SALE, DISCOUNTING, ASSIGNMENT OR NEGOTIATION BY BANKS AND QUASI-BANKS OF THEIR CREDIT RIGHTS IN SPECIAL DEPOSIT ACCOUNT (SDA) PLACEMENTS AND REVERSE REPURCHASE AGREEMENTS WITH T…

The Monetary Board, in its Resolution No. 1581 dated 27 November
2008, approved the following regulations governing the sale,
discounting, assignment or negotiation by banks/quasi-banks of their
credit rights in Special Deposit Account (SDA) placements and Reverse
Repurchase Agreements with the BSP (RR/P) to clients.

SECTION 1. Sale, Discounting, Assignment or Negotiation by
Banks of their Credit Rights Arising from Claims Against the BSP to
Clients. The following banking regulations are hereby amended, as follows:

a. Subsection X234.6 of the Manual of Regulations for Banks (MORB) is hereby added, as follows:

“Sub section X234.6 Sale, discounting, assignment or
negotiation by banks of their credit rights arising from claims
against the BSP. Pursuant to the policy of the BSP to promote
investor protection and transparency in securities transactions as
important components of capital markets development, credit rights in
Special Deposit Account placemen ts and Reverse Repurchase Agreements
with the BSP, shall not be the subject of sale, discounting, assignment
or negotiation on a “with or without recourse” basis.

“Any violation of the provisions of this Subsection shall be
considered a less serious offense and shall subject the bank and the
director/s and/or officer/s concerned to the sanctions provided under
Section X299.”

b. Item A of Circular Letter dated 14 November 2001 on the sale
of RR/P to clients and Annex G of the same Circular Letter on the
pro-forma accounting entries on the sale by banks of their RR/P to
clients are hereby deleted.

c. The Financial Reporting Package for Banks issued under
Circular No. 512 dated 3 February 2006, as amended, is hereby further
amended so as to delete the sub-account

“Revers e Repurchase Agreements with BSP-Sold to Clients” under “Other Deposit Substitutes”.

SECTION 2. Sale, Discounting, Assignment or Negotiation by
Quasi-Banks of their Credit Rights Arising from Claims Against the BSP
to Clients. The following regulations governing quasi-banks are hereby amended, as follows:

a. Subsection 4101Q.6 of the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) is hereby added, as follows:

“Subsection 4101Q.6 Sale,
discounting, assignment or negotiation by quasi-banks of their credit
rights arising from claims against the BSP. Pursuant to the
policy of the BSP to promote investor protection and transparency in
securities transactions as important components of capital markets
development, credit rights in Special Deposit Account placements and
Reverse Repurchase Agreements with the BSP, shall not be the subject
of sale, discounting, assignment or negotiation on a “with or without
recourse” basis.

“Any violation of the provisions of this Subsection shall be
considered a less serious offense and shall subject the quasi-bank and
the director/s and/or officer/s concerned to the sanctions provided
under Section 4199Q.”

b. Subsection 4602Q.1 of the MORNBFI on Reverse Repurchase
Agreements with the BS P is hereby amended to delete the second and
third paragraphs of Item “e”, as follows:

“Subsection 4602Q.1 Reverse repurchase agreements with Bangko Sentral. Reverse repurchase agreements may be effected with the BSP subject to the following terms and conditions:

xxx

“e. Reservation. Prepayment may be made by the BSP at its option anytime before maturity.

“Effective 1 July 2003, published interest rates that will be
applied on reverse repurchase agreements with the BSP of quasi-banks
shall be inclusive of Value Added Tax ( VAT).”

c. Appendix Q-26 of the MORNBFI which provides the pro-forma
accounting entries on the sale by quasi-banks of their RR/P to clients
is hereby deleted.

SECTION 3. Transitory Provision. The
provisions of this Circular shall be applied prospectively, in that
sale agreements executed by banks and quasi-banks with clients before
the effectivity of this Circular, which are not in compliance
therewith, shall be allowed to remain in force and subsisting until the
pre-termination or maturity of the underlying SDA placement or RR/ P,
whichever comes earlier.

This Circular shall take effect fifteen (15) calendar days following
its publication either in the Official Gazette or in a newspaper of
general circulation.

Adopted: 17 Dec. 2008

 

FOR THE MONETARY BOARD:

(SGD.) AMANDO M. TETANGCO, JR.
Governor