2011 Annual Report - BDO

2.15.02.01 Foreign Exchange RiskThe Bank manages its exposure to effects of fluctuations in the foreign currency exchangerates by maintaining foreign currency exposure within the existing regulatory guidelines andat a level that it believes to be relatively conservative for a financial institution engaged in thattype of business.The Bank’s net foreign exchange exposure is computed as its foreign currency resources lessforeign currency liabilities plus contingent assets less contingent liabilities. BSP regulationsimpose a cap of 20% of unimpaired capital or US$50 million, whichever is lower, on theconsolidated excess foreign exchange holdings of banks in the Philippines. In the case ofthe Bank, its foreign exchange exposure is primarily foreign exchange trading with corporateaccounts and other financial institutions. The Bank, as a market participant in the PhilippineDealing System, may engage in proprietary trading to take advantage of foreign exchangefluctuations.The Bank’s foreign exchange exposure during the day is guided by the limits set forth in theBank’s Risk Management Manual. These limits are within the prescribed ceilings mandatedby the BSP. At the end of each day, the Bank reports to the BSP on its compliance with themandated foreign currency exposure limits.The following tables set out the composition of the Bank’s financial resources and liabilities asto currency as of December 31, 2011 and 2010:2011ForeignCurrency Peso TotalResources:Due from BSP P - P 7,092,895,832 P 7,092,895,832Due from other banks 1,199,281,201 446,533 1,199,727,734Financial assets at fair valuethrough profit or loss 206,344,183 7,065,226,517 7,271,570,700Available-for-sale securities 3,093,975,043 16,011,588 3,109,986,631Held-to-maturity investments 4,800,865,902 3,080,325,220 7,881,191,122Loans and receivables - 1,533,921,496 1,533,921,496Other resources - 1,655,795 1,655,795P 9,300,466,329 P 18,790,482,981 P 28,090,949,310www.bdo.com.ph 59