Clarifications on Circular No. 351 and amendment on Circular Letter dated September 25, 2002

CIRCULAR LETTER Series of 2003

TO:          All Banks

The following clarifications on Circular No. 351 dated September 19, 2002 which allowed banks to exclude loans classified as “Loss” in the latest examination of BSP from the non-performing classification, and amendment on Circular Letter dated September 25, 2002 which prescribed the reportorial requirements thereto are hereby issued:

a.   Only banks with no unbooked valuation reserves and capital adjustments, even if approved for booking on a staggered basis, are qualified to exclude loans classified as “Loss” by the BSP from the non-performing classification under Circular No. 351.  Banks which are not qualified may opt not to fill up Item 7.a of the Additional Information of the monthly Consolidated Statement of Condition (CSOC) as required in Circular Letter dated September 25, 2002.

b.   Only the following accounts are qualified to be excluded from the non-performing classification:

1.   Loans previously classified as “Loss” by the Bangko Sentral ng Pilipinas fully covered by allowance for probable losses;

2.   Outstanding credit card receivables classified as “Loss” in the latest BSP examination plus credit card receivables classified as “Loss” by the bank but not to exceed the total amount classified “Loss” in the latest BSP examination: Provided that information on the outstanding credit card receivables classified as “Loss” as of the reporting month shall be reported in a separate item in the Additional Information of the CSOC.

c.   The Additional Information of the CSOC required under Circular Letter dated September 25, 2002 is further revised as follows (template attached):

7. Total Non-Performing Loans a.  Non-Performing Regular Loans b.  Non-Performing Restructured Loans   xxx xxx

7.a    Loans classified as “Loss” in the latest examination by the BSP which are fully covered by Allowance for Probable Losses, net of write-offs and recoveries xxx

7.b.   Outstanding credit card receivables classified as “Loss” in the latest BSP examination, net of write-offs, recoveries and collections xxx

7.c    Credit card receivables classified as “Loss” by the bank as of this month xxx

This Circular Letter shall take effect immediately.

ALBERTO V. REYES Deputy Governor