Rules on deposit certificates relaxed

Regulators have relaxed rules on deposit certificates issued by banks, cutting the amount of documents needed and removing timing requirements for selling to investors.

New rules partly scale back tougher requirements on long-term negotiable certificates of deposits (LTNCD) that banks sell to the public.

LTNCDs allow banks to lock in depositors’ cash for longer periods of time to create a better match between the available funds and maturities of loans.

The Bangko Sentral ng Pilipinas (BSP), in a circular approved this month, removed the requirement for banks to sell LTNCDs six months after these securities are given the green light by the Monetary Board.

Banks will now also be allowed to sell securities prior to the submission of additional documentary requirements to the BSP.

These documents will still have to be submitted after the LTNCDs are offered to the market.

Companies were also given more leeway for the listing of LTNCDs on a public exchange.

Old rules required banks to list LTNCDs 30 days after these are issued. This requirement was extended, allowing banks to wait for as long as a year before listing.

Penalties for the failure to list LTNCDs were also relaxed.

The BSP removed a ban on the future issuance of LTNCDs for banks that fail to meet listing requirements, replacing the penalty with fines.

The new rules were approved by the BSP’s policymaking Monetary Board on May 22.

LTNCDs are seen as a more stable source of funding for banks. Most of the funds that banks lend to the public are made of current and savings account or Casa deposits, which clients can withdraw anytime.–Paolo G. Montecillo