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(NAR) VOL. 19 NO. 3 / JULY - SEPTEMBER 2008
[ BSP CIRCULAR LETTER NO. CL-2008-036, June 20, 2008 ]
ENHANCED INTRADAY LIQUIDITY FACILITY
The Monetary Board in its Resolution No. 1145 dated 11 October 2007, among other decisions, approved the enhancement of the Intraday Liquidity Facility (ILF) to support the BSP's Philippine Payments and Settlement System (PhilPaSS).
Given the increasing volume of PhilPaSS transactions as well as concerns of having temporary gridlocks in the PhilPaSS, the current features of the ILF had been enhanced, specifically on the following areas:
A. Access to ILF
Government securities (GS) held by an Eligible Participant bank/NBQB in its Regular Principal Securities Account that will be used for ILF purposes shall be delivered to a account under the BSP-ILF Securities Account with the Bureau of the Treasury's (BTR) Registry of Scripless Securities (RoSS). The delivered GS to be used for 1LF purposes shall be recorded by RoSS in a sub-account (the "Client Securities Account (CSA) ILF under the BSP-ILF Securities Account in the name of the Eligible Participant/NBQB.
Banks/NBQBs without RoSS securities accounts who intend/desire to avail of the F shall be required to open/maintain a Securities Account with the RoSS. The documentation requirements for RoSS membership shall be prescribed by the BTr.
Banks/NBQBs desiring to avail of the iLF shall be further required to open a sub-account under the BSP-ILF Securities Account with the BTr's RoSS by accomplishing an application letter addressed to the Treasurer of the Philippines, Attn: The Director, Liability Management Service and the Chief, Scripless Securities Registration Division. The application letter shall be in the form of ANNEX 1* hereto. ( * Text Available at Office of the National Administrative Register, UP. Law Complex, Diliman, Quezon City.)
B. Timeline
From 9:00AM to 9:30AM of each banking day, an Eligible Participant bank/NBOB shall electronically instruct the BTR to move/transfer from its Principal Securities Account with the BTR's ROSS to the CSA-ILF under the name of the Eligible Participant bank/ NBQB, the pool of peso-denominated GS to be set aside for the ILF purpose. The Eligible Participant bank/NBQB hereby confirms to the BTr that pursuant to an ILF availment, it has authorized the transfer without consideration unto the CSA-ILF the poo! of GS to be used for ILF purposes.
From 9:30 AM to 10:00 AM, the BTr RoSS shall electronically submit a consolidated report to BSP showing the details of the GS that were transferred to the BSP-ILF Securities Account.
From 10:00 AM to 4:00PM, Eligible Participant banks/NBQBs with insufficient balances in its Demand Deposit Account No.2 (PhilPaSS Account) may avail of the ILF.
Eligible Participant banks/NBQBs may avail of the ILF as necessary to fund pending payment instructions. Thus, when the iLF system detects queued transactions in the PhilPaSS-Central Accounting System, the Eligible Participant bank/NBQB with insufficient balance in its PhilPaSS Account will automatically sell to the BSP-Treasury the GS in the CSA-ILF pool corresponding to the amount which may be needed to cover any pending payment instruction, and the proceeds of the sale of securities shall be immediately credited to the bank's PhilPaSS Account. There may be more than one availment during the day. Until a sale to the BSP or an Overnight Repurchase (O/N-RP) transaction with the BSP is executed, the beneficial ownership of the GS that have been transferred to the CSA-ILF still belongs to the banks/NBQBs.
At 5:00PM, the BSP shall sell back to the Eligible Participant bank/NBQB the GS at the same price as the original BSP purchase. Partial repayment of a particular availment will not be allowed.
In case the PhilPaSS Account balance of the participating bank is not sufficient to cover the afternoon repayment transaction, the BSP and the participating bank may agree on the following:
a. BSP shall extend to the Eligible participant bank/NBQB an O/N-RP at 600 basis points over the BSP's regular overnight lending rate for the day. The O/N-RP shall be paid not later than 11:00AM on maturity date. Unpaid O/N-RP shall be automatically converted into an absolute safe to the BSP of the subject GS earlier delivered/transferred to the CSA-ILF pursuant to an ILF availment by the Eligible Participant bank/NBQB, in which case, BSP shall issue an instruction to BTr to deliver/transfer the subject GS from the BSP-ILF Secu rities Account to the BSP regular Principal Securities Account. The sale shall be evi denced by the issue of Confirmation of Sale by the Eligible Participant bank/NBQB (AN NEX 2*) and the Confirmation of Purchase by the BSP treasury Department (ANNEX 3*), Or, (* Text Available at Office of the National Administrative Register, U.P. Law Complex, Diliman, Quezon City.)
b. Only in extreme cases, the BSP shall self back to the participating bank GS up to the extent of the PhilPaSS Account balance. The BSP shall issue an instruction to the BTR to transfer the remaining GS amounting to the unpaid ILF availment from the BSP-ILF Secu rities Account to the BSP's Regular Principal Securities Account.
At the end of the day and after BSP's sell-back of the GS to ILF participants, normally by 5:45PM, the BSP Treasury Department shai! electronically instruct RoSS, using the ILF RoSS system developed for herein purpose, to return/deliver from the CSA-ILF of, the participating banks/NBQBs to their respective Regular Principal Securities Accounts with the RoSS all unused/unencumbered GS. GS used for O/N-RP shall remain in the CSA-ILF until repayment of subject O/N-RP or conversion to outright sale the following day.
Upon receipt of BSP's electronic instruction for the return of GS back to the partici pating banks' regular Principal Securities Accounts, the BTr shall update their database after which participating banks/NBQBs may request/download statements of securities accounts for their verification
C. Eligible Securities
Peso-denominated scnpless securities of the National Government that are free and unencumbered and with remaining maturity of eleven (11) days to ten (10) years shall be eligible for the ILF
GS that will be used for ILF purposes would be reclassified with due consideration to the original booking of the security, as follows:
D. Valuation of Securities
The GS subject of an ILF transaction shall be valued based on the 11:16AM fixing of the previous business day, from the applicable Reuters PDEX pages or any other valuation benchmark as may be prescribed by the BSR
E. Margins
Margins shall be applied based on prevailing policies of the BSP Treasury Department. F. Transaction Fee
The BTR shall collect a monthly maintenance fee of One Thousand Pesos (P1,000.00) from each Eligible Participant bank/NBQB forthe use of the CSA-ILF Securities Account. The maintenance fees herein required to be paid by each Eligible Participant bank/NBQB shall be separate from and exclusive of any other fees being assessed and collected by BTR for membership in the RoSS. For this purpose, the Eligible Participant bank/NBQB shall issue to the BTR an autodebit instruction to authorize the BTR to debit its DDA with BSP for the above-mentioned monthly maintenance fee. The BTR will inform the Eligible Participant banks/NBQBs of any change in fee at least fifteen (15) days prior to implemen tation.
G. DDA Statements/Transaction Details
Eligible Participating banks/NBQBs will be able to verify the status of their accounts by initiating the SWIFT/PPS-Front-end System inquiry request.
3.0 AVAILABILITY OF SERVICES
The ILF is covered by a Memorandum of Agreement (MOA) dated 25 March 2008 by and among the BSP, the BTR, the Bankers Association of the Philippines (for BAP members) and the Money Market Association of the Philippines (for non-BAP members). Participating banks and NBQBs shall sign individual participation agreements.
The services outlined in the MOA shall be available at the BSP and the BTR at a fixed hour on all banking days Banking days refer to the days banking institutions are open for business Mondays thru Fridays as authorized by the BSP.
This Circular Letter shall take effect on 30 June 2008.
Adopted: 20 June 2008
FOR THE MONETARY BOARD:
(SGD.) AMANDO M. TETANGCO, JR.
Governor
Given the increasing volume of PhilPaSS transactions as well as concerns of having temporary gridlocks in the PhilPaSS, the current features of the ILF had been enhanced, specifically on the following areas:
a. Flexibility in changing the securities that will be used for the ILF;The revised features of the ILF are described below.
b. Availment of the facility on a "as the need arises" basis; and
c. Removal of commitment fees
A. Access to ILF
Government securities (GS) held by an Eligible Participant bank/NBQB in its Regular Principal Securities Account that will be used for ILF purposes shall be delivered to a account under the BSP-ILF Securities Account with the Bureau of the Treasury's (BTR) Registry of Scripless Securities (RoSS). The delivered GS to be used for 1LF purposes shall be recorded by RoSS in a sub-account (the "Client Securities Account (CSA) ILF under the BSP-ILF Securities Account in the name of the Eligible Participant/NBQB.
Banks/NBQBs without RoSS securities accounts who intend/desire to avail of the F shall be required to open/maintain a Securities Account with the RoSS. The documentation requirements for RoSS membership shall be prescribed by the BTr.
Banks/NBQBs desiring to avail of the iLF shall be further required to open a sub-account under the BSP-ILF Securities Account with the BTr's RoSS by accomplishing an application letter addressed to the Treasurer of the Philippines, Attn: The Director, Liability Management Service and the Chief, Scripless Securities Registration Division. The application letter shall be in the form of ANNEX 1* hereto. ( * Text Available at Office of the National Administrative Register, UP. Law Complex, Diliman, Quezon City.)
B. Timeline
From 9:00AM to 9:30AM of each banking day, an Eligible Participant bank/NBOB shall electronically instruct the BTR to move/transfer from its Principal Securities Account with the BTR's ROSS to the CSA-ILF under the name of the Eligible Participant bank/ NBQB, the pool of peso-denominated GS to be set aside for the ILF purpose. The Eligible Participant bank/NBQB hereby confirms to the BTr that pursuant to an ILF availment, it has authorized the transfer without consideration unto the CSA-ILF the poo! of GS to be used for ILF purposes.
From 9:30 AM to 10:00 AM, the BTr RoSS shall electronically submit a consolidated report to BSP showing the details of the GS that were transferred to the BSP-ILF Securities Account.
From 10:00 AM to 4:00PM, Eligible Participant banks/NBQBs with insufficient balances in its Demand Deposit Account No.2 (PhilPaSS Account) may avail of the ILF.
Eligible Participant banks/NBQBs may avail of the ILF as necessary to fund pending payment instructions. Thus, when the iLF system detects queued transactions in the PhilPaSS-Central Accounting System, the Eligible Participant bank/NBQB with insufficient balance in its PhilPaSS Account will automatically sell to the BSP-Treasury the GS in the CSA-ILF pool corresponding to the amount which may be needed to cover any pending payment instruction, and the proceeds of the sale of securities shall be immediately credited to the bank's PhilPaSS Account. There may be more than one availment during the day. Until a sale to the BSP or an Overnight Repurchase (O/N-RP) transaction with the BSP is executed, the beneficial ownership of the GS that have been transferred to the CSA-ILF still belongs to the banks/NBQBs.
At 5:00PM, the BSP shall sell back to the Eligible Participant bank/NBQB the GS at the same price as the original BSP purchase. Partial repayment of a particular availment will not be allowed.
In case the PhilPaSS Account balance of the participating bank is not sufficient to cover the afternoon repayment transaction, the BSP and the participating bank may agree on the following:
a. BSP shall extend to the Eligible participant bank/NBQB an O/N-RP at 600 basis points over the BSP's regular overnight lending rate for the day. The O/N-RP shall be paid not later than 11:00AM on maturity date. Unpaid O/N-RP shall be automatically converted into an absolute safe to the BSP of the subject GS earlier delivered/transferred to the CSA-ILF pursuant to an ILF availment by the Eligible Participant bank/NBQB, in which case, BSP shall issue an instruction to BTr to deliver/transfer the subject GS from the BSP-ILF Secu rities Account to the BSP regular Principal Securities Account. The sale shall be evi denced by the issue of Confirmation of Sale by the Eligible Participant bank/NBQB (AN NEX 2*) and the Confirmation of Purchase by the BSP treasury Department (ANNEX 3*), Or, (* Text Available at Office of the National Administrative Register, U.P. Law Complex, Diliman, Quezon City.)
b. Only in extreme cases, the BSP shall self back to the participating bank GS up to the extent of the PhilPaSS Account balance. The BSP shall issue an instruction to the BTR to transfer the remaining GS amounting to the unpaid ILF availment from the BSP-ILF Secu rities Account to the BSP's Regular Principal Securities Account.
At the end of the day and after BSP's sell-back of the GS to ILF participants, normally by 5:45PM, the BSP Treasury Department shai! electronically instruct RoSS, using the ILF RoSS system developed for herein purpose, to return/deliver from the CSA-ILF of, the participating banks/NBQBs to their respective Regular Principal Securities Accounts with the RoSS all unused/unencumbered GS. GS used for O/N-RP shall remain in the CSA-ILF until repayment of subject O/N-RP or conversion to outright sale the following day.
Upon receipt of BSP's electronic instruction for the return of GS back to the partici pating banks' regular Principal Securities Accounts, the BTr shall update their database after which participating banks/NBQBs may request/download statements of securities accounts for their verification
C. Eligible Securities
Peso-denominated scnpless securities of the National Government that are free and unencumbered and with remaining maturity of eleven (11) days to ten (10) years shall be eligible for the ILF
GS that will be used for ILF purposes would be reclassified with due consideration to the original booking of the security, as follows:
| Original Booking of GS | To be reclassified to |
| a. Held for Trading : | Held for Trading- ILF |
| b. Designated Fair Value | |
| Through Profit or Loss | Designated Fair Value Through Profit |
| or Loss - ILF | |
| c. Available for Sale | Available for Sale - ILF |
| d. Held to Maturity | Held to Maturity -ILF |
D. Valuation of Securities
The GS subject of an ILF transaction shall be valued based on the 11:16AM fixing of the previous business day, from the applicable Reuters PDEX pages or any other valuation benchmark as may be prescribed by the BSR
E. Margins
Margins shall be applied based on prevailing policies of the BSP Treasury Department. F. Transaction Fee
The BTR shall collect a monthly maintenance fee of One Thousand Pesos (P1,000.00) from each Eligible Participant bank/NBQB forthe use of the CSA-ILF Securities Account. The maintenance fees herein required to be paid by each Eligible Participant bank/NBQB shall be separate from and exclusive of any other fees being assessed and collected by BTR for membership in the RoSS. For this purpose, the Eligible Participant bank/NBQB shall issue to the BTR an autodebit instruction to authorize the BTR to debit its DDA with BSP for the above-mentioned monthly maintenance fee. The BTR will inform the Eligible Participant banks/NBQBs of any change in fee at least fifteen (15) days prior to implemen tation.
G. DDA Statements/Transaction Details
Eligible Participating banks/NBQBs will be able to verify the status of their accounts by initiating the SWIFT/PPS-Front-end System inquiry request.
The ILF is covered by a Memorandum of Agreement (MOA) dated 25 March 2008 by and among the BSP, the BTR, the Bankers Association of the Philippines (for BAP members) and the Money Market Association of the Philippines (for non-BAP members). Participating banks and NBQBs shall sign individual participation agreements.
The services outlined in the MOA shall be available at the BSP and the BTR at a fixed hour on all banking days Banking days refer to the days banking institutions are open for business Mondays thru Fridays as authorized by the BSP.
This Circular Letter shall take effect on 30 June 2008.
Adopted: 20 June 2008
(SGD.) AMANDO M. TETANGCO, JR.
Governor