participant and Customer Assets
- JSCC requires Clearing Participants and their customers to deposit collateral in order to cover credit risks in each clearing business. JSCC keeps and invests such posted assets safely.
- Custody of the collateral of Clearing Participants and their customers is limited to JSCC’s direct holding in the account with the CSD or the central bank, or custodians that satisfy the criteria specified in JSCC’s “Policies for Designation of Custodians of Posted Collateral” and investment should be done based on JSCC’s “Policies for Management of Posted Collateral.“
Management of Custodian Risk
- Commercial banks holding JSCC’s own assets are those which satisfy the “Policies for Designation of Japanese Yen Fund Settlement Banks” or “Policies for Designation of Foreign Currency Fund Settlement Banks.” Banks holding assets of Clearing Participants and their customers posted as collateral are the CSD, the central bank, or commercial banks that satisfy the “Policies for Designation of Custodians of Posted Collateral.”
- JSCC regularly monitors each custodian’s compliance with the relevant guidelines.
- The relevant guidelines require custodians to be subject to regulatory supervision, have stable business processing capability, stable profitability, and a certain level of financial strength and credit.