BSP eases FCDU rules, bond reclassification

Published April 12, 2020, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) has relaxed the rules on banks’ expanded foreign currency deposit unit (E/FCDU) and debt securities reclassification as relief measures to lessen mark-to-market losses amid the COVID-19 crisis.

 

Bangko Sentral ng Pilipinas (BSP) logo

The BSP said the relief measures should allow banks to remain confident particularly in maintaining financial market liquidity during this “extraordinary global situation due to the corona virus pandemic.”

“The Monetary Board approved the grant of prudential accounting relief measures to reduce the impact of mark-to-market losses on the financial condition of BSP supervised financial institutions (BSFIs). The relief aims to strengthen the ability of BSFIs to continue to operate and service the financing requirements of the general public,” according to a BSP statement.

The BSP approved two relief measures: the relaxation of the E/FCDU asset cover requirement for five months or until September 30 this year; and to allow the reclassification of debt securities from categories measured at fair value to the amortized cost category, even without a change in the business model for managing these securities.

“The relaxation in the E/ FCDU guidelines permits a bank to add back its net unrealized losses arising from the change in the fair value of E/FCDU securities in determining compliance with the 100 percent E/FCDU asset cover requirement,” the BSP explained.

“Through the add-back provision, a bank will be able to utilize its foreign currency (FX)- denominated liquid assets for lending and investment instead of holding the same in its books to meet the prudential requirement.” The reprieve is granted until September 30, 2020.

 
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