By Daryll E. D. Saclag, Reporter

PDEx to start trading deposit certificates

Posted on August 29, 2014

THE COUNTRY’S fixed income exchange will operate the trading platform -- which will start running next week -- for long-term negotiable certificates of time deposits (LTNCDs), a central bank official yesterday said.

A TRADER studies fixed income and currency data provided by the Philippine Dealing & Exchange Corp. (PDEx). -- WWW.PDS.COM.PH/
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla, Jr., responding to a BusinessWorld query, said that the Philippine Dealing & Exchange Corp. (PDEx) will run the platform starting Sept. 1.

Mr. Espenilla noted that as of end-June, there are currently P85.3 billion worth of LTNCDs out in the market.

That’s a size equivalent to the combined LTNCD issuances of about 17 banks, which in the past have been selling the certificates by an average volume of P5 billion per tranche.

LTNCDs, like the regular time deposits, offer higher interest rates. Unlike time deposits, however, LTNCDs cannot be pre-terminated. They are called “negotiable” because they can be sold at the secondary market.

Before PDEx was designated to become the trading platform for LTNCDs, these hybrid deposit products were traded over the counter, according to Mr. Espenilla.

An LTNCD exchange was needed for “investor protection,” the central bank official said.

For RCBC Retail Banking Group Head Raul Victor B. Tan, the platform would provide “more price transparency.”

RCBC itself plans to sell up to P20 billion in LTNCDs to further raise fresh capital.

In Memorandum No. M-2014-034 posted on its website late Wednesday, the central bank told banks that issued LTNCDs after the effectivity of Circular No. 824 - released last January - to apply for listing by Sept. 2.

“This is in accordance with the listing requirement of long-term negotiable certificates of time deposits on an organized platform pursuant to the BSP Circular No. 824 dated Jan. 30,” the memorandum read.

Last January, the central bank mandated via Circular 824 the listing of LTNCDs -- one of the modes by which a bank can source long-term funding other than the sale or issuance of debt or equity instruments.

Five months later, however, the BSP said it was temporarily suspending the requirement due to “non-availability of a suitable operating platform.”

Circular 824 relaxed the rules on the sale of LTNCDs to provide banks more stable sources of funding. The central bank, among others, removed the P5-billion-per-issue limit and the 300% cap on the ratio of total LTNCDs to outstanding capital.