MAJOR FINANCIAL STATEMENTS OF BANKS IN THE PHILIPPINES

In the Philippine banking sector, financial statements are prepared in accordance with

Philippine Financial Reporting Standards (PFRS) and Bangko Sentral ng Pilipinas (BSP) regulations.

major financial statements typically published by banks in the Philippines

1. Statement of Financial Condition (Balance Sheet)

2. Statement of Income (Profit and Loss Statement)

3. Statement of Changes in Equity

4. Statement of Cash Flows

5. Notes to Financial Statements

Statement of Financial Condition (Balance Sheet)

• Shows the bank’s assets, liabilities, and equity at a specific point in time.

• Used to assess liquidity, solvency, and capital adequacy.

• Required quarterly by BSP and often published in newspapers or on bank websites.

Statement of Income (Profit and Loss Statement)

• Reports revenues, expenses, and net income over a period.

• Includes interest income, fee-based income, operating expenses, and provisions for

• credit losses.

• Critical for evaluating profitability and operational efficiency

Statement of Changes in Equity

• Tracks movements in capital stock, retained earnings, and reserves.

• Reflects shareholder contributions, dividends, and net income allocations.

Statement of Cash Flows

• Details cash inflows and outflows from operating, investing, and financing activities.

• Helps assess the bank’s liquidity position and cash management.

Notes to Financial Statements

• Provides contextual details, accounting policies, and breakdowns of key figures.

• Includes disclosures on risk management, loan classifications, regulatory compliance, and contingent liabilities.

BSP-Specific Reports

• Quarterly Published Statement of Condition

• Capital Adequacy Ratio (CAR) Reports

• Liquidity Coverage Ratio (LCR) Reports

•  Trust and Investment Management Account Statements

STATEMENT OF FINANCIAL CONDITION

is a regulatory financial report submitted to the Bangko Sentral ng Pilipinas (BSP) that outlines the institution’s financial health. It includes a detailed breakdown of assets, liabilities, and capital accounts, and is typically published quarterly.

Key Components of STATEMENT OF FINANCIAL CONDITION

Importance of bank’s Statement of Financial Condition (SOC)

TRIPR

1. Regulatory Compliance and Oversight

2. Transparency for Stakeholders

3. Internal Decision-Making

4. Risk Detection and Fraud Prevention

5. Public Confidence and Market Discipline

Regulatory Compliance and Oversight

 Required by the Bangko Sentral ng Pilipinas (BSP) to monitor financial health and ensure banks meet prudential standards.

 Helps BSP assess capital adequacy, liquidity, and risk exposure, which are critical for systemic stability

Transparency for Stakeholders

 Provides a clear snapshot of the bank’s assets, liabilities, and equity.

 Enables depositors, investors, and regulators to evaluate the bank’s financial soundness and operational integrity.

Internal Decision-Making

 Guides bank management in strategic planning, risk management, and resource allocation.

 Supports decisions on lending, investing, and liquidity management.

Risk Detection and Fraud Prevention

 Facilitates internal audits and bank reconciliations, helping spot discrepancies, errors, or unauthorized transactions

 Acts as a safeguard against financial misstatements and fraudulent activities.

Public Confidence and Market Discipline

 A well-maintained SOC reinforces public trust in the banking system.

 Encourages market discipline, as banks are held accountable for their financial disclosures

STATEMENT OF INCOME (PROFIT AND LOSS STATEMENT)

also known as the Profit and Loss Statement—is a vital financial report that shows how a bank earns and spends money over a specific period. It’s structured to reflect both interest-based and non-interest-based activities, in line with Bangko Sentral ng Pilipinas (BSP) guidelines and Philippine Financial Reporting Standards (PFRS).

Key Components of STATEMENT OF INCOME (PROFIT AND LOSS STATEMENT)

1. Operating Income

2. Operating Expenses

3. Net Operating Profit

4. Income Before Tax

5. Provision for Income Tax
6. Net Profit or Loss

Operating Income

This is the total income generated from core banking operations:

Net Interest Income

o Interest earned from loans, investments, and deposits

o Minus interest paid on deposits and borrowings

Non-Interest Income

o Fees and commissions

o Trading gains/losses

o Dividend income

o Profits from sale of assets

o Foreign exchange gains

o Other miscellaneous income

Operating Expenses

Net Operating Profit

Calculated as: Operating Income – Operating Expenses

Income Before Tax

Includes adjustments for non-operating income/expenses, if any

Provision for Income Tax

Based on taxable income, following BIR and BSP rules

Net Profit or Loss

 Final bottom-line figure

 Reflects the bank’s profitability after all costs and taxes

Importance of the Statement of Income (or Profit and Loss Statement)

STATEMENT OF CHANGES IN EQUITY (SCE)

tracks movements in a bank’s equity accounts over a reporting period. It’s a vital financial statement required under Philippine Financial Reporting Standards (PFRS) and monitored by the Bangko Sentral ng Pilipinas (BSP).

Key Components of STATEMENT OF CHANGES IN EQUITY (SCE)

Importance of STATEMENT OF CHANGES IN EQUITY (SCE)

STATEMENT OF CASH FLOWS

a vital financial report that shows how a bank manages its cash across different activities. It’s prepared in accordance with Philippine Financial Reporting Standards (PFRS) and monitored by the Bangko Sentral ng Pilipinas (BSP). This statement helps stakeholders understand how cash is generated and used during a specific period.

Key Components of STATEMENT OF CASH FLOWS

Importance of STATEMENT OF CASH FLOWS

 Helps assess liquidity, solvency, and cash management efficiency.

 Crucial for regulators, investors, and internal decision-makers.

 Complements the Statement of Financial Condition by showing movement, not just position.

NOTES TO FINANCIAL STATEMENTS

detailed disclosures that accompany the main financial reports—such as the balance sheet, income statement, and cash flow statement. These notes provide context, explanations, and breakdowns that help users understand the numbers more deeply.

NOTES TO FINANCIAL STATEMENTS typically include:

 General Information: Legal identity, regulatory framework (e.g., BSP regulations), and nature of operations

 Accounting Policies: Methods used for recognizing income, valuing assets, handling impairments, etc.

 Risk Management: Details on credit, market, liquidity, and operational risks

 Breakdowns of Key Accounts: Loans, deposits, investments, liabilities, and equity components

 Tax Disclosures: Income tax, gross receipts tax (GRT), documentary stamp tax (DST), and other levies

 Regulatory Compliance: Required disclosures under BSP’s Manual of Regulations for Banks (MORB)

 Related Party Transactions: Dealings with subsidiaries, affiliates, or directors

 Contingencies and Commitments: Legal claims, guarantees, and off-balance sheet exposures

Importance of NOTES TO FINANCIAL STATEMENTS

 Regulatory Compliance: BSP and SEC require banks to disclose specific information to ensure public trust and financial stability.

 Investor Insight: Investors and analysts use these notes to assess risk, profitability, and future prospects.

 Risk Awareness: Notes reveal how banks manage credit, liquidity, and market risks—vital for stakeholders.

 Clarification of Complex Items: They explain accounting judgments, estimates, and unusual transactions that aren’t obvious from the face of the financial statements.

BSP-SPECIFIC REPORTS

1. Quarterly Published Statement of Condition

2. Capital Adequacy Ratio (CAR) Reports

3. Liquidity Coverage Ratio (LCR) Reports

4. Trust and Investment Management Account Statements

Quarterly Published Statement of Condition

a regulatory financial disclosure that banks are required to submit and publish every quarter. It presents a snapshot of a bank’s financial position as of the end of each quarter—typically March 31, June 30, September 30, and December 31.

Key Components of Quarterly Published Statement of Condition

 Assets: Cash, loans, investments, and other resources

 Liabilities: Deposits, borrowings, and other obligations

 Equity: Capital stock, retained earnings, and reserves

 Contingent Accounts: Commitments and guarantees

 Financial Ratios: Capital adequacy, liquidity, profitability, and asset quality indicators

 Related Party Transactions: Including DOSRI loans (Directors, Officers, Stockholders, and Related Interests)

Quarterly Published Statement of Condition

This report is submitted to the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC), and is often made publicly available on the bank’s website or through regulatory filings

Importance of Quarterly Published Statement of Condition

 Regulatory Oversight: BSP uses it to monitor compliance with banking laws, capital adequacy, and risk exposure.

 Public Confidence: Publishing the statement builds trust among depositors, investors, and stakeholders.

 Performance Tracking: Analysts and investors use it to assess the bank’s quarterly performance and trends.

 Risk Management: It reveals how well a bank is managing credit, liquidity, and market risks.

Capital Adequacy Ratio (CAR) Reports

are regulatory submissions that measure a bank’s financial strength and ability to absorb risks. These reports are mandated by the Bangko Sentral ng Pilipinas (BSP) under its Risk-Based Capital Adequacy Framework, aligned with international standards like Basel III These reports are submitted quarterly and cover both solo (head office and branches) and consolidated (parent bank and subsidiaries) financial positions

Importance of Capital Adequacy Ratio (CAR) Reports

 Risk Resilience: They show how well a bank can absorb losses from credit, market, and operational risks.

 Depositor Protection: A strong CAR reassures depositors that their funds are safe even in economic downturns.

 Investor Confidence: Investors use CAR data to assess a bank’s financial health and long-term viability.

 Regulatory Oversight: BSP uses these reports to monitor systemic risks and enforce prudential standards.

Liquidity Coverage Ratio (LCR) Reports

are regulatory submissions required under BSP Circular No. 905, aligned with the Basel III Framework. These reports assess whether a bank holds enough High-Quality Liquid Assets (HQLA) to cover its net cash outflows over a 30-day stress period Banks must maintain an LCR of at least 100%, meaning they should have enough liquid assets to survive a short-term liquidity crisis. These reports are submitted to the Bangko Sentral ng Pilipinas (BSP) and disclosed publicly by banks

Importance of Liquidity Coverage Ratio (LCR) Reports

 Crisis Readiness: They ensure banks can meet short-term obligations even during financial stress.

 Depositor Confidence: A strong LCR reassures the public that the bank is liquid and stable.

 Risk Management: Helps BSP monitor systemic liquidity risks and prevent bank runs.

 Investor Assurance: Investors use LCR data to gauge a bank’s ability to manage liquidity shocks.

Trust and Investment Management Account Statements

are periodic reports issued by trust entities (like banks’ trust departments) to clients who have entrusted them with managing assets under a trust or investment management arrangement.

Trust and Investment Management Account Statements typically include:

 Portfolio Summary: Breakdown of assets held (e.g., government securities, corporate bonds, equities, deposits)

 Market Valuation: Current market value of each investment

 Income and Expenses: Interest earned, dividends received, management fees, taxes

 Transactions: Purchases, sales, withdrawals, and deposits made during the reporting period

 Benchmark Comparison: Performance vs. market indices or client-defined benchmarks

 Compliance Notes: Adherence to investment guidelines, risk limits, and regulatory disclosures

Trust and Investment Management Account Statements

These accounts are not deposit accounts and are not covered by PDIC insurance, as they involve investment risk and are governed by trust agreements

Importance of Trust and Investment Management Account Statements

 Client Oversight: They allow clients to monitor how their funds are being managed and whether their investment goals are being met.

 Performance Tracking: Clients can assess returns, compare against benchmarks, and adjust strategies if needed.

 Risk Awareness: Statements reveal asset allocation and exposure to different risk classes.

 Regulatory Compliance: BSP requires trust entities to maintain proper records and issue periodic statements under its Financial Reporting Package for Trust Institutions (FRPTI)

COMPARATIVE MATRIX: MAJOR FINANCIAL STATEMENTS OF PHILIPPINE BANKS

SANCTIONS FOR NONCOMPLIANCE IN FINANCIAL STATEMENT SUBMISSION (PHILIPPINE BANKS)

Importance of SANCTIONS FOR NONCOMPLIANCE IN FINANCIAL STATEMENT SUBMISSION (PHILIPPINE BANKS)

 Protects Depositors: Ensures banks are financially sound and transparent

 Promotes Market Discipline: Encourages accurate reporting and ethical conduct

 Enables Regulatory Oversight: Helps BSP and SEC monitor systemic risks

 Supports Financial Literacy: Reinforces the importance of compliance in banking education