Amendments to the rules on conversion/transfer of foreign currency loans to peso loans

Bexoxo SeNrRaL NG Ptt-rptN^as OFFICE OF THE GOVERNOR ctRcurAR No. L006 Series of 2018 Subject: Amendments to rules on conversion/transfer of foreign currency loans to peso loans The Monetary Board, in its Resolution No. 815 dated 17 May 20L8, approved the following policy guidelines on the conversion and transfer of foreign currency loans and Real and Other Properties Acquired (ROPA) in the books of the foreign currency deposit unit (FCDU)/Expanded FCDU (EFCDU) to peso loans and ROPA in the books of the Regular Banking Unit (RBU): A. FCDU/EFCDU loans may be converted to peso loans and transferred from banks' FCDU books to the RBU books without prior BSP approval, subject to the following conditions: i, The Board of Directors of banks shall approve sound policies for the redenomination of FCDU/EFCDU loans; ii. The banks shall put in place the appropriate risk management system and ensure compliance with the FCDU/EFCDU cover requirement and other relevant FCDU/EFCDU regulations including the timely and accurate accounting and reporting of transactions. No income shall be recognized in the FCDU/EFCDU or RBU books arising from the redenomination of loans; and iii. There shall be actual settlement in foreign currency, simultaneous with the transfer, by the RBU to the FCDU/EFCDU of the total amount of foreign currency-denominated loans/ROPA being transferred to the RBU using the prevailing foreign exchange/conversion rate at the time of transfer. B. FCDU/EFCDU ROPA may also be converted to peso ROPA and transferred to the RBU books without prior BSP approval, subject to items (i)to (iii) above. Attached as Annex A are the prescribed accounting entries on the conversion and transfer of FCDU /EFCDU loans and ROPA to the RBU books. Repealing Clouse. This Circular supersedes Circular No. 420 dated 10 February 2004 and accordingly amends Appendix 17 of the Manual of Regulations on Foreign Exchange Transactions (FX Manual), as amended. Effectivity. This Circular shall take effect 15 calendar days after its publication either in the Official Gazette or in a newspaper of general circulation in the Philippines. FOR THE MONETARY BOARD: 0 | tune 2ors A- Mabini St, Malate 1@4 Manila, Philippines o (63217O*77OL . www.bsp.gov.ph . [email protected]

l, ! ANNEXA Page L of 2 CONVERSIONIRANSFER OF FCDU LOANSTO RBU: Amount of FCDU Loans to be transferred USS 1MM Prevailing exchange rate USS 1: Php 53.00 FCDU Eooks RBU Books uss PhP uss Dr Cr Dr Cr Dr Cr Transfcr of e currcnt FCDU Loan: Due from RBU 1,013,333.33 FCDU Loan 1,000,000.00 Accrued Interest Recelvable 13,333.33 Peso Loan 53,000,000.00 Accrued Interest Recelvable 705,666.50 Due to FCOU 1,013,333.33 Purchase of Forelgn Exchange: Due from Foreign Banks 1,013,333.33 Cash (or any mode of s3,706,666.50 paymentl Slttlcmcnt: Due from Foreign Banks 1,013,333.33 Due from RBU 1,013,333.33 Due to FCDU 1,013,333.33 Oue from Foreign Bank 1,013,333.33 Trensfer of a past due FCOU Loan: Due from RBU 763,333.33 Allowance for Probable Loss 250,000.00 FCDU Loan 1,000,000.00 Accrued Interest Recelvable 13,333.33 Peso Loan 53,m0,000.00 Accrued Interest Receivable 706,666.50 Oue to FCDU 763,333.33 Allowance for Probable Loss 13,250,000.00 Purcha$ of Foreltn Cxchrnge: Due from Forelgn Banks 763,333.33 Cash {or any mode of 40,456,666.50 payment Settlementr Due from Foreign Banks 763,333.33 Due from RBU 763,333,33 Due to FCOU 753,333.33 Due from Foreign Banks 753,333.33

' i,' ANNEX A Page2 of 2 CONVERSION/TRANSFER OF FCDU ROPA TO RBU: Amount of FCDU ROPA to be transferred USS 1MM rate Prevailing exchange USS 1: Php 53.00 FCDU Books RBU Books uss PhP UI s Dr Cr Or Cr Dr Cr Transfcr of ROPA: Due from RBU 750,m0.00 Allowance for Probable Loss 250,000.00 ROPA 1,000,000.00 ROPA s3,000,000.00 Due to FCDU 7s0,000.00 Allowance for Probable Loss 13,250,000.00 Purcha3e of Forelgn Exch.nge: Due from Forelgn Banks 750,000.00 Cash (or any mode of 39,750,000.00 paymentl Settlcmcnt: Due from Forelgn Banks 750,000.00 Due from RBU 750,000.00 Due to FCDU 750,m0.00 Due from Foreign Banks 750,000.00

APPENDIX 17 (As amended by Circular No. 1006 dated l June 2018) Guidelines on the Conversion to Peso Loans/ROPA and Transfer to RBU of FCDU/EFCDU Loans/ROPA A. FCDU/EFCDU loans may be converted to peso loans and transferred from banks' FCDU books to the RBU books without prior BSP approval, subject to the following conditions: The Board of Directors of banks shall approve sound policies for the redenomination of FCDU/EFCDU loans; ii. The banks shall put in place the appropriate risk management system and ensure compliance with the FCDU/EFCDU cover requirement and other relevant FCDU/EFCDU regulations including the timely and accurate accounting and reporting of transactions. No income shall be recognized in the FCDU/EFCDU or RBU books arising from the redenomination of loans; and iii. There shall be actual settlement in foreign currency, simultaneous with the transfer, by the RBU to the FCDU/EFCDU of the total amount of foreign currency-denominated loans/nOpR being transferred to the RBU using the prevailing foreign exchange/conversion rate at the time of transfer. B. FCDU/EFCDU ROPA may also be converted to peso ROPA and transferred to the RBU books without prior BSP approval, subject to items (i)to (iii) above.

APPENDIX 17 l June 2018) (As amended by Circular No. 1005 dated C. The prescribed accounting entries on the conversion and transfer of FCDU/EFCDU loans and ROPA to the RBU books are as follows: CONVERSION/TRANSFER OF FCDU LOANS TO RBU: Amount of FCDU Loans to be transferred USS lMM Prevailing exchange rate USS 1: Php 53.00 FCDU Eooks RBU BooK USS PhP U: Dr Cr Dr Cr Dr Cr Transfer of a current FCDU Loan: Due from RBU 1,013,333.33 FCDU Loan 1,000,000.00 Accrued Interest Receivable 13,333.33 Peso Loan s3,000,000.00 Accrued Interest Receivable 706,665.s0 DUE tO FCDU 1,013,333.33 Purchase of Foreign Exchange: Due from Foreign Banks 1,013,333.33 Cash (or any mode of 53,706,666.50 Payment) Settlement: Due from Foreign Banks 1,013,3 33.33 Due from RBU 1 r)1? ??? ?? Due to FCDU 1,013,333.33 Due from Foreign Eanks 1,013,333.33 Transfer of a past due FCDU [oan: Due from RBU 763,333.33 Allowance for Probable Loss 250,000.00 FCDU Loan 1,000,000.00 Accrued Interest Receivable 13,333.33 Peso Loan 53,000,000.00 Accrued Interest Receivable 706,666.s0 Due to FCDU 753,333.33 Allowance for Probable Loss 13,250,000.00 Purchase of Foreign Exchange: Due from Foreign Banks 763,333.33 Cash (or any mode of 40,4s6,656.50 payment Settlement: Due from Foreign Banks 763,333.33 Due from RBU 763,333.33 DUC tO FCDU 763,333.33 Due from Foreign Banks 763,333.33

APPENDIX 17 (As amended by Circular No. 1006 dated l June 2018) CONVERSION/TRANSFER OF FCDU ROPA TO RBU: Amount of FCDU ROPA to be transfe rred USs 1MM Prevailing exchange rate uss 1: Php 53.00 FCDU Books RBU Books USS PhP U Dr Cr Dr Cr Dr Cr Transfer of ROPA: Due from RBU 750,000.00 Allowance for Probable Loss 2s0,000.00 ROPA 1,000,000.00 ROPA 53,000,000.00 Due to FCDU 7s0,000.00 Allowance for Probable Loss 13,2s0,000.00 Purchase of Foreign Exchange: Due from Foreign Banks 7s0,000.00 Cash (or any mode of 39,750,000.00 payment) Settlement: Due from Foreign Banks 750,000.00 Due from RBU 7s0,000.00 Due to FCDU 750,000.00 Due from Foreign Banks 750,000.00