Control Banh of the Lhilipines OFFICE OF THE GOVERNOR CIRCULAR NO. _905 Series of 1982 The Monetary Board, in its Resolution No, 2224 dated December 3_, 1982, approved the following regulations governing interest rates on loans or forbearance of money, goods or credit and the amendment of Books I to IV of the Manual of Regulations for Banks and Other Financial Inter— mediaries: General Provisions SECTION 1, The rate of interest, including commissions, premiums, fees and other charges, on a loan or forbearance of any money, goods, or credits, regardless of maturity and whether secured or unsecured, that may be charged or collected by any person, whether natural or juridical, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended. SEC. 2. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall continue to be twelve per cent (12%) per annum. SEC. 3, Loans denominated or payable in a foreign currency shall continue to be subject to Central Bank regulations on foreign borrowings. Book I= Commercial Banks SEC. 4, Subsection 1254.3 of the Manual of Regulations is hereby deleted, SEC. 5. Section 1303 of the Manual of Regulations is hereby amended to read as follows:‘SEC, 1303, Interest and Other Charges. The rate of interest, including commissions, premiums, fees and other charges, on any loan, or forbearance of any money, goods or credits, regardless of maturity and whether secured or unsecured, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended. SEC, 6. Subsection 1303.3 of the Manual of Regulations is hereby deleted. SEC, 7. The first paragraph of Subsection 1303.4 of the Manual of Regulations is hereby amended to read as follows: “he rate of interest on a floating rate loan during each interest period shall be stated on the basis of a reference rate plus a margin as may be agreed upon by the parties." SEC. 8. Subsection 1303, 6 of the Manual of Regulations is hereby amended to read as follows: "Subsection 1303.6. Short-term prime rate. Fxpanded commercial banks, commercial banks and specialized government banks shall post their respective short-term prime rates in a conspicuous place in their principal offices, branches and other banking offices. Expanded commercial banks and the Land Bank of the Philippines shall publish every other Monday their respective prevailing short-term prime rates in at least one daily newspaper of general circulation throughout the Philippines and on the effective date of any change of at least one-half per cent (1/2%) per annum. from the last published rate, in at least one daily newspaper of general circulation throughout the Philippines. For purposes of this subsection, the short-term prime rate shall be the lowest effective rate which a bank will charge on availments of P500, 000.00 and above with a maturity of 90 days, more or less, against credit lines of the bank's more established clients, provided that such availments are not eligible for rediscounting with the Central Bank at preferential rates and that the borrowers are not directors, officers and stockholders, including their related interest, of the lending bank, Likewise, for purposes of this subsection, "more established clients" is defined as a client who has been availing himself of the facilities of the bank-for a number of years, by maintaining substantial deposit balances, utilizing foreign exchange facilities such as exports, imports and remittances on a regular basis, or availing himself of other fee-based services. "For statistical and monitoring purposes, banks shall report these rates monthly to the Department of Economic Research, Domestic, Central Bank of the Philippines. Changes in these rates shall also be reported to said Department on the day the changes are to be effective.Lee e "Banks shall report monthly to the Department of Economic Research-Domestic the volume and interest rates of availments of P500, 000,00 and above with a maturity of 90 days, more or less, against credit lines of their clients." SEC. 9. Item "d" of Section 1349 of the Manual of Regulations is hereby amended to read as follows: 'd, Terms, interest and charges. The maximum term of loans monéy shops may grant shall in no case exceed 180 days and the rate of interest on such loans, inclusive of commissions, premiums, fees and other charges, shall not be subject to any ceilings prescribed under or pursuant to the Usury Law, as amended." SEC, 10. Subsection 1388, 1 of the Manual of Regulations is hereby amended to read as follows: "The rate of yield, including commissions, premiums, fees and other charges, from the purchase of receivables and other obligations, regardless of maturity, that may be charged or received by banks authorized to engage in quasi-banking functions or by non~ bank financial intermediaries authorized to engage in quasi-banking functions, shall not be subject to any regulatory ceiling. "pata on the volume and interest rates of domestic loans and discounts with original maturities of more than 365 days shall be reported by expanded commercial banks and commercial banks to the Department of Economic Research, Domestic, Central Bank of the Philippines, not later than the 15th banking day after end of reference month." Book I -_ Thrift Banks SEC, 11, Subsection 2254, 3 of the Manual of Regulations is hereby deleted, SEC. 12, Section 2303 of the Manual of Regulations is hereby amended to read as follows: "SEC, 2303. Interest and other charges. ‘The rate of interest, including Commissions, premiums, fees and other charges, on a loan or forbearance of any money, goods orcredits, regardless of maturity, and whether secured or un- secured,shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended." SEC. 13. Subsection 2303.3 of the Msnual of Regulations is hereby deleted. SEC. 14, The first paragraph of Subsection 2303.4 of the Manuel of Regulations is hereby amended to read as follows: "The rate of interest on a floating rate loan during each interest period shall be stated on the besis of reference rate plus a margin es may be agreed upon by the parties." SEC. 15, The last paragraph of Subsection 2303.4 of the Menual of Regulations is hereby amended to read as follows: “Where the loan agreement provides for a floating interest rate, the interest period, which shall be such period of time for which the rate of Interest is fixed, shall be such period as moy be agreed upon by the parties." SEC. 16. The first paragraph of Subsection 2303.6 of the Manual of Regulations is hereby deleted. SEC, 17, Item "c" of Section 2349 of the Manual of Regulations is hereby amended to read as follows: "GC. Terms, interest and charges. The maximum term of loans money shops may grant shall in no case exceed 180 days and the rate of interest on such loans, inclusive of commissions, premiums, fees and other charges, shall not be subject to any ceiling prescribed under or pursuent to the Usury Law, as amended." SEC, 18, Subsection 2388.1 of the Menual of Regulations is hereby amended to read as follows: “Subsection 2388.1. Yields on purchases of receivables. ‘The rete of yield, including commissions, premiums, fees and other charges, from the purchase of receivables and other obligations, regardless of maturity, that may be charged“@ e or received by banks authorized to engage in quasi~ banking functions or by non-bank financial intermediaries authorized to engage in quasi-banking functions, shall not be subject to any regulatory ceiling." Book III - Rural Banks SEC. 19, Item "c" of Subsection 3152.3 of the Manual of Regulations is hereby amended to read as follows: "c. Terms, interest and charges. The maximum term of loans money shops may grant shall in no case exceed 180 days and the rate of interest on such loans, inclusive of commissions, premiums, fees and other charges, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended." SEC. 20. Subsection 3254.2 of the Manual of Regulations is hereby deleted. SEC, 21, Paragraph "a" of Subsection 3303.1 of the Manual of Regulations is hereby amended to read as follows: “a. Interest rate, The rate of interest, including commissions, premiums, fees and other charges, on a Joan or forbearance of any money, goods, or credits, regardless of maturity and whether secured or unsecured, shall not be subject to any cefling prescribed under or pursuant to the Usury Law, as amended. SEC. 22. Itom “b" of Subsection 3303.1 of the Manual of Regulations is hereby deleted and Items "c", "a", "f" and "g" of the same Subsection are hereby relettered as items "b", “c", “d" and “e", respectively. SEC. 23. The first paragraph of Subsection 3303.2 of the Manual of Regulations is hereby deleted. SEC. 24, Subsection 3303.5 of the Manual of Regulations is hereby amended to read as follows: "Subsection 3303.5. Floating rates of interest. The rate of interest on a floating rate loan during each interest period shall be stated on the basis of a reference rate plus a margin as may be agreed upon by the parties.“Reference rates for various interest periods shall be determined and announced by the Central Bank every week and shall be based on the weighted average of the interest rates paid during the immediately preceding week by the ten (10) commercial banks with the highest levels of out- standing deposit substitutes on promissory notes issued by such banks, with maturities corresponding to the interest periods for which such reference rates are being determined, ‘The commercial banks to be included for purposes of computing the reference rates shall be reviewed and determined at the beginning of every calendar semester on the basis of the levels of their outstanding deposit substitutes as of May 31 or November 30, as thecase may be. “The rate of interest on floating rate loans, existing and outstanding as of April 2, 1982 shall continue to be determined on the basis of the reference rate obtained from the weighted average of the interest rates paid by the five banks with the largest volume of business transacted during the immediately preceding thirty (30) days, on time deposits with maturities of more than seven hundred thirty (730) days, which shall be announced by the Central Bank every month for as Jong as such loans are existing and outstanding: Provided, however, That the parties to such existing floating rate loans agreements are not precluded from amending or modifying thelr loan agreements by adopting a floating rate of interest determined on the basis of the reference rate mentioned in the preceding paragraph. "Where the loan agreement provides for a floating interest rate, the interest period, which shall be such period of time for which the rate of interest is fixed, shall be such period as may be agreed upon by the parties." Book IV- Non-Bank Financial Intermediaries SEC. 25, The last paragraph of Subsection 4283Q,1 of the Manual of Regulations is hereby amended to read as follows: “Procedures for demand deposits of NBQBs with the Central Bank as provided in Appendix 14 shail be followed." SEC. 26, Subsections 4303Q.1 to 4303Q.9 6f the Manual of Regulations are hereby amended to read as follows:Subsection 4303Q.1. Purchase of Receivables, The rate of yield, including commissions, premiums, fees and other charges, from the purchase of receivables and other obligations, regardless of maturity, that may be charged or received by NBQBs shall not be subject to any regulatory ceiling. “Receivables and other obligations shall include claims collectible in money of any amount and maturity from domestic and foreign sources. The Monetary Board shall determine in doubtful cases whether a particular claim is included within said phrase." "subsection 4303Q.2. Loans. The rate of interest, including commissions, premiums, fees and other charges, on loan transactions, regardless of maturity and whether secured or unsecured, shall not be subject ta any ceiling prescribed under or pursuant to the Usury Law,as amended." "Subsection 4303Q.3. Floating rate of interest. The rate of interest on a floating rate Ioan during each interest period shall be stated on the basis of a reference rate plus a margin as may be agreed upon by the parties. "Reference rates for various interest periods shall be determined and announced by the Central Bank every week and shall be based on the weighted average of the interest rates paid during the immediately preceding weck by the ten (10) commercial banks with the highest levels of outstanding deposit substitutes on promissory notes issued by such banks, with maturities corresponding to the interest periods for which such reference rates are being determined. The commercial banks to be included for purposes of computing the reference rates shall be reviewed and determined at the beginning of every calendar semester on the basis of the levels of their outstanding deposit substitutes as of May 31 or November 30, as the case may be.""The rate of interest on floating rate loans, existing and outstanding as of April 2, 1982 shall continue to be determined on the basis of the reference rate obtained from the weighted average of the interest rates paid by the five banks with the largest volume of business transacted during the immediately preceding thirty (30) days, on time deposits with maturities of more than seven hundred thirty (730) days, which shall be announced by the Central Bank every month for as long as such loans are existing and outstanding: Provided, however, That the parties to such existing floating Tate loan agreements are not precluded from amending or modifying their loan agreements by adopting a floating rate of interest determined on the basis of the reference rate mentioned in the next preceding paragraph, “Where the loan agreement provides for a floating interest rate, the interest period, which shall be such period of time for which the rate of interest is fixed, shall be such period as may be agreed upon by the parties." "Subsection 4303Q.4. Effect of prepayment. If there is no agreement on the rebate of interest in the évent of prepayment of the loan, the creditor is not under any legal obligation to return the interest corresponding to the period from date of prepayment to the stipulated maturity date of the loan, Any prepayment made by the debtor should not, therefore, affect the computation of the effective rate stipulated n the loan contract." SEC, 27. Subsections 4303Q, 10 and 4303Q11 of the Manual of Regulations are hereby renumbered as Subsections 4303Q.5. and 4303Q.6, respectively. SEC, 28. Subsection 4305N, 1 of the Manual of Regulations is hereby amended to read as follows: "Subsection 4303N.1, Interest Rates. The rate of interest including commissions, premiums, fees and other charges on loans and forbearance of money, regardless of maturity and whether secured or unsecured, shall not be subject to any ceilings prescribed under or pursuant to the Usury Law, as amended,"SEC, 29, Subsections 4303N,2, 4303N.4 and 4303N.5 of the Manual of Regulations are hereby deleted, and Subsections 4303N.3, 4303N,6, and 4303N.7 thereof are hereby renumbered as Subsections 4303N.2, 4303N,3 and 4303N.4, respectively. SEC. 30. Section 4303P of the Manual of Regulations is hereby amended to read as follows: "SEC. 4303P. Interest, Fees and Other Charges. The rate of interest including commissions, premiums, fees and other charges on any loan or forbearance of money extended by a pawnshop, pawnbroker or pawnbroker's agent, regardless of maturity, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended. "No pawnshop shall collect interest on loans in advance for a period of more than one year." SEC, 31, Subsection 4303P,1 of the Manual of Regulations is hereby deleted. SEC, 32. Whenever any person or entity violates any of the provisions of this Circular, the person or entity responsible for such violation shall be subject to the penalties prescribed in the first paragraph of Section 34 of Republic Act No, 265, as amended, and/or the penalties prescribed in Section 10 of Act No, 2655, without prejudice to the imposition of administrative sanctions under Sections 34-A and 34-B of Republic Act No. 265, as amended. SEC. 33, This Circular shall take effecton January 1, 1983. For the Monetary Board: ay bikes Governor December 10,19822 @ é$ APPENDIX IV CaP 5-17-35b (Effective » 1982) Pursuant to Circular No. , SUBMISSION: Original to DER- dated sr Domestic DEADLINE : Not later than 1 banking day after end of reference month or prime rate change ‘Wane of Banking Tnstitutton) ress REPORT ON SHORT-TERM PRIME RATE. OFFERED (For the Month of 198 _/or Date of Prime Fate Change ) Short-Term Prime Rate (in fraction of - up Date of to the 16th, e.g., Effectivity 15.0625 = 15 1/16) As of As of As of As of CERTIFIED CORRECT: TSIgnetire Over PRIAted Wane of — Authorized Officer) - 000 - INSTRUCTIONS: 1, This report shall be accomplished by head offices of commercial expended banks and specialized government banks and shall be submitted to the Department of Economic Research (Domestic), Room 415, 5-Storey Building, Central Benk of the Philippines, Manila, on or before the deadline shown on this report form,En ‘The bank's short-term prime rate shall be indicated on the appropriate srace shown above. Any changes in this rate of at least 1/2 of 1 per cent per annum from previously reported rate shall be reported not later than the following day of such change. For purposes of this report, short-term prime rate shall be the lowest effective rate which a bank will normally charge on aveilments of P500,00,00 and above with maturities of three months (normally 90 days) against oredit Lines of the bank's more established clients, Provided that such availments are not eligible for rediscounting with ‘the Central Bank at preferential rates, nor are they DOSRI loans, The term "more established clients" refers to a client who has been availing himself of the facilities of the bank for a number of years by maintaining substential deposit balances, utilizing foreign exchange facilities such ae exports, imports and remittances on @ regular basis or availing himself of other fee-based services.3. For purposes of this report, short-term prime rate shall be the lowest effective rate which e bank will normally charge on availnents of 500,000.00 and above with maturities of three months (normally 90 days) against credit Lines of the bank's more established clients, provided ‘that such availnents are not eligible for rediscounting with the Central Bank at preferential rates, nor are they DOSRI loans, The term "more established clients" refers to a client who has been availing himself of the facilities of the bank for a number of years by maintaining substantial deposit balnces, utilizing foreign exchange facilities such as exports, imports end remittances on a regular basis or availing him self of other fee-based services. A reporting bank may lump or add-up avaiiments of at least 500,000 which have the came interest rate, The number of transactions must be clearly indicated under the appropriate column. Availments against credit lines which are eligible for rediscounting with the Central Bank at preferential rates and DOSRI loens shall be excluded. In case there are no availments during the month, please indicate "NT." (No Transaction) on the first line of the colum "Amount Avatled of". For further inguiries, please contact the Assistant Director, Pinan- ciel Markets Group, DER (Domestic), Tel. No. 59-40-02 or 50-70-51 locals 2336 and 2339.(on) es im @ q ‘APPENDIX V CBP 5-17-35A (Revised » 1982) SUBMISSION: Original to DER- Pursuant to Circular No. dated Domestic » OE DEADLINE : Not later than 5 banking days af- ter end of refer- ence month lame oF me aeton. Fess) REPORT ON THE VOLUME OF AND INTEREST RATES ON CHEDI?T LINE AVATIMENTS UNDER ‘SHORT-TERM PRIME RATE (For the Month of » 198_) Number Amount Availed of : Effective Interest Rate of during the month + (Im fractions of up to the 16th ‘Transactions (In thousand pesos) .: e.g., 15,0625 = 15 1/16) CERTIFIED CORREC?: quatre Over Printed Wane 0 Authorized Officer) = 000 — INSTRUCTIONS + 1, This report shall be accomplished by head offices of commercial /expanded Danks and specialized government banks and shall be submitted to the Department of Economic Research (Domestic), Room 415, 5-Storey Building, Central Benk of the Philippines, Manila, on or before the deadline shown on thie report form.