MikeLigalig.com

Monetary Board Amends the Definition of Deposit Substitutes

        The Monetary Board approved the revision to the definition of a deposit substitute to align the same with the provisions of the BSP Charter which was amended under Republic Act No. 11211.  

Under Section 95 of the new BSP Charter, a deposit substitute refers to a form of obtaining funds from the public, other than deposits, through the issuance, endorsement or acceptance of debt instruments for the purpose of relending or purchase of other receivables and obligations.  The provisions of Section 95 clarify that the term “obtaining funds from the public” refers to borrowing from 20 or more lenders that are individuals or corporate entities which are not financial intermediaries.  

This means that borrowings from banks, quasi-banks and other financial intermediaries are no longer considered as deposit substitutes which are subject to reserve requirements.  Examples of these borrowings include interbank borrowings, repurchase agreements with financial counterparties as well as bonds issued to financial intermediaries. The exclusion of these types of borrowings from the reserve base of banks and quasi-banks will result in freed-up liquidity for lending or investment activities.  

This amendment is in line with the BSP’s commitment to implement legislation and ensure that the BSP’s regulatory framework is consistent with prevailing laws.  It also facilitates the flow of funds within the financial system which may help reduce intermediation costs and, in turn, support the economic activity.

* Today's Helpful Tip *
Tala app is a fast and easy way to borrow money, and it's used and trusted by many. Download Tala to join millions of Filipino users today! >>> http://inv.re/9o3vp



Linkback: https://tubagbohol.mikeligalig.com/index.php?topic=91548.0