BSP Circular No. 1224 (Series of 2025) updates the definition of financial intermediaries and tightens rules on bonds, commercial papers, and borrowings under the MORB and MORNBFI. If you issue debt instruments or rely on lender-count rules, this circular reshapes compliance and documentation expectations.
Key Changes
- Updated definition of financial intermediaries in Section 101-Q of the MORNBFI, focusing on entities whose principal functions include lending, investing, or placement of funds or securities.
- Clarified what counts as a financial intermediary through a function-based test, tied to purpose clauses and business registration details.
- Expanded list of entities that qualify as financial intermediaries, including banks, quasi-banks, investment houses, trust entities, financing companies, securities dealers/brokers, NSSLAs, pawnshops, insurance companies, and other NBFIs meeting the definition.
- Aligned issuance rules for banks and quasi-banks on bonds, commercial papers, and other debt instruments with SEC requirements and prudential criteria.
- New notice requirements to BSP within five banking days after board approval of an issuance, including funding plans and compliance certifications.
- Prohibition on holdings by issuing banks and related entities for listed/traded debt securities, with specified exceptions.
- Borrowings classification clarified: borrowings from entities meeting the revised definition are treated as borrowings from financial intermediaries under Section 293/242-Q.
- Transitory provision: lenders no longer considered financial intermediaries under the revised definition remain excluded from lender count until borrowings are paid or renewed.
Who Is Affected
- Banks with quasi-banking authority issuing bonds, commercial papers, or other debt securities.
- Banks without quasi-banking authority but permitted to issue debt instruments through private offering.
- Quasi-banks issuing bonds, commercial papers, or other debt instruments.
- Regulated entities that function as financial intermediaries under the revised definition.
- Underwriters/arrangers and related parties to issuing banks.
Effective Date & Transition
The circular takes effect 15 calendar days after publication in the Official Gazette or a newspaper of general circulation. The transitory provision preserves lender-count exclusions for borrowings from lenders that cease to qualify as financial intermediaries, until those borrowings are paid or renewed.
Compliance Actions Checklist
- Confirm entity classification under the updated definition of financial intermediaries and update internal compliance mappings.
- For debt issuance (bonds/CPs/other instruments), ensure compliance with:
- SEC Securities Regulation Code and implementing rules.
- BSP prudential criteria referenced in the MORB/MORNBFI.
- AML/CFT customer due diligence requirements for issuance activity.
- Foreign currency liquidity management requirements for FX-denominated issuance.
- Prepare BSP notification package within five banking days of board approval, including:
- Notification letter with amount, terms, and a three-year funding plan.
- Board approval certification.
- Compliance certifications with prudential and SEC requirements.
- Undertaking to enroll/trade in an SEC-regulated market, as applicable.
- Review related-party restrictions on holding or market-making for listed/traded debt instruments.
- Update lender-count policy to reflect the revised definition and transitory rule.
FAQs
Does this circular change who is considered a financial intermediary? Yes. The definition now explicitly centers on principal functions (lending, investing, placement of funds or securities) and ties the test to formal business purposes and registration details.
Do banks still need prior BSP approval to issue bonds or commercial papers? No, as long as the bank meets prudential criteria and complies with SEC rules. However, BSP notification and documentation requirements apply within five banking days after board approval.
What about banks without quasi-banking authority? They may issue debt instruments through private offerings or equivalent negotiated issuance, subject to prudential criteria and SEC guidelines, without prior BSP approval.
How does this affect lender counts for deposit substitutes? Borrowings from entities that meet the revised definition are treated as borrowings from financial intermediaries. Borrowings from lenders no longer considered financial intermediaries remain excluded from lender count until paid or renewed.
Related Links
- Regulator hub: /regulations/bsp
- Topic hub: /regulations/topics/quasi-banking
- Topic hub: /regulations/topics/financial-intermediaries
- Ask CHD: /chat (Ask CHD about this regulation)