Amendments to the Expanded Report on Real Estate Exposure (ERRRE) and the Submission of the Report on Project Finance Exposures (RPFE)

,A\ /,./s>: \ (il(1< zJ ear.rexo SENTRAL NG PrLrPrNAs ,&r' \o\':- OFFICE OF THE GOVERNOR CIRCULAR NO. 976 Series of 2OL7 Subject: Amendments to the Expanded Report on Real Estate Exposures (ERREE) and the Submission of the Report on Proiect Finance Exposures (RPFEI The Monetary Board, in its Resolution No. 1617 dated 22 September2OLT, approved the amendments to (1) the Expanded Report on Real Estate Exposures (ERREE) of Banks, and granular (2) the submission of the Report on Project Finance Exposures to gather more information regarding these exposures which are useful inputs in arriving at a comprehensive from these assessment of the quality of bank loans and vulnerability of banks on risks arising exposures. Section 1. Limits on Real Estate Exposures. Section 1397 of the Manual of Regulations for Banks (MORB), as amended, on the limits on real estate exposures and other real estate property is hereby further amended to (1) clarify the definition of loans to finance percent (2O%l infrastructure projects for public use that are currently exempt from the twenty limit on real estate loans, the expanded definition of real estate exposures and the Real Estate housing units stress Test (REST) limits, and (2) update the definition of socialized and low-cost in accordance with the latest definition of the Housing and Urban Development Coordinating Council (HUDCC): ,,Sec. 1397 Limits on Real Estate Exposures and Other Real Estate Property of UniversaUCommercial Banks (UBs/Kgs). uL. Real Estate Loan Limit. Total real estate loans of UB/KBs, excluding ltems "o" to "d' below, shall not exceed twenty percent l2}%l of the total loan portfolio, net of interbank loans: "xxx. ,,lt shall not include loans to finance the construction, rehabilitation and improvement of highways, streets, bridges, tunnels, railways, railroad, transport systems, ports, airports, power plants, hydropower projects, canals, dams, water supply, irrigation, telecommunications, land reclamation projects, industrial estates or townships, government buildings and housing projects, public markets, slaughterhouses, warehouses, civil work components of information.technology networks and database infrastructure projects, solid waste management, sewerage, flood control, drainage, dredging and other infrastructure projects that are intended for public use. ,,purchase by banks of receivables under Contract to Sell (CTS) executed between the real estate developers and home buyers on a with recourse basis shall be considered loans to real estate developers and shall be classified as commercial real estate loans. A. Mabini St., Malate 1004 Manila, Philippines .(6321708-7701 r www.bsp.gov'ph o [email protected]

prescribed limit on real "Trust departments of UBs/KBs shall be exempted from the estate loans. ,.Under HUDCC guidelines, socialized and low-cost housing units are defined as follows: Housing Units Level 1-A (Socialized P 450,000 and below Above P 450,000 to P 500,000 Above P 500,000 to P 1, Above P 1,700,000 to P 3,000,000 or in such other amounts which HUDCC may prescribe in the future for said housing units. "2. Reol Estate Stress Test (REST) Limits. A prudential limit is set for real estate exposures and other real estate property of UBs/KBs. Reol estate exposures shall refer to: "a. Real estate loans (RELs), which shall consist of: "(1) Residential real estate loans to individual households for occupancy categorized under the following types of housing segments: "(a) Socialized Housing; "(b) Low-Cost Housing; "(c) Mid-End Housing; and "(d) High-End Housing; and ,,(2) Commercial real estate loans, which shall refer to loans granted to the following: "(a) individuals(includingsoleproprietorships); "(b) landdevelopers/constructioncompanies;and "(c) other corporate borrowers, such as (i) Real estate brokers; (ii) Real estate lessors; (iii) Propertymanagementcompanies; (iv) Holding comPanies; and (v) Others; for purposes of financing real estate activities; "b. lnvestments in debt securities issued by land developers/construction companies and other corporate borrowers, such as real estate brokers, real estate lessors, property management companies, for purposes of financing real estate activities; and ,rc. Investments in equity securities issued by land developers/construction companies and and other corporate borrowers, such as real estate brokers, real estate lessors property management companies, for purposes of financing real estate activities. Equity securities issued by holding companies are likewise covered, if proceeds from the issue shall be/has been invested by the holding company in its subsidiary corporation/s that is/are engaged in real estate activities'

"Real estate activities shall refer to the acquisition, construction and improvement of real estate; buying and selling of real estate; rental of self-owned or leased real estate; and management of real estate/real property. "Real estate exposures shall not include loans and investments in debt and equity securities the proceeds of which are used to finance infrastructure projects for public use as defined under ltem"7" of this Section. "Other real estate property shall include those recorded under Real and Other Properties Acquired and Non-Current Assets Held for Sale. "For this purpose, a stress test will be undertaken on UB's/KB's REEs (Real Estate Exposures) and other real estate property under an assumed write-off of twenty- five percent (25%1. "xxx,t' Section 2. Report on Real Estate Exposures of Banks. Subsection X397.5 of the MORB is hereby added to set forth guidelines on the submission of the Expanded Report on Real Estate Exposures. The revised reportorial templates covering the amendments to the relevant Schedules under the Expanded Report on Real Estate Exposures are shown under Annexes A-1a (Bank Report) to A-1b (Banking Group Report). Specific guidelines on the mode and manner of electronic submission of the revised reportorial template of the Expanded Report on Real Estate Exposures shall be covered by a separate issuance. "Sec. X397 Real Estate Exposures of Banks. The following are the guidelines governing real estate exposures of banks. "xxx "Sec. 3397 (Reserved) "Subsecs. X397 .t - X397 .4 (Reserved) 'Subsec. X397.5 Exponded report on reol estote exposures. The Expanded Report on Real Estate Exposures is designed to measure and monitor the aggregate real estate exposures, as defined under ltem "2" of Section L397, of the banking system. The report aims to provide the Bangko Sentralwith a comprehensive view of the quality and type of real estate loans/investments financed by banks. "The Expanded Report on Real Estate Exposures (ERREE) shall be submitted in accordance with (a) the guidelines on the preparation of solo and consolidated financial statements under Subsection X191.3; and (b) the line item instructions prescribed under Appendix 727o of the MORB, attached as Annex A-2. "This report shall be considered a Cotegory A-1 report and shall be submitted within the deadf ines indicatedin Appendix 6 of the MORB.

"(1) Bank Report "All UBs/KBs and thrift banks (TBs) shall submit the Expanded Report on Real Estate Exposures on a solo (i.e., head office and branches) basis. UBs/KBs and TBs shall, likewise, submit the ERREE covering real estate exposures of their trust departments. "starting quarter-ending 31 March 2OI8, a rural bank that is a subsidiary of a UB/KB or TB, shall also be required to submit the Expanded Report on Real Estate Exposures on a solo (head office and branches) basis. Covered RBs shall likewise submit the ERREE covering real estate exposures of its trust departments starting 31. March 2018. "(21 Banking Group Report "A parent UBIKBITB shall, likewise, submit the Expanded Report on Real Estate Exposures on a consolidated (i.e., consolidated real estate exposures of the banking group) basis, including aggregate real estate exposures of trust departments of banks/Financial Institutions (Fls) that are part of the banking group. "The schedules comprising covered banks' Revised Expanded Report on Real Estate Exposures are as follows: Report -..----. Covered Banks UBs KBs TBs RBs that are subs. of UB/KB/TBs 1. Bank Report. This shall contain the solo report of the X X X bank's real estate exposures. Covered banks shall likewise submit the ERREE covering real estate exposure of their trust departments. a. Bank Proper and Trust Department b. Schedule 1 - Bank Proper c. Schedule 2 - Trust Department 2. Banking Group Report. This shall contain the X X X consolidated report of the banking group's real estate exposures. Covered banks shall likewise submit aggregate real estate exposures of trust departments of banks/Fls that are part of the banking group. a. Banking Group and Trust Department(s) of i...!:Lll)l ltxttl ti,,:,ai:i Banks/Fls that are part ofthe banking group b. Schedule 1- Banking Group c. Schedule 2 - Trust Department(s) "The revised guidelines, line item instructions and reportorial templates shall take effect starting the quarter ending 30 June 2078. "A pilot run of the revised Expanded Report on Real Estate Exposures (ERREE) shall be conducted for the quarter ending 31 March 2Ot8. During the pilot run, covered banks and their trust department shall submit both the original and revised ERREE (on a solo and consolidated basis) in accordance with the following submission deadlines: Page 4 of7

Expanded Report on Real Estate Exposures Submission deadline a. ERREE template Within 30 banking days after end of the reference quarter ending as of 31 March 20L8. b. Revised ERREE template in accordance Within 45 banking days after end of with euidelines provided in this circular 3l March 2018 Section 3. Report on Project Finance Exposures. Subsection LL92.L9 of the MORB is hereby added to set forth the guidelines on the submission of the Report on Project Finance Exposures. The reportorial templates for the Report on Project Finance Exposures are shown under Annexes B-1a (Bank Report)to B-lb (Banking Group Report). Specific guidelines on the mode and manner of electronic submission of the reportorial template of the Report on Project Finance Exposures shall be covered by a separate issuance. "Subsec. IL92.t9 Report on Project Finonce Exposures. The Report on Project Finance Exposures is designed to measure and monitor the exposure of the banking system to project finance as defined under Subsection X330.2. "All UBs/KBs shall submit the Report on Project Finance Exposures in accordance with (a) the guidelines on the preparation of solo and consolidated financial statements under Subsection X191.3; and (b) the line item instructions prescribed under Appendix 727b of the MORB, attached as Annex B-2. "This report shall be considered a Cotegory A-7 reporl and shall be submitted within the deadf ines indicatedin Appendix 6 of the MORB. "(1) Bank Report "All UBs/KBs shall submit the Report on Project Finance Exposures on a solo (i.e., head office and branches) basis. UBs/KBs shall, likewise, submit the Report on Project Finance Exposures covering project finance exposures of their trust departments. "(21 Banking Group Report "A parent UB/KB shall, likewise, submit the Report on Project Finance Exposures on a consolidated (i.e., consolidated project finance exposures of the banking group) basis, including aggregate project finance exposures of trust departments of banks/Financial lnstitutions (Fls) that are part of the banking group. "The schedules comprising covered banks' Report on Project Finance Exposures are as follows: Report Covered Banks UBs KBs 1. Bank Report. This shall contain the solo report of the bank's project X X finance exposures. Trust departments of covered banks shall likewise submit the Report on Project Finance Exposures covering the project finance exposure of their clients. a. Bank Proper and Trust Department b. Schedule 1 - Bank Proper c. Schedule 2 - Trust Department

Report Covered Banks UBs KBs 2. Banking Group Report. This shall contain the consolidated report of X X the banking group's project finance exposures. UBs/KBs shall likewise submit aggregate project finance exposures of trust departments of banks/Fls that are part of the banking group. a. Banking Group and Trust Department(s) of Banks that are part of the banking group b. Schedule 1- Banking Group c. Schedule 2 - Trust Department(s) "A pilot run of the Report on Project Finance Exposures shall be conducted for the quarter-ending 31 March 2018 which shall be submitted within forty-five (45) banking days after the reference quarter. The template of the Report on Project Finance Exposures shall take effect starting with the reporting period ending 30 June 20L8." Section 4. Amendments to Appendix 6"Reports Required of Bonkt'of the MORB Appendix 6 "Reports Required of Banks" of the MORB, is hereby amended as shown in Annex C. Section 5. Amendments to the Financial Reporting Package (FRPI for Banks. The line item instructions and template of the Financial Reporting Package for Banks is revised to align with the guidelines set forth in this Circular. A. Line ltem lnstructions of Schedules lld and its Sub-Schedules The Line ltem Instructions for Schedules 1Ld and its Sub-Schedules pertaining to Gross Loans ond Receivobles-Others - Classified as to Type of Businessflndustry ol Counterparty of the FRP for Banks/Simplified Financial Reporting Package for Rural and Cooperative Banks are hereby further amended to read, as follows: "schedules l1d (Total Amount), 11d1 (Peso Accounts|, 11d2 (Foreign Regular), 11d3 (FCDU/EFCDUI and 11d4 (Foreign Offices) - Gross Loans and Receivables - Others - Classified as to Type of Business/lndustry of Counterparty "xxx. "Additional lnformation Report under ltems (1.) to (a) the amortized cost (i.e. gross of allowance for credit losses) of Loans and Receivables - Others classified as to the following status: "(1) Current "(2) Past Due "(3) Non-Performing "(4) ltems in Litigation Report under ltems (5) and (6) the amortized cost of Loans and Receivables - Others reported as real estate loans:

"(5) Real estate loans under Circular No. 600 - Report the amortized cost of Loans and Receivables-Others which are reported as real estate loans following the definition provided under Circular No. 500 dated 4 February }OOBL/. "(6) Real estate exposures under Memorandum No. M-20L2-046 - xxx. "Non-Performing Loans are defined under the line item instructions for Schedule 10. "l/This shall correspond to Real Estate Loans reported under ltem Nos. l.A and 1.B.1 ofthe Expanded Report on Real Estate Exposures ofcovered banks." B. Line ltem Instructions and Template of Schedules 119L, 1192, and 1.193 The Line ltem lnstructions, attached as Annex D, and template of Schedules 1L91, LLgZ, and 1193 of the FRP issued under Circular No.512 dated 3 February 2006, as amended, shall be deleted upon live implementation of the revised ERREE starting quarter-ending 30 June 2018. Section 5. Effectivity This Circular shall take effect fifteen (15) calendar days following its publication either in the Official Gazette or in a newspaper of general circulation. FOR THE MONETARY BOARD: ltl| Ud i , -6a^' tv"* MARIA ALMASARA CYD N. TUAfiO-AMADOR Officer-in-Charge \D October2OLT PageT of7