MANILA, Philippines--A unit of the Philippine Stock Exchange on Wednesday sealed a deal with the country's largest bank, Metropolitan Bank & Trust Co., making it the third financial institution accredited by the PSE as a settlement and cash custodian bank.

The move is hoped to improve the settlement system of the local bourse, which is done through its wholly owned subsidiary, the Securities Clearing Corp. of the Philippines (SCCP).

The two agreements signed Wednesday by Metrobank and SCCP will support the latter in securing and timely processing of payments from, and disbursement of funds to, the trading participants of the PSE.

SCCP is a clearing agency licensed by the Securities and Exchange Commission (SEC) to perform the clearing and settlement of PSE-eligible shares being transacted by PSE-accredited trading participants that are concurrently SCCP clearing members.

Under the agreements, Metrobank will provide its services to the clearing members which, in turn, will open and maintain with the bank their cash settlement accounts.

The cash to be deposited with Metrobank will be used to effect payments by clearing members of their cash obligations, while facilitating the process of crediting cash for members with cash entitlements.

As a settlement bank, Metrobank also supports SCCP's mark-to-market collateral deposit (MMCD) system--a risk management procedure being performed by SCCP to address price fluctuation risks through the daily monitoring of cash collateral being maintained in the accounts of clearing members.

The bank likewise signed an agreement to act as cash custodian bank for this purpose.