2010 MORB Volume 1 With Cir. No. 645

FOREWORD

The 2010 Manual of Regulations for Banks (MORB) is an updated compilation ofbanking regulations and policy issuances of the Bangko Sentral ng Pilipinas (BSP).Available in hard and soft copies, it is a convenient reference and guide for banks inthe conduct of their operations.

The updated MORB incorporates regulatory policies issued to align bankingpractices on risk management, good corporate governance, capital adequacy, accountingand reporting with international standards. It also includes rules implementing legislativereform measures, the more significant of which are the General Banking Law of 2000,the Anti-Money Laundering Act of 2001, the Special Purpose Vehicle Act of 2002 and theCooperative Code of the Philippines.

In providing banks and the banking public easy access to this information, theupdated MORB seeks to facilitate compliance with the BSPs supervisory and regulatoryrequirements that will contribute to the enhancement of the partnership between BSPand the banking sector, and ultimately to the strengthening of the Philippine BankingSystem and the economy.

AMANDO M. TETANGCO, JR. Governor

PREFACE(2010 Edition)

The 2010 Manual of Regulations for Banks (MORB) is the latest updated edition from theinitial issuance in 1996 . The updates consist of the significant policy developments and changesin statutory laws. It shall serve as the principal source of banking regulations issued by theMonetary Board and the Governor of the BSP and shall be cited as the authority for enjoiningcompliance with the rules and regulations embodied therein.

To accomplish the work of proposing revision to the Old Manual, the Monetary Boardof the BSP, in its Resolution No. 1203 dated December 7, 1994, directed the creation of amulti-departmental Ad Hoc Review Committee. The Committee was officially constitutedunder Office Order No. 2 Series of 1995 and was reconstituted several times thereafter.Under the aforesaid office order, the Committee is tasked to update the Manuals on acontinuing basis (i) to incorporate relevant issuances (ii) propose revision/deletion of provisionswhich have become obsolete, redundant, irrelevant or inconsistent with laws/regulations(iii) reformulate provisions as the need arises and (iv) oversee printing of the Manuals/Updates in coordination with the Corporate Affairs Office.

The present Committee, as reconstituted under Office Order No. 0152, Series of2011 dated 01 February 2011, is composed of: Mr. Alberto A. Reyes, Director, ExaminationDepartment II (ED) II, Chairman; Atty. Magdalena D. Imperio, Deputy Director, Officeof the General Counsel and Legal Services (OGCLS), Vice Chairman; Ms. Ma. BelindaG. Caraan, Deputy Director/Head, Financial Consumer Affairs Group (FCAG); Ms. Ma.Corazon T. Alva, Acting Deputy Director, Examination Department (ED) I; Atty. LordEileen S. Tagle, Legal Officer III, OGCLS; Atty. Florabelle S. Madrid, Manager, CPCD I;Ms. Celedina P. Garbosa, Acting Manager, CPCD II; Atty. Asma A. Panda, Legal OfficerIV, OGCLS; Ms. Concepcion A. Garcia, Bank Officer IV, ED III; Ms. Ma. Corazon B.Bilgera, Bank Officer II, Anti-Money Laundering Specialists Group (AMLSG), members;and Mr. Nestor A. Espenilla, Jr., Deputy Governor, Supervision and Examination Sector,Adviser.

The Committee Secretariat is headed by Ms. Ma. Cecilia U. Contreras, Supervision andExamination Specialist I, ED II.

The Bangko Sentral ng Pilipinas

INSTRUCTIONS TO USERS(2010 Edition)

The Manual of Regulations for Banks (the Manual) is divided into nine (9) Parts.For provisions common to all types of banks, the sections and subsections of each part isprefixed by the letter X. Special provisions do not contain the prefix X but instead, thesection/subsection applicable only to universal/commercial banks (UBs/KBs), thrift banks(TBs) and rural banks (RBs) and cooperative banks (Coop Banks) are indicated by the firstdigit showing the numbers 1, 2, and 3 applicable to said banks, respectively. The seconddigit refers to the Part of the Manual. The third and fourth digits refer to the section numberof the Part while the number/s after the decimal point, if any, refer to the subsection.

Thus, to illustrate, Subsection X143.1 and Section 1381 would indicate

Main Section - Disqualification of Directors/Trustees and Officers

Subsection - Persons disqualified to become officers

X 1 4 3 . 1

Part One on Organization, Management and Administration

Manual of Regulations for Banks (Common provision)

Main Section - Investment in Non-Allied Undertakings

1 3 8 1

Part Three - Loans, Investments and Special Credits

Manual of Regulations for Banks (special provision for UBs/KBs)

The runners in the upper-right or left hand corners of each page show the sections/subsections and the cut-off date of the regulatory issuances included in the page of theManual where the runner is shown.

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MANUAL OF REGULATIONS FOR BANKS

TABLE OF CONTENTS

POWER OF THE BANGKO SENTRAL TO EXAMINE BANKS

Examination by the Bangko Sentral

PART ONE - ORGANIZATION, MANAGEMENT AND ADMINISTRATION

A. CLASSIFICATIONS AND POWERS OF BANKS

SECTION X101 Classifications, Powers and Scope of Authorities of Banks1101.1 (Reserved)2101.1 Authority of thrift banks to issue foreign letters of

credit and pay/accept/negotiate/import/export drafts/bills of exchange

2101.2 Application for authority to issue foreign letters ofcredit and pay/accept/negotiate import/export drafts/bills of exchange

B. ESTABLISHMENT AND ORGANIZATION

SECTION X102 Basic Guidelines in Establishing BanksX102.1 Prerequisites for the grant of a universal banking

authorityX102.2 Suspension of the grant of new banking licenses or

the establishment of new banksX102.3 Partial lifting of general moratorium on the licensing

of new thrift banks and rural banksX102.4 Conditions for the grant of authority to convert into

a lower categoryX102.5 Conversion of microfinance-oriented thrift banks/

rural banks

SECTION X103 Certificate of Authority to Register

SECTION X104 Business NameX104.1 Bank advertisements

xSECTION X105 Liberalized Entry and Scope of Operations of Foreign BanksX105.1 Modes of entry of foreign banksX105.2 Qualification requirementsX105.3 Guidelines for selectionX105.4 Capital requirementsX105.5 Composition of capital accounts; compliance with

capital ratiosX105.6 Prescribed ratio of net due to and permanently

assigned capitalX105.7 Head office guaranteeX105.8 Scope of authority for locally incorporated

subsidiaries of foreign banks as well as branches withfull banking authority

X105.9 LimitationsX105.10 Change from one mode of entry to anotherX105.11 Listing of shares with the Philippine Stock ExchangeX105.12 Applicability to Philippine corporations

SECTIONS X106 - X107 (Reserved)

C. MERGER AND CONSOLIDATION

SECTION X108 Merger or Consolidation to Meet Minimum CapitalX108.1 Requirement of Bangko Sentral approvalX108.2 Rules on exchange of sharesX108.3 Merger or consolidation incentives1108.3 (Reserved)2108.3 (Reserved)3108.3 Regulatory relief under the strengthening program

for RBs


D. CAPITALIZATION

SECTION X111 Minimum Required CapitalX111.1 Minimum capitalizationX111.2 Capital build-up programX111.3 Memorandum of Understanding; Prompt Corrective

Action Program; Sanctions ( Deleted by Circular No.696 dated 29 October 2010 )


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E. RISK-BASED CAPITAL

SECTION X115 Basel II Risk-Based CapitalX115.1 ScopeX115.2 (Reserved)1115.2 Market risk capital requirement2115.2 (Reserved)3115.2 (Reserved)X115.3 Capital treatment of exposures/investments in certain

products

SECTION X116 Basel I Risk-Based CapitalX116.1 ScopeX116.2 Qualifying capitalX116.3 Risk-weighted assetsX116.4 DefinitionsX116.5 Required reportsX116.6 SanctionsX116.7 Temporary relief

SECTION X117 Internal Capital Adequacy Assessment Process and Supervisory Review Process

SECTION X118 Revised Risk-Based Capital Adequacy Framework for Stand Alone Thrift Banks, Rural Banks and Cooperative Banks

F. CAPITAL INSTRUMENTS

SECTION X119 Unsecured Subordinated DebtX119.1 Minimum features of unsecured subordinated debtX119.2 Prior Bangko Sentral approvalX119.3 Pre-qualification requirements of issuing bankX119.4 Public issuance of unsecured subordinated debtX119.5 Private or negotiated issuance of unsecured

subordinated debtX119.6 Issuance abroad of unsecured subordinated debtX119.7 Qualified investors/buyersX119.8 Prohibitions on holdings of unsecured subordinated

debtX119.9 Accounting treatmentX119.10 - X119.12 (Reserved)X119.13 Sanctions

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SECTION X120 Interim Tier 1 Capital for Banks Under Rehabilitation


G. STOCK, STOCKHOLDERS AND DIVIDENDS

SECTION X126 Shares of Stock of BanksX126.1 Limits of stockholdings in a single bankX126.2 Transfer of sharesX126.3 Other foreign equity investment in domestic banksX126.4 Convertibility of preferred stock common stockX126.5 Issuance of redeemable shares: conditions;

certification and report; sanctionsX126.6 Stock options/warrantsX126.7 - X126.9 (Reserved)X126.10 Dealings with stockholders and their related interests

SECTION X127 (Reserved)

SECTION 1127 Shares of Stock of Universal/Commercial Banks1127.1 Limits on stockholdings in several banks1127.2 - 1127.5 (Reserved)

SECTION 2127 Shares of Stock of Thrift Banks2127.1 Moratorium on ownership ceilings2127.2 Preferred shares2127.3 - 2127.5 (Reserved)

SECTION 3127 Shares of Stock of Rural Banks and Cooperative Banks3127.1 Moratorium on ownership ceiling3127.2 Government-held shares3127.3 Limits on stockholdings in several rural banks3127.4 Convertibility of preferred stock to common stock3127.5 Equity investment by holding corporations


SECTION X136 DividendsX136.1 DefinitionsX136.2 Requirements on the declaration of dividendsX136.3 Net amount available for dividendsX136.4 Reporting and verificationX136.5 Recording of dividends

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X136.6 Issuance of fractional shares


SECTION 1137 (Reserved)


SECTION 3137 Limitations/Amount Available on Dividends Declared by RuralBanks and Cooperative Banks3137.1 Dividends on government shares


H. DIRECTORS, OFFICERS AND EMPLOYEES

SECTION X141 Definition and Qualifications of Directors; Responsibilities andDuties of Board of DirectorsX141.1 Definition/limitsX141.2 Qualifications of a directorX141.3 Powers/responsibilities and duties of directorsX141.4 Confirmation of the election/appointments of

directors and officersX141.5 Place of board of directors meetingX141.6 - X141.8 (Reserved)X141.9 Reports requiredX141.10 Sanctions

SECTION X142 Definition and Qualifications of OfficersX142.1 Definition of officersX142.2 Qualifications of an officerX142.3 Appointment of officers

SECTION X143 Disqualification of Directors and OfficersX143.1 Persons disqualified to become directorsX143.2 Persons disqualified to become officersX143.3 Effect of non-possession of qualifications or

possession of disqualificationsX143.4 Disqualification proceduresX143.5 Watchlisting

SECTION X144 Bio-data of Directors and Officers

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SECTION X145 Interlocking Directorships and/or OfficershipsX145.1 Representatives of government

SECTION X146 Profit Sharing Programs

SECTION X147 Compensation and Other Benefits of Directors and Officers



SECTION 3147 Bonding/Training of Directors, Officers and Employees


SECTION X149 Conducting Business in an Unsafe/Unsound MannerX149.1 - X149.8 (Reserved)X149.9 Sanctions

SECTION X150 Rules of Procedure on Administrative Cases Involving Directorsand Officers of Banks

I. BANKING OFFICES

SECTION X151 Establishment/Relocation/Voluntary Closure/Sale of BranchesX151.1 Prior Monetary Board approvalX151.2 Prerequisites for the grant of authority to establish a

branchX151.3 Application for authority to establish branchesX151.4 Branching guidelinesX151.5 Branch processing feeX151.6 Establishment of other banking officesX151.7 Date of openingX151.8 Requirements for opening a branch/other banking

officeX151.9 Relocation of branches/other banking officesX151.10 Voluntary closure/sale of branches/other banking

officesX151.11 Relocation/transfer of branch licenses of closed banksX151.12 SanctionsX151.13 - X151.18 (Reserved)X151.19 Tellering booths

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SECTION X152 Relocation of Head OfficesX152.1 Sanctions

SECTION X153 Establishment of Additional Branches of Foreign BanksX153.1 Application for authority to establish additional

branchX153.2 Requirements for establishment of additional branchX153.3 Date of openingX153.4 Requirements for opening a branchX153.5 Choice of locations for establishment of branchesX153.6 Sanctions

SECTION X154 Establishment of Offices AbroadX154.1 Application for authority to establish an office abroadX154.2 Requirements for establishing an office abroadX154.3 Conditions attached to the approved applicationX154.4 Date of openingX154.5 Requirements for opening an office abroadX154.6 SanctionsX154.7 - X154.8 (Reserved)X154.9 Establishment of a foreign subsidiary by a bank

subsidiary

SECTION X155 Mobile Foreign Exchange Booth; Off-Site Automatic Multi-Currency Money Changers

X155.1 Mobile foreign exchange booths X155.2 Off-site automatic multi-currency money changers

J. BANKING DAYS AND HOURS

SECTION X156 Banking Days and HoursX156.1 Banking hours beyond the minimum; banking

services during holidaysX156.2 Report of, and changes in, banking days and hoursX156.3 Posting of schedule of banking days and hours


K. BANKING PREMISES

SECTION X160 Bank Premises and Other Fixed AssetsX160.1 Appreciation or increase in book value

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X160.2 Ceiling on total investmentsX160.3 Reclassification of real and other properties acquired

to bank premises, furniture, fixture and equipment;Sanctions

X160.4 - X160.9 (Reserved)X160.10 Batas Pambansa Blg. 344 - An Act to Enhance the

Mobility of Disabled Persons by Requiring CertainBuildings, Institutions, Establishments and PublicUtilities to Install Facilities and Other Devices

L. MANAGEMENT CONTRACTS AND OUTSOURCINGOF BANKING FUNCTIONS

SECTION X161 Management Contracts

SECTION X162 Duties and Responsibilities of Banks and their Directors/Officersin All Cases of Outsourcing of Banking FunctionsX162.1 Prohibition against outsourcing certain banking

functionsX162.2 Outsourcing of information technology systems/

processesX162.3 Outsourcing of other banking functionsX162.4 Service providersX162.5 Review of subsisting outsourcing contractsX162.6 - X162.10 (Reserved)X162.11 Other banking services for subsidiaries, affiliates and

related companiesX162.12 Other banking services to other entitiesX162.13 - X162.18 (Reserved)X162.19 Penalties


M. BANK OFFICES AS OUTLET OF FINANCIAL PRODUCTS OF ALLIEDUNDERTAKINGS/INVESTMENT HOUSE


SECTION 1172 Financial Products of Allied Undertakings or Investment HouseUnits of Banks1172.1 Statement of principles1172.2 Prior Monetary Board approval1172.3 Minimum documentary requirements

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1172.4 Financial ratios and other related requirements1172.5 Promotional materials; stationeries and other

paraphernalia1172.6 Contracts/Information to be disclosed1172.7 Training1172.8 Other requirements1172.9 - 1172.10 (Reserved)1172.11 Sanctions

SECTION 2172 Market ing, Sale and Servicing of Microinsurance Products byThrift Banks

SECTION 3172 Market ing, Sale and Servicing of Microinsurance Products byRural and Cooperative Banks

N. RISK MANAGEMENT

SECTION X173 Supervision by Risks

SECTION X174 Market Risk Management

SECTION X175 Liquidity Risk Management

SECTION X176 Technology Risk Management


SECTION X180 Compliance System; Compliance OfficerX180.1 Compliance systemX180.2 Compliance officerX180.3 Compliance riskX180.4 Responsibilities of the board of directors and senior

management on complianceX180.5 StatusX180.6 IndependenceX180.7 Role and responsibilities of the compliance functionX180.8 Cross-border compliance issuesX180.9 Outsourcing of compliance risk assessment and

testing

SECTION X181 Bank ProtectionX181.1 ObjectivesX181.2 Designation of security officer

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X181.3 Security programX181.4 Minimum security measuresX181.5 ReportsX181.6 Bangko Sentral inspectionX181.7 Common security service provisionX181.8 Sanctions


SECTION X185 Internal Control SystemX185.1 Proper accounting recordsX185.2 Independent balancingX185.3 Division of duties and responsibilitiesX185.4 Joint custodyX185.5 Signing authoritiesX185.6 Dual controlX185.7 Number controlX185.8 Rotation of dutiesX185.9 Independence of the internal auditorX185.10 Confirmation of accountsX185.11 Other internal control standardsX185.12 Internal control procedures for dormant/inactive

accounts

SECTION X186 Internal Audit FunctionX186.1 Independence of internal audit functionX186.2 ScopeX186.3 Qualification standards of the internal auditorX186.4 Code of Ethics and Internal Auditing Standards


SECTION X189 Selection, Appointment, Reporting Requirements and Delisting of External Auditors and/or Auditing Firm; Sanctions; Effectivity

SECTION X190 Audited Financial Statements of BanksX190.1 Financial auditX190.2 Posting of audited financial statementsX190.3 Disclosure of external auditor's adverse findings to

the Bangko Sentral; sanctionX190.4 Disclosure requirement in the notes to the audited

financial statementsX190.5 Disclosure requirements in the annual report

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X190.6 Posting and submission of annual report

SECTION X191 RecordsX191.1 Adoption of the Manual of AccountsX191.2 Financial Reporting PackageX191.3 Philippine Financial Reporting Standards/Philippine

Accounting StandardsX191.4 - X191.9 (Reserved)1191.9 (Reserved)2191.9 (Reserved)3191.9 Retention and disposal of records of rural/cooperative

banks

SECTION X192 ReportsX192.1 Categories and signatories of bank reportsX192.2 Sanctions in case of willful delay in the submission

of reports/refusal to permit examinationX192.3 Submission of certain required informationX192.4 Report on crimes/lossesX192.5 Report on real estate/chattel transactionsX192.6 Reconciliation of head office and branch

transactionsX192.7 List of stockholders and their stockholdingsX192.8 Bangko Sentral offices, where reports are submittedX192.9 Publication/Posting of balance sheetX192.10 Consolidated financial statements of banks and their

subsidiaries engaged in financial allied undertakingsX192.11 Reports of other banking officesX192.12 Reports required of foreign subsidiaries/affiliates/

banking offices or non-bank entities of domesticbanks

X192.13 (Reserved)1192.13 Additional reports from UBs/KBs2192.13 (Reserved)3192.13 (Reserved)X192.14 Reports of strikes and lockoutsX192.15 Report on the Sworn Statement on Real Estate/Chattel

Transactions

O. PROMPT CORRECTIVE ACTION FRAMEWORK

SECTION X193 Prompt Corrective Action Framework

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SECTION X194 - X195 (Reserved)

P. LIQUIDATION AND RECEIVERSHIP

SECTION X196 Voluntary LiquidationX196.1 Prior Monetary Board approvalX196.2 Liquidation planX196.3 - X196.7 (Reserved)X196.8 Final liquidation report


SECTION X198 Insolvency or Receivership of BanksX198.1 Definition of termsX198.2 Prohibited actsX198.3 - X198.8 (Reserved)X198.9 Penalties and sanctions

Q. GENERAL PROVISION ON SANCTIONS

SECTION X199 General Provision on Sanctions

PART TWO - DEPOSIT AND BORROWING OPERATIONS

A. DEMAND DEPOSITS

SECTION X201 Authority to Accept or Create Demand DepositsX201.1 Prerequisites to accept or create demand deposits

for thrift banks/rural banks/cooperative banksX201.2 Requirements for accepting demand depositsX201.3 Sanctions

SECTION X202 Temporary Overdrawings; Drawings Against UncollectedDeposits

SECTION X203 Returned Checks

SECTION X204 Current Accounts of Bank Officers and Employees

SECTION X205 Check Clearing Rules for Banks Authorized to Accept Demand Deposits

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SECTION 2205 Check Clearing Rules for Thrift Banks Authorized to AcceptDemand Deposits

SECTION 3205 Check Clearing Rules for Rural Banks Who Are Members of thePhilippine Clearing House Corporation

SECTIONS X206 Clearing Operations

SECTION X207 Check Clearing Operations During Public Sector Holidays


B. SAVINGS DEPOSITS

SECTION X213 Servicing Deposits Outside Bank Premises

SECTION X214 Withdrawals

SECTION X215 Rental Deposits of Lessees


SECTION X221 Peso Savings Deposit Accounts of Embassy Officials


C. NEGOTIABLE ORDER OF WITHDRAWAL ACCOUNTS

SECTION X223 Authority to Accept Negotiable Order of Withdrawal AccountsX223.1 Prerequisites to accept negotiable order of withdrawal

accounts for thrift banks/rural banks/cooperativebanks

X223.2 Requirements for accepting negotiable order ofwithdrawal accounts

X223.3 Sanctions

SECTION X224 Rules on Servicing Negotiable Order of Withdrawal Accounts

SECTION X225 Minimum Features

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SECTION X226 Clearing of Negotiable Order of Withdrawal Accounts


D. TIME DEPOSITS

SECTION X231 Term of Time Deposits

SECTION X232 Special Time Deposits

SECTION X233 Certificates of Time DepositsX233.1 Prerequisites to issue negotiable certificates of time

deposits for thrift banks/rural banks/cooperativebanks

X233.2 Requirements for issuing negotiable certificates oftime deposits

X233.3 Minimum featuresX233.4 Insurance coverageX233.5 Desistance from issuing new negotiable certificates

of time depositsX233.6 SanctionsX233.7 - X233.8 (Reserved)X233.9 Long-term negotiable certificates of time depositsX233.10 (Reserved)X233.11 Long-term non-negotiable tax-exempt certificates of

time deposit

E. DEPOSIT SUBSTITUTE OPERATIONS (QUASI-BANKING FUNCTIONS)

SECTION X234 Scope of Quasi-Banking FunctionsX234.1 Elements of quasi-bankingX234.2 Definition of terms and phrasesX234.3 Transactions not considered quasi-bankingX234.4 Pre-conditions for the exercise of quasi-banking

functionsX234.5 Certificate of Authority from the Bangko SentralX234.6 Sale, discounting, assignment or negotiation by

banks of their credit rights arising from claims againstthe BSP

SECTION X235 Deposit Substitute InstrumentsX235.1 Prohibition against use of acceptances, bills of

exchange and trust certificates

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X235.2 Negotiation of promissory notesX235.3 Minimum featuresX235.4 Interbank loan transactionsX235.5 Delivery of securitiesX235.6 Other rules and regulations governing the issuance

and treatment of deposit substitute instrumentsX235.7 - X235.11 (Reserved)X235.12 Repurchase agreements covering government

securities, commercial papers and other negotiableand non-negotiable securities or instruments

SECTION X236 Minimum Trading Lot and Minimum Term of Deposit Substitute

SECTION X237 Money Market Placements of Rural BanksX237.1 Definition of termsX237.2 Conditions required on accepted placements not

covered by prohibitionX237.3 Sanctions

SECTION X238 Without Recourse TransactionsX238.1 Delivery of securitiesX238.2 SanctionsX238.3 Securities custodianship operations

SECTION X239 Issuance of BondsX239.1 Definition of termsX239.2 Compliance with Securities and Exchange

Commission rules on registration of bond issuesX239.3 Notice to Bangko Sentral ng PilipinasX239.4 Minimum featuresX239.5 Issuance of commercial papers

F. GOVERNMENT DEPOSITS

SECTION X240 Statement of PolicyX240.1 Prior Monetary Board approvalX240.2 Banks which may accept government fundsX240.3 Prerequisites for the grant of authority to accept

deposits from the government and governmententities

X240.4 Application for authorityX240.5 Limits on funds of the Government and government

entities that may be deposited with banks

xxiv

X240.6 Liquidity floorX240.7 Exempt transactionsX240.8 ReportsX240.9 SanctionsX240.10 - X240.14 (Reserved)X240.15 Acceptance by banks with internet banking facility

of payment of fees for account of government entities


G. INTEREST

SECTION X242 Interest on Deposits/Deposit SubstitutesX242.1 Time of payment of interest on time deposits/deposit

substitutesX242.2 Treatment of matured time deposits/deposit

substitutes

SECTION X243 Disclosure of Effective Rates of Interest


H. RESERVES AGAINST DEPOSIT AND DEPOSIT SUBSTITUTE LIABILITIES

SECTION X253 Accounts Subject to Reserves; Amounts RequiredX253.1 Regular reserves against deposit and deposit substitute

liabilitiesX253.2 Liquidity reserves

SECTION X254 Composition of ReservesX254.1 Allowable drawings against reservesX254.2 Exclusion of uncleared checks and other cash itemsX254.3 Interest income on reserve depositsX254.4 Book entry method for reserve securities

SECTION X255 Exemptions from Reserve Requirements

SECTION X256 Computation of Reserve PositionX256.1 Measurement of reserve requirementX256.2 - X256.4 (Reserved)X256.5 Guidelines in calculating and reporting to the Bangko

Sentral the required reserves on deposit substitutesevidenced by repurchase agreements coveringgovernment securities

xxv

SECTION X257 Reserve Deficiencies; SanctionsX257.1 Chronic reserve deficiency; penaltiesX257.2 Failure to cover overdrawings with the Bangko SentralX257.3 Payment of penalties on reserve deficiencies

SECTION X258 Report on Compliance


I. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS

SECTION X261 Booking of Deposits and WithdrawalsX261.1 Clearing cut-off timeX261.2 DefinitionsX261.3 Booking of cash depositsX261.4 Booking of non-cash depositsX261.5 Booking of deposits after regular banking hoursX261.6 Other records requiredX261.7 Notice required

SECTION X262 Miscellaneous Rules on DepositsX262.1 Specimen signatures, identification photosX262.2 Insurance on depositsX262.3 Certification of compliance with Subsection 55.4 of

R.A. No. 8791

SECTION X263 Service and Maintenance FeesX263.1 Amendments to terms and conditions for the

imposition of service charges/fees

SECTION X264 Unclaimed Balances

SECTION X265 Acceptance, Encashment or Negotiation of Checks Drawn inFavor of Commissioner/Collector of Customs

SECTION X266 Deposit Pick-up/Cash Delivery ServicesX266.1 Operation of armored cars



SECTION 3266 Qualifying Criteria Before a Rural/Cooperative Bank Engages inDeposit Pick-up Services

xxvi

SECTION X267 Automated Teller Machines

J. BORROWINGS FROM THE BANGKO SENTRAL

SECTION X268 Rediscounting LineX268.1 Credit Information SystemX268.2 Application proceduresX268.3 Approval/Renewal of the lineX268.4 Amount of lineX268.5 Term of the lineX268.6 - X268.9 (Reserved)X268.10 Constitutional prohibition

SECTION X269 Rediscounting AvailmentsX269.1 Eligibility requirements at the time of availmentX269.2 Eligible papers and collateralsX269.3 Loan availment proceduresX269.4 Loan valueX269.5 MaturitiesX269.6 Rediscount/lending rates and liquidated damagesX269.7 Release of proceedsX269.8 Repayments/remittance of collections/arrearagesX269.9 Prohibited transactionsX269.10 Monitoring and credit examination of borrowing

banksX269.11 Penalties/sanctionsX269.12 Interlocking directorship/officership

SECTION X270 Repurchase Agreements with the Bangko Sentral

SECTION X271 Bangko Sentral Liquidity WindowX271.1 Nature of liquidity windowX271.2 Terms of creditX271.3 Limit

SECTION X272 Emergency Loans or Advances to Banking InstitutionsX272.1 Nature of emergency loans or advancesX272.2 When an emergency loan or advance may be

availed ofX272.3 Allowable amount of emergency loan or advanceX272.4 Application proceduresX272.5 Other documentary requirementsX272.6 Acceptable collaterals and their corresponding loan

values

xxvii

X272.7 Manner and conditions of releaseX272.8 Interest rates, liquidated damages, and penaltiesX272.9 General terms and conditionsX272.10 Maturity/Conditions for renewalsX272.11 Remittance of collections/repayments/arrearagesX272.12 Default

SECTION X273 Facility to Committed Credit Line IssuersX273.1 Nature of special credit accommodationsX273.2 Conditions to accessX273.3 Terms of creditX273.4 Ceiling



SECTION 2274 Countryside Financial Institutions Enhancement Program forThrift Banks

SECTION 3274 Countryside Financial Institutions Enhancement Program forRural and Cooperative Banks

SECTION X275 Recording and Reporting of Borrowings

SECTION X276 Rediscounting Window for Low-Cost Housing as Defined by theHousing and Urban Development Coordinating Council


SECTION 1277 Rediscounting Window Available to All Universal andCommercial Banks for the Purpose of Providing LiquidityAssistance to Investment Houses

SECTION 2277 Rediscounting Window Available to TBs for the Purpose ofProviding Liquidity Assistance to Support and PromoteMicrofinance Programs

SECTION 3277 Rediscounting Window Available to Rural and CooperativeBanks for the Purpose of Providing Liquidity Assistance to Supportand Promote Microfinance Programs3277. 1 Eligibility requirements3277. 2 Microcredit line

xxviii

3277. 3 Terms and conditions3277. 4 Documentary requirements3277. 5 Remittance of collections/payments/repayments3277. 6 Reports required3277. 7 Accounts verification3277. 8 Sanctions

SECTION X278 Enhanced Intraday Liquidity Facility


K. OTHER BORROWINGS

SECTION X281 Borrowings from the GovernmentX281.1 Exemption from reserve requirement

SECTION X282 Borrowings from Trust Departments or Investment Houses



SECTION 2283 Mortgage/CHM Certificates of Thrift Banks





SECTION 3284 Borrowings of Rural Banks/Cooperative Banks



PART THREE - LOANS, INVESTMENTS AND SPECIAL CREDITS

SECTION X301 Lending PoliciesX301.1 (Reserved)

xxix

1301.1 Rules and regulations to govern the development andimplementation of banks internal credit risk ratingsystems

2301.1 (Reserved)3301.1 (Reserved)X301.2 - X301.5 (Reserved)X301.6 Large exposures and credit risk concentrations

SECTION X302 Loan Portfolio and Other Risk Assets Review SystemX302.1 Provisions for losses; bookingX302.2 Sanctions

A. LOANS IN GENERAL

SECTION X303 Credit Exposure Limits to a Single BorrowerX303.1 Definition of termsX303.2 Rediscounted papers included in loan limitX303.3 Credit risk transferX303.4 Exclusions from loan limitX303.5 SanctionsX303.6 - X303.7 (Reserved)X303.8 Limit for wholesale lending activities of government

banks

SECTION X304 Grant of Loans and Other Credit AccommodationsX304.1 General guidelinesX304.2 Purpose of loans and other credit accommodationsX304.3 Prohibited use of loan proceedsX304.4 SignatoriesX304.5 - X304.8 (Reserved)X304.9 Policies on loans to non-immigrants and embassy

officialsX304.10 Minimum required disclosureX304.11 Unfair collection practicesX304.12 Confidentiality of InformationX304.13 - X304.14 (Reserved)X304.15 Sanctions

SECTION X305 Interest and Other ChargesX305.1 Rate of interest in the absence of stipulationX305.2 Escalation clause; when allowableX305.3 Floating rates of interestX305.4 Accrual of interest earned on loans

xxx

SECTION X306 Past Due AccountsX306.1 Accounts considered past dueX306.2 Demand loansX306.3 Renewals/extensionsX306.4 Restructured loansX306.5 Write-off of loans as bad debtsX306.6 Writing-off microfinance loans as bad debtsX306.7 Updating of information provided to credit

information bureaus

SECTION X307 Truth in Lending Act Disclosure RequirementX307.1 Definition of termsX307.2 Information to be disclosedX307.3 Inspection of contracts covering credit transactionsX307.4 Posters

SECTION X308 Amortization on Loans and Other Credit Accommodations

SECTION X309 Non-Performing LoansX309.1 Accounts considered non-performing; definitionsX309.2 - X309.3 (Reserved)X309.4 Reporting requirement


B. SECURED LOANS

SECTION X311 Loans Secured by Real Estate MortgagesX311.1 Loans secured by junior mortgage on real estateX311.2 (Reserved)1311.2 (Reserved)2311.2 (Reserved)3311.2 Eligible real estate collaterals on rural/cooperative

bank loansX311.3 Insurance on real estate improvementsX311.4 (Reserved)1311.4 (Reserved)2311.4 Foreclosure by thrift banks3311.4 Foreclosure by rural/cooperative banksX311.5 Redemption of foreclosed real estate mortgage

SECTION X312 Loans and Other Credit Accommodations Secured By Chattelsand Intangible Properties

xxxi

SECTION X313 Loans and Other Credit Accommodations Secured By PersonalProperties

SECTION X314 Increased Loan Values and Terms of Loans for Home-Building

SECTION X315 Loans Secured by Certificates of Time Deposit


C. UNSECURED LOANS

SECTION X319 Loans Against Personal SecurityX319.1 General guidelines (deleted by Circular No. 622 dated

16 September 2008)X319.2 Proof of financial capacity of borrower (deleted by

Circular No. 622 dated 16 September 2008) X319.3 Signatories (deleted by Circular No. 622 dated

16 September 2008)

SECTION X320 Credit Card Operations; General PolicyX320.1 Definition of termsX320.2 Risk management systemX320.3 Minimum requirementsX320.4 Information to be disclosedX320.5 Interest accrual on past due loansX320.6 Finance chargesX320.7 Deferral chargesX320.8 Late payment/penalty feesX320.9 Confidentiality of informationX320.10 Suspension, termination of effectivity and reactivationX320.11 Inspection of records covering credit card transactionsX320.12 OffsetsX320.13 Handling of complaintsX320.14 Unfair collection practicesX320.15 Sanctions


D. RESTRUCTURED LOANS

SECTION X322 Restructured Loans; General PolicyX322.1 Definition; when to consider performing/

non-performingX322.2 Procedural requirements

xxxii

X322.3 Restructured loans considered past dueX322.4 Classification


E. LOANS AND OTHER CREDIT ACCOMMODATIONS TO DIRECTORS,OFFICERS, STOCKHOLDERS AND THEIR RELATED INTERESTS

SECTION X326 General PolicyX326.1 Definitions

SECTION X327 Transactions Covered

SECTION X328 Transactions Not CoveredX328.1 Applicability to credit card operationsX328.2 - X328.4 (Reserved)X328.5 Loans, other credit accommodations and guarantees

granted to subsidiaries and/or affiliates

SECTION X329 Direct or Indirect Borrowings

SECTION X330 Individual CeilingsX330.1 Exclusions from individual ceiling

SECTION X331 Aggregate Ceiling; Ceiling on Unsecured Loans, Other CreditAccommodations and Guarantees

SECTION X332 Exclusions from Aggregate Ceiling

SECTION X333 Applicability to Branches and Subsidiaries of Foreign Banks

SECTION X334 Procedural Requirements

SECTION X335 Reportorial Requirements

SECTION X336 Sanctions

SECTION X337 Waiver of Secrecy of Deposit

SECTION X338 Financial Assistance to Officers and EmployeesX338.1 MechanicsX338.2 (Reserved)1338.2 Funding by foreign banks

xxxiii

2338.2 (Reserved)3338.2 (Reserved)X338.3 Other conditions/limitations

SECTION X339 Transitory ProvisionsX339.1 - X339.3 (Reserved)X339.4 Reportorial requirements

SECTION X340 Applicability of DOSRI Rules and Regulations to GovernmentBorrowings in Govenment-Owned or -Controlled Banks

F. MANDATORY CREDITS

SECTION X341 Agrarian Reform and Agricultural CreditX341.1 Definition of termsX341.2 Who may borrow; purposesX341.3 Required allocation for agrarian reform and

agricultural credit in generalX341.4 Computation of loanable fundsX341.5 Allowable alternative complianceX341.6 Syndicated type of agrarian reform credit/agricultural

creditX341.7 Interest and other chargesX341.8 Unused agri-agra funds to be utilized for socialized

and low-cost housingX341.9 Submission of reportsX341.10 - X341.11 (Reserved)X341.12 Consolidated complianceX341.13 - X341.14 (Reserved)X341.15 Sanctions

SECTION X342 Mandatory Allocation of Credit Resources to Micro, Small andMedium EnterprisesX342.1 Definition of termsX342.2 Period covered; prescribed portions of loan portfolio

to be allocatedX342.3 Eligible credit exposuresX342.4 Ineligible credit instrumentsX342.5 Rights/remedies available to lending institutions not

qualified to acquire or hold lands of public domainX342.6 Submission of reportsX342.7 SanctionsX342.8 Disposition of penalties collected

xxxiv

X342.9 - X342.14 (Reserved)X342.15 Accreditation guidelines for Rural and Thrift Banks

under the SME Unified Lending Opportunities forNational Growth

G. SPECIAL TYPE OF LOANS

SECTION X343 Interbank LoansX343.1 Systems and procedures for interbank call loan

transactionsX343.2 Accounting proceduresX343.3 Settlement procedures for interbank loan transactions

SECTION X344 Loans to Thrift/Rural/Cooperative BanksX344.1 Loans under Section 12 of R.A. No. 7353, Section 10

of R.A. No. 7906 and Article 102 of R.A. No. 6038, asamended by R.A. No. 9520

X344.2 Loans under Section 14 of R.A. No. 7353


SECTION X347 Standby Letters of CreditX347.1 Domestic standby letters of creditX347.2 CeilingX347.3 Reports

SECTION X348 Committed Credit Line for Commercial Paper IssuesX348.1 Who may grant line facilityX348.2 CeilingsX348.3 Terms; conditions; restrictionsX348.4 Reports to the Bangko SentralX348.5 Loan limit

SECTION X349 Agriculture and Fisheries Projects with Long Gestation PeriodsX349.1 Definition of termsX349.2 Grace periodX349.3 Responsibility of lending banksX349.4 Past due loansX349.5 Non-performing loans


SECTION X361 Microfinance LoansX361.1 Definition

xxxv

X361.2 Loan limit; amortization; interestX361.3 Credit information exemptionX361.4 Exemptions from rules on unsecured loansX361.5 Housing microfinance loanX361.6 (Reserved)X361.7 Micro-agri loansX361.8 (Reserved)1361.8 (Reserved)2361.8 Marketing, sale and servicing of microinsurance

products by thrift banks3361.8 Marketing, sale and servicing of microinsurance

products by rural and cooperative banksX361.9 (Reserved)

X361.10 Sanctions


SECTION X365 Loans to Barangay Micro Business EnterprisesX365.1 Credit deliveryX365.2 Interest on loans to barangay micro business

enterprisesX365.3 Amortization of loans to barangay micro business

enterprisesX365.4 Waiver of documentary requirementsX365.5 Incentives to participating financial institutionsX365.6 Credit guaranteeX365.7 RecordX365.8 Reports to CongressX365.9 Administrative sanctions


H. EQUITY INVESTMENTS

SECTION X376 Scope of AuthorityX376.1 Conditions for investment in equitiesX376.2 - X376.4 (Reserved)X376.5 Guidelines for major investments

SECTION X377 Financial Allied Undertakings

SECTION X378 Limits on Investment in the Equities of Financial AlliedUndertakings

xxxvi

SECTION X379 Investments in Venture Capital CorporationsX379.1 Requirements for investorsX379.2 Equity investments of venture capital corporationsX379.3 Business name of venture capital corporationsX379.4 Reportorial requirements; examination by Bangko

SentralX379.5 Interlocking directorships and/or officerships

SECTION X380 Non-Financial Allied Undertakings


SECTION 1381 Investments in Non-Allied or Non-Related Undertakings1381.1 Non-allied undertakings eligible for investment by

universal banks1381.2 Limits on investments in non-allied enterprises1381.3 Report on outstanding equity investments in and

outstanding loans to non-allied enterprises

SECTION X382 Investments in Subsidiaries and Affiliates AbroadX382.1 Application for authority to establish or acquire

subsidiaries and affiliates abroadX382.2 Requirements for establishing subsidiaries or affiliates

abroadX382.3 Conditions for approval of applicationX382.4 - X382.7 (Reserved)X382.8 Investment of a bank subsidiary in a foreign subsidiary

SECTION X383 Other Limitations and Restrictions



I. (RESERVED)


J . OTHER OPERATIONS

SECTION X388 Purchase of Receivables and Other ObligationsX388.1 Yield on purchase of receivablesX388.2 Purchase of receivables on a without recourse basis

xxxvii

X388.3 Purchase of commercial paperX388.4 Reverse repurchase agreements with Bangko SentralX388.5 Investment in debt and readily marketable equity

securities


SECTION 1389 Guidelines on the Investment of Universal Banks andCommercial Banks in Credit-Linked Notes, Structured Productsand Securities Overlying Securitization Structures




K. MISCELLANEOUS PROVISIONS

SECTION X393 Loans-to-Deposits RatioX393.1 Statement of policyX393.2 Regional loans-to-deposits ratioX393.3 Computation of the regional loans-to-deposits ratio

SECTION X394 Acquired Assets in Settlement of LoansX394.1 PostingX394.2 BookingX394.3 Sales contract receivableX394.4 - X394.9 (Reserved)X394.10 Transfer/sale of non-performing assets to a special

purpose vehicle or to an individualX394.11 - X394.14 (Reserved)X394.15 Joint venture of banks with real estate development

companies

SECTION X395 Credit Policies of Government-Owned Corporations

SECTION X396 Parcellary Plans on Crop Loans


SECTION 1397 Limits on Real Estate Loans of UBs/KBs


xxxviii


SECTION X398 Debt Service Limit on Local Government Borrowings

L. GENERAL PROVISION ON SANCTIONS


PART FOUR - TRUST, OTHER FIDUCIARY BUSINESS ANDINVESTMENT MANAGEMENT ACTIVITIES

SECTION X401 Statement of Principles

SECTION X402 Scope of Regulations

SECTION X403 Definitions

A. TRUST AND OTHER FIDUCIARY BUSINESS

SECTION X404 Authority to Perform Trust and Other Fiduciary BusinessX404.1 Application for authority to perform trust and other

fiduciary businessX404.2 Required capitalX404.3 Prerequisites for engaging in trust and other fiduciary

businessX404.4 Pre-operating requirements


SECTION 2404 Grant of Authority to Engage in Limited Trust Business to ThriftBanks

SECTION 3404 Grant of Authority to Engage in Limited Trust Business to RuralBanks

SECTION X405 Security for the Faithful Performance of Trust and Other FiduciaryBusinessX405.1 Basic security depositX405.2 Eligible securitiesX405.3 Valuation of securities and basis of computation of

the basic security deposit requirementX405.4 Compliance period; sanctionsX405.5 Reserves against peso-denominated common trust

xxxix

funds and trust and other fiduciary accounts - othersX405.6 Composition of reservesX405.7 Computation of reserve positionX405.8 Reserve deficiencies; sanctionsX405.9 Report of compliance

SECTION X406 Organization and ManagementX406.1 OrganizationX406.2 Composition of trust committeeX406.3 Qualifications of committee members, officers and

staffX406.4 Responsibilities of administrationX406.5 - X406.8 (Reserved)X406.9 Outsourcing services in trust departments

X406.10 Approval of the appointment/designation of trust officer

SECTION X407 Non-Trust, Non-Fiduciary and/or Non-Investment ManagementActivities

SECTION X408 Unsafe and Unsound PracticesX408.1 - X408.8 (Reserved)X408.9 Sanctions

SECTION X409 Trust and Other Fiduciary BusinessX409.1 Minimum documentary requirementsX409.2 Lending and investment dispositionX409.3 Transactions requiring prior authorityX409.4 Ceilings on loansX409.5 Funds awaiting investment or distributionX409.6 Other applicable regulations on loans and

investmentsX409.7 Operating and accounting methodologyX409.8 Tax-exempt individual trust accountsX409.9 Living trust accountsX409.10 - X409.15 (Reserved)X409.16 Qualification and accreditation of private banks acting

as trustee on any mortgage or bond issuance by anymunicipality, government-owned or controlledcorporation, or any body politic

X409.17 Trust fund of pre-need companies

SECTION X410 Unit Investment Trust Funds/Common Trust Funds

xl

X410.1 DefinitionsX410.2 Establishment of a Unit Investment Trust FundX410.3 Administration of a Unit Investment Trust FundX410.4 Relationship of trustee with Unit Investment Trust FundX410.5 Operating and accounting methodologyX410.6 Plan rulesX410.7 Minimum disclosure requirementsX410.8 Exposure limit to single person/entityX410.9 Allowable investments and valuationX410.10 Other related guidelines on valuation of allowable

investmentsX410.11 Unit investment trust fund administration supportX410.12 CounterpartiesX410.13 Foreign currency-denominated unit investment trust

fundsX410.14 Exemptions from statutory and liquidity reserves,

single borrower's limit, director, officers, stockholdersand their related interests

SECTION X411 Investment Management ActivitiesX411.1 Minimum documentary requirementsX411.2 Minimum size of each investment management

accountX411.3 Commingling of fundsX411.4 Lending and investment dispositionX411.5 Transactions requiring prior authorityX411.6 Title to securities and other propertiesX411.7 Ceilings on loans

X411.8 Other applicable regulations on loans and investments

X411.9 Operating and accounting methodologyX411.10 Tax-exempt individual investment management

accounts

SECTION X412 Foreign Currency Deposit Unit/Expanded Foreign CurrencyDeposit Unit Trust Accounts; Other Fiduciary or Investment

Management AccountsX412.1 Banks with trust authority or investment management

authorityX412.2 Additional deposit for the faithful performance of trust

duties or investment management activitiesX412.3 Applicability of rules and regulationsX412.4 Liquidity requirement for foreign currency deposit

xli

unit/expanded foreign currency deposit unit commontrust funds (Deleted by Circular No. 666 dated 24September 2009)

SECTION X413 Required Surplus

B. INVESTMENT MANAGEMENT ACTIVITIES

SECTION X414 Authority to Perform Investment ManagementX414.1 Prerequisites for engaging in investment management

activitiesX414.2 Pre-operating requirements

SECTION X415 Security for the Faithful Performance of Investment ManagementActivitiesX415.1 Basic security depositX415.2 Eligible securitiesX415.3 Valuation of securities and basis of computation of

the basic security deposit requirementX415.4 Compliance period; sanctions

SECTION X416 Organization and Management

SECTION X417 Non-Investment Management Activities

SECTION X418 Unsound Practices

SECTION X419 Conduct of Investment Management Activities

SECTION X420 Required Surplus

C. GENERAL PROVISIONS

SECTION X421 Books and Records

SECTION X422 Custody of Assets

SECTION X423 Fees and Commissions

SECTION X424 Taxes

SECTION X425 Reports RequiredX425.1 To trustor, beneficiary, principal

xlii

X425.2 To the Bangko SentralX425.3 Audited financial statements

X425.4 Post-bond flotation report

SECTION X426 AuditsX426.1 Internal auditX426.2 External auditX426.3 Board action

SECTION X427 Authority Resulting from Merger or Consolidation

SECTION X428 Receivership

SECTION X429 Surrender of Trust or Investment Management License


SECTION X441 Securities Custodianship and Securities Registry OperationsX441.1 Statement of policyX441.2 Applicability of this regulationX441.3 Prior Bangko Sentral approvalX441.4 Application for authorityX441.5 Pre-qualification requirements for a securities

custodian/registryX441.6 Functions and responsibilities of a securities custodianX441.7 Functions and responsibilities of a securities registryX441.8 Protection of securities of the customerX441.9 Independence of the registry and custodianX441.10 Registry of scripless securities of the Bureau of the

TreasuryX441.11 ConfidentialityX441.12 Compliance with anti-money laundering

laws/regulationsX441.13 Basic security depositX441.14 Reportorial requirementsX441.15 - X441.28 (Reserved)X441.29 Sanctions


D. GENERAL PROVISIONS ON SANCTIONS


xliii

PART FIVE - MANUAL OF REGULATIONS ON FOREIGNEXCHANGE TRANSACTIONS

PART ONE. CURRENT ACCOUNTS

Chapter I

NON-TRADE FOREIGN EXCHANGE RECEIPTS AND DISBURSEMENTS, CROSS-BORDER TRANSFER OF LOCAL AND FOREIGN CURRENCIES, AND GOLD

TRANSACTIONS

SECTION 1 Disposition of Foreign Exchange Receipts

SECTION 2 Sale of Foreign Exchange to Residents by AABs and AAB-ForexCorps for Non-Trade Current Account Transactions with Non-

Residents

SECTION 3 Sale of Foreign Exchange to Non-Resident Tourists/Balikbayans by AABs and AAB-Forex Corps

SECTION 4 Cross-Border Transfer of Local and Foreign Currencies

SECTION 5 Buying and Selling of Gold by Residents

Chapter II

FOREIGN MERCHANDISE TRADE TRANSACTIONS

A. IMPORT TRADE TRANSACTIONS

SECTION 6 General Policy

SECTION 7 Classification of Imports

SECTION 8 Modes of Payment for Imports

SECTION 9 Letter of Credit (L/C)

SECTION 10 Documents Against Payment (D/P)

SECTION 11 Documents Against Acceptance (D/A) and Open Account (O/A)Arrangements

xliv

SECTION 12 Direct Remittance (DR)

SECTION 13 Advance Payment

SECTION 14 Other Import Arrangements

B. EXPORT TRADE TRANSACTIONS


SECTION 16 Classification of Exports

SECTION 17 Export Declaration

SECTION 18 Modes and Currency of Payment

SECTION 19 Negotiation Procedures

SECTION 20 Disposition of Export Proceeds

SECTION 21 Gold and Constructive Exports

PART TWO. CAPITAL ACCOUNTS

Chapter I

LOANS AND GUARANTEES


SECTION 23 Loans Requiring Prior BSP Approval

SECTION 24 Loans Not Requiring Prior BSP Approval

SECTION 25 Projects/Costs Eligible for Foreign Financing

SECTION 26 Terms of Loans

SECTION 27 Drawdown/Availment on Loans

SECTION 28 Registration of Loans

SECTION 29 Servicing of Loans

xlv

SECTION 30 Approval/Registration and Servicing of Guarantees

SECTION 31 Approval/Registration and Servicing of Other Financing Schemes/Arrangements

Chapter II

FOREIGN INVESTMENTS


SECTION 33 Categories of Inward Foreign Investments

SECTION 34 Inward Foreign Direct Investments

SECTION 35 Inward Foreign Portfolio Investments

SECTION 36 Registration with the BSP

SECTION 37 Registration with Custodian Banks

SECTION 38 Registration Procedures

SECTION 39 Import/Export of Stock Certificates of Philippine Firms

SECTION 40 Repatriation and Remittance Privileges

SECTION 41 Deposit of Divestment/Sales Proceeds

SECTION 42 Reinvestment

SECTION 43 Inward Foreign Investments Prior to 15 March 1973

SECTION 44 Investments by Philippine Residents

PART THREE. OBUs, REPRESENTATIVE OFFICES AND FCDUs

Chapter I

OFFSHORE BANKING UNITS OF FOREIGN BANKS

SECTION 45 Definition of Terms

xlvi

SECTION 46 Approvals Required

SECTION 47 Criteria for Selection

SECTION 48 Pre-Operation Requirements

SECTION 49 Annual Fee

SECTION 50 Transactions with Non-Residents and/or with Other OBUs

SECTION 51 Transactions with Foreign Currency Deposit Units FCDUs)/Expanded Foreign Currency Deposit Units (EFCDUs)

SECTION 52 Transactions with Residents which are not Banks

SECTION 53 Peso Deposits

SECTION 54 Financial Assistance to Officers/Employees

SECTION 55 Secrecy of Deposits

SECTION 56 Exemption from Certain Laws

SECTION 57 Accounting and Reporting

SECTION 58 Supervision

SECTION 59 Taxes, Customs Duties

SECTION 60 Revocation/Suspension

Chapter II

REPRESENTATIVE OFFICES OF FOREIGN BANKS


SECTION 62 Criteria for Approval

SECTION 63 Authorized Activities of Representative Offices

SECTION 64 Fees

SECTION 65 Use of the term Representative Office

xlvii

SECTION 66 Licensing

SECTION 67 Visitorial Power

SECTION 68 Reporting

SECTION 69 Revocation of License

Chapter III

FOREIGN CURRENCY DEPOSIT SYSTEM


SECTION 71 Qualification Requirements

SECTION 72 Authorized Transactions

SECTION 73 Foreign Currency Cover Requirements

SECTION 74 Foreign Currency Deposits with the Bangko Sentral

SECTION 75 Currency Composition of the Cover

SECTION 76 Secrecy of Deposits

SECTION 77 Numbered Accounts

SECTION 78 Withdrawability and Transferability of Deposits

SECTION 79 Insurance Coverage

SECTION 80 Rates of Interest

SECTION 81 Eligibility as Collateral

SECTION 82 Taxes

SECTION 83 Exemption from Court Order or Process

SECTION 84 Accounting

SECTION 85 Supervision

xlviii

SECTION 86 Prospective Effect of Regulations

SECTION 87 Sanctions

PART FOUR. FOREIGN EXCHANGE FORWARDS AND SWAPSAND OPEN FOREIGN EXCHANGE POSITION OF BANKS

Chapter I

FOREIGN EXCHANGE FORWARDS AND SWAPSINVOLVING THE PHILIPPINE PESO



SECTION 90 Documentation

SECTION 91 Tenor/Maturity and Settlement

SECTION 92 Forward Contracts with Non-residents

SECTION 93 Cancellations, Roll-overs or Non-delivery of DeliverableForeign Exchange Forward and Swap Contracts

SECTION 94 Reporting Requirements

SECTION 95 Non-Bank BSP-Supervised Entities (NBBSEs)

Chapter II

OPEN FOREIGN EXCHANGE POSITION OF BANKS



SECTION 98 Allowable Open Foreign Exchange Position

SECTION 99 Computation of Foreign Exchange Position

SECTION 100 Sanctions

xlix

PART FIVE. GENERAL PROVISIONS

Chapter I

REPORTS AND POST VERIFICATION

SECTION 101 Reportorial Requirements

SECTION 102 Procedures for Reporting

SECTION 103 Fines and Penalties

SECTION 104 Post-Verification

Chapter II

FINAL PROVISIONS

SECTION 105 Compliance with Anti-Money Laundering Rules

SECTION 106 Penal Sanctions

SECTION 107 Repealing Clause

SECTION 108 Separability Clause

PART SIX - TREASURY AND MONEY MARKET OPERATIONS

A. OPEN MARKET OPERATIONS

SECTION X601 Open Market OperationsX601.1 Repurchase agreements with Bangko SentralX601.2 Reverse repurchase agreements with Bangko SentralX601.3 Settlement procedures on the purchase and sale of

government securities under repurchase agreementswith the Bangko Sentral

X601.4 - X601.5 (Reserved)X601.6 Bangko Sentral trading windows and services during

public sector holidays


lB. FINANCIAL INSTRUMENTS

SECTIONS X611 DerivativesX611.1 Generally authorized derivatives activitiesX611.2 Activities requiring additional derivatives authorityX611.3 Intra-group transactionsX611.4 Accounting guidelinesX611.5 Reporting requirementsX611.6 Sanctions


SECTION X625 Forward and Swap TransactionsX625.1 Statement of policyX625.2 Definition of termsX625.3 DocumentationX625.4 Tenor/maturity and settlementX625.5 (Reserved)1625.5 Forward contracts with non-residents2625.5 (Reserved)3625.5 (Reserved)X625.6 Cancellations, roll-overs or non-delivery of FX forward

contractsX625.7 Non-deliverable forward contracts with non-residentsX625.8 Compliance with anti-money laundering rulesX625.9 Reporting requirementsX625.10 - X625.13 (Reserved)X625.14 Sanctions


SECTION 1628 Credit-linked Notes and Similar Credit Derivative Products 1628.1 Definitions1628.2 Qualified banks1628.3 Capital treatment of investments in CLNs1628.4 Risk management1628.5 Transitional arrangements1628.6 Bangko Sentral approval not required




li

SECTION 1635 Bank's Exposures to Structured Products1635.1 Statement of policy1635.2 Definition1635.3 Qualified banks1635.4 Capital treatment of banks' exposures to structured

products1635.5 Bangko Sentral approval not required




SECTION 1636 Expanded Foreign Currency Deposit Units Investments in ForeignCurrency Denominated Structured Products1636.1 Statement of policy1636.2 Scope1636.3 Other conditions1636.4 Capital treatment of structured products1636.5 Bangko Sentral approval not required

1636.6 Sanctions




SECTION 1648 Investments in Securities Overlying Securitization Structures1648.1 Statement of policy1648.2 Definition1648.3 Qualified banks1648.4 Capital treatment of investments in securities

overlying securitization structures1648.5 Bangko Sentral approval not required




lii

SECTION X651 Asset-Backed SecuritiesX651.1 Definition of termsX651.2 Prior Bangko Sentral approvalX651.3 Board approval requirementX651.4 Minimum documents requiredX651.5 Minimum features of asset-backed securitiesX651.6 Disclosure requirementsX651.7 Conveyance of assetsX651.8 Representations and warrantiesX651.9 Third party reviewX651.10 Originator and sellerX651.11 Trustee and issuerX651.12 ServicerX651.13 UnderwriterX651.14 GuarantorX651.15 Credit enhancementX651.16 Clean-up callX651.17 Prohibited activitiesX651.18 Amendment of trust indentureX651.19 Trustee or servicer in securitizationX651.20 Report to Bangko Sentral


C. GENERAL PROVISION ON SANCTIONS


PART SEVEN - ELECTRONIC BANKING SERVICES AND OPERATIONS

SECTION X701 Electronic Banking ServicesX701.1 ApplicationX701.2 Pre-screening of applicantsX701.3 Approval in principleX701.4 Documentary requirementsX701.5 Conditions for Monetary Board approvalX701.6 Requirements for banks with pending applicationsX701.7 ExemptionX701.8 Transitory provisionX701.9 - X701.11 (Reserved)X701.12 Sanctions

liii

X701.13 Outsourcing of internet and mobile banking services


SECTION X705 Consumer Protection for Electronic BankingX705.1 E-Banking oversight functionX705.2 E-Banking risk management and internal controlX705.3 Compliance with consumer awareness programX705.4 Minimum disclosure requirementsX705.5 Complaint resolutionX705.6 Applicability


SECTION X780 Issuance and Operations of Electronic Money X780.1 Declaration of policy

X780.2 DefinitionsX780.3 Prior Bangko Sentral approvalX780.4 Common provisionsX780.5 (Reserved)X780.6 SanctionsX780.7 Transitory provisionsX780.8 - X780.10 (Reserved)X780.11 Outsourcing of Services by Electronic Money Issuers

(EMIs) to Electronic Money Network ServicesProviders (EMNSP)

SECTIONS X781 - X798 - (Reserved)


PART EIGHT - ANTI-MONEY LAUNDERING REGULATIONS

SECTION X801 Prevention of Money Laundering, Customer IdentificationRequirements and Record KeepingX801.1 Customer identificationX801.2 Issuance of cashier's, manager's or certified checksX801.3 Programs against money launderingX801.4 Submission of plans of actionX801.5 Required reporting of certain transactionsX801.6 Certification of compliance with anti-money

laundering regulations

liv

X801.7 Acceptance of second-endorsed checks


SECTION X804 Minimum Guidelines for Fund Transfers and CorrespondentBanking Account Opening and Customer IdentificationX804.1 Nature of fund transfersX804.2 Responsibility and oversightX804.3 Risk-based due diligenceX804.4 ValidationX804.5 Exception processingX804.6 Control and administration policies for incoming fund/

wire transfersX804.7 Integration with anti-money laundering program

SECTION X805 Banking Account Opening and Customer IdentificationX805.1 Nature of correspondent banking activitiesX805.2 Responsibility and oversightX805.3 Risk-based due diligenceX805.4 Due diligence standardsX805.5 Enhanced due diligenceX805.6 Shell banksX805.7 Branches, subsidiaries and affiliatesX805.8 Updating client filesX805.9 Monitoring and reporting of suspicious activitiesX805.10 Integration with anti-money laundering program


SECTION 1881 Electronic Monitoring System for Money Laundering



SECTION X882 Sanctions and Penalties


SECTION X895 Valid Identification Cards for Financial Transactions



lv

PART NINE - OTHER BANKING REGULATIONS

A. BANKING FEES/CHARGES

SECTION X901 Assessment Fees on BanksX901.1 Annual fees on banks

SECTION X902 Collection of Fines and Other Charges from BanksX902.1 Guidelines on the imposition of monetary penaltiesX902.2 Payment of fines by banksX902.3 Cost of checks and documentary stampsX902.4 Check/demand draft payments to the Bangko Sentral

of thrift, cooperative and rural banks

B. BANK AS COLLECTION/REMITTANCE AGENTS

SECTION X903 Collection of Customs Duties/Taxes/Levies and Other RevenuesX903.1 CoverageX903.2 Collection and reporting of internal revenue taxesX903.3 Collection and reporting of customs duties and import

processing feesX903.4 Collection and reporting of export/premium dutiesX903.5 Remittances thru debit/credit advicesX903.6 Reconciliation of revenue collectionsX903.7 Penalty for willful delay on the reporting of

collections/remittancesX903.8 Fines for delayed reports/remittances of collectionsX903.9 Liquidity floor requirement on revenue collectionsX903.10 Collection of import duties at the time of opening of

letters of credit

SECTION X904 Collection and Paying Agents of the Social Security System

SECTION X905 Collection Agents of PhilHealth

SECTION X906 Disclosure of Remittance Charges and Other RelevantInformation


C. CREDIT RATING AGENCIES

SECTION X931 Recognition and Derecognition of Domestic Credit RatingAgencies for Bank Supervisory Purposes

lvi

X931.1 Statement of policyX931.2 Minimum eligibility criteriaX931.3 Pre-qualification requirementsX931.4 Inclusion in Bangko Sentral listX931.5 Derecognition of credit rating agenciesX931.6 Recognition of PhilRatings as domestic credit

rating agency for bank supervisory purposes

SECTION X932 Internationally Accepted Credit Rating AgenciesX932.1 Recognition of Fitch Singapore Pte., Ltd. as

International credit rating agency for bank supervisory purposes


SECTION X934 Recognition and Derecognition of Microfinance InstitutionRating AgenciesX934.1 Statement of policyX934.2 Pre-qualification requirementsX934.3 Minimum eligibility criteriaX934.4 Derecognition of MIRA


SECTION X947 Prohibition on the Sale of Foreign-Based Mutual Funds byBanks

SECTION 1948 Offering in the Philippines of Products by Parent Bank andBranches Abroad of the Parent Bank




D. PHILIPPINE & FOREIGN CURRENCY NOTES & COINS

SECTION X950 Philippine and Foreign Currency Notes and CoinsX950.1 Definition of termsX950.2 Treatment and disposition of counterfeit Philippine

and foreign currency notes and coinsX950.3 Reproduction and/or use of facsimiles of legal tender

Philippine currency notes

lvii

X950.4 Reproduction and/or use of facsimiles of legal tenderPhilippine currency coins

X950.5 Clean note policyX950.6 Replacement and redemption of mutilated or unfit

legal tender Philippine currency notes and coinsX950.7 Treatment of Philippine currency notes and coins

called in for replacementX950.8 Sanctions


SECTION X954 Servive Fee for New/Fit Note Deposits with the Bangko Sentral



li

(2008 - X658) Examination by the BangkoSentral. Effective 14 August 2004 the termexamination shall, henceforth, refer to aninvestigation of an institution under thesupervisory authority of the BSP todetermine compliance with laws andregulations. It shall include determinationthat the institution is conducting its businesson a safe and sound basis. Examinationrequires full and comprehensive looking intothe operations and books of institutions, andshall include, but need not be limited to,the following:

a. Determination of the bankssolvency and liquidity position;

b. Evaluation of asset quality as wellas determination of suff iciency ofvaluation reserves on loans and other riskassets;

c. Review of all aspects of bankoperations;

d. Assessment of risk managementsystem, including the evaluation of theeffectiveness of the bank managementsoversight functions, policies, procedures,internal control and audit;

e. Appraisal of overall management ofthe bank;

f. Review of compliance withapplicable laws, rules and regulations; and

g. Any other activities relevant to theabove.

Regular or periodic examination shallbe done once a year, with an interval oftwelve (12) months from the last datethereof. Special examination may beconducted earlier, or at a shorter interval,when authorized by the Monetary Board byan affirmative vote of five (5) members.

In the full exercise of the supervisorypowers of the BSP, examination by the BSPof institutions shall be complemented byoverseeing thereof. In this regard, the termoverseeing shall refer to a limitedinvestigation of an institution, or anyinvestigation/s that is limited in scope,conducted to inquire into a particular area/aspect of an institutions operations, for thepurpose of overseeing that laws andregulations are complied with, inquiringinto the solvency and liquidity of theinstitution, enforcing prompt correctiveaction, or such other matters requiringimmediate investigation: Provided, That -(i) specific authorizations be issued by theDeputy Governor, Supervision andExamination Sector, and (ii) periodicsummary reports on overseeings made besubmitted to the Monetary Board.(Circular No. 442 dated 20 July 2004)

POWER OF THE BANGKO SENTRAL TO EXAMINE BANKS

PART ONE

ORGANIZATION, MANAGEMENT AND ADMINISTRATION

A. CLASSIFICATIONS AND POWERSOF BANKS

Section X101 Classifications, Powers andScope of Authorities of Banks. Thefollowing are the classifications, powers andscope of authorities of banks, as well as theprerequisites for the grant of bankingauthorities.

a. Classifications of banks. Banks areclassified into the following subject to thepower of the Monetary Board to createother classes or kinds of banks:

(1) Universal banks (UBs); (2) Commercial banks (KBs);(3) Thrift banks (TBs), as defined in

Republic Act (R.A.) No. 7906, which shallbe composed of: (a) savings and mortgagebanks, (b) stock savings and loan associations,and (c) private development banks;

(4) Rural banks (RBs), as defined inR. A. No. 7353;

(5) Cooperative banks (Coop Banks);and

(6) Islamic banks (IBs), as defined inR.A. No. 6848.

b. Powers and scope of authoritiesThe following are the powers and scope ofauthorities of banks.

(1) UBs. A UB shall have the authorityto exercise, in addition to the powers andservices authorized for a KB as enumeratedin Item b(2) and those provided by otherlaws, the following:

(a) the powers of an investment house(IH) as provided under existing laws;

(b) the power to invest in non-alliedenterprises;

(c) the power to own up to onehundred percent (100%) of the equity in aTB, an RB, a financial allied enterprise, or a

non-financial allied enterprise; and (d) in case of publicly-listed UBs, the

power to own up to one hundred percent(100%) of the voting stock of only one (1)other UB or KB.

A UB may perform the functions of anIH either directly or indirectly through asubsidiary IH; in either case, theunderwriting of equity securities andsecurities dealing shall be subject topertinent laws and regulations of theSecurities and Exchange Commission(SEC): Provided, That if the IH functions areperformed directly by the UB, suchfunctions shall be undertaken by a separateand distinct department or other similar unitin the UB: Provided, further, That a UBcannot perform such functions both directlyand indirectly through a subsidiary.

(2) KBs. In addition to the generalpowers incident to corporations and thoseprovided in other laws, a KB shall have theauthority to exercise all such powers asmay be necessary to carry on the businessof commercial banking, such as acceptingdrafts and issuing letters of credit;discounting and negotiating promissorynotes, drafts, bills of exchange, and otherevidences of debt; accepting or creatingdemand deposits; receiving other types ofdeposits and deposit substitutes; buying andselling foreign exchange and gold or silverbullion; acquiring marketable bonds andother debt securities; and extending credit,subject to such rules as the Monetary Boardmay promulgate. These rules may includethe determination of bonds and other debtsecurities eligible for investment, thematurities and aggregate amount of suchinvestment.

It may also exercise or perform any or

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all of the following: (a) invest in the equities of allied

enterprises as provided in Sections 31 and32 of R.A. No. 8791;

(b) purchase, hold and convey realestate as specified under Sections 51 and52 of R.A. No. 8791;

(c) receive in custody funds, documentsand valuable objects;

(d) act as financial agent and buy and sell,by order of and for the account of theircustomers, shares, evidences of indebtednessand all types of securities;

(e) make collections and payments forthe account of others and perform such otherservices for their customers as are notincompatible with banking business;

(f) upon prior approval of the MonetaryBoard, act as managing agent, adviser,consultant or administrator of investmentmanagement /advisory /consul tancyaccounts;

(g) rent out safety deposit boxes; and (h) engage in quasi-banking functions. (3) TBs. In addition to the powers

provided in other laws, a TB may performany or all of the following services:

(a) grant loans, whether secured orunsecured;

(b) invest in readily marketable bondsand other debt securities, commercialpapers and accounts receivable, drafts, billsof exchange, acceptances or notes arisingout of commercial transactions;

(c) issue domestic letters of credit; (d) extend credit facilities to private and

government employees; (e) extend credit against the security of

jewelry, precious stones and articles ofsimilar nature, subject to such rules andregulations as the Monetary Board mayprescribe;

(f) accept savings and time deposits; (g) rediscount paper with the Land

Bank of the Philippines (LBP), Development

Bank of the Philippines (DBP), and othergovernment-owned or -controlledcorporations;

(h) accept foreign currency deposits asprovided under R.A. No. 6426, as amended;

(i) act as correspondent for otherfinancial institutions (FIs);

(j) purchase, hold and convey realestate as specified under Sections 51 and52 of R.A. No. 8791; and

(k) offer other banking services asprovided in Section 53 of R.A. No. 8791.

With prior approval of the MonetaryBoard, and subject to such guidelines asmay be established by it, TBs may alsoperform the following services:

(l) open current or checking accounts;(m) engage in trust, quasi-banking

functions and money market operations; (n) act as collection agent for

government entities, including but notlimited to, the Bureau of Internal Revenue(BIR), Social Security System (SSS) and theBureau of Customs (BOC);

(o) act as official depository of nationalagencies and of municipal, city or provincialfunds in the municipality, city or provincewhere the TB is located;

(p) issue mortgage and chattelmortgage certificates, buy and sell them forits own account or for the account of others,or accept and receive them in payment oras amortization of its loan;

(q) invest in the equity of alliedundertakings;

(r) issue foreign letters of credit; and(s) pay/accept/negotiate import/export

draft/bills of exchange.(4) RBs. In addition to the powers

provided in other laws, an RB may performany or all of the following services:

(a) extend loans and advancesprimarily for the purpose of meeting thenormal credit needs of farmers, fishermenor farm families as well as cooperatives,

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merchants, private and public employees; (b) accept savings and time deposits;(c) act as correspondent of other FIs;(d) rediscount paper with the LBP, DBP

or any other bank, including its branchesand agencies. Said banks shall specify thenature of paper deemed acceptable forrediscount, as well as the rediscount rate tobe charged by any of these banks;

(e) act as collection agent;(f) offer other banking services as

provided in Section 53 of R.A. No. 8791.With prior approval of the Monetary

Board, an RB may perform any or all of thefollowing services:

(g) accept current or checkingaccounts: Provided, That such RB has netassets of at least P5.0 million;

(h) accept negotiable order ofwithdrawal (NOW) accounts;

(i) act as trustee over estates orproperties of farmers and merchants;

(j) act as official depository ofmunicipal, city or provincial funds in themunicipality, city or province where it islocated;

(k) sell domestic drafts; and(l) invest in allied undertakings. (5) Coop Banks. A Coop Bank shall

primarily provide financial, banking andcredit services to cooperatives and theirmembers, although it may provide the sameservices to non-members or the generalpublic.

In addition to the powers granted toCoop Banks under existing laws, any CoopBank may perform any or all of the bankingservices offered by other types of banks,subject to prior approval of the BSP.

(6) IBs. In addition to the generalpowers incident to corporations and thoseprovided in other laws, as well as inCircular No. 105 (Appendix 44), insofar asthey are not inconsistent or incompatiblewith the provisions of R.A. No. 6848, an IB

may perform any or all of the followingservices:

(a) open savings accounts forsafekeeping or custody with no participationin profit and losses except unless otherwiseauthorized by the account holders to beinvested;

(b) accept investment accountplacements and invest the same for a termwith the IBs funds in Islamically permissibletransactions on participation basis;

(c) accept foreign currency depositsfrom banks, companies, organizations andindividuals, including foreign governments;

(d) buy and sell foreign exchange; (e) act as correspondent of banks and

institutions to handle remittances or anyfund transfers;

(f) accept drafts and issue letters ofcredit or letters of guarantee, negotiatenotes and bills of exchange and otherevidence of indebtedness under theuniversally accepted Islamic financialinstruments;

(g) act as collection agent insofar as thepayment orders, bills of exchange or othercommercial documents are exclusive of ribaor interest prohibitions;

(h) provide financing with or withoutcollateral by way of leasing, sale andleaseback, or cost plus profit salesarrangement;

(i) handle storage operations forgoods or commodity financing secured bywarehouse receipts presented to the bank;

(j) issue shares for the account ofinstitutions and companies assisted by thebank in meeting subscription calls oraugmenting their capital and/or fundrequirements as may be allowed by law;

(k) undertake various investments inall transactions allowed by the IslamicSharia in such a way that shall not permitthe haram (forbidden), nor forbid the halal(permissible);

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Manual of Regulations for Banks Part I - Page 3

(l) act as an official governmentdepository, or its branches, subdivisionsand instrumentalities and of government-owned or -controlled corporations,particularly those doing business in theAutonomous Region;

(m) issue investment participationcertificates, muquaradah (non-interest-bearing bonds), debentures, collaterals and/or the renewal and refinancing of the same, with the approval of the MonetaryBoard to be used by the IB in its financingoperations for projects that will promote theeconomic development primarily of theAutonomous Region;

(n) carry out financing and jointinvestment operations by way of mudarabahpurchasing for others on a cost-plusfinancing arrangement, and invest fundsdirectly in various projects or through theuse of funds whose owners desire to investjointly with other resources available to theIB on a joint mudarabah basis; and

(o) invest in equities of the followingallied undertakings:

(1) Warehousing companies;(2) Leasing companies;(3) Storage companies;(4) Companies engaged in the

management of mutual funds but not in themutual funds themselves; and

(5) Such other similar activities as theMonetary Board has declared or maydeclare as appropriate from time to time,subject to existing limitations imposed bylaw.(As amended by Circular Nos. 682 dated 15 February 2010 and650 dated 09 March 2009)

1101.1 (Reserved)

2101.1 Authority of thrift banks toissue foreign letters of credit and pay/accept/negotiate import/export drafts/billsof exchange. With prior Monetary Boardapproval, TBs may be authorized to issue

foreign letters of credit (LCs) and pay/accept/negotiate import/export drafts/billsof exchange, subject to compliance withthe following conditions (at the time ofapplication unless otherwise indicated):

a. Minimum capital requirement ofP1.0 billion;

b. Ten percent (10%) risk-based capitaladequacy ratio (CAR);

c. CAMELS composite rating not lowerthan 3, with Management componentscore not lower than 3 in the latestexamination of the bank;

d. Risk management systemappropriate to i ts operations,characterized by clear delineation ofresponsibility for risk management,adequate risk measurement system,appropriately structured risk limits,effective internal control system andcomplete, t imely and efficient riskreporting system;

e. Articles of incorporation whichshall include among its powers or purposes,the issuance of foreign LCs and payment/acceptance/negotiation of import/exportdrafts/bills of exchange (which may besubmitted any time prior to engaging in saidactivities);

f. Correspondent banking relationshipor arrangement with reputable foreignbanks (which should be in place prior toengaging in said activities);

g. Appointment of the officer withactual experience of at least two (2) yearsas in-charge or at least as assistant in-chargeof import and export financing operationsin a UB/KB who will be in-charge of thesaid operations (prior to engaging in saidactivities);

h. Appointment of bank personnelwith actual experience and/or specifictraining in import and export financingoperations who will handle the saidoperations (prior to engaging in saidactivities);

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i. No net weekly regular and liquidityreserve deficiencies during the twelve (12)week period immediately preceding the dateof application;

j. No deficiency in asset and liquidasset cover for FCDU liabilities forthree (3) months immediately preceding thedate of application;

k. No deficiency in liquidity floorrequirement for government funds held during the twelve (12) week periodimmediately preceding the date ofapplication;

l. No float items outstanding for morethan sixty (60) calendar days in the DueFrom/To Head Office/Branches/Officesand Due from BSP accounts exceedingone percent (1%) of the total resources asof end of month preceding the date ofapplication;

m. No unbooked valuation reserves;n. Compliant with ceilings on loans,

other credit accommodations andguarantees to directors, officers,stockholders, and their related interests(DOSRI) for the quarter immediatelypreceding the date of application;

o. Compliant with the singleborrowers loan limit (SBL);

p. Compliant with the limit on realestate and improvements, including bankequipment;

q. No uncorrected findings of unsafeand unsound banking practices;

r. Generally compliant with bankinglaws, rules and regulations, orders orinstructions of the Monetary Board and/orBSP Management; and

s. No past due obligations with theBSP or with any FI.(Circular No. 650 dated 09 March 2009 as amended by CircularNo. 686 dated 20 April 2010)

2101.2 Application for authority toissue foreign letters of credit and pay/

accept/negotiate import/export drafts/billsof exchange. An application for authorityto issue foreign LCs and pay/accept/negotiate import/export drafts/bills ofexchange shall be signed by the presidentof the bank or officer of equivalent rank andshall be accompanied by a certified true copyof the resolution of the banks board ofdirectors authorizing the application.(Circular No. 650 dated 09 March 2009)

B. ESTABLISHMENT ANDORGANIZATION

Sec. X102 Basic Guidelines in EstablishingBanks. In establishing a new bankingorganization and a Coop Bank, the basicguidelines shown in Appendices 37 and 38,respectively, shall be observed.(As amended by Circular No.682 dated 15 February 2010)

X102.1 (2008 - X101.2) Prerequisitesfor the grant of a universal banking authority

a. Compliance with guidelines. Adomestic bank seeking authority to operateas a UB shall submit an application to theappropriate department of the SES. Theapplicant shall comply with the guidelinesfor the issuance of a UB authority and shallsubmit all the documentary requirementsenumerated in Appendix 1.

b. Public offering of bank shares. Adomestic bank applying for a UBauthority shall, as a condition to theapproval of its application, make a publicoffering of at least ten percent (10%) ofthe required minimum capital and thiscondition must be complied with beforeit can be granted the license for authorityto operate as a UB.

The term public offering shall mean theoffer to sell equity shares to the public.

Public shall refer to all prospectivestockholders, excluding the banks directors,shareholders owning twenty percent (20%)

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Manual of Regulations for Banks Part I - Page 4a

or more of the banks subscribed capitalstock, together with those of their relativeswithin the fourth degree of consanguinityor affinity, and corporations controlled oraffiliated with them.

A bank whose shares of stock arealready listed in the Philippine StockExchange (PSE) at the time of filing of itsapplication for UB authority shall bedeemed to have complied with the publicoffering requirement. Likewise, anapplicant bank may opt to have its shareslisted in the PSE directly instead of passingthrough the process of public offering. Ineither case, at least ten percent (10%) ofthe applicant banks capital stock shouldbe held by public stockholders before itcan be granted the license for authority tooperate as a UB.

c. Listing of bank shares in the stockexchange. Domestic banks granted a UBlicense, existing or new, must list theirshares in the PSE within three (3) years:

Provided, That in the case of new UBs,the three (3) year period shall be reckonedfrom the date the license to operate as aUB was granted. In the case of existingUBs which have not listed their shares inthe exchange, the three (3) year periodlapsed on 27 December 1998.

The guidelines on public offering andlisting of bank shares are enumerated inAppendix 1.

X102.2 (2008 - X102.1) Suspensionof the grant of new banking licenses orthe establishment of new banks. Pendingcompletion of a study, there shall be anindefinite moratorium on theestablishment of new banks, except incities and municipalities where there areno existing banking offices.

The moratorium shall apply to allapplications for establishment of newbanks, including pending ones receivedprior to 16 August 1999.

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Manual of Regulations for Bank

2010 MORB Volume 1 With Cir. No. 645

Documents

Transcript of 2010 MORB Volume 1 With Cir. No. 645