Legal basis and re-issued prior approval
- The memorandum is issued for the purpose of implementing Subsection 4404 Period 1(5)(a) under the trust rules.
- The memorandum applies to the segment of trust/investment management applicants involving investment houses not authorized to engage in quasi-banking functions.
- The guidelines being re-issued were previously approved under Monetary Board Resolution No. 1059 dated November 16, 1992.
- The memorandum expressly covers the use of formula/criteria and the substitution of reserve/liquidity requirements with a cash ratio for a defined category of firms.
Covered entities and purpose
- The memorandum applies to investment houses not authorized to engage in quasi-banking functions that apply for trust/investment management authority.
- The memorandum governs implementation “in so far as” such applicants are concerned.
- The memorandum focuses on two areas for these applicants: (1) determining compliance using a capital-to-risk-assets framework for certain quasi-banking performance, and (2) reserve/liquidity requirements converted into a cash ratio.
- The memorandum adopts criteria for non-bank financial intermediaries performing quasi-banking functions (NBQB).
NBQB capital-to-risk and loan ceilings
- The memorandum requires adoption of a formula/criteria for determining compliance by non-bank financial intermediaries performing quasi-banking functions (NBQB).
- The compliance determination covers the capital-to-risk assets ratio for NBQB.
- The compliance determination also covers ceilings on loans extended to the following covered interests: directors, officers, stockholders, and related interests.
- The memorandum links the use of the formula/criteria specifically to the assessment required under the trust rules implementation for the covered applicants.
Cash ratio in place of reserve and liquidity floor
- The memorandum substitutes the reserve and liquidity floor requirements with the cash ratio requirement.
- The substitution is structured through two cash-ratio computation sets:
- Primary Reserves to Bills Payable
- Primary and Secondary Reserves to Bills Payable
- The memorandum defines primary reserves to consist of:
- cash on hand
- cash in vault
- checks and other cash items
- due from the Bangko Sentral
- due from banks
- due from head office/branches/agencies outside the Philippines
- The memorandum defines secondary reserves to consist of:
- Bangko Sentral up ported government securities
- treasury bills
- other government securities
Adoption
- The memorandum is adopted on July 5, 1996.
- The memorandum bears the signature of (SGD.) ALBERTO V. REYES, Deputy Governor.