HOME GUARANTY CORPORATION (HGC) BOND ISSUE TO FINANCE ITS GUARANTY SERVICING OF SOCIALIZED AND LOW-COST HOUSING PROJECT
The Monetary Board, in its
Resolution Nos. 588 and 1067 dated 25 April 2002 and 25 July 2002,
respectively, decided to consider the proposed zero coupon bond issue by
the Home Guaranty Corporation (HGC) of up to P7.0 billion 5-year
regular series and up to P3.0 billion 7-year special series to finance
its guaranty servicing of socialized and low-cost-housing projects as:
(a) Alternative
compliance with the agrarian reform credit requirement of P.D. No. 717
in line with Section 4 (a) thereof which allows banking institutions to
invest in such government securities as may be declared eligible by the Bangko Sentral
any portion of the amount set aside for agrarian reform credit not
actually loaned out, provided that the issuing government entity shall
stand ready to monetize, encash or
repurchase such securities whenever funds are needed by the banks
holding the said securities for lending to the beneficiaries of agrarian
reform, and(b) Reserve for trust and other fiduciary duties.
Investments made by banks in HGC’s
proposed bond issues shall be allowed as alternative compliance with
the ten percent (10%) agrarian reform credit requirement subject to the
following conditions:1. Such bonds shall not be hypothecated in any way or earmarked for any other purpose;
2. In
case the bonds are the subject of a repurchase/resale agreement, only
the buying/lending bank may use such bonds as compliance with agrarian
reform credit requirement during the holding period: Provided, That the
repurchase/resale agreement shall be for a term of at least thirty (30)
days without pre-termination during the first thirty (30) days; and3. Such
bonds shall be eligible as alternative compliance with the agrarian
reform credit requirement only to the extent of the present value of the
bond computed using the original yield to maturity (as of auction/issue
date).The bonds may also qualify as
eligible reserve for trust and other fiduciary duties only when they
meet the 3-year remaining maturity requirement to ensure that such bonds
are liquid: Provided, That such bonds shall qualify as eligible reserve
for trust and other fiduciary duties only to the extent of the present
value of the bond computed using the original yield to maturity (as of
auction/issue date).
This Circular shall take effect immediately.
Adopted: 9 October 2002
(SGD.) ALBERTO V. REYES
Officer-in-Charge