Revised Guidelines on the Submission of the Annual Report of Banks and QBs

BANeKo SErurnaL NG PII.IpINn,s OFFICE OF THE DEPUTY GOVERNOR SUPERVISION AND EXAMINATION SECTOR MEMORANDUM NO. M.2OT7. O7T To : ALL BANKS AND QUASI-BANKS (OAs1 Subject : Revised Guidelines on the submission of the Annual Report of Banks and QBs The Monetary Board (MB), in its Resolution No.461 dated 16 March ZO!7, approved the issuance of the revised guidelines on the submission of the annual reports of banks and QBs pursuant to Subsections X1.90.6 and 4190Q.6 of the Manual of Regulation for Banks (MORB) and Manual of Regulations for Non-Bank Financial Institutions (MORN BFI), respectively. Consequently, the Annual Report Assessment Checklist (ARAC) is hereby amended to align it with the revised disclosure requirements of the Annual Report. The revised reportorial template for ARAC for financial year 2Ot7 and onwards is shown in Annexes "A'to "Dn. For strict compliance. z -- lJ ESTOR e. ESpeMl Deputy Gover JlMarch 2ot7 A. MabiniSt-, Malate 1004 Manila, Philippines .Trunkline (6321708-77-01r URL:www.bso.sov.ph oe-mail: [email protected]

Annex "A" Annual Report Assessment Checklist Name of Bank Universal and Commercial Banks, and their Subsidiary Banks As of Annual Report Reference Conditions Page Section Complionce with Subsection Xl90.S-Disclosure Requirements in the Annual Report 7. Corporate Policv a. Brief discussion of bank's vision and mission statements b. Introduction of bank's brand c. Business model of the bank 2. Financial Sum ma ry/Financial Hiehliehts 3. Financial Condition and Results of Operations a. Review of bank's operations and result of operations for the financial year including details and explanations for any significant change during the vear b. Highlight of major activities during the year that impact operations, if any Major strategic initiatives of the bank and the banking group, as applicable d. Challenges, opportunities, and responses during the year, if anv 4. Financial Results of Business Sesments (for comolex banks) a. Summary of financial performance of the business segment b. Contribution of each major business segment to the total revenue ofthe bank Significant developments during the year including major activities c. Futu re pla ns/ta rgets/obiective 5. Risk Management Framework Adopted l. Overall risk manasement culture and ohilosoohv b. Risk appetite and strategy Bank-wide risk governance structure and risk management process c. AML governance and culture, and description of the overall Money Laundering (ML)/Terrorist Financing (TF) risk management framework to prevent the use of the bank for ML/TF activities 6. Corporate Governance a. Overall corporate governance structure and practices b. Selection process for the Board and Senior Management Boa rd's overall responsibility d. Description of the role and contribution of executive, non-executive and independent directors, and of the chairman of the Board

Annex "A" Annual Report Assessment Checklist Name of Bank Universal and Commercial Banks, and their Subsidiary Banks As of Annual Report Reference Conditions Page Section e. Board composition. For each member, include the following: I Iype of directorship il. The principal stockholder represented if nominee ilt. Ihe number of years served as director tv. Number of direct and indirect shares held V. Percentage of shares held to total outstanding shares of the bank t. Board qualification List of board-level committees including membership and function h. Directors'attendance at Board and committee meetings Changes in the Board of Directors (for complex banks) List of Executive Officers/Senior Management k. Performance Assessment Program I t. Orientation and Education Proqram m. Retirement and Succession Policy n. Remuneration policy Remuneration Policy and Structure for Executive anc Non-Executive Directors il. Remuneration Policv for Senior Manasement o. Policies and procedures on related party transactions Overarching policies and procedures for managing related partv transactions ilt. Co nRlo merate Structu re ilt. Material RPTs D. Self-Assessme nt Fu nction The structure of the internal audit and compliance functions including its role, mandate/authority, and reporting process il. The review process adopted by the Board to ensur€ effectiveness and adequacy of the internal contro svstem q. Dividend policy r, Corporate Social Responsibility Initiatives s. Consumer Protection Practices i. Role and responsibility of the Board and Senior Management for the development of consumer protection strategy and establishment of an effective oversight over the bank's consumer protection programs

Annex "A" Annual Report Assessment Checklist Name of Bank Universal and Commercial Banks, and their Subsidiary Banks As of Annual Report Reference Conditions Page Section il. The consumer protection risk management systen of the bank il1. The consumer assistance management system of th€ bank which shall include the consumer assistance policies and procedures as well as the corporate structure for handling complaints 7. Corporate lnformation a. Organizational structure, including the name and position of kev officers b. List of major stockholders of the bank, includin6 nationality, percentage of stockholdings and votin€ status List and description of products and services offered d. Bank website e. List of banking units domestic and abroad including 8. Audited Financial Statements (AFS) with Auditor's Opinion It. Compliance with Appendix 63b of the MORB-Disclosures in the Annuol Reports and Published Statement of Condition A. Copital strudure and copitol adequacv: 1. CET 1 capital and a breakdown of its comoonents: 2. Tier 1 capital and a breakdown of its components; 3. Tier 2 capital and a breakdown of its components; 4, Total qua lifying capital; 5. Capital Conservation Buffer; 6. Capital requirements for credit risk (including securitization exposures); 7. Capital requirements for market risk; 8. Capital requirements for operational risk; and 9. Total CAR, Tier L and CET1 ratios on both solo and consolidated bases; 10. Full reconciliation of all regulatory capital elements back to the balance sheet in the audited financial statements; Lt. All regulatory adjustments/deductions, as applicable; 72. Description of the main features of capital instruments issued; and 13. Comprehensive explanations of how ratios involving components of regulatory capital are calculated. B. Risk Exposures ond Assessments (for eoch separate risk areo - credit, market, operdtiondl, interest rate risk in the banking book) L Strategies and processes;

Annex "A" Annual Report Assessment Checklist Name of Bank Universal and Commercial Banks, and their Subsidiary Banks As of Annual Report Reference Conditions Page Section 2. The structure and organization of the relevant risk management function; 3. The scope and nature of risk reporting and/or measurement systems; and Policies for hedging and/or mitigating risk, and strategies anc processes for monitoring the continuing effectiveness o1 hedges/mitigants. Aside from the general disclosure requirements, the following information with regord to the following risk types have to be disclosed in bonk's Annual Reports: L. Credit Risk a. Total credit risk exposures (i.e., principal amount for on- balance sheet and credit equivalent amount for off- balance sheet, net of specific provision) broken down by type of exposures; b. Total credit risk exposure after risk mitigation, broken down by: t. Type of exposures; il. Risk buckets, as well as those that are deducted from capital. c. Total credit risk-weighted assets broken down by type o{ exposures; d. Names of external credit assessment institutions used, and the types of exposures for which they were used; e. Iypes of eligible credit risk mitigants used including credit derivatives; t. For banks with exposures to securitization structures, the following information have to be disclosed: I Accounting polcies for these activities; il. Total outstanding exposures securitized by the bank; and ilt. Total amount of securitization exposures retained or purchased broken down by exposure type.

Annex "A" Annual Report Assessment Checklist Name of Bank Universal and Commercial Banks, and their Subsidiary Banks As of Annual Report Reference Conditions Page Section o Total outstanding amount of credit protection given by the bank broken down by type of reference exposures (for banks that provide credit protection through credil derivatives); and h. Total outstanding amount of other types of structured products issued or purchased by the bank broken down by type (for banks with investments in other types of structured products). 2. Market Risk a. Total market risk-weighted assets broken down by type of exposures (interest rate, equity, foreign exchange and options); and b. For banks using the internal models approach, the following information have to be disclosed: I Ihe characteristics of the models used; ll. A description of stress testing applied to the portfolio; ilt. A description of the approach used for backtesting/validating the accuracy and consistenc! of the internal models and modeling processes; tv. The scope of acceptance by the BSp; and A comparison of VaR estimates with actual gains/losses experienced by the bank, with analysis of important outliers in backtest results. 3. Operational Risk a. Operational risk-weighted assets. 4. lnte rest Rate in the Banking Book a. Internal measurement of interest of interest rate risk in the banking book, including assumptions regarding loan payments and behavior of non-maturity deposits, and frequency of measuremenU and b. The increase (decrease) in earnings or economic value (or relevant measure used by management) for upward and downward rate shocks according to internal measurement of interest rate risk in the bankins book.

Annex "B" Annual Report Assessment Checklist Name of Bank Stand-alone Thrift Banks, Rural Banks and Cooperative Banks As of Annual Report Reference Conditions Page Section t. Compliance with Subsection 4L90e.S-Disclosure Requirements in the Annual Report 1. Corporate Policy a. Brief discussion of bank's vision and mission statements b. Introduction of the bank's brand c. Business model of the bank 2. Financial Summary/Financial Highlights 3. Financial Condition and Results of Operations a. Review of bank's operations and result of operations for the financial year including details and explanations for any significant change during the vear b. Highlight of major activities during the year that impact operations c. Major strategic initiatives of the bank and the banking group, as applicable d. Challenges, opportunities, and responses during the year 4. Financial Results of Business Segments (for complex banks) a. Summary of financial performance of the business segment b. Contribution of each major business segment to the total revenue of the bank c. Significant developments during the year including major activities d. Futu re pla ns/ta rgets/obiective 5. Risk Management Framework Adopted a. Overall risk management culture and philosophv b. Risk appetite and strategy c. Bank-wide risk governance structure and risk management process d. AML governance and culture, and description of the overall Money Laundering {Mt)/Terrorist Financing (TF) risk management framework to prevent the use of the bank for ML/TF activities 6. Corporate Governance a. Overall corporate governance structure and practices b. Selection process for the Board and Senior Manasement c. Board's overall responsibility d. Description of the role and contribution of executive, non-executive and independent directors, and of the chairman of the Board

Annex "8" Annual Report Assessment Checklist Name of Bank Stand-alone Thrift Banks, Rural Banks and Cooperative Banks As of Annual Report Reference Conditions Page Section e. Board composition. For each member, include the following: Type of directorship tl The principal stockholder represented if nominee ilt. The number of years served as director tv. Number of direct and indirect shares held Percentage of shares held to total outstandine shares of the bank f. Board qualification g. List of board-level committees including membership and function h. Directors'attendance at Board and committee meetinss I Changes in the Board of Directors (for complex banks) List of Executive Officers/Senior Management k. Performance Assessment Program I Orientation and Education Program m. Retirement and Succession Policy n. Remuneration policy I Remuneration Policy and Structure for Executive and Non-Executive Directors il. Remuneration Policy for Senior Management o. Policies and procedures on related partv transactions I Overarching policies and procedures for managing related party transactions ilt. Conglomerate Structure ilt. Material RPTS 0. Self-Assessment Function The structure of the internal audit and compliance functions including its role, mandate/authority, and reporting process il. The review process adopted by the Board to ensure effectiveness and adequacy of the internal control system 0. Dividend policy r Corporate Social Responsibility Initiatives s. Consumer Protection Practices Role and responsibility of the Board and Senior Management for the development of consumer protection strategy and establishment of an effective oversight over the bank's consumer protection programs

Annex "B" Annual Report Assessment Checklist Name of Bank Stand-alone Thrift Banks, Rural Banks and Cooperative Banks As of Annual Report Reference Conditions Page Section il. The consumer protection risk management system of the bank ilt. The consumer assistance management system of the bank which shall include the consumer assistance policies and procedures as well as the corporate structure for handling complaints 7. Corporate Information a. Organizational structure, including the name and position of key officers b. List of major stockholders of the bank, including nationality, percentage of stockholdings and voting status c. List and description of products and services offered d. Bank website o List of banking units domestic and abroad includins 8. Audited Financial Statements (AFS) with Auditor's Opinion il. Compliance with Appendix 63c of the MORB-Disclosures in the Annual Reports and Published Statement of Condition A. Copital structure and capital adequocy: 7. Tier 1 capital and a breakdown of its components; 2. Tier 2 capital and a breakdown of its components; 3. Deductions from Tier 1, (5O%l and Tier 2 (SO%I capital; 4. Total qualifying capital; 5. Capital requirements for credit risk; 6. Capital requirements for market risk; 7. Capital requirements for operational risk; and 8. Total and Tier 1 capital adequacy ratio on both solo and consolidated bases.

Annex "C" Annual Report Assessment Checklist Name of Quasi Bank (QB Quasi Banks that are subsidiaries of Universal and Commercial Banks As of Annual Report Reference Conditions Page Section Complionce with Subseaion X790.S-Disclosure Requirements in the Annual Report t. Corporate Policy a. Brief discussion of QB's vision and mission statements b. Introduction of who the QB's brand Business model of the QB 2. Financial Summary/Financial Hiehliehts 3. Financial Condition and Results of Operations a. Review of QB's operations and result of operations for the financial year including details and explanations for any significant change during the year b. Highlight of major activities during the year that impact operations c. Major strategic initiatives of the QB and its subsidiaries, as applicable d. hallenges, opportunities, and responses during the year 4. Financial Results of Business Segments a. Summary of financial performance of the business segment b. Contribution of business segment to the total revenue ol the QB during the year c. Significant developments during the year including major activities d. Future pla ns/ta rgets/obiective 5. Risk Management Framework Adopted a. Overall risk management culture and philosophy b. Risk appetite and strategv c. Entity-wide risk governance structure and risl management process d. AML governance and culture, and description of the overall Money Laundering (ML)/Terrorist Financing (TF) risk management framework to prevent the use of the QB for ML/TF activities 6. Corporate Governance a. Overall corporate governance structure and practices b. Selection process for the Board and Senior Manasement c. Boa rd's overall responsibilitv

Anngx "C" Annual Report Assessment Checklist Name of Quasi Bank (QB Quasi Banks that are subsidiaries of Universal and Commercial Banks As of Annual Report Reference Conditions Page Section d. Description of the role and contribution of executive, non-executive and independent directors, and of the chairman of the Board o Board composition. For each member, include the following: I Type of directorship ii. The principal stockholder represented if nominee ilt. The number of years served as director tv. Number of direct and indirect shares held v, Percentage of shares held to total outstandinE shares of the QB f. Board qualification ct b. List of board-level committees including membership and function h. Directors'attendance at Board and committee meetinss Changes in the Board of Directors List of Executive Officers/Senior Management k. Performance Assessment Program Orientation and Education Program m. Retirement and Succession Policv n. Remuneration policy Remuneration Policy and Structure for Executive and Non-Executive Directors ii. Remuneration Policy for Senior Management o. Policies and procedures on related party transactions Overarching policies and procedures for managing related party transactions il. Material RPTs p. Self-Assessment Function The structure of the internal audit and compliance functions including its role, mandate/authority, and reporting process il. The review process adopted by the Board to ensure effectiveness and adequacy of the internal control system c. Dividend policy r Corporate Social Responsibility Initiatives ). Consumer Protection Practices

Annex "C" Annual Report Assessment Checklist Name of Quasi Bank (QB Quasi Banks that are subsidiaries of Universal and Commercial Banks As of Annual Report Reference Conditions Page Section I Role and responsibility of the Board and Senior Management for the development of consumer protection strategy and establishment of an effective oversight over the QB's consumer protection programs il. The consumer protection risk management system of the QB ilt. The consumer assistance management system of the QB which shall include the consumer assistance policies and procedures as well as the corporate structure for handling complaints 7. Corporate Information a. Organizational structure, including the name and position of key officers b. List of major stockholders of the QB, including nationality, percentage of stockholdings and voting status c. List and description of products and services offered d. QB's website e. List of branches/units domestic and abroad including 8. Audited Financial Statements (AFS)with Audito/s Opinion il. Complionce with Appendix e46 of the MORBNBFT- Disclosures in the Annual Reports and Published Financiol Statements A. Capital structure and capital adequacy: 1.. CET 1 capital and a breakdown of its components; 2. Iier 1 capital and a breakdown of its components; 3. Tier 2 capital and a breakdown of its components; 4. Total qualifying capital; 5. Capital Conservation Buffer; 6. Capital requirements for credit risk (including securitization exposures); 7. Capital requirements for market risk; 8. Capital requirements for operational risk; and 9. Total CAR, Tier 1 and CET1 ratios on both solo and consolidated bases; L0. Full reconciliation of all regulatory capital elements back to the balance sheet in the audited financial statements; IL, All regulatory adjustments/deductions, as applicable; 12. Description of the main features of capital instruments issued; and

Annex "C" Annual Report Assessment Checklist Name of Quasi Bank (QB Quasi Banks that are subsidiaries of Universal and Commercial Banks As of Annual Report Reference Conditions Page Section 13. Comprehensive explanations of how ratios involving components of regulatory capital are calculated. B. Risk Exposures and Assessments (for each separate risk ored - credit, market, operational, interest rate risk in the bonking book) 1.. Strategies and processes; 2. The structure and organization of the relevant risk management function; 3. The scope and nature of risk reporting and/or measurement systems; and 4. Policies for hedging and/or mitigating risk, and strategies and processes for monitoring the continuing effectiveness ol hedges/m itiga nts. c. Aside from the general disclosure requirements, the following information with regard to the lollowing risk Upes have to be disclosed in Annudl Reports: 1. Credit Risk a. Total credit risk exposures (i.e., principal amount for on- balance sheet and credit equivalent amount for off- balance sheet, net of specific provision) broken down by type of exposures; b. Total credit risk exposure after risk mitigation, broken down by: t. Type of exposures; tl Risk buckets, as well as those that are deducted from capital. c. Total credit risk-weighted assets broken down by type ol exposures; d. Names of external credit assessment institutions used, and the types of exposures for which thev were used: e. Types of eligible credit risk mitigants used including credit derivatives; f. For QBs with exposures to securitization structures, the following information have to be disclosed: Accounting polcies for these activities; il. Total outstanding exposures securitized by the QB; and ilt. Total amount of securitization exposures retained or purchased broken down by exposure type.

Annex "C" Annual Report Assessment Checklist Name of Quasi Bank (QB Quasi Banks that are subsidiaries of Universal and Commercial Banks As of Annual Report Reference Conditions Page Section o D. Total outstanding amount of credit protection given b1 the QB broken down by type of reference exposures (for QBs that provide credit protection through credit derivatives); and h. Total outstanding amount of other types of structured products issued or purchased by the QB broken down by type (for QBs with investments in other types of structured products). 2. Market Risk a. Total market risk-weighted assets broken down by type of exposures (interest rate, equity, foreign exchange and options); and b. For QBs using the internal models approach, the following information have to be disclosed: t. The characteristics of the models used; ll. A description of stress testing applied to the portfolio; ilt. A description of the approach used for backtesting/validating the accuracy and consistenc! of the internal models and modeling processes; tv. The scope of acceptance by the BSP; and A comparison of VaR estimates with actua gains/losses experienced by the QB, with analysis o1 important outliers in backtest results. 3. Operational Risk a. Operational risk-weishted assets. 4. lnterest Rote in the Banking Book a. Internal measurement of interest of interest rate risk in the banking book, including assumptions regarding loan payments and behavior of non-maturity deposits, and frequency of measurement; and b. The increase (decrease) in earnings or economic value (or relevant measure used by management) for upward and downward rate shocks according to internal measurement of interest rate risk in the banking book.

Annex "D" Annual Report Assessment Checklist Name of Quasi Bank (QB, Stand-alone Quasi Banks As of Annual leport Reference Conditions Page Section I Compliance with Subsection X790.S-Disclosure Requirements in the Annual Report L. Corporate Policy a. Brief discussion of QB's vision and mission statements b. Introduction of who the QB's brand c. Business model of the QB 2. Financial Summary/Financial Hiehliehts 3. Financial Condition and Results of Operations a. Review of QB's operations and result of operations for the financial year including details and explanations for any significant change during the year b. Highlight of major activities during the year that impact operations Major strategic initiatives of the QB and its subsidiaries, as applicable d. Challenges, opportunities, and responses during the year 4. Financial Results of Business Segments a. Summary of financial performance of the business regment b. Contribution of business segment to the total revenue ol the QB during the year c. Significant developments during the year including major activities d. Futu re pla ns/ta rgets/o bjective 5. Risk Management Framework Adopted a. Qygrall risk management culture and philosophy b. Risk appetite and strategy c. Entity-wide risk governance structure and risk management process d. AML governance and culture, and description of the overall Money Laundering (ML)/Terrorist Financing (TF) risk management framework to prevent the use of the QB for MWF activities 6. Corporate Governance a. Overall corporqte governance structure and practices b. Selection process for the Board and Senior Management c. 9gq4's overall responsibility Page 1, of 3

Annex "D" Annual Report Assessment Checklist Name of Quasi Bank tQB Stand-alone Quasi Banks As of Annual teport Reference Conditions Page Section c. Description of the role and contribution of executive, non-executive and independent directors, and of the chairman of the Board A Board composition. For each member, include the following: L Type of directorship il. The principal stockholder represented if nominee 1il. The number of vears served as director tv. Number of direct and indirect shares held V. Percentage of shares held to total outstandinp shares of the QB f. Board qualification g. List of board-level committees including membership and function h. Directors'attendance at Board and committee meetings Changes in the Board of Directors List of Executive Officers/Senior Management k. Performa nce Assessment Progra m Orientation and Education Program m. Retirement and Succession Policv n. Remuneration policy L Remuneration Policy and Structure for Executive and Non-Executive Directors il. Remuneration Policy for Senior Management o. Self-Assessment Fu nction t. The structure of the internal audit and compliance functions including its role, mandate/authority, and reporting process tl Ihe review process adopted by the Board to ensure effectiveness and adequacy of the internal control system p. Dividend policy q. Corporate Social Responsibility Initiatives I Consumer Protection Practices Role and responsibility of the Board and Senior Management for the development of consumer protection strategy and establishment of an effective oversight over the QB's consumer protection programs il. The consumer protection risk management system of the QB

Annex "D" Annual Report Assessment Checklist Name of Quasi Bank (QBl Stand-alone Quasi Banks As of Annual Report Reference Conditions Page Section ilt. The consumer assistance management system of the QB which shall include the consumer assistance policies and procedures as well as the corporate structure for handling complaints 7. Corporate Information a. 0rganizational structure, including the name and position of key officers b. List of major stockholders of the QB, including nationality, percentage of stockholdings and voting status c. List and description of products and services offered d. QB's website e. List of branches/units domestic and abroad including 8. Audited Financial Statements (AFS) with Auditor's Opinion