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Metropolitan Bank and Trust Company (Metrobank), the country’s
largest bank, will raise capital through the issuance of long-term
negotiable certificates of time deposit (LTNCD).
Nestor Espenilla Jr., BSP deputy governor, told
reporters that Metrobank would raise P10 billion through LTNCDs.
He said the Monetary Board gave last week the
green light to Metrobank’s planned capital-raising exercise.
“This has a maturity of 10 years and
non-callable,” he said. Metrobank intends to expand its capital as
the BSP requires banks to implement the new capital standards under
Basel II, which commercial banks started to adopt in July last year.
LTNCD is a certificate of deposit issued by
banks with a maturity of at least five years. Unlike regular time
deposits, an LTNCD may be negotiated over its life. Banks issue
LTNCDs to lengthen the maturity profile of their deposits and match
funds with long-term assets.
LTNCDs are often bought by large institutional
investors, which use these as a way to invest in a low-risk,
low-interest security.
Metrobank posted a net income reached P2.80
billion as of end-June this year, 24.34 percent lower compared with
P3.70 billion in the same period last year due to lower trading,
securities and foreign exchange gains.
Moreover, the Monetary Board has approved
Metrobank to expand its derivatives license to offer more
sophisticated hedging and investment solutions.
”Metrobank applied
for its expanded derivatives license, emphasis was placed on having
the correct systems to manage risk, monitor exposure, and aid in
compliance,” Fernand Antonio Tansingco, Metrobank executive vice
president said in a statement.
With its new expanded derivatives license,
Metrobank has upgraded its treasury platform to a front-to-back
office transaction processing solution across a wide range of
instruments including derivatives, fixed income, equities, and
treasury trades.
The bank has also implemented an advanced risk
management system for market risk and asset-liabilities management.
These new systems will further boost the
bank’s capability to support the booking and risk management of
better and more sophisticated products such as swaps, options,
credit derivatives and structured products.
The Monetary Board approved its application for
a type 2 derivatives license under BSP circular no. 594, which
supports the development of the Philippine financial market by
providing banks and their clients with more opportunities for
financial risk management and investment diversification through the
prudent use of derivatives.
A financial derivative is any financial
instrument or contract whose value changes in response to a change
in a specified interest rate, financial instrument price, commodity
price, FX rate, index of prices or rates, credit spread, credit
rating or credit index or other variables not prohibited under
existing laws.
Metrobank has an extensive network with 547
domestic branches, 37 international branches and offices in 21
countries.
-- Maricel E. Burgonio
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