The Japanese Institute of Certified Public Accountants has issued a definitive set of guidelines that tighten up the rules on how much an issuer of a securitization transaction can retain on its books and still get capital relief.

The finalized guidelines were issued at the beginning of August and follow the provisional rules that the JICPA published in June for consultation.

The new rules mean that if a company retains more than 5% of an issue then it must count all of the assets that back a deal on its balance sheet.

According to securitization pros in Tokyo, market participants had petitioned the body to allow a ceiling of 10%, but this was rejected. However, the accountants have agreed to delay the implementation until April 2001, with the 10% limit being in force until then.

Pros suggested that the body was particularly concerned by the recent spate of CMBS deals, most of which featured large subordinated pieces that were retained by the issuer. The body argued that moving such assets of balance sheet distorted a true picture of a company's financial health, as a company would still hold large chunks of the riskiest part of the deal.

However, experts suggested that the rule change is not likely to significantly dent the volumes of securitization in general or CMBS in particular. "There is a strong impetus towards securitization in Japan and this won't have much effect on its own," said one analyst. "It may even do some good by encouraging more placement of sub pieces, with the increase in the level of disclosure and information which will be necessary for that to happen."

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