Enhanced Intraday Liquidity Facility

Jan ko Sentral ng Pil ibina.

MAYNILA, PILIPINAS

CIRCULAR LETtER No. : CL-2008-.036

TO ALL BANKS AND NON-BANK FINANCIAL INSTITUTIONS PERFORMING QUASI BANKING FUNCTIONS

Subject: Enhanced Intraday Liquidity Facility

Facility (ILF) to support the BSP's Philippine Payments and Settlement System among other decisions, approved the enhancement of the intraday Liquidity (PhilPaSS). The Monetary Board In its Resolution No. 1145 dated 11 October 2007

of having temporary gridlocks in the PhilPaSS, the current features of the ILF had been enhanced, specifically on the foflowing areas: Given the increasing volume of PhilPaSs transactions as well as concerns

a. Flexibility in changing the securities that will be used for the ILF; b. Availment of the facility on a "as the need arises" basis; and c. Removal of commitment fees

The revised features of the ILF are described below.

A. Access to ILF

delivered to a sub-account under the BSP-ILF Securities Account with the delivered GS to be used for ILF 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. 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 Bureau of the Treasury's (BTR) Registry of Scripless Securities (RoSS). The

the BTr. the ILF shall be required to open/maintain a Securities Account with the RoSs Banks/NBQBs without RoSS securities accounts who intend/desire to avail of The documentation requirements for RoSS membership shall be prescribed by

Philippines, Attn: The Director, Liability Management Service and the Chief. 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

PananaLaPIng MatataG, BanSanG Panatag A. Mabini St., Malate 1004, Manila, Philippines Trunkline (632) 524-70-11 URL:www.bsp.gov.ph e-mail: [email protected]

Scripless Securities Registration Division. The application letter shall be in the form of ANNEX 1.hereto.

B. Timeline

From 9:00AM to 9:30AM of each banking day, an Eligible Participant 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 transfer without consideration unto the CSA-ILF the pool of GS to be used for ILF purposes. bank/NBQB shall electronically instruct the BTR to move/transfer from its Principal Securities Account with the BTR's ROSS to the CSA-ILF under the confirms to the BTr that pursuant to an ILF availment, it has authorized the

to the BSP-ILF Securities Account. 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

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 automatically sell to the BSP-Treasury the GS in the CSA-ILF pool 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 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 wil 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 ownership of the GS that have been transferred to the CSA-ILF still belongs to the banks/NBQBs.

particular avaiiment will not be allowed. At 5:O0PM, 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

to cover the afternoon repayment transaction, the BSP and the participating bank may agree on the following: In case the PhilPaSs Account balance of the participating bank is not sufficient

a. BSP shall extend to the Eligible participant bank/NBQB an O/N-RP at 600 subject GS from the BSP-ILF Securities Account to the BSP regular Confirmation of Sale by the Eligible Participant bank/NBQB (ANNEX 2) basis points over the BSP's regular overnight lending rate for the day Unpaid O/N-RP shall be automatically converted into an absolute sale to the BSP of the subiect 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 The O/N-RP shall be paid not later than"11:00AM"on maturity date. Principa! Securities Account. The sale shall be evidenced by the issue of

and the Confirmation of Purchase by the BSP Treasury Department (ANNEX 3), Or,

b. Only in extreme cases, the BsP shall seil back to the participating bank

BSP's Regular Principal Securities Account. GS up to the extent of the PhilPaSS Account balance. The BSP shall the unpaid ILF availment from the BSP-iLF Securities Account to the issue an instruction to the BTR to transfer the remaining GS amounting to

participants, normally by 5:45PM, the BSP Treasury Department shall to their respective Regular Principal Securities Accounts with the Ross all purpose, to return/deliver from the CSA-ILF of the participating banks/NBQBs 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. electronically instruct RoSS, using the ILF RoSS system developed for herein At the end of the day and after BSP's sell-back of the GS to ILF

request/download statements of securities accounts for their verification. the .participating banks' regular Principal Securities Accounts, the BTr shall update their database after which participating banks/NBQBs may Upon receipt of BSP's electronic instruction for the return of Gs back to

C. Eligible Securities

(10) years shall be eligible for the ILF. Peso-denominated scripless securities of the National Government that are free and unencumbered and with remaining maturity of eleven (11) days to ten

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

fixing rates of the previous business day, from the applicable Reuters PDEX pages or any other valuation benchmark as may be prescribed by the BSP The GS subiect of an ILF transaction shall be valued based on the 11:16AM

E. Margins

Margins shall be applied based on prevailing policies of the BSP Treasury Department.

F. Transaction Fee

RosS. For this purpose, the Eligible Participant bank/NBQB shall issue to the 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 The BTR shall collect a monthly maintenance fee of One Thousand Pesos BTR an autodebit instruction to authorize the BTR to debit its DDA with BSP for prior to implementation. (P1,000.00) from each Eligible Participant bank/NBQB for the 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

G. DDA Statements/Transaction Details

accounts by initiating the SWIFT/PPS-Front-end System inquiry request. Eligible Participating banks/NBQBs will be abie to verify the status of their

3.0 AVAILABILITY OF SERVICES

2008 by and among the BSP, the BTR, the Bankers Association of the individual participation agreements. Philippines (for BAP members) and the Money Market Association of the Philippines (for non-BAP members). Participating banks and NBQBs shall sign The ILF is covered by a Memorandum of Agreement (MOA) dated 25 March

institutions are open for business Mondays thru 'Fridays as authorized by the a fixed hour on all banking days. Banking days refer to the days banking The services outlined in the MOA shall be available at the BSP and the BTR at BSP

This Circular Letter shall take effect on 30 June 2008

FOR THE MONETARY BOARD

SwM AMANdO M. tetANGCO, JR. Governor

20 June 2008

(Date)

PARTICIPATION AGREEMENT

Date

A. Mabini corner P. Ocampo Sr. Streets Manila Bangko Sentral ng Pilipinas

Intramuros, Manila Bureau of the Treasury. Palacio del Gobernador

Makati City Bankers Association of the Philippines H.V. dela Costa Street, Salcedo Village 11th Floor, Sagittarius Building

Makati City Herrera corner L.P. Leviste Streets, Salcedo Village Money Market Association of the Philippines Penthouse, PDCP Bank Center

Gentlemen:

and its subsequent amendments or revisions as may be agreed upon by the parties thereto from time to time. Settlement System (the "System") which is covered by the Memorandum of Please be advised that we agree to participate in the Agreement for the Establishment of Intraday Liquidity Facility to support the Philippine Payment and Agreement dated (the "Agreement") among yourselves

to/against our Securities Account. Further, we agree to comply with all our obligations as a participating bank/financial institution as provided in the Agreement. Lastly, we agree to keep yourselves free and harmiess from any claim or liability arising from, or in connection with, our transactions transmitted through the System in accordance with the provisions of the Agreement. We agree to be bound by all the terms and conditions of the Agreement and adopt it as an integral part of this Participation Agreement, including the authority Treasury (BTR) to execute our instructions on transfer to/from, credit and debit of the BsP to execute payment instructions and the authority of the Bureau of the

This participation will become effective upon your conformity hereto and your notification of the same to us, the BSP and the BTR.

Very truly yours.

Participating Bank/Financial Institution

APPROVED:

Bangko Sentral ng Pilipinas By:

Bureau of the Treasury By :

Bankers Association of the Philippines By:

Money Market Association of the Philippines By:

AnneX 1

(LETTERHEAD OF THE APPLICANT)

Intramuros, Manila Palacio del Gobernador The Treasurer of the Philippines

Sir:

Account under the BSP-ILF RoSS Account in the Registry of Scripless Securities (RoSS) operated and maintained by the Bureau of the Treasury (BTr). The undersigned hereby makes an application to open a Client Securities

the Client Securities Account opened payable on the first business day of each month. The BTr will inform the undersigned of any change in fee at least fifteen (15) days prior to implementation. The undersigned will pay to BTr an additional monthly fee of P1,000.00 for

Please : debit/credit our Regular Demand Deposit Account with the BSP for the payment of the said monthly fee. No.

(Date) Manila, Philippines

(Name of Applicant)

(Signature of Authorized Signatory)

(Designation)

AnneX 2

LETTERHEAD OF THE SELLER

Transaction No Value Date

CONFIrMAtiON oF SALE OF GOVERNMEnt SECUrItIES

respectively: all of its rights, titles and interests over the following described Agreement for"Intraday Liquidity Facility and the Participation Agreement Government Securities, held by the Bureau of the Treasury under the Registry of Scripless Securities System. SOLD. executed The on TRANSFERRED pursuant AND does hereby CONFiRM that it has and to CONVEYED the Memorandum unto of

ISIN TerM ISSUE DATE MAtuRItY DATE Amount FACE

(Code) (Account Number)

(Name of GSED)

(Signature of Authorized Signatory)

(Designation)

ANNEX 3

Bangho Sentral ng J binas

199 MAYNILA, PILIPINAS

Transaction No. Value Date

CoNFIrMAtion oF PurCHASE oF GoVernMEnt SeCurItieS

has PURCHASED from the Memorandum of Agreement for the Intraday Liquidity the following described Government Securities, held by the Bureau of the Participation Agreement executed on Treasury under its Registry of Scripless Securities System. The respectively, all of its rights, tities and interests over does hereby CONFIRM that it Facility and pursuant to and

ISIN TERM ISSUE DATE MAturItY DATE Amount FACE

(Code) (Account Number)

(Name of GSED)

(Signature of Authorized Signatory)

(Designation)