QuestionsQuestions (BSP CIRCULAR NO. 1257)
It provides that such borrowings—specifically those arising from participation in GSIS’s Industrial and Commercial Lending Program—are not considered deposit substitutes and are therefore not subject to the legal reserve requirement and not covered by the liquidity floor requirement applicable to borrowings from the government.
The borrowing must arise from the financial institution’s participation in the GSIS Industrial and Commercial Lending Program.
No. The Monetary Board determined that these borrowings should not be considered deposit substitutes.
Resolution No. 1068, dated October 15, 1990.
First, they are not subject to the legal reserve requirement (because they are not deposit substitutes). Second, they are not subject to the liquidity floor requirement on borrowings from the government.
The Industrial and Commercial Lending Program.
Yes. The Circular applies to borrowings arising from the financial institution’s participation in the GSIS Industrial and Commercial Lending Program.
The Circular’s exemption is tied to borrowings arising from participation in the Industrial and Commercial Lending Program. If the borrowing does not arise from that participation, the Circular may not apply as written.
Because deposit substitutes are typically subject to legal reserve requirements. The Circular states the GSIS borrowings in question are not deposit substitutes, so they are not subject to legal reserve requirements.
It refers to a regulatory benchmark for liquidity on certain borrowings from the government. The Circular states that the specified GSIS borrowings are not subject to the liquidity floor requirement on borrowings from the government.
It takes effect immediately.
Jose L. Cuisia, Jr., Governor of the BSP.
October 23, 1990.
(1) The creditor/source is the GSIS; (2) the debtor is a financial institution; (3) the borrowing arises from participation in GSIS’s Industrial and Commercial Lending Program; (4) the effect is no deposit-substitute classification and therefore no legal reserve; and (5) no liquidity floor requirement on borrowings from the government.
They may treat the specified GSIS borrowings as outside the calculations/requirements for legal reserves and the liquidity floor that would otherwise apply to government borrowings or deposit substitutes.
This Circular draws a line: even though the borrowing is from a financial-support source (GSIS), the Monetary Board chose to classify certain borrowings not as deposit substitutes. Therefore, classification affects whether reserve and liquidity requirements apply.