MORNBFI Vol. 1 - Planters Development Bank

APP. Q-4611.12.31iii. It does not qualify as UT2 capitalas determined by the BSP:Provided, further, That such repaymentprior to maturity shall be approved by theBSP only if the 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 ofinsolvency. The agreement governing itsissuance must not contain any provisionthat mandates or creates an incentive forthe bank to repay the outstandingprincipal of the instrument, e.g., a crossdefaultor negative pledge or a restrictivecovenant, other than a call option whichmay be exercised by the bank;f) Its main features must be publiclydisclosed by annotating the same on theinstrument and in a manner that is easilyunderstood by the investor;g) The proceeds of the issuance mustbe immediately available withoutlimitation to the bank;h) The bank must have the option todefer any coupon payment where thebank:i. has not paid or declared adividend on its common shares in thepreceding financial year; orii. determines that no dividend is tobe paid on such shares in the currentfinancial year;It is acceptable for the deferredcoupon to bear interest but the interestrate payable must not exceed marketrates;i) The coupon rate, or theformulation for calculating couponpayments must be fixed at the time ofissuance and must not be linked to thecredit standing of the bank;j) It may allow only one (1)moderate step-up in the 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 resultsin an increase over the initial rate that isnot more 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 spreadbetween the initial index basis and thestepped-up index basis.The swap spread should be fixed asof the pricing date and reflect thedifferential in pricing on that date betweenthe initial reference security or rate andthe stepped-up reference security or rate;k) It must be underwritten by a thirdparty not related to the issuer bank noracting in reciprocity for and in behalf ofthe issuer bank;l) It must be issued in minimumdenominations of at least P500,000.00 orits equivalent;m) It must clearly state on its face thatit is not a deposit and is not insured bythe PDIC; andn) The bank must submit a writtenexternal legal opinion that theabovementioned requirements, includingthe subordination and loss absorptionfeatures, have been met:Provided, That it shall be subject to acumulative discount factor of twentypercent (20%) per year during the last five(5) years to maturity [i.e., twenty percent(20%) if the remaining life is four (4) yearsto less than five (5) years, forty percent(40%) if the remaining life is three (3)years to less than four (4) years, etc.]:Provided, further, That where it isdenominated in a foreign currency, it shallQ RegulationsAppendix Q-46 - Page 8Manual of Regulations for Non-Bank Financial Institutions