Reverse Repurchase Agreements (REPO)

Bang Ential n nae

MAYNILA, PILIPINAS

SUPERVISION AND EXAMINATION SECTOR OFFICE OF THE DEPUTY GOVERNOR

CIRCULAR LETTER Series of 2002

TO : ALL INVESTMENT HOUSES AND FINANCING COMPANIES WITH QUASI BANKING FUNCTIONS

banking functions (IH/FC with QB) shall record properly its Reverse Repurchase Agreements Bangko Sentral ng Pilipinas (BSP), ali investment houses and financing companies with quasi) (REPO) with the Bangko Sentrat ng Pilipinas sold to clients. To properly monitor transactions involving reverse repurchase agreements with the

IH/FC's ciaim on the BSP arising from the reverse REPO shouid not be offset against its loan transactions are different. Thus, the iH/FC's reverse REPO transaction with the BSP shalf client, the securities under REPO support two ioan transactions -- the IH/FC's claim on the BSP remain to be recorded as "Government Securities Purchased under Reverse Repurchase Agreements with BSP" under "Trading Account Securities -- Loans". The IH/FC's payable to clients arising from the subsequent sale of the reverse REPO shall be recorded as "Reverse Repurchase Agreements with BSP Sold to Clients" under "Bills Payable -- Others". The subsequent sale of the reverse REPO agreements is not subiect to reserve requirements. The pro-forma accounting entries are in Annex "A". under the original REPO and the client's claim on the tH/FC under the new REPO. The payable to clients in the subsequent sale of the REPO because the counterparties to the two When an IH/FC sells an outstanding reverse REPO agreement with the BSP to a

C:ondition (BSP 7-26-02). with quasi-banking functions is hereby amended as shown in Annex "B". Annex "C" is the revised Schedule 5 ("Schedule of Bills Payable and Bonds Payable"} of the Statement of Accordingly, the Manual of Accounts for Investment Houses and Financing Companies

This Circular Letter shall take effect immediately

Testor A. EgPenIlla, Jr Sector-in-Charge

Sertember r24: 2002

Att. : als.

MAG-IMPOK SA BANGKO

AnneX "a"

INVESTMENT HOUSES AND FINANCING COMPANIES (IH/FC)

WITH QUASi-BANKING FUNCTIONS

REVERSE REPURCHASE AGREEMEN'TS WITH BSP

PRO-FORMA ACCOUNtING EntRIES

1. To record the purchase by iH/FC from BSP of government securities under reverse REPO agreement

DRTrading Account Securities -- Loans

Government Securities Purchased under Reverse Repurchase Agreements with BSp

CR Due from BSP (or arry appropriate account)

2 To record the subseguent sale by iH/FC of reverse REPO with BSP to clients

DR Cash (or any appropriate account)

CR Bills Payabie - Others - Reverse Repurchase Agreements with BsP Sold to Clients

3. To record payment of client's claim on the IH/FC

DR Bills Payable - Others Reverse Repurchase Agreoments with BSP Sold to Clients

DR Interest Expense on Borrowed Funds -- Bills Pavable -- Others

CR Cash (or any appropriate account)

4. To record BSP's payment of the reverse REPO agreement

DR Due from BSP (or any appropriate account)

CR Trading Account Securities -- Loans Government Securities Purchased under Reverse Repurchase Agreements with BSP

CR Interest Income -- "Trading Account Securities -- Loans

ANNEX "B

ADDITION TO MANUAL OF ACCOUNTS -- INVESTMENT HOUSES

thus A new account shall be included under the account titie "Bills Payable",

Bills Payable -- Others

Clients Bills Payable - Reverse Repurchase Agreements with BSP Sold to

balance of the account "Trading Account Securities -- Loans, Government This represents borrowings incurred from the subsequent sale to IH's clients of reverse repurthase agreements with the Bangko Sentral ng Pilipinas. The outstanding balance of this liability account shall not exceed the outstanding Securities Purchased Under Reverse Repurchase Agreements with the Bangko Sentral ng Pilf pinas".

ADDITION TO MANUAL OF ACCOUNTS - FINANCING COMPANIES

Hhus A new account shall be included under the account titie "Bills Payable"

Bills Payable -- Others

Clients Bills Payable - Reverse Repurchase Agreements with BSP Sold to

outstanding balance of this liability account shall not exceed the outstanding Securities Purchased Under Reverse Repurchase Agreements with the of reverse repurchase agreements with the Bangko Sentral ng Pilipinas. The balance of the account "Trading Account Securities -- Loans, Government This represents borrowings incurred from the subsequent sale to FC's clients Bangko Sentral ng Pilipinas".

Annex "C" BSP 7-26-02-A Scheduie 5 (For IH) BSP 7-26-02-B Schedule 5 ( For FC)

Name of Entity

Addrese

SCHEDULE OF BILLS PAYABLE and BONDS PAYABLE

A [By Source of Funds 1 Bangko Sentrai ng Pilipinas PArtIculArS As of (In Thousand Pesos) Nurnber Record 80 Payable Bills Payable Bonds

4 5 2 HInterbank Borrowings [c. [Other Financial Intermediaries - Local d. TOther Foreign Banks [Deposit Substitutes a. [Repurchase Agreements with Bangko Sentral b.Commercial Banks- Local [c.[Other Gov"t. Agencies Loan Procram Q [a.[Rediscounting [d. [Others d.Other Financiai Intermediaries -Local [e.Private Firms and Individuals Governrnent Lending Programs a.GSiS - Special Financing Progam b.[Sss - Special Financing Progam Others b C. a.iCommercial Banks - Local c.. [Other Banks - Local b.! & Foreign Entities and Individuals IEmergency Advances Reverse Repurchase Agreements with BSP [Other Banks Overdrafts 832 40 803 81 812 813 81 820 82 823 824 825 131 0 810 82 830 833 802 05 826

B. By Original Maturity [Number of lenders b.i Jc. Foreign Entities and Individuais 2.One (1) year or less 3. [> One (0 year to five (5) years [4.]> five (5 years 1.Demand Total Domestic 2) Other Banks {5} Others 1) Commercial Banks 3) Other Financiai intermediaries 4) Private Firms and individuals Sold to Clients. 8 0 843 84 844 86 87 848 886 887 888 889 81 842 849