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(NAR) VOL. 24 NO. 1 / JANUARY - MARCH 2013
[ BSP CIRCULAR NO. 786, February 15, 2013 ]
RISK DISCLOSURE REQUIREMENTS ON LOSS ABSORBENCY FEATURES OF CAPITAL INSTRUMENTS
Section 1. When marketing, selling and distributing Additional Tier 1 and Tier 2 instruments eligible as capital under the Basel III framework, banks/quasibanks must:
1. Subject investors to a client suitability test to determine their understanding of the specific risks related to these investments and their ability to absorb risks arising from these instruments;
2. Provide the appropriate Risk Disclosure Statement for the issuance of Additional Tier 1 and Tier 2 capital instruments. The said disclosure statement shall explain the loss absorbency feature for Additional Tier 1 and Tier 2 capital instruments as well as the resulting processes that will be effected when the triggers for loss absorbency are breached;
3. Secure a written certification from each investor stating that:
a. | the investor has been provided a Risk Disclosure Statement which, among others, explains the concept of loss absorbency for Additional Tier 1 and Tier 2 capital instruments as well as the resulting processes should the case triggers are breached; |
b. | the investor has read and understood the terms and conditions of the issuance; |
c. | the investor is aware of the risks associated with the capital instruments; and |
d. | said risks include permanent write-down or conversion of the debt instrument into common equity at a specific discount; |
4. Make available to the BSP, as may be required, the:
a. | Risk Disclosure Statement; |
b. | Certification cited in item 3 above duly signed by the investor; and |
c. | Client Suitability Test of the investor. |
Section 2. This Circular shall take effect fifteen (15) calendar days following its publication either in the Official Gazette or in a newspaper of general circulation.
FOR THE MONETARY BOARD:
(SGD.) AMANDO M. TETANGCO, JR.
Governor