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BSP Enhances Rules on the Marking to Market of Financial Instruments


The Monetary Board approved the enhanced guidelines on marking-to-market of financial instruments to align BSP regulations with international accounting standards and in response to the adoption of a valuation methodology for peso denominated government securities (GS) by a benchmark administrator authorized by the Securities and Exchange Commission (SEC).  The new policy aims to ensure consistency of fair value measurements and comparability of financial reports in the financial system. 

The revised guidelines provide the bases for the valuation at market prices of debt and equity securities.   Specifically, for peso-denominated GS the market prices provided by either a third party pricing service or calculating agent should be used as reference provided that the same, including the valuation methodology, is recognized by the SEC.   The Bangko Sentral also expects BSP-Supervised Financial Institutions to have adequate governance structures and control processes to ensure that valuations are prudent and reliable for risk management and financial reporting purposes.  These valuation practices should be consistently applied across the institution and embedded within the overall governance framework and risk management systems.  

The revised marking-to-market guidelines are anchored on the provisions of the Philippine Financial Reporting Standards (PFRS) 13 on Fair Value Measurement.  PFRS 13 generally requires that a fair value should reflect the price that would be received to sell the financial instrument in an orderly transaction in the principal or most advantageous market under current market conditions. 

The issuance of enhanced rules on valuation is part of the capital markets roadmap aimed at promoting price transparency and confidence in the market, encouraging active market trading, and providing basis for the establishment of reliable and market-based benchmarks. 

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