CBP Circular No. 902-82

November 19, 1982 CBP CIRCULAR NO. 902-82 The Monetary Board, in its Resolution No. 2086 dated November 12, 1982, approved the amendment of Sections 1347 and 2347 of Books I and II, respectively, of the Manual of Regulations for Banks and Other Financial Intermediaries, as follows: 1. Items "f" and "h" of Sections 1347 and 2347, respectively, of the Manual are hereby amended to read as follows: "Standby L/Cs including those in favor of the Philippine Government to guarantee the performance or completion of vital government projects, shall be issued only on the security of the following: "(1) First and junior mortgages on real estate property: Provided , That the loanable value of the real property is adequate to cover both the senior and junior liens; "(2) Bonds or securities issued by the Central Bank or the Philippine Government; evidences of indebtedness of the Republic of the Philippines and of the Central Bank, and any other evidence of indebtedness or obligation the servicing and repayment of which are fully guaranteed by the Republic of the Philippines; "(3) Assignment of or hold-out on local or foreign currency deposits, money market placements and/or trust placements maintained in the issuing bank and held in the Philippines: Provided , That such deposits or placements are not funded from proceeds of loans granted by the issuing bank or its subsidiary; "(4) Assignment of contract receivables arising from contracts completed or under completion and which are due to or from currently existing contracts with parties other than the beneficiary of the L/C: Provided , That in case the assigned receivables are collected or paid before the expiry date of the L/C, the same shall be substituted with other receivables with the same characteristics aforementioned so that the L/C shall be fully secured at all times during its term: Provided, further , That the assignment of contract receivables to a bank as security for letters of credit shall have the written conformity of the party ultimately liable under the contract which gave rise to the receivables; and "(5) Contracts with the Philippine Government in connection with vital government construction projects, subject to the following conditions: "a) The domestic standby letter of credit is issued in favor of the Philippine Government against advances made for the project by the Philippine Government; "b) The project is foreign-assisted and internationally bidded, the contracts for which have been won by Philippine contractors; c) The execution of the project is supported by a performance guarantee in the form of a surety bond from a duly accredited firm; and d) The contractor executes an irrevocable deed of assignment of all contract proceeds including advances in favor of the bank issuing the domestic standby letter of credit, which assignment must bear the acceptance and approval of the Philippine Government. "In no case shall banks accept chattel mortgage as security/collateral for standby L/Cs." 2. The same sections are hereby amended by adding the following as Items "i", "j" and "k" thereto: "i. Banks shall not issue standby L/Cs in favor of another bank to secure the obligation of the latter's client or for the faithful performance by the client of his obligation to said bank; "j. Total aggregate standby letters of credit, foreign and domestic, that may be issued by a bank and outstanding at any given time shall not exceed 50 percent of the bank's networth: "k. Banks shall submit a monthly report within ten (10) banking days after end of reference month to the Department of Commercial and Savings Banks, of domestic standby letters of credit opened and outstanding." 3. This Circular shall take effect immediately. FOR THE MONETARY BOARD: (SGD.) JAIME C. LAYA Governor