BSP relaxes rules on small banks’ interbank deposits

BSP relaxes rules on small banks' interbank deposits

Small banks may deposit higher amounts in other banks after the central bank relaxed the limit on their interbank deposits.
The Bangko Sentral ng Pilipinas (BSP), in a statement on Friday, said: "The Monetary Board... recently approved the amendment to regulations on single borrower's limit (SBL) related to interbank exposures of small banks."

Small banks, usually located in the countryside, may deposit funds equivalent to 25% of their net worth or P100 million, whichever is higher.
"The ceiling of P100 million will benefit banks with net worth of less than P400 million as banks with a higher net worth will already be covered by the 25% limit," the BSP explained.

The SBL, imposed on the lending bank, is intended to limit exposure to a borrower or group of borrowers, including banks.
Small banks -- rural, cooperative and some thrift banks -- the BSP said, faced a unique problem with respect to their interbank deposits.
"These banks, especially those located in far flung municipalities, need to deposit sufficient funds in the nearest banks to be able to avail services such as deposit pick-up and delivery, and for security purposes," it said.

"Banks that will benefit from the amendment are small banks that play an important role in the government's efforts to promote comprehensive rural development by making needed credit available and readily accessible in the rural areas not being served by bigger banks," the BSP said.

These banks are required, however, to "exercise proper due diligence in selecting a depository bank..."

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