BSP Circular No. 239 - ROPOA Regulations

The Circular amends the Manual of Regulations for Banks by renumbering and adding a specific subsection.
The Circular amends the Manual of Regulations for Non-bank Financial Institutions by adding specified sections.
The Circular amends the Manual of Accounts for Banks by further revising Item 20.a.
The Circular amends the Manual of Accounts for Non-bank Financial Institutions by further revising the ROPOA definition paragraph.
The amendments are made to reflect how ROPOA reclassified as bank premises or as real property land/building must be booked.

The Circular requires that ROPOA reclassified as bank premises or ROPOA reclassified as real property-land/building be booked at a valuation that starts from the ROPOA balance, net of any valuation reserves.
The Circular restricts reclassification so that only assets intended for immediate use or earmarked for future use may be reclassified and rebooked.
The Circular requires prior BSP approval before banks and non-banks reclassify ROPOA accounts to the specified asset categories.
The Circular standardizes the initial accounting record of properties acquired in settlement of loans via foreclosure or dation in payment by setting clear measurement rules.

Under the Manual of Regulations for Banks, the accounting treatment applies to “Real and Other Properties Owned or Acquired (ROPOA) reclassified as Bank Premises.”
Under the Manual of Regulations for Non-bank Financial Institutions, the accounting treatment applies to “Real and Other Properties Owned or Acquired (ROPOA) reclassified either as Real Property-Land or Real Property-Building.”
ROPOA reclassified as Bank Premises must be booked at the asset’s ROPOA balance, net of any valuation reserves.
ROPOA reclassified as Real Property-Land/Building must be booked at the asset’s ROPOA balance, net of any valuation reserves.
Reclassification is permitted only for (1) assets immediately used or (2) assets earmarked for future use.

Banks must first secure prior Bangko Sentral approval before effecting the reclassification of ROPOA accounts to bank premises.
For banks’ cases involving future use, banks must submit justification and plans for expansion/use before reclassification.
Non-banks must first secure prior Bangko Sentral approval before effecting the reclassification of ROPOA accounts to real property-land/building.
For non-banks’ cases involving future use, non-banks must submit justification and plans for expansion/use before reclassification.

The Manual of Accounts for banks revises Item 20.a with a new first paragraph describing ROPOA.
A bank’s ROPOA refers to real and other properties, other than those used for banking purposes or held in the investment portfolio, acquired in settlement of loans and/or for other reasons.
Properties acquired by the bank in settlement of loans through foreclosure or dation in payment must be recorded at the balance of the loan (defined as principal plus booked accrued interest receivable after considering allowance for uncollected interest on loans less unamortized income) or at the bid/purchase price, whichever is lower.
The bank may include in the book value the non-refundable capital gains tax and documentary stamp tax paid in connection with the foreclosure/purchase, provided the total book value does not exceed the appraised value of the asset acquired determined by an independent appraiser acceptable to Bangko Sentral ng Pilipinas.
Properties acquired by the bank for other reasons must be recorded at cost or appraised value when cost is not involved/determinable in the acquisition of the property.

The Manual of Accounts for non-bank financial institutions revises the first paragraph on the definition of ROPOA.
Non-bank ROPOA refers to real and other properties, other than those used for business purposes or held in the investment portfolio, acquired in settlement of loans and/or for other reasons.
Properties acquired by the non-bank in settlement of loans through foreclosure or dation in payment must be recorded at the balance of the loan (defined as principal plus booked accrued interest receivable after considering allowance for uncollected interest on loans less unamortized income) or at the bid/purchase price, whichever is lower.
The non-bank may include in the book value the non-refundable capital gains tax and documentary stamp tax paid in connection with the foreclosure/purchase, provided the total book value does not exceed the appraised value of the asset acquired determined by an independent appraiser acceptable to Bangko Sentral ng Pilipinas.
Properties acquired by the non-bank for other reasons must be recorded at cost or appraised value when cost is not involved/determinable in the acquisition of the property.