Reserve requirements of thrift banks and NBQBs

MEMORANDUM Series of 1994

TO ALL BANKS AND NON-BANK FINANCIAL INTERMEDIARIES AUTHORIZED TO PERFORM QUASI-BANKING FUNCTIONS (NBQBS)

Pursuant to M.B. Resolution No. 592 dated 29 December 1993, as implemented under Circular No. 10 issued on the same date, allowing banks and NBQBs effective 31 December 1993, to maintain as part of the present reserve requirements, not more than 2% of the combined deposit liabilities and deposits substitutes in the form of short-term market-yielding government securities purchased directly from Bangko Sentral ng Pilipinas (BSP), the following implementing rules/guidelines shall be observed:

1. Only outright purchases of government securities with remaining maturities of not more than one (1) year, which are bought directly from BSP and not hypothecated or otherwise earmarked or used as part of other reserve requirements of BSP shall be eligible for this purpose;

2. These eligible government securities shall be sold by BSP at one-half percent (½%) below the prevailing market rate for an equivalent tenor and volume, and shall be subject to BSP's firm commitment to buy back at any time at prevailing market rates;

3. All purchases of aforecited government securities shall be under the Book Entry System (BES). Accordingly, transactions covering said securities shall be entered in the respective securities account of each bank/NBQB and shall be evidenced by securities account debit or credit advice to be promptly furnished the institution/s concerned. No physical certificate shall be issued for any purpose and transactions with third parties other than the BSP shall not be recognized.

Interest and redemption payments on said book entry securities shall be made by BSP on interest payment date and at maturity through automatic credit to the institution's demand deposit account with the BSP;

4. Interbank call loans, which are subject to 1% reserves, are not covered by Circular No. 10 and this memorandum;

5. The remaining required reserves after deducting the aforecited short-term market-yielding government securities shall continue to be in the forms prescribed under existing regulations; and

6. For reportorial purposes, banks and NBQBs shall continue to submit to the BSP the computer generated or manually computed reports, as applicable, on the required and available reserves on deposits and deposit substitute liabilities in the attached revised forms.

GABRIEL C. SINGSON Governor