Reclassification of Financial Assets Between Categories

OFFICE OF THE GOVERNOR

Circular No. Series of 2008 626

Subject: Reclassification of Financial Assets Between Categories

The Monetary Board, in its Resolution No. 1388 dated 23 October 2008 approved the following guidelines governing the reclassification of investments in debt and equity securities between categories:

Financial institutions shall be allowed to reclassify their investments in debt and equity securities from the Held for Trading (HFT) or Available for Sale (AFS) categories to the Held to Maturity (HTM) or Unquoted Debt Securities Classified as Loans (UDSCL) categories, subject to the foilowing conditions:

(1) The reclassification shall be done in accordance with the provisions of the

October 2o08 amendments to the International Accounting Standards (IAS)

Financial Reporting Standards (IFRS) 7: Financial Instruments: Disclosures; 39: Financial Instruments: Recognition and Measurement and International

(2) Financial assets that are reclassified from HFT/AFS to HTM/UDSCL shall thereafter be treated in accordance with the guidelines provided under

Appendix 33 of the Manual of Regulations for Banks and Appendix Q-20 of the Manual of Regulations for Non-Bank Financial Institutions on the Classification, Accounting Procedures, Valuation and Sales and Transfers of Investments In All Debt Securities and Marketable Equity Securities;

(3) Reclassification from the AFS to the HTM category shall only be allowed if

there was a change in intention for holding the debt instrument, and the financial institution has the ability to hold it until maturity; and

(4) Financial institutions may reclassify from HFT/AFS to HTM/UDSCL effective

1 July 2oo8: Provided, That any reclassification made in periods beginning on or after 1 November 2008 shall take effect from the date when the reciassification is made: Provided, Further that, financial institutions may only reclassify from HFT/AFS to HTM/UDSCL until 31 December 2008.

This Circular shall take effect immediately.

vte DIWA C.GUINIGUNDO

Officer-In-Charge 2 3 October 2008

PANANALAPING MATATAG, BANSANG PANATAG

A. Mabini St., Malate 1004, Manila, Philippines Trunkline (632) 524-70-11 URL:www.bsp.gov.ph e-mail: [email protected]