(NAR) VOL. 25 NO. 1 / JANUARY - MARCH 2014
Section 1. The risk disclosure requirements on loss absorbency features as provided in Circular No. 786 including amendments thereto shall be incorporated in Appendix 63b/Q46b of the MORB/MORNBFI as Annex G - Risk Disclosure Requirements on Loss Absorbency Features, which shall now read as:
“Risk Disclosure Requirements on Loss Absorbency Features of Capital Instruments
I. | When marketing, selling and/or distributing Additional Tier 1 and Tier 2 instruments eligible as capital under the Basel III framework, in the Philippines, banks/quasi-banks 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 features 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. | ||
II. | For offshore issuances of Additional Tier 1 and Tier 2 capital instruments, the risk disclosure requirements shall be governed by the applicable rules and regulations of the country where these instruments are issued. The subsequent sale and/or distribution of Additional Tier 1 and Tier 2 capital instruments in the Philippines, originally issued overseas, shall comply with all the risk disclosure requirements for issuance in the Philippines.” |
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