Lender Security Bank Corp. has joined the bandwagon of big local banks setting up local bond programs to diversify their funding base.
In a disclosure to the Philippine Stock Exchange, Security Bank said its board had approved the establishment of a bond program worth up to P50 billion.
This gives Security Bank leeway to tap the bond market to fund expansion programs, giving it more options to raise funds aside from generating deposits.
Security Bank—led by the Dy family and 20-percent-owned by The Bank of Tokyo-Mitsubishi Bank—is currently valued by the stock market at about P121 billion.
Banking and securities regulators recently issued rules that made it easier for banks to issue bonds. Previously, the Bangko Sentral ng Pilipinas required banks that intended to offer bonds to back up 100 percent of the bonds with government securities as collateral. If a bank uses other collateral, its value must exceed that of the issue size.
BSP Circular 1010 series of 2018 scrapped this collateral requirement. However, part of the new requirement is for the bonds issued by a bank to be enrolled or traded in a formal market.
Debt issuances of banks are exempted from the registration requirement of the SEC.
Given a more flexible regulatory environment, some of the country’s largest banks have set up debt offering programs to diversify funding sources amid rising demand for long-term loans for big-ticket projects. Metrobank and BDO Unibank each set up a P100-billion bond and commercial paper program.
Under BSP rules, a bank or quasi-bank may issue bonds and/or commercial papers without prior BSP approval provided it meets “prudential” criteria, such as a rating of at least 3 in “Camels”—an international rating system based on metrics represented by the acronym: capital adequacy, asset quality, management, earnings, liquidity, sensitivity.
Also, the bank must not have any major supervisory concern in governance, risk management systems, internal controls and compliance system. —DORIS DUMLAO-ABADILLA