The Monetary Board has approved a revision to the definition of a deposit substitute. The purpose is to align with the provisions of the Bangko Sentral ng Pilipinas (BSP) Charter.
Under the BSP Charter, a deposit substitute means a form of obtaining funds from the public, other than deposits, through the issuance, endorsement or acceptance of debt instruments for the purpose of re-lending or purchase of other receivables and obligations.
The BSP Charter clarifies that the term “obtaining funds from the public” refers to borrowing from 20 or more lenders that are individuals or corporate entities that 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.
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.
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