Computation of the US$ equivalent of Dollar Linked Peso Notes (DLPNs) issued by ROP in Tranches and the Amount of DLPNs to be excluded in the Bank’s Daily Consolidated Foreign Exchange Position Report (CFXPR)

CIRCULAR LETTER Series of 2003

TO : ALL UNIVERSAL AND COMMERCIAL BANKS

SUBJECT : Computation of the US$ equivalent of Dollar Linked Peso Notes (DLPNs) issued by ROP in Tranches and the Amount of DLPNs to be excluded in the Bank’s Daily Consolidated Foreign Exchange Position Report (CFXPR)

This is to clarify Circular-Letter dated March 4, 2002 requiring universal and commercial banks to include in their Daily FX Position Reports the US$ equivalent of the DLPNs held by them, as a manual adjustment to the FX position amount in the Banks daily CFXPR, which provides the following guidelines in the computation:

“The US dollar equivalent of the bank’s holdings on the Notes shall be included in the computation of the banks FX position after the initial 90 calendar days from issue date, to wit:

For the banks that will be designated as market makers, exclude amount to the extent of 1 divided by the number of market makers multiplied by 50% of outstanding issue or 5% of total outstanding issue, whichever is lower; and

For the other banks, exclude amount to the extent of 50% of the regulatory limit.”

For item (a), the limit is a percentage of the outstanding issue and therefore, the amount of DLPN holdings to be excluded in the banks FX position shall be calculated on a per tranche basis. On the other hand, the amount of DLPN holdings to be excluded in the bank’s FX position for item (b) shall be determined on an aggregate basis, since the maximum exclusion is a percentage of the bank’s regulatory limit.

Banks designated by the Bureau of Treasury and the joint financial advisors as market makers in one tranche shall be considered market makers for all tranches for the purpose of reporting DLPNs in the Bank’s daily CFXPR.

Notwithstanding the bank’s booking of its DLPN holdings, the US$ equivalent of the bank’s DLPN holdings for each tranche shall be the face amount or notional amount (even if the DLPN was revalued at marked-to-market price) divided by the applicable spot Peso/US$ exchange rate determined on the issue dates.

Effective immediately, universal and commercial banks are required to submit their daily adjusted FX position reports using the attached Revised Bank’s Daily CFXPR form with the corresponding Annexes A and B. Sanctions provided under Circular Letter dated August 29, 2001 shall apply for non-submission, delayed, erroneous or incomplete reporting of the daily CFXPR.

RAFAEL B. BUENAVENTURA Governor