BSP sees shift to bonds, commercial papers as alternate funding source

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) expects banks to shift to the issuance of bonds and commercial papers instead of long-term negotiable certificates of deposits (LTNCD) in tapping the domestic capital market.

BSP Governor Nestor Espenilla Jr. said the Monetary Board has approved the rules that would facilitate the issuance of bonds as an alternative funding source.

“As a way of raising long term money, they can issue bonds to support their growth,” Espenilla said.

LTNCDs have been an effective way for banks to raise cost-effective funding, while offering a new investment product to their own deposit base, most of whom are looking for long term assets that provide higher yields than traditional time deposits.

Banks that have so far issued LTNCDs this year include China Bank with P10.25 billion, followed by BDO Unibank with P8.2 billion, Security Bank with P5.78 billion, Union Bank with P3 billion, and Robinsons Bank with P1.78 billion.

The BSP expect bonds and commercial papers to replace LTNCDs down the road as the main funding source of Philippine banks.

“It will actually help build the corporate bond market. It is a kind of corporate bonds except that this is issued by banks,” he said.

In October last year, the Monetary Board approved amendments to pertinent regulations to streamline the requirements on the issuance of bonds and commercial papers by banks and quasi-banks.

The changes include the removal of the minimum bond features, such as the requirement on eligible collaterals that constrain banks from issuing debt securities.

The revised regulation, however, reiterates compliance with the securities law and its implementing rules and regulations.

“The bottom line is like a non-financial corporate, a bond can be issued by a bank following basically the SEC’s bonds issuance rules,” he said.

The regulation was aimed at providing banks with greater flexibility in tapping the capital market as an alternative funding source.

This is also consistent with the initiatives of the BSP, together with other financial regulators, to spur the development of the domestic bond market.