QuestionsQuestions (BSP CIRCULAR NO. 186)
It is issued pursuant to Monetary Board Resolutions Nos. 1666 and 1802 dated December 2 and 29, 1998, respectively, amending provisions of the Manual of Regulations for Banks and Other Financial Intermediaries (Books I to IV) on secured loans to DOSRI.
It amends the definition to include specific types of acceptable collateral/security and adds/clarifies restrictions for loans secured by “blue chip” stocks, including issuer qualifications and a loan-value-to-market-value ratio.
The issuer corporation must be (a) a listed corporation with net worth of at least P1 billion, and (b) with a record of at least 5 consecutive years earnings, reckoned from the immediately preceding 5 years; also, the loan value shall be equivalent to 50% of the market value of the stocks.
Standby letters of credit issued by foreign banks excluding Philippine branches of foreign banks; assignment/hold-out on deposits or deposit substitutes maintained in the lending bank; cash margin deposits; and assignment or pledge of government securities or readily marketable bonds and other high-grade debt securities.
It refers to a security arrangement where the lender’s right to the deposits or deposit substitutes maintained in its own books is assigned to, or withheld/encumbered in favor of, the bank/non-bank performing quasi-banking functions.
It includes real estate mortgage; chattel mortgage on tangible assets; standby letters of credit issued by foreign banks excluding Philippine branches of foreign banks; assignment/hold-out on deposits maintained in the lending bank; and assignment/pledge of government securities and other high-grade debt securities and blue chip stocks. Notably, it omits “cash margin deposits” and “deposit substitutes” language present in Books I and II, specifying deposits maintained in the lending bank.
Receivables arising from financial leases are included to the extent of the guaranty deposit plus 60% of the remaining value of the leased equipment.
The loan value of the stocks shall be equivalent to 50% of its market value, and the issuer must meet the same listing/net worth/earnings criteria stated in the circular.
The loan value shall be equivalent to fifty percent (50%) of the market value of the stocks.
It takes effect immediately upon issuance (adopted 26 January 1999). This means covered institutions should apply the amended DOSRI secured-loan definition and related restrictions without waiting for a later effective date.
It tightens and clarifies what forms of collateral qualify as “secured” for purposes of DOSRI lending rules, thereby promoting prudent risk management and limiting potential conflicts of interest and undue risk-taking.