MANILA, Philippines--The Bangko Sentral ng Pilipinas (the Philippine central bank) has given state-owned Land Bank of the Philippines the authority to offer up to P5 billion worth of high-yielding long-term deposit facility to overseas Filipino workers and their families.

At the sidelines of a risk management forum at the Asian Institute of Management yesterday, BSP Deputy Governor for bank supervision and examination Nestor Espenilla Jr. said the central bank's policy-making Monetary Board had approved Landbank's offering of long-term negotiable certificates of deposits (LTNCDs).

This deposit instrument was designed to help overseas Filipinos and their families participate in the government's savings mobilization program, as well as to help minimize the adverse impact of the sharp peso appreciation on our OFWs as the LTNCD carries a higher yield compared to existing peso savings and time deposits.

LTNCD is tax free because of the long tenor. Unlike regular time deposits, the reserve requirement on LTNCDs is much lower, thereby enabling the issuer to offer higher yield.

Another major difference is that investors are required to hold the LTNCDs until maturity unlike time deposits where pre-termination is allowed. But since the instrument is negotiable, it can be used as collateral for bank loans or sold to another investor without effecting a change in ownership.

The LTNCD will be available by March in all Landbank branches, HSBC and designated selling agents.

The peso-denominated LTNCD will be issued in P20,000 denomination and in tenors of five and a half years and 10 years starting this month. It is covered by Philippine Deposit Insurance Corp. up to P250,000 per depositor and is exempt from withholding tax if held to maturity.

The instrument carries an indicative yield of 6.25 percent for the five-and-a-half-year term, and 6.88 percent if held for 10 years. The final interest rates, however, will depend on the prevailing market rates at the time of issuance.