BSP Circular Letter

October 2, 2002 BSP CIRCULAR LETTER TO : All Universal and Commercial Banks Pursuant to Monetary Board Resolution No. 999 dated 11 July 2002, which allows excess funds of Foreign Currency Deposit Unit (FCDU)/Expanded FCDU (EFCDU) of universal and commercial banks to be lent to the regular banking unit solely for the purpose of funding the latter's net fund outflow on its on-balance sheet foreign exchange transactions, the following amendments to BSP Circular No. 108 dated 09 May 1996, as amended, shall be adopted: 1. Creation of the following accounts a) "Lending RBU" [1-4-47-00] This represents FCDU/EFCDU funds lent to RBU solely for the purpose of funding RBU's net fund outflow on its on-balance sheet foreign exchange transactions, as allowed under existing regulations. b) "Borrowing FCDU/EFCDU [2-3-49-00] This represents foreign currency borrowings by RBU from the FCDU/EFCDU, obtained solely for the purpose of funding the net fund outflow on RBUs on-balance sheet foreign exchange transactions, as allowed under existing regulations. CDHaET 2. Amendment of the definition of the following subsidiary ledger accounts a) "Accrued Interest Receivable FCDU/EFCDU" This represents interest income already earned but not yet collected/received on loans, investments and deposits of FCDUs/EFCDUs under Circular No. 1389, as amended, as well as on FCDU/EFCDU funds lent to RBU as allowed under existing regulations , which shall be recorded at their respective foreign currency amounts. b) "Accrued Interest Payable Foreign Regular" This represents the estimated liability for interest incurred/due but not yet paid on foreign borrowings, including foreign currency borrowings by RBU from the FCDU/EFCDU as allowed under existing regulations , which shall be set up monthly against current operations. This account shall be recorded at their foreign currency amounts and at their local currency equivalent at the applicable rate of exchange prevailing on transaction dates. c) "Interest Income Others" [5-0-02-40] This represents interest earned and/or actually collected on all receivable accounts other than loans, such as accounts receivable, sales contract receivable, FCDU/EFCDU lending to RBU as allowed under existing regulations , and others. d) "Interest Expense Others" [6-0-02-08] This represents payments and/or monthly accruals of interest other than on deposits and borrowed funds (from external sources), such as the interest portion of amortization payments on the purchase of fixed assets on installment basis, interest on foreign currency borrowings by RBU from the FCDU/EFCDU as allowed under existing regulations, and others . 3. Revision of pages 22 to 26 and pages 39 to 40 to re-number the accounts under "Other Assets" (Item 22) and "Other Liabilities" (Item 42), so as to align the numerical sequence with those of the General Ledger template, as amended. aTCAcI Effective immediately, the following revised pages shall be adopted to implement the foregoing amendments A. Consolidated Statement of Condition (CSOC), Main Report, pages 6 and 9 Annex "A" B. Circular No. 108, as amended 1. Manual of Accounts, pages 22 to 26, 35, 39 to 40, 56-b and 60 Annex "B" 2. General Ledger (GL) Template, pages 5 and 9 Annex "C" (SGD.) ALBERTO V. REYES Deputy Governor ANNEX "A" ANNEX "B" MANUAL of ACCOUNTS (Circular No. 108, as amended) Page 22 to 26, 35 39 to 40, 56-b and 60 currency equivalent at the applicable rate of exchange on transaction dates. Sub-control accounts shall be maintained for: 1) Foreign Currency Notes and Coins on Hand Non-Risk Assets This represents the total amount of foreign currency notes and coins on hand which are acceptable as part of international reserves. 2) Foreign Currency Notes and Coins on Hand Others This represents the total amount of foreign currency notes and coins on hand which are not acceptable as part of international reserves. Foreign Currency Notes and Coins on Hand FCDU/EFCDU This represents the total amount of foreign currency notes and coins on hand which are maintained to service transactions of FCDUs/EFCDUs under Circular No. 1389. The said notes and coins shall be recorded at their respective foreign currency amounts. HTaIAC c. Foreign Currency Checks and Other Cash Items [1-4-14-00] Foreign Currency Checks and Other Cash Items Regular 1 This represents the total amount of foreign currency checks and other cash items other than those received by FCDUs/EFCDUs under Circular No. 1389, which shall be recorded at their respective foreign currency amounts and at their local currency equivalent at the applicable rate of exchange on transaction dates. Foreign Currency Checks and Other Cash Items FCDU/EFCDU This represents the total amount of foreign currency checks and other cash items which come into the possession of the bank in connection with its FCDU/EFCDU transactions under Circular No. 1389. The said checks and other cash items shall be recorded at their respective foreign currency amounts. d. Returned Checks and Other Cash Items [1-4-16-00] Sub-control accounts shall be maintained for: (a) returned checks delivered to BSP clearing; (b) returned checks received from BSP clearing; and (c) others. Returned Checks and Other Cash Items Local Currency This represents the aggregate amount of checks and other cash items, other than those lodged under "Checks and Other Cash Items", "Domestic Bills Purchased-Clean", and "Miscellaneous Checks and Other Cash Items" accounts returned to/by the bank or dishonored/found to be defective for certain reasons such as insufficiency of funds and alterations in the documents. Returned Checks and Other Cash Items Foreign Regular This represents the aggregate amount of foreign currency checks and other cash items other than those received by FCDUs/EFCDUs under Circular No. 1389 returned to/by the bank or dishonored/found to be defective for certain reasons such as insufficiency of funds and alterations in the documents. The said checks and other cash items shall be recorded at their respective foreign currency amounts. Returned Checks and Other Cash items FCDU/EFCDU This represents the aggregate amount of foreign currency checks and other cash items which come into the possession of the bank in connection with its FCDU/EFCDU transactions under Circular No. 1389, returned to/by the bank or dishonored/found to be defective for certain reasons such as insufficiency of funds and alterations in the documents. The said checks and other cash items shall be recorded at their respective foreign currency amounts. IaEHSD 22 e. Miscellaneous Checks and Other Cash Items [1-4-18-00] This represents the aggregate amount of checks and cash items other than those lodged under "Checks and Other Cash Items", "Domestic Bills Purchased Clean", and "Returned Checks and Cash items" accounts such as miscleared and missorted checks. f. Petty Cash Fund [1-4-20-00] This represents a fund maintained on an imprest system to defray minimal disbursements. All payments shall be evidenced/supported by duly accomplished and approved petty cash vouchers. g. Deficiency Judgment Receivable [1-4-22-00] This represents claims against borrower-debtor(s) arising from deficiency judgments rendered by the court. h. Documentary Stamps [1-4-24-00] This represents the cost of documentary stamps, loose and/or loaded in the meter machine. i. Postage Stamps [1-4-26-00] This represents the cost of postage stamps, loose and/or loaded in the postage meter machine. j. Stationery and Supplies on Hand [1-4-28-00] This represents the cost of unissued stationery, printed forms and supplies. k. Shortages [1-4-30-00] This represents the amount of shortages found in the tellers' daily transactions and/or accountability of officers and/or other employees. This account shall be closed when the shortage is: (a) duly accounted; or (b) paid in full; or (c) charged as receivable from the officer/employee concerned; or (d) charged to expense or written off in accordance with existing rules and regulations. l. Dividends Receivable [1-4-32-00] This represents cash dividends earned but not yet received on shares of stocks owned by the bank such as equity investments in allied undertakings/affiliates and shares acquired in settlement of loans. m. Accounts Receivable [1-4-34-00] Accounts Receivable Margin Deposit on Financial Futures [1-4-34-02] Accounts Receivable Margin Deposit on Financial Futures Foreign Regular 1 This represents the initial margin paid by the bank at the inception of the contract. At liquidation, this deposit is refundable. This shall be recorded in local currency with the corresponding foreign currency equivalent, if any. ITADaE Accounts Receivable Margin Deposit on Financial Futures FCDU/EFCDU This represents the initial margin paid by the bank at the inception of the contract. At liquidation, this deposit is refundable. This shall be recorded at its foreign currency amount. 23 Accounts Receivable Others [1-4-34-04] Accounts Receivable Others This represents the following: 1) Amounts due from customers and other parties under open-account arrangements including miscellaneous advances made, such as cable expenses, out-of-pocket collection charges, documentary stamps, commissions and insurance premiums. 2) Claims such as tax refund and insurance proceeds 3) Staff salary advances payable in thirty (30) days or less (those payable in more than 30 days shall be considered as loans) 4) Advances for official travel of officers/employees 5) Temporary overdrafts allowed under existing rules and regulations. Accounts Receivable Others FCDU/EFCDU This represents amounts due from customers and other parties under open-account arrangements including miscellaneous advances made, such as cable expenses, out-of-pocket collection charges, documentary stamps, commissions and insurance premiums in connection with transactions of FCDUs/EFCDUs under Circular No. 1389, which shall be recorded at their respective foreign currency amounts. ASHEca Allowance for Probable Losses Accounts Receivable Others [2-9-34-04] This represents the amount set up against current operations to provide for losses which may arise from non-collection of accounts receivable. Under existing rules and regulations, this account is also known as "valuation reserve". Sub-control accounts shall be maintained for: (a) Accounts Receivable and (b) Accounts Receivable FCDU/EFCDU. n. Accrued Interest Receivable [1-4-36-00] Accrued Interest Receivable Domestic This represents interest income already earned but not yet collected/received on investments in government securities and on loans considered under existing rules and regulations. Accrued Interest Receivable Foreign Regular 1 This represents interest income already earned but not yet collected/received on investments in foreign securities and on foreign loans considered under existing rules and regulations. This shall be recorded at their foreign currency amounts and at their local currency equivalent at the applicable rate of exchange on accrual dates. Accrued Interest Receivable FCDU/EFCDU This represents interest income already earned but not yet collected/received on loans, investments and deposits of FCDUs/EFCDUs under Circular No. 1389, as amended, as well as on FCDU/EFCDU funds lent to RBU as allowed under existing regulations, which shall be recorded at their respective foreign currency amounts. Allowance for Uncollected Interest on Loans [2-9-36-00] This represents the amount required to be set up for uncollected interest accrued on current loans which have become past due under existing rules and regulations. Sub-control accounts shall be maintained for: (a) domestic; (b) foreign regular; and (c) FCDU/EFCDU. 24 o. Prepaid Expenses [1-4-38-00] Prepaid Expenses Call/Put Option Premium [1-4-38-02] Prepaid Call/Put Option Premium Foreign Regular 1 This represents the premium paid by the bank for the purchase of a right to buy/sell a financial asset, which shall be amortized monthly to expense on a straight line manner over the life of the contract. This shall be recorded in local currency with the corresponding foreign currency equivalent, if any. Prepaid Call/Put Option Premium FCDU/EFCDU This represents the premium paid by the bank for the purchase of a right to buy/sell a financial asset, which shall be amortized monthly to expense over the life of the contract. This shall be recorded at its foreign currency amount. aDIHTE Prepaid Expenses Others [1-4-38-04] Prepaid Expenses Others This represents expense prepayments expected to benefit the Bank for a future period not exceeding one (1) year (i.e., insurance premiums, rent and interest on time certificates of deposits, etc.) paid in advance, which shall be amortized monthly. Prepaid Expenses Others FCDU/EFCDU This represents expense prepayments in connection with transactions of FCDUs/EFCDUs under Circular No. 1389 expected to benefit the Bank for a future period not exceeding one (1) year, such as interest on time certificates of deposits paid in advance. These prepaid expenses shall be recorded at their foreign currency amounts and shall be amortized monthly. p. Deferred Charges [1-4-40-00] Deferred Charges This represents expense prepayments expected to benefit the Bank for a future period exceeding one (1) year, such as organizational expense, goodwill, rent paid in advance and others. Organizational expense shall be amortized monthly over a period not exceeding five (5) years. Rent paid in advance and the like shall be amortized monthly or in accordance with the covering agreement, if any. Deferred Charges FCDU/EFCDU This represents expense prepayments in connection with transactions of FCDUs/EFCDUs under Circular No. 1389 expected to benefit the bank for a future period exceeding one (1) year. These charges shall be recorded at their respective foreign currency amounts and shall be amortized monthly or in accordance with the covering agreement, if any. q. Deferred Income Tax [1-4-42-00] This represents the income tax expense deferred in view of certain expenses or provisions for losses not currently deductible for income tax purposes. The income tax expense shall be recognized only when the expenses/losses provided for are actually sustained and/or written off and considered deductible for income tax purposes. r. Deposits with Closed Banks/Banks in Liquidation [1-4-44-00] This represents demand, savings, and/or time deposits maintained with a bank and/or private securities/commercial papers purchased from financial intermediaries (banks and non-banks), which have been closed or placed under liquidation. AcSEHT 25 Allowance for Probable Losses Deposits with Closed Banks/Banks in Liquidation [2-9-44-00] This represents the amount set up against current operations to provide for losses which may arise from non-recovery of deposits with banks and/or private securities purchased from financial intermediaries (banks and non-banks), which have been closed or placed under liquidation. Under existing rules and regulations, this account is also known as "valuation reserve". s. Sundry Debits [1-4-46-00] Sundry Debits This represents items/transactions which, at the time of recording, cannot be classified immediately under any debit account. Entries to this account shall be cleared within one (1) month from the date of entry. Sundry Debits FCDU/EFCDU This represents items/transactions which, at the time of recording, cannot be classified immediately under any debit "FCDU/EFCDU under Circular No. 1389 account. These items shall be recorded at their respective foreign currency amounts. Entries to this account shall be cleared within one (1) month from the date of entry. t. Lending RBU [1-4-47-00] This represents FCDU/EFCDU funds lent to RBU solely for the purpose of funding RBU's net fund outflow on its on-balance sheet foreign exchange transactions, as allowed under existing regulations. u. Other Investments [1-4-48-00] This represents the cost of investments made for public relations purposes and/or to qualify as member/subscriber of clubs/other non-profit organization, and for purposes of availing the services of public utility firms or other entities, excluding deposits paid for rentals of premises and equipment, or for service and other contracts. v. Inter-Office Float Items (Debit Balances) [1-4-50-00] This represents the debit balance difference between the Due from Head Office/Branches/Agencies and Due to Head Office/Branches/Agencies accounts resulting from the elimination of reciprocal accounts in the consolidation process. This account shall be used for consolidated statements. Sub-control accounts shall be maintained for the following: (a) Domestic; (b) Foreign Regular; and (c) FCDU/EFCDU. w. Miscellaneous Assets [1-4-52-00] Miscellaneous Assets This represents items/transactions which cannot be appropriately classified under any of the foregoing asset accounts. Miscellaneous Assets FCDU/EFCDU This represents items/transactions which cannot be appropriately classified under any of the foregoing FCDU/EFCDU asset accounts which shall be recorded at their respective foreign currency amounts. x. Allowance for Probable Losses Others [2-9-90-00] This represents the amount set up against operations to provide for losses which may arise from non-recovery of other risk assets for which no specific "Allowance for Probable Losses" account has been provided herein. This account is also known as "valuation reserve" under existing rules and regulations. 26 35. Cash Letters of Credit [2-3-16-00] Cash Letters of Credit Domestic This represents import letters of credit issued where the importer pays 100% in pesos. Cash Letters of Credit Foreign Regular 1 This represents import letters of credit issued where the importer pays 100% in foreign currency. This account shall be recorded at their foreign currency amounts and at their local currency equivalent at the applicable rate of exchange prevailing on transaction dates. 36. Special Time Deposits [2-3-18-00] This represents non-interest bearing deposits used as security for IGLF purposes. 37. Accrued Interest, Fringe Benefits, Taxes and Other Expenses Payable [2-3-20-00] a. Accrued Interest Payable [2-3-20-02] Accrued Interest Payable Domestic This represents the estimated liability for interest incurred/due but not yet paid on demand, savings and time deposits and on domestic borrowings, which shall be set up monthly against current operations. Accrued Interest Payable Foreign Regular 1 This represents the estimated liability for interest incurred/due but not yet paid on foreign borrowings, including foreign currency borrowings by RBU from the FCDU/EFCDU as allowed under existing regulations, which shall be set up monthly against current operations. This account shall be recorded at their foreign currency amounts and at their local currency equivalent at the applicable rate of exchange prevailing on transaction dates. Accrued Interest Payable FCDU/EFCDU This represents the estimated liability for interest incurred/due but not yet paid on demand, savings, time deposits and on foreign borrowings by FCDUs/EFCDUs, which shall be set up against current operations. Accruals shall be recorded at their foreign currency amounts. Sub-control accounts shall be maintained for interest due to the foreign bank not yet paid but covered with forward contract with the Bangko Sentral. b. Accrued Fringe Benefits Payable [2-3-20-03] This represents the estimated liability for any good, service, or other benefit furnished or granted by the bank, in cash or in kind, in addition to basic salaries, to its directors and officers such as, but not limited to housing; expense account; vehicle of any kind; household personnel such as maid, driver and others; interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted; membership fees, dues and other expenses borne by the bank for its directors/officers in social and athletic clubs or other similar organizations; expenses for foreign travel; holiday and vacation expenses; educational assistance to directors/officers or their dependents; and life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows, in accordance with BIR regulations, which were accrued but not yet paid. 35 g. Overages [2-3-42-00] This represents the amount of overages found in the tellers' daily transactions and/or accountability of officers and/or other employees. Overages arising from loose change shall be closed to an appropriate income account at the end of the accounting period while overages of substantial amounts shall be transferred to Accounts Payable account pending proper disposition. h. Subscriptions Payable [2-3-44-00] Subscriptions Payable Equity Investments in Financial Allied Undertakings Domestic This represents the banks liability on the unpaid portion of its total subscriptions to shares of stocks of domestic financial allied undertakings. Subscriptions Payable Equity Investments in Non-Financial Allied Undertakings Domestic This represents the banks liability on the unpaid portion of its total subscriptions to shares of stocks of domestic non-financial allied undertakings. Subscriptions Payable Equity Investments in Non-Allied/Non-Related Undertakings Domestic (for EKBs) This represents the bank's liability on the unpaid portion of its total subscriptions to shares of stocks of domestic non-allied/non-related undertakings. Subscriptions Payable Equity Investments in Allied (for EKBs and KBs)/Non-Allied (for EKBs) Undertakings Abroad This represents the banks liability on the unpaid portion of its total subscriptions to shares of stocks of allied/non-allied undertakings abroad. i. Deposit for Keys of Safe Deposit Boxes [2-3-46-00] This represents the deposits made by lessees of safe deposit boxes for the keys thereof. j. Sundry Credits [2-3-48-00] Sundry Credits This represents items/transactions which cannot be classified immediately under any credit account. Entries to this account shall be cleared within one (1) month from date of entry. Sundry Credits FCDU/EFCDU This represents items/transactions which cannot be classified immediately under any credit "FCDU/EFCDU" account. These items shall be recorded at their respective foreign currency amounts. Entries to this account shall be cleared within one (1) month from date of entry. k. Borrowings FCDU/EFCDU [2-3-49-00] This represents foreign currency borrowings by RBU from the FCDU/EFCDU, obtained solely for the purpose of funding the net fund outflow on RBUs on-balance sheet foreign exchange transactions, as allowed under existing regulations. 39 l. Deposit for Margin on Financial Futures [2-3-50-00] Deposit for Margin on Financial Futures Foreign Regular 1 This represents the initial margin collected/received by the bank as broker at the inception of contract. At liquidation, this deposit is refundable. This shall be recorded in local currency with the corresponding foreign currency equivalent. Deposit for Margin on Financial Futures FCDU/EFCDU This represents the initial margin collected/received by the bank as broker at the inception of the contract. At liquidation, this deposit is refundable. This shall be recorded at its foreign currency amount. m. Payable to Broker (Futures) [2-3-52-00] This represents the clearing accounts with various brokers for the settlement of margin calls, brokerage fees and profits/(losses) from futures trading and hedging during the month. Cash settlement may be done daily (as in the case of SIMEX), monthly (as in the case of LIFFE), or periodically as agreed with each respective broker. n. Deposit for Stock Subscription [2-3-54-00] This represents payments made by stockholders of the bank on subscription to the increase in the authorized capital which cannot be directly credited to "Common Capital Stock Paid-in" account pending approval by the Bangko Sentral and registration with the Securities and Exchange Commission of the amendment to the Articles of Incorporation increasing capital stock. This account will be used only when existing authorized capital is already fully subscribed. o. Inter-Office Float Items (Credit Balances) [2-3-56-00] This represents the credit balance difference between the Due to Head Office/Branches/Agencies and Due from Head Office/Branches/Agencies accounts resulting from the elimination of reciprocal accounts in the consolidation process. This account shall be used only for consolidated statements. Sub-control accounts shall be maintained for the following: (a) Domestic; (b) Foreign Regular and (c) FCDU/EFCDU. p. Miscellaneous Liabilities [2-3-58-00] Miscellaneous Liabilities This represents items/transactions which cannot be appropriately classified under any of the foregoing liability accounts. Miscellaneous Liabilities FCDU/EFCDU This represents items/transactions which cannot be appropriately classified under any of the foregoing FCDU/EFCDU liability accounts which shall be recorded at their respective foreign currency amounts. 40 Interest Income Tax-Exempt IBODI This represents interest earned and/or actually collected on tax-exempt investments in bonds and other debt instruments. Interest Income Taxable IBODI This represents interest earned and/or actually collected on taxable investments in bonds and other debt instruments. Interest Income IBODI Foreign Regular 1 This represents interest earned and/or actually collected on foreign currency-denominated bonds and other debt instruments held by the bank which shall be recorded at their foreign currency amounts and at their local currency equivalent at the applicable rate of exchange prevailing on transaction dates. Interest Income IBODI FCDU/EFCDU This represents interest earned and/or actually collected on foreign currency-denominated bonds and other debt instruments held by the FCDU/EFCDU which shall be recorded at their foreign currency amounts. n. Interest Income Others [5-0-02-40] This represents interest earned and/or actually collected on all receivable accounts other than loans, such as accounts receivable, sales contract receivable, FCDU/EFCDU lending to RBU as allowed under existing regulations, and others. 76. Bank Commissions [5-0-04-00] This represents commission collected for services rendered, as in: a. opening of letters of credit; b. handling of collection items, domestic/export/import bills and telegraphic transfers; c. sale of demand drafts, traveller's checks and government securities. 77. Service Charges/Fees [5-0-06-00] This represents charges/fees, including commitment fees, collected for services rendered as in: a. handling of loan transactions and returned checks; b. sale of managers checks. 56-b Interest Expense Bills Payable Others Interest Expense Bills Payable Others Domestic Interest Expense Bills Payable Non-Banks This represents payments and/or monthly accruals of interest on outstanding bills payable to non-bank financial intermediaries. Interest Expense Bills Payable Private Firms and Individuals This represents payments and/or monthly accruals of interest on outstanding bills payable to individuals and other private firms (other than banks and non-bank financial intermediaries). Interest Expense Bills Payable Others This represents payments and/or monthly accruals of interest on outstanding local bills payable which cannot be appropriately classified under any of the foregoing "Interest Expense Bills Payable" accounts. Interest Expense Bills Payable Others Foreign Interest Expense Bills Payable Others Foreign Regular 1 This represents payments and/or monthly accruals of interest on outstanding foreign borrowings other than those obtained from foreign banks which shall be recorded at their foreign currency amounts and at their local foreign currency equivalent at the applicable rate of exchange on transaction dates. Interest Expense Bills Payable Others FCDU/EFCDU This represents payments and/or monthly accruals of interest on bills payable to foreign and local banks under the FCDU system which shall be recorded at their foreign currency amounts. c. Interest Expense on Bonds Payable [6-0-02-06] This represents payments and/or monthly accruals of interest on issued and outstanding bonds. d. Interest Expense Others [6-0-02-08] This represents payments and/or monthly accruals of interest other than on deposits and borrowed funds (from external sources), such as the interest portion of amortization payments on the purchase of fixed assets on installment basis, interest on foreign currency borrowings by RBU from the FCDU/EFCDU as allowed under existing regulations, and others. 86. Finance Charges [6-0-04-00] This represents payments of finance and other charges on loans obtained, placements, promissory notes issued and other forms of obligations. 87. Compensation/Fringe Benefits [6-0-06-00] a. Salaries and Wages [6-0-06-02] This represents the gross remuneration of officers and employees for regular and overtime services rendered. 60 Footnotes 1. Refer to guidelines on Revaluation in Appendix A. ANNEX "C" GENERAL LEDGER TEMPLATE (Circular No. 108, as amended) Pages 5 and 9