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MANILA, Philippines—Local banking giant Metropolitan Bank and Trust Co. plans to redeem P4.5 billion worth of debt notes that no longer qualify as Tier 2 or supplementary capital under the Basel 3 capital adequacy framework.
In a disclosure to the Philippine Stock Exchange, Metrobank said it would exercise the call option of these notes, which carry an interest rate of 7.5 per cent per annum, on May 6 this year.
The exercise of the call option is subject to the approval of the Bangko Sentral ng Pilipinas.
Starting last Jan. 1, universal and commercial banks were required by the BSP to adopt the capital adequacy standards under Basel 3, which introduces a complex package of reforms designed to improve the ability of banks to absorb losses. This framework also extends the coverage of financial risks and puts in place stronger firewalls against periods of stress.
Basel 3-compliant Tier 2 notes typically have a provision for the instrument to either be written off or converted to common equity upon the occurrence of certain trigger events.
At present, Metrobank is planning to offer Basel 3 compliant Tier 2 notes in order to proactively manage its capital base in support of continued growth.