Monetary Board eases rules on time deposit note issues

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The Monetary Board (MB) has eased the rules on the maturity duration of long-term negotiable certificates of time deposits (LTNCTD).

In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said that the longer the period for the time deposit notes, the less risk these financial instruments are for borrowers.

“The gains of having more long-term deposits should ultimately accrue to the borrowing public . . . Having less of the tenor mismatch reduces systemic risk and that is itself already a gain,” Tetangco said, citing that annual repricing of the borrower’s obligation will be reduced, and banks face less risks on refinancing.

The MB said that the lengthening of maturity period would be beneficial as LTNCTDs “behave like fixed-term investment issued by a private entity,” and such instruments can be traded between one holder to another but cannot be withdrawn prior to its maturity.


The LTNCTDs were only available for P5 billion per issue “while outstanding LTNCTDs were capped at 300 percent of an issuing bank’s capital.”

“The lifting of LTNCTD limits comes with further refinements that promote issuer accountability. Under the new guidelines, the MB raised the reserve requirement for these deposits instruments from 3 [percent]to 6 percent of outstanding LTNCTDs,” the MB said.

“Likewise, any portion of an approved LTNCTD that is not issued within six months of its approval will be forfeited. This ensures that banks will structure an LTNCTD issue size which they believe they can sell within the six-month period,” the board added.

The new rule for longer-term time deposit notes would require listing LTNCTDs at an accredited exchange. This would be “aligned” with global practices of enhancing transparency, instilling price discovery, and providing ultimate investor protection.

The MB said that the new rule will boost the financial stability of banks with stronger balance sheets that operate in a well-functioning capital market.

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