MORNBFI Vol. 1 - Planters Development Bank

APP. Q-4611.12.31ii. There is a change in tax status of theHT1 capital instrument due to changes inthe tax laws and/or regulations; oriii. It does not qualify as HT1 capital asdetermined by the BSP:Provided, further, That such repaymentshall be approved by the BSP only if thepreferred share/debt is simultaneouslyreplaced with issues of new capital whichis neither smaller in size nor of lower qualitythan the original issue, unless the bank’scapital ratio remains more than adequateafter redemption.It must not contain any clause whichrequires acceleration of payment ofprincipal, except in the event of insolvency.The agreement governing its issuance mustnot contain any provision that mandates orcreates an incentive for the bank to repaythe outstanding principal of the instrument,e.g., a cross-default or negative pledge or arestrictive covenant, other than a call optionwhich may be exercised by the bank;g) Its main features must be publiclydisclosed by annotating the same on theinstrument and in a manner that is easilyunderstood by the investor;h) The proceeds of the issuance mustbe immediately available without limitationto the bank;i) The bank must have full discretionover the amount and timing of dividends/coupons where the bank –i. Has not paid or declared a dividendon its common shares in the precedingfinancial year; orii. Determines that no dividend is tobe paid on such shares in the currentfinancial year.The bank must have full control andaccess to waived payments;j) Any dividend/coupon to be paidmust be paid only to the extent that the bankhas profits distributable determined inaccordance with existing BSP regulations.The dividend/coupon rate, or theformulation for calculating dividend/couponpayments must be fixed at the time ofissuance and must not be linked to the creditstanding of the bank;k) It may allow only one (1) moderatestep-up in the dividend/coupon rate inconjunction with a call option, only if thestep-up occurs at a minimum of ten (10)years after the issue date and if it results inan increase over the initial rate that is notmore than:i. 100 basis points less the swapspread between the initial index basis andthe stepped-up index basis; orii. fifty percent (50%) of the initialcredit spread less the swap spread betweenthe initial index basis and the stepped-upindex basis.The swap spread should be fixed as ofthe pricing date and reflect the differentialin pricing on that date between the initialreference security or rate and the steppedupreference security or rate.l) It must be underwritten by a thirdparty not related to the issuer bank noracting in reciprocity for and in behalf of theissuer bank;m) It must be issued in minimumdenominations of at least P500,000.00 orits equivalent;n) It must clearly state on its face thatit is not a deposit and is not insured by thePDIC; ando) The bank must submit a writtenexternal legal opinion that theabovementioned requirements, includingthe subordination and loss absorptionfeatures, have been met:Provided, That for purposes of reserverequirement regulation, it shall not betreated as time deposit liability, depositsubstitute liability or other forms ofborrowings: Provided, further, That the totalamount of HT1 capital that may be includedin the Tier 1 capital shall be limited to amaximum of fifteen percent (15%) of totalQ RegulationsAppendix Q-46 - Page 6Manual of Regulations for Non-Bank Financial Institutions