RCBC eyes LTNCD issue

MANILA, Philippines - Rizal Commercial Banking Corp. (RCBC), the banking unit of the Yuchengco Group, is planning the issuance of long-term negotiable certificates of time deposit (LTNCD) within the year, a company disclosure said.

RCBC said its board has approved the issuance of the peso-denominated LTNCD but did not give details. It said it would seek the approval of the Bangko Sentral ng Pilipinas (BSP) soon to undertake the fundraising exercise.

To give their customers more investment options, banks have been issuing these kind of certificates.

EastWest Banking Corp. issued P5 billion worth of LTNCDs in late 2012 and will issue another P5 billion within the year.

Union Bank of the Philippines said it is also planning to issue P5 billion worth of LTNCD within the year.

Metropolitan Bank and Trust Co. and Banco de Oro Unibank have also issued LTNCDs over the past years.

It was noted that instead of issuing more shares or launching a new debt instrument, local banks are resorting to LTNCDs which consumers find more attractive because they are relatively safe yet high-yielding compared to traditional deposits.

LTNCDs are negotiable certificates of deposit indicating an amount of indebtedness of a bank with a designated maturity.

These certificates form part of a bank’s deposits and rank senior to all unsecured and subordinated debts, and all classes of equity securities.

They are similar in a way but differ primarily in the negotiability of the instrument. A long-term time deposit cannot be transferred during its life, while there is a market for LTNCDs should the holder wish to sell it prior to maturity date.