Question & AnswerQ&A (BSP CIRCULAR NO. 601, S. OF 2008)
The BSP's policy is to promote fairness, accuracy, and comparability in financial reporting by aligning foreign currency cover regulations and reportorial requirements with Philippine Financial Reporting Standards (PFRS)/Philippine Accounting Standards (PAS).
Depository banks under the foreign currency deposit and expanded foreign currency deposit systems must maintain at all times a 100% cover for their foreign currency liabilities.
The principal offices in the Philippines of the authorized banks and all their branches located therein shall be considered as a single unit for compliance purposes.
Eligible assets include foreign currency cash on hand, checks and other cash items, due from BSP-Foreign Currency, due from other banks, derivatives with positive fair value, investments in readily marketable foreign currency-denominated debt instruments (under certain control accounts), foreign currency loans and receivables maturing within one year authorized by BSP, loans and receivables arising from repurchase agreements, foreign currency accrued interest income, accounts receivable from sale of financial assets under trade date accounting, loans to RBU complying with conditions, and other assets determined eligible by the Monetary Board.
At least 30% of the cover requirement for foreign currency liabilities in the FCDU/EFCDU shall be in the form of liquid assets.
Those sold or lent in repurchase agreement/securities lending and borrowing transactions, those used as additional collateral in repurchase agreements or as collateral by borrowing bank in securities lending and borrowing transactions, and investments in structured products are excluded from the 30% liquid asset cover.
Yes, they shall be considered as eligible asset cover for the 100% cover requirement but are not eligible for the 30% liquid asset cover.
Transfers of realized profits must be made from Undivided Profits/(Losses) - FCDU/EFCDU to Retained Earnings-Free in the RBU book at year-end, with a corresponding transfer of eligible foreign currency assets. Transfers of realized losses must be made immediately with corresponding transfer of eligible foreign currency assets from the RBU book to the FCDU/EFCDU. Unrealized gains/losses are excluded from these transfers and handled separately.
Banks must use the US dollar (USD) as their functional currency for preparing FCDU/EFCDU financial statements.
It shall take effect fifteen (15) calendar days after its publication in the Official Gazette or in a newspaper of general circulation.