RCBC gets BSP okay to issue P5-B LTNCDs

MANILA, Philippines - Rizal Commercial Banking Corp. (RCBC), the banking arm of the Yuchengco Group, has secured Bangko Sentral ng Pilipinas (BSP) approval to issue P5 billion worth of long-term negotiable certificates of time deposit (LTNCD).

In a disclosure to the Philippine Stock Exchange, RCBC said it plans to start with the LTNCD offering in the coming weeks, subject to market conditions and compliance with regulatory requirements.

In June this year, the bank’s board had approved the issuance of the peso-denominated LTNCD.

To give customers more investment options, several local banks have ventured into issuing these kind of certificates.

East West Banking Corp. issued P5 billion worth of LTNCD in late 2012 and will issue another P5 billion within the year. Union Bank of the Philippines said it is also planning to issue P5 billion within the year, while Metropolitan Bank and Trust Co. and Banco de Oro Unibank have also issued LTNCDs.

Instead of issuing more shares or launching a new debt instrument, banks are resorting to LTNCDs which consumers find more attractive because they are relatively safe yet high-yielding compared to traditional deposits.

LTNCDs are negotiable certificates of deposit indicating an amount of indebtedness of a bank with a designated maturity.

These certificates form part of a bank’s deposits and rank senior to all unsecured and subordinated debts, and all classes of equity securities.

They are similar in a way but differ primarily in the negotiability of the instrument. A long-term time deposit cannot be transferred during its life, while there is a market for LTNCDs should the holder wish to sell it prior to maturity date.

LTNCDs are covered by the Philippine Deposit Insurance Corp. (PDIC), subject to applicable rules and regulations, on a maximum insurance coverage up to P500,000 per depositor.