Banking Laws, particular topics for study
Banking Laws, Vol. II, by T. Aquino, 2010 3rd Edition
Page Topic
186 Use of a credit card by
a bank officer which is
issued by the bank
where he is an officer;
would the DOSRI rule
apply;
187 In case of DOSRI
transactions, what are
the procedural
requirements; arms
length rule; reportorial
requirements;
1 Sec. X326, Manual of Regulations for Banks
Comment/Remark
Subsection X328.1 Applicability to Credit Card Operations. The credit card operations of banks shall not be subject to these
regulations where the credit cardholders are bank’s directors, officers, stockholders and their related interests : Provided,
That (a) the privilege of becoming a credit card holder is open to all qualified persons on the basis of selective criteria which
are applied by the bank to all applicants thereof; and (b) the bank’s directors, officers, stockholders and their related
interests reimburse/pay the bank for the billed amount in full on or before the payment due date in the billing or statement
of account, as set by the bank for all other qualified credit card holders on availments made for the same period on their
credit cards. However, the transaction shall be subject to applicable DOSRI regulations if the bank’s directors, officers,
stockholders and their related interests:
(i) Fail to reimburse/pay the bank within the period mentioned herein; or
(ii) On the outset, opt for deferred payment scheme, and the availment is booked by the bank.
For purposes of this section, stockholders and related interests refer to individual credit card holders.
II. GENERAL POLICY
Dealings of a bank with any of its DOSRI should be in the regular course of business and upon terms not less
favorable to the bank than those offered to others.1
II. DEFINITIONS
For this purpose the following definitions shall apply:
a. Directors shall include (i) directors whose named as such in the articles of incorporation; (ii) directors duly
elected in subsequent meetings of the stockholders or those appointed by virtue of the charter of government owned
banks; and (iii) those elected to fill vacancies in the board of directors.
b. Officers shall include the president, executive vice president, senior vice-president, vice president, general
manager, treasurer, secretary, trust officer and other mentioned as officers of the bank, or those whose duties as such
are defined by by-laws, or are generally known to be the officers of the bank (or ny of its branches an offices other than
the head office) either through announcement, representation, publication or any kind of communication made by the
bank: Provided, That a person holding the position of chairman or vice-chairman of the board or another position in the
board shall not be considered as an officer unless the duties of his position in the board include functions of
management such those ordinarily performed by regular officers: Provided, further, That members of a group or
committee, including sub-groups or sub-committees, whose duties include functions of management such as those
ordinarily performed by regular officers, and are not purely recommendatory or advisor, shall likewise be considered as
officers.
c. Stockholder shall refer to any stockholder of record in the books of the bank, acting personally, or through an
attorney-in-fact; or any other person duly authorized by him or through a trustee designated pursuant to a proxy or
voting trust or other similar contracts, whose stockholdings in the lending bank, Individual and/or collectively with the
stockholdings of: (i) his spouse and/or relative within the first degree by consanguinity or affinity or legal adoption; (ii) a
partnership in which the stockholder and/or the spouse and/or any of the aforementioned relatives is a general partner;
and (iii) corporation, association or firm of which the stockholder and/or his spouse and/or the aforementioned relatives
own more than fifty percent (50%) of the total subscribed capital stock of such corporation, association or firm, amount
to one percent (1%) or more of the total subscribed capital stock of the bank.
d. Substantial stockholder shall mean a person, or group of persons whether natural or juridical, owning such
number of shares that will allow such person or group to elect at least one (1) member of the board of directors of a
bank or who is directly or indirectly the registered or beneficial owner of more than ten percent (10%) of any class of its
equity security.
e. Related interest shall refer to any of the following:
(1) Spouse or relative within the first degree of consanguinity or affinity, or relative by legal adoption, of a
director, officer or stockholder of the bank;
(2) Partnership of which a director, officer, or stockholder of a bank or his spouse or relative within the first
degree of consanguinity or affinity, or relative by legal adoption, is a general partner;
(3) Co-owner with the director, officer, stockholder or his spouse or relative within
the first degree of consanguinity or affinity, or relative by legal adoption, of the property or interest or right mortgaged,
pledged or assigned to secure the loans or other credit accommodations, except when the mortgage, pledge or
assignment covers only said co-owner’s undivided interest;
(4) Corporation, association, or firm of which a director or officer of the bank, or his spouse is also a director or
officer of such corporation, association or firm, except
(a) where the securities of such corporation, association or firm are listed and traded in the big board or
commercial and industrial board of domestic stock exchanges and less than fifty percent (50%) of the voting stock
thereof is owned by any one (1) person or by persons related to each other within the first degree of consanguinity or
affinity; or
(b) where the director, officer or stockholder of the bank sits as a representative of the bank in the board
of directors of such corporation: Provided, That the bank representative shall not have any equity interest in the
borrower corporation except for the minimum shares required by law, rules and regulations, or by the by-laws of the
corporation, or
(c) where the corporation is at least ninety-nine percent (99%) owned by a non-stock corporation as
defined in Section 87 of the Corporation Code of the Philippines: Provided, That the purpose of the loan is to finance
hospitals and other medical services: Provided, further, That the loan is fully secured: Provided, furthermore, That in the
case of Items “(a)”, “(b)” and “(c)” above, the borrowing corporation is not among those mentioned in Items “e(5)”,
“e(6)”, “e(7)” and “e(8)” of this Section;
(5) Corporation, association or firm of which any or a group of directors, officers, stockholders of the lending
bank and/or their spouses or relatives within the first degree of consanguinity or affinity, or relative by legal adoption,
hold or own at least twenty percent (20%) of the subscribed capital of such corporation, or of the equity of such
 association or firm;
(6) Corporation, association or firm wholly or majority-owned or controlled by any related entity or a group of
related entities mentioned in Items “e(2)”, “e(4)” and “e(5)” of this Section;
(7) Corporation, association or firm which owns or controls directly or indirectly whether singly or as part of a
group of related interest at least twenty percent (20%) of the subscribed capital of a substantial
stockholder of the lending bank or which controls majority interest of the bank pursuant to Subsec. X303.1 of the Manual
of Regulations for Banks (“MORB”)
(8) Corporation, association or firm which has an existing management contract or any similar arrangement with
the parent of the lending bank; and
(9)Non-governmental organizations (NGOs)/foundations that are engaged in retail microfinance operations
which are incorporated by any of the stockholders and/or directors and/or officers of related
banks. The general principles and standards that will govern the business relationships between banks and their related
NGOs/foundations engaged in retail microfinance are found in Appendix 27 of the MORB.

f. Subsidiary shall refer to a corporation or firm more than fifty percent (50%) of the outstanding voting stock of
which is directly or indirectly owned, controlled or held with power to vote by its parent corporation.
g. Unencumbered deposits shall refer to savings, time and demand deposits, which are not subject to an
assignment or hold-out agreement or any other encumbrance.
h. Book value of the paid-in capital contribution shall mean the proportional amount of the bank’s total capital accounts
(net of such unbooked valuation reserves and other capital adjustments as may be required by the Bangko Sentral) as
the corresponding paid-in capital contribution of each of the bank’s directors, officers, stockholders and their related
interests bear to the total paid-in capital of the bank:
Provided, That as a basis for determining the individual ceiling referred to in Sec. X330 of the MORB2, the corresponding
book value of the shares of stock of said directors, officers, stockholders and their related interests which are the subject
of pledge, assignment or any other encumbrance shall be deducted therefrom.
i. Net worth shall mean the total of the unimpaired paid-in capital including paid-in surplus, retained earnings
and undivided profit, net of valuation reserves and other adjustments as may be required by the Bangko Sentral.
j. Total loan portfolio shall refer to the sum of all loan accounts outstanding, gross of valuation reserves, as
reflected in the bank’s consolidated statement of condition, excluding outstanding loans
financed by special/specific funds from the government FIs.
k. Secured loan, borrowing or other credit accommodation shall refer to any loan, or credit accommodation or
portion thereof referred to in Sec. X327 of the MORB3 which is secured by:

2 Sec. X330 Individual Ceilings. The total outstanding loans, other credit accommodations and guarantees to each of the bank's DOSRI shall be limited to an amount equivalent to their respective unencumbered deposits
and the book value of their paid-in capital contribution in the bank: Provided, however, That unsecured loans other credit accommodations and guarantees to each of the bank's DOSRI, shall not exceed thirty percent
(30%) of their respective total loans, other credit accommodations and guarantees.
3 Sec. X327 Transactions Covered. The terms loans, other credit accommodations and guarantees as used herein shall refer to transactions of the bank which involve the grant of loan, advance or other credit
accommodation in any form whatsoever, whether renewal, extension or increase, and shall include:
a. Any advance by means of an incidental or temporary overdraft , cash items, “vale”, etc.;
b. Any advance of unearned salary or other unearned compensation for periods in excess of thirty (30) days;
c. Cash advance by means of DAUDs;
d. Outstanding availments under an established credit line;
 (1) Real estate mortgage, chattel mortgage on tangible assets, and pledge of jewelry, precious stones
and other valuable articles1;
(2) Assignment of intangible assets such as patents, trademarks, trade names and copyrights;
(3) Unconditional payment guarantees such as standby letters of credit and letter of indemnity issued by
banks/multilateral FIs;
(4) Assignment of, or hold-out on, deposits or deposit substitutes maintained in the lending bank;
(5) Cash margin deposits; or assignment or pledge of government securities or readily marketable bonds
and other high-grade debt securities and “blue-chip” stocks, except those issued by the lending entity, or by its parent
company which owns more than fifty percent (50%) of its outstanding shares of
stocks, subject to the additional provision that the issuer corporation has a net worth of at least P1.0 billion and with
annual net earnings during the immediately preceding five (5) years;
(6) Customer’s liability under import bills outstanding for not more than thirty (30) days from date of
original entry;
(7) Sales contract receivables arising from sale of real property on credit where title to the property is
retained by the bank; and
(8) Customer’s liability-import bills under trust receipts outstanding for not more than thirty (30) days
from date of booking: Provided, That the booking under trust receipts shall have been made not later than the thirty-first
day from the date of original entry referred to in Item “(6)” above.

l. Unsecured loan, borrowing or other credit accommodation shall refer to any loan, or other credit
accommodation or portion thereof referred in Sec. X327 of the MORB which is not secured in accordance with Item “k”
above.

IV. TRANSACTIONS COVERED

The terms loans, other credit accommodations and guarantees as used herein shall refer to transactions of the bank
which involve the grant of any loan, advance or other credit accommodation in any form whatsoever, whether renewal,
extension or increase, and shall include:
a. Any advance by means of an incidental or temporary overdraft, cash item, “vale”, etc.;
b. Any advance of unearned salary or other unearned compensation for periods in excess of thirty (30) days;
c. Any advance by means of DAUDs;
d. Outstanding availments under an established credit line;
e. Drawings against an existing letter of credit;
f. The acquisition of any note, draft, bill of exchange or other evidence of indebtedness upon which the bank’s

e. Drawings against an existing letter of credit;

f. The acquisition of the note, draft, bill of exchange or other evidence of indebtedness upon which the bank's DOSRIs maybe liable as makers, drawers, acceptors, endorsers, guarantors or sureties;
g. Indirect lending such as loans or other credit accommodations granted by another financial intermediary to said DOSRIs from funds of the banks invested in the other institution's trust or other department when
there is a clear relationship between the transactions;
h. The increase of an existing indebtedness, as well as additional availments under a credit line or additional drawings against a letter or credit;
I. The sale of assets, such as shares of stock, on credit; and
j. Any other transactions as a result of which the bank's DOSRIs become obligated or may become obligated to lending bank, by any means whatsoever to pay money or its equivalent.
 DOSRIs may be liable as makers, drawers, acceptors, endorsers, guarantors or sureties;
g. Indirect lending such as loans or other credit accommodations granted by another financial intermediary to
said DOSRIs from funds of the bank invested in the other institution’s trust or other department when there is a clear
relationship between the transactions;
h. The increase of an existing indebtedness, as well as additional availments under a credit line or additional
drawings against a letter of credit;
i. The sale of assets, such as shares of stock, on credit; and
j. Any other transactions as a result of which the bank’s DOSRIs become obligated or may become obligated to
the lending bank, by any means whatsoever to pay money or its equivalent.4

V. TRANSACTION NOT COVERED

The terms loans, other credit accommodations and guarantees as used herein shall not refer to the following:
a. Advances against accrued compensation, or for the purpose of providing payment of authorized travel,
legitimate expenses or other transactions for the account of the bank or for utilization of maternity and other leave
credits;
b. The increase in the amount of outstanding credit accommodations as a result of additional charges or
advances made by the bank to protect its interest such as taxes, insurance, etc.;
c. The discount of bills of exchange drawn in good faith against actually existing values, and the discount of
commercial or business paper actually owned by the person negotiating the same, including, but not limited to, the
acquisition by a domestic bank of export bills from any of its DOSRI which are drawn in accordance with the terms and
conditions of the covering letters of credit:
Provided, That the transaction shall automatically be subject to the ceilings as herein provided once the DOSRI who is a
party to the transaction becomes directly liable to the bank;
d. Transactions with a foreign bank which has stockholdings in the local bank where the foreign bank acts as
guarantor through the issuance of letters of credit or assignment of a deposit in a currency eligible as part of the
international reserves and held in a bank in the Philippines to secure other credit accommodations granted to another
person or entity: Provided, That the foreign bank stockholder shall automatically be subject to the ceilings as herein
provided in the event that its contingent liability as
guarantor becomes a real liability; and
e. Interbank call loan transactions.

The credit card operations of banks shall not be subject to these regulations where the credit cardholders are
bank’s DOSRI: Provided, That
(a) the privilege of becoming a credit cardholder is open to all qualified persons on the basis of selective criteria
which are applied by the bank to all applicants thereof; and
(b) the bank’s DOSRIs reimburse/pay the bank for the billed amount in full on or before the payment due date in
the billing or statement of account, as set by the bank for all other qualified credit card holders on availments made for

4 Sec. X327 Transaction Covered, MORB

 the same period on their credit cards. However, the transaction shall be subject to applicable DOSRI regulations if the
bank’s DOSRIs:
a. fail to reimburse/pay the bank within the period mentioned herein; or
b. on the outset, opt for deferred payment scheme, and the availment is booked by the bank.

For this purpose, stockholders and related interests refer to individual credit card holders.5

VI. DIRECT OR INDIRECT BORROWINGS

Loans, other credit accommodations and guarantees to DOSRI shall be considered direct or indirect borrowings
in accordance with the following criteria:
a. Direct borrowing. If the director, officer or stockholder of the lending bank is a party to any of the transactions
enumerated in Sec. X327 of the MORB for himself, or as the representative or agent of others, or if he acts as a
guarantor, endorser or surety for loans from the bank, or if the loan or other credit accommodation to another party is
secured by a property interest or right of the director, officer or stockholder.
b. Indirect borrowing. If in any of the transactions in Related Interest found herein the borrower, guarantor,
endorser or surety is a related interest as defined in Item “e”, Subsec. X326.1.
Other cases of direct/indirect borrowing shall be resolved on a case-to-case basis. It shall be the responsibility of the
bank concerned to ascertain whether the borrower, guarantor, endorser or surety is related or connected with the bank
or with any of the directors, officers or stockholders of the bank in any of the capacities mentioned in Irelated Interest
found herein. In determining indirect borrowings, as
enumerated above, only those cases involving living relatives shall be considered.
VII. INDIVIDUAL CEILINGS

The total outstanding loans, other credit accommodations and guarantees to each of the bank’s DOSRI shall be
limited to an amount equivalent to their respective unencumbered deposits and book value of their paid-in capital
contribution in the bank: Provided, however, That unsecured loans, other credit accommodations and guarantees to
each of the bank’s DOSRI shall not exceed thirty percent (30%) of their respective total loans, other credit
accommodations and guarantees.6

VIII. EXLUSIONS FROM INDIVIDUAL CEILINGS

The following loans, other credit accommodations and guarantees shall be excluded in determining compliance
with the individual ceiling.
a. Loans, other credit accommodations and guarantees secured by assets considered as non-risk by the
Monetary Board;

5 Sec. X328 Transactions Not Covered, MORB

6 Sec. X330 Individual Ceilings, MORB
 Assets considered as non-risk shall refer to the following:
(1) Cash;
(2) Debt securities issued by the Bangko Sentral or the Philippine government;
(3) Deposits maintained in the lending bank and held in the Philippines;
(4) Debt securities issued by the U.S.
government;
(5) Debt securities issued by central governments, central banks of foreign countries and multilateral financial
institutions such as International Finance Corporation, Asian Development Bank and World Bank, with the highest credit
quality given by any two (2) internationally accepted rating agencies; and
(6) Deposits of clients of related non-governmental organizations (NGOs)/foundations, that are engaged in retail
microfinance operations, and are maintained with the related lending bank and held in the Philippines: Provided, That
all of the following conditions are met:
(i) existing regulations on the opening of deposit accounts and other deposit transactions shall apply
except when specifically stated otherwise;
(ii) depositors shall issue waivers of confidentiality of their deposits and enter hold-out agreements with
the lending bank;
(iii) interest rates on such deposits shall not be more than those of similar type of deposit accounts;
(iv) collected but undeposited capital build-up funds from clients shall be recorded in a temporary
liability account in the books of related NGOs/foundations and shall be deposited with the related bank not later than
fifteen (15) calendar days from date of collection;
(v) total loans, other credit accommodations and guarantees granted to the related NGO/foundation
shall not exceed, at any time, the total deposits owned by its clients; and
(vi) That the NGO/foundation shall consider as payments to the clients’ obligations any deposits used by
the lending bank to settle any unpaid obligation(s) of the NGO/foundation.
b. Loans, other credit accommodations and advances to officers in the form of fringe benefits granted in
accordance with existing regulations; and
c. Loans, other credit accommodations and guarantees extended by a Coop Bank to its cooperative shareholders.
The general principles and standards that will govern the business relationships between banks and their related
NGOs/foundations engaged in retail microfinance are found in Appendix 27 of the MORB.
d. The portion of loans and other credit accommodations covered by guarantees of international/regional
institutions/multilateral financial institutions where the Philippine Government is a member/shareholder, such as the
International Finance Corporation and the Asian Development Bank.7

IX. AGGREGATE CEILINGS; CEILINGS ON UNSECURED LOANS, OTHER CREDIT ACCOMMODATIONS AND GUARANTEES

Except with the prior approval of the Monetary Board, the total outstanding loans, other credit accommodations and
guarantees to DOSRI shall not exceed fifteen percent (15%) of the total loan portfolio of the bank or 100% of net worth
whichever is lower: Provided, That in no case shall the total unsecured loans, other credit accommodations and

7 Sec. X330.1 Exclusion from Individual Ceiling, MORB

 guarantees to said DOSRI exceed thirty percent (30%) of the aggregate ceiling or the outstanding loans, other credit
accommodations and guarantees,
whichever is lower. For the purpose of determining compliance with the ceiling on unsecured loans, other credit
accommodations and guarantees, banks shall be allowed to average their ceiling on unsecured loans, other credit
accommodations and guarantees every week. In evaluating requests for extension of loans in excess of the aggregate
ceiling, the Bangko Sentral shall consider the credit standing of the borrower, viability of the projects financed by such
other credit accommodations in relation to national objectives, collateral or security and other pertinent considerations.8

X. EXCLUSIONS FROM AGGREGATE CEILING

The following loans, other credit accommodations and guarantees shall be excluded in determining compliance with the
aggregate ceiling:
a. Credit accommodations or portions thereof to the extent secured by assets considered as non-risk by the
Monetary Board;
b. Credit accommodations to a corporate stockholder which meets all the following conditions:
(1) The corporation is a non-financial institution;
(2) Its shares are listed and traded in the domestic stock exchanges; and
(3) No person or group of persons related within the first degree of consanguinity or affinity holds/owns
more than twenty percent (20%) of the subscribed capital of the corporation.
c. Credit accommodations to government-owned or controlled corporations, in cases where a director, officer or
stockholder of the lending bank is a representative of the government in the borrowing corporation and does not hold
any proprietary interest in such corporation: Provided, That other rules on loans to DOSRI, such as procedural and
reportorial requirements under Procedural Requirements and Reportorial Requirements fund herein are followed.
d. Exclusions from individual ceiling mentioned herein. 9

XI. PROCEDURAL REQUIREMENTS

The following provisions shall apply if the bank’s DOSRI are parties to, or act as representatives or agents of others in,
any of the transactions enumerated under Transaction Covered found herein:
a. Approval of the board, when to obtain. Except with prior written approval of the majority of the directors,
excluding the director concerned, no loan, other credit accommodation and guarantee shall
be granted nor shall any of the transactions enumerated under Transactions Covered found herein be entered into.
b. Approval by the board, how manifested. The approval shall be manifested in a resolution passed by the board
of directors during a meeting and made of record.
c. Determination of majority of the directors. The determination of the majority of the directors, excluding the
director concerned, shall be based on the total number of directors of the bank as provided in its articles of incorporation
and by-laws.

8 Sec. X331 Aggregate Ceilings; Ceilings on Unsecured Loans, other Credit Accommodations and Guarantees, MORB
9 Sec. X332. Exclusions from Aggregate Ceiling, MORB
 d. Contents of the resolution. The resolution of the board of directors shall contain the following information:
(1) Name of the director or officer concerned and his involvement as regardsthe credit accommodation,
such as principal, endorser, spouse of borrower, etc.;
(2) Nature of the loan or other credit accommodation, purpose, amount, credit basis for such loan or
other credit accommodation, security and appraisal thereof, maturity, interest rate, schedule of
repayment and other terms of the loan or other credit accommodation;
(3) Date of resolution;
(4) Names of the directors who participated in the deliberations of the meeting; and
(5) Names in print and signatures of the directors approving the resolution: Provided, That in instances
where a director who participated in the board meeting and who approved such resolution failed to sign, the corporate
secretary may issue a certification to this effect indicating the reason for the failure of the said director to sign the
resolution.
e. Transmittal of copy of board approval; contents thereof. A copy of the written approval of the board of
directors, as herein required, shall be submitted to the appropriate department of the SES within twenty (20) banking
days from the date of approval. The copy may be a duplicate of the original, or a reproduction copy showing clearly the
signatures of the approving directors: Provided, That if a reproduction copy is to be submitted, it shall contain on its face
or reverse side a signed certification by the secretary that it is a reproduction of the original written approval: Provided,
further, That such written approval shall not be required for loans, other credit accommodations and advances granted
to officers under a fringe benefit plan approved by the Bangko Sentral. 10

XII. REPORTORIAL REQUIREMENTS

Each bank shall maintain a record of loans, other credit accommodations and guarantees covered by these
regulations in a manner and form that will facilitate verification of such transactions by Bangko Sentral examiners. The
appropriate department of the SES may require banks to furnish such data or
information as may be necessary for purposes of implementing the provisions of the foregoing rules.11

XIII. SANCTIONS

Any violation of the provisions of the foregoing rules shall be subject to any or all of the following sanctions:
a. Restriction or prohibition on the bank from declaring dividends for non-compliance with the prescribed ceiling
on DOSRI until the outstanding loans and other credit accommodations have been
reduced to within the herein prescribed ceilings;
b. After due notice to the board of directors of the bank, the office of any bank director or officer who violates
the provisions of this Section may be declared vacant and the director or officer shall be subject to the penal provisions
of the New Central Bank Act;
c. Application of

10 Sec. X334 Procedural Requirements, MORB

11 Sec. X335 Reportorial Requirements, MORB
 (1) the borrowing director’s or officer’s share in the bank’s profit sharing program; and
(2) the share of the director voting for the approval of theloan or other credit accommodation, against
the excess of such loan or other credit accommodation over any of the herein prescribed ceilings; and
d. For the duration of each violation, imposition of a fine of one-tenth of one
percent (1/10 of 1%) of the excess over the ceilings per day but not to exceed P30,000 a day on the following:
(1) The lending bank;
(2) The director, officer or stockholder whose borrowing exceeds his individual ceiling; and
(3) Each of the directors voting for the approval of the loan or other credit accommodation in excess of
any of the ceilings prescribed in Exclusions from Individual Ceiling and Aggregate Ceiling. The penalty for exceeding the
individual ceiling, aggregate ceiling and ceiling on unsecured loans shall be computed on the average amount of loans in
excess of said ceilings during the same week.
190 Individual and DOSRI Limit
aggregate ceiling in
DOSRI loans; The general policy behind the DOSRI limit is to level the lending field between insiders (namely, directors, officers,
stockholders, and their related interests) and the outsiders. The rules require that loans and other credit accommodations to
DOSRI are to be in the regular course of business and upon terms not less favourable to the bank than those offered to
those outside the DOSRI circle. The aim is to prevent the bank from becoming a captive source of finance of the DOSRI.

The existing DOSRI rules have three ceilings: an individual ceiling, an aggregate ceiling, and a ceiling on unsecured loans.
The individual ceiling relates to the total allowable outstanding direct credit accommodation to a DOSRI, which is an
amount equivalent to his or her unencumbered deposits in the lending bank plus the book value of paid-capital contribution
therein. It is also required that the unsecured credit accommodations must not exceed 30 per cent of the total DOSRI credit
accommodations. On the other hand, the aggregate ceiling refers to the total credit accommodations to DOSRI. This is 15
per cent of the total loan portfolio of the bank or 100 per cent of its net worth, whichever is lower.

Before a bank can extend a DOSRI loan, there must be specific resolution that must be passed by the board of directors,
without the participation of the interested director. The resolution must be entered upon the records of the bank and a copy
of the entry must be transmitted to the BSP within 20 banking days of board approval.

SECTION X330. Individual Ceiling. The total outstanding loans, other credit accommodations and guarantees to each of the
bank’s directors, officers, stockholders and their related interests shall be limited to an amount equivalent to their respective
unencumbered deposits and book value of their paid-in capital contribution in the bank: Provided, however, that unsecured
loans, other credit accommodations and guarantees to each of the bank's directors, officers, stockholders and their related
interests shall not exceed thirty percent (30%) of their respective total loans, other credit accommodations and guarantees.

Subsection X330.1 Exclusions from Individual Ceiling. The following loans, other credit accommodations and guarantees shall
be excluded in determining compliance with the individual ceiling.

Loans, other credit accommodations and guarantees secured by assets considered as non-risk by the Monetary Board;
Assets considered as non-risk shall refer to the following:

1. Cash;

2. Debt securities issued by the BSP or the Philippine government;

3. Deposits maintained in the lending bank and held in the Philippines;

4. Debt securities issued by the U.S. government;

5. Debt securities issued by central governments, central banks of foreign countries and multilateral financial institutions
such as International Finance Corporation, Asian Development Bank and World Bank, with the highest credit quality given by
any two internationally accepted rating agencies;

6. Such other assets considered as non-risk by the Monetary Board.

Loans, other credit accommodations and advances to officers in the form of fringe benefits granted in accordance with
existing regulations;

Loans, other credit accommodations and guarantees extended by a cooperative bank to its cooperative shareholders;

SECTION X331. Aggregate Ceiling; Ceiling on Unsecured Loans, Other Credit Accommodations and Guarantees. Except with
the prior approval of the Monetary Board, the total outstanding loans, other credit accommodations and guarantees to
directors, officers, stockholders and their related interests shall not exceed fifteen percent (15%) of the total loan portfolio of
the bank or one hundred percent (100%) of net worth whichever is lower: Provided, That in no case shall the total unsecured
loans, other credit accommodations and guarantees to said directors, officers, stockholders and their related interests exceed
thirty percent (30%) of the aggregate ceiling or the outstanding loans, other credit accommodations and guarantees,
whichever is lower. For the purpose of determining compliance with the ceiling on unsecured loans, other credit
accommodations and guarantees, banks shall be allowed to average their ceiling on unsecured loans, other credit
accommodations and guarantees every quarter.

In evaluating requests for extension of loans in excess of the aggregate ceiling, the BSP shall consider the credit standing of
the borrower, viability of the projects financed by such other credit accommodations in relation to national objectives,
collateral or security and other pertinent considerations.

SECTION X332. Exclusions from Aggregate Ceiling. The following loans, other credit accommodations and guarantees shall
be excluded in determining compliance with the aggregate ceiling:

Credit accommodations or portions thereof to the extent secured by assets considered as non-risk by the Monetary Board;

Credit accommodations to a corporate stockholder which meets all the following conditions:
 (1) The corporation is a non-financial institution;

(2) Its shares are listed and traded in the domestic stock exchanges;

(3) No person or group of persons related within the first degree of consanguinity or affinity holds/owns more than twenty
percent (20%) of the subscribed capital of the corporation.

Credit accommodations to government-owned or controlled corporations, in cases where a director, officer or stockholder of
the lending bank is a representative of the government in the borrowing corporation and does not hold any proprietary
interest in such corporation: Provided, That other rules on loans to DOSRI, such as procedural and reportorial requirements
under Sections X334 and X335 of this Circular are followed.

Exclusions from individual ceiling mentioned under items (b) and (c) of Subsection X330.1.

SECTION X333. Applicability to Branches and Subsidiaries of Foreign Banks. The individual and aggregate ceilings as well as
ceilings on unsecured credit accommodations prescribed herein shall also apply to branches and subsidiaries of foreign banks
in the Philippines.

SECTION X334. Procedural Requirements. The following provisions shall apply if the bank’s directors, officers, stockholders,
and their related interests are parties to, or act as representatives or agents of others in, any of the transactions enumerated
under Section X327:

Approval of the board, when to obtain. Except with prior written approval of the majority of the directors, excluding the
director concerned, no loan, other credit accommodation and guarantee shall be granted nor shall any of the transactions
enumerated under Section X327 be entered into.

Approval by the board, how manifested. The approval shall be manifested in a resolution passed by the board of directors
during a meeting and made of record.

Determination of majority of the directors. The determination of the majority of the directors, excluding the director
concerned, shall be based on the total number of directors of the bank as provided in its articles of incorporation and by-
laws.

193 Waiver of rights to SECTION X337. Waiver of Secrecy of Deposit. Any director, officer or stockholder who, together with his related interest,
secrecy of bank contracts a loan or any form of financial accommodation from:
deposits in case of his bank; or
DOSRI transactions;
from a bank

(1) which is a subsidiary of a bank holding company of which both his bank and the lending bank are subsidiaries or

194 May unsecured loans
(2) in which a controlling proportion of the shares is owned by the same interest that owns a controlling proportion of the
shares of his bank, in excess of five percent (5%) of the capital and surplus of the bank, or in the maximum amount
permitted by law, whichever is lower, shall be required by the lending bank to waive the secrecy of his deposits of whatever
nature in all banks in the Philippines. Any information obtained from an examination of his deposits shall be held strictly
confidential and may be used by the examiners only in connection with their supervisory and examination responsibility or by
the BSP in an appropriate legal action it has initiated involving the deposit account.
On DOSRI:

be granted by bank; That unsecured loans other credit accommodations and guarantees to each of the bank's DOSRI, shall not exceed thirty percent (30%) of their respective total loans,
other credit accommodations and guarantees.

Under BSP Circular 837 in June, 2014

Under the new guidelines, the BSP said salary loans had been renamed and redefined primarily to emphasize the nature and
purpose of the said loans. It would now be called Salary-Based General-Purpose Consumption Loans.

These loans, the BSP explained, would now refer to “unsecured loans for a broad range of consumption purposes, granted to
individuals mainly on the basis of regular salary, pension or other fixed compensation, where repayment would come from such
future cash flows, either through salary deductions, debits from the borrower’s deposit account, mobile payments, pay-through
collections, over-the-counter payments or other type of payment arrangement agreed upon by the borrower and lender.”

Likewise, the bank regulator added the definition also now covers credit accommodations for education, hospitalization,
emergency, travel, household and other personal consumption needs.

The BSP clarified, however, the salary-based general-purpose consumption loans would not include credit cards, motor vehicles
and other personal loans covered under other existing BSP regulations.

194 May banks grant loans

in amounts equivalent
to 100% of the
appraised value of the
securities;

196 In case of foreclosure

of mortgages executed
in favor of a bank, what
is the period of
redemption granted to
the mortgagor;
197 May a bank extend the
redemption period for
foreclosed mortgages;

198 Will the issuance of a

restraining order or a
writ of preliminary
injunction toll the
running of the
redemption period;

198 Will the filing of an

action to annul the
foreclosure sale
suspend the running of
the redemption period;
200 In case of mortgages
foreclosed by banks,
what is the redemption
price;

202 May a bank obtain

possession of the
foreclosed property
during the redemption
period;

204 What is the extent or

nature of the authority
 of the judge before
whom an application
for the issuance of a
writ of possession is
made;

205 May a bank be deemed

to be a mortgagee in
good faith based on a
claim that a mortgagee
of land is not required
to look further than
what appears on the
face of the title;

207 In case of a loan

granted to a borrower
corporation, may a
bank validly cause the
execution of the
personal properties of
an officer of the
borrowing corporation
who has signed as
surety or a joint and
solidary undertaking
with the borrowing
corporation (JSS);
208 In case a loan is
secured by an
assignment of deposit
by the borrower, in
case of default, what is
the procedure to be
undertaken by the
lender to get the value
of the security;
212 Where the borrower
executed an
assignment of rights or
properties in favor of
the lender, is the
ownership over the
rights or the properties
transferred to the
assignee;
215 What is the so-called
“single borrower limit”
in case of loans granted
by banking institutions;

223 What is “loan

participation”;
“syndicated loan”;

224 Gateway Electronics

Corporation v. Land
Bank of the Philippines,
GR Nos. 155217 and
156393, July 30, 2003;
229 Truth in Lending Act;
will the act of
furnishing the
borrower a copy of the
promissory note which
stipulates the interest
rate and other charges
be deemed compliance
with the requirement
for a disclosure
statement;
246 Sia v. CA et al., GR No.
102970, May 13, 1993;
256 “Independence
principle” in Letters of
Credits transctions;
284 Fit and Proper Rule;
293 Doctrine of apparent
authority; First
Philippine International
Bank v. CA, GR No.
115849, January 24,
1996;
307 Unsound banking
practices;
312 Conservatorship;
powers of conservator;
315 Receivership; grounds
for the appointment of
a receiver;
315 Who has the
jurisdiction to hear and
decide cases to place a
bank under
receivership;
316 Duties of a receiver;

317 Powers of PDIC;

322 “Close Now, Hear Later

Scheme”;

326 Liquidation of banks;

336 Judicial review of

orders placing banks
under conservatorship
or receivership;
337 Banco Filipino Savings
and Mortgage Bank v.
Monetary Board, 204
SCRA 767 (1991);
338 Ong v. CA, GR No. No.
112830, Feb. 1, 1996);