Foreign Currency Cover Requirements
- Depository banks under FCDU and EFCDU must maintain a 100% cover for foreign currency liabilities.
- Principal offices and branches treated as a single unit for compliance.
- Eligible foreign currency assets for cover include:
- Foreign currency cash on hand and checks.
- Due from BSP and other banks (FCDUs/EFCDUs, OBUs, and non-resident banks).
- Derivatives with positive fair value held for trading/hedging, with matching cover for those with negative fair value.
- Investments in readily marketable foreign currency-denominated debt instruments under various classifications (HFT, DFVPL, AFS, HTM).
- Foreign currency loans and receivables maturing within one year, including BSP authorized loans, interbank loans, export-related loans, and others per BSP circular provisions.
- Loans/receivables from repurchase agreements, certificates of assignment with recourse, and securities lending maturing within one year.
- Foreign currency accrued interest income and accounts receivable from sales of financial assets pending settlement.
- Loans to the regular banking unit under specified conditions.
- Other assets as designated by the Monetary Board.
- EFCDU can count all such assets regardless of maturity or marketability, including unquoted debt securities and structured product investments.
- Short-term maturity required for certain loans to resident borrowers without prior BSP approval.
- At least 30% of foreign currency liability cover must be held as liquid assets, composed of cash, checks, short-term placements with BSP and other banks, marketable debt instruments (with exceptions), authorized short-term loans and receivables, and accounts receivable from financial asset sales.
- Asset cover and liquid assets must be unencumbered except as provided.
- Separate accounting for foreign currency cover held in non-resident due from other banks accounts for FCDU/EFCDU versus regular banking units.
Securities Lending
- Foreign currency-denominated debt securities lent or used as collateral in securities lending are eligible for the 100% foreign currency liability cover.
- Such securities are not eligible for the 30% liquid asset cover.
Repurchase Agreements with Foreign Currency-Denominated Government Securities
- Borrowings under repurchase agreements should be booked as "Bills Payable" and included in total FCDU/EFCDU liabilities subject to 100% asset cover and 30% liquid asset cover.
- Debt securities sold or used as collateral under repurchase agreements qualify as eligible asset cover but not for liquid asset cover.
- Banks must at all times comply with the 100% asset cover and 30% liquid asset cover requirements.
Transfer of Undivided Profits/(Losses) from FCDU/EFCDU to RBU Books
- Transfers refer only to realized profits/losses; unrealized gains/losses from marking to market, foreign exchange profits/losses, and hedging instrument remeasurement excluded.
- Prior to transferring realized profits, classified accounts in FCDU/EFCDU must be fully provided for.
- Realized profits are transferred at fiscal year-end from "Undivided Profits/(Losses) - FCDU/EFCDU" to "Retained Earnings-Free" in RBU book, with a corresponding transfer of eligible foreign currency assets within one month.
- Realized losses transferred immediately with corresponding foreign currency asset transfer from RBU to FCDU/EFCDU, using specific ledger accounts.
- Unrealized gains/losses managed monthly in FCDU/EFCDU accounts and recognized annually; net debit balances trigger immediate asset transfers from RBU to FCDU/EFCDU.
Accounting
- For financial statement preparation, the US dollar (USD) shall be used as the functional currency of FCDU/EFCDU.
- Consolidation with RBU financial statements requires translation into Philippine Peso (PHP) as presentation currency.
Repealing Clause and Effectivity
- This Circular supersedes/amends/modifies conflicting provisions in existing circulars or regulations.
- Takes effect 15 calendar days after publication in the Official Gazette or a newspaper of general circulation.