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Manual of Regulations on Foreign Exchange Bangko Sentral ng

VIEWS: 42 PAGES: 48

  • pg 1
									                                                                                                            Sections 1 - 2
                                                                                                                10.12.31


                                                     PART FIVE

                             MANUAL OF REGULATIONS ON
                           FOREIGN EXCHANGE TRANSACTIONS

     PART ONE. CURRENT ACCOUNTS                                   for Non-Trade Current Account
                                                                  Transactions with Non-Residents. AABs
                      Chapter I                                   and AAB-forex corps may sell foreign
                                                                  exchange to residents to cover payments
     NON-TRADE FOREIGN EXCHANGE                                   to non-resident beneficiaries for non-trade
      RECEIPTS AND DISBURSEMENTS,                                 current account purposes (e.g.,
    CROSS-BORDER TRANSFER OF LOCAL                                educational expenses, medical expenses,
     AND FOREIGN CURRENCIES, AND                                  travel expenses and salaries of foreign
          GOLD TRANSACTIONS                                       expatriates) other than those relating to
                                                                  foreign/foreign currency loans and
Section 1. Disposition of Foreign Exchange                        investments, without need for prior BSP
Receipts. Foreign exchange receipts,                              approval, subject to the the submission/
acquisitions or earnings of residents from                        presentation of the following to the foreign
non-trade sources may be used freely for                          exchange selling institution:
any purpose. Such proceeds may, at the option                          1. For sales not exceeding USD60,000
of said residents, be sold for pesos, retained                    or its equivalent in other foreign currency
or deposited in foreign currency accounts,                             - Duly accomplished application to
whether in the Philippines or abroad.                             purchase foreign exchange using the
    Resident shall refer to:                                      prescribed format (Annex A);
    a. an individual citizen of the                                    2. For sales exceeding USD60,000 or
Philippines residing therein; or                                  its equivalent in other foreign currency
    b. an individual who is not a citizen                              - Duly accomplished application to
of the Philippines but is permanently                             purchase foreign exchange using the
residing1 therein; or                                             prescribed format (Annex A) and
    c. a corporation or other juridical                           supported by documents prescribed under
person organized under the laws of the                            Item "A" of Appendix 1.
Philippines; or                                                        The authority to purchase foreign
    d. a branch, subsidiary, affiliate,                           exchange for non-trade current account
extension office or any other unit of                             purposes does not include purchases of
corporations or juridical persons which are                       foreign exchange for direct credit to or
organized under the laws of any country and                       deposit in the purchasers’ foreign currency
operating in the Philippines, except OBUs.                        deposit unit account.
    Non-resident shall refer to an                                     All foreign exchange purchases for non-
individual, a corporation or other juridical                      trade current account transactions shall be
person not included in the definition of                          directly remitted to the intended non-
resident.                                                         resident beneficiary’s account (whether
                                                                  offshore or onshore). Exceptions to this rule
Section 2. Sale of Foreign Exchange to                            include travel funds, medical expenses
Residents by AABs and AAB-Forex Corps                             abroad not yet incurred, and sales proceeds

1
 Residents include any individual, citizen or otherwise, who has resided in the Philippines for a year or longer, as defined
in Section 83 of the International Monetary Fund (IMF) Balance of Payments Textbook, 1996.


Manual of Regulations for Banks                                                                        Part V - Page 1
Sections 2 - 6
11.12.31

of emigrant’s domestic assets if emigrant is              shall refer to the following foreign
still in the country.                                     exchange-denominated instruments in
                                                          bearer form whereby title thereto passes to
Section 3. Sale of Foreign Exchange to Non-               another by endorsement, assignment or
Resident Tourists/Balikbayans by AABs and                 delivery: travelers’ checks, other checks,
AAB-Forex Corps. AABs and AAB-forex                       drafts, notes, money orders, bonds, deposit
corps may sell foreign exchange to non-                   certificates, securities, commercial papers,
resident tourists or balikbayans to the extent            trust certificates, custodial receipts, deposit
of the amount shown to have been sold by                  substitute instruments, trading orders,
them for pesos to said entities. Departing                transaction tickets and confirmation of sale/
non-resident tourists or balikbayans may                  investment.
reconvert at airports or other ports of exit
unspent pesos to a maximum of USD5,000                    Section 5. Buying and Selling of Gold by
or its equivalent in other foreign currency               Residents
calculated at prevailing exchange rates,                       1. Except as provided in this Manual,
without showing proof/s of previous sale of               gold and gold-bearing metals may be
foreign exchange for pesos.                               bought and sold without specific approval
(As amended by Circular No. 698 dated 05 November 2010)   of the BSP.
                                                               2. Gold from small-scale mining,
Section 4. Cross-Border Transfer of Local                 including panned-gold, shall be sold to the
and Foreign Currencies                                    BSP pursuant to Republic Act No. 7076
    1. Local Currency. No person may                      (People’s Small-Scale Mining Act of 1991)
import or export nor bring with him into or               dated 27 June 1991. All other forms or types
take out of the country, or electronically                of gold may, at the option of the owner or
transfer, legal tender Philippine notes and               producer thereof and with the consent of
coins, checks, money order and other bills                the BSP, be sold and delivered to the BSP.
of exchange drawn in pesos against banks                       The BSP may sell gold grains/pellets/
operating in the Philippines in an amount                 bars and sheets to local jewelry
exceeding PHP10,000.00 without                            manufacturers and other industrial users
authorization by the BSP.                                 upon application, or to banks exclusively
    The term “electronic transfer” as used                for re-sale to jewelry manufacturers/
herein shall mean a system where the                      industrial users, at the BSP’s gold-selling
authority to debit or credit an account (bank,            price plus a service fee to cover costs
business or individual) is provided by wire,              including cost of conversion and packaging.
with or without a source document being
mailed to evidence the authority.                                          Chapter II
    2. Foreign Currency. Any person, who
brings into or takes out of the Philippines                  FOREIGN MERCHANDISE TRADE
foreign currency, as well as other foreign                         TRANSACTIONS
currency-denominated bearer monetary
instruments, in excess of USD10,000 or its
equivalent, is required to declare the same                 A. IMPORT TRADE TRANSACTIONS
in writing and to furnish information on the
source and purpose of the transport of such               Section 6. General Policy. As a general
currency or monetary instrument.                          rule, all kinds of merchandise imports are
    As used herein, “other foreign currency-              allowed. However, the importation of
denominated bearer monetary instruments”                  certain commodities are regulated or




Part V - Page 2                                                        Manual of Regulations for Banks
                                                                                                 Sections 6 - 11
                                                                                                       11.12.31

prohibited for reasons of public health and               and the guidelines covering the sale of
safety, national security, international                  foreign exchange for trade transactions
commitments, and development/                             under Appendix 4:
rationalization of local industry.                            1. Letter of Credit (L/C);
    Foreign exchange purchased from                           2. Documents Against Payment (D/P);
AABs/AAB-forex corps to service                               3. Documents Against Acceptance (D/A);
importations shall be directly remitted to the                4. Open Account (O/A);
non-resident beneficiary on the date of                       5. Direct Remittance (DR); and
purchase. However, foreign exchange                           6. Advance Payment.
purchases may be credited to FCDU deposit
accounts of the importer pending remittance               Section 9. Letter of Credit (L/C)
to the non-resident beneficiary: Provided,                    1. All L/Cs must be opened on or before
That the importer shall execute a waiver of               the date of shipment and only one L/C should
the requirements of R.A. No. 6426 (Foreign                be opened for each import transaction. For
Currency Deposit Act) dated 04 April 1974,                purposes of opening an L/C, importers shall
as amended, on the secrecy of foreign                     submit to the AAB the documents listed in
currency deposits upon purchase of foreign                Appendix 5. Amendments of L/Cs need not
exchange to enable the BSP to validate the                be referred to the BSP for prior approval.
authenticity of the credits and eventual                  L/Cs shall be negotiated in accordance with
remittance of the funds.                                  the terms and conditions set forth in the L/C
(As Amended by Circular No. 742 dated 21 November 2011)   and shall be governed by the Uniform
                                                          Customs and Practices on Documentary
Section 7. Classification of Imports                      Credits.
Imports are classified as follows:                            2. Deferred L/Cs shall be governed by
    1. Freely Importable Commodities.                     the pertinent provisions of Part Two,
These are commodities the importation of                  Chapter 1 hereof (Loans and Guarantees).
which is neither regulated nor prohibited                 For this purpose, deferred L/Cs refer to those
as defined under (2) and (3) hereunder. The               with payment terms of more than one year
importation may be effected without the                   reckoned from initial shipment date.
prior approval of or clearance from any                   (As Amended by Circular No. 742 dated 21 November 2011)
government agency.
    2. Regulated Commodities. These are                   Section 10. Documents Against Payment
commodities, listed in Appendix 2, the                    (D/P)
importation of which requires clearances/                     1. Under the D/P arrangement, AABs
permits from appropriate government                       shall advise the importer of the receipt of
agencies including the BSP.                               the complete original shipping documents
    3. Prohibited Commodities. These are                  and effect the release of said documents to
commodities, listed in Appendices 3 and                   the importer upon receipt of payment.
3.1, the importation of which is not allowed                  2. AABs shall remit payment to the
under existing laws.                                      supplier through the correspondent bank
                                                          abroad.
Section 8. Modes of Payment for Imports
AABs and AAB-forex corps may sell foreign                 Section 11. Documents Against Acceptance
exchange to service payments for imports                  (D/A) and Open Account (O/A)
under any of the following arrangements                   Arrangements. Under a D/A arrangement, the
subject to the provisions of Sections 9 to 13             original shipping documents are released




Manual of Regulations for Banks                                                              Part V - Page 3
Sections 11 - 16
11.12.31

to the importer by the AAB concerned at           shall be filed directly with the BSP-IOD for
the instance of the seller’s bank upon the        prior approval.
importer’s acceptance of the seller’s bill of     (As Amended by Circular Nos. 742 dated 21 November 2011
exchange obligating the importer to pay for       and Circular No. 698 dated 05 November 2010)
the shipment at some future date. Under an
O/A arrangement, the said documents are           Section 14. Other Import Arrangements
released by the seller directly to the importer   The following import arrangements are also
without coursing the documents through the        allowed without prior BSP approval:
banks, upon the importer’s promise to pay             1. Self-Funded/”No Dollar” Imports.
at some future date. As used herein, an           These are imports funded by importer’s own
import transaction to be considered under         foreign currency deposit accounts or those
D/A or O/A must be payable at least 30 days       sent by suppliers abroad for which no
after bill of lading (B/L) or airway bill (AWB)   payment in foreign exchange will be made
shipment date.                                    whether immediate or potential.
    The guidelines for reporting, payments            2. Importations on Consignment Basis.
and extensions of imports under D/A or O/A        These are importations by export producers
arrangements are shown in Appendix 6.             of raw materials and accessories/supplies
                                                  from foreign suppliers/buyers abroad for the
Section 12. Direct Remittance (DR). AABs          manufacture or processing of products
and AAB-forex corps may service within            destined for export to said foreign suppliers/
twenty nine (29) calendar days after B/L or       buyers. These shall also include machinery/
AWB shipment date applications for direct         equipment and spare parts consigned to the
remittance of import payments upon                local manufacturer/processor for eventual
presentation of the complete original             re-export to the consignor: Provided, That
shipping documents, in accordance with            the equipment involved shall be used only
existing rules, and if applicable, import         in connection with the processing of
clearance, for regulated items issued by          products for export.
concerned government agencies. If the 29th
day falls on a non-banking day, the following       B. EXPORT TRADE TRANSACTIONS
banking day shall apply and the importation
will still be considered DR.                      Section 15. General Policy. It is the policy
                                                  of the BSP to encourage commodity exports
Section 13. Advance Payment. AABs and             which generate foreign exchange earnings
AAB-forex corps may sell foreign exchange         for the country. Accordingly, commodity
to importers without prior BSP approval, for      exports are allowed without restriction
advance payment for importations subject          except for certain commodities which are
to the guidelines under Appendix 7 hereof         regulated or prohibited for reasons of
including documents prescribed thereunder.        national interest or by provision of law.
The foreign exchange selling/remitting AAB
shall report these transactions to the BSP-       Section 16. Classification of Exports
International Operations Department (IOD)            1. Freely Exportable Commodities.
using the prescribed forms (Annexes B and         These are commodities the exportation of
C). All applications to purchase foreign          which is neither regulated nor prohibited.
exchange in excess of USD1.0 million or           They may be effected without prior approval
its equivalent in other foreign currency to       of or clearance from any government
service advance payment for importation           agency.




Part V - Page 4                                                   Manual of Regulations for Banks
                                                                              Sections 16 - 20
                                                                                     09.12.31

    2. Regulated Commodities. These are         foreign currency notes may be used in
commodities the exportation of which            prepayment/export advance, but for buyer’s
requires clearances/permits from appropriate    checks, the same shall be cleared before
products with the appropriate government        shipment.
agencies/offices is shown in Appendix 8.             3. Acceptable Currencies
    3. Prohibited Exports. These are                 a. Payments for exports may be made
commodities the exportation or sale of          in the following currencies:
which is prohibited/penalized by law                 1) U.S. dollar
(Appendix 9).                                        2) Japanese yen
                                                     3) Pound sterling
Section 17. Export Declaration                       4) Euro
    All export shipments shall be covered            5) Hong Kong dollar
by an Export Declaration using the                   6) Swiss franc
prescribed form. AABs or OBUs shall                  7) Canadian dollar
require submission, for record purposes, of          8) Singapore dollar
a copy of the duly accomplished Export               9) Australian dollar
Declaration form if the export negotiation           10) Saudi riyal
or payment of the pertinent export shipment          11) Bahrain dinar
is coursed through them.                             12) Brunei dollar
                                                     13) Indonesian rupiah
Section 18. Modes and Currency of                    14) Thai baht
Payment                                              15) United Arab Emirates dirham
     1. Authorized Modes. Payments for               16) Chinese renminbi or yuan
exports may be made under any of the                 17) Korean won
following modes without prior BSP                    18) Such other currencies that may be
approval:                                       declared acceptable by the BSP
     a. Letter of Credit (L/C);                      b. Payments may, however, be made
     b. Documents Against Payment (D/P)/        in Philippine pesos for the following:
Cash Against Documents (CAD);                        1) Exports to ASEAN countries:
     c. Documents Against Acceptance (D/A);     Provided, That the BSP shall not be asked
     d. Open Account (O/A);                     to intervene in the clearing of any balances
     e. Intercompany Open Account Offset        from this payments scheme; and
(Interco O/A) Arrangement (can be availed            2) Gold sales to the BSP which are
of only by firms with parent/affiliate          considered as constructive exports.
relationship abroad); and
     f. Consignment.                            Section 19. Negotiation Procedures
     2. Other Authorized Modes. Payments             The exporter shall negotiate his bill of
for exports may also be made through export     exchange/account with the AAB or OBU
advances without prior approval of the BSP.     together with the bill of lading (B/L)/airway
Export advances shall refer to all payments/    bill (AWB), signed commercial invoice and
remittances received before shipment,           other documents as required.
including prepayments and Red Clause                 In case of availments of export
advances.                                       advances, the AAB through which the
     Bank draft/telegraphic transfer, buyer’s   availment was made must also be the same
checks, traveler’s checks or acceptable         bank to negotiate the export documents.




Manual of Regulations for Banks                                             Part V - Page 5
Sections 21 - 22
11.12.31

     Section 20. Disposition of Export            PART TWO. CAPITAL ACCOUNTS
Proceeds. Foreign exchange receipts,
acquisitions or earnings of residents from                       Chapter I
exports may be used freely for any
purpose. Such proceeds may, at the option             LOANS AND GUARANTEES
of the exporter, be sold for pesos, retained,
or deposited in foreign currency accounts,      Section 22. General Policy. The BSP shall
whether in the Philippines or abroad.           regulate foreign/foreign currency loans to
                                                ensure that principal and interest owed
Section 21. Gold and Constructive               to creditors can be serviced in an orderly
Exports                                         manner and with due regard to the
     1. Gold. All exports of gold in any        economy’s overall debt servicing
form may be allowed except for gold from        capacity. All public and publicly-
small-scale mining, including panned            guaranteed private sector obligations from
gold, which is required to be sold to the       foreign creditors, OBUs and Foreign
BSP pursuant to Republic Act No. 7076.          Currency Deposit Units (FCDUs)/Expanded
     2. Constructive Exports. The               Foreign Currency Deposit Units (EFCDUs)
following sales of residents paid for in        of banks shall be referred to the BSP for prior
foreign currency shall be considered as         approval, unless otherwise indicated herein.
constructive exports:                           Other private sector loans from these
     a. Gold sales to the BSP even if paid      creditors and other financing schemes/
for in Philippine currency;                     arrangements shall require prior approval
     b. Sales of residents paid for in          and/or registration by the BSP if these will
foreign currency to the following entities:     ultimately involve foreign exchange
     1) Bonded             manufacturing        purchased from AABs or AAB-forex corps.
warehouses of export producers/                 1. The required BSP approval shall be
manufacturers;                                  obtained as follows:
     2) Export processing zones;                    a. For public sector loans – Applications
     3) Board of Investments (BOI)-             for loan approval shall be filed with the
registered export traders operating bonded      BSP using the prescribed form (Annex D.1)
trading warehouses supplying raw                together with all the required supporting
materials used in the manufacture of            documents/information,                 before
export products;                                commencement of actual negotiations, or
     4) Diplomatic missions in the              before issuing a mandate of commitment
Philippines;                                    to foreign funders/arrangers; and
     5) Duty Free Philippines, Inc. (DFP);          b. For private sector loans – Applications
and                                             for loan approval shall be filed with the
     6) Foreign buyers of goods/products        BSP using the prescribed form (Annex D.2)
to be delivered directly to local consumers     together with all the required supporting
at the instruction of the former and paid       documents/information, at least 30
for in foreign currency.                        banking days before the target signing date
     An Export Declaration for each sale        of the loan documents and/or initial
shall be accomplished: Provided, That the       drawdown date, whichever is earlier.
exporter shall submit a delivery receipt        2. Resident companies/entities intending
signed by the buyer in lieu of the B/L or       to obtain medium- and long-term foreign
AWB.                                            loans or issue bonds/notes/debt securities




Part V - Page 6                                              Manual of Regulations for Banks
                                                                                               Sections 22 - 24
                                                                                                      11.12.31

offshore shall submit to the BSP-IOD their                     b. Government-owned/controlled
annual foreign borrowings plan as follows:                corporations (GOCCs);
     a. Public sector entities, including the                  c. Government financial institutions
National Government – every end-                          (GFIs), except short-term normal interbank
September for borrowings for the following                borrowings;
year, regardless of amount; and                                d. Local government units (LGUs); and
     b. Private sector entities, with planned                  e. Other public sector entities.
aggregate annual borrowing of at lease                         2. Loans of the private sector irrespective
USD10 million, or its equivalent - every                  of maturity, creditor and the source of
end-September for borrowings for the                      foreign exchange for servicing thereof if:
following year.                                                a. guaranteed by government
     The timetable and any changes on the                 corporations and/or government financial
submitted foreign borrowings plan shall be                institutions;
communicated to the BSP-IOD within two                         b. covered by foreign exchange
(2) weeks upon availability of information                guarantees issued by AABs; and
for monitoring and programming purposes.                       c. to be granted by FCDUs/EFCDUs
3. Private sector loans that are submitted                and specifically or directly funded from, or
to the BSP for approval or registration that              collateralized by offshore loans or deposits.
were not included under a foreign                              3. Loans with maturities exceeding one
borrowings plan as required in Item 2 of                  (1) year to be obtained by private non-bank
this Section shall be assessed an additional              financial institutions intended for relending
fee equivalent to ten percent (10%) of the                to public or private sector enterprises.
applicable processing fee for BSP approval/                    4. Other loans irrespective of maturity
registration, as indicated under Appendix                 and currency if to be serviced using foreign
20 hereof.                                                exchange purchased by the borrower/
4. For statistical purposes, all foreign loans            creditor/guarantor from AABs or AAB-forex
obtained by private sector entities, whether              corps and not covered by Section 24.
or not these are BSP-approved/registered,                      Applications submitted to the BSP with
shall be regularly reported to the BSP-IOD,               signed loan documents and/or loan proceeds
using the prescribed forms (Annexes E.1 and               already drawn shall no longer be eligible
E.2) within the required deadline until the               for BSP approval and registration.
obligations are fully extinguished.                       (As Amended by Circular No. 742 dated 21 November 2011)
5. AABs shall not extend peso financing
to non-residents unless explicitly allowed                Section 24. Loans Not Requiring Prior BSP
under existing BSP rules.                                 Approval. The following loans may be
(As Amended by Circular No. 742 dated 21 November 2011)   granted without prior approval of the BSP:
                                                              1. a. Loans of resident private sector
Section 23. Loans Requiring Prior BSP                     borrowers from FCDUs/EFCDUs/offshore
Approval. Prior BSP approval shall be                     sources, irrespective of maturity, that will
required for the following loans:                         be serviced using foreign exchange
    1. Loans of the following public sector               purchased from entities that are not AABs
entities irrespective of maturity, creditor and           or AAB-forex corps.
the source of foreign exchange for servicing                  b. Loans of non-residents from
thereof, except short-term FCDU/EFCDU                     FCDUs/ EFCDUs, irrespective of maturity:
loans covered by Section 24.4:                            Provided, That the loan shall be serviced
    a. National Government, its agencies                  using foreign exchange purchased from
and instrumentalities;                                    entities that are not AABs or AAB-forex corps.




Manual of Regulations for Banks                                                              Part V - Page 7
Section 24
11.12.31

     2. Short-term loans of financial                    5. Short-term loans of private
institutions, both public and private for           exporters/importers from OBUs and foreign
normal interbank transactions, e.g.,                banks with branches in the Philippines:
interbank call loans.                               Provided, That:
     Short-term loans of the private sector in           a. The loans are not covered by a
the form of export advances from buyers             guarantee from a government financial
abroad.                                             institution/corporation;
     4. Short-term loans of the following                b. The loans shall be exclusively used
private and public sector borrowers from            to finance specific trade transactions, i.e.,
FCDUs/EFCDUs:                                       to liquidate/pay for import obligations and/
     a. Commodity and service exporters:            or in the case of export financing
Provided, That these loans are used to              transactions, to fund the borrower’s
finance export-related import costs of goods        pre-export financing requirements and shall
and services as well as peso cost                   not be refinanced by a medium- /long-term
requirements.                                       foreign currency loan;
     Service exporters shall refer to                    c. Proceeds of loans intended to pay
Philippine residents engaged or proposing           for foreign exchange requirements may be
to engage in rendering technical,                   paid directly to the supplier/creditor, while
professional or other services which are            amounts intended to fund pre-export peso
paid for in foreign exchange.                       costs shall be inwardly remitted and sold
     Indirect exporters may likewise borrow         for pesos to AABs;
to fund export-related costs, which may                  d. Drawdown and registration
include both foreign exchange as well as            requirements under Sections 27 and 28
peso costs. Indirect exporters shall refer to       hereof shall be complied with;
cottage/small and medium industries                      e. Any assignment of the loan by the
(producers/manufacturers) that have supply          creditor concerned shall be reported to the
arrangements with direct exporters who are          BSP within five (5) days from date of
holders of an export letter of credit or a          assignment;
confirmed purchase order/sales contract                  f. Creditor banks shall submit the
from a foreign buyer.                               following reports to the BSP:
     b. Producers/manufacturers, including               i. Their lending program for private
oil companies and public utility concerns:          sector borrowers for the next six (6) months
Provided, That the loans are used to finance        indicating their proposed credit limit
import costs of goods and services necessary        together with a list of prospective borrowers/
in the production of goods by the borrower          beneficiaries; and
concerned. Producers/manufacturers shall                 ii. Monthly report on loans granted
refer to persons or entities that undertake         to residents using Schedule 4A (Part I)
the processing/conversion of raw materials          & 4B (Part II) - Consolidated Report
into marketable form through physical,              on Loans Granted by OBUs to Residents
mechanical, chemical, or other means or by          - to the “Statement of Assets and
special treatment or a series of actions that       Liabilities” of OBUs, and similar reports
result in a change in the nature or state of        by foreign banks with branches in the
the products.                                       Philippines.
     Public utility firms shall refer to business        g. The borrowers shall submit monthly
organizations that regularly supply the public      reports on transactions and status of their
with commodities or services such as                short-term loans within three (3) banking
electricity, gas, water, transportation,            days after end of reference month using the
telegraph/telephone services and the like.          prescribed form (Annex F).



Part V - Page 8                                                  Manual of Regulations for Banks
                                                                                              Sections 24 - 26
                                                                                                     11.12.31

     6. Short-term loans of private                       Section 25. Projects/Costs Eligible for
exporters/importers from other offshore                   Foreign Financing
sources/creditors: Provided, That all                          1. Loans submitted for prior BSP
provisions of Section 24.5 are complied                   approval shall finance the following types
with, except Item (f), and that the loans shall           of projects/activities:
be granted against BSP-approved short-term                     a. Export-oriented projects;
relending programs of foreign creditors.                       b. Projects registered with the BOI;
Creditors shall submit to the BSP for                          c. Priority investment areas under the
approval their short-term relending program               current Investment Priorities Plan (IPP);
for Philippine borrowers indicating their                      d. Activities listed in the current
proposed credit limit together with a list of             Medium-Term Public Investment Program
prospective borrowers/beneficiaries. These                (MTPIP);
relending programs shall be valid for one                      e. Development of industrial estates
(1) year.                                                 and economic zones;
     7. Private sector loans not guaranteed                    f. Socialized/Low-cost housing
by foreign governments/official export credit             projects;
agencies covering importation of freely                        g. Acquisition of non-performing
importable commodities under deferred                     assets/loans (NPAs/NPLs) of banks and
L/Cs or D/A-O/A arrangements with a term                  other GFIs;
of more than one (1) year.                                     h. Acquisition of government assets
     8. Private sector intercompany loans                 approved for privatization;
granted by foreign companies to their local                    i. Other projects that may be declared
branches/subsidiaries, irrespective of                    priority under the country’s socio-economic
amount and maturity: Provided, That these                 development plan by the National Economic
are used to finance eligible projects/costs               and Development Authority or by Congress;
cited under Section 25. For purposes of                   and
this Item, intercompany loans shall                            j. Refinancing of existing loans used
include those granted by foreign branches                 for eligible projects/costs which are eligible
and wholly-owned subsidiaries of a                        for servicing using foreign exchange sourced
foreign parent company as well as other                   from AABs or AAB-forex corps.; and
subsidiaries of the parent company but                         k. Microfinance activities.
shall exclude those loans that are intended                    2. Short-term loans shall finance
to refinance existing obligations:                        exclusively foreign exchange requirements
Provided, That, in the case of other                      of eligible projects, except as may be
subsidiaries, the loan/s shall be fully                   specifically allowed under this Manual.
guaranteed by the parent company.                         Medium- and long-term loans may finance
     9. Loans of resident private sector                  foreign exchange costs as well as peso costs
borrowers from FCDUs/EFCDUs/offshore                      (excluding working capital) of eligible
sources that are not publicly-guaranteed                  projects.
to finance infrastructure projects included               (As Amended by Circular No. 742 dated 21 November 2011)
in the Government’s list of Public Private
Partnership (PPP) projects. The exemption                 Section 26. Terms of Loans
of these loans from prior BSP approval                        1. Loans shall have terms reflective of
shall be valid up to three (3) years                      those prevailing in the international capital
reckoned from the effectivity of this                     markets.
Circular.                                                     2. Terms of loans to be obtained by the
(As Amended by Circular No. 742 dated 21 November 2011)   National Government and other public




Manual of Regulations for Banks                                                             Part V - Page 9
Sections 26 - 29
11.12.31

sector entities shall be in accordance with      utilization of loan proceeds for medium and
the provisions of pertinent laws/regulations     long-term loans using the prescribed forms
governing public sector borrowings.              (Annex D.2). Private sector loans that do
    3. The Monetary Board may require            not require prior BSP approval but are
longer grace/maturity periods for medium         submitted to the BSP for registration shall
and long-term loans involving large amounts      be charged a processing fee indicated in
to reduce the impact thereof on debt             Appendix 20 hereof. Public sector loans
servicing.                                       extended final approval by the Monetary
                                                 Board are deemed registered.
Section 27. Drawdown/Availment on                     2. Loans shall be registered by the BSP
Loans. Loans intended to be serviced using       upon the borrower’s compliance with the
foreign exchange purchased from AABs or          terms and conditions imposed under the BSP
AAB-forex corps shall comply with the            approval of the loan and/or pertinent
following procedures/conditions for              provisions of this Manual, including submission
drawdown:                                        of required documents and information.
     1. Loan proceeds shall be used solely            3. Loans granted under Sections 24.4
for the purpose/s as approved by the BSP or      and 24.5 that are duly reported to the BSP
considered eligible for foreign financing        using the prescribed forms (IOS Form 4 and
under the rules herein.                          Schedule 4A (Part I) & 4B (Part II)-
     2. Loan proceeds intended to fund           Consolidated Report on Loans Granted by
local costs (i.e., those payable to residents)   OBUs to Residents, respectively) are
shall be inwardly remitted and sold for pesos    deemed registered.
to AABs.                                              4. Loans requiring prior BSP approval
     3. Amounts intended to finance              which have been signed and/or drawn/
foreign exchange costs (i.e., those payable      availed of prior to securing the requisite
to non-residents) need not be inwardly           approval shall not be eligible for registration
remitted but may either be paid directly to      and subsequent servicing using foreign
the non-resident supplier/beneficiary            exchange purchased from AABs or AAB-
concerned or deposited in a foreign              forex corps.
exchange account pending utilization of the      (As Amended by Circular No. 742 dated 21 November 2011)
funds unless covered by Section 27.4.
     4. Pending utilization, foreign             Section 29. Servicing of Loans
exchange proceeds of loans and bond/note              1. All foreign exchange purchases from
issues of the public sector shall be deposited   AABs or AAB-forex corps for servicing of
with the BSP pursuant to Section 113 of          foreign/foreign currency loans shall be
Republic Act No. 7653 (The New Central           directly remitted to the creditor/beneficiary
Bank Act) dated 14 June 1993.                    concerned on the day of purchase, unless
                                                 otherwise explicitly allowed by BSP.
Section 28. Registration of Loans                     2. Payments for principal, interest, fees
    1. Loans shall be registered with the        and related charges on loans duly registered
BSP to be eligible for servicing using foreign   with the BSP may be remitted through AABs
exchange purchased from AABs or AAB-             as these fall due without prior BSP approval
forex corps. Applications for registration of    provided such interest, fees and charges are
private sector loans shall be filed by the       indicated in the BSP registration document,
borrower with the BSP within ten (10)            and upon presentation of documents
banking days from drawdown date for              prescribed under Item B of Appendix 1
short-term loans and three (3) months from       hereof.




Part V - Page 10                                                 Manual of Regulations for Banks
                                                                             Sections 29 - 30
                                                                                    10.12.31

     3. Payments for the following shall,       consideration prevailing conditions; revised
however, be subject to prior BSP approval:      limits shall be duly disseminated by the BSP.
     a. Prepayment of public sector/                 d. Advance foreign exchange purchases
publicly guaranteed private sector loans;       shall be deposited in the borrower’s FCDU/
     b. All loans that are past due for more    offshore account pending remittance of the
than thirty (30) calendar days reckoned as      full amount to the creditor at the target
follows:                                        prepayment date.
     (1) For short-term loans, from the 360th        e. The foreign exchange selling
day after availment; and                        institution shall see to it that documents
     (2) For MLT loans, from original           evidencing payment of applicable
maturity date.                                  documentary stamp tax, if any, are
     c. Other loan-related fees/charges not     presented/available.
authorized by the BSP; and                           f. The foreign exchange sold shall be
     d. Loans covered by official               duly reported by the foreign exchange-selling
rescheduling with Paris Club creditors.         AAB under FX Form 1 (Consolidated Report
     4. AABs and AAB-forex corps may sell       on Foreign Exchange Assets & Liabilities)-
foreign exchange for prepayments (i.e.,         Schedule 4 following the deadline for
payments before original due dates) of MLT      submission of FX Form 1.
private sector loans (including bonds and            5. Applications to purchase foreign
notes) that are not publicly-guaranteed and     exchange for servicing of loan-related
are covered by a BSP registration document      payments shall be submitted to any AAB or
(BSRD) without prior BSP approval, subject      AAB-forex corp. using the prescribed form
to the following conditions:                    (Annex A) and supported by documents
     a. The borrower shall submit to the BSP-   prescribed under Item B, Appendix 1 hereof.
IOD a notice of their intention to prepay at         6. AABs and AAB-forex corps shall not
least one (1) month prior to the target         sell foreign exchange to residents for
prepayment date indicating the following:       payment of foreign exchange obligations to
name of creditor, BSP registration number       residents other than AABs.
for the loan, date of prepayment, amount to          7. All loan payments made, irrespective
be prepaid in original currency, and            of the source of the foreign exchange used,
remittance instructions (e.g., account number   shall be reported by the borrower concerned
and recipient bank for the prepayment). After   to BSP-IOD using the prescribed form
payment, the borrower shall submit to the       (Annex F).
BSP-IOD, proof/s of the payment made,
together with copy of the duly stamped BSRD     Section 30. Approval/Registration and
and its Form 2 report (Report on Foreign        Servicing of Guarantees
Borrowings for the month)                           1. The following guarantees shall
     b. The foreign exchange selling AAB/       require prior BSP approval:
AAB-forex corp shall require the                    a. Guarantees for account of the
presentation by the borrower of documents       public sector as well as those to be issued
prescribed under Item B, Appendix 1 hereof.     by government-owned and controlled
     c. The foreign exchange purchases shall    corporations in favor of non-residents; and
not exceed USD 50.0 million per day,                b. Guarantees issued by foreign banks
provided that the total foreign exchange        and financial institutions to secure
purchases shall not at any case exceed the      obligations of residents partaking the nature
amount to be prepaid. The daily limit shall     of a foreign loan which require prior BSP
be subject to periodic review to take into      approval pursuant to Section 23.




Manual of Regulations for Banks                                             Part V - Page 11
Sections 30 - 31
09.12.31

     2. The following guarantees, including           4. Fees and charges on guarantees
risk take-over and similar arrangements, for      shall be reflective of prevailing market terms:
account of the private sector shall not           Provided, That guarantees issued by parent
require prior BSP approval and registration       companies to their affiliates shall not be
but shall be reported to the BSP by AABs as       charged any fee.
issuer/beneficiary using the prescribed form          5. Any payments relative to BSP
(Annex G if issuer or Annex H if beneficiary)     registered guarantees may be remitted by
to be eligible for servicing using foreign        AABs as they fall due without prior BSP
exchange purchased from AABs or AAB-              approval. Any foreign liability arising from
forex corps in the event of default by the        a call on the guarantee shall require prior
principal obligor:                                BSP approval, if to be serviced using foreign
     a. Guarantees to be issued by local          exchange purchased from AABs or AAB-
banks and other financial institutions,           forex corps.
including government financial institutions,
in favor of non-residents such as:                Section 31. Approval/Registration and
     1) Payment guarantees (e.g., bid             Servicing of Other Financing Schemes/
bonds, performance bonds, advance                 Arrangements
payment bonds); and                                   Financing schemes which would
     2) Guarantees to secure foreign              involve option to purchase arrangement or
obligations of residents which do not             transfer of ownership after a certain period
partake the nature of a foreign loan.             of time as in the case of Build-Operate-
     b. Guarantees to be issued by foreign        Transfer (BOT), Build and Transfer (BT)
banks and financial institutions as well as       arrangements shall be registered with the
other foreign entities to secure peso loans/      BSP to be eligible for servicing using foreign
FCDU loans authorized under Section 24.4.         exchange purchased from AABs or AAB-
Proceeds of guarantees where the                  forex corps. Applications for registration
beneficiary is a resident shall be inwardly-      shall be filed by the implementing agency/
remitted and sold to AABs for pesos.              proponent with the BSP within one month
     As a prerequisite to the issuance of         from contract signing.
guarantees under Item a, the following                Implementing agencies/proponents of
documents shall be submitted to the               projects under BOT/similar financing
guarantor:                                        arrangements shall submit to the BSP the
     a. Registration papers of domestic           following reports:
accountee with the Securities and Exchange            a. Yearly       Projected       Funding
Commission (SEC) (for corporation/                Requirements for BOT/Other Similar
partnership) or with the Bureau of Domestic       Financing Schemes (Annex I), on or before
Trade (BDT) of the Department of Trade and        September 30 of the year preceding the
Industry (DTI) (for single proprietorship); and   reference period; and
     b. Contract and/or other documents               b. Monthly Report on payment under
which serve as basis for the issuance of the      BOT/Other Similar Financing Schemes
guarantee.                                        (Annex J) within ten (10) working days from
     3. Other guarantees or similar               end of reference month.
arrangements which may give rise to actual            2. Offshore issuances of peso-
foreign obligations shall require prior BSP       denominated instruments involving:
approval to be eligible for servicing using           a. inward remittance of foreign
foreign exchange purchased from AABs or           exchange to the Philippines and sale thereof
AAB-forex corps.                                  for pesos to AABs; or




Part V - Page 12                                               Manual of Regulations for Banks
                                                                                       Sections 31 - 35
                                                                                              11.12.31

     b. a resident enterprise or any of its      Section 34. Inward Foreign Direct
offshore offices, branches, subsidiaries and     Investments. Inward foreign direct
affiliates, which will participate in such       investments may be in cash or in kind. For
transactions as an issuer, guarantor or          registration purposes, foreign exchange
beneficiary, and where proceeds shall be         funding for the cash investments must be
lent to or invested in resident companies.       inwardly remitted but need not be converted
     The approval of said instruments shall      to pesos.
be subject to the following conditions:               Assets eligible for registration as
     a. the transaction shall not involve        investment in kind shall include:
import or export of Philippine currency          (1) machinery and equipment; (2) raw
whether physically or electronically; and        materials, supplies, spare parts and other
     b. compliance with pertinent rules and      items including intangible assets necessary
regulations of the BSP (including reportorial    for the operations of the investee firm. The
requirements) and other regulatory/              value of these investments in kind shall be
government agencies/entities including           assessed and appraised by the BSP before
approval by the Department of Finance            their registration.
(DOF) in the case of supranational issuers.           Expenses incurred by foreign firms
     3. Non-residents’ issuance of notes/        pursuant to government-approved service
bonds or similar instruments in the domestic     contracts/other contracts for oil, gas, and
market, shall require BSP approval before        geothermal         energy     exploration/
execution thereof.                               developments may be capitalized and
                                                 registered as foreign investment with the
                 Chapter II                      BSP.
                                                 (As Amended by Circular No. 742 dated 21 November 2011)
        FOREIGN INVESTMENTS
                                                 Section 35. Inward Foreign Portfolio
Section 32. General Policy. The BSP              Investments. Inward foreign portfolio
supports the country’s policy to encourage       investments shall include the following:
inward foreign investments. Said                      1. Investments in government
investments need not be registered with the      securities which refer to investments in
BSP unless the foreign exchange needed to        peso-denominated certificates of
service the repatriation of capital and the      indebtedness, issued by public sector
remittance of dividends, profits and earnings    entities.
which accrue thereon shall be purchased               2. Investments in listed securities
from AABs or AAB-forex corps.                    which refer to investments in securities
                                                 listed in the PSE.
Section 33. Categories of Inward Foreign              3. Investments in money market
Investments. For purposes of registration,       instruments which refer to all peso-
foreign investments may be in the form of:       denominated debt instruments, such as but
(1) foreign direct investments in Philippine     not limited to bonds, bills payables,
firms or enterprises; (2) investments in peso-   promissory notes, and non-participating
denominated government securities; (3)           preferred shares, issued onshore by private
investments in securities listed in the          resident firms, not included in Section 23.
Philippine Stock Exchange (PSE);(4)                   4. Investments in bank deposits:
investments in peso-denominated money            Provided, That only peso time deposits with
market instruments; and (5) investments in       an AAB with a maturity of at least ninety
peso time deposits with AABs with a              (90) days shall be eligible for registration
minimum maturity of ninety (90) days.            with the BSP.



Manual of Regulations for Banks                                                     Part V - Page 13
Sections 35 - 40
11.12.31

    For registration purposes, the foreign                Section 38. Registration Procedures. The
exchange funding for the portfolio                        procedures for registration of foreign
investments must be inwardly remitted and                 investments including the supporting
converted to pesos.                                       documents are outlined in Appendix 10.
(As Amended by Circular No. 742 dated 21 November 2011)
                                                          Section 39. Import/Export of Stock
Section 36. Registration with the BSP. The                Certificates of Philippine Firms. No prior
following inward foreign investments shall                BSP authority shall be required for the
be registered with the BSP:                               import/export of stock certificates of
    1. Inward foreign direct investments                  Philippine firms issued to foreign investors,
        under Section 34; and                             including investments prior to 15 March
    2. Investments in peso-denominated                    1973 under Section 43.
        money market instruments under
        Item 3 of Section 35.                             Section 40. Repatriation and Remittance
     All applications for registration of                 Privileges
foreign direct investments under Section 34                    1. Inward foreign investments duly
shall be filed with the BSP within five (5)               registered with the BSP or with a custodian
years from the date of inward remittance/                 bank duly designated by the foreign investor,
actual transfer of assets to the Philippines.             shall be entitled to full and immediate
A Bangko Sentral Registration Document                    repatriation of capital and remittance of
(BSRD) shall be issued by the BSP evidenc-                dividends, profits and earnings using foreign
ing registration of such investments.                     exchange to be purchased from AABs and
(As Amended by Circular No. 743 dated 15 December 2011)   AAB-forex corps.
                                                               2. Foreign exchange may be purchased
Section 37. Registration with Custodian                   from AABs and AAB-forex corps for outward
Banks. Inward foreign investments in peso-                remittance in an amount equivalent to the
denominated government securities, PSE-                   peso sales/divestments proceeds (including
listed securities, and peso time deposits                 dividends, profits or earnings thereon) of
under Items 1, 2 and 4, respectively, of                  BSP-registered foreign investments in
Section 35 shall be registered with an                    accordance with the procedures outline in
investor’s designated custodian bank on                   Appendix 11 and supported by the
behalf of the BSP.                                        documents prescribed under Items C.1 and
     A custodian bank may be any AAB or                   C.2 of Appendix 1 hereof.
an OBU appointed by the foreign investor                       3. Registering banks for foreign
to register his investments and to hold                   investments may sell for outward remittance
shares and other investment instruments for               the equivalent foreign exchange of excess
and on his behalf and to represent him in                 pesos funded with inward remittance of
all the necessary actions in connection with              foreign exchange but not to exceed the
his investments in the Philippines.                       amount of foreign exchange brought in less
     The BSRD to be issued by a custodian                 the amount actually used for BSP-registered
bank on behalf of the BSP shall be in the                 investments made in the country, subject
prescribed pre-numbered form purchased by                 to the following conditions:
the custodian bank from the BSP. BSRDs                         a. the investor shall comply with the
issued directly by custodian banks for                    prescribed documents under Item C. 3 of
registered investments in peso time deposits              Appendix 1 hereof;
shall be (a) annotated with roll-overs of the                  b. such excess pesos should not have
investment; or (b) cancelled if such deposits             been utilized to fund any investment;
are preterminated before ninety (90) days.                and



Part V - Page 14                                                      Manual of Regulations for Banks
                                                                                Sections 40 - 44
                                                                                       11.12.31

    c.   the remittance of the equivalent         Section 44. Investments by Philippine
foreign exchange shall be reported to the         Residents
BSP-IOD by the remitting AAB within two                1. Outward Investments.
(2) banking days from the date of outward              a. Residents may undertake outward
remittance, with copies of the prescribed         investments only if:
supporting documents.                                  i. the investments are funded by
    The foreign exchange purchases may            withdrawals from the resident investor’s
be made by the resident agent on behalf           FCDU account/s; or
of the non-resident investor for direct                ii. the funds to be invested are not
remittance to the non-resident beneficiary        among those required to be sold to AABs
on the day of purchase.                           for pesos under existing BSP rules; or
                                                       iii. the funds to be invested are
Section 41. Deposit of Divestment/Sales           purchased from AABs or AAB-forex corps
Proceeds. Pending reinvestment or                 but in amounts not exceeding USD60
repatriation, divestment/sales proceeds of        million or its equivalent in other foreign
duly registered foreign investments,              currency per investor per year, or per fund
including dividends, profits, and earnings        per year for qualified investors (QIs).
may be deposited temporarily with any                  Application to purchase foreign
AAB. The eventual repatriation thereof            exchange for outward investments(Annex A)
including interest earned net of taxes, shall     shall be supported by documents prescribed
be remittable in full through any AAB             under Item "C.4" of Appendix 1 hereof.
without prior BSP approval in accordance               b. Outward investments by residents
with the procedures outlined in Appendix 11.      (excluding AABs) funded with foreign
                                                  exchange purchased from AABs or AAB-
Section 42. Reinvestment. Foreign investors       forex corps in excess of the USD60 million
may reinvest divestment/sales proceeds or         per investor per year shall require prior
remittable dividends/profits or earnings of       approval by the BSP: Provided, That the
duly registered investments. The                  purchase of foreign exchange for outward
reinvestments shall be registered with the        investments by managed or trusteed
BSP or the investors’ designated custodian        accounts (other than pooled funds) shall be
banks, as applicable, if the foreign exchange     considered as part of the foreign exchange
needed to service the repatriation of capital     purchases by the principal or trustor of such
and the remittance of dividends, profits and      accounts for determining compliance with
earnings which accrue thereon shall be            the limits. Outward investments of banks
purchased from AABs and AAB-forex corps.          shall be subject to existing prudential
                                                  regulations of the BSP.
Section 43. Inward Foreign Investments Prior           c. QIs may apply with the BSP for a
to 15 March 1973. Repatriation of divestment      higher annual outward investment limit.
proceeds and remittance of dividends, profits     For purposes of this section, QIs shall be
and earnings from foreign investments certified   limited to the following: insurance and pre-
by stock transfer agents to have been made        need companies; collective/pooled funds,
prior to 15 March 1973 may be serviced using      whether in a corporate or contractual
foreign exchange purchased from AABs and          structure, such as mutual funds, unit
AAB-forex corps, without prior BSP approval.      investment trust funds and variable
In the absence of said certification, such        insurance; public or private pension or
investments may be registered with the BSP        retirement or provident funds and such other
subject to submission of documentary              entities and funds as the BSP may determine
requirements under Appendix 12.                   as QIs on the basis of such factors as



Manual of Regulations for Banks                                               Part V - Page 15
Sections 44 - 45
11.12.31

financial sophistication, size and regularity                Section 45. Definition of Terms. As used
of financial transactions, net worth and size                in this Chapter, the following terms shall
of assets being managed. The application                     have the meaning indicated unless the
of collective/pooled funds and pension,                      context clearly indicates otherwise:
retirement and provident funds for a higher
annual outward investment limit may be                            1. “Offshore Banking” shall refer to the
effected through its governing board or                      conduct of banking transactions in foreign
through its trustee.                                         currencies involving the receipt of funds
     2. Investments in bonds/notes issued                    principally from external sources and, as
by residents offshore. Residents may                         allowed in this Manual, from internal
purchase foreign exchange from AABs or                       sources and utilization of such funds, as
AAB-forex corps without prior BSP                            provided herein.
approval for investments in the following:                        2. “Offshore Banking Unit” or “OBU”
(a) foreign currency-denominated bonds/                      shall refer to a branch a foreign banking
notes of the Republic of the Philippines                     corporation which is duly authorized by the
or other Philippine resident entities; and                   BSP to transact offshore banking business
(b) peso-denominated bonds/notes of the                      in the Philippines.
Republic of the Philippines or other                              3. “Net office funds” shall refer to the
Philippine resident entities requiring                       net credit balance of the “Due to Head Office
settlement in foreign currency Provided,                     (HO)/Branches/” after deducting the “Due
That such purchases shall be consolidated                    from HO/Branches”, as shown in the
with foreign exchange purchases for                          following computation:
outward investments under Item 1.b
hereof for purposed of determining                                Due to HO/Branches
compliance with the allowed limit, and                         Remittances/Advances/Deposits
                                                               to OBU by HO/Branches               xxxxxxx
supported by documents prescribed under                        Unremitted earnings of OBU          xxxxxxx
Item “C.5” of Appendix 1 hereof.
     3. Foreign exchange received by                           Total                           USD x x x x x x x

residents as dividends/earnings or                             Less: Due from HO/Branches
divestment proceeds from outward
                                                               Remittances/Advances/Deposits of
investments and investments in bonds/                          OBU with its HO/Branches             xxxxxxx
notes issued by residents offshore that
were funded with foreign exchange pur-                         Net Office Funds                USD x x x x x x x
chased from AABs or AAB-forex corps,
need not be inwardly remitted and sold                           4. “Deposits” shall refer to funds in
for pesos.                                                   foreign currencies which are accepted and
(As Amended by Circular Nos. 742 dated 21 November 2011and   held by an OBU in the regular course of
698 dated 05 November 2010)                                  business, with the obligation to return an
                                                             equivalent amount to the owner thereof,
 PART THREE. OFFSHORE BANKING                                with or without interest.
UNITS, REPRESENTATIVE OFFICES AND                                5. “Resident” shall refer to –
        FOREIGN CURRENCY                                         a) an individual citizen of the
          DEPOSIT UNITS                                      Philippines residing therein; or
                                                                 b) an individual who is not a citizen
              Chapter I                                      of the Philippines but is permanently
     OFFSHORE BANKING UNITS OF                               residing1 therein; or
          FOREIGN BANKS                                          c) a corporation or other juridical




Part V - Page 16                                                            Manual of Regulations for Banks
                                                                                  Sections 45 - 48
                                                                                         09.12.31

person organized under the laws of the             Certificate of Authority to operate by the
Philippines; or                                    Monetary Board and registration with the
     d) a branch,subsidiary,affiliate,             SEC.
extension office or any other unit of
corporations or juridical persons which are        Section 47. Criteria for Selection. The
organized under the laws of any country            following factors shall serve as basis for the
and operating in the Philippines, except           issuance of certificate of authority to operate
OBUs.                                              an OBU: (1) liquidity and solvency
     6. “Non-resident” shall refer to an           positions; (2) net worth and resources; (3)
individual, a corporation or other juridical       managerial and international banking
person not included in the definition of           expertise of applicant bank; (4) contribution
resident.                                          to the Philippine economy; and (5) other
     7. “Foreign Currency Deposit Unit” or         relevant factors, such as participation in the
“FCDU” shall refer to that unit of a local         equity of local UBs/KBs and appropriate
bank or of a local branch of a foreign bank        geographic representations.
authorized by the BSP to engage in foreign
currency-denominated transactions,                 Section 48. Pre-Operation Requirements
pursuant to the provisions of Republic Act         Upon advice from the BSP, a qualified bank
No. 6426 (Foreign Currency Deposit Act)            shall submit a sworn undertaking of its head
dated 4 April 1974, as amended.                    office through any of its duly authorized
     8. “Local bank” shall refer to a rural        officers, supported by an appropriate
bank (RB)/cooperative bank (Coop Bank),            resolution of its board of directors, to the
thrift bank (TB), commercial bank (KB) or          effect that it shall:
universal bank (UB) organized under the                 1. provide, on demand, the necessary
laws of the Republic of the Philippines.           currencies to cover liquidity needs that may
     9. “Local branch of a foreign bank”           arise or other shortfall that its OBU may
shall refer to a branch of a foreign bank          incur;
doing business in the Philippines,                      2. manage the operations of its OBU
pursuant to the provisions of Republic Act         soundly and with prudence;
No. 7653 and Republic Act No. 8791 (The                 3. continually train a specific number
General Banking Law of 2000) dated 23              of Filipinos in international banking and
May 2000.                                          foreign exchange trading with a view to
     10. “Acceptable foreign exchange”             reducing the number of expatriates;
comprise those foreign currencies which are             4. provide and maintain in its OBU at
acceptable to and exchangeable at the BSP          all times net office funds in the minimum
and which form part of the international           amount of USD1 million;
reserves of the country.                                5. start operations of its OBU within
                                                   180 days from receipt of its certificate of
Section 46. Approvals Required. A                  authority to operate such unit;
foreign bank may operate an OBU                         6. comply with all applicable local
in the Philippines, upon issuance of a             laws relating to labor and employment; and



                                  (Next Page is Part V - Page 17)




Manual of Regulations for Banks                                                 Part V - Page 16a
                                                                              Sections 48 - 52
                                                                                     09.12.31

     7. submit, before start of operations,      OBUs and resident banks authorized to
other documents as may be required by the        accept foreign currency deposits under the
BSP such as certification or similar             provisions of Republic Act No. 6426, as
documents showing that it is duly                amended.
authorized by the proper government entity           Interbank short-term transactions of not
of its country to engage in offshore banking     exceeding 360 days such as credit lines of
business in the Philippines.                     Philippine banks with correspondent banks,
                                                 interbank call loans and interbank loans for
Section 49. Annual Fee. Upon issuance of         general liquidity purposes shall not require
a certificate of authority to operate an OBU     prior BSP approval.
in the Philippines, and yearly thereafter, the
authorized bank shall pay the BSP a fee of       Section 52. Transactions with Residents
not less than USD20,000.00.                      which are not Banks. An OBU may engage
                                                 in the following transactions with residents
Section 50. Transactions with Non-               which are not banks:
Residents and/or with Other OBUs. An                  1. Deal in foreign currency financial
OBU may freely engage in all normal              instruments;
banking transactions with non-residents               2. Extend foreign currency loans and
and/or with other OBUs, involving any            advances, subject to existing regulations on
currency other than the Philippine peso.         foreign borrowings;
                                                      3. Service importations through L/C,
Section 51. Transactions with Foreign            D/A, O/A and D/P of resident-borrowers:
Currency Deposit Units (FCDUs)/                  Provided, That such importations shall be
Expanded Foreign Currency Deposit Units          funded by a BSP-authorized OBU foreign
(EFCDUs). Subject to BSP regulations, an         currency loan to the resident-borrower
OBU may engage in the following                  involved; and Provided, further, That D/A-
transactions with FCDUs/EFCDUs of local          O/A imports coursed through and serviced
banks in any currency other than the             by OBUs shall be subject to the reporting
Philippine peso:                                 requirements under Appendix 6;
    1. Accept time, savings and demand                4. Negotiate inward (export) L/Cs and
deposits or issue negotiable certificates of     handle other export transactions (including
time deposit;                                    D/P, D/A and O/A) coursed through their
    2. Borrow with maturities not                worldwide network of branches and
exceeding 360 days;                              correspondents: Provided, That OBUs share
    3. Deposit;                                  in the total export L/C negotiation business
    4. Extend loans and advances;                shall be limited to ½ of the growth
    5. Deal in foreign currency financial        (incremental) element in the country’s total
instruments;                                     annual export. This limit shall be observed
    6. Discount bills, acceptances, and          yearly until this equals ten percent (10%) of
negotiable certificates of deposits;             total exports. Exports not covered by L/Cs,
    7. Engage in foreign exchange trading;       i.e., done through D/A-O/A arrangements
    8. Engage in foreign currency, foreign       shall be considered subject to this overall
currency swap; and                               limit;
    9. Engage in such other transactions as           5. Provide full foreign exchange
authorized under this Section between            service for all foreign currency non-trade




Manual of Regulations for Banks                                              Part V - Page 17
Sections 52 - 56
09.12.31

and trade remittances resulting from or                        inward remittances of Filipino overseas
related to their own negotiation of export                     workers or of Filipino or multinational
L/Cs;                                                          companies, coursed through the OBUs’
     6. Render financial, advisory and                         correspondent banks abroad;
related services; and                                               3. To pay the designated beneficiaries
     7. Refinance trust receipts without                       in the Philippines the peso equivalent of
prior BSP approval arising from import                         foreign exchange inward remittances other
transactions of Philippine residents in U.S.                   than those related to (a) trade; or (b) inward
dollars or in other acceptable foreign                         foreign investments that are intended to be
currencies. The refinancing shall be                           serviced using foreign exchange purchased
evidenced by banker’s acceptances.                             from AABs or AAB-forex corps; and
     However, OBUs may hold peso-                                   4. To pay the peso equivalent of
denominated assets arising from                                foreign exchange sold by beneficiaries of
restructuring or other repayment scheme of                     export L/Cs negotiated with the OBUs.
outstanding loans, subject to the terms and                         The peso deposit accounts shall be
conditions of the approval of such                             funded exclusively by inward remittances
restructuring/other repayment scheme and                       of foreign exchange eligible to form part of
to the following clarifications and                            the Philippine international reserves.
conditions:                                                         OBUs may also sell inward remittances
     a. That term ‘assets’ as used in this                     of foreign exchange for pesos to the BSP
Section shall refer to bonds or other                          through the Treasury Department, for credit
certificates of indebtedness, shares of stocks                 to the demand deposit account of the
and other properties;                                          designated AABs for the account of the
     b. That bonds or other certificates of                    OBU.
indebtedness issued by a third party as well
as shares of stocks and other properties                       Section 54. Financial Assistance to
acquired as a result of restructuring/other                    Officers/Employees. OBUs may extend
payment scheme shall be accounted for in                       financial assistance (real estate, car, personal
accordance with Philippine Accounting                          loans, etc.) in local or foreign currency to
Standards (PAS) 39; and                                        their Filipino officers and employees as part
     c. That shares of stock and other                         of their fringe benefit program.
properties acquired as a result of                                  They may likewise grant foreign
restructuring/other repayment scheme shall                     currency loans to their expatriate officers
be sold/disposed of within a period of five                    without need of BSP approval.
(5) years from date of acquisition.
                                                               Section 55. Secrecy of Deposits. The
Section 53. Peso Deposits. OBUs may open                       provisions of Republic Act No. 6426, as
and maintain peso deposit accounts with                        amended, shall apply to deposits in OBUs;
AABs exclusively for the following                             Provided, That numbered deposit accounts
purposes:                                                      shall not be used.
    1. To meet administrative and other
operating expenses, such as salaries, rentals                  Section 56. Exemption from Certain Laws.
and the like;                                                  The provisions of Republic Act No. 2655
    2. To pay the peso equivalent of                           (Usury Law) dated 01 May 1915, as
foreign exchange sold by beneficiaries of                      amended1, and Republic Act No. 3591




1
    Suspended by CBP Circular No. 905-82 dated 10 December 1982, effective 01 January 1983.

Part V - Page 18                                                             Manual of Regulations for Banks
                                                                           Sections 56 - 64
                                                                                  09.12.31

(An Act Establishing the Philippine Deposit       2. “Representative Office” shall refer
Insurance Corporation) dated 22 June 1963,    to a liaison office of a foreign bank which
as amended, shall not apply to transactions   deals directly with the public by promoting
and/or deposits in OBUs in the Philippines.   and giving information about the services
                                              offered by the foreign bank. It does not
Section 57. Accounting and Reporting          include the regional or area headquarters
OBUs shall maintain an accounting             of a foreign bank registered and licensed
system in accordance with guidelines          under existing laws.
prescribed by the BSP. Periodically or as
required, existing reports shall continue     Section 62. Criteria for Approval. The
to be submitted in the prescribed forms       Monetary Board may authorize qualified
to the BSP.                                   foreign banks to open representative offices
                                              in the Philippines if, in its judgment, the
Section 58. Supervision. The operations and   public interest and economic conditions,
activities of OBUs shall be conducted under   both general and local, justify the
the supervision of the BSP.                   establishment of such office. The following
                                              factors, among others, shall serve as basis
Section 59. Taxes, Customs Duties             for issuance of authority to open a
Transactions of OBUs in the Philippines       representative office in the Philippines:
shall be subject to such taxes as are         (1) liquidity and solvency positions; (2) net
prescribed in Presidential Decree No. 1034    worth and resources; (3) financial and credit
(Authorizing the Establishment of an          standing in the international banking
Offshore Banking System in the Philippines)   community; (4) exposure in the Philippines;
dated 30 September 1976, as implemented       and (5) other relevant factors, such as
by regulations of the BIR.                    Philippine commercial and financial
                                              relationships with the country where
Section 60. Revocation/Suspension. The        applicant bank is based.
Monetary Board, upon recommendation of
the Governor, may revoke or suspend the       Section 63. Authorized Activities of
authority of an OBU to operate in the         Representative Offices. Authorized
Philippines for violation of Presidential     representative offices may promote and
Decree No. 1034 or relevant provisions of     provide information about the services/
this Manual.                                  products offered by the foreign banks but
                                              may not transact banking business, such as
                Chapter II                    acceptance of deposits, issuance of letters
                                              of credit and foreign exchange trading.
     REPRESENTATIVE OFFICES OF                Transactions generated through the
          FOREIGN BANKS                       promotional efforts of the representative
                                              office may be booked only by the foreign
Section 61. Definition of Terms. As used      bank abroad.
in this Chapter, the following terms shall
have the meaning indicated unless the         Section 64. Fees. Foreign banks intending
context clearly indicates otherwise:          to establish a representative office shall,
    1. “Foreign Bank” shall refer to a bank   upon issuance by the BSP of a Certificate of
or banking corporation formed, organized      Authority, pay the BSP a license fee of
and existing under any foreign law.           USD2,000.00.




Manual of Regulations for Banks                                           Part V - Page 19
Sections 65 - 70
09.12.31

Section 65. Use of the term                                        Chapter III
“Representative Office”. Foreign banks
authorized to operate representative offices          FOREIGN CURRENCY DEPOSIT
shall, in their representation with the public,                SYSTEM
carry with their name the additional term
“Representative Office” to properly guide the     Section 70. Definition of Terms. As used
public on the nature and extent of their          in this Chapter, the following terms shall
activities.                                       have the meaning indicated unless the
                                                  context clearly indicates otherwise:
Section 66. Licensing. The licensing and               1. “Foreign Currency Deposit Unit”
operations of representative offices including    (FCDU) and “Expanded Foreign Currency
the implementation of these regulations and       Deposit Unit” (EFCDU) shall refer to a
such other rules and regulations that may         unit of a local bank or of a local branch
be issued from time to time shall be the          of a foreign bank authorized by the BSP
responsibility of the BSP-Supervision and         to engage in foreign currency-
Examination Sector (SES).                         denominated transactions, pursuant to the
                                                  provisions of Republic Act No. 6426, as
Section 67. Visitorial Power. The BSP may,        amended.
from time to time, look into the affairs of            2. “Local bank” shall refer to an RB/
the representative offices to determine the       Coop Bank, TB, KB or UB organized under
extent of their compliance with these             the laws of the Republic of the Philippines.
regulations and/or other related BSP                   3. “Local branch of a foreign bank”
issuances.                                        shall refer to a branch of a foreign bank doing
                                                  business in the Philippines, pursuant to the
Section 68. Reporting. Representative             provisions of Republic Act No. 7721 (An
offices shall submit to the BSP annual reports    Act Liberalizing the Entry and Scope of
of their Head Office and, periodically as may     Operations of Foreign Banks in the
be required, reports on the transactions of       Philippines and for Other Purposes) dated
their Head Office in the Philippines in such      18 May 1994, Republic Act No. 7653, and
form as may be prescribed for the purpose.        Republic Act No. 8791.
                                                       4. “Short-term” loans and securities
Section 69. Revocation of License. The            shall refer to those with maturities of one
Monetary Board may revoke the license of          (1) year or less.
a representative office if it finds after due          5. “Medium-term” loans and securities
investigation that: (1) the representative        shall refer to those with maturities of more
office or its officers have violated the          than one (1) year but not more than five (5)
provisions of this Manual and any other           years.
applicable rules and regulations of the BSP;           6. “Long-term” loans and securities
or (2) its Head Office is found to be in          shall refer to those with maturities of more
imminent danger of insolvency or that its         than five (5) years.
continuance in business will involve                   The definition of such other terms used
probable loss to those transacting business       in this Chapter shall be consistent with the
with it, pursuant to Section 37 of Republic       definition of terms used under the Chapters
Act No. 7653, and Section 78 of Republic          on OBUs and Representative Offices of
Act No. 8791.                                     Foreign Banks.




Part V - Page 20                                              Manual of Regulations for Banks
                                                                                     Sections 71
                                                                                       09.12.31

Section 71. Qualification Requirements                g. The bank does not have float items
UBs/KBs may be authorized to operate an          outstanding for more than 60 calendar days
FCDU or EFCDU: Provided, That they meet the      in the “Due From/To Head Office/Branches/
minimum capital requirements as prescribed       Offices” accounts and the “Due from Bangko
under Section X106 and Subsections X106.1        Sentral” account exceeding one percent (1%)
and X106.2 of the Manual of Regulations          of the total resources as of end of preceding
for Banks (MORB) for local banks and             month;
Subsections X121.4 and X121.5 of the                  h. The bank has no past due obligation
MORB for branches of foreign banks.              with the BSP or with any financial institution
     In addition, the following standard pre-    as of date of application;
qualification requirements as prescribed              i. The bank’s facilities pertinent to the
under Appendix 5 of the MORB shall be            authority applied for are adequate;
complied with:                                        j. The officers who will be in-charge
     a. The bank has complied, during the        of the operation relating to the authority
period indicated immediately preceding the       applied for have actual experience of at least
date of application, with the following:         two (2) years in another bank as in-charge
     1) Risk-based capital adequacy ratio        (or at least as assistant-in-charge) of the same
for the last 60 days;                            operation;
     2) Ceilings on credit accommodation              k. The bank personnel who will handle
to directors, officers, stockholders and         the operation relating to the authority
related interests (DOSRI); and                   applied for, have attended appropriate
     3) Liquidity floor on government            seminars, workshops or on-the-job training
deposits.                                        or have experience of at least six (6) months;
     b. The bank has not incurred net            and
weekly reserve deficiencies for the last eight        l. The bank has complied with the
(8) weeks;                                       mandatory allocation of credit resources to
     c. The bank has generally complied          micro, small and medium enterprises for
with banking laws, rules and regulations,        two (2) quarters immediately preceding the
orders or instructions of the Monetary Board     date of application.
and/or BSP Management;                                2. TBs with net worth or combined
     d. The bank’s past due loans do not         capital accounts of at least PHP325 million
exceed twenty percent (20%) of its total loan    for those with head offices located within
portfolio as of the date of application;         Metro Manila and PHP52 million for those
     e. The bank has corrected as of date        with head offices located outside Metro
of application the major violations noted        Manila may, subject to prior Monetary
in its latest examination particularly           Board approval, operate an FCDU. A TB
relating to -                                    desiring to operate an FCDU shall file an
     1) single borrower’s limit; and             application with the BSP-SES. The
     2) total investment in real estate and      application shall be signed by the bank
improvements thereon, including bank             president or officer of equivalent rank and
equipment, which shall not exceed fifty          shall be accompanied by the following
percent (50%) of net worth;                      documents:
     f. The bank’s accounting records,                a. Certified true copy of the resolution
systems, procedures and internal control         of the bank’s board of directors authorizing
systems are satisfactorily maintained;           the application; and




Manual of Regulations for Banks                                               Part V - Page 21
Section 71
09.12.31

     b. A certification signed by the               (6) investment in bank premises and
president or the officer of equivalent rank    other fixed assets.
that the bank has complied with all                 f. The bank maintains adequate
conditions/prerequisites for the grant of      provisions         for   probable        losses
authority to operate an FCDU.                  commensurate to the quality of its asset
     A TB applying for authority to operate    portfolio but not lower than the required
FCDU must comply with the following            valuation reserves as determined by the BSP;
requirements:                                       g. The bank has no float items
     a. The bank’s operation during the        outstanding for more than 60 calendar days
preceding calendar year and for the period     in the “Due From/To Head Office/Branches/
immediately preceding the date of              Offices” accounts and the “Due From
application has been profitable;               Bangko Sentral” account exceeding one
     b. The bank is well capitalized with      percent (1%) of the total resources as of date
risk-based capital adequacy ratio not lower    of application;
than twelve percent (12%) at the time of            h. The bank has no past due
filing the application;                        obligations with the BSP or with any
     c. The officer who will be in charge of   government financial institution;
FCDU operations shall either have at least          i. The bank has established a risk
one (1) year of actual experience in another   management system appropriate to its
bank as in-charge or assistant in-charge of    operations characterized by clear
the same operations, or have attended a        delineation of responsibility for risk
specialized training course on FCDU            management, adequate risk measurement
transactions or operations conducted by the    systems, appropriately structured risk limits,
BSP or an institution duly accredited by the   effective internal controls and complete,
BSP;                                           timely and efficient risk reporting system;
     d. The bank has not incurred net               j. The bank has a CAMELS Composite
weekly reserve deficiencies within eight (8)   Rating of at least “3” in the last regular
weeks immediately preceding the date of        examination with Management rating of not
application;                                   lower than “3”; and
     e. The bank has generally complied             k. The bank is a member of the
with banking laws, rules and regulations,      Philippine Deposit Insurance Corporation
orders or instructions of the Monetary Board   (PDIC) in good standing.
and/or the BSP Management in the last two           3. An RB/Coop Bank desiring to
(2) preceding examinations prior to the date   operate an FCDU shall file an application
of application, more particularly on:          with the BSP-SES. The application shall be
     (1) election of at least two (2)          signed by the bank president or officer of
independent directors;                         equivalent rank and shall be accompanied
     (2) attendance by every member of the     by the following documents:
board of directors in a special seminar for         a. Certified true copy of the resolution
board of directors conducted or accredited     of the bank’s board of directors authorizing
by the BSP;                                    the application; and
     (3) the     ceilings      on     credit        b. Certification signed by the president
accommodations to DOSRI;                       or the officer of equivalent rank that the bank
     (4) liquidity floor requirements for      has complied with all the conditions/
government deposits;                           prerequisites for the grant of authority to
     (5) single borrower’s loan limit; and     operate an FCDU.




Part V - Page 22                                           Manual of Regulations for Banks
                                                                                Sections 71 - 72
                                                                                       09.12.31

    An RB/Coop Bank applying for                  assistant in-charge of the same operations
authority to operate an FCDU must comply          for at least one (1) year, or (b) who has
with the following requirements:                  attended a specialized training course on
    a. Minimum capital under Subsection           FCDU transactions or operations conducted
X151.2 of the MORB or PHP20 million,              by the Bangko Sentral ng Pilipinas Institute
whichever is higher;                              or an institution or bank duly accredited by
    b. Risk-based capital adequacy ratio at       the BSP; and
the time of filing the application of at least        b. establish a risk management system
twelve percent (12%);                             appropriate to its operations, characterized
    c. CAMELS composite rating in the             by clear delineation of responsibility for risk
latest examination of at least “3”, with          management, adequate risk measurement
Management component score not lower              system, appropriately structured risk limits,
than “3”; and                                     effective internal control system and
    d. No outstanding major supervisory           complete, timely and efficient risk reporting
concerns on safety and soundness from last        system.
examination, such as, but not limited to:
  1) Unbooked valuation reserves                  Section 72. Authorized Transactions
  2) Inadequate regular and liquidity 12 weeks
                                                      1. TBs and RBs/Coop Banks which are
      reserves on deposits including
      government deposits and deposit             granted a certificate of authority to operate
     substitutes                                  an FCDU are authorized to engage in the
  3) DOSRI loans in excess of ceilings 3 months   following transactions in any acceptable
  4) Poor asset quality                           foreign currency:
  5) Violation of single borrower’s
     loan limit and investment limits.
                                                      a. Accept deposits and trust accounts
  6) Past due obligation with the BSP             (for banks authorized to engage in trust
     or with any financial institution            operations) from residents and non-
  7) Unsafe and unsound banking        6 months   residents;
     practices
                                                      b. Deposit, regardless of maturity,
  8) Inadequate accounting
      records, systems, procedures                with foreign banks abroad, OBUs and other
     and internal controls                        FCDUs/EFCDUs;
  9) Corporate governance                             c. Invest in readily marketable foreign
  10)Compliance with banking                      currency denominated debt instruments. For
     laws, rules and regulations,
     orders or instructions of the
                                                  this purpose, ‘readily marketable’ debt
     Monetary Board and/or BSP                    instruments shall refer to debt instruments
     Management                                   that are quoted in an active market and the
  11)Membership with the PDIC                     quoted prices are readily and regularly
                                                  available from an exchange, dealer,
    In addition to requirements under             broker, industry group, pricing service or
existing regulations, an RB/Coop Bank             regulatory agency, and those prices
authorized to operate an FCDU shall:              represent actual and regularly occurring
    a. have the capacity to operate an            market transactions on an arm’s length
FCDU. An RB/Coop Bank may, however,               basis;
upgrade its capacity by appointing as Officer         d. Grant short-term foreign currency
who will be in-charge of the FCDU                 loans as may be allowed by BSP
operations an individual (a) with actual          regulations: Provided, That FCDUs of
experience in another bank as in-charge or        RBs/Coop Banks shall not grant loans to




Manual of Regulations for Banks                                               Part V- Page 23
Section 72
09.12.31

producers/manufacturers, including oil                iii. The debt instrument must have the
companies and public utility concerns;            same maturity and interest rate.
    e. Borrow, subject to existing rules on           (2) The lending activity shall have prior
foreign/foreign currency borrowings, (i) from     approval of the bank’s board of directors
EFCDUs, foreign banks abroad and OBUs,            and shall be governed by adequate written
regardless of maturity; and (ii) from other       policies and procedures duly approved by
FCDUs, on short-term maturity;                    the said board;
    f. Engage in foreign currency-foreign             (3) The securities lending shall be done
currency swaps with the BSP, OBUs and             through reputable internationally
other FCDUs/EFCDUs;                               recognized and experienced third-party
    g. Engage in securities lending               lending agent/intermediary which must be
activities as lender subject to the following     a regulated entity in its country of operation;
conditions:                                           (4) The securities lending transaction
    (1) The securities to be lent shall be        shall be subject to a written legal agreement
limited to securities lodged under the account    between the lending bank and the lending
Held for Trading (HFT) Financial Assets and       agent which must clearly specify the:
Available for Sale (AFS) Financial Assets.            (a) relationship as well as the
    The use of Held to Maturity (HTM)             respective duties and responsibilities of each
Financial Assets holdings shall also be           counterparty;
allowed in securities lending subject to the          (b) obligation of the borrower to
following conditions:                             redeliver a like quantity of the same issue
    (a) The lending bank had the positive         or series as the loaned securities;
intention and ability to maintain or recover          (c) guidelines for selecting investments
control of the same or substantially similar      for cash collateral, which shall include a
securities as those lent;                         provision that cash collateral will not be
    (b) The counterparty’s failure to             reinvested in liabilities of the lender, its
redeliver the securities lent at maturity or at   subsidiaries or affiliates; and
the date agreed upon could not have been              (d) lending fee or compensation;
reasonably anticipated by the lender at the           (5) The loaned securities must be fully
time of the transaction; and                      secured by debt securities of countries or
    (c) In case of failure or default of the      entities with highest credit quality, cash in
counterparty to redeliver the securities lent,    currencies acceptable as part of
the same shall be immediately replaced by         international reserves, letters of credit and
identical or substantially similar securities.    certificates of deposits issued by banks with
For this purpose, a replacement security may      highest credit quality. For this purpose, a
only be considered substantially similar to       foreign country and a bank with highest
the securities lent or sold if all of the         credit quality refer to a foreign country and
following circumstances are present:              a bank given the highest credit rating by any
    i. The security must have the same            two (2) of the following internationally
primary obligor and must have the same            accepted rating agencies:
guarantor under the same terms and
                                                      Rating Agencies        Highest Rating
conditions, if guaranteed;
    ii. The security must be identical in            Moody’s                     “Aa3”
form and type so as to give the same risks           Standard and Poor’s         “AA”
                                                     Fitch IBCA                  “AA”
and rights to the holder; and                        Others as may be approved by the Monetary Board




Part V - Page 24                                               Manual of Regulations for Banks
                                                                                       Section 72
                                                                                        09.12.31

     Collateral value shall initially be at least   these shall not be eligible for the thirty
102% of the current market value of the             percent (30%) liquid asset cover.
loaned securities and maintained at 100%                 h. Engage in repurchase agreements
of the value of the loaned securities plus          involving foreign currency denominated
accrued interest thereon during the course          government securities subject to the
of the loan;                                        following conditions:
     (6) The lender shall do daily mark-to-              (1) Such repurchase agreements shall
market on the loaned securities and on the          be limited to:
securities where cash collateral is invested/            a. HFT and AFS securities held under
reinvested;                                         the FCDU/EFCDU books;
     (7) The lender shall require from the               b. HTM securities holdings, subject to
lending agent/intermediary timely and               the following conditions:
comprehensive reports on the lending                     i. The selling bank had the positive
activity;                                           intention and ability to maintain or recover
     (8) For proper identification and              control of the same or substantially similar
monitoring, the outstanding book balance            securities as those sold;
on the loaned securities shall be reclassified           ii. The counterparty’s failure to
to the sub-account Government Securities            redeliver the securities sold at maturity or
(GS)/Debt Securities (DS) Lent under                at the date agreed upon could not have been
Securities Lending and Borrowing                    reasonably anticipated by the seller at the
Transactions under the HFT/AFS/HTM                  time of the transaction;
Financial Asset accounts;                                iii. In case of failure or default of the
     (9) The bank has in place a risk               counterparty to redeliver the securities
management system commensurate to the               sold, the same shall be immediately
nature, volume and complexity of its                replaced by identical or substantially
operations and characterized by clear               similar securities. For this purpose, a
delineation of responsibility for risk              replacement security may only be
management, adequate risk measurement               considered substantially similar to the
systems, appropriately structured risk              securities sold if all of the following
limits, effective internal controls and             circumstances are present:
complete, timely and efficient risk                      a. The security must have the same
reporting system: Provided, That this               primary obligor and must have the same
requirement shall be automatically                  guarantor under the same terms and
considered complied with by banks with              conditions, if guaranteed;
derivatives license;                                     b. The security must be identical in
     (10)The bank’s CAMELS composite                form and type so as to give the same risks
rating in the last BSP regular examination is       and rights to the holder; and
at least “3”, with a minimum score of “3”                c. The debt instrument must have the
on management; and                                  same maturity and interest rate.
     (11)The foreign currency denominated                (2) For proper identification and
debt securities lent or used as collateral          monitoring, the outstanding book
by the borrowing bank in securities                 balance of the government securities
lending and borrowing transactions shall            sold under repurchase agreements are
be considered as eligible asset cover for           to be reclassified to the sub-account GS
the 100% cover requirement. However,                Sold under Repurchase Agreement




Manual of Regulations for Banks                                                 Part V - Page 25
Section 72
09.12.31

under the HFT/AFS/HTM Financial Asset               (2) That the maximum term of the resale
accounts;                                       agreements shall be one (1) year; and
    (3) The borrowings shall only be from           (3) That such government securities
FCDUs/EFCDUs, non-resident financial            purchased under resale agreements shall be
institutions and OBUs;                          classified as Loans and Receivables Arising
    (4) The maximum term of the                 from Repurchase Agreements/Certificates of
repurchase agreements shall be one (1) year;    Assignment/Participation with Recourse and
    (5) The borrowings shall be booked          Securities Lending and Borrowing
under “Bills Payable” and included in the       Transactions.
computation of the total FCDU/EFCDU                 j. Issue Hybrid Tier 1 (HT1) capital
liabilities subject to the mandatory 100        instruments subject to the requirements
percent asset cover and thirty percent (30%)    under existing regulations;
liquidity cover;                                    k. Engage in USD-denominated
    (6) The foreign currency-denominated        repurchase agreements (R/P) with the BSP
debt securities sold or used as additional      as provided under Subsection X601.1 of the
collateral in repurchase agreement shall be     MORB, subject to the guidelines under
considered as eligible asset cover for the      Appendix 13.
100% cover requirement. However, these              Sanctions. Without prejudice to the
shall not be eligible for the thirty percent    criminal and administrative sanctions
(30%) liquid asset cover;                       provided for under Sections 36 and 37,
    (7) Banks shall, at all times, comply       respectively, of Republic Act No. 7653,
with the 100% FCDU/EFCDU asset cover            violation of any provision of Items “1.g.1“
and thirty percent (30%) liquid asset cover;    and “1.h.1.b” of this Section pertaining to
and                                             HTM financial assets, shall be considered
    (8) Banks shall monitor and assess the      a violation of the “tainting” provision under
risks inherent in these repurchase              Subsection X388.5(b) of the MORB in
transactions.                                   relation to Section 3.a of Appendix 33 of
    The provisions/requirements under           the MORB. In such a case, the entire HTM
Item g which are not inconsistent with the      portfolio shall be reclassified to the AFS
foregoing shall be strictly observed by the     category and the financial institution shall
bank concerned.                                 be prohibited from using the HTM account
    i. Purchase foreign currency                during the year the violation was committed
denominated government securities under         and for the succeeding two (2) full financial
resale agreements from other banks’ FCDU/       years. Failure to reclassify the HTM portfolio
EFCDU, non-resident financial institutions      to AFS shall subject the bank and concerned
and OBUs, subject to the following              officers to the penalties and sanctions
conditions:                                     provided under Subsection X388.5(c) of the
    (1) That the government securities          MORB.
purchased shall be limited to those issued          Moreover, the Monetary Board may at
by central governments and/or central banks     its discretion, impose any or all of the
of foreign countries with the highest credit    following sanctions to a bank and/or its
quality given by any two internationally        director/s or officer/s found to be responsible
accepted rating agencies (i.e., currently the   for violation of Item “k” of this Subsection:
equivalent of Standard and Poor’s AA- or            a. Termination of eligibility and
Moody’s Aa3 or better);                         pre-termination of any outstanding balance




Part V - Page 26                                            Manual of Regulations for Banks
                                                                                     Section 72
                                                                                      09.12.31

through repayment and/or sale of the              h. On request/instructions of its foreign
collateral;                                  correspondent bank, it may:
    b. Fine of up to PHP30,000 per                (1) issue letters of credit for a non-
transaction per day of violation reckoned    resident importer in favor of a non-resident
from the time the violation was committed    exporter;
up to the date it is corrected;                   (2) pay, accept, or negotiate drafts/bills
    c. Suspension of interbank clearing      of exchange drawn under the letter of credit;
privileges/immediate exclusion from          and
clearing;                                         (3) make payment to the order of the
    d. Suspension of access to the BSP       non-resident exporter.
rediscounting facilities;                         Provided, That the foreign correspondent
    e. Suspension of lending or foreign      bank shall deposit sufficient foreign
exchange operations or authority to accept   exchange with the EFCDU issuing the letter
new deposits or make new investments;        of credit to cover all drawings.
    f. Revocation of authority to perform         i. Engage in direct purchase of export
trust operations;                            bills of resident exporters subject to the
    g. Revocation of quasi-banking           following conditions:
license;                                          (1) Export transactions covered by
    h. Suspension for 120 days without       usance or sight letters of credit, shall be
pay of the officers and/or directors         allowed to be purchased by EFCDUs; and
responsible for the violation; and                (2) Export bills negotiated/purchased by
    i. Other sanctions as may be provided    the bank’s Regular Banking Unit (RBU) and
by law.                                      outstanding in its books shall not be allowed
    2. UBs/KBs, which are authorized to      to be purchased by its EFCDUs.
operate under the expanded foreign                j. Engage in securities lending
currency deposit system may engage in the    activities as lender subject to the conditions
following transactions in any acceptable     as enumerated in Item "1.g" of this Section;
foreign currency:                                 k. Engage in repurchase agreements
    a. Accept deposits and trust accounts    involving foreign currency denominated
(for banks authorized to engage in trust     government securities subject to the
operations) from residents and non-          conditions as enumerated in Item "1.h" of
residents;                                   this Section, except Item "1.h(4)";
    b. Deposit with foreign banks abroad,         l. In v e s t i n f o r e i g n c u r r e n c y
OBUs and other FCDUs/EFCDUs;                 denominated structured products issued
    c. Invest in foreign currency-           by banks and special purpose vehicles
denominated debt instruments;                (SPVs) of high credit quality subject to
    d. Grant foreign currency loans as may   the provisions in Section 1636 of the
be allowed by the BSP;                       MORB;
    e. Borrow from other FCDUs/EFCDUs             m. Purchase foreign currency
and from non-residents and OBUs, subject     denominated government securities under
to existing rules on foreign borrowings;     resale agreements from other banks’ FCDU/
    f. Engage in foreign currency-foreign    EFCDU, non-resident financial institutions
currency swap;                               and OBUs, subject to the following
    g. Engage in foreign exchange trading,   conditions:
and with prior BSP approval, engage in            (1) That the government securities
financial futures and options trading;       purchased shall be limited to those issued




Manual of Regulations for Banks                                              Part V - Page 27
Section 72
09.12.30

by central governments and/or central banks                         director/s or officer/s found to be responsible
of foreign countries with the highest credit                        for violation of Item “o” of this Subsection:
quality given by any two internationally                                 a. Termination of eligibility and
accepted rating agencies (i.e., currently the                       pre-termination of any outstanding balance
equivalent of Standard and Poor’s AA- or                            through repayment and/or sale of the
Moody’s Aa3 or better); and                                         collateral;
    (2) That such government securities                                  b. Fine of up to PHP30,000 per
purchased under resale agreements shall be                          transaction per day of violation reckoned
classified as Loans and Receivables Arising                         from the time the violation was committed
from Repurchase Agreements, Certificates                            up to the date it is corrected;
of Assignment/Participation with Recourse,                               c. Suspension of interbank clearing
and Securities Lending and Borrowing                                privileges/immediate exclusion from
Transactions.                                                       clearing;
    n. Issue Hybrid Tier 1 (HT1) capital                                 d. Suspension of access to the BSP
instruments subject to the requirements                             rediscounting facilities;
under existing regulations;                                              e. Suspension of lending or foreign
    o. Engage in USD-denominated                                    exchange operations or authority to accept
repurchase agreements (R/P) with the BSP                            new deposits or make new investments;
as provided under Subsection X601.1 of the                               f. Revocation of authority to perform
MORB, subject to the guidelines under                               trust operations;
Appendix 13.                                                             g. Revocation of quasi-banking
    Sanctions. Without prejudice to the                             license;
criminal and administrative sanctions                                    h. Suspension for 120 days without
provided for under Sections 36 and 37,                              pay of the officers and/or directors
respectively, of Republic Act No. 7653,                             responsible for the violation; and
violation of any provision of Items “2.j”, and                           i. Other sanctions as may be provided
“2.k” of this Section pertaining to HTM                             by law.
financial assets, shall be considered a                                  3. Excess FCDU/EFCDU funds of
violation of the “tainting” provision under                         UBs/KBs may be lent to the regular banking
Subsec. X388.5(b) of the MORB in relation                           unit (RBU) to fund the latter’s on-balance
to Section 3.a of Appendix 33 of the MORB.                          sheet foreign exchange trade transactions,
In such a case, the entire HTM portfolio                            subject to the following conditions:
shall be reclassified to the AFS category and                            a. FCDU/EFCDU may lend funds to
the financial institution shall be prohibited                       the RBU only after it has fully complied with
from using the HTM account during the year                          the prescribed 100% asset cover/thirty
the violation was committed and for the                             percent (30%) liquid asset cover on FCDU/
succeeding two (2) full financial years.                            EFCDU liabilities;
Failure to reclassify the HTM portfolio to                               b. FCDU/EFCDU lending to the RBU
AFS shall subject the bank and concerned                            shall be -
officers to the penalties and sanctions                                  (1) Capped at the lower of total
provided under Subsec. X388.5(c) of the                             outstanding balance on the RBU’s on-
MORB.                                                               balance sheet foreign currency trade assets1
    Moreover, the Monetary Board may at                             or thirty percent (30%) of the level of FCDU/
its discretion, impose any or all of the                            EFCDU deposit liabilities, computed at the
following sanctions to a bank and/or its                            average daily balance (using 2-month rolling


1
  i.e., Customers' Liability on Import Bills-Foreign, Customers' Liability under Trust Receipts-Foreign, Customers' Liablity for
this Bank's Acceptances Outstanding-Foreign, Export Bills Purchased and Foreign Bills Purchased-Documentary, excluding
past due accounts and Items in Litigation.

Part V - Page 28                                                                    Manual of Regulations for Banks
                                                                               Sections 72 - 73
                                                                                      09.12.31

data) as of end of the second week prior to        reference month, a certification under oath
the reference week. Total outstanding              (Appendix 14), signed by the Bank’s
balance of FCDU/EFCDU lending to the               President or Country Manager, in case of
RBU shall, at all times, be within the             local branch/subsidiary of foreign banks,
prescribed cap. Any breach thereon shall           Compliance Officer and Head of Treasury,
be subject to the imposition of a monetary         to the effect that, at any day of the
penalty of PHP30,000 per calendar day,             reference month, the outstanding balance
commencing on the day the cap was                  on funds borrowed from FCDU/EFCDU
breached until the same is corrected;              did not exceed the prescribed cap (i.e.,
     (2) Charged interest at prevailing            lower of total outstanding balance on
market rates, computed monthly at the              RBU’s on-balance sheet foreign currency
average daily balance of the receivable from       trade assets or thirty percent (30%) of the
the RBU; and                                       level of FCDU/EFCDU deposit liabilities)
     (3) On short-term maturity, or for a          and were utilized by the RBU solely for
period of one (1) year or less. Balances shall     foreign currency trade transactions.
be settled, within a year from availment, by           The foregoing rule shall be subject to
way of actual transfer of foreign currency         quarterly review by the BSP.
assets from the RBU books to the FCDU/
EFCDU books.                                       Section 73. Foreign Currency Cover
     c. The lending transaction shall be           Requirements. Depository banks under the
booked as “Loans to RBU by FCDU/                   foreign currency deposit and expanded
EFCDU” in the FCDU/EFCDU books and                 foreign currency deposit systems shall
“Loans by RBU from FCDU/EFCDU” in the              maintain at all times a 100% cover for their
RBU books;                                         foreign currency liabilities, except for
     d. The “Loans to RBU by FCDU/                 USD-denominated repurchase agreements
EFCDU” account balance (net of                     (R/P) with the BSP. Provided, That
transactions outstanding for more than one         violation of the terms and conditions of
(1) year) shall qualify as eligible asset cover,   the USD- denominated R/P facility shall
but not as liquid asset cover, for FCDU/           subject the borrowings of the bank to the
EFCDU liabilities;                                 FCDU/EFCDU asset and liquid asset cover
     e. Banks shall establish and maintain         requirements. For purposes of complying
systems to–                                        with this requirement, the principal offices
     (1) monitor the foreign currency funds        in the Philippines of the authorized banks
flow of RBU and the average daily balances         and all their branches located therein shall
of foreign currency trade assets, with             be considered as a single unit. The foreign
minimum database covering a two (2)-               currency cover shall consist of the net
month rolling period; and                          carrying amount of the following:
     (2) account for the utilization of funds          1. For banks authorized to operate an
borrowed from FCDU/EFCDU.                          FCDU:
     The systems as well as periodic                   a. Foreign currency cash on hand;
reports generated therefrom shall be made              b. Foreign currency checks and other
available to the BSP examiners for                 cash items;
verification.                                          c. Due from BSP – Foreign Currency;
     f. Banks shall submit to the                      d. Due from other banks (other
appropriate BSP supervising department,            FCDUs/EFCDUs, OBUs, and non-resident
within five (5) banking days from end of           banks);




Manual of Regulations for Banks                                               Part V - Page 29
Section 73
09.12.31

     e. Derivatives with Positive Fair Value    loans to resident private sector borrowers
Held for Trading and/or Hedging                 to be serviced using foreign exchange
(Derivatives with Negative Fair Value Held      purchased from entities that are not AABs
for Trading and/or Hedging shall require        or AAB-forex corps under Section 24.1.a:
corresponding asset/liquid asset cover);        Provided, That all applicable banking rules
     f. Investments in readily marketable       and regulations are complied with including
foreign currency-denominated debt               single borrower’s limit as provided in
instruments, booked under the following         Section X303 of the MORB;
control accounts: (i) Held for Trading (HFT);        h. Loans and receivables arising from
(ii) Designated at Fair Value through Profit    repurchase agreements, certificates of
or Loss (DFVPL); (iii) Available for Sale       assignment/participation with recourse, and
(AFS); and (iv) Held to Maturity (HTM).         securities lending and borrowing
     Foreign currency-denominated debt          transactions, maturing within one (1) year;
securities sold/lent in repurchase agreement/        i. Foreign currency accrued interest
securities lending and borrowing                income from financial assets;
transactions shall be considered as eligible         j. Accounts receivable arising from
asset cover for the 100% asset cover            sale of financial assets under the trade date
requirement. The same treatment shall           accounting pending actual settlement/
likewise apply to foreign currency              delivery of the underlying securities
denominated debt securities used as             (Accounts payable arising from the purchase
additional collateral in repurchase             of financial assets under the trade date
agreements or as collateral by borrowing        accounting pending actual settlement/
bank in securities lending and borrowing        receipt of the underlying securities shall
transactions.                                   require corresponding asset/liquid asset
     g. Foreign currency loans and              cover);
receivables maturing within one (1) year             k. Loans to RBU (net of transactions
authorized by the BSP, booked under the         outstanding for more than one (1) year):
following:                                      Provided, That the conditions under Item 3
     i. Loans to BSP                            of Section 72 are complied with;
     ii. Interbank loans receivable                  l. Receivable from the RBU book
     iii. Loans and receivables – others        arising from the exercise of warrants paired
     Loans and receivables authorized by the    with ROP Global Bond Holdings in the
BSP shall refer to those granted pursuant to    FCDU/EFCDU book: Provided, That it shall
this Manual and shall include the following:    be settled by the RBU book to the FCDU/
(a) those with specific approval by the BSP     EFCDU book within six (6) months from the
under Section 23 (Loans Requiring Prior BSP     date of receipt of the Exchange Securities;
Approval); (b) those short term loans to        and
resident private and public sector borrowers         m. Such other assets as may be
which under existing regulations require no     determined by the Monetary Board as
prior BSP approval but allowed to be            eligible asset cover.
serviced using foreign exchange purchased            2. For banks authorized to operate an
from AABs or AAB-forex corps (i.e., loans       EFCDU – The foregoing accounts,
to commodity and service exporters,             regardless of maturity, and in the case of
indirect exporters, producers/manufacturers,    investment in foreign currency denominated
including oil companies and public utility      debt instruments (including debt
concerns) under Section 24.4 (Loans Not         instruments booked under Unquoted Debt
Requiring Prior BSP Approval); and (c) those    Securities Classified as Loans and




Part V - Page 30                                           Manual of Regulations for Banks
                                                                                    Section 73
                                                                                     09.12.31

investments in structured products),                  a. Foreign currency cash on hand;
regardless of maturity and marketability,             b. Foreign currency checks and other
shall all be considered as eligible asset        cash items;
cover. Loans to resident private and public           c. Due from BSP – Foreign Currency
sector borrowers which under Section 24.4        with remaining maturity of one (1) year or
require no prior BSP approval and allowed        less regardless of funding: Provided, That
to be serviced using foreign exchange            such deposit/placement is not encumbered
purchased from AABs or AAB-forex corps           or is not being utilized for any other
(i.e., loans to commodity and service            purposes;
exporters, indirect exporters, producers/             d. Due from other banks (other
manufacturers, including oil companies and       FCDUs/EFCDUs, OBUs and non-resident
public utility concerns) shall however have      banks);
short term maturity.                                  e. Investments in readily marketable
     In addition, the following shall also be    foreign currency denominated debt
considered as eligible asset cover:              instruments, booked under the following
     a. Loans and Receivables granted by         control accounts: (i) HFT; (ii) DFVPL;
EFCDU pursuant to Section 24, i.e., those        (iii) AFS; and (iv) HTM; except for the
loans of non-residents from EFCDUs, to be        following: (a) those which are sold/lent in
serviced using foreign exchange purchased        repurchase agreement/securities lending and
from entities that are not AABs or AAB-forex     borrowing transactions and those used as
corps under Section 24.1.b: Provided, That       additional collateral in repurchase
all applicable banking rules and regulations     agreements or as collateral by borrowing
are complied with including single               bank in securities lending and borrowing
borrower’s limit as provided in Section X303     transactions; and (b) those investments in
of the MORB;                                     structured products;
     b. Outstanding Export Bills Purchased            f. Loans and receivables authorized by
in the EFCDU books, booked under the             the BSP booked under the following:
following control accounts:                           i. Loans to BSP maturing within one
     i. Interbank loans receivable - if          (1) year;
without recourse                                      ii. Interbank loans receivable maturing
     ii. Loans and receivables – others - if     within one (1) year;
with recourse                                         iii. Loans and receivables – others that
     For this purpose, net carrying amount       is any of the following:
shall refer to the gross amount of financial          (1) Outstanding export bills purchased
asset, plus or minus, as the case may be,        in the EFCDU books.
the following: (i) unamortized premium/               (2) Short-term EFCDU loans to
(discount) determined using the effective        exporters in the form of export packing
interest method; (ii) any accumulated market     credits, whether rediscounted or not under
gains/(losses) in the case of AFS financial      BSP’s Export Dollar Facility, up to the extent
assets; and (iii) any allowance for credit       guaranteed by Trade and Investment
losses determined based on existing              Development Corporation of the Philippines
regulations.                                     (TIDCORP) or Small Business Guarantee
     3. Further, at least thirty percent (30%)   and Finance Corporation (SBGFC): Provided,
of the cover requirement for foreign             That these credits are not overdue.
currency liabilities in the FCDU/EFCDU                g. Loans and receivables arising from
shall be in the form of liquid assets as         repurchase agreements, certificates of
follows:                                         assignment/participation with recourse and




Manual of Regulations for Banks                                              Part V - Page 31
Sections 73 - 75
09.12.31

securities lending and borrowing                    c. In the case of foreign banks,
transactions, maturing within one (1) year;     remittance of profits to their Head Office
and                                             abroad.
     h. Accounts receivable arising from            Issuance by a bank of false/erroneous
sale of financial assets under the trade date   certification that it has fully complied with
accounting pending actual settlement/           the FCDU/EFCDU cover requirements any
delivery of the underlying securities           days of the reference month shall be subject
pertaining to readily marketable foreign        to a maximum monetary penalty of
currency denominated debt instruments.          PHP30,000 per day (reckoned from the date
     The 100% asset cover and thirty percent    the deficiency started until it is corrected)
(30%) to be held in the form of liquid assets   without prejudice to the imposition on the
enumerated above, shall be unencumbered,        erring bank and/or the concerned bank
except as otherwise provided in second          officers, of the penal sanctions provided
paragraph of Item f of Section 73.1.            under Sections 35 and 36 of Republic Act
     The amended report (Appendix 15) on        No. 7653.
compliance with FCDU/EFCDU cover                    The Due from Other Banks – Non-
requirements shall form part of the Financial   Resident (DFOB-Non-Resident) account
Reporting Package (FRP) issued under            representing cover for foreign currency
Subsec. X162.16 of the MORB. The bank           liabilities of FCDU/EFCDU shall be kept
shall continue to submit to the BSP-            separate and distinct from the DFOB – Non
Supervisory Data Center (SDC) a                 Resident account for the regular banking
certification (Appendix 15.1) under oath and    unit (RBU).
signed by the bank’s President or Country
Manager, in the case of local branch of         Section 74. Foreign Currency Deposits
foreign banks, Compliance Officer and           with the Bangko Sentral. Foreign currency
Head of Treasury, to the effect that the bank   deposit with the BSP equivalent to at least
has fully complied with the FCDU/EFCDU          fifteen percent (15%) as a form of foreign
cover requirements on all banking days of       currency cover referred to in Section 4 of
the reference quarter.                          Republic Act No. 6426, as amended, shall
     Sanctions: Non-compliance with the         be optional on FCDUs/EFCDUs of UBs/
prescribed 100% FCDU/EFCDU asset                KBs and FCDUs of TBs and RBs/Coop
cover and/or thirty percent (30%) liquid        Banks. The BSP may pay interest on the
asset cover requirements shall be subject to    foreign currency deposit and if requested,
the imposition of a monetary penalty of one-    shall exchange the foreign currency notes
tenth of one percent (1/10 of 1%) of the        and coins into foreign currency instruments
deficiency, converted to its peso equivalent    drawn on its depository banks.
at the exchange rate prevailing on the date
the deficiency was incurred but not to          Section 75. Currency Composition of the
exceed PHP30,000 per deficiency, per            Cover. FCDUs of TBs and RBs/Coop Banks
calendar day. Compliance for at least six (6)   shall maintain the foreign currency cover
months of the FCDU/EFCDU cover                  in the same currency as that of the
requirement is a pre-condition for the          corresponding foreign currency deposit
following:                                      liability.
     a. Declaration of cash dividends;              FCDUs/EFCDUs of UBs/KBs shall
     b. Bank’s application for branching;       maintain not less than seventy percent
and                                             (70%) of the foreign currency cover in the




Part V - Page 32                                            Manual of Regulations for Banks
                                                                                Sections 75 - 84
                                                                                       09.12.31

same currency as that of the liability and       amended. Depositors are entitled to receive
thirty percent (30%) or less, at the option of   payment in the same currency in which the
the FCDU/EFCDU, may be denominated in            insured deposits are denominated.
other acceptable foreign currencies.
                                                 Section 80. Rates of Interest. Foreign
Section 76. Secrecy of Deposits. Pursuant        currency deposits shall not be subject to
to Republic Act No. 6426, as amended, all        interest rate ceilings.
foreign currency deposits are declared as
and considered of an absolutely                  Section 81. Eligibility as Collateral. Deposits
confidential nature and, except upon the         under the foreign currency deposit system
written permission of the depositor, or          are eligible as collateral for peso loans or
pursuant to a lawful order issued by a           for foreign currency loans to residents and
competent court, in no instance shall such       non-residents.
foreign currency deposits be examined,
inquired or looked into by any person,           Section 82. Taxes. Pursuant to the National
government official, bureau or office            Internal Revenue Code of 1997, as amended
whether judicial, administrative or              and its Implementing Rules and Regulations,
legislative, or any other entity whether         any income of non-residents (whether
public or private.                               individuals or corporations) from
                                                 transactions with depository banks covered
Section 77. Numbered Accounts. Pursuant          under this Chapter shall be exempt from
to Section 9 of Republic Act No. 9160 (The       income tax. Interest income derived by
Anti-Money Laundering Act of 2001) dated         residents (whether individuals or
29 September 2001, as amended, and its           corporations) from depository banks covered
Revised Implementing Rules and                   under this Chapter shall be subject to a final
Regulations, foreign currency non-checking       income tax at the rate of seven and one-half
numbered accounts shall be allowed:              percent (7.5%) of such interest income. The
Provided, that the true identity of the          transactions of FCDUs/EFCDUs shall,
customers of all foreign currency non-           however, be subject to such taxes as
checking numbered accounts are                   provided under the National Internal
satisfactorily established based on official     Revenue Code, as amended and its
and other reliable documents and records         Implementing Rules and Regulations.
and the information and documents required
are obtained and recorded by the bank.           Section 83. Exemption from Court Order
                                                 or Process. Subject to the provisions of
Section 78. Withdrawability and                  Republic Act No. 9160, as amended,
Transferability of Deposits. There shall be      foreign currency deposits shall be exempt
no restrictions on the withdrawal by the         from attachment, garnishment, or any other
depositor of his deposit or on the transfer      order or process of any court, legislative
of the same abroad except those arising from     body, government agency or any
the contract between the depositor and the       administrative body whatsoever.
bank.
                                                 Section 84. Accounting. The foreign
Section 79. Insurance Coverage. Foreign          currency deposits and their corresponding
currency deposits shall be insured under the     cover shall be considered as funds separate
provisions of Republic Act No. 3591, as          and distinct from the regular assets and




Manual of Regulations for Banks                                               Part V - Page 33
Sections 84 - 87
09.12.31

liabilities of the AABs. AABs shall maintain       the bank’s compliance with the provisions
a separate accounting for transactions             of law and these regulations.
covered by these rules that will enable
preparation of the Balance Sheet and Income        Section 86. Prospective Effect of
Statement covering said funds.                     Regulations. In the event a new enactment
    For purposes of preparing the FCDU/            or regulation is issued decreasing the rights
EFCDU financial statements, the bank shall         hereunder granted, such new enactment or
use the US dollar (USD) as its functional          regulation shall not apply to foreign
currency. However, for purposes of                 currency deposits already made or existing
consolidating the FCDU/EFCDU financial             at the time of issuance of such new
statements with the RBU financial                  enactment or regulation, but such new
statements, these shall be translated into the     enactment or regulation shall apply only to
presentation currency, i.e. Philippine Peso        foreign currency deposits made after its
(PHP).                                             issuance.
    The transfer of net realized/unrealized
losses recognized in profit or loss and equity     Section 87. Sanctions
and Undivided Profits/(Losses) from FCDU/               1. Any willful violation of Republic
EFCDU to the Regular Banking Unit (RBU)            Act No. 6426, as amended, or any
shall be subject to the guidelines and             regulation duly promulgated by the
conditions under Appendix 16.                      Monetary Board pursuant thereto shall
    The policy guidelines on the conversion        subject the offender upon conviction to
and transfer of foreign currency-                  an imprisonment of not less than one (1)
denominated loans, and Real and Other              year nor more than five (5) years or a fine
Properties Acquired (ROPA) in the books            of not less than Five Thousand Pesos
of the FCDU/EFCDU to peso loans and                (PHP5,000.00) nor more than Twenty-
ROPA in the books of the RBU shall be              Five Thousand Pesos (PHP25,000.00), or
subject to the conditions provided under           both such fine and imprisonment at the
Appendix 17.                                       discretion of the court.
    Banks which are authorized to operate               The BSP may revoke or suspend the
under this Chapter shall submit to the BSP-        authority of a bank to accept new foreign
SES a separate audited financial statement         currency deposits for violation of Republic
(Category B report) of the FCDU/EFCDU for          Act No. 6426, as amended, or these
the past year within ninety (90) calendar          regulations, or if such bank ceases to possess
days after the start of the audit which audit      the minimum qualifications required.
shall start not later than thirty (30) calendar         2. Delayed submission of report by
days after the close of the calendar/fiscal year   a bank and/or submission of erroneous/
adopted by the bank in accordance with the         incomplete report shall be subject to the
provisions of Section X166 of the MORB.            monetary penalties under Section 103.
                                                        3. Any violation of the provisions of
Section 85. Supervision. The Governor and          this Chapter shall be subject to Section 37
the head of the appropriate department of          of Republic Act No. 7653. The guidelines
the BSP personally, or by deputies, are            for the imposition of monetary penalty for
authorized to verify the books of account          violations/offenses with sanctions falling
and transactions of each AAB, to verify the        under Section 37 of Republic Act No. 7653
eligible cover, as well as review all other        on banks, their directors and/or officers are
requirements under these regulations and           shown in Appendix 67 of the MORB.




Part V - Page 34                                               Manual of Regulations for Banks
                                                                              Sections 88 - 89
                                                                                     09.12.31

  PART FOUR. FOREIGN EXCHANGE                    transactions involving the Philippine peso
FORWARDS AND SWAPS AND OPEN                      between authorized dealer banks and their
 FOREIGN EXCHANGE POSITION OF                    customers.
              BANKS
                                                 Section 89. Definition of Terms
                 Chapter I                            “Customers” shall refer to: (a) resident
                                                 banks (other than KBs and UBs), and non-
  FOREIGN EXCHANGE FORWARDS                      bank BSP supervised entities (NBBSEs) not
   AND SWAPS INVOLVING THE                       authorized to engage in foreign exchange
        PHILIPPINE PESO                          forwards and swaps as dealers; (b) resident
                                                 non-bank entities; and (c) non-residents,
Section 88. General Policy. It is the policy     both banks and non-banks.
of the BSP to support the deepening of the            “Foreign exchange obligation” shall
Philippine financial markets. In line with       refer to an actual commitment to repatriate
this policy, customers may, through foreign      or pay to a non-resident or any AAB a
exchange forwards, hedge their market risks      specific amount of foreign currency on a
arising from foreign exchange obligations        pre-agreed date.
and/or exposures: Provided, That forward              “Foreign exchange exposure” shall refer
sale of foreign exchange (deliverable and        to foreign exchange risk arising from an
non-deliverable) may only be used when           existing commitment which will lead to an
the underlying transaction is eligible for       actual payment of foreign exchange to, or
servicing using foreign exchange purchased       receipt of foreign exchange assets from, non-
from AABs or AAB-forex corps. Customers          residents or any AAB based on verifiable
may, likewise, cover their funding               documents on deal date. Foreign exchange
requirements through foreign exchange            risks arising from BSP-registered foreign
swaps.                                           investments without specific repatriation
     AABs may only engage in foreign             dates are considered foreign exchange
exchange forwards and swap transactions          exposures.
with customers if the latter is hedging market        “Foreign exchange swap” shall refer to
risk or covering funding requirements. There     a transaction involving the actual exchange
shall be no double/multiple hedging such         of two currencies (principal amount only)
that at any given point in time, the total       on a specific date at a rate agreed on deal
notional amount of the foreign exchange          date (the first leg), and a reverse exchange
derivatives transaction/s shall not exceed the   of the same two currencies at a date further
amount of the underlying foreign exchange        in the future (the second leg) at a rate
obligation/exposure.                             (different from the rate applied to the first
     The customer shall no longer be allowed     leg) agreed on deal date.
to buy foreign exchange from AABs or AAB-             “Foreign exchange forward” shall refer
forex corps for foreign exchange obligations/    to a contract to purchase/sell a specified
exposures that are fully covered by              amount of currency against another at a
deliverable foreign exchange forwards and        specified exchange rate for delivery at a
foreign exchange swaps.                          specified future date three or more business
     The following guidelines, as well as        days after deal date.
minimum documentary requirements, shall               “Non-Deliverable Forward (NDF)” shall
cover foreign exchange forward and swap          refer to a foreign exchange forward contract




Manual of Regulations for Banks                                              Part V - Page 35
Sections 89 - 92
09.12.31

where only the net difference between the       pretermination of the contract due to
contracted forward rate and the market rate     prepayment of the underlying obligation or
at maturity (i.e., the fixing rate) shall be    exposure: Provided, That for foreign
settled on the forward date.                    currency loans, prior BSP approval has been
                                                obtained for the prepayment and a copy of
Section 90. Documentation. Minimum              such approval is presented to the AAB
documentary requirements for foreign            counterparty.
exchange forward and swap transactions              b. Foreign Exchange Swaps
listed in Appendix 18 shall be presented on         No restriction on tenor.
or before deal date to AABs unless                  c. Settlement of NDFs
indicated.                                          All NDF contracts with residents shall
     Foreign exchange selling AABs shall        be settled in pesos.
stamp the supporting documents upon                 d. Remittance of foreign exchange
presentation by customers as follows:           proceeds of deliverable forward and swap
     a. For hedging transactions: “FX           contracts
HEDGED/DELIVERABLE” or “FX HEDGED/                  Foreign exchange proceeds of
NON-DELIVERABLE”;                               deliverable forward and swap contracts shall
     b. For funding transactions: “FX           be delivered by the AAB counterparty
SOLD”,                                          directly to the beneficiaries concerned
                                                except for foreign investments where said
indicating the contract date and amount         FX proceeds are reconverted to Philippine
involved, and signed by the AAB’s               pesos and re-invested in eligible peso
authorized officer. Copies of all duly marked   instruments such as those listed in Item
supporting documents shall be retained by       A.2.2 of Appendix 18. For this purpose,
AABs and made available to the BSP for          beneficiaries shall refer to the FCDU/
verification. The retained copies shall also    EFCDU of a bank or a non-resident entity
be marked “DOCUMENTS PRESENTED AS               (e.g., creditor, supplier, investor) to whom
REQUIRED” and signed by the AAB’s               the customer is committed to pay/remit
authorized officer.                             foreign exchange.

Section 91. Tenor/Maturity and Settlement       Section 92. Forward Contracts with Non-
     a. Forward Sale of Foreign Exchange        residents
(whether deliverable or non-deliverable)            All forward contracts to sell foreign
     The tenor/maturity of such contracts       exchange to non-residents (including OBUs)
shall not be longer than:                       with no full delivery of principal, including
     (i) the maturity of the underlying         cancellations, roll-overs/renewals shall be
foreign exchange obligation; or                 submitted to the BSP for prior clearance.
     (ii) the approximate due date or           However, every roll-over of short-term (ST)
settlement of the foreign exchange exposure.    deliverable forward contracts with non-
For deliverable foreign exchange forward        residents need not be prior approved:
contracts, the tenor/maturity shall be          Provided, That:
co-terminus with the maturity of the                1. The underlying transaction for each
underlying obligation or the approximate        ST deliverable foreign exchange forward
due date or settlement of the foreign           contract is a foreign investment in long-term
exchange exposure. This shall not preclude      (LT) Philippine government securities for




Part V - Page 36                                           Manual of Regulations for Banks
                                                                              Sections 92 - 95
                                                                                     09.12.31

which a Bangko Sentral Registration             the counterparty signature on pertinent
Document (BSRD) has been issued;                documents; and
    2. The roll-over is effected during the          d. Mark-to-Market Test – the booking
tenor of the underlying LT Philippine           or recording in the books of accounts of the
government securities;                          profit or loss on contracts and cash flows/
    3. The actual delivery/settlement of the    settlement to counterparties must be fully
forward contract coincides with the date        supported by appropriate documents such
of the intended capital repatriation of the     as authenticated copy of debit/credit tickets,
BSP-registered investments;                     schedules showing among others, mark-to-
    4. The value of the forward contract        market valuation computation, etc.
does not exceed the foreign currency
equivalent of the maturity value/net            Section 94. Reporting Requirements
proceeds of the BSP-registered investments           Banks duly authorized to engage in
computed at the agreed forward exchange         derivatives transactions shall continue to be
rate; and                                       covered by the BSP’s existing reporting
    5. The repatriation of capital and          requirements on financial derivatives.
remittance of income for the BSP-               Cancellations, roll-overs or non-delivery of
registered investment complies with             deliverable foreign exchange forward
documentary requirements under existing         contracts and under the forward leg of swap
BSP rules.                                      contracts shall be reported electronically in
                                                excel format to the BSP not later than five
Section 93. Cancellations, Roll-overs or        (5) banking days after reference month using
Non-delivery of Deliverable Foreign             the prescribed format in Annex L.
Exchange Forward and Swap Contracts                  Swap contracts with counterparties
    All cancellations, roll-overs or non-       involving purchase of foreign exchange by
delivery of all foreign exchange                banks at the initial leg shall likewise be
deliverable forward contracts and the           reported electronically in excel format to the
forward leg of swap contracts shall be          BSP not later than five (5) banking days after
subject to the following guidelines to          reference month using the prescribed format
determine the validity thereof:                 in Annex M .
    a. Eligibility Test - Contracts must be          The reports shall be transmitted to the
supported by documents listed in                International Operations Department at
Appendix 18;                                    iod@bsp.gov.ph, copy furnished the
    b. Frequency          Test     -      the   Supervisory Data Center (SDC) at the
reasonableness of the cancellation, roll-over   following addresses: sdcfxkbdom@
or non-delivery shall be based on the results   bsp.gov.ph (for Domestic Banks) and
of the evaluation of the justification/         sdcfxkbfor@bsp.gov.ph (for Foreign Banks).
explanation submitted by banks as
evidenced by appropriate documents;             Section 95. Non-Bank BSP-Supervised
    c. Counterparty Test – the                  Entities (NBBSEs)
cancellation or roll-over of contracts must         NBBSEs that may subsequently be
be duly acknowledged by the counterparty        authorized to engage in foreign exchange
to the contract as shown in documents           forwards and swaps as dealers shall
submitted by banks, e.g., there should be       likewise be covered by the provisions of
conforme of counterparty as evidenced by        this Chapter.




Manual of Regulations for Banks                                             Part V - Page 37
Sections 96 - 99
09.12.31

                      Chapter II                                    (e) appraisal increment reserves
                                                                    (revaluation surplus) arising from an
       OPEN FOREIGN EXCHANGE                                        appreciation or an increase in the book
         POSITION OF BANKS                                          value of bank assets.
                                                                        “Permanently assigned capital” shall
Section 96. General Policy. It is the policy                        refer to the minimum capital required for
of the BSP to promote the growth and                                branches of foreign banks in the
development of the foreign exchange market.                         Philippines to be inwardly remitted and
It is also recognized that banks are the main                       converted into pesos.
players in this market, primarily in their role                         “Unimpaired capital of foreign banks”,
as “market-makers” 1. Thus, in order to                             for purposes of this Chapter, shall be
ensure that banks are able to provide ample                         defined as “permanently assigned capital”
liquidity in the market but, at the same time,                      plus the “Net Due To Head Office”
conduct their business in a sound manner,                           account: Provided, That the amount of Net
and guard against speculative activity, limits                      Due To Head Office that may be added
on their net open foreign exchange position                         to the permanently assigned capital of
are instituted.                                                     foreign banks that are UBs shall not
                                                                    exceed the equivalent of six (6) times the
Section 97. Definition of Terms                                     permanently assigned capital. Provided
     “Open Foreign Exchange Position” shall                         further; That the amount of Net Due To
refer to the extent that banks’ foreign                             Head Office that may be added to the
exchange assets do not match their foreign                          permanently assigned capital of foreign
exchange liabilities. An open position may                          banks that are KBs shall not exceed the
either be “positive”, “long”, or “overbought”                       equivalent of eight (8) times the
(i.e., foreign exchange assets exceed foreign                       permanently assigned capital.
exchange liabilities) or “negative”, “short”,
or “oversold” (i.e., foreign exchange                               Section 98. Allowable Open Foreign
liabilities exceed foreign exchange assets).                        Exchange Position. Banks’ allowable open
     “Unimpaired capital” shall refer to a                          foreign exchange position (either
bank’s total capital net of (a) such                                overbought or oversold) shall be the lower
unbooked valuation reserves and other                               of 20 percent (20%) of their unimpaired
capital adjustments as may be required by                           capital or USD50 million.
the BSP; (b) total outstanding unsecured                                Any excess of the allowable limit shall
credit accommodations, both direct and                              be settled on a daily basis.
indirect, to directors, officers,                                       Penalties on excess overbought and
stockholders, and their related interests                           oversold positions of banks when PDS
(DOSRI); (c) deferred income tax; (d)                               trading is suspended shall be waived.
equity investment of a bank in another
bank or enterprise whether foreign or                               Section 99. Computation of Foreign
domestic, if the other bank or enterprise                           Exchange Position. Banks’ open foreign
has a reciprocal equity investment in the                           exchange position shall be computed daily
investing bank, in which case, the                                  based on their FX Form 1. The guidelines
investment of the bank or the reciprocal                            on the computation of foreign exchange
investment of the other bank or                                     position of banks and reporting
enterprises, whichever is lower; and                                requirements are outlined in Appendix 19.



1
 There are two facets to this role. First, banks must be able to quote rates to their customers at which they stand ready to buy
and sell currencies. Second, banks themselves may take open positions in currencies.

Part V - Page 38                                                                    Manual of Regulations for Banks
                                                                                Sections 100 - 101
                                                                                         09.12.31

Section 100. Sanctions. The following                                   Non-Monetary Sanctions
sanctions shall be imposed on banks                 "chronic" violation suspension of bank's
found in violation of the net open foreign                              rediscounting privileges,
exchange position limits:                                               cash dividend declaration
    a. A bank is considered immediately                                 and branching privileges
in violation of the open foreign exchange                                until the violation is
                                                                        corrected but in case shall
position limit on the day it exceeds such
                                                                        such suspension be less
limit. Such bank shall be subject to the
                                                                        than 30 calendar days
following monetary penalties:                       "abusive" violation suspension of bank's
                                                                        rediscounting privileges,
    Per Calendar Month            Daily Penalty
                                                                        cash dividend declaration
 1st calendar day of violation       PHP10,000.00                       and branching privileges
 2nd calendar day of violation       PHP20,000.00                         until the violation is
 3rd calendar day of violation,      PHP30,000.00                        corrected but in no case
 and onwards, or if the excess
                                                                         shall such suspension be
 open foreign exchange position
 of the bank is thirty percent (30%)                                     less than 60 calendardays.
 or more of the allowable limit in
 any calendar day, regardless of
 whether a bank is in first, second,
                                                        c. The Monetary Board may impose
 third or more days of violation                    other non-monetary sanctions on a bank
                                                    for violations determined by BSP as
    b. In addition, the following non-              “chronic” or “abusive” on a case-to-case
monetary sanctions shall be imposed on              basis, pursuant to Section 37 of Republic
the bank committing violations                      Act No. 7653.
considered as:
    1 ) “chronic”, that is, when the                  PART FIVE. GENERAL PROVISIONS
violation continues beyond three (3)
banking days within a calendar month,                                 Chapter I
but the excess position is less than thirty
percent (30%) of the allowable limit; and             REPORTS AND POST VERFICATION
    2) “abusive”, that is, when the
violation continues beyond three (3)                Section 101. Reportorial Requirements.
banking days within a calendar month and            The following reports are required to be
the excess position is thirty percent (30%)         submitted to the BSP by AABs, OBUs, and
or more of the allowable limit.                     AAB-forex corps when applicable:

          Title of Report                      Submission               Submission Process
                                          Frequency/Deadline
Category A. Consolidated Report on Foreign Exchange Assets and Liabilities
             For UBs/KBs
   A-3   FX Form 1, Main Report         Weekly, within five (5)          email to DES at
                                       banking days after end of         der.itrs@bsp. gov. ph
                                       reference week
   A-3   FX Form 1, Schedule 1          Weekly, within five (5)          email to DES at
                                       banking days after end of         der.itrs@bsp.gov.ph
                                        reference week
   A-3   FX Form 1, Schedules 2 to 7, Weekly, within five (5)            email to DES at
         9 to 12                        banking days after end of        der.itrs@bsp.gov.ph
                                        reference date                   (hard copy of Schedule
                                                                        10 & 11 to ID)




Manual of Regulations for Banks                                                   Part V - Page 39
Section 101
09.12.31

                   Title of Report                  Submission            Submission Process
                                               Frequency/Deadline
         Sworn Certification – FX Form 1    Weekly, within three (3)      Hard copy to DES
         Main Report and Schedules          banking days after
         2 to 7, 9 to 12 (Annex T)          submission deadline for the
                                            covered reports/schedules
   A-3    FX Form 1, Schedules 8 &13        Daily, within two (2)         email to SDC at
                                            banking days after end of     fed@bsp.gov.ph or sedi-
                                            reference date                fxvmd@bsp.gov.ph
         Sworn Certification – FX Form 1    Weekly, within three (3)      Hard copy to SDC
         Schedules 8 &13 (Annex U)          banking days after end of
                                            reference week
   A-3 FX Form 1, Schedule 14               Monthly, within 15 banking    email to SDC at
                                            days after end of reference   fed@bsp.gov.ph or sedi-
                                            month                         fxvmd@bsp.gov.ph
   A-3   Consolidated Foreign Exchange      Daily, within three (3)       Hard copy to SDC
         Position Report                   banking days from
                                           reference date
         For TBs:
   B     FX Form 1A, Main Report and        Monthly, within ten (10)      e-mail to DES at
         Schedules 2 to 9                   banking days after end of     der.itrs@bsp.gov.ph
                                            reference month
         B. Foreign Trade Transactions
   A-3    Report on Export Proceeds        Weekly, within five (5)        e-mail to DES at
          FX Form 1, Schedule 9            banking days after end of      der.itrs@bsp.gov.ph
                                          reference week
   A-3 Report on Import Letters of Credit          -do-                   e-mail to DES
       (L/Cs) Opened and DA-OA Import                                     der.itrs@bsp.gov.ph
       Availments and Extensions, FX                                      (hard copy to ID)
       Form 1, Schedule 10
   A-3 Report on Import Payments                   -do-                  e-mail to DES
        FX Form 1, Schedule 11                                           der.itrs@bsp.gov.ph
                                                                         (hard copy to ID)
      Monthly Report on Sale/Remittance Monthly, within the first five Hard copy to ID
      of Foreign Exchange (FX) for (5)    banking days of the
       Advance Payment of Importations month succeeding the date
       up to USD100,000.00 (Annex B) of foreign exchange sale
        Monthly Report on Purchase of     Monthly, within the first five Hard copy to ID
        Foreign Exchange (FX) from        (5) banking days of the
       Refund of Advance Payment of       month succeeding the
       Importations up to USD100,000.00 receipt of the refund
         (Annex C)
      C. Foreign Currency Loans and Related Transactions
   A-2 Report on Bank Liabilities to Non- Monthly, within fifteen (15) email to ID at
       Residents (including hard copy of banking days after end of        id-form5@bsp.gov.ph
       Certification for correctness and  reference month
        consistency with FRP), ID-Form 5
   B   Consolidated Report on Loans        Monthly, within fifteen (15) Hard copy and
         Granted by FCDUs, IOS Form 4      banking days after end of     diskette to ID
                                          reference month




Part V - Page 40                                              Manual of Regulations for Banks
                                                                                       Section 101
                                                                                         09.12.31

              Title of Report                        Submission              Submission Process
                                                 Frequency/Deadline
    B     Report on Guarantees Issued by      Quarterly, within fifteen (15) Hard copy to ID
         Local Banks and Financial           banking days from end of
         Institutions in Favor of Non-       reference quarter
         Residents, R-1 (Annex G)
    B   Report on Foreign Guarantees           Quarterly, within fifteen (15) Hard copy to ID
        Securing Loans of Residents from banking days from end of
        Local Banks and Financial            reference quarter
          Institutions, R-4 (Annex H)
    B     Report on Cancellations,             Monthly, within five (5)       email to ID at
        Roll-overs and Non-delivery of        banking days after end of       iod@bsp.gov.ph
        Deliverable Foreign Exchange          reference month
        Forward Purchase and Sale
        Contracts and Forward Leg of Swap
         Contracts (Annex L)
   B    Report on Foreign Exchange                         -do-                     -do-
        Swaps with Customers where the
        First Leg is a Purchase of Foreign
        Exchange Against Pesos (Annex M)
         D. FCDUs/EFCDUs
        Report on Inventory of Philippine Weekly, within three (3)            Original to SDC
         Debt Papers                           banking days after end of
                                             reference week
          Sworn Certification on               Monthly, within five (5)       Hardcopy to SDC
        FCDU/EFCDU Lending to RBU             banking days from end of
          (Appendix 14)                       reference month
   B     Audited Financial Statement of         Annually, within ninety (90) Hardcopy to
         FCDU/EFCDU                          calendar days after the start appropriate SES
                                              of audit which audit shall      department
                                               start not later than thirty
                                              (30) calendar days after the
                                              close of the calendar/fiscal
                                              year adopted by the bank
   A-2 Report on Compliance with              Quarterly, within fifteen (15) Generated by SDC
       FCDU/EFCDU Cover Requirements banking days after end of                using FRP data
        (Appendix 15)                        reference quarter                submitted by bank
       Sworn Certification of Compliance Quarterly, within fifteen (15) Hardcopy to SDC
        with FCDU/EFCDU Cover                 banking days from end of
       Requirements (Appendix 15.1)          reference quarter
       E. Offshore Banking Units
        Statement of Assets and Liabilities Monthly, within fifteen (15) hard copy to SDC
                                               banking days after end of
                                               reference month
        Schedule 1 – Maturity Profile of                    -do-
       Sources and Uses of Funds
        Schedule 2 Page 1 – Currency                       -do-
        Classification of Funds (In US
        Dollars)
        Schedule 2 Page 2 – Currency                       -do-
        Classification of Funds (In Original
        Currencies)




Manual of Regulations for Banks                                                  Part V - Page 41
Section 101
09.12.31

                   Title of Report                      Submission           Submission Process
                                                   Frequency/Deadline
         Schedule 3 – Country Classification Monthly, within fifteen (15)
         of Interbank Funds/Non-Bank         banking day after end of
         Funds                               reference month
        Schedule 4A – Report on Loans                     -do-
        Granted by OBUs: Part I – Credit
        Information (In Original Currencies)
        Schedule 4B– Report on Loans                      -do-
        Granted by OBUs: Part II – Credit
         Status
         Schedule 4C – Loans and                          -do-
        Discounts – Residents: By
       Borrower/By Economic Activity/By
         Status
        Schedule 5 – Investments in Bonds                 -do-
        and Other Debt Instruments (In
       Original Currencies and USD
        Equivalent)
         Schedule 5A – Investments in                     -do-
       Bonds and Other Debt Instruments
        Issued by Residents
        Schedule 6 – Indebtedness Among                    -do-
       Banks Operating in the Philippines
        Schedule 7 – Report on OBU                         -do-
        Liabilities to Non-Residents (In
       Original Currencies and USD
        Equivalent)
        Schedule 8 – Report on Spot and                   -do-
      Forward Foreign Exchange
        Transactions of OBUs
        Schedule 9 – Report of Foreign                     -do-
       Exchange Flows
        Schedule 9A – Foreign Exchange                     -do-
       Actually Sold to Authorized Agent
         Banks (AABs)
         Schedule 9B – Details of                          -do-
       Investment Receipts/Disbursements
       Statement of Earnings and                 Semi-annual, within fifteen
       Expenses, BSP 6.40.02                   (15) banking days after end
                                                 of reference semester
        Financial Assistance and Training        Annually, within ten (10)
        Granted by OBUs to its Filipino          banking days after end of
         Staff                                 reference year
        Updated List and Bio-Data of             Annually, within ten (10)
        Expatriates                            banking days after end of
                                                reference year
      F. Representative Offices of Foreign Banks
       FX Cash Receipts and Cash                 Monthly, within ten (10)     hard copy to SDC
        Disbursements                            banking days after end of
                                                reference month




Part V - Page 42                                                Manual of Regulations for Banks
                                                                                  Sections 101 - 103
                                                                                           09.12.31

               Title of Report                        Submission              Submission Process
                                                  Frequency/Deadline
        Annual Report of Head Office             Within five (5) months after hard copy to SDC
                                                 end of fiscal/calendar year
      G. Custodian Banks/Remitting AABs
  A-2  Statement of Remittance Report            Daily, within two (2)        hard copy to ID
      (for Registered Foreign Direct             banking days from date of
       Investments), together with               actual remittance
      supporting documents under Items
       C.1(b) and C.2 of Appendix 1 and
       Appendix 11)
  A-2 Consolidated Daily Foreign Portfolio        Daily, within two (2)       e-mail to ID at
       Investment Registration and               banking days from           iod-pid@bsp.gov.ph
       Outward Remittance Report,                transaction date            and hard copy to ID
      together with supporting documents
       under Items C.1(a) and C.2 of
      Appendix 1 and Appendix 10 and 11
       H. AAB-forex corps
       Report on Foreign Exchange                 Weekly, within five (5)    e-mail to DES
       Transactions                              banking days after end of
                                                 reference week



Section 102. Procedures for Reporting.                      C. For Reports of Representative
Reports shall be filed with the BSP Main               Offices of Foreign Banks and Reports of
Office or with the BSP Regional Offices                UBs/KBs, TBs, and RBs/Coop Banks Not
or by sending them by mail or special                  Classified as Category A or B Reports:
delivery, unless otherwise specified.                       a. PHP100 per calendar day for the
The date of acknowledgment of receipt                  first five (5) successive calendar days of
on the copy of the report (if mailed)                  delay
shall be considered as the date of                          b. PHP150 per calendar day for the
submission.                                            next five (5) successive calendar days of
                                                       delay
Section 103. Fines and Penalties                            c. PHP200 per calendar day after the
    1. The following schedule of fines                 first ten (10) successive calendar days of
for delayed submission of reports and/                 delay until the particular report has been
or incomplete/erroneous reporting shall                filed.
apply:                                                      D. For Reports of OBUs
    A. For Category A-1, A-2, and A-3                       PHP500 per calendar day except for
reports:                                               the following reports where the above
 a. UBs/KBs        : PHP 1,200 per calendar            fines and penalties for representative
                     day                               offices of foreign banks shall apply:
 b. TBs            : PHP 600 per calendar day
                                                            a. Statement of Earnings and
 c. RBs/Coop Banks : PHP 180 per calendar day
                                                       Expenses;
                                                            b. Financial Assistance and Training
   B. For Category B reports:
                                                       Granted by OBUs to its Filipino Staff;
 a. UBs/KBs         : PHP 240 per calendar day
                                                       and
 b. TBs            : PHP 120 per calendar day
 c. RBs/Coop Banks : PHP 60 per calendar day
                                                            c. Updated List and Bio-Data of
                                                       Expatriates.



Manual of Regulations for Banks                                                    Part V - Page 43
Sections 103 - 106
09.12.31

     E. For Reports of AAB-Forex corps                                      Chapter II
    PHP 1,000 per calendar day of delay
until complied                                                        FINAL PROVISIONS
    F. Chronic delayed reporting including
submission of amended reports required for               Section 105. Compliance with Anti-Money
FX Form 1 shall be subject to an additional              Laundering Rules
monetary penalty of PHP 2,000.00 per                        All transactions under this Manual shall
banking day until the respective report and              comply with existing regulations on anti-
schedules are correctly submitted.                       money laundering pursuant to the
    Submission of delayed reports, including             provisions of Republic Act No. 9160, as
amended reports, shall be considered                     amended.
chronic based on the following:
                                                         Section 106. Penal Sanctions. Any person
 Name of Report/    Frequency of     No. of times
   Schedule          Submission          delay           violating the provisions of this Manual
 Schedules 8 & 13       Daily        More than seven     shall suffer the penalties prescribed under
                                   (7) times delayed     Section 36 of Republic Act No. 7653.
                                    per month
 Main Report,         Weekly        At least two (2)          Administrative sanctions may also be
 Schedules 2 - 7                     times delayed per   imposed upon institutions within BSP’s
 and 9 - 12                          month or five (5)
                                   banking days of
                                                         administrative authority found violating
                                    continuous delay     this Manual, including their directors and
                                    from submission      officers responsible for such violation.
                                   deadline
 Schedule 14 and        Monthly     More than two             These penalties may be any or all of
 Reconciliation                    (2) times delayed     the following as circumstances warrant:
 Statement                         per semester or            1. Monetary sanction - The amount
                                    ten (10) banking
                                    days of continuous   of PHP30,000.00 penalty imposed per day
                                    delay from the       per violation committed shall be based on
                                    submission
                                   deadline
                                                         a per transaction basis;
                                                              2. Non-monetary sanction - This shall
    2. Manner of payment or collection of                be based on the gravity of the offense or
fines:                                                   violation:
    a. Fines shall be collected through                       a. Reprimand of bank officers who
debit to the AAB’s current account deposit               approved the transaction;
maintained with the BSP by the Financial                      b. Suspension of bank officers who
Accounting Department upon receipt of                    approved the transaction;
notice from the department/s concerned; or                    c. Suspension of directors (for local
    b. In case payment of fines is effected              banks) and Country Manger (for foreign banks);
through check or cash, the same shall be                      d. Permanent disqualification of bank
remitted to the Cash Department of the BSP               officers/directors;
through the department/s concerned.                           e. Reduction or suspension of
                                                         overbought/oversold limits;
Section 104. Post-Verification. Post-                         f. Suspension of opening of L/Cs
verification of foreign exchange transactions            and over-the-counter sale of foreign
covered by this Manual and reported under                exchange for a period of up to six (6)
Section 101 hereof shall be undertaken by                months;
the BSP to verify compliance with the                         g. S u s p e n s i o n o f d e r i v a t i v e s
provisions of this Manual and for monitoring             activities for a period of up to six (6)
purposes.                                                months; and




Part V - Page 44                                                       Manual of Regulations for Banks
                                                                      Sections 106 - 108/Glossary
                                                                                         09.12.31

    h. Suspension of FCDU/EFCDU                   entity, or vice-versa;
authority for a period of up to six (6) months.       b. Interlocking directorship or
                                                  officership, except in cases involving
Section 107. Repealing Clause. All existing       independent directors as defined under
BSP rules and regulations on current              existing regulations;
accounts, capital accounts, OBUs,                     c. Common stockholders owning ten
representative offices of foreign banks,          percent (10%) to fifty percent (50%) of the
FCDUs/EFCDUs, foreign exchange                    outstanding voting stock of each financial
forwards and swaps involving the Philippine       intermediary and the entity;
peso, and open foreign exchange position              d. Management contract or any
of banks, as well as all other existing BSP       arrangement granting power to the bank to
rules and regulations or parts thereof which      direct or cause the direction of management
are inconsistent with or contrary to the          and policies of the entity, or vice-versa; and
provisions of this Manual are hereby                  e. Permanent proxy or voting trusts in
repealed or modified accordingly: Provided,       favor of the bank or quasi-bank constituting
That regulations, violations of which are the     ten percent (10%) to fifty percent (50%) of
subject of pending actions or investigations,     the outstanding voting stock of the entity,
shall not be considered repealed insofar as       or vice-versa.
such pending actions or investigations are            Authorized Agent Banks (AABs) shall
concerned, it being understood that as to         refer to all categories of banks [except
such pending actions or investigations, the       Offshore Banking Units (OBUs)] duly
regulations existing at the time the cause of     licensed by the BSP. It is understood that each
action accrued shall govern.                      category of bank should function within the
                                                  operational parameters defined by existing
Section 108. Separability Clause. Nothing         laws/regulations for the specific bank category
herein is intended nor shall be construed,        to which they respectively belong.
to repeal or amend any law or statute.                AAB-forex corps, whether or not named
Should any provision of this Manual be            as such, shall refer to AAB subsidiary/affiliate
declared unconstitutional or invalid, the         forex corporations whose business include
remaining provisions or parts thereof shall       buying and selling of foreign exchange.
remain in full force and effect, and continue         Balikbayan is a Filipino that has
to be valid and binding.                          established permanent residence abroad.
                                                      Cash Against Document (CAD) is an
             Glossary of Terms                    arrangement whereby the buyer pays the
                                                  exporter upon the former’s receipt of the
FOR PURPOSES OF THIS MANUAL, the                  shipping documents sent to him by the
following definitions are adopted:                exporter either directly or through the banks.
    Advance Payment is an arrangement                 Consignment is an arrangement
between the seller and buyer where the            whereby payment is contingent upon the
buyer pays, either partial or full, the           sale to third parties abroad of the exported
seller prior to the shipment of the               commodities by consignee.
goods.                                                Direct Remittance (DR) is a supplier-
    Affiliate refers to an entity linked          buyer arrangement where payment is made
directly or indirectly to a bank by means of:     within 29 calendar days from bill of lading/
    a. Ownership, control or power to             airway bill date.
vote, of ten percent (10%) to fifty percent           Documents Against Acceptance (D/A)
(50%) of the outstanding voting stock of the      is an arrangement under documentary




Manual of Regulations for Banks                                                Part V - Page 45
Glossary
09.12.31

collection in which an exporter instructs the        Forex Corporations, whether or not
presenting bank to hand over shipping and       named as such, refer to entities whose
title documents to the importer only if the     business include buying and selling of
importer accepts and signs the                  foreign exchange.
accompanying bill of exchange or draft.              Intercompany Open Account Offset
     Documents Against Payment (D/P) is         Arrangement (Interco O/A) is an
an arrangement under documentary                arrangement whereby the exporter offsets
collection in which an exporter instructs the   its payables to against its receivables from,
presenting bank to hand over shipping and       its parent/affiliate company abroad.
title documents to the importer only if the          Legal Tender refers to money
importer fully pays the accompanying bill       recognized by law as acceptable payment
of exchange or draft.                           for debts owed to creditors.
     Electronic transfer is a system where           Letter of Credit (L/C), which gives the
the authority to debit or credit an account     seller assurance that he will receive the
(bank, business or individual) is provided      payment for the goods, is binding
by wire, with or without a source document      document that a buyer can request from
being mailed to evidence the authority.         his bank in order to guarantee that the
     Financial Institutions shall refer to      payment for goods will be transferred to
business organizations that offer a broad       the seller. In order for the payment to
base of financial services or specialize in     occur, the seller has to present the bank
specific financial functions, products, or      with the necessary shipping documents
services, e.g. banks, investment houses,        confirming the delivery of goods within a
pension funds, pawnshops, credit unions,        given time frame.
investment companies, insurance                      Low-Cost Housing refers to housing
companies, securities brokers and dealers,      packages with loan ceilings ranging from
stock exchanges, mutual funds, trust            above PHP300,000 up to PHP2 million.
corporations, leasing companies, financing           Medium- and Long-Term Loans are
companies, credit card companies, companies     credits with maturities exceeding one (1) year.
engaged in foreign exchange dealership/              Non-bank BSP-supervised entities
brokerage and others that deal in money.        (NBBSEs) refer to non-bank entities that fall
     Foreign Bank shall refer to a bank or      under the supervisory authority of the BSP
banking corporation formed, organized and       under Republic Act No. 7653 (The New
existing under any foreign law.                 Central Bank Act), Republic Act No. 8791
     Foreign Currency Deposit Unit              (The General Banking Law of 2000) and
(FCDU)/Expanded Foreign Currency                other special laws. These include quasi-
Deposit Unit (EFCDU) shall refer to a unit      banks, subsidiaries and affiliates of AABs/
of a local bank or of a local branch of a       quasi-banks, non-banks with trust or
foreign bank authorized by the BSP to           investment management activities license,
engage in foreign currency-denominated          non-stock savings and loan associations,
transactions, pursuant to the provisions of     and pawnshops.
Republic Act No. 6426, as amended.                   Non-resident refers to an individual, a
     Foreign Currency Loans are loans           corporation or other juridical person not
denominated in currencies other than the        included in the definition of resident.
Philippine peso, regardless of the creditor.    (See “Resident”)
     Foreign Loans are loans owed to                 Non-trade         current      account
non-residents, regardless of currency           transactions refer to all non-trade
denomination.                                   transactions (also referred to as invisibles)




Part V - Page 46                                            Manual of Regulations for Banks
Glossary
09.12.30

excluding those related to foreign/foreign                  advances in order to assure that revenues
currency loans and foreign investments.                     from the shipment are used to repay the
     Non-trade transactions refer to all other              advances made.
foreign exchange transactions not included in                    Representative Office shall refer to a
the definition of trade transactions. These shall           liaison office of a foreign bank which deals
include foreign loans and foreign investments.              directly with the public by promoting and
(See “Trade Transactions”)                                  giving information about the foreign bank’s
     Offshore Banking refers to the conduct                 services offered. It does not include the
of banking transactions in foreign currencies               regional or area headquarters of a foreign bank
involving the receipt of funds principally from             registered and licensed under existing laws.
external sources and, as allowed in this                         Resident shall refer to –
Manual, from internal sources and utilization                    a) an individual citizen of the Philippines
of such funds, as provided herein.                          residing therein; or
     Offshore Banking Unit (OBU) refers to a                     b) an individual who is not a citizen of
branch, subsidiary, or affiliate of a foreign               the Philippines but is permanently residing1
banking corporation which is duly authorized                therein; or
by the BSP to transact offshore banking                          c) a corporation or other juridical
business in the Philippines. For purposes of                person organized under the laws of the
this Manual, OBUs are classified as non-                    Philippines; or
residents.                                                       d) a branch, subsidiary, affiliate,
     Open Account (O/A) is an arrangement                   extension office or any other unit of
whereby the shipping documents are sent and                 corporations or juridical persons which are
released by the exporter directly to the buyer,             organized under the laws of any country and
without coursing the documents through the                  operating in the Philippines, except OBUs.
banks, upon the buyer’s promise to pay at                        Short-term loans are credits with maturity
some future date after shipment.                            not exceeding one (1) year.
     Red Clause is a clause (originally typed in                 Socialized housing refers to housing
red) added to a letter of credit authorizing the            packages with loan ceilings of not more than
advising/negotiating bank to make an advance                PHP300,000.
payment to the beneficiary (exporter) before                     Small-scale mining refers to mining
the actual shipment to the buyer. The advance               activities which rely heavily on manual labor
may be up to 100% of the export contract                    using simple implement and methods and do
value and may be used by the exporter to buy                not use explosives or heavy mining equipment
the inputs for manufacturing or shipment. Red                    Subsidiary (of a bank) refers to a
clause credits are used primarily when the                  corporation or firm more than fifty percent
buyer (importer) has an agent in the exporting              (50%) of the outstanding voting stock of which
country. To finance its purchases, the importer             is directly or indirectly owned, controlled or
may arrange for the opening of a red clause                 held with power to vote by a bank.
letter of credit. Negotiations of red clause                     Trade transactions refer to merchandise
credits are limited to the bank making the                  export and/or import transactions.


For an updated version of the FX Manual, please visit http://www.bsp.gov.ph/regulations/
reg_MORB.asp then click on the Manual of Regulations on Foreign Exchange Transactions.

1
 Residents include any individual, citizen or otherwise, who has resided in the Philippines for a year or longer,
as defined in Section 83 of IMF Balance of Payments Textbook 1996.




Manual of Regulations for Banks                                                               Part V - Page 47

								
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