THE BANGKO SENTRAL ng Pilipinas (BSP) has revised its rules on banks’ issuance of long-term negotiable certificate of time deposit (LTNCTDs), bonds and commercial papers in a move to develop the capital market.

In a statement on Sunday, the BSP said its policy-setting Monetary Board (MB) has approved amendments to rules allowing universal and commercial banks (U/KB) and quasi-banks (QB) to have its related companies underwrite or arrange offerings of LTNCTDs, bonds and commercial papers, now requiring lenders to hire firms other than parties that have any connection to them.

“The amended rules require that there are other third party underwriters/arrangers that are not related in any manner to the issuing U/KB or QB. The parties shall ensure that an objective conduct of the due diligence review is not undermined and that appropriate safeguards and controls on related party transactions shall be instituted to prevent conflict of interest on the arrangement,” the central bank said.

“These prudential reforms are aimed to promote efficiency in the issuance of the said instruments by U/KBs and QBs and at the same time protect the interest of the investing public,” it added.

Some banks that offer financial instruments hire their investment-banking subsidiaries as sole underwriters or arrangers for their transactions. With the BSP’s new rules, these lenders will have to get other firms to manage their capital-raising activities in cooperation with their own units.

Meanwhile, the BSP said in the same statement on Sunday that the MB has approved indefinite moratorium for LTNCTD issuances starting January 2021, giving lenders until September 2020 to file their requests to issue these instruments.

“The moratorium is seen to shift the banks’ funding channel from LTNCTDs to bond issuances that is to likewise further deepen the local debt market,” it said.

LTNCTDs are like regular time deposits that offer higher interest rates.

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