Reporting framework for banks gets nod
The Securities and Exchange Commission (SEC) has approved an industry- specific framework for the preparation of the audited financial statements of banks and other financial institutions under the supervision of the Bangko Sentral ng Pilipinas (BSP).
In its memorandum circular issued on November 17, SEC allowed the preparation of audited financial statements of the said entities in accordance with the Philippine Financial Reporting Standards, some of the sections of which were modified to apply relief measures issued by the BSP and approved by the SEC.
“The industry-specific framework recognizes the necessity of the prudential accounting relief measures, as well as the other regulatory reliefs issued by the central bank, in countering or, at least, cushioning the impact of the Covid-19 outbreak on banks and other financial institutions,” SEC Chairperson Emilio B. Aquino said.
“These reliefs were intended to reduce the impact of losses that BSFIS [Bsp-supervised financial institutions] may incur due to exposure to borrowers, industries and sectors severely affected by the Covid-19 pandemic and the mark-to-market losses that may be sustained due to volatilities in the financial markets."
The new measure took into account the recent BSP memorandum that allowed the staggered booking of allowance for credit losses over a maximum period of 5 years and the reclassification of debt securities measured at fair value to amortized cost category, among others.
Without the said industry- specific financial reporting framework, the relief measures are considered deviations from the PFRS, which may lead to the issuance of a “qualified opinion” by the external auditor if such reliefs have a material impact on the fair presentation of the audited financial statements of banks and other institutions. Under the Revised Securities Regulation Code Rule 68, the SEC may allow a financial reporting framework, other than the PFRS, that complies with the regulatory reportorial requirements of the concerned regulatory agency.
The BSP gave the banks and financial institutions options to prepare their financial statements using the industry specific framework or the PFRS, in full, for a specific period.