The main operations of Agricultural and Fishery Co-operative Savings Insurance Corporation (hereinafter “SIC”) are as follows.
1.Operations under Agricultural and Fishery Cooperatives Savings Insurance Act
– Collection of insurance premiums
SIC collects insurance premiums from insured agricultural and fishery cooperatives (agricultural cooperatives, fishery cooperatives, credit federations of agricultural cooperatives, credit federations of fishery cooperatives, The Norinchukin Bank, etc.) (hereinafter “AFCs”) every year for operations of the savings insurance system.
The insurance premium is calculated by multiplying the balance of savings (except foreign currency savings and other savings specified in government ordinances) by the insurance rate approved by SIC’s Policy Board and the competent ministers (in this case, the Minister of Agriculture, Forestry and Fisheries, the Minister of Finance and the Commissioner of the Financial Services Agency).
– Insurance payment and partial payment
When any insured event occurs (e.g. suspension of repayments of savings in AFCs), SIC may pay the insurance to depositors. The insurance amount is the sum of the principal up to 10 million yen and the interest thereon in the case of general savings (savings other than those for settlement). As to the savings for settlement which meet specific conditions* such as bearing no interest, full amount is protected.
When it takes time before payment of insurance, SIC may make partial payment (up to 600 thousand yen per one account of ordinary savings) to cover the immediate living expenses upon request from the depositors.
*Savings which meet three conditions; “bearing no interest, being redeemable on demand, and providing normally required payment and settlement services”.
– Financial assistance
SIC may provide financial assistance directly to AFCs supporting those cooperatives faced with business difficulty by mergers, etc., in order to facilitate the transaction. SIC may also provide financial assistance indirectly to federations of AFCs which provide assistance in mergers of AFCs based on the agreement on mutual aid concerning AFCs.
Moreover, SIC may provide financial assistance to designated public corporations supporting mergers based on the directions from The Norinchukin Bank.
The financial assistance may take the form of a monetary grant, loan or deposit of funds, purchase of assets, guarantee of liabilities, assumption of debts, subscription for preferred equity investment and loss sharing. (However, in the case of financial assistance to federations of agricultural/fishery cooperatives and designated public corporations, purchase of assets, assumption of debts and subscription for preferred equity investment are excluded.)
In addition, as a special measure, when any AFC in distress assigns a part of its credit business to other AFC, SIC may provide financial assistance to the unsound AFC to ensure equitable treatment among creditors.
Moreover, when an assuming AFC or that established through merger applies for additional financial assistance after merger to which financial assistance was granted, SIC may provide additional financial aid if necessary.
It is specified that a plan to ensure financial soundness must be submitted to SIC to apply for subscription for preferred equity investment.
Past record of financial assistance (PDF file)
– Purchase of savings and other claims
When an insured event occurs, SIC may purchase a portion in excess of the insurance coverage limit of principal and interests thereon as well as foreign currency savings of the receivables including savings owned by depositors, at a sum multiplied by estimated proceeds payment rate determined by SIC upon requests from depositors. The estimated proceeds payment rate is determined considering the estimated amount of liquidating dividend of the relevant AFC.
When the liquidation dividends and other money recovered by SIC after the above-mentioned purchase exceed the purchased amount, the surplus is also paid to the depositors (settlement payment).
– Operations related to agreed servicers
SIC has concluded an agreement with servicers (2 companies at present) and may conduct the relevant operations. Specifically, SIC may:
i) provide the servicers with funds necessary for smooth collection practices under the agreement,
ii) compensate for loss incurred to the agreed servicers due to operations under the agreement, within the range of the amount calculated based on a government ordinance,
iii) loan funds necessary for purchases of assets and smooth collection practices under the agreement, or guarantee debts in connection with the borrowing of the necessary funds, upon request from the agreed servicers,
iv) collect the amount of profits earned by the agreed servicers as a result of the operations under the agreement, calculating it based on a government ordinance, and
v) provide guidance and advice necessary for collection practices to the agreed servicers.
– Operations of financial administrator
When a prefectural governor or competent ministers (in this case, the Minister of Agriculture, Forestry and Fishery and the Commissioner of the Financial Services Agency) deem that any AFCs’ liabilities are in excess of its assets and issue an order for the management of business and assets by financial administrators (hereinafter “the management order”), SIC itself may be appointed as a financial administrator. In that case, SIC sends SIC staffs to the AFCs that received the management order (hereinafter “AFCs under management”), and undertakes the operations as a financial administrator in cooperation with other financial administrators if they are appointed.
Key activities of the financial administrator are as follows.
i) Manage operations of the AFCs under management on behalf of the former executives.
ii) Take necessary procedures related to merger, etc., of the AFCs under management.
iii) Pursue liability of the former executives of the AFCs under management.
-> Past record of operations of financial administrator
– Financial crisis management
The competent ministers (in this case, the Minister of Agriculture, Forestry and Fishery and the Commissioner of the Financial Services Agency) may, when deeming that an extremely serious threat may be posed to the maintenance of financial stability in Japan or a region where relevant AFCs are conducting operations unless the following measures are taken, order SIC to take respective measures after deliberation by the Financial Crisis Response Council.
i) Subscription for preferred equity investment of the AFCs (except those mentioned below) for capital adequacy.
ii) Financial assistance exceeding the payout cost to the AFCs in distress or insolvent (full protection on savings, etc.).
SIC conducts the above operations under the order from the competent ministers, and the management order is given to the AFCs subject to the above ii).
– On-site inspection
When competent ministers (in this case, the Minister of Agriculture, Forestry and Fishery and the Commissioner of the Financial Services Agency) and a prefectural governor deem it as necessary and order SIC to conduct on-site inspection, SIC shall enter the offices or premises of the AFCs to question about or inspect the following.
i) Whether the payment of the set insurance premiums is being made properly.
ii) Whether the AFCs are implementing measures to improve the name-based aggregation databases and electric data processing system.
iii) The estimated amount of savings and other claims to be repaid which is necessary for calculation of the estimated proceeds payment rate.
On-site inspection by SIC
Check items with respect to [Article 57-2, paragraph 4 and Article 60-3, paragraph 1 of the Savings Insurance Act]
SIC conducts on-site inspections under Article 117, paragraph 6 of the Savings Insurance Act. The article stipulates items to be checked in on-site inspection undertaken by SIC with respect to “whether the measures provided in Article 57-2, paragraph 4 and Article 60-3, paragraph 1 of the Savings Insurance Act are taken or not (preparation of name-based aggregation database)” as follows.
The check items will be revised as necessary and the webpage will be updated accordingly.
(Reference) Relevant articles of the Savings Insurance Act
Article 117 (On-site inspection)
Article 50, paragraph 1 (Payment of insurance premiums)
Article 57-2, paragraph 4 (Grasp of amount of claims pertaining to savings, etc.)
Article 60-3, paragraph 1 (Measures for payment of insurance claims, etc. pertaining to savings for payment and settlement purposes)
Article 71, paragraph 2 (Estimated proceeds payment rate, etc.)
Article 125 (Penal provisions)
Check items with respect to Article 57-2, paragraph 4 and Article 60-3, paragraph 1 of the Savings Insurance Act
Contents to be reviewed
Points to be checked
|I. Customer data preparedness||1. The data necessary for name-based aggregation is prepared or not.||– Progress status compared to the schedule and the reason for delay|
|2.The customer data is correctly registered or not.||
– Identification of depositors
– Management status of depositors whose data cannot be prepared
|II. System preparedness||1.Systems have been developed in line with the “format designated by SIC” or not.||
– Contents of the systems format
– Quick preparation of magnetic tape (or floppy disk)
|2.Appropriate measures have been taken to respond to changes in system environment or not.||
– Responses to new products
– Responses to replacement of computer systems, etc.
|3.Systems have been appropriately maintained and managed or not.||– Preparedness of related materials and storage of programs|
|III. Management system for legal compliance||a) Recognition and involvement of the management||1.The management understands the purpose of Article 57-2, paragraph 4 and Article 60-3, paragraph 1 of the Act and takes appropriate actions for legal compliance or not.||
– Status of responses
– Reporting to the management and accurate responses
|2.With respect to Article 57-2, paragraph 4 of the Act, the management has taken measures to promptly submit accurate data to SIC at all times or not.||
– Departments concerned
– Understanding by persons in charge
|b) Management system||An appropriate management system has been established to comply with Article 57-2, paragraph 4 and Article 60-3, paragraph 1 of the Act or not.||
– Management system for existing data
– Management system for new data
– Emergency structure
|c) Preparedness of procedures and manuals||The procedures and manuals concerning workflow from the occurrence of an insured event to the submission of data recorded on magnetic tape (or floppy disk) to SIC are prepared or not. In addition, their contents are appropriate or not.||
– Role sharing and responsibility
– Responses to changes in systems
|d) Status of internal audits||1.Audit items include those intended for Article 57-2, paragraph 4 and Article 60-3, paragraph 1 of the Act or not.||– Internal audit items|
|2.Implementation status of internal audits||
– Status of audit schedule development and implementation
– Improvement status
2. Operations under the Act on Special Treatment of Rehabilitation Procedures of Agricultural and Fishery Cooperative
SIC may conduct the following operations in connection with the civil rehabilitation and bankruptcy proceedings under the above-mentioned Act for the purpose of prompt and smooth resolution of AFCs.
– Proceedings on behalf of depositors
SIC may take all procedures in connection with rehabilitation and bankruptcy on behalf of depositors by preparing depositors’ list and submitting it to the relevant court.
3.Operations under the Act on Enhancement and Restructuring of Credit Business Conducted by The Norinchukin Bank and Specified Agricultural and Fishery Cooperatives, etc.
– Operations related to special treatment of earthquake disaster
SIC maintains and strengthens the financial functions of AFCs in the areas affected by the Great East Japan Earthquake (hereinafter “the Earthquake”), and reinforces capital bases (by means of preferred equity investment and subordinated loan) of disaster-affected AFCs so that the depositors feel safe.
4.Operations under the Act on Corporation for Revitalizing Earthquake-Affected Business
– Revitalization of earthquake-affected business
SIC promoted the establishment of the Corporation for Revitalizing Earthquake-Affected Business and capitalized on the Corporation in collaboration with financial institutions and local governments. The Corporation is intended to reduce the debts as well as to support the revitalization of businesses which have incurred inordinate debts due to damages caused by the Earthquake and are attempting to revitalize the operations in the damaged area. Through these activities, SIC aims to prevent outflow of the industries and people from the disaster area to other areas to maintain the economic activities and to contribute to reconstruction of the devastated area.