The numerator, unencumbered capital, is the sum of basic items such as capital stock and surpluses and supplementary items such as subordinated debt, less deducted assets such as fixed assets1. When the ratio falls below 140%, the operator must report at once and file a report every business day, in addition to the month-end report2.

Consider a hypothetical example in which unencumbered capital is 5.4 billion yen and the three risk equivalents total 4.0 billion yen. The ratio is 135%, which is below 140%.

This differs from a bank's capital adequacy ratio: the denominator is not risk-weighted assets but the three amounts calculated by the method the Commissioner of the Financial Services Agency sets3.

Notes

  1. Cabinet Office Order on Financial Instruments Business, etc. (in Japanese), Article 1, paragraph 4, item 2, and Articles 176 and 177. ↩

  2. Cabinet Office Order on Financial Instruments Business, etc. (in Japanese), Article 179, paragraphs 1, 3, and 4. ↩

  3. Cabinet Office Order on Financial Instruments Business, etc. (in Japanese), Article 178, paragraph 1. ↩