Issuance and Features of NDC Agri-Agra ERAP Bonds
- The National Development Company (NDC) is authorized to issue Agri-Agra ERAP Bonds totaling Fifty Billion Pesos (P50,000,000,000).
- Bonds are issued in tranches and guaranteed by the Republic of the Philippines.
- Interest income on these bonds is tax-exempt.
- Bond features (such as interest rates and terms) are to be competitively determined by NDC in consultation with the Department of Finance.
Utilization of Proceeds from ERAP Bonds
- Proceeds must be exclusively used for developing agriculture and agrarian sectors.
- Priority projects include rice production joint ventures, establishment of food chains, livestock and agri-processing support services.
- The NDC, Department of Agrarian Reform (DAR), and Department of Agriculture identify eligible projects.
- Utilization modes include concessional co-financing loans, equity investments, issuance of guarantees among others.
Allowable Alternative Compliance with PD 717
- Investment in NDC Agri-Agra ERAP Bonds and firm underwriting by banks or their investment subsidiaries counts as compliance with the mandatory loan allocations under PD 717.
- Conditions for compliance include:
- Bonds must not be hypothecated or earmarked for other purposes.
- In repurchase/resale agreements, only the buying/lending bank may claim compliance during the holding period.
- Such agreements must have a minimum 30-day non-pre-termination term.
Group-wide Compliance Reporting
- Banks with subsidiaries (at least 75% owned or controlled) may report PD 717 compliance on a consolidated group-wide basis.
- Parent banks must submit consolidated reports supported by individual bank reports.
- Subsidiaries still submit individual reports to their regulators.
- Parent banks can use subsidiaries’ excess compliance for their own compliance.
- Board members and officers of parent banks are held accountable for group compliance deficiencies.
Other Permissible Uses of ERAP Bonds
- ERAP Bonds not used for PD 717 compliance may be used as:
- Liquidity reserves for deposits and deposit substitutes.
- Funds for trust accounts and common trust funds.
- Liquidity floor for government deposits.
- Security for the faithful performance of trust duties.
- Existing restrictions on term lengths for securities used in these ways do not apply to ERAP Bonds.
Sanctions for Non-compliance
- Banks failing to meet mandatory credit allocations under PD 717 face sanctions under existing laws.
- Sanctions are based on quarterly consolidated reports banks submit to Bangko Sentral detailing utilization of loanable funds set aside for agrarian reform and agricultural credit.
Effectivity of Circular
- The circular takes effect upon availability of the NDC Agri-Agra ERAP Bonds in the market.
- Adopted April 12, 1999, by the Monetary Board and Bangko Sentral Governor Gabriel C. Singson.