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Guidelines on the Accounting Treatment of Securities Offered and Accepted in Debt Exchange Offerings of GOCCs

11.12.2009

The Monetary Board approved on 12 November 2009 the guidelines on the treatment of securities held by banks and other BSP-supervised financial institutions participating in debt exchange offerings of government owned and controlled corporations (GOCCs) for prudential reporting purposes.

Under the said guidelines, securities booked under the Held-to-Maturity (HTM) category that are offered and accepted in the exchange shall be exempted from the tainting provision provided that securities rejected in the exchange shall continue to be booked under the said category.

The tainting provision prohibits financial institutions from using the HTM category and requires reclassification of the entire HTM portfolio to the Available for Sale (AFS) category during the reporting year and for the succeeding two full financial years. This is triggered whenever a financial institution sells or reclassifies more than an insignificant amount of HTM investments before maturity other than for reasons specified under existing regulations.

In earlier issuances, the BSP similarly exempts from the tainting rule bonds subject of the Domestic Debt Exchange and Global Bond Offering of the Republic of the Philippines (ROP), under Circular Nos. 509 and 546 dated 1 February and 21 September 2006, respectively.

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