In our other article, we have discussed the new regulations on the issuance and offering of bills as securities. As a follow up, this article gives a snapshot, particularly for commercial banks, to use as a reference when considering the new regulations.
The following table contains a summary of what commercial banks can and cannot do when the new set of regulations becomes effective on 2 July 2012.
Click here to view table.
For other business entities, below are the takeaway points if issuing bills or derivative debentures.
- Offerings of bills issued to financial institutions (including commercial banks) are permissible, provided that the bills bear the statement "nonnegotiable" on the face.
- Offerings of bills to the public with maturity of more than 270 days are prohibited. To raise funds from the public with long-term maturities, nonbank companies need to issue debentures instead.
- Offerings of short-term bills (bills with maturity up to 270 days) to institutional investors and high net-worth investors is permissible, provided that certain conditions are met. (See the table above.) To avoid such regulatory requirements, the total number of outstanding bills issued must not exceed 10.
- Bills with derivatives embedded cannot be issued by non-banks. Derivative debentures are an alternative financial product through which companies may issue instruments with embedded derivatives. Note, however, that for non-commercial banks, underlying factors cannot be gold prices, gold price indices, or foreign-exchange rates.