BSP allows rural, coop banks to invest in marketable bonds

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has allowed rural and cooperative banks to invest in readily marketable bonds and other debt securities without prior approval from the regulator.

BSP Governor Amando Tetangco Jr. has issued Circular 960 amending certain provisions of the Manual of Regulations for Banks (MORB).

The amendments, Tetangco said, allows rural and cooperative banks to acquire readily marketable funds and other debt instruments without prior approval from the BSP.

He said the bonds and other debt instruments should have complied with the new rules on registration of commercial papers.

Furthermore, the BSP chief added the investment should not be held for trading purposes.

Rural and cooperative banks should conduct a continuous self-assessment of their compliance and should submit one-time notarized certification that the pre-qualification requirements under the MORB have been complied with 10 calendar days from date of initial investment.

The regulator said the classification, accounting procedures, valuation, sale and transfers of investment in debt securities and marketable equity securities should be in accordance with the guidelines.

On the other hand, thrift banks could invest in evidence of indebtedness that are not registered with the Securities and Exchange Commission (SEC) but are not readily marketable securities.

Tetangco said rural banks could also offer other banking services as well as engage in the buy and sell of foreign exchange.

Cooperative banks could also perform any or all of the banking services offered by rural banks.

The regulator warned it would impose penalties and sanctions on BSP-supervised financial institutions and concerned officers found violating provisions of the guidelines.

A fine ranging between P1,000 and P20,000 would per day be imposed on rural, cooperative, thrift, commercial, and universal banks reckoned from the date the violation was committed.

Concerned officers face reprimand on the first offense while subsequent offenses would merit a 90-day suspension without pay.

Latest data from the BSP showed the number of banks declined to 602 last year from 632 in 2015 consisting of 42 universal banks, 21 commercial banks, 60 thrift banks as well as 500 rural and cooperative banks.

The BSP ordered the closure of 22 problematic banks last year as part of efforts to weed out weak players and to pursue the consolidation among major players.