Reduction of Liquidity Reserves

Memorandum to All Banks and Other Financial Intermediaries Performing Trust, Other Fiduciary Business and Investment Management Activities

Pursuant to Monetary Board Resolution No. 116 dated 29 January 1999, reducing the liquidity reserve requirement for all financial intermediaries, the Rules and Regulations on Trust, Other Fiduciary Business and Investment Management Activities (Trust Rules) are amended as follows:

Section 1. The first paragraph of Subsection _405.5, Item 1.1 is amended to read as follows:

"1.1. Reserves Against Peso-Denominated Common Trust Funds

The required reserves against peso-denominated common trust funds and such other managed peso funds which partake the nature of collective investment of peso-denominated common trust funds of all financial intermediaries authorized to engage in trust and other fiduciary business shall be maintained as follows:

a) For expanded commercial banks and commercial banks

7%

b) For thrift banks

6%

c) For non-bank financial intermediaries with or without quasi-banking functions

7%

d) For rural banks

5%

In addition to the regular reserve requirement, the liquidity reserves maintained against peso-denominated common trust funds and such other peso funds which partake the nature of collective investment of peso-denominated common trust funds shall be reduced from eight percent (8%) to seven percent (7%) effective 1 February 1999 and to six percent (6%) effective 1 March 1999. The liquidity reserve may be held in the form of short-term market-yielding government securities purchased directly from the BSP-Treasury Department".

Section 2. Item 1.2 of Subsection _405.5 is amended to read as follows:

"1.2. Reserves Against Trust and Other Fiduciary Accounts (TOFA) - Others

In addition to the basic security deposit required under Subsection _405.1, all financial intermediaries authorized to engage in trust and other fiduciary business shall maintain required reserve against Trust and Other Fiduciary Accounts (TOFA) - Others, except (a) accounts held under administration; (b) bond issues under deed of trust or mortgage; (c) custodianship and safekeeping; d) depository/reorganization; (e) employees’ benefit plans under trust; (f) escrow; (g) personal trust (testamentary or living trust); (h) executorship; (I) guardianship; (j) life insurance trust; and (k) pre-need plans (institutional/individual).

The required reserves against TOFA-Others shall be maintained as follows:

a) For expanded commercial banks and commercial banks

7%

b) For thrift banks

6%

c) For non-bank financial intermediaries with or without quasi-banking Functions

7%

d) For rural banks

5%

The liquidity reserve, which is maintained in addition to the required reserve, shall be reduced from eight percent (8%) to seven percent (7%) effective 1 February 1999 and to six percent (6%) effective 1 March 1999. The liquidity reserve may be held in the form of short-term market-yielding government securities purchased directly from the BSP-Treasury Department,

Provided, that the reserves on trust and other fiduciary accounts (TOFA) - Others shall be provided out of such funds."

FOR THE MONETARY BOARD:

GABRIEL C. SINGSON Governor