APPRAISAL AND LOAN VALUATION FRAMEWORK FOR RIGHTS

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					                                                                                         APP. 81
                                                                                        08.12.31

               APPRAISAL AND LOAN VALUATION FRAMEWORK
              FOR RIGHTS-BASED SECURE TENURE ARRANGEMENTS
                       AS COLLATERAL SUBSTITUTES
                                  (Appendix to Subsec. X361.5)


    In the appraisal of real properties or        Valuation of leasehold
rights offered as collateral substitutes               A leasehold is the real right of the lessee
under the housing microfinance                    acquired from an owner (the lessor) of a piece
program, the form of the secure tenure            of real estate to occupy and use it for a fixed
instrument must be considered. Generally,         term or period at a stipulated rental rate, and
two (2) appraisal methodologies or                subject to conditions set forth in a written
approaches may be applied: the market             document of lease. The lease may include
value must be determined using the                the right of the lessee to improve the land,
market data or sales comparison                   mortgage the building, sublet all or part of
approach for properties under freehold            the property, and assign or sell his leasehold.
and right to occupy and/or build (in                   The task of the appraiser is to estimate
respect of the housing unit or                    the present worth or “market value” of the
improvement to be used as collateral              imputed rental income of the lessee derived
substitute), and for properties under             from the property over and above the rent
Lease agreement and usufruct, the                 required to be paid by him to the lessor under
value of the Leasehold interest of the            the terms of the lease and his interest in any
borrower must be determined.                      improvements made by him. In evaluating a
                                                  leasehold, the appraiser must have a thorough
Market value                                      knowledge of all the salient terms and
    Market value is the most probable             conditions of the primary or main lease and
price that a property should obtain in a          any subleases, for these affect the value of
competitive and open market under all             the leasehold considerably, such as:
conditions requisite of a fair sale, with              a. Rental. If the rental to be paid under
the buyer and seller each acting                  the terms of the lease is below the rental
prudently and knowledgeably, and                  prevailing in the market, the leasehold may
assuming that the price is not affected           have a substantial value. Where the rental
by undue stimulus. In determining the             actually paid is the prevailing rental value
market value of the property, the                 of the property, the leasehold may have no
appraiser must use the Market Data or             value. Prevailing rental rates refer to the
Sales Comparison approach. This                   rental rates of comparable properties within
approach attempts to compare the                  comparable locations.
subject property’s value with similar                  b. Term of Lease. A long-term lease
properties and adjust its value according         or the right of the lessee to renew the lease
to the presence or absence of value               at the expiration of the original term of the
determining characteristics. This                 lease may add value to the leasehold.
approach is based upon the principles of               c. Payment for Improvement
supply and demand and upon the                         d. Option to Purchase
principle of substitution.                             e. Leasehold Restrictions




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Loan Valuation Based on Appraisal                                   occupy and/or build) or prevailing rental rates
Valuation Framework or Methodology                                  (leasehold/usufruct). The standard practice of
    The valuation of properties under the                           participating banks in determining the loan
housing microfinance loan program will be                           to collateral ratios shall be adopted.The
based on prevailing market values of real                           following terms provided in the table below
estate properties (freehold and right to                            may be applied:

 FORM OF SECURE          NATURE AND                     TERMS AND                 APPRAISAL              LOAN VALUATION
   TENURE OR          DESCRIPTION OF                    CONDITIONS               METHODOLOGY
 PROPERTY RIGHT         ACCEPTABLE
                        INSTRUMENT
Usufruct           Usufruct agreement or            The Term of Lease must      Valuation of Leasehold   70% of the appraised
                   contract – Duly executed         not be less than the term   Interest                 value of the collateral
                   contract executed by the         of the loan.
                   owner of the property
                   granting the usufructuary/
                   beneficiary/ client the right
                   to use, possess, and
                   enjoy the real property
                   including its fruits and other
                   rights or benefits

 Lease             Lease agreement or               The Term of Lease must      Valuation of Leasehold   70% of the appraised
                   contract – Duly executed         not be less than the term   Interest                 value of the collateral
                   contract granting the            of the loan
                   lessee the right to use and
                   possess the real property
                   for a fixed long-term
                   period in consideration of
                   rental payments

 Freehold          OCT/TCT – Torrens title          Adjustment of appraisal     Market Data Approach     90% of the appraised
                   issued by the Register of        value due to documentary                             value of the collateral
                   Deeds evidencing                 nature or status of
                   absolute ownership of real       instrument must be taken
                   property                         into account

                   Interim Title, Contract to
                   Sell or Conditional Sale –
                   Duly executed contract or
                   other legal instrument
                   issued by the appropriate
                   government agency
                   indicating full payment for
                   the purchase of the
                   property or its conditional
                   sale or conveyance to be
                   perfected upon full
                   payment of the purchase
                   price and/or the fulfillment
                   of other conditions




Appendix 81 - Page 2                                                                   Manual of Regulations for Banks
                                                                                                                          APP. 81
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  FORM OF SECURE           NATURE AND                    TERMS AND                  APPRAISAL                LOAN VALUATION
    TENURE OR              DESCRIPTION OF                CONDITIONS                METHODOLOGY
  PROPERTY RIGHT           ACCEPTABLE
                           INSTRUMENT
Right to occupy and/or   (1) Certification validly     Adjustment of appraisal    Market Data Approach (as   70% of the appraised
build                    issued by the appropriate     value due to documentary   to the improvement or      value of the collateral
                         government agency             nature or status of        housing unit)
                         stating that the borrower/    instrument must be taken
                         client has the right to       into account
                         occupy, build and/or
                         acquire the property he/
                         she is possessing being
                         an eligible beneficiary of
                         a public or private social
                         housing program or a
                         Presidential proclamation,
                         or (2) certification or
                         written acknowledgment
                         from the owner of the
                         property that the borrower/
                         client has the owner’s
                         consent and permission to
                         occupy and build on such
                         property

(MAB-2008-015 dated 19 March 2008)




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          FORMAT CERTIFICATION ON DEPOSIT/CASH DELIVERY SERVICES
                                              (Appendix to Sec. X266)



                                                  Name of Bank


                                                 CERTIFICATION


    We,                                         , Executive Vice President (or its equivalent
position) and                                  , Compliance Officer, certify that the (Name
of Bank) shall render deposit pick-up/cash delivery services beyond regular banking hours/
days to the following clients:

     Servicing Banking                     Client Name and       Deposit Pick-up/Cash Delivery services
         Unit1/                                Address2/                  Days            Hours


1/ The name of the branch or banking unit that will render the Deposit Pick-up/Cash Delivery Services
2/ Name and address of client requesting deposit pick-up/cash delivery services

    We further certify that in the performance of deposit pick-up/cash delivery services to the
above clients, the (Name of Bank) shall comply with all the conditions provided under
Section X266 of the Manual of Regulations for Banks on Deposit Pick-up/Cash Delivery
Services.

    This certification executed on                             is being submitted in compliance with
the requirements of abovementioned regulation.


Signed:                                                                            Signed:


(Name of Executive Vice President)                                      (Name of Compliance Officer)
Position:                                                               Position:


    Subscribed and sworn to before me, this                      day of               , affiants exhibiting
their valid identifications indicated below:

     Name                               Government ID/Passport No.                 Date/Place Issued



                                                                                   Notary Public
(Circular No. 614 dated 14 July 2008)

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                                                                                         APP. 83
                                                                                        11.12.31

BASIC STANDARDS IN THE ADMINISTRATION OF TRUST, OTHER FIDUCIARY
            AND INVESTMENT MANAGEMENT ACCOUNTS
                                   (Appendix to Subsec. X401)


I. Introduction                                   the account. It shall be covered by a written
     Trust and other fiduciary business and       policy which shall contain, among other
investment management activities have             things, the types of trust, other fiduciary and
evolved with the changes in the financial         investment management accounts that are
market and advancement in technology.             desirable and consistent with the TE’s risk
These innovations have allowed trust              strategies and the specific conditions for
entities to expand the scope of trust             accepting new accounts, and approved by
products and services offered to customers,       the Trust Committee, or the Trust Officer,
thus increasing their exposure to various         or subordinate officer of the trust
risks. As trust entities grow more diverse,       department, authorized by the board of
necessarily policies and procedures as well       directors or its functional oversight
as risk management practices must keep            equivalent, in the case of foreign banks and
pace. The basic standards would provide           institutions.
common processes for an efficient                     The review process entails the
operation and administration of trust, other      thorough and complete review of the
fiduciary and investment management               client’s/account’s characteristics and
activities across the trust industry.             investment profile, including the assets/
                                                  properties to be contributed/delivered.
II. Statement of policy                           Non-financial/non-traditional assets (i.e.,
     It is the policy of the BSP to provide       real estate and the like) which are more
adequate level of protection to investors         likely to be iliquid shall be carefully
who, under a fiduciary arrangement,               reviewed prior to acceptance to ensure that
engage the services or avail of products of       the TE only accepts accounts which hold
trust entities which are required to observe      assets it may be able to properly manage.
prudence in the exercise of their fiduciary           Prior to the acceptance of a fiduciary
responsibility. Along this line, the BSP          account, the TE shall review the underlying
prescribes basic standards for the efficient      instrument (trust agreement or contract)
administration and operation of trust and         for potential conflicts of interest. If such
other fiduciary business and investment           conflict exists, the TE shall take
management activities.                            appropriate action to address such
                                                  condition before the account is accepted.
III. Standards                                        In cases where the TE is chosen as a
     The basic standards in the administration    successor trustee or investment manager,
of trust, other fiduciary and investment          the TE shall perform a review and
management accounts are meant to address          evaluation of all assets to be delivered to
the significant areas of operations and provide   the TE to determine how these would serve
minimum set of requirements and                   the client's objectives, whether the TE can
procedures:                                       properly handle such assets and to assess
     A. Account acceptance and review             any possible issue/problem which may
processes                                         arise with respect to such assets before
     1. Pre-acceptance account review             acceptance of such assets and/or
     This review must document that the           assumption of the trust, fiduciary or
trust entity (TE) can effectively administer      investment management relationship.



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     2. Establishment and post-acceptance         The profiling process, to be documented
review                                            through a CSA Form signed by the
     Acceptance policies for new accounts         concerned parties, shall be undertaken on
shall, at a minimum, include the following        a per client basis, which shall emphasize
processes and/or requirements:                    the level of risk tolerance of the client.
     (1) Account opening process. This                 • CSA
process defines the TE’s policies and                  The TE shall obtain adequate
procedures for client/account identification,     information from the client to determine the
consistent with the TE’s KYC policy for           appropriateness of the fiduciary product/
compliance with anti-money laundering             service to be provided and ensure the
regulations; identification of the needs of       suitability of the investment product/
the client; the objective(s) of the engagement;   portfolio/strategy to be recommended to
the vehicle to be used; and the account’s         each client. It shall provide prospective
investment parameters. The trust officer or       clients with client suitability questionnaire
other authorized personnel of the trust           and require them to accomplish the same
department shall conduct the account              prior to the acceptance of the account and
opening process for trust, fiduciary and          execution of a transaction.
investment management accounts. In the                 For this purpose, the TE shall make an
case of UIT Funds, only authorized branch         assessment of the client’s level of financial
managers/officers as well as UIT marketing        sophistication and consider factors relevant
personnel, who have all successfully              to the creation and management of, or
undergone the required certification/             participation in, an investment portfolio,
accreditation/licensing process, may              such as but not limited to, the specific needs
perform said process for UIT Fund clients.        and unique circumstances of the client and/
The account opening process shall at least        or beneficiary/(ies), basic characteristics of
involve the following:                            the clients’ investment and experience,
     (a.) As a general rule, client profiling     financial constraints, risk tolerance, tax
shall be performed for all UIT Fund and           considerations and regulatory requirements.
regular trust, other fiduciary and investment          The same CSA process shall be applied
management accounts via a duly                    by the TE for directional accounts.
acknowledged Client Suitability Assessment             • Minimum information required for
(CSA), which aims to provide the TE with          CSA:
information leading to the prudent design              i. Personal/Institutional            data.
of investment packages, suited to a particular    Minimum personal/institutional information
client or investment account. The CSA,            that are unique to a natural or juridical client,
however, shall not be required for the            which shall also cover demographics and
following trust and other fiduciary accounts:     KYC information; the identity of
     1. court trust;                              beneficiaries, where applicable, and
     2. legislated and quasi-judicial trust;      approximate portion of total assets
     3. trust under indenture;                    administered/managed.
     4. facility/loan agency;                          ii. Investment objective. A clear
     5. transfer agency;                          statement or definition of the client’s
     6. depository and reorganization;            investment goals/purposes to be achieved
     7. escrow;                                   through a particular trust, fiduciary or
     8. custodianship;                            investment product or service. The client
     9. safekeeping; and                          may opt to open several accounts, each one
     10. institutional trust – pre-need plans.    (1) with specific investment objectives




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separate and distinct from the other                foreign country: Provided, That said FI has
accounts.                                           at least an investment grade credit rating
     iii. Investment experience. A list of          from a reputable international credit rating
various types of investment the prospective         agency. For purposes of investing in a UIT
client is familiar with, acquired from actual/      Fund, a client wants an investment strategy
personal investment experience, or of               where the primary objective is to prevent
similar investment circumstances.                   the loss of principal at all times and where
     iv. Knowledge and financial situation.         the fund is invested in deposits with local
For complex transactions where the level            banks/branches of foreign banks operating
of risk involved is greater, the TE must take       in the Philippines and with FI in any foreign
into account the knowledge, experience and          country: Provided, That said FI has at least
financial situation of the client or potential      an investment grade credit rating from a
client to assess the level of investment            reputable international credit rating agency.
sophistication. This may include the careful             ii. Moderate. Client wants a portfolio
assessment whether the specific type of             which may provide potential returns on
financial instrument/service/portfolio/             investment that are higher than the regular
strategy is in line with the client’s disclosed     traditional deposit products and client is
financial capacity.                                 aware that a higher return is accompanied
     Such assessment is necessary as there          by a higher level of risk. Client is willing to
are significant risks involved on financial         expose the funds to a certain level of risks
investments (e.g., derivatives), the type of        in consideration for higher returns.
transaction (e.g. sale of options), the                  iii. Aggressive. Client wants a portfolio
characteristics of the order (e.g., size or price   which may provide appreciation of capital
specifications) or the frequency of the             over time and client is willing to accept
trading.                                            higher risks involving volatility of returns
     v. Investment time frame and liquidity         and even possible loss of investment in
requirement. The TE is able to organize the         return for potential higher long-term results.
portfolio in a manner that will provide for              • Investment policy statement
anticipated liquidity requirement through                The TE shall have in place a method by
redemption of principal contribution or             which suitability of investment is
earnings.                                           determined based on the results of the CSA
     vi. Risk tolerance. Allow the TE to            and formulated via an Investment Policy
classify clients in accordance with its own         Statement (IPS). It shall communicate to
pre-set internal risk classification.               prospective clients the results of the
     Based on the results of the CSA,               assessment, recommend the investment
classification of clients by the TE may             product/portfolio/strategy, and explain the
include, but need not be limited to the             reasons why, on the basis of the given
following:                                          information, its recommendation is to the
     i. Conservative. Client wants an               best interest of the client as of a defined
investment strategy where the primary goal          timeframe. The TE shall make a
is to prevent the loss of principal at all times,   recommendation only after having
and where the client prefers investment             reasonably determined that the proposed
grade and highly liquid assets, government          investment is suitable to the client’s and/or
securities, Republic of the Philippines'            beneficiary’s financial situation, investment
bonds (ROPs), deposits with local banks/            experience, and investment objectives.
branches of foreign banks operating in the               The IPS is a clear reference frame for
Philippines, and deposits with FIs in any           investment decisions and must be based on




Manual of Regulations for Banks                                              Appendix 83 - Page 3
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the investment objectives and risk tolerance       particular investment/service/ transaction/
of the client. It must include, at a minimum,      product; and
a description of the following:                         •    He fully understands and is willing
     i. Investment objective;                      to take the risks incidental to the investment
     ii. Investment strategy-indicating how        product/portfolio/strategy to be availed of.
assets will be allocated indicating the                 ii. The TE shall issue a clear written
agreed portfolio mix;                              warning to the client of the protections he
     iii. Investment performance review –          may lose and conversely, of the risks that
indicating proposed market benchmarks, if          he is exposed to.
any and the desired frequency of the                    iii. The TE shall have taken all
performance review/reporting;                      reasonable steps to ensure that the client
     iv. Investment limits – identifies any        meets all relevant requirements as provided
limitation which the client may have for the       for in the TE’s written policies.
portfolio such as investment restrictions               •    Frequency of CSA and IPS
(e.g., prohibited investments) and client’s             i. The CSA shall be performed and the
consent for taking losses.                         IPS shall be formulated and executed prior
     For UIT Fund, the IPS is equivalent to        to the opening of the account;
the investment objective of the fund                    ii. The TE shall update the CSA and the
specifically stated in the Declaration of          IPS at least every three (3) years except in
Trust.                                             the following instances;
     •    Option of client to re- classification        •    Whenever updates are necessitated
     Generally, the TE shall recommend the         by the client, upon notice/advise to the TE,
investment product/portfolio/strategy              on account of a change in personal/financial
suitable to the client based on the results of     circumstances or preferences, the TE shall
the CSA. The TE may, however, provide a            adjust/modify its investment strategy/
process for allowing clients to invest in          portfolio and recommendation, subject to
investment products/ portfolio/strategy with       the conformity of the client;
a higher risk than those corresponding to               •    Whenever managed trust, other
the CSA profile results. A client who              fiduciary, and investment management
exercises the option to be re-classified           accounts express intention to invest in
outside the CSA process thereby waives             complex investment products such as
some of the protection afforded by these           financial derivatives, the TE shall ensure that
guidelines. Such re-classification may be          the CSA and the IPS are updated at least
allowed subject to the observance of the           annually. Otherwise, the TE shall not make
following:                                         new/additional investments in complex
     i. The client shall state in writing to       investment products.
the TE that -                                           iii. The TE shall ensure that periodic
     •    He does not agree with or accept         written notices given to clients reminding
the recommendation of the TE on the                them of such updates are received/
investment product/portfolio/strategy              acknowledged by clients or their authorized
appropriate to the client’s profile based on       representatives;
the results of the CSA;                                 iv. Updated CSA and IPS shall be
     •    He would like to avail of the            acknowledged by the client;
investment product/portfolio/strategy other             v. The frequency of review shall be
than that which is consistent with the results     included as a provision in the written
of the CSA;                                        agreement; and
     •    He requests/intends to be re-                 vi. The latest CSA and IPS will continue
classified, either generally or in respect to a    to be applied for any subsequent principal



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                                                                                          APP. 83
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contributions to the account, until these are      management accounts. In addition, the
amended or updated by the client.                  Agreement shall contain the following
     (b.) Identification of degree of discretion   provisions:
granted by client to the TE. This process               (i.) A description of the services to be
involves the determination of the extent of        provided;
discretion granted to the TE to manage the              (ii.) All charges relating to the services
client’s portfolio.                                or instruments envisaged and how the
     (1) Discretionary. The TE has authority       charges are calculated;
or discretion to invest the funds/property of           (iii.) The obligations of the client with
the client in accordance with the parameters       respect to the transactions envisaged, in
set forth by the client. Such authority of the     particular his financial commitments
TE which obtained a composite Trust Rating         towards the TE; and
of “4” in the latest BSP examination will not           (iv.) For engagements involving
be subject to the investment limitations           management of assets or properties, the
provided under Subsecs. X409.2 and                 degree of discretion granted to the trustee
X409.3 for trust and other fiduciary accounts      or agent must be clearly defined and stated
and Subsecs. X411.4 and X411.5 for                 in the agreement;
investment management accounts,                         (b.) The Agreement shall be in plain
respectively; and                                  language understandable by the client and/
     (2) Non-discretionary. Investment             or personnel of the TE responsible for
activity of the TE is directed by the client or    explaining the contents of the agreement to
limited only to specific securities or             the client.
properties and expressly stipulated in the              (c.) For complex investment products
agreement or upon written instruction of the       such as financial derivatives instruments or
client.                                            those that use synthetic investment vehicles,
     (3) Documentation. The trust, fiduciary       the TE shall disclose to the client and require
or investment management relationship              client’s prior written conformity to the
shall be formally established through a            following:
written legal document such as the trust or             (i.) Key features of investment services
investment management agreement. The               and financial instruments envisaged,
engagement documents shall clearly specify         according to the nature of such instruments
the extent of fiduciary assignments/               and services;
responsibilities of the TE and articulate the           (ii.) The type(s) of instruments and
nature and limits of each party’s status as        transactions envisaged;
trustor/principal or trustee/agent. Policies            (iii.) The obligations of the TE with
and procedures shall provide that trust or         respect to the transactions envisaged, in
investment management agreements are               particular, its reporting and notice
signed by the trust officer or , subordinate       obligations to the clients; and
officer of the trust department, or in the case         (iv.) An appropriate disclosure bringing
of UIT Funds, branch managers/officers duly        to the client’s attention the risks involved
authorized by the board of directors.              in the transactions envisaged.
     The documentation process must also                (d.) In order to give a fair and adequate
consider the following:                            description of the investment service or
     (a.) The Agreement must conform to the        financial instrument, the TE shall provide a
requirements provided under Subsec.                clearly stated and easily understood Risk
X409.1 for trust and other fiduciary accounts      Disclosure Statement to its clients, which
and Subsec. X411.1 for investment                  forms part of or attached to the trust,




Manual of Regulations for Banks                                             Appendix 83 - Page 5
APP. 83
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fiduciary or investment management                 Committee shall formulate and implement
agreement. The Risk Disclosure Statement           a policy to ensure that a comprehensive
shall contain, among other things, the             review of trust, fiduciary and investment
following provisions:                              management accounts (including collective
     (i.) Cautionary statement on the              investment schemes such as UIT Funds)
general risks of investing or associated with      shall be conducted. The periodic review of
financial intruments, i.e., if the market is not   managed accounts shall be aligned with the
good, an investor may not be able to get           provisions on the review and updating of
back his principal or original investment.         the CSA and IPS. The board of directors may
Such statement must be given due                   delegate the conduct of account review to
prominence, and not to be concealed or             the Trust Officer or Trust Department
masked in any way by the wording, design           Committee created for that purpose. The
or format of the information provided;             policy shall likewise indicate the scope of
     (ii.) If the investment outlet is exposed     the account review depending upon the
to any major or specific risks, a description      nature and types of trust, fiduciary and
and explanation of such risks shall be clearly     investment management accounts managed.
stated; and                                            A comprehensive accounts review,
     (iii.) Advisory statement that for            which shall entail an administrative as well
complex investment products, said                  as investments review, shall be performed
instruments can be subject to sudden and           on a periodic basis to ascertain that the
sharp falls in value such that the client may      account is being managed in accordance
lose its/his entire investment, and, whenever      with the instrument creating the trust and
applicable, be obligated to provide extra          other fiduciary relationship. The
funding in case it/he is required to pay more      administrative review of an account is taken
later.                                             to determine whether the portfolio/assets
     Additional risk disclosures may be            are appropriate, individually and
provided as appropriate.                           collectively, for the account, while an
     The TE must ensure that the trust,            investment review is used to analyze the
fiduciary and investment management                investment performance of an account and
agreements and documents have been                 reaffirm or modify the pertinent investment
reviewed and found to be legally in order.         policy statement, including asset allocation
     B. Account administration                     guidelines. Whether the administrative and
     It is the fundamental duty of a fiduciary     investment review are performed separately
to administer an account solely in the             or simultaneously, the reviewing authority
interest of clients. The duty of loyalty is a      shall be able to determine if certain portfolio/
paramount importance and underlies the             assets are no longer appropriate for the
entire administration of trust, other fiduciary    account, (i.e., not consistent with the
and investment management accounts. A              requirements of the client) and to take
successful administration will meet the            proper action through prudent investment
needs of both clients and beneficiaries in a       practices to change the structure or
safe and productive manner.                        composition of the assets.
     Account administration basically                  The periodic review process also
involves three (3) processes, namely;              involves disclosure of information on the
(1) periodic review of existing accounts, (2)      investment portfolio and the relevant
credit process and (3) investment process.         investing activities. Regardless of the degree
     (1) Periodic review of existing accounts      of discretion granted by the client to the TE,
     The board of directors and Trust              the former assumes full risk on the




Appendix 83 - Page 6                                              Manual of Regulations for Banks
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investment and related activities, and                a. Credit policies. Trust entities must
counterparties. Relevant changes in the TE’s     clearly define its credit policies and
organization or investment policies that may     processes, including the use of internal and
affect the client’s decision to continue the     external credit rating and approval process
services of the TE shall be disclosed to the     relative to the delivery of its instrument
client.                                          function. The TE can share credit information
     In the case of non-discretionary public     with the bank proper subject to proper
interest accounts such as employee benefit/      delineation and documentation. The credit
retirement or pension funds, due diligence       process shall show the following at the
review of the investment portfolio by the        minimum:
TE shall include providing investors with             i. Clear credit process flow, from
appropriate information needed to make an        initiation of the lending activities envisioned
informed investment decision and avoid           by the TE up to the execution of actual
possible conflict of interest and self-dealing   investment;
situations.                                           ii. Credit criteria and rating used;
     The TE should be able to show (in                iii. Manner by which the TE handles
addition to the specific written directive       the information, including confidential and
from the client) what it has done in the         material data, which is shared between and
exercise of due diligence and prudence on        among the departments, subsidiaries or
its part to protect the interest of the client   affiliates of the TE; and
and/or beneficiaries, especially for accounts         iv. Clear delineation of duties and
of public interest like retirement/pension       responsibilities of each of the departments,
fund accounts.                                   subsidiaries and affiliates of the TE, where
     The TE shall keep its clients informed      such groups or entities share the credit
of the investment and related activities by      process.
rendering periodic reports and financial              b. Counterparty accreditation process.
statements prescribed under Subsec.              The TE must clearly define the policies and
X425.1 and as necessary. The types of            the processes it will undertake to accredit
reports and statements and the frequency         counterparties, including the bank proper,
of their submission must be clearly specified    and its subsidiaries and affiliates, for their
in the TE’s written policies and procedures.     investment trading functions. It may use or
     The TE shall also establish a system that   avail itself of the accreditation process of its
enables a trust account representative or        bank proper provided there is proper
officer to periodically contact clients          delineation of functions. The counterparty
and/or beneficiaries to determine whether        accreditation process shall show the
their financial objectives and circumstances     following at the minimum:
have changed.                                         i. Clear accreditation process flow
     (2) Credit process                          from the initiation of credit activities up to
     Each trust entity shall define its credit   the actual usage of lines;
process in relation to the discharge of the           ii. Credit criteria and rating used;
TE’s investment function. The process                 iii. Manner by which the TE handles
ensures credit worthiness of investment          the information, including confidential and
undertakings including dealings and              material data, which are shared between and
relationship with counterparties. It also        among the departments, subsidiaries or
serves to institutionalize the independence      affiliates of the TE;
of the credit process of the TE. The credit           iv. Usage, duties and responsibilities of
process must at least cover the following:       each of the department, subsidiaries and




Manual of Regulations for Banks                                            Appendix 83 - Page 7
APP. 83
11.12.31

affiliates of the TE, where there is sharing of      portfolios.
credit lines between and among these                      • Asset allocation. Outlines the
concerned groups/entities; and                       process and criteria for selecting and
     v. Clear delineation of duties and              evaluating different asset classes identified
responsibilities of each of the departments,         to be appropriate for the client’s profile and
subsidiaries and affiliates of the TE, where         investment objective. It includes the
such groups or entities share the                    allocation of desired tenors in conjunction
accreditation credit process.                        with the client or portfolio profile based on
     (3) Investment process                          the CSA or IPS. The asset allocation may be
     This process defines the investment             based on percentage to total funds managed
policies and procedures, including decision-         by the TE or stated in absolute amount
making processes, undertaken by the TE in            whichever is preferred by the client.
the execution of its fund/asset management                •   Security selection. Policies and
function. The primary objective of such              procedures on the selection of investment
process is to create a structure that will           outlets, including investment advisory, must
assure TEs observe prudence in investment            be in place. This involves the selection of
activities at all levels, preservation of capital,   issuers for each of the identified asset
diversification, a reasonable level of risk as       classes. The process provides for the review
well as undivided loyalty to each client and         of investment performance using risk
adherence to established structure for the           parameters and comparison to appropriate
TE’s investment undertakings. The                    benchmarks. It shall also identify the
investment process covers a broad range of           documentation required for all investment
activities; thus, the investment policies shall      decisions.
clearly outline the parameters that, at a                 If the TE uses approved lists of
minimum, include the following:                      investments, there shall be an outline of the
     a. Overall investment philosophy,               criteria for the selection and monitoring of
standards and practices. A general statement         such investments, as well as a description
of principles that guides the portfolio              of the overall process for addition to and
manager in the management of investments             deletion from the lists.
outlined in the board-approved policy, along              •   Benchmark selection/creation.
with a discussion on the practices and               Selects or crafts the benchmarks to reflect
standards to be implemented to achieve the           the desired return of the portfolio and to
desired result.                                      measure the performance of the portfolio
     b. Investment Policies and Processes.           manager. The TE shall be required to
Defines the policies and the processes               measure performance based on benchmarks
undertaken to create the portfolio to ensure         to gauge or measure the performance of the
the proper understanding of the client’s             account. The TE must have clear definition
preferences.                                         of its benchmarking policy.
     i. Profiling of client. Aims to                      •   Limits. Identifies any limitations on
understand the level of maturity of the client       portfolio management which the client may
relevant to the creation of an appropriate           impose on the TE. These limitations have
portfolio.                                           to be specific as to the nature of the
     ii. Portfolio construction for custom-          portfolio, such as but not limited to, core
made portfolios. Includes the process of             holdings, investment in competitor
researching and selecting recommended                companies, and companies engaged in
portfolio and setting objectives or strategies       vices.
for diversification by types and classes of               •   Risk disclosure statement. A clear
securities into general and specialized              and appropriately worded statement/s to



Appendix 83 - Page 8                                               Manual of Regulations for Banks
                                                                                       APP. 83
                                                                                      11.12.31

disclose different risks to clients of the         and liquidity;
various investment undertakings of the                 iv. Past record of good and timely
investment manager done in behalf of the           delivery and payment on trades;
client.                                                v. Value of services provided,
     iii. Internal policies on trade allocation.   including research; and
Defines the institution’s policies in ensuring         vi. Available information about the
timely, fair and equitable allocation of           broker from other broker customers,
investments across investing portfolios.           regulators, and self-regulated organizations
     iv. Diversification of discretionary          authorized by the SEC.
investments. The TE shall have a policy                The TE with large portfolio may opt to
on the general diversification requirements        evaluate broker performance using a
for asset administration, as well as the           formalized point scoring system. A list of
process implemented to monitor and                 approved brokers shall be made available
control deviations from policy guidelines.         by the TE, reviewed periodically and
     v. A TE shall have access to timely           updated at least annually.
and competent economic analyses and                    d. Best practices. The TE shall
forecasts for the capital markets and other        document best practices policies and
products in which its clients will be              processes to institutionalize proper
investing. TEs engaged in more complex             safeguards for the protection of its clients
transactions may consider providing an             and itself. At a minimum, the policies must
economic and securities research unit that         include the following standards:
continually monitors global trends and                 i. Best execution. The TE shall use
capital markets. This unit provides                reasonable diligence to ensure that
necessary forecasts of capital market              investment trades are executed in a
expectations, currency relationships,              timely manner and on the best available
interest rate movements, commodity                 terms that are favorable to the client
prices, and expected returns of asset              under prevailing market conditions as
classes and individual investment                  can be reasonably obtained elsewhere
instruments, which help the TE establish           with an acceptable counterparty. For
appropriate investment policies and                related counterparties, no purchase/sale
strategies, select appropriate investments,        must be made for discretionary accounts
and manage risks effectively.                      without considering at least two (2)
     vi. The TE shall have a process that          competitive quotes from other sources. The
will confirm trust personnel with                  policy on best execution must document
investment functions know and follow the           processes to warrant such execution is
BOD-approved investment policies and               readily and operationally verifiable.
processes.                                             ii. Chinese wall. A clear policy on
     c. Selection and use of brokers/ dealers.     Chinese Wall aims to protect the institution
The quality of execution is an important           from conflict of interest arising from
determinant in broker selection. In selecting      varying functions carried by the TE in
brokers/dealers, a TE must consider the            relation to credit (debt), shareholder, and
following minimum standards and criteria:          investment position taking. The policy
     i. Execution capability and ability to        shall state the duties and responsibilities
handle specialized transactions;                   of the TE and each department including
     ii. Commission rates and other                that of the bank proper and subsidiaries
compensation;                                      and affiliates should transactions involve
     iii. Financial strength, including            the concerned departments and entities.
operating results and adequacy of capital              iii. Personnel investment policies.



Manual of Regulations for Banks                                            Appendix 83 - Page 9
APP. 83
11.12.31

These policies aim to ensure honest and fair      and make certain that its advice and
discharge of investment trading functions of      recommendations to clients are based on
all qualified personnel. Qualified personnel      thorough analysis and take into account
are those that may have access to information     available alternatives.
on clients and investment position-taking of           •    The TE shall take all reasonable
clients, investment manager or portfolios.        steps to execute promptly client orders in
The use of such information may be abused         accordance with the instruction of clients.
and detrimental to the clients. The policy             •    The TE, when acting for or with
shall state the duties and responsibilities of    clients, shall always execute client orders
each qualified personnel in relation to           on the best available terms.
trading and portfolio management activities            •    The TE shall ensure that transactions
including allowed and not allowed                 executed on behalf of clients are promptly
transactions as well as sanctions in case of      and fairly allocated to the accounts of the
violations.                                       clients on whose behalf the transactions
     iv. Confidentiality and materiality of       were executed.
Information. The TE must keep information              Where a client opts not to accept the
about past, current and prospective clients       recommendation of the TE and chooses to
confidential, unless disclosure is authorized     purchase another investment product which
in writing by the client or required by law       is not recommended, the TE may proceed
and the information involve illegal activities    with the client’s request/ instruction,
perpetrated by the client. It must ensure         provided it shall document the decision of
safekeeping of confidential and material          the client and highlight to him/her that it is
information and prevent the abuse of such         his/her responsibility to ensure the
information to the detriment of the institution   suitability of the product selected.
or its clients.                                        vii. In-House or related party
     v. Fair dealing. The TE shall document       transactions handling. The TE shall define
dealing practices to ensure fair, honest and      the policies in handling related-interest
professional practices in accordance with         transaction to ensure that the best interest
the best interest of the client and               of clients prevails at all times and all
counterparties at all times and for the           dealings are above board. It must conform
integrity of the market. It must ensure that      to the requirements of Subsecs. X409.3 and
any       representations        or      other    X411.5.
communications made and information                    viii.Valuation. The TE shall document
provided to the client are accurate and not       the institution’s valuation process to show
misleading. The TE must also take care not        the sources of prices, either market or
to discriminate against any client but treat      historical value, and the formula used to
all clients in a fair and impartial manner.       derive the NAV of investment portfolios.
     vi. Diligence and reasonable basis. In       Valuation shall be understood, compliant
conducting its investment services, the TE        with written policies and operating
shall act with skill, and care and diligence,     procedures, and used consistently within
and in the best interests of its clients and      the TE. The TE must ensure that the valuation
the integrity of the market. The duty of due      processes of service providers, custodians,
diligence is intertwined with the duty to         and other subcontractors are compatible
maintain independence and objectivity in          with those of the TE and in compliance with
providing investment recommendations or           relevant statutory or regulatory valuation
taking investment actions. When providing         standards.
advice to a client, the TE shall act diligently        Risk officers shall document the




Appendix 83 - Page 10                                           Manual of Regulations for Banks
                                                                                              APP. 83
                                                                                             11.12.31

accuracy and reliability of all valuation         under trusteeship/agency arrangement,
processes and data sources and ensure that        preparation and filing of required reports.
valuations are completed as required by           The TE must ensure the risk control
internal policies and procedures and              processes are observed when terminating
regulatory reporting standards.                   accounts just as when accepting them.
     e. Conflicts of interests. These may              The TE must have a general policy with
arise when the TE exercises any discretion        respect to the termination of trust accounts,
where mutually opposing interests are             which policy shall take into consideration
involved. The most serious conflict of            the general processes to be observed in the
interest is self-dealing, which could include     return or delivery of different types of assets,
transactions such as an investment in             the possible modes of distribution, fees to
related interests of the TE or purchase of        be paid, taxes to be imposed, the
securities from or through an affiliate. Such     documentation required to effect the transfer
transactions must be fully disclosed and          of assets, the provision of terminal reports,
authorized in writing by clients. Because of      and whenever applicable, the timing of
the complexity and sensitivity of the issue,      distribution, needs and circumstances of the
a TE must develop policies and procedures         beneficiaries. Should the TE anticipate
to identify and deal with conflicts of interest   possible issues or problems with respect
situations.                                       to the termination of the account, such as
     3. Account termination                       the liquidation of certain assets or the
     Accounts may be terminated for a             partition or division of assets, these issues
variety of reasons, including the occurrence      shall be disclosed to the client for proper
of a specified event or upon written notice       disposition. The policy on the termination
of either the client or the TE. The trust or      of trust, fiduciary and investment
investment management agreement shall             management accounts shall likewise
provide for the terms and manner of               include the approval process to be observed
liquidation, return and delivery of assets/       for the termination of these accounts as well
portfolio to the client. Generally, the TE's      as the reporting requirements for accounts
responsibilities include distribution to the      terminated and closed.
client, the successor trustee and/or              (Circular No. 618 dated 20 August 2008, as amended by
beneficiaries of the remaining assets held        Circular No. 721 dated 13 May 2011)




Manual of Regulations for Banks                                              Appendix 83 - Page 11
                                                                         GUIDELINES FOR DAYS DECLARED AS PUBLIC SECTOR HOLIDAYS
Manual of Regulations for Banks


                                                                                    (Appendix to Secs. X207, X256 and X601.6)
                                                                           Bangko Sentral ng Pilipinas                                             Bureau of the Treasury
                                                                                                                                                                                             PCHC
                                  Time of receipt                 Treasury Department                                                   Reserve
                                  of Public Holiday                                                             PhilPASS                Position              Sec. Mkt.          Manila             Regional
                                                      Overnight RP/RRP     Term RP& RRP/GS/              PDS               Cash Dept                Auction
                                  Announcement by
                                                                                SDA/RDA                                    Withdrawal
                                  the BSP
                                                      Trading Settlement    Trading Settlement

                                  1.    On    an                                                                                                                            No clearing; no To be decided in
                                  o r d i n a r y                                                                                                                           s e t t l e m e n t . coordination with
                                  business day        Closed    Closed      Closed       Closed      Closed     Closed      Closed       Non-        Closed    Closed       PCHC will issue Head Office
                                  prior to the                                                                                          Reserve                             an advisory to its
                                  date         of                                                                                                                           members that it
                                  effectivity                                                                                                                               will continue
                                                                                                                                                                            accepting and
                                                                                                                                                                            processing checks

                                  2.     On     a
                                  Saturday or
                                  Sunday to take
                                  effect      the
                                  following
                                  Monday or on
                                  a non-working
                                  holiday to take
                                  effect the next
                                  business day

                                  a. Under good         No          No       No             No                                                                                                 To be decided in
                                  w e a t h e r       change     change change in       change in        Open                                                                                  coordination with
                                                                                                                 Open        Open       Reserve      Open       Open             Normal
                                  condition              in          in    trading      settlement                                                                                             Head Office
                                                      trading   settlement  hours          time
                                                       hours       time

                                  b . U n d e r                                                                                                                             No clearing; no To be decided in
                                  unfavorable                                                                                                                               s e t t l e m e n t . coordination with
                                  conditions such                                                                                                                           PCHC will issue Head Office
                                  as          bad     Closed     Closed     Closed       Closed      Closed     Closed      Closed       Non-                               an advisory to its
                                                                                                                                                    Closed      Closed
Appendix 84 - Page 1




                                  weather, (e.g.                                                                                        Reserve                             members that it
                                  Typhoon signal                                                                                                                            will continue
                                  no. 3), natural                                                                                                                           accepting and




                                                                                                                                                                                                                      08.12.31
                                                                                                                                                                                                                       APP. 84
                                  calamities or                                                                                                                             processing checks
                                  c i v i l
                                  disturbances
Appendix 84 - Page 2


                                                                                                                                                              Bureau of the Treasury




                                                                                                                                                                                                                                  08.12.31
                                                                                                                                                                                                                                  APP. 84
                                   Time of receipt                                    Bangko Sentral ng Pilipinas                                                                                        PCHC
                                   of Public Holiday                          Treasury Department                                                  Reserve
                                   Announcement by                                                                         PhilPASS                Position              Sec. Mkt.           Manila             Regional
                                                               Overnight RP/RRP   Term RP& RRP/GS/                  PDS               Cash Dept               Auction
                                   the BSP
                                                                                      SDA/RDA                                         Withdrawal
                                                               Trading Settlement Trading  Settlement

                                                                                                                                                                                       No clearing; no
                                  3. Before 9:00               Closed        Closed    Closed        Closed      Closed     Closed     Closed       Non-      Closed      Closed                              To be decided in
                                                                                                                                                                                       settlement. PCHC
                                  a.m. on the date                                                                                                 Reserve                                                    coordination with
                                                                                                                                                                                       will issue an advisory
                                  of effectivity                                                                                                                                                              Head Office
                                                                                                                                                                                       to its members that
                                                                                                                                                                                       it will continue
                                                                                                                                                                                       accepting         and
                                                                                                                                                                                       processing checks

                                   4. After     Day 1 Suspended                          No             No          Open    Open                   Reserve     Open        Open             Normal         To be decided in
                                                                                                                                       Open
                                   9:00 a.m. on          to be
                                                                                      change in     change in                                                                                              coordination with
                                   the date of         resumed
                                                                                       trading        settle-                                                                                              Head Office
                                   effectivity            the
                                                                                        hours         ment
                                                      following
                                                                                                       time
                                                        day at
                                                       9:01a.m.
                                                           to
                                                      9:45 a.m.
                                                              Resumed 9:01 a.m.     No                  No          Open    Open        Open                   Open                         Normal         To be decided in
                                                      Day 2                                                                                        Reserve                 Open
                                                              from 9:01     to   change in                                                                                                                 coordination with
                                                                                                     change
                                                                a.m. to   10:00   trading                                                                                                                  Head Office
                                                                                                         in
                                                                9:45 am    a.m.    hours            settlement
                                                              (for value
                                                                                                       time
                                                                Day 1)
                                                                 then,
                                                               4:45p.m. 4:45p.m.
                                                                   to       to
                                                               5:30p.m. 5:45p.m.
                                                               for same
                                                                  day
                                                              transaction
                                  5. In case     of
Manual of Regulations for Banks




                                  suspension     of
                                  work           is
                                  extended       to
                                  Day 2

                                  a. Before                     closed;                Closed        Closed      Closed    Closed      Closed       Non-       Closed     Closed        No clearing; no To be decided in
                                                      Day 2                  Closed
                                  9:00 a.m. of                   Day 1                                                                             Reserve                              settlement PCHC coordination with
                                  Day 2                       transactions                                                                                                              will issue an Head Office
                                                                will be                                                                                                                 advisory to its
                                                                moved                                                                                                                   members that it
                                                                to Day                                                                                                                  will continue
                                                                 3 ( for                                                                                                                accepting and
                                                                 value                                                                                                                  processing checks
                                                                Day 1)
 Manual of Regulations for Banks

                                   Time of receipt                               Bangko Sentral ng Pilipinas
                                   of Public Holiday                                                                                      Reserve    Bureau of the Treasury       PCHC
                                   Announcement by                                                                                        Position
                                                                Treasury Department
                                   the BSP                                                                 PDS               Cash Dept
                                                        Overnight RP/RRP        Term RP& RRP/GS/                  PhilPASS
                                                                                                                             Withdrawal              Auction     Sec. Mkt.    Manila        Regional
                                                                                    SDA/RDA
                                                        Trading   Settlement   Trading  Settlement


                                                Day 3 Resumed                      No           No        Open     Open        Open       Reserve    Open          Open       Normal     To be decided in
                                                          from      9:01 a.m.   change in   change in                                                                                    coordination
                                                      9:01 a.m.     to 10:00     trading      settle-                                                                                    with      Head
                                                            to         am         hours       ment                                                                                       Office
                                                        9:45 am                                time
                                                      (for value
                                                        Day 1)
                                                         then,      4:45p.m.
                                                       4:45p.m.        to
                                                            to      5:45p.m.
                                                       5:30p.m.
                                                       for same
                                                           day
                                                      transaction

                                   b. After     Day 2 Resumed       9:01 a.m.      No           No         Open    Open        Open       Reserve     Open         Open       Normal   To be decided in
                                   9:00 a.m.              from          to      change in    change                                                                                    coordination with
                                   of Day 2            9:01 a.m.      10:00      trading         in                                                                                    Head Office
                                                            to         a.m.       hours     settlement
                                                      9: 45 a.m.                               time
                                                       (for value
                                                         Day 1)
                                                          then,     4:45p.m.
                                                         Day 2         to
                                                     transactions   5:45p.m.
                                                      suspended
                                                          to be
                                                        resumed
                                                           the
                                                       following
                                                        day from
                                                        9:01a.m.
Appendix 84 - Page 3




                                                             to
                                                       9:45 a.m.




                                                                                                                                                                                                            08.12.31
                                                                                                                                                                                                             APP. 84
                                                                                                                                                                                                                     08.12.31
                                                                                                                                                                                                                     APP. 84
                                                                                                                                                              Bureau of the Treasury
Appendix 84 - Page 4



                                   Time of receipt                                    Bangko Sentral ng Pilipinas                                                                               PCHC
                                   of Public Holiday                        Treasury Department                                                    Reserve
                                   Announcement by                                                                                    Cash Dept    Position    Auction   Sec. Mkt.     Manila          Regional
                                                              Overnight RP/RRP  Term RP& RRP/GS/                    PDS    PhilPASS
                                   the BSP                                                                                            Withdrawal
                                                                                     SDA/RDA
                                                             Trading Settlement Trading   Settlement

                                                            Resumed                      No                                            Open
                                                    Day 3                 9:01 a.m.                 No              Open    Open                   Reserve      Open       Open        Normal    To be decided in
                                                               from                   change in change in
                                                                          to 10:00                                                                                                               coordination with
                                                            9:01 a.m.                  trading
                                                                             a.m.               settlement                                                                                       Head Office
                                                              to 9:45                   hours      time
                                                              am (for
                                                               value
                                                              Day 2)
                                                                          4:45p.m.
                                                               then,
                                                                             to
                                                             4:45p.m.
                                                                          5:45p.m.
                                                                 to
                                                             5:30p.m.
                                                             for same
                                                                day
                                                            transaction


                                  6. In case the            4:45 p.m. 4:45 p.m.    No                 No        Open        Open       Open        Reserve      Open        Open       Normal    To be decided in
                                  suspension of               to 5:30   to 5:45 change in         change in                                                                                      coordination with
                                  work does not               p.m. for    p.m.   trading          settlement                                                                                     Head Office
                                  apply to all              same day              hours              time
                                  government                transaction
                                  offices (Manila
                                  Day, Quezon
                                  City Day, etc.)


                                  (M-2008-025 dated 13 August 2008)
Manual of Regulations for Banks
                                  ILLUSTRATIVE ACCOUNTING ENTRIES
Manual of Regulations for Banks




                                          (Appendix to Section X564)


                                  (Superseded by Circular No. 691 dated 23 June 2010)
Appendix 85 - Page 1




                                                                                        08.12.31
                                                                                         APP. 85
                                                                                    APP. 86
                                                                                   08.12.31

        GUIDELINES ON THE AVAILMENT OF US DOLLAR DENOMINATED
        REPURCHASE AGREEMENT FACILITY WITH THE BANGKO SENTRAL
                        (Appendix to Subsec. X601.1)

    The guidelines on the availment of          D. Valuation of securities
USD denominated repo agreement facility             The haircut on the underlying securities
of banks with the BSP are as follows:           shall be determined by the Treasury
                                                Department, with the concurrence of the
A. Eligible borrowers                           Governor. Collateral cover will be
    RBUs or FCDU/EFCDUs of banks with           maintained through periodic margin calls
FCDU/EFCDU authority who can                    as specified in the repo agreement.
demonstrate legitimate funding needs can            Said valuation will be subject to
avail of this facility.                         periodic review and will be modified
                                                when necessary.
B. Qualifying purposes
    Proceeds from the borrowings shall be       E. Available credit line
used for legitimate liquidity requirements          Credit lines shall be based on
of FCDU/EFCDU or RBU for local                  outstanding USD-denominated evidences
operations as follows:                          of indebtedness issued directly by the
    1. Compliance with FCDU/EFCDU               Government of the Philippines (ROP
cover requirements;                             Bonds) held by the applicant bank as of
    2. Servicing of withdrawals of              30 September 2008.
FCDU/EFCDU; and
    3. Servicing            trade-related       F. Rate, term and trading time
requirements.                                       The rates of the USD denominated
    Borrowing shall be for the account of       repo agreement facility shall be set by the
the applicant bank and shall not be used        Treasury Department, with the
to fund liquidity requirements of foreign       concurrence of the Governor, taking into
head office, foreign branches, affiliates, or   account prevailing liquidity/market
subsidiaries                                    conditions.
                                                    The term of the USD denominated
C. Acceptable collateral                        repo agreement facility shall be set by the
    Eligible securities shall cover USD-        Treasury Department, with the
denominated evidences of indebtedness           concurrence of the Governor: Provided,
issued directly by the Government of the        That, should a bank become disqualified
Philippines (ROP Bonds) held by the             for the repo agreement facility, the
applicant bank. These can be lodged in          outstanding repo agreement shall
FCDU/EFCDU’s or RBU’s Available-for-            immediately become due and payable.
Sale, HFT and HTM portfolios.                       Trading time for the USD repo
    ROP Bonds to be pledged have to be          agreement transactions shall be set from
transferred/credited to BSP’s designated        10:00 AM to 12 Noon, then from 1:00 PM
securities account before availment of the      to 2:00 PM.
USD repo agreement facility.
    The tenor of the underlying security        G. Application requirements
should not be shorter than the overlying            Applicant bank shall submit the
instrument.                                     following information/documents, and




Appendix 86 - Page 1                                         Manual of Regulations for Banks
APP. 86
08.12.31

such other documents as may be deemed         I.  Pre-termination
necessary, to the Treasury Department,            1. The repo agreement may be paid
copy furnished the appropriate CPCD and       at any time before maturity, subject to
SES, to aid BSP evaluate applications:        mutual agreement of both parties.
     1. Application for availment of the          2. The BSP may unilaterally
facility stating therein the amount,          pre-terminate the borrowing arrangements
requested term, specific purpose of the       under the following conditions:
borrowing, including disclosure of the            (a) Funds are found to have been used
specific collateral, including source, i.e.   for ineligible purposes
RBU or FCDU/EFCDU;                                (b) Collateral margins, if any, are not
     2. Notarized undertaking/certification   met.
signed by the bank’s president or country
manager (in the case of local branch of a     J.  Documentation
foreign bank), compliance officer and head        The repo agreement between the
of treasury, indicating the following:        bank and the BSP shall be covered by a
     (a) Specific purpose of fund             master repo agreement, repo agreement
utilization;                                  confirmation        and     such other
     (b) Proceeds of borrowing shall be       documentation as may be necessary to
used exclusively to fund liquidity            facilitate the transaction.
requirements of FCDU/EFCDU or RBU
local operations;                             K. Accounting treatment
     (c) That the Bank is not a conduit for       The USD denominated repo
another bank nor will the Bank take           agreement facility shall be treated as
arbitrage positions on the availment of       collateralized borrowings from the BSP and
the repo agreement facility.                  shall be accounted for in accordance with
                                              the FRP issued under Subsection X161.3.
H. Reportorial requirements                       Eligible securities booked under the
     Banks with outstanding USD               HTM category shall be subject to the tainting
denominated repo agreement with the           provision provided under Subsection X388.5
BSP are required to submit to the             upon default/non-payment of the amount due
appropriate CPCD of the SES the               three (3) banking days after the maturity of
following:                                    the repo agreement or disqualification of
     1. Report on the deployment/             borrowers.
utilization of USD repo borrowing and
other documents and supplemental              L. Penalty clauses
information, as may be required, to               Violations of the terms and conditions
enable BSP to assess the legitimacy of        of the USD repo agreement facility are
the utilization of such funds, within three   governed by sanctions provided under
(3) banking days from release of the          X601.2, including but not limited, to
proceeds of the repo agreement; and           termination of eligibility and pre-
     2. All documents and records             termination of any outstanding balance
relative to the Bank’s availment and use      through repayment and/or sale of the
of proceeds of the USD denominated            collateral.
repo agreement facility shall be made         (M-2008-031 dated 23 October 2008 as amended/superseded
available to the BSP upon request.            by M-2008-034 dated 12 November 2008)




Manual of Regulations for Banks                                           Appendix 86 - Page 2
                                                                                      APP. 87
                                                                                     09.12.31

            GUIDELINES ON THE SUBMISSION OF APPLICATION FOR
                      MERGER AND CONSOLIDATION
                        [Appendix to Subsec. X108.1(2008-X111.1)]


     The following guidelines and procedures         • Of consolidation, all the statements
shall be observed by banks in their             required to be set forth in the Articles of
application for merger/consolidation:           Incorporation;
     1. The merging/consolidating entities           • Such other provisions with respect
shall comply with the safety and soundness      to the proposed merger or consolidation as
test requirements as follows:                   are deemed necessary or desirable.
     a. Compliance, especially by the                c. Resolution of the Board of Directors
acquiring bank, with major banking laws         of the respective institutions approving the
and regulations; and                            Plan of Merger or Consolidation. The
     b. Submission to the BSP of a              resolution shall be certified under oath by
satisfactory action plan, if applicable, to     the respective corporate secretaries of the
address serious supervisory concerns.           constituent institutions;
     2. Submission of the following                  d. Resolution of the meeting of the
documentary requirements simultaneously         stockholders in which at least two-thirds
to the BSP and the PDIC for merger/             (2/3) of the outstanding capital stock of
consolidation application involving a bank;     each corporation have approved the plan
and to the BSP for application involving only   of merger or consolidation. The resolution
banks;                                          shall be certified under oath by the
     a. Articles of Merger or Consolidation     respective corporate secretaries of the
duly signed by the President or Vice-           constituent institutions;
President and certified by the secretary or          e. Financial Statements:
assistant secretary of each of the                   • Latest financial statements and three
constituent institutions setting forth the      (3) - year audited financial statements of the
following as required in Section 78 of the      merging institutions
Corporation Code:                                    • Three (3) - year financial projections
     • The Plan of Merger or                    with valid assumptions of the merged or
Consolidation;                                  consolidated institutions’ balance sheet and
     • The number of shares outstanding;        income statement.
and                                                  f. List of merger incentives the bank
     • The number of shares voting for and      will avail of;
against the Plan, respectively.                      g. List of stockholdings of each of the
     b. Plan of Merger or Consolidation         constituent institutions before and after the
setting forth the following:                    merger;
     • The names of the constituent                  h. List of directors and officers of each
institutions;                                   of the merging/consolidating institutions;
     • The terms of the merger or                    i. List of proposed officers and
consolidation and the mode of carrying the      directors of the merged or consolidated
same into effect;                               institution and the summary of their
     • A statement of the changes, if any,      qualifications;
in the Articles of Incorporation of the              j. Organizational chart of the merged
surviving institution in the case of merger;    or consolidated institution including the
and in the case                                 number of offices and locations thereof;




Manual of Regulations for Banks                                          Appendix 87 - Page 1
APP. 87
09.12.31

     k. Inter-company transactions relative         p. Proposed amendments in the
to the submitted Financial Statements;          Articles of Incorporation of surviving bank;
     l. Computation of Capital Adequacy             q. Director’s Certificate (surviving
Ratio on the submitted financial                bank) on the proposed amendment of the
Statements;                                     Articles of Incorporation increasing the
     m. Viable Operational Plan with the        authorized capital stock; and
following components:                               r. Any other reasonable requirement
     • Marketing Strategies                     deemed material in the proper evaluation
     • Proposed        Loan        Portfolio    of the merger or consolidation as may
Diversification                                 subsequently be requested by the BSP and/
     • Deposit Generation                       or PDIC.
     • Proposed Improvements in                     3. For merger/consolidation involving
Accounting System                               a bank, the BSP shall wait for PDIC consent
     • Operational Control                      before elevating the proposed merger/
     • Computerization Plan                     consolidation to the Monetary Board for
     • Communication System                     approval; and
     n. The appraiser’s report of reappraisal       4. The authority given to merge/
of bank premises, if any, done by an            consolidate the constituent entities shall be
independent and licensed appraiser;             valid within six (6) months reckoned after
     o. Proposed increase of capital stock      BSP approval.
of surviving bank;                              (M-2009-028 dated 12 August 2009)




Appendix 87 - Page 2                                               Manual of Regulations for Banks
                                                                                       APP. 88
                                                                                      11.12.31

                   GUIDELINES ON THE COLLECTION OF THE
                 ANNUAL SUPERVISORY FEES FOR THE YEAR 2011

                         Appendix to Subsec. X901.1 (2008 -X608.1)

     The following guidelines shall govern the        Any exceptions received after the cut-
collection by the BSP and the payment by banks   off date or any exception not duly
of the 2011 Annual Supervisory Fees (ASF).       substantiated with documents before the
     1. Notification of amount due for 2011      cut-off date will be evaluated and
ASF and mode of payment. The BSP                 considered in the computation of the ASF
Supervisory Data Center (SDC) shall send         for the immediate succeeding year.
a billing notice in June 2011 to the bank             3. Withholding tax on 2011
for its ASF payment indicating, among            supervisory fees. The following shall apply
others, the computation of the ASF due,          to banks covered by Sections M and N of
including the 2% creditable withholding tax      BIR Revenue Regulations (R.R.) No. 2-98 as
(CWT) thereon, if applicable, the period         amended by R.R. No. 17-2003:
covered by the ASF and the specific date              a. Within ten (10) days from
when the ASF will be debited from the            26 May 2011, the bank shall submit to
bank’s demand deposit account (DDA) with         the BSP (at the address indicated in Item
the BSP.                                         “2” hereof) a certified true copy of the BIR
     The BSP will not accept checks as mode      notice classifying it as among the
of ASF payment. Banks, upon receipt of the       institutions covered under Section M of
ASF billing notice from the BSP, should          R.R. No. 2-98 as amended by R.R. No.
maintain adequate balance in their DDA to        17-2003. Such BIR notice received by the
cover the ASF and other daily obligations        BSP after said cut-off of ten (10) days will
and, when necessary, make corresponding          be considered in the ASF computation of
deposits to fully cover said obligations. In     the next year. The submission of such BIR
case of deficiency, the provisions on DDA        notice will no longer be necessary if
deficiency in Subsec. X901.1, as amended,        previously transmitted and received by the
shall apply.                                     BSP in compliance with Section 3.1 of the
     2. Exceptions noted on billing notice       BSP Memorandum Nos. 2009-0046 dated
of 2011 ASF. Upon receipt of the BSP             17 November 2009 and M-2010-013 dated
Notice of ASF billing, a bank is encouraged      31 May 2010.
to check the accuracy of the billing and to           b. The ASF, net of the two percent (2%)
submit any of the noted exceptions therein       CWT, shall be debited from the DDA on
not later than ten (10) days before the          the specified date referred to in the notice
specified date of collection/debit to DDA        of ASF billing under Item “1”.
as indicated in the billing notice. The said          c. The following timelines shall be
exceptions, together with supporting             observed on the submission of annual
documents, shall be submitted to:                withholding tax documents to BSP at the
       The Director                              address indicated in Item "2" hereof:
       Supervisory Data Center (SDC)                Tax Documents                  Due Date
       Bangko Sentral Ng Pilipinas               1. Original copy of BIR Form    On or before
       16th Floor, Multi-Storey Building            No. 2307 - Certificate of    31 December
       BSP Complex, A. Mabini Street                Creditable Tax Withheld at   2011
       Malate, Manila 1004                          Source




Manual of Regulations for Banks                                           Appendix 88 - Page 1
APP. 88
11.12.31

    Tax Documents                   Due Date       the annual income tax return of the BSP,
2. Original Duplicate Copy of       On or before   the failure to submit all of the enumerated
   BIR Form No. 1601E -             31 December    documents within the stated deadline will
   Monthly Remittance Return        2011           compel the BSP to immediately debit an
   of Creditable Income Taxes                      amount equivalent to the 2% CWT from
   Tax Documents                                   the DDA of banks concerned, with no
   Withheld (Expanded), duly                       obligation on the part of the BSP to
   received by BIR, If manually                    reimburse said amount in case of late
   filed, or duly supported with                   submission. In case of DDA deficiency,
   BIR confirmation notice/                        the provisions in Subsec. X901.1, as
   advice, if elctronically filed                  amended, shall apply.
3. Certified true copy of BIR       On or before       The above guidelines on withholding
   official receipt/payment         31 December    tax shall be strictly enforced pending
   confirmation receipt             2011           resolution of the tax treatment on the ASF
                                                   being assessed by the BSP.
    d. Considering that the withholding            (M-2009-004 dated 12 February 2009, as amended by
tax documents enumerated in Item “c” will          M-2011-029 dated 26 May, 2011, M-2010-013 dated 31 May
be used to avail the tax credits for filing        2010, M-2009-046 dated 17 November 2009)




Appendix 88 - Page 2                                                Manual of Regulations for Banks
                                                                                    APP. 89
                                                                                   11.12.31

          REGULATORY RELIEF FOR BANKS AFFECTED BY CALAMITIES
 (Footnote to Secs. X257, X302, X306, X338, Subsec. X192.2, X269.6, X269.8 and App. 18)

     The Monetary Board approved the grant     of loans for this purpose are waived:
of temporary regulatory relief to banks with   Provided further, That bank will adopt
head offices and branches located in the       appropriate and prudent operational
areas which were devastated by the             controls;
following tropical storms:                          b. Reduction of the five percent (5%)
                                               general loan loss provision to one percent
    ONDOY                                      (1%) for restructured loans to borrowers in
    1. The following areas were declared       affected areas from 26 September 2009 to
under State of Calamity by the National        31 December 2010;
Disaster Coordinating Council (NDCC) in             c. Non-imposition of monetary
view of Ondoy's extensive effects:             penalties for delays in the submission of all
    a. The whole of National Capital           supervisory reports due to be submitted from
Region (NCR);                                  30 September 2009 to 30 November 2009;
    b. Cordillera Administrative Region:       and
Mt. Province, Ifugao and Benguet;                   d. Allowing banks to provide financial
    c. Region I: Pangasinan, La Union and      assistance to their officers and employees
Ilocos Sur;                                    who were affected by the calamity even if
    d. Region II: Isabela, Quirino and         not within the scope of the existing
Nueva Vizcaya;                                 BSP-approved Fringe Benefit Program (FBP)
    e. Region III: Aurora, Nueva Ecija,        subject to subsequent submission of request
Zambales, Pampanga, Bulacan, Tarlac and        for approval of the amendment to FBP to the
Bataan;                                        appropriate department of the SES for
    f. Region IV-A: Cavite, Laguna,            regularization.
Batangas, Rizal and Quezon;
    g. Region IV-B: Mindoro (Occidental        For RBs/TBs/Coop Banks
and Oriental) and Marinduque; and                  a. During a temporary grace period for
    h. Region V: Catanduanes, Camarines        payment or upon their restructuring and
Norte and Camarines Sur.                       subject to reporting to the BSP, exclusion of
                                               the loans of borrowers in affected areas,
    2. The temporary relief shall be in the    which should have been reclassified as past
form of the following whenever applicable:     due loans under Sec. X306 on 26 September
                                               2009 and those maturing up to 31 December
For UBs/KBs                                    2010, from computation of past due loan
     a. During a temporary grace period for    ratio: Provided, That BSP documentary
payment or upon their restructuring and        requirements for restructuring of loans for
subject to reporting to the BSP, exclusion     this purpose are waived: Provided further,
of the loans of borrowers in affected areas,   That bank will adopt appropriate and
which should have been reclassified as past    prudent operational controls;
due loans under Sec. X306 on 26 September          b. Reduction of the five percent (5%)
2009 and those maturing up to                  general loan loss provision to one percent
31 December 2010, from computation of          (1%) for restructured loans to borrowers in
past due loan ratio: Provided, That BSP        affected areas from 26 September 2009 to
documentary requirements for restructuring     31 December 2010;




Manual of Regulations for Banks                                        Appendix 89 - Page 1
APP. 89
11.12.31

    c. Non-imposition of penalties on               b. In addition to above, allow the
legal reserve deficiencies of RBs/TBs/Coop      rediscounting banks to restructure with the
Banks with head office and/or branches in       BSP, on a case-to-case basis the outstanding
the affected areas incurred starting from       rediscounted loans of their end-user
reserve weeks ended 01 October 2009 to          borrowers affected by the calamity,
01 April 2010 provided these reserve            subject to the terms and conditions stated
deficiencies can be shown to be calamity        in the implementing guidelines provided
related rather than due to pre-existing         in Annex A.
condition;                                      (M-2009-036 dated 07 October 2009)
    d. Moratorium without penalty on
monthly payments due to the BSP until               B. PEPENG
31 March 2010 for banks with ongoing                1. The following areas were declared
rehabilitation programs upon filing of          under State of Calamity by President Gloria
application for extension/rescheduling;         Macapagal Arroyo on 02 October 2009 in
    e. For all types of credits extended to     view of Pepeng's extensive effects:
individuals and businesses directly                 a. Region I: La Union, Pangasinan,
affected by the calamity, allowing, subject     Ilocos Norte and Ilocos Sur;
to BSP prior approval, the booking of               b. Region II: Isabela, Quirino, Cagayan
allowances for probable losses on a             and Nueva Viscaya;
staggered basis over a maximum period               c. Region III: Aurora, Bulacan,
of five (5) years on loans outstanding as       Pampanga, Zambales, Nueva Ecija and
of 26 September 2009;                           Tarlac;
    f. Non-imposition of monetary                   d. Region IV-A: Quezon and Rizal;
penalties for delays in the submission of all       e. Region V: Albay, Camarines Sur,
supervisory reports due to be submitted from    Catanduanes and Sorsogon;
30 September 2009 to 31 March 2010; and             f. Region VI: Negros Occidental;
    g. Allowing banks to provide financial          g. Cordillera Administrative Region:
assistance to their officers and employees      Apayao, Mt. Province, Kalinga, Benguet,
who were affected by the calamity even if       Abra, Ifugao and La Trinidad; and
not within the scope of the existing BSP-           h. The National Capital Region (NCR).
approved Fringe Benefit Program (FBP)
subject to subsequent submission of request         2. The temporary relief shall be in the
for approval of the amendment to FBP to         form of the following whenever applicable:
the appropriate department of the SES for
regularization.                                 For RBs/TBs/Coop Banks
                                                     a. During a temporary grace period for
For All Rediscounting Banks                     payment or upon their restructuring and
    a. Upon application, granting of a          subject to reporting to BSP, exclusion of the
sixty (60)-day grace period to settle the       loans of borrowers in affected areas, which
outstanding rediscounting obligations as        should have been reclassified as past due
of 28 September 2009 with the BSP of all        loans under Sec. X306 on 03 October 2009
rediscounting banks with head office, or        and those maturing up to 31 December
with branches or with end-user borrowers        2010, from computation of past due loan
in the affected areas except those with         ratio: Provided, That BSP documentary
serious violations of findings with the SES;    requirements for restructuring of loans for
and                                             this purpose are waived: Provided, further,




Appendix 89 - Page 2                                              Manual of Regulations for Banks
                                                                                           APP. 89
                                                                                          11.12.31

That bank will adopt appropriate and            28 September 2009 with the BSP of all
prudent operational controls;                   rediscounting banks with head office, or
     b. Reduction of the five percent (5%)      with branches or with end-user borrowers
general loan loss provision to one percent      in the affected areas except those with
(1%) for restructured loans to borrowers in     serious violations of findings with the SES;
affected areas from 03 October 2009 to          and
31 December 2010;                                   b. In addition to above, allow the
     c. Non-imposition of penalties on          rediscounting banks to restructure with the
legal reserve deficiencies of RBs/TBs/Coop      BSP, on a case-to-case basis the outstanding
Banks with head office and/or branches in       rediscounted loans of their end-user
the affected areas incurred starting from       borrowers affected by the calamity,
reserve weeks ended 08 October 2009 to          subject to the terms and conditions stated
01 April 2010, provided, these reserve          in the implementing guidelines provided
deficiencies can be shown to be calamity        in Annex A.
related rather than due to pre-existing         (M-2009-040 dated 30 October 2009)
condition;
     d. Moratorium without penalty on                C. EL NINO (2009)
monthly payments due to the BSP until                The Monetary Board approved to grant
31 March 2010 for banks with ongoing            temporary regulatory and rediscounting
rehabilitation programs upon filing of          relief to RBs and Coop Banks located in:
application for extension/rescheduling;              a. Areas adversely affected by El Nino
     e. For all types of credits extended to    phenomenon based on the latest update of
individuals and businesses directly affected    the National Disaster Coordinating Council
by the calamity, allowing, subject to BSP       (NDCC) dated 19 March 2010 in view of
prior approval, the booking of allowances       its extensive effects, as follows:
for probable losses on a staggered basis over        Region I: La Union, Pangasinan, Ilocos
a maximum period of five (5) years on loans     Norte, and Ilocos Sur
outstanding as of 03 October 2009;                   Region II: Cagayan, Isabela, Nueva
     f. Non-imposition of monetary              Vizcaya, and Quirino
penalties for delays in the submission of all        Region III: Bataan, Bulacan, Nueva Ecija,
supervisory reports due to be submitted from    Pampanga, Tarlac, and Zambales
31 October 2009 to 31 March 2010; and                Region IV-A: Cavite , Laguna, Batangas,
     g. Allowing banks to provide financial     Rizal, and Quezon
assistance to their officers and employees           Region V: Albay [six (6) municipalities
who were affected by the calamity even if       and two (2) cities], Camarines Sur [eighteen
not within the scope of the existing            (18) municipalities and two (2) cities],
BSP-approved Fringe Benefit Program (FBP)       Camarines Norte [nine (9) municipalities],
subject to subsequent submission of request     Sorsogon [one (1) municipality],
for approval of the amendment to FBP to         Catanduanes [six (6) municipalities], and
the appropriate department of the SES for       Masbate [fourteen (14) municipalities and
regularization.                                 one (1) city]
                                                     Region VI: Antique, Guimaras, Iloilo,
For All Rediscounting Banks                     Negros Occidental and Capiz
    a. Upon application, granting of a               Region VII: twenty eight (28) mountain
sixty (60)-day grace period to settle the       barangays in Cebu City, and Negros
outstanding rediscounting obligations as of     Oriental




Manual of Regulations for Banks                                                Appendix 89 - Page 3
APP. 89
11.12.31

     Region IX: Zamboanga del Norte,                  iv. For all types of credits extended to
Zamboanga Sibugay, and Zamboanga City            individuals and businesses directly affected
     Region X: Lanao del Sur, Lanao del          by the calamity, allowing, subject to BSP
Norte, Bukidnon, Misamis Occidental, and         prior approval, the booking of allowances
Misamis Oriental                                 for probable losses on a staggered basis over
     Region XI: Davao del Sur, Davao del         a maximum period of five (5) years reckoned
Norte, and Davao City                            from the dated of this approval (08 April
     Region XII: Cotabato Province, Sultan       2010) on loans outstanding as of 31 March
Kudarat, Sarangani, South Cotabato, and          2010.
Maguindanao Province [seventy five (75)               For All Rediscounting Banks
municipalities]                                       i. Upon application, granting of a sixty
     Cordillera: Ifugao, Kalinga, Apayao, Mt.    (60)-day grace period to settle the
Province and Abra; and                           outstanding rediscounting obligations as of
     Administrative Region                       15 March 2010 with the BSP except those
     b. such other areas may be subsequently     with serious violations of findings with the
added by NDCC to the list contained in           SES;
aforementioned update. RBs and Coop                   ii. Allow the rediscounting banks to
Banks in the additional affected areas shall     restructure with the BSP, on a case-to-case
be automatically eligible for the temporary      basis the outstanding rediscounted loans of
regulatory and rediscounting relief.             their end-user borrowers affected by the
     The temporary relief to RBs and Coop        calamity, subject to the terms and
Banks shall be in the following form             conditions in the implementing guidelines
whenever applicable:                             attached as Annex A hereof.
     i. During a temporary grace period for           iii. Allow the affected RBs and Coop
payment or upon their restructuring (including   Banks up to 31 May 2010 to apply for a
second restructuring) and subject to reporting   special rediscounting line and up to
to the BSP, exclusion of the loans of the        31 December 2010 to avail themselves of
affected borrowers of RBs and Coop Banks in      such line. Loans availed by affected RBs and
abovementioned areas, which should have          Coop Banks under the special rediscounting
been reclassified as past due loans (PDLs)       lines are subject to renewal based on the
under Sec. X306 on 01 March 2010 and those       original term of the loans but not to exceed
maturing up to 30 April 2011, from               five (5) years; and
computation of PDL ratio;                             iv. Allow the use of the unavailed
     ii. Reduction of the five percent (5%)      portion of P5 billion budget exclusively for
general loan loss provision to one percent       the restructuring of rediscounting
(1%) for restructured loans to borrowers of      obligations of banks and new availments of
RBs and Coop Banks in affected areas from        banks intended as rediscounting relief for
01 March 2010 to 30 April 2011;                  bank customers adversely affected by
     iii. Non-imposition of penalties on legal   Typhoons “Ondoy” and “Pepeng”
reserve deficiencies of RBs and Coop Banks       (M-2010-07 dated 23 April 2010)
in the affected areas incurred or that maybe
incurred starting from reserve weeks ended          D. JUAN
04 March 2010 to 30 September 2010                  1. The following areas identified by the
provided these reserve deficiencies can be       report of the National Disaster Risk
shown to be calamity related rather than due     Reduction and Management Council were
to pre-existing condition; and                   devastated by typhoon “Juan”:




Appendix 89 - Page 4                                               Manual of Regulations for Banks
                                                                                         APP. 89
                                                                                        11.12.31

    a. Region I: Ilocos Norte, Ilocos Sur, La       d. Moratorium without penalty on
Union and Pangasinan;                           monthly payments due to the BSP until 30
    b. Region II: Cagayan, Isabela Nueva        April 2011 for banks with ongoing
Vizcaya, and Quirino                            rehabilitation programs upon filing of
    c. Region III: Aurora, Bataan, Bulacan,     application for extension/rescheduling;
Nueva Ecija, Pampanga, Tarlac and                   e. For all types of credits extended to
Zambales                                        individuals and businesses directly
    d. Region IV –A: Cavite and Rizal           affected by the calamity, allowing subject
    e. Cordillera Administrative Region:        to BSP prior approval, the booking
Abra, Apayao, Benguet, Ifugao, Kalinga and      allowances for probable losses on a
Mt. Province; and                               staggered basis over a maximum period
    f. National Capital Region: Manila          of five (5) years on loans outstanding as
                                                of 18 October 2010;
    2. The temporary relief shall be in the         f. Non-imposition of monetary
form of the following whenever applicable:      penalties for delays in the submission of all
                                                supervisory reports due to be submitted from
For TBs/RBs/Coop Banks                          18 October 2010 to 30 April 2011; and
     a. During a temporary grace period             g. Allowing banks to provide financial
for payment or upon their restructuring         assistance to their officers and employees
and subject to reporting to BSP, exclusion      who were affected by the calamity even if
of the loans of borrowers in affected           not within the scope of the existing
areas, which should have been                   BSP-approved Fringe Benefit Plan (FBP)
reclassified as past due loans under            subject to subsequent submission of request
Section X306 on 18 October 2010 and             for approval of the amendment to FBP to
those becoming past due up to 31                the appropriate department of the SES for
December 2011, from computation of past         regularization.
due loan ratio: Provided, That BSP
documentary          requirements         for   For All Rediscounting Banks
restructuring of loans for this purpose are         a. Upon application, granting of a
waived: Provided, further, That bank will       sixty (60)-day grace period to settle the
adopt appropriate and prudent                   outstanding rediscounting obligations as
operational controls;                           of 20 October 2010 with the BSP of all
     b. Reduction of the five percent (5%)      rediscounting banks with head office, or
general loan loss provision to one percent      with branches or with end-user borrowers
(1%) for restructured loans to borrowers        in the affected areas except those with
in affected areas from 18 October 2010          serious violations or findings with the SES;
to 31 December 2011;                            and
     c. Non-imposition of penalties on              b. In addition to above, allow the
legal reserve deficiencies of RBs/TBs/Coop      rediscounting banks to restructure with the
Banks with head office and/or branches          BSP, on a case to case basis the
in the affected areas incurred starting from    outstanding rediscounted loans of their
reserve weeks ended 21 October 2010 to          end-user borrowers affected by the
21 April 2011 provided these reserve            calamity, subject to the terms and
deficiencies can be shown to be calamity        conditions stated in the implementing
related rather than due to pre-existing         guidelines provided in Annex A.
condition;                                      (M-2010-039 dated 03 November 2010)




Manual of Regulations for Banks                                              Appendix 89 - Page 5
APP. 89
11.12.31

    E. LANDSLIDES AND FLOODING                  (1%) for restructured loans to borrowers in
    1. The following areas identified by the    affected areas from 29 August 2010 to 31
report of the National Disaster Risk            December 2011;
Reduction and Management Council were                c. Non-imposition of penalties on legal
devastated by typhoon “Landslides and           reserve deficiencies of TBs/RBs/Coop Banks
Flooding”:                                      with HOs and/or branches in the affected
    a. Region IV-B: Palawan;                    areas incurred starting from reserve weeks
    b. Region V: Albay, Sorsogon,               ended 30 December 2010 to 30 June 2011,
Camarines Sur, and Catanduanes;                 provided these reserve deficiencies can be
    c. Region VI: Negros Occidental;            shown to be calamity-related rather than due
    d. Region VII: Cebu, Bohol, Negros          to pre-existing condition;
Oriental, and Siquijor;                              d. Moratorium without penalty on
    e. Region VIII: Southern Leyte, Eastern     monthly payments due to the BSP until
Samar, Western Samar, Northern Samar,           30 June 2011 for banks with ongoing
and Leyte;                                      rehabilitation programs upon filing of
    f. Region X: Lanao del Norte and            application for extension/rescheduling
Misamis Occidental;                                  e. For all types of credits extended to
    g. Region XI: Compostela Valley, Davao      individuals and businesses directly
del Norte, Davao del Sur, and Davao             affected by the calamity, allowing,
Oriental;                                       subject to BSP prior approval, the
    h. Region XII: South Cotabato;              booking of allowances for probable losses
    i. CARAGA: Surigao del Norte, Surigao       on a staggered basis over a maximum
del Sur, Agusan del Norte, and Agusan del       period of five years on loans outstanding
Sur; and                                        as of 29 December 2010;
    j. Autonomous Region of Muslim                   f. Non-imposition of monetary
Mindanao: Maguidanao.                           penalties for delays in the submission of
    2. The temporary relief shall be in the     all supervisory reports due to be
form of the following whenever applicable:      submitted from 29 December 2010 to
                                                30 June 2011; and
For TBs/RBs/Coop Banks                               g. Allowing banks to provide
     a. During a temporary grace period for     financial assistance to their officers and
payment or upon their restructuring and         employees who were affected by the
subject to reporting to the BSP, exclusion of   calamity even if not within the scope of
the loans of borrowers in affected areas,       the existing BSP-approved Fringe Benefit
which should have been reclassified as          Program (FBP), subject to subsequent
PDLs under Section X306 of the Manual of        submission of request for approval of the
Regulations for Banks on 29 August 2010         amendment to FBP to the appropriate
and those becoming past due up to               supervision and examination department
31 December 2011, from computation of           for regularization.
PDL ratio: Provided, that BSP documentary
requirements for restructuring of loans for         For All Rediscounting Banks
this purpose are waived; Provided, further,         a. Upon application, granting of a sixty
that the bank will adopt appropriate and        (60)-day grace period to settle the
prudent operational controls;                   outstanding rediscounting obligations as of
     b. Reduction of the five percent (5%)      29 December 2010 with the BSP of all
general loan loss provision to one percent      rediscounting banks with HO, or with




Appendix 89 - Page 6                                         Manual of Regulations for Banks
                                                                                    APP. 89
                                                                                   11.12.31

branches or with end-user borrowers in the     affected areas, which should have been
affected areas, except those with serious      reclassified as past due loans (PDLs)
violations or findings with the SES; and       under Section X306 of the Manual of
    b. In addition to above, allow the         Regulations for Banks on 25 July 2011
rediscounting banks to restructure with        and those becoming past due up to
the BSP, on a case-to-case basis, the          31 December 2012, from computation
outstanding rediscounted loans of their        of PDL ratio: Provided, that BSP
end-user borrowers affected by the             documentary          requirements         for
calamity, subject to the terms and             restructuring of loans for this purpose are
conditions stated in the implementing          waived; Provided, further, that the bank
guidelines provided in Annex A.                will adopt appropriate and prudent
(M-2011-007 dated 04 February 2011)            operational controls;
                                                    b. Reduction of the five percent (5%)
    F. JUANING                                 general loan loss provision to one percent
    1. The following areas identified by the   (1%) for restructured loans to borrowers in
report of the National Disaster Risk           affected areas from 25 July 2011 to
Reduction and Management Council were          31 December 2012;
devastated by typhoon “Juaning”:                    c. Non-imposition of penalties on legal
    a. NCR: Las Piñas City, Muntinlupa         reserve deficiencies of TBs/RBs/Coop Banks
City, Pasay City and Quezon City               with HOs and/or branches in the affected
    b. CAR: Benguet, Ifugao and Kalinga        areas incurred starting from reserve weeks
    c. Region I: La Union and Pangasinan       ended 28 July 2011 to 26 January 2012,
    d. Region II: Isabela, Nueva Vizcaya and   provided these reserve deficiencies can be
Quirino                                        shown to be calamity-related rather than
    e. Region III: Aurora, Bulacan, Nueva      due to pre-existing condition;
Ecija and Pampanga                                  d. Moratorium without penalty on
    f. Region IV-A: Batangas and Quezon        monthly payments due to the BSP until
    g. Region IV-B: Marinduque and             31 January 2012 for banks with ongoing
Romblon                                        rehabilitation programs upon filing of
    h. Region V: Albay, Camarines Norte,       application for extension/rescheduling;
Camarines Sur, Catanduanes, Masbate and             e. For all types of credits extended to
Sorsogon                                       individuals and businesses directly affected
    i. Region VI: Iloilo and Antique           by the calamity, allowing, subject to BSP
    j. Region VII: Siquijor and Cebu           prior approval, the booking of allowances
    k. Region VIII: Leyte and Eastern Samar    for probable losses on a staggered basis over
    l. Region X: Lanao del Norte               a maximum period of five years on loans
    2. The temporary relief shall be in the    outstanding as of 25 July 2011;
form of the following whenever                      f. Non-imposition of monetary penalties
applicable:                                    for delays in the submission of all
                                               supervisory reports due to be submitted
   For TBs/RBs/Coop Banks:                     from 25 July 2011 to 31 January 2012; and
   a. During a temporary grace period for           g. Allowing banks to provide financial
payment or upon their restructuring and        assistance to their officers and employees
subject to reporting to the (BSP),             who were affected by the calamity even if
exclusion of the loans of borrowers in         not within the scope of the existing




Manual of Regulations for Banks                                        Appendix 89 - Page 7
APP. 89
11.12.31

BSP-approved Fringe Benefit Program (FBP),         For TBs/RBs/Coop Banks:
subject to subsequent submission of request        a. During a temporary grace period for
for approval of the amendment to FBP to        payment or upon their restructuring and
the appropriate supervision and examination    subject to reporting to the BSP, exclusion
department for regularization.                 of the loans of borrowers in affected
                                               areas, which should have been
For All Rediscounting Banks                    reclassified as PDLs under Section X306
    a. Upon application, granting of a sixty   of the Manual of Regulations for Banks
(60)-day grace period to settle the            on 25 August 2011 and those becoming
outstanding rediscounting obligations as       past due up to 31 December 2012, from
of 25 July 2011 with the BSP of all            computation of PDL ratio: Provided, that
rediscounting banks with HO, or with           BSP documentary requirements for
branches or with end-user borrowers in the     restructuring of loans for this purpose are
affected areas, except those with serious      waived; Provided, further, that the bank
violations or findings with the Supervision    will adopt appropriate and prudent
and Examination Sector; and                    operational controls;
    b. In addition to above, allow the             b. Reduction of the five percent (5%)
rediscounting banks to restructure with the    general loan loss provision to one percent
BSP, on a case-to-case basis, the              (1%) for restructured loans to borrowers
outstanding rediscounted loans of their        in affected areas from 25 August 2011 to
end-user borrowers affected by the             31 December 2012;
calamity, subject to the terms and                 c. Non-imposition of penalties on
conditions stated in the implementing          legal reserve deficiencies of TBs/RBs/Coop
guidelines in Annex A.                         Banks with HOs and/or branches in the
(M-2011-043 dated 12 August 2011)              affected areas incurred starting from
                                               reserve weeks ended 1 September 2011
    G. MINA                                    to 23 February 2012, provided these
    1. The following areas identified by       reserve deficiencies can be shown to be
the report of the National Disaster Risk       calamity-related rather than due to
Reduction and Management Council were          pre-existing condition;
devastated by typhoon “Mina”:                      d. Moratorium without penalty on
    a. NCR: Navotas City                       monthly payments due to the BSP until
    b. CAR: Abra, Apayao, Benguet,             29 February 2012 for banks with ongoing
Kalinga and Mt. Province                       rehabilitation programs upon filing of
    c. Region I: Ilocos Norte, Ilocos Sur,     application for extension/rescheduling;
La Union and Pangasinan                            e. For all types of credits extended to
    d. Region II: Cagayan, Isabela and         individuals and businesses directly
Nueva Vizcaya                                  affected by the calamity, allowing,
    e. Region III: Tarlac and Zambales         subject to BSP prior approval, the
    f. Region V: Albay                         booking of allowances for probable losses
    g. Region VI: Iloilo and Negros            on a staggered basis over a maximum
Occidental                                     period of five years on loans outstanding
    2. The temporary relief shall be in the    as of 25 August 2011;
form of the following whenever                     f. Non-imposition of monetary
applicable:                                    penalties for delays in the submission




Appendix 89 - Page 8                                        Manual of Regulations for Banks
                                                                                    APP. 89
                                                                                   11.12.31

of all supervisory reports due to be               c. Region I: Ilocos Norte, Ilocos Sur, La
submitted from 25 August 2011 to               Union and Pangasinan
29 February 2012; and                              d. Region II: Cagayan, Isabela, Nueva
    g. Allowing banks to provide financial     Vizcaya and Quirino
assistance to their officers and employees         e. Region III: Aurora, Bataan, Bulacan,
who were affected by the calamity even         Nueva Ecija, Pampanga, Tarlac and
if not within the scope of the existing        Zambales
BSP-approved Fringe Benefit Program                f. Region IV-A: Batangas, Cavite,
(FBP), subject to subsequent submission        Laguna, Quezon and Rizal
of request for approval of the amendment           g. Region IV-B: Occidental Mindoro,
to FBP to the appropriate supervision          Oriental Mindoro and Romblon
and examination department for                     h. Region V: Albay, Camarines Norte,
regularization.                                Camarines Sur and Catanduanes
                                                   i. Region VI: Antique and Iloilo
    For All Rediscounting Banks                    2. The temporary relief shall be in the
    a. Upon application, granting of a sixty   form of the following whenever applicable:
(60)-day grace period to settle the
outstanding rediscounting obligations as           For TBs/RBs/Coop Banks:
of 25 August 2011 with the BSP of all              a. During a temporary grace period for
rediscounting banks with HO, or with           payment or upon their restructuring and
branches or with end-user borrowers in         subject to reporting to the BSP, exclusion of
the affected areas, except those with          the loans of borrowers in affected areas,
serious violations or findings with the SES;   which should have been reclassified as
and                                            PDLs under Section X306 of the MORB on
    b. In addition to above, allow the         24 September 2011 and those becoming
rediscounting banks to restructure with        past due up to 31 December 2012, from
the BSP, on a case-to-case basis, the          computation of PDL ratio: Provided, that BSP
outstanding rediscounted loans of their        documentary requirements for restructuring
end-user borrowers affected by the             of loans for this purpose are waived;
calamity, subject to the terms and             Provided, further, that the bank will adopt
conditions stated in the implementing          appropriate and prudent operational
guidelines provided in Annex A.                controls;
                                                   b. Reduction of the five percent (5%)
    F. PEDRING                                 general loan loss provision to one percent
    1. The following areas identified by       (1%) for restructured loans to borrowers in
the report of the National Disaster Risk       affected areas from 24 September 2011 to
Reduction and Management Council were          31 December 2012;
devastated by typhoon “Pedring”:                   c. Non-imposition of penalties on legal
    a. NCR: Caloocan City, Malabon             reserve deficiencies of TBs/RBs/Coop Banks
City, Manila City, Muntinlupa City,            with HOs and/or branches in the affected
Navotas City, Parañaque City, Pasay City,      areas incurred starting from reserve weeks
Pasig City, Pateros, Quezon City and           ended 29 September 2011 to 29 March
Valenzuela City                                2012, provided these reserve deficiencies
    b. CAR: Abra, Apayao, Benguet,             can be shown to be calamity related rather
Ifuagao, Kalinga and Mt. Province              than due to pre-existing condition;




Manual of Regulations for Banks                                        Appendix 89 - Page 9
APP. 89
11.12.31

    d. Moratorium without penalty on                            of request for approval of the amendment
monthly payments due to the BSP until                           to FBP to the appropriate supervision
31 March 2012 for banks with ongoing                            and examination department for
rehabilitation programs upon filing of                          regularization.
application for extension/rescheduling;
   e. For all types of credits extended to                          For All Rediscounting Banks
individuals and businesses directly                                 a. Upon application, granting of a
affected by the calamity, allowing, subject                     sixty (60)-day grace period to settle the
to BSP prior approval, the booking of                           outstanding rediscounting obligations as
allowances for probable losses on a                             of 24 September 2011 with the BSP of all
staggered basis over a maximum period                           rediscounting banks with HO, or with
of five years on loans outstanding as of                        branches or with end-user borrowers in
24 September 2011;                                              the affected areas, except those with
    f. Non-imposition of monetary                               serious violations or findings with the SES;
penalties for delays in the submission of                       and
all supervisory reports due to be                                   b. In addition to above, allow the
submitted from 24 September 2011 to                             rediscounting banks to restructure with
31 March 2012; and                                              the BSP, on a case-to-case basis, the
    g. Allowing banks to provide financial                      outstanding rediscounted loans of their
assistance to their officers and employees                      end-user borrowers affected by the
who were affected by the calamity even if                       calamity, subject to the terms and
not within the scope of the existing                            conditions stated in the implementing
BSP-approved Fringe Benefit Program                             guidelines provided in Annex A.
(FBP), subject to subsequent submission                         (M-2011-055 dated 17 October 2011)


(M-2009-036 dated 07 October 2009, as amended by M-2011-056 dated 10 November 2011, M-2011-055 dated 17 October 2011,
M-2011-043 dated 12 August 2011, M-2011-007 dated 04 February 2011, M-2010-039 dated 03 November 2010, M-2010-007 dated
23 April 2010, M-2009-037 dated 08 October 2009 and M-2009-038 dated 08 October 2009, as amended by M-2009-040 dated 30
October 2009)




Appendix 89 - Page 10                                                              Manual of Regulations for Banks
                                                                                   APP. 89
                                                                                  11.12.31

                                                                                 Annex A

IMPLEMENTING GUIDELINES ON THE RESTRUCTURING SCHEME COVERING
THE REDISCOUNTING OBLIGATIONS WITH THE BANGKO SENTRAL OF
REDISCOUNTING BANKS IN THE AREAS AFFECTED BY NATURAL CALAMITIES
 (Footnote to Secs. X257, X302, X306, X338, Subsecs. X192.2, X269.6, X269.8 and App. 18)

I.   Objectives                                     (1) Principal. Unpaid outstanding
     The objectives of the loan settlement      balance of the principal obligation in
scheme are as follows:                          books of account of the BSP; and
     a. To support the recovery efforts of          (2) Accrued interest. Unpaid interest
rediscounting banks in the areas affected       due on the outstanding principal
by typhoon “Ondoy”;                             obligation as of the end of the applicable
     b. To enable the rediscounting banks       repayment or amortization date,
to liquidate their loan obligations with the    preceding the approval of the loan
BSP by way of restructuring; and                restructuring.
     c. To ensure the collection of the             c. Interest rate
rediscounted loans which may become                 The interest rate to be charged against
past due in view of the damage caused by        the outstanding principal balance of the
the typhoon, and maintain if not improve        restructured loan shall be based on
the quality of the loan portfolio of the BSP.   prevailing rediscount rate. The interest
                                                shall be re-priced annually.
II. Qualified banks                                 d. Maximum bank lending rate
     a. All rediscounting banks with end-           The restructured interest rate of the
user borrowers located in the areas             bank to its end-user borrowers shall not
declared as “under state of natural             exceed six percent (6%) over and above
calamity” by the NDCC (see Item "A.1"           the applicable BSP interest rate.
of Appendix 89);                                Moreover, the bank shall not charge
     b. Rediscounting banks with serious        interest on accrued interest.
violations or findings with the SES, and/           e. Terms of repayment
or which are currently under investigation          (1) Settlement Value. The settlement
or subject to legal action by the Office of     value shall be paid by the bank in equal
Special Investigation shall not be qualified    monthly amortizations: Provided, That the
to avail of the restructuring scheme.           amortization period shall not exceed five
     c. In addition to Item No. “II.b”, the     (5) years, to wit:
DLC shall evaluate each bank to determine           (a) Principal. The principal obligation
if each would qualify for the restructuring.    shall be paid in equal monthly
                                                amortization plus the applicable
III. Terms and conditions                       rediscount rate; and
     a. Maturity                                    (b) Accrued interest. The accrued
     The restructured loan shall have a         interest on the principal obligation as of
maximum term of five (5) years;                 the end of the month immediately
     b. Amount to be restructured               preceding the approval of the loan
     The amount to be restructured shall        settlement scheme shall likewise be paid
be equivalent to the following:                 in equal monthly amortizations. No




Manual of Regulations for Banks                                       Appendix 89 - Page 11
APP. 89
11.12.31

interest shall be charged on the accrued          IV. Application procedures
interest.                                             a. Filing of application
    (2) Grace Period. The bank shall be               The bank shall file with the DLC an
given a grace period of six (6) months            application for restructuring of its
within which to pay the first                     outstanding rediscounting loans,
amortization.                                     supported by the following documents:
    f. Collaterals. The following shall               (1) Resolution of the board of
be collaterals acceptable:                        directors (a) authorizing the bank to enter
    (1) Restructured promissory notes             into a loan settlement arrangement with
of end-user borrowers;                            the BSP, and (b) designating authorized
    (2) Hard collaterals owned by the             senior officers therefor;
bank such as bank premises and                        (2) The restructured promissory notes
government securities; and                        of the end-user borrowers and other
    (3) Other collaterals acceptable to           supporting documents; and
the DLC.                                              (3) Promissory Note with Trust
    g. Default cause                              Receipt Agreement and Deed of
    (1) Failure to pay two (2) or more            Assignment executed by the authorized
amortizations shall be considered an event        senior officers of the bank, duly notarized.
of default and shall render the unpaid                b. Notice of approval of application
balance of the loan, plus accrued interest            The DLC shall notify the bank of the
and penalty charges due thereon,                  approval of its application to avail of the
immediately due and demandable;                   loan settlement scheme. Upon receipt of
    (2) A penalty charge of twelve percent        said advice, the bank shall:
(12%) per annum shall be assessed on the              (1) Execute the applicable document
defaulted amortization payment, reckoned          under Item No. “IV.a”; and
from the amortization due date to date of             (2) Pay the required amortization
payment; and                                      immediately on the month following the
    (3) T h e D L C m a y e x e r c i s e t h e   date of approval of the loan restructuring
option to refer to the Office of Special          scheme and monthly thereafter until fully
Investigation or to an external lawyer            paid.
for appropriate legal action, without
further need for demand or notice to the          V. Authorized signatories of the Bangko
defaulting bank.                                     Sentral
    h. Required documents. Qualified
banks shall submit the following                   Transaction               Authorized BSP Officer
documents:                                         Approval of the           Director, DLC, or in her
    (1) Letter of Understanding (LOU),             application to avail of    absence, any of the
                                                   the loan restructuring     DLC Deputy Directors
agreeing to the terms and conditions of            scheme
the restructuring. The LOU shall be                Approval to release       Director, DLC, or in her
executed by the senior officers of the             the collateral            absence, any of the DLC
bank, duly designated by its board of              documents                 Deputy Directors
                                                   Execution of              Deputy Governor,
directors; and                                     Cancellation of Deeds     Monetary Stability
    (2) Surety Agreement, if there is              of Real Estate Mortgage   Sector
collateral deficiency.                             Assignment or Pledge




Appendix 89 - Page 12                                            Manual of Regulations for Banks
                                                                                                                APP. 89
                                                                                                               11.12.31

VI. Other provisions                                               a) Ondoy - 31 March 2010;
     a. Value-Date of the Settlement Scheme                        b) Pepeng - 31 March 2010;
     The value–date of the settlement value                        c) El Nino - 31 May 2010;
shall be the end of the month immediately                          d) Juan - 30 April 2011;
preceding the date of approval of the loan                         e) Landslides and Flooding - 30 June
restructuring.                                                  2011;
     b. Effectivity date                                           f) Juaning - 31 January 2012; and
     The loan settlement scheme for the                            g) Mina - 29 February 2011.
following calamities shall be made available
on the following schedule dates:




 (M-2009-036 dated 07 October 2009, as amended by M-2011-056 dated 10 November 2011, M-2011-055 dated 17 October 2011,
 M-2011-043 dated 12 August 2011, M-2011-007 dated 04 February 2011, M-2010-039 dated 03 November 2010, M-2010-007 dated
 23 April 2010, M-2009-037 dated 08 October 2009 and M-2009-038 dated 08 October 2009, as amended by M-2009-040 dated 30
 October 2009)




Manual of Regulations for Banks                                                               Appendix 89 - Page 13
                                                                                      APP. 90
                                                                                     11.12.31

                    GUIDELINES ON BANKS’ INTERNAL CAPITAL
                       ADEQUACY ASSESSMENT PROCESS
                                   (Appendix to Sec. X117)



A. Introduction                                 the inputs and definitions that a bank
                                                normally uses for internal purposes.
     1. This document sets out the broad            3. Banks’ ICAAP (i.e., the methodologies,
guidelines that UBs and KBs (hereinafter        assumptions and procedures) and other
referred to as ‘banks’) should follow in        policies supporting it (e.g., capital policy,
the design and use of their Internal Capital    risk management policy, etc.) should be
Adequacy Assessment Process (ICAAP).            formally documented, and they should be
A bank’s ICAAP supplements the BSP’s            reviewed and approved by the board. The
Risk-Based Capital Adequacy Framework           results of the ICAAP should also be regularly
(the Framework) as contained in existing        reported to the board.
regulations and, thus, must be applied              In addition, the board and senior
on a group-wide basis, i.e., it should          management are responsible for integrating
cover all of a bank’s subsidiaries and          capital planning and capital management
affiliates.                                     into banks’ overall management culture and
     2. Although the Framework prescribes       approach. They should ensure that formal
the guidelines for determining banks’           capital planning and management policies
minimum regulatory capital requirements         and procedures are communicated and
in relation to their exposure to credit risk,   implemented group-wide and supported by
market risk and operational risk, a bank’s      sufficient authority and resources.
Board of Directors and senior management            Banks’ ICAAP document should be
are still ultimately responsible in ensuring    submitted to the appropriate Central Point
that the bank maintains an appropriate level    of Contact Department (CPCD) of the BSP
and quality of capital commensurate not just    every 31 January of each year. A suggested
with the risks covered by the Framework,        format of the ICAAP submission to the BSP
but also with all other material risks to       is provided in Annex A of Appendix 90.
which it is exposed. Hence, a bank must             4. The ICAAP should form an integral
have in place an ICAAP that takes into          part of banks’ risk management processes
account all of these risks.                     so as to enable the board and senior
                                                management to assess, on an on-going basis,
B. Guiding principles                           the risks that are inherent in their activities
    1. Banks must have a process for            and material to their bank. This could range
assessing their capital adequacy relative to    from using the ICAAP in more general
their risk profile (an ICAAP).                  business decisions (e.g. expansion plans) and
    2. The ICAAP is the responsibility of       budgets, to the more specific decisions such
banks. Banks are responsible for setting        as allocating capital to business units, or to
internal capital targets that are consistent    having it play a role in the individual credit
with their risk profile, operating              decision process.
environment, and strategic/business plans.          5. The ICAAP should be reviewed by
The ICAAP should be tailored to a bank’s        the board and senior management at least
circumstances and needs, and it should use      annually, or as often as is deemed necessary




Manual of Regulations for Banks                                          Appendix 90 - Page 1
APP. 90
11.12.31

to ensure that risks are covered adequately         a. Risks not fully captured under the
and that capital coverage reflects the actual   Framework, for example, credit
risk profile of their bank. Moreover, any       concentration risk, risk posed by non-
changes in a bank’s strategic focus,            performing assets, risk posed by
business plan, operating environment or         contingent exposures, etc.;
other factors that materially affect                b. Risks not covered under the
assumptions or methodologies used in the        Framework. As a starting point, banks
ICAAP should initiate appropriate               may choose to use the other risks
adjustments to the ICAAP. New risks that        identified under Circular No. 510 dated
occur in the business of a bank should be       03 February 2006. Some of these risks
identified and incorporated into the            are less likely to lend themselves to
ICAAP. The ICAAP and its review process         quantitative approaches, in which cases
should be subject to independent internal       banks are expected to employ more
or external review. Results thereof should      qualitative methods of assessment and
be communicated to the board and senior         mitigation. Banks should clearly establish
management.                                     for which risks a quantitative measure is
    6. Banks should set capital targets         warranted, and for which risks a
which are consistent with their risk            qualitative measure is the correct risk
profile, operating environment, and             assessment and mitigation tool ; and
business plans. Banks, however, may take            c.Risk factors external to banks.
other considerations into account in            These include risks which may arise from
deciding how much capital to hold, such         the regulatory, economic or business
as external rating goals, market reputation     environment.
and strategic goals. If these other                 8. Banks should have a documented
considerations are included in the process,     process for assessing risks. This process
banks must be able to show to the BSP           may operate either at the level of the
how they influenced their decisions             individual banks within the banking
concerning the amount of capital to hold.       group, or at the banking group level.
    7. The ICAAP should capture the risks       Banks are likely to find that some risks
covered under the Framework – credit            are easier to measure than others,
risk, market risk, and operational risk. If     depending on the availability of
applicable, banks should disclose major         information. This implies that their ICAAP
differences between the treatments of           could be a mixture of detailed calculations
these risks in the calculation of minimum       and estimates. It is also important that
regulatory capital requirement under the        banks not rely on quantitative methods
Framework and under the ICAAP. In               alone to assess their capital adequacy, but
addition, the ICAAP should also consider        include an element of qualitative
other material risks that banks are exposed     assessment and management judgment of
to, albeit that there is no standard            inputs and outputs. Non-quantifiable risks
definition of materiality. Banks are free       should be included if they are material,
to use their own definition, albeit that they   even if they can only be estimated. This
should be able to explain this in detail to     requirement might be eased if banks can
the BSP, including the methods used, and        demonstrate that they have an appropriate
the coverage of all material risks. These       policy for mitigating/managing these risks.
other material risks may include any of the         9. The ICAAP should take into
following:                                      account banks’ strategic plans and how they




Appendix 90 - Page 2                                         Manual of Regulations for Banks
                                                                                     APP. 90
                                                                                    11.12.31

relate to macro-economic factors. Banks          ICAAP and its minimum regulatory capital
should develop an internal strategy for          requirements under the Framework.
maintaining capital levels which can
incorporate factors such as loan growth          C. ICAAP Methodologies
expectations, future sources and uses of             1. While banks may use simple or
funds and dividend policy, and any               model-based ICAAP methodologies
procyclical variation of minimum regulatory      depending on what they think is
capital requirements.                            appropriate for them (please see Annex B
     Banks should also have an explicit,         of Appendix 90 for description of the
board-approved capital plan which states         different broad classification of
their objectives and the time horizon for        methodologies), at the minimum, the BSP
achieving those objectives, and in broad         expects banks to adopt an ICAAP based
terms the capital planning process and the       on the minimum regulatory capital
responsibilities for that process. The plan      requirement under the Framework and,
should also lay out how banks will comply        where applicable, assess extra capital
with capital requirements in the future, any     proportionate to the other risks that are
relevant limits related to capital, and a        not covered under said Framework. This
general contingency plan for dealing with        requires an assessment first of whether the
divergences and unexpected events (for           risks covered under the Framework - credit
example, raising additional capital,             risk, market risk and operational risk - are
restricting business, or using risk mitigation   fully captured, and second, how much
techniques).                                     capital to allocate against other risks and
     In addition, banks should conduct           external factors.
appropriate scenario/stress tests which take         2. Regardless of which methodology
into account, for example, the risks specific    a bank decides to adopt, it should
to the particular stage of the business cycle.   compare its actual and future projected
Banks should analyze the impact that new         capital with the actual and future internal
legislation/regulation, actions of competitors   capital need arising from the assessment.
or other factors may have on their               The actual calculation and allocation of
performance, in order to determine what          capital always needs to be supplemented
changes in the environment they could            by sufficiently robust qualitative
sustain.                                         procedures, measures and provisions to
     10. The results and findings of the         identify, manage, control and monitor all
ICAAP should feed into banks’ evaluation         risks.
of their strategy and risk appetite. For less        3. The ICAAP will always consist of
sophisticated banks in particular, for           two parts. One part covers all steps
which genuine strategic capital planning         necessary for assessing the risks. The
is likely to be more difficult, the results of   other part covers all steps necessary to
the process should mainly influence the          assess the actual capital (risk-taking
bank’s management of its risk profile (for       capacity). As these two parts will always
example, via changes to its lending              meet at the end of the ICAAP and have to
behavior or through the use of risk              be in balance, there is no procedure which
mitigants). The ICAAP should produce a           says which part has to be assessed first.
reasonable overall capital number and                4. After choosing its ICAAP
assessment. Banks should be able to              methodology, a bank could take its
explain to the BSP’s satisfaction the            thinking through the following steps in
similarities and differences between its         developing the ICAAP:




Manual of Regulations for Banks                                         Appendix 90 - Page 3
APP. 90
11.12.31

     a. Risk identification                              c. Forward capital planning
     A bank could prepare a list of all material         A bank could then consider how its capital
risks to which it is exposed; for that purpose it   need as calculated above might change in line
may find it useful to identify and consider its     with its business plans over its strategic time
largest past losses and whether those losses        horizon, and how it might respond to these
are likely to recur. The identification of all      changes. In doing so, a bank may want to perform
material risk to which a bank is exposed            a sensitivity analysis to understand how sensitive
should be conducted in a forward looking            its capital is to changes in internal and external
manner.                                             factors such as business risks, and changes in
     b. Capital assessment                          economic/business cycles.
     For all the risks identified through the            d. ICAAP outcome
process above, a bank could then consider                Finally, a bank should document the
how it would act, and the amount of capital         ranges of capital required as identified above
that would be absorbed, in the event that one       and form an overall view on the amount of
or more of the risks identified was to              internal capital which it should hold.
materialize.                                        (Circular No. 639 dated 15 January 2009)




Appendix 90 - Page 4                                                   Manual of Regulations for Banks
                                                                                       APP. 90
                                                                                      11.12.31

                                                                                     Annex A

              INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS
                             (Suggested Format)


     The BSP expects that there will be a fair   appropriate capital level and risk
degree of variation in the length and format     management approach.
of submissions since banks’ business and             Where appropriate, technical
risk profiles differ. As such the ICAAP          information on risk measurement and capital
document should be proportional to the           methodologies, and all other works carried
size, nature and complexity of a bank’s          out to validate the approach (e.g. board
business.                                        papers and minutes, internal or external
     This format has been provided as a          reviews) could be contained in appendices.
starting point. Banks are not required to
adopt this format. However, adopting this        1. EXECUTIVE SUMMARY
format may be convenient for banks as it              The purpose of the Executive Summary
covers the minimum issues which typically        is to present an overview of the ICAAP
would be the subject of review by the BSP        methodology and results. This overview
and may therefore make the review process        would typically include:
more efficient for both the bank and the BSP.         i. The purpose of the report and which
     Equally, use of this template is not a      group entities are covered by the ICAAP;
substitute for being aware of the relevant            ii. The main findings of the ICAAP
rules.                                           analysis:
                                                      · How much and what composition
What is an ICAAP document?                       of internal capital the bank considers it
    An ICAAP document is a bank’s                should hold as compared with the capital
explanation to the BSP of its internal capital   adequacy requirement under the existing BSP
adequacy assessment process. While this          Risk-Based Capital Adequacy Framework
may be based on existing internal                (the Framework), and
documentation from numerous sources, the              · The adequacy of the bank’s risk
BSP will clearly find it helpful to have a       management processes given the risks
summary prepared to communicate the key          assumed;
results and issues to it at a senior level.           iii. A summary of the financial position
Since the BSP will be basing many of its         of the business, including the strategic
views on the information contained in the        position of the bank, its balance sheet
ICAAP document, the bank’s board of              strength, and future profitability;
directors and senior management should                iv. Brief descriptions of the capital and
have formally approved its contents. As          dividend plan; how the bank intends to
such, the BSP would expect the ICAAP             manage capital going forward and for what
document to be in a format that can be           purposes;
easily understood at a high level and to              v. Commentary on the most material
contain all the relevant information that is     risks, why the level of risk is acceptable or,
necessary for the bank and BSP to make an        if it is not, what mitigating actions are
informed judgment and decision as to the         planned;




Manual of Regulations for Banks                                          Appendix 90 - Page 5
APP. 90
11.12.31

    vi. Commentary on major issues where            impact the ICAAP calculation together with
further analysis and decisions are required;        their effects; and
and                                                     ii. Details of, and rationale for, the
    vii. Who has carried out the assessment,        time period over which capital has been
how it has been challenged, and who has             assessed.
approved it.
                                                    Risks analyzed
2. BACKGROUND                                           i. An identification of the major risks
     This section would cover the relevant          faced in each of the following categories:
organizational structure and business lines,            · credit risk;
and historical financial data for the bank              · market risk;
(e.g., group structure (legal and operational),         · interest rate risk in the banking book;
operating profit, profit before tax, profit after       · liquidity risk;
tax, dividends, equity, capital resources held          · operational risk;
and as compared with regulatory                         · compliance risk;
requirements, total loans, total deposits,              · strategic/business risk; and
total assets, etc., and any conclusions that            · reputation risk;
can be drawn from trends in the data which              ii. And for each, an explanation of how
may have implications for the bank’s future).       the risk has been assessed and, where
                                                    appropriate, the quantitative results of that
3. CAPITAL ADEQUACY                                 assessment;
     This section could start with a                    iii. Where relevant, a comparison of
description of the risk appetite used in the        that assessment with the results of the
ICAAP. It is vital for the BSP to understand        assessment under the Framework
whether the bank is presenting its view             (specifically for credit risk, market risk, and
regarding: (1) the amount of capital required       operational risk);
to meet minimum regulatory needs, or                    iv. A clear articulation of the bank’s risk
(2) the amount of capital that a bank believes      appetite by risk category if this varies from
it needs to meet its business objectives            the assessment; and
(e.g., whether the capital required is based            v. Where relevant, an explanation of
on a particular desired credit rating, or           any other methods apart from capital used
includes buffers for strategic purposes, or         to mitigate the risks.
minimizes the chances of breaching                      The discussion here would make clear
regulatory requirements). A description of          which additional risks the bank considers
the methodology used to assess the bank’s           material to its operation and, thus, would
capital adequacy should also be included.           warrant additional capital on top of that
     The section would then include a               required for credit risk, market risk, and
detailed review of the capital adequacy of          operational risk under the Framework.
the bank.
     The information provided would                 Methodology and assumptions
include:                                                A description of how assessments for
                                                    each of the major risks have been
Timing                                              approached and the main assumptions
    i. The effective date of the ICAAP              made.
calculations together with consideration of             At a minimum, the BSP expects banks
any events between this date and the date           to base their ICAAP on the results of the
of submission which would materially                capital adequacy requirement under the




Appendix 90 - Page 6                                              Manual of Regulations for Banks
                                                                                          APP. 90
                                                                                         11.12.31

Framework and additional risks, where               say, three to five years based on business
applicable, should be assessed separately.          plans and solvency calculations. Likewise,
                                                    a bank should disclose here the key
Capital transferability                             assumptions and other factors that would
    Details of any restrictions that may            have significant impact on its financial
curtail the management’s ability to transfer        condition, in conducting scenario analyses/
capital into or out of the business(es)             stress testing.
covered, for example, contractual,                       Typical scenarios would include how
commercial, regulatory or statutory                 an economic downturn/market disruption
restrictions that apply.                            would affect:
                                                         i. the bank’s capital resources and
4. CURRENT           AND       PROJECTED            future earnings; and
FINANCIAL AND CAPITAL POSITIONS                          ii. the bank’s capital adequacy
     This section would explain the current         requirement under the Framework taking
and expected changes to the business profile        into account future changes in its projected
of the bank, the environment in which it            balance sheet.
expects to operate, its projected business               It would also be helpful if these
plans (by appropriate lines of business), and       projections showed separately the effects of
projected financial position for, say three         management potential actions to change the
to five years.                                      bank’s business strategy and the
     The starting balance sheet and date as         implementation of contingency plans.
of which the assessment is carried out                   In addition, banks are encouraged to
would be set out.                                   include an assessment of any other capital
     The projected financial position might         planning actions that would be necessary
consider both the projected capital available       to enable it to continue to meet its
and projected capital resource requirements         regulatory capital requirements throughout
to support strategic/business initiatives.          a recession/market disruption such as new
These might then provide a baseline against         capital injections from related companies or
which adverse scenarios (please see Capital         new share issues.
Planning below) might be compared.                       Given the projected capital needs
     Given these business plans, this section       arising from an economic recession or
would also discuss the bank’s assessment            business/market downswings, this section
on whether additional capital is necessary          would also discuss the bank’s assessment
on top of that assessed to cover their existing     on whether additional capital is necessary
risk exposures, as well as future planned           on top of that assessed to cover their existing
sources of capital.                                 risk exposures and business plans.

5. CAPITAL PLANNING                                 6. CHALLENGE AND ADOPTION OF
    This section would explain how a bank           THE ICAAP
would be affected by an economic recession               This section would describe the extent
or downswings in the business or market             of challenge and testing of the ICAAP.
relevant to its activities. The BSP is interested   Banks should describe the review and sign-
in how a bank would manage its business             off procedures used by senior management
and capital so as to survive a recession/           and the board. It might also be helpful if a
market disruption while meeting minimum             copy of any relevant report to senior
regulatory standards. The analysis would            management or the board and their response
include financial projections forward for,          were attached.




Manual of Regulations for Banks                                              Appendix 90 - Page 7
APP. 90
11.12.31

    Details of the reliance placed on any       allocating capital to business units, or in
external suppliers would also be detailed       individual credit decision process.
here, e.g. for generating economic scenarios.       Banks should include a statement of the
    In addition, a copy of any report           actual operating philosophy on capital
obtained from an external reviewer or           management and how this links to the
internal audit would also be included.          ICAAP. For instance differences in risk
                                                appetite used in the ICAAP as compared to
7. USE OF THE ICAAP WITHIN THE                  that used for business decisions might be
BANK                                            discussed.
    This section would describe the extent          Lastly, it would be helpful if details on
to which capital management is embedded         any anticipated future refinements within the
within the bank including the extent and use    bank’s ICAAP (highlighting those aspects
of scenario analysis and/or stress testing      which are work-in-progress), as well as any
within the bank’s capital management            other information that would help the BSP
policy, e.g. in business decisions (e.g.        review the bank’s ICAAP could be provided.
expansion plans) and budgets, or in             (Circular No. 639 dated 15 January 2009)




Appendix 90 - Page 8                                               Manual of Regulations for Banks
                                                                                           APP. 90
                                                                                          11.12.31

                                                                                          Annex B

                   ALTERNATIVE INTERNAL CAPITAL ADEQUACY
                     ASSESSMENT PROCESS METHODOLOGIES



    This appendix outlines ICAAP                    Allocation-of-risk-taking approach – In
methodologies which banks may adopt            this approach, banks might start with its
in lieu of that based on the minimum           actual capital and break it down to all its
regulatory capital requirement under the       material risks. This step in the process
BSP Risk-Based Capital Adequacy                requires quantification or at least an
Framework (the Framework). However,            estimation method for various risks. The
the choice of methodology should clearly       amount of capital provided for each risk
be commensurate with banks’ ability to         category is determined by the current and
collect the necessary information and to       envisaged amount of risk in each category,
calculate the necessary inputs in a reliable   a risk buffer and their risk appetite. Banks
manner.                                        will decide which type of risk quantification/
    Structured approach - In this case,        estimation method is suitable and sufficient
banks will need to set the internal capital    for its particular use. If the allocated capital
requirement at a starting point of zero        seems insufficient, either the risk has to be
capital and then build on capital due to all   reduced or capital has to be raised. The
risks (both those captured under the           allocated amounts of the capital will
Framework and those that are not) and          therefore work as a limit system, which
external factors. This methodology could       assists and facilitates banks in balancing
be seen as a simple model for calculating      their risk-taking capacity and their risks.
economic capital and is not based on the            Formal economic capital models –
minimum regulatory capital requirement.        These are expected to be used eventually by
A sensitivity analysis could form the          banks that use advanced approaches in
starting point. The sensitivity analysis       determining the minimum regulatory capital
should be based on an exceptional but          requirement, or those that have substantial
plausible scenario. Risks which are not        derivatives and structured products
included in the sensitivity analysis should    transactions (i.e., those that have expanded
also be considered in terms of the             dealer and/or user capabilities).
structured approach.                           (Circular No. 639 dated 15 January 2009)




Manual of Regulations for Banks                                                Appendix 90 - Page 9
                                                                                       APP. 90a
                                                                                       11.12.31

                        GUIDELINES ON THE BANGKO SENTRAL’S
                            SUPERVISORY REVIEW PROCESS
                                      (Appendix to Sec. X117)


A. Introduction                                   be compared with the required capital
     1. The BSP’s supervisory review              resulting from the ICAAP.
process (SRP) in the context of this                   2. Next, the assessment of banks’
document involves (1) an evaluation of            ICAAP should include an evaluation of their
banks’ internal capital adequacy assessment       assumptions, components, methodologies,
processes (ICAAP) and their output, (2) a         coverage and outcome. This review should
dialogue with banks with regard to their          cover both banks’ risk management
ICAAP, and (3) the prudential measures that       processes and their assessment of adequate
may be taken to address issues identified.        capital. The BSP should review how banks
These guidelines should be observed mainly        assess the other risks they are exposed to,
by the appropriate Central Point of Contact       especially Elements 2 to 4 listed in Item
Department (CPCD) within the BSP and,             "C.4" hereof, the controls they have in place
where appropriate for on-site validation          to mitigate these risks, as well as the
during regulation examination, by the             adequacy and composition of capital held
examination personnel. This therefore             against those risks.
supplements the existing guidelines set out            3. The BSP should then identify existing
in the Manual of Examinations, the CAMELS         or potential problems and key risks faced
Rating, and the Risk Assessment System            by banks, the deficiencies in their control
(RAS). The CPCD may draft, for its own use,       and risk management frameworks, and the
detailed guidelines on the conduct of the         degree of reliance that can be placed on the
assessment of banks’ ICAAP and of the BSP-        outputs of their ICAAP. This process will
bank dialogue.                                    enable the BSP to tailor its approach for each
     2. Although these guidelines are             individual bank and will provide the
directed mainly at BSP supervision and            foundation for the BSP’s general approach
examination personnel, banks will have a          for each bank and its actions.
clear interest in knowing the approach the             4. The BSP’s evaluation of the
BSP intends to take in assessing their capital    adequacy of banks’ capital in relation to their
adequacy.                                         risk profile would serve as the basis for
                                                  assigning a rating for the Capital component
B. Guiding principles in assessing                of the bank’s CAMELS rating. It would also
banks’ ICAAP                                      serve as the basis for identifying any
    1. As a first step, the BSP should            prudential measures or other supervisory
evaluate banks’ compliance with the               actions required. For example, where there
minimum regulatory capital requirements as        is an imbalance between business and risk
prescribed under the Framework. This              controls, the BSP should consider the range
would involve the verification of banks’          of remedial supervisory actions that may be
calculation of their risk weighted assets         needed to rectify a deficiency in controls
(RWA) and capital adequacy ratio (CAR).           and/or perceived shortfalls in capital, either
The minimum regulatory capital                    as a long-term requirement(s) or as a short-
requirements should always be the starting        term action(s).
point in the assessment of banks’ capital              5. The results of the SRP will be
adequacy. The validated CAR should then           communicated to the board and senior




Manual of Regulations for Banks                                           Appendix 90a - Page 1
APP. 90a
11.12.31

management of banks together with any                a. Element 1: Risks covered under the
action that is required of them and any         Framework (i.e., credit risk, market risk, and
significant action planned by the BSP. This     operational risk);
may be done as part of the dialogue                  b. Element 2: Risks not fully covered
between the BSP and each bank on the            under the Framework (for example, credit
ICAAP.                                          concentration risk, risk posed by non-
     6. In evaluating the ICAAP of branches     performing assets, risk posed by contingent
of foreign banks in the Philippines, the BSP    exposures, etc.);
will refer to the home supervisor’s                  c. Element 3: Risks not covered under
consolidated assessment of the ICAAP of the     the Framework (other risks identified under
head office/parent bank. The BSP will also      Circular No. 510 dated 3 February 2006);
take into account the strength and              and
availability of parental support.                    d. Element 4: External factors, which
                                                include risks which may arise from the
C. Guiding principles on BSP-bank               regulatory, economic or business
dialogue                                        environment.
    1. A key element of the SRP is the               5. Aside from these four main
dialogue between the BSP and each bank.         elements, the dialogue should also cover
The dialogue will inform the BSP about the      the quality of internal governance of banks,
way each bank’s ICAAP is structured, and        including risk controls, compliance and
the assumptions and methodologies which         internal audit, as well as operational and
are used to assess its risk exposures.          organizational structure.
    2. The ICAAP document, which                     6. For the SRP to be effective, the BSP
banks are required to submit to the BSP         will need to develop a sufficiently thorough
every January of each year (suggested           understanding of how the ICAAP is
format is in Annex A of Appendix 90), will      determined and the differences between it
be the basis for the BSP-bank (specifically,    and the minimum regulatory capital
BSP-CPCD) dialogue. This dialogue may           requirement under the Framework. This
feed into the regular examination, and the      would help in evaluating the ICAAP
findings of the regular examination may         outcome. The SRP emphasizes the
in turn feed into the dialogue. The BSP         importance of analyzing the main elements,
will determine the nature and depth of the      and understanding the differences between
dialogue, based on the type and                 ICAAP assumptions and minimum
complexity of the bank.                         regulatory capital requirement assumptions.
    3. Banks should be able to justify their         7. Once the process has begun, the
processes for identifying and measuring their   dialogue will provide the opportunity for
risks as well as how much capital, if any,      iteration between the ICAAP and SRP, with
they allocate against them, taking into         each informing the other, i.e., banks may
account other qualitative mitigants of risk.    make changes to the ICAAP in the course
Banks should be able to explain any             of the dialogue, in response to challenge
differences between their own assessment        and feedback from the BSP, and vice versa.
of capital needs and targets under the ICAAP    Following the dialogue, the BSP will reach
and the minimum regulatory capital              an assessment.
requirements prescribed under the
Framework.                                      D. Guidelines on prudential measures
    4. The dialogue should embrace the             1. If the BSP considers that a bank’s
following four main elements:                   ICAAP does not adequately reflect its overall




Appendix 90a - Page 2                                         Manual of Regulations for Banks
                                                                                            APP. 90a
                                                                                            11.12.31

risk profile, or does not result in the bank     supervisory actions within an appropriate
having adequate capital, then consideration      timeframe.
should be given to applying prudential                4. The requirement to increase capital
measures.                                        may also be set where the BSP judges the
    2. The measures available to the BSP         existing capital held by a bank to be
include:                                         inherently inadequate for its overall risk
    a. Requiring the bank to improve its         profile. It must be acknowledged that there
internal control and risk management             is no ‘scientific’ method for determining the
frameworks;                                      amount, and that capital is not a long-run
    b. Requiring the bank to reduce the risk     substitute for remedying deficiencies in
inherent in its activities, products and         systems and controls. In practice, the
systems;                                         process relies heavily on subjective
    c. Restricting or limiting the business,     judgment and peer-group consistency to
operations or network of the bank;               ensure a level playing field and a defense to
    d. Limiting or prohibiting the               possible challenge that may be posed by
distribution of net profits and requiring that   banks.
part or all of the net profits be used to             5. Prudential measures should be
increase the capital accounts of the bank;       communicated promptly and in sufficient
and                                              detail. In communicating its decision on
    e. Requiring the bank to increase its        prudential measures, the BSP should:
capital.                                              a. Explain in sufficient detail the factors
    3. The choice of prudential measures         which have led to the risk assessment
should be determined according to the            conclusions;
severity and underlying causes of the                 b. Indicate areas of weakness and the
situation and the range of measures and          timeframe for remedial action;
sanctions available to the BSP. Measures              c. Explain the reasons for any
can be used individually or in combination.      additional capital requirement; and
The requirement to increase capital should,           d. Indicate what improvements could
however, be imposed on any bank which            be made to systems and controls to make
exhibits an imbalance between its business       them adequate for the risks and activities of
risks and its internal control and risk          the bank, and for this improvement to be
frameworks, if that imbalance cannot be          reflected in the bank’s capital requirements.
remedied by other prudential measures or         (Circular No. 639 dated 15 January 2009)




Manual of Regulations for Banks                                                Appendix 90a - Page 3
                                                                                            APP. 90b
                                                                                            11.12.31

                SUPPLEMENTAL GUIDELINES ON THE
     INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS (ICAAP)
AND SUPERVISORY REVIEW PROCESS (SRP) FOR FOREIGN BANK BRANCHES
                                      (Appendix to Sec. X117)

In implementing the provisions of               allocation. It should also be able to
Appendices 90a and 90b, the BSP shall           illustrate how this capital is managed, and
consider the following guidelines with          how capital can be made available to the
respect to the ICAAP and the related SRP        branch in a timely manner when it has been
for foreign bank branches:                      determined that there is a need to do so.
     1. The guiding principles for banks’            6. In line with Appendix 90b Item
ICAAP’s and SRP in Appendix 90a and 90b         “B.6” the BSP will refer to the ICAAP
respectively shall apply to foreign bank        developed at the level of the head office/
branches on a proportionate basis. In this      parent bank, and the home supervisor’s
regard, the BSP expects that there will be      assessment thereof. The BSP will look at the
variation in foreign banks branches’ ICAAPs     extent that the head office/parent bank
in accordance with the nature, size and         ICAAP covers the risks of its branch in the
complexity of their business in the             Philippines, including the possible impact
Philippines;                                    of scenarios that primarily affect the
     2. The BSP will primarily be interested    operations of the head office/parent bank on
in finding out how a foreign bank branch        the operations and capital adequacy of the
assesses its capital in relation to its         branch.
business plans and operations in the                 7. The ICAAP document of foreign bank
Philippines;                                    branches should be submitted to the
     3. The ICAAP of a foreign bank branch      Central Point of Contact Department
should cover risks arising from the             (CPCD) of the BSP on or before 28 February
occurrence of domestically-oriented             of each year. Banks may refer to Annex A of
scenarios. It should also take into account     Appendix 90a for the suggested format of
the specific circumstances of the branch,       the document. While a common outline
i.e., regulatory commitments in relation to     facilitates the BSP’s evaluation, banks are not
special licenses or authorities, etc.;          precluded from modifying the format and
     4. The BSP acknowledges that a             content of the ICAAP document if certain
foreign bank branch is likely to make use of    sections or suggested content do not apply
the methodology of the head office/parent       to the operations of the branch, or, if
bank for its own ICAAAP or portion thereof.     presenting the information in another way
However the branch should be able to            would best reflect the internal capital
explain that such process and methodology       assessment process of the branch;
are appropriate to its business in the          and
Philippines;                                         8. A “trial” ICAAP document shall be
     5. A branch must include in its ICAAP      submitted to the CPCD of the BSP on or
how capital is being allocated to the branch    before 30 September 2011.
and the factors that influence this             (Circular 731 dated 28 July 2011)




Manual of Regulations for Banks                                                 Appendix 90b - Page 1
                                                                                              App. 91
                                                                                              11.12.31


                          EFFECTIVE INTEREST CALCULATION MODELS
                                  (Appendix to Subsec. X305.5)

Illustration 1

                           EFFECTIVE INTEREST CALCULATION MODEL
                              FIXED EQUAL AMORTIZATION CASE

            A            B          C              D             E         F              G
1    Loan Amount                 120,000
2    Monthly Installment        11,001.60
3    Contractual Rate (Monthly)    1.50%
4    Other Charges                  3.00%
5    No. of Monthly Installment        12
6
7     Installment      Gross                               Other                     O/S
8      Period          Loan    Principal       Interest   Charges    Cash flows      Balance
9                   120,000.00                                                      120,000.00
10       0                                             3,600.00 116,400.00          120,000.00
11      1                           9,201.60  1,800.00          (11,001.60)         110,798.40
12       2                          9,339.62  1,661.98          (11,001.60)         101,458.78
13       3                          9,479.72 1,521.88           (11,001.60)          91,979.06
14       4                          9,621.91 1,379.69           (11,001.60)          82,357.15
15       5                          9,766.24  1,235.36          (11,001.60)          72,590.91
16       6                          9,912.74 1,088.86           (11,001.60)          62,687.17
17       7                         10,061.43    940.17          (11,001.60)          52,616.74
18       8                         10,212.35    789.25          (11,001.60)          42,404.39
19       9                         10,365.53    636.07          (11,001.60)          32,038.86
20      10                         10,521.02    480.58          (11,001.60)          21,517.85
21      11                         10,678.83    322.77          (11,001.60)          10,839.01
22      12                         10,839.01    162.59          (11,001.60)
23               TOTAL            120,000.00 12,019.19 3,600.00

     Monthly Installment        =       PMT (C3, C5, -C1)*-1          =     11,001.60
     (Using excel PMT Function
     Effective Annual Interest  =       (1+IRR (F10:F22)) 12-1         =    26.71%
     Rate (EIR)
     (using Excel IRR Function)
     Effective Monthly Interest =       IRR (F10:F22)                  =    1.99%
     Rate (MIR)
     (using Excel IRR Function)




Manual of Regulations for Banks                                                   Appendix 91 - Page 1
App. 91
11.12.31


Illustration 2



                        EFFECTIVE INTEREST CALCULATION MODEL
                          FIXED PRINCIPAL AMORTIZATION CASE

       A               B             C            D            E              F              G
1  Loan Amount                     120,000
2  Monthly Installment           11,001.60
3  Contractual Rate (Monthly)       1.50%
4  Other Charges                    3.00%
5  No. of Monthly Installment           12
6
7 Installment    Gross                          Other                                      O/S
8   Period       Loan             Principal    Interest   Charges        Cash flows       Balance
9             120,000.00                                                                120,000.00
10    0                                                   3,600.00       116,400.00     120,000.00
11    1                             10,000     1,800.00                  (11,800.00)    110,000.00
12    2                             10,000     1,650.00                  (11,650.00)    100,000.00
13    3                             10,000     1,500.00                  (11,500.00)     90,000.00
14    4                             10,000     1,350.00                   (11,350.00)    80,000.00
15    5                             10,000     1,200.00                   (11,200.00)    70,000.00
16    6                             10,000     1,050.00                  (11,050.00)     60,000.00
17    7                             10,000       900.00                  (10,900.00)     50,000.00
18    8                             10,000       750.00                  (10,750.00)     40,000.00
19    9                             10,000       600.00                   (10,600.00)    30,000.00
20   10                             10,000       450.00                   (10,450.00)    20,000.00
21   11                             10,000       300.00                  (10,300.00)     10,000.00
22   12                             10,000       150.00                  (10,150.00)
23             TOTAL            120,000.00    11,700.00   3,600.00


   Effective Annual Interest Rate (EIR) =      (1+IRR (F10:F22)) 12-1     =        26.91%
   (using Excel IRR Function)
   Effective Monthly Interest Rate (MIR) =     IRR (F10:F22)              =         2.01%
   (using Excel IRR Function)




Appendix 91 - Page 2                                                    Manual of Regulations for Banks
                                                                                                   App. 91
                                                                                                  11.12.31


Illustration 3



                          EFFECTIVE INTEREST CALCULATION MODEL
                   FIXED EQUAL AMORTIZATION CASE WITH GRACE PERIOD

      A               B                C              D            E               F             G
1 Loan Amount                      120,000
2 Monthly Installment             11,001.60
3 Contractual Rate (Monthly)          1.50%
4 Other Charges                       3.00%
5 No. of Monthly Installment             12
6
7 Installment      Gross                                        Other                           O/S
8   Period          Loan          Principal        Interest    Charges         Cash flows      Balance
9               120,000.00                                                                   120,000.00
10     0                                                      3,600.00     116,400.00        120,000.00
11    1                                                                          -           120,000.00
12     2                                                                         -           120,000.00
13     3                           9,201.60        1,800.00                (11,001.60)       110,798.40
14     4                           9,339.62        1,661.98                (11,001.60)       101,458.78
15     5                           9,479.72        1,521.88                (11,001.60)        91,979.06
16     6                           9,621.91        1,379.69                (11,001.60)        82,357.15
17     7                           9,766.24        1,235.36                (11,001.60)        72,590.91
18     8                           9,912.74        1,088.86                (11,001.60)        62,687.17
19     9                          10,061.43          940.17                 (11,001.60)       52,616.74
20    10                          10,212.35          789.25                (11,001.60)        42,404.39
21    11                          10,365.53          636.07                (11,001.60)        32,038.86
22    12                          10,521.02          480.58                (11,001.60)        21,517.85
23    13                          10,678.83          322.77                (11,001.60)        10,839.01
24    14                          10,839.01          162.59                (11,001.60)             (0.00)
               TOTAL              98,482.15       11,533.84   3,600.00

   Monthly Installment                        =        PMT (C3, C5, -C1)*-1       =      11,001.60
   (Using excel PMT Function
   Effective Annual Interest Rate (EIR)       =       (1+IRR (F10:F22)) 12-1      =           19.68%
   (using Excel IRR Function)
   Effective Monthly Interest Rate (MIR)      =       IRR (F10:F24)               =            1.51%
   (using Excel IRR Function)




Manual of Regulations for Banks                                                        Appendix 91 - Page 3
App. 91
11.12.31


Illustration 4



                        EFFECTIVE INTEREST CALCULATION MODEL
           FIXED PERIODIC INTEREST PAYMENT, BALLOON PAYMENT AT MATURITY

       A              B            C               D            E               F               G
1  Loan Amount                  120,000
2  Monthly Installment        11,001.60
3  Contractual Rate (Monthly)     1.50%
4  Other Charges                  3.00%
5  No. of Monthly Installment         12
6
7 Installment    Gross                                                      Other           O/S
8   Period       Loan     Principal             Interest    Charges        Cash flows      Balance
9             120,000.00                                                                 120,000.00
10    0                                                    3,600.00     116,400.00       120,000.00
11    1                                         1,800.00                  (1,800.00)     120,000.00
12    2                                         1,650.00                  (1,800.00)     120,000.00
13    3                                         1,500.00                  (1,800.00)     120,000.00
14    4                                         1,350.00                  (1,800.00)     120,000.00
15    5                                         1,200.00                  (1,800.00)     120,000.00
16    6                                         1,050.00                  (1,800.00)     120,000.00
17    7                                           900.00                  (1,800.00)     120,000.00
18    8                                           750.00                 (1,800.00)      120,000.00
19    9                                           600.00                  (1,800.00)     120,000.00
20   10                                           450.00                  (1,800.00)     120,000.00
21   11                                           300.00                 (1,800.00)      120,000.00
22   12                  120,000.00               150.00               (121,800.00)
23            TOTAL      120,000.00            21,600.00   3,600.00

   Effective Annual Interest Rate (EIR)    =      (1+IRR (F10:F22)) 12-1    =       23.58%
   (using Excel IRR Function)
   Effective Monthly Interest Rate (MIR)   =       IRR (F10:F22)            =           1.78%
   (using Excel IRR Function)




Appendix 91 - Page 4                                                  Manual of Regulations for Banks
                                                                                                                   App. 91
                                                                                                                11.12.31


Illustration 5



                            EFFECTIVE INTEREST CALCULATION MODEL
                                  FIXED EQUAL AMORTIZATION
                  (WEEKLY INSTALLMENTS QUOTED IN MONTHLY EFFECTIVE RATE)

         A            B           C                                 D                  E        F              G
1 Loan Amount                10,000.00
2 Weekly Installment            788.00
3 Contractual Rate (Monthly)     1.50%
4 Weekly Compounding Rate        0.35%
5 Other Charges                  3.00%
6 Term (Weeks)                       13
7 Period/Year                        52
8 Installment       Gross                                                        Other                        O/S
9    Period         Loan      Principal                         Interest         Charges      Cash flows     Balance
10               10,000.00                                                                                  10,000.00
11     0                                                                             300.00    9,700.00     10,000.00
12     1                        753.38                            34.62                            -         9,246.62
13      2                       755.99                            32.01                         (788.00)     8,490.63
14      3                       758.61                            29.39                         (788.00)     7,732.02
15      4                       761.23                            26.76                         (788.00)     6,970.78
16      5                       763.87                            24.13                         (788.00)     6,206.91
17     6                        766.51                            21.49                         (788.00)     5,440.40
18     7                        769.17                            18.83                         (788.00)     4,571.24
19     8                        771.83                            16.17                         (788.00)     3,899.41
20     9                        774.50                            13.50                         (788.00)     3,124.91
21    10                        777.18                            10.82                         (788.00)     2,347.72
22    11                        779.87                             8.13                         (788.00)     1,567.85
23    12                        782.57                             5.43                         (788.00)       785.28
24    13                        785.28                             2.72                         (788.00)         (0.00)
25              TOTAL        10,000.00                           243.98              300.00

   Weekly                               =                   PMT (Contractual Rate, Term, -Loan Amount)*-1
   (Using excel PMT Function
   Effective Annual Interest Rate (EIR) =                     (1+IRR (F10:F24)) 52-1            =       50.46%
   (using Excel IRR Function)
   Effective Monthly Interest Rate (MIR) =                    (1+IRR (F10:F24) 13/3-1           =          3.46%
   (using Excel IRR Function)


(Circular No. 730 dated 20 July 2011, as amended by M-2011-040 dated 28 July 2011)




Manual of Regulations for Banks                                                                     Appendix 91 - Page 5
APP. 92                                                                                       APP. 1
                                                                                            10.12.31

    Minimum Documentary Requirements* for the Sale of Foreign Exchange (FX) for
       Non-Trade Purposes by Authorized Agent Banks (AABs)/AAB-Forex Corps

A. Sale of FX for Non-trade Current Account Purposes under Section 2 of the Manual of
    Regulations on FX Transactions (FX Manual)

                 Purposes                                       Documents Required
                                                          (All originals except as indicated)

1. Foreign travel funds                                Applicant's passport and passenger ticket

2. Educational expenses/student                        Photocopy of proof of enrolment with,
   maintenace abroad                                   or billing statement from, school abroad

3. Correspondence studies                              Photocopy of proof of enrolment with,
                                                       or billing statement from, school abroad

4. Medical Expenses                                    Photocopy of billing statement (for services
                                                       rendered/expenses incurred abroad) or
                                                       certification issued by doctor/hospital
                                                       abroad indicating cost estimate (for the
                                                       treatment/service to be administered/
                                                       rendered)

5. Emigrants' assets (including inheritance,           a. Photocopies of:
   legacies, and income from properties)                  i. Emigrant's visa or proof of residence
                                                                abroad
                                                          ii. Notarized Deed of Sale of assets
                                                               in the Philippines (e.g. real estate,
                                                               vehicles,machineries/equipment,
                                                               etc.) and;
                                                          iii. Proof of income received from
                                                                properties in the Philippines.
                                                       b. In the absence of the emigrant, a
                                                          notarized Special Power of Attorney
                                                          (SPA) for emigrant's representative/
                                                          agent. If SPA was executed abroad,
                                                          original of SPA authenticated by
                                                          Philippine consulate abroad.

6. Salary/bonus/dividend/other benefits of             a. Employment contract/Certification of
   foreign nationals (including peso                       employer showing amount of
                                                           compensation paid to the foreign
                                                          national during the validity of the
                                                          contract, stating whether the same had
                                                           been paid in FX or in pesos, and if in
                                                           FX, proof that the FX was previously
                                                           previously sold for pesos to AABs;



Manual of Regulations for Banks - Appendix to Part V                             Appendix 1 - Page 1
APP. 1                                                                                     APP. 92
10.12.31

                Purposes                                       Documents Required
                                                        (All originals except as indicated)
                                                     b. ACR I-Card and DOLE Alien Employment
                                                         Permit of the foreign national;
                                                     c. Applicant's notarized certification that
                                                         the FX remitted is net of local expenses
                                                         incurred and/or net of previous
                                                         transfers abroad; and
                                                     d. If amount to be remitted comes from
                                                         sources other than salaries/
                                                         compensation, information regarding
                                                         the sources supported by appropriate
                                                         documents should be submitted.

7. Foreign nationals' income taxes due to            a. ACR-I Card and DOLE Alien Employment
   foreign governments                                  Permit; and
                                                     b. Photocopy of income tax return covering
                                                        the income tax payment sought to be
                                                        remitted.

8. Sales proceeds of foreign nationals'              a. ACR I-Card; and
   domestic assets                                   b. Photocopy of proof of sale of asset/s
                                                        indicating currency of payment

9. Producers' share in movie revenue/TV              a. Statement of remittable share rental or
   film rentals                                         rental; and
                                                     b. Photocopy of contract/agreement

10. Exports commissions due to foreign               a. Billing statement from non-resident
    agents                                              agent; and
                                                     b. Photocopy of contract/agreement

11. Freight charges on exports/imports               a. Billing statement; and
                                                     b. Photocopy of contract/agreement

12. Charters and leases of vessels/aircrafts         a. Billing statement from non-resident
                                                        lessor/owner of vessel/aircraft; and
                                                     b. Photocopy of contract/agreement

13. Port disbursements abroad for aircraft           a. Billing statement; and
    and vessels of Philippine registry or            b. Photocopy of contract/agreement
    chartered by domestic operators and
    salvage fees

14. Satellite and other telecommunication            a. Billing Statement; and
    services                                         b. Photocopy of contract/agreement




Appendix 1- Page 2                             Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                     APP. 1
                                                                                          10.12.31


                  Purposes                                      Documents Required
                                                          (All originals except as indicated)

15. Other services such as advertising,                a. Billing statement; and
    consultancy, IT, fees for other                    b. Photocopy of contract/agreement.
    professional services

16. Share in head office expenses                      a. BSRD for the assigned capital in the
   (including reimbursements)                             branch;
                                                       b. Audited schedules of allocation of
                                                          expenses for the periods covered;
                                                       c. Certification from the head office
                                                          that the share in head office
                                                          expenses remain unpaid and
                                                          outstanding; and
                                                       d. Audited financial statements of the
                                                          Philippine branch.

17. Insurance/Reinsurance premium due to               Billings/Invoices of insurance companies/
    foreign insurance companies                        brokers abroad.

18. Claims against domestic insurance                  Billings/Invoices from foreign insurer/
    companies by brokers abroad                        reinsurer.

19. Net Peso revenues of foreign airlines/             a. Statement of Net Peso Revenues (Peso
    shipping companies                                    revenues less expenses) certified by
                                                          authorized officer of airline/shipping
                                                          company; and
                                                       b. Photocopy of contract/agreement.

20. Royalty/Copyright/Franchise/Patent/                a. Statement/Computation of the royalty/
    Licensing fees                                        copyright/franchise/patent/licensing
                                                          fee; and
                                                       b. Photocopy of contract/agreement.

21. Net peso revenues of embassies/                    Statement of net peso revenues (Peso
    consulates of foreign countries                    revenues less expenses) certified by the
                                                       Embassy's/Consulate's authorized officer.

22. FX obligations of Philippine credit card           Summary billings
    companies to international credit card
    companies/non-resident merchants




Manual of Regulations for Banks - Appendix to Part V                            Appendix 1 - Page 3
APP. 1                                                                                                            APP. 92
10.12.31


B. Sale of FX for Servicing Foreign/Foreign Currency Loans Including Prepayments by
   Private Sector Covered by Sections 22 to 31 of the FX Manual

                        Purposes                                               Documents Required
                                                                         (All originals except as indicated)
Loan Payments

1. Medium/Long-term foreign/foreign
   currency loans (with original maturities
   of over 1 year)

     a. Regular amortization/payment                               1.a. BSP registration letter and
                                                                        accompanying Schedule RA-2
                                                                        (Part I: Schedule of Payments on
                                                                        BSP Registered Foreign/FCDULoans
                                                                        and Part II – Details of FX/Hedging
                                                                        Transactions for BSP-Registered
                                                                        Foreign/FCDU Loan; and

                                                                   1.b. Copy of billing statement from creditor

                                                                           Amounts that may be purchased shall
                                                                           be limited to maturing amounts on
                                                                           scheduled due dates indicated in the
                                                                           registration letter. Purchase and
                                                                          remittance of FX shall coincide with
                                                                          the due dates of the obligations to
                                                                          be serviced, unless otherwise
                                                                          explicitly allowed by the BSP

                                                                   or:

                                                                   2.a BSP letter-authority for the borrower
                                                                       to purchase FX to service specific
                                                                       loan account/s and where applicable,
                                                                       the "Schedule of Foreign Exchange
                                                                       Purchases from the Banking System";
                                                                       and

                                                                   2.b. Copy of billing statement from
                                                                        creditor




1
    All original documents shall be stamped "FX-SOLD" indicating the date and amount of FX sold, and signed by the seller's
    authorized signatory.




Appendix 1- Page 4                                         Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                       APP. 1
                                                                                            10.12.31

                                                            Amounts that may be purchased
                                                           shall be limited to the unutilized
                                                           balance of the letter authority.
                                                           Remittance of FX purchased shall
                                                           coincide with the due dates of the
                                                           obligations to be serviced, unless
                                                           otherwise explicitly allowed by
                                                            the BSP.

b. Prepayments of foreign/foreign                      1.a BSP registration letter and
   currency loans of the private Sector                    accompanying Schedule RA-2 (Part I
   that are not publicly-guaranteed                        Schedule of Payments on BSP-
                                                           Registered Foreign/FCDU Loans
                                                           and Part II -Details of FX/Hedging
                                                           Transactions for BSP - Registered
                                                           Foreign/FCDU Loans ;and

                                                       1.b Original of the BSP letter
                                                           acknowledging receipt of the
                                                           borrower’s notice of prepayment

2. Short-term foreign/foreign currency
   loans (with original maturity of
   up to 1 year)

    a. Loans from offshore creditors                   1.a. BSP approval or registration letter
       (banks and non-banks)                                showing loan terms and borrower's
                                                            receiving copy of its report on short-
                                                            term loans as submitted to BSP's
                                                            International Operations Department
                                                            (IOD); and

                                                       1.b. Copy of billing statement from creditor

                                                            Amounts that may be purchased
                                                            shall be limited to: (a) amounts/rates
                                                            indicated in the BSP approval or
                                                            registration letter; or (b) the outstand-
                                                            ing balance of the loan indicated in
                                                            the report, whichever is lower.
                                                            Purchase and remittance of FX shall
                                                            coincide with the due dates of the
                                                            obligations to be serviced, unless
                                                            otherwise explicitly allowed by
                                                            the BSP.




Manual of Regulations for Banks - Appendix to Part V                             Appendix 1 - Page 5
APP. 1                                                                    APP. 92
10.12.31

   b. Loans from FCDUs/OBUs         1.a. BSP approval or registration letter
                                         showing loan terms or certification
                                         from the lending bank on the amount
                                         outstanding; and

                                    1.b. Copy of billing statement from creditor

                                          Amounts that may be purchased shall
                                          be limited to: (a) amounts/rates
                                          indicated in the BSP approval or
                                          registration letter; or (b) the
                                          outstanding balance of the loan
                                          indicated in the bank certification,
                                          whichever is lower. Purchases and
                                          remittance of FX shall coincide with
                                          the due dates of the obligations to be
                                          serviced, unless otherwise explicitly
                                          allowed by the BSP.

                                    or:

                                    2.a. For loans not requiring BSP approval/
                                          individual registration2, Promissory
                                         Note (PN) certified as true copy by
                                         the Head of the lending bank's
                                         Loans Department and certification
                                         from the lending bank:
                                          i. on the principal amount still
                                          outstanding;
                                          ii. that the loan is eligible for
                                          servicing with FX to be purchased
                                          from the AABs/AAB-forex corps in
                                         line with existing regulations;
                                          iii. That the loan was used to finance
                                          trade transactions (as well as pre-
                                          export costs in the case of FCDU
                                          loans of exporters) of the borrower;
                                          and
                                          iv. On date when the loan account
                                          was reported to the appropriate BSP
                                         department/office under the
                                         prescribed forms. (This may be
                                         dispensed with for new loans which
                                         may not have been reported yet to
                                         BSP as of date of application to
                                         purchase FX.)




Appendix 1- Page 6            Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                                            APP. 1
                                                                                                                 10.12.31

                                                                   2.b Copy of billing statement from creditor.

                                                                         Amounts that may be purchased shall
                                                                         be limited to amounts/rates indicated
                                                                         in the bank certification or PN,
                                                                         whichever is lower. Purchase and
                                                                         remittance of FX shall coincide with
                                                                         the due dates of the obligations to be
                                                                         serviced, unless otherwise explicitly
                                                                         allowed by the BSP.

Payments related to Guarantees and
Similar Arrangements (including Risk
Take Over Arrangements)

    1. For FX liabilities arising from                              a. BSP approval of the resulting foreign/
       guarantees and similar arrangements                             foreign currency obligation;
       [(including Risk Take Over Arrangements
       (RTO)]                                                       b. Copies of:
                                                                       i. Agreement/contracts covered by
                                                                       the guarantee/similar arrangement;
                                                                        ii.Standby letter of Credit (SLC) or
                                                                       guarantee contract/agreement for the
                                                                        guarantee;
                                                                    c. Proof/notice of original obligor's
                                                                       default and creditor's call on the
                                                                       guarantee; and
                                                                    d. Billing statement from the non-
                                                                       resident or local bank guarantor

    2. Regular Fees related to Build-Operate-                      a. BSP Registration Document
       Transfer (BOT) and similar financing                        b . Copy of the covering agreements/
       schemes with transfer provisions                                contracts
                                                                   c. Billing statement from the private
                                                                        sector project company/proponent

C. Sale of FX for Servicing of Foreign Investments, Investments by Residents and Related
   Transactions Covered by Sections 32 to 44 of the FX Manual

                        Purposes                                              Documents Required
                                                                        (All originals except as indicated)2

Foreign Investments

1. Capital repatriation of:



2
    All original documents shall be stamped "FX-SOLD" indicating the date and amount of FX sold, and signed by the seller's
    authorized signatory.


Manual of Regulations for Banks - Appendix to Part V                                                Appendix 1 - Page 7
APP. 1                                                                               APP. 92
10.12.31

a. Portfolio investments in:
   i. PSE-listed securities                    BSRD or BSRD Letter-Advice from the
                                               registering custodian bank and photocopy
                                               of broker's sales invoice

   ii. Peso government securities              BSRD or BSRD Letter-Advice from the
                                               registering custodian bank and
                                               photocopy of confirmation of purchase for
                                               peso government securities

   iii. Money market instruments (MMI)         BSRD and photocopy of matured contract
                                               for MMI

   iv. 90-day time deposits                    BSRD or BSRD Letter Advice from the
                                               registering custodian bank and photocopy
                                               of Matured Certificate of Deposits for 90-
                                               day time deposits

b. Foreign direct equity investments           a. BSRD;
                                               b. Photocopy of proof of sale or relevant
                                                  documents showing the amount to be
                                                  repatriated; in case of dissolution/
                                                  capital reduction, proof of distribution
                                                  of funds/assets such as statement of net
                                                  assets in liquidation;
                                               c. Photocopy of Clearance from
                                                  appropriate department of the BSP-
                                                  Supervision and Examination Sector
                                                  (for banks), or from the Insurance
                                                  Commission (for insurance
                                                  companies), from the Department of
                                                  Energy or from the National Power
                                                  Corporation (for oil/natural gas/
                                                  geothermal companies);

                                               d. Detailed computation of the amount
                                                  applied for in the attached format
                                                  (Annex N) prepared by the selling
                                                  stockholder's representative;

                                               e. Photocopy of pertinent audited
                                                  financial statements; and

                                               f.   SEC clearance in case of dissolution




Appendix 1- Page 8                       Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                 APP. 1
                                                                                      10.12.31

2.Remittance of Dividends/Profits/                 a. BSRD or BSRD Letter-Advice;
  Earnings/Interests                               b. Photocopy of PSE-cash dividends
                                                      notice and Phil. Central Depository
                                                      (PCD) printout of cash dividend
                                                      payment or computation of interest
                                                      earned issued by MMI issuer or bank;
                                                   c. Photocopy of secretary’s sworn
                                                      statement on the Board Resolution
                                                      covering the dividend declaration;
                                                   d. Photocopy of latest audited financial
                                                      statements or interim financial
                                                      statements of the investee firm covering
                                                      the dividend declaration period (for
                                                      direct foreign equity investments);
                                                   e. For direct foreign equity investments,
                                                      photocopy of clearance pertaining to
                                                      the investee firm from BSP-Supervision
                                                      and Examination Sector (for non-PSE
                                                      listed banks), Insurance Commission
                                                      (for insurance companies), Department
                                                      of Energy or from the National Power
                                                      Corporation (for oil/natural gas/
                                                      geothermal companies); and
                                                   f. Detailed computation of the amount
                                                      applied for using the prescribed format
                                                      (Annex N).

3. Outward remittance in equivalent FX of          a. Original certificate of inward
   pesos (funded by FX inwardly remitted)              remittance (fully unutilized) or
   in excess of investments made in the                certified true copy of inward
   country but not to exceed the amount of             remittance (partially unutilized)
   brought in less amount used for                      showing inward remittance of FX
   investments                                          and its conversion to pesos;
                                                   b. Swift message/letter request from
                                                      non-resident investors for return of
                                                       excess funds;
                                                   c. Bank certificate on the investor's
                                                      peso cash account attesting credit of
                                                      the excess peso funds to the account
                                                      and that the amount has been
                                                      outstanding since the date of credit
                                                      and is sufficient to cover the amount
                                                       applied for conversion to FX for
                                                      remittance. In case the balance of the
                                                      peso account has fallen below the
                                                      amount applied for conversion and




Manual of Regulations for Banks - Appendix to Part V                        Appendix 1 - Page 9
APP. 1                                                                         APP. 92
10.12.31

                                             outward remittance, the investor may
                                             only purchase up to the amount
                                             shown in the certificate.

                                         d. Statement from the custodian bank
                                            (for foreign portfolio investment) or
                                             from an authorized officer of the
                                             investee firm/selling investor (for
                                             foreign direct investment) on the
                                             investments made funded by a
                                            portion of the FX remittance.

                                             For refunds arising from the
                                             unapproved additional subscription of
                                             PSE-listed shares, rights offering, the
                                             following additional documents shall
                                             be required in addition to Items 1-3
                                             above:

                                             a. PSE Circulars indicating
                                             declaration of stock rights/warrants
                                             offering and the pertinent procedures
                                             and implementing guidelines;

                                             b. Copy of the Subscription
                                             Agreement with validation of
                                             payment/Philippine Depositary and
                                             Trust Corp. (PDTC) ledger; and


                                             c. Schedule of entitlement of the
                                             stock rights indicating the subscribed
                                             shares, the approved and unapproved
                                             additional shares.

                                         For remittance of interest earned from the
                                         peso cash account, certification from the
                                         depositary/custodian bank on the amount
                                         of interest pertaining to the excess peso
                                         funds for outward remittance

 4. Outward Investment
    a. Direct Equity Investments         a. Photocopy of investment proposal/
                                            agreement, or subscription agreement;
                                         b. Photocopy of Deed of Sale or
                                            Assignment of the investments;




Appendix 1- Page 10                Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                   APP. 1
                                                                                        10.12.31

                                                       c. A certification on the cumulative FX
                                                           purchases from AABs and AAB-forex
                                                           corps within the calendar year for
                                                          outward investments, including
                                                          investments in bonds/notes of the
                                                          Republic of the Philippines and other
                                                          Philippine entities;
                                                       d. Affidavit of Undertaking to inwardly
                                                           remit and sell for pesos through AABs
                                                           thirty (30) banking days from receipt
                                                           abroad the dividends earnings or
                                                           divestment proceeds from outward
                                                           investments funded by FX purchased
                                                           from AABs and AAB-forex corps using
                                                           the prescribed format under Annex K;
                                                       e. Photocopy of BSP approval on FX
                                                           purchases from AABs and AAB-forex
                                                           corps for outward investments,
                                                          including investments in bonds/notes
                                                          of the Republic of the Philippines and
                                                           other Philippine entities, exceeding
                                                           USD60 million per investor per
                                                           calendar year; and
                                                       f. Photocopy of clearance, regardless of
                                                           amount, from the appropriate
                                                           department of the BSP-Supervision and
                                                           Examination Sector (SES) for outward
                                                           direct equity investments of banks and
                                                           from the Insurance Commission (IC)
                                                           for outward investments of insurance
                                                           companies.

    b. Portfolio Investments                           a. Photocopy of subscription agreement,
                                                          or bond/stock offering;
                                                       b. Photocopy of swift payment order
                                                          instruction from the counterparty/
                                                          broker/trader indicating the name of
                                                          payee and type/kind of investment
                                                          authenticated by the broker/trader;
                                                       c. Photocopy of investor’s order to
                                                          broker/trader to buy the securities;
                                                       d. A certification on the cumulative
                                                          FX purchases from AABs and AAB-
                                                          forex corps within the calendar year
                                                          for outward investments, including
                                                          investments in bonds/notes of the
                                                          Republic of the Philippines and other




Manual of Regulations for Banks - Appendix to Part V                         Appendix 1 - Page 11
APP. 1                                                                              APP. 92
10.12.31

                                                 Philippine entities;
                                              e. Affidavit of Undertaking to inwardly
                                                 remit and sell for pesos through AABs
                                                 within thirty (30) banking days from
                                                 receipt abroad of the dividends/
                                                 earnings or divestment proceeds from
                                                 outward investments funded by FX
                                                 purchased from AABs and AAB-forex
                                                 corps using the prescribed format
                                                 under Annex K;
                                              f. Photocopy of BSP approval on FX
                                                 purchases from AABs and AAB-forex
                                                 corps for outward investments,
                                                 including investments in bonds/notes
                                                 of the Republic of the Philippines and
                                                 other Philippine entities, exceeding
                                                 USD30 million per investor per
                                                 calendar year; and
                                              g. Photocopy of clearance, regardless of
                                                 amount, from the Insurance
                                                 Commission (IC) for outward
                                                 investments of insurance companies.

5. Investments in FX-denominated bonds/       a. Photocopy of subscription agreement
   notes and Philippine Peso-denominated         or bond offering;
   bonds/notes (to be settled in foreign      b. Photocopy of swift payment order
   currency)issued offshore by the Republic      instruction from the counterparty/
   of the Philippines and Other Philippine       broker/trader indicating the name of
   Entities                                      payee and type/kind of investment
                                                 authenticated by the broker/trader;
                                              c. Photocopy of investor’s order to
                                                 broker/trader to buy the securities;
                                              d. A certification on the cumulative
                                                 FX purchases from AABs and AAB-
                                                 forex corps within the calendar year
                                                 for investments in bonds/notes of the
                                                 Republic of the Philippines and other
                                                 Philippine entities, including for
                                                 outward investments;
                                              e. Affidavit of Undertaking to inwardly
                                                 remit and sell for pesos through AABs
                                                 within thirty (30) banking days from
                                                 receipt abroad the dividends/earnings
                                                 or divestment proceeds from foreign
                                                 currency-denominated bonds/notes of
                                                 the Republic of the Philippines and




Appendix 1- Page 12                     Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                         APP. 1
                                                                                              10.12.31

                                                             other Philippine entities funded by
                                                             FX purchased from AABs and AAB-
                                                             forex corps using the prescribed format
                                                             under Annex K;
                                                          f. Photocopy of BSP approval on FX
                                                             purchases from AABs and AAB-forex
                                                             corps for outward investments,
                                                             including investments in bonds/notes
                                                             of the Republic of the Philippines and
                                                             other Philippine entities, exceeding
                                                             USD60 million per investor per
                                                             calendar year; and
                                                          g. Photocopy of clearance, regardless of
                                                             amount, from the Insurance
                                                             Commission for investments by
                                                             insurance companies

All FX purchases for non-trade transactions shall be directly remitted to the (a) intended non-resident
beneficiary’s account (whether offshore or onshore); or (b) resident creditor bank, whose FCDU loans
are eligible to be serviced with FX purchased from the banking system.Exceptions to this rule include
travel funds, medical expenses abroad not yet incurred, and sales proceeds of emigrant’s domestic
assets if emigrant is still in the country.

(As amended by Circular No. 698 dated 05 November 2010)




Manual of Regulations for Banks - Appendix to Part V                             Appendix 1 - Page 13
APP. 92                                                                                    APP. 2
                                                                                         09.12.31

                 LIST OF REGULATED IMPORT COMMODITIES AND
                       ADMINISTERING AGENCIES/BUREAUS


     Government Agencies/Issuing               Commodity Description/Commodity Group/
     Permits/Clearance/Legal Basis                       Tariff Heading (TH)

 Philippine Drug Enforcement Agency
 (PDEA) and Dangerous Drugs Board
 (DDB)

     Republic Act (RA) No. 9165 (The           Essential Chemicals and Controlled Precursors;
     Comprehensive Dangerous Drugs             and Dangerous Drugs (Ketamine,
     Act of 2002) dated 07 June 2002           Pseudoephedrine, Oripavine, and Amineptine)

 Environmental Management Bureau
 (EMB)

     R.A. No. 6969 (The Toxic                  Cyanide, Mercury, Asbestos, Polychlorinated
     Substances, Hazardous and Nuclear         Biphenyl, Chlorofluorocarbon and other ozone
     Wastes Control Act of 1990) dated         depleting substances TH 2805.4, 2903, 2523,
     26 October 1990                           2503

 Department of Health - Bureau of Food
 and Drugs (DOH - BFAD)

     Executive Order No. 776 dated 24          Semi-synthetic antibiotics (all form and salts of
     Febraury 1992 and Bureau Circular         ampicillin, amoxicillin, and cloxacillin)
     No. 03-A s.2000

     R.A. No. 8976 (Philippine Food            Wheat Flour /
     Fortification Act of 2000) dated 07       TH 1101
     November 2000

     R.A. No. 8172 (An Act for Salt            Iodized Salt /
     Iodization Nationwide - ASIN) dated       TH 2501
     20 December 1995

 Energy Resource Development Bureau
 (ERDB)

     Section 104 of Presidential Decree        Coal and lignite (excluding jet), whether or not
     No. 1464 (The Tariffs and Customs         pulverized, but not agglomerated /
     Code of 1978) dated 11 June 1978          TH 2701, 2702

 National Bureau of Investigation (NBI)        Color Reproduction Machines /
 and Cash Department of the Bangko             TH 9009
 Sentral ng Pilipinas (BSP)


Manual of Regulations for Banks - Appendix to Part V                          Appendix 2 - Page 1
APP. 2                                                                                   APP. 92
09.12.31

     Government Agencies/Issuing              Commodity Description/Commodity Group/
     Permits/Clearance/Legal Basis                      Tariff Heading (TH)

 Explosives Mangement Branch (EMB),
 Philippine National Police (PNP)

    Executive Order (E.O.) No. 522           Chlorates, nitrates and nitric acid /
    (prescribing Rules and Regulations       TH 2829, 2834, 2808
    for the Control and Supervision of
    the Importation, Sale and Possession
    of Chemical Used as Ingredients in
    the Manufacture of Explosives and
    for Other Purposes) dated 26 June
    1992

 Fertilizers and Pesticide Authority (FPA)

    Presidential Decree No. 1144             All fertilizers, pesticides and other chemical
    (Creating the Fertilizer and Pesticide   products that are intended for agricultural use
    Authority and Abolishing the
    Fertilizer Industry Authority) dated
    30 May 1997 and FPA Pesticide
    Regulatory Policies and Implementing
    Guidelines, 2nd Edition, 2001

 Bureau of Import Services (DTI - BIS)

    E.O. No. 156 (Providing for a            Used motor vehicle under the no-dollar import
    Comprehensive Industry Policy and        program that is owned and for personal use by
    Directions for the Motor Vehicle         a returning resident or immigrant with a gross
    Development Program and Its              vehicle weight (GVW) not exceeding 3,000
    Imlementing Rules) dated 12              kilograms (kgs) and must be left-hand drive
    December 2002
                                             Used trucks excluding pick-up trucks with
                                             GVW of 2.5 - 6 tons /
                                             TH 8709

                                             Used buses with GVW of 6 - 12 tons /
                                             TH 8702

                                             Brand new/Used automotive replacement parts
                                             and brand new motorcycle replacement parts
                                             [Note: All used motorcycle parts (except
                                             engine), including brand new motorcycle
                                             replacement chassis and frame, are not allowed
                                             for importation.] /
                                             TH 8702.9, 8703.9




Appendix 2 - Page 2                          Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                   APP. 2
                                                                                        09.12.31

     Government Agencies/Issuing               Commodity Description/Commodity Group/
     Permits/Clearance/Legal Basis                       Tariff Heading (TH)

    E.O. No. 156 and Department                Used trucks for rebuilding purposes such as
    Administrative Order (DAO) No. 08          truck chassis, engine, body and cabin/cowl,
    s. 2003                                    transmission/drivelines, axles (front and rear)
                                               or steering system /
                                               TH 8701.1

    LOI No. 1086 dated 25 November             Used tires
    1980

    E.O. No. 443 s. 2005 dated 05 July         Used motor vehicle importation through
    2005                                       donation by local government units

    LOI No. 1307 s. 2003                       Importation by all instrumentalities of the
                                               government

 Department of Foreign Affairs (DFA)

    E.O. No. 156 dated 12 December             Used vehicles for the use an official of the
    2002 and                                   Diplomatic Corps

 Philippine International Trading
 Corporation (PITC)

    LOI No. 444 (Promulgating                  All commodities originating from the following
    Guidelines on Trade Socialist and          socialist and centrally-planned economy
    Other Centrally-Planned Economy            countries (Albania, Angola, Ethiopia, Laos,
    Countries) dated 09 August 1967,           Libya, Mongolia, Mozambique, Myanmar,
    as amended by EO No. 244 dated             Nicaragua and North Korea)
    12 May 1995

 Maritime Industry Authority (MARINA)

    Memorandum Circular (MC) No.               Ships /
    104 dated 06 April 1995                    TH 8901

    MC No. 121 dated 29 July 1997              High Speed Craft /
                                               TH 8901.9

    R.A. No. 9295 (Domestic Shipping           Ship’s Equipment/Spare Parts
    Development Act of 2004)
    dated 03 May 2004

    MC No. 169 dated 13 December               Spare Parts of Foreign Flagships undergoing
    2001                                       emergency repair




Manual of Regulations for Banks - Appendix to Part V                          Appendix 2 - Page 3
APP. 2                                                                                   APP. 92
09.12.31

     Government Agencies/Issuing              Commodity Description/Commodity Group/
     Permits/Clearance/Legal Basis                      Tariff Heading (TH)

 Philippine Nuclear Research Institute
 (PNRI)

    Republic Act No. 5207 (An Act            Atomic energy materials /
    Providing for the Licensing and          TH 2844
    Regulation of Atomic Energy
    Facilities and Materials, Establishing
    the Rules on Liability for Nuclear
    Damage, and for Other Purposes)
    dated 15 June 1968, as amended by
    Presidential Decree No. 1484 dated
    11 June 1978

 Bangko Sentral ng Pilipinas (BSP)           Legal tender Philippine currency in excess of
                                             PHP10,000

                                             Bank Notes, Coin of precious metal other than
                                             gold and of non-precious metal not being legal
                                             tender, Coin blank essentially of gold, Coin
                                             blank essentially of steel, Coin blank essentially
                                             of copper, Coin blank essentially of nickel,
                                             Coin blank essentially of zinc, Coin blank
                                             essentially of tin, and Coin blank essentially of
                                             aluminum /

                                             TH 4907, 7118, 7108, 7326, 7419, 7508,
                                             7907, 8007, 7616




Appendix 2 - Page 4                          Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                               APP. 3
                                                                                    09.12.31

                               PROHIBITED COMMODITIES


    The importation of the following commodities is not allowed under existing laws:

    (a) Those specifically listed under Section 101 of the Tariff and Customs Code
        (Appendix 3.1);

    (b) Used clothing and rags (R.A. 4653);

    (c) Toy firearms and explosives, which, even if dissimilar in other aspects, are replicas
        in appearance, measurements, color and parts as its genuine counterpart firearms
        and explosives (LOI 1264 dated July 31, 1982)




Manual of Regulations for Banks - Appendix to Part V                      Appendix 3 - Page 1
APP. 92                                                                                     APP. 3.1
                                                                                            09.12.31

                 TARIFF AND CUSTOMS CODE OF THE PHILIPPINES
                                SECTION 101


          Prohibited Importations                      distribution is dependent on chance,
                                                       including jackpot and pinball machines or
     The importation into the Philippines of           similar contrivances, or parts thereof.
the following articles are prohibited:                     (6) Lottery and Sweepstakes tickets
     (1) Dynamite, gunpowder, ammunitions              except those authorized by the Philippine
and other explosives, firearms, and weapons            Government, advertisements thereof and list
of war, and parts thereof, except when                 of drawings therein.
authorized by law.                                         (7) Any article manufactured in whole
     (2) Written or printed articles in any            or in part of gold, silver or other precious
form containing any matter advocating or               metals or alloys thereof, the stamps,
inciting treason, or rebellion, insurrection,          brands or marks or which do not indicate
sedition, or subversion against the                    the actual fineness of quality of said metals
Government of the Philippines, or forcible             or alloys.
resistance to any law of the Philippines, or               (8) Any adulterated or misbranded
containing any threat to take the life of , or         articles of food or any adulterated or
inflict bodily harm upon any person in the             misbranded drug in violation of the
Philippines.                                           provisions of the “Food and Drugs Act”.
     (3) Written or printed articles, negatives            (9) Marijuana, opium, poppies, coca
or cinematographic film, photographs,                  leaves, heroin or any other narcotics or
engravings, lithographs, objects, paintings,           synthetic drugs which are or may hereafter
drawings, or other representation of an                be declared habit forming by the President
obscene or immoral character.                          of the Philippines, or any compound,
     (4) Articles, instruments, drugs and              manufactured salt, derivative, or preparation
substances designed, intended or adapted               thereof, except when imported by the
for producing unlawful abortion, or any                Government of the Philippines or any
printed matter which advertises or describes           person duly authorized by the Dangerous
or gives directly or indirectly information            Drugs Board, for medical purposes only.
where, how or by whom unlawful abortion                    (10) Opium pipes and parts thereof, or
is produced.                                           whatever material.
     (5) Roulette wheels, gambling outfits,                (11) All other articles and parts thereof,
loaded dice, marked cards, machines,                   the importation of which is prohibited by
apparatus or mechanical devices used in                law or rules and regulations issued by
gambling or the distribution of money,                 competent authority (as amended by
cigars, cigarettes, or other when such                 Presidential Decree No. 34).




Manual of Regulations for Banks - Appendix to Part V                           Appendix 3.1 - Page 1
APP. 92                                                                                       APP. 4
                                                                                            09.12.31

  GUIDELINES COVERING THE SALE OF FOREIGN EXCHANGE BY AUTHORIZED
   AGENT BANK AND AUTHORIZED AGENT BANK-FOREX CORPS FOR TRADE
                           TRANSACTIONS


I. Importations under Letter of Credit (L/C),              iii. Bank Reference Number (BRN) for
Documents against Payment (D/P) and                    D/A.
Documents against Acceptance (D/A):                        2. The foreign exchange selling AAB/
     a. All import L/Cs to be opened shall             OBU or AAB-forex corp shall immediately
include under the L/C terms and conditions,            remit proceeds of foreign exchange sale
among others, the clause:                              directly to the issuing/booking/reporting
     “L/C number shall be indicated on all             AAB/OBU, indicating in the remittance
copies of shipping documents”                          instructions pertinent information such as
     b. All original shipping documents [Bill          the L/C No., BSP Registration No., BL No.,
of Lading (BL) or Airway Bill (AWB) and                Invoice No., etc.
Invoice] shall be stamped by the issuing/                  3. The booking/issuing/reporting AAB/
booking reporting AAB/OBU with the                     OBU shall, upon receipt of foreign
AAB’s/OBU’s name and mode of                           exchange, stamp “FX SOLD” on the original
importation (i.e. L/C, D/P, or D/A), whether           shipping documents at hand and indicate
foreign exchange has been sold or not.                 thereon the amount of foreign exchange and
AAB’s/OBU’s authorized officers shall                  name of the foreign exchange selling AAB(s)
accomplish a certification that original               or OBU(s) or AAB-forex corp(s). The
documents were presented and duly                      stamped information shall be duly signed
stamped. This certification shall be                   by the booking issuing/reporting AAB’s/
maintained by the stamping AAB/OBU                     OBU’s authorized signatory.
together with the photocopied shipping
documents and be made available for BSP                II. Importations under Direct Remittance
verification.                                          (DR) or Open Account (O/A) Arrangement
     c. AABs/OBUs other than the issuing                    a. For importations under O/A, the
booking/reporting AAB/OBU, including                   importer-client shall present to his reporting
AAB-forex corps, may sell foreign exchange             AAB/OBU original copies of the shipping
to importer clients, provided that:                    documents, including one original BL or one
     1. The sale is supported by the                   of the original/carbon copies of AWBs, for
following documents:                                   stamping of bank’s name, BRN and O/A as
     1.1 Copy/photocopy of the original                mode of importation. The authorized officer
shipping documents duly stamped as in Item             of the AAB/OBU shall affix his signature on
I.b above;                                             the duly stamped original shipping
     1.2 Certification from the issuing                documents certifying that original
booking/reporting AAB/OBU signed by the                documents have been presented and that no
AAB’s/OBU’s authorized signatory                       foreign exchange has been sold. For
(addressed to individual foreign exchange              importations under DR, the importer-client
selling AABs or OBUs or AAB forex corps)               shall directly present to the selling AAB or
indicating the following:                              AAB-forex corp the same original shipping
     i. Amount of the outstanding foreign              documents for stamping of “FX SOLD” upon
exchange trade obligations;                            purchase of foreign exchange.
     ii. Amount of FX intended to be                        b. AABs or AAB-forex corps may sell
purchased; and                                         foreign exchange for DR imports to




Manual of Regulations for Banks - Appendix to Part V                             Appendix 4 - Page 1
APP. 4                                                                                        APP. 92
09.12.31

importer-client subject to presentation by the          original shipping documents and indicate
importer-client of all original shipping                thereon the amount of foreign exchange sold;
documents cited in Item II.a above. The                      3.3. The selling AAB/OBU or AAB-forex
selling AAB or AAB-forex corp shall stamp               corp shall transmit the duly stamped “FX
“FX SOLD” on the original shipping                      SOLD” original shipping documents
documents upon sale of foreign exchange.                indicating thereon the amount of foreign
     c. AABs/OBUs or AAB-forex corps                    exchange sold to the importer-client and
may sell foreign exchange for duly reported             simultaneously transfer the foreign exchange
O/A imports to importer-client subject to the           proceeds to the remitting AAB/OBU for
following conditions:                                   immediate remittance to foreign supplier;
     1. In case the selling/remitting AAB/              and
OBU is also the reporting AAB/OBU, the                       3.4. The remitting AAB/OBU shall
importer-client shall present the original              report such payment under Schedule 11 of
shipping documents duly stamped as in Item              FX Form 1.
II.a above.                                                  d. In all cases, the selling AAB/OBU
     2. In case the selling/remitting AAB/              or AAB-forex corp shall not sell foreign
OBU is not the reporting AAB/OBU:                       exchange to an importer-client beyond the
     2.1. The importer-client shall present the         maturity of the O/A importation without
duly stamped original shipping documents                being duly extended by the foreign supplier
as in Item II.a above; and                              as evidenced by an extension letter from the
     2.2. The selling/remitting AAB/OBU                 foreign supplier submitted to the selling bank
shall stamp “FX SOLD” signed by the selling/            which should have been reported under
remitting AAB’s/OBU’s authorized                        Schedule 10 of FX Form 1. AABs/OBUs or
signatory on the duly stamped original                  AAB-forex corps may sell foreign exchange
shipping documents and indicate thereon                 for servicing of O/A importations extended
the amount of foreign exchange sold.                    beyond 360 days from date of BL/AWB upon
     3. In case the selling AAB/OBU or                  presentation by the importer-client of a BSP
AAB-forex corp is not the remitting AAB/                letter of approval.
OBU:
     3.1. The importer-client shall present the         III. Photocopies of the original shipping
duly stamped original shipping documents                documents (released to client) shall be marked
as in Item II.a above;                                  “ORIGINAL DOCUMENT PRESENTED AS
     3.2. The selling AAB/OBU or AAB-forex              REQUIRED” and duly signed by the AAB’s/
corp shall stamp “FX SOLD” signed by the                OBUs authorized signatory. These should be
selling AAB’s/OBU’s or AAB-forex corp’s                 retained in the AAB’s/OBU’s file for BSP
authorized signatory on the duly stamped                examination purposes.




Appendix 4 - Page 2                               Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                             APP. 5
                                                                                  09.12.31

             DOCUMENTARY REQUIREMENTS FOR OPENING AN L/C
                    (To be Submitted by the Importer to the AAB/OBU)


   1. The duly accomplished L/C application;

   2. Firm offer/proforma invoice which shall contain information on specific quantity of
      the importation, unit cost and total cost, complete description/specification of the
      commodity and Philippine Standard Commodity Classification statistical code;

   3. Permits/clearances from appropriate government agencies, whenever applicable; and

   4. Duly accomplished Import Entry Declaration (IED) Form which shall serve as basis
      for payment of advance duties as required under Presidential Decree No. 1853
      (Requiring Deposits of Duties at the Time of Opening of L/Cs Covering Imports and
      for Other Purposes) dated 21 December 1982.




Manual of Regulations for Banks - Appendix to Part V                    Appendix 5 - Page 1
APP. 92                                                                                      APP. 6
                                                                                           09.12.31

          GUIDELINES FOR REPORTING, PAYMENTS AND EXTENSIONS OF
             IMPORTATIONS UNDER D/A OR O/A ARRANGEMENTS


     1. Reporting. Authorized Agent Banks              use foreign exchange purchased from AABs,
(AABs) and offshore banking units (OBUs)               OBUs or AAB-forex corps unless BSP
shall report importations under D/A or                 official receipt is presented that the
O/A arrangements as availments under                   prescribed processing fee has been paid to
Schedule 10 (Import Letters of Credits                 the BSP.
(L/Cs) Opened and D/A-O/A Import                            3. Extensions. Payments after the
Availments and Extensions) of FX Form 1                original maturity date for duly reported DA/
(Consolidated Report on Foreign Exchange               OA imports may be allowed without prior
Assets and Liabilities) upon receipt of the            BSP approval, regardless of frequency of
documents specified in 4.a herein and                  extension, provided that the cumulative
payments on said importations under                    length of extensions does not exceed 360
Schedule 11 (Import Payments) of FX                    days from BL/AWB date.
Form 1. Frequency and schedule of                           4. Mechanics of Reporting.
submission of said Schedules to BSP with                    a. Importers shall submit through an
the corresponding fines and penalties for              AAB/OBU copies of the pertinent
late or erroneous submission shall be in               commercial invoice, BL/AWB, and if
accordance with Sections 101 and 103,                  applicable, import permit on the basis of
respectively, of the Manual. Any extension             which the AAB shall report to the BSP the
of the maturity date thereof shall likewise            same as DA/OA availment under said
be reported under said Schedule 10.                    Schedule 10.
     Period of Reporting. Such reporting of                 b. The D/A-O/A import transactions
availments shall be made not later than ten            shall be considered reported only if the same
(10) calendar days before the maturity date            has been assigned a unique Bank Reference
of the said D/A-O/A importation. If reported           Number (BRN) by the reporting AAB/OBU
later than said period (i.e., less than 10             and duly reported by the same AAB/OBU
calendar days before maturity), the importer           under said Schedule 10.
shall be required to pay to the BSP the peso                c. AABs, OBUs or AAB forex corps
equivalent of 1/100 of 1 percent of the                shall not service the foreign exchange
unpaid balance of the importation but not              requirements upon maturity of any D/A-
less than USD50.00 or more than                        O/A importation not duly reported under
USD1,000.00.                                           said Schedule 10 as prescribed herein.
     2. Payments. Payments using foreign                    d. AABs, OBUs or AAB-forex corps
exchange sourced from AABs, OBUs or                    selling foreign exchange for duly reported
AAB-forex corps shall be effected only for             O/A imports shall stamp “FX SOLD” on the
D/A-O/A imports reported by an AAB/OBU                 original shipping documents and indicate
under said Schedule 10 of FX Form 1.                   thereon the amount of foreign exchange sold
Payments prior to maturity date may be                 and name of the foreign exchange selling
allowed without BSP approval, provided                 institution. The stamped information shall
these are for duly reported D/A-O/A                    be duly signed by the foreign exchange
imports.                                               selling institution’s authorized signatory.
     Payments for D/A-O/A importations                 Thereafter, the importer shall present the
reported later than the required period as             stamped original shipping documents to the
provided in the preceding Item 1 shall not             remitting AAB/OBU and the same shall be




Manual of Regulations for Banks - Appendix to Part V                            Appendix 6 - Page 1
APP. 6                                                                                 APP. 92
09.12.31

reported by the remitting AAB/OBU under          corps to pay D/A-O/A imports shall be
Schedule 11 of FX Form 1.                        strictly complied with.
   e. The existing documentary                        The guidelines for reporting of
requirements for the purchase of foreign         importations under D/A or O/A
exchange from AABs, OBUs or AAB-forex            arrangements are detailed in Appendix 6.1.




Appendix 6 - Page 2                        Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                    APP. 6.1
                                                                                           09.12.31

                   GUIDELINES FOR REPORTING OF IMPORTATIONS
                         UNDER D/A-O/A ARRANGEMENTS


     1. Authorized Agent Banks (AABs) and                   4. If the currency of payment is not
offshore banking units (OBUs), upon receipt            USD, the USD equivalent to be reported
of their importer-clients’ original shipping           under said Schedule 10 shall be computed
documents under documents against                      at the exchange rate quoted in the daily BSP
acceptance (D/A) and open account (O/A),               Treasury Department Reference Exchange
shall report the same under the revised                Rate Bulletin issued on report date;
Schedule 10 (Import Letters of Credit (L/Cs)                5. Extensions of maturity date shall be
Opened and D/A-O/A Import Availments                   reported under said Schedule 10;
and Extensions) and upon payment thereof                    6. In case of an O/A importation
under Schedule 11 (Import Payments), both              where the foreign exchange selling/remitting
Schedules of FX Form 1 (Consolidated                   AAB/OBU is not the reporting AAB/OBU,
Report on Foreign Exchange Assets and                  the selling/remitting AAB/OBU shall, prior
Liabilities);                                          to foreign exchange sale, require the
     2. Within five (5) banking days after             submission of the following: (1) required
the end of the reference week, the hard copy           documents under Item II.a of Appendix 4;
of the following shall be submitted to the             and (2) certification from the reporting AAB/
BSP-International Department (ID):                     OBU as to the remaining unpaid balance of
     a. Schedule 10 together with a copy               the O/A importation and that the O/A
of commercial invoice, for DA/OA imports               importation has been duly reported to the
exceeding USD50,000 or its equivalent, a               BSP with the BRN indicated thereon duly
copy of the commercial invoice, bill of                signed by the reporting AAB’s/OBU’s
lading (B/L) or airway bill (AWB) and/or               authorized officer. The foreign exchange
other appropriate documents required                   selling and remitting AAB/OBU shall report
under Appendix 4 of the Manual, for post-              such payment under said Schedule 11;
audit and validation purposes; and                          7. The AAB/OBU reporting the D/A-
     b. Schedule 11 if it involves D/A-O/A             O/A availment shall verify the importer code
partial payments indicating such partial               of a new importer with the BSP-ID to avoid
payments with an asterisk and as footnote              invalid entries and unreconciled importer
the amount in original currency and USD                name under Schedule 10; and
equivalent thereof.                                         8. Penalty provisions under Section
     3. Each D/A-O/A importation shall                 106 of the Manual shall apply to AABs that
be assigned by the reporting AAB/OBU                   sell foreign exchange for servicing D/A-
its unique Bank Reference Number (BRN)                 O/A importations that were not previously
incorporating thereon its bank code and                reported to the BSP under the prescribed
such BRN reference number should also                  Schedule 10 of FX Form 1 or were reported
be used by the remitting AAB/OBU when                  later than ten (10) calendar days before due
reporting payment of the same                          date without payment of required BSP
importation;                                           processing fee.




Manual of Regulations for Banks - Appendix to Part V                           Appendix 6.1 - Page 1
APP. 92                                                                                                      APP. 7
                                                                                                           10.12.31

GUIDELINES FOR THE SALE OF FOREIGN EXCHANGE (FX) TO IMPORTERS BY
AABs AND AAB-FOREX CORPS UP TO USD1 MILLION OR ITS EQUIVALENT IN
   OTHER FOREIGN CURRENCY FOR ADVANCE PAYMENT OF IMPORTS


     Sale of FX up to USD1 million or its                          3. The importer shall present to the FX
equivalent in other foreign currency for full                 selling/remitting AAB the original shipping
or partial advance payment of imports may                     documents [import invoice and bill of lading
be done without prior BSP approval1 subject                   (BIL) or air waybill (AWB)] where the date
to the following guidelines:                                  and amount of FX sold/remitted shall be
     1. AABs or AAB-forex corps shall                         stamped and duly signed by the AAB’s
require presentation of the original/                         authorized signatory, and the Bureau of
submission of copies of the following                         Customs Import Release Documents, within
documents prior to the sale of FX for                         three (3) banking days after receipt thereof.
advance payment of imports:                                        4. Submission by the FX selling and
     (a) purchase order (PO);                                 remitting AAB to the BSP-ID of the following
     (b) sales contract (SC) or proforma                      reports:
invoice (PI) signed by the resident importer                       a. Monthly Report on Sale/Remittance
and foreign supplier requiring payment of                     of FX for Advance Payment of Importations
the importation in advance and indicating                     up to USD1 million or its equivalent in other
the intended delivery period of the imported                  foreign currency (Annex B) - within the first
goods; and                                                    five (5) banking days of the month
     (c) notarized Letter of Undertaking                      succeeding the date of FX sale/remittance;
(LOU) to the effect that if the importation                   and
is cancelled, the importer shall inwardly                          b. Monthly Report on Purchase of FX
remit the FX refunded by the foreign                          from Refund of Advance Payment of
supplier and sell same for pesos to the FX                    Importations up to USD1 million (Annex C)
selling/remitting AAB on the same date.                       - within the first five (5) banking days of the
     2. If the seller of FX is an AAB, the                    month succeeding the receipt of the refund.
FX sale and remittance shall be transacted                         5. The FX selling/remitting AAB shall
on the same date and shall involve only                       report to the BSP under FX Form 1
one AAB. The foreign exchange remittance                      (Consolidated Report on Foreign Exchange
shall be made directly to the foreign                         Assets and Liabilities) the following
supplier and serviced at the exchange rate                    transactions:
prevailing at the time of remittance,                              a. The remittance of FX by the AAB for
subject to the applicable tax provisions                      advance payment of imports as “Import
of the National Internal Revenue Code,                        Advances/Down Payments” (Code No. 040)
as amended. If the selling entity is an AAB-                  under Schedule 4 (FX Disposition for Loans);
forex corp, the foreign exchange proceeds                          b. The purchase of FX by the AAB from
shall be remitted to the foreign supplier                     the importer arising from a refund of
through the parent AAB. The remitting                         advance payment on cancelled imports as
AAB shall see to it that sales of FX by its                   “Refund of Import Advances/Down
AAB-forex corp subject for remittance are                     Payments” (Code No. 040) under Schedule
made in accordance with existing rules.                       3 (FX Acquisition from Loans); and


1
 Sale of foreign exchange exceeding USD100,000.00 or its equivalent for advance payment of imports shall require prior
BSP approval.




Manual of Regulations for Banks - Appendix to Part V                                          Appendix 7 - Page 1
APP. 7                                                                                              APP. 92
10.12.31

    c. In case of importations with partial           Availments and Extensions] for L/C (upon
advance payment whose balance is payable              opening) and for DA-OA (upon availment);
through letters of credit (L/Cs), documents           and
against acceptance (DA), open account                     (2) Schedule 11 (Import Payments)
(OA), documents against payment (DP), or              upon payment.
direct remittance (DR), such balance shall                6. The foregoing rules on advance
be reported under the following Schedules:            payments shall apply to importations under
    (1) Schedule 10 [Import Letters of Credit         all modes of payment.
(L/Cs) Opened and DA-OA lmport                        (As amended by Circular No. 698 dated 05 November 2010)




Appendix 7 - Page 2                             Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                     APP. 8
                                                                                          09.12.31

             REGULATED PRODUCTS NEEDING EXPORT CLEARANCES

The list below pertains to regulated products needing export clearances from various concerned
government agencies prior to shipment.

           List of Regulated Commodities and Administering Agencies/Bureaus



                     Products                                      Office/Agency

  All exports to the following socialist and           Philippine International Trading
  centrally-planned economy countries: Albania,        Corporation (PITC)
  Laos People's Democratic Republic, Ethiopia,
  Mozambique, Angola, Mongolia People's
  Republic, Democratic Republic of Korea
  (North Korea), Nicaragua, Libya, Myanmar

  All plants, planting materials and plant products    Bureau of Plant Industry (BPI)
  capable of harboring pests; insect specimens,
  live and dead

  Animals, animal products and animal effects          Bureau of Animal Industry (BAI)

  Antiques, cultural artifacts and historical relics   National Museum (NM)

  Coffee                                               International Coffee Organization
                                                       Certifying Agency (ICO-CA) –
                                                       Department of Trade and Industry (DTI)

  Copper concentrates                                  Board of Investments (BOI)

  Firearms, ammunitions and explosives                 Firearms and Explosives Office
                                                       Philippine National Police (PNP) -
                                                       Department of Interior and Local
                                                       Government (DILG)

  Grains and grain-by-products                         National Food Authority (NFA)

  Logs, poles and piles including log core and         Forest Management Bureau (FMB),
  flitches/railroad ties                               Department of Environment and
                                                       Natural Resources (DENR)

  Lumber                                                               - do -

  Motion pictures/television films and related         Movie and Television Review and
  publicity materials                                  Classification Board (MTRCB)




Manual of Regulations for Banks - Appendix to Part V                            Appendix 8 - Page 1
APP. 8                                                                                      APP. 92
09.12.31


                      Products                                        Office/Agency

 Legal tender Philippine notes and coins, checks,        Bangko Sentral Ng Pilipinas (BSP)
 money orders and other bills of exchange
 drawn in pesos against banks operating in the
 Philippines greater than P10,000.00

 Radioactive materials                                   Philippine Nuclear Research Institute
                                                         (PNRI)

 Sugar, molasses and muscovado                           Sugar Regulatory Administration (SRA)

 Frogs: Live, skin or products from the skin or meat     Protected Areas and Wildlife Bureau
                                                         (PAWB)

 Wild Terrestrial Species to include live, stuffed,                       - do -
 preserved, by-products and derivatives, e.g.:
 Mammals (i.e., Philippine Monkeys, cloud-rats,
 ant eater, Philippine tarsier and skunk), Aves
 (i.e., bleeding heart pigeons, java sparrows, tree
 , sparrow, parrot, finches, Phil. white-eye, Phil.
 starlings, hanging parakeets, brush cuckoo,
 plaintive cuckoo, amethyst fruit dove, blue-
 tailed bee-eater, crested mynah, pink-necked
 green pigeon, painted quail, button quails,
 bended rail, plain swamphen, green-winged
 dove, slender-billed cuckoo, white-eared
 brown dove, kingfishers, black-naped oriole,
 black-naped monarch, redamadavat, guiabero)
 Reptiles (i.e., gecko, monitor and sail-finned
 lizards, land turtles) Flora (i.e., tree ferns, cycas
 plant, all species orchids, aloe plant, sanders
 alocasia, striped alocasia, voiavoi, bungang
 ipod, cactus, Philippine camia/garland,
 Himalayan yew, Agar wood, eagle wood, big-
 leaf mahogany and red-sanders). All species of
 butterflies, exotic wildlife species found under
 Appendix II of the Convention on International
 Trade on Endangered Species of Wild Flora and
 Fauna (CITES) such as parrots, macaw, pigeons
 and conures

 All handicrafts for export. (Exporters can avail of     DTI – National Capital Region
 the Special Tariff Treatment in countries where
 the Philippines have trade agreements if they
 secure a handicraft certification from the DTI




Appendix 8 - Page 2                             Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                 APP. 8
                                                                                      09.12.31


                     Products                                     Office/Agency

 Tobacco products                                      National Tobacco Administration (NTA)

 Matured coconuts without husk for food or             Philippine Coconut Authority (PCA)
 non-food processing and fresh young coconuts
 (buko) capable of harboring coconut cadang-
 cadang viroid disease (CCCVD) or other pests

 Capiz shells: semi-finished or semi-processed         Bureau of Fisheries and Aquatic
                                                       Resources (BFAR)

 Processed coir, and raw or processed coco peat        PCA
 (dust) capable of harboring cadang-cadang
 viroid disease

 Live animals: gamefowl, wild birds and exotic         BAI
 animals, monkeys, other livestock and poultry,
 dogs and cats

 Bamboo poles                                          FMB

 Wildlife species: wild marine species, e.g.:          BFAR
 water snakes (Cerberus nynchops); seasnakes:
 live, skin or products from the skin or meat




Manual of Regulations for Banks - Appendix to Part V                        Appendix 8 - Page 3
APP. 92                                                                                 APP. 9
                                                                                      09.12.31

                   LIST OF PROHIBITED PRODUCTS FOR EXPORT

These products are prohibited for export under existing policies of the government agency/
office concerned except for scientific or testing purposes



                     Products                                      Office/Agency

 Abaca and Ramie Seeds, Seedlings Suckers,             Fiber Industry Development Authority
 and Root Stocks; Buri Seeds and Seedlings             (FIDA)

 Bakawan (mangrove)                                    Forest Management Bureau (FMB),
                                                       Department of Environment and
                                                       Natural Resources (DENR)

 mother bangus (sabalo)                                Bureau of Fisheries and Aquatic
                                                       Resources (BFAR)

 Gold from small scale mining or panned gold           Bangko Sentral ng Pilipinas (BSP)

 Matured coconuts and coconut seedlings                Philippine Coconut Authority (PCA)

 Prawn-Spawner and Fry                                 BFAR

 Raw materials for cottage industries: monkey          DENR
 pod (acacia), rattan (including poles)

 Shells:Trumpet shells (Triton); Helmet Shells         BFAR
 (Cassis); Live specimens, raw shells, meat and
 by-products of giant clams under the family
 Tridacnidae (Tridacna gigas, T. derasa, T.
 squamosa, T. maxima,T. crocea, Hippopus
 hippopus porceilanus)

 Shells: Undersized raw shells of Trocas, Gold                         - do -
 lip, Black lip, Turbo mamoratus and raw capiz

 Stalactites and stalagmites                           DENR

 Wildlife species: Wild marine species, e.g.:          BFAR
 precious, semi-precious and all ordinary corals
 raw and by-products




Manual of Regulations for Banks - Appendix to Part V                        Appendix 9 - Page 1
APP. 9                                                                                     APP. 92
09.12.31


                      Products                                      Office/Agency

 Wild terrestrial species whether live, stuffed        Protected Areas and Wildlife Bureau
 or by-products, e.g.: Mammals (i.e., tamaraw,         (PAWB)
 tarsier, deers (calamian deer), sea cow, fruit
 bats) Aves (i.e., eagles, redvent cockatoo,
 Palawan peacock pheasant, Palawan mynah,
 horn bills, nicobar pigeon, Mindoro imperial
 pigeon, Peregrine falcon, spotted green shank,
 Kotch’s pitta, giant scops owl and Eastern sarus
 crane), Reptiles (i.e., crocodiles, marine turtles,
 pythons), Flora (i.e., lady’s slipper orchid,
 vanda sanderiana, pitcher plant, dendrobicum
 cruenthum). Exotic wildlife species found
 under Appendix 1 of the CITES such as buffoon
 macaw, scarlet macaw.




Appendix 9 - Page 2                            Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                                        APP. 10
                                                                                                              09.12.31

            PROCEDURES AND DOCUMENTATION REQUIREMENTS FOR THE
                REGISTRATION OF INWARD FOREIGN INVESTMENTS


    A foreign investment is considered BSP-                          iii. Sworn certification of the officer of
registered upon issuance of a Bangko                            the investee firm concerned attesting to the
Sentral Registration Document (BSRD) by                         number of shares and amount paid for the
the BSP or a designated custodian bank.                         investment (Suggested format attached as
                                                                Appendix 10.3).
    A. For registration with the BSP                                 The value of investments in kind shall
    Foreign direct investments and                              be assessed and appraised by the BSP before
investments in peso-denominated money                           their registration.
market instruments under Section 34 and                              c. For investment in financial
Section 35.3, respectively, of the “Manual”                     institutions which are governed and
shall be registered directly with the BSP.                      regulated by the BSP:
                                                                     Clearance from the Supervision and
     1. Foreign Direct Investments1                             Examination Sector of the BSP shall be required
     The following are the procedures for                       in addition to the documentary requirements
registration and the requisite supporting                       for investments in cash or in kind.
documents:                                                           d. Registration as foreign investments
     a. For Cash Investment                                     of capitalized oil/gas/geothermal exploration
     The application shall be filed directly                    expenditures
with BSP together with the following                                 The application for registration shall be
supporting documents:                                           filed directly with the BSP together with the
     i. Certificate of Inward Remittance                        following supporting documents:
(CIR) of foreign exchange and its conversion                         i. Government-approved service
to pesos through an AAB (except for                             contract/other contract; and
investments in banks where conversion to                             ii. Copy of the Department of Energy
pesos is not required) in the prescribed                        (DOE)/National Power Corporation (NPC)
format (Sample CIR and Guide/Instructions                       letter-validation of expenditures showing,
for Filling-Out CIR Form hereto attached as                     among others, the distribution of validated
Appendix 10.1 and Appendix 10.2,                                expenditures among the partners under the
respectively); and                                              service contract/other contract.
     ii. Sworn certification of the officer of                       e. Investments funded by foreign loan/s
the investee firm concerned attesting to the                    and other payables converted into equity
number of shares and amount paid for the                             i. Original CIR of foreign exchange
investment (Suggested format attached as                        and its conversion to pesos through an AAB
Appendix 10.3).                                                 in the prescribed format (Appendix 10.1) for
     b. For Investment in Kind                                  foreign loans not registered with the BSP; or
     Application for registration shall be filed                     ii. Copy of BSP registration for foreign
directly with BSP together with the                             loans registered with the BSP;
following supporting documents:                                      iii. Sworn certification from investee
     i. Shipping documents;                                     firm’s authorized officer attesting to the
     ii. Bureau of Customs Import Entry and                     number of shares and amount paid for the
Internal Revenue Declaration (IEIRD); and                       investment remittable outward and that such


1
 Foreign direct investments required by law to be registered with the Securities and Exchange Commission or the Bureau of
Trade Regulation and Consumer Protection of the Department of Trade and Industry shall be extended a Bangko Sentral
Registration Document (BSRD) upon endorsement by either agency without need for the foreign investor/applicant to
submit supporting documents to the BSP.

Manual of Regulations for Banks - Appendix to Part V                                           Appendix 10 - Page 1
APP. 10                                                                                       APP. 92
09.12.31

are funded from foreign loans/payables                      a. Copies of bonds or PNs;
converted to equity;                                        b. Purchase Price Letter/Agreement;
     iv. Deed of Assignment of foreign loan                 c. Deed of Assignment of the loan;
or other payables;                                          d. Notice of Assignment of the loan; and
     v. Latest audited financial statements                 e. Acknowledgment by debtor of the
of investee firm; and                                   Notice of Assignment
     vi. Articles of Incorporation of the                   For foreign investments in non-
investee firm                                           participating preferred shares of Philippine
     f. Stock and/or property dividends                 investee enterprises, the following
accruing on BSP-registered investments in               additional document/s shall be required:
non-PSE-listed firms                                        Purchase invoice, or subscription
     a. Copy of BSRD; and                               agreement and/or proof of listing in the local
     b. Sworn certification signed by the               stock exchange for new/additional issues/
investee firm’s authorized officer on the               stock rights
declaration of the stock and/or property                    3. Reinvestment of divestment/sales
dividend, to include relevant excerpts of the           proceeds or dividends/profits/earnings of
covering Board Resolution                               duly registered investments (The following
     g. Stock splits/reverse stock splits on            documentation requirements are in lieu of
BSP-registered investments in non-PSE-listed            the CIR and in addition to the required
firms                                                   documentation for the specific form/type of
     a. Copy of BSRD; and                               reinvestment)
     b. Sworn certification signed by the                   For divestment/sales proceeds
investee firm’s authorized officer declaring                a. Original BSRD;
the stock split/reverse stock split, to include             b. Sworn certification signed by the
relevant excerpts of the covering Board                 original investee firm’s authorized officer
Resolution                                              attesting to the divestment/sale by the
                                                        foreign investor; and
     2. Investments in Peso-denominated                     c. Proof of divestment/sale for direct
Money Market Instruments                                investment/s; or
     Investments in money market                            d. Matured contract/certificate of
instruments which refer to all peso-                    investment/proof of redemption for money
denominated debt instruments, such as but               market instruments
not limited to bonds, bills payables,                       For dividends/profits/earnings
promissory notes (PNs), and non-                            a. Copy of BSRD; and
participating preferred shares, issued                      b. Sworn certification signed by the
onshore by private resident firms, not                  investee firm’s authorized officer declaring
included in Section 23 of the “Manual”, shall           the dividends or distribution of profits, to
be registered directly with the BSP                     include relevant excerpts of the covering
supported by the following documents:                   Board Resolution; or
     a. Original CIR of foreign exchange                    c. Proof of interest/coupon payments for
and its conversion to pesos through an AAB              investment/s in money market instruments
in the prescribed form (Appendix 10.1); and                 4. BSP-registered investments sold/
     b. Contract/Certificate of investment              transferred to another foreign investor if
     For bonds or PNs issued by private                 payment is made offshore in foreign exchange
domestic firms that were purchased from                     a. Original BSRD;
local creditor banks, the following                         b. Sworn certification from the
additional documents shall be required:                 authorized officer of the investee firm,




Appendix 10 - Page 2                              Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                     APP. 10
                                                                                           09.12.31

attesting to the transfer/assignment of the            submitted to the BSP within two (2) banking
investments from the selling foreign investor          days from date of registration for post audit
to the buyer, in the books of the investee             purposes. The original copy of the BSRD
firm; and                                              shall remain in the custody of the issuing
    c. Deed of Sale/Assignment                         custodian bank.

Replacement of Lost BSRDs                                   The “one-BSRD-per-investor-per-
     a. Letter request from the foreign investor       custodian-bank” rule
or his duly authorized representative;                      The “one-BSRD-per-investor-per-
     b. Affidavit of Loss from the foreign             custodian-bank” rule shall be followed for
investor or his duly authorized                        the registration of investments with
representative attesting to the following:             custodian banks.
     i. Loss of the original BSRD;                          1. Only one BSRD shall be issued by
     ii. Reason for the loss;                          a custodian bank to a foreign investor
     iii. Affirmation that they have exercised         applying with that bank for registration of
diligent search for the document/s declared            his foreign investments;
lost;                                                       2. Additional inward foreign exchange
     iv. That the investment is still intact and       remittances of a foreign investor through a
existing to date;                                      custodian bank, which had earlier issued
     v. The outstanding balance of the                 to that investor a BSRD, shall be considered
investment, net of repatriation, if any                BSP-registered after annotating such
     vi. The registration number/s and date/           investments in said BSRD, and reporting to
s registered;                                          the BSP by said custodian bank within two
     vii. The number of shares registered              (2) banking days from transaction date under
under each registration and percentage of              the “Consolidated Daily Foreign Portfolio
the foreign investment to the total shares             Investment Registration and Outward
subscribed and paid up, as applicable.                 Remittance Report”; and
     c. Letter authority from the foreign                   3. Changes in the composition of the
investor for the replacement of the lost BSRD          registered investment holdings of the foreign
if the request and affidavit of loss are               investor that do not involve inward
accomplished and signed by the duly                    remittance of foreign exchange such as stock
authorized representative.                             dividends, stock splits, or reverse stock
                                                       splits, shall be annotated in the same BSRD
B. For Registration with Custodian Banks               and reported by the custodian bank to the
     Foreign investments in peso                       BSP under the “Consolidated Daily Foreign
denominated government securities, PSE                 Portfolio Investment Registration and
listed securities, and peso time deposits              Outward Remittance Report”.
with tenor of at least 90 days as described
in Items 1, 2, and 4 under Section 35 of the           Surrender of BSRD to the BSP
Manual shall be registered with custodian                  Whenever the BSP-registered investments
banks designated by the foreign investors.             have been fully divested (redeemed/sold/
Custodian banks are authorized to issue on             withdrawn) by the foreign investor, the
behalf of the BSP the BSRD for such                    custodian of the original copy of the BSRD
investments. The duplicate copy of the new             shall surrender said BSRD to the BSP for
BSRD issued by custodian banks together                cancellation within two (2) banking days
with the requisite supporting documents                from date of full remittance of divestment
enumerated in this Appendix shall be                   proceeds.




Manual of Regulations for Banks - Appendix to Part V                           Appendix 10 - Page 3
APP. 10                                                                                       APP. 92
09.12.31

Documentary Requirements                                  PSE Notice (Circular for Brokers)
    1. Investments in peso-denominated                 announcing the issuance of Stock Splits/
government securities (GS)                             Reverse Stock Splits
    a. Accredited dealer’s Confirmation of
Sale (COS);                                            3. Investments in peso time deposits with
    b. Original CIR of foreign exchange                tenor of at least 90 days
and its conversion to pesos through an AAB                  a. Certification of peso time deposit;
in the prescribed format (Appendix 10.1);                   b. Original Certificate of Inward
    c. “Authority to Disclose Information”             Remittance (CIR) of foreign exchange and
in the prescribed format (Appendix 10.4).              its conversion to pesos through an AAB in
    2. Investments in PSE-listed securities            the prescribed format (Appendix 10.1); and
    The application for registration shall be               c. “Authority to Disclose Information”
supported with the following documents:                in the prescribed format (Appendix 10.4)
    a. For new investments:
    i. Purchase invoice, or subscription               4. Reinvestment of divestment/sales
agreement and/or proof of listing in the local         proceeds or dividends/profits/earnings of
stock exchange for new/additional issues/              duly registered investments
stock rights: and                                           For divestment/sales proceeds
    ii. Original CIR of foreign exchange                    a. Original BSRD-Letter Advice; and
and its conversion to pesos through an AAB                  b. Proof of redemption of GS; or
in the prescribed format (Appendix 10.1).              Broker’s sales invoice; or Matured certificate
    b. For annotation in the BSRD of stock             of peso time deposit, as applicable
dividends which accrued to duly registered                  For dividends/profits/earnings
investments:                                                a. Original BSRD-Letter Advice;
    PSE Notice (Circular for Brokers)                       b. PSE Notice (Circular for Brokers)
announcing the issuance of Stock                       announcing the issuance of cash dividend
Dividend                                               for PSE-listed securities; or proof of interest/
    c. For annotation in the BSRD of stock             coupon payments for investment/s in GS
splits/reverse stock splits                            and peso time deposits




Appendix 10 - Page 4                             Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                                                    APP. 10.1
                                                                                                                            09.12.31

                           CERTIFICATE OF INWARD REMITTANCE (CIR)
                         OF FOREIGN EXCHANGE NO. CCYY-NNNNN-BBBB


                                                   Name of Issuing Bank

TO THE BANGKO SENTRAL NG PILIPINAS:

Part I.
               This is to certify that this Bank (mark applicable box/boxes)



          Received an inward remittance of foreign                            Converted FX into Pesos, with the following
          exchange (FX), with the following particulars:                      particulars:

          1.     Name of Remitter:                                            8.    (a)     FX converted to Pesos:
                                                                                                Full Utilization of FX Received:

                 Global Custodian:     Yes          No                                          Partial Utilization of FX
          2.     Country Code of Remitter:                                                      Received:

          3.     Beneficiary of Foreign Currency                                                O/S Balance after this
                 Funds:                                                                         Utilization:

                                                                                    (b) Rate of Conversion, Pesos per
          4.     Remitting Foreign Bank:                                                Foreign Currency (before charges):

                                                                                    (c) Amount of Peso Proceeds (net of
                                                                                        charges):
          5.     Date of Remittance: (___/___/___)                                  (d) Date Converted to Pesos:
          6.     Remittance/Telegraphic Transfer
                 Ref. No.:                                                          (e)     FX Receiving Bank's Name (if other
                                                                                            than coverting bank):
          7.     FX Received:
                     Currency:                                                          CIR No.:
                     Total T/T Amount:                                                  T/T Ref. No.
                     Amount Utilized:                                         9.    USD Equivalent (if foreign currency
                     O/S Balance after this CIR                                     remitted is other than USD):
                     Utilization:
Part II.
               This is to certify that (mark and fill out applicable box):

               The said peso proceeds were deposited with this bank on
                                                                                    date the proceeds were credited to client's account
               The peso proceeds have been paid to the beneficiary under:
                       MC No.:
                       CC No.:
                       PCHC Ref.:

        This certificate is issued for the sole purpose of obtaining a Bangko Sentral Registration Document
(BSRD) for the inward foreign investment of                                     this
                                                         Name and Nationality of Investor                     Date of Certification



Name of Branch/Department in Head Office                             Signature of Authorized Officer Over Printed Name

Contact Telephone No.:
              Fax No.:                                                                           Position

Manual of Regulations for Banks - Appendix to Part V                                                    Appendix 10.1 - Page 1
APP. 92                                                                                  APP. 10.2
                                                                                          09.12.31

     Guide/Instructions for Filling Out the Certificate of Inward Remittance (CIR) Form




I.   GENERAL INSTRUCTIONS                                • BBBB is the BSP assigned numeric
    1. Only one CIR shall be issued and              bank code
only the original of each CIR shall be the           PART I-A (Items 1 to 7 to be filled-out by
basis, among other requirements, for the             the FX receiving bank)
issuance of a BSRD unless with prior                      1. NAME OF REMITTER - if
specific BSP approval. The issuing bank              information is available, indicate if foreign
shall immediately release the original of            investor is a global custodian. (Length should
each CIR to the investee, or his authorized          not exceed 50 characters).
representative, upon receipt by the                       2. COUNTRY OF REMITTER - states
beneficiary of the proceeds of foreign               the domicile or country of residence of the
exchange (FX) remittance and/or conversion           investor or global custodian (Length should
to pesos. The original CIR, among other              be 3 bytes and refer to Annex 2 for the
documentation requirements, shall be                 coding scheme).
submitted to a custodian bank, for                        3. BENEFICIARY OF FOREIGN
registration of investments in government            CURRENCY FUND – account name /
securities, PSE-listed securities, and bank          company name of the recipient (Length
time deposits; or to the BSP-International           should not exceed 50 characters).
Department (ID), for registration of all other            4. REMITTING FOREIGN BANK –
investments.                                         name of overseas bank that sent the foreign
    2. If the bank receiving the FX is also          currency funds (Length should not exceed
the bank converting the FX to pesos, it shall        50 characters).
fully fill out and accomplish Parts I and II              5. DATE OF REMITTANCE - the value
of the CIR.                                          date that the foreign funds entered the books
    3. If the receiving bank is different            of the bank. Field format is ccyymmdd (e.g.,
from the converting bank, the receiving bank         03-April-2001 will be indicated as
shall fully fill out and accomplish only Nos.        20010403). The same format is standard
1 to 7 of Part I and submit a copy of the CIR        for all date fields in the report.
so accomplished to the converting bank                    6. REMITTANCE / TELEGRAPHIC
which shall then issue a CIR by filling out          TRANSFER REFERENCE NO. - contains the
and accomplishing only Nos. 8 (a to e) and           bank’s unique reference number only
9 of Part I, and Part II.                            (Length should not exceed 50 characters).
    4. The bank officer authorized to sign                7. FX RECEIVED:
the CIR must be duly designated by the                        Currency - specifies the foreign
bank’s Executive Vice President or Head of           currency symbol used in the BSP Reference
the Branch.                                          Exchange Rate Bulletin.
                                                               Total T/T Amount - the gross FX
II. SPECIFIC INSTRUCTIONS                            amount covered by the bank’s unique
    CIR NUMBER FORMAT – CCYY-                        Telegraphic Transfer Reference Number
NNNNN-BBBB (e.g. 2001-00001-BBBB)                    mentioned in Item 6 above.
    • CCYY is the year the CIR is issued                      Amount Utilized - specifies the
    • NNNNN is the series number of the              actual amount of the funds utilized to fund
CIR. (00001 is the issuing bank’s first CIR)         the investment.




Manual of Regulations for Banks Appendix to Part V                          Appendix 10.2 - Page 1
APP. 10.2                                                                                 APP. 92
09.12.31

         Outstanding Balance After This CIR              8c. AMOUNT OF PESO PROCEEDS
Utilization – specifies the remaining               (Net of Charges) - specifies the peso
balance of the gross FX received less the           proceeds from the conversion net of bank
amount utilized.                                    charges.
PART I-B (Items 8 to 9 to be filled-out by               8d. DATE CONVERTED TO PESOS -
the FX converting bank)                             value date of conversion to local currency.
    8a. FX CONVERTED INTO PESOS:                         8e. FX RECEIVING BANK’S NAME -
         Full Utilization of FX Received –          the name of the Philippine-based bank from
specifies the whole inwardly remitted FX            which the foreign currency funds were
converted to Pesos and utilized for                 received. Please use the numeric bank code
investment.                                         (head office).
         Partial Utilization of FX Received              CIR No.: Quotes the CIR Reference
– specifies the partial inwardly remitted FX        number of the FX Receiving bank.
converted to Pesos and utilized for                      Telegraphic Transfer Ref. No.: Quotes
investment.                                         the Telegraphic Transfer Reference Number
         O/S Balance after this Utilization         of the FX received.
– the available inwardly remitted FX after               9. USD EQUIVALENT (If FX remitted
partial conversion/utilization.                     is other than USD) - shows the US Dollar
    8b. RATE OF CONVERSION, PESOS                   value of the 3rd currency amount converted
PER FOREIGN CURRENCY (before                        into Peso. This is a mandatory field for
charges) - the exchange rate used for the           remittances other than USD and computed
conversion to local currency. Field value is        as peso proceeds divided by the BSP
expressed in six decimal places (e.g.,              reference rate (PHP/USD) on the conversion
PHP50.280002).                                      date.




Appendix 10.2 - Page 2                         Manual of Regulations for Banks Appendix to Part V
APP. 92                                                                                                  APP. 10.3
                                                                                                          09.12.31
                                 SWORN CERTIFICATION
                    (Suggested Format for Stock Corporation/Investee Firm)

         I, ________________________________, of legal age, ____________________, and
                    (Name of Affiant)                            (Nationality)
resident of the Philippines, after being duly sworn in accordance with law, depose and
state that:

1. I am the ________________________ of _________________________________________,
              (Position/Designation)                 (Name of Investee-Firm)
    a corporation duly registered with/licensed by the Philippine Securities and Exchange
    Commission (SEC) under SEC Reg. No. ________ dated _________, to engage in the
    business of __________________________________________________________________
    _______________________________________________________________________.
    That the __________________________________ has a Capital Structure, as follows:
                    (Name of Investee Firm)
                 Class      Number of Shares      Par Value       Total Amount
Authorized            _____          ______________               ________           ____________
Subscribed            _____          ______________               ________           ____________
Paid Up               _____          ______________               ________           ____________


3. That _______________________________, _________________________, with address
             (Name of Foreign Investor)             (Nationality)
   at _________________________________________________________________________,
   whose business is ______________________________________________________________,
   has remitted/caused the remittance of USD/Other Foreign Currency (FC)
   _________________________________________________ and converted the same into
   PHP ________________________ thru the Philippine banking system as certified by
   ___________________________________ under Certificate of Inward Remittance (CIR) of
            (Name of Issuing Bank)
   Foreign Exchange No.               dated                       ,of which amount,
   PHP____________________ was paid in consideration for the following shares of the
   Investee-Firm 1 and is now recorded in his/its name in the books of the
   ____________________________, as follows:
            (Name of Investee-Firm)
                                                                       Amount Paid in (PHP)
                   Number of
                     Shares               Par
      Class        Purchased          Value/Share        Total Par Value        As Premium           Total




1
    The balance (total peso proceeds less amount applied to this investment transaction, if any) in the amount of
    PHP _________________ is recorded in the books of _______________________________________________________ as
                                                                       (Name of Investee-Firm)
_______________________________________.
(e.g. Advances, Deposit for Future Subscription)
Manual of Regulations for Banks - Appendix to Part V                                      Appendix 10.3 - Page 1
APP. 10.3                                                                                 APP. 92
09.12.31

4. That of the above total, the following share/s was/were assigned to cited Foreign
   Investor’s nominee/s (if any):
           Name                    Nationality               No. of Shares         Amount Paid
  ______________________        _________________            ____________         _____________
  ______________________        _________________            ____________         _____________

(The following paragraph may follow as appropriate)

   That the aforecited Filipino nominee/s appear/s in the corporate books of the
   _______________________________________________________ only as nominee/s of the
                         (Name of Investee-Firm)
   ___________________________________________ and that the said share/s is/are covered
               (Name of Foreign Investor)
   by Deed/s of Assignment of Foreign Investor transferring the share/s to each of the
   Filipino nominee named above; and that the covering certificates of stock issued to the
   said Filipino nominee/s are with annotation/s that the said nominee/s is/are merely
   nominee/s of the foreign investor named above;

3. That in the corporate books of _____________________________________________ as of
                                               (Name of Investee-Firm)
   _____________________ show that the following are the stockholdings of its investors:
         (current date)
        Name of Investor      No. of Shares Held    Class          Amount Paid
   ______________________            ____________   _____________ ___________________
   ______________________            ____________   _____________ ___________________

   Correspondingly, the capital stock of the _____________________________________as of
                                                     (Name of Investee Firm)
    ____________________________ is as follows:
            (Current Date)

                                                                       Amount
                                              Number of Shares         (in PHP)      %
                                            Common    Preferred
   Issued and Paid
      Filipino
      Foreign
    Additional Paid-In Capital
   Deposit for future subscription

3. That as of date, total foreign investments in the percentage stated above in the
   ____________________________________ is within the limit for foreign investor under
            (Name of Investee-Firm)
   the Constitution and existing laws of the Philippines.

          IN WITNESS WHEREOF, I have hereunto set my hand this ___________ day of
   ___________________ 20__ at ____________________.


                                                         ___________________________
                                                           (Signature over Printed Name)

Appendix 10.3 - Page 2                        Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                APP. 10.3
                                                                                        09.12.31

        SUBSCRIBED AND SWORN TO before me this ___day of _________________ 20__,
Affiant exhibiting his/her Community Tax Certificate No. ______________________ issued
on ___________________ at ____________________________.


                                                                    Notary Public
                                                            Until:______________________




Doc. No. _____________
Page No. _____________
Book No._____________
Series of 200__________

N.B. The above form may be amended as appropriate for non-stock corporation and/or other business
      organizations, and/or for purchases of secondary shares from existing shareholder/s.




Manual of Regulations for Banks - Appendix to Part V                      Appendix 10.3 - Page 3
APP. 92                                                                               APP. 10.4
                                                                                       09.12.31

                      AUTHORITY TO DISCLOSE INFORMATION


        The undersigned, [name of foreign investor or duly authorized representative of
the foreign investor, pursuant to the sworn special authority (copy attached) issued by
the foreign investor] , hereby grants unto (name of custodian bank) the authority to disclose
to the Bangko Sentral ng Pilipinas (“BSP”) any information as may be required to comply
with the post-audit requirements for the registration of his investments in peso-
denominated government securities amounting to PHP                              covered by
Confirmation of Sale dated                  by (name of accredited dealer), and/or peso time
deposits with tenor of at least 90 days amounting to PHP                    under Certificate
of Time Deposit No.             with (name of depository bank).

        It is understood that the authority granted to (name of custodian bank) does not include
the disclosure of any information on said investment/s to parties other than the BSP.

       This authority is being executed to facilitate the BSP registration of said investment/s
through (name of custodian bank).




          Date                                              Signature over Printed Name




Manual of Regulations for Banks - Appendix to Part V                     Appendix 10.4 - Page 1
APP. 92                                                                                      APP. 11
                                                                                            09.12.31

                                 Inward Foreign Investments

                         Procedures for Repatriation of Capital and
                          Remittance of Dividends/Profits/Earnings

I. Capital Repatriation/Remittance of                  For remittance of dividends/profits/earnings:
Dividends/Profits/Earnings                                 1) Board Resolution declaring
    The repatriation of sales/divestments              dividend and the amount due the foreign
proceeds, including remittance of                      investor; and
dividends/profits/earnings which accrued to                2) Audited financial statements
duly BSP-registered foreign investments,               covering the dividend declaration period.
may be effected by AABs without prior BSP
approval upon presentation of the original             III. Reporting Requirements
BSRD together with the supporting                           1. All remitting AABs shall duly
documents under Item C.1 and C.2 of                    accomplish and submit to the BSP-
Appendix 1 of the Manual.                              International Department (ID) a Statement
    Whenever the repatriation/remittance               of Remittance Report pertaining to the
shall be effected through an AAB other                 repatriation of capital and outward
than the custodian bank or the selling                 remittance of cash dividends, profits and
transaction was made through a stock                   earnings of BSP-registered inward direct
broker other than the custodian broker,                foreign equity investments to be submitted
the custodian bank/broker, upon request                daily accompanied by supporting
from the remitting bank or selling broker,             documents mentioned in this Appendix
shall issue a BSRD Letter Advice                       within two (2) banking days from date of
authorizing the latter to use fully or in part         actual remittance.
the remaining shares covered by the                         2. The report form shall cover all
pertinent BSRD. The remitting AAB shall                remittances pertaining to foreign direct
only effect the remittance upon                        equity investments (namely, investments in
presentation of the supporting documents               kind and in cash in non-PSE listed firms)
under Item C.1 and C.2 of Appendix 1 of                registered directly by the BSP.
the Manual.                                                 3. The following data shall be
                                                       annotated at the back of the BSRD duly
II. Investments registered under the old               certified correct by the authorized officer of
Central Bank Registration Documents                    the remitting bank:
(Transitory Procedures)                                     a. On Capital Repatriation:
                                                       Identity of Investments; Sale or Transaction
For capital repatriation:                              Date; No. of Shares Sold; Net Peso Sales
    The repatriation of capital of Central             Proceeds After Tax; Net USD Equivalent of
Bank registered direct foreign equity                  Amount Remitted; Date of Actual
investments shall be effected through a                Remittance; Country To Which Remitted;
commercial bank, without prior BSP                     and Name of Remitting Bank.
approval, upon presentation of the                          b. On Dividends/Profits/Earnings
following documents:                                   Remittance
    1) Proof of Central Bank Registration;             Identity of Investments; Record Date;
       and                                             Number of Base Shares; Dividend Rate; Net
    2) Proof of Sale.                                  Peso Amount Remitted After Tax; Net USD




Manual of Regulations for Banks - Appendix to Part V                            Appendix 11 - Page 1
APP. 11                                                                              APP. 92
09.12.31

Equivalent of Amount Remitted; Date of         authorized officer as forming part of the
Actual Remittance; Country to Which            BSRD.
Remitted; and Name of Remitting Bank.              4. Transactions of BSP-registered
    These data shall be arranged in one        investments in PSE-listed securities,
line per remittance basis. If the space at     government securities, money market
the back of the BSRD is not enough,            instruments and peso time deposits shall be
additional page/s may be used for this         reported in the Consolidated Daily Foreign
purpose, which page/s shall be duly            Portfolio Investment Registration and
marked and certified by the bank’s             Outward Remittance Report.




Appendix 11 - Page 2                     Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                   APP. 12
                                                                                         09.12.31


  Checklist of Required Documents, in Lieu of Stock Transfer Agent's Certifcation, for
          Registration of Inward Foreign Investments Prior to 15 March 1973


     Investee’s corporate secretary’s/authorized officer’s sworn certification that a) the foreign
     investments were made prior to 15 March 1973; b) stock certificates for said investments
     were issued to the investor; and c) such investments are still intact and existing

     Investee’s latest audited financial statements or, in case the investee is under liquidation,
     liquidator’s notarized statement of net assets in liquidation

     For corporations, copies of the stock certificates issued to the foreign investor, certified
     by the investee’s corporate secretary as true copies

     For stock dividend shares, copies of Board Resolutions declaring the dividends endorsed
     by the investee’s authorized officer

     Relevant Securities and Exchange Commission (SEC) documents showing the existence
     of the investments prior to 15 March 1973, i.e.: a) copy of SEC certificate of registration
     including articles of incorporation and any amendments thereto, as applicable; and/or
     b) copy of SEC’s resolution approving the issuance of new shares from the unissued
     capital stock and as exemption from SEC registration requirements, or certificate of
     increase of capital stock (or deed of sale/assignment).

     Others: _____________________________________________________________


Note:
          Please submit the above documents (with check mark) together with your letter request
          to the International Department at Room 301, 5-Storey Building, Bangko Sentral ng
          Pilipinas, A. Mabini, Malate, Manila.




Manual of Regulations for Banks - Appendix to Part V                         Appendix 12 - Page 1
APP. 92                                                                                      APP. 13
                                                                                            09.12.31

Guidelines on the Availment of US Dollar-Denominated Repurchase Agreement Facility
                                   with the BSP



The following terms and conditions shall               securities account before availment of the
be observed in the availment of the USD-               USD R/P facility.
denominated repurchase agreement facility
of banks with the BSP (USD R/P):                           •  The tenor of the underlying security
                                                       should not be shorter than the overlying
A. Eligible Borrowers                                  instrument.
   RBUs or FCDU/EFCDUs of banks who                    D. Valuation of Securities
can demonstrate legitimate funding needs
can avail of this facility.                                • The haircut on the underlying
                                                       securities shall be determined by the
B. Qualifying Purposes                                 Treasury Department, with the
                                                       concurrence of the Governor. Collateral
    • Proceeds from the borrowings shall               cover will be maintained through periodic
be used for legitimate liquidity                       margin calls as specified in the repurchase
requirements of FCDU/EFCDU or RBU for                  agreement.
local operations as follows:
                                                           • Said valuation will be subject to
        Compliance with FCDU/EFCDU
                                                       periodic review and will be modified when
cover requirements;
                                                       necessary.
     Servicing of withdrawals of FCDU/
                                                       E. Available Credit Line
EFCDU; and
                                                           • Credit lines shall be based on
          Servicing trade-related requirements.        outstanding USD-denominated evidence of
                                                       indebtedness issued directly by the
     • Borrowing shall be for the account              Government of the Philippines (ROP Bonds)
of the applicant bank and shall not be used            held by the applicant bank as of 30
to fund liquidity requirements of foreign              September2008.
head office, foreign branches, affiliates, or
subsidiaries.                                          F.Rate,TermandTradingTime
C. Acceptable Collateral                                   • The rates of the USD R/P facility
                                                       shall be set by the Treasury Department,
    • Eligible securities shall cover USD              with the concurrence of the Governor,
denominated evidence of indebtedness                   taking into account prevailing liquidity
issued directly by the Government of the               market conditions.
Philippines (ROP Bonds) held by the
applicant bank. These can be lodged in                     •   The term of the USD R/P facility shall
FCDU/EFCDU’s or RBU’s Available-for                    be set by the Treasury Department, with the
Sale (AFS), Held-for-Trading (HFT) and Held            concurrence of the Governor; Provided, that,
to-Maturity (HTM) portfolios.                          should a bank become disqualified for the
                                                       R/P facility, the outstanding repurchase
    •   ROP Bonds to be pledged have to                agreement shall immediately become due
be transferred/credited to BSP’s designated            and payable.



Manual of Regulations for Banks - Appendix to Part V                            Appendix 13 - Page 1
APP. 13                                                                                  APP. 92
09.12.31

    • Trading time for the USD R/P                       • Report on the deployment
transactions shall be set from 10:00 AM to          utilization of USD repo borrowing and
12 Noon, then from 1:00 PM to 2:00 PM.              other documents and supplemental
                                                    information, as may be required, to
G. Application Requirements                         enable BSP to assess the legitimacy of the
                                                    utilization of such funds, within three (3)
Applicant bank shall submit the following
                                                    banking days from release of the proceeds
information/documents, and such other
                                                    of the R/P agreement; and
documents as may be deemed
necessary, to the Treasury Department,                   • All documents and records relative
copy furnished the appropriate Central              to the Bank’s availment and use of proceeds
Point of Contact Department (CPCD) of               of the US dollar denominated R/P facility
the Supervision and Examination Sector              shall be made available to the BSP upon
(SES), to aid BSP evaluate applications:            request.
     • Application for availment of the             I. Pre-termination
facility stating therein the amount, requested
term, specific purpose of the borrowing,                • The R/P agreement may be paid at
including disclosure of the specific                any time before maturity, subject to mutual
collateral, including source, i.e. RBU or           agreement of both parties.
FCDU/EFCDU;
                                                       • The BSP may unilaterally pre-
    •    Notarized           undertaking/           terminate the borrowing arrangements
certification signed by the bank’s President        under the following conditions:
or Country Manager (in the case of local
branch of a foreign bank), Compliance                        Funds are found to have been used
Officer and Head of Treasury, indicating            for ineligible purposes
the following:
                                                            Collateral margins, if any, are not
        Specific purpose of fund utilization;       met.

       Proceeds of borrowing shall be               J. Documentation
used exclusively to fund liquidity
requirements of FCDU/EFCDU or RBU                       •     The repurchase agreement between
local operations;                                   the bank and the BSP shall be covered by a
                                                    master repurchase agreement, repurchase
    • That the Bank is not a conduit for            agreement confirmation and such other
another bank nor will the Bank take                 documentation as may be necessary to
arbitrage positions on the availment of the         facilitate the transaction.
R/P facility.
                                                    K. Accounting treatment
H. Reportorial Requirements
                                                        • The US dollar denominated R/P
Banks with outstanding USD R/P agreement            facility shall be treated as collateralized
with the BSP are required to submit to the          borrowings from the BSP and shall be
appropriate Central Point of Contact                accounted for in accordance with the
Department (CPCD) of the Supervision and            Financial Reporting Package (FRP) issued
Examination Sector (SES) the following :            under Subsection X191.2 of the MORB, as
                                                    amended.




Appendix 13 - Page 2                         Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                      APP. 13
                                                                                            09.12.31

    •  Eligible securities booked                      L. Penalty Clauses
under the HTM category shall be
subject to the tainting provision                          •   Violations of the terms and conditions
provided under Subsection X388.5 of                    of the USD R/P facility are governed by
the MORB upon default/non payment                      sanctions provided under Section 72 of the
of the amount due three (3) banking                    Manual, including but not limited, to
days after the maturity of the R/P                     termination of eligibility and pre-termination
agreement or disqualification of                       of any outstanding balance through
borrowers.                                             repayment and/or sale of the collateral.




Manual of Regulations for Banks - Appendix to Part V                            Appendix 13 - Page 3
APP. 92                                                                              APP. 14
                                                                                    09.12.31


             SWORN CERTIFICATION OF FCDU/EFCDU LENDING TO RBU




                                        (Name of Bank)


                                   CERTIFICATION

       Pursuant to Section 72 of the Manual of Regulations on Foreign Exchange Transactions,
we hereby certify1 that on all banking days of the month ended ________, <Year>:

             There were no foreign currency borrowings by the Regular Banking Unit (RBU)
             from the Foreign Currency Deposit Unit (FCDU)/Expanded FCDU (EFCDU)

             RBU had foreign currency borrowings from FCDU/EFCDU and –

             1. Total outstanding balance of such foreign currency borrowings did not exceed
                the prescribed cap (i.e., lower of total outstanding balance on RBU’s on-
                balance sheet foreign currency trade assets or thirty percent (30%) of the
                level of FCDU/EFCDU deposit liabilities, and

             2. The borrowed foreign currency funds were utilized by RBU solely for its
                foreign currency trade transactions.

        We further certify that, to the best of our knowledge, the foregoing statements are
true and correct.


      President or Country             Compliance Officer          Head of Treasury
    Manager (for foreign banks)                                      Department

TIN:                                TIN:                               TIN:
CTC No.                             CTC No.                            CTC No.
Issued on:                          Issued on:                         Issued on:
Issued at:                          Issued at:                         Issued at:

        Subscribed and sworn to before me this ___ day of _______________________ affiants
exhibiting their Community Tax Certificates indicated above.



                                                         Person Administering Oath

1
    Check appropriate box



Manual of Regulations for Banks - Appendix to Part V                     Appendix 14 - Page 1
                                                                                                                                                                                               APPENDIX 15
Manual of Regulations for Banks - Appendix to Part V



                                                                                                                          BANK NAME
                                                                                                      REPORT ON COMPLIANCE WITH E/FCDU COVER REQUIREMENT
                                                                                                                AS OF MONTH END


                                                                                                                                                                           Total               Ratio
                                                                                                                         Schedule
                                                       A. Total E/FCDU Liabilities Requiring Cover [A1 + A2 - A3 - A4]                                                           0.00

                                                        1. E/FCDU Liabilities (excluding Due to HO/Br Abroad)            BS                                                      0.00

                                                                                                                         BS Item L31 -                                           0.00
                                                        2. Net Due to HO/Br Abroad - E/FCDU      1/
                                                                                                                         A25

                                                        3. Due to RBU - E/FCDU [3.a + 3.b]                                                                                       0.00
                                                          a. Due to RBU - E/FCDU Realized Losses from Operation          Sch. 42                                                 0.00

                                                             b. Due to RBU - E/FCDU Unrealized Losses Recognized in      Sch. 42                                                 0.00
                                                                Profit or Loss and in Equity

                                                        4.     Bills Payable - Repurchase Agreements with BSP            Sch. 24                                                 0.00



                                                                                                                                         Liquid Assets         Other Assets      Total         Ratio
                                                                                                                                                     0.00                 0.00       0.00
                                                        B. Total E/FCDU Asset Cover2/

                                                               a. Foreign currency cash on hand                          BS Item 1                  0.00                                0.00
                                                               b. Foreign currency checks and other cash items           BS Item 2                  0.00                                0.00
  Appendix 15 - Page 1




                                                               c. Due from BSP Foreign Currency - E/FCDU                 BS Item 3,                 0.00 5/6              0.00          0.00
                                                                                                                         Sch. 39a
                                                               d. Due from Other Banks - E/FCDUs/OBUs/Non-Resident       Sch. 2                      0.00                               0.00




                                                                                                                                                                                                             09.12.31
                                                                                                                                                                                                              App. 15
 Appendix 15 - Page 2




                                                                                                                                                                                   09.12.31
                                                                                                                                                                                   APP. 15
                                                                                                                    Liquid Assets        Other Assets           Total      Ratio
                                  e. Derivative with Positive Fair Value Held for Trading/Hedging
                                     1. Derivatives with Positive Fair Value Held for               BS Item 5.b                                         0.00        0.00
                                          Trading
                                     2. Derivatives with Positive Fair Value Held for               BS Item 13                                          0.00        0.00
                                          Hedging
                                  f. Investments in foreign currency-denominated debt
                                     instruments:
                                     1. Held for Trading (HFT) - E/FCDU                             BS Item 5(a)]

                                         a. Sold/Lent/Collateralized in Repurchase/SLB              Sch. 3A                                             0.00        0.00
                                         Transactions
                                         b. Structured Products                                     Sch. 3                                               0.00       0.00
                                         c. Others                                                                            0.00 7/                   0.00        0.00

                                    2.   Financial Assets DFVPL - E/FCDU                            BS Item 6

                                         a. Sold/Lent/Collateralized in Repurchase/SLB                                                                  0.00        0.00
                                         Transactions

                                         b. Structured Products                                     Sch. 5                                              0.00        0.00

                                         c. Others                                                  Sch. 5                    0.00 7/                   0.00        0.00

                                    3.   Available for Sale (AFS) - E/FCDU                          BS Item 7(i)

                                         a. Sold/Lent/Collateralized in Repurchase/SLB              Sch. 6A                                             0.00        0.00
                                         Transactions
Manual of Regulations for Banks




                                         b. Structured Products                                     Sch.6                                               0.00        0.00

                                         c. Others                                                  Sch. 6                    0.00 7/                   0.00        0.00

                                    4.   Held to Maturity (HTM) - E/FCDU                            BS Item 8

                                         a. Sold/Lent/Collateralized in Repurchase/SLB              Sch. 7A                   0.00 7/                   0.00        0.00
                                         Transactions
                                         b. Structured Products                                     Sch. 7                                              0.00        0.00

                                         c. Others                                                  Sch. 7                    00.00 7/                  0.00        0.00
Manual of Regulations for Banks - Appendix to Part V
                                                                                                                                          Liquid Assets       Other Assets                Total       Ratio
                                                       g. Unquoted Debt Securities Classified as Loans - EFCDU            BS Item 9                                          0.00   8/
                                                                                                                                                                                               0.00

                                                       h. Loans and Receivables - E/FCDU authorized by BSP,
                                                          except those classified by the BSP as loss
                                                          1. Loans to BSP                                                 BS Item 11.a              0.00 5/                  0.00             0.00

                                                          2.   Interbank loans receivable                                 Sch. 10, Sch.             0.00 5/                  0.00             0.00
                                                                                                                          39A

                                                          3.   Loans and receivables - others                             Sch. 11

                                                               a. Outstanding export bills purchased                      Sch. 11                   0.00 8/                                   0.00

                                                               b. Short-term E/FCDU loans to exporters in the form        Sch.12
                                                               of export packing credits up to the sextent guaranteed
                                                               by TIDCORP or SBGFC, provided not overdue
                                                                                                                                                    0.00 8/                                   0.00

                                                               c. Others
                                                                  (i) Loans with specific approval by the BSP             Sch. 11                                            0.00   9/
                                                                                                                                                                                              0.00

                                                                 (ii) Short - term loans to resident private sector       Sch. 11                                            0.00             0.00
                                                                 borrowers which under existing regulations requires
                                                                 no prior BSP approval and allowed to be serviced
                                                                 using foreign exchange purchased from the banking
                                                                  system                                                                                                            9/


                                                                 (iii) Loans to resident private sector borrowers to be   Sch.11                                             0.00             0.00
                                                                  serviced using foreign exchange purchased from
                                                                  outside the banking system                                                                                        9/


                                                                (iv) Loans to non-resident to be serviced using           Sch. 11                                            0.00             0.00
                                                                foreign exchange purchased from outside the
                                                                 banking system                                                                                                      8/
  Appendix 15 - Page 3




                                                       i. Loans and Receivables Arising from Repurchase                   Sch. 12, Sch.
                                                          Agreements, Certificates of Assignment/Participation with       39A
                                                          Recourse, and Securities Lending and Borrowing




                                                                                                                                                                                                              09.12.31
                                                                                                                                                                                                               App. 15
                                                          Transactions - E/FCDU                                                                     0.00 5/                  0.00             0.00
 Appendix 15 - Page 4




                                                                                                                                                                                                                  09.12.31
                                                                                                                                                                                                                  APP. 15
                                                                                                                                 Liquid Assets            Other Assets              Total            Ratio
                                       j. Foreign currency accrued interest from financial                 BS Item 16
                                          assets - E/FCDU                                                                                                                0.00           0.00
                                       k. Accounts receivable arising from the sale of financial           Sch. 19
                                           assets under trade date accounting - E/FCDU 3/                                                  0.00 10/                    0.00             0.00
                                       l. Loans to RBU by E/FCDU net of transactions outstanding           Sch. 19
                                           for over 1 year                                                                                                               0.00           0.00

                                  C.     Exempt Liabilities   4/
                                                                                                                                                                                        0.00

                                  D.     Excess/(Deficiency) in Liquid Assets [Liquid Assets - 30%* (Item A - Item C)]                                                                  0.00 11/

                                  E.     Excess/(Deficiency) in Cover Requirement (Total Assets - Item A)                                                                               0.00 12/


                                         1/
                                               Applicable to Philippine branches of foreign banks only. If resulting balance is a Net Due from HO/Br Abroad, the amount to be shown as Net Due to HO/Br shall be
                                               zero. Net Due from HO/Br Abroad shall not be eligible for both the 100% asset and 30% liquid asset cover.

                                         2/
                                               At net carrying amount (i.e. net of premiums/(discounts), accumulated market gains/(losses) and allowance for impaiment loss)

                                         3/
                                               Accounts Receivable arising from sale of financial assets under the trade date accounting pending actual settlement/delivery of the underlying assets/securities

                                         4/
                                               Refers to liabilities exempt from 30% liquid cover requirement as may be approved by the Monetary Board

                                         5/
                                               Maturing within 1 year

                                         6/
                                               Unencumbered
Manual of Regulations for Banks




                                         7/
                                               Readily marketable

                                         8/
                                               EFCDU only

                                         9/
                                               Maturing within 1 year for FCDU and regardless of maturity for EFCDU

                                         10/
                                               Arising from sale of readily marketable debt instruments

                                         11/
                                               [Liquid Assets / (A - C)]*100

                                         12/
                                               [Total Assets / A] *100
APP. 92                                                                             APP. 15.1
                                                                                     09.12.31



                     SWORN CERTIFICATION OF COMPLIANCE WITH
                       THE FCDU/EFCDU COVER REQUIREMENTS



                                      <Name of Bank>


                                   CERTIFICATION


         Pursuant to the requirement of BSP Circular Letter dated 6 June 1997 we hereby
certify that we have fully complied with the FCDU cover requirements (both 100% Foreign
Currency Cover and 30% Liquid Asset Cover) on all banking days of the quarter ended
_________ <Year>.

           We further certify to the best of our knowledge that above statement is true and
correct.




 President or Country                    Compliance Officer          Head of Treasury
Head (for foreign banks)                                              Department

TIN:                                     TIN:                          TIN:
CTC No.                                  CTC No.                       CTC No.
Issued on:                               Issued on:                    Issued on:
Issued at:                               Issued at:                    Issued at:

        Subscribed and sworn to before me this ___ day of _______________________ affiants
exhibiting their Community Tax Certificates indicated above.




                                                              Person Administering Oath




Manual of Regulations for Banks - Appendix to Part V                   Appendix 15.1 - Page 1
APP. 92                                                                                     APP. 16
                                                                                           10.12.31

     Guidelines on the Transfer of Net Realized/Unrealized Losses Recognized
          In Profit Or Loss And In Equity’ And Undivided Profits/(Losses)
                    from FCDU/EFCDU Books to the RBU Books

    Following are the guidelines on the                Items 1.a, 1.b and 1.c shall be considered
transfer of ‘Net Realized/Unrealized Losses            as a zero balance in ‘Net Realized/
Recognized in Profit or Loss and in Equity’            Unrealized Losses Recognized in Profit or
and ‘Undivided Profits/(Losses)’ from the              Loss and in Equity’.
FCDU/EFCDU to the RBU book:                                 The amount of eligible foreign currency
    1. ‘Net Realized/Unrealized Losses                 assets to be transferred from the RBU book
Recognized in Profit or Loss and in Equity’.           to the FCDU/EFCDU book shall be that
Whenever the total of the following:                   which will bring the balance of ‘Due to RBU
    a. ‘Retained Earnings Free – FCDU/                 – FCDU/EFCDU Net Realized/Unrealized
EFCDU’;                                                Losses Recognized in Profit or Loss and in
    b. ‘Undivided Profits/(Losses) - FCDU/             Equity’ equal to the ‘Net Realized/
EFCDU’ comprising of the following:                    Unrealized Losses Recognized in Profit or
    (1) Net realized profits/(losses);                 Loss and in Equity’.
    (2) ‘Net Unrealized Gains/(Losses) from                 Whenever the balance of ‘Due to RBU
Operations’ as defined in Item 2.                      – FCDU/EFCDU Net Realized/Unrealized
    c. Net unrealized gains/(losses)                   Losses Recognized in Profit or Loss and in
recognized directly in equity comprising of            Equity’ exceeds the ‘Net Realized/
the following:                                         Unrealized Losses Recognized in Profit or
    (1) ‘Net Unrealized Gains/(Losses) on              Loss and in Equity’, the excess shall be
AFS Financial Assets – FCDU/EFCDU’                     settled at the end of the reference month by
recognized directly in equity; and                     the FCDU/EFCDU to the RBU book by a
    (2) ‘Gains/(Losses) on Fair Value                  debit to ‘Due to RBU – FCDU/EFCDU Net
Adjustments of Hedging Instruments –                   Realized/Unrealized Losses Recognized in
FCDU/EFCDU’ recognized directly in                     Profit or Loss and in Equity’ and a credit to
equity.                                                the eligible foreign currency assets.
                                                            For purposes of this Appendix, the
results to a net debit balance (referred to as         eligible foreign currency assets shall be in
‘Net Realized/Unrealized Losses                        the form of:
Recognized in Profit or Loss and in Equity’                 a. Due from BSP – Foreign Currency;
in this Appendix), the bank shall                           b. Due from other banks (Other FCDUs/
immediately transfer from the RBU book to              EFCDUs, OBUs and non-resident banks);
the FCDU/EFCDU book eligible foreign                        c. Investments in readily marketable
currency assets by a credit to ‘Due to RBU             foreign currency denominated debt
– FCDU/EFCDU Net Realized/Unrealized                   instruments, except for the following:
Losses Recognized in Profit or Loss and in                  (1) those which are sold/lent in
Equity’, which account shall not be subject            repurchase agreement/securities lending and
to asset and liquid asset cover requirements.          borrowing transactions and those used as
    For purposes of this Appendix, a net               additional collateral in repurchase
credit balance in the total of the foregoing           agreements or as collateral of the borrowing




Manual of Regulations for Banks - Appendix to Part V                           Appendix 16 - Page 1
APP. 16                                                                                         APP. 92
10.12.31

bank in securities lending and borrowing                  in the RBU book, the FCDU/EFCDU shall
transactions;                                             fully comply with BSP’s provisioning
    (2) those investments in structured                   requirements.
products; and                                                 The net realized and unrealized FCDU/
    (3) those Philippine debt papers which                EFCDU profits/(losses) shall be credited/
were restructured during the period of                    (debited) to ‘Undivided Profits/(Losses) –
moratorium in the payment of external debt.               FCDU/EFCDU’ at the end of each reference
                                                          month which account shall be credited/
Provided, That these shall likewise be                    (debited) to ‘Retained Earnings Free - FCDU/
booked under the same category in the RBU                 EFCDU’ at the end of calendar or fiscal year
book/(in the FCDU/EFCDU book) as they                     adopted by the bank.
were before the transfer from the FCDU/                       The transfer of net realized FCDU/
EFCDU book/(from the RBU book).                           EFCDU profits/(losses) to the RBU shall be
     2. Undivided Profits/(Losses). The                   made by a debit/(credit) to ‘Retained
transfer of ‘Undivided Profits/(Losses) –                 Earnings Free – FCDU/EFCDU’ and a
FCDU/EFCDU’ to the ‘Retained Earnings                     corresponding transfer of eligible foreign
Free’ account in the RBU book at the end of               currency assets from the FCDU/EFCDU to
calendar or fiscal year adopted by the bank               the RBU book/(from the RBU to the FCDU/
shall refer to net realized profits/(losses) only         EFCDU book) within a period of one month
and shall exclude the following:                          from the end of the calendar or fiscal year
     a. ‘Unrealized Gains/(Losses) from                   adopted by the bank: Provided, however,
Marking to Market of Financial Assets and                 That if after the transfer of net realized
Liabilities Held for Trading (HFT)’;                      FCDU/EFCDU profits/(losses) the balance
     b. ‘Unrealized Gains/(Losses) from                   of ‘Net Realized/Unrealized Losses
Marking to Market of Financial Assets and                 Recognized in Profit or Loss and in Equity’
Liabilities Designated at Fair Value through              exceeds the balance of ‘Due to RBU –
Profit or Loss (DFVPL)’;                                  FCDU/EFCDU Net Realized/Unrealized
     c. ‘Foreign Exchange Profit/(Loss)’, (i.e.,          Losses Recognized in Profit or Loss and in
arising from revaluation of foreign exchange              Equity’, the bank shall transfer eligible
transactions);                                            foreign currency assets from the RBU to the
     d. ‘Unrealized Gains/(Losses) from                   FCDU/EFCDU book on the same date of
Remeasurement of Hedging Instruments’,                    transfer of the net realized FCDU/EFCDU
and                                                       profits/(losses) by a credit to ‘Due to RBU –
     e. ‘Unrealized Gains/(Losses) from                   FCDU/EFCDU Net Realized/Unrealized
Remeasurement of Hedged Items’                            Losses Recognized in Profit or Loss and in
                                                          Equity’: Provided, further, That if after the
(collectively referred to as ‘Net Unrealized              transfer of net realized FCDU/EFCDU
Gains/(Losses) from Operations’ in this                   profits/(losses) the balance of ‘Due to RBU
Appendix): Provided, That prior to the                    – FCDU/EFCDU Net Realized/Unrealized
transfer of net realized FCDU/EFCDU                       Losses Recognized in Profit or Loss and in
profits/(losses) to the ‘Retained Earnings Free’          Equity’ exceeds the balance of ‘Net




Appendix 16 - Page 2                                Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                                APP. 16
                                                                                                      10.12.31

Realized/Unrealized Losses Recognized in                   d. Remeasurement of ‘Hedging
Profit or Loss and in Equity’, the bank shall          Instruments’; and
transfer eligible foreign currency assets from             e. Remeasurement of ‘Hedged Items’.
the FCDU/EFCDU to the RBU book on the                      For purposes of this Appendix,
same date of transfer of the net realized              ‘Retained Earnings – Free – FCDU/
FCDU/EFCDU profits/(losses) by a debit to              EFCDU’, shall, in the case of Philippine
‘Due to RBU – FCDU/EFCDU Net                           branches of foreign banks refer either to
Realized/Unrealized Losses Recognized in               ‘Due to Head Office/Branches/Agencies
Profit or Loss and in Equity’. The amount of           Abroad – Unremitted Profits not yet
eligible foreign currency assets to be                 approved by the BSP – FCDU/EFCDU’ if
transferred from the RBU to the FCDU/                  credit balance or ‘Due from Head Office/
EFCDU book or from the FCDU/EFCDU                      Branches/Agencies Abroad – Losses in
to the RBU book, as the case may be, shall             Operation of Philippine Branch of Foreign
be that which will bring the balance of ‘Due           Banks – FCDU/EFCDU’ if debit balance:
to RBU – FCDU/EFCDU Net Realized/                      Provided, That for purposes of
Unrealized Losses Recognized in Profit or              determining compliance with FCDU/
Loss and in Equity’ equal to the ‘Net                  EFCDU cover requirements the balance
Realized/Unrealized Losses Recognized in               of ‘Due to Head Office/Branches/
Profit or Loss and in Equity’.                         Agencies Abroad – Unremitted Profits not
     The balance of ‘Retained Earnings Free            yet approved by the BSP – FCDU/EFCDU’
– FCDU/EFCDU’ account shall, after the                 shall not be subject to FCDU/EFCDU
transfer of net realized FCDU/EFCDU                    asset and liquid asset cover requirements,
profits/(losses) to the RBU book,                      while the balance of ‘Due from Head
correspond to the cumulative unrealized                Office/Branches/Agencies Abroad –
gains/(losses) from operations from prior              Losses in Operation of Philippine Branch
years arising from the following:                      of Foreign Banks – FCDU/EFCDU’ shall
     a. Marking-to-market of ‘Financial                not be offset against the ‘Due to Head
Assets and Liabilities Held for Trading                Office/Branches/Agencies’ account.
(HFT)’;                                                    The amended illustrative accounting
     b. Marking-to-market of ‘Financial                entries on the transfer of FCDU/EFCDU
Assets and Liabilities Designated at Fair              profits/(losses) which shall supercede
Value through Profit or Loss (DFVPL)’;                 Appendix 85 is under Appendix 16.1 of the
     c. Revaluation of foreign exchange                FX Manual.
transactions;                                          (As amended by Circular No. 691 dated 23 June 2010)




Manual of Regulations for Banks - Appendix to Part V                                   Appendix 16 - Page 3
APP. 92                                                                                        APP. 17
                                                                                              09.12.31


                  Guidelines on the Conversion to Peso Loans/ROPA and
                     Transfer to RBU of FCDU/EFCDU Loans/ROPA


A. FCDU/EFCDU loans may be                             written consent of the borrower whose
transferred to the RBU without prior BSP               account will be transferred/converted,
approval, subject to the following                     except for loans covered by credit/loan
conditions:                                            agreement allowing the bank to unilaterally
     i. The FCDU/EFCDU loan to be                      convert and transfer the FCDU/EFCDU loan
transferred must meet the following criteria:          in which case the prior written consent
(a) current and performing; and (b) eligible           requirement may be dispensed with;
to be serviced by the banking system:                      iv. The converted/transferred FCDU/
Provided, That a past due FCDU/EFCDU                   EFCDU loans are properly documented/
loan may be transferred to the RBU if it               covered by a written agreement/contract.
meets the following criteria: (a) eligible to          Provided, That if the original loan agreement
be serviced by the banking system; (b) fully           allows the bank to unilaterally convert/
secured by real estate mortgage;                       transfer the FCDU/EFCDU loan to peso, the
(c) foreclosure of the collateral shall be             said loan agreement should indicate the
effected within six (6) months from the date           general terms and conditions of the
of transfer to the RBU if the loan remains             converted/transferred peso loan: Provided,
to be past due; and (d) they are not eligible          further, That upon conversion/transfer, the
to be serviced by the banking system but               borrower must be informed in writing of the
loan is already outstanding as of 27 October           peso loan’s new terms and conditions:
2000: Provided, further, That a past due               Provided, finally, That once converted
partially secured or unsecured FCDU/                   transferred to a peso loan, the same loan
EFCDU loan shall only be eligible for                  should not be converted back to an FCDU/
conversion/transfer to RBU if part of a                EFCDU loan;
multi-creditor rehabilitation or work-out                  v. No income shall be recognized by
plan acceptable to all creditors where the             the FCDU/EFCDU or RBU on the transfer
said plan requires the conversion of FCDU/             of FCDU/EFCDU loans to RBU;
EFCDU loans to peso;                                       vi. The status of the FCDU/EFCDU loan
     ii. There shall be actual settlement in           prior to the transfer, i.e., current or past due,
foreign currency, simultaneous with the                performing or non-performing, and the loan
transfer, by the RBU to the FCDU/EFCDU                 classification, i.e., especially mentioned,
of the total amount of foreign currency-               substandard, doubtful or loss, shall be
denominated loans being transferred to the             retained once the loan is transferred to the
RBU using the prevailing foreign exchange/             RBU books, which transfer shall also
conversion rate at the time of transfer;               include the corresponding booked
     iii. The transfer and conversion of               allowance for probable losses.
foreign currency-denominated loans from                    B. FCDU/EFCDU ROPA may also be
the FCDU/EFCDU books to the RBU books                  transferred to the RBU without prior BSP
including the prevailing foreign exchange/             approval, subject to items ii to vi above;
conversion rate to be used shall have the                  C. Conversions and transfers of FCDU/
prior approval of the bank’s board of                  EFCDU loans and ROPA to RBU books that
directors, or the Country Head, in case of             do not meet the above guidelines shall be
branches of foreign banks, and the prior               subject to prior Monetary Board approval; and




Manual of Regulations for Banks - Appendix to Part V                              Appendix 17 - Page 1
APP. 17                                                                             APP. 92
09.12.31

    All foreign currency-denominated           transferred/converted, outstanding
loans and ROPA in the FCDU/ EFCDU              balance in foreign currency in the FCDU/
converted to peso and transferred to the       EFCDU, peso amount booked in the RBU,
books of the RBU shall be reported             prevailing foreign exchange rate used, status
monthly to the BSP Supervision and             and classification on date of transfer,
Examination Sector within ten (10)             collateral (if any) and date approved by
banking days from end of reference             bank’s board Country Head. (A report is
month. The report, classified as Category      not required if no transfers were effected
B, shall include name of borrower, date        during the month.)




Appendix 17 - Page 2                    Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                                   APP. 18
                                                                                                         09.12.31


                    Guidelines and Minimum Documentary Requirements for
                       Foreign Exchange Forward and Swap Transactions


   The following is a list of minimum                                     ii. No double hedging has been
documentary requirements for foreign                                 obtained by the customer for the covered
exchange forward and swap transactions.                              transactions.
Unless otherwise indicated, original                                      1.1.3 Direct Remittance
documents* shall be presented on or before                                Original shipping documents indicated
deal date to banks.                                                  in item II.a of Appendix 4 of the Manual, as
                                                                     amended.
A. FORWARD SALE OF FOREIGN                                                2. NON-TRADE TRANSACTIONS
EXCHANGE TO COVER OBLIGATIONS                                             Only non-trade transactions with
–   DELIVERABLE  AND    NON-                                         specific due dates shall be eligible for
DELIVERABLE                                                          forward contracts, and shall be subject to
                                                                     the same documentation requirements
    1. FORWARD SALE OF FOREIGN                                       under Appendix 1 of the Manual, with the
EXCHANGE – TRADE                                                     following additional guidelines for foreign
    1.1 Trade Transactions                                           currency loans and investments.
    1.1.1. Under Letters of Credit (LC)                                   2.1 Foreign Currency Loans owed to
    a. Copy of LC opened; and                                        non-residents or AABs
    b. Accepted draft or Commercial                                       2.1.1 Deliverable Forwards
invoice/ Bill of Lading                                                   The maturing portion of the
    1.1.2. Under Documents against                                   outstanding eligible obligation, i.e., those
Acceptances (DA)/Open Account (OA)                                   that are registered with the BSP, including
Arrangements                                                         interest and fees thereon as indicated in
    a. Certification of reporting bank on the                        the BSP registration letter, may be covered
details of DA/OA under Schedule 10 (Import                           by a deliverable forward subject to the
Letters of Credits Opened and       D/A-O/A                          documentary requirements under Item B
Import Availments and Extensions) of FX Form                         of Appendix 1 of the Manual. A copy of
1 (Consolidated Report on Foreign Exchange                           the creditor’s billing statement may be
Assets and Liabilities);                                             submitted on or before the maturity date
    b. Copy of commercial invoice.                                   of the contract.
    In addition to the above                                              2.1.2 NDFs
requirements, the bank shall require the                                  The outstanding eligible obligation,
customer to submit a Letter of                                       i.e., those that are registered with the BSP,
Undertaking that:                                                    including interests and fees thereon as
    i. Before or at maturity date of the                             indicated in the BSP registration letter,
forward contract, it (the importer) shall                            may be covered by a NDF, subject to the
comply with the documentation                                        documentary requirements under Item B
requirements on sale of foreign exchange                             of Appendix 1 of the Manual, except for
for trade transactions under Appendix 4                              the creditor’s billing statement which need
of the Manual; and                                                   not be submitted.




*
    If copy is indicated, it shall mean photocopy, electronic copy or facsimile of original



Manual of Regulations for Banks - Appendix to Part V                                          Appendix 18 - Page 1
APP. 18                                                                                 APP. 92
09.12.31

     The amount of the forward contract                 a. Copy of LC opened; and
shall not exceed the outstanding amount                 b. Proforma Invoice, or Sales Contract
of the underlying obligation during the term       /Purchase Order
of the contract.                                        1.2 Under DA/OA, Documents Against
     2.2 Inward Foreign Investments                Payment (DP) or Direct Remittance (DR)
     The unremitted amount of sales/maturity            Any of the following where delivery or
proceeds due for repatriation to non-resident      shipment shall be made not later than one
investors pertaining to BSP-registered             (1) year from deal date:
investments in the following instruments                a. Sales Contract
issued by a Philippine resident:                        b. Confirmed Purchase Order
     a. shares of stock listed in the                   c. Accepted Proforma Invoice
Philippine Stock Exchange (PSE);                        d. Shipment/Import Advice of the
     b. government securities;                     Supplier
     c. money market instruments; and                   In addition to the above requirements,
     d. peso time deposits with a minimum          the bank shall require the customer to
tenor of 90 days                                   submit a Letter of Undertaking that:
                                                        i. At maturity of the forward
may be covered by FX forward contracts             contract, it shall comply with the
subject to the presentation of the original        documentation requirements on the sale
Bangko Sentral Registration Documents              of foreign exchange for trade transactions
(BSRD) on or before deal date. However,            under Appendix 4 of the Manual; and
for Item 2.2.a above, original BSRD or                  ii. No double hedging has been
BSRD Letter-Advice, together with the              obtained by the customer for the covered
broker’s sales invoice, shall be presented         transactions.
on or before maturity date of the FX                    2. NON-TRADE (NON-DELIVERABLE)
forward contract, which date coincides                  The outstanding balance of BSP-
with the settlement date of the PSE                registered foreign investments without
transaction.                                       specific repatriation date, appearing in the
     Sales proceeds of BSP-registered              covering BSRD may only be covered by
investments in shares of stock that are not        an NDF contract, based on its market/
listed in the PSE may be covered by a              book value on deal date, subject to prior
deliverable FX forward contract only if            BSP approval and if already with BSRD,
determined to be outstanding as of deal            presentation of the covering BSRD and the
date for the contract and payable on a             proof that the investment still exists (e.g.,
specific future date as may be indicated           stock certificate, or broker’s buy invoice,
in the Contract To Sell/Deed of Absolute           or confirmation of sale, or certificate of
Sale and subject to the same documentary           investment in money market instruments,
requirements under Item C of Appendix 1            or certificate of peso time deposits).
of the Manual.                                     Hedging of permanently assigned capital
                                                   of Philippine branches of foreign banks/
B. FORWARD SALE OF FOREIGN                         firms is not allowed.
EXCHANGE TO COVER EXPOSURES –
DELIVERABLE AND NON-DELIVERABLE                    C. FORWARD PURCHASE OF FOREIGN
   1. TRADE (DELIVERABLE AND                       EXCHANGE
NON-DELIVERABLE)                                      Such foreign exchange forward
   1.1 Under LC                                    contracts shall be subject to the bank’s




Appendix 18 - Page 2                        Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                      APP. 18
                                                                                            09.12.31

“Know Your Customer” policy and existing               Manual for non-trade transactions, and
regulations on anti-money laundering. In               Appendix 4 of the Manual for trade
addition, counterparties must be limited to            transactions, shall be presented on or
those that are manifestly eligible to engage           before deal date.
in foreign exchange forwards as part of the                 2. FOREIGN EXCHANGE PURCHASE
normal course of their operations, and                 (first     leg)/FORWARD            FOREIGN
which satisfy the bank’s suitability and               EXCHANGE SALE (second leg)-
eligibility rules for such transactions.                    The first leg of the swap will be subject
                                                       to the bank’s “Know Your Customer” policy
D. FOREIGN EXCHANGE SWAP                               and existing regulations on anti-money
TRANSACTIONS                                           laundering. The second leg of the swap will
    1. FOREIGN EXCHANGE SALE (first                    be subject to the swap contract between the
leg)/FORWARD FOREIGN EXCHANGE                          counterparties.
PURCHASE (second leg) –                                     Swap contracts of this type intended to
    The same minimum documentary                       fund peso loans to be extended by non-
requirements for sale of foreign                       residents in favor of residents shall require
exchange under Appendix 1 of the                       prior BSP approval.




Manual of Regulations for Banks - Appendix to Part V                            Appendix 18 - Page 3
APP. 92                                                                                     APP. 19
                                                                                           09.12.31


Implementing Guidelines on the Computation of Open Foreign Exchange (FX) Position of
                AABs and Reporting Requirements under FX Form 1


    1. The following AABs shall render a                   5. All transactions for the reference
daily report to the Supervisory Data Center            date shall be included. Transactions with
(SDC) of the Supervision and Examination               deficient documents shall be reflected in the
Sector (SES), on their net foreign exchange            schedules with appropriate footnotes.
positions using Schedule 13 of FX Form 1:
    a) Universal Banks (UBs); and                          6. For purposes of computing the net
    b) Commercial Banks (KBs)                          FX position of reporting banks, AABs shall
                                                       use the total USD equivalent of their net FX
     2. The FX Form 1 together with all                position as reflected in Item E of Schedule
schedules shall be reported in USD                     13 and as computed in item 3 above.
equivalent except for Schedules 8 and 13
which shall be in multi-currency. All reports               7. The reporting bank’s unimpaired
shall be submitted in accordance with                  capital as used in Schedule 13, shall be in
Section 101 of the Manual.                             accordance with the definition under
     In addition, an end of month report               Section X111 of the MORB and shall be
(Schedule 14) which shall be in multi                  converted to USD as in Item 3 above. AABs
currency shall be submitted not later than,            shall use the Unimpaired Capital Accounts
fifteen (15) banking days from end of                  as of the immediately preceding month-end.
reference month.                                       Thus, beginning with the month of February,
                                                       end of month January balances shall be used
    3. The data shall be reported in whole             for this purpose.
currency units (e.g. nearest USD1; EURO1,
etc.). The original currencies to be reported              8. The following shall likewise be
in Schedule 13 and Schedule 14 shall be                observed in the computation of banks’ net
converted to USD using the foreign                     open FX position limit:
exchange rates provided in the BSP                         a. A bank shall have the option to
Reference Exchange Rate Bulletin. The                  exclude from its FX assets the following:
report for a particular banking day shall use              i. its foreign exchange holdings
the foreign exchange rates in the said BSP             resulting from original investments in New
Bulletin issued the next banking day.                  Money Bonds (NMB),
                                                           ii. “Due from Head Office/Branches
     4. The balances to be reported in                 Agencies Abroad-Assigned Capital”
Schedules 13 and 14 shall be sourced from              account, to the extent of the lower of
the banks’ Multi Currency Control Ledgers              assigned capital approved by the BSP or the
(MCCL) or such other control records                   amount of capital actually remitted; and
maintained by the reporting bank which                     iii. Amount of foreign currency
contain the breakdown of foreign exchange              denominated assets pertaining to the net
assets and liabilities in their original               proceeds of outstanding issues of foreign
currencies. The data from such MCCL or                 currency denominated Hybrid Tier 1 (HT1)
other control records should be equal to               capital instruments.
the balance of the corresponding accounts                  Banks shall signify in writing to the BSP
in the reporting bank’s general ledger.                through the International Department, their




Manual of Regulations for Banks - Appendix to Part V                           Appendix 19 - Page 1
APP. 19                                                                                   APP. 92
09.12.31

intention whether to exclude or to include           net foreign exchange position of the
their above assets from the computation of           respective banks with whom they are
their net open FX position. Once a bank has          affiliated or are subsidiaries of.
opted to include (or to exclude) the said                 The monthly certification by the
assets, the option signified can no longer           President/Chief Executive Officer (CEO) or
be subsequently reversed or changed.                 Country Manager (in case of branches of
     b. The following accounts shall be              foreign banks) and Treasurer of the banks
excluded:                                            as well as the daily reportorial requirement
     i. 100% FX cover required by the                on consolidated foreign exchange position
foreign Monetary Authority to be deposited           of banks as required shall continue to be in
by Philippine UBs/KBs with its advising              effect. The Certification, as amended, by the
confirming bank in the foreign country for           President/CEO or Country Manager and
letters of credit issued; and,                       Treasurer in the form and language
     ii. Equity investments in foreign               substantially similar to the sample
subsidiaries.                                        certification shown in Annex P and P.1, shall
     c. Banks shall submit a supporting              be deemed to satisfy and to be in
schedule in prescribed format (Annex O)              compliance with this requirement.
on the Details of Accounts Excluded in the
Computation of Net Open Exchange                          11. UBs/KBs with expanded authority
Position, which is an attachment to Schedule         to write options shall include the net delta
13 of the FX Form I report.                          weighted positions of foreign currency
                                                     options in their computation of the net FX
     9. Reporting. Banks shall submit a              position. UBs/KBs without authority to
report on the daily consolidated foreign             write options shall include the notional
exchange position of banks which shall               amounts of purchased options that are in
include a foreign currency position against          or at the money and exclude those that are
pesos of any of the banks’ branches/offices,         out of the money in their computation of
subsidiaries and affiliates, here and abroad         the net FX position.
whether or not they are financial institutions,           The USD equivalent of the positions
as long as the ‘banks and their shareholders         arising from foreign currency options shall
officers exercise reasonable influence or            be reported as a manual adjustment to the
control over them, as well as any entity that        net FX position amount reported in the
is engaged in foreign exchange trading or            bank’s Consolidated Foreign Exchange
foreign exchange corporation that is                 Position Report (CFXPR). For banks with
affiliated with the banks either by                  authority to write options, the USD
ownership, management control or                     equivalent of the foreign currency options
influence by banks, their retirement fund,           position is equal to the sum of long delta
officers, directors or shareholders.                 weighted positions minus the sum of short
                                                     delta-weighted positions arising from FX
    10. While it is recognized that the              options contracts. The breakdown of the
principal reason for being of forex                  options positions by currency and a listing
subsidiaries/affiliates of banks is to trade in      of outstanding contracts shall be annexed
foreign exchange, they are nevertheless              to the CFXPR. The amended format of the
discouraged from taking net foreign                  CFXPR, the detailed schedule for options
exchange positions and whatever net foreign          positions, and the listing of outstanding
exchange positions are kept or maintained            contracts for banks with and without
by them, are to be consolidated into the total       authority to write options (Annex C of the




Appendix 19 - Page 2                          Manual of Regulations for Banks - Appendix to Part V
APP. 92                                                                                      APP. 19
                                                                                            09.12.31

CFXPR) are attached as Annexes “Q”, “R”                original is transmitted the following day. The
and “R.1”, “S” and “S.1”. Bank shall submit            monthly certification by the CEO and
the report on the daily consolidated foreign           Treasurer in the form and language, as
exchange position of Banks to the                      corrected, shall be submitted at the end of
Supervisory Data Center of the BSP.                    each month but not later than five (5) banking
    Deadline of submission of                          days from reference month. Banks that have
Consolidated Foreign Exchange Position                 certified that they do not have any affiliate/
Report (CFXPR) shall be on the third (3rd)             subsidiary need no longer submit the
banking day after reference date, to allow             consolidated FX position report and monthly
the banks more time to consolidate all                 certification for the purpose. Late or
transactions of branches, affiliates and               incomplete submission within the above
subsidiaries. The reports submitted should             prescribed deadline shall constitute
be properly signed by the authorized Officer           violation of the BSP reportorial requirements
of the bank. Faxed reports shall be                    and subject the bank concerned to the fines
considered received within the prescribed              and penalties provided under Section 103
deadline provided these are signed and the             of the Manual.




Manual of Regulations for Banks - Appendix to Part V                            Appendix 19 - Page 3
App. 93
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                  PROCESSING GUIDELINES FOR MICROFINANCE OTHER
                    BANKING OFFICES OR MICROBANKING OFFICES
                                    (Appendix to Subsection X160.3)

     The establishment of other banking                 7. How does the QB propose to comply
offices and the notes on microfinance shall         with the minimum fifty percent (50%)
be guided by the following processing               microfinance transaction requirement per
guidelines:                                         MBO? (Microfinance transactions comprise
                                                    of micro-loans and micro-deposits)
   The processing of applications will be               8. What is the policy on the minimum
undertaken in a two-stage process.                  cash position of the MBO? This shall include
                                                    arrangement for replenishment.
   Stage 1: Letter of Intent and Pre-                   9. What are the management and
qualification                                       organizational arrangements for the MBO?
   Stage 2: Business Plan (Strategic and            This shall include proposed staffing pattern
Operational Plan Assessment)                        and functions and qualification of the
                                                    personnel in accordance with the
    Stage 1: The applicant QB shall submit          requirements in X160.3.
a letter of intent duly authorized by the               10. What are the Management
Board      of    Directors,     signed     by       Information           Systems          (MIS)
the President or equivalent rank.                   and financial accounting arrangements to
The letter will be evaluated by the                 support customer handling and proper
appropriate Supervision and Examination             recording and reporting of transactions?
Sector (SES) Department based on safety and             11. What are the physical security
soundness considerations.                           arrangements? These arrangements shall be
    Stage 2: The applicant QB will be               included in the overall security program of
required to submit a business plan containing       the bank.
the strategic and operational details. Among
others, such plan shall address the following            A final decision will be made based on
questions:                                          the quality of Stage 2 submissions. Stage 2
                                                    submissions will be evaluated whether the
    1.Why is the QB establishing micro-             proposed operational plan is commensurate
banking offices and how does it relate to the       and proportionate to the strategy to ascertain
overall corporate strategy?                         safe and sound MBO operations. A QB may
    2. How many are to be established in            apply for additional MBOs, after six (6)
the next 1 (one) year, 3 (three) years, 5 (five)    months from approval of the initial set/batch.
years? Where are these to be established?           All MBOs must be opened within one (1)
Why have these areas been identified?               year from their approval. If not deemed
    3. What are the products and services           satisfactory, the application may be denied.
to be offered?                                      Re-application shall only be allowed after
    4. How is the expansion to be funded?           six (6) months from the date of receipt of
    5. How does the QB plan to maintain             denial.
adequate command and control over the                    All applications are to be submitted
expanded network?                                   through the Central Application and
    6. The proposed MBOs are to be linked           Licensing Group (CALG) of the SES.
operationally to which branches?                    (M-2010-040 dated 04 November 2010)




Manual of Regulations for Non-Bank Financial Institutions
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          GUIDELINES ON THE GRANT OF REGULATORY RELIEF UNDER THE
                 STRENGTHENING PROGRAM FOR RURAL BANKS
                          (Appendix to Subsec. 3108.3)

     The following are the guidelines and      loans of eligible RBs as of the end of the
the documentary requirements (Annex “A”)       month immediately preceding the date of
on the grant of regulatory relief under the    request for loan restructuring;
Strengthening Program For Rural Banks               4. Restructuring of past due
(SPRB). Said guidelines contain the merger     rediscounting/emergency loans of the
or consolidation incentives which recipient    eligible RBs with the BSP, subject to
RBs under the SRPB may avail in                compliance with the following guidelines:
accordance with the provisions of the               a)Amount to be restructured
guidelines.                                         The amount to be restructured shall
     The SRPB is a joint undertaking of the    consist of the following:
BSP and the Philippine Deposit Insurance            Principal – outstanding balance of the
Corporation (PDIC) aimed at promoting          principal obligation as of the end of the
mergers and consolidations as a means to       month immediately preceding the date of
further strengthen the rural banking system    request for loan restructuring.
through the grant of financial assistance           Accrued interest – accrued interest on
(FA) by the PDIC and regulatory relief by      the outstanding principal obligation as of
the BSP to eligible strategic third party      the end of the month immediately
investors (STPIs) which shall be RBs,          preceding the date of request for loan
desiring to enter into mergers and             restructuring.
consolidations with eligible distressed RBs         b) Interest rate
that may be considered under the SPRB.              Only the restructured principal
     Constituent RBs may, subject to prior     obligation shall be charged interest at the
BSP approval, avail themselves of any or       rate equal to the prevailing 364-day treasury
all of the following merger or consolidation   bill rate of the last auction immediately
incentives under the SPRB:                     preceding the date of request for loan
     1. Conversion of the existing head        restructuring. No interest shall be charged
offices, branches and/or extension offices     on the restructured accrued interest.
of the merging or consolidating RBs into            c)Terms of repayment
head office, branches or extension offices          The amount to be restructured shall be
of the merged/consolidated RB;                 paid by the merged/consolidated RB in
     2. Relocation/opening of existing/        monthly amortizations over a period not
approved but unopened branches,                exceeding ten (10) years.
extension offices and/or other banking              d) Collateralization
offices of the merged/consolidated RB               A surety agreement shall be executed
within two (2) years from date of merger or    by the stockholders owning at least sixty
consolidation subject to applicable            seven percent (67%) of the shares of stock
requirements on relocation of branches,        of the merged/consolidated RB.
extension offices and/or banking offices;           e. Default clause
     3. Condonation of liquidated damages           i. Event of default – failure to pay two
on past due rediscounting/emergency loans      (2) amortizations shall constitute an event
and/or monetary penalties for violation of     of default and shall render the entire
BSP issuances on rediscounting/emergency       obligation due and demandable.




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                                                                            App. 94 - Page 1
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    ii. Consequence of default – the amount           a)Dividend rate
of liquidated damages on past due                     The dividend rate shall be four percent
rediscounting/ emergency loans waived            (4%).
shall be restored and the payments already            b) Redemption term
made shall be re-applied, first to liquidated         The staggered redemption shall be
damages, and the balance, if any, to interest,   effected by the merged/ consolidated RB in
then to the principal loan. Monetary             monthly installments over a period not
penalties for violation of BSP issuances on      exceeding ten (10) years.
rediscounting, if any, shall also be restored         c)Waiver of dividends
and payment thereof in full shall be                  Dividends due on the LBP preferred
demanded against the defaulting merged/          shares of stock of the eligible RBs as of date
consolidated RB.                                 of merger or consolidation shall be waived.
    iii. Legal action – The BSP may institute         d) Documentary requirement
appropriate legal action without further              Upon approval, the merged/
need for demand or notice to the defaulting      consolidated RB shall execute a written
merged/consolidated RB.                          agreement with the LBP for the staggered
    f) Documentary requirement                   redemption of LBP preferred shares of stock
    The merged/consolidated RB shall             of the eligible RBs, copy furnished the BSP.
execute a Letter of Understanding with the            6. Rediscount ceiling of at least 150%
BSP covering the terms and conditions of         of the adjusted capital accounts of the
the approved restructured loan/s together        merged/ consolidated RB for a period of one
with the authority for the BSP to debit the      (1) year reckoned from the date of merger
surviving/consolidated RB’s demand               or consolidation, subject to compliance
deposit account with the BSP for the             with the existing eligibility requirements of
amortizations due. Documentary                   the BSP as provided under Subsec. X268.3.
requirements in applying for the regulatory           7. Waiver of monetary penalties
relief are attached as Annex “A”.                imposed on the eligible RBs for violations
    5. Preferred shares for staggered            of existing laws and BSP rules and
redemption.                                      regulations, except penalties accruing to the
    The shares for staggered redemption          other parties, e.g. Micro, Small and Medium
shall be the LBP preferred shares of stock of    Enterprises), as amended, and Agriculatural
the eligible RBs, representing the               Guarantee Fund Pool (AGFP) and Philippine
rediscounting arrearages with BSP converted      Corp. Insurance Corporation (PCIC) as
into LBP equity. Repayment arrangement           provided under Section 10 of R.A. No.
should be made by the merged or                  10000 (The Agri-Agra Reform Credit Act of
consolidated RB directly with the LBP.           2009), as of date of merger/consolidation.




                                                               Manual of Regulations for Banks
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                                                                                      App. 94
                                                                                     10.12.31

                                                                                  Annex “A”

                    STENGTHENING PROGRAM FOR RURAL BANKS
                            Documentary Requirements

     1. Articles of Merger or Consolidation     (2/3) of the outstanding capital stock of each
duly signed by the President or Vice            constituent institution have approved the
President and certified by the corporate        plan of merger or consolidation. The
secretary or assistant corporate secretary of   resolution shall be certified under oath by
each of the Eligible STPI and Eligible RB       the respective corporate secretaries of the
(constituent institutions) setting forth the    constituent institutions;
following as required in Section 78 of the           5. Financial statements:
Corporation Code:                                    - Latest financial statements as of
     - The Plan of Merger or                    month immediately preceding the date of
Consolidation;                                  application and latest three (3) year audited
     - The number of shares outstanding;        financial statements of the constituent
and                                             institutions; and
     - The number of shares voting for and           - Ten (10)-year financial projections
against the Plan, respectively.                 with valid assumptions of the merged or
     2. Plan of Merger or Consolidation         consolidated institutions’ balance sheet and
setting forth the following:                    income statement.
     - The names of the constituent                  6. List of regulatory relief the
institutions;                                   constituent institutions will avail from BSP;
     - The terms of merger or                        7. Letter to BSP requesting
consolidation and the mode of carrying the      restructuring of past due rediscounting/
same into                                       emergency loan; and letter to LBP requesting
effect;                                         staggered redemption of matured LBP
     - A statement of the changes, if any,      preferred shares;
in the Articles of incorporation of the              8. List of stockholdings of each of the
surviving institution in the case of merger;    constituent institutions before and after the
and in the case of consolidation, all the       merger;
statements required to be set forth in the           9. List of directors and officers of each
Articles of Incorporation; and                  of the constituent institutions;
     - Such other provisions with respect            10. List of proposed officer and
to the proposed merger or consolidation as      directors of the merged or consolidated
are deemed necessary or desirable.              institution and the summary of their
     3. Resolution of the Board of Directors    qualifications;
of the respective constituent institution            11. Organizational chart of the merged
approving the Plan of Merger or                 or consolidated institution including the
Consolidation. The resolution shall be          number of offices and location thereof;
certified under oath by the respective               12. Inter-company transactions relative
corporate secretaries of the constituent        to the submitted Financial Statements;
institutions;                                        13. Computation of Risk Based Capital
     4. Resolution of the meeting of the        Adequacy Ratio on the submitted financial
stockholders in which at least two-thirds       statements;




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                                                                                     App. 94
                                                                                    10.12.31

    14. Schedule of unbooked valuation            17. Proposed increase of capital stock
reserves based on the latest BSP-ROE;        of surviving bank;
    15. Viable operational plan with the          18. Proposed amendments in the
following components:                        articles of incorporation of surviving bank;
    - Marketing strategies                        19. Director’s certifcate (surviving
    - Proposed target market                 bank) on the proposed amendment of the
    - Proposed         loan      portfolio   Articles of Incorporation increasing the
diversification                              authorized capital stock;
    - Deposit generation                          20. Copy of due diligence report on the
    - Proposed improvements in               eligible RB, if any; and
accounting system                                 21. Any other reasonable requirement
    - Operational control                    deemed material in the proper evaluation
    - Computerization plan                   of the merger or consolidation as may
    - Communication system                   subsequently be requested by the BSP and/
    16. The appraiser’s report of            or PDIC.
reappraisal of bank premises, if any, done   (Circular 693 dated 06 August 2010)
by an independent and licensed appraiser;




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                                                                                       App. 95
                                                                                      10.12.31
                       GUIDELINES ON OUTSOURCING OF
                SERVICES BY ELECTRONIC MONEY ISSUERS (EMIs) TO
            ELECTRONIC MONEY NETWORK SERVICE PROVIDERS (EMNSP)
                           (Appendix to Subsec. X780.11)

     I. Statement of Policy. It is the goal      contemplated under Item “2” shall limit itself
of the BSP to achieve a truly inclusive          to an EMNSP as an outsource entity, and
financial system. In line with achieving         shall follow the procedures for outsourcing
this goal, the BSP recognizes the potential      information technology systems/processes
of electronic money (E-Money) as an              as provided under Subsec. X162.2. In
instrument to facilitate delivery of financial   addition to the documentary requirements
services affordably to the low-income,           under said Subsec., an EMI should also
unbanked or undeserved segments of the           submit a certification signed by its President
population, particularly in non-urbanized        or any officer of equivalent rank and function
areas. The BSP likewise recognizes that          certifying that a due diligence review had
efficient and effective delivery of financial    been conducted and that the selected
services may necessitate Electronic Money        EMNSP has met the minimum requirements
Issuers (EMI) to develop business models         provided under Item “V”.
that utilize outsourcing arrangements,                IV. Responsibilities of an EMI. Relative
considering the specialized operational          to the outsourcing of services to an EMNSP,
and technological requirements in an             it shall be the responsibility of an EMI to:
E-money business. Outsourcing, however                a. Conduct due diligence review on an
may introduce an EMI to certain                  EMNSP in accordance with Item “V”;
operational and reputational risks that               b. Ensure that the relationship/
need to be properly managed. The BSP             arrangement with an EMNSP is supported
hereby issues the following guidelines to        by a written contract that should contain, at
govern the outsourcing of E-Money related        a minimum, the requirements prescribed
services.                                        under Subsec. X162.2. The contract should
     II. Definition. An Electronic Money         also stipulate that:
Network Service Provider (EMNSP) shall                (1) the EMNSP shall allow the BSP to
refer to a non-financial institution that        have access and to examine the E-money
provides automated systems, network              system, network infrastructure, operation of
infrastructure, including a network of           the network of accredited agents and all
accredited agents utilizing the systems, to      operations related to E-money services being
enable clients of an EMI to perform any          outsourced by the EMI for the purpose of
or all of the following:                         assessing the confidentiality, integrity, and
     a. Convert cash to E-money and              reliability of the E-money system and
monetize e-money;                                determining compliance with BSP rules and
     b. Transfer funds from one electronic       regulations;
wallet to another;                                    (2) that the EMNSP shall not further
     c. Use E-money as a means of                outsource or subcontract the activity being
payment for goods and services; and              outsourced to the EMNSP; and
     d. Conduct other similar and/or                  (3) that interconnection by the EMNSP
related e-money activities/transactions.         with other networks shall be limited to
     III. Application to outsource. An EMI       networks of other EMNSPs and the BSP-
intending to outsource the services              recognized ATM consortia.




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10.12.31

     c. Ensure that the EMNSP employs a      anti-money laundering requirements and
high degree of professional care in          BSP rules and regulations.
performing the outsourced activities as if        An EMI should make sure that the
these were conducted by the EMI itself.      EMNSP adheres to international standards
This would include, among others, making     on IT governance, information security, and
use of monitoring and control procedures     business continuity in the performance of
to ensure compliance at all times with       its outsourced activities. An EMI should
applicable BSP rules and regulations;        endeavor to obtain independent reviews and
     d. Ensure that the EMNSP has an         market feedback on the EMNSP to
accreditation process in the selection of    supplement its own findings.
agents participating in the retail network        Operational review by an EMI of the
for the conversion of cash to E-money and    EMNSP should be undertaken at least on
its monetization and that the EMNSP has      an annual basis as part of risk
instituted mechanism to manage sufficient    management. This review should be
liquidity in the system/network.             documented as part of an EMI’s
     e. Ensure that the EMNSP enforces a     monitoring and control process.
program that requires all cash-in and cash        VI. Delineation of Responsibilities.
out agents under its network to undergo      The EMI and EMNSP shall identify,
AML trainings and re-trainings every two     delineate       and      document         the
(2) years; and                               responsibilities and accountabilities of
     f. Comply with all laws and BSP rules   each party as regards the outsourcing
and regulations covering the activities      arrangement, including planning for
outsourced to the EMNSP, especially on       contingencies. Notwithstanding any
compliance with anti-money laundering        contractual agreement between an EMI
(AML) requirements.                          and an EMNSP on the sharing of
     V. Due Diligence and Continuing         responsibility, the EMI shall be responsible
Operational Review. Prior to entering into   to its customers, without prejudice to further
an outsourcing arrangement with an           recourse, if any, by the EMI to the EMNSP.
EMNSP, an EMI should conduct                      VII. Confidentiality and Security. An
appropriate due diligence review to assess   EMI should review and monitor the security
the capability of an EMNSP in performing     practices and control processes of the
the service to be outsourced. The due        EMNSP on a regular basis, including
diligence should take into consideration     commissioning or obtaining periodic expert
both qualitative and quantitative factors    reports on adequacy of security to maintain
affecting the performance of the             the confidentiality and integrity of data,
outsourced service, such as the financial    and compliance with internationally-
condition and results of operation for the   recognized standards in respect to the
previous year/s, risk management             operations of the EMNSP. Considering
practices, technical expertise which         that the EMNSP may service more than
involve monitoring the velocity of           one EMI, the EMI should ensure that
e-money transactions and aggregation of      records pertaining to its transactions are
monthly limits, among others, market         segregated from those of other EMIs.
share, reputation (both the company and           The EMI and EMNSP shall identify
its stockholders) and compliance with        circumstances under which each party has




                                                           Manual of Regulations for Banks
App. 95 - Page 2
                                                                                            App. 95
                                                                                           10.12.31

the right to change security                   Others and maintained pursuant to Sec.
requirements. An EMNSP should be               X780 and Subsecs. X780.1 to X780.7, be
required to report immediately any             insulated from risks arising from its
security breaches to the EMI.                  liabilities as EMNSP. These measures may
    In addition, the EMI should make sure      include ring fencing the liquid assets
the EMNSP have documented business             through an escrow or trust account in a
continuity plans in place and that said plan   financial institution acceptable to BSP.
periodically reviewed and tested with no           IX. Sanctions. Violations committed by
significant test findings. An EMNSP shall      EMIs pertaining to outsourcing of activities
provide the EMI with timely and adequate       to EMNSP shall be subject to monetary
notification on any adverse development        penalties as graduated under Appendix
that may impact the former’s performance       29 and/or other non-monetary sanctions
and delivery of service to the EMI.            under Section 37 of RA No. 7653.
    VIII. EMI-Others intending to be an            X. Transitory Provisions. EMIs that
EMNSP. An EMI-Others that intend to be         were granted an authority to outsource
an EMNSP because of its specialized            their E-Money activities to an EMNSP may
technical expertise shall comply with the      continue to exercise such authority
requirements for an EMNSP. In addition,        provided that they have to conform to this
an EMI-Others shall undertake risk-            guidelines within a six (6)-month period
mitigating measures to ensure that liquid      from date of its effectivity.
assets, corresponding to the outstanding       (Circular No. 704 dated 22 December 2010)
balance of E-money issued by the EMI-




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                                                                                                            10.12.31
                                                                                                       Annex A

                                                                       Deadline Within Five (5) banking days
                                                                            from date of reclassification

         CERTIFICATION ON COMPLIANCE WITH RULES AND REGULATIONS ON THE
      RECLASSIFICATION OF REAL AND OTHER PROPERTIES ACQUIRED (ROPA) TO BANK
                    PREMISES, FURNITURE, FIXTURE AND EQUIPMENT

                                             (Name of Bank)
         I hereby certify that the reclassification of Real and Other Properties Acquired (ROPA) to Bank Premises,
Furniture, Fixture and Equipment was made in accordance with the provisions of Subsec. X160.3 of the
MORB, in particular, I certify that:

1.   The reclassification, which involves the property(ies) described in Schedule 1 was duly authorized by
     ( name of bank )’s board of directors, in a (specify whether regular/special meeting of the board) held on
     (specify date of board meeting) for the purpose stated therein;

2.   The approval of said reclassification was manifested in a resolution passed by the board of directors of
     ( name of bank ) during the meeting, a certified true copy of which is attached as Annex A. Said resolution
     of the board of directors, a;ong with the supporting records and documents involving the reclassified
     ROPA account, shall be made available for inspection by BSP examiners;

3.   Only such acquired asset or a portion thereof, that will be (i) immediately used, or (ii) ready and available
     for use within a two (2)-year period from the date of reclassification (in case of ROPA earmarked for future
     use) was reclassified to Bank Premises, Furniture, Fixture and Equipment;

4.   ROPA reclassified to Bank Premises, Furniture, Fixture and Equipment was recorded at its net carrying
     amount where the amounts booked as cost, accumulated depreciation and allowance for losses for bank
     premises, furniture, fixture and equipment corresponds to the balance of these accounts under ROPA at
     the time of reclassification. As such no gains/(losses) were recognized in our books from such
     reclassification; and

5. The reclassification did not cause the bank to exceed the prescribed ceiling on investment in real estate and
    improvements thereon, including bank equipment, under Subsection X160.2 of the MORB, as shown
    below.
                                                                          Before           After
                   Description                                       Reclassification Reclassification
    Ratio of bank's investment in real estate andimprovements
    thereon, including bank equipment, to net worth


                                                                     Signature above Printed Name
                                                                   President/Officer of Equivalent Rank
     Date _________________

         SUBSCRIBED and SWORN to before me, this ______ day of _______________, affiant
     exhibiting his Community Tax Certificate as indicated below:
                                           Community Tax
           Name                            Certificate No.            Date/Place of Issue


                                                                                 Notary Public
                                                                             _____________________
                                                                             _____________________
                                                                             _____________________
                                                                             _____________________



Manual of Regulations for Banks                                                          Appendix 96 - Page 1
                                                                                                   APP. 97
                                                                                                   11.12.31


         GUIDELINES GOVERNING THE IMPLEMENTATION/EARLY ADOPTION OF
    PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRS 9) FINANCIAL INSTRUMENTS
                             (Appendix to Subsec. X191.3)


Section 1. Statement of Policy                          financial instrument). This may include, for
    It is the policy of the Bangko Sentral to           instance, a portfolio of investments that an FI
promote fairness, transparency and accuracy in          manages in order to collect contractual cash flows
financial reporting. It is in this light that the BSP   and another portfolio of investments that an FI
aims to adopt all Philippine Financial Reporting        manages in order to trade to realize fair value
Standards (PFRS) and Philippine Accounting              changes.
Standards (PAS) to the greatest extent possible.            An FI’s business model for managing financial
                                                        assets shall be documented and approved by the
Section 2. Classification and Measurement of            FI’s board of directors or its equivalent governing
Financial Assets and Financial Liabilities under        body. The documentation shall include, at a
PFRS 9                                                  minimum, the following:
     PFRS 9 shall apply to financial assets and                  a. clearly documented policies and
financial liabilities within the scope of Philippine    procedures on the specific business model for
Accounting Standards (PAS) 39. FIs shall classify       managing financial assets and for measuring/
and measure financial assets and financial              evaluating performance of those financial assets
liabilities in accordance with the provisions of        within a specific business model;
PFRS 9 upon its initial application. FIs shall               b. type and frequency of reports which shall
likewise observe the following guidelines in the        be presented to management to measure/evaluate
implementation of PFRS 9:                               performance of financial instruments within a
     1. Classification of financial assets. Financial   specific business model; and
assets that are debt instruments shall be classified         c. accountable officers and their specific
as subsequently measured at either amortized cost       responsibilities with respect to the management,
or fair value based on the (a) FI’s business model      monitoring and evaluation of the performance of
for managing financial assets, and (b) the              financial instruments within a specific business
contractual cash flow characteristics of the            model.
financial asset. Financial assets that are equity            3. Financial assets measured at fair value
securities shall be classified at either fair value     through profit or loss (FVPL). A financial asset
through profit or loss (FVPL) or irrevocably            shall be measured at fair value through profit or
designated at initial recognition at fair value         loss, except in the following cases:
through other comprehensive income (DFVOCI).                 a. The financial asset is part of a hedging
     2. Business model for managing financial           relationship, in which case the provisions of PAS
assets. An FI’s business model pertains to the          39 on hedge accounting shall apply;
manner by which it actually manages its business            b. The financial asset that is an equity security
or portfolio of financial instruments.                  that is not held for trading and is irrevocably
     An FI’s business model need not be assessed        elected upon initial recognition to be measured
at the level of the FI. The business model criteria     at fair value through other comprehensive income
may be applied at the level of a portfolio of           as provided under Item No. “5”; or
financial instruments (i.e., group of financial              c. The financial asset that is a debt instrument
instruments that are managed together by the FI)        is measured at amortized cost as provided under
but not on an instrument-by-instrument basis (i.e.,     Item No. “7”.
not based on intention for each individual                  Financial assets measured at fair value through




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profit or loss shall consist of the following:               b. FIs shall apply the fair value option only to
     a. Financial assets held for trading (HFT) as      instruments for which fair values can be reliably
defined in PFRS 9;                                      estimated; and
     b. Financial assets designated at fair value             c. FIs shall provide BSP with supplemental
through profit or loss (FA DFVPL) as defined in         information as may be necessary, to enable BSP
PFRS 9; and                                             to assess the impact of the FI’s use of the DFVPL
    c. Other financial assets mandatorily measured      option.
at fair value through profit or loss (FA MMFVPL)             5. Equity securities designated at fair value
under PFRS 9.                                           through other comprehensive income (DFVOCI).
     Investments in hybrid securities, securities       Financial assets that are equity securities that are
overlying securitization structures and other           not held for trading may be irrevocably elected at
structured products shall be measured at FVPL,          initial recognition by an FI to be accounted for as
unless these meet the criteria for amortized cost       at fair value through other comprehensive income,
measurement in accordance with PFRS 9.                  subject to the conditions provided under PFRS 9.
    Investments in credit-linked notes (CLNs) and            Unrealized gains/(losses) arising from changes
similar structured products with embedded credit        in fair value of investment in equity securities
derivatives, as defined under Section 1628),            classified as DFVOCI, including any related
including those that were reclassified from HFT         foreign exchange gains/(losses), shall be credited/
to Available for Sale (AFS)/Held to Maturity (HTM)/     (charged) to Other Comprehensive Income (OCI)
Unquoted Debt Securities Classified as Loans            under the equity section of the balance sheet:
(UDSCL) or from AFS to HTM/UDSCL in                     Provided, That the realized gains/(losses) on sale
accordance with the reclassification rules under        or derecognition of equity securities booked under
Appendix 33, shall be classified and measured at        the DFVOCI account shall be credited/(charged)
FVPL upon initial application of PFRS 9.                to the “Retained Earnings – Free” account on sale/
    The accounting treatment for investments in         derecognition date.
CLNs and other structured products under                    6. Investments in unquoted equity securities.
Appendix 66a and the guidelines on the                  Investments in unquoted equity securities shall
reclassification of CLNs and other similar              be recorded at fair value from the date of initial
instruments that are linked to the ROP under BSP        application of PFRS 9.
Memorandum No. M-2009-012 dated 16 April                     However, in limited circumstances, cost may
2009 shall no longer apply to financial assets that     be an appropriate measure of fair value. For this
are accounted for in accordance with PFRS 9.            purpose, FIs shall be guided by the provisions of
     4. Financial assets designated at fair value       PFRS 9 in making its assessment.
through profit or loss (DFVPL). An FI may, at initial        7. Financial assets measured at amortized cost
recognition, designate financial assets that are debt        a. Classification criteria
instruments as measured at fair value through               Financial assets that are debt instruments, other
profit or loss in accordance with the conditions        than those that are DFVPL, which meet all of the
mentioned under PFRS 9, subject to the following        following conditions shall be measured at
requirements:                                           amortized cost:
     a. FIs shall have in place appropriate risk            i. The financial asset is held within a
management systems (including related risk              business model whose objective is to hold
management policies, procedures and controls)           financial assets in order to collect contractual cash
prior to initial application of the fair value option   flows; and
for a particular activity or purpose and on an               ii. The contractual terms of the financial asset
ongoing basis;                                          give rise on specified dates to cash flows that are




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                                                                                                      APP. 97
                                                                                                      11.12.31


solely payments of principal and interest on the         value;
principal amount outstanding.                                  (5) sales that occur after the FI has
   b. Hold to collect contractual cash flows (HTC)       substantially collected all of the security’s original
business model                                           principal through scheduled payments or
    In addition to those provided under PFRS 9,          prepayments.
the following instances are, likewise, deemed                (6) sales attributable to an isolated event that
inconsistent with an HTC business model; hence,          is beyond the FI’s control, is non-recurring and
should not qualify for amortized cost                    could not have been reasonably anticipated by
measurement category:                                    the FI (e.g., a run on a bank);
     i. a portfolio of debt instruments that is              (7) sales attributable to a change in tax law
managed in order to benefit from actual or               that eliminates or significantly reduces the tax
expected price movements/fair value changes              exempt status of interest on the security under the
(e.g., changes in credit spreads, yield curve, etc.)     amortized cost category;
or to lock in arbitrage profits;                             (8) sales attributable to a major combination
     ii. a portfolio of debt instruments held for        or major disposition that necessitates the sale of
market-making by an FI who is a market maker in          securities under the amortized cost category to
those instruments (e.g., government securities);         maintain the FI’s interest rate risk position or credit
     iii. positions in debt instruments which arise      risk policy;
from the execution of trade orders from customers;           (9) sales attributable to a change in statutory
or                                                       or regulatory requirements significantly modifying
     iv. a portfolio of debt instruments that is         either what constitutes a permissible investment
managed and evaluated on a fair value basis in           or the maximum level of particular investments,
accordance with a documented risk management             thereby causing the FI to dispose a security under
or investment strategy as evidenced by                   the amortized cost category;
management reports provided to senior                        (10) sales attributable to a significant increase
management.                                              in regulatory capital requirements that causes the
      A “more than infrequent sale” of financial         FI to downsize by selling securities under the
assets in a portfolio of debt instruments measured       amortized cost category;
at amortized cost shall be assessed as to whether            (11) sales attributable to a significant increase
such sales are consistent with an HTC business           in the risk weights of securities under the
model.                                                   amortized cost category used for regulatory risk-
     The following sales/derecognition of financial      based capital purposes; and
assets shall not be considered inconsistent with              (12) sales/derecognition attributable to the
an HTC business model:                                   changes in the payment structure as initiated by
     (1) sales which no longer meet the FI’s             the creditor (e.g., bond swap or exchange, options,
investment policy (e.g., due to downgrade in credit      changes in tenor and other related debt
rating below that required by the entity’s               restructuring).
investment policy);                                         An FI shall clearly document in its policies and
     (2) sales of financial assets in order to fund      procedures the instances and the manner by which
capital expenditures;                                    sales of financial assets under the amortized cost
   (3) sales of financial assets to reflect the change   category would not be inconsistent with the HTC
in expected timing of payouts;                           business model in accordance with PFRS 9 and
     (4) sales which are so close to maturity (e.g.,     the requirements of this Appendix.
less than three months) or the security’s call date          Any sale/derecognition of financial assets
that changes in the market rate of interest would        under the amortized cost category shall be
not have a significant effect on the security’s fair     documented by the FI. The documentation shall




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APP. 97
11.12.31


include, at a minimum, the following information:        subsequently measured at amortized cost using
     i. details of the financial asset sold/             the effective interest method, except for:
derecognized;                                                a. Financial liabilities which are part of a
     ii. gain or loss on sale/derecognition; and         hedging relationship, in which case the provisions
     iii. the specific reason/s for derecognizing the    of PAS 39 on hedge accounting shall apply;
financial asset and a justification on how such sale/        b. Financial liabilities measured at fair value
derecognition is consistent with the HTC business        through profit or loss; and
model.                                                       c. The following financial liabilities which
    c. Amortized cost of financial assets at date of     shall be subsequently measured in accordance
initial application. The amortized cost of financial     with the provisions of PFRS 9 :
assets that are reclassified from the fair value             i. Financial liabilities that arise when a
category (i.e., HFT, DFVPL, AFS) to the amortized        transfer of a financial asset does not quality for
cost category at the date of initial application of      derecognition or when the continuing
PFRS 9 shall be determined retrospectively (i.e.,        involvement approach applies;
using the original acquisition cost and the original         ii. Financial guarantee contracts, as defined
effective interest rate at the date of acquisition) in   under Appendix A of PFRS 9 ; and
accordance with the provisions of PFRS 9, except             iii. Commitments to provide a loan at a
in cases when it is “impracticable” to do so, as         below-market interest rate.
defined in PAS 8, in which case the fair value of            9. Financial liabilities measured at fair value
the financial asset at the date of initial application   through profit or loss. Financial liabilities
of PFRS 9 shall be treated as the new amortized          measured at fair value through profit or loss shall
cost of that financial asset at the date of initial      consist of the following:
application.                                                 a. Financial liabilities HFT, including
    The retrospective determination of amortized         derivative liabilities that are not accounted for as
cost at initial application of PFRS 9 under the          hedging instruments, and
preceding paragraph shall, likewise, apply to                b. Financial liabilities designated at fair value
financial assets accounted for under the amortized       through profit or loss.
cost category under PFRS 9 that were reclassified            10. Financial liabilities designated at fair
from the HFT and AFS categories to the HTM and           value through profit or loss (DFVPL). An FI may,
the UDSCL categories in accordance with the              at initial recognition, irrevocably designate
reclassification guidelines under Annex A of             financial liabilities at fair value through profit or
Appendix 33.                                             loss subject to the conditions mentioned under
     In the case of financial assets reclassified from   PFRS 9 and the regulatory requirements for
AFS to the HTM/UDSCL category under Annex A              financial assets DFVPL under Item No. “4” above.
of Appendix 33, any remaining balance (i.e.,                 Net unrealized gains/losses arising from
unamortized amount) of previously recognized net         changes in the fair value of financial liabilities
unrealized gains/(losses) under the “Other               DFVPL shall be recognized in profit or loss:
Comprehensive Income - Net Unrealized Gains/             Provided, That those net unrealized gains/losses
(Losses) on AFS Financial Assets” account in the         that are attributable to changes in the liability’s
balance sheet that correspond to those reclassified      credit risk shall be recognized in “Other
AFS financial assets shall be closed to the              Comprehensive Income (OCI)”, Provided,
appropriate accounts upon initial application of         however, That if the recognition of net unrealized
PFRS 9.                                                  gains/losses in OCI would create or enlarge an
     8. Classification of financial liabilities.         accounting mismatch in the FI’s profit or loss, the
Financial liabilities shall be classified as             FI shall present all net unrealized gains/losses on




Appendix 97 - Page 4                                                        Manual of Regulations for Banks
                                                                                                    APP. 97
                                                                                                    11.12.31



that financial liability DFVPL in profit or loss.      consistent with PFRS 7 Financial Instruments:
     11. Reclassification of financial assets and      Disclosures which require among others the
finacial liabilities.                                  disclosure of an entity’s objectives, policies and
    a. Financial assets shall be reclassified when,    processes for managing the risk from financial
and only when, an FI changes its business model        instruments and any changes to those objectives,
for managing financial assets in accordance with       policies, and procedures.
the provisions of PFRS 9 and of this Appendix.             b. Financial liabilities shall not be reclassified.
Reclassifications other than due to change in              12. Operations and Accounting Manual. An
business model are not permitted.                      FI shall maintain an operations and accounting
     A change in an FI’s business model is             manual on the classification and measurement of
expected to be very infrequent and must be             financial assets and financial liabilities which shall
determined as a result of external and internal        be consistent with PFRS 9 and the provisions of
changes that are significant to the FI’s operations    this Appendix. The said manual shall cover
and demonstrable to external parties. Hence, such      processes and procedures that will capture the
change in business model must be approved by           reconfiguration and/or modification of existing
the FI’s board of directors or its equivalent          systems, interface and data requirements, changes
governing body, and such fact properly                 to the chart of accounts and implementation of
documented. The documentation, at a minimum,           new accounting/information systems to ensure
shall include the following information:               compliance with the PFRS/PAS and the reportorial
    a. A certified true copy of the board              requirements of the SEC and the BSP, as
resolution approving the change in the business        applicable.
model for managing financial assets;
     b. The reasons for the change in the FI’s         Section 3. Early Adoption of PFRS 9
business model and how it is aligned with the               The guidance provided in this Section shall
objectives and strategies of the FI;                   apply to FIs that early adopt PFRS 9 prior to 01
    c. A description of the new business model;        January 2013. The date of initial application of
and                                                    PFRS 9 is the date when the FI first applies the
    d. A qualitative description of the new            requirements of PFRS 9. If the date of initial
business model’s implication on the FI’s financial     application is prior to 1 January 2011, the date of
statements.                                            initial application can be any date between 01
    In addition to the foregoing items, the BSP        January 2010 up to 31 December 2010. If the
may require additional documents from FIs to           date of early application is on or after 01 January
support the reclassification of financial assets due   2011, the date of initial application must be the
to change in business model.                           first day of the fiscal year or calendar year adopted
     A change in the objective of the entity’s         by the FI (e.g., 01 January).
business model must be effected before the                  An FI that elects to apply PFRS 9 prior to 01
reclassification date.                                 January 2013 shall observe the requirements of
    An FI shall not effect a reclassification within   PFRS 9 and any amendments thereto.
the period of change in the business model. Any              FI’s shall, likewise, observe the following
reclassification of financial assets due to change     guidelines:
in business model should take effect from the               1. Board/Senior management approval. FIs
beginning of the next reporting period of the FI’s     that early adopt PFRS 9 must assess the financial
financial statements: Provided, That the change        statement implications of early adoption of PFRS
in business model shall be disclosed in the            9 and must ensure that it has the capability to
financial statements in the period of change           comply with the requirements of that standard,




Manual of Regulations for Banks                                                        Appendix 97 - Page 5
APP. 97
11.12.31


including the required disclosures in the financial    derivatives)” in the FRP, shall be used to record
statements. The early adoption of PFRS 9 must be       the positive fair value of embedded derivatives
approved by the FI’s board of directors.               where the host contract is a financial liability of
     2. Inapplicability of Appendix 33. The            the FI.
guidelines set forth under Appendix 33, including           (ii) Financial Assets Designated at Fair Value
Annex A of Appendix 33 on the classification and       through Profit or Loss (DFVPL). This account shall
accounting of debt and equity securities shall no      be used to record investments in FA DFVPL and
longer be applicable when an FI opts to adopt          FA MMFVPL, as follows:
PFRS 9.                                                     · FA DFVPL refers to investments in debt
    3. FRP reporting. Banks shall report financial     instruments that are designated as at fair value
assets and financial liabilities in accordance with    through profit or loss in accordance with PFRS 9.
the following guidelines on the mapping of                  · FA MMFVPL refers to financial assets that
financial assets and liabilities (Annexes A and        are required to be measured at fair value through
A-1) using the existing FRP template issued under      profit or loss under PFRS 9, other than those that
Circular No. 512 dated 03 February 2006, as            are HFT and DFVPL.
amended:                                                    c. The “Available for Sale (AFS) Financial
    a. Debt securities measured at amortized cost      Asset – Equity Securities” account shall be used
under PFRS 9 shall be booked under the HTM             to record investments in equity securities (other
account, in the case of debt securities that are       than those that are held for trading) that are
quoted in an active market, or the UDSCL               irrevocably designated at initial recognition to be
account, in the case of debt securities that are not   accounted for as DFVOCI in accordance with
quoted in an active market.                            PFRS 9. The “Other Comprehensive Income –
    The “tainting rule” for HTM securities shall       Net Unrealized Gains/(Losses)” account under the
no longer apply to early adopters of PFRS 9.           equity section of the balance sheet shall be used
     b. Financial assets measured at fair value        to record unrealized gains/(losses) from changes
through profit or loss under PFRS 9 shall be           in fair value, including any related foreign
booked under the following accounts/sub-               exchange gains/(losses), of those equity securities
accounts.                                              under the DFVOCI category.
    (i) Held for Trading (HFT) Financial Assets            d. Financial liabilities measured at fair value
     · The “HFT Securities” sub-account shall be       through profit or loss under PFRS 9 shall continue
used to record held for trading debt and equity        to be booked under the following accounts/sub-
securities.                                            accounts:
     · The “Derivatives with Positive Fair Value           i. The “Financial Liabilities Held for Trading”
Held for Trading” account shall be used to record      account shall be used to record financial liabilities
the positive fair value of derivatives, other than     HFT.
those that are designated and effective hedging             · The “Derivatives with Negative Fair Value
instruments.                                           Held for Trading” account shall be used to record
     · The sub-account “Derivatives with               the negative fair value of derivatives, other than
Positive Fair Value Held for Trading (stand-alone      those that are designated and effective hedging
derivatives)” in the FRP shall be used to record       instruments.
the positive fair value of stand alone derivatives,         · The sub-account “Derivatives with
other than those that are designated and effective     Negative Fair Value Held for Trading (stand-alone
hedging instruments.                                   derivatives)” shall be used to record the negative
     · The sub-account “Derivatives with               fair value of stand-alone derivatives, other than
Positive Fair Value Held for Trading” (embedded        those that are designated and effective hedging




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                                                                                                     APP. 97
                                                                                                     11.12.31


instruments.                                                   a. Debt securities measured at amortized cost
     · The sub-account “Derivatives with                  under PFRS 9 shall be booked under the
Negative Fair Value Held for Trading (embedded            “Investments in Bonds and Other Debt
derivatives)” shall be used to record the negative        Instruments” account.
fair value of embedded derivatives where the host               The “tainting rule” for HTM securities shall
contract is a financial liability of the FI.              no longer apply to early adopters of PFRS 9.
     · The “Liability for Short Position” account              b. The use of the “Trading Account Securities
shall be used to record the (a) obligation of the         – Loans” account shall be limited to the recording
purchaser/borrower of securities under Reverse            of the amortized cost of loans arising from
Repurchase Agreements/Certificates of Assignment/         repurchase agreements, certificates of assignment,
Participation with Recourse/Securities Lending            participation with recourse transactions.
and Borrowing Agreements to return the securities              (i) The “Government Securities Purchased
purchased/ borrowed from the seller/lender which          under Resale Agreements” sub-account shall be
the former sold to third parties.                         used to record the amortized cost of loans arising
    ii. The “Financial Liabilities designated at Fair     from repurchase agreements involving
Value Through Profit or Loss’ account shall be            government securities.
used to record financial liabilities that are                  (ii) The “Government Securities Purchased
designated as at fair value through profit or loss.       under Certificates of Assignment/Participation
The “Other Comprehensive Income – Others”                 with Recourse” sub-account shall be used to
account under the equity section of the balance           record the amortized cost of loans arising from
                                                          certificates of assignment and participation with
sheet shall be used to record net unrealized gains/
                                                          recourse agreements involving government
(losses) from changes in fair value attributable to       securities.
own credit risk of financial liabilities DFVPL that            (iii) The “Government Securities Purchased
are accounted for in accordance with PFRS 9.              under Reverse Repurchase Agreements with the
        e. The following accounts/sub-accounts            BSP” sub-account shall be used to record the
shall no longer be used upon initial application          amortized cost of loans arising from repurchase
of PFRS 9.                                                agreements with the BSP.
     (i) Financial assets HFT (c) Derivatives Carried         (iv) The “Private Debt Securities/Commercial
at Cost,                                                  Papers Purchased Under Resale Agreements” sub-
                                                          account shall be used to record the amortized cost
     (ii) AFS Financial Assets (i) Debt Securities, and
                                                          of loans arising from repurchase agreements
     (iii) Investment in Non-Marketable Equity            involving private debt securities.
Securities (INMES).                                           (v) The “Private Debt Securities/Commercial
     f. All the required information in the main          Papers Purchased under Certificates of
schedules, sub-schedules, and additional                  Assignment/Participation with Recourse” sub-
disclosures/information in the FRP shall be               account shall be used to record the amortized cost
accomplished for completeness.                            of loans arising from certificates of assignment and
     4. Consolidated Statement of Condition               participation with recourse agreements involving
(CSOC). QBs and other NBFIs shall report                  private debt securities.
financial assets and financial liabilities in                  c. Financial assets measured at fair value
accordance with the following guidelines on the           through profit or loss under PFRS 9 shall be
mapping of financial assets and financial                 booked under the following accounts/sub-
liabilities (Annexes B and B-1) using the existing        accounts.
CSOC template:                                                 (i) Trading Account Securities (TAS)




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APP. 97
11.12.31


   ·       The “TAS - Investments” account shall be            d. Private Debt Sec./Commercial Papers
used to record held for trading debt securities           (CPs) Purchased,
under PAS 39.                                                 h. Private Debt Sec./Commercial Papers (CPs)
     · The “TAS - Equity” account shall be used           Sold Under Repurchase Agreements,
to record held for trading equity securities.                 (iii) Underwriting Accounts – Equity Securities
      (ii) Underwriting Accounts – Debt/Equity                 a. Underwritten Equity Securities Purchased,
Securities. This account shall be used to record               b. Accumulated Market Gains/(Losses) UA,
investments in FA DFVPL and FA MMFVPL, as                      c. Receivables – Underwritten Equity
follows:                                                  Securities Sold.
     · FA DFVPL refers to investments in debt                 5. FRP for Trust Institutions (FRPTI) reporting.
securities that are designated as at fair value           Trust institutions shall report financial assets in
through profit or loss in accordance with PFRS 9.         accordance with the following guidelines on the
     · FA MMFVPL refers to financial assets that          mapping of financial assets (Annexes C and C-1)
are required to be measured at fair value through         using the existing FRPTI template issued under
profit or loss under PFRS 9, other than those that        Circular No. 609 dated 26 May 2008, as amended:
are HFT and DFVPL.                                             a. Debt securities measured at amortized cost
     d. The “Available for Sale (AFS) Securities”         under PFRS 9 shall be booked under the HTM
account shall be used to record investments in            account, in the case of debt securities that are
equity securities (other than those that are held         quoted in an active market, or the UDSCL
for trading) that are irrevocably designated at initial   account, in the case of debt securities that are not
recognition to be accounted for as DFVOCI in              quoted in an active market.
accordance with PFRS 9. The “Net Unrealized                   The “tainting rule” for HTM securities shall
Gains/(Losses) on Securities Available for Sale”          no longer apply to early adopters of PFRS 9.
account under the equity section of the balance                b. Financial assets measured at fair value
sheet shall be used to record unrealized gains/           through profit or loss under PFRS 9 shall be
(losses) from changes in fair value, including any        booked under the “Financial Assets at Fair Value
related foreign exchange gains/(losses), of those         Through Profit or Loss-Debt and Equity Securities”
equity securities under the DFVOCI category.              sub-account.
     e. The “Bills Payable–Others” account shall               c. The “Derivatives with Positive Fair Value
be temporarily be used to record financial                Held for Trading” account shall be used to record
liabilities held for trading and financial liabilities    the positive fair value of derivatives, other than
DFVPL.                                                    those that are designated and effective hedging
     f. Changes in fair value of financial liabilities    instruments.
DFVPL attributable to own credit risk shall                    d. The “Available for Sale (AFS) Financial
temporarily be recorded in the account “Net               Assets” account shall be used to record
Unrealized Gains/Losses on Available for Sale             investments in equity securities (other than those
Financial Asset”.                                         that are held for trading) that are irrevocably
     g. The following sub-accounts in the balance         designated at initial recognition to be accounted
sheet of the CSOC shall no longer be used upon            for as DFVOCI in accordance with PFRS 9. The
initial application of PFRS 9.                            “Net Unrealized Gains/(Losses) on AFS Financial
     (i) Underwriting Accounts – Debt Securities          Assets” account under the equity section of the
     a. Underwritten Debt Sec. Purchased,                 balance sheet shall be used to record the
      b. Accum. Market Gains/(Losses) UA,                 unrealized gains/(losses) arising from changes in
     c. Receivables – Underwritten Debt                   fair value, including any related foreign exchange
Securities Sold,                                          gains/(losses), of those equity securities under the
     (ii) Trading Accounts Securities – Loans             DFVOCI category.




Appendix 97 - Page 8                                                         Manual of Regulations for Banks
                                                                                                  APP. 97
                                                                                                  11.12.31


     e. The following accounts/sub-accounts in the     from the end of the first month or quarter, in the
balance sheet of the FRPTI shall no longer be used     case of rural banks/Coop Banks, of the calendar
upon initial application of PFRS 9.                    or fiscal year of initial application of PFRS 9.
   (i) AFS Financial Assets (i) Debt Securities, and       The report shall disclose the cumulative
   (ii) INMES account.                                 impact of the FI’s adoption of PFRS 9 on selected
     f. All the required information in the main       balance sheet accounts, net income and capital
schedules, sub-schedules, and additional               position reckoned from the beginning of the FI’s
disclosures/information in the FRPTI shall be          calendar of fiscal year, as applicable.
accomplished for completeness.
    g. Trust institutions that early adopt PFRS 9 on
or before 31 December 2010 need not submit             Section 4. Transition Rules
revised FRPTI reports that conform with the                FIs shall observe the transition rules provided
guidelines under Section 2 of this Circular for        under PFRS 9 as well as the following:
periods prior to 31 December 2010.                          1. PFRS 9 shall not be applied to financial
    6. Supplementary report. Early adopters shall      assets and financial liabilities that have already
submit a Supplementary Report on Early Adoption        been derecognized at the date of initial
of PFRS 9 which shall be a Category A-1 report to      application.
the SDC together with the prescribed monthly/               2. An FI shall assess whether a financial asset
quarterly FRP/CSOC reports, as follows:                shall be classified under the amortized cost, FVPL,
     a. Banks shall submit the solo and                or DFVOCI category on the basis of the facts and
consolidated supplementary (Annex D) in                circumstances that exist at the date of initial
accordance with the submission frequency and           application of PFRS 9. However, the resulting
deadline of the prescribed FRP.                        classification shall be applied retrospectively,
     b. NBFIs, other than trust institutions, shall    irrespective of the FI’s business model in prior
submit the solo supplementary report (Annex E)         reporting periods.
in accordance with the submission frequency and            3. The tainting rule for HTM securities and
deadline of the Consolidated Statement of              the related holding period for HTM securities that
Condition report”.                                     are classified to the AFS category under Appendix
    7. Report on initial application of PFRS 9. A      33 shall no longer apply to FIs upon initial
bank and each of its subsidiary banks/QBs, that        application of PFRS 9.
opt to early adopt PFRS 9 shall submit a one-time          4. An FI may choose to adopt the provisions
solo report on initial application of PFRS 9 to the    of PFRS 9 issued in 2009 or the provisions of
BSP through the SDC using the attached format          PFRS 9 issued in 2010 before 01 January 2013.
(Annex F). The report which shall be considered            5. An FI that has adopted PFRS 9 on financial
a Category A-1 report shall be submitted to the        assets in 2010 need not submit revised FRP/CSOC
BSP in accordance with the following timelines:        reports that conform with the guidelines under the
     a. For FIs which initially apply PFRS 9 on or     Supplementary Report on Early Adoption of PFRS
before 31 December 2010 - not later than 31            9 for periods prior to 31 December 2010. It may
January 2011;                                          adopt the provisions of PFRS 9 on financial
    b. For FIs which initially apply PFRS 9 in 2011    liabilities before 01 January 2013: Provided, That
– not later than fifteen (15) banking/business days    it does not re-apply the transitional provisions of
from the end of the month when such initial            the said standard on its financial assets: Provided,
adoption is reflected in their book, and               further, That the FI complies with the submission
     c. For FIs which initially apply PFRS 9 in 2012   guidelines set forth under Nos. “6”, “7” and “8”
– not later than fifteen (15) banking/business days    below, as applicable: Provided, finally, That the




Manual of Regulations for Banks                                                      Appendix 97 - Page 9
APP. 97
11.12.31


FI limits the information that it shall report in        8. An FI is expected to comply with the
the one-time solo Report on Initial Application      reportorial and disclosure requirements of the
of PFRS 9 to that arising from its adoption of       Securities and Exchange Commission on the
the provisions of PFRS 9 on financial liabilities.   adoption of PFRS 9.
   6. An FI which intends to early adopt PFRS            9. An FI which adopts PFRS 9 on the
9 in 2011 is given up to 31 December 2011            mandatory effective date shall present prior
within which to reflect the requirements of PFRS     comparative general purpose financial statements
9 in its prudential reports: Provided, That it       which reflect all of the requirements of PFRS 9.
notifies the BSP, through the SDC, of the details    FIs are, therefore, expected to have an
of its actual implementation of adoption of the      implementation program in place to ensure
said standard, including the month-end date          compliance with the said requirements by 01
when such initial adoption is reflected in its       January 2013.
books, in its one-time solo Report on initial
Application of PFRS 9.                               Section 5. Sanction
     7. An FI that intends to early adopt PFRS 9     The penalties and sanctions provided under
in 2012 shall reflect the requirements of the said   Subsec. X388.5(c) shall be imposed on FIs and
standard in its FRP/CSOC report as of the end        officers concerned found to have violated any of
of the first month or quarter, in case of rural      the provisions of this Appendix.
banks/Coop Banks, of the calendar or fiscal year     (Circular No. 708 dated 10 January 2011, as amended by M-2011-048
of initial application of PFRS 9.                    dated 26 August 2011 and Circular No. 733 dated 05 August 2011)




Appendix 97 - Page 10                                                        Manual of Regulations for Banks
                                                                                                                    APP. 98
                                                                                                                   11.12.31



     LIST OF DOCUMENTARY REQUIREMENTS CONFIRMATION OF THE ELECTION/
APPOINTMENT OF THE MEMBERS OF THE BOARD OF DIRECTORS/SENIOR VICE PRESIDENTS
               (SVP) AND ABOVE OR EQUIVALENT RANKS OF BANKS
                  (Appendix to Subsecs. X141.4, X180.2 and X406.10)

     1. Letter request signed by a duly authorized                    5. Notarized Authorization Form for
officer of the bank. When applicable, the letter                 Querying the BSP Watchlist File of the director/
should also indicate request for approval of the                 officer concerned pursuant to Subsec. X143.5;
interlocking positions1 of the directors and/or                       6. If the director concerned is an
officers concerned, pursuant to Section X145 and                 independent director, sworn statement under oath
related provisions of the MORB, together with a                  of the independent director containing
justification for such interlock;                                certification and information required under Sec.
     2. Secretary’s Certificate on the resolution of             X144;
the (1) stockholders of the bank regarding the                        7. Copies of the certificate of attendance on
election of the director concerned; or (2) board of              corporate governance seminar by the newly-
directors of the bank approving the appointment                  elected directors;2
of the officer concerned. In the case of foreign                      8. In case of directors for re-election,
banks, consularized letter of appointment of the                 secretary’s certificate on the attendance by the
officer concerned from the head office and /or                   director concerned to the board meetings held
Regional Office;                                                 for the last (twelve) 12 months covering the term
     3. Notarized certification of the director/                 of service, indicating the percentage under Section
officer concerned that he possesses all the                      X141;
qualifications and none of the disqualifications to                   9. In the case of officers with rank of SVP
become a director/officer as enumerated in                       and above or equivalent rank, a brief description
Sections X141, X142 and X143 and other pertinent                 of his/her duties and responsibilities;
provisions;                                                           10. Alien Employment Permit issued by the
     4. Notarized certification as described under               Department of Labor and Employment for
Subsec. X141.9 and Appendix 6 that the director                  foreigners appointed as officers; and
concerned is fully aware and understands the                          11. To be directly submitted to SDC, a fully
specific duties and responsibilities enumerated                  accomplished bio-data together with a photograph
under Subsec. X141.3. For the avoidance of doubt,                (2"X2") of the elected/appointed directors and
this requirement shall also apply to directors of                officers respectively3.
trust corporations.                                              CL-2011-045 dated 01 July 2011




1
  Banks are responsible in determining interlocking positions of their directors/officer that are subject to the prior approval
of the Monetary Board as required under Section X145.
2
  This does not apply to those directors previously confirmed by the Monetary Board notwithstanding that their confirmation
as such were with other banks.
3
  Subsequent submissions of bio-data and/or schedules or attachments thereto for the purpose of completing a previously
submitted but incomplete version shall be considered late reporting subject to applicable penalties in accordance with
Section X192.2.


Manual of Regulations for Banks                                                                      Appendix 98 - Page 1
                                                                                                            APP. 98a
                                                                                                            11.12.31




                     LIST OF DOCUMENTARY REQUIREMENTS
   APPROVAL OF THE APPOINTMENT OF TRUST AND COMPLIANCE OFFICERS OF BANKS


     1. Letter request1 signed by an authorized                 4. Notarized Authorization Form for
officer of the bank;                                        querying the BSP Watchlist File of the officer
     2. Secretary’s Certificate attesting to the            concerned pursuant to Subsec. X143.5;
resolution of the board of directors of the bank                5. Alien Employment Permit issued by the
approving the appointment of the officer                    Department of Labor and Employment for
concerned or in the case of foreign banks, letter           foreigners appointed as officers;
of approval on the appointment from the country                 6. Brief description of the concerned officer’s
head;                                                       duties and responsibilities; and
     3. Notarized certification of the officer                  7. To be submitted to Supervisory Data
concerned that he possess all the qualifications            Center, a fully accomplished bio-data together
and none of the disqualifications to become an              with a photograph (2"X 2") of the elected/
officer as enumerated in Sections X142 and X143;            appointed directors and officers, respectively2.
                                                            CL-2011-045 dated 01 July 2011




1
  In case of Trust Officer and/or compliance officer with rank of senior vice president and above or equivalent rank
and whose appointment as SVP in another capacity has not yet been confirmed by the BSP, the letter should state that
it is a request for approval and confirmation of the concerned officers.
2
  Subsequent submissions of bio-data and/or schedules or attachments thereto for the purpose of completing a
previously submitted but incomplete version shall be considered late reporting subject to applicable penalties in
accordance with Section X192.2.




Manual of Regulations for Banks                                                               Appendix 98a - Page 1

				
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