Article 140p. 140

COMMERCIAL LAWS NEGOTIABLE INSTRUMENTS, CORPORATION, INSURANCE, TRANSPORTATION, BANKING

SECTION

91.

Purchases

and

Sales

of

Government

Securities . — In order to achieve the objectives of the

national monetary policy, the Bangko Sentral may, in

accordance with the principle stated in Section 90 of this

Act and with such rules and regulations as may be

prescribed by the Monetary Board, buy and sell in the

open market for its own account:

(a) evidences of indebtedness issued directly by the

Government

of

the

Philippines

or

by

its

political

subdivisions; and

(b) evidences of indebtedness issued by government

instrumentalities

and

fully

guaranteed

by

the

Government.

The

evidences

of

indebtedness

acquired

under

the

provisions of this section must be freely negotiable and

regularly serviced and must be available to the general

public

through

banking

institutions

and

local

government treasuries in denominations of a thousand

pesos or more.

SECTION 92. Issue and Negotiation of Bangko Sentral

Obligations . — In order to provide the Bangko Sentral

with effective instruments for open market operations,

the Bangko Sentral may, subject to such rules and

regulations as the Monetary Board may prescribe and in

accordance with the principles stated in Section 90 of this

Act, issue, place, buy and sell freely negotiable evidences

of indebtedness of the Bangko Sentral : Provided , That

issuance of such certificates of indebtedness shall be

made only in cases of extraordinary movement in price

levels. Said evidences of indebtedness may be issued

directly against the international reserve of the Bangko

Sentral or against the securities which it has acquired

under the provisions of Section 91 of this Act, or may be

issued without relation to specific types of assets of the

Bangko Sentral .

The Monetary Board shall determine the interest rates,

maturities and other characteristics of said obligations of

the Bangko Sentral , and may, if it deems it advisable,

denominate the obligations in gold or foreign currencies.

Subject to the principles stated in Section 90 of this Act,

the evidences of indebtedness of the Bangko Sentral to

which this section refers may be acquired by the Bangko

Sentral before their maturity, either through purchases in

the open market or through redemptions at par and by

lot if the Bangko Sentral has reserved the right to make

such

redemptions.

The

evidences

of

indebtedness

acquired or redeemed by the Bangko Sentral shall not be

included among its assets, and shall be immediately

retired and cancelled.

ARTICLE VI Composition of Bangko Sentral's

Portfolio

SECTION 93. Review of the Bangko Sentral's Portfolio . —

At least once every month the Monetary Board shall

review the portfolio of the Bangko Sentral in relation to

its future credit policy.

In reviewing the Bangko Sentral 's portfolio, the Monetary

Board shall especially consider whether a sufficiently

large part of the portfolio consists of assets with early

maturities, in order that a contraction in Bangko Sentral

credit may be effected promptly whenever the national

monetary policy so requires.

ARTICLE VII Bank Reserves

SECTION

94. Reserve Requirements . — In order to

control the volume of money created by the credit

operations of the banking system, all banks operating in

the Philippines shall be required to maintain reserves

against

their

deposit

liabilities:

Provided ,

That

the

Monetary Board may, at its discretion, also require all

banks and/or quasi-banks to maintain reserves against

funds held in trust and liabilities for deposit substitutes as

defined in this Act. The required reserves of each bank

shall be proportional to the volume of its deposit liabilities

and shall ordinarily take the form of a deposit in the

Bangko Sentral . Reserve requirements shall be applied to

all banks of the same category uniformly and without

discrimination.

Reserves against deposit substitutes, if imposed, shall be

determined in the same manner as provided for reserve

requirements against regular bank deposits, with respect

to the imposition, increase, and computation of reserves.

The

Monetary

Board

may

exempt

from

reserve

requirements

deposits

and

deposit

substitutes

with

remaining maturities of two (2) years or more, as well as

interbank borrowings.

Since the requirement to maintain bank reserves is

imposed primarily to control the volume of money, the

Bangko Sentral shall not pay interest on the reserves

maintained with it unless the Monetary Board decides

otherwise as warranted by circumstances.

SECTION 95. Definition of Deposit Substitutes . — The

term "deposit substitutes" is defined as an alternative

form of obtaining funds from the public, other than

deposits,

through

the

issuance,

endorsement,

or

acceptance of debt instruments for the borrower's own

account, for the purpose of relending or purchasing of

receivables and other obligations. These instruments may

include, but need not be limited to, bankers acceptances,

promissory

notes,

participations,

certificates

of

assignment and similar instruments with recourse, and

repurchase

agreements.

The

Monetary

Board

shall

determine what specific instruments shall be considered

as deposit substitutes for the purposes of Section 94 of

this Act: Provided, however , That deposit substitutes of

commercial,

industrial

and

other

non-financial

companies issued for the limited purpose of financing

their own needs or the needs of their agents or dealers

shall not be covered by the provisions of Section 94 of this

Act.

SECTION 96. Required Reserves Against Peso Deposits .

— The Monetary Board may fix and, when it deems

necessary, alter the minimum reserve ratios to peso

deposits, as well as to deposit substitutes, which each

bank and/or quasi-bank may maintain, and such ratio

shall be applied uniformly to all banks of the same

category as well as to quasi-banks.

SECTION

97.

Required

Reserves

Against

Foreign

Currency Deposits . — The Monetary Board is similarly

authorized to prescribe and modify the minimum reserve

ratios applicable to deposits denominated in foreign

currencies.

SECTION 98. Reserves Against Unused Balances of

Overdraft Lines . — In order to facilitate Bangko Sentral

control over the volume of bank credit, the Monetary

Board may establish minimum reserve requirements for

unused balances of overdraft lines.

The powers of the Monetary Board to prescribe and

modify reserve requirements against unused balances of

overdraft lines shall be the same as its powers with

respect

to

reserve

requirements

against

demand

deposits.

SECTION

99.

Increase in Reserve Requirements . —

Whenever in the opinion of the Monetary Board it

becomes necessary to increase reserve requirements

against existing liabilities, the increase shall be made in a

gradual manner and shall not exceed four percentage

points in any thirty-day period. Banks and other affected

financial

institutions

shall

be

notified

reasonably

in

advance of the date on which such increase is to become

effective.

SECTION 100. Computation on Reserves . — The reserve

position of each bank or quasi-bank shall be calculated

daily on the basis of the amount, at the close of business

for the day, of the institution's reserves and the amount of

its liability accounts against which reserves are required

to

be

maintained:

Provided ,

That

with reference to

holidays or non-banking days, the reserve position as

calculated at the close of the business day immediately

© Compiled by RGL

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