Increase in BSP Reserve Requirements for Trust Funds

The additional reserves (increase of 3% then 2%) could be satisfied by purchasing government securities.
These securities must be purchased directly from the Bangko Sentral ng Pilipinas (BSP) at half a percent (0.5%) below prevailing market rates.
BSP provides a firm commitment to buy back these securities anytime at prevailing market prices.
Government securities reserves are in addition to other eligible reserves such as cash in vault or deposits with BSP.

Purchases of government securities must be transacted under the BSP’s Book Entry System (BES).
Securities are recorded electronically in the securities accounts of the banks or financial institutions.
No physical certificates will be issued; transactions with third parties aside from BSP are invalid.
Interest and redemption payments are credited automatically to the institutions' demand deposit accounts with BSP.
Institutions must coordinate with BSP's Government Securities Department for BES participation documentation.

The remainder of the reserve requirement, after accounting for government securities, shall comply with existing prescribed forms (e.g., cash in vault or deposits with BSP).

From May 15, 1995, deposits maintained with BSP by financial intermediaries authorized to conduct trust/fiduciary business, up to 40% of their reserve requirement (calculated as 13% less government securities portion, max 3%), will earn an interest rate of 4% per annum.
Interest is based on the average daily balance and credited quarterly.
From June 15, 1995, the reserve requirement calculation changes (15% less government securities portion, max 5%) while 40% of these deposits continue to earn 4% annual interest.

Any previous regulations inconsistent with these guidelines are deemed amended, revised, or revoked.
This memorandum shall guide all relevant banks and financial intermediaries accordingly.