Question & AnswerQ&A (BSP CIRCULAR NO. 484)
The BSP Circular No. 484 amends item "(b)" of Subsection 4126Q.2 of the Manual of Regulations for Non-Bank Financial Institutions to implement Section 57 of Republic Act No. 8791 or The General Banking Law of 2000.
The Monetary Board approved the amendments in its Resolution No. 460 dated April 7, 2005.
It pertains to the calculation of the net amount available for dividends by non-bank financial institutions.
It is the amount of unrestricted or free retained earnings and profit and loss summary less certain deductions such as bad debts without required valuation reserves, unbooked valuation reserves, deferred income tax, and others as specified.
Bad debts refer to debts against which valuation reserves are not required by the BSP to be set up.
These are valuation reserves and other unbooked capital adjustments required by the BSP whether or not they are allowed to be set up on a staggered basis.
Deferred income tax is deducted to reflect the actual distributable earnings that a financial institution can declare as dividends without violating regulatory requirements.
These are profits from its subsidiaries under the equity method of accounting that have been recorded but not yet received, and they must be deducted from the amount available for dividends.
Accrued interest is excluded pursuant to Item "c" or Subsection 4307Q.7 to ensure only collectible income is considered in distributable earnings.
Such foreign exchange profit must be deducted from the net amount available for dividends as per the amended regulation.
The circular took effect immediately upon its adoption on May 24, 2005.