BSP simplifies rules for banks’ bond floats

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Nestor A. Espenilla, Jr.
BANGKO Sentral ng Pilipinas Governor Nestor A. Espenilla, Jr.

By Melissa Luz T. Lopez, Senior Reporter

THE CENTRAL BANK has simplified rules for lenders issuing bonds to raise additional capital, its chief said, which is expected to replace long-term note offerings.

Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said the Monetary Board has approved simpler rules for bank fundraising via bond float.

“We (approved) the rules that will facilitate banks to issue bonds into the market. As a way of raising long-term money, they can consider issuing bonds to support their growth,” Mr. Espenilla told reporters on Friday.

“Down the road, that should replace LTNCDs,” he added, referring to long-term negotiable certificates of deposit.

LTNCDs, like the regular time deposits, offer higher interest rates but cannot be pre-terminated. Instead, these can be sold at the secondary market. Several banks have offered long-term notes in tranches to shore up fresh investments, beef up their capital bases and manage existing debts.




“It can be costlier to do LTNCDs down the road,” Mr. Espenilla said.

He added that the latest issuance seeks to streamline the rules for corporate bond issuances which have made this option tricky for banks in raising additional capital.

Compared to LTNCDs which are deposits, bonds are capital instruments that will also help deepen the local bond market. The BSP chief added that they have coordinated with the Securities and Exchange Commission (SEC) in crafting the regulations.

“The bottom line is like a non-financial corporate, a bond can be issued by a bank following basically the SEC bonds issuance rules… We sort it out within the context of the existing law,” Mr. Espenilla said, noting that the circular will be issued soon.

Central bank officials have said that the industry trend for capital-raising represents the banks’ steps towards the full implementation of tighter standards imposed by the regulator.

Starting Jan. 1, 2019, big banks are expected to be fully compliant with capital and liquidity standards set under the international Basel 3 framework, a set of prudential measures meant to improve risk management that ensures a solid footing for banks.

These standards ensure that banks will not collapse even during a financial crisis.