Law Summary

Overview of the Circular

This Circular establishes guidelines regarding the treatment of borrowings by financial institutions from the Government Service Insurance System (GSIS) in relation to its Industrial and Commercial Lending Program.

Legal Principle

• The Monetary Board, through Resolution No. 1068, has determined that:
  • Borrowings by financial institutions from the GSIS as a result of participation in its lending program are not to be classified as deposit substitutes.
  • Consequently, these borrowings are exempt from the legal reserve requirements and liquidity floor requirements applicable to borrowings from the government.

Key Definitions

• Borrowings: Refers to funds obtained by financial institutions from the GSIS under the Industrial and Commercial Lending Program.
• Deposit Substitutes: Financial instruments or arrangements that are treated like deposits but do not meet the criteria for traditional deposits under banking regulations.

Important Requirements

• Financial institutions engaging in borrowings from the GSIS under the specified program must ensure compliance with the stipulations outlined in this Circular.
• There are no specific procedural requirements detailed in this Circular beyond the indication of the borrowings’ treatment.

Timeframes

• The Circular takes effect immediately upon its adoption date of October 23, 1990.

Penalties and Liabilities

• The Circular does not explicitly outline any penalties or liabilities for non-compliance, as it primarily serves to clarify the classification of the borrowings rather than impose new obligations.

Cross-References

• This Circular should be considered in conjunction with other regulations governing financial institutions and their borrowing practices, particularly those related to deposit substitutes and liquidity requirements.

Key Takeaways

• Borrowings from the GSIS for the Industrial and Commercial Lending Program are not considered deposit substitutes.
• Such borrowings are exempt from legal reserve and liquidity floor requirements.
• The Circular is effective immediately from its adoption date, providing clarity to financial institutions regarding their obligations and regulatory framework concerning these borrowings.