The Monetary Board (MB) approved the enhancements to the rules on the issuance of long-term negotiable certificates of time deposit (LTNCTDs), bonds and commercial papers (CPs) that allow related companies of the issuing universal/commercial banks (U/KBs) and quasi-banks (QBs) to underwrite or arrange the said financial instruments subject to certain conditions. Said enhancement is aimed at contributing to the development of the capital market.
The amended rules require that there are other third party underwriters/arrangers that are not related in any manner to the issuing U/KB or QB. The parties shall ensure that an objective conduct of the due diligence review is not undermined and that appropriate safeguards and controls on related party transactions shall be instituted to prevent conflict of interest on the arrangement. These prudential reforms are aimed to promote efficiency in the issuance of the said instruments by U/KBs and QBs and at the same time protect the interest of the investing public.
Meanwhile, the MB approved an indefinite moratorium on the issuance of LTNCTDs which will commence on 1 January 2021. Banks are given until 30 September 2020 to submit their request for authority to issue LTNCTD. The moratorium is seen to shift the banks’ funding channel from LTNCTDs to bond issuances that is to likewise further deepen the local debt market.