Part Five Manual of Regulations On Foreign Exchange Transactions

Sections 1 - 2
10.12.31
PART FIVE
MANUAL OF REGULATIONS ON
FOREIGN EXCHANGE TRANSACTIONS
PART ONE. CURRENT ACCOUNTS for Non-Trade Current Account

Transactions with Non-Residents. AABs
Chapter I and AAB-forex corps may sell foreign
exchange to residents to cover payments
NON-TRADE FOREIGN EXCHANGE to non-resident beneficiaries for non-trade
RECEIPTS AND DISBURSEMENTS, current account purposes (e.g.,
CROSS-BORDER TRANSFER OF LOCAL educational expenses, medical expenses,
AND FOREIGN CURRENCIES, AND travel expenses and salaries of foreign
GOLD TRANSACTIONS expatriates) other than those relating to
foreign/foreign currency loans and
Section 1. Disposition of Foreign Exchange investments, without need for prior BSP
Receipts. Foreign exchange receipts, approval, subject to the the submission/
acquisitions or earnings of residents from presentation of the following to the foreign
non-trade sources may be used freely for exchange selling institution:
any purpose. Such proceeds may, at the option 1. For sales not exceeding USD60,000
of said residents, be sold for pesos, retained or its equivalent in other foreign currency
or deposited in foreign currency accounts, - Duly accomplished application to
whether in the Philippines or abroad. purchase foreign exchange using the
Resident shall refer to: prescribed format (Annex A);
a. an individual citizen of the 2. For sales exceeding USD60,000 or
Philippines residing therein; or its equivalent in other foreign currency
b. an individual who is not a citizen - Duly accomplished application to
of the Philippines but is permanently purchase foreign exchange using the
residing1 therein; or prescribed format (Annex A) and
c. a corporation or other juridical supported by documents prescribed under
person organized under the laws of the Item "A" of Appendix 1.
Philippines; or The authority to purchase foreign
d. a branch, subsidiary, affiliate, exchange for non-trade current account
extension office or any other unit of purposes does not include purchases of
corporations or juridical persons which are foreign exchange for direct credit to or
organized under the laws of any country and deposit in the purchasers foreign currency
operating in the Philippines, except OBUs. deposit unit account.
Non-resident shall refer to an All foreign exchange purchases for non-
individual, a corporation or other juridical trade current account transactions shall be
person not included in the definition of directly remitted to the intended non-
resident. resident beneficiarys account (whether
offshore or onshore). Exceptions to this rule
Section 2. Sale of Foreign Exchange to include travel funds, medical expenses
Residents by AABs and AAB-Forex Corps abroad not yet incurred, and sales proceeds
1
Residents include any individual, citizen or otherwise, who has resided in the Philippines for a year or longer, as defined
in Section 83 of the International Monetary Fund (IMF) Balance of Payments Textbook, 1996.
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of emigrants domestic assets if emigrant is denominated bearer monetary instruments

still in the country. shall refer to the following foreign
(As amended by Circular No. 698 dated 05 November 2010) exchange-denominated instruments in
bearer form whereby title thereto passes to
Section 3. Sale of Foreign Exchange to Non- another by endorsement, assignment or
Resident Tourists/Balikbayans by AABs and delivery: travelers checks, other checks,
AAB-Forex Corps. AABs and AAB-forex drafts, notes, money orders, bonds, deposit
corps may sell foreign exchange to non- certificates, securities, commercial papers,
resident tourists or balikbayans to the extent trust certificates, custodial receipts, deposit
of the amount shown to have been sold by substitute instruments, trading orders,
them for pesos to said entities. Departing transaction tickets and confirmation of sale/
non-resident tourists or balikbayans may investment.
reconvert at airports or other ports of exit
unspent pesos to a maximum of USD5,000 Section 5. Buying and Selling of Gold by
or its equivalent in other foreign currency Residents
calculated at prevailing exchange rates, 1. Except as provided in this Manual,
without showing proof/s of previous sale of gold and gold-bearing metals may be
foreign exchange for pesos. bought and sold without specific approval
(As amended by Circular No. 698 dated 05 November 2010) of the BSP.
2. Gold from small-scale mining,
Section 4. Cross-Border Transfer of Local including panned-gold, shall be sold to the
and Foreign Currencies BSP pursuant to Republic Act No. 7076
1. Local Currency. No person may (Peoples Small-Scale Mining Act of 1991)
import or export nor bring with him into or dated 27 June 1991. All other forms or types
take out of the country, or electronically of gold may, at the option of the owner or
transfer, legal tender Philippine notes and producer thereof and with the consent of
coins, checks, money order and other bills the BSP, be sold and delivered to the BSP.
of exchange drawn in pesos against banks The BSP may sell gold grains/pellets/
operating in the Philippines in an amount bars and sheets to local jewelry
exceeding PHP10,000.00 without manufacturers and other industrial users
authorization by the BSP. upon application, or to banks exclusively
The term electronic transfer as used for re-sale to jewelry manufacturers/
herein shall mean a system where the industrial users, at the BSPs gold-selling
authority to debit or credit an account (bank, price plus a service fee to cover costs
business or individual) is provided by wire, including cost of conversion and packaging.
with or without a source document being
mailed to evidence the authority. Chapter II
2. Foreign Currency. Any person, who
brings into or takes out of the Philippines FOREIGN MERCHANDISE TRADE
foreign currency, as well as other foreign TRANSACTIONS
currency-denominated bearer monetary
instruments, in excess of USD10,000 or its A. IMPORT TRADE TRANSACTIONS
equivalent, is required to declare the same
in writing and to furnish information on the Section 6. General Policy. As a general
source and purpose of the transport of such rule, all kinds of merchandise imports are
currency or monetary instrument. allowed. However, the importation of
As used herein, other foreign currency- certain commodities are regulated or
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prohibited for reasons of public health and foreign exchange for trade transactions
safety, national security, international under Appendix 4:
commitments, and development/ 1. Letter of Credit (L/C);
rationalization of local industry. 2. Documents Against Payment (D/P);
Foreign exchange purchased from 3. Documents Against Acceptance (D/A);
AABs/AAB-forex corps to service 4. Open Account (O/A);
importations shall be directly remitted to the 5. Direct Remittance (DR); and
non-resident beneficiary on the date of 6. Advance Payment.
purchase. However, foreign exchange
purchases may be credited to FCDU deposit Section 9. Letter of Credit (L/C)
accounts of the importer pending remittance 1. All L/Cs must be opened on or before
to the non-resident beneficiary: Provided, the date of shipment and only one (1) L/C
That the importer shall execute a waiver of should be opened for each import
the requirements of R.A. No. 6426 (Foreign transaction. For purposes of opening an L/C,
Currency Deposit Act) dated 04 April 1974, importers shall submit to the AAB the
as amended, on the secrecy of foreign documents listed in Appendix 5.
currency deposits upon purchase of foreign Amendments of L/Cs need not be referred
exchange to enable the BSP to validate the to the BSP for prior approval. L/Cs shall
authenticity of the credits and eventual be negotiated in accordance with the terms
remittance of the funds. and conditions set forth in the L/C and shall
(As amended by Circular No. 742 dated 21 November 2011) be governed by the Uniform Customs and
Practices on Documentary Credits.
Section 7. Classification of Imports 2. Deferred L/Cs shall be governed by
Imports are classified as follows: the pertinent provisions of Part Two,
1. Freely Importable Commodities. Chapter 1 hereof (Loans and Guarantees).
These are commodities the importation of For this purpose, deferred L/Cs refer to those
which is neither regulated nor prohibited with payment terms of more than one year
as defined under (2) and (3) hereunder. The reckoned from initial shipment date.
importation may be effected without the (As amended by Circular No. 742 dated 21 November 2011)
prior approval of or clearance from any
government agency. Section 10. Documents Against Payment (D/P)
2. Regulated Commodities. These are 1. Under the D/P arrangement, AABs
commodities, listed in Appendix 2, the shall advise the importer of the receipt of
importation of which requires clearances/ the complete original shipping documents
permits from appropriate government and effect the release of said documents to
agencies including the BSP. the importer upon receipt of payment.
3. Prohibited Commodities. These are 2. AABs shall remit payment to the
commodities, listed in Appendices 3 and supplier through the correspondent bank
3.1, the importation of which is not allowed abroad.
under existing laws.
Section 11. Documents Against Acceptance
Section 8. Modes of Payment for Imports (D/A) and Open Account (O/A)
AABs and AAB-forex corps may sell foreign Arrangements. Under a D/A arrangement, the
exchange to service payments for imports original shipping documents are released
under any of the following arrangements to the importer by the AAB concerned at
subject to the provisions of Sections 9 to 13 the instance of the sellers bank upon the
and the guidelines covering the sale of importers acceptance of the sellers bill of

Sections 11 - 16
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exchange obligating the importer to pay for Section 14. Other Import Arrangements
the shipment at some future date. Under an The following import arrangements are also
O/A arrangement, the said documents are allowed without prior BSP approval:
released by the seller directly to the importer 1. Self-Funded/No Dollar Imports.
without coursing the documents through the These are imports funded by importers own
banks, upon the importers promise to pay foreign currency deposit accounts or those
at some future date. As used herein, an sent by suppliers abroad for which no
import transaction to be considered under payment in foreign exchange will be made
D/A or O/A must be payable at least 30 days whether immediate or potential.
after bill of lading (B/L) or airway bill (AWB) 2. Importations on Consignment Basis.
shipment date. These are importations by export producers
The guidelines for reporting, payments of raw materials and accessories/supplies
and extensions of imports under D/A or O/A from foreign suppliers/buyers abroad for the
arrangements are shown in Appendix 6. manufacture or processing of products
destined for export to said foreign suppliers/
Section 12. Direct Remittance (DR). AABs buyers. These shall also include machinery/
and AAB-forex corps may service within equipment and spare parts consigned to the
twenty nine (29) calendar days after B/L or local manufacturer/processor for eventual
AWB shipment date applications for direct re-export to the consignor: Provided, That
remittance of import payments upon the equipment involved shall be used only
presentation of the complete original in connection with the processing of
shipping documents, in accordance with products for export.
existing rules, and if applicable, import
clearance, for regulated items issued by B. EXPORT TRADE TRANSACTIONS
concerned government agencies. If the 29th
day falls on a non-banking day, the following Section 15. General Policy. It is the policy
banking day shall apply and the importation of the BSP to encourage commodity exports
will still be considered DR. which generate foreign exchange earnings
for the country. Accordingly, commodity
Section 13. Advance Payment. AABs and exports are allowed without restriction
AAB-forex corps may sell foreign exchange except for certain commodities which are
to importers without prior BSP approval, for regulated or prohibited for reasons of
advance payment for importations subject national interest or by provision of law.
to the guidelines under Appendix 7 hereof,
including documents prescribed thereunder. Section 16. Classification of Exports
The foreign exchange selling/remitting AAB 1. Freely Exportable Commodities.
shall report these transactions to the BSP- These are commodities the exportation of
International Operations Department (IOD) which is neither regulated nor prohibited.
using the prescribed forms (Annexes B and They may be effected without prior approval
C). All applications to purchase foreign of or clearance from any government
exchange in excess of USD1.0 million or agency.
its equivalent in other foreign currency to 2. Regulated Commodities. These are
service advance payment for importation commodities the exportation of which
shall be filed directly with the BSP-IOD for requires clearances/permits from
prior approval. appropriate products with the appropriate
(As amended by Circular Nos. 742 dated 21 November 2011 government agencies/offices is shown in
and Circular No. 698 dated 05 November 2010) Appendix 8.

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3. Prohibited Exports. These are 1) U.S. dollar

commodities the exportation or sale of 2) Japanese yen
which is prohibited/penalized by law 3) Pound sterling
(Appendix 9). 4) Euro
5) Hong Kong dollar
Section 17. Export Declaration 6) Swiss franc
All export shipments shall be covered 7) Canadian dollar
by an Export Declaration using the 8) Singapore dollar
prescribed form. AABs or OBUs shall 9) Australian dollar
require submission, for record purposes, of 10) Saudi riyal
a copy of the duly accomplished Export 11) Bahrain dinar
Declaration form if the export negotiation 12) Brunei dollar
or payment of the pertinent export shipment 13) Indonesian rupiah
is coursed through them. 14) Thai baht
15) United Arab Emirates dirham
Section 18. Modes and Currency of 16) Chinese renminbi or yuan
Payment 17) Korean won
1. Authorized Modes. Payments for 18) Such other currencies that may be
exports may be made under any of the declared acceptable by the BSP
following modes without prior BSP b. Payments may, however, be made
approval: in Philippine pesos for the following:
a. Letter of Credit (L/C); 1) Exports to ASEAN countries:
b. Documents Against Payment (D/P)/ Provided, That the BSP shall not be asked
Cash Against Documents (CAD); to intervene in the clearing of any balances
c. Documents Against Acceptance (D/A); from this payments scheme; and
d. Open Account (O/A); 2) Gold sales to the BSP which are
e. Intercompany Open Account Offset considered as constructive exports.
(Interco O/A) Arrangement (can be availed
of only by firms with parent/affiliate Section 19. Negotiation Procedures
relationship abroad); and The exporter shall negotiate his bill of
f. Consignment. exchange/account with the AAB or OBU
2. Other Authorized Modes. Payments together with the bill of lading (B/L)/airway
for exports may also be made through export bill (AWB), signed commercial invoice and
advances without prior approval of the BSP. other documents as required.
Export advances shall refer to all payments/ In case of availments of export
remittances received before shipment, advances, the AAB through which the
including prepayments and Red Clause availment was made must also be the same
advances. bank to negotiate the export documents.
Bank draft/telegraphic transfer, buyers
checks, travelers checks or acceptable Section 20. Disposition of Export
foreign currency notes may be used in Proceeds. Foreign exchange receipts,
prepayment/export advance, but for buyers acquisitions or earnings of residents from
checks, the same shall be cleared before exports may be used freely for any
shipment. purpose. Such proceeds may, at the option
3. Acceptable Currencies of the exporter, be sold for pesos, retained,
a. Payments for exports may be made or deposited in foreign currency accounts,
in the following currencies: whether in the Philippines or abroad.

Sections 21 - 22
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Section 21. Gold and Constructive Exports Foreign Currency Deposit Units (EFCDUs)
1. Gold. All exports of gold in any of banks shall be referred to the BSP for prior
form may be allowed except for gold from approval, unless otherwise indicated herein.
small-scale mining, including panned gold, Other private sector loans from these
which is required to be sold to the BSP creditors and other financing schemes/
pursuant to Republic Act No. 7076. arrangements shall require prior approval
2. Constructive Exports. The following and/or registration by the BSP if these will
sales of residents paid for in foreign currency ultimately involve foreign exchange
shall be considered as constructive exports: purchased from AABs or AAB-forex corps.
a. Gold sales to the BSP even if paid 1. The required BSP approval shall be
for in Philippine currency; obtained as follows:
b. Sales of residents paid for in foreign a. For public sector loans Applications
currency to the following entities: for loan approval shall be filed with the BSP
1) Bonded manufacturing warehouses using the prescribed form (Annex D.1)
of export producers/manufacturers; together with all the required supporting
2) Export processing zones; documents/information,before
3) Board of Investments (BOI)- commencement of actual negotiations, or
registered export traders operating bonded before issuing a mandate of commitment to
trading warehouses supplying raw materials foreign funders/arrangers; and
used in the manufacture of export products; b. For private sector loans Applications
4) Diplomatic missions in the for loan approval shall be filed with the BSP
Philippines; using the prescribed form (Annex D.2)
5) Duty Free Philippines, Inc. (DFP); and together with all the required supporting
6) Foreign buyers of goods/products to documents/information, at least thirty (30)
be delivered directly to local consumers at banking days before the target signing date
the instruction of the former and paid for in of the loan documents and/or initial
foreign currency. drawdown date, whichever is earlier.
An Export Declaration for each sale 2. Resident companies/entities
shall be accomplished: Provided, That the intending to obtain medium- and long-term
exporter shall submit a delivery receipt signed foreign loans or issue bonds/notes/debt
by the buyer in lieu of the B/L or AWB. securities offshore shall submit to the BSP-
IOD their annual foreign borrowings plan
PART TWO. CAPITAL ACCOUNTS as follows:
a. Public sector entities, including the
Chapter I National Government every end-
September for borrowings for the following
LOANS AND GUARANTEES year, regardless of amount; and
b. Private sector entities, with planned
Section 22. The BSP shall regulate foreign/ aggregate annual borrowing of at lease
foreign currency loans to ensure that USD10 million, or its equivalent - every
principal and interest owed to creditors can end-September for borrowings for the
be serviced in an orderly manner and with following year.
due regard to the economys overall debt The timetable and any changes on the
servicing capacity. All public and publicly- submitted foreign borrowings plan shall be
guaranteed private sector obligations from communicated to the BSP-IOD within two
foreign creditors, OBUs and Foreign (2) weeks upon availability of information
Currency Deposit Units (FCDUs)/Expanded for monitoring and programming purposes.

Sections 22 - 24
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3. Private sector loans that are submitted c. to be granted by FCDUs/EFCDUs

to the BSP for approval or registration that and specifically or directly funded from, or
were not included under a foreign collateralized by offshore loans or deposits.
borrowings plan as required in Item 2 of 3. Loans with maturities exceeding one
this Section shall be assessed an additional (1) year to be obtained by private non-bank
fee equivalent to ten percent (10%) of the financial institutions intended for relending
applicable processing fee for BSP approval/ to public or private sector enterprises.
registration, as indicated under Appendix 4. Other loans irrespective of maturity
20. and currency if to be serviced using foreign
4. For statistical purposes, all foreign exchange purchased by the borrower/
loans obtained by private sector entities, creditor/guarantor from AABs or AAB-forex
whether or not these are BSP-approved/ corps and not covered by Section 24.
registered, shall be regularly reported to the Applications submitted to the BSP with
BSP-IOD, using the prescribed forms signed loan documents and/or loan proceeds
(Annexes E.1 and E.2) within the required already drawn shall no longer be eligible
deadline until the obligations are fully for BSP approval and registration.
extinguished. (As amended by Circular No. 742 dated 21 November 2011)
5. AABs shall not extend peso financing
to non-residents unless explicitly allowed Section 24. Loans Not Requiring Prior BSP
under existing BSP rules. Approval. The following loans may be
(As amended by Circular No. 742 dated 21 November 2011) granted without prior approval of the BSP:
1. a. Loans of resident private sector
Section 23. Loans Requiring Prior BSP borrowers from FCDUs/EFCDUs/offshore
Approval. Prior BSP approval shall be sources, irrespective of maturity, that will
required for the following loans: be serviced using foreign exchange
1. Loans of the following public sector purchased from entities that are not AABs
entities irrespective of maturity, creditor and or AAB-forex corps.
the source of foreign exchange for servicing b. Loans of non-residents from
thereof, except short-term FCDU/EFCDU FCDUs/ EFCDUs, irrespective of maturity:
loans covered by Section 24.4: Provided, That the loan shall be serviced
a. National Government, its agencies using foreign exchange purchased from
and instrumentalities; entities that are not AABs or AAB-forex corps.
b. Government-owned/controlled 2. Short-term loans of financial
corporations (GOCCs); institutions, both public and private for
c. Government financial institutions normal interbank transactions, e.g.,
(GFIs), except short-term normal interbank interbank call loans.
borrowings; Short-term loans of the private sector in
d. Local government units (LGUs); and the form of export advances from buyers
e. Other public sector entities. abroad.
2. Loans of the private sector irrespective 4. Short-term loans of the following
of maturity, creditor and the source of private and public sector borrowers from
foreign exchange for servicing thereof if: FCDUs/EFCDUs:
a. guaranteed by government a. Commodity and service exporters:
corporations and/or government financial Provided, That these loans are used to
institutions; finance export-related import costs of goods
b. covered by foreign exchange and services as well as peso cost
guarantees issued by AABs; and requirements.

Section 24
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Service exporters shall refer to not be refinanced by a medium- /long-term

Philippine residents engaged or proposing foreign currency loan;
to engage in rendering technical, c. Proceeds of loans intended to pay
professional or other services which are for foreign exchange requirements may be
paid for in foreign exchange. paid directly to the supplier/creditor, while
Indirect exporters may likewise borrow amounts intended to fund pre-export peso
to fund export-related costs, which may costs shall be inwardly remitted and sold
include both foreign exchange as well as for pesos to AABs;
peso costs. Indirect exporters shall refer to d. Drawdown and registration
cottage/small and medium industries requirements under Sections 27 and 28
(producers/manufacturers) that have supply hereof shall be complied with;
arrangements with direct exporters who are e. Any assignment of the loan by the
holders of an export letter of credit or a creditor concerned shall be reported to the
confirmed purchase order/sales contract BSP within five (5) days from date of
from a foreign buyer. assignment;
b. Producers/manufacturers, including f. Creditor banks shall submit the
oil companies and public utility concerns: following reports to the BSP:
Provided, That the loans are used to finance i. Their lending program for private
import costs of goods and services necessary sector borrowers for the next six (6) months
in the production of goods by the borrower indicating their proposed credit limit
concerned. Producers/manufacturers shall together with a list of prospective borrowers/
refer to persons or entities that undertake beneficiaries; and
the processing/conversion of raw materials ii. Monthly report on loans granted
into marketable form through physical, to residents using Schedule 4A (Part I)
mechanical, chemical, or other means or by & 4B (Part II) - Consolidated Report
special treatment or a series of actions that on Loans Granted by OBUs to Residents
result in a change in the nature or state of - to the Statement of Assets and
the products. Liabilities of OBUs, and similar reports
Public utility firms shall refer to business by foreign banks with branches in the
organizations that regularly supply the public Philippines.
with commodities or services such as g. The borrowers shall submit monthly
electricity, gas, water, transportation, reports on transactions and status of their
telegraph/telephone services and the like. short-term loans within three (3) banking
5. Short-term loans of private days after end of reference month using the
exporters/importers from OBUs and foreign prescribed form (Annex F).
banks with branches in the Philippines: 6. Short-term loans of private
Provided, That: exporters/importers from other offshore
a. The loans are not covered by a sources/creditors: Provided, That all
guarantee from a government financial provisions of Section 24.5 are complied
institution/corporation; with, except Item (f), and that the loans shall
b. The loans shall be exclusively used be granted against BSP-approved short-term
to finance specific trade transactions, i.e., relending programs of foreign creditors.
to liquidate/pay for import obligations and/ Creditors shall submit to the BSP for
or in the case of export financing approval their short-term relending program
transactions, to fund the borrowers for Philippine borrowers indicating their
pre-export financing requirements and shall proposed credit limit together with a list of

Sections 24 - 26
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prospective borrowers/beneficiaries. These Medium-Term Public Investment Program

relending programs shall be valid for one (MTPIP);
(1) year. e. Development of industrial estates
7. Private sector loans not guaranteed and economic zones;
by foreign governments/official export credit f. Socialized/Low-cost housing
agencies covering importation of freely projects;
importable commodities under deferred g. Acquisition of non-performing
L/Cs or D/A-O/A arrangements with a term assets/loans (NPAs/NPLs) of banks and
of more than one (1) year. other GFIs;
8. Private sector intercompany loans h. Acquisition of government assets
granted by foreign companies to their local approved for privatization;
branches/subsidiaries, irrespective of i. Other projects that may be
amount and maturity: Provided, That these declared priority under the countrys
are used to finance eligible projects/costs socio-economic development plan by the
cited under Section 25. For purposes of National Economic and Development
this Item, intercompany loans shall Authority or by Congress;
include those granted by foreign branches j. Refinancing of existing loans used
and wholly-owned subsidiaries of a for eligible projects/costs which are eligible
foreign parent company as well as other for servicing using foreign exchange sourced
subsidiaries of the parent company but from AABs or AAB-forex corps.; and
shall exclude those loans that are intended k. Microfinance activities.
to refinance existing obligations: 2. Short-term loans shall finance
Provided, That, in the case of other exclusively foreign exchange requirements
subsidiaries, the loan/s shall be fully of eligible projects, except as may be
guaranteed by the parent company. specifically allowed under this Manual.
9. Loans of resident private sector Medium- and long-term loans may finance
borrowers from FCDUs/EFCDUs/offshore foreign exchange costs as well as peso costs
sources that are not publicly-guaranteed (excluding working capital) of eligible
to finance infrastructure projects included projects.
in the Governments list of Public Private (As amended by Circular No. 742 dated 21 November 2011)
Partnership (PPP) projects. The exemption
of these loans from prior BSP approval Section 26. Terms of Loans
shall be valid up to three (3) years 1. Loans shall have terms reflective of
reckoned from 10 December 2011. those prevailing in the international capital
(As amended by Circular No. 742 dated 21 November 2011) markets.
2. Terms of loans to be obtained by
Section 25. Projects/Costs Eligible for the National Government and other public
Foreign Financing sector entities shall be in accordance with
1. Loans submitted for prior BSP the provisions of pertinent laws/
approval shall finance the following types regulations governing public sector
of projects/activities: borrowings.
a. Export-oriented projects; 3. The Monetary Board may require
b. Projects registered with the BOI; longer grace/maturity periods for medium
c. Priority investment areas under the and long-term loans involving large amounts
current Investment Priorities Plan (IPP); to reduce the impact thereof on debt
d. Activities listed in the current servicing.

Sections 27 - 29
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Section 27. Drawdown/Availment on by the Monetary Board are deemed

Loans. Loans intended to be serviced using registered.
foreign exchange purchased from AABs or 2. Loans shall be registered by the BSP
AAB-forex corps shall comply with the upon the borrowers compliance with the
following procedures/conditions for terms and conditions imposed under the BSP
drawdown: approval of the loan and/or pertinent
1. Loan proceeds shall be used solely provisions of this Manual, including
for the purpose/s as approved by the BSP or submission of required documents and
considered eligible for foreign financing information.
under the rules herein. 3. Loans granted under Sections 24.4
2. Loan proceeds intended to fund and 24.5 that are duly reported to the BSP
local costs (i.e., those payable to residents) using the prescribed forms (IOS Form 4 and
shall be inwardly remitted and sold for pesos Schedule 4A (Part I) & 4B (Part II)-
to AABs. Consolidated Report on Loans Granted by
3. Amounts intended to finance OBUs to Residents, respectively) are
foreign exchange costs (i.e., those payable deemed registered.
to non-residents) need not be inwardly 4. Loans requiring prior BSP approval
remitted but may either be paid directly to which have been signed and/or drawn/
the non-resident supplier/beneficiary availed of prior to securing the requisite
concerned or deposited in a foreign approval shall not be eligible for registration
exchange account pending utilization of the and subsequent servicing using foreign
funds unless covered by Section 27.4. exchange purchased from AABs or AAB-
4. Pending utilization, foreign forex corps.
exchange proceeds of loans and bond/note (As amended by Circular No. 742 dated 21 November 2011)
issues of the public sector shall be deposited
with the BSP pursuant to Section 113 of Section 29. Servicing of Loans1
Republic Act No. 7653 (The New Central 1. All foreign exchange purchases from
Bank Act) dated 14 June 1993. AABs or AAB-forex corps for servicing of
foreign/foreign currency loans shall be
Section 28. Registration of Loans directly remitted to the creditor/beneficiary
1. Loans shall be registered with the concerned on the day of purchase, unless
BSP to be eligible for servicing using foreign otherwise explicitly allowed by BSP.
exchange purchased from AABs or AAB- 2. Payments for principal, interest, fees
forex corps. Applications for registration of and related charges on loans duly registered
private sector loans shall be filed by the with the BSP may be remitted through AABs
borrower with the BSP within ten (10) as these fall due without prior BSP approval
banking days from drawdown date for provided such interest, fees and charges are
short-term loans and three (3) months from indicated in the BSP registration document,
utilization of loan proceeds for medium and and upon presentation of documents
long-term loans using the prescribed forms prescribed under Item B of Appendix 1
(Annex D.2). Private sector loans that do not hereof.
require prior BSP approval but are submitted 3. Payments for the following shall,
to the BSP for registration shall be charged however, be subject to prior BSP approval:
a processing fee indicated in Appendix 20. a. Prepayment of public sector/
Public sector loans extended final approval publicly guaranteed private sector loans;
1
Guidelines on the three (3) months temporary window for the purchase of FX to service unregistered
private sector foreign loans issued under Cir. 741 dated 17 November 2011

Sections 29 - 30
10.12.31
b. All loans that are past due for more full amount to the creditor at the target
than thirty (30) calendar days reckoned as prepayment date.
follows: e. The foreign exchange selling institution
(1) For short-term loans, from the 360th shall see to it that documents evidencing
day after availment; and payment of applicable documentary stamp
(2) For MLT loans, from original tax, if any, are presented/available.
maturity date. f. The foreign exchange sold shall be
c. Other loan-related fees/charges not duly reported by the foreign exchange-selling
authorized by the BSP; and AAB under FX Form 1 (Consolidated Report
d. Loans covered by official on Foreign Exchange Assets & Liabilities)-
rescheduling with Paris Club creditors. Schedule 4 following the deadline for
4. AABs and AAB-forex corps may sell submission of FX Form 1.
foreign exchange for prepayments (i.e., 5. Applications to purchase foreign
payments before original due dates) of MLT exchange for servicing of loan-related
private sector loans (including bonds and payments shall be submitted to any AAB or
notes) that are not publicly-guaranteed and AAB-forex corp. using the prescribed form
are covered by a BSP registration document (Annex A) and supported by documents
(BSRD) without prior BSP approval, subject prescribed under Item B, Appendix 1 hereof.
to the following conditions: 6. AABs and AAB-forex corps shall not
a. The borrower shall submit to the BSP- sell foreign exchange to residents for
IOD a notice of their intention to prepay at payment of foreign exchange obligations to
least one (1) month prior to the target residents other than AABs.
prepayment date indicating the following: 7. All loan payments made, irrespective
name of creditor, BSP registration number of the source of the foreign exchange used,
for the loan, date of prepayment, amount to shall be reported by the borrower concerned
be prepaid in original currency, and to BSP-IOD using the prescribed form
remittance instructions (e.g., account number (Annex E.2).
and recipient bank for the prepayment). After (As amended by Circular Nos. 741 dated 17 November 2011 and
payment, the borrower shall submit to the 698 dated 05 November 2010)
BSP-IOD, proof/s of the payment made,
together with copy of the duly stamped BSRD Section 30. Approval/Registration and
and its Form 2 report (Annex E.2) Servicing of Guarantees
b. The foreign exchange selling AAB/ 1. The following guarantees shall
AAB-forex corp shall require the require prior BSP approval:
presentation by the borrower of documents a. Guarantees for account of the
prescribed under Item B, Appendix 1 hereof. public sector as well as those to be issued
c. The foreign exchange purchases shall by government-owned and controlled
not exceed USD 50.0 million per day, corporations in favor of non-residents; and
provided that the total foreign exchange b. Guarantees issued by foreign banks
purchases shall not at any case exceed the and financial institutions to secure
amount to be prepaid. The daily limit shall obligations of residents partaking the nature
be subject to periodic review to take into of a foreign loan which require prior BSP
consideration prevailing conditions; revised approval pursuant to Section 23.
limits shall be duly disseminated by the BSP. 2. The following guarantees, including
d. Advance foreign exchange purchases risk take-over and similar arrangements, for
shall be deposited in the borrowers FCDU/ account of the private sector shall not
offshore account pending remittance of the require prior BSP approval and registration

Sections 30 - 31
11.12.31
but shall be reported to the BSP by AABs as issuer/ 5. Any payments relative to BSP
beneficiary using the prescribed form (Annex G registered guarantees may be remitted by AABs
if issuer or Annex H if beneficiary) to be eligible as they fall due without prior BSP approval. Any
for servicing using foreign exchange purchased foreign liability arising from a call on the
from AABs or AAB-forex corps in the event of guarantee shall require prior BSP approval, if
default by the principal obligor: to be serviced using foreign exchange
a. Guarantees to be issued by local banks purchased from AABs or AAB-forex corps.
and other financial institutions, including
government financial institutions, in favor of Section 31. Approval/Registration and Servicing
non-residents such as: of Other Financing Schemes/Arrangements
1) Payment guarantees (e.g., bid bonds, 1. Financing schemes which would
performance bonds, advance payment bonds); involve option to purchase arrangement or
and transfer of ownership after a certain period of
2) Guarantees to secure foreign time as in the case of Build-Operate-Transfer
obligations of residents which do not partake (BOT), Build and Transfer (BT) arrangements
the nature of a foreign loan. shall be registered with the BSP to be eligible
b. Guarantees to be issued by foreign for servicing using foreign exchange purchased
banks and financial institutions as well as other from AABs or AAB-forex corps. Applications
foreign entities to secure peso loans/FCDU for registration shall be filed by the
loans authorized under Section 24.4. Proceeds implementing agency/proponent with the BSP
of guarantees where the beneficiary is a within one month from contract signing.
resident shall be inwardly-remitted and sold Implementing agencies/proponents of
to AABs for pesos. projects under BOT/similar financing
As a prerequisite to the issuance of arrangements shall submit to the BSP the
guarantees under Item a, the following following reports:
documents shall be submitted to the guarantor: a. Yearly Projected Funding
a. Registration papers of domestic Requirements for BOT/Other Similar
accountee with the Securities and Exchange Financing Schemes (Annex I), on or before
Commission (SEC) (for corporation/ September 30 of the year preceding the
partnership) or with the Bureau of Domestic reference period; and
Trade (BDT) of the Department of Trade and b. Monthly Report on payment under
Industry (DTI) (for single proprietorship); and BOT/Other Similar Financing Schemes
b. Contract and/or other documents which (Annex J) within ten (10) working days from
serve as basis for the issuance of the guarantee. end of reference month.
3. Other guarantees or similar 2. Offshore issuances of peso-
arrangements which may give rise to actual denominated instruments1 involving:
foreign obligations shall require prior BSP a. inward remittance of foreign
approval to be eligible for servicing using exchange to the Philippines and sale thereof
foreign exchange purchased from AABs or for pesos to AABs; or
AAB-forex corps. b. a resident enterprise or any of its
4. Fees and charges on guarantees shall offshore offices, branches, subsidiaries and
be reflective of prevailing market terms: affiliates, which will participate in such
Provided, That guarantees issued by parent transactions as an issuer, guarantor or
companies to their affiliates shall not be beneficiary, and where proceeds shall be lent
charged any fee. to or invested in resident companies.
1
Under Circular Letter No. CL-2011-14, dated 03 March 2011, this provision covers all offshore issuances by
residents of peso-denominated bonds/notes and similar instruments, whether to be settled in pesos or foreign
currency and thus, require BSP approval (regardless of the source of foreign exchange for servicing of the
obligation) prior to launching/signing of agreements/receipt of proceeds.

Sections 31 - 35
11.12.31
The approval of said instruments shall funding for the cash investments must be
be subject to the following conditions: inwardly remitted but need not be converted
a. the transaction shall not involve to pesos.
import or export of Philippine currency Assets eligible for registration as
whether physically or electronically; and investment in kind shall include:
b. compliance with pertinent rules and (1) machinery and equipment; (2) raw
regulations of the BSP (including reportorial materials, supplies, spare parts and other
requirements) and other regulatory/ items including intangible assets necessary
government agencies/entities including for the operations of the investee firm. The
approval by the Department of Finance value of these investments in kind shall be
(DOF) in the case of supranational issuers. assessed and appraised by the BSP before
3. Non-residents issuance of notes/ their registration.
bonds or similar instruments in the domestic Expenses incurred by foreign firms
market, shall require BSP approval before pursuant to government-approved service
execution thereof. contracts/other contracts for oil, gas, and
geothermal energy exploration/
Chapter II developments may be capitalized and
registered as foreign investment with the BSP.
FOREIGN INVESTMENTS (As amended by Circular No. 742 dated 21 November 2011)
Section 32. General Policy. The BSP Section 35. Inward Foreign Portfolio
supports the countrys policy to encourage Investments. Inward foreign portfolio
inward foreign investments. Said investments shall include the following:
investments need not be registered with the 1. Investments in government securities
BSP unless the foreign exchange needed to which refer to investments in peso-
service the repatriation of capital and the denominated certificates of indebtedness,
remittance of dividends, profits and earnings issued by public sector entities.
which accrue thereon shall be purchased 2. Investments in listed securities
from AABs or AAB-forex corps. which refer to investments in securities
listed in the PSE.
Section 33. Categories of Inward Foreign 3. Investments in money market
Investments. For purposes of registration, instruments which refer to all peso-
foreign investments may be in the form of: denominated debt instruments, such as but
(1) foreign direct investments in Philippine not limited to bonds, bills payables,
firms or enterprises; (2) investments in peso- promissory notes, and non-participating
denominated government securities; (3) preferred shares, issued onshore by private
investments in securities listed in the resident firms, not included in Section 23.
Philippine Stock Exchange (PSE);(4) 4. Investments in bank deposits:
investments in peso-denominated money Provided, That only peso time deposits with
market instruments; and (5) investments in an AAB with a maturity of at least ninety
peso time deposits with AABs with a (90) days shall be eligible for registration
minimum maturity of ninety (90) days. with the BSP.
For registration purposes, the foreign
Section 34. Inward Foreign Direct exchange funding for the portfolio
Investments. Inward foreign direct investments must be inwardly remitted and
investments may be in cash or in kind. For converted to pesos.
registration purposes, foreign exchange (As amended by Circular No. 742 dated 21 November 2011)

Sections 36 - 40
11.12.31
Section 36. Registration with the BSP. The Section 39. Import/Export of Stock
following inward foreign investments shall Certificates of Philippine Firms. No prior
be registered with the BSP: BSP authority shall be required for the
1. Inward foreign direct investments import/export of stock certificates of
under Section 34; and Philippine firms issued to foreign investors,
2. Investments in peso-denominated including investments prior to 15 March
money market instruments under Item 3 of 1973 under Section 43.
Section 35.
All applications for registration of Section 40. Repatriation and Remittance
foreign direct investments under Section 34 Privileges
shall be filed with the BSP within five (5) 1. Inward foreign investments duly
years from the date of inward remittance/ registered with the BSP or with a custodian
actual transfer of assets to the Philippines.1 bank duly designated by the foreign investor,
A Bangko Sentral Registration Document shall be entitled to full and immediate
(BSRD) shall be issued by the BSP repatriation of capital and remittance of
evidencing registration of such investments. dividends, profits and earnings using foreign
(As amended by Circular No. 743 dated 15 December 2011) exchange to be purchased from AABs and
AAB-forex corps.
Section 37. Registration with Custodian 2. Foreign exchange may be purchased
Banks. Inward foreign investments in peso- from AABs and AAB-forex corps for outward
denominated government securities, PSE- remittance in an amount equivalent to the
listed securities, and peso time deposits peso sales/divestments proceeds (including
under Items 1, 2 and 4, respectively, of dividends, profits or earnings thereon) of
Section 35 shall be registered with an BSP-registered foreign investments in
investors designated custodian bank on accordance with the procedures outline in
behalf of the BSP. Appendix 11 and supported by the
A custodian bank may be any AAB or documents prescribed under Items C.1 and
an OBU appointed by the foreign investor C.2 of Appendix 1 hereof.
to register his investments and to hold 3. Registering banks for foreign
shares and other investment instruments for investments may sell for outward remittance
and on his behalf and to represent him in the equivalent foreign exchange of excess
all the necessary actions in connection with pesos funded with inward remittance of
his investments in the Philippines. foreign exchange but not to exceed the
The BSRD to be issued by a custodian amount of foreign exchange brought in less
bank on behalf of the BSP shall be in the the amount actually used for BSP-registered
prescribed pre-numbered form purchased investments made in the country, subject
by the custodian bank from the BSP. BSRDs to the following conditions:
issued directly by custodian banks for a. the investor shall comply with the
registered investments in peso time deposits prescribed documents under Item C. 3 of
shall be (a) annotated with roll-overs of the Appendix 1 hereof;
investment; or (b) cancelled if such deposits b. such excess pesos should not
are preterminated before ninety (90) days. have been utilized to fund any
investment; and
Section 38. Registration Procedures. The c. the remittance of the equivalent
procedures for registration of foreign foreign exchange shall be reported to the
investments including the supporting BSP-IOD by the remitting AAB within two
documents are outlined in Appendix 10. (2) banking days from the date of outward
1
Qualified foreign investment, whose date of inward remittance of funds or actual transfer of assets
to the Philippines are beyond the 5-year period, are allowed to register until 14 December 2012.

Sections 40 - 44
11.12.31
remittance, with copies of the prescribed Section 44. Investments by Philippine

supporting documents. Residents
The foreign exchange purchases may be 1. Outward Investments.
made by the resident agent on behalf of the a. Residents may undertake outward
non-resident investor for direct remittance investments only if:
to the non-resident beneficiary on the day i. the investments are funded by
of purchase. withdrawals from the resident investors
(As amended by Circular No. 698 dated 05 November 2010) FCDU account/s; or
ii. the funds to be invested are not
Section 41. Deposit of Divestment/Sales among those required to be sold to AABs
Proceeds. Pending reinvestment or for pesos under existing BSP rules; or
repatriation, divestment/sales proceeds of iii. the funds to be invested are
duly registered foreign investments, purchased from AABs or AAB-forex corps
including dividends, profits, and earnings but in amounts not exceeding USD60
may be deposited temporarily with any million or its equivalent in other foreign
AAB. The eventual repatriation thereof currency per investor per year, or per fund
including interest earned net of taxes, shall per year for qualified investors (QIs).
be remittable in full through any AAB Application to purchase foreign
without prior BSP approval in accordance exchange for outward investments(Annex A)
with the procedures outlined in shall be supported by documents prescribed
Appendix 11. under Item "C.4" of Appendix 1 hereof.
b. Outward investments by residents
Section 42. Reinvestment. Foreign investors (excluding AABs) funded with foreign
may reinvest divestment/sales proceeds or exchange purchased from AABs or AAB-
remittable dividends/profits or earnings of forex corps in excess of the USD60 million
duly registered investments. The per investor per year shall require prior
reinvestments shall be registered with the approval by the BSP: Provided, That the
BSP or the investors designated custodian purchase of foreign exchange for outward
banks, as applicable, if the foreign exchange investments by managed or trusteed
needed to service the repatriation of capital accounts (other than pooled funds) shall be
and the remittance of dividends, profits and considered as part of the foreign exchange
earnings which accrue thereon shall be purchases by the principal or trustor of such
purchased from AABs and AAB-forex corps. accounts for determining compliance with
the limits. Outward investments of banks
Section 43. Inward Foreign Investments shall be subject to existing prudential
Prior to 15 March 1973. Repatriation of regulations of the BSP.
divestment proceeds and remittance of c. QIs may apply with the BSP for a
dividends, profits and earnings from foreign higher annual outward investment limit.
investments certified by stock transfer agents For purposes of this section, QIs shall
to have been made prior to 15 March 1973 be limited to the following: insurance
may be serviced using foreign exchange and pre-need companies; collective/
purchased from AABs and AAB-forex corps, pooled funds, whether in a corporate or
without prior BSP approval. In the absence contractual structure, such as mutual
of said certification, such investments may funds, unit investment trust funds and
be registered with the BSP subject to variable insurance; public or private
submission of documentary requirements pension or retirement or provident
under Appendix 12. funds and such other entities and funds

Sections 44 - 45
11.12.31
as the BSP may determine as QIs on the PART THREE. OFFSHORE BANKING
basis o f s u c h f a c t o r s a s f i n a n c i a l UNITS, REPRESENTATIVE OFFICES
sophistication, size and regularity of AND FOREIGN CURRENCY
financial transactions, net worth and DEPOSIT UNITS
size of assets being managed. The
application of collective/pooled funds Chapter I
and pension, retirement and provident
funds for a higher annual outward OFFSHORE BANKING UNITS OF
investment limit may be effected FOREIGN BANKS
through its governing board or through
its trustee. Section 45. Definition of Terms. As used
2. Investments in bonds/notes in this Chapter, the following terms shall
issued by residents offshore. Residents have the meaning indicated unless the
may purchase foreign exchange from context clearly indicates otherwise:
AABs or AAB-forex corps without prior 1. Offshore Banking shall refer to the
BSP approval for investments in the conduct of banking transactions in foreign
following: (a) foreign currency- currencies involving the receipt of funds
denominated bonds/notes of the principally from external sources and, as
Republic of the Philippines or other allowed in this Manual, from internal
Philippine resident entities; and sources and utilization of such funds, as
(b) peso-denominated bonds/notes of provided herein.
the Republic of the Philippines or other 2. Offshore Banking Unit or OBU
Philippine resident entities requiring shall refer to a branch a foreign banking
settlement in foreign currency: corporation which is duly authorized by the
Provided, That such purchases shall be BSP to transact offshore banking business
consolidated with foreign exchange in the Philippines.
purchases for outward investments 3. Net office funds shall refer to the
under Item 1.b hereof for purposed of net credit balance of the Due to Head Office
determining compliance with the (HO)/Branches/ after deducting the Due
allowed limit, and supported by from HO/Branches, as shown in the
documents prescribed under Item C.5 following computation:
of Appendix 1 hereof.
3. Foreign exchange received by Due to HO/Branches
residents as dividends/earnings or Remittances/Advances/Deposits
to OBU by HO/Branches xxxxxxx
divestment proceeds from outward Unremitted earnings of OBU xxxxxxx
investments and investments in bonds/
notes issued by residents offshore that Total USD x x x x x x x
were funded with foreign exchange Less: Due from HO/Branches

purchased from AABs or AAB-forex
Remittances/Advances/Deposits of
corps, need not be inwardly remitted OBU with its HO/Branches xxxxxxx
and sold for pesos.
(As amended by Circular Nos. 742 dated 21 November Net Office Funds USD x x x x x x x
2011 and 698 dated 05 November 2010)

Sections 45 - 47
09.12.31
4. Deposits shall refer to funds in acceptable to and exchangeable at the BSP and
foreign currencies which are accepted and which form part of the international reserves
held by an OBU in the regular course of of the country.
business, with the obligation to return an
equivalent amount to the owner thereof, with Section 46. Approvals Required. A
or without interest. foreign bank may operate an OBU in the
5. Resident shall refer to Philippines, upon issuance of a Certificate of
a) an individual citizen of the Philippines Authority to operate by the Monetary Board
residing therein1; or and registration with the SEC.
b) an individual who is not a citizen of
the Philippines but is permanently residing1 Section 47. Criteria for Selection. The
therein; or following factors shall serve as basis for the
c) a corporation or other juridical person issuance of certificate of authority to operate
organized under the laws of the Philippines; an OBU: (1) liquidity and solvency positions;
or (2) net worth and resources; (3) managerial
d) a branch,subsidiary,affiliate, extension and international banking expertise of applicant
office or any other unit of corporations or bank; (4) contribution to the Philippine
juridical persons which are organized under economy; and (5) other relevant factors, such
the laws of any country and operating in the as participation in the equity of local UBs/KBs
Philippines, except OBUs. and appropriate geographic representations.
6. Non-resident shall refer to an
individual, a corporation or other juridical Section 48. Pre-Operation Requirements
person not included in the definition of Upon advice from the BSP, a qualified bank
resident. shall submit a sworn undertaking of its head
7. Foreign Currency Deposit Unit or office through any of its duly authorized
FCDU shall refer to that unit of a local bank officers, supported by an appropriate
or of a local branch of a foreign bank resolution of its board of directors, to the effect
authorized by the BSP to engage in foreign that it shall:
currency-denominated transactions, pursuant 1. provide, on demand, the necessary
to the provisions of Republic Act No. 6426 currencies to cover liquidity needs that may
(Foreign Currency Deposit Act) dated 4 April arise or other shortfall that its OBU may incur;
1974, as amended. 2. manage the operations of its OBU
8. Local bank shall refer to a rural bank soundly and with prudence;
(RB)/cooperative bank (Coop Bank), thrift bank 3. continually train a specific number of
(TB), commercial bank (KB) or universal bank Filipinos in international banking and foreign
(UB) organized under the laws of the Republic exchange trading with a view to reducing the
of the Philippines. number of expatriates;
9. Local branch of a foreign bank shall 4. provide and maintain in its OBU at
refer to a branch of a foreign bank doing all times net office funds in the minimum
business in the Philippines, pursuant to the amount of USD1 million;
provisions of Republic Act No. 7653 and 5. start operations of its OBU within 180
Republic Act No. 8791 (The General Banking days from receipt of its certificate of authority
Law of 2000) dated 23 May 2000. to operate such unit;
10. Acceptable foreign exchange 6. comply with all applicable local laws
comprise those foreign currencies which are relating to labor and employment; and
(Next Page is Part V - Page 17)
1
Residents include any individual, citizen or otherwise, who has resided in the Philippines for a year or longer,
as defined in Section 83 of the IMF Balance of Payments Textbook, 1996.
Manual of Regulations for Banks Part V- Page 16a

Sections 48 - 52
09.12.31
7. submit, before start of operations, OBUs and resident banks authorized to

other documents as may be required by the accept foreign currency deposits under the
BSP such as certification or similar provisions of Republic Act No. 6426, as
documents showing that it is duly amended.
authorized by the proper government entity Interbank short-term transactions of not
of its country to engage in offshore banking exceeding 360 days such as credit lines of
business in the Philippines. Philippine banks with correspondent banks,
interbank call loans and interbank loans for
Section 49. Annual Fee. Upon issuance of general liquidity purposes shall not require
a certificate of authority to operate an OBU prior BSP approval.
in the Philippines, and yearly thereafter, the
authorized bank shall pay the BSP a fee of Section 52. Transactions with Residents
not less than USD20,000.00. which are not Banks. An OBU may engage
in the following transactions with residents
Section 50. Transactions with Non- which are not banks:
Residents and/or with Other OBUs. An 1. Deal in foreign currency financial
OBU may freely engage in all normal instruments;
banking transactions with non-residents 2. Extend foreign currency loans and
and/or with other OBUs, involving any advances, subject to existing regulations on
currency other than the Philippine peso. foreign borrowings;
3. Service importations through L/C,
Section 51. Transactions with Foreign D/A, O/A and D/P of resident-borrowers:
Currency Deposit Units (FCDUs)/ Provided, That such importations shall be
Expanded Foreign Currency Deposit Units funded by a BSP-authorized OBU foreign
(EFCDUs). Subject to BSP regulations, an currency loan to the resident-borrower
OBU may engage in the following involved; and Provided, further, That D/A-
transactions with FCDUs/EFCDUs of local O/A imports coursed through and serviced
banks in any currency other than the by OBUs shall be subject to the reporting
Philippine peso: requirements under Appendix 6;
1. Accept time, savings and demand 4. Negotiate inward (export) L/Cs and
deposits or issue negotiable certificates of handle other export transactions (including
time deposit; D/P, D/A and O/A) coursed through their
2. Borrow with maturities not worldwide network of branches and
exceeding 360 days; correspondents: Provided, That OBUs share
3. Deposit; in the total export L/C negotiation business
4. Extend loans and advances; shall be limited to of the growth
5. Deal in foreign currency financial (incremental) element in the countrys total
instruments; annual export. This limit shall be observed
6. Discount bills, acceptances, and yearly until this equals ten percent (10%) of
negotiable certificates of deposits; total exports. Exports not covered by L/Cs,
7. Engage in foreign exchange trading; i.e., done through D/A-O/A arrangements
8. Engage in foreign currency, foreign shall be considered subject to this overall
currency swap; and limit;
9. Engage in such other transactions as 5. Provide full foreign exchange
authorized under this Section between service for all foreign currency non-trade
Manual of Regulations for Banks Part V - Page 17

Sections 52 - 56
09.12.31
and trade remittances resulting from or inward remittances of Filipino overseas

related to their own negotiation of export workers or of Filipino or multinational
L/Cs; companies, coursed through the OBUs
6. Render financial, advisory and correspondent banks abroad;
related services; and 3. To pay the designated beneficiaries
7. Refinance trust receipts without in the Philippines the peso equivalent of
prior BSP approval arising from import foreign exchange inward remittances other
transactions of Philippine residents in U.S. than those related to (a) trade; or (b) inward
dollars or in other acceptable foreign foreign investments that are intended to be
currencies. The refinancing shall be serviced using foreign exchange purchased
evidenced by bankers acceptances. from AABs or AAB-forex corps; and
However, OBUs may hold peso- 4. To pay the peso equivalent of
denominated assets arising from foreign exchange sold by beneficiaries of
restructuring or other repayment scheme of export L/Cs negotiated with the OBUs.
outstanding loans, subject to the terms and The peso deposit accounts shall be
conditions of the approval of such funded exclusively by inward remittances
restructuring/other repayment scheme and of foreign exchange eligible to form part of
to the following clarifications and the Philippine international reserves.
conditions: OBUs may also sell inward remittances
a. That term assets as used in this of foreign exchange for pesos to the BSP
Section shall refer to bonds or other through the Treasury Department, for credit
certificates of indebtedness, shares of stocks to the demand deposit account of the
and other properties; designated AABs for the account of the
b. That bonds or other certificates of OBU.
indebtedness issued by a third party as well
as shares of stocks and other properties Section 54. Financial Assistance to
acquired as a result of restructuring/other Officers/Employees. OBUs may extend
payment scheme shall be accounted for in financial assistance (real estate, car, personal
accordance with Philippine Accounting loans, etc.) in local or foreign currency to
Standards (PAS) 39; and their Filipino officers and employees as part
c. That shares of stock and other of their fringe benefit program.
properties acquired as a result of They may likewise grant foreign
restructuring/other repayment scheme shall currency loans to their expatriate officers
be sold/disposed of within a period of five without need of BSP approval.
(5) years from date of acquisition.
Section 55. Secrecy of Deposits. The
Section 53. Peso Deposits. OBUs may open provisions of Republic Act No. 6426, as
and maintain peso deposit accounts with amended, shall apply to deposits in OBUs;
AABs exclusively for the following Provided, That numbered deposit accounts
purposes: shall not be used.
1. To meet administrative and other
operating expenses, such as salaries, rentals Section 56. Exemption from Certain Laws.
and the like; The provisions of Republic Act No. 2655
2. To pay the peso equivalent of (Usury Law) dated 01 May 1915, as
foreign exchange sold by beneficiaries of amended1, and Republic Act No. 3591
1
Suspended by CBP Circular No. 905-82 dated 10 December 1982, effective 01 January 1983.
Part V - Page 18 Manual of Regulations for Banks

Sections 56 - 64
09.12.31
(An Act Establishing the Philippine Deposit 2. Representative Office shall refer
Insurance Corporation) dated 22 June 1963, to a liaison office of a foreign bank which
as amended, shall not apply to transactions deals directly with the public by promoting
and/or deposits in OBUs in the Philippines. and giving information about the services
offered by the foreign bank. It does not
Section 57. Accounting and Reporting include the regional or area headquarters
OBUs shall maintain an accounting of a foreign bank registered and licensed
system in accordance with guidelines under existing laws.
prescribed by the BSP. Periodically or as
required, existing reports shall continue Section 62. Criteria for Approval. The
to be submitted in the prescribed forms Monetary Board may authorize qualified
to the BSP. foreign banks to open representative offices
in the Philippines if, in its judgment, the
Section 58. Supervision. The operations and public interest and economic conditions,
activities of OBUs shall be conducted under both general and local, justify the
the supervision of the BSP. establishment of such office. The following
factors, among others, shall serve as basis
Section 59. Taxes, Customs Duties for issuance of authority to open a
Transactions of OBUs in the Philippines representative office in the Philippines:
shall be subject to such taxes as are (1) liquidity and solvency positions; (2) net
prescribed in Presidential Decree No. 1034 worth and resources; (3) financial and credit
(Authorizing the Establishment of an standing in the international banking
Offshore Banking System in the Philippines) community; (4) exposure in the Philippines;
dated 30 September 1976, as implemented and (5) other relevant factors, such as
by regulations of the BIR. Philippine commercial and financial
relationships with the country where
Section 60. Revocation/Suspension. The applicant bank is based.
Monetary Board, upon recommendation of
the Governor, may revoke or suspend the Section 63. Authorized Activities of
authority of an OBU to operate in the Representative Offices. Authorized
Philippines for violation of Presidential representative offices may promote and
Decree No. 1034 or relevant provisions of provide information about the services/
this Manual. products offered by the foreign banks but
may not transact banking business, such as
Chapter II acceptance of deposits, issuance of letters
of credit and foreign exchange trading.
REPRESENTATIVE OFFICES OF Transactions generated through the
FOREIGN BANKS promotional efforts of the representative
office may be booked only by the foreign
Section 61. Definition of Terms. As used bank abroad.
in this Chapter, the following terms shall
have the meaning indicated unless the Section 64. Fees. Foreign banks intending
context clearly indicates otherwise: to establish a representative office shall,
1. Foreign Bank shall refer to a bank upon issuance by the BSP of a Certificate of
or banking corporation formed, organized Authority, pay the BSP a license fee of
and existing under any foreign law. USD2,000.00.

Sections 65 - 70
09.12.31
Section 65. Use of the term Chapter III

Representative Office. Foreign banks
authorized to operate representative offices FOREIGN CURRENCY DEPOSIT
shall, in their representation with the public, SYSTEM
carry with their name the additional term
Representative Office to properly guide the Section 70. Definition of Terms. As used
public on the nature and extent of their in this Chapter, the following terms shall
activities. have the meaning indicated unless the
context clearly indicates otherwise:
Section 66. Licensing. The licensing and 1. Foreign Currency Deposit Unit
operations of representative offices including (FCDU) and Expanded Foreign Currency
the implementation of these regulations and Deposit Unit (EFCDU) shall refer to a
such other rules and regulations that may unit of a local bank or of a local branch
be issued from time to time shall be the of a foreign bank authorized by the BSP
responsibility of the BSP-Supervision and to engage in foreign currency-
Examination Sector (SES). denominated transactions, pursuant to the
provisions of Republic Act No. 6426, as
Section 67. Visitorial Power. The BSP may, amended.
from time to time, look into the affairs of 2. Local bank shall refer to an RB/
the representative offices to determine the Coop Bank, TB, KB or UB organized under
extent of their compliance with these the laws of the Republic of the Philippines.
regulations and/or other related BSP 3. Local branch of a foreign bank
issuances. shall refer to a branch of a foreign bank doing
business in the Philippines, pursuant to the
Section 68. Reporting. Representative provisions of Republic Act No. 7721 (An
offices shall submit to the BSP annual reports Act Liberalizing the Entry and Scope of
of their Head Office and, periodically as may Operations of Foreign Banks in the
be required, reports on the transactions of Philippines and for Other Purposes) dated
their Head Office in the Philippines in such 18 May 1994, Republic Act No. 7653, and
form as may be prescribed for the purpose. Republic Act No. 8791.
4. Short-term loans and securities
Section 69. Revocation of License. The shall refer to those with maturities of one
Monetary Board may revoke the license of (1) year or less.
a representative office if it finds after due 5. Medium-term loans and securities
investigation that: (1) the representative shall refer to those with maturities of more
office or its officers have violated the than one (1) year but not more than five (5)
provisions of this Manual and any other years.
applicable rules and regulations of the BSP; 6. Long-term loans and securities
or (2) its Head Office is found to be in shall refer to those with maturities of more
imminent danger of insolvency or that its than five (5) years.
continuance in business will involve The definition of such other terms used
probable loss to those transacting business in this Chapter shall be consistent with the
with it, pursuant to Section 37 of Republic definition of terms used under the Chapters
Act No. 7653, and Section 78 of Republic on OBUs and Representative Offices of
Act No. 8791. Foreign Banks.

Sections 71
09.12.31
Section 71. Qualification Requirements g. The bank does not have float items
UBs/KBs may be authorized to operate an outstanding for more than 60 calendar days
FCDU or EFCDU: Provided, That they meet the in the Due From/To Head Office/Branches/
minimum capital requirements as prescribed Offices accounts and the Due from Bangko
under Section X106 and Subsections X106.1 Sentral account exceeding one percent (1%)
and X106.2 of the Manual of Regulations of the total resources as of end of preceding
for Banks (MORB) for local banks and month;
Subsections X121.4 and X121.5 of the h. The bank has no past due obligation
MORB for branches of foreign banks. with the BSP or with any financial institution
In addition, the following standard pre- as of date of application;
qualification requirements as prescribed i. The banks facilities pertinent to the
under Appendix 5 of the MORB shall be authority applied for are adequate;
complied with: j. The officers who will be in-charge
a. The bank has complied, during the of the operation relating to the authority
period indicated immediately preceding the applied for have actual experience of at least
date of application, with the following: two (2) years in another bank as in-charge
1) Risk-based capital adequacy ratio (or at least as assistant-in-charge) of the same
for the last 60 days; operation;
2) Ceilings on credit accommodation k. The bank personnel who will handle
to directors, officers, stockholders and the operation relating to the authority
related interests (DOSRI); and applied for, have attended appropriate
3) Liquidity floor on government seminars, workshops or on-the-job training
deposits. or have experience of at least six (6) months;
b. The bank has not incurred net and
weekly reserve deficiencies for the last eight l. The bank has complied with the
(8) weeks; mandatory allocation of credit resources to
c. The bank has generally complied micro, small and medium enterprises for
with banking laws, rules and regulations, two (2) quarters immediately preceding the
orders or instructions of the Monetary Board date of application.
and/or BSP Management; 2. TBs with net worth or combined
d. The banks past due loans do not capital accounts of at least PHP325 million
exceed twenty percent (20%) of its total loan for those with head offices located within
portfolio as of the date of application; Metro Manila and PHP52 million for those
e. The bank has corrected as of date with head offices located outside Metro
of application the major violations noted Manila may, subject to prior Monetary
in its latest examination particularly Board approval, operate an FCDU. A TB
relating to - desiring to operate an FCDU shall file an
1) single borrowers limit; and application with the BSP-SES. The
2) total investment in real estate and application shall be signed by the bank
improvements thereon, including bank president or officer of equivalent rank and
equipment, which shall not exceed fifty shall be accompanied by the following
percent (50%) of net worth; documents:
f. The banks accounting records, a. Certified true copy of the resolution
systems, procedures and internal control of the banks board of directors authorizing
systems are satisfactorily maintained; the application; and

Section 71
09.12.31
b. A certification signed by the (6) investment in bank premises and

president or the officer of equivalent rank other fixed assets.
that the bank has complied with all f. The bank maintains adequate
conditions/prerequisites for the grant of provisions for probable losses
authority to operate an FCDU. commensurate to the quality of its asset
A TB applying for authority to operate portfolio but not lower than the required
FCDU must comply with the following valuation reserves as determined by the BSP;
requirements: g. The bank has no float items
a. The banks operation during the outstanding for more than 60 calendar days
preceding calendar year and for the period in the Due From/To Head Office/Branches/
immediately preceding the date of Offices accounts and the Due From
application has been profitable; Bangko Sentral account exceeding one
b. The bank is well capitalized with percent (1%) of the total resources as of date
risk-based capital adequacy ratio not lower of application;
than twelve percent (12%) at the time of h. The bank has no past due
filing the application; obligations with the BSP or with any
c. The officer who will be in charge of government financial institution;
FCDU operations shall either have at least i. The bank has established a risk
one (1) year of actual experience in another management system appropriate to its
bank as in-charge or assistant in-charge of operations characterized by clear
the same operations, or have attended a delineation of responsibility for risk
specialized training course on FCDU management, adequate risk measurement
transactions or operations conducted by the systems, appropriately structured risk limits,
BSP or an institution duly accredited by the effective internal controls and complete,
BSP; timely and efficient risk reporting system;
d. The bank has not incurred net j. The bank has a CAMELS Composite
weekly reserve deficiencies within eight (8) Rating of at least 3 in the last regular
weeks immediately preceding the date of examination with Management rating of not
application; lower than 3; and
e. The bank has generally complied k. The bank is a member of the
with banking laws, rules and regulations, Philippine Deposit Insurance Corporation
orders or instructions of the Monetary Board (PDIC) in good standing.
and/or the BSP Management in the last two 3. An RB/Coop Bank desiring to
(2) preceding examinations prior to the date operate an FCDU shall file an application
of application, more particularly on: with the BSP-SES. The application shall be
(1) election of at least two (2) signed by the bank president or officer of
independent directors; equivalent rank and shall be accompanied
(2) attendance by every member of the by the following documents:
board of directors in a special seminar for a. Certified true copy of the resolution
board of directors conducted or accredited of the banks board of directors authorizing
by the BSP; the application; and
(3) the ceilings on credit b. Certification signed by the president
accommodations to DOSRI; or the officer of equivalent rank that the bank
(4) liquidity floor requirements for has complied with all the conditions/
government deposits; prerequisites for the grant of authority to
(5) single borrowers loan limit; and operate an FCDU.

Sections 71 - 72
09.12.31
An RB/Coop Bank applying for assistant in-charge of the same operations

authority to operate an FCDU must comply for at least one (1) year, or (b) who has
with the following requirements: attended a specialized training course on
a. Minimum capital under Subsection FCDU transactions or operations conducted
X151.2 of the MORB or PHP20 million, by the Bangko Sentral ng Pilipinas Institute
whichever is higher; or an institution or bank duly accredited by
b. Risk-based capital adequacy ratio at the BSP; and
the time of filing the application of at least b. establish a risk management system
twelve percent (12%); appropriate to its operations, characterized
c. CAMELS composite rating in the by clear delineation of responsibility for risk
latest examination of at least 3, with management, adequate risk measurement
Management component score not lower system, appropriately structured risk limits,
than 3; and effective internal control system and
d. No outstanding major supervisory complete, timely and efficient risk reporting
concerns on safety and soundness from last system.
examination, such as, but not limited to:
1) Unbooked valuation reserves Section 72. Authorized Transactions
2) Inadequate regular and liquidity 12 weeks
1. TBs and RBs/Coop Banks which are
reserves on deposits including
government deposits and deposit granted a certificate of authority to operate
substitutes an FCDU are authorized to engage in the
3) DOSRI loans in excess of ceilings 3 months following transactions in any acceptable
4) Poor asset quality foreign currency:
5) Violation of single borrowers
loan limit and investment limits.
a. Accept deposits and trust accounts
6) Past due obligation with the BSP (for banks authorized to engage in trust
or with any financial institution operations) from residents and non-
7) Unsafe and unsound banking 6 months residents;
practices
b. Deposit, regardless of maturity,
8) Inadequate accounting
records, systems, procedures with foreign banks abroad, OBUs and other
and internal controls FCDUs/EFCDUs;
9) Corporate governance c. Invest in readily marketable foreign
10)Compliance with banking currency denominated debt instruments. For
laws, rules and regulations,
orders or instructions of the
this purpose, readily marketable debt
Monetary Board and/or BSP instruments shall refer to debt instruments
Management that are quoted in an active market and the
11)Membership with the PDIC quoted prices are readily and regularly
available from an exchange, dealer,
In addition to requirements under broker, industry group, pricing service or
existing regulations, an RB/Coop Bank regulatory agency, and those prices
authorized to operate an FCDU shall: represent actual and regularly occurring
a. have the capacity to operate an market transactions on an arms length
FCDU. An RB/Coop Bank may, however, basis;
upgrade its capacity by appointing as Officer d. Grant short-term foreign currency
who will be in-charge of the FCDU loans as may be allowed by BSP
operations an individual (a) with actual regulations: Provided, That FCDUs of
experience in another bank as in-charge or RBs/Coop Banks shall not grant loans to

Section 72
09.12.31
producers/manufacturers, including oil iii. The debt instrument must have the
companies and public utility concerns; same maturity and interest rate.
e. Borrow, subject to existing rules on (2) The lending activity shall have prior
foreign/foreign currency borrowings, (i) from approval of the banks board of directors
EFCDUs, foreign banks abroad and OBUs, and shall be governed by adequate written
regardless of maturity; and (ii) from other policies and procedures duly approved by
FCDUs, on short-term maturity; the said board;
f. Engage in foreign currency-foreign (3) The securities lending shall be done
currency swaps with the BSP, OBUs and through reputable internationally
other FCDUs/EFCDUs; recognized and experienced third-party
g. Engage in securities lending lending agent/intermediary which must be
activities as lender subject to the following a regulated entity in its country of operation;
conditions: (4) The securities lending transaction
(1) The securities to be lent shall be shall be subject to a written legal agreement
limited to securities lodged under the account between the lending bank and the lending
Held for Trading (HFT) Financial Assets and agent which must clearly specify the:
Available for Sale (AFS) Financial Assets. (a) relationship as well as the
The use of Held to Maturity (HTM) respective duties and responsibilities of each
Financial Assets holdings shall also be counterparty;
allowed in securities lending subject to the (b) obligation of the borrower to
following conditions: redeliver a like quantity of the same issue
(a) The lending bank had the positive or series as the loaned securities;
intention and ability to maintain or recover (c) guidelines for selecting investments
control of the same or substantially similar for cash collateral, which shall include a
securities as those lent; provision that cash collateral will not be
(b) The counterpartys failure to reinvested in liabilities of the lender, its
redeliver the securities lent at maturity or at subsidiaries or affiliates; and
the date agreed upon could not have been (d) lending fee or compensation;
reasonably anticipated by the lender at the (5) The loaned securities must be fully
time of the transaction; and secured by debt securities of countries or
(c) In case of failure or default of the entities with highest credit quality, cash in
counterparty to redeliver the securities lent, currencies acceptable as part of
the same shall be immediately replaced by international reserves, letters of credit and
identical or substantially similar securities. certificates of deposits issued by banks with
For this purpose, a replacement security may highest credit quality. For this purpose, a
only be considered substantially similar to foreign country and a bank with highest
the securities lent or sold if all of the credit quality refer to a foreign country and
following circumstances are present: a bank given the highest credit rating by any
i. The security must have the same two (2) of the following internationally
primary obligor and must have the same accepted rating agencies:
guarantor under the same terms and
Rating Agencies Highest Rating
conditions, if guaranteed;
ii. The security must be identical in Moodys Aa3
form and type so as to give the same risks Standard and Poors AA
Fitch IBCA AA
and rights to the holder; and Others as may be approved by the Monetary Board

Section 72
09.12.31
Collateral value shall initially be at least these shall not be eligible for the thirty
102% of the current market value of the percent (30%) liquid asset cover.
loaned securities and maintained at 100% h. Engage in repurchase agreements
of the value of the loaned securities plus involving foreign currency denominated
accrued interest thereon during the course government securities subject to the
of the loan; following conditions:
(6) The lender shall do daily mark-to- (1) Such repurchase agreements shall
market on the loaned securities and on the be limited to:
securities where cash collateral is invested/ a. HFT and AFS securities held under
reinvested; the FCDU/EFCDU books;
(7) The lender shall require from the b. HTM securities holdings, subject to
lending agent/intermediary timely and the following conditions:
comprehensive reports on the lending i. The selling bank had the positive
activity; intention and ability to maintain or recover
(8) For proper identification and control of the same or substantially similar
monitoring, the outstanding book balance securities as those sold;
on the loaned securities shall be reclassified ii. The counterpartys failure to
to the sub-account Government Securities redeliver the securities sold at maturity or
(GS)/Debt Securities (DS) Lent under at the date agreed upon could not have been
Securities Lending and Borrowing reasonably anticipated by the seller at the
Transactions under the HFT/AFS/HTM time of the transaction;
Financial Asset accounts; iii. In case of failure or default of the
(9) The bank has in place a risk counterparty to redeliver the securities
management system commensurate to the sold, the same shall be immediately
nature, volume and complexity of its replaced by identical or substantially
operations and characterized by clear similar securities. For this purpose, a
delineation of responsibility for risk replacement security may only be
management, adequate risk measurement considered substantially similar to the
systems, appropriately structured risk securities sold if all of the following
limits, effective internal controls and circumstances are present:
complete, timely and efficient risk a. The security must have the same
reporting system: Provided, That this primary obligor and must have the same
requirement shall be automatically guarantor under the same terms and
considered complied with by banks with conditions, if guaranteed;
derivatives license; b. The security must be identical in
(10)The banks CAMELS composite form and type so as to give the same risks
rating in the last BSP regular examination is and rights to the holder; and
at least 3, with a minimum score of 3 c. The debt instrument must have the
on management; and same maturity and interest rate.
(11)The foreign currency denominated (2) For proper identification and
debt securities lent or used as collateral monitoring, the outstanding book
by the borrowing bank in securities balance of the government securities
lending and borrowing transactions shall sold under repurchase agreements are
be considered as eligible asset cover for to be reclassified to the sub-account GS
the 100% cover requirement. However, Sold under Repurchase Agreement

Section 72
09.12.31
under the HFT/AFS/HTM Financial Asset (2) That the maximum term of the resale
accounts; agreements shall be one (1) year; and
(3) The borrowings shall only be from (3) That such government securities
FCDUs/EFCDUs, non-resident financial purchased under resale agreements shall be
institutions and OBUs; classified as Loans and Receivables Arising
(4) The maximum term of the from Repurchase Agreements/Certificates of
repurchase agreements shall be one (1) year; Assignment/Participation with Recourse and
(5) The borrowings shall be booked Securities Lending and Borrowing
under Bills Payable and included in the Transactions.
computation of the total FCDU/EFCDU j. Issue Hybrid Tier 1 (HT1) capital
liabilities subject to the mandatory 100 instruments subject to the requirements
percent asset cover and thirty percent (30%) under existing regulations;
liquidity cover; k. Engage in USD-denominated
(6) The foreign currency-denominated repurchase agreements (R/P) with the BSP
debt securities sold or used as additional as provided under Subsection X601.1 of the
collateral in repurchase agreement shall be MORB, subject to the guidelines under
considered as eligible asset cover for the Appendix 13.
100% cover requirement. However, these Sanctions. Without prejudice to the
shall not be eligible for the thirty percent criminal and administrative sanctions
(30%) liquid asset cover; provided for under Sections 36 and 37,
(7) Banks shall, at all times, comply respectively, of Republic Act No. 7653,
with the 100% FCDU/EFCDU asset cover violation of any provision of Items 1.g.1
and thirty percent (30%) liquid asset cover; and 1.h.1.b of this Section pertaining to
and HTM financial assets, shall be considered
(8) Banks shall monitor and assess the a violation of the tainting provision under
risks inherent in these repurchase Subsection X388.5(b) of the MORB in
transactions. relation to Section 3.a of Appendix 33 of
The provisions/requirements under the MORB. In such a case, the entire HTM
Item g which are not inconsistent with the portfolio shall be reclassified to the AFS
foregoing shall be strictly observed by the category and the financial institution shall
bank concerned. be prohibited from using the HTM account
i. Purchase foreign currency during the year the violation was committed
denominated government securities under and for the succeeding two (2) full financial
resale agreements from other banks FCDU/ years. Failure to reclassify the HTM portfolio
EFCDU, non-resident financial institutions to AFS shall subject the bank and concerned
and OBUs, subject to the following officers to the penalties and sanctions
conditions: provided under Subsection X388.5(c) of the
(1) That the government securities MORB.
purchased shall be limited to those issued Moreover, the Monetary Board may at
by central governments and/or central banks its discretion, impose any or all of the
of foreign countries with the highest credit following sanctions to a bank and/or its
quality given by any two internationally director/s or officer/s found to be responsible
accepted rating agencies (i.e., currently the for violation of Item k of this Subsection:
equivalent of Standard and Poors AA- or a. Termination of eligibility and
Moodys Aa3 or better); pre-termination of any outstanding balance

Section 72
09.12.31
through repayment and/or sale of the h. On request/instructions of its foreign

collateral; correspondent bank, it may:
b. Fine of up to PHP30,000 per (1) issue letters of credit for a non-
transaction per day of violation reckoned resident importer in favor of a non-resident
from the time the violation was committed exporter;
up to the date it is corrected; (2) pay, accept, or negotiate drafts/bills
c. Suspension of interbank clearing of exchange drawn under the letter of credit;
privileges/immediate exclusion from and
clearing; (3) make payment to the order of the
d. Suspension of access to the BSP non-resident exporter.
rediscounting facilities; Provided, That the foreign correspondent
e. Suspension of lending or foreign bank shall deposit sufficient foreign
exchange operations or authority to accept exchange with the EFCDU issuing the letter
new deposits or make new investments; of credit to cover all drawings.
f. Revocation of authority to perform i. Engage in direct purchase of export
trust operations; bills of resident exporters subject to the
g. Revocation of quasi-banking following conditions:
license; (1) Export transactions covered by
h. Suspension for 120 days without usance or sight letters of credit, shall be
pay of the officers and/or directors allowed to be purchased by EFCDUs; and
responsible for the violation; and (2) Export bills negotiated/purchased by
i. Other sanctions as may be provided the banks Regular Banking Unit (RBU) and
by law. outstanding in its books shall not be allowed
2. UBs/KBs, which are authorized to to be purchased by its EFCDUs.
operate under the expanded foreign j. Engage in securities lending
currency deposit system may engage in the activities as lender subject to the conditions
following transactions in any acceptable as enumerated in Item "1.g" of this Section;
foreign currency: k. Engage in repurchase agreements
a. Accept deposits and trust accounts involving foreign currency denominated
(for banks authorized to engage in trust government securities subject to the
operations) from residents and non- conditions as enumerated in Item "1.h" of
residents; this Section, except Item "1.h(4)";
b. Deposit with foreign banks abroad, l. In v e s t i n f o r e i g n c u r r e n c y
OBUs and other FCDUs/EFCDUs; denominated structured products issued
c. Invest in foreign currency- by banks and special purpose vehicles
denominated debt instruments; (SPVs) of high credit quality subject to
d. Grant foreign currency loans as may the provisions in Section 1636 of the
be allowed by the BSP; MORB;
e. Borrow from other FCDUs/EFCDUs m. Purchase foreign currency
and from non-residents and OBUs, subject denominated government securities under
to existing rules on foreign borrowings; resale agreements from other banks FCDU/
f. Engage in foreign currency-foreign EFCDU, non-resident financial institutions
currency swap; and OBUs, subject to the following
g. Engage in foreign exchange trading, conditions:
and with prior BSP approval, engage in (1) That the government securities
financial futures and options trading; purchased shall be limited to those issued

Section 72
09.12.30
by central governments and/or central banks director/s or officer/s found to be responsible

of foreign countries with the highest credit for violation of Item o of this Subsection:
quality given by any two internationally a. Termination of eligibility and
accepted rating agencies (i.e., currently the pre-termination of any outstanding balance
equivalent of Standard and Poors AA- or through repayment and/or sale of the
Moodys Aa3 or better); and collateral;
(2) That such government securities b. Fine of up to PHP30,000 per
purchased under resale agreements shall be transaction per day of violation reckoned
classified as Loans and Receivables Arising from the time the violation was committed
from Repurchase Agreements, Certificates up to the date it is corrected;
of Assignment/Participation with Recourse, c. Suspension of interbank clearing
and Securities Lending and Borrowing privileges/immediate exclusion from
Transactions. clearing;
n. Issue Hybrid Tier 1 (HT1) capital d. Suspension of access to the BSP
instruments subject to the requirements rediscounting facilities;
under existing regulations; e. Suspension of lending or foreign
o. Engage in USD-denominated exchange operations or authority to accept
repurchase agreements (R/P) with the BSP new deposits or make new investments;
as provided under Subsection X601.1 of the f. Revocation of authority to perform
MORB, subject to the guidelines under trust operations;
Appendix 13. g. Revocation of quasi-banking
Sanctions. Without prejudice to the license;
criminal and administrative sanctions h. Suspension for 120 days without
provided for under Sections 36 and 37, pay of the officers and/or directors
respectively, of Republic Act No. 7653, responsible for the violation; and
violation of any provision of Items 2.j, and i. Other sanctions as may be provided
2.k of this Section pertaining to HTM by law.
financial assets, shall be considered a 3. Excess FCDU/EFCDU funds of
violation of the tainting provision under UBs/KBs may be lent to the regular banking
Subsec. X388.5(b) of the MORB in relation unit (RBU) to fund the latters on-balance
to Section 3.a of Appendix 33 of the MORB. sheet foreign exchange trade transactions,
In such a case, the entire HTM portfolio subject to the following conditions:
shall be reclassified to the AFS category and a. FCDU/EFCDU may lend funds to
the financial institution shall be prohibited the RBU only after it has fully complied with
from using the HTM account during the year the prescribed 100% asset cover/thirty
the violation was committed and for the percent (30%) liquid asset cover on FCDU/
succeeding two (2) full financial years. EFCDU liabilities;
Failure to reclassify the HTM portfolio to b. FCDU/EFCDU lending to the RBU
AFS shall subject the bank and concerned shall be -
officers to the penalties and sanctions (1) Capped at the lower of total
provided under Subsec. X388.5(c) of the outstanding balance on the RBUs on-
MORB. balance sheet foreign currency trade assets1
Moreover, the Monetary Board may at or thirty percent (30%) of the level of FCDU/
its discretion, impose any or all of the EFCDU deposit liabilities, computed at the
following sanctions to a bank and/or its average daily balance (using 2-month rolling
1
i.e., Customers' Liability on Import Bills-Foreign, Customers' Liability under Trust Receipts-Foreign, Customers' Liablity for
this Bank's Acceptances Outstanding-Foreign, Export Bills Purchased and Foreign Bills Purchased-Documentary, excluding
past due accounts and Items in Litigation.

Sections 72 - 73
09.12.31
data) as of end of the second week prior to reference month, a certification under oath
the reference week. Total outstanding (Appendix 14), signed by the Banks
balance of FCDU/EFCDU lending to the President or Country Manager, in case of
RBU shall, at all times, be within the local branch/subsidiary of foreign banks,
prescribed cap. Any breach thereon shall Compliance Officer and Head of Treasury,
be subject to the imposition of a monetary to the effect that, at any day of the
penalty of PHP30,000 per calendar day, reference month, the outstanding balance
commencing on the day the cap was on funds borrowed from FCDU/EFCDU
breached until the same is corrected; did not exceed the prescribed cap (i.e.,
(2) Charged interest at prevailing lower of total outstanding balance on
market rates, computed monthly at the RBUs on-balance sheet foreign currency
average daily balance of the receivable from trade assets or thirty percent (30%) of the
the RBU; and level of FCDU/EFCDU deposit liabilities)
(3) On short-term maturity, or for a and were utilized by the RBU solely for
period of one (1) year or less. Balances shall foreign currency trade transactions.
be settled, within a year from availment, by The foregoing rule shall be subject to
way of actual transfer of foreign currency quarterly review by the BSP.
assets from the RBU books to the FCDU/
EFCDU books. Section 73. Foreign Currency Cover
c. The lending transaction shall be Requirements. Depository banks under the
booked as Loans to RBU by FCDU/ foreign currency deposit and expanded
EFCDU in the FCDU/EFCDU books and foreign currency deposit systems shall
Loans by RBU from FCDU/EFCDU in the maintain at all times a 100% cover for their
RBU books; foreign currency liabilities, except for
d. The Loans to RBU by FCDU/ USD-denominated repurchase agreements
EFCDU account balance (net of (R/P) with the BSP. Provided, That
transactions outstanding for more than one violation of the terms and conditions of
(1) year) shall qualify as eligible asset cover, the USD- denominated R/P facility shall
but not as liquid asset cover, for FCDU/ subject the borrowings of the bank to the
EFCDU liabilities; FCDU/EFCDU asset and liquid asset cover
e. Banks shall establish and maintain requirements. For purposes of complying
systems to with this requirement, the principal offices
(1) monitor the foreign currency funds in the Philippines of the authorized banks
flow of RBU and the average daily balances and all their branches located therein shall
of foreign currency trade assets, with be considered as a single unit. The foreign
minimum database covering a two (2)- currency cover shall consist of the net
month rolling period; and carrying amount of the following:
(2) account for the utilization of funds 1. For banks authorized to operate an
borrowed from FCDU/EFCDU. FCDU:
The systems as well as periodic a. Foreign currency cash on hand;
reports generated therefrom shall be made b. Foreign currency checks and other
available to the BSP examiners for cash items;
verification. c. Due from BSP Foreign Currency;
f. Banks shall submit to the d. Due from other banks (other
appropriate BSP supervising department, FCDUs/EFCDUs, OBUs, and non-resident
within five (5) banking days from end of banks);

Section 73
09.12.31
e. Derivatives with Positive Fair Value loans to resident private sector borrowers
Held for Trading and/or Hedging to be serviced using foreign exchange
(Derivatives with Negative Fair Value Held purchased from entities that are not AABs
for Trading and/or Hedging shall require or AAB-forex corps under Section 24.1.a:
corresponding asset/liquid asset cover); Provided, That all applicable banking rules
f. Investments in readily marketable and regulations are complied with including
foreign currency-denominated debt single borrowers limit as provided in
instruments, booked under the following Section X303 of the MORB;
control accounts: (i) Held for Trading (HFT); h. Loans and receivables arising from
(ii) Designated at Fair Value through Profit repurchase agreements, certificates of
or Loss (DFVPL); (iii) Available for Sale assignment/participation with recourse, and
(AFS); and (iv) Held to Maturity (HTM). securities lending and borrowing
Foreign currency-denominated debt transactions, maturing within one (1) year;
securities sold/lent in repurchase agreement/ i. Foreign currency accrued interest
securities lending and borrowing income from financial assets;
transactions shall be considered as eligible j. Accounts receivable arising from
asset cover for the 100% asset cover sale of financial assets under the trade date
requirement. The same treatment shall accounting pending actual settlement/
likewise apply to foreign currency delivery of the underlying securities
denominated debt securities used as (Accounts payable arising from the purchase
additional collateral in repurchase of financial assets under the trade date
agreements or as collateral by borrowing accounting pending actual settlement/
bank in securities lending and borrowing receipt of the underlying securities shall
transactions. require corresponding asset/liquid asset
g. Foreign currency loans and cover);
receivables maturing within one (1) year k. Loans to RBU (net of transactions
authorized by the BSP, booked under the outstanding for more than one (1) year):
following: Provided, That the conditions under Item 3
i. Loans to BSP of Section 72 are complied with;
ii. Interbank loans receivable l. Receivable from the RBU book
iii. Loans and receivables others arising from the exercise of warrants paired
Loans and receivables authorized by the with ROP Global Bond Holdings in the
BSP shall refer to those granted pursuant to FCDU/EFCDU book: Provided, That it shall
this Manual and shall include the following: be settled by the RBU book to the FCDU/
(a) those with specific approval by the BSP EFCDU book within six (6) months from the
under Section 23 (Loans Requiring Prior BSP date of receipt of the Exchange Securities;
Approval); (b) those short term loans to and
resident private and public sector borrowers m. Such other assets as may be
which under existing regulations require no determined by the Monetary Board as
prior BSP approval but allowed to be eligible asset cover.
serviced using foreign exchange purchased 2. For banks authorized to operate an
from AABs or AAB-forex corps (i.e., loans EFCDU The foregoing accounts,
to commodity and service exporters, regardless of maturity, and in the case of
indirect exporters, producers/manufacturers, investment in foreign currency denominated
including oil companies and public utility debt instruments (including debt
concerns) under Section 24.4 (Loans Not instruments booked under Unquoted Debt
Requiring Prior BSP Approval); and (c) those Securities Classified as Loans and

Section 73
09.12.31
investments in structured products), a. Foreign currency cash on hand;

regardless of maturity and marketability, b. Foreign currency checks and other
shall all be considered as eligible asset cash items;
cover. Loans to resident private and public c. Due from BSP Foreign Currency
sector borrowers which under Section 24.4 with remaining maturity of one (1) year or
require no prior BSP approval and allowed less regardless of funding: Provided, That
to be serviced using foreign exchange such deposit/placement is not encumbered
purchased from AABs or AAB-forex corps or is not being utilized for any other
(i.e., loans to commodity and service purposes;
exporters, indirect exporters, producers/ d. Due from other banks (other
manufacturers, including oil companies and FCDUs/EFCDUs, OBUs and non-resident
public utility concerns) shall however have banks);
short term maturity. e. Investments in readily marketable
In addition, the following shall also be foreign currency denominated debt
considered as eligible asset cover: instruments, booked under the following
a. Loans and Receivables granted by control accounts: (i) HFT; (ii) DFVPL;
EFCDU pursuant to Section 24, i.e., those (iii) AFS; and (iv) HTM; except for the
loans of non-residents from EFCDUs, to be following: (a) those which are sold/lent in
serviced using foreign exchange purchased repurchase agreement/securities lending and
from entities that are not AABs or AAB-forex borrowing transactions and those used as
corps under Section 24.1.b: Provided, That additional collateral in repurchase
all applicable banking rules and regulations agreements or as collateral by borrowing
are complied with including single bank in securities lending and borrowing
borrowers limit as provided in Section X303 transactions; and (b) those investments in
of the MORB; structured products;
b. Outstanding Export Bills Purchased f. Loans and receivables authorized by
in the EFCDU books, booked under the the BSP booked under the following:
following control accounts: i. Loans to BSP maturing within one
i. Interbank loans receivable - if (1) year;
without recourse ii. Interbank loans receivable maturing
ii. Loans and receivables others - if within one (1) year;
with recourse iii. Loans and receivables others that
For this purpose, net carrying amount is any of the following:
shall refer to the gross amount of financial (1) Outstanding export bills purchased
asset, plus or minus, as the case may be, in the EFCDU books.
the following: (i) unamortized premium/ (2) Short-term EFCDU loans to
(discount) determined using the effective exporters in the form of export packing
interest method; (ii) any accumulated market credits, whether rediscounted or not under
gains/(losses) in the case of AFS financial BSPs Export Dollar Facility, up to the extent
assets; and (iii) any allowance for credit guaranteed by Trade and Investment
losses determined based on existing Development Corporation of the Philippines
regulations. (TIDCORP) or Small Business Guarantee
3. Further, at least thirty percent (30%) and Finance Corporation (SBGFC): Provided,
of the cover requirement for foreign That these credits are not overdue.
currency liabilities in the FCDU/EFCDU g. Loans and receivables arising from
shall be in the form of liquid assets as repurchase agreements, certificates of
follows: assignment/participation with recourse and

Sections 73 - 75
09.12.31
securities lending and borrowing c. In the case of foreign banks,

transactions, maturing within one (1) year; remittance of profits to their Head Office
and abroad.
h. Accounts receivable arising from Issuance by a bank of false/erroneous
sale of financial assets under the trade date certification that it has fully complied with
accounting pending actual settlement/ the FCDU/EFCDU cover requirements any
delivery of the underlying securities days of the reference month shall be subject
pertaining to readily marketable foreign to a maximum monetary penalty of
currency denominated debt instruments. PHP30,000 per day (reckoned from the date
The 100% asset cover and thirty percent the deficiency started until it is corrected)
(30%) to be held in the form of liquid assets without prejudice to the imposition on the
enumerated above, shall be unencumbered, erring bank and/or the concerned bank
except as otherwise provided in second officers, of the penal sanctions provided
paragraph of Item f of Section 73.1. under Sections 35 and 36 of Republic Act
The amended report (Appendix 15) on No. 7653.
compliance with FCDU/EFCDU cover The Due from Other Banks Non-
requirements shall form part of the Financial Resident (DFOB-Non-Resident) account
Reporting Package (FRP) issued under representing cover for foreign currency
Subsec. X162.16 of the MORB. The bank liabilities of FCDU/EFCDU shall be kept
shall continue to submit to the BSP- separate and distinct from the DFOB Non
Supervisory Data Center (SDC) a Resident account for the regular banking
certification (Appendix 15.1) under oath and unit (RBU).
signed by the banks President or Country
Manager, in the case of local branch of Section 74. Foreign Currency Deposits
foreign banks, Compliance Officer and with the Bangko Sentral. Foreign currency
Head of Treasury, to the effect that the bank deposit with the BSP equivalent to at least
has fully complied with the FCDU/EFCDU fifteen percent (15%) as a form of foreign
cover requirements on all banking days of currency cover referred to in Section 4 of
the reference quarter. Republic Act No. 6426, as amended, shall
Sanctions: Non-compliance with the be optional on FCDUs/EFCDUs of UBs/
prescribed 100% FCDU/EFCDU asset KBs and FCDUs of TBs and RBs/Coop
cover and/or thirty percent (30%) liquid Banks. The BSP may pay interest on the
asset cover requirements shall be subject to foreign currency deposit and if requested,
the imposition of a monetary penalty of one- shall exchange the foreign currency notes
tenth of one percent (1/10 of 1%) of the and coins into foreign currency instruments
deficiency, converted to its peso equivalent drawn on its depository banks.
at the exchange rate prevailing on the date
the deficiency was incurred but not to Section 75. Currency Composition of the
exceed PHP30,000 per deficiency, per Cover. FCDUs of TBs and RBs/Coop Banks
calendar day. Compliance for at least six (6) shall maintain the foreign currency cover
months of the FCDU/EFCDU cover in the same currency as that of the
requirement is a pre-condition for the corresponding foreign currency deposit
following: liability.
a. Declaration of cash dividends; FCDUs/EFCDUs of UBs/KBs shall
b. Banks application for branching; maintain not less than seventy percent
and (70%) of the foreign currency cover in the

Sections 75 - 84
09.12.31
same currency as that of the liability and amended. Depositors are entitled to receive
thirty percent (30%) or less, at the option of payment in the same currency in which the
the FCDU/EFCDU, may be denominated in insured deposits are denominated.
other acceptable foreign currencies.
Section 80. Rates of Interest. Foreign
Section 76. Secrecy of Deposits. Pursuant currency deposits shall not be subject to
to Republic Act No. 6426, as amended, all interest rate ceilings.
foreign currency deposits are declared as
and considered of an absolutely Section 81. Eligibility as Collateral. Deposits
confidential nature and, except upon the under the foreign currency deposit system
written permission of the depositor, or are eligible as collateral for peso loans or
pursuant to a lawful order issued by a for foreign currency loans to residents and
competent court, in no instance shall such non-residents.
foreign currency deposits be examined,
inquired or looked into by any person, Section 82. Taxes. Pursuant to the National
government official, bureau or office Internal Revenue Code of 1997, as amended
whether judicial, administrative or and its Implementing Rules and Regulations,
legislative, or any other entity whether any income of non-residents (whether
public or private. individuals or corporations) from
transactions with depository banks covered
Section 77. Numbered Accounts. Pursuant under this Chapter shall be exempt from
to Section 9 of Republic Act No. 9160 (The income tax. Interest income derived by
Anti-Money Laundering Act of 2001) dated residents (whether individuals or
29 September 2001, as amended, and its corporations) from depository banks covered
Revised Implementing Rules and under this Chapter shall be subject to a final
Regulations, foreign currency non-checking income tax at the rate of seven and one-half
numbered accounts shall be allowed: percent (7.5%) of such interest income. The
Provided, that the true identity of the transactions of FCDUs/EFCDUs shall,
customers of all foreign currency non- however, be subject to such taxes as
checking numbered accounts are provided under the National Internal
satisfactorily established based on official Revenue Code, as amended and its
and other reliable documents and records Implementing Rules and Regulations.
and the information and documents required
are obtained and recorded by the bank. Section 83. Exemption from Court Order
or Process. Subject to the provisions of
Section 78. Withdrawability and Republic Act No. 9160, as amended,
Transferability of Deposits. There shall be foreign currency deposits shall be exempt
no restrictions on the withdrawal by the from attachment, garnishment, or any other
depositor of his deposit or on the transfer order or process of any court, legislative
of the same abroad except those arising from body, government agency or any
the contract between the depositor and the administrative body whatsoever.
bank.
Section 84. Accounting. The foreign
Section 79. Insurance Coverage. Foreign currency deposits and their corresponding
currency deposits shall be insured under the cover shall be considered as funds separate
provisions of Republic Act No. 3591, as and distinct from the regular assets and

Sections 84 - 87
09.12.31
liabilities of the AABs. AABs shall maintain the banks compliance with the provisions
a separate accounting for transactions of law and these regulations.
covered by these rules that will enable
preparation of the Balance Sheet and Income Section 86. Prospective Effect of
Statement covering said funds. Regulations. In the event a new enactment
For purposes of preparing the FCDU/ or regulation is issued decreasing the rights
EFCDU financial statements, the bank shall hereunder granted, such new enactment or
use the US dollar (USD) as its functional regulation shall not apply to foreign
currency. However, for purposes of currency deposits already made or existing
consolidating the FCDU/EFCDU financial at the time of issuance of such new
statements with the RBU financial enactment or regulation, but such new
statements, these shall be translated into the enactment or regulation shall apply only to
presentation currency, i.e. Philippine Peso foreign currency deposits made after its
(PHP). issuance.
The transfer of net realized/unrealized
losses recognized in profit or loss and equity Section 87. Sanctions
and Undivided Profits/(Losses) from FCDU/ 1. Any willful violation of Republic
EFCDU to the Regular Banking Unit (RBU) Act No. 6426, as amended, or any
shall be subject to the guidelines and regulation duly promulgated by the
conditions under Appendix 16. Monetary Board pursuant thereto shall
The policy guidelines on the conversion subject the offender upon conviction to
and transfer of foreign currency- an imprisonment of not less than one (1)
denominated loans, and Real and Other year nor more than five (5) years or a fine
Properties Acquired (ROPA) in the books of not less than Five Thousand Pesos
of the FCDU/EFCDU to peso loans and (PHP5,000.00) nor more than Twenty-
ROPA in the books of the RBU shall be Five Thousand Pesos (PHP25,000.00), or
subject to the conditions provided under both such fine and imprisonment at the
Appendix 17. discretion of the court.
Banks which are authorized to operate The BSP may revoke or suspend the
under this Chapter shall submit to the BSP- authority of a bank to accept new foreign
SES a separate audited financial statement currency deposits for violation of Republic
(Category B report) of the FCDU/EFCDU for Act No. 6426, as amended, or these
the past year within ninety (90) calendar regulations, or if such bank ceases to possess
days after the start of the audit which audit the minimum qualifications required.
shall start not later than thirty (30) calendar 2. Delayed submission of report by
days after the close of the calendar/fiscal year a bank and/or submission of erroneous/
adopted by the bank in accordance with the incomplete report shall be subject to the
provisions of Section X166 of the MORB. monetary penalties under Section 103.
3. Any violation of the provisions of
Section 85. Supervision. The Governor and this Chapter shall be subject to Section 37
the head of the appropriate department of of Republic Act No. 7653. The guidelines
the BSP personally, or by deputies, are for the imposition of monetary penalty for
authorized to verify the books of account violations/offenses with sanctions falling
and transactions of each AAB, to verify the under Section 37 of Republic Act No. 7653
eligible cover, as well as review all other on banks, their directors and/or officers are
requirements under these regulations and shown in Appendix 67 of the MORB.

Sections 88 - 89
09.12.31
PART FOUR. FOREIGN EXCHANGE transactions involving the Philippine peso

FORWARDS AND SWAPS AND OPEN between authorized dealer banks and their
FOREIGN EXCHANGE POSITION OF customers.
BANKS
Section 89. Definition of Terms
Chapter I Customers shall refer to: (a) resident
banks (other than KBs and UBs), and non-
FOREIGN EXCHANGE FORWARDS bank BSP supervised entities (NBBSEs) not
AND SWAPS INVOLVING THE authorized to engage in foreign exchange
PHILIPPINE PESO forwards and swaps as dealers; (b) resident
non-bank entities; and (c) non-residents,
Section 88. General Policy. It is the policy both banks and non-banks.
of the BSP to support the deepening of the Foreign exchange obligation shall
Philippine financial markets. In line with refer to an actual commitment to repatriate
this policy, customers may, through foreign or pay to a non-resident or any AAB a
exchange forwards, hedge their market risks specific amount of foreign currency on a
arising from foreign exchange obligations pre-agreed date.
and/or exposures: Provided, That forward Foreign exchange exposure shall refer
sale of foreign exchange (deliverable and to foreign exchange risk arising from an
non-deliverable) may only be used when existing commitment which will lead to an
the underlying transaction is eligible for actual payment of foreign exchange to, or
servicing using foreign exchange purchased receipt of foreign exchange assets from, non-
from AABs or AAB-forex corps. Customers residents or any AAB based on verifiable
may, likewise, cover their funding documents on deal date. Foreign exchange
requirements through foreign exchange risks arising from BSP-registered foreign
swaps. investments without specific repatriation
AABs may only engage in foreign dates are considered foreign exchange
exchange forwards and swap transactions exposures.
with customers if the latter is hedging market Foreign exchange swap shall refer to
risk or covering funding requirements. There a transaction involving the actual exchange
shall be no double/multiple hedging such of two currencies (principal amount only)
that at any given point in time, the total on a specific date at a rate agreed on deal
notional amount of the foreign exchange date (the first leg), and a reverse exchange
derivatives transaction/s shall not exceed the of the same two currencies at a date further
amount of the underlying foreign exchange in the future (the second leg) at a rate
obligation/exposure. (different from the rate applied to the first
The customer shall no longer be allowed leg) agreed on deal date.
to buy foreign exchange from AABs or AAB- Foreign exchange forward shall refer
forex corps for foreign exchange obligations/ to a contract to purchase/sell a specified
exposures that are fully covered by amount of currency against another at a
deliverable foreign exchange forwards and specified exchange rate for delivery at a
foreign exchange swaps. specified future date three or more business
The following guidelines, as well as days after deal date.
minimum documentary requirements, shall Non-Deliverable Forward (NDF) shall
cover foreign exchange forward and swap refer to a foreign exchange forward contract

Sections 89 - 92
09.12.31
where only the net difference between the pretermination of the contract due to
contracted forward rate and the market rate prepayment of the underlying obligation or
at maturity (i.e., the fixing rate) shall be exposure: Provided, That for foreign
settled on the forward date. currency loans, prior BSP approval has been
obtained for the prepayment and a copy of
Section 90. Documentation. Minimum such approval is presented to the AAB
documentary requirements for foreign counterparty.
exchange forward and swap transactions b. Foreign Exchange Swaps
listed in Appendix 18 shall be presented on No restriction on tenor.
or before deal date to AABs unless c. Settlement of NDFs
indicated. All NDF contracts with residents shall
Foreign exchange selling AABs shall be settled in pesos.
stamp the supporting documents upon d. Remittance of foreign exchange
presentation by customers as follows: proceeds of deliverable forward and swap
a. For hedging transactions: FX contracts
HEDGED/DELIVERABLE or FX HEDGED/ Foreign exchange proceeds of
NON-DELIVERABLE; deliverable forward and swap contracts shall
b. For funding transactions: FX be delivered by the AAB counterparty
SOLD, directly to the beneficiaries concerned
except for foreign investments where said
indicating the contract date and amount FX proceeds are reconverted to Philippine
involved, and signed by the AABs pesos and re-invested in eligible peso
authorized officer. Copies of all duly marked instruments such as those listed in Item
supporting documents shall be retained by A.2.2 of Appendix 18. For this purpose,
AABs and made available to the BSP for beneficiaries shall refer to the FCDU/
verification. The retained copies shall also EFCDU of a bank or a non-resident entity
be marked DOCUMENTS PRESENTED AS (e.g., creditor, supplier, investor) to whom
REQUIRED and signed by the AABs the customer is committed to pay/remit
authorized officer. foreign exchange.
Section 91. Tenor/Maturity and Settlement Section 92. Forward Contracts with Non-
a. Forward Sale of Foreign Exchange residents
(whether deliverable or non-deliverable) All forward contracts to sell foreign
The tenor/maturity of such contracts exchange to non-residents (including OBUs)
shall not be longer than: with no full delivery of principal, including
(i) the maturity of the underlying cancellations, roll-overs/renewals shall be
foreign exchange obligation; or submitted to the BSP for prior clearance.
(ii) the approximate due date or However, every roll-over of short-term (ST)
settlement of the foreign exchange exposure. deliverable forward contracts with non-
For deliverable foreign exchange forward residents need not be prior approved:
contracts, the tenor/maturity shall be Provided, That:
co-terminus with the maturity of the 1. The underlying transaction for each
underlying obligation or the approximate ST deliverable foreign exchange forward
due date or settlement of the foreign contract is a foreign investment in long-term
exchange exposure. This shall not preclude (LT) Philippine government securities for

Sections 92 - 95
09.12.31
which a Bangko Sentral Registration the counterparty signature on pertinent

Document (BSRD) has been issued; documents; and
2. The roll-over is effected during the d. Mark-to-Market Test the booking
tenor of the underlying LT Philippine or recording in the books of accounts of the
government securities; profit or loss on contracts and cash flows/
3. The actual delivery/settlement of the settlement to counterparties must be fully
forward contract coincides with the date supported by appropriate documents such
of the intended capital repatriation of the as authenticated copy of debit/credit tickets,
BSP-registered investments; schedules showing among others, mark-to-
4. The value of the forward contract market valuation computation, etc.
does not exceed the foreign currency
equivalent of the maturity value/net Section 94. Reporting Requirements
proceeds of the BSP-registered investments Banks duly authorized to engage in
computed at the agreed forward exchange derivatives transactions shall continue to be
rate; and covered by the BSPs existing reporting
5. The repatriation of capital and requirements on financial derivatives.
remittance of income for the BSP- Cancellations, roll-overs or non-delivery of
registered investment complies with deliverable foreign exchange forward
documentary requirements under existing contracts and under the forward leg of swap
BSP rules. contracts shall be reported electronically in
excel format to the BSP not later than five
Section 93. Cancellations, Roll-overs or (5) banking days after reference month using
Non-delivery of Deliverable Foreign the prescribed format in Annex L.
Exchange Forward and Swap Contracts Swap contracts with counterparties
All cancellations, roll-overs or non- involving purchase of foreign exchange by
delivery of all foreign exchange banks at the initial leg shall likewise be
deliverable forward contracts and the reported electronically in excel format to the
forward leg of swap contracts shall be BSP not later than five (5) banking days after
subject to the following guidelines to reference month using the prescribed format
determine the validity thereof: in Annex M .
a. Eligibility Test - Contracts must be The reports shall be transmitted to the
supported by documents listed in International Operations Department at
Appendix 18; [email protected], copy furnished the
b. Frequency Test - the Supervisory Data Center (SDC) at the
reasonableness of the cancellation, roll-over following addresses: sdcfxkbdom@
or non-delivery shall be based on the results bsp.gov.ph (for Domestic Banks) and
of the evaluation of the justification/ [email protected] (for Foreign Banks).
explanation submitted by banks as
evidenced by appropriate documents; Section 95. Non-Bank BSP-Supervised
c. Counterparty Test the Entities (NBBSEs)
cancellation or roll-over of contracts must NBBSEs that may subsequently be
be duly acknowledged by the counterparty authorized to engage in foreign exchange
to the contract as shown in documents forwards and swaps as dealers shall
submitted by banks, e.g., there should be likewise be covered by the provisions of
conforme of counterparty as evidenced by this Chapter.

Sections 96 - 99
09.12.31
Chapter II (e) appraisal increment reserves

(revaluation surplus) arising from an
OPEN FOREIGN EXCHANGE appreciation or an increase in the book
POSITION OF BANKS value of bank assets.
Permanently assigned capital shall
Section 96. General Policy. It is the policy refer to the minimum capital required for
of the BSP to promote the growth and branches of foreign banks in the
development of the foreign exchange market. Philippines to be inwardly remitted and
It is also recognized that banks are the main converted into pesos.
players in this market, primarily in their role Unimpaired capital of foreign banks,
as market-makers 1. Thus, in order to for purposes of this Chapter, shall be
ensure that banks are able to provide ample defined as permanently assigned capital
liquidity in the market but, at the same time, plus the Net Due To Head Office
conduct their business in a sound manner, account: Provided, That the amount of Net
and guard against speculative activity, limits Due To Head Office that may be added
on their net open foreign exchange position to the permanently assigned capital of
are instituted. foreign banks that are UBs shall not
exceed the equivalent of six (6) times the
Section 97. Definition of Terms permanently assigned capital. Provided
Open Foreign Exchange Position shall further; That the amount of Net Due To
refer to the extent that banks foreign Head Office that may be added to the
exchange assets do not match their foreign permanently assigned capital of foreign
exchange liabilities. An open position may banks that are KBs shall not exceed the
either be positive, long, or overbought equivalent of eight (8) times the
(i.e., foreign exchange assets exceed foreign permanently assigned capital.
exchange liabilities) or negative, short,
or oversold (i.e., foreign exchange Section 98. Allowable Open Foreign
liabilities exceed foreign exchange assets). Exchange Position. Banks allowable open
Unimpaired capital shall refer to a foreign exchange position (either
banks total capital net of (a) such overbought or oversold) shall be the lower
unbooked valuation reserves and other of 20 percent (20%) of their unimpaired
capital adjustments as may be required by capital or USD50 million.
the BSP; (b) total outstanding unsecured Any excess of the allowable limit shall
credit accommodations, both direct and be settled on a daily basis.
indirect, to directors, officers, Penalties on excess overbought and
stockholders, and their related interests oversold positions of banks when PDS
(DOSRI); (c) deferred income tax; (d) trading is suspended shall be waived.
equity investment of a bank in another
bank or enterprise whether foreign or Section 99. Computation of Foreign
domestic, if the other bank or enterprise Exchange Position. Banks open foreign
has a reciprocal equity investment in the exchange position shall be computed daily
investing bank, in which case, the based on their FX Form 1. The guidelines
investment of the bank or the reciprocal on the computation of foreign exchange
investment of the other bank or position of banks and reporting
enterprises, whichever is lower; and requirements are outlined in Appendix 19.
1
There are two facets to this role. First, banks must be able to quote rates to their customers at which they stand ready to buy
and sell currencies. Second, banks themselves may take open positions in currencies.

Sections 100 - 101
09.12.31
Section 100. Sanctions. The following Non-Monetary Sanctions

sanctions shall be imposed on banks "chronic" violation suspension of bank's
found in violation of the net open foreign rediscounting privileges,
exchange position limits: cash dividend declaration
a. A bank is considered immediately and branching privileges
in violation of the open foreign exchange until the violation is
corrected but in case shall
position limit on the day it exceeds such
such suspension be less
limit. Such bank shall be subject to the
than 30 calendar days
following monetary penalties: "abusive" violation suspension of bank's
rediscounting privileges,
Per Calendar Month Daily Penalty
cash dividend declaration
1st calendar day of violation PHP10,000.00 and branching privileges
2nd calendar day of violation PHP20,000.00 until the violation is
3rd calendar day of violation, PHP30,000.00 corrected but in no case
and onwards, or if the excess
shall such suspension be
open foreign exchange position
of the bank is thirty percent (30%) less than 60 calendardays.
or more of the allowable limit in
any calendar day, regardless of
whether a bank is in first, second,
c. The Monetary Board may impose
third or more days of violation other non-monetary sanctions on a bank
for violations determined by BSP as
b. In addition, the following non- chronic or abusive on a case-to-case
monetary sanctions shall be imposed on basis, pursuant to Section 37 of Republic
the bank committing violations Act No. 7653.
considered as:
1 ) chronic, that is, when the PART FIVE. GENERAL PROVISIONS
violation continues beyond three (3)
banking days within a calendar month, Chapter I
but the excess position is less than thirty
percent (30%) of the allowable limit; and REPORTS AND POST VERFICATION
2) abusive, that is, when the
violation continues beyond three (3) Section 101. Reportorial Requirements.
banking days within a calendar month and The following reports are required to be
the excess position is thirty percent (30%) submitted to the BSP by AABs, OBUs, and
or more of the allowable limit. AAB-forex corps when applicable:
Title of Report Submission Submission Process

Frequency/Deadline
Category A. Consolidated Report on Foreign Exchange Assets and Liabilities
For UBs/KBs
A-3 FX Form 1, Main Report Weekly, within five (5) email to DES at
banking days after end of der.itrs@bsp. gov. ph
reference week
A-3 FX Form 1, Schedule 1 Weekly, within five (5) email to DES at
banking days after end of [email protected]
reference week
A-3 FX Form 1, Schedules 2 to 7, Weekly, within five (5) email to DES at
9 to 12 banking days after end of [email protected]
reference date (hard copy of Schedule
10 & 11 to ID)

Section 101
09.12.31

Frequency/Deadline
Sworn Certification FX Form 1 Weekly, within three (3) Hard copy to DES
Main Report and Schedules banking days after
2 to 7, 9 to 12 (Annex T) submission deadline for the
covered reports/schedules
A-3 FX Form 1, Schedules 8 &13 Daily, within two (2) email to SDC at
banking days after end of [email protected] or sedi-
reference date [email protected]
Sworn Certification FX Form 1 Weekly, within three (3) Hard copy to SDC
Schedules 8 &13 (Annex U) banking days after end of
reference week
A-3 FX Form 1, Schedule 14 Monthly, within 15 banking email to SDC at
days after end of reference [email protected] or sedi-
month [email protected]
A-3 Consolidated Foreign Exchange Daily, within three (3) Hard copy to SDC
Position Report banking days from
reference date
For TBs:
B FX Form 1A, Main Report and Monthly, within ten (10) e-mail to DES at
Schedules 2 to 9 banking days after end of [email protected]
reference month
B. Foreign Trade Transactions
A-3 Report on Export Proceeds Weekly, within five (5) e-mail to DES at
FX Form 1, Schedule 9 banking days after end of [email protected]
reference week
A-3 Report on Import Letters of Credit -do- e-mail to DES
(L/Cs) Opened and DA-OA Import [email protected]
Availments and Extensions, FX (hard copy to ID)
Form 1, Schedule 10
A-3 Report on Import Payments -do- e-mail to DES
FX Form 1, Schedule 11 [email protected]
(hard copy to ID)
Monthly Report on Sale/Remittance Monthly, within the first five Hard copy to ID
of Foreign Exchange (FX) for (5) banking days of the
Advance Payment of Importations month succeeding the date
up to USD100,000.00 (Annex B) of foreign exchange sale
Monthly Report on Purchase of Monthly, within the first five Hard copy to ID
Foreign Exchange (FX) from (5) banking days of the
Refund of Advance Payment of month succeeding the
Importations up to USD100,000.00 receipt of the refund
(Annex C)
C. Foreign Currency Loans and Related Transactions
A-2 Report on Bank Liabilities to Non- Monthly, within fifteen (15) email to ID at
Residents (including hard copy of banking days after end of [email protected]
Certification for correctness and reference month
consistency with FRP), ID-Form 5
B Consolidated Report on Loans Monthly, within fifteen (15) Hard copy and
Granted by FCDUs, IOS Form 4 banking days after end of diskette to ID
reference month

Section 101
09.12.31

Frequency/Deadline
B Report on Guarantees Issued by Quarterly, within fifteen (15) Hard copy to ID
Local Banks and Financial banking days from end of
Institutions in Favor of Non- reference quarter
Residents, R-1 (Annex G)
B Report on Foreign Guarantees Quarterly, within fifteen (15) Hard copy to ID
Securing Loans of Residents from banking days from end of
Local Banks and Financial reference quarter
Institutions, R-4 (Annex H)
B Report on Cancellations, Monthly, within five (5) email to ID at
Roll-overs and Non-delivery of banking days after end of [email protected]
Deliverable Foreign Exchange reference month
Forward Purchase and Sale
Contracts and Forward Leg of Swap
Contracts (Annex L)
B Report on Foreign Exchange -do- -do-
Swaps with Customers where the
First Leg is a Purchase of Foreign
Exchange Against Pesos (Annex M)
D. FCDUs/EFCDUs
Report on Inventory of Philippine Weekly, within three (3) Original to SDC
Debt Papers banking days after end of
reference week
Sworn Certification on Monthly, within five (5) Hardcopy to SDC
FCDU/EFCDU Lending to RBU banking days from end of
(Appendix 14) reference month
B Audited Financial Statement of Annually, within ninety (90) Hardcopy to
FCDU/EFCDU calendar days after the start appropriate SES
of audit which audit shall department
start not later than thirty
(30) calendar days after the
close of the calendar/fiscal
year adopted by the bank
A-2 Report on Compliance with Quarterly, within fifteen (15) Generated by SDC
FCDU/EFCDU Cover Requirements banking days after end of using FRP data
(Appendix 15) reference quarter submitted by bank
Sworn Certification of Compliance Quarterly, within fifteen (15) Hardcopy to SDC
with FCDU/EFCDU Cover banking days from end of
Requirements (Appendix 15.1) reference quarter
E. Offshore Banking Units
Statement of Assets and Liabilities Monthly, within fifteen (15) hard copy to SDC
banking days after end of
reference month
Schedule 1 Maturity Profile of -do-
Sources and Uses of Funds
Schedule 2 Page 1 Currency -do-
Classification of Funds (In US
Dollars)
Schedule 2 Page 2 Currency -do-
Classification of Funds (In Original
Currencies)

Section 101
09.12.31

Frequency/Deadline
Schedule 3 Country Classification Monthly, within fifteen (15)
of Interbank Funds/Non-Bank banking day after end of
Funds reference month
Schedule 4A Report on Loans -do-
Granted by OBUs: Part I Credit
Information (In Original Currencies)
Schedule 4B Report on Loans -do-
Granted by OBUs: Part II Credit
Status
Schedule 4C Loans and -do-
Discounts Residents: By
Borrower/By Economic Activity/By
Status
Schedule 5 Investments in Bonds -do-
and Other Debt Instruments (In
Original Currencies and USD
Equivalent)
Schedule 5A Investments in -do-
Bonds and Other Debt Instruments
Issued by Residents
Schedule 6 Indebtedness Among -do-
Banks Operating in the Philippines
Schedule 7 Report on OBU -do-
Liabilities to Non-Residents (In
Original Currencies and USD
Equivalent)
Schedule 8 Report on Spot and -do-
Forward Foreign Exchange
Transactions of OBUs
Schedule 9 Report of Foreign -do-
Exchange Flows
Schedule 9A Foreign Exchange -do-
Actually Sold to Authorized Agent
Banks (AABs)
Schedule 9B Details of -do-
Investment Receipts/Disbursements
Statement of Earnings and Semi-annual, within fifteen
Expenses, BSP 6.40.02 (15) banking days after end
of reference semester
Financial Assistance and Training Annually, within ten (10)
Granted by OBUs to its Filipino banking days after end of
Staff reference year
Updated List and Bio-Data of Annually, within ten (10)
Expatriates banking days after end of
reference year
F. Representative Offices of Foreign Banks
FX Cash Receipts and Cash Monthly, within ten (10) hard copy to SDC
Disbursements banking days after end of
reference month

Sections 101 - 103
09.12.31

Frequency/Deadline
Annual Report of Head Office Within five (5) months after hard copy to SDC
end of fiscal/calendar year
G. Custodian Banks/Remitting AABs
A-2 Statement of Remittance Report Daily, within two (2) hard copy to ID
(for Registered Foreign Direct banking days from date of
Investments), together with actual remittance
supporting documents under Items
C.1(b) and C.2 of Appendix 1 and
Appendix 11)
A-2 Consolidated Daily Foreign Portfolio Daily, within two (2) e-mail to ID at
Investment Registration and banking days from [email protected]
Outward Remittance Report, transaction date and hard copy to ID
together with supporting documents
under Items C.1(a) and C.2 of
Appendix 1 and Appendix 10 and 11
H. AAB-forex corps
Report on Foreign Exchange Weekly, within five (5) e-mail to DES
Transactions banking days after end of
reference week
Section 102. Procedures for Reporting. C. For Reports of Representative

Reports shall be filed with the BSP Main Offices of Foreign Banks and Reports of
Office or with the BSP Regional Offices UBs/KBs, TBs, and RBs/Coop Banks Not
or by sending them by mail or special Classified as Category A or B Reports:
delivery, unless otherwise specified. a. PHP100 per calendar day for the
The date of acknowledgment of receipt first five (5) successive calendar days of
on the copy of the report (if mailed) delay
shall be considered as the date of b. PHP150 per calendar day for the
submission. next five (5) successive calendar days of
delay
Section 103. Fines and Penalties c. PHP200 per calendar day after the
1. The following schedule of fines first ten (10) successive calendar days of
for delayed submission of reports and/ delay until the particular report has been
or incomplete/erroneous reporting shall filed.
apply: D. For Reports of OBUs
A. For Category A-1, A-2, and A-3 PHP500 per calendar day except for
reports: the following reports where the above
a. UBs/KBs : PHP 1,200 per calendar fines and penalties for representative
day offices of foreign banks shall apply:
b. TBs : PHP 600 per calendar day
a. Statement of Earnings and
c. RBs/Coop Banks : PHP 180 per calendar day
Expenses;
b. Financial Assistance and Training
B. For Category B reports:
Granted by OBUs to its Filipino Staff;
a. UBs/KBs : PHP 240 per calendar day
and
b. TBs : PHP 120 per calendar day
c. RBs/Coop Banks : PHP 60 per calendar day
c. Updated List and Bio-Data of
Expatriates.

Sections 103 - 106
09.12.31
E. For Reports of AAB-Forex corps Chapter II

PHP 1,000 per calendar day of delay
until complied FINAL PROVISIONS
F. Chronic delayed reporting including
submission of amended reports required for Section 105. Compliance with Anti-Money
FX Form 1 shall be subject to an additional Laundering Rules
monetary penalty of PHP 2,000.00 per All transactions under this Manual shall
banking day until the respective report and comply with existing regulations on anti-
schedules are correctly submitted. money laundering pursuant to the
Submission of delayed reports, including provisions of Republic Act No. 9160, as
amended reports, shall be considered amended.
chronic based on the following:
Section 106. Penal Sanctions. Any person
Name of Report/ Frequency of No. of times
Schedule Submission delay violating the provisions of this Manual
Schedules 8 & 13 Daily More than seven shall suffer the penalties prescribed under
(7) times delayed Section 36 of Republic Act No. 7653.
per month
Main Report, Weekly At least two (2) Administrative sanctions may also be
Schedules 2 - 7 times delayed per imposed upon institutions within BSPs
and 9 - 12 month or five (5)
banking days of
administrative authority found violating
continuous delay this Manual, including their directors and
from submission officers responsible for such violation.
deadline
Schedule 14 and Monthly More than two These penalties may be any or all of
Reconciliation (2) times delayed the following as circumstances warrant:
Statement per semester or 1. Monetary sanction - The amount
ten (10) banking
days of continuous of PHP30,000.00 penalty imposed per day
delay from the per violation committed shall be based on
submission
deadline
a per transaction basis;
2. Non-monetary sanction - This shall
2. Manner of payment or collection of be based on the gravity of the offense or
fines: violation:
a. Fines shall be collected through a. Reprimand of bank officers who
debit to the AABs current account deposit approved the transaction;
maintained with the BSP by the Financial b. Suspension of bank officers who
Accounting Department upon receipt of approved the transaction;
notice from the department/s concerned; or c. Suspension of directors (for local
b. In case payment of fines is effected banks) and Country Manger (for foreign banks);
through check or cash, the same shall be d. Permanent disqualification of bank
remitted to the Cash Department of the BSP officers/directors;
through the department/s concerned. e. Reduction or suspension of
overbought/oversold limits;
Section 104. Post-Verification. Post- f. Suspension of opening of L/Cs
verification of foreign exchange transactions and over-the-counter sale of foreign
covered by this Manual and reported under exchange for a period of up to six (6)
Section 101 hereof shall be undertaken by months;
the BSP to verify compliance with the g. S u s p e n s i o n o f d e r i v a t i v e s
provisions of this Manual and for monitoring activities for a period of up to six (6)
purposes. months; and

Sections 106 - 108/Glossary
11.12.31
h. Suspension of FCDU/EFCDU entity, or vice-versa;

authority for a period of up to six (6) months. b. Interlocking directorship or
officership, except in cases involving
Section 107. Repealing Clause. All existing independent directors as defined under
BSP rules and regulations on current existing regulations;
accounts, capital accounts, OBUs, c. Common stockholders owning ten
representative offices of foreign banks, percent (10%) to fifty percent (50%) of the
FCDUs/EFCDUs, foreign exchange outstanding voting stock of each financial
forwards and swaps involving the Philippine intermediary and the entity;
peso, and open foreign exchange position d. Management contract or any
of banks, as well as all other existing BSP arrangement granting power to the bank to
rules and regulations or parts thereof which direct or cause the direction of management
are inconsistent with or contrary to the and policies of the entity, or vice-versa; and
provisions of this Manual are hereby e. Permanent proxy or voting trusts in
repealed or modified accordingly: Provided, favor of the bank or quasi-bank constituting
That regulations, violations of which are the ten percent (10%) to fifty percent (50%) of
subject of pending actions or investigations, the outstanding voting stock of the entity,
shall not be considered repealed insofar as or vice-versa.
such pending actions or investigations are Authorized Agent Banks (AABs) shall
concerned, it being understood that as to refer to all categories of banks [except
such pending actions or investigations, the Offshore Banking Units (OBUs)] duly
regulations existing at the time the cause of licensed by the BSP. It is understood that each
action accrued shall govern. category of bank should function within the
operational parameters defined by existing
Section 108. Separability Clause. Nothing laws/regulations for the specific bank category
herein is intended nor shall be construed, to which they respectively belong.
to repeal or amend any law or statute. AAB-forex corps, whether or not named
Should any provision of this Manual be as such, shall refer to AAB subsidiary/affiliate
declared unconstitutional or invalid, the forex corporations whose business include
remaining provisions or parts thereof shall buying and selling of foreign exchange.
remain in full force and effect, and continue Balikbayan is a Filipino that has
to be valid and binding. established permanent residence abroad.
Cash Against Document (CAD) is an
Glossary of Terms arrangement whereby the buyer pays the
exporter upon the formers receipt of the
FOR PURPOSES OF THIS MANUAL, the shipping documents sent to him by the
following definitions are adopted: exporter either directly or through the banks.
Advance Payment is an arrangement Consignment is an arrangement
between the seller and buyer where the whereby payment is contingent upon the
buyer pays, either partial or full, the sale to third parties abroad of the exported
seller prior to the shipment of the commodities by consignee.
goods. Direct Remittance (DR) is a supplier-
Affiliate refers to an entity linked buyer arrangement where payment is made
directly or indirectly to a bank by means of: within 29 calendar days from bill of lading/
a. Ownership, control or power to airway bill date.
vote, of ten percent (10%) to fifty percent Documents Against Acceptance (D/A)
(50%) of the outstanding voting stock of the is an arrangement under documentary

Glossary
11.12.31
collection in which an exporter instructs the Forex Corporations, whether or not

presenting bank to hand over shipping and title named as such, refer to entities whose business
documents to the importer only if the importer include buying and selling of foreign
accepts and signs the accompanying bill of exchange.
exchange or draft. Intercompany Open Account Offset
Documents Against Payment (D/P) is an Arrangement (Interco O/A) is an arrangement
arrangement under documentary collection in whereby the exporter offsets its payables to
which an exporter instructs the presenting against its receivables from, its parent/affiliate
bank to hand over shipping and title company abroad.
documents to the importer only if the importer Legal Tender refers to money recognized
fully pays the accompanying bill of exchange by law as acceptable payment for debts owed
or draft. to creditors.
Electronic transfer is a system where the Letter of Credit (L/C), which gives the
authority to debit or credit an account (bank, seller assurance that he will receive the
business or individual) is provided by wire, payment for the goods, is binding document
with or without a source document being that a buyer can request from his bank in order
mailed to evidence the authority. to guarantee that the payment for goods will
Financial Institutions shall refer to be transferred to the seller. In order for the
business organizations that offer a broad base payment to occur, the seller has to present
of financial services or specialize in specific the bank with the necessary shipping
financial functions, products, or services, e.g. documents confirming the delivery of goods
banks, investment houses, pension funds, within a given time frame.
pawnshops, credit unions, investment Low-Cost Housing refers to housing
companies, insurance companies, securities packages with loan ceilings ranging from
brokers and dealers, stock exchanges, mutual above PHP400,000 up to PHP3 million or in
funds, trust corporations, leasing companies, such other amounts which HUDCC may
financing companies, credit card companies, prescribe in the future.
companies engaged in foreign exchange Medium- and Long-Term Loans are credits
dealership/brokerage and others that deal in with maturities exceeding one (1) year.
money. Non-bank BSP-supervised entities
Foreign Bank shall refer to a bank or (NBBSEs) refer to non-bank entities that fall
banking corporation formed, organized and under the supervisory authority of the BSP
existing under any foreign law. under Republic Act No. 7653 (The New
Foreign Currency Deposit Unit (FCDU)/ Central Bank Act), Republic Act No. 8791
Expanded Foreign Currency Deposit Unit (The General Banking Law of 2000) and other
(EFCDU) shall refer to a unit of a local bank or special laws. These include quasi-banks,
of a local branch of a foreign bank authorized subsidiaries and affiliates of AABs/quasi-
by the BSP to engage in foreign currency- banks, non-banks with trust or investment
denominated transactions, pursuant to the management activities license, non-stock
provisions of Republic Act No. 6426, as savings and loan associations, and
amended. pawnshops.
Foreign Currency Loans are loans Non-resident refers to an individual, a
denominated in currencies other than the corporation or other juridical person not
Philippine peso, regardless of the creditor. included in the definition of resident.
Foreign Loans are loans owed to (See Resident)
non-residents, regardless of currency Non-trade current account
denomination. transactions refer to all non-trade

Glossary
11.12.31
transactions (also referred to as invisibles) advances in order to assure that revenues from
excluding those related to foreign/foreign the shipment are used to repay the advances
currency loans and foreign investments. made.
Non-trade transactions refer to all other Representative Office shall refer to a
foreign exchange transactions not included in liaison office of a foreign bank which deals
the definition of trade transactions. These shall directly with the public by promoting and
include foreign loans and foreign investments. giving information about the foreign banks
(See Trade Transactions) services offered. It does not include the
Offshore Banking refers to the conduct regional or area headquarters of a foreign bank
of banking transactions in foreign currencies registered and licensed under existing laws.
involving the receipt of funds principally from Resident shall refer to
external sources and, as allowed in this a) an individual citizen of the Philippines
Manual, from internal sources and utilization residing therein; or
of such funds, as provided herein. b) an individual who is not a citizen of
Offshore Banking Unit (OBU) refers to a the Philippines but is permanently residing1
branch, subsidiary, or affiliate of a foreign therein; or
banking corporation which is duly authorized c) a corporation or other juridical person
by the BSP to transact offshore banking organized under the laws of the Philippines;
business in the Philippines. For purposes of or
this Manual, OBUs are classified as non- d) a branch, subsidiary, affiliate,
residents. extension office or any other unit of
Open Account (O/A) is an arrangement corporations or juridical persons which are
whereby the shipping documents are sent and organized under the laws of any country and
released by the exporter directly to the buyer, operating in the Philippines, except OBUs.
without coursing the documents through the Short-term loans are credits with maturity
banks, upon the buyers promise to pay at not exceeding one (1) year.
some future date after shipment. Socialized housing refers to housing
Red Clause is a clause (originally typed in packages with loan ceilings of not more than
red) added to a letter of credit authorizing the PHP400,000, or in such other amounts which
advising/negotiating bank to make an advance the HUDCC may prescribe in the future.
payment to the beneficiary (exporter) before Small-scale mining refers to mining
the actual shipment to the buyer. The advance activities which rely heavily on manual labor
may be up to 100% of the export contract using simple implement and methods and do
value and may be used by the exporter to buy not use explosives or heavy mining equipment
the inputs for manufacturing or shipment. Red Subsidiary (of a bank) refers to a
clause credits are used primarily when the corporation or firm more than fifty percent
buyer (importer) has an agent in the exporting (50%) of the outstanding voting stock of which
country. To finance its purchases, the importer is directly or indirectly owned, controlled or
may arrange for the opening of a red clause held with power to vote by a bank.
letter of credit. Negotiations of red clause Trade transactions refer to merchandise
credits are limited to the bank making the export and/or import transactions.
For an updated version of the FX Manual, please visit http://www.bsp.gov.ph/regulations/

reg_MORB.asp then click on the Manual of Regulations on Foreign Exchange Transactions.
1
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.

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Sections 1 - 2

PART ONE. CURRENT ACCOUNTS for Non-Trade Current Account

Manual of Regulations for Banks Part V- Page 1

of emigrants domestic assets if emigrant is denominated bearer monetary instruments

Part V- Page 2 Manual of Regulations for Banks

Manual of Regulations for Banks Part V- Page 3

Part V- Page 4 Manual of Regulations for Banks

3. Prohibited Exports. These are 1) U.S. dollar

Manual of Regulations for Banks Part V- Page 5

Part V- Page 6 Manual of Regulations for Banks

3. Private sector loans that are submitted c. to be granted by FCDUs/EFCDUs

Manual of Regulations for Banks Part V- Page 7

Service exporters shall refer to not be refinanced by a medium- /long-term

Part V- Page 8 Manual of Regulations for Banks

prospective borrowers/beneficiaries. These Medium-Term Public Investment Program

Manual of Regulations for Banks Part V- Page 9

Section 27. Drawdown/Availment on by the Monetary Board are deemed

Part V- Page 10 Manual of Regulations for Banks

Manual of Regulations for Banks Part V- Page 11

Part V- Page 12 Manual of Regulations for Banks

Manual of Regulations for Banks Part V- Page 13

Part V- Page 14 Manual of Regulations for Banks

remittance, with copies of the prescribed Section 44. Investments by Philippine

Manual of Regulations for Banks Part V- Page 15

were funded with foreign exchange Less: Due from HO/Branches

Part V- Page 16 Manual of Regulations for Banks

(Next Page is Part V - Page 17)

Manual of Regulations for Banks Part V- Page 16a

7. submit, before start of operations, OBUs and resident banks authorized to

Manual of Regulations for Banks Part V - Page 17

and trade remittances resulting from or inward remittances of Filipino overseas

Part V - Page 18 Manual of Regulations for Banks

Manual of Regulations for Banks Part V - Page 19

Section 65. Use of the term Chapter III

Part V - Page 20 Manual of Regulations for Banks

Manual of Regulations for Banks Part V - Page 21

b. A certification signed by the (6) investment in bank premises and

Part V - Page 22 Manual of Regulations for Banks

An RB/Coop Bank applying for assistant in-charge of the same operations

Manual of Regulations for Banks Part V- Page 23

Part V - Page 24 Manual of Regulations for Banks

Manual of Regulations for Banks Part V - Page 25

Part V - Page 26 Manual of Regulations for Banks

through repayment and/or sale of the h. On request/instructions of its foreign

Manual of Regulations for Banks Part V - Page 27

by central governments and/or central banks director/s or officer/s found to be responsible

Part V - Page 28 Manual of Regulations for Banks

Manual of Regulations for Banks Part V - Page 29

Part V - Page 30 Manual of Regulations for Banks

investments in structured products), a. Foreign currency cash on hand;

Manual of Regulations for Banks Part V - Page 31

securities lending and borrowing c. In the case of foreign banks,

Part V - Page 32 Manual of Regulations for Banks

Manual of Regulations for Banks Part V - Page 33

Part V - Page 34 Manual of Regulations for Banks

PART FOUR. FOREIGN EXCHANGE transactions involving the Philippine peso

Manual of Regulations for Banks Part V - Page 35

Part V - Page 36 Manual of Regulations for Banks

which a Bangko Sentral Registration the counterparty signature on pertinent