Guidelines for purposes of implementing the provisions of Circular 444 dated 18 August 2004 in reporting the deposit substitutes evidenced by repurchase agreements (repos) covering government securities

MEMORANDUM Series of 2005

TO   :   All Banks and Non-Bank Financial Intermediaries with QB Functions (NBQBs)

All Non-Bank Financial Intermediaries with Quasi-Banking Functions shall observe the following guidelines for purposes of implementing the provisions of Circular 444 dated 18 August 2004 under Monetary Board Resolution No. 914 and 1713 dated 26 June 2003 and 20 November 2003, respectively, in reporting the deposit substitutes evidenced by repurchase agreements (repos) covering government securities:

1.   The maximum allowable amount of repos covering government securities that will qualify for the reduced statutory reserve requirement of 2 percent shall be determined by the Supervisory Data Center (SDC) based on the revised Consolidated Report of Required and Available Reserves Against Deposit Substitutes and Special Financing (CRRAR) which are transmitted by concerned entities on a weekly basis.

2.   In calculating the 2 percent required reserves, SDC shall base its computation on the adjusted Tier 1 capital as reported by the NBQBs in their weekly CRRAR, or the balance of the deposit substitutes evidenced by repurchase agreements covering government securities reported under CRRAR, whichever is lower. The adjusted Tier 1 capital reported in the CRRAR should approximate the amount of adjusted Tier 1 capital as reported in the quarterly Report on the Computation of the Risk Based Capital Adequacy Ratio Covering Credit Risk as required under Circular 400 dated 1 September 2003.

3.   Any material differences that may be noted by SDC on the adjusted Tier 1 capital as reported in the CRRAR and the quarterly report shall be considered as erroneous report, and shall be subject to penalties under existing regulations.

4.   In calculating the 2 percent statutory reserve requirement for deposit substitutes evidenced by repurchase agreements covering government securities, the lagged system in the measurement of an entity’s reserve requirement as provided under Circular 254 dated 31 July 2000 shall be followed.

5.   In case the deposits substitutes evidenced by repurchase agreements covering government securities as reported in the CRRAR is more than the balance of the adjusted Tier 1 capital, the excess shall be treated as a regular deposit substitutes and shall be subject to the regular statutory and liquidity reserve requirements under existing regulations.

6.   The new reporting requirement shall be implemented effective for week ended 25 March 2005. The revised report is shown in Annex A.

For compliance.

ALBERTO V. REYES Deputy Governor