The Monetary Board in its Resolution No. 765 dated 4 June 2010, approved the following amendments to the guidelines on the transfer of Foreign Currency Deposit Unit (FCDU)/Expanded FCDU to the Regular Banking Unit (RBU) book and to the selected accounts and schedules of the Financial Reporting Package (FRP).

Section 1. Guidelines on the Transfer of FCDU/EFCDU Profits/(Losses) to the RBU Book. Section X564 of the Manual of Regulations for Banks (MORB) and Appendix 16 of the Manual of Regulations on Foreign Exchange Transactions (MORFXT) issued under Circular No. 645 dated 13 February 2009 are hereby amended as follows:

œFollowing are the guidelines on the transfer of ˜Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™ and ˜Undivided Profits/ (Losses) ™ from the FCDU/EFCDU to the RBU book:

1. ˜Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™. Whenever the total of the following:

a. ˜Retained Earnings Free - FCDU/EFCDU ™;
b. ˜Undivided Profits/(Losses) - FCDU/EFCDU ™ comprising of the following:

(1) Net realized profits/(losses);
(2) ˜Net Unrealized Gains/(Losses) from Operations ™ as defined in Item 2 of this Section.

c. Net unrealized gains/(losses) recognized directly in equity comprising of the following:
(1) ˜Net Unrealized Gains/(Losses) on AFS Financial Assets - FCDU/EFCDU ™ recognized directly in equity; and
(2) ˜Gains/(Losses) on Fair Value Adjustments of Hedging Instruments - FCDU/EFCDU ™ recognized directly in equity.

results to a net debit balance (referred to as ˜Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™ in this Section), the bank shall immediately transfer from the RBU book to the FCDU/EFCDU book eligible foreign currency assets by a credit to ˜Due to RBU - FCDU/EFCDU Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™, which account shall not be subject to asset and liquid asset cover requirements.

For purposes of this Section, a net credit balance in the total of the foregoing Items 1.a, 1.b and 1.c shall be considered as a zero balance in ˜Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™.

The amount of eligible foreign currency assets to be transferred from the RBU book to the FCDU/EFCDU book shall be that which will bring the balance of ˜Due to RBU - FCDU/EFCDU Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™ equal to the ˜Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™.

Whenever the balance of ˜Due to RBU - FCDU/EFCDU Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™ exceeds the ˜Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™, the excess shall be settled at the end of the reference month by the FCDU/EFCDU to the RBU book by a debit to ˜Due to RBU - FCDU/EFCDU Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™ and a credit to the eligible foreign currency assets.

For purposes of this Section, the eligible foreign currency assets shall be in the form of:

a. Due from BSP - Foreign Currency;

b. Due from other banks (Other FCDUs/EFCDUs, OBUs and non-resident banks);

c. Investments in readily marketable foreign currency denominated debt instruments, except for the following:

(1) those which are sold/lent in repurchase agreement/securities lending and borrowing transactions and those used as additional collateral in repurchase agreements or as collateral of the borrowing bank in securities lending and borrowing transactions;

(2) those investments in structured products; and

(3) those Philippine debt papers which were restructured during the period of moratorium in the payment of external debt.

Provided, That these shall likewise be booked under the same category in the RBU book/(in the FCDU/EFCDU book) as they were before the transfer from the FCDU/ EFCDU book/(from the RBU book).

2. Undivided Profits/(Losses). The transfer of ˜Undivided Profits/(Losses) - FCDU/ EFCDU ™ to the ˜Retained Earnings Free ™ account in the RBU book at the end of calendar or fiscal year adopted by the bank shall refer to net realized profits/(losses) only and shall exclude the following:

a. ˜Unrealized Gains/(Losses) from Marking to Market of Financial Assets and Liabilities Held for Trading (HFT) ™;

b. ˜Unrealized Gains/(Losses) from Marking to Market of Financial Assets and Liabilities Designated at Fair Value through Profit or Loss (DFVPL) ™;

c. ˜Foreign Exchange Profit/(Loss) ™, (i.e., arising from revaluation of foreign exchange transactions);

d. ˜Unrealized Gains/(Losses) from Remeasurement of Hedging Instruments ™, and

e. ˜Unrealized Gains/(Losses) from Remeasurement of Hedged Items ™

(collectively referred to as ˜Net Unrealized Gains/(Losses) from Operations ™ in this Section): Provided, That prior to the transfer of net realized FCDU/EFCDU profits/(losses) to the ˜Retained Earnings Free ™ in the RBU book, the FCDU/EFCDU shall fully comply with BSP ™s provisioning requirements.

The net realized and unrealized FCDU/EFCDU profits/(losses) shall be credited/ (debited) to ˜Undivided Profits/(Losses) - FCDU/EFCDU ™ at the end of each reference month which account shall be credited/(debited) to ˜Retained Earnings Free - FCDU/ EFCDU ™ at the end of calendar or fiscal year adopted by the bank.

The transfer of net realized FCDU/EFCDU profits/(losses) to the RBU shall be made by a debit/(credit) to ˜Retained Earnings Free - FCDU/EFCDU ™ and a corresponding transfer of eligible foreign currency assets from the FCDU/EFCDU to the RBU book/(from the RBU to the FCDU/EFCDU book) within a period of one month from the end of the calendar or fiscal year adopted by the bank: Provided, however, That if after the transfer of net realized FCDU/EFCDU profits/(losses) the balance of ˜Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™ exceeds the balance of ˜Due to RBU - FCDU/ EFCDU Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™, the bank shall transfer eligible foreign currency assets from the RBU to the FCDU/EFCDU book on the same date of transfer of the net realized FCDU/EFCDU profits/(losses) by a credit to ˜Due to RBU - FCDU/EFCDU Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™: Provided, further, That if after the transfer of net realized FCDU/EFCDU profits/(losses) the balance of ˜Due to RBU - FCDU/EFCDU Net Realized/ Unrealized Losses Recognized in Profit or Loss and in Equity ™ exceeds the balance of ˜Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™, the bank shall transfer eligible foreign currency assets from the FCDU/EFCDU to the RBU book on the same date of transfer of the net realized FCDU/EFCDU profits/(losses) by a debit to ˜Due to RBU - FCDU/EFCDU Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™. The amount of eligible foreign currency assets to be transferred from the RBU to the FCDU/EFCDU book or from the FCDU/EFCDU to the RBU book, as the case may be, shall be that which will bring the balance of ˜Due to RBU - FCDU/ EFCDU Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™ equal to the ˜Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™.

The balance of ˜Retained Earnings Free - FCDU/EFCDU ™ account shall, after the transfer of net realized FCDU/EFCDU profits/(losses) to the RBU book, correspond to the cumulative unrealized gains/(losses) from operations from prior years arising from the following:

a. Marking-to-market of ˜Financial Assets and Liabilities Held for Trading (HFT) ™;

b. Marking-to-market of ˜Financial Assets and Liabilities Designated at Fair Value through Profit or Loss (DFVPL) ™;

c. Revaluation of foreign exchange transactions;

d. Remeasurement of ˜Hedging Instruments ™; and

e. Remeasurement of ˜Hedged Items ™.

For purposes of this Section, ˜Retained Earnings - Free - FCDU/EFCDU ™, shall, in the case of Philippine branches of foreign banks refer either to ˜Due to Head Office/Branches/ Agencies Abroad - Unremitted Profits not yet approved by the BSP - FCDU/EFCDU ™ if credit balance or ˜Due from Head Office/Branches/Agencies Abroad - Losses in Operation of Philippine Branch of Foreign Banks - FCDU/EFCDU ™ if debit balance: Provided, That for purposes of determining compliance with FCDU/EFCDU cover requirements the balance of ˜Due to Head Office/Branches/Agencies Abroad - Unremitted Profits not yet approved by the BSP - FCDU/EFCDU ™ shall not be subject to FCDU/EFCDU asset and liquid asset cover requirements, while the balance of ˜Due from Head Office/Branches/ Agencies Abroad - Losses in Operation of Philippine Branch of Foreign Banks - FCDU/ EFCDU ™ shall not be offset against the ˜Due to Head Office/Branches/Agencies ™ account. 

The amended illustrative accounting entries on the transfer of FCDU/EFCDU profits/ (losses) which shall supersede Appendix 85 of the MORB and which shall be added as Appendix 16.1 of the MORFXT is attached as Annex A^* .

Section 2. Amendment to Section 84 of the MORFXT. Paragraph 3 of Section 84 of the MORFXT issued under Circular No. 645 dated 13 February 2009, is hereby amended as follows:

œSection 84. Accounting. X x x

˜The transfer of ˜Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ™ and ˜Undivided Profits/(Losses) ™ from the FCDU/EFCDU to the Regular Banking Unit (RBU) book shall be subject to the guidelines and conditions under Appendix 16. 

Section 3. Amendment to Appendix 15 of the MORFXT. The amended Report on Compliance with FCDU/EFCDU Cover Requirements under Appendix 15 of the MORFXT which form part of the Financial Reporting Package is attached as Annex B^* .

Section 4. Amendments to Selected Accounts and Schedules of the Financial Reporting Package. The selected accounts and schedules of the Financial Reporting Package (FRP) issued under Circular No. 512 dated 3 February 2006, as amended, are hereby amended, as follows:

1. Manual of Accounts. The definition and composition of œDue from FCDU/RBU  and œDue to FCDU/RBU  is hereby amended, as follows:

œAsset Accounts

26. Due from FCDU/RBU - X x x

(a) X x x

Sub-account (b) shall only apply to the RBU book:

(b) Due from FCDU/EFCDU - FCDU/EFCDU Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity - This refers to the amount of receivables by the RBU from FCDU/EFCDU corresponding to the amount of eligible foreign currency assets transferred from the RBU book to the FCDU/EFCDU book representing ˜Net Realized/ Unrealized Losses Recognized in Profit or Loss and in Equity ™ in the FCDU/EFCDU book.

œLiability Accounts

32. Due to FCDU/RBU - X x x

(a) X x x

    Sub-account (b) shall only apply to the FCDU/EFCDU book:

    (b) Due to RBU - FCDU/EFCDU Net Realized/Unrealized Losses

Recognized in Profit or Loss and in Equity - This refers to the amount of payables by the FCDU/EFCDU to the RBU corresponding to the amount of eligible foreign currency assets transferred from the RBU book to the FCDU/EFCDU book representing ˜Net Realized/ Unrealized Losses Recognized in Profit or Loss and in Equity ™ in the FCDU/EFCDU book.

œEquity Accounts

4. Retained Earnings

(a) Retained Earnings Reserve

X x x

(b)Retained Earnings Free - This refers to the unappropriated or free portion of the accumulated profits of the bank.

A separate ˜Retained Earnings Free ™ account in the FCDU/ EFCDU book shall be maintained, which shall be defined as follows:

Retained Earnings Free - This refers to the net realized FCDU/ EFCDU profits/(losses) of the preceding year pending transfer to the RBU book within the prescribed period and the cumulative unrealized gains/(losses) from operations in the FCDU/EFCDU from prior years arising from the following:

(i) Marking-to-market of ˜Financial Assets and Liabilities Held for Trading ™;
(ii) Marking-to-market of ˜Financial Assets and Liabilities Designated at Fair Value through Profit or Loss ™;
(iii) Revaluation of foreign exchange transactions;
(iv) Remeausurement of ˜Hedging Instruments ™; and
(v) Remeasurement of ˜Hedged Items ™. 

For Philippine branches of foreign banks, instead of the ˜Retained Earnings Free ™ account the ˜Due to Head Office/Branches/Agencies Abroad - Unremitted Profits not yet approved by the BSP ™ shall be used if credit balance and the ˜Due from Head Office/Branches/Agencies Abroad - Losses in Operation of Philippine Branch of Foreign Banks ™ shall be used if debit balance.

2. Balance Sheet. Balance sheet equity account Item 7(c) œCumulative Foreign Currency Translation  under the FCDU/EFCDU column is hereby unblocked, as follows: 

Account Description Account Code

FCDU   /EFCDU

 



Equity Accounts   In US $ Peso Equiv. (7) Other Comprehensive Income 320000000000000000 0.00 0.00 (c) Cumulative Foreign Currrency Translation 320150000000000000   UNBLOCKED
3. Schedule 42 - Disclosure of Due from FCDU/RBU and Due to FCDU/RBU. Schedule 42 is hereby amended, as follows:

Particulars

Disclosure of Due from FCDU/RBU

1. Due from FCDU/RBU - Clearing Account other than those disclosed in Item 2.

2. Due from FCDU/EFCDU - FCDU/EFCDU Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ^1/

TOTAL

Disclosure of Due to FCDU/RBU

1. Due to FCDU/RBU - Clearing Account other than those disclosed in Items 2

2. Due to RBU - FCDU/EFCDU Net Realized/Unrealized Losses Recognized in Profit or Loss and in Equity ^2/

TOTAL

^1/ This account shall only apply to the RBU book.

^2/ This account shall only apply to the FCDU/EFCDU book.

Section 5. Amendment to Memorandum M-2009-12 - Item F.24 of Memorandum No. M-2009-12 (Frequently Asked Questions on the Preparation of Prudential Reports) dated 16 April 2009, is hereby amended as follows:

œF. Published Balance Sheet (PBS)

˜24. For branches of foreign banks, how shall the prior year ™s net unrealized profits/(losses) from operations under the FCDU/EFCDU book be presented?

˜Prior year ™s net unrealized profits/(losses) from operations credited to œDue to Head Office/Branches/Agencies Abroad - Unremitted Profits not yet approved by the BSP - FCDU/EFCDU /(debited to œDue from Head Office/Branches/ Agencies Abroad - Losses in Operation of Philippine Branch of Foreign Banks - FCDU/EFCDU ) account at the end of the calendar or fiscal year adopted by the bank shall be presented as part of the œNet Due to Head Office/Branches/ Agencies  account in the Published Balance Sheet.

Section 6. Repealing Clause - This Circular supersedes/amends/modifies the provisions of Section X564 and Appendix 85 of the MORB, Section 84 (Paragraph 3) and Appendices 15 and 16 of the MORFXT issued under Circular No. 645 dated 13 February 2009, Item F.24 of Memorandum No. M-2009-12 dated 16 April 2009, as well as the selected accounts and schedules of the FRP issued under Circular No. 512 dated 3 February 2006, as amended, and other existing Circulars, memoranda and/or regulations that are inconsistent herewith.

Section 7. Effectivity - This Circular shall take effect fifteen (15) calendar days after its publication either in the Official Gazette or in a newspaper of general circulation.

  FOR THE MONETARY BOARD:

  (SGD.) AMANDO M. TETANGCO, JR.
  Governor   

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^* Text Available at Office of the National Administrative Register, U.P. Law Complex, Diliman,Quezon City.