Thorough risk management of financial product “CLO” BOJ and FSA June 3 at 6:57

Since Japanese financial institutions have many financial products called CLO, which are made by collecting loans for overseas companies with low creditworthiness, the Bank of Japan and the Financial Services Agency have compiled a report requesting thorough risk management. It was. He points out that it is necessary to pay attention to the loss caused by the prolonged economic downturn caused by the new coronavirus.

CLO is a financial product with a high yield, which is risky due to the collection of loans for companies with low creditworthiness. According to IMF = International Monetary Fund, etc. It owns 13.80 trillion yen.

According to reports from the BOJ and the FSA, 99% of CLOs held by Japanese financial institutions are the highest rated AAA, and three-quarters plan to hold until maturity without selling on the way, The risk of immediate loss is not high.

However, he said caution is needed in the event of a prolonged economic downturn due to the new coronavirus, or in the event of another global financial market turmoil that occurred in March. In particular, if the CLO is downgraded, the price will drop significantly, and accounting rules may force us to process losses.

The Bank of Japan and the Financial Services Agency have urged thorough risk management by closely checking whether the corporate loans that are the source of the CLO are non-performing.