Question & AnswerQ&A (BSP CIRCULAR NO. 555)
The primary subject of BSP Circular No. 555, s. 2007 is the amendment to Circular No. 520 regarding the timing of booking Real and Other Properties Acquired (ROPA) by financial institutions.
In the case of judicial foreclosure, ROPA should be booked upon the entry of judgment.
ROPA should be booked upon execution of the Sheriff's Certificate of Sale in cases of extrajudicial foreclosure.
ROPA is booked upon notarization of the Deed of Dacion in the case of dacion in payment (dacion en pago).
The initial book value of ROPA is the carrying amount of the loan (outstanding loan balance adjusted for unamortized premium or discount less allowance for credit losses per PAS 39) plus booked accrued interest, less allowance for credit losses (also per PAS 39), plus transaction costs related to acquisition (e.g., non-refundable capital gains tax and documentary stamp tax).
The allowance for credit losses is computed based on PAS 39 provisioning requirements.
If the carrying amount of ROPA exceeds PHP 5 million, an appraisal of the foreclosed or purchased asset must be conducted by an independent appraiser acceptable to the BSP.
Transaction costs include non-refundable capital gains tax and documentary stamp tax paid in connection with foreclosure or purchase of the acquired real estate property.
The Circular took effect fifteen (15) calendar days after its publication either in the Official Gazette or in a newspaper of general circulation.
The amendments are governed by the resolution of the Monetary Board, specifically Monetary Board Resolution No. 10 dated 4 January 2007.