ManualofRegulationson ForeignExchange Transactions

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FOREWORD The Manual of Regulations on Foreign Exchange Transactions, hereinafter referred to as the Manual, is a consolidation of all regulations governing foreign exchangetransactions.ThisManualreplacesCircularNo.1389dated13April1993,as amended,whichwasthefirstconsolidationofforeignexchangeregulations.Thisisan enhancedandcompleteversionofCircularNo.1389,asamended,asitincorporatesall amendmentsmadesince1993andconsolidatesallregulationsonforeignexchangeand relatedtransactions. The Manual, which shall be updated upon effectivity of subsequent amendmentsmadetheretoasapprovedbytheMonetaryBoard,ispostedontheBSP website (www.bsp.gov.ph) and has hyperlink features to allow users easy access to different sections, appendices, annexes, reports, relevant laws and issuances, and relatedwebsites. In providing users easy access to information, the Manual is expected to facilitate compliance with existing regulations and requirements governing foreign exchangeandrelatedtransactions. AMANDOM.TETANGCO,JR. Governor
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MANUALOFREGULATIONSONFOREIGNEXCHANGETRANSACTIONS ListofAcronyms/Abbreviations AABs AuthorizedAgentBanks AABforexcorps subsidiary/affiliateforeignexchangecorporationsofAABs AFS AvailableforSaleFinancialAssets ASEAN AssociationofSoutheastAsianNations AWB airwaybill BIR BureauofInternalRevenue B/L billoflading BOI BoardofInvestments BOT BuildOperateTransfer BSP BangkoSentralngPilipinas BSRD BangkoSentralRegistrationDocument BT BuildandTransfer BTRCP BureauofTradeRegulationandConsumerProtection CIR certificateofinwardremittance CoopBanks cooperativebanks D/A documentsagainstacceptance DFP DutyFreePhilippines,Inc. DOF DepartmentofFinance DOSRI directors,officers,stockholdersandtheirrelatedinterests D/P documentsagainstpayment DR directremittance DTI DepartmentofTradeandIndustry EFCDU ExpandedForeignCurrencyDepositUnit FCDU ForeignCurrencyDepositUnit HO HeadOffice HTM HeldtoMaturity IPOs initialpublicofferings IPP InvestmentPrioritiesPlan KBs CommercialBanks L/C letterofcredit MORB ManualofRegulationsforBanks MTPIP MediumTermPublicInvestmentProgram NEDA NationalEconomicandDevelopmentAuthority NBBSEs nonbankBSPsupervisedentities NBFIs nonbankfinancialinstitutions O/A openaccount OBU offshorebankingunit PAS PhilippineAccountingStandards PDIC PhilippineDepositInsuranceCorporation
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PSE QIs RBs SEC SES TBs UBs

PhilippineStockExchange qualifiedinvestors ruralbanks SecuritiesandExchangeCommission SupervisionandExaminationSector thriftbanks universalbanks

TableofContents GeneralPolicy PARTONE.CURRENTACCOUNTS ChapterI NONTRADEFOREIGNEXCHANGERECEIPTSANDDISBURSEMENTS,CROSSBORDER TRANSFEROFLOCALANDFOREIGNCURRENCIES,ANDGOLDTRANSACTIONS Section1. Section2. Section3. Section4. Section5. DispositionofForeignExchangeReceipts Sale of Foreign Exchange to Residents by AABs and AABForex CorpsforNonTradeCurrentAccountTransactions SaleofForeignExchangetoNonResidentTourists/Balikbayansby AABsandAABForexCorps CrossBorderTransferofLocalandForeignCurrencies BuyingandSellingofGoldbyResidents ChapterII FOREIGNMERCHANDISETRADETRANSACTIONS A. IMPORTTRADETRANSACTIONS Section6. GeneralPolicy Section7. ClassificationofImports Section8. ModesofPaymentforImports Section9. LetterofCredit(L/C) Section10. DocumentsAgainstPayment(D/P) Section11. Documents Against Acceptance (D/A) and Open Account (O/A) Arrangements Section12. DirectRemittance(DR) Section13. AdvancePayment Section14. OtherImportArrangements
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B. EXPORTTRADETRANSACTIONS Section15. GeneralPolicy Section16. ClassificationofExports Section17. ExportDeclaration(ED) Section18. ModesandCurrencyofPayment Section19. NegotiationProcedures Section20. DispositionofExportProceeds Section21. GoldandConstructiveExports PARTTWO. CAPITALACCOUNTS ChapterI LOANSANDGUARANTEES Section22. GeneralPolicy Section23. LoansRequiringPriorBSPApproval Section24. LoansNotRequiringPriorBSPApproval Section25. Projects/CostsEligibleforForeignFinancing Section26. TermsofLoans Section27. Drawdown/AvailmentonLoans Section28. RegistrationofLoans Section29. ServicingofLoans Section30. Approval/RegistrationandServicingofGuarantees Section31. Approval/RegistrationandServicingofOtherFinancingSchemes/ Arrangements ChapterII FOREIGNINVESTMENTS Section32. GeneralPolicy Section33. CategoriesofInwardForeignInvestments Section34. InwardForeignDirectInvestments Section35. InwardForeignPortfolioInvestments Section36. RegistrationwiththeBSP Section37. RegistrationwithCustodianBanks Section38. RegistrationProcedures Section39. Import/ExportofStockCertificatesofPhilippineFirms Section40. RepatriationandRemittancePrivileges Section41. DepositofDivestment/SalesProceeds
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Section42. Section43. Section44.

Reinvestment InwardForeignInvestmentsPriorto15March1973 InvestmentsbyPhilippineResidents PARTTHREE.OBUs,REPRESENTATIVEOFFICESANDFCDUs ChapterI OFFSHOREBANKINGUNITSOFFOREIGNBANKS Section45. DefinitionofTerms Section46. ApprovalsRequired Section47. CriteriaforSelection Section48. PreOperationRequirements Section49. AnnualFee Section50. TransactionswithNonResidentsand/orwithOtherOBUs Section51. TransactionswithForeignCurrencyDepositUnitsFCDUs)/ ExpandedForeignCurrencyDepositUnits(EFCDUs) Section52. TransactionswithResidentswhicharenotBanks Section53. PesoDeposits Section54. FinancialAssistancetoOfficers/Employees Section55. SecrecyofDeposits Section56. ExemptionfromCertainLaws Section57. AccountingandReporting Section58. Supervision Section59. Taxes,CustomsDuties Section60. Revocation/Suspension ChapterII REPRESENTATIVEOFFICESOFFOREIGNBANKS Section61. DefinitionofTerms Section62. CriteriaforApproval Section63. AuthorizedActivitiesofRepresentativeOffices Section64. Fees Section65. UseofthetermRepresentativeOffice Section66. Licensing Section67. VisitorialPower Section68. Reporting Section69. RevocationofLicense
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ChapterIII FOREIGNCURRENCYDEPOSITSYSTEM Section70. DefinitionofTerms Section71. QualificationRequirements Section72. AuthorizedTransactions Section73. ForeignCurrencyCoverRequirements Section74. ForeignCurrencyDepositswiththeBangkoSentral Section75. CurrencyCompositionoftheCover Section76. SecrecyofDeposits Section77. NumberedAccounts Section78. WithdrawabilityandTransferabilityofDeposits Section79. InsuranceCoverage Section80. RatesofInterest Section81. EligibilityasCollateral Section82. Taxes Section83. ExemptionfromCourtOrderorProcess Section84. Accounting Section85. Supervision Section86. ProspectiveEffectofRegulations Section87. Sanctions PARTFOUR.FOREIGNEXCHANGEFORWARDSANDSWAPSAND OPENFOREIGNEXCHANGEPOSITIONOFBANKS ChapterI FOREIGNEXCHANGEFORWARDSANDSWAPS INVOLVINGTHEPHILIPPINEPESO Section88. GeneralPolicy Section89. DefinitionofTerms Section90. Documentation Section91. Tenor/MaturityandSettlement Section92. ForwardContractswithNonresidents Section93. Cancellations,RolloversorNondeliveryofDeliverableForeign ExchangeForwardandSwapContracts Section94. ReportingRequirements Section95. NonBankBSPSupervisedEntities(NBBSEs)
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Section96. Section97. Section98. Section99. Section100.

ChapterII OPENFOREIGNEXCHANGEPOSITIONOFBANKS GeneralPolicy DefinitionofTerms AllowableOpenForeignExchangePosition ComputationandReportingofForeignExchangePosition Sanctions PARTFIVE.GENERALPROVISIONS ChapterI REPORTSANDPOSTVERIFICATION ReportorialRequirements ProceduresforReporting FinesandPenalties PostVerification ChapterII FINALPROVISIONS CompliancewithAntiMoneyLaunderingRules PenalSanctions RepealingClause SeparabilityClause

Section101. Section102. Section103. Section104.

Section105. Section106. Section107. Section108. GlossaryofTerms

APPENDICES Appendix1 Minimum Documentary Requirements for Sale of Foreign ExchangeforNonTradePurposesbyAABsandAABForexCorps RegulatedImports ProhibitedImports Section101oftheTariffandCustomsCode GuidelinesCoveringtheSaleofForeignExchangebyAABsand AABForexCorpsforTradeTransactions DocumentaryRequirementsforOpeninganL/C GuidelinesforReporting,PaymentsandExtensionsofImports underD/AorO/AArrangements
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Appendix2 Appendix3 Appendix3.1 Appendix4 Appendix5 Appendix6

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Appendix6.1 Appendix7 Appendix8 Appendix9 Appendix10 Appendix10.1 Appendix10.2 Appendix10.3A Appendix10.3B

Appendix10.4

Appendix11 Appendix12

Appendix13 Appendix14 Appendix15 Appendix15.1 Appendix16 Appendix16.1 Appendix17 Appendix18 Appendix19

Appendix20

GuidelinesforReportingofImportationsunderD/AO/A Arrangements GuidelinesfortheSaleofForeignExchangetoImportersbyAABs andAABForexCorpsforAdvancePaymentofImports RegulatedExports ProhibitedExports ProceduresandDocumentationRequirementsforthe RegistrationofInwardForeignInvestments CertificateofInwardRemittance(CIR)Form Guide/Instructions for Filling Out the Certificate of Inward Remittance(CIR)Form Sworn Certification for foreign direct investments in stock corporations Sworn Certification for foreign direct investments in branches, representative offices, Regional Headquarters/Regional OperatingHeadquarters Authority to Disclose Information Custodian Banks (for Registration of Foreign Investments in PesoDenominated GovernmentSecuritiesandPesoTimeDeposit) ProceduresforRepatriationofCapitalandRemittanceof Dividends/Profits/Earnings ChecklistofRequiredDocuments,inLieuofaStockTransfer AgentsCertification,forRegistrationofInwardForeign InvestmentsPriorto15March1973 GuidelinesontheAvailmentofUSDollarDenominated RepurchaseAgreementFacilitywiththeBSP SwornCertificationofFCDULendingToRBU ReportonCompliancewithFCDU/EFCDUCoverRequirements SwornCertificationofCompliancewiththeFCDU/EFCDUCover Requirements GuidelinesontheTransferofUndividedProfits/(Losses) fromFCDU/EFCDUBookstotheRBUBooks IllustrativeAccountingEntriesonthetransferofFCDU/EFCDU Profits/(Losses) GuidelinesontheConversiontoPesoLoans/ROPAand TransfertoRBUofFCDU/EFCDULoans/ROPA GuidelinesandMinimumDocumentaryRequirementsforForeign ExchangeForwardandSwapTransactions Implementing Guidelines on the Computation of Open Foreign ExchangePositionsofAABsandReportingRequirementunderFX Form1 FeesChargedonForeignExchangeTransactionsProcessedbythe BSP
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ANNEXES AnnexA AnnexB AnnexC AnnexD.1 AnnexD.2 AnnexE.1 AnnexE.2 AnnexF AnnexG AnnexH
H

AnnexI AnnexJ AnnexK AnnexL

AnnexM AnnexN AnnexO AnnexP AnnexP.1 AnnexQ AnnexR AnnexR.1 AnnexS AnnexS.1

ApplicationFormtoPurchaseForeignExchange MonthlyReportonSale/RemittanceofForeignExchange(FX)for AdvancePaymentofImportations MonthlyReportonPurchaseofForeignExchange(FX)from RefundofAdvancePaymentofImportations ApplicationFormforApprovalofForeignLoansofPublicSector Entities ApplicationFormforApprovalorRegistrationofForeignLoansof PrivateSectorEntities Reportontransactionsonshorttermforeignloans Reportonforeignborrowingsformediumandlongtermloans ReportonShortTermLoansGrantedtoResidentsbyForeign Banks Report on Guarantees Issued by Local Banks and Financial InstitutionsinFavorofNonResidents ReportonForeignGuaranteesSecuringLoansofResidentsFrom LocalBanksandFinancialInstitutions ProjectedFundingRequirementsforBOT/OtherSimilarFinancing SchemesFormBOT1A ReportonPaymentsUnderBOT/OtherSimilarFinancingSchemes FormBOT1B (Reserved) Report on Cancellations, Rollovers and Nondelivery of Deliverable Foreign Exchange Forward Purchase and Sale ContractsandForwardLegofSwapContracts Report on Foreign Exchange Swaps with Customers where the FirstLegisaPurchaseofForeignExchangeAgainstPesos Computation Sheet for Remittance of Dividends/Profits and RepatriationofCapital Details of Accounts Excluded in the Computation of Net Foreign ExchangePosition Sworn Certification on the Consolidation of Foreign Exchange Position(ForLocalBanks) Sworn Certification on the Consolidation of Foreign Exchange Position(ForBranchesofForeignBanks) ConsolidatedForeignExchangePositionReport Summary of DeltaWeighted Positions of Foreign Currency OptionsperCurrency ForeignCurrencyOptionsPurchased/SoldOutstanding Summary of Notional Amounts of Foreign Currency Options per Currency ForeignCurrencyOptionsPurchasedOutstanding
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AnnexT AnnexU AnnexV

FXForm1

SwornCertificationFXForm1,MainReportandSchedules27 and912 SwornCertificationFXForm1,Schedules8and13 Monthly Report on Foreign Exchange Sales by Authorized Agent BanksforInvestmentsEnumeratedunderSection44 ReportsforElectronicSubmission ConsolidatedForeignExchangeAssetsandLiabilitiesUBs/KBs (MainReportandSchedules1to14) ConsolidatedForeignExchangeAssetsandLiabilitiesTBs(Main ReportandSchedules1to9) ConsolidatedReportonLoansGrantedbyFCDUs

FXForm1A

IOSForm4

IDForm5

ReportonBankLiabilitiestoNonResidents DailyForeignPortfolioInvestmentRegistrationandOutward RemittanceReport

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MANUALOFREGULATIONSONFOREIGNEXCHANGETRANSACTIONS The regulations governing foreign exchange transactions are hereby consolidated in the Manual of Regulations on Foreign Exchange Transactions hereinafterreferredtoastheManual.ThisManualreplacesCircularNo.1389dated 13April1993,asamended. The sale of foreign exchange may be freely made: (1) between and among Authorized Agent Banks (AABs); (2) by AABsubsidiary/affiliate forex corporations (AABforex corps) to AABs; and (3) by individuals/entities other than AABs/AABforex corps:Provided,ThatthesaleofforeignexchangebynonbankBSPsupervisedentities (NBBSEs)andtheirsubsidiary/affiliateforexcorps,includingqualifiedentitiesoperating asforeignexchangedealers/moneychangers(FXDs/MCs)andremittanceagents(RAs) thatarenotAABsandAABforexcorps,isgovernedbyotherapplicableBSPregulations, including Circular No. 471 dated 24 January 2005, as amended 1 , and shall not be coveredunderthisManual. Theruleshereinprescribingthelimitsonforeignexchangethatmaybesoldand therequireddocumentstosupportthesaleshallapplytosaleofforeignexchange:(1) by AABs to individuals/entities that are not AABs; and (2) by AABforex corps to individuals/entitiesthatarenotAABs. Allcategoriesofbanks[exceptoffshorebankingunits(OBUs)]dulylicensedby theBSPshallbeconsideredAABs. The seller/remitter of foreign exchange shall ensure that applicable Philippine taxes related to the: a) sale of foreign exchange; b) remittance of foreign exchange; and c) the underlying foreign exchange transaction have been paid and that the remittanceisnetofsuchtaxes.Forthispurpose,theseller/remitterofforeignexchange shallrequiresubmissionofreceipt(s)evidencingpaymentofapplicabletaxes. ThetermsusedhereinareasdefinedintheGlossaryofTermsatthelastpart ofthisManualunlessotherwiseindicatedinspecificsectionshereof.

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PARTONE.CURRENTACCOUNTS ChapterI NONTRADEFOREIGNEXCHANGERECEIPTSANDDISBURSEMENTS,CROSSBORDER TRANSFEROFLOCALANDFOREIGNCURRENCIES,ANDGOLDTRANSACTIONS Section1. Disposition of Foreign Exchange Receipts. Foreign exchange receipts, acquisitions or earnings of residents from nontrade sources may be used freelyforanypurpose.Suchproceedsmay,attheoptionofsaidresidents,besoldfor pesos,retainedordepositedinforeigncurrencyaccounts,whetherinthePhilippinesor abroad. Residentshallreferto: a. anindividualcitizenofthePhilippinesresidingtherein;or b. an individual who is not a citizen of the Philippines but is permanentlyresiding 2 therein;or c. a corporation or other juridical person organized under the laws of thePhilippines;or d. a branch, subsidiary, affiliate, extension office or any other unit of corporationsorjuridicalpersonswhichareorganizedunderthelaws ofanycountryandoperatinginthePhilippines,exceptOBUs. Nonresidentshallrefertoanindividual,acorporationorotherjuridicalperson notincludedinthedefinitionofresident. Section2. SaleofForeignExchangetoResidentsbyAABsandAABForexCorpsfor NonTrade Current Account Transactions with NonResidents. AABs and AABforex corps may sell foreign exchange to residents to cover payments to nonresident beneficiaries for nontrade current account purposes (e.g., educational expenses, medicalexpenses,travelexpensesandsalariesofforeignexpatriates),otherthanthose relatingtoforeign/foreigncurrencyloansandinvestments,withoutneedforpriorBSP approval, subject to the submission/presentation of the following to the foreign exchangesellinginstitution: 1.ForsalenotexceedingUSD60,000oritsequivalentinotherforeigncurrency

Residentsincludeanyindividual,citizenorotherwise,whohasresidedinthePhilippinesforayearor longer, as defined in Section 83 of the International Monetary Fund (IMF) Balance of Payments Textbook,1996. Back to top

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Duly accomplished application to purchase foreign exchange using theprescribedformat(AnnexA); 2.ForsaleexceedingUSD60,000oritsequivalentinotherforeigncurrency Duly accomplished application to purchase foreign exchange using theprescribedformat(AnnexA),supportedbydocumentsprescribed underItemAofAppendix1hereof.

The authority to purchase foreign exchange for nontrade current account purposesdoesnotincludepurchasesofforeignexchangefordirectcredittoordeposit inthepurchasersforeigncurrencydepositunitaccount. Allforeignexchangepurchasesfornontradecurrentaccounttransactionsshall be directly remitted to the intended nonresident beneficiarys account (whether offshore or onshore). Exceptions to this rule include travel funds, medical expenses abroadnotyetincurred,andsalesproceedsofemigrantsdomesticassetsifemigrantis stillinthecountry. (AsamendedbyCircularNo.698dated5November2010) Section3. Saleof Foreign Exchange to NonResident Tourists/Balikbayans byAABsandAABForexCorps.AABsandAABforexcorpsmaysellforeignexchangeto nonresidenttouristsorbalikbayanstotheextentoftheamountshowntohavebeen soldbythemforpesostosaidentities.Departingnonresidenttouristsorbalikbayans may reconvert at airports or other ports of exit unspent pesos up to a maximum of USD5,000oritsequivalentinotherforeigncurrencycalculatedatprevailingexchange rates,withoutshowingproof/sofprevioussaleofforeignexchangeforpesos. (AsamendedbyCircularNo.698dated5November2010) Section4. CrossBorderTransferofLocalandForeignCurrencies 1. Local Currency. No person may import or export nor bring with him into or take out of the country, or electronically transfer, legal tender Philippine notes and coins, checks, money order and other bills of exchange drawn in pesos against banks operating in the Philippines in an amount exceeding PHP10,000.00 without authorizationbytheBSP. The term electronic transfer as used herein shall mean a system where the authoritytodebitorcreditanaccount(bank,businessorindividual)isprovidedbywire, withorwithoutasourcedocumentbeingmailedtoevidencetheauthority.
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2. ForeignCurrency.Anyperson,whobringsintoortakesoutofthePhilippines foreign currency, as well as other foreign currencydenominated bearer monetary instruments,inexcessofUSD10,000oritsequivalent,isrequiredtodeclarethesamein writingandtofurnishinformationonthesourceandpurposeofthetransportofsuch currencyormonetaryinstrument. As used herein, other foreign currencydenominated bearer monetary instrumentsshallrefertothefollowingforeignexchangedenominatedinstrumentsin bearer form whereby title thereto passes to another by endorsement, assignment or delivery: travelers checks, other checks, drafts, notes, money orders, bonds, deposit certificates,securities,commercialpapers,trustcertificates,custodialreceipts,deposit substitute instruments, trading orders, transaction tickets and confirmation of sale/investment. Section5. BuyingandSellingofGoldbyResidents 1. Except as provided in this Manual, gold and goldbearing metals may be boughtandsoldwithoutspecificapprovaloftheBSP. 2. Goldfromsmallscalemining,includingpannedgold,shallbesoldtotheBSP pursuanttoRepublicActNo.7076(PeoplesSmallScaleMiningActof1991)dated27 June1991.Allotherformsortypesofgoldmay,attheoptionoftheownerorproducer thereofandwiththeconsentoftheBSP,besoldanddeliveredtotheBSP. The BSP may sell gold grains/pellets/bars and sheets to local jewelry manufacturersandotherindustrialusersuponapplication,ortobanksexclusivelyfor resaletojewelrymanufacturers/industrialusers,attheBSPsgoldsellingpriceplusa servicefeetocovercostsincludingcostofconversionandpackaging. ChapterII FOREIGNMERCHANDISETRADETRANSACTIONS A. IMPORTTRADETRANSACTIONS Section6. General Policy. As a general rule, all kinds of merchandise importsareallowed.However,theimportationofcertaincommoditiesareregulatedor prohibited for reasons of public health and safety, national security, international commitments,anddevelopment/rationalizationoflocalindustry.
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Foreign exchange purchased from AABs/AABforex corps to service importations shall be directly remitted to the nonresident beneficiary on the date of purchase. However, foreign exchange purchases may be credited to FCDU deposit accounts of the importer pending remittance to the nonresident beneficiary: Provided, That the importer shall execute a waiver of the requirements of RepublicActNo.6426(ForeignCurrencyDepositAct)dated4April1974,asamended, on the secrecy of foreign currency deposits upon purchase of foreign exchange to enabletheBSPtovalidatetheauthenticityofthecreditsandeventualremittanceofthe funds. (AsamendedbyCircularNo.742dated21November2011) Section7. ClassificationofImports.Importsareclassifiedasfollows: 1. FreelyImportableCommodities.Thesearecommoditiestheimportationof whichisneitherregulatednorprohibitedasdefinedunder(2)and(3)hereunder.The importation may be effected without the prior approval of or clearance from any governmentagency. 2. Regulated Commodities. These are commodities, listed in Appendix 2, the importation of which requires clearances/permits from appropriate government agenciesincludingtheBSP. 3. Prohibited Commodities. These are commodities, listed in Appendices3and3.1,theimportationofwhichisnotallowedunderexistinglaws. Section8. Modes of Payment for Imports. AABs and AABforex corps may sell foreign exchange to service payments for imports under any of the following arrangementssubjecttotheprovisionsofSections9to13andtheguidelinescovering thesaleofforeignexchangefortradetransactionsunderAppendix4: 1. LetterofCredit(L/C); 2. DocumentsAgainstPayment(D/P); 3. DocumentsAgainstAcceptance(D/A); 4. OpenAccount(O/A); 5. DirectRemittance(DR);and 6. AdvancePayment. Section9. LetterofCredit(L/C) 1. All L/Cs must be opened on or before the date of shipment and onlyoneL/Cshouldbeopenedforeachimporttransaction.Forpurposesofopeningan
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L/C, importers shall submit to the AAB the documents listed in Appendix 5. AmendmentsofL/CsneednotbereferredtotheBSPforpriorapproval.L/Csshallbe negotiatedinaccordancewiththetermsandconditionssetforthintheL/Candshallbe governedbytheUniformCustomsandPracticesonDocumentaryCredits. 2. Deferred L/Cs shall be governed by the pertinent provisions of Part Two, Chapter 1 hereof (Loans and Guarantees). For this purpose, deferred L/Cs refer to thosewithpaymenttermsofmorethanoneyearreckonedfrominitialshipmentdate. (AsamendedbyCircularNo.742dated21November2011) Section10. DocumentsAgainstPayment(D/P) 1. UndertheD/Parrangement,AABsshalladvisetheimporterofthereceiptof thecompleteoriginalshippingdocumentsandeffectthereleaseofsaiddocumentsto theimporteruponreceiptofpayment. 2. AABs shall remit payment to the supplier through the correspondent bank abroad. Section11. Documents Against Acceptance (D/A) and Open Account (O/A) Arrangements.UnderaD/Aarrangement,theoriginalshippingdocumentsarereleased to the importer by the AAB concerned at the instance of the sellers bank upon the importersacceptanceofthesellersbillofexchangeobligatingtheimportertopayfor theshipmentatsomefuturedate.UnderanO/Aarrangement,thesaiddocumentsare releasedbythesellerdirectlytotheimporterwithoutcoursingthedocumentsthrough thebanks,upontheimporterspromisetopayatsomefuturedate.Asusedherein,an importtransactiontobeconsideredunderD/AorO/Amustbepayableatleast30days afterbilloflading(B/L)orairwaybill(AWB)shipmentdate. Theguidelinesforreporting,paymentsandextensionsofimportsunderD/Aor O/AarrangementsareshowninAppendix6. Section12. Direct Remittance (DR). AABs and AABforex corps may service withintwentynine(29)calendardaysafterB/LorAWBshipmentdateapplicationsfor direct remittance of import payments upon presentation of the complete original shipping documents, in accordance with existing rules, and if applicable, import clearance,forregulateditemsissuedbyconcernedgovernmentagencies.Ifthe29thday fallsonanonbanking day,thefollowingbankingdayshallapplyandtheimportation willstillbeconsideredDR.
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Section 13. AABs and AABforex corps may sell foreign exchange to importers without prior BSP approval for advance payment for importations subject to the guidelinesunderAppendix7hereof,includingdocumentsprescribedthereunder.The foreign exchange selling/remitting AAB shall report these transactions to the BSP International Operations Department (IOD) using the prescribed forms (Annexes B andC) (AsamendedbyCircularNo.698dated5November2010andCircularNo.742 dated21November2011) Section14. OtherImportArrangements.Thefollowingimportarrangements arealsoallowedwithoutpriorBSPapproval: 1. SelfFunded/No Dollar Imports. These are imports funded by importers own foreign currency deposit accounts or those sent by suppliers abroad for which no payment in foreign exchange will be made whether immediateorpotential. 2. Importations on Consignment Basis. These are importations by export producers of raw materials and accessories/supplies from foreign suppliers/buyersabroadforthemanufactureorprocessingofproductsdestined for export to said foreign suppliers/buyers. These shall also include machinery/equipment and spare parts consigned to the local manufacturer/processorforeventualreexporttotheconsignor:Provided,That theequipmentinvolvedshallbeusedonlyinconnectionwiththeprocessingof productsforexport. B. EXPORTTRADETRANSACTIONS Section15. General Policy. It is the policy of the BSP to encourage commodity exports which generate foreign exchange earnings for the country. Accordingly, commodity exports are allowed without restriction except for certain commodities which are regulated or prohibited for reasons of national interest or by provisionoflaw. Section16. ClassificationofExports 1. Freely Exportable Commodities. These are commodities the exportation of whichisneitherregulatednorprohibited.Theymaybeeffectedwithoutpriorapproval oforclearancefromanygovernmentagency.
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2. Regulated Commodities. These are commodities the exportation of which requires clearances/permits from appropriate government agencies. The list of these productswiththeappropriategovernmentagencies/officesisshowninAppendix8. 3. ProhibitedExports.Thesearecommoditiestheexportationorsaleofwhich isprohibited/penalizedbylaw(Appendix9). Section17. ExportDeclaration All export shipments shall be covered by an Export Declaration using the prescribedform.AABsorOBUsshallrequiresubmission,forrecordpurposes,ofacopy ofthedulyaccomplishedExportDeclarationformiftheexportnegotiationorpayment ofthepertinentexportshipmentiscoursedthroughthem. Section18. ModesandCurrencyofPayment 1. Authorized Modes. Payments for exports may be made under any of the followingmodeswithoutpriorBSPapproval: a. LetterofCredit(L/C); b. DocumentsAgainstPayment(D/P)/CashAgainstDocuments(CAD); c. DocumentsAgainstAcceptance(D/A); d. OpenAccount(O/A); e. Intercompany Open Account Offset (Interco O/A) Arrangement (can be availedofonlybyfirmswithparent/affiliaterelationshipabroad);and f. Consignment. 2. OtherAuthorizedModes.Paymentsforexportsmayalsobemadethrough export advances without prior approval of the BSP. Export advances shall refer to all payments/remittances received before shipment, including prepayments and Red Clauseadvances. Bankdraft/telegraphictransfer,buyerschecks,travelerschecksoracceptable foreign currency notes may be used in prepayment/export advance, but for buyers checks,thesameshallbeclearedbeforeshipment. 3. AcceptableCurrencies a. Paymentsforexportsmaybemadeinthefollowingcurrencies: 1) U.S.dollar 2) Japaneseyen 3) Poundsterling 4) Euro
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5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18)

HongKongdollar Swissfranc Canadiandollar Singaporedollar Australiandollar Saudiriyal Bahraindinar Bruneidollar Indonesianrupiah Thaibaht UnitedArabEmiratesdirham Chineserenminbioryuan Koreanwon Such other currencies that may be declared acceptable by the BSP

b. Paymentsmay,however,bemadeinPhilippinepesosforthefollowing: 1) Exports to ASEAN countries: Provided, That the BSP shall not be asked to intervene in the clearing of any balances from this paymentsscheme;and Gold sales to the BSP which are considered as constructive exports.

2)

Section19. NegotiationProcedures Theexportershallnegotiatehisbillofexchange/accountwiththeAABorOBU togetherwiththebilloflading(B/L)/airwaybill(AWB),signedcommercialinvoiceand otherdocumentsasrequired. Incaseofavailmentsofexportadvances,theAABthroughwhichtheavailment wasmademustalsobethesamebanktonegotiatetheexportdocuments. Section20. Disposition of Export Proceeds. Foreign exchange receipts, acquisitionsorearningsofresidentsfromexportsmaybeusedfreelyforanypurpose. Such proceeds may, at the option of the exporter, be sold for pesos, retained, or depositedinforeigncurrencyaccounts,whetherinthePhilippinesorabroad.
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Section21.

GoldandConstructiveExports

1. Gold. All exports of gold in any form may be allowed except for gold from smallscale mining, including panned gold, which is required to be sold to the BSP pursuanttoRepublicActNo.7076. 2. Constructive Exports. The following sales of residents paid for in foreign currencyshallbeconsideredasconstructiveexports: a. GoldsalestotheBSPevenifpaidforinPhilippinecurrency; b. Salesofresidentspaidforinforeigncurrencytothefollowingentities: 1) Bonded manufacturing warehouses of export producers/ manufacturers; 2) Exportprocessingzones; 3) Board of Investments (BOI)registered export traders operating bonded trading warehouses supplying raw materials used in the manufactureofexportproducts; 4) DiplomaticmissionsinthePhilippines; 5) DutyFreePhilippines,Inc.(DFP);and 6) Foreign buyers of goods/products to be delivered directly to local consumers at the instruction of the former and paid for in foreign currency. An Export Declaration for each sale shall be accomplished: Provided, That the exportershallsubmitadeliveryreceiptsignedbythebuyerinlieuoftheB/LorAWB. PARTTWO. CAPITALACCOUNTS ChapterI LOANSANDGUARANTEES Section22. The BSP shall regulate foreign/foreign currency loans to ensure thatprincipalandinterestowedtocreditorscanbeservicedinanorderlymannerand with due regard to the economys overall debt servicing capacity. All public and publiclyguaranteedprivatesectorobligationsfromforeigncreditors,OBUsandForeign CurrencyDepositUnits(FCDUs)/ExpandedForeignCurrencyDepositUnits(EFCDUs)of banksshallbereferredtotheBSPforpriorapproval,unlessotherwiseindicatedherein. Other private sector loans from these creditors and other financing schemes/arrangements shall require prior approval and/or registration by the BSP if thesewillultimatelyinvolveforeignexchangetobepurchasedfromAABsorAABforex corps.
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1. For public sector loans Applications for loan approval shall be filed with the BSP using the prescribed form (Annex D.1) together with all the required supporting documents/information, before commencementofactualnegotiations,orbeforeissuingamandateof commitmenttoforeignfunders/arrangers. ii. ForprivatesectorloansApplicationsforloanapprovalshallbefiled with the BSP using the prescribed form (Annex D.2) together with all the required supporting documents/information, at least 30 banking days before the target signing date of the loan documentsand/orinitialdrawdowndate,whicheverisearlier. 2. Resident companies/entities intending to obtain medium and longterm foreign loans or issue bonds/notes/debt securities offshore shall submit to theBSPIODtheirannualforeignborrowingsplanasfollows: 1. Publicsectorentities,includingtheNationalGovernmenteveryend September for borrowings for the following year, regardless of amount;and 2. Privatesectorentities,withplannedaggregateannualborrowingsofat least USD10 million, or its equivalent every endSeptember for borrowingsforthefollowingyear. The timetable and any changes on the submitted foreign borrowings plan shall be communicatedtotheBSPIODwithintwo(2)weeksuponavailabilityofinformationfor monitoringandprogrammingpurposes. 3. Private sector loans that are submitted to the BSP for approval or registrationthatwerenotincludedunderaforeignborrowingsplanasrequiredinItem 2ofthisSectionshallbeassessedanadditionalfeeequivalenttotenpercent(10%)of the applicable processing fee for BSP approval/registration, as indicated under Appendix20hereof. 4. For statistical purposes, all foreign loans obtained by private sector entities, whether or not these are BSPapproved/registered, shall be regularly reportedtotheBSPIOD,usingtheprescribedforms(AnnexesE.1andE.2)withinthe requireddeadlineuntiltheobligationsarefullyextinguished.
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TherequiredBSPapprovalshallbeobtainedasfollows: i.

Private sector loans submitted for BSP approval shall be assessed a processingfeeindicatedunderAppendix20hereof.

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5. AABs shall not extend peso financing to nonresidents unless explicitly allowedunderexistingBSPrules. (AsamendedbyCircularNo.742dated21November2011) Section23. LoansRequiringPriorBSPApproval.PriorBSPapprovalshallbe requiredforthefollowingloans: 1. Loansofthefollowingpublicsectorentitiesirrespectiveofmaturity,creditor and the source of foreign exchange for servicing thereof, except shortterm FCDU/EFCDUloanscoveredbySection24.4: a. NationalGovernment,itsagenciesandinstrumentalities; b. Governmentowned/controlledcorporations(GOCCs); c. Government financial institutions (GFIs), except shortterm normal interbankborrowings; d. Localgovernmentunits(LGUs);and e. Otherpublicsectorentities. 2. Loansoftheprivatesectorirrespectiveofmaturity,creditorandthesource offoreignexchangeforservicingthereofif: a. guaranteed by government corporations and/or government financial institutions; b. coveredbyforeignexchangeguaranteesissuedbyAABs;and c. tobegrantedbyFCDUs/EFCDUsandspecificallyordirectlyfundedfrom, orcollateralizedbyoffshoreloansordeposits. 3. Loanswithmaturitiesexceedingone(1)yeartobeobtainedbyprivatenon bankfinancialinstitutionsintendedforrelendingtopublicorprivatesectorenterprises. 4. Other loans irrespective of maturity and currency if to be serviced using foreign exchange purchased by the borrower/creditor/guarantor from AABs or AAB forexcorpsandnotcoveredbySection24. Applications submitted to the BSP with signed loan documents and/or loan proceedsalreadydrawnshallnolongerbeeligibleforBSPapprovalandregistration. (AsamendedbyCircularNo.742dated21November2011)
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Section24. LoansNotRequiringPriorBSPApproval.Thefollowingloansmay begrantedwithoutpriorapprovaloftheBSP: 1. a. LoansofresidentprivatesectorborrowersfromFCDUs/EFCDUs/offshore sources,irrespectiveofmaturity,thatwillbeservicedusingforeignexchangepurchased fromentitiesthatarenotAABsorAABforexcorps. b. Loans of nonresidents from FCDUs/EFCDUs, irrespective of maturity: Provided, That the loan shall be serviced using foreign exchange purchased fromentitiesthatarenotAABsorAABforexcorps. 2. Shorttermloansoffinancialinstitutions,bothpublicandprivatefornormal interbanktransactions,e.g.,interbankcallloans. 3. Shorttermloansoftheprivatesectorintheformofexportadvancesfrom buyersabroad. 4. Shorttermloansofthefollowingprivateandpublicsectorborrowersfrom FCDUs/EFCDUs: a. Commodity and service exporters: Provided, That these loans are used to finance exportrelated import costs of goods and services as well as pesocostrequirements. ServiceexportersshallrefertoPhilippineresidentsengagedorproposing toengageinrenderingtechnical,professionalorotherserviceswhicharepaid forinforeignexchange. Indirect exporters may likewise borrow to fund exportrelated costs, which may include both foreign exchange as well as peso costs. Indirect exporters shall refer to cottage/small and medium industries (producers/manufacturers)thathavesupplyarrangementswithdirectexporters who are holders of an export letter of credit or a confirmed purchase order/salescontractfromaforeignbuyer. b. Producers/manufacturers, including oil companies and public utility concerns:Provided,Thattheloansareusedtofinanceimportcostsofgoodsand services necessary in the production of goods by the borrower concerned. Producers/manufacturers shall refer to persons or entities that undertake the processing/conversionofrawmaterialsintomarketableformthroughphysical, mechanical, chemical, or other means or by special treatment or a series of actionsthatresultinachangeinthenatureorstateoftheproducts.
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Public utility firms shall refer to business organizations that regularly supply the public with commodities or services such as electricity, gas, water, transportation,telegraph/telephoneservicesandthelike. 5. Shortterm loans of private exporters/importers from OBUs and foreign bankswithbranchesinthePhilippines:Provided,That: a. The loans are not covered by a guarantee from a government financialinstitution/corporation; b. The loans shall be exclusively used to finance specific trade transactions, i.e., to liquidate/pay for import obligations and/or in the case of export financing transactions, to fund the borrowers preexport financing requirements and shall not be refinanced by a medium /longterm foreign currencyloan; c. Proceedsofloansintendedtopayforforeignexchangerequirements may be paid directly to the supplier/creditor, while amounts intended to fund preexportpesocostsshallbeinwardlyremittedandsoldforpesostoAABs; d. Drawdown and registration requirements under Sections 27 and 28 hereofshallbecompliedwith; e. Any assignment of the loan by the creditor concerned shall be reportedtotheBSPwithinfive(5)daysfromdateofassignment; f. CreditorbanksshallsubmitthefollowingreportstotheBSP: i. Their lending program for private sector borrowers for the next six(6)monthsindicatingtheirproposedcreditlimittogetherwith alistofprospectiveborrowers/beneficiaries;and ii. MonthlyreportonloansgrantedtoresidentsusingSchedule4A (PartI)&4B(PartII)ConsolidatedReportonLoansGrantedby OBUstoResidentstotheStatementofAssetsandLiabilitiesof OBUs,andsimilarreportsbyforeignbankswithbranchesinthe Philippines. g. The borrowers shall submit monthly reports on transactions and status of their shortterm loans within three (3) banking days after end of referencemonthusingtheprescribedform(AnnexF). 6. Shortterm loans of private exporters/importers from other offshore sources/creditors: Provided, That all provisions of Section 24.5 are complied with, except item (f), and that the loans shall be granted against BSPapproved shortterm
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relendingprogramsofforeigncreditors.CreditorsshallsubmittotheBSPforapproval theirshorttermrelendingprogramforPhilippineborrowersindicatingtheirproposed creditlimittogetherwithalistofprospectiveborrowers/beneficiaries.Theserelending programsshallbevalidforone(1)year. 7. Private sector loans not guaranteed by foreign governments/official export creditagenciescoveringimportationoffreelyimportablecommoditiesunderdeferred L/CsorD/AO/Aarrangementswithatermofmorethanone(1)year. 8. Private sector intercompany loans granted by foreign companies to their localbranches/subsidiaries,irrespectiveofamountandmaturity:Provided,Thatthese areusedtofinanceeligibleprojects/costscitedunderSection25.Forpurposesofthis Item,intercompanyloansshallincludethosegrantedbyforeignbranchesandwholly owned subsidiaries of a foreign parent company as well as other subsidiaries of the parent company but shall exclude those loans that are intended to refinance existing obligations: Provided, That, in the case of other subsidiaries, the loan/s shall be fully guaranteedbytheparentcompany. 9. Loans of resident private sector borrowers from FCDUs/EFCDUs/offshore sourcesthatarenotpubliclyguaranteedtofinanceinfrastructureprojectsincludedin the Governments list of Public Private Partnership (PPP) projects. The exemption of theseloansfrompriorBSPapprovalshallbevaliduptothree(3)yearsreckonedfrom the10December2011. (AsamendedbyCircularNo.742dated21November2011) Section25. Projects/CostsEligibleforForeignFinancing 1. LoanssubmittedforpriorBSPapprovalshallfinancethefollowingtypesof projects/activities: a. Exportorientedprojects; b. ProjectsregisteredwiththeBOI; c. Priority investment areas under the current Investment Priorities Plan (IPP); d. ActivitieslistedinthecurrentMediumTermPublicInvestmentProgram (MTPIP); e. Developmentofindustrialestatesandeconomiczones; f. Socialized/Lowcosthousingprojects; g. Acquisition of nonperforming assets/loans (NPAs/NPLs) of banks and otherGFIs; h. Acquisitionofgovernmentassetsapprovedforprivatization; i. Otherprojectsthatmaybedeclaredpriorityunderthecountryssocio economicdevelopmentplanbytheNationalEconomicandDevelopment AuthorityorbyCongress;
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Refinancing of existing loans used for eligible projects/costs which are eligibleforservicingusingforeignexchangesourcedfromAABsorAAB forexcorps;and k. Microfinanceactivities. 2. Shorttermloansshallfinanceexclusivelyforeignexchangerequirementsof eligible projects, except as may be specifically allowed under this Manual. Medium andlongtermloansmayfinanceforeignexchangecostsaswellaspesocosts(excluding workingcapital)ofeligibleprojects. (AsamendedbyCircularNo.742dated21November2011) Section26. TermsofLoans 1. Loans shall have terms reflective of those prevailing in the international capitalmarkets. 2. TermsofloanstobeobtainedbytheNationalGovernmentandotherpublic sectorentitiesshallbeinaccordancewiththeprovisionsofpertinentlaws/regulations governingpublicsectorborrowings. 3. TheMonetaryBoardmayrequirelongergrace/maturityperiodsformedium and longterm loans involving large amounts to reduce the impact thereof on debt servicing. Section27. Drawdown/Availment on Loans. Loans intended to be serviced usingforeignexchangepurchasedfromAABsorAABforexcorpsshallcomplywiththe followingprocedures/conditionsfordrawdown: 1. Loanproceedsshallbeusedsolelyforthepurpose/sasapprovedbythe BSPorconsideredeligibleforforeignfinancingundertherulesherein. 2. Loan proceeds intended to fund local costs (i.e., those payable to residents)shallbeinwardlyremittedandsoldforpesostoAABs. 3. Amountsintendedtofinanceforeignexchangecosts(i.e.,thosepayable tononresidents)neednotbeinwardlyremittedbutmayeitherbepaiddirectly to the nonresident supplier/beneficiary concerned or deposited in a foreign exchange account pending utilization of the funds unless covered by Section 27.4. 4. Pending utilization, foreign exchange proceeds of loans and bond/note issuesofthepublicsectorshallbedepositedwiththeBSPpursuanttoSection 113ofRepublicActNo.7653(TheNewCentralBankAct)dated14June1993.
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j.

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Section28. RegistrationofLoans 1. Loans shall be registered with the BSP to be eligible for servicing using foreign exchange purchased from AABs or AABforex corps. Applications for registration of private sector loans shall be filed by the borrower with the BSP within ten(10)bankingdaysfromdrawdowndateforshorttermloansandthree(3)months from utilization of loan proceeds for medium and longterm loans using the prescribed forms (Annex D.2). Private sector loans that do not require prior BSP approvalbutaresubmittedtotheBSPforregistrationshallbechargedaprocessingfee indicated in Appendix 20 hereof. Public sector loans extended final approval by the MonetaryBoardaredeemedregistered. 2. Loans shall be registered by the BSP upon the borrowers compliance with thetermsandconditionsimposedundertheBSPapprovaloftheloanand/orpertinent provisionsofthisManual,includingsubmissionofrequireddocumentsandinformation. 3. Loans granted under Sections 24.4 and 24.5 that are duly reported to the BSP using the prescribed forms (IOS Form 4 and Schedule 4A (Part I) & 4B (Part II) ConsolidatedReportonLoansGrantedbyOBUstoResidents,respectively)aredeemed registered. 4. Loans requiring prior BSP approval which have been signed and/or drawn/availed of prior to securing the requisite approval shall not be eligible for registrationandsubsequentservicingusingforeignexchangepurchasedfromAABsor AABforexcorps. (AsamendedbyCircularNo.742dated21November2011) Section29. ServicingofLoans 1. AllforeignexchangepurchasesfromAABsorAABforexcorpsforservicingof foreign/foreign currency loans shall be directly remitted to the creditor/beneficiary concernedonthedayofpurchase,unlessotherwiseexplicitlyallowedbyBSP. 2. Payments for principal, interest, fees and related charges on loans duly registeredwiththeBSPmayberemittedthroughAABsasthesefallduewithoutprior BSP approval provided such interest, fees and charges are indicated in the BSP registrationdocument,and upon presentationof documents prescribed under Item B ofAppendix1hereof. 3. Paymentsforthefollowingshall,however,besubjecttopriorBSPapproval: a. Prepaymentofpublicsector/publiclyguaranteedprivatesectorloans;
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b. follows:

Allloansthatarepastdueformorethan30calendardaysreckonedas 1) Forshorttermloans,fromthe360thdayafteravailment;and 2) ForMLTloans,fromoriginalmaturitydate.

c. d. 4. AABsandAABforexcorpsmaysellforeignexchangeforprepayments(i.e., paymentsbeforeoriginalduedates)ofMLTprivatesectorloans(includingbondsand notes)thatarenotpubliclyguaranteedandarecoveredbyaBSPregistrationdocument (BSRD)withoutpriorBSPapproval,subjecttothefollowingconditions: a. TheborrowershallsubmittotheBSPIODanoticeoftheirintentionto prepay at least one (1) month prior to the target prepayment date indicating the following: name of creditor, BSP registration number for theloan,dateofprepayment,amounttobeprepaidinoriginalcurrency, andremittanceinstructions(e.g.,accountnumberandrecipientbankfor theprepayment).Afterpayment,theborrowershallsubmittotheBSP IOD, proof/s of the payment made, together with copy of the duly stampedBSRDanditsForm2report(AnnexE.2). b. The foreign exchange selling AAB/AABforex corp shall require the presentation by the borrower of documents prescribed under Item B, Appendix1hereof. c. The foreign exchange purchases shall not exceed USD50 million per day, provided that the total foreign exchange purchasesshallnotatanycaseexceedtheamounttobeprepaid.The dailylimitshallbesubjecttoperiodicreviewtotakeintoconsideration prevailing conditions; revised limits shall be duly disseminated by the BSP. d. Advance foreign exchange purchases shall be deposited in the borrowers FCDU/offshore account pending remittance of the full amounttothecreditoratthetargetprepaymentdate.

Otherloanrelatedfees/chargesnotauthorizedbytheBSP;and LoanscoveredbyofficialreschedulingwithParisClubcreditors.

e.

The foreign exchange selling institution shall see to it that documents evidencing payment of applicable documentary stamp tax, if any, are presented/available.

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f.

The foreign exchange sold shall be duly reported by the foreign exchangeselling AAB under FX Form 1 (Consolidated Report on Foreign Exchange Assets & Liabilities) Schedule 4 following the deadlineforsubmissionofFXForm1.

5. Applications to purchase foreign exchange for servicing of loanrelated payments shall be submitted to any AAB or AABforex corp using the prescribed form (Annex A) and supported by documents prescribed under item B, Appendix1hereof. 6. AABs and AABforex corps shall not sell foreign exchange to residents for paymentofforeignexchangeobligationstoresidentsotherthanAABs. 7. Allloanpaymentsmade,irrespectiveofthesourceoftheforeignexchange used, shall be reported by the borrower concerned to BSPIOD using the prescribed form(AnnexE.2). (AsamendedbyCircularNo.698dated5November2010) Section30. Approval/RegistrationandServicingofGuarantees 1. ThefollowingguaranteesshallrequirepriorBSPapproval: a. Guaranteesforaccountofthepublicsectoraswellasthosetobe issuedbygovernmentownedandcontrolledcorporationsinfavorofnon residents;and b. Guarantees issued by foreign banks and financial institutions to secureobligationsofresidentspartakingthenatureofaforeignloanwhich requirepriorBSPapprovalpursuanttoSection23. 2. Thefollowingguarantees,includingrisktakeoverandsimilararrangements, for account of the private sector shall not require prior BSP approval and registration butshallbereportedtotheBSPbyAABsasissuer/beneficiaryusingtheprescribedform (Annex G if issuer or Annex H if beneficiary) to be eligible for servicing using foreign exchange purchased from AABs or AABforex corps in the event of default by the principalobligor: a. Guarantees to be issued by local banks and other financial institutions, including government financial institutions, in favor of non revsidentssuchas: 1) Payment guarantees (e.g., bid bonds, performance bonds, advancepaymentbonds);and
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2) Guaranteestosecureforeignobligationsofresidentswhich donotpartakethenatureofaforeignloan. b.Guaranteestobeissuedbyforeignbanksandfinancialinstitutions aswellasotherforeignentitiestosecurepesoloans/FCDUloansauthorized under Section 24.4. Proceeds of guarantees where the beneficiary is a residentshallbeinwardlyremittedandsoldtoAABsforpesos. As a prerequisite to the issuance of guarantees under Item a, the followingdocumentsshallbesubmittedtotheguarantor: a. Registration papers of domestic accountee with the Securities and Exchange Commission (SEC) (for corporation/partnership) or with the BureauofDomesticTrade(BDT)oftheDepartmentofTradeandIndustry (DTI)(forsingleproprietorship);and b. Contract and/or other documents which serve as basis for the issuanceoftheguarantee. 3. Other guarantees or similar arrangements which may give rise to actual foreign obligations shall require prior BSP approval to be eligible for servicing using foreignexchangepurchasedfromAABsorAABforexcorps. 4. Fees and charges on guarantees shall be reflective of prevailing market terms:Provided,Thatguaranteesissuedbyparentcompaniestotheiraffiliatesshallnot bechargedanyfee. 5. Any payments relative to BSP registered guarantees may be remitted by AABsastheyfallduewithoutpriorBSPapproval.Anyforeignliabilityarisingfromacall on the guarantee shall require prior BSP approval, if to be serviced using foreign exchangepurchasedfromAABsorAABforexcorps. Section31. Approval/Registration and Servicing of Other Financing Schemes/Arrangements 1. Financingschemeswhichwouldinvolveoptiontopurchasearrangementor transfer of ownership after a certain period of time as in the case of BuildOperate Transfer(BOT),BuildandTransfer(BT)arrangementsshallberegisteredwiththeBSPto be eligible for servicing using foreign exchange purchased from AABs or AABforex corps. Applications for registration shall be filed by the implementing agency/proponentwiththeBSPwithinonemonthfromcontractsigning. Implementing agencies/proponents of projects under BOT/similar financing arrangementsshallsubmittotheBSPthefollowingreports:
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a. YearlyProjectedFundingRequirementsforBOT/OtherSimilarFinancing Schemes(AnnexI),onorbeforeSeptember30oftheyearprecedingthe referenceperiod;and b. MonthlyReportonpaymentunderBOT/OtherSimilarFinancingSchemes (AnnexJ)withinten(10)workingdaysfromendofreferencemonth. 2. Offshoreissuancesofpesodenominatedinstrumentsinvolving: a. inward remittance of foreign exchange to the Philippines and sale thereofforpesostoAABs;or b. aresidententerpriseoranyofitsoffshoreoffices,branches,subsidiaries and affiliates, which will participate in such transactions as an issuer, guarantororbeneficiary,andwhereproceedsshallbelenttoorinvested inresidentcompanies The approval of said instruments shall be subject to the following conditions: a. thetransactionshallnotinvolveimportorexportofPhilippinecurrency whetherphysicallyorelectronically;and b. compliance with pertinent rules and regulations of the BSP (including reportorial requirements) and other regulatory/ government agencies/entitiesincludingapprovalbytheDepartmentofFinance(DOF) inthecaseofsupranationalissuers. 3. Nonresidents issuance of notes/bonds or similar instruments in the domesticmarket,shallrequireBSPapprovalbeforeexecutionthereof. ChapterII FOREIGNINVESTMENTS Section32. General Policy. The BSP supports the countrys policy to encourage inward foreign investments. Said investments need not be registered with theBSPunlesstheforeignexchangeneededtoservicetherepatriationofcapitaland the remittance of dividends, profits and earnings which accrue thereon shall be purchasedfromAABsorAABforexcorps.
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Section33. Categories of Inward Foreign Investments. For purposes of registration,foreigninvestmentsmaybeintheformof:(1)foreigndirectinvestments in Philippine firms or enterprises; (2) investments in pesodenominated government securities;(3)investmentsinsecuritieslistedinthePhilippineStockExchange(PSE);(4) investments in pesodenominated money market instruments; and (5) investments in pesotimedepositswithAABswithaminimummaturityofninety(90)days. Section34. Inward Foreign Direct Investments. Inward foreign direct investments may be in cash or in kind. For registration purposes, foreign exchange funding for the cash investments must be inwardly remitted but need not be convertedtopesos. Assets eligible for registration as investment in kind shall include: (1)machineryandequipment;(2)rawmaterials,supplies,sparepartsandotheritems includingintangibleassetsnecessaryfortheoperationsoftheinvesteefirm.Thevalue of these investments in kind shall be assessed and appraised by the BSP before their registration. Expenses incurred by foreign firms pursuant to governmentapproved service contracts/other contracts for oil, gas, and geothermal energy exploration/ developmentsmaybecapitalizedandregisteredasforeigninvestmentwiththeBSP. (AsamendedbyCircularNo.742dated21November2011) Section35. Inward Foreign Portfolio Investments. Inward foreign portfolio investmentsshallincludethefollowing: 1. Investments in government securities which refer to investments in peso denominatedcertificatesofindebtedness,issuedbypublicsectorentities. 2. Investmentsinlistedsecuritieswhichrefertoinvestmentsinsecuritieslisted inthePSE. 3. Investments in money market instruments which refer to all peso denominated debt instruments, such as but not limited to bonds, bills payables, promissory notes, and nonparticipating preferred shares, issued onshore by private residentfirms,notincludedinSection23. 4. Investmentsinbankdeposits:Provided,Thatonlypesotimedepositswithan AABwithamaturityofatleastninety(90)daysshallbeeligibleforregistrationwiththe BSP.
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For registration purposes, the foreign exchange funding for the portfolio investmentsmustbeinwardlyremittedandconvertedtopesos. (AsamendedbyCircularNo.742dated21November2011) Section36. Registration with the BSP. The following inward foreign investmentsshallberegisteredwiththeBSP: 1. InwardforeigndirectinvestmentsunderSection34;and 2. InvestmentsinpesodenominatedmoneymarketinstrumentsunderItem3 ofSection35. All applications for registration of foreign direct investments under Section 34 shall be filed with the BSP within five (5) years from the date of inward remittance/actualtransferofassetstothePhilippines 3 .ABangkoSentralRegistration Document (BSRD) shall be issued by the BSP evidencing registration of such investments. (AsamendedbyCircularNo.743dated15December2011) Section37. Registration with Custodian Banks. Inward foreign investments in pesodenominated government securities, PSElisted securities, and peso time depositsunderItems1,2and4,respectively,ofSection35shallberegisteredwithan investorsdesignatedcustodianbankonbehalfoftheBSP. AcustodianbankmaybeanyAABoranOBUappointedbytheforeigninvestor to register his investments and to hold shares and other investment instruments for andonhisbehalfandtorepresenthiminallthenecessaryactionsinconnectionwith hisinvestmentsinthePhilippines. TheBSRDtobeissuedbyacustodianbankonbehalfoftheBSPshallbeinthe prescribedprenumberedformpurchasedbythecustodianbankfromtheBSP.BSRDs issueddirectlybycustodianbanksforregisteredinvestmentsinpesotimedepositsshall be(a)annotatedwithrolloversoftheinvestment;or(b)cancelledifsuchdepositsare preterminatedbeforeninety(90)days. Section38. Registration Procedures. The procedures for registration of foreign investments including the supporting documents are outlined in Appendix10.
3

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Section39. Import/ExportofStockCertificatesofPhilippineFirms.Noprior BSPauthorityshallberequiredfortheimport/exportofstockcertificatesofPhilippine firms issued to foreign investors, including investments prior to 15March1973underSection43. Section40. RepatriationandRemittancePrivileges 1. InwardforeigninvestmentsdulyregisteredwiththeBSPorwithacustodian bank duly designated by the foreign investor, shall be entitled to full and immediate repatriation of capital and remittance of dividends, profits and earnings using foreign exchangetobepurchasedfromAABsandAABforexcorps. 2. Foreign exchange may be purchased from AABs and AABforex corps for outward remittance in an amount equivalent to the peso sales/divestments proceeds (including dividends, profits or earnings thereon) of BSP registeredforeigninvestmentsinaccordancewiththeproceduresoutlinedinAppendix 11andsupportedbythedocumentsprescribedunderItemsC.1andC.2ofAppendix1 hereof. 3. Registering banks for foreign investments may sell for outward remittance the equivalent foreign exchange of excess pesos funded with inward remittance of foreignexchangebutnottoexceedtheamountofforeignexchangebroughtinlessthe amount actually used for BSPregistered investments made in the country, subject to thefollowingconditions: a. theinvestorshallcomplywiththeprescribeddocumentsunderItemC.3 ofAppendix1hereof; b. suchexcesspesosshouldnothavebeenutilizedtofundanyinvestment; and c. the remittance of the equivalent foreign exchange shall be reported to theBSPIODbytheremittingAABwithintwo(2)bankingdaysfromthe date of outward remittance, with copies of the prescribed supporting documents. Theforeignexchangepurchasesmaybemadebytheresidentagentonbehalfof thenonresidentinvestorfordirectremittancetothenonresidentbeneficiaryonthe dayofpurchase. (AsamendedbyCircularNo.698dated5November2010)
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Section41. DepositofDivestment/SalesProceeds.Pendingreinvestmentor repatriation, divestment/sales proceeds of duly registered foreign investments, includingdividends,profits,andearningsmaybedepositedtemporarilywithanyAAB. The eventual repatriation thereof including interest earned net of taxes, shall be remittable in full through anyAAB without prior BSP approval in accordance with the proceduresoutlinedinAppendix11. Section42. Reinvestment. Foreign investors may reinvest divestment/sales proceeds or remittable dividends/profits or earnings of duly registered investments. The reinvestments shall be registered with the BSP or the investors designated custodian banks, as applicable, if the foreign exchange needed to service the repatriation of capital and the remittance of dividends, profits and earnings which accruethereonshallbepurchasedfromAABsandAABforexcorps. Section43. Inward Foreign Investments Prior to 15 March 1973. Repatriationofdivestmentproceedsandremittanceofdividends,profitsandearnings fromforeigninvestmentscertifiedbystocktransferagentstohavebeenmadepriorto 15March1973maybeservicedusingforeignexchangepurchasedfromAABsandAAB forex corps, without prior BSP approval. In the absence of said certification, such investments may be registered with the BSP subject to submission of documentary requirementsunderAppendix12. Section44. InvestmentsbyPhilippineResidents 1. OutwardInvestments. a. Residentsmayundertakeoutwardinvestmentsonlyif: i. the investments are funded by withdrawals from the resident investorsFCDUaccount/s;or ii. thefundstobeinvestedarenotamongthoserequiredtobesoldto AABsforpesosunderexistingBSPrules;or iii. thefundstobeinvestedarepurchasedfromAABsorAABforexcorps butinamountsnotexceedingUSD60millionoritsequivalentinother foreign currency per investor per year, or per fund per year for qualifiedinvestors(QIs). Application to purchase foreign exchange for outward investments (AnnexA)shallbesupportedbydocumentsprescribedunderItemC.4of Appendix1hereof.
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b. Outwardinvestmentsbyresidents(excludingAABs)fundedwithforeign exchange purchased from AABs or AABforex corps in excess of the USD60millionlimitperinvestorperyearshallrequirepriorapprovalby the BSP: Provided, That the purchase of foreign exchange for outward investmentsbymanagedortrusteedaccounts(otherthanpooledfunds) shall be considered as part of the foreign exchange purchases by the principalortrustorofsuchaccountsfordeterminingcompliancewiththe limits. Outward investments of banks shall be subject to existing prudentialregulationsoftheBSP. c. QIsmayapplywiththeBSPforahigherannualoutwardinvestmentlimit. For purposes of this section, QIs shall be limited to the following: insuranceandpreneedcompanies;collective/pooledfunds,whetherin a corporate or contractual structure, such as mutual funds, unit investmenttrustfundsandvariableinsurance;publicorprivatepension orretirementorprovidentfundsandsuchotherentitiesandfundsasthe BSP may determine as QIs on the basis of such factors as financial sophistication,sizeandregularityoffinancialtransactions,networthand sizeofassetsbeingmanaged.Theapplicationofcollective/pooledfunds and pension, retirement and provident funds for a higher annual outwardinvestmentlimitmaybeeffectedthroughitsgoverningboardor throughitstrustee. 2. Investments in bonds/notes issued by residents offshore. Residents may purchase foreign exchange from AABs or AABforex corps without prior BSP approval forinvestmentsinthefollowing:(a)foreigncurrencydenominatedbonds/notesofthe Republic of the Philippines or other Philippine resident entities; and (b) peso denominated bonds/notes of the Republic of the Philippines or other Philippine resident entities requiring settlement in foreign currency, Provided, That: such purchases shall be consolidated with foreign exchange purchases for outward investments under item 1.b hereof for purposes of determining compliance with the allowed limit, and supported by documents prescribed under Item C.5 of Appendix 1 hereof. 3. Foreignexchangereceivedbyresidentsasdividends/earningsordivestment proceeds from outward investments and investments in bonds/notes issued by residents offshore that were funded with foreign exchange purchased from AABs or AABforexcorps,neednotbeinwardlyremittedandsoldforpesos. (AsamendedbyCircularNo.698dated5November2010andCircularNo.742 dated21November2011)
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PARTTHREE.OFFSHOREBANKINGUNITS,REPRESENTATIVEOFFICESANDFOREIGN CURRENCYDEPOSITUNITS ChapterI OFFSHOREBANKINGUNITSOFFOREIGNBANKS Section45. DefinitionofTerms.AsusedinthisChapter,thefollowingterms shallhavethemeaningindicatedunlessthecontextclearlyindicatesotherwise: 1. Offshore Banking shall refer to the conduct of banking transactions in foreigncurrenciesinvolvingthereceiptoffundsprincipallyfromexternalsourcesand, as allowed in this Manual, from internal sources and utilization of such funds, as providedherein. 2. OffshoreBankingUnitorOBUshallrefertoabranchaforeignbanking corporationwhichisdulyauthorizedbytheBSPtotransactoffshorebankingbusinessin thePhilippines. 3. NetofficefundsshallrefertothenetcreditbalanceoftheDuetoHead Office(HO)/Branches/afterdeductingtheDuefromHO/Branches,asshowninthe followingcomputation: DuetoHO/Branches Remittances/Advances/DepositstoOBUby HO/Branches xxxxxxx UnremittedearningsofOBU xxxxxxx Total USDxxxxxxx Less: DuefromHO/Branches Remittances/Advances/DepositsofOBUwithits HO/Branches xxxxxxx NetOfficeFunds USDxxxxxxx 4. Depositsshallrefertofundsinforeigncurrencieswhichareacceptedand held by an OBU in the regular course of business, with the obligation to return an equivalentamounttotheownerthereof,withorwithoutinterest.
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5. Residentshallreferto a) anindividualcitizenofthePhilippinesresidingtherein;or b) an individual who is not a citizen of the Philippines but is permanentlyresiding 4 therein;or c) a corporation or other juridical person organized under the laws of thePhilippines;or d) a branch, subsidiary, affiliate, extension office or any other unit of corporationsorjuridicalpersonswhichareorganizedunderthelaws ofanycountryandoperatinginthePhilippines,exceptOBUs. 6. Nonresident shall refer to an individual, a corporation or other juridical personnotincludedinthedefinitionofresident. 7. ForeignCurrencyDepositUnitorFCDUshallrefertothatunitofalocal bankorofalocalbranchofaforeignbankauthorizedbytheBSPtoengageinforeign currencydenominated transactions, pursuant to the provisions of Republic Act No. 6426(ForeignCurrencyDepositAct)dated4April1974,asamended. 8. Localbankshallrefertoaruralbank(RB)/cooperativebank(CoopBank), thriftbank(TB),commercialbank(KB)oruniversalbank(UB)organizedunderthelaws oftheRepublicofthePhilippines. 9. Local branch of a foreign bank shall refer to a branch of a foreign bank doingbusinessinthePhilippines,pursuanttotheprovisionsofRepublicActNo.7653 andRepublicActNo.8791(TheGeneralBankingLawof2000)dated23May2000. 10. Acceptableforeignexchangecomprisethoseforeigncurrencieswhichare acceptable to and exchangeable at the BSP and which form part of the international reservesofthecountry. Section46. ApprovalsRequired.AforeignbankmayoperateanOBUinthe Philippines, upon issuance of a Certificate of Authority to operate by the Monetary BoardandregistrationwiththeSEC. Section47. CriteriaforSelection.Thefollowingfactorsshallserveasbasisfor the issuance of certificate of authority to operate an OBU: (1) liquidity and solvency positions; (2) net worth and resources; (3) managerial and international banking expertiseofapplicantbank;(4)contributionto thePhilippineeconomy;and(5)other relevant factors, such as participation in the equity of local UBs/KBs and appropriate geographicrepresentations.
Residentsincludeanyindividual,citizenorotherwise,whohasresidedinthePhilippinesforayearor longer,asdefinedinSection83oftheIMFBalanceofPaymentsTextbook,1996. Back to top
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Section48. PreOperation Requirements. Upon advice from the BSP, a qualified bank shall submit a sworn undertaking of its head office through any of its duly authorized officers, supported by an appropriate resolution of its board of directors,totheeffectthatitshall: 1. provide,ondemand,thenecessarycurrenciestocoverliquidityneedsthat mayariseorothershortfallthatitsOBUmayincur; 2. managetheoperationsofitsOBUsoundlyandwithprudence; 3. continuallytrainaspecificnumberofFilipinosininternationalbankingand foreignexchangetradingwithaviewtoreducingthenumberofexpatriates; 4. provideandmaintaininitsOBUatalltimesnetofficefundsintheminimum amountofUSD1million; 5. startoperationsofitsOBUwithin180daysfromreceiptofitscertificateof authoritytooperatesuchunit; 6. complywithallapplicablelocallawsrelatingtolaborandemployment;and 7. submit,beforestartofoperations,otherdocumentsasmayberequiredby theBSPsuchascertificationorsimilardocumentsshowingthatitisdulyauthorizedby thepropergovernmententityofitscountrytoengageinoffshorebankingbusinessin thePhilippines. Section49. AnnualFee.Uponissuanceofacertificateofauthoritytooperate anOBUinthePhilippines,andyearlythereafter,theauthorizedbankshallpaytheBSP afeeofnotlessthanUSD20,000.00. Section50. Transactions with NonResidents and/or with Other OBUs. An OBU may freely engage in all normal banking transactions with nonresidents and/or withotherOBUs,involvinganycurrencyotherthanthePhilippinepeso. Section51. Transactions with Foreign Currency Deposit Units (FCDUs)/Expanded Foreign Currency Deposit Units (EFCDUs). Subject to BSP regulations, an OBU may engage in the following transactions with FCDUs/EFCDUs of localbanksinanycurrencyotherthanthePhilippinepeso: 1. Accepttime,savingsanddemanddepositsorissuenegotiablecertificatesof timedeposit;
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2. 3. 4. 5. 6. 7.

Borrowwithmaturitiesnotexceeding360days; Deposit; Extendloansandadvances; Dealinforeigncurrencyfinancialinstruments; Discountbills,acceptances,andnegotiablecertificatesofdeposits; Engageinforeignexchangetrading;

8. Engageinforeigncurrency,foreigncurrencyswap;and 9. EngageinsuchothertransactionsasauthorizedunderthisSectionbetween OBUs and resident banks authorized to accept foreign currency deposits under the provisionsofRepublicActNo.6426,asamended. Interbankshorttermtransactionsofnotexceeding360dayssuchascreditlines ofPhilippinebankswithcorrespondentbanks,interbankcallloansandinterbankloans forgeneralliquiditypurposesshallnotrequirepriorBSPapproval. Section52. Transactions with Residents which are not Banks. An OBU may engageinthefollowingtransactionswithresidentswhicharenotbanks: 1. Dealinforeigncurrencyfinancialinstruments; 2. Extendforeigncurrencyloansandadvances,subjecttoexistingregulations onforeignborrowings; 3. ServiceimportationsthroughL/C,D/A,O/AandD/Pofresidentborrowers: Provided, That such importations shall be funded by a BSPauthorized OBU foreign currency loan to the residentborrower involved; and Provided, further, That D/AO/A imports coursed through and serviced by OBUs shall be subject to the reporting requirementsunderAppendix6; 4. Negotiate inward (export) L/Cs and handle other export transactions (includingD/P,D/AandO/A)coursedthroughtheirworldwidenetworkofbranchesand correspondents:Provided,ThatOBUsshareinthetotalexportL/Cnegotiationbusiness shallbelimitedtoofthegrowth(incremental)elementinthecountrystotalannual export.Thislimitshallbeobservedyearlyuntilthisequalstenpercent(10%)oftotal exports.ExportsnotcoveredbyL/Cs,i.e.,donethroughD/AO/Aarrangementsshallbe consideredsubjecttothisoveralllimit;
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5. Providefullforeignexchangeserviceforallforeigncurrencynontradeand traderemittancesresultingfromorrelatedtotheirownnegotiationofexportL/Cs; 6. Renderfinancial,advisoryandrelatedservices;and 7. Refinance trust receipts without prior BSP approval arising from import transactions of Philippine residents in U.S. dollars or in other acceptable foreign currencies.Therefinancingshallbeevidencedbybankersacceptances. However,OBUsmayholdpesodenominatedassetsarisingfromrestructuringor otherrepaymentschemeofoutstandingloans,subjecttothetermsandconditionsof the approval of such restructuring/other repayment scheme and to the following clarificationsandconditions: a. That term assets as used in this Section shall refer to bonds or other certificatesofindebtedness,sharesofstocksandotherproperties; b. Thatbondsorothercertificatesofindebtednessissuedbyathirdparty as well as shares of stocks and other properties acquired as a result of restructuring/otherpaymentschemeshallbeaccountedforinaccordancewith PhilippineAccountingStandards(PAS)39;and c. That shares of stock and other properties acquired as a result of restructuring/otherrepaymentschemeshallbesold/disposedofwithinaperiod offive(5)yearsfromdateofacquisition. Section53. Peso Deposits. OBUs may open and maintain peso deposit accountswithAABsexclusivelyforthefollowingpurposes: 1. To meet administrative and other operating expenses, such as salaries, rentalsandthelike; 2. To pay the peso equivalent of foreign exchange sold by beneficiaries of inward remittances of Filipino overseas workers or of Filipino or multinational companies,coursedthroughtheOBUscorrespondentbanksabroad; 3. TopaythedesignatedbeneficiariesinthePhilippinesthepesoequivalentof foreign exchange inward remittances other than those related to (a) trade, or (b) inward foreign investments that are intended to be serviced using foreignexchangepurchasedfromAABsorAABforexcorps;and 4. To pay the peso equivalent of foreign exchange sold by beneficiaries of exportL/CsnegotiatedwiththeOBUs.
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Thepesodepositaccountsshallbefundedexclusivelybyinwardremittancesof foreignexchangeeligibletoformpartofthePhilippineinternationalreserves. OBUsmayalsosellinwardremittancesofforeignexchangeforpesostotheBSP through the Treasury Department, for credit to the demand deposit account of the designatedAABsfortheaccountoftheOBU. Section54. Financial Assistance to Officers/Employees. OBUs may extend financialassistance(realestate,car,personalloans,etc.)inlocalorforeigncurrencyto theirFilipinoofficersandemployeesaspartoftheirfringebenefitprogram. They may likewise grant foreign currency loans to their expatriate officers withoutneedofBSPapproval. Section55. SecrecyofDeposits.TheprovisionsofRepublicActNo.6426,as amended,shallapplytodepositsinOBUs;Provided,Thatnumbereddepositaccounts shallnotbeused. Section56. ExemptionfromCertainLaws.TheprovisionsofRepublicActNo. 2655(UsuryLaw)dated1May1915,asamended 5 ,andRepublicActNo.3591(AnAct Establishing the Philippine Deposit Insurance Corporation) dated 22 June 1963, as amended,shallnotapplytotransactionsand/ordepositsinOBUsinthePhilippines. Section57. Accounting and Reporting. OBUs shall maintain an accounting systeminaccordancewithguidelinesprescribedbytheBSP.Periodicallyorasrequired, existingreportsshallcontinuetobesubmittedintheprescribedformstotheBSP. Section58. Supervision. The operations and activities of OBUs shall be conductedunderthesupervisionoftheBSP. Section59. Taxes, Customs Duties. Transactions of OBUs in the Philippines shall be subject to such taxes as are prescribed in Presidential Decree No. 1034 (AuthorizingtheEstablishmentofanOffshoreBankingSysteminthePhilippines)dated 30September1976,asimplementedbyregulationsoftheBIR.

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Section60. Revocation/Suspension. The Monetary Board, upon recommendationoftheGovernor,mayrevokeorsuspendtheauthorityofanOBUto operate in the Philippines for violation of Presidential Decree No. 1034 or relevant provisionsofthisManual. ChapterII REPRESENTATIVEOFFICESOFFOREIGNBANKS Section61. DefinitionofTerms.AsusedinthisChapter,thefollowingterms shallhavethemeaningindicatedunlessthecontextclearlyindicatesotherwise: 1. Foreign Bank shall refer to a bank or banking corporation formed, organizedandexistingunderanyforeignlaw. 2. RepresentativeOfficeshallrefertoaliaisonofficeofaforeignbankwhich deals directly with the public by promoting and giving information about the services offeredbytheforeignbank.Itdoesnotincludetheregionalorareaheadquartersofa foreignbankregisteredandlicensedunderexistinglaws. Section62. Criteria for Approval. The Monetary Board may authorize qualified foreign banks to open representative offices in the Philippines if, in its judgment,thepublicinterestandeconomicconditions,bothgeneralandlocal,justify the establishment of such office. The following factors, among others, shall serve as basis for issuance of authority to open a representative office in the Philippines: (1)liquidityandsolvencypositions;(2)networthandresources;(3)financialandcredit standing in the international banking community; (4) exposure in the Philippines; and (5)otherrelevantfactors,suchasPhilippinecommercialandfinancialrelationshipswith thecountrywhereapplicantbankisbased. Section63. Authorized Activities of Representative Offices. Authorized representative offices may promote and provide information about the services/productsofferedbytheforeignbanksbutmaynottransactbankingbusiness, such as acceptance of deposits, issuance of letters of credit and foreign exchange trading.Transactionsgeneratedthroughthepromotionaleffortsoftherepresentative officemaybebookedonlybytheforeignbankabroad. Section64. Fees.Foreignbanksintendingtoestablisharepresentativeoffice shall,uponissuancebytheBSPofaCertificateofAuthority,paytheBSPalicensefeeof USD2,000.00.
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Section65. Use of the term Representative Office. Foreign banks authorized to operate representative offices shall, in their representation with the public, carry with their name the additional term Representative Office to properly guidethepubliconthenatureandextentoftheiractivities. Section66. Licensing. The licensing and operations of representative offices includingtheimplementationoftheseregulationsandsuchotherrulesandregulations thatmaybeissuedfromtimetotimeshallbetheresponsibilityoftheBSPSupervision andExaminationSector(SES). Section67. Visitorial Power. The BSP may, from time to time, look into the affairs of the representative offices to determine the extent of their compliance with theseregulationsand/orotherrelatedBSPissuances. Section68. Reporting.RepresentativeofficesshallsubmittotheBSPannual reports of their Head Office and, periodically as may be required, reports on the transactionsoftheirHeadOfficeinthePhilippinesinsuchformasmaybeprescribed forthepurpose. Section69. Revocation of License. The Monetary Board may revoke the license of a representative office if it finds after due investigation that: (1) the representativeofficeoritsofficershaveviolatedtheprovisionsofthisManualandany otherapplicablerulesandregulationsoftheBSP;or(2)itsHeadOfficeisfoundtobein imminentdangerofinsolvencyorthatitscontinuanceinbusinesswillinvolveprobable loss to those transacting business with it, pursuant to Section 37 of Republic Act No. 7653,andSection78ofRepublicActNo.8791. ChapterIII FOREIGNCURRENCYDEPOSITSYSTEM Section70. DefinitionofTerms.AsusedinthisChapter,thefollowingterms shallhavethemeaningindicatedunlessthecontextclearlyindicatesotherwise: 1. Foreign Currency Deposit Unit (FCDU) and Expanded Foreign Currency Deposit Unit (EFCDU) shall refer to a unit of a local bank or of a local branch of a
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foreign bank authorized by the BSP to engage in foreign currencydenominated transactions,pursuanttotheprovisionsofRepublicActNo.6426,asamended. 2. LocalbankshallrefertoanRB/CoopBank,TB,KBorUBorganizedunder thelawsoftheRepublicofthePhilippines. 3. Local branch of a foreign bank shall refer to a branch of a foreign bank doingbusinessinthePhilippines,pursuanttotheprovisionsofRepublicActNo.7721 (An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and for Other Purposes) dated 18 May 1994, Republic Act No. 7653, and RepublicActNo.8791. 4. Shorttermloansandsecuritiesshallrefertothosewithmaturitiesofone (1)yearorless. 5. Mediumterm loans and securities shall refer to those with maturities of morethanone(1)yearbutnotmorethanfive(5)years. 6. Longtermloansandsecuritiesshallrefertothosewithmaturitiesofmore thanfive(5)years. ThedefinitionofsuchothertermsusedinthisChaptershallbeconsistentwith thedefinitionoftermsusedundertheChaptersonOBUsandRepresentativeOfficesof ForeignBanks. Section71. QualificationRequirements 1. UBs/KBs may be authorized to operate an FCDU or EFCDU: Provided, That they meet the minimum capital requirements as prescribed under Section X106 and SubsectionsX106.1andX106.2oftheManualofRegulationsforBanks(MORB)forlocal banksandSubsectionsX121.4andX121.5oftheMORBforbranchesofforeignbanks. Inaddition,thefollowingstandardprequalificationrequirementsasprescribed underAppendix5oftheMORBshallbecompliedwith: a. The bank has complied, during the period indicated immediately precedingthedateofapplication,withthefollowing: 1) Riskbasedcapitaladequacyratioforthelast60days; 2) Ceilingsoncreditaccommodationtodirectors,officers,stockholders andrelatedinterests(DOSRI);and 3) Liquidityfloorongovernmentdeposits.
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b. The bank has not incurred net weekly reserve deficiencies for the last eight(8)weeks; c. The bank has generally complied with banking laws, rules and regulations, orders or instructions of the Monetary Board and/or BSP Management; d. The banks past due loans do not exceed twenty percent (20%) of its totalloanportfolioasofthedateofapplication; e. The bank has corrected as of date of application the major violations notedinitslatestexaminationparticularlyrelatingto 1) singleborrowerslimit;and 2) totalinvestmentinrealestateandimprovementsthereon,including bank equipment, which shall not exceed fifty percent (50%) of net worth; f. Thebanksaccountingrecords,systems,proceduresandinternalcontrol systemsaresatisfactorilymaintained; g. The bank does not have float items outstanding for more than 60 calendar days in the Due From/To Head Office/Branches/Offices accounts and the Due from Bangko Sentral account exceeding one percent(1%)ofthetotalresourcesasofendofprecedingmonth; h. The bank has no past due obligation with the BSP or with any financial institutionasofdateofapplication; i. j. The officers who will be incharge of the operation relating to the authority applied for have actual experience of at least two (2)yearsinanotherbankasincharge(oratleastasassistantincharge) ofthesameoperation; Thebanksfacilitiespertinenttotheauthorityappliedforareadequate;

k. The bank personnel who will handle the operation relating to the authorityappliedfor,haveattendedappropriateseminars,workshopsor onthejob training or have experience of at least six (6) months; and

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l.

Thebankhascompliedwiththemandatoryallocationofcreditresources to micro, small and medium enterprises for two (2)quartersimmediatelyprecedingthedateofapplication.

2. TBs with net worth or combined capital accounts of at least PHP325 million for those with head offices located within Metro Manila and PHP52 millionforthosewithheadofficeslocatedoutsideMetroManilamay,subjecttoprior MonetaryBoard approval,operateanFCDU.ATBdesiringtooperateanFCDUshallfile anapplicationwiththeBSPSES.Theapplicationshallbesignedbythebankpresident orofficerofequivalentrankandshallbeaccompaniedbythefollowingdocuments: a. Certified true copy of the resolution of the banks board of directors authorizingtheapplication;and b. Acertificationsignedbythepresidentortheofficerofequivalentrank that the bank has complied with all conditions/prerequisites for the grantofauthoritytooperateanFCDU. A TB applying for authority to operate FCDU must comply with the following requirements: a. The banks operation during the preceding calendar year and for the period immediately preceding the date of application has been profitable; b. The bank is well capitalized with riskbased capital adequacy ratio not lowerthantwelvepercent(12%)atthetimeoffilingtheapplication; c. TheofficerwhowillbeinchargeofFCDUoperationsshalleitherhaveat least one (1) year of actual experience in another bank as incharge or assistant incharge of the same operations, or have attended a specialized training course on FCDU transactions or operations conductedbytheBSPoraninstitutiondulyaccreditedbytheBSP; d. The bank has not incurred net weekly reserve deficiencies within eight (8)weeksimmediatelyprecedingthedateofapplication; e. The bank has generally complied with banking laws, rules and regulations,ordersorinstructionsoftheMonetaryBoardand/ortheBSP Managementinthelasttwo(2)precedingexaminationspriortothedate ofapplication,moreparticularlyon: 1) electionofatleasttwo(2)independentdirectors;
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2) attendance by every member of the board of directors in a special seminarforboardofdirectorsconductedoraccreditedbytheBSP; 3) theceilingsoncreditaccommodationstoDOSRI; 4) liquidityfloorrequirementsforgovernmentdeposits; 5) singleborrowersloanlimit;and 6) investmentinbankpremisesandotherfixedassets. f. The bank maintains adequate provisions for probable losses commensuratetothequalityofitsassetportfoliobutnotlowerthanthe requiredvaluationreservesasdeterminedbytheBSP; g. Thebankhasnofloatitemsoutstandingformorethan60calendardays in the Due From/To Head Office/Branches/Offices accounts and the Due FromBangko Sentralaccount exceedingone percent (1%) of the totalresourcesasofdateofapplication; h. The bank has no past due obligations with the BSP or with any governmentfinancialinstitution; i. The bank has established a risk management system appropriate to its operations characterized by clear delineation of responsibility for risk management, adequate risk measurement systems, appropriately structured risk limits, effective internal controls and complete, timely andefficientriskreportingsystem; The bank has a CAMELS Composite Rating of at least 3 in the last regularexaminationwithManagementratingofnotlowerthan3;and

j. k. The bank is a member of the Philippine Deposit Insurance Corporation (PDIC)ingoodstanding. 3. AnRB/CoopBankdesiringtooperateanFCDUshallfileanapplicationwith the BSPSES. The application shall be signed by the bank president or officer of equivalentrankandshallbeaccompaniedbythefollowingdocuments: a. Certified true copy of the resolution of the banks board of directors authorizingtheapplication;and b. Certificationsignedbythepresidentortheofficerofequivalentrankthat thebankhascompliedwithalltheconditions/prerequisitesforthegrant ofauthoritytooperateanFCDU.
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AnRB/CoopBankapplyingforauthoritytooperateanFCDUmustcomplywith thefollowingrequirements: a. Minimum capital under Subsection X151.2 of the MORB or PHP20million,whicheverishigher; b. Riskbasedcapitaladequacyratioatthetimeoffilingtheapplicationof atleasttwelvepercent(12%); c. CAMELS composite rating in the latest examination of at least 3,withManagementcomponentscorenotlowerthan3;and d. No outstanding major supervisory concerns on safety and soundness fromlastexamination,suchas,butnotlimitedto:

In addition to requirements under existing regulations, an RB/Coop Bank authorizedtooperateanFCDUshall: a. havethecapacitytooperateanFCDU.AnRB/CoopBankmay,however, upgradeitscapacitybyappointingasOfficerwhowillbeinchargeofthe FCDUoperationsanindividual(a)withactualexperienceinanotherbank as incharge or assistant incharge of the same operations for at least one (1) year, or (b) who has attended a specialized training course on FCDU transactions or operations conducted by the Bangko Sentral ng
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Unbookedvaluationreserves Inadequate regular and liquidity reserves on deposits including government deposits and depositsubstitutes 3) DOSRIloansinexcessofceilings 4) Poorassetquality 5) Violation of single borrowers loan limit and investmentlimits. 6) Past due obligation with the BSP or with any financialinstitution 7) Unsafeandunsoundbankingpractices 8) Inadequate accounting records, systems, proceduresandinternalcontrols 9) Corporategovernance 10) Compliance with banking laws, rules and regulations, orders or instructions of the MonetaryBoardand/orBSPManagement 11) MembershipwiththePDIC

1) 2)

12weeks

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Pilipinas Institute or an institution or bank duly accredited by the BSP; and b. establish a risk management system appropriate to its operations, characterizedbycleardelineationofresponsibilityforriskmanagement, adequateriskmeasurementsystem,appropriatelystructuredrisklimits, effectiveinternalcontrolsystemandcomplete,timelyandefficientrisk reportingsystem. Section72. 1. TBs and RBs/Coop Banks which are granted a certificate of authority to operate an FCDU are authorized to engage in the following transactions in any acceptableforeigncurrency: a. Accept deposits and trust accounts (for banks authorized to engage in trustoperations)fromresidentsandnonresidents; b. Deposit, regardless of maturity, with foreign banks abroad, OBUs and otherFCDUs/EFCDUs; c. Invest in readily marketable foreign currency denominated debt instruments.Forthispurpose,readilymarketabledebtinstrumentsshallrefer todebtinstrumentsthatarequotedinanactivemarketandthequotedprices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual andregularlyoccurringmarkettransactionsonanarmslengthbasis; d. Grant shortterm foreign currency loans as may be allowed by BSP regulations: Provided, That FCDUs of RBs/Coop Banks shall not grant loans to producers/manufacturers,includingoilcompaniesandpublicutilityconcerns; e. Borrow,subjecttoexistingrulesonforeign/foreigncurrencyborrowings, (i)fromEFCDUs,foreignbanksabroadandOBUs,regardlessofmaturity;and(ii) fromotherFCDUs,onshorttermmaturity; f. Engage in foreign currencyforeign currency swaps with the BSP, OBUs andotherFCDUs/EFCDUs; g. Engageinsecuritieslendingactivitiesaslendersubjecttothefollowing conditions:

AuthorizedTransactions

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1) The securities to be lent shall be limited to securities lodged under the account Held for Trading (HFT) Financial Assets and Available for Sale (AFS)FinancialAssets. TheuseofHeldtoMaturity(HTM)FinancialAssetsholdingsshallalsobe allowedinsecuritieslendingsubjecttothefollowingconditions: a) The lending bank had the positive intention and ability to maintainorrecovercontrolofthesameorsubstantiallysimilarsecurities asthoselent; b) The counterpartys failure to redeliver the securities lent at maturity or at the date agreed upon could not have been reasonably anticipatedbythelenderatthetimeofthetransaction;and c) In case of failure or default of the counterparty to redeliver the securities lent, the same shall be immediately replaced by identical or substantiallysimilarsecurities.Forthispurpose,areplacementsecurity mayonlybeconsideredsubstantiallysimilartothesecuritieslentorsold ifallofthefollowingcircumstancesarepresent: i. The security must have the same primary obligor and must havethesameguarantorunderthesametermsandconditions, ifguaranteed; ii. Thesecuritymustbeidenticalinformandtypesoastogivethe samerisksandrightstotheholder;and iii. Thedebtinstrumentmusthavethesamematurityandinterest rate. 2) Thelendingactivityshallhavepriorapprovalofthebanksboardof directorsandshallbegovernedbyadequatewrittenpoliciesandprocedures dulyapprovedbythesaidboard; 3) The securities lending shall be done through reputable internationally recognized and experienced thirdparty lending agent/intermediary which must be a regulated entity in its country of operation; 4) The securities lending transaction shall be subject to a written legal agreement between the lending bank and the lending agent which must clearlyspecifythe:
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a) relationshipaswellastherespectivedutiesandresponsibilitiesof eachcounterparty; b) obligationoftheborrowertoredeliveralikequantityofthesame issueorseriesastheloanedsecurities; c) guidelines for selecting investments for cash collateral, which shallincludeaprovisionthatcashcollateralwillnotbereinvested inliabilitiesofthelender,itssubsidiariesoraffiliates;and d) lendingfeeorcompensation; 5) The loaned securities must be fully secured by debt securities of countries or entities with highest credit quality, cash in currencies acceptableaspartofinternationalreserves,lettersofcreditandcertificates ofdepositsissuedbybankswithhighestcreditquality.Forthispurpose,a foreign country and a bank with highest credit quality refer to a foreign country and a bank given the highest credit rating by any two (2) of the followinginternationallyacceptedratingagencies:
RatingAgencies Moody's StandardandPoors FitchIBCA OthersasmaybeapprovedbytheMonetaryBoard "Aa3" "AA" "AA" HighestRating

Collateralvalueshallinitiallybeatleast102%ofthecurrentmarket valueoftheloanedsecuritiesandmaintainedat100%ofthevalueofthe loanedsecuritiesplusaccruedinterestthereonduringthecourseofthe loan; 6) Thelendershalldodailymarktomarketontheloanedsecuritiesand onthesecuritieswherecashcollateralisinvested/reinvested; 7) Thelendershallrequirefromthelendingagent/intermediarytimely andcomprehensivereportsonthelendingactivity; 8) For proper identification and monitoring, the outstanding book balance on the loaned securities shall be reclassified to the subaccount Government Securities (GS)/Debt Securities (DS) Lent under Securities LendingandBorrowingTransactionsundertheHFT/AFS/HTMFinancialAsset accounts;
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9) The bank has in place a risk management system commensurate to the nature, volume and complexity of its operations and characterized by clear delineation of responsibility for risk management, adequate risk measurementsystems,appropriatelystructuredrisklimits,effectiveinternal controlsandcomplete,timelyandefficientriskreportingsystem:Provided, That this requirement shall be automatically considered complied with by bankswithderivativeslicense; 10) The banks CAMELS composite rating in the last BSP regular examination is at least 3, with a minimum score of 3 on management; and 11) The foreign currency denominated debt securities lent or used as collateral by the borrowing bank in securities lending and borrowing transactions shall be considered as eligible asset cover for the 100% cover requirement. However, these shall not be eligible for the thirty percent (30%)liquidassetcover. h. Engage in repurchase agreements involving foreign currency denominatedgovernmentsecuritiessubjecttothefollowingconditions: 1)Suchrepurchaseagreementsshallbelimitedto: a) HFTandAFSsecuritiesheldundertheFCDU/EFCDUbooks; b) HTMsecuritiesholdings,subjecttothefollowingconditions: i. The selling bank had the positive intention and ability to maintainorrecovercontrolofthesameorsubstantiallysimilar securitiesasthosesold; ii. The counterpartys failure to redeliver the securities sold at maturity or at the date agreed upon could not have been reasonably anticipated by the seller at the time of the transaction; iii. Incaseoffailureordefaultofthecounterpartytoredeliverthe securities sold, the same shall be immediately replaced by identical or substantially similar securities. For this purpose, a replacement security may only be considered substantially similartothesecuritiessoldifallofthefollowingcircumstances arepresent:

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a. The security must have the same primary obligor and must have the same guarantor under the same terms andconditions,ifguaranteed; b. Thesecuritymustbeidenticalinformandtypesoasto givethesamerisksandrightstotheholder;and c. Thedebtinstrumentmusthavethesamematurityand interestrate. 2) For proper identification and monitoring, the outstanding book balanceofthegovernmentsecuritiessoldunderrepurchaseagreementsare tobereclassifiedtothesubaccountGSSoldunderRepurchaseAgreement undertheHFT/AFS/HTMFinancialAssetaccounts; 3) The borrowings shall only be from FCDUs/EFCDUs, nonresident financialinstitutionsandOBUs; 4) The maximum term of the repurchase agreements shall be one (1) year; 5) TheborrowingsshallbebookedunderBillsPayableandincludedin the computation of the total FCDU/EFCDU liabilities subject to the mandatory100percentassetcoverandthirtypercent(30%)liquiditycover; 6) The foreign currencydenominated debt securities sold or used as additionalcollateralinrepurchaseagreementshallbeconsideredaseligible asset cover for the 100% cover requirement. However, these shall not be eligibleforthethirtypercent(30%)liquidassetcover; 7) Banks shall, at all times, comply with the 100% FCDU/EFCDU asset coverandthirtypercent(30%)liquidassetcover;and 8) Banksshallmonitorandassesstherisksinherentintheserepurchase transactions. The provisions/requirements under Item g which are not inconsistent with theforegoingshallbestrictlyobservedbythebankconcerned. i. Purchase foreign currency denominated government securities under resale agreements from other banks FCDU/EFCDU, nonresident financial institutionsandOBUs,subjecttothefollowingconditions: 1) That the government securities purchased shall be limited to those issued by central governments and/or central banks of foreign countries
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with the highest credit quality given by any two internationally accepted ratingagencies(i.e.,currentlytheequivalentofStandardandPoorsAAor MoodysAa3orbetter); 2) That the maximum term of the resale agreements shall be one (1) year;and 3) Thatsuchgovernmentsecuritiespurchasedunderresaleagreements shall be classified as Loans and Receivables Arising from Repurchase Agreements/Certificates of Assignment/Participation with Recourse and SecuritiesLendingandBorrowingTransactions. j. IssueHybridTier1(HT1)capitalinstrumentssubjecttotherequirements underexistingregulations; k. EngageinUSDdenominatedrepurchaseagreements(R/P)withtheBSP as provided under Subsection X601.1 of the MORB, subject to the guidelines underAppendix13. Sanctions.Withoutprejudicetothecriminalandadministrativesanctions providedforunderSections36and37,respectively,ofRepublicActNo.7653, violation of any provision of Items 1.g.1 and 1.h.1.b of this Section pertaining to HTM financial assets, shall be considered a violation of the tainting provision under Subsection X388.5(b) of the MORB in relation to Section 3.a of Appendix 33 of the MORB. In such a case, the entire HTM portfolio shall be reclassified to the AFS category and the financial institution shall be prohibited from using the HTM account during the year the violation was committed and for the succeeding two (2) full financial years. Failure to reclassifytheHTMportfoliotoAFSshallsubjectthebankandconcernedofficers to the penalties and sanctions provided under Subsection X388.5(c) of the MORB. Moreover,theMonetaryBoardmayatitsdiscretion,imposeanyorallof thefollowingsanctionstoabankand/oritsdirector/sorofficer/sfoundtobe responsibleforviolationofItemkofthisSubsection: a. Terminationofeligibilityandpreterminationofanyoutstandingbalance throughrepaymentand/orsaleofthecollateral; b. Fine of up to PHP30,000 per transaction per day of violation reckoned fromthetimetheviolationwascommitteduptothedateitiscorrected; c. Suspension of interbank clearing privileges/immediate exclusion from clearing; d. SuspensionofaccesstotheBSPrediscountingfacilities;
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e. Suspension of lending or foreign exchange operations or authority to acceptnewdepositsormakenewinvestments; f. Revocationofauthoritytoperformtrustoperations; g. Revocationofquasibankinglicense; h. Suspension for 120 days without pay of the officers and/or directors responsiblefortheviolation;and i. 2. UBs/KBs, which are authorized to operate under the expanded foreign currency deposit system may engage in the following transactions in any acceptable foreigncurrency: a. Accept deposits and trust accounts (for banks authorized to engage in trustoperations)fromresidentsandnonresidents; b. Depositwithforeignbanksabroad,OBUsandotherFCDUs/EFCDUs; c. Investinforeigncurrencydenominateddebtinstruments; d. GrantforeigncurrencyloansasmaybeallowedbytheBSP; e. Borrow from other FCDUs/EFCDUs and from nonresidents and OBUs, subjecttoexistingrulesonforeignborrowings; f. Engageinforeigncurrencyforeigncurrencyswap; g. Engageinforeignexchangetrading,andwithpriorBSPapproval,engage infinancialfuturesandoptionstrading; h. Onrequest/instructionsofitsforeigncorrespondentbank,itmay: 1) issuelettersofcreditforanonresidentimporterinfavorofannon residentexporter; 2) pay, accept, or negotiate drafts/bills of exchange drawn under the letterofcredit;and 3) makepaymenttotheorderofthenonresidentexporter. Provided, That the foreign correspondent bank shall deposit sufficientforeignexchangewiththeEFCDUissuingtheletterofcreditto coveralldrawings.
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i. Engageindirectpurchaseofexportbillsofresidentexporterssubjectto thefollowingconditions: 1) Exporttransactionscoveredbyusanceorsightlettersofcredit,shall beallowedtobepurchasedbyEFCDUs;and 2) Exportbillsnegotiated/purchasedbythebanksRegularBankingUnit (RBU)andoutstandinginitsbooksshallnotbeallowedtobepurchasedby itsEFCDUs. j. Engageinsecuritieslendingactivitiesaslendersubjecttotheconditions asenumeratedinItem1.gofthisSection; k. Engage in repurchase agreements involving foreign currency denominatedgovernmentsecuritiessubjecttotheconditionsasenumeratedin Item1.hofthisSection,exceptItem1.h(4); l. Invest in foreign currency denominated structured products issued by banks and special purpose vehicles (SPVs) of high credit quality subject to the provisionsinSection1636oftheMORB; m. Purchase foreign currency denominated government securities under resale agreements from other banks FCDU/EFCDU, nonresident financial institutionsandOBUs,subjecttothefollowingconditions: 1) That the government securities purchased shall be limited to those issued by central governments and/or central banks of foreign countries with the highest credit quality given by any two internationally accepted ratingagencies(i.e.,currentlytheequivalentofStandardandPoorsAAor MoodysAa3orbetter);and 2) Thatsuchgovernmentsecuritiespurchasedunderresaleagreements shall be classified as Loans and Receivables Arising from Repurchase Agreements, Certificates of Assignment/Participation with Recourse, and SecuritiesLendingandBorrowingTransactions. n. IssueHybridTier1(HT1)capitalinstrumentssubjecttotherequirements underexistingregulations; o. EngageinUSDdenominatedrepurchaseagreements(R/P)withtheBSP as provided under Subsection X601.1 of the MORB, subject to the guidelines underAppendix13.
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Sanctions.Withoutprejudicetothecriminalandadministrativesanctions providedforunderSections36and37,respectively,ofRepublicActNo.7653, violationofanyprovisionofItems2.j,and2.kofthisSectionpertainingto HTMfinancialassets,shallbeconsideredaviolationofthetaintingprovision underSubsectionX388.5(b)oftheMORBinrelationtoSection3.aofAppendix 33oftheMORB.Insuchacase,theentireHTMportfolioshallbereclassifiedto theAFScategoryandthefinancialinstitutionshallbeprohibitedfromusingthe HTM account during the year the violation was committed and for the succeedingtwo(2)fullfinancialyears.FailuretoreclassifytheHTMportfolioto AFSshallsubjectthebankandconcernedofficerstothepenaltiesandsanctions providedunderSubsectionX388.5(c)oftheMORB. Moreover,theMonetaryBoardmayatitsdiscretion,imposeanyorallof thefollowingsanctionstoabankand/oritsdirector/sorofficer/sfoundtobe responsibleforviolationofItemoofthisSubsection: a. Terminationofeligibilityandpreterminationofanyoutstandingbalance throughrepaymentand/orsaleofthecollateral; b. Fine of up to PHP30,000 per transaction per day of violation reckoned fromthetimetheviolationwascommitteduptothedateitiscorrected; c. Suspension of interbank clearing privileges/immediate exclusion from clearing; d. SuspensionofaccesstotheBSPrediscountingfacilities; e. Suspension of lending or foreign exchange operations or authority to acceptnewdepositsormakenewinvestments; f. Revocationofauthoritytoperformtrustoperations; g. Revocationofquasibankinglicense; h. Suspension for 120 days without pay of the officers and/or directors responsiblefortheviolation;and i. Othersanctionsasmaybeprovidedbylaw.

3. Excess FCDU/EFCDU funds of UBs/KBs may be lent to the regular banking unit (RBU) to fund the latters onbalance sheet foreign exchange trade transactions, subjecttothefollowingconditions: a. FCDU/EFCDUmaylendfundstotheRBUonlyafterithasfullycomplied with the prescribed 100% asset cover/thirty percent (30%) liquid asset coveronFCDU/EFCDUliabilities;
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b. FCDU/EFCDUlendingtotheRBUshallbe 1) Capped at the lower of total outstanding balance on the RBUs on balancesheetforeigncurrencytradeassets 6 orthirtypercent(30%)ofthe level of FCDU/EFCDU deposit liabilities, computed at the average daily balance(using2monthrollingdata)asofendofthesecondweekpriorto thereferenceweek.TotaloutstandingbalanceofFCDU/EFCDUlendingto the RBU shall, at all times, be within the prescribed cap. Any breach thereon shall be subject to the imposition of a monetary penalty of PHP30,000 per calendar day, commencing on the day the cap was breacheduntilthesameiscorrected;

2) Charged interest at prevailing market rates, computed monthly at theaveragedailybalanceofthereceivablefromtheRBU;and 3) On shortterm maturity, or for a period of one (1) year or less. Balances shall be settled, within a year from availment, by way of actual transferofforeigncurrencyassetsfromtheRBUbookstotheFCDU/EFCDU books. c. The lending transaction shall be booked as Loans to RBU by FCDU/EFCDUintheFCDU/EFCDUbooksandLoansbyRBUfromFCDU/EFCDU intheRBUbooks; d. TheLoanstoRBUbyFCDU/EFCDUaccountbalance(netoftransactions outstandingformorethanone(1)year)shallqualifyaseligibleassetcover,but notasliquidassetcover,forFCDU/EFCDUliabilities; e. Banksshallestablishandmaintainsystemsto 1) monitortheforeigncurrencyfundsflowofRBUandtheaveragedaily balances of foreign currency trade assets, with minimum database coveringatwo(2)monthrollingperiod;and 2) accountfortheutilizationoffundsborrowedfromFCDU/EFCDU. The systems as well as periodic reports generated therefrom shall be madeavailabletotheBSPexaminersforverification. f. Banks shall submit to the appropriate BSP supervising department, withinfive(5)bankingdaysfromendofreferencemonth,acertificationunder
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i.e., Customers Liability on Import BillsForeign, Customers Liability under Trust ReceiptsForeign, Customers Liability for this Banks Acceptances OutstandingForeign, Export Bills Purchased and ForeignBillsPurchasedDocumentary,excludingpastdueaccountsandItemsinLitigation. Back to top

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oath(Appendix14),signedbytheBanksPresidentorCountryManager,incase of local branch/subsidiary of foreign banks, Compliance Officer and Head of Treasury,totheeffectthat,atanydayofthereferencemonth,theoutstanding balance on funds borrowed from FCDU/EFCDU did not exceed the prescribed cap(i.e.,loweroftotaloutstandingbalanceonRBUsonbalancesheetforeign currency trade assets or thirty percent (30%) of the level of FCDU/EFCDU depositliabilities)andwereutilizedbytheRBUsolelyforforeigncurrencytrade transactions. TheforegoingruleshallbesubjecttoquarterlyreviewbytheBSP.

Section73. Foreign Currency Cover Requirements. Depository banks under the foreign currency deposit and expanded foreign currency deposit systems shall maintainatalltimesa100%coverfortheirforeigncurrencyliabilities,exceptforUSD denominatedrepurchaseagreements(R/P)withtheBSP.Provided,Thatviolationofthe termsandconditionsoftheUSDdenominatedR/Pfacilityshallsubjecttheborrowings of the bank to the FCDU/EFCDU asset and liquid asset cover requirements. For purposesofcomplyingwiththisrequirement,theprincipalofficesinthePhilippinesof the authorized banks and all their branches located therein shall be considered as a singleunit.Theforeigncurrencycovershallconsistofthenetcarryingamountofthe following: 1. ForbanksauthorizedtooperateanFCDU: a.Foreigncurrencycashonhand; b. Foreigncurrencychecksandothercashitems; c. DuefromBSPForeignCurrency; d. Due from other banks (other FCDUs/EFCDUs, OBUs, and nonresident banks); e.Derivatives with Positive Fair Value Held for Trading and/or Hedging (Derivatives with Negative Fair Value Held for Trading and/or Hedging shall requirecorrespondingasset/liquidassetcover); f. Investmentsinreadilymarketableforeigncurrencydenominateddebt instruments, booked under the following control accounts: (i) Held for Trading (HFT);(ii)DesignatedatFairValuethroughProfitorLoss(DFVPL);(iii)Available forSale(AFS);and(iv)HeldtoMaturity(HTM). Foreign currencydenominated debt securities sold/lent in repurchase agreement/securitieslendingandborrowingtransactionsshallbeconsideredas
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eligibleassetcoverforthe100%assetcoverrequirement.Thesametreatment shall likewise apply to foreign currency denominated debt securities used as additional collateral in repurchase agreements or as collateral by borrowing bankinsecuritieslendingandborrowingtransactions. g.Foreign currency loans and receivables maturing within one (1) year authorizedbytheBSP,bookedunderthefollowing: i. LoanstoBSP ii. Interbankloansreceivable iii. Loansandreceivablesothers LoansandreceivablesauthorizedbytheBSPshallrefertothosegranted pursuanttothisManualandshallincludethefollowing:(a)thosewithspecific approvalbytheBSPunderSection23(LoansRequiringPriorBSPApproval);(b) those short term loans to resident private and public sector borrowers which under existing regulations require no prior BSP approval but allowed to be servicedusingforeignexchangepurchasedfromAABsorAABforexcorps(i.e., loans to commodity and service exporters, indirect exporters, producers/manufacturers, including oil companies and public utility concerns) underSection24.4(LoansNotRequiringPriorBSPApproval);and(c)thoseloans to resident private sector borrowers to be serviced using foreign exchange purchased from entities that are not AABs or AABforex corps under Section 24.1.a:Provided,Thatallapplicablebankingrulesandregulationsarecomplied withincludingsingleborrowerslimitasprovidedinSectionX303oftheMORB; h. Loansandreceivablesarisingfromrepurchaseagreements,certificates ofassignment/participationwithrecourse,andsecuritieslendingandborrowing transactions,maturingwithinone(1)year; i. Foreigncurrencyaccruedinterestincomefromfinancialassets; j. Accounts receivable arising from sale of financial assets under the trade date accounting pending actual settlement/delivery of the underlying securities(Accountspayablearisingfromthepurchaseoffinancialassetsunder the trade date accounting pending actual settlement/receipt of the underlying securitiesshallrequirecorrespondingasset/liquidassetcover); k. Loans to RBU (net of transactions outstanding for more than one (1) year): Provided, That the conditions under Subsection X501.3(c) of the MORB arecompliedwith;and l. Such other assets as may be determined by the Monetary Board as eligibleassetcover.
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2. For banks authorized to operate an EFCDU The foregoing accounts, regardlessofmaturity,andinthecaseofinvestmentinforeigncurrencydenominated debtinstruments(includingdebtinstrumentsbookedunderUnquotedDebtSecurities ClassifiedasLoansandinvestmentsinstructuredproducts),regardlessofmaturityand marketability,shallallbeconsideredaseligibleassetcover.Loanstoresidentprivate and public sector borrowers which under Section 24.4 require no prior BSP approval andallowedtobeservicedusingforeignexchangepurchasedfromAABsorAABforex corps (i.e., loans to commodity and service exporters, indirect exporters, producers/manufacturers, including oil companies and public utility concerns) shall howeverhaveshorttermmaturity. Inaddition,thefollowingshallalsobeconsideredaseligibleassetcover: a. Loans and Receivables granted by EFCDU pursuant to Section 24, i.e., those loans of nonresidents from EFCDUs, to be serviced using foreign exchangepurchasedfromentitiesthatarenotAABsorAABforexcorpsunder Section24.1.b:Provided,Thatallapplicablebankingrulesandregulationsare complied with including single borrowers limit as provided in Section X303 of theMORB; b. Outstanding Export Bills Purchased in the EFCDU books, booked under thefollowingcontrolaccounts: i. Interbankloansreceivableifwithoutrecourse ii. Loansandreceivablesothersifwithrecourse For this purpose, net carrying amount shall refer to the gross amount of financial asset, plus or minus, as the case may be, the following: (i) unamortized premium/(discount) determined using the effective interest method; (ii) any accumulated market gains/(losses) in the case of AFS financial assets; and (iii)anyallowanceforcreditlossesdeterminedbasedonexistingregulations. 3. Further, at least thirty percent (30%) of the cover requirement for foreign currencyliabilitiesintheFCDU/EFCDUshallbeintheformofliquidassetsasfollows: a. Foreigncurrencycashonhand; b. Foreigncurrencychecksandothercashitems; c. DuefromBSPForeignCurrencywithremainingmaturityofone(1)year or less regardless of funding: Provided, That such deposit/placement is not encumberedorisnotbeingutilizedforanyotherpurposes; d. Due from other banks (other FCDUs/EFCDUs, OBUs and nonresident banks);
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e. Investments in readily marketable foreign currency denominated debt instruments, booked under the following control accounts: (i) HFT; (ii)DFVPL;(iii)AFS;and(iv)HTM;exceptforthefollowing:(a)thosewhichare sold/lent in repurchase agreement/securities lending and borrowing transactionsandthoseusedasadditionalcollateralinrepurchaseagreementsor ascollateralbyborrowingbankinsecuritieslendingandborrowingtransactions; and(b)thoseinvestmentsinstructuredproducts; f. LoansandreceivablesauthorizedbytheBSPbookedunderthefollowing: i. LoanstoBSPmaturingwithinone(1)year; ii. Interbankloansreceivablematuringwithinone(1)year; iii. Loansandreceivablesothersthatisanyofthefollowing: 1) OutstandingexportbillspurchasedintheEFCDUbooks. 2) Shortterm EFCDU loans to exporters in the form of export packingcredits,whetherrediscountedornotunderBSPsExportDollar Facility, up to the extent guaranteed byTrade and Investment Development Corporation of the Philippines (TIDCORP) or Small Business Guarantee and Finance Corporation (SBGFC): Provided, That thesecreditsarenotoverdue. g. Loans and receivables arising from repurchase agreements, certificates ofassignment/participationwithrecourseandsecuritieslendingandborrowing transactions,maturingwithinone(1)year;and h. Accountsreceivablearisingfromsaleoffinancialassetsunderthetrade dateaccountingpendingactualsettlement/deliveryoftheunderlyingsecurities pertaining to readily marketable foreign currency denominated debt instruments. The100%assetcoverandthirtypercent(30%)tobeheldintheformofliquid assets enumerated above, shall be unencumbered, except as otherwise provided in secondparagraphofItemfofSection73.1. The amended report (Appendix 15) on compliance with FCDU/EFCDU cover requirements shall form part of the Financial Reporting Package (FRP) issued under Subsection X162.16 of the MORB. The bank shall continue to submit to the BSP SupervisoryDataCenter(SDC)acertification(Appendix15.1)underoathandsignedby thebanksPresidentorCountryManager,inthecaseoflocalbranchofforeignbanks, ComplianceOfficerandHeadofTreasury,totheeffectthatthebankhasfullycomplied withtheFCDU/EFCDUcoverrequirementsonallbankingdaysofthereferencequarter.
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Sanctions:Noncompliancewiththeprescribed100%FCDU/EFCDUasset cover and/or thirty percent (30%) liquid asset cover requirements shall be subject to the imposition of a monetary penalty of onetenth of one percent (1/10of1%)ofthedeficiency,convertedtoitspesoequivalentattheexchange rate prevailing on the date the deficiency was incurred but not to exceed PHP30,000 per deficiency, per calendar day. Compliance for at least six (6) months of the FCDU/EFCDU cover requirement is a precondition for the following: a. Declarationofcashdividends; b. Banksapplicationforbranching;and c. Inthecaseofforeignbanks,remittanceofprofitstotheirHeadOffice abroad. Issuance by a bank of false/erroneous certification that it has fully complied with the FCDU/EFCDU cover requirements any days of the reference monthshallbesubjecttoamaximummonetarypenaltyofPHP30,000perday (reckoned from the date the deficiency started until it is corrected) without prejudice to the imposition on the erring bank and/or the concerned bank officers, of the penal sanctions provided under Sections 35 and 36 of Republic ActNo.7653. 4. The Due from Other Banks NonResident (DFOBNonResident) account representingcoverforforeigncurrencyliabilitiesofFCDU/EFCDUshallbekeptseparate anddistinctfromtheDFOBNonResidentaccountfortheregularbankingunit(RBU). Section74. Foreign Currency Deposits with the Bangko Sentral. Foreign currencydepositwiththeBSPequivalenttoatleastfifteenpercent(15%)asaformof foreigncurrencycoverreferredtoinSection4ofRepublicActNo.6426,asamended, shallbeoptionalonFCDUs/EFCDUsofUBs/KBsandFCDUsofTBsandRBs/CoopBanks. The BSP may pay interest on the foreign currency deposit and if requested, shall exchangetheforeigncurrencynotesandcoinsintoforeigncurrencyinstrumentsdrawn onitsdepositorybanks. Section75. CurrencyCompositionoftheCover.FCDUsofTBsandRBs/Coop Banks shall maintain the foreign currency cover in the same currency as that of the correspondingforeigncurrencydepositliability. FCDUs/EFCDUsofUBs/KBsshallmaintainnotlessthanseventypercent(70%)of the foreign currency cover in the same currency as that of the liability and thirty percent(30%)orless,attheoptionoftheFCDU/EFCDU,maybedenominatedinother acceptableforeigncurrencies.
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Section76. Secrecy of Deposits. Pursuant to Republic Act No. 6426, as amended,allforeigncurrencydepositsaredeclaredasandconsideredofanabsolutely confidential nature and, except upon the written permission of the depositor, or pursuant to a lawful order issued by a competent court, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial, administrative or legislative, or anyotherentitywhetherpublicorprivate. Section77. Numbered Accounts. Pursuant to Section 9 of Republic Act No. 9160(TheAntiMoneyLaunderingActof2001)dated29September2001,asamended, and its Revised Implementing Rules and Regulations, foreign currency nonchecking numberedaccountsshallbeallowed:Provided,thatthetrueidentityofthecustomers of all foreign currency nonchecking numbered accounts are satisfactorily established based on official and other reliable documents and records and the information and documentsrequiredareobtainedandrecordedbythebank. Section78. Withdrawability and Transferability of Deposits. There shall be norestrictionsonthewithdrawalbythedepositorofhisdepositoronthetransferof thesameabroadexceptthosearisingfromthecontractbetweenthedepositorandthe bank. Section79. Insurance Coverage. Foreign currency deposits shall be insured undertheprovisionsofRepublicActNo.3591,asamended.Depositorsareentitledto receivepaymentinthesamecurrencyinwhichtheinsureddepositsaredenominated. Section80. RatesofInterest.Foreigncurrencydepositsshallnotbesubject tointerestrateceilings. Section81. Eligibility as Collateral. Deposits under the foreign currency depositsystemareeligibleascollateralforpesoloansorforforeigncurrencyloansto residentsandnonresidents. Section82. Taxes. Pursuant to the National Internal Revenue Code of 1997, asamendedanditsImplementingRulesandRegulations,anyincomeofnonresidents (whetherindividualsorcorporations)fromtransactionswithdepositorybankscovered under this Chapter shall be exempt from income tax. Interest income derived by residents (whether individuals or corporations) from depository banks covered under this Chapter shall be subject to a final income tax at the rate of seven and onehalf
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percent (7.5%) of such interest income. The transactions of FCDUs/EFCDUs shall, however, be subject to such taxes as provided under the National Internal Revenue Code,asamendedanditsImplementingRulesandRegulations. Section83. Exemption from Court Order or Process. Subject to the provisions of Republic Act No. 9160, as amended, foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislativebody,governmentagencyoranyadministrativebodywhatsoever. Section84. Accounting. The foreign currency deposits and their correspondingcovershallbeconsideredasfundsseparateanddistinctfromtheregular assets and liabilities of the AABs. AABs shall maintain a separate accounting for transactions covered by these rules that will enable preparation of the Balance Sheet andIncomeStatementcoveringsaidfunds. ForpurposesofpreparingtheFCDU/EFCDUfinancialstatements,thebankshall use the US dollar (USD) as its functional currency. However, for purposes of consolidatingtheFCDU/EFCDUfinancialstatementswiththeRBUfinancialstatements, theseshallbetranslatedintothepresentationcurrency,i.e.PhilippinePeso(PHP). Thetransferofnetrealized/unrealizedlossesrecognizedinprofitorlossandin equity and Undivided Profits/(Losses) from FCDU/EFCDU to the Regular Banking Unit (RBU)shallbesubjecttotheguidelinesandconditionsunderAppendix16. The policy guidelines on the conversion and transfer of foreign currency denominatedloans,andRealandOtherPropertiesAcquired(ROPA)inthebooksofthe FCDU/EFCDUtopesoloansandROPAinthebooksoftheRBUshallbesubjecttothe conditionsprovidedunderAppendix17. Banks which are authorized to operate under this Chapter shall submit to the BSPSESaseparateauditedfinancialstatement(categoryBreport)oftheFCDU/EFCDU forthepastyearwithinninety(90)calendardaysafterthestartoftheauditwhichaudit shallstartnotlaterthanthirty(30)calendardaysafterthecloseofthecalendar/fiscal year adopted by the bank in accordance with the provisions of Section X166 of the MORB. Section85. Supervision. The Governor and the head of the appropriate departmentoftheBSPpersonally,orbydeputies,areauthorizedtoverifythebooksof accountandtransactionsofeachAAB,toverifytheeligiblecover,aswellasreviewall other requirements under these regulations and the bank's compliance with the provisionsoflawandtheseregulations.
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Section86. ProspectiveEffectofRegulations.Intheeventanewenactment orregulationisissueddecreasingtherightshereundergranted,suchnewenactmentor regulationshallnotapplytoforeigncurrencydepositsalreadymadeorexistingatthe time of issuance of such new enactment or regulation, but such new enactment or regulationshallapplyonlytoforeigncurrencydepositsmadeafteritsissuance. Section87. Sanctions 1. AnywillfulviolationofRepublicActNo.6426,asamended,oranyregulation duly promulgated by the Monetary Board pursuant thereto shall subject the offender uponconvictiontoanimprisonmentofnotlessthanone(1)yearnormorethanfive(5) years or a fine of not less than Five Thousand Pesos (PHP5,000.00) nor more than TwentyFive Thousand Pesos (PHP25,000.00), or both such fine and imprisonment at thediscretionofthecourt. TheBSPmayrevokeorsuspendtheauthorityofabanktoacceptnewforeign currency deposits for violation of Republic Act No. 6426, as amended, or these regulations,orifsuchbankceasestopossesstheminimumqualificationsrequired. 2. Delayed submission of report by a bank and/or submission of erroneous/incompletereportshallbesubjecttothemonetarypenaltiesunderSection 103. 3. AnyviolationoftheprovisionsofthisChaptershallbesubjecttoSection37 of Republic Act No. 7653. The guidelines for the imposition of monetary penalty for violations/offenseswithsanctionsfallingunderSection37ofRepublicActNo.7653on banks,theirdirectorsand/orofficersareshowninAppendix67oftheMORB. PARTFOUR.FOREIGNEXCHANGEFORWARDSANDSWAPSAND OPENFOREIGNEXCHANGEPOSITIONOFBANKS ChapterI FOREIGNEXCHANGEFORWARDSANDSWAPS INVOLVINGTHEPHILIPPINEPESO Section88. General Policy. It is the policy of the BSP to support the deepeningofthePhilippinefinancialmarkets.Inlinewiththispolicy,customersmay, through foreign exchange forwards, hedge their market risks arising from foreign exchange obligations and/or exposures: Provided, That forward sale of foreign exchange (deliverable and nondeliverable) may only be used when the underlying transactioniseligibleforservicingusingforeignexchangepurchasedfromAABsorAAB
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forex corps. Customers may, likewise, cover their funding requirements through foreignexchangeswaps. AABsmayonlyengageinforeignexchangeforwardsandswaptransactionswith customersifthelatterishedgingmarketriskorcoveringfundingrequirements.There shall be no double/multiple hedging such that at any given point in time, the total notionalamountoftheforeignexchangederivativestransaction/sshallnotexceedthe amountoftheunderlyingforeignexchangeobligation/exposure. ThecustomershallnolongerbeallowedtobuyforeignexchangefromAABsor AABforex corps for foreign exchange obligations/exposures that are fully covered by deliverableforeignexchangeforwardsandforeignexchangeswaps. Thefollowingguidelines,aswellasminimumdocumentaryrequirements,shall cover foreign exchange forward and swap transactions involving the Philippine peso betweenauthorizeddealerbanksandtheircustomers. Section89. DefinitionofTerms Customers shall refer to: (a) resident banks other than UBs, KBs, and other banks with Type 3 (limited user) derivatives authority, as well as resident nonbank entities;and(b)nonresidents,bothbanksandnonbanks. Foreignexchangeobligationshallrefertoanactualcommitmenttorepatriate or pay to a nonresident or any AAB a specific amount of foreign currency on a pre agreeddate. Foreignexchangeexposureshallrefertoforeignexchangeriskarisingfroman existing commitment which will lead to an actual payment of foreign exchange to, or receiptofforeignexchangeassetsfrom,nonresidentsoranyAABbasedonverifiable documents on deal date. Foreign exchange risks arising from BSPregistered foreign investments without specific repatriation dates are considered foreign exchange exposures. Foreign exchange swap shall refer to a transaction involving the actual exchangeoftwocurrencies(principalamountonly)onaspecificdateatarateagreed ondealdate(thefirstleg),andareverseexchangeofthesametwocurrenciesatadate furtherinthefuture(thesecondleg)atarate(differentfromtherateappliedtothe firstleg)agreedondealdate. Foreignexchangeforwardshallrefertoacontracttopurchase/sellaspecified amount of currency against another at a specified exchange rate for delivery at a specifiedfuturedatethreeormorebusinessdaysafterdealdate.
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NonDeliverable Forward (NDF) shall refer to a foreign exchange forward contract where only the net difference between the contracted forward rate and the marketrateatmaturity(i.e.,thefixingrate)shallbesettledontheforwarddate. (AsamendedbyCircularNo.690dated23June2010) Section90.Documentation.Minimumdocumentaryrequirementsforforeign exchangeforwardandswaptransactionslistedinAppendix18shallbepresentedonor beforedealdatetoAABsunlessindicated. Foreign exchange selling AABs shall stamp the supporting documents upon presentationbycustomersasfollows: a. Forhedgingtransactions:FXHEDGED/DELIVERABLEorFXHEDGED/NON DELIVERABLE; b. Forfundingtransactions:FXSOLD, indicatingthecontractdateandamountinvolved,andsignedbytheAABsauthorized officer.CopiesofalldulymarkedsupportingdocumentsshallberetainedbyAABsand made available to the BSP for verification. The retained copies shall also be marked DOCUMENTSPRESENTEDASREQUIREDandsignedbytheAABsauthorizedofficer. Section91.Tenor/MaturityandSettlement a. Forward Sale of Foreign Exchange (whether deliverable or non deliverable) Thetenor/maturityofsuchcontractsshallnotbelongerthan: (i) the maturity of the underlying foreign exchange obligation; or (ii) the approximate due date or settlement of the foreign exchange exposure. For deliverable foreign exchange forward contracts, the tenor/maturityshallbecoterminuswiththematurityoftheunderlying obligation or the approximate due date or settlement of the foreign exchange exposure. This shall not preclude pretermination of the contract due to prepayment of the underlying obligation or exposure: Provided, That for foreign currency loans, prior BSP approval has been obtainedfortheprepaymentandacopyofsuchapprovalispresentedto theAABcounterparty. b. ForeignExchangeSwaps Norestrictionontenor.
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c. SettlementofNDFs AllNDFcontractswithresidentsshallbesettledinpesos. d. Remittance of foreign exchange proceeds of deliverable forward and swapcontracts Foreign exchange proceeds of deliverable forward and swap contracts shall be delivered by the AAB counterparty directly to the beneficiaries concerned except for foreign investments where said FX proceeds are reconverted to Philippine pesos and reinvested in eligible peso instrumentssuchasthoselistedinItemA.2.2ofAppendix18.Forthis purpose,beneficiariesshallrefertotheFCDU/EFCDUofabankoranon residententity(e.g.,creditor,supplier,investor)towhomthecustomer iscommittedtopay/remitforeignexchange.

Section92.ForwardContractswithNonresidents Allforwardcontractstosellforeignexchangetononresidents(includingOBUs) with no full delivery of principal, including cancellations, rollovers/renewals shall be submittedtotheBSPforpriorclearance.However,everyrolloverofshortterm(ST) deliverableforwardcontractswithnonresidentsneednotbepriorapproved:Provided, That: 1. TheunderlyingtransactionforeachSTdeliverableforeignexchangeforward contract is a foreign investment in longterm (LT) Philippine government securities for which a Bangko Sentral Registration Document (BSRD) has beenissued; 2. The rollover is effected during the tenor of the underlying LT Philippine governmentsecurities; 3. The actual delivery/settlement of the forward contract coincides with the dateoftheintendedcapitalrepatriationoftheBSPregisteredinvestments; 4. The value of the forward contract does not exceed the foreign currency equivalent of the maturity value/net proceeds of the BSPregistered investmentscomputedattheagreedforwardexchangerate;and 5. The repatriation of capital and remittance of income for the BSPregisteredinvestmentcomplieswithdocumentaryrequirementsunder existingBSPrules.
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Section93.Cancellations,RolloversorNondeliveryofDeliverableForeign ExchangeForwardandSwapContracts All cancellations, rollovers or nondelivery of all foreign exchange deliverable forward contracts and the forward leg of swap contracts shall be subject to the followingguidelinestodeterminethevaliditythereof: a. Eligibility Test Contracts must be supported by documents listed in Appendix18; b. Frequency Test the reasonableness of the cancellation, rollover or non delivery shall be based on the results of the evaluation of the justification/explanation submitted by banks as evidenced by appropriate documents; c. CounterpartyTestthecancellationorrolloverofcontractsmustbeduly acknowledgedbythecounterpartytothecontractasshownindocuments submitted by banks, e.g., there should be conforme of counterparty as evidencedbythecounterpartysignatureonpertinentdocuments;and d. MarktoMarketTestthebookingorrecordinginthebooksofaccountsof theprofitorlossoncontractsandcashflows/settlementtocounterparties must be fully supported by appropriate documents such as authenticated copy of debit/credit tickets, schedules showing among others, markto marketvaluationcomputation,etc. Section94.ReportingRequirements Banksdulyauthorizedtoengageinderivativestransactionsshallcontinuetobe covered by the BSPs existing reporting requirements on financial derivatives. Cancellations, rollovers or nondelivery of deliverable foreign exchange forward contractsandundertheforwardlegofswapcontractsshallbereportedelectronically in excel format to the BSP not later than five (5) banking days after reference month usingtheprescribedformatinAnnexL. Swap contracts with counterparties involving purchase of foreign exchange by banks at the initial leg shall likewise be reported electronically in excel format to the BSP not later than five (5) banking days after reference month using the prescribed formatinAnnexM. ThereportsshallbetransmittedtotheInternationalOperationsDepartmentat iod@bsp.gov.ph, copy furnished the Supervisory Data Center (SDC) at the following addresses:sdcfxkbdom@bsp.gov.ph(forDomesticBanks)andsdcfxkbfor@bsp.gov.ph (forForeignBanks).
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Section95.NonBankBSPSupervisedEntities(NBBSEs) NBBSEs that may subsequently be authorized to engage in foreign exchange forwards and swaps as dealers shall likewise be covered by the provisions of this Chapter. ChapterII OPENFOREIGNEXCHANGEPOSITIONOFBANKS Section96. GeneralPolicy.ItisthepolicyoftheBSPtopromotethegrowth anddevelopmentoftheforeignexchangemarket.Itisalsorecognizedthatbanksare the main players in this market, primarily in their role as marketmakers 7 . Thus, in ordertoensurethatbanksareabletoprovideampleliquidityinthemarketbut,atthe same time, conduct their business in a sound manner, and guard against speculative activity,limitsontheirnetopenforeignexchangepositionareinstituted. Section97. DefinitionofTerms Open Foreign Exchange Position shall refer to the extent that banks' foreign exchangeassetsdonotmatchtheirforeignexchangeliabilities.Anopenpositionmay either be "positive", "long", or "overbought" (i.e., foreign exchange assets exceed foreignexchangeliabilities)or"negative","short",or"oversold"(i.e.,foreignexchange liabilitiesexceedforeignexchangeassets). Unimpaired capital shall refer to a banks total capital net of (a) such unbookedvaluationreservesandothercapitaladjustmentsasmayberequiredbythe BSP;(b)totaloutstandingunsecuredcreditaccommodations,bothdirectandindirect, to directors, officers, stockholders, and their related interests (DOSRI); (c) deferred income tax; (d) equity investment of a bank in another bank or enterprise whether foreignordomestic,iftheotherbankorenterprisehasareciprocalequityinvestment in the investing bank, in which case, the investment of the bank or the reciprocal investment of the other bank or enterprises, whichever is lower; and (e) appraisal incrementreserves(revaluationsurplus)arisingfromanappreciationoranincreasein thebookvalueofbankassets.

Therearetwofacetstothisrole.First,banksmustbeabletoquoteratestotheircustomersatwhich they stand ready to buy and sell currencies. Second, banks themselves may take open positions in currencies. Back to top

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Permanentlyassignedcapitalshallrefertotheminimumcapitalrequiredfor branchesofforeignbanksinthePhilippinestobeinwardlyremittedandconvertedinto pesos. Unimpaired capital of foreign banks, for purposes of this Chapter, shall be definedaspermanentlyassignedcapitalplustheNetDueToHeadOfficeaccount: Provided, That the amount of Net Due To Head Office that may be added to the permanently assigned capital of foreign banks that are UBs shall not exceed the equivalentofsix(6)timesthepermanentlyassignedcapital.Providedfurther;Thatthe amount of Net Due To Head Office that may be added to the permanently assigned capitalofforeignbanksthatareKBsshallnotexceedtheequivalentofeight(8)times thepermanentlyassignedcapital. Section98. Allowable Open Foreign Exchange Position. Banks' allowable openforeignexchangeposition(eitheroverboughtoroversold)shallbethelowerof20 percent(20%)oftheirunimpairedcapitalorUSD50million. Anyexcessoftheallowablelimitshallbesettledonadailybasis. Penalties on excess overbought and oversold positions of banks when PDS tradingissuspendedshallbewaived. Section99. ComputationofForeignExchangePosition.Banks'openforeign exchange position shall be computed daily based on their FX Form 1. The guidelines on the computation of foreign exchange position of banks andreportingrequirementsareoutlinedinAppendix19. Section 100. Sanctions. The following sanctions shall be imposed on banks foundinviolationofthenetopenforeignexchangepositionlimits: a. A bank is considered immediately in violation of the open foreign exchange position limit on the day it exceeds such limit. Such bank shall be subjecttothefollowingmonetarypenalties: PerCalendarMonth DailyPenalty st PHP10,000.00 1 calendardayofviolation nd PHP20,000.00 2 calendardayofviolation rd 3 calendar day of violation, and onwards, or PHP30,000.00 iftheexcessopenforeignexchangepositionof thebankisthirtypercent(30%)ormoreofthe
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allowablelimitinanycalendarday,regardless of whether a bank is in first, second, third or moredaysofviolation b. In addition, the following nonmonetary sanctions shall be imposed on thebankcommittingviolationsconsideredas: 1) chronic, that is, when the violation continues beyond three (3)bankingdayswithinacalendarmonth,buttheexcesspositionis lessthanthirtypercent(30%)oftheallowablelimit;and 2) abusive, that is, when the violation continues beyond three (3)bankingdayswithinacalendarmonthandtheexcesspositionis thirtypercent(30%)ormoreoftheallowablelimit. NonMonetarySanctions chronicviolation suspension of the banks rediscounting privileges, cash dividend declaration and branching privileges until the violation is corrected but in no case shall such suspension be less than 30calendardays. abusiveviolation suspension of the banks rediscounting privileges, cash dividend declaration and branching privileges until the violation is corrected but in no case shall such suspension be less than 60calendardays. c. The Monetary Board may impose other nonmonetary sanctions on a bank for violations determined by BSP as chronic or abusive on a caseto casebasis,pursuanttoSection37ofRepublicActNo.7653. PARTFIVE.GENERALPROVISIONS ChapterI REPORTSANDPOSTVERFICATION Section101. ReportorialRequirements.Thefollowingreportsarerequiredto besubmittedtotheBSPbyAABs,OBUs,andAABforexcorpswhenapplicable:
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TitleofReport Category A3 Submission Frequency/Deadline SubmissionProcedure A.ConsolidatedReportonForeignExchangeAssetsandLiabilities ForUBs/KBs: FXForm1,MainReport Weekly, within five (5) banking days after end of referenceweek Weekly, within five (5) FXForm1,Schedule1 banking days after end of referenceweek Weekly, within five (5) FXForm1,Schedules2to7, banking days after end of 9to12 referencedate

A3

A3

A3

A3

A3

emailtoDESat der.itrs@bsp.gov.ph emailtoDESat der.itrs@bsp.gov.ph emailtoDESat der.itrs@bsp.gov.ph (hardcopyofSchedule10& 11toID) SwornCertificationFXForm1,Main Weekly, within three (3) HardcopytoDES ReportandSchedules2to7, bankingdaysaftersubmission 9to12(AnnexT) deadline for the covered reports/schedules FXForm1,Schedules8&13 Daily, within two (2) banking email to SDC at days after end of reference fed@bsp.gov.ph or sedi fxvmd@bsp.gov.ph date SwornCertificationFXForm1, Weekly, within three (3) HardcopytoSDC Schedules8&13(AnnexU) banking days after end of referenceweek Monthly, within 15 banking email FXForm1,Schedule14 to SDC at days after end of reference fed@bsp.gov.ph or sedi fxvmd@bsp.gov.ph month ConsolidatedForeignExchange Daily,withinthree(3)banking HardcopytoSDC PositionReport daysfromreferencedate ForTBs: FX Form 1A, Main Report and Monthly, within ten (10) emailtoDESat banking days after end of der.itrs@bsp.gov.ph Schedules2to9 referencemonth B. ForeignTradeTransactions

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TitleofReport A3 ReportonExportProceeds FXForm1,Schedule9

Submission Frequency/Deadline

SubmissionProcedure

A3

A3

A2

Weekly, within five (5) emailtoDESat banking days after end of der.itrs@bsp.gov.ph referenceweek Report on Import Letters of Credit do emailtoDES (L/Cs) Opened and DAOA Import der.itrs@bsp.gov.ph (hardcopytoID) AvailmentsandExtensions,FXForm1, Schedule10 do emailtoDES ReportonImportPayments der.itrs@bsp.gov.ph FXForm1,Schedule11 (hardcopytoID) MonthlyReportonSale/Remittanceof Monthly, within the first five HardcopytoID Foreign Exchange (FX) for Advance (5)bankingdaysofthemonth PaymentofImportations(AnnexB) succeedingthedateofforeign exchangesale MonthlyReportonPurchaseofForeign Monthly, within the first five HardcopytoID Exchange(FX)fromRefundofAdvance (5)bankingdaysofthemonth PaymentofImportations(AnnexC) succeeding the receipt of the refund C. ForeignCurrencyLoansandRelatedTransactions Monthly,withinfifteen(15) ReportonBankLiabilitiestoNon emailtoIDat bankingdaysafterendof Residents(includinghardcopyof idform5@bsp.gov.ph referencemonth Certificationforcorrectnessand consistencywithFRP),IDForm5 ConsolidatedReportonLoansGranted Monthly,withinfifteen(15) Hardcopyanddisketteto bankingdaysafterendof byFCDUs,IOSForm4 ID referencemonth Quarterly, within fifteen (15) HardcopytoID ReportonGuaranteesIssuedbyLocal banking days from end of BanksandFinancialInstitutionsin FavorofNonResidents,R1(AnnexG) referencequarter ReportonForeignGuaranteesSecuring Quarterly,withinfifteen(15) HardcopytoID bankingdaysfromendof LoansofResidentsfromLocalBanks referencequarter andFinancialInstitutions,R4(Annex H)
H

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TitleofReport B ReportonCancellations, RolloversandNondeliveryof DeliverableForeignExchangeForward PurchaseandSaleContractsand ForwardLegofSwapContracts(Annex L)

Submission Frequency/Deadline

SubmissionProcedure

Monthly, within five (5) emailtoIDat banking days after end of iod@bsp.gov.ph referencemonth

ReportonForeignExchangeSwaps withCustomerswheretheFirstLegisa PurchaseofForeignExchangeAgainst Pesos(AnnexM) D. FCDUs/EFCDUs ReportonInventoryofPhilippineDebt Papers SwornCertificationonFCDU/EFCDU LendingtoRBU(Appendix14)

do

do

Weekly,withinthree(3) bankingdaysafterendof referenceweek

OriginaltoSDC

A2

Monthly, within five (5) HardcopytoSDC banking days from end of referencemonth AuditedFinancialStatementof Annually, within ninety (90) Hardcopy to appropriate FCDU/EFCDU calendar days after the start SESdepartment ofauditwhichauditshallstart not later than thirty (30) calendar days after the close of the calendar/fiscal year adoptedbythebank ReportonCompliancewith Quarterly,withinfifteen(15) GeneratedbySDCusingFRP FCDU/EFCDUCoverRequirements bankingdaysafterendof datasubmittedbybank (Appendix15) referencequarter SwornCertificationofCompliancewith Quarterly,withinfifteen(15) HardcopytoSDC FCDU/EFCDUCoverRequirements bankingdaysfromendof (Appendix15.1) referencequarter E. OffshoreBankingUnits Monthly,withinfifteen(15) StatementofAssetsandLiabilities hardcopytoSDC bankingdaysafterendof referencemonth Schedule1MaturityProfileof do SourcesandUsesofFunds Back to top

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TitleofReport Schedule2Page1Currency ClassificationofFunds(InUSDollars) Schedule2Page2Currency ClassificationofFunds(InOriginal Currencies) Schedule3CountryClassificationof InterbankFunds/NonBankFunds Schedule4AReportonLoans GrantedbyOBUs:PartICredit Information(InOriginalCurrencies) Schedule4BReportonLoansGranted byOBUs:PartIICreditStatus Schedule4CLoansandDiscounts Residents:ByBorrower/ByEconomic Activity/ByStatus Schedule5InvestmentsinBondsand OtherDebtInstruments(InOriginal CurrenciesandUSDEquivalent) Schedule5AInvestmentsinBonds andOtherDebtInstrumentsIssuedby Residents Schedule6IndebtednessAmong BanksOperatinginthePhilippines Schedule7ReportonOBULiabilities toNonResidents(InOriginal CurrenciesandUSDEquivalent) Schedule8ReportonSpotand ForwardForeignExchange TransactionsofOBUs Schedule9ReportofForeign ExchangeFlows Schedule9AForeignExchange ActuallySoldtoAuthorizedAgent Banks(AABs) Schedule9BDetailsofInvestment Receipts/Disbursements

Submission Frequency/Deadline do

SubmissionProcedure

do

do

do

do

do

do

do

do

do

do

do

do

do

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TitleofReport StatementofEarningsandExpenses, BSP6.40.02 FinancialAssistanceandTraining GrantedbyOBUstoitsFilipinoStaff UpdatedListandBioDataof Expatriates

Submission Frequency/Deadline Semiannual,withinfifteen (15)bankingdaysafterendof referencesemester Annually,withinten(10) bankingdaysafterendof referenceyear Annually,withinten(10) bankingdaysafterendof referenceyear

SubmissionProcedure

A2

A2

F.RepresentativeOfficesofForeignBanks FXCashReceiptsandCash Monthly,withinten(10) Disbursements bankingdaysafterendof referencemonth AnnualReportofHeadOffice Withinfive(5)monthsafter endoffiscal/calendaryear G.CustodianBanks/RemittingAABs StatementofRemittanceReport(for Daily,withintwo(2)banking RegisteredForeignDirect daysfromdateofactual Investments),togetherwithsupporting remittance documentsunderItemsC.1(b)andC.2 ofAppendix1andAppendix11) ConsolidatedDailyForeignPortfolio Daily,withintwo(2)banking InvestmentRegistrationandOutward daysfromtransactiondate RemittanceReport,togetherwith supportingdocumentsunderItems C.1(a)andC.2ofAppendix1and Appendix10and11 H. AABforexcorps ReportonForeignExchange Weekly,withinfive(5) Transactions bankingdaysafterendof referenceweek

hardcopytoSDC

hardcopytoSDC

hardcopytoID

emailtoIDat iodpid@bsp.gov.phand hardcopytoID

emailtoDES

Section102. Procedures for Reporting. Reports shall be filed with the BSP Main Office or with the BSP Regional Offices or by sending them by mail or special
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delivery, unless otherwise specified. The date of acknowledgment of receipt on the copyofthereport(ifmailed)shallbeconsideredasthedateofsubmission. Section103. FinesandPenalties 1. The following schedule of fines for delayed submission of reports and/or incomplete/erroneousreportingshallapply: A. ForCategoryA1,A2,andA3reports: a. UBs/KBs : PHP1,200percalendarday b. TBs : PHP600percalendarday c. RBs/CoopBanks : PHP180percalendarday B. ForCategoryBreports: a. UBs/KBs : PHP240percalendarday b. TBs : PHP120percalendarday c. RBs/CoopBanks : PHP60percalendarday C. For Reports of Representative Offices of Foreign Banks and Reports of UBs/KBs, TBs, and RBs/Coop Banks Not Classified as Category A or B Reports: a. PHP100 per calendar day for the first five (5) successive calendar daysofdelay b. PHP150 per calendar day for the next five (5) successive calendar daysofdelay c. PHP200percalendardayafterthefirstten(10)successivecalendar daysofdelayuntiltheparticularreporthasbeenfiled D. ForReportsofOBUs PHP500percalendardayexceptforthefollowingreportswherethe above fines and penalties for representative offices of foreign banks shall apply: a. StatementofEarningsandExpenses; b. Financial Assistance and Training Granted by OBUs to its Filipino Staff;and c. UpdatedListandBioDataofExpatriates. E. ForReportsofAABforexcorps
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PHP1,000percalendardayofdelayuntilcomplied. F. Chronic delayed reporting including submission of amended reports requiredforFXForm1shallbesubjecttoanadditionalmonetarypenalty of PHP2,000.00 per banking day until the respective report and schedulesarecorrectlysubmitted. Submission of delayed reports, including amended reports, shall beconsideredchronicbasedonthefollowing:
NameofReport/ Schedule Schedules8&13 MainReport, Schedules27and9 12 Schedule14and Reconciliation Statement Frequencyof Submission Daily Weekly No.oftimesdelay Morethanseven(7)timesdelayedper month Atleasttwo(2)timesdelayedpermonth orfive(5)bankingdaysofcontinuous delayfromsubmissiondeadline Morethantwo(2)timesdelayedper semesterorten(10)bankingdaysof continuousdelayfromthesubmission deadline

Monthly

2. Mannerofpaymentorcollectionoffines: a. Fines shall be collected through debit to the AABs current account depositmaintainedwiththeBSPbytheFinancialAccountingDepartmentupon receiptofnoticefromthedepartment/sconcerned;or b. Incasepaymentoffinesiseffectedthroughcheckorcash,thesameshall be remitted to the Cash Department of the BSP through the department/s concerned. Section104. PostVerification. Postverification of foreign exchange transactions covered by this Manual and reported under Section 101 hereof shall be undertakenbytheBSPtoverifycompliancewiththeprovisionsofthisManualandfor monitoringpurposes.
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ChapterII FINALPROVISIONS Section105.CompliancewithAntiMoneyLaunderingRules AlltransactionsunderthisManualshallcomplywithexistingregulationsonanti moneylaunderingpursuanttotheprovisionsofRepublicActNo.9160,asamended. Section106. Penal Sanctions. Any person violating the provisions of this ManualshallsufferthepenaltiesprescribedunderSection36ofRepublicActNo.7653. Administrative sanctions may also be imposed upon institutions within BSPs administrative authority found violating this Manual, including their directors and officersresponsibleforsuchviolation. Thesepenaltiesmaybeanyorallofthefollowingascircumstanceswarrant: 1. Monetary sanction The amount of PHP30,000.00 penalty imposed per dayperviolationcommittedshallbebasedonapertransactionbasis; 2. NonmonetarysanctionThisshallbebasedonthegravityoftheoffense orviolation: a. Reprimandofbankofficerswhoapprovedthetransaction; b. Suspensionofbankofficerswhoapprovedthetransaction; c. Suspension of directors (for local banks) and Country Manger (for foreignbanks); d. Permanentdisqualificationofbankofficers/directors; e. Reductionorsuspensionofoverbought/oversoldlimits; f. Suspension of opening of L/Cs and overthecounter sale of foreign exchangeforaperiodofuptosix(6)months; g. Suspension of derivatives activities for a period of up to six (6)months;and h. Suspension of FCDU/EFCDU authority for a period of up to six (6) months. Section107. Repealing Clause. All existing BSP rules and regulations on current accounts, capital accounts, OBUs, representative offices of foreign banks, FCDUs/EFCDUs, foreign exchange forwards and swaps involving the Philippine peso, andopenforeignexchangepositionofbanks,aswellasallotherexistingBSPrulesand regulationsorpartsthereofwhichareinconsistentwithorcontrarytotheprovisionsof this Manual are hereby repealed or modifiedaccordingly: Provided,That regulations,
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violations of which are the subject of pending actions or investigations, shall not be consideredrepealedinsofarassuchpendingactionsorinvestigationsareconcerned,it being understood that as to such pending actions or investigations, the regulations existingatthetimethecauseofactionaccruedshallgovern. Section108. Separability Clause. Nothing herein is intended nor shall be construed,torepealoramendanylaworstatute.ShouldanyprovisionofthisManual bedeclaredunconstitutionalorinvalid,theremainingprovisionsorpartsthereofshall remaininfullforceandeffect,andcontinuetobevalidandbinding. GlossaryofTerms FORPURPOSESOFTHISMANUAL,thefollowingdefinitionsareadopted: Advance Payment is an arrangement between the seller and buyer where the buyer pays,eitherpartialorfull,thesellerpriortotheshipmentofthegoods. Affiliatereferstoanentitylinkeddirectlyorindirectlytoabankbymeansof: a. Ownership,controlorpowertovote,oftenpercent(10%)tofiftypercent(50%) oftheoutstandingvotingstockoftheentity,orviceversa; b. Interlocking directorship or officership, except in cases involving independent directorsasdefinedunderexistingregulations; c. Commonstockholdersowningten percent(10%)tofiftypercent(50%)ofthe outstandingvotingstockofeachfinancialintermediaryandtheentity; d. Managementcontractoranyarrangementgrantingpowertothebanktodirect orcausethedirectionofmanagementandpoliciesoftheentity,orviceversa; and e. Permanentproxyorvotingtrustsinfavorofthebankorquasibankconstituting tenpercent(10%)tofiftypercent(50%)oftheoutstandingvotingstockofthe entity,orviceversa. AuthorizedAgentBanks(AABs)shallrefertoallcategoriesofbanks[exceptOffshore BankingUnits(OBUs)]dulylicensedbytheBSP.Itisunderstoodthateachcategoryof bank should function within the operational parameters defined by existing laws/regulationsforthespecificbankcategorytowhichtheyrespectivelybelong. AABforexcorps,whetherornotnamedassuch,shallrefertoAABsubsidiary/affiliate forexcorporationswhosebusinessincludebuyingandsellingofforeignexchange. BalikbayanisaFilipinothathasestablishedpermanentresidenceabroad.
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CashAgainstDocument(CAD)isanarrangementwherebythebuyerpaystheexporter upontheformer'sreceiptoftheshippingdocumentssenttohimbytheexportereither directlyorthroughthebanks. Consignmentisanarrangementwherebypaymentiscontingentuponthesaletothird partiesabroadoftheexportedcommoditiesbyconsignee. DirectRemittance(DR)isasupplierbuyerarrangementwherepaymentismadewithin 29calendardaysfrombilloflading/airwaybilldate. DocumentsAgainstAcceptance(D/A)isanarrangementunderdocumentarycollection in which an exporter instructs the presenting bank to hand over shipping and title documentstotheimporteronlyiftheimporteracceptsandsignstheaccompanyingbill ofexchangeordraft. DocumentsAgainstPayment(D/P)isanarrangementunderdocumentarycollectionin which an exporter instructs the presenting bank to hand over shipping and title documents to the importer only if the importer fully pays the accompanying bill of exchangeordraft. Electronictransferisasystemwheretheauthoritytodebitorcreditanaccount(bank, business or individual) is provided by wire, with or without a source document being mailedtoevidencetheauthority. Financial Institutions shall refer to business organizations that offer a broad base of financialservicesorspecializeinspecificfinancialfunctions,products,orservices,e.g. banks, investment houses, pension funds, pawnshops, credit unions, investment companies, insurance companies, securities brokers and dealers, stock exchanges, mutual funds, trust corporations, leasing companies, financing companies, credit card companies, companies engaged in foreign exchange dealership/brokerage and others thatdealinmoney. Foreign Bank shall refer to a bank or banking corporation formed, organized and existingunderanyforeignlaw. Foreign Currency Deposit Unit (FCDU)/Expanded Foreign Currency Deposit Unit (EFCDU) shall refer to a unit of a local bank or of a local branch of a foreign bank authorized by the BSP to engage in foreign currencydenominated transactions, pursuanttotheprovisionsofRepublicActNo.6426,asamended. ForeignCurrencyLoansareloansdenominatedincurrenciesotherthanthePhilippine peso,regardlessofthecreditor. ForeignLoansareloansowedtononresidents,regardlessofcurrencydenomination.
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Forex Corporations, whether or not named as such, refer to entities whose business includebuyingandsellingofforeignexchange. Intercompany Open Account Offset Arrangement (Interco O/A) is an arrangement whereby the exporter offsets its payables to against its receivables from, its parent/affiliatecompanyabroad. LegalTenderreferstomoneyrecognizedbylawasacceptablepaymentfordebtsowed tocreditors. LetterofCredit(L/C),whichgivesthesellerassurancethathewillreceivethepayment forthegoods,isbindingdocumentthatabuyercanrequestfromhisbankinorderto guaranteethatthepaymentforgoodswillbetransferredtotheseller.Inorderforthe payment to occur, the seller has to present the bank with the necessary shipping documentsconfirmingthedeliveryofgoodswithinagiventimeframe. LowCost Housing refers to housing packages with loan ceilings ranging from above PHP400,000uptoPHP3millionorinsuchotheramountswhichtheHousingandUrban DevelopmentCoordinatingCouncilmayprescribeinthefuture.(AsamendedbyCircular No.724dated13June2011) MediumandLongTermLoansarecreditswithmaturitiesexceedingone(1)year. Nonbank BSPsupervised entities (NBBSEs) refer to nonbank entities that fall under the supervisory authority of the BSP under Republic Act No. 7653 (The New Central BankAct),RepublicActNo.8791(TheGeneralBankingLawof2000)andotherspecial laws. These include quasibanks, subsidiaries and affiliates of AABs/quasibanks, non banks with trust or investment management activities license, nonstock savings and loanassociations,andpawnshops. Nonresident refers to an individual, a corporation or other juridical person not includedinthedefinitionofresident.(SeeResident) Nontrade current account transactions refer to all nontrade transactions (also referredtoasinvisibles)excludingthoserelatedtoforeign/foreigncurrencyloansand foreigninvestments. Nontradetransactionsrefertoallotherforeignexchangetransactionsnotincludedin the definition of trade transactions. These shall include foreign loans and foreign investments.(SeeTradeTransactions) Offshore Banking refers to the conduct of banking transactions in foreign currencies involvingthereceiptoffundsprincipallyfromexternalsourcesand,asallowedinthis Manual,frominternalsourcesandutilizationofsuchfunds,asprovidedherein.
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Offshore Banking Unit (OBU) refers to a branch, subsidiary, or affiliate of a foreign banking corporation which is duly authorized by the BSP to transact offshore banking business in the Philippines. For purposes of this Manual, OBUs are classified as non residents. OpenAccount(O/A)isanarrangementwherebytheshippingdocumentsaresentand releasedbytheexporterdirectlytothebuyer,withoutcoursingthedocumentsthrough thebanks,uponthebuyer'spromisetopayatsomefuturedateaftershipment. RedClauseisaclause(originallytypedinred)addedtoaletterofcreditauthorizingthe advising/negotiating bank to make an advance payment to the beneficiary (exporter) beforetheactualshipmenttothebuyer.Theadvancemaybeupto100%oftheexport contractvalueandmaybeusedbytheexportertobuytheinputsformanufacturingor shipment.Redclausecreditsareusedprimarilywhenthebuyer(importer)hasanagent in the exporting country. To finance its purchases, the importer may arrange for the openingofaredclauseletterofcredit.Negotiationsofredclausecreditsarelimitedto thebankmakingtheadvancesinordertoassurethatrevenuesfromtheshipmentare usedtorepaytheadvancesmade. RepresentativeOfficeshallrefertoaliaisonofficeofaforeignbankwhichdealsdirectly withthepublicbypromotingandgivinginformationabouttheforeignbanksservices offered. It does not include the regional or area headquarters of a foreign bank registeredandlicensedunderexistinglaws. Residentshallreferto a) anindividualcitizenofthePhilippinesresidingtherein;or b) an individual who is not a citizen of the Philippines but is permanently residing 8 therein;or c) a corporation or other juridical person organized under the laws of the Philippines;or d) a branch, subsidiary, affiliate, extension office or any other unit of corporationsorjuridicalpersonswhichareorganizedunderthelawsofany countryandoperatinginthePhilippines,exceptOBUs. Shorttermloansarecreditswithmaturitynotexceedingone(1)year. Socialized housing refers to housing packages with loan ceilings of not more than PHP400,000, or in such other amounts which the Housing and Urban Development Coordinating Council may prescribe in the future. (As amended by Circular No. 724 dated13June2011)
8 Residents include any individual, citizen or otherwise, who has resided in the Philippines for a year or longer, as defined in Section 83 of IMF Balance of Payments Textbook, 1996. Back to top

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Smallscaleminingreferstominingactivitieswhichrelyheavilyonmanuallaborusing simpleimplementandmethodsanddonotuseexplosivesorheavyminingequipment Subsidiary(ofabank)referstoacorporationorfirmmorethanfiftypercent(50%)of theoutstandingvotingstockofwhichisdirectlyorindirectlyowned,controlledorheld withpowertovotebyabank. Tradetransactionsrefertomerchandiseexportand/orimporttransactions.

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