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In an effort to further assist banks in finalizing the Financial Reporting Package (FRP), attached are the updated validation rules used by the BSP to check and determine whether the entries in the FRP are either balanced and reconciled or cited with mathematical defects requiring correction and the submission of amendments  that are subject to penalty in accordance with existing regulations. Same  validation  rules  emanate  from  the  existing  Reconciliation  Report electronically  transmitted  by the BSP to banks immediately  after the submitted FRP has been processed and validated.

The updated validation rules considered the following issuances of the BSP:

1)   Stress Testing Reports pursuant to Memorandum  No. M-2014-032 dated 11 August 2014,

2)   Report  on Cross-Border  Financial  Positions  pursuant  to Memorandum  No. M-2015-021 dated 22 April 2015,

3)   The  updated  Financial  Reporting  Package  for  Trust  Institutions  (FRPTI) template  pursuant  to Memorandum  No.  M-2015-032  dated  14  September 2015 and

4)   The  updated  FRP  templates  pursuant  to  Memorandum  No.  M-2015-033 dated 14 September 2015.

Other rules have been also enhanced to further strengthen the overall validation of   the   FRP.   The   attached   validation   rules   have   the   following   three   (3) components:

1)  A User Guide that explains and describes the validation process and the translation  of the validation  rules into the Reconciliation  Report transmitted by the BSP to banks with illustrative samples and references;

2)   The Intra Validation Rules in Annex A"  itemizing the arithmetic formulations in balancing and reconciling the Balance Sheet, Income Statement, and Supporting Schedules of the FRP; and

3)   The Inter Validation Rules in Annex B* itemizing the arithmetic formulations in reconciling the FRP with the following prescribed reports:

a.   Report  on  Compliance   with  Mandatory  Agri-Agra  Credit  under  R.A. 10000 (Agri-Agra Report)

b.   FRP Branch Report

c.   Risk-Based Capital Adequacy Report for Stand-Alone Thrift Banks, Rural Banks and Cooperative Banks

d.   Quarterly Statement of E-Money Balances and Activity e.   FRPTI

f.     Report  on  Microfinance   Products   and  Income  Statement   on  Retail Microfinance Operations

g.   Report on Compliance with Mandatory Credit Allocation Required under R.A. 6977 (MSME Report)

h.   Published Balance Sheet

i.     Expanded Report on Real Estate Exposure

j.     Stress Testing Reports

k.   Report on Cross-Border Financial Positions

Additional validation rules will be issued through a Circular Letter (CL) as future enhancements   to  the  FRP  are  prescribed  and/or  as  new  formulations   are introduced. As validation rules are updated and issued, a lead time of one (1) reporting  cycle  after  the  issuance  of the  corresponding  CL shall  be observed before penalties can be assessed against non-compliance with the updated reconciliation rules.

Banks  may  use  the  aforementioned  rules  and  formulations  as  reference  for internally  developing  and  reinforcing  their  own  validation  procedures,  systems and controls. Such rules and formulations, however, mainly focus in determining arithmetical consistency of the FRP within an acceptable tolerance limit and are not intended to capture errors arising from significant changes or movements in values reported from one period to another nor misclassification of transactions arising from the misuse of the FRP accounts.

The  integrity  and  quality  of the FRP  ultimately  rests  with  the bank.  Adequate internal controls should be in place to ensure that the information  submitted by banks to BSP is consistent, correct and conforms to the prescribed reporting standards.

This issuance supersedes CL No. CL-2014-044 dated 23 July 2014.