The Bangko Sentral ng Pilipinas (BSP) will change the definition of financial intermediaries and expand the list as it pertains to the issuance of bonds and commercial papers by banks, quasi-banks and other financial intermediaries.

Based on the draft circular which was circulated on Friday, Nov. 24, the BSP will list the following as financial intermediaries: all considered as non-bank financial institutions (NBFIs); government financial institutions; funds administered and managed by a trust entity under a trust agreement; and funds administered and managed under an agency agreement if the principal or owner of the fund meets the definition of a financial intermediary.

Meanwhile, a “person” or entity “which holds itself out” as a non-bank financial intermediary such as by the use of a business name or finance, investment, lending, will not be considered as financial intermediary, said the BSP.

Basically, the BSP is proposing to change the definition of financial intermediaries as used by quasi-banks -- which are authorized by the central bank to borrow funds -- to just “entities” by removing “persons” as qualifier.

Financial intermediaries are “entities whose principal functions include the lending, investing or placement of funds or evidences of indebtedness or equity deposited with them, acquired by them, or otherwise coursed through them either for their own account or for the account of others.”

On the issuance of bonds, commercial papers and other debt securities or instruments, the BSP said all banks with quasi-banking authority will meet the definition of lenders under the Securities Regulation Code (SRC) of the Securities and Exchange Commission (SEC). As such, these bonds or commercial papers may be issued without prior BSP approval if compliant with prudential criteria.

Meanwhile, in the draft circular, the BSP said borrowings from banks and quasi banks will not be considered as deposit substitutes if the bonds, commercial papers, and other debt securities or instruments are solely issued to banks, quasi-banks and other financial intermediaries. This means it is under a private offering or equivalent form of negotiated issuance and these are covered by separate rules.

The BSP wants all banks and quasi-banks affected to submit a feedback or suggestion to the BSP by Dec 15.

The draft circular indicated that financial intermediaries will still have the same functions, such as: to receive funds from one group of persons, irrespective of number, through traditional deposits, or issuance of debt or equity securities; and make available/lend these funds to another person or entity, and in the process acquire debt or equity securities.

Other functions are: the use of funds received for acquiring various types of debt or equity securities; borrow against, or lend on, or buy or sell debt or equity securities; hold assets consisting principally of debt or equity securities such as promissory notes, bills of exchange, mortgages, stocks, bonds, and commercial papers; and realize regular income in the nature of, but need not be limited to, interest, discounts, capital gains, underwriting fees, guarantees, fees, commissions, and service fees.

Financial intermediaries which are non-banks include investment house, investment company, trust corporation, NBFIs with quasi-banking license, financing company, securities dealer/broker and lending investor.

The list also include pawnshop, money broker, fund manager, cooperative, insurance company, non-stocks saving and loan association, and venture capital corporation.