2004 - Asianbanks.net

The Group has pending claims and/or is a defendant in legal actions arising from normal business activities includingsale of a subsidiary. Management and its legal counsel believe that these actions are without merit or that theultimate liability, if any, resulting from such actions will not materially affect the Group’s financial position.The Parent Company has received tax assessments from the Bureau of Internal Revenue on two industry issues. Inaddition, the Parent Company has pending tax assessments from the BIR on FCDU taxation, which is also anindustry issue. The Parent Company, through its tax counsels, is contesting these assessments andpreassessments on the ground that the factual situations were not considered which, if considered, will not give riseto material tax deficiencies. Accordingly, no provision has been made in the accompanying financial statements forthese contingencies.25. Related Party TransactionsIn the ordinary course of business, the Group has loans transactions with investees and with certain directors,officers, stockholders and related interests (DOSRI). Existing banking regulations limit the amount of individual loansto DOSRI, 70% of which must be secured, to the total of their respective deposits and book value of their respectiveinvestments in the Group. In the aggregate, loans to DOSRI generally should not exceed the respective totalregulatory capital or 15% of total loans portfolio, whichever is lower.BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts.The following table shows information relating to the loans, other credit accommodations and new guaranteesclassified as DOSRI accounts under regulations existing prior to said circular, and new DOSRI loans, other creditaccommodations granted under said circular (amounts in thousands) as of December 31, 2004 and 2003:GroupParent Company2004 2003 2004 2003Total outstanding DOSRI accounts P=1,126,878 P=822,212 P=1,126,779 P=821,531Percent of DOSRI accounts granted priorto effectivity of BSP Circular No. 423to total loans 0.71% 0.63% 0.75% 0.66%Percent of DOSRI accounts granted aftereffectivity of BSP Circular No. 423 tototal loans 0.06% 0.00% 0.06% 0.00%Percent of DOSRI accounts to total loans 0.77% 0.63% 0.81% 0.66%Percent of unsecured DOSRI accounts tototal DOSRI accounts 27.68% 11.44% 27.67% 11.36%Percent of past due DOSRI accounts tototal DOSRI accounts 0.00% 0.00% 0.00% 0.00%Percent of nonaccruing DOSRI accounts tototal DOSRI accounts 14.52% 0.00% 14.52% 0.00%The following table shows information relating to the loans, other credit accommodations and guarantees, as well asavailments of previously approved loans and committed credit lines not considered DOSRI accounts prior to theissuance of said circular but are allowed a transition period of two years from the effectivity of said circular or untilsaid loan, other credit accommodations and guarantees become past due, or are extended, renewed orrestructured, whichever comes later, (amounts in thousands) as of December 31, 2004 :GroupParentCompanyTotal outstanding non-DOSRI accounts granted prior to BSPCircular No. 423 P=15,546,362 P=15,546,362Percent of unsecured non-DOSRI accounts granted prior to BSPCircular No. 423 to total loans 11.16% 11.16%- 75-