METROPOLITAN BANK and Trust Co., the country?s biggest bank, plans to offer up to P10 billion worth of high-yielding deposit products to harness long-term savings from clients.

Metrobank also recently obtained a license from the Bangko Sentral ng Pilipinas to offer sophisticated hedging and investment instruments called derivatives.

BSP Deputy Governor Nestor Espenilla Jr. told reporters on Friday that the policy-making Monetary Board has approved the bank?s plan to offer up to P10 billion worth of long-term negotiable certificates of deposits (LTNCDs).

By using the LTNCD structure, which is tax-free because of the long tenor (over five years), banks can offer better yields to clients. Unlike regular time deposits, LTNCDs are also covered by a much lower reserve requirement, thus enabling the issuing bank 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 these instruments are negotiable, they can be used as collateral for bank loans or sold to another investor without effecting a change in ownership.

The issuance of LTNCDs has been popular among banks in recent years to attract the long-term savings from people who shun risky financial investments. Other banks which recently issued LTNCDs were China Banking Corp. and Land Bank of the Philippines.

In a separate statement, Metrobank said the BSP has approved its application for a Type 2 derivatives license.

A financial derivative is any financial instrument or contract whose value changes in response to a change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit spread, credit rating or credit index or other variables.

To support its new expanded derivatives license, Metrobank has upgraded its treasury platform to handle a wide range of instruments, including derivatives, fixed income, equities and treasury trades.

Metrobank executive vice president Fernand Antonio Tansingco said: ?Metrobank is firmly committed to providing the right solution. When used appropriately, derivatives can help our customers manage their risks in the financial market.?

Tansingco added that when Metrobank applied for its expanded derivatives license, emphasis was placed on having the correct systems to manage risk, monitor exposure and aid in compliance.