If a firm’s financial performance deteriorated, the financial debt of this firm would no longer be acceptable as collateral or as an instrument of market operations, even if it had once been deemed to be suitable for such purposes. Of course, these measures alone are not enough.
The double-name principle might reduce the probability of defaults, but taking a firm’s debt as collateral is not sufficient if the firm’s creditworthiness is bolstered by the support of the commercial bank to which the Bank of Japan is lending. Nor is it desirable for the Bank’s assets and collateral to be concentrated in the liabilities of firms in a particular industry.