DOF seen revoking gov’t depository rule

The Department of Finance plans to repeal the rule that require national agencies, state-run corporations and local government units to deposit their funds only in government financial institutions (GFIs) as such rule may result in the closure of more small banks.

Finance Secretary Carlos G. Dominguez III told reporters that he had received complaints from small lenders that Department Circular (DC) 1-2015, issued by by then finance chief Cesar V. Purisima last year, was “not reasonable.”

For instance, “some municipalities do not have a Landbank branch,” Dominguez said, referring to state-run Land Bank of the Philippines.

Also, Dominguez said Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. had told him that “many rural banks will go under if [DC 1-2015] is fully implemented.”

So far this year, the BSP shuttered 21 rural banks.

Last July, Dominguez gave all national government agencies, government-owned and/or -controlled corporations (GOCCs) or local government units (LGUs) that maintain accounts with banks that do not have a universal bank license and a Camels rating of at least “3” until June 30 next year to transfer all their cash balance and funds to compliant GFIs through DC 2-2016.

Such allowed agencies, GOCCs and LGUs to comply with DC 1-2015, which laid down the revised guidelines on authorized government depository banks in order to ensure that public funds will be tightly safeguarded in line with efforts to further strengthen the government’s overall fiscal position.

An amendment under DC 3-2015 in August last year ordered the transfer of all funds and cash balances within one year, or until August this year.

Back then, Dominguez granted the extension “in view of the numerous requests received by the [Department of Finance], and to minimize operational impact among national government agencies, GOCCs and LGUs.”

Under DC 2-2016, government agencies, GOCCs, and LGUs “may maintain existing accounts with a noncompliant bank but may not increase deposit balances beyond what they were” now until June 30, 2017.

Accounts in noncompliant banks may still be kept for one more year beyond the new deadline, as long as agencies, GOCCs and LGUs request another extension through a transition plan to be submitted for the DOF’s evaluation and approval at least 90 days before June 30, according to DC 2-2016.

If the request of the agency, GOCC or LGU to further extend their accounts in noncompliant banks was disapproved by the DOF, it is a must to transfer all cash balances and funds to qualified GFIs.

Now, Dominguez said he had given instructions to repeal the order. “We’ll just remove that. It’s just an issuance.”