Morb1 PDF

PREFACE
Manual of Regulations for Banks
The 31 October 2015 Manual of Regulations for Banks (MORB) is the latest edition
from the initial issuance in 1996. The updates consist of the banking legislative reforms and
its implementing rules and regulations and amendments to existing policies. It shall serve as
the principal source of banking regulations issued by the Monetary Board and the Governor
of the Bangko Sentral and shall be cited as the authority for enjoining compliance with the
rules and regulations embodied therein.
The Monetary Board of the Bangko Sentral, in its Resolution No. 1203 dated
07 December 1994, directed the creation of a multi-departmental Ad Hoc Review Committee
with representatives from the Supervision and Examination Sector (SES) and Office of the
General Counsel and Legal Services (OGCLS). The Committee was officially constituted
under Office Order No. 2 series of 1995 and was reconstituted several times thereafter, the
latest of which was Office Order No. 0458 dated 21 June 2013. Under the aforesaid Office
Order, the Committee is tasked to update the Manuals on a continuing basis to:
1. Incorporate relevant issuances;
2. Propose revisions/amendments/deletions of provisions which have
become obsolete, redundant, irrelevant or inconsistent with laws/
rules and regulations;
3. Reformulate provisions as the need arises; and
4. Oversee the publication and printing of the MORB in coordination
with the Economic and Financial Learning Center and Corporate
Affairs Office.
The present Committee, as reconstituted under Office Order No. 0458 dated
21 June 2013 is composed of:
Adviser - Nestor A. Espenilla Jr.

Deputy Governor
Supervision and Examination Sector
Chairman - Judith E. Sungsai

Director
Office of Supervisory Policy
Development (OSPD)
Vice Chairman - Atty. Ma. Loretta S. Esquivias-Conlu

Deputy Director
OGCLS
Members:
Ma. Belinda G. Caraan Betty Christine C. Bunyi

Director Officer-In-Charge
Integrated Supervision Department (ISD) I Central Point of Contact Department
(CPCD) I
Ma. Corazon T. Alva Andrea A. Vitangcol

Deputy Director Deputy Director
Examination Department (ED) II OSPD
Atty. Florabelle S. Madrid Atty. Asma A. Panda

Deputy Director Legal Officer IV
CPCD I OGCLS
Lucila F. Ocampo Celedina P. Garbosa

Manager Manager
ISD I CPCD I
Atty. Lord Eileen S. Tagle Amelia B. Damian

Legal Officer III Bank Officer IV
OGCLS OSPD
Concepcion A. Garcia Atty. Ma. Corazon Bilgera-Cordero

Bank Officer IV Bank Officer III
ED III Anti-Money Laundering Specialist
Group (AMLSG)
The Committee Secretariat is headed by Ms. Ma. Cecilia U. Contreras, Supervision
and Examination (SE) Specialist II, OSPD, and is assisted by Maria Evette T. Santos, SE Analyst
II, OSPD, and two (2) other personnel.
The Bangko Sentral ng Pilipinas

INSTRUCTIONS TO USERS
(31 October 2015 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 is
prefixed by the letter “X”. Special provisions do not contain the prefix “X” but instead, the
section/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 first
digit showing the numbers 1, 2, and 3 applicable to said banks, respectively. The second
digit refers to the Part of the Manual. The third and fourth digits refer to the section number
of 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 the
Manual where the runner is shown.
MANUAL OF REGULATIONS FOR BANKS
TABLE OF CONTENTS
POWER OF THE BANGKO SENTRAL TO EXAMINE BANKS
Examination by the Bangko Sentral
SECTION X001- X008 (Reserved)
SECTION X009 Supervising Enforcement Policy
PART ONE - ORGANIZATION, MANAGEMENT AND ADMINISTRATION
A. CLASSIFICATIONS AND POWERS OF BANKS
SECTION X101 Classifications, Powers and Scope of Authorities of Banks

1101.1 (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 of
credit and pay/accept/negotiate import/export drafts/
bills of exchange
B. ESTABLISHMENT AND ORGANIZATION
SECTION X102 Basic Guidelines in Establishing Banks

X102.1 Prerequisites for the grant of a universal banking
authority
X102.2 Suspension of the grant of new banking licenses or
the establishment of new banks
X102.3 Partial lifting of general moratorium on the licensing
of new thrift banks and rural banks
X102.4 Conditions for the grant of authority to convert into
a lower category
X102.5 Conversion of microfinance-oriented thrift banks/
rural banks
SECTION X103 Certificate of Authority to Register
SECTION X104 Business Name

X104.1 Bank advertisements
ix
SECTION X105 Liberalized Entry and Scope of Operations of Foreign Banks
X105.1 Modes of entry of foreign banks
X105.2 Qualification requirements
X105.3 Guidelines for selection
X105.4 Capital requirements of foreign banks
X105.5 Prescribed ratio of "Net Due to" account (Deleted
by Circular No. 858 dated 21 November 2014 )
X105.6 Risk-based capital for foreign bank branch
X105.7 Head office guarantee
X105.8 Scope of authority for locally incorporated
subsidiaries of foreign banks as well as branches with
full banking authority
X105.9 Control of the resources of the banking system
X105.10 Change from one mode of entry to another
X105.11 Listing of shares with the Philippine Stock Exchange
(Deleted by Circular No. 858 dated 21 November
2014)
X105.12 Equal treatment
SECTIONS X106 - X107 (Reserved)
C. MERGER AND CONSOLIDATION
SECTION X108 Merger or Consolidation to Meet Minimum Capital

X108.1 Requirement of Bangko Sentral approval
X108.2 Rules on exchange of shares
X108.3 Merger or consolidation incentives
1108.3 (Reserved)
2108.3 (Reserved)
3108.3 Regulatory relief under the strengthening program
for RBs (SPRB)
X108.4 SPRB Plus and Strengthening Program for
Cooperative Banks (SPCB) Plus
SECTIONS X109 Consolidation Program for Rural Banks (CPRB)
SECTIONS X110 (Reserved)
D. CAPITALIZATION
SECTION X111 Minimum Required Capital

X111.1 Minimum capitalization
X111.2 Capital build-up program (Deleted by Circular No.
696 dated 29 October 2010)
x
X111.3 Memorandum of Understanding; Prompt Corrective
Action Program; Sanctions (Deleted by Circular No.
X111.4 Guidelines on proposed investment from third party
investors (TPIs) for purposes of complying with the
minimum capital requirements
E. RISK-BASED CAPITAL
SECTION X115 Basel III Risk-Based Capital

X115.1 Scope
X115.2 (Reserved)
1115.2 Market risk capital requirement
2115.2 (Reserved)
3115.2 (Reserved)
X115.3 Capital treatment of exposures/investments in certain
products
X115.4 Required reports
X115.5 Domestic systemically important banks (DSIBs)
X115.6 Basel III Leverage Ratio Framework
X115.7 - X115.8 (Reserved)
X115.9 Sanctions
SECTION X116 Basel I Risk-Based Capital (Deleted by Circular No. 827 dated
28 February 2014)
X116.1 Scope (Deleted by Circular No. 827 dated
28 February 2014)
X116.2 Qualifying capital (Deleted by Circular No. 827
dated 28 February 2014)
X116.3 Risk-weighted assets (Deleted by Circular No. 827
dated 28 February 2014)
X116.4 Definitions (Deleted by Circular No. 827 dated
28 February 2014)
X116.5 Required reports (Deleted by Circular No. 827 dated
28 February 2014)
X116.6 Sanctions (Deleted by Circular No. 827 dated
28 February 2014)
X116.7 Temporary relief (Deleted by Circular No. 827 dated
28 February 2014)
SECTION X117 Internal Capital Adequacy Assessment Process and Supervisory

Review Process
xi
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 Debt

X119.1 Minimum features of unsecured subordinated debt
X119.2 Prior Bangko Sentral approval
X119.3 Pre-qualification requirements of issuing bank
X119.4 Public issuance of unsecured subordinated debt
X119.5 Private or negotiated issuance of unsecured
subordinated debt
X119.6 Issuance abroad of unsecured subordinated debt
X119.7 Qualified investors/buyers
X119.8 Prohibitions on holdings of unsecured subordinated
debt
X119.9 Accounting treatment
X119.10 - X119.12 (Reserved)
X119.13 Sanctions
SECTION X120 Interim Tier 1 Capital for Banks Under Rehabilitation
G. STOCK, STOCKHOLDERS AND DIVIDENDS
SECTION X126 Shares of Stock of Banks

X126.1 Limits of stockholdings in a single bank
X126.2 Transactions involving voting shares of stocks
X126.3 Other foreign equity investment in domestic banks
X126.4 Convertibility of preferred stock to common stock
X126.5 Issuance of redeemable shares: conditions;
certification and report; sanctions
X126.6 Stock options/warrants
X126.7 - X126.9 (Reserved)
X126.10 Dealings with stockholders and their related interests
SECTION X127 (Reserved)
SECTION 1127 Shares of Stock of Universal/Commercial Banks

1127.1 Limits on stockholdings in several banks
1127.2 - 1127.5 (Reserved)
xii
SECTION 2127 Shares of Stock of Thrift Banks
2127.1 Moratorium on ownership ceilings
2127.2 Preferred shares
2127.3 - 2127.5 (Reserved)
SECTION 3127 Shares of Stock of Rural Banks and Cooperative Banks

3127.1 Moratorium on ownership ceiling
3127.2 Government-held shares
3127.3 Limits on stockholdings in several rural banks
3127.4 Convertibility of preferred stock to common stock
3127.5 Guidelines for selection
SECTION X128 Deposits for Stock Subscription
SECTION X136 Dividends

X136.1 Definitions
X136.2 Requirements on the declaration of dividends
3136.2 Limitations/amount available for dividends declared
by rural banks and cooperative banks
X136.3 Net amount available for dividends
X136.4 Reporting and verification
X136.5 Recording of dividends
X136.6 Issuance of fractional shares
X136.7 - X136.9 (Reserved)
X136.10 Supervisory Enfrocement Actions
SECTION 1137 (Reserved)
SECTION 3137 Limitations/Amount Available on Dividends Declared by Rural

Banks and Cooperative Banks (Deleted by Circular No. 888
dated 9 October 2015)
3137.1 Dividends on government shares (Deleted by
Circular No. 888 dated 9 October 2015)
xiii
H. DIRECTORS, OFFICERS AND EMPLOYEES
SECTION X141 Definition; Qualifications; Powers/Responsibilities and

Duties of Board of Directors; Confirmation of the Election/
Appointments of Directors and Officers; Place of Board of
Directors’ Meeting; Reports Required; Sanctions
X141.1 Definition/limits
X141.2 Qualifications of a director
X141.3 Powers/responsibilities and duties of directors
X141.4 Confirmation of the election/appointment of
directors/officers
X141.5 Place of board of directors’ meeting
X141.6 - X141.8 (Reserved)
X141.9 Certifications required
X141.10 Sanctions
SECTION X142 Definition; Qualifications; and Duties and Responsibilities of

Officers
X142.1 Definition of officers
X142.2 Qualifications of an officer
X142.3 Duties and responsibilities of officers
X142.4 Appointment of officers
(Deleted by Circular No. 758 dated 11 May 2012)
SECTION X143 Disqualification and Watchlisting of Directors and Officers

X143.1 Persons disqualified to become directors
X143.2 Persons disqualified to become officers
X143.3 Effect of non-possession of qualifications or
possession of disqualifications
X143.4 Disqualification procedures
X143.5 Watchlisting
SECTION X144 Bio-data of Directors and Officers
SECTION X145 Interlocking Directorships and/or Officerships

X145.1 Representatives of government
SECTION X146 Profit Sharing Programs
SECTION X147 Compensation and Other Benefits of Directors and Officers
xiv
SECTION 3147 Bonding/Training of Directors, Officers and Employees
SECTION X148 Real Estate and Chattel Transactions with DOSRI and Employees
X148.1 Certification on real estate/chattel transactions with
DOSRI and employee(s)
X148.2 - X148.8 (Reserved)
X148.9 Sanctions
SECTION X149 Conducting Business in an Unsafe/Unsound Manner

X149.1 - X149.7 (Reserved)
X149.8 Reportorial requirement
X149.9 Sanctions
SECTION X150 Rules of Procedure on Administrative Cases Involving Directors

and Officers of Banks
I. BANKING OFFICES
SECTION X151 Establishment/Relocation/Voluntary Closure/Sale of Branches

X151.1 Prior Monetary Board approval
X151.2 Prerequisites for the grant of authority to establish a
branch
X151.3 Application for authority to establish branches
X151.4 Branching guidelines
X151.5 Branch processing and special licensing fee
X151.6 Establishment of other banking offices
X151.7 Opening of banking offices
X151.8 Requirements for opening a branch/other banking
office
X151.9 Relocation of branches/other banking offices
X151.10 Temporary closure, permanent closure and surrender
of branch/other banking office license, and sale/
acquisition of branches/other banking offices
X151.11 Relocation/transfer of branch licenses of closed banks
X151.12 Sanctions
X151.13 - X151.18 (Reserved)
X151.19 Tellering booths
SECTION X152 Relocation of Head Offices

X152.1 Sanctions
xv
SECTION X153 Establishment of Sub-Branches of Foreign Bank Branches
X153.1 Application for authority to establish sub-branches
X153.2 Requirements for establishment of sub-branches
X153.3 Date of opening
X153.4 Requirements for opening a sub-branch
X153.5 Limitations on establishment of sub-branches
X153.6 Sanctions
SECTION X154 Establishment of Offices Abroad

X154.1 Application for authority to establish an office abroad
X154.2 Requirements for establishing an office abroad
X154.3 Conditions attached to the approved application
X154.4 Date of opening
X154.5 Requirements for opening an office abroad
X154.6 Sanctions
X154.7 - 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 Hours

X156.1 Banking hours beyond the minimum; banking
services during holidays
X156.2 Report of, and changes in, banking days and hours
X156.3 Posting of schedule of banking days and hours
K. BANKING PREMISES
SECTION X160 Bank Premises and Other Fixed Assets

X160.1 Appreciation or increase in book value
X160.2 Ceiling on total investments
X160.3 Reclassification of real and other properties acquired
to bank premises, furniture, fixture and equipment;
Sanctions
X160.4 - X160.9 (Reserved)
xvi
X160.10 Batas Pambansa Blg. 344 - An Act to Enhance the
Mobility of Disabled Persons by Requiring Certain
Buildings, Institutions, Establishments and Public
Utilities to Install Facilities and Other Devices
X160.11 Republic Act No. 9994 - An Act Granting Additional
Benefits and Privileges to Senior Citizens, Further
Amending Republic Act No. 7432 of 1992 as
Amended by Republic Act No. 9257 of 2003
L. MANAGEMENT CONTRACTS AND OUTSOURCING

OF BANKING FUNCTIONS
SECTION X161 Management Contracts
SECTION X162 Statement of Principle on Outsourcing

X162.1 Governance in all case of outsourcing of banking
functions
X162.2 Prohibition against outsourcing of inherent banking
functions
X162.3 Definition
X162.4 Managing outsourcing-related risks
X162.5 Authority to outsource
X162.6 Documentations
X162.7 Intra-group outsourcing
X162.8 Offshore outsourcing
X162.9 Service providers
X162.10 Transitory provision
X162.11 Penalties
M. BANK OFFICES AS OUTLET OF FINANCIAL PRODUCTS OF ALLIED

UNDERTAKINGS/INVESTMENT HOUSE
SECTION X172 Statement of Principles

X172.1 Definition
X172.2 Financial products
X172.3 Governance
X172.4 Minimum documentary requirements
1172.4 Financial ratios and other related requirements
X172.5 Fair and balanced view of the product
X172.6 Cross-selling of collective investment schemes and
its suitability to customers
X172.7 Financial product providers
xvii
1172.7 Training (Deleted by Circular No. 801 dated
27 June 2013)
X172.8 Authority to cross-sell
1172.8 Other requirements (Deleted by Circular No. 801
dated 27 June 2013)
X172.9 - Complaints handling
X172.10 Sanctions
SECTION 2172 Market ing, Sale and Servicing of Microinsurance Products by

Thrift Banks
SECTION 3172 Market ing, Sale and Servicing of Microinsurance Products by

Rural and Cooperative Banks
N. RISK MANAGEMENT
SECTION X173 Supervision by Risks
SECTION X174 Risk Management Function

X174.1 Chief Risk Officer (CRO)
SECTION X175 Market Risk Management
SECTION X176 Liquidity Risk Management
SECTION X177 Information Technology Risk Management (ITRM)

X177.1 Declaration of policy
X177.2 Purpose and scope
X177.3 Complexity of IT risk profile
X177.4 IT rating system
X177.5 Definition of terms
X177.6 Description of IT-related risks
X177.7 IT Risk Management Systems (ITRMS)
X177.8 Reports
X177.9 Sanctions and penalties
SECTION X178 Credit Risk Management; Statement of Policy

X178.1 Evaluation of credit risk management system
A. Establishing an Appropriate Credit Risk Environment
X178.2 Role of the board and senior management
X178.3 Credit risk management structure
X178.4 Credit risk strategy
X178.5 Credit policies, process and procedure
xviii
B. Operating Under a Sound Credit Granting Process
X178.6 Credit approval process
X178.7 Credit granting and loan evaluation/analysis process
and underwriting standards
X178.8 Renewal or extension of maturity date of credits
X178.9 Credit limits, large exposures, and credir risk
concentrations
X178.10 Country and transfer risks
X178.11 Credits granted to related parties
C. Maintaining an Appropriate Credit Administration,
Measurement and Monitoring Process
X178.12 Credit administration
X178.13 Credit risk measurement, validation and stress
testing
X178.14 Credit risk management information and reporting
systems
X178.15 Credit monitoring
D. Maintaining an Appropriate Credit Control Process
X178.16 Credit review process
X178.17 Credit classification and provisioning
X178.18 Credit workout and remedial management of
problem credits
X178.19 Writing off problem credits
X178.20 Enforcement actions
X179 (Reserved)
SECTION X180 Compliance System; Compliance Officer

X180.1 Definition of business risk
X180.2 Status of the compliance functions
X180.3 Compliance system
X180.4 Chief Compliance Officer (CCO)
X180.5 Responsibilities of the board of directors and senior
management on compliance
X180.6 Cross-border compliance issues
X180.7 Outsourcing of compliance risk assessment and
testing
SECTION X181 Bank Protection

X181.1 Objectives
X181.2 Designation of a chief security officer
X181.3 Qualifications and responsibilities of the CSO
X181.4 Security program
xix
X181.5 Minimum security measures
X181.6 Reports
X181.7 Bangko Sentral inspection
X181.8 Sanctions
SECTION X185 Internal Control Framework

X185.1 Management oversight and control culture
X185.2 Risk recognition and assessment
X185.3 Control activities
X185.4 Information and communication
X185.5 Monitoring activities and correcting deficiencies
X185.6 Dual control (Deleted by Circular No. 871 dated
05 March 2015)
X185.7 Number control (Deleted by Circular No. 871 dated
05 March 2015)
X185.8 Rotation of duties (Deleted by Circular No. 871 dated
05 March 2015)
X185.9 Independence of the internal auditor (Deleted by
Circular No. 871 dated 05 March 2015)
X185.10 Confirmation of accounts (Deleted by Circular No.
871 dated 05 March 2015)
X185.11 Other internal control standards (Deleted by Circular
No. 871 dated 05 March 2015)
X185.12 Internal control procedures for dormant/inactive
accounts (Deleted by Circular No. 871 dated 05
March 2015)
SECTION X186 Internal Audit Function

X186.1 Qualifications of the head of the internal audit
function
X186.2 Duties and responsibilities of the head of the internal
audit function or the chief audit executive
X186.3 Professional competence and ethics of the internal
audit function
X186.4 Independence and objectivity of the internal audit
function
X186.5 Internal audit charter
X186.6 Scope
xx
SECTION X189 Selection, Appointment, Reporting Requirements and Delisting
of External Auditors and/or Auditing Firm; Sanctions; Effectivity
SECTION X190 Audited Financial Statements of Banks

X190.1 Financial audit
X190.2 Posting of audited financial statements
X190.3 Disclosure of external auditor's adverse findings to
the Bangko Sentral; sanction
X190.4 Disclosure requirement in the notes to the audited
financial statements
X190.5 Disclosure requirements in the annual report
X190.6 Posting and submission of annual report
SECTION X191 Records

X191.1 Adoption of the Manual of Accounts
X191.2 Financial Reporting Package
X191.3 Philippine Financial Reporting Standards/Philippine
Accounting Standards
X191.4 - X191.9 (Reserved)
1191.9 (Reserved)
2191.9 (Reserved)
3191.9 Retention and disposal of records of rural/cooperative
banks
SECTION X192 Reports

X192.1 Categories and signatories of bank reports
X192.2 Sanctions in case of willful delay in the submission
of reports/refusal to permit examination
X192.3 Submission of certain required information
1192.3 Submission of certain required information by UBs.
X192.4 Report on crimes/losses
X192.5 Report on real estate/chattel transactions (Deleted
by Circular No. 737 dated 19 September 2011)
X192.6 Reconciliation of head office and branch
transactions
X192.7 List of stockholders and their stockholdings
X192.8 Bangko Sentral offices, where reports are submitted
X192.9 Publication/Posting of balance sheet
X192.10 Consolidated financial statements of banks and their
subsidiaries engaged in financial allied undertakings
X192.11 Reports of other banking offices
X192.12 Reports required of foreign subsidiaries/affiliates/
banking offices or non-bank entities of domestic
banks
xxi
X192.13 Report on cross-border financial positions
1192.13 Additional reports from UBs/KBs
2192.13 (Reserved)
3192.13 (Reserved)
X192.14 Reports of strikes and lockouts
X192.15 Report on the Sworn Statement on Real Estate/Chattel
Transactions (Deleted by Circular No. 737 dated
19 September 2011)
X192.16 Notarized contracts/agreements between banks and
their related microfinance (MF) non-governmental
organizations (NGO’s)/foundations.
O. PROMPT CORRECTIVE ACTION FRAMEWORK
SECTION X193 Prompt Corrective Action Framework
SECTION X194 - X195 (Reserved)
P. LIQUIDATION AND RECEIVERSHIP
SECTION X196 Voluntary Liquidation

X196.2 Liquidation plan
X196.3 - X196.7 (Reserved)
X196.8 Final liquidation report
SECTION X198 Insolvency or Receivership of Banks

X198.2 Prohibited acts
X198.3 - 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 Deposits

X201.1 Prerequisites to accept or create demand deposits
for thrift banks/rural banks/cooperative banks
xxii
X201.2 Requirements for accepting demand deposits
X201.3 Sanctions
SECTION X202 Temporary Overdrawings; Drawings Against Uncollected

Deposits
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
SECTION 2205 Check Clearing Rules for Thrift Banks Authorized to Accept
Demand Deposits ( Deleted by Circular No. 825 dated
27 February 2014 )
SECTION 3205 Check Clearing Rules for Rural Banks Who Are Members of the
Philippine Clearing House Corporation ( Deleted by Circular
No. 825 dated 27 February 2014 )
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
xxiii
C. NEGOTIABLE ORDER OF WITHDRAWAL ACCOUNTS
SECTION X223 Authority to Accept Negotiable Order of Withdrawal Accounts

X223.1 Prerequisites to accept negotiable order of withdrawal
accounts for thrift banks/rural banks/cooperative
banks
X223.2 Requirements for accepting negotiable order of
withdrawal accounts
X223.3 Sanctions
SECTION X224 Rules on Servicing Negotiable Order of Withdrawal Accounts
SECTION X225 Minimum Features
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 Deposits

X233.1 Prerequisites to issue negotiable certificates of time
deposits for thrift banks/rural banks/cooperative
banks
X233.2 Requirements for issuing negotiable certificates of
time deposits
X233.3 Minimum features
X233.4 Insurance coverage
X233.5 Desistance from issuing new negotiable certificates
of time deposits
X233.6 Sanctions
X233.7 - X233.8 (Reserved)
X233.9 Long-term negotiable certificates of time deposit
X233.10 (Reserved)
X233.11 Long-term non-negotiable tax-exempt certificates of
time deposit
xxiv
E. DEPOSIT SUBSTITUTE OPERATIONS (QUASI-BANKING FUNCTIONS)
SECTION X234 Scope of Quasi-Banking Functions

X234.1 Elements of quasi-banking
X234.2 Definition of terms and phrases
X234.3 Transactions not considered quasi-banking
X234.4 Pre-conditions for the exercise of quasi-banking
functions
X234.5 Certificate of Authority from the Bangko Sentral
X234.6 Sale, discounting, assignment or negotiation by
banks of their credit rights arising from claims against
the BSP
SECTION X235 Deposit Substitute Instruments

X235.1 Prohibition against use of acceptances, bills of
exchange and trust certificates
X235.2 Negotiation of promissory notes
X235.4 Interbank loan transactions
X235.5 Delivery of securities
X235.6 Other rules and regulations governing the issuance
and treatment of deposit substitute instruments
X235.7 - X235.11 (Reserved)
X235.12 Repurchase agreements covering government
securities, commercial papers and other negotiable
and non-negotiable securities or instruments
SECTION X236 Minimum Trading Lot and Minimum Term of Deposit Substitute
SECTION X237 Money Market Placements of Rural Banks

X237.2 Conditions required on accepted placements not
covered by prohibition
X237.3 Sanctions
SECTION X238 Without Recourse Transactions

X238.1 Delivery of securities
X238.2 Sanctions
X238.3 Securities custodianship operations
SECTION X239 Issuance of Bonds

X239.2 Compliance with Securities and Exchange
Commission rules on registration of bond issues
xxv
X239.3 Notice to Bangko Sentral ng Pilipinas
X239.5 Issuance of commercial papers
F. GOVERNMENT DEPOSITS
SECTION X240 Statementof Policy

X240.2 Banks which may accept government funds
X240.3 Prerequisites for the grant of authority to accept
deposits from the Government and government
entities
X240.4 Application for authority
X240.5 Limits on funds of the Government and government
entities that may be deposited with banks
X240.6 Liquidity floor
X240.7 Exempt transactions
X240.8 Reports
X240.9 Sanctions
X240.10 - 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 Substitutes

X242.1 Time of payment of interest on time deposits/deposit
substitutes
X242.2 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 Required

X253.1 Required reserves against deposit and deposit
substitute liabilities
X253.2 Liquidity reserves (Deleted by Circular No. 753 dated
29 March 2012)
xxvi
SECTION X254 Composition of Reserves
X254.1 Allowable drawings against reserves
X254.2 Exclusion of uncleared checks and other cash items
X254.3 Interest income on reserve deposits
X254.4 Book entry method for reserve securities
SECTION X255 Exemptions from Reserve Requirements
SECTION X256 Computation of Reserve Position

X256.1 Measurement of reserve requirement
X256.2 - X256.4 (Reserved)
X256.5 Guidelines in calculating and reporting to the Bangko
Sentral the required reserves on deposit substitutes
evidenced by repurchase agreements covering
government securities
SECTION X257 Reserve Deficiencies; Sanctions

X257.1 Chronic reserve deficiency; penalties
X257.2 Failure to cover overdrawings with the Bangko Sentral
X257.3 Payment of penalties on reserve deficiencies
SECTION X258 Report on Compliance
I. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS
SECTION X261 Booking of Deposits and Withdrawals

X261.1 Clearing cut-off time
X261.2 Definitions
X261.3 Booking of cash deposits
X261.4 Booking of non-cash deposits
X261.5 Booking of deposits after regular banking hours
X261.6 Other records required
X261.7 Notice required
SECTION X262 Miscellaneous Rules on Deposits

X262.1 Specimen signatures, identification photos
X262.2 Insurance on deposits
X262.3 Certification of compliance with Subsection 55.4 of
R.A. No. 8791
SECTION X263 Service and Maintenance Fees

X263.1 Amendments to terms and conditions for the
imposition of service charges/fees
SECTION X264 Unclaimed Balances
xxvii
SECTION X265 Acceptance, Encashment or Negotiation of Checks Drawn in
Favor of Commissioner/Collector of Customs
SECTION X266 Deposit Pick-up/Cash Delivery Services

X266.1 Operation of armored cars
SECTION 3266 Qualifying Criteria Before a Rural/Cooperative Bank Engages in

Deposit Pick-up Services
SECTION X267 Automated Teller Machines
J. BORROWINGS FROM THE BANGKO SENTRAL
SECTION X268 Rediscounting Line

X268.1 Credit Information System
X268.2 Application procedures
X268.3 Approval/Renewal of the line
X268.4 Amount of line
X268.5 Term of the line
X268.6 - X268.9 (Reserved)
X268.10 Constitutional prohibition
SECTION X269 Rediscounting Availments

X269.1 Eligibility requirements at the time of availment
X269.2 Eligible papers and collaterals
X269.3 Loan availment procedures
X269.4 Loan value
X269.5 Maturities
X269.6 Rediscount/lending rates and liquidated damages
X269.7 Release of proceeds
X269.8 Repayments/remittance of collections/arrearages
X269.9 Prohibited transactions
X269.10 Monitoring and credit examination of borrowing
banks
X269.11 Penalties/sanctions
X269.12 Interlocking directorship/officership
SECTION X270 Repurchase Agreements with the Bangko Sentral
SECTION X271 Bangko Sentral Liquidity Window
xxviii
X271.1 Nature of liquidity window
X271.2 Terms of credit
X271.3 Limit
SECTION X272 Emergency Loans or Advances to Banking Institutions

X272.1 Nature of emergency loans or advances
X272.2 When an emergency loan or advance may be
availed of
X272.3 Allowable amount of emergency loan or advance
X272.4 Application procedures
X272.5 Other documentary requirements
X272.6 Acceptable collaterals and their corresponding loan
values
X272.7 Manner and conditions of release
X272.8 Interest rates, liquidated damages, and penalties
X272.9 General terms and conditions
X272.10 Maturity/Conditions for renewals
X272.11 Remittance of collections/repayments/arrearages
X272.12 Default
SECTION X273 Facility to Committed Credit Line Issuers

X273.1 Nature of special credit accommodations
X273.2 Conditions to access
X273.3 Terms of credit
X273.4 Ceiling
SECTION 2274 Countryside Financial Institutions Enhancement Program for

Thrift Banks
SECTION 3274 Countryside Financial Institutions Enhancement Program for

Rural and Cooperative Banks
SECTION X275 Recording and Reporting of Borrowings
SECTION X276 Rediscounting Window for Low-Cost Housing as Defined by the

Housing and Urban Development Coordinating Council
SECTION 1277 Rediscounting Window Available to All Universal and

Commercial Banks for the Purpose of Providing Liquidity
Assistance to Investment Houses
xxix
SECTION 2277 Rediscounting Window Available to TBs for the Purpose of
Providing Liquidity Assistance to Support and Promote
Microfinance Programs
SECTION 3277 Rediscounting Window Available to Rural and Cooperative

Banks for the Purpose of Providing Liquidity Assistance to Support
and Promote Microfinance Programs
3277. 1 Eligibility requirements
3277. 2 Microcredit line
3277. 3 Terms and conditions
3277. 4 Documentary requirements
3277. 5 Remittance of collections/payments/repayments
3277. 6 Reports required
3277. 7 Accounts verification
3277. 8 Sanctions
SECTION X278 Enhanced Intraday Liquidity Facility
K. OTHER BORROWINGS
SECTION X281 Borrowings from the Government

X281.1 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
xxx
PART THREE - LOANS, INVESTMENTS AND SPECIAL CREDITS
SECTION X301 Lending Policies (Deleted by Circular No. 855 dated

29 October 2014)
X301.1 (Reserved)
1301.1 Rules and regulations to govern the development and
implementation of banks’ internal credit risk rating
systems (Deleted by Circular No. 855 dated
29 October 2014)
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 System (Deleted
by Circular No. 855 dated 29 October 2014)
X302.1 Provisions for losses; booking (Deleted by Circular
No. 855 dated 29 October 2014)
X302.2 Sanctions (Deleted by Circular No. 855 dated
29 October 2014)
X302.3 Regulatory relief for banks under rehabilitation
program approved by the Bangko Sentral
A. LOANS IN GENERAL
SECTION X303 Credit Exposure Limits to a Single Borrower

X303.2 Rediscounted papers included in loan limit
X303.3 Credit risk transfer
X303.4 Exclusions from loan limit
X303.5 Sanctions
X303.6 - X303.7 (Reserved)
X303.8 Limit for wholesale lending activities of government
banks
SECTION X304 Grant of Loans and Other Credit Accommodations

X304.1 Additional requirements
X304.2 Purpose of loans and other credit accommodations
(Deleted by Circular No. 855 dated
29 October 2014)
xxxi
X304.3 Prohibited use of loan proceeds
X304.4 Signatories
X304.5 - X304.8 (Reserved)
X304.9 Policies on loans to non-immigrants and embassy
officials
X304.10 Minimum required disclosure
X304.11 Unfair collection practices
X304.12 Confidentiality of Information
X304.13 - X304.14 (Reserved)
X304.15 Sanctions
SECTION X305 Interest and Other Charges

X305.1 Rate of interest in the absence of stipulation
X305.2 Escalation clause; when allowable
X305.3 Floating rates of interest
X305.4 Accrual of interest earned on loans
X305.5 Method of computing interest
SECTION X306 Past Due Accounts

X306.1 Accounts considered past due
X306.2 Demand loans
X306.3 Renewals/extensions (Deleted by Circular No. 855
X306.4 Restructured loans (Deleted by Circular No. 855
X306.5 Write-off of loans, other credit accommodations,
advances and other assets as bad debts (Deleted by
X306.6 Writing-off microfinance loans as bad debts
29 October 2014)
X306.7 Updating of information provided to credit
information bureaus
SECTION X307 “Truth in Lending Act” Disclosure Requirement

X307.2 Information to be disclosed
X307.3 Inspection of contracts covering credit transactions
X307.4 Posters
X307.5 Sanctions and penal provisions
SECTION X308 Amortization on Loans and Other Credit Accommodations
SECTION X309 Non-Performing Loans

X309.1 Accounts considered non-performing; definitions
X309.2 - X309.3 (Reserved)
xxxii
X309.4 Reporting requirement
X309.5 Reportorial requirement
B. SECURED LOANS
SECTION X311 Secured Loans and Other Credit Accommodations

X311.1 Loans secured by junior mortgage on real estate
29 October 2014)
X311.2 (Reserved)
1311.2 (Reserved)
2311.2 (Reserved)
3311.2 Eligible real estate collaterals on rural/cooperative
bank loans (Deleted by Circular No. 855 dated
29 October 2014)
X311.3 Insurance on real estate improvements (Deleted by
X311.4 Participation in foreclosure proceedings
1311.4 (Reserved)
2311.4 Foreclosure by thrift banks
3311.4 Foreclosure by rural/cooperative banks
X311.5 Redemption of foreclosed real estate mortgage
SECTION X312 Loans and Other Credit Accommodations Secured By Chattels

and Intangible Properties (Deleted by Circular No. 855 dated
29 October 2014)
SECTION X313 Loans and Other Credit Accommodations Secured By Personal

Properties (Deleted by Circular No. 855 dated
29 October 2014)
SECTION X314 Increased Loan Values and Terms of Loans for Home-Building
(Deleted by Circular No. 855 dated 29 October 2014)
SECTION X315 Loans Secured by Certificates of Time Deposit (Deleted by

C. UNSECURED LOANS
SECTION X319 Loans Against Personal Security (Deleted by Circular No. 855
xxxiii
X319.1 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 Policy

X320.2 Risk management system
X320.3 Minimum requirements
X320.4 Information to be disclosed
X320.5 Interest accrual on past due loans
X320.6 Method of computing interest
X320.7 Finance charges
X320.8 Deferral charges
X320.9 Late payment/penalty fees
X320.10 Confidentiality of information
X320.11 Suspension, termination of effectivity and reactivation
X320.12 I n s p e c t i o n o f r e c o r d s c o v e r i n g c r e d i t c a r d
transactions
X320.13 Offsets
X320.14 Handling of complaints
X320.15 Unfair collection practices
X320.16 Sanctions and penal provisions
X320.17 Submission of credit card business activity report
SECTION X321 Policies on Salary-Based General-Purpose Consumption loans

X321.1 Definition; Transactions covered; Exclusions; Report
X321.2 Credit granting
X321.3 Consumer protection
X321.4 Sanctions
D. RESTRUCTURED LOANS
SECTION X322 Restructured Loans; General Policy (Deleted by Circular No.

X322.1 Definition; when to consider performing/
non-performing (Deleted by Circular No. 855
X322.2 Procedural requirements (Deleted by Circular No.
xxxiv
X322.3 Restructured loans considered past due ( Deleted by
Circular No. 855 dated 29 October 2014 )
X322.4 Classification ( Deleted by Circular No. 855 dated
29 October 2014 )
E. LOANS AND OTHER CREDIT ACCOMMODATIONS TO DIRECTORS,

OFFICERS, STOCKHOLDERS AND THEIR RELATED INTERESTS
SECTION X326 General Policy

X326.1 Definitions
SECTION X327 Transactions Covered
SECTION X328 Transactions Not Covered

X328.1 Applicability to credit card operations
X328.2 - 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 Ceilings

X330.1 Exclusions from individual ceiling
SECTION X331 Aggregate Ceiling; Ceiling on Unsecured Loans, Other Credit

Accommodations 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 Employees

X338.1 Mechanics
X338.2 (Reserved)
1338.2 Funding by foreign banks
2338.2 (Reserved)
xxxv
3338.2 (Reserved)
X338.3 Other conditions/limitations
SECTION X339 Transitory Provisions

X339.1 - X339.3 (Reserved)
X339.4 Reportorial requirements
SECTION X340 Applicability of DOSRI Rules and Regulations to Government

Borrowings in Govenment-Owned or -Controlled Banks
F. MANDATORY CREDITS
SECTION X341 Agriculture and Agrarian Reform Credit

X341.2 Qualified borrowers
X341.3 Required allocation for agriculture and agrarian reform
credit
X341.4 Direct compliance
X341.5 Allowable alternative compliance
X341.6 Computation of loanable funds
X341.7 Computation of total equity
X341.8 Accreditation of banks as rural financial institutions
X341.9 Syndicated type of agrarian reform credit/agricultural
credit
X341.10 Interest and other charges
X341.11 Submission of reports
X341.12 Consolidated compliance
X341.13 - X341.14 (Reserved)
X341.15 Sanctions
SECTION X342 Mandatory Allocation of Credit Resources to Micro, Small and

Medium Enterprises
X342.2 Period covered; prescribed portions of loan portfolio
to be allocated
X342.3 Eligible credit exposures
X342.4 Ineligible credit instruments
X342.5 Rights/remedies available to lending institutions not
qualified to acquire or hold lands of public domain
X342.6 Submission of reports
X342.7 Sanctions
X342.8 Disposition of penalties collected
X342.9 - X342.14 (Reserved)
xxxvi
X342.15 Accreditation guidelines for Rural and Thrift Banks
under the SME Unified Lending Opportunities for
National Growth
G. SPECIAL TYPE OF LOANS
SECTION X343 Interbank Loans

X343.1 Systems and procedures for interbank call loan
transactions
X343.2 Accounting procedures
X343.3 Settlement procedures for interbank loan transactions
SECTION X344 Loans to Thrift/Rural/Cooperative Banks

X344.1 Loans under Section 12 of R.A. No. 7353, Section 10
of R.A. No. 7906 and Article 102, R.A. No. 6038, as
amended by R.A. No. 9520
X344.2 Loans under Section 14 of R.A. No. 7353
SECTION X347 Standby Letters of Credit

X347.1 Domestic standby letters of credit
X347.2 Ceiling
X347.3 Reports
SECTION X348 Committed Credit Line for Commercial Paper Issues

X348.1 Who may grant line facility
X348.2 Ceilings
X348.3 Terms; conditions; restrictions
X348.4 Reports to the Bangko Sentral
X348.5 Loan limit
SECTION X349 Agriculture and Fisheries Projects with Long Gestation Periods
X349.2 Grace period
X349.3 Responsibility of lending banks
X349.4 Past due loans
X349.5 Non-performing loans
SECTION X361 Microfinance Loans

X361.1 Definition
X361.2 Loan limit; amortization; interest
xxxvii
X361.3 Credit information exemption
X361.4 Exemptions from rules on unsecured loans
X361.5 Housing microfinance loan
X361.6 (Reserved)
X361.7 Micro-agri loans
X361.8 (Reserved)
1361.8 (Reserved)
2361.8 Marketing, sale and servicing of microinsurance
products by thrift banks
3361.8 Marketing, sale and servicing of microinsurance
products by rural and cooperative banks
X361.9 Required reports
X361.10 Sanctions
SECTION X365 Loans to Barangay Micro Business Enterprises

X365.1 Credit delivery
X365.2 Interest on loans to barangay micro business
enterprises
X365.3 Amortization of loans to barangay micro business
enterprises
X365.4 Waiver of documentary requirements
X365.5 Incentives to participating financial institutions
X365.6 Credit guarantee
X365.7 Record
X365.8 Reports to Congress
X365.9 Administrative sanctions
H. EQUITY INVESTMENTS
SECTION X376 Scope of Authority

X376.1 Conditions for investment in equities
X376.2 - X376.4 (Reserved)
X376.5 Guidelines for major investments
SECTION X377 Financial Allied Undertakings
SECTION X378 Limits on Investment in the Equities of Financial Allied

Undertakings
xxxviii
SECTION X379 Investments in Venture Capital Corporations
X379.1 Requirements for investors
X379.2 Equity investments of venture capital corporations
X379.3 Business name of venture capital corporations
X379.4 Reportorial requirements; examination by Bangko
Sentral
X379.5 Interlocking directorships and/or officerships
SECTION X380 Non-Financial Allied Undertakings
SECTION 1381 Investments in Non-Allied or Non-Related Undertakings

1381.1 Non-allied undertakings eligible for investment by
universal banks
1381.2 Limits on investments in non-allied enterprises
1381.3 Report on outstanding equity investments in and
outstanding loans to non-allied enterprises
SECTION X382 Investments in Subsidiaries and Affiliates Abroad

X382.1 Application for authority to establish or acquire
subsidiaries and affiliates abroad
X382.2 Requirements for establishing subsidiaries or affiliates
abroad
X382.3 Conditions for approval of application
X382.4 - 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 Obligations

X388.1 Yield on purchase of receivables
X388.2 Purchase of receivables on a “without recourse” basis
X388.3 Purchase of commercial paper
xxxix
X388.4 Reverse repurchase agreements with Bangko Sentral
X388.5 Investment in debt and readily marketable equity
securities
SECTION 1389 Guidelines on the Investment of Universal Banks and

Commercial Banks in Credit-Linked Notes, Structured Products
and Securities Overlying Securitization Structures
SECTIONS 2389 - 3389 (Reserved)
SECTION 1390 Prohibition Against Non-Residents form Investing in the Special

Deposit Account (SDA) Facility
SECTION 2390 Prohibition Against Non-Residents from Investing in the SDA

Facility
K. MISCELLANEOUS PROVISIONS
SECTION X393 Loans-to-Deposits Ratio

X393.1 Statement of policy
X393.2 Regional loans-to-deposits ratio
X393.3 Computation of the regional loans-to-deposits ratio
SECTION X394 Acquired Assets in Settlement of Loans

X394.1 Posting
X394.2 Booking
X394.3 Sales contract receivable
X394.4 - X394.9 (Reserved)
X394.10 Transfer/sale of non-performing assets to a special
purpose vehicle or to an individual
X394.11 - X394.14 (Reserved)
X394.15 Joint venture of banks with real estate development
companies
SECTION X395 Credit Policies of Government-Owned Corporations
xl
SECTION X396 Parcellary Plans on Crop Loans
SECTION 1397 Limits on Real Estate Exposures and Other Real Estate Property
of UBs/KBs
SECTION 2397 Limits on Real Estate Exposures and Other Real Estate Property
of TBs
SECTION X398 Monetary Board Opinion on Domestic Borrowings of

Government
X398.1 Domestic borrowings by local government units
pursuant to Section 123 of R.A. No. 7653
X398.2 Debt service limit on local government borrowings
X398.3 - X398.4 (Reserved)
X398.5 Enforcement actions
L. GENERAL PROVISION ON SANCTIONS
PART FOUR - TRUST, OTHER FIDUCIARY BUSINESS AND

INVESTMENT 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 Business

X404.1 Application for authority to perform trust and other
fiduciary business
X404.2 Required capital
X404.3 Prerequisites for engaging in trust and other fiduciary
business
X404.4 Pre-operating requirements
xli
SECTION 2404 Grant of Authority to Engage in Limited Trust Business to Thrift

Banks
SECTION 3404 Grant of Authority to Engage in Limited Trust Business to Rural

Banks
SECTION X405 Security for the Faithful Performance of Trust and Other Fiduciary
Business
X405.1 Basic security deposit
X405.2 Eligible securities
X405.3 Valuation of securities and basis of computation of
the basic security deposit requirement
X405.4 Compliance period; sanctions
X405.5 Reserves against peso-denominated common trust
funds and trust and other fiduciary accounts - others
X405.6 Composition of reserves
X405.7 Computation of reserve position
X405.8 Reserve deficiencies; sanctions
X405.9 Report of compliance
SECTION X406 Organization and Management

X406.1 Organization
X406.2 Composition of trust committee
X406.3 Qualifications of committee members, officers and
staff
X406.4 Responsibilities of administration
X406.5 - X406.8 (Reserved)
X406.9 Outsourcing services in trust departments
X406.10 Confirmation of the appointment/designation
of trust officers and independent professional
SECTION X407 Non-Trust, Non-Fiduciary and/or Non-Investment Management

Activities
SECTION X408 Unsafe and Unsound Practices

X408.1 - X408.8 (Reserved)
X408.9 Sanctions
SECTION X409 Trust and Other Fiduciary Business

X409.2 Lending and investment disposition
xlii
X409.3 Transactions requiring prior authority
X409.4 Ceilings on loans
X409.5 Funds awaiting investment or distribution
X409.6 Other applicable regulations on loans and
investments
X409.7 Operating and accounting methodology
X409.8 Tax-exempt individual trust accounts
X409.9 Living trust accounts
X409.10 - X409.15 (Reserved)
X409.16 Qualification and accreditation of private banks acting
as trustee on any mortgage or bond issuance by any
municipality, government-owned or controlled
corporation, or any body politic
X409.17 Trust fund of pre-need companies
SECTION X410 Unit Investment Trust Funds/Common Trust Funds

X410.1 Definitions
X410.2 Establishment of a Unit Investment Trust Fund
X410.3 Administration of a Unit Investment Trust Fund
X410.4 Relationship of trustee with Unit Investment
Trust Fund
X410.6 Plan rules
X410.7 Minimum disclosure requirements
X410.8 Exposure limit
X410.9 Allowable investments and valuation
X410.10 Other related guidelines on valuation of allowable
investments
X410.11 Unit investment trust fund administration support
X410.12 Counterparties
X410.13 Foreign currency-denominated unit investment trust
funds
X410.14 Exemptions from statutory and liquidity reserves,
s i n g l e b o r r o w e r ' s l i m i t , d i r e c t o r s, officers,
stockholders and their related interests
SECTION X411 Investment Management Activities

X411.2 Minimum size of each investment management
account
X411.3 Commingling of funds
X411.4 Lending and investment disposition
xliii
X411.5 Transactions requiring prior authority
X411.6 Title to securities and other properties
X411.7 Ceilings on loans
X411.8 Other applicable regulations on loans and
investments
X411.10 Tax-exempt individual investment management
accounts
SECTION X412 Foreign Currency Deposit Unit/Expanded Foreign Currency

Deposit Unit Trust Accounts; Other Fiduciary or Investment
Management Accounts
X412.1 Banks with trust authority or investment management
authority
X412.2 Additional deposit for the faithful performance of trust
duties or investment management activities
X412.3 Applicability of rules and regulations
X412.4 Liquidity requirement for foreign currency deposit
unit/expanded foreign currency deposit unit common
trust funds (Deleted by Circular No. 666 dated 24
September 2009)
SECTION X413 Required Surplus
B. INVESTMENT MANAGEMENT ACTIVITIES
SECTION X414 Authority to Perform Investment Management

X414.1 Required capital
X414.2 Prerequisites for engaging in investment management
activities
X414.3 Pre-operating requirements
SECTION X415 Security for the Faithful Performance of Investment Management

Activities
X415.2 Eligible securities
X415.3 Valuation of securities and basis of computation of
the basic security deposit requirement
X415.4 Compliance period; sanctions
SECTION X416 Organization and Management
SECTION X417 Non-Investment Management Activities
SECTION X418 Unsound Practices

xliv
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 Required

X425.1 To trustor, beneficiary, principal
X425.2 To the Bangko Sentral
X425.3 Audited financial statements
X425.4 Post-bond flotation report (Superseded by Circular No.
769 dated 26 September 2012)
SECTION X426 Audits

X426.1 Internal audit
X426.2 External audit
X426.3 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 Operations

X441.2 Applicability of this regulation
X441.4 Application for authority
X441.5 Pre-qualification requirements for a securities
custodian/registry
X441.6 Functions and responsibilities of a securities custodian
X441.7 Functions and responsibilities of a securities registry
X441.8 Protection of securities of the customer
xlv
X441.9 Independence of the registry and custodian
X441.10 Registry of scripless securities of the Bureau of the
Treasury
X441.11 Confidentiality
X441.12 Compliance with anti-money laundering laws/
regulations
X441.15 - X441.28 (Reserved)
X441.29 Sanctions
D. GENERAL PROVISION ON SANCTIONS
PART FIVE - FOREIGN EXCHANGE TRANSACTIONS
Please refer to separate Manual on Foreign Exchange Transactions
PART SIX - TREASURY AND MONEY MARKET OPERATIONS
A. OPEN MARKET OPERATIONS
SECTION X601 Open Market Operations

X601.1 Repurchase agreements with Bangko Sentral
X601.2 Reverse repurchase agreements with Bangko Sentral
X601.3 Settlement procedures on the purchase and sale of
government securities under repurchase agreements
with the Bangko Sentral
X601.4 - X601.5 (Reserved)
X601.6 Bangko Sentral trading windows and services during
public sector holidays
B. FINANCIAL INSTRUMENTS
SECTIONS X611 Derivatives

X611.1 Generally authorized derivatives activities
X611.2 Activities requiring additional derivatives authority
xlvi
X611.3 Intra-group transactions
X611.4 Accounting guidelines
X611.5 Reporting requirements
X611.6 Sanctions
SECTION X625 Forward and Swap Transactions

X625.3 Documentation
X625.4 Tenor/maturity and settlement
X625.5 (Reserved)
1625.5 Forward contracts with non-residents
2625.5 (Reserved)
3625.5 (Reserved)
X625.6 Cancellations, roll-overs or non-delivery of FX forward
contracts
X625.7 Non-deliverable forward contracts involving the
Philippine peso
X625.8 Compliance with anti-money laundering rules
X625.9 Reporting requirements
X625.10 - X625.13 (Reserved)
X625.14 Sanctions
SECTION 1628 Credit-linked Notes and Similar Credit Derivative Products

1628.1 Definitions
1628.2 Qualified banks
1628.3 Capital treatment of investments in CLNs
1628.4 Risk management
1628.5 Transitional arrangements
1628.6 Bangko Sentral approval not required
SECTION 1635 Bank's Exposures to Structured Products

1635.1 Statement of policy
1635.2 Definition
xlvii
1635.4 Capital treatment of banks' exposures to structured
products
SECTION 1636 Expanded Foreign Currency Deposit Units Investments in Foreign

Currency Denominated Structured Products
1636.2 Scope
1636.3 Other conditions
1636.4 Capital treatment of structured products
1636.6 Sanctions
SECTION 1648 Investments in Securities Overlying Securitization Structures

1648.2 Definition
1648.4 Capital treatment of investments in securities
overlying securitization structures
SECTION X651 Asset-Backed Securities

xlviii
X651.3 Board approval requirement
X651.4 Minimum documents required
X651.5 Minimum features of asset-backed securities
X651.6 Disclosure requirements
X651.7 Conveyance of assets
X651.8 Representations and warranties
X651.9 Third party review
X651.10 Originator and seller
X651.11 Trustee and issuer
X651.12 Servicer
X651.13 Underwriter
X651.14 Guarantor
X651.15 Credit enhancement
X651.16 Clean-up call
X651.17 Prohibited activities
X651.18 Amendment of trust indenture
X651.19 Trustee or servicer in securitization
X651.20 Report to Bangko Sentral
SECTION X660 Global Peso Notes
PART SEVEN - ELECTRONIC BANKING SERVICES AND

OPERATIONS
SECTION X701 Electronic Banking Services

X701.1 Application
X701.2 Pre-screening of applicants
X701.3 Approval in principle
X701.4 Documentary requirements
X701.5 Conditions for Monetary Board approval
X701.6 Requirements for banks with pending applications
X701.7 Exemption
X701.8 Transitory provision
X701.9 - X701.11 (Reserved)
X701.12 Sanctions
X701.13 Outsourcing of internet and mobile banking services
xlix
SECTION X705 Consumer Protection for Electronic Banking

X705.1 E-Banking oversight function (Transferred to X177.7
pursuant to Circular No. 808 dated 22 August 2013)
X705.2 E-Banking risk management and internal control
(Transferred to X177.7 pursuant to Circular No. 808
dated 22 August 2013)
X705.3 Compliance with consumer awareness program
(Transferred to X177.7 pursuant to Circular No. 808
dated 22 August 2013)
X705.4 Minimum disclosure requirements (Transferred to
X177.7 pursuant to Circular No. 808 dated 22 August
2013)
X705.5 Complaint resolution (Transferred to X177.7 pursuant
to Circular No. 808 dated 22 August 2013)
X705.6 Applicability (Transferred to X177.7 pursuant to
Circular No. 808 dated 22 August 2013)
SECTION X780 Issuance and Operations of Electronic Money

X780.1 Declaration of policy
X780.2 Definitions
X780.4 Common provisions
X780.5 (Reserved)
X780.6 Sanctions
X780.7 Transitory provisions
X780.8 - X780.10 (Reserved)
X780.11 Outsourcing of services by Electronic Money Issuers
(EMIs) to Electronic Money Network Services
Providers (EMNSP)
SECTIONS X781 - X798 - (Reserved)
PART EIGHT - ANTI-MONEY LAUNDERING REGULATIONS
SECTION X801 Declaration of Policy
SECTION X802 Scope of Regulations
l
SECTION X803 Definitions of Terms
SECTION X804 Basic Principles and Policies to Combat Money Laundering
A. RISK MANAGEMENT
SECTION X805 Risk Management

X805.1 Board and senior management oversight
X805.1.a. Compliance office
X805.2 Money laundering and terrorist financing
prevention program
X805.2.a. Submission of the revised and updated MLPP;
approval by the board of directors or country
head
X805.3 Monitoring and reporting tools
X805.3.a Electronic monitoring and reporting systems for
money laundering
X805.3.b Manual monitoring
X805.4 Internal audit
B. CUSTOMER IDENTIFICATION PROCESS
SECTION X806 Customer Identification

X806.1 Customer acceptance policy
X806.1.a Criteria for type of customers: low, normal and
high risk; standards for applying reduced, average
and enhanced due diligence
X806.1.b Enhanced due diligence
X806.1.c Minimum validation procedures
X806.1.d Reduced due diligence
X806.1.e Face-to-face contact
X806.1.e.1 Account opened through a trustee, agent,
nominee, or intermediary
X806.1.e.2 Outsourcing arrangement
X806.1.e.3 Third party reliance
X806.2 Customer identification
X806.2.a New individual customers
X806.2.b New corporate and juridical entities
X806.2.c Valid identification documents
X806.2.d Outsourcing of the gathering of minimum
information and/or documents
X806.2.e Trustee, nominee, agent or intermediary account
li
X806.2.e.1 Where the customer transacts through a trustee,
nominee, agent or intermediary which is a third
party as herein defined (Third Party Reliance)
X806.2.e.1.a Third Party is a covered institution specifically
defined by this Part and as generally defined by
AMLA, as amended and its RIRR
X806.2.e.1.b Third Party is an FI operating outside the
Philippines that is other than covered institutions
referred to in Subsec. X806.2.e.1.a but conducts
business operations and activities similar to them
X806.2.f Private banking/wealth management operations
X806.2.g Politically exposed person
X806.2.h Correspondent banking
X806.2.i Fund/Wire transfer
X806.2.j Buyers of cashier's manager's or certified checks
X806.2.j.1 Buyers of cashier's, manager's or certified checks
other than an existing customer
X806.2.j.2 Buyers of cashier's manager's or certified checks
in blank or payable to cash, bearer or numbered
account
X806.2.k Second-endorsed checks
X806.2.l Foreign exchange dealers/money changers/
remittance agents
X806.2.m High risk customer
X806.2.n Shell company/Shell bank
X806.2.o Numbered accounts
X806.2.p Prohibited accounts
X806.3 On-going monitoring of customers, accounts and
transactions
X806.3.a Enhanced due diligence
C. COVERED AND SUSPICIOUS TRANSACTION REPORTING
SECTION X807 Covered and Suspicious Transaction Reporting

X807.1 Deferred reporting of certain covered transactions
X807.2 Electronic monitoring system for money
laundering
X807.3 Manual monitoring
X807.4 Electronic submission of reports
X807.5 Exemption from Bank Secrecy Laws
X807.6 Confidentiality provision
X807.7 Safe harbor provision
lii
D. RECORD KEEPING AND RETENTION
SECTION X808 Record Keeping

X808.1 Closed accounts
X808.2 Retention of records in case a money laundering
case has been filed in court
X808.3 Safekeeping of records and documents
X808.4 Form of records
E. TRAINING PROGRAM
SECTION X809 AML Training Program
F. BANGKO SENTRAL AUTHORITY AND ENFORCEMENT ACTIONS
SECTION X810 Bangko Sentral Authority to Examine Deposits and Investments;

Additional Exeption to the Bank Secrecy Act; Annual Testing of
Numbered Accounts
SECTION X811 Enforcement Action
SECTION X813 Separability Clause
PART NINE - OTHER BANKING REGULATIONS
A. BANKING FEES/CHARGES
SECTION X901 Assessment Fees on Banks

X901.1 Annual fees on banks
SECTION X902 Collection of Fines and Other Charges from Banks

X902.1 Guidelines on the imposition of monetary penalties
X902.2 Payment of fines by banks
X902.3 Cost of checks and documentary stamps
X902.4 Check/demand draft payments to the Bangko Sentral
of thrift, cooperative and rural banks
liii
B. BANK AS COLLECTION/REMITTANCE AGENTS
SECTION X903 Collection of Customs Duties/Taxes/Levies and Other Revenues

X903.1 Coverage
X903.2 Collection and reporting of internal revenue taxes
X903.3 Collection and reporting of customs duties and import
processing fees
X903.4 Collection and reporting of export/premium duties
X903.5 Remittances thru debit/credit advices
X903.6 Reconciliation of revenue collections
X903.7 Penalty for willful delay on the reporting of
collections/remittances
X903.8 Fines for delayed reports/remittances of collections
X903.9 Liquidity floor requirement on revenue collections
X903.10 Collection of import duties at the time of opening of
letters of credit
SECTION X904 Collection Agents of the Social Security System
SECTION X905 Collection Agents of PhilHealth
SECTION X906 Disclosure of Remittance Charges and Other Relevant

Information
C. SECURITIES BROKERING ACTIVITIES OF BANKS
SECTIONS X907 Segregation of Customer Funds and Securities Received by Banks

in the Performance of their Securities Brokering Functions
X907.3 Segregation of customer funds and securities
X907.4 Accounting and record keeping
X907.5 Receivership
SECTION X908 - X930 (Reserved)
D. CREDIT RATING AGENCIES
SECTION X931 Recognition and Derecognition of Domestic Credit Rating

Agencies for Bank Supervisory Purposes
X931.2 Minimum eligibility criteria
liv
X931.3 Pre-qualification requirements
X931.4 Inclusion in Bangko Sentral list
X931.5 Derecognition of credit rating agencies
X931.6 Recognition of PhilRatings as domestic credit
rating agency for bank supervisory purposes
SECTION X932 Internationally Accepted Credit Rating Agencies

X932.1 Recognition of Fitch Singapore Pte., Ltd. as
international credit rating agency for bank
supervisory purposes
SECTION X934 Recognition and Derecognition of Microfinance Institution

Rating Agencies
X934.2 Pre-qualification requirements
X934.3 Minimum eligibility criteria
X934.4 Derecognition of MIRA
SECTION X947 Prohibition on the Sale of Foreign-Based Mutual Funds by

Banks
SECTION 1948 Offering in the Philippines of Products by Parent Bank and

Branches Abroad of the Parent Bank
E. PHILIPPINE & FOREIGN CURRENCY NOTES & COINS
SECTION X950 Philippine and Foreign Currency Notes and Coins

X950.2 Treatment and disposition of counterfeit Philippine
and foreign currency notes and coins
X950.3 Reproduction and/or use of facsimiles of legal tender
Philippine currency notes
X950.4 Reproduction and/or use of facsimiles of legal tender
Philippine currency coins
lv
X950.5 Clean note and coin policy
X950.6 Replacement and redemption of legal tender
Philippine currency notes and coins considered
mutilated or unfit for circulation
X950.7 Treatment and disposition of Philippine currency
notes and coins called in for replacement
called in for replacement
X950.8 Penalties
SECTION X954 Service Fee for New/Fit Note Deposits with the Bangko Sentral
SECTION X960 Personal Equity and Retirement Account (PERA) Market

Participants and PERA Investment Products
X960.1 Applicability
X960.2 Eligibility criteria
X960.3 Qualification/Accreditation requirements
X960.4 Application for qualification/accreditation
X960.5 Security for the faithful performance of
administrators
X960.6 Grounds for suspension or revocation of qualification/
accreditation of administrator, investment manager
or custodian
X960.7 Penalty
X960.8 Reportorial Requirements
PART TEN - BSP REGULATIONS ON FINANCIAL CONSUMER

PROTECTION
A. CONSUMER PROTECTION OVERSIGHT FUNCTION
SECTION X1001 Consumer Protection Oversight Function

X1001.1 Role and responsibility of the board and senior
management
X1001.2 Consumer protection risk management system
(CPRMS)
lvi
B. CONSUMER PROTECTION STANDARDS OF CONDUCT FOR BANKS
SECTION X1002 Consumer Protection Standards

X1002.1 Disclosure and transparency
X1002.2 Protection of client information
X1002.3 Fair treatment
X1002.4 Effective recourse
X1002.5 Financial education and awareness
C. ENFORCEMENT ACTIONS
SECTION X1003 Enforcement Actions
SECTIONS X1004-1099 (Reserved)
lvii
POWER OF THE BANGKO SENTRAL TO EXAMINE BANKS
(2008 - X658) Examination by the Bangko e. Any other activity relevant to the
Sentral. The term “examination” shall refer above.
to an investigation of an institution under Regular or periodic examination shall
the supervisory authority of the Bangko be done once a year, with an interval of
Sentral ng Pilipinas to determine whether twelve (12) months from the last date
the institution is operating on a safe and thereof. Special examination may be
sound basis, inquire into its solvency and conducted earlier, or at a shorter interval,
liquidity, and assess the effectiveness of its when authorized by the Monetary Board by
compliance function to ascertain that it is an affirmative vote of five (5) members.
conducting business in accordance with In the full exercise of the supervisory
laws and regulations. Consistent with a risk- powers of the Bangko Sentral, examination
based approach to supervision, the scope by the Bangko Sentral of institutions shall
of examination may include, but need not be complemented by overseeing thereof.
be limited to, the following: In this regard, the term “overseeing” shall
a. Appraisal of the overall quality of refer to a limited investigation of an
corporate governance; institution, or any investigation/s that is
b. Assessment of risk management limited in scope, conducted to inquire into
system, which shall include the evaluation a particular area/aspect of an institution’s
of the effectiveness of management oversight operations, for the purpose of overseeing
and self-assessment functions (e.g. internal that laws and regulations are complied with,
audit, risk management and compliance), inquiring into the solvency and liquidity of
adequacy of policies, procedures, and limits, the institution, enforcing prompt corrective
effectiveness of risk measurement, action, or such other matters requiring
monitoring and management information immediate investigation: Provided, That -
system, and robustness of internal control; (i) specific authorizations be issued by the
c. Review of the institution’s operations Deputy Governor, Supervision and
and overall risk profile; Examination Sector, and (ii) periodic
d. Evaluation of financial performance, summary reports on overseeings made be
capital adequacy, asset quality and liquidity; submitted to the Monetary Board.
and (Circular No. 442 dated 20 July 2004, as amended by Circular
No. 862 dated 17 December 2014)
li
§§ X001 - X009
15.10.31
Secs. X001 - X008 (Reserved) regulations, taking into consideration the

nature and extent of the supervisory issues and
Sec. X009 Supervisory Enforcement Policy. concerns and the level of cooperation
The Policy sets forth guidance on the Bangko provided by Management.
Sentral’s supervision-by-risk framework. It The Bangko Sentral adopts a holistic
also puts together in a holistic manner all approach to supervision with the objective
the enforcement tools available to the of guiding FIs under its supervision to
Bangko Sentral as contained in various laws mitigate risk and achieve the desired changes.
and rules and regulations 1 and Bangko Sentral’s risk-based supervision,
communicates the deployment thereof in a of which enforcement action is a key part,
consistent manner by the Bangko Sentral in focuses on the safety and soundness of
the course of performing its supervisory operations of the FIs. This policy sets forth
function. It further sets out the guiding the expectations of the Bangko Sentral when
principles and objectives behind the it deploys enforcement action and the
deployment of such enforcement actions. consequences when expected actions are
Nothing in this Section shall be not performed within prescribed timelines.
construed as superseding enforcement Thus, this over-arching policy is
actions previously imposed against needed - (a) as a collation of various
Bangko Sentral-supervised FIs pursuant to enforcement actions already present in
existing laws, Bangko Sentral rules and various laws, rules and regulations; (b) for
regulations. better guidance of the FIs and the bank
supervisors; and (c) as a means to broadcast
a. Statement of policy and rationale to the banking/financial industry the
The Bangko Sentral is issuing this consequences of failure to address the
Supervisory Enforcement Policy to provide Bangko Sentral requirements and
guidance on its supervision-by-risk supervisory expectations.
framework. The Bangko Sentral
recognizes that risk-taking is integral to a b. Objectives of the enforcement policy
financial institution’s business. The The Bangko Sentral’s Supervisory
existence of risk is not necessarily a Enforcement Policy aims to achieve the
reason for concern so long as Management following two (2) key objectives:
exhibits the ability to effectively manage (1) Achieving the desired change.
that level of risk and operates the financial Effect a change in the overall condition
institution (FI) in a safe and sound manner. and governance of Bangko Sentral-
Thus, when risk is not properly managed, supervised FIs consistent with the
the Bangko Sentral may deploy a wide range expectations set under relevant laws and
of enforcement actions provided under regulations; and
existing laws, Bangko Sentral rules and (2) Mitigating risk. Mitigate risks to the
1
Section 4 of R.A. No. 8791 (General Banking Law of 2000) defines the scope of Bangko Sentral’s
supervisory powers, which may be grouped into three categories: (i) issuance of rules; (ii) examination
and investigation; and (iii) enforcement of Prompt Corrective Action (PCA)
Manual of Regulations for Non-Bank Financial Institutions X001 - X009

Page 1
§ X009
15.10.31
FIs and other stakeholders in order to supervisory actions. These enforcement

maintain the stability of the financial system. actions may be imposed singly or in
combination with others.
c. General principles (a) Corrective actions
The Bangko Sentral, in the deployment Corrective actions are enforcement
of enforcement actions, is guided by the actions intended to require the FI to address
following general principles: the underlying cause of supervisory issues,
(1) Root cause diagnosis. The enforcement concerns and problems. These include the
action addresses the underlying cause of the following:
supervisory issues and concerns. (i) Bangko Sentral directives
(2) Consistently matching the severity of Directives are basically orders and
enforcement action to the supervisory issue. instructions communicated by the
The deployment of appropriate enforcement appropriate supervising department in
action is commensurate to the severity of Bangko Sentral requiring the FI to undertake
the supervisory issues and concerns. The a specific positive action or refrain from
severity of the supervisory issues and performing a particular activity within a
concerns is assessed in terms of prevalence1 prescribed timeline.
and persistence. (ii) Letter of Commitment (LOC)
(3) Successive or simultaneous The LOC is an enforcement action
deployment of enforcement actions. where the FI’s Board of Directors (Board) is
Enforcement actions may be deployed required, upon approval and/or
successively or simultaneously taking into confirmation by the Monetary Board (MB),
account the nature and seriousness of the to make a written commitment to undertake
difficulties encountered by the FIs and the a specific positive action or refrain from
ability and willingness of the FI’s performing a particular activity with a given
Management to address the supervisory time period.
issues and concerns. The LOC is generally used to arrest
emerging supervisory concerns before these
(4) Monitorability and follow-through.
develop into serious weaknesses or
The Bangko Sentral monitors the FI’s
problems, or to address remaining
progress/compliance with the expected
supervisory issues and concerns.
actions to address the supervisory issues,
(b) Sanctions
concerns and problems.
Sanctions that may be imposed on an
(5) Escalation of enforcement actions.
FI and/or its directors and officers, as
Enforcement actions may be escalated if the
provided under existing laws, Bangko Sentral
desired change is not achieved and the root
rules and regulations, are subject to the prior
causes of the FI’s issues, concerns and
approval and/or confirmation by the MB. Such
problems are not addressed by the FI within
sanctions include the following:
prescribed timelines.
(i) FIs
• Restrictions on activities and
d. Categories of enforcement actions
privileges
The three (3) main categories of
enforcement action are: (1) corrective • Suspension of authorities, privileges
actions, (2) sanctions and (3) other and other activities
1
Prevalence pertains to the pervasiveness of the supervisory issues, concerns and problems in relation to their
impact on the FI’s solvency, asset quality, operating performance and liquidity, among others.

Page 2
§ X009
15.10.31
• Divestment and/or unwinding (i) Initiation into the PCA Framework;

• Monetary sanction - penalties/fines (ii) Issuance of a cease and desist order
against the FI (CDO) against the FI as well as its directors
(ii) Directors and officers and officers;
• Reprimand (iii) Conservatorship; and
• Restriction on compensation and (iv) Placement under receivership.
benefits
• Divestment e. Due Process
• Suspension An integral part of the deployment of
• Disqualification enforcement actions is the observance of
• Removal due process in all cases.
• Monetary penalties/fines The FI and/or its directors and officers
The foregoing sanctions to individuals are afforded fair and reasonable opportunity
are without prejudice to the filing of separate to explain their side and to submit
civil or criminal actions against them, when evidence/s in support thereof, which are
appropriate. given due consideration in determining the
(c) Other supervisory actions appropriate enforcement action(s) to be
Subject to prior MB approval, the imposed.
Bangko Sentral, when warranted, may (Circular No. 875 dated 15 April 2015)
deploy other supervisory actions such as

Page 3
§ X101
14.12.31
PART ONE
ORGANIZATION, MANAGEMENT AND ADMINISTRATION
A. CLASSIFICATIONS AND POWERS non-financial allied enterprise; and

OF BANKS (d) in case of publicly-listed UBs, the
power to own up to one hundred percent
Section X101 Classifications, Powers and (100%) of the voting stock of only one (1)
Scope of Authorities of Banks. The other UB or KB.
following are the classifications, powers and A UB may perform the functions of an
scope of authorities of banks, as well as the IH either directly or indirectly through a
prerequisites for the grant of banking subsidiary IH; in either case, the
authorities. underwriting of equity securities and
a. Classifications of banks. Banks are securities dealing shall be subject to
classified into the following subject to the pertinent laws and regulations of the
power of the Monetary Board to create Securities and Exchange Commission
other classes or kinds of banks: (SEC): Provided, That if the IH functions are
(1) Universal banks (UBs); performed directly by the UB, such
(2) Commercial banks (KBs); functions shall be undertaken by a separate
(3) Thrift banks (TBs), as defined in and distinct department or other similar unit
Republic Act (R.A.) No. 7906, which shall in the UB: Provided, further, That a UB
be composed of: (a) savings and mortgage cannot perform such functions both directly
banks, (b) stock savings and loan associations, and indirectly through a subsidiary.
and (c) private development banks; (2) KBs. In addition to the general
(4) Rural banks (RBs), as defined in powers incident to corporations and those
R. A. No. 7353; provided in other laws, a KB shall have the
(5) Cooperative banks (Coop Banks); authority to exercise all such powers as
and may be necessary to carry on the business
(6) Islamic banks (IBs), as defined in of commercial banking, such as accepting
R.A. No. 6848. drafts and issuing letters of credit;
b. Powers and scope of authorities discounting and negotiating promissory
The following are the powers and scope of notes, drafts, bills of exchange, and other
authorities of banks. evidences of debt; accepting or creating
(1) UBs. A UB shall have the authority demand deposits; receiving other types of
to exercise, in addition to the powers and deposits and deposit substitutes; buying and
services authorized for a KB as enumerated selling foreign exchange and gold or silver
in Item “b(2)” and those provided by other bullion; acquiring marketable bonds and
laws, the following: other debt securities; and extending credit,
(a) the powers of an investment house subject to such rules as the Monetary Board
(IH) as provided under existing laws; may promulgate. These rules may include
(b) the power to invest in non-allied the determination of bonds and other debt
enterprises; securities eligible for investment, the
(c) the power to own up to one maturities and aggregate amount of such
hundred percent (100%) of the equity in a investment.
TB, an RB, a financial allied enterprise, or a It may also exercise or perform any or
Manual of Regulations for Banks Part I - Page 1

§ X101
14.12.31
all of the following: (h) accept foreign currency deposits as

(a) invest in the equities of allied provided under R.A. No. 6426, as amended;
enterprises as provided in Sections 31 and (i) act as correspondent for other
32 of R.A. No. 8791; financial institutions (FIs);
(b) purchase, hold and convey real (j) purchase, hold and convey real
estate as specified under Sections 51 and estate as specified under Sections 51 and
52 of R.A. No. 8791; 52 of R.A. No. 8791;
(c) receive in custody funds, documents (k) offer other banking services as
and valuable objects; provided in Section 53 of R.A. No. 8791; and
(d) act as financial agent and buy and sell, (l) buy and sell foreign exchange.
by order of and for the account of their With prior approval of the Monetary
customers, shares, evidences of indebtedness Board, and subject to such guidelines as
and all types of securities; may be established by it, TBs may also
(e) make collections and payments for perform the following services:
the account of others and perform such other (m) open current or checking accounts;
services for their customers as are not (n) engage in trust, quasi-banking
incompatible with banking business; functions and money market operations;
(f) upon prior approval of the Monetary (o) act as collection agent for
Board, act as managing agent, adviser, government entities, including but not
consultant or administrator of investment limited to, the Bureau of Internal Revenue
management/advisory/consultancy (BIR), Social Security System (SSS) and the
accounts; Bureau of Customs (BOC);
(g) rent out safety deposit boxes; and (p) act as official depository of national
(h) engage in quasi-banking functions. agencies and of municipal, city or provincial
(3) TBs. In addition to the powers funds in the municipality, city or province
provided in other laws, a TB may perform where the TB is located;
any or all of the following services: (q) issue mortgage and chattel mortgage
(a) grant loans, whether secured or certificates, buy and sell them for its own
unsecured; account or for the account of others, or
(b) invest in readily marketable bonds accept and receive them in payment or as
and other debt securities, commercial amortization of its loan;
papers and accounts receivable, drafts, bills (r) invest in the equity of allied
of exchange, acceptances or notes arising undertakings;
out of commercial transactions; (s) issue foreign letters of credit; and
(c) issue domestic letters of credit; (t) pay/accept/negotiate import/export
(d) extend credit facilities to private and draft/bills of exchange.
government employees; (4) RBs. In addition to the powers
(e) extend credit against the security of provided in other laws, an RB may perform
jewelry, precious stones and articles of any or all of the following services:
similar nature, subject to such rules and (a) extend loans and advances
regulations as the Monetary Board may primarily for the purpose of meeting the
prescribe; normal credit needs of farmers, fishermen
(f) accept savings and time deposits; or farm families as well as cooperatives,
(g) rediscount paper with the Land merchants, private and public employees;
Bank of the Philippines (LBP), Development (b) accept savings and time deposits;
Bank of the Philippines (DBP), and other (c) act as correspondent of other FIs;
government-owned or -controlled corporations; (d) rediscount paper with the LBP, DBP
Part I - Page 2 Manual of Regulations for Banks

§ X101
14.12.31
or any other bank, including its branches they are not inconsistent or incompatible
and agencies. Said banks shall specify the with the provisions of R.A. No. 6848, an IB
nature of paper deemed acceptable for may perform any or all of the following
rediscount, as well as the rediscount rate to services:
be charged by any of these banks; (a) open savings accounts for
(e) act as collection agent; safekeeping or custody with no participation
(f) offer other banking services as in profit and losses except unless otherwise
provided in Section 53 of R.A. No. 8791; and authorized by the account holders to be
(g) buy and sell foreign exchange. invested;
With prior approval of the Monetary (b) accept investment account
Board, an RB may perform any or all of the placements and invest the same for a term
following services: with the IB’s funds in Islamically permissible
(h) accept current or checking transactions on participation basis;
accounts: Provided, That such RB has net (c) accept foreign currency deposits
assets of at least P5.0 million; from banks, companies, organizations and
(i) accept negotiable order of individuals, including foreign governments;
withdrawal (NOW) accounts; (d) buy and sell foreign exchange;
(j) act as trustee over estates or (e) act as correspondent of banks and
properties of farmers and merchants; institutions to handle remittances or any
(k) act as official depository of fund transfers;
municipal, city or provincial funds in the (f) accept drafts and issue letters of
municipality, city or province where it is credit or letters of guarantee, negotiate
located; notes and bills of exchange and other
(l) sell domestic drafts; and evidence of indebtedness under the
(m) invest in allied undertakings. universally accepted Islamic financial
(5) Coop Banks. A Coop Bank shall instruments;
primarily provide financial, banking and (g) act as collection agent insofar as the
credit services to cooperatives and their payment orders, bills of exchange or other
members, although it may provide the same commercial documents are exclusive of riba
services to non-members or the general or interest prohibitions;
public. (h) provide financing with or without
In addition to the powers granted to collateral by way of leasing, sale and
Coop Banks under existing laws, any Coop leaseback, or cost plus profit sales
Bank may perform any or all of the banking arrangement;
services offered by rural banks under Items (i) handle storage operations for goods
“4.a” to “4.g” above. A Coop Bank may or commodity financing secured by
likewise perform any or all of the banking warehouse receipts presented to the bank;
services offered by rural banks under Items (j) issue shares for the account of
“4.h” to “4.m” as well as any or all of the institutions and companies assisted by the
banking services offered by other types of bank in meeting subscription calls or
banks, subject to prior approval of the augmenting their capital and/or fund
Bangko Sentral. requirements as may be allowed by law;
(6) IBs. In addition to the general (k) undertake various investments in all
powers incident to corporations and those transactions allowed by the Islamic Shari’a in
provided in other laws, as well as in such a way that shall not permit the haram
Circular No. 105 (Appendix 44), insofar as (forbidden), nor forbid the halal (permissible);

§§ X101 - 2101.1
14.12.31
(l) act as an official government foreign letters of credit (LCs) and pay/
depository, or its branches, subdivisions accept/negotiate import/export drafts/bills
and instrumentalities and of government- of exchange, subject to compliance with
owned or-controlled corporations, the following conditions (at the time of
particularly those doing business in the application unless otherwise indicated):
Autonomous Region; a. Minimum capital requirement of
(m) issue investment participation P1.0 billion;
certificates, muquaradah (non-interest- b. Ten percent (10%) risk-based capital
bearing bonds), debentures, collaterals and/ adequacy ratio (CAR);
or the renewal and refinancing of the c. CAMELS composite rating not lower
same, with the approval of the Monetary than “3”, with Management component
Board to be used by the IB in its financing score not lower than “3” in the latest
operations for projects that will promote the examination of the bank;
economic development primarily of the d. Risk management system
Autonomous Region; appropriate to its operations,
(n) carry out financing and joint characterized by clear delineation of
investment operations by way of mudarabah responsibility for risk management,
purchasing for others on a cost-plus adequate risk measurement system,
financing arrangement, and invest funds appropriately structured risk limits,
directly in various projects or through the effective internal control system and
use of funds whose owners desire to invest complete, timely and efficient risk
jointly with other resources available to the reporting system;
IB on a joint mudarabah basis; and e. Articles of incorporation which
(o) invest in equities of the following shall include among its powers or purposes,
allied undertakings: the issuance of foreign LCs and payment/
(1) Warehousing companies; acceptance/negotiation of import/export
(2) Leasing companies; drafts/bills of exchange (which may be
(3) Storage companies; submitted any time prior to engaging in said
(4) Companies engaged in the activities);
management of mutual funds but not in the f. Correspondent banking relationship
mutual funds themselves; and or arrangement with reputable foreign
(5) Such other similar activities as the banks (which should be in place prior to
Monetary Board has declared or may engaging in said activities);
declare as appropriate from time to time, g. Appointment of the officer with
subject to existing limitations imposed by actual experience of at least two (2) years
law. as in-charge or at least as assistant in-charge
(As amended by Circular Nos. 865 dated 22 December 2014, of import and export financing operations
682 dated 15 February 2010 and 650 dated 09 March 2009) in a UB/KB who will be in-charge of the
said operations (prior to engaging in said
§ 1101.1 (Reserved) activities);
h. Appointment of bank personnel with
§ 2101.1 Authority of thrift banks to actual experience and/or specific training in
issue foreign letters of credit and pay/ import and export financing operations who
accept/negotiate import/export drafts/bills will handle the said operations (prior to
of exchange. With prior Monetary Board engaging in said activities);
approval, TBs may be authorized to issue

§§ 2101.1 - X102.1
12.12.31
i. No net weekly regular and liquidity to issue foreign LCs and pay/accept/
reserve deficiencies during the twelve (12) negotiate import/export drafts/bills of
week period immediately preceding the date exchange shall be signed by the president
of application; of the bank or officer of equivalent rank
j. No deficiency in asset and liquid and shall be accompanied by a certified
asset cover for FCDU liabilities for true copy of the resolution of the bank’s
three (3) months immediately preceding the board of directors authorizing the
date of application; application.
k. No deficiency in liquidity floor (Circular No. 650 dated 09 March 2009)
requirement for government funds held
during the twelve (12)- week period B. ESTABLISHMENT AND
immediately preceding the date of ORGANIZATION
application;
l. No float items outstanding for more Sec. X102 Basic Guidelines in Establishing
than sixty (60) calendar days in the “Due Banks. In establishing a new banking
From/To Head Office/Branches/Offices” organization and a Coop Bank, the basic
and “Due from BSP” accounts exceeding guidelines shown in Appendices 37 and 38,
one percent (1%) of the total resources as respectively, shall be observed.
of end of month preceding the date of (As amended by Circular Nos. 774 dated 16 November 2012
application; and 682 dated 15 February 2010)
m. No unbooked valuation reserves;
§ X102.1 (2008 - X101.2) Prerequisites
n. Compliant with ceilings on loans,
for the grant of a universal banking authority
other credit accommodations and
a. Compliance with guidelines. A
guarantees to directors, officers,
domestic bank seeking authority to operate
stockholders, and their related interests
as a UB shall submit an application to the
(DOSRI) for the quarter immediately
appropriate department of the SES. The
preceding the date of application;
applicant shall comply with the guidelines
o. Compliant with the single
for the issuance of a UB authority and shall
borrower’s loan limit (SBL);
submit all the documentary requirements
p. Compliant with the limit on real
enumerated in Appendix 1.
estate and improvements, including bank
b. Public offering of bank shares. A
equipment;
domestic bank applying for a UB authority
q. No uncorrected findings of unsafe
shall, as a condition to the approval of its
and unsound banking practices;
application, make a public offering of at
r. Generally compliant with banking
least ten percent (10%) of the required
laws, rules and regulations, orders or
minimum capital and this condition must
instructions of the Monetary Board and/or
be complied with before it can be granted
Bangko Sentral Management; and
the license for authority to operate as a
s. No past due obligations with the
UB.
BSP or with any FI.
The term public offering shall mean the
(Circular No. 650 dated 09 March 2009 as amended by Circular
offer to sell equity shares to the public.
No. 686 dated 20 April 2010)
Public shall refer to all prospective
stockholders, excluding the bank’s directors,
§ 2101.2 Application for authority to
shareholders owning twenty percent (20%)
issue foreign letters of credit and pay/
or more of the bank’s subscribed capital
accept/negotiate import/export drafts/bills
stock, together with those of their relatives
of exchange. An application for authority
within the fourth degree of consanguinity

§§ X102.1 - X102.3
08.12.31
or affinity, and corporations controlled or sectors such as farmers, peasants,

affiliated with them. artisanal fisherfolk, workers in the formal
A bank whose shares of stock are sector and migrant workers, workers in
already listed in the Philippine Stock the informal sectors, indigenous peoples
Exchange (PSE) at the time of filing of its and cultural communities, women,
application for UB authority shall be differently-abled persons, senior citizens,
deemed to have complied with the public victims of calamities and disasters, youth
offering requirement. Likewise, an and students, children, urban poor and
applicant bank may opt to have its shares low income households for their
listed in the PSE directly instead of passing microenterprises and small businesses so
through the process of public offering. In as to enable them to raise their income
either case, at least ten percent (10%) of levels and improve their living standards.
the applicant bank’s capital stock should Microfinance loans are granted on the
be held by public stockholders before it basis of the borrower’s cash flow and are
can be granted the license for authority to typically unsecured.
operate as a UB. The guidelines on the establishment of
c. Listing of bank shares in the stock a microfinance-oriented bank are as follows:
exchange. Domestic banks granted a UB a. Microfinance-oriented banks may be
license, existing or new, must list their established on a very selective basis,
shares in the PSE within three (3) years: preferably in places not fully served by
Provided, That in the case of new UBs, existing RBs or in areas not fully serviced
the three (3) year period shall be reckoned by microfinance-oriented banks, subject to
from the date the license to operate as a the following additional criteria (in addition
UB was granted. to standard licensing requirements):
The guidelines on public offering and (1) That the microfinance-oriented bank
listing of bank shares are enumerated in to be established shall either be a TB or an
Appendix 1. RB;
(2) That the capital of the microfinance-
§ X102.2 (2008 - X102.1) Suspension oriented banks to be established should be
of the grant of new banking licenses or owned by private persons, multilateral
the establishment of new banks. There entities or a combination thereof;
shall be an indefinite moratorium1 on the (3) That in the case of an RB to be
establishment of new banks, except in cities established as a microfinance bank, the
and municipalities where there are no minimum paid-in capital shall be P5.0
existing banking offices. million or the applicable existing
capitalization requirement for a new RB,
§ X102.3 (2008 - X102.2) Partial lifting whichever is higher. The capitalization
of general moratorium on the licensing of requirement under existing regulations shall
new thrift banks and rural banks. The apply to TBs;
general moratorium on the licensing of new (4) That the organizers must have the
TBs and RBs is partially lifted to allow the capacity to engage in microfinancing, which
entry of microfinance-oriented banks. may be indicated by the following:
For this purpose, a microfinance- (a) At least twenty percent (20%) of the
oriented bank is a bank that provides paid-in capital of the proposed bank must
financial services and caters primarily to the be owned by persons or entities with track
credit needs of the basic or disadvantaged record in microfinancing.
1
The moratorium applied to all applications for establishment of new banks as of 16 August 1999. The
moratorium for establishing new KBs lapsed on 12 June 2003, pursuant to Section 8 of R.A. No. 8791.

§ X102.3 - X102.4
08.12.31
(b) Majority of the members of the board authority to establish, or convert into a TB
of directors have experience in or RB: Provided, That the concerned officer
microfinancing with at least one (1) member is a college graduate.
having actual banking experience. c. Subject to the standard branching
(c) The proposed bank must have as a requirements, microfinance-oriented banks
minimum, an adequate loan tracking system are also exempted from the general
that allows daily monitoring of loan releases, moratorium on the establishment of bank
collection and arrearages, and any branches, under Sec. X151. After one (1)
restructuring and refinancing. year of profitable operations, a
(5) In addition to the requirements for microfinance-oriented bank may apply for
the establishment of banks in Appendix 37, establishment of a branch but the Monetary
the application for authority to establish a Board may require additional capital to be
microfinance-oriented bank must be infused for every branch in addition to the
accompanied by the following documents: minimum capital of the TB/RB.
(a) A vision and mission statement with
d. Existing microfinance organizations
clear expression of the commitment to reach
applying for authority to establish, or
low-income clients.
convert into a TB or RB may also be
(b) A written manual of operations,
allowed to convert their existing branches/
which shall include the administrative and
offices into branches of the bank proposed
credit program systems and procedures.
to be established by simultaneously
The Manual must be consistent with the
applying for authority for the purpose.
core principles, characteristics and features
However, the standard requirements for
of microfinance indicated in Sec. X361.
the establishment of branches, particularly
(6) At least fifty percent (50%) of the
the capitalization requirement, have to be
bank’s gross loan portfolio shall at all times
complied with. Moreover, there must be
consist of microfinance loans as defined in
a proof that the area is not fully served by
Sec. X361.
any existing RB.
b. The requirement that the president,
(As amended by Circular No. 624 dated 13 October 2008)
chief operating officer or general manager
of a TB or RB must have at least two (2) § X102.4 (2008 - X101.6) Conditions
years experience in banking and/or finance for the grant of authority to convert into a
may be substituted with microfinance lower category
experience in cases of officers of a a. That the bank must have complied
microfinance organization applying for with the end-2000 minimum capital
(Next page is Part I - Page 7)
Manual of Regulations for Banks Part I - Page 6a

§ X102.4
08.12.31
requirement and other laws/regulations (e) Suspension of authority to accept or

applicable to the lower bank category into handle government deposits;
which it is converting. For this purpose, (f) Suspension of authority to engage
the term “capital” shall be as defined under in derivatives activities (for a UB converting
Sec. X111; into a KB); and
b. That the bank immediately upon (g) Suspension of authority to invest in
receipt of notice of approval of conversion allied undertakings.
shall not engage in nor renew transactions c. That a bank which has not corrected
under authorities not associated with those as of date of application the major findings/
allowed for the lower bank category into violations noted in its latest examination
which it is converting and within six (6) shall submit upon application a
months from date of receipt of notice of Memorandum of Understanding that it shall
approval of its application for conversion, correct the same within a period of six (6)
the bank shall phaseout all inherent powers months from date of receipt of notice of
and activities under special authorities not approval of its application, otherwise, the
normally associated to the lower bank same monetary and non-monetary penalties
category into which it is converting: mentioned in Item “b” above shall be
Provided, That a TB (previously authorized imposed;
by the Monetary Board to accept demand d. That the bank shall submit the
deposits) may be allowed to retain such pertinent amended Articles of
authority when converting into an RB but Incorporation and By-Laws duly registered
may clear checks only through a with the SEC within six (6) months from
correspondent bank and shall not be date of receipt of notice of approval of its
allowed to participate directly in the application;
Philippine Clearing House Corporation e. That the bank shall fully disclose its
(PCHC) and the Bangko Sentral check new status in its signage, financial
clearing operations: Provided, further, That statements and stationeries; and
for failure to comply with these f. That the bank shall start operation
requirements, the following monetary and in the lower category into which it is
non-monetary penalties shall be imposed converting after approval by the SEC of
reckoned from the set deadline until the the bank’s amended Articles of
bank has fully complied with the said Incorporation and By-Laws, its
requirements compliance with all the conditions of
(1) Monetary penalties approval of the conversion and the
From UB to KB P30,000/day issuance by the Bangko Sentral of a
From KB to TB 15,000/day certificate of authority to operate.
From TB to RB The same conditions and sanctions
Within Metro Manila P 5,000/day mentioned in Items “a” to “f” above shall
Outside Metro Manila 500/day apply to all banks which have
(2) Non-monetary penalties downgraded or with approved
(a) Suspension of branching downgrading prior to 13 March 2000:
privileges; Provided, That the penalties mentioned in
(b) Suspension of declaration of cash Items “b” an d “ c ” a b o v e s h a l l b e
dividends; reckoned from their respective prescribed
(c) Restriction on lending to affiliates; deadlines or within six (6) months from
(d) Denial of access to Bangko Sentral 13 March 2000, if no such deadline is
rediscounting facilities; prescribed.

§§ X102.5 - X104
15.10.31
§ X102.5 (2008 - X102.3) Conversion conditions, both general and local, justify
of microfinance-oriented thrift banks/ rural the authorization; and
banks. c. The amount of capital, the
a. Microfinance-oriented TBs and RBs financing, organization, direction and
are disallowed from converting to regular administration, as well as the integrity and
TBs and RBs. responsibility of the organizers and
b. Microfinance-oriented branches of administrators reasonably assure the safety
regular TBs and RBs may convert into of deposits and the public interest.
regular branches, five (5) years after the start Likewise, the SEC shall not register the
of the branch’s operations, subject to the by-laws of any bank, or any amendment
submission of the following: thereto, unless accompanied by a
(1) Certification signed by the president certificate of authority from the Bangko
or officer of equivalent rank that: Sentral.
(a) At least seventy percent (70%) of (As amended by CL-2008-078 dated 15 December 2008)
deposits generated by the branch to be
established shall be actually lent out to Sec. X104 (2008 - X167) Business Name2.
microfinance borrowers; and a. UBs/KBs. Only a bank that is granted
(b) The microfinance loans of said universal/commercial banking authority may
branch shall at all times be fifty percent represent itself to the public as such in
(50%) of its gross loan portfolio connection with its business name.
are no longer feasible due to changes in b. TBs. TBs may be allowed to adopt
market condition in the locality where it is and use any name: Provided, That the words
located. The certification shall be supported A Thrift Bank, A Savings Bank, A Private
by a market study citing, among others, Development Bank or A Stock Savings and
changes in demographic, social, and Loan Association, as the case may be, are
economic factors; and affixed after its business name.
(2) Certified true copy of the resolution c. RBs/Coop Banks. RBs/Coop Banks
of the bank’s board of directors authorizing may adopt a corporate name or use a
the conversion of the microfinance-oriented business name/style with the word Rural or
branch into a regular branch. Coop, as the case may be. Said banks may
(CL-2008-075 dated 28 November 2008) also adopt a name without such words:
Provided, That the identifying phrase, A
Sec. X103 Certificate of Authority to Cooperative Bank or A Rural Bank, as the
Register1. The SEC shall not register the articles case may be, is affixed after its business
of incorporation of any bank, or any name: Provided, further, That where the
amendment thereto, unless accompanied by name of the bank is shown on letterheads,
a certificate of authority issued by the Monetary billboards and other advertising materials,
Board, under its seal. The certificate shall the size of the letters of such phrase shall
not be issued unless the Monetary Board is be at least one-half (½) the size of the
satisfied from the evidence submitted that: business name.
a. All requirements of existing laws Subject to prior approval of the Bangko
and regulations to engage in the business Sentral, a TB, RB or Coop Bank may apply
for which the applicant is proposed to be to be exempted from the general
incorporated have been complied with; requirements under Items “b” and “c” above:
b. The public interest and economic Provided, That the applicant TB, RB or Coop
1
See SEC Circular No. 3 dated 16 February 2006.
2
See SEC Circular Nos. 5 dated 17 July 2008 and 14 October 2000, and DTI Administrative Order No. 1008 effective
10 October 2010.
.
§ X104 - X104.1
15.10.31
Bank shows compliance with the following has complied with all the conditions for the
conditions: said application; and
(1) The new business name of the bank (4) Such other documents as may be
must reasonably describe the business required by the Bangko Sentral.
activities that the bank is engaged in. (As amended by Circular No. 872 dated 13 March 2015,
(2) The business name should not CL-2011-062 dated 19 August 2011, CL-2008-053 dated 21 August
2008 and 2008-007 dated 21 January 2008)
mislead, misrepresent or give a false
impression to the public with respect to the § X104.1 (2008-X607) Bank
banking category of a bank, the location/s Advertisements. The following rules and
and clientele it serves, as well as the regulations shall govern bank
products and services that the applicant advertisements.
bank is authorized to offer to the public. a. No bank shall publish, issue or
(3) The applicant bank shall not use a distribute in any form, any advertisement
business name that is identical, deceptive that shall degrade, deprecate or otherwise
or confusingly similar with existing prejudice other banking and financial
corporate names, in accordance with institutions.
existing applicable laws, rules and b. No bank shall publish, issue or
regulations governing the use of corporate distribute in any form of advertisement (in
names pursuant to the provisions of the newspapers, magazines, television, radio,
Corporation Code of the Philippines. billboards, brochures, prospectuses, or any
(4) The applicant bank must meet the other medium) or allow itself to be used/
minimum capitalization requirements mentioned in any form of advertisement
applicable at the time of filing of its unless such advertisement is in pursuance
application to change its business name. of its business or investment.
(5) The applicant bank must not have c. No bank shall place or cause to be
any major supervisory concern/s that placed any advertisement tending to mislead
threaten its solvency or liquidity, as a depositor into believing that he will get
determined by the appropriate more in benefits than what the bank is
department/s of the SES. legally authorized to give. No bank
(6) Other conditions which the Bangko advertisement shall contain any false claim
Sentral may deem necessary or as may be or exaggerated representation as to its
warranted by the attendant circumstances liquidity, solvency, resources, deposits and
in order to protect the public interest. banking services.
The application of a TB, RB or Coop d. No bank advertisement shall give the
Bank for exemption from the general impression that the bank is engaged in a
requirements on the use of name under business other than banking.
Items “(b)” and “(c)” above shall be e. Banks shall inform their depositors
supported by the following: and other clients by advertisement or
(1) Application letter signed by the publication of the termination of benefits
president or officer of equivalent rank previously advertised or publicized.
indicating the justification for the request; f. Banks shall discontinue any
(2) Notarized secretary’s certificate on advertisement whenever the same is
the resolution of the bank’s board of deemed unethical/unwarranted or violative
directors authorizing the request for of the provisions of these regulations. The
exemption; client banks and/or their advertising
(3) Certification signed by the president agencies shall incorporate in their contract/
or the officer of equivalent rank that the bank agreement for time and space with media

§§ X104.1 - X105.3
14.12.31
the condition that such contract/agreement operate in the Philippines through any of
for time and space can be cancelled/ the modes of entry provided under Items
terminated immediately whenever the client “a” to “c” of Subsec. X105.1 must, in
bank is directed by the Bangko Sentral to addition to satisfying the criteria prescribed
desist or discontinue the particular under Subsec. X105.3, be -
advertisement in question. (1) Widely-owned and publicly-listed in
g. Responsibility for compliance with the country of origin, unless the foreign bank
the above rules and regulations rests with applicant is owned and controlled by the
the bank officers or directors who caused government of its country of origin.
the approval or placement of such (2) Established, reputable and financially
advertisement. sound.
The determination of whether a foreign
Sec. X105 (2008 - X121) Liberalized Entry bank applicant is widely-owned and
and Scope of Operations of Foreign Banks. publicly listed, established, reputable, and
The following rules shall govern the financially sound shall be based on the
liberalized entry and scope of operation of information derived from submitted
foreign banks. documents as required under Appendix 2.
(As amended by Circular No. 858 dated 21 November 2014)
Further, if the foreign bank is owned/
controlled by a holding company, this
requirement may apply to the holding
§ X105.1 (2008 - X121.1) Modes of
company.
entry of foreign banks. With prior approval
of the Monetary Board, foreign banks may
operate in the Philippines through any
§ X105.3 (2008 - X121.3) Guidelines
one (1) of the following modes:
for selection. The following factors shall be
a. By acquiring, purchasing or owning
considered in selecting the foreign banks
up to 100% of the voting stock of an existing which will be allowed to enter the
domestic bank (including banks under Philippine banking system through R.A. No.
receivership or liquidation, provided no 7721, as amended by R.A. No. 10641:
final court liquidation order has been issued); a. Geographic representation and
b. By investing in up to 100% of the complementation. Representation from the
voting stock of a new banking subsidiary different parts of the world and/or the
incorporated under the laws of the international financial centers shall be
Philippines; or ensured.
c. By establishing a branch and b. Strategic trade and investment
sub-branches with full banking authority. relationships between the Philippines and
Interested foreign banks shall file with the home country of the foreign bank.
the Office of the Governor, Bangko Sentral, Consideration shall be given to the
their application for authority to operate in countries of origin of applicant foreign
the Philippines through any of the modes of banks –
entry mentioned above. The application (1) With substantial financial assistance
requirements are listed in Appendix 2. to, and loans and investments, past and
(As amended by Circular Nos. 858 dated 21 November 2014 present, in the Philippines; and
and 774 dated 16 November 2012) (2) With which the Philippines has
significant volume of trade especially to
§ X105.2 (2008 - X121.2) Qualification those with which the country has substantial
requirements. A foreign bank seeking to net exports.

§ X105.3 - X105.4
14.12.31
c. Relationship between the applicant § X105.4 (2008 - X121.4) Capital

bank and the Philippines. Consideration requirements of foreign banks.
shall be given to the capability of the foreign a. For locally incorporated subsidiaries.
bank to promote trade with, and to bring A foreign bank subsidiary shall comply with
foreign investments into, the Philippines. the minimum capital and prudential capital
Long standing financial and commercial ratios applicable to domestic banks of the
relationship with, and assistance extended same category as prescribed under
to, the Philippines, shall likewise be taken prevailing regulations.
into account. b. For foreign bank branches
d. Demonstrated capacity, global (1) A foreign bank branch shall comply
reputation for financial innovations and with the minimum capital and prudential
stability in a competitive environment of the capital ratios applicable to domestic banks
applicant bank. of the same category as prescribed under
e. Reciprocity rights enjoyed by Philippine prevailing regulations.
banks in the applicant’s country. Subject to (2) For purposes of compliance with
the host country’s rules and regulations of minimum capital regulations, the term
general application, Philippine banks should “capital of a foreign bank branch” shall refer
have the opportunity to establish operations to the sum of: (i) permanently assigned
in the foreign bank applicant’s home country.
capital, (ii) undivided profits, and
f. Willingness to fully share banking
(iii) accumulated net earnings, which is
technology.
(As amended by Circular Nos. 858 dated 21 November 2014 and
composed of unremitted profits not yet
809 dated 23 August 2013) cleared by the Bangko Sentral for outward

§§ X105.4 - X105.8
14.12.31
remittance and losses in operations, less § X105.5 Prescribed ratio of “Net Due
capital adjustments as may be required by to” account.
the Bangko Sentral in accordance with (Deleted by Circular No. 858 dated 21 November 2014)
prevailing rules and regulations of general
application. § X105.6 (2008 - X121.6) Risk-based
(3) Permanently assigned capital shall capital for foreign bank branch
be inwardly remitted and converted into a. Foreign bank branches shall comply
Philippine currency at the exchange rate with the same risk-based capital adequacy
prevailing at the time of remittance. ratios applicable to domestic banks of the
(4) Any Net due from head office, same category.
branches, subsidiaries and other offices b. In computing the risk-based capital
outside the Philippines, excluding adequacy ratios, Common Equity Tier 1
accumulated net earnings, shall be a (CET1) capital shall include permanently
deductible adjustment to capital. assigned capital, undivided profits,
(5) For purposes of compliance with the accumulated net earnings and other capital
Single Borrower’s Limit (SBL), the capital of components.
a foreign bank branch, subject to prescribed c. Any Net due from head office,
adjustments, shall be synonymous to its “net branches, subsidiaries and other offices
worth”. outside the Philippines, excluding
Transitory provision. accumulated net earnings shall be deducted
a. Minimum capital of foreign banks. from CET1 capital.
Minimum capital of foreign banks d. The guidelines for computing the risk-
established in the Philippines prior to R.A. based capital adequacy ratios are provided
No. 10641 shall comply with the applicable in Appendix 63b.
(As amended by Circular Nos. 858 dated 21 November 2014
minimum capital level requirement as
and 822 dated 13 December 2013)
prescribed under Subsec. X111.1. Existing
foreign banks that do not meet the minimum § X105.7 (2008 - X121.7) Head Office
capital requirements shall submit an guarantee. The head office of foreign bank
acceptable capital build-up program as branches shall guarantee prompt payment
required under Subsec. X111.1. of all liabilities of its Philippine branches,
b. SBL as well as the observance of the
1. Loans and credit commitments of constitutional rights of the employees of such
foreign bank branches as of 07 August 2014 branches.
may be maintained, but once repaid or
expired, shall no longer be increased in § X105.8 (2008 - X121.8) Scope of
excess of the ceiling allowed under the authority for locally incorporated
suceeding paragraph. subsidiaries of foreign banks as well as
2. Existing foreign bank branches shall branches with full banking authority
be given until 31 December 2019 to use Subsidiaries and branches of foreign banks
twice the level of capital as defined in this established under Subsec. X105.1 shall be
Subsection as net worth, as reference point allowed to perform the same functions and
for purposes of determining the appropriate enjoy the same privileges of, and be subject
SBL. to the same limitations imposed upon, a
(As amended by Circular Nos. 858 dated 21 November 2014, Philippine bank of the same category.
822 dated 13 December 2013 and 696 dated 29 October 2010)

§§ X105.8 - X108
14.12.31
Privileges shall include the eligibility to § X105.12 (2008-X121.12) Equal

operate under a universal banking authority treatment. Any right, privilege or incentive
subject to compliance with existing rules granted to foreign banks or their subsidiaries
and regulations and the guidelines or affiliates under R.A. No. 7721, as
enumerated in Appendix 3. amended by R.A. No. 10641 shall be
(As amended by Circular No. 858 dated 21 November 2014) equally enjoyed by, and extended under the
same conditions, to domestic banks.
§ X105.9 (2008 - X121.9) Control of the (As amended by Circular No. 858 dated 21 November 2014)
resources of the banking system. The
Monetary Board shall adopt such measures Secs. X106 - X107 (Reserved)
as may be necessary to ensure that at all
times the control of sixty percent (60%) of C. MERGER AND CONSOLIDATION
the resources or assets of the entire banking
system is held by domestic banks, which Sec. X108 (2008 - X111) Merger or
are majority-owned by Filipinos. Said Consolidation to Meet Minimum Capital
measures may include – The merger or consolidation of banks and
a. Suspension of entry of additional other financial intermediary(ies) to meet
foreign bank subsidiaries and branches; and minimum capital requirements shall be
b. Suspension of license upgrade or allowed subject to the following
conversion to subsidiary of existing foreign regulations.
bank branches. For purposes of merger and
Other measures may also be considered, consolidation, the following definitions shall
provided that such measures so adopted apply:
shall be consistent with R.A. No. 7721, as a. Merger - is the absorption of one (1)
amended by R.A. No. 10641, and shall or more corporations by another existing
consider vested rights and the non- corporation, which retains its identity and
impairment of contracts. takes over the rights, privileges, franchises,
(As amended by Circular No. 858 dated 21 November 2014) and properties, and assumes all the
liabilities and obligations of the absorbed
§ X105.10 (2008 - X121.10) Change
corporation(s) in the same manner as if it
from one mode of entry to another. Foreign
had itself incurred such liabilities or
banks which are operating in the Philippines
obligations. The absorbing corporation
may apply for conversion of their mode of
continues its existence while the life or lives
entry.
of the other corporation(s) is/are terminated.
The bank shall comply with all
b. Consolidation - is the union of two
applicable requirements and submit an
(2) or more corporations into a single new
acceptable transition plan which shall
corporation, called the consolidated
address how the foreign bank shall
corporation, all the constituent corporations
implement the change in mode of entry.
thereby ceasing to exist as separate entities.
The consolidated corporation shall
§ X105.11 (2008 - X121.11) Listing of thereupon and thereafter possess all the
shares with the Philippine Stock Exchange rights, privileges, immunities, franchises
(Deleted by Circular No. 858 dated 21 November 2014) and properties, and assume all the liabilities

§§ X108 - 3108.3
12.12.31
and obligations of each of the constituent § X108.3 (2008 - X112) Merger or

corporations in the same manner as if it had consolidation incentives. In pursuance of
itself incurred such liabilities or obligations. the policy to promote mergers and
consolidations among banks and other
§ X108.1 (2008 - X111.1) Requirement financial intermediaries, as well as
of Bangko Sentral approval. Mergers and purchases or acquisitions of majority or all
consolidations including the terms and of the outstanding shares of stock of a bank/
conditions thereof shall comply with the QB, as a means to develop larger and
provisions of applicable law and are subject stronger FIs, constituent/participating entities
to approval by the Bangko Sentral. may avail themselves of incentives or reliefs,
The guidelines and procedures in the subject to prior approval of the Monetary
application for merger/consolidation as Board.
shown in Appendix 87 shall be observed (As amended by Circular Nos. 771 dated 11 October 2012 and
by banks. 494 dated 20 September 2005)
(As amended by M-2009-028 dated 12 August 2009)
1108.3 (Reserved)
§ X108.2 (2008 - X111.2) Rules on
exchange of shares. As a general rule, the 2108.3 (Reserved)
ratio of exchange of shares between or
among the participants in a bank merger or 3108.3 Regulatory relief under the
consolidation shall be based on mutual strengthening program for RBs (SPRB)1.In
agreement of the parties concerned. pursuance of the policy to promote mergers
However, any appraisal increment reserve and consolidations as a means to develop
(revaluation reserve) arising from the bigger and stronger RBs and to further
revaluation of the fixed assets, as may be strengthen the rural banking system,
agreed upon by the parties, shall be constituent RBs may, subject to prior Bangko
limited to premises, improvement, and Sentral approval, avail themselves of any or
equipment which are necessary for its all of the merger or consolidation incentives
immediate accommodation in the under the SPRB.
transaction of the bank’s business. Such The guidelines on the grant of regulatory
revaluation should be based on fair relief under the SPRB including the
valuation of the property which shall be documentary requirements in applying for
subject to review and approval by the the regulatory relief are provided in
Bangko Sentral. Appendix 94.
(Circular No. 693 dated 09 August 2010)
(No pages 14 to 16)

(Next page is Part I page 17)
1
The SPRB is a joint undertaking of the Bangko Sentral and the Philippine Deposit Insurance Corporation (PDIC) aimed at
promoting mergers and consolidations as a means to further strengthen the rural banking system through the grant of
financial assistance (FA) by the PDIC and regulatory relief by the Bangko Sentral to eligible strategic third party investors
(STPIs) which shall be RBs, desiring to enter into mergers and consolidations with eligible distressed RBs that may be
considered under the SPRB.

§ X108.4
15.10.31
§ X108.4 SPRB Plus1 and Strengthening eight percent (8%) per annum fixed in the
Program for Cooperative Banks (SPCB) SPCB;
Plus. As a supplement to the SPRB, the d. Principal of the DL under the
SPRB Plus, which became effective on combination of preferred shares (PS) and
02 August 2012 and shall be available up DL will be equivalent to such amount that
to 31 December 2014 2 , contains the will provide a net interest spread (NIS)
following enhanced features: over the tenor of the DL to such amount
a. inclusion of TBs, which serve the equal to the PS;
same niche market as the RBs, as among e. Interest rate per annum on DL under
the eligible banks in addition to RBs; the combination of PS and DL will be
b. inclusion of TBs, UBs and KBs, non- equivalent to such rate that will provide the
bank corporations and banking groups as bank with an annual NIS that will
among the eligible STPIs; accumulate over the tenor of the DL to such
c. additional branching and other amount equal to the PS instead of the three
incentives to be provided on top of the percent (3%) less premium rate of
regulatory relief already available under the government securities fixed in the SPCB;
SPRB Module 1; and f. Principal of the DL intended to provide
d. acquisition via purchase of assets and income support to the surviving bank will be
assumption of liabilities, and acquisition of equivalent to such amount that will provide a
control in an eligible bank as additional NIS equal to the capital deficiency to bring
modes of entry of an eligible STPI. Risk-Based Capital Adequacy Ratio (RBCAR)
The SPRB Plus Framework and to zero percent (0%);
guidelines are shown in Appendix 94a. g. Interest rate per annum on DL
The SPCB Plus, which replaced the intended to provide income support to the
SPCB (Strengthening Program for Rural surviving bank will be equivalent to such
Banks [SPRB] Module II) became effective rate that will provide the bank with an
on 16 September 2013 and shall be annual NIS that will accumulate over the
available up to 17 September 2014. It has tenor of the DL to such amount equal to the
generally the same framework as the SPRB capital deficiency to bring RBCAR to zero
Module II, with the following percent (0%); and
enhancements/amendments: h. Conduct of due diligence review by
a. inclusion of KBs, among the eligible PDIC or an external auditor.
Strategic Third Party Investors (STPIs) in Branching and other incentives under
addition to Coop Banks, RBs and TBs; the SPCB Plus are provided for under
b. Financial assistance (FA) to be Appendix 94b - Annex A.
extended by the PDIC and LBP can be in Based on the arrangement agreed upon
the form of direct loan (DL) only (without by the Bangko Sentral, PDIC and LBP, the
the preferred shares) intended to provide eligible STPIs and eligible Coop Banks shall
income support to the surviving bank; submit to the SPCB lane a joint letter,
c. Dividend rate on the preferred shares separately addressed to PDIC, Bangko
shall be equal to the rate per annum of the Sentral and LBP, indicating their intention
prevailing ten (10)-year FXTN available at the to merge or consolidate, or enter into a
time of the release of FA instead of the purchase of assets and assumption of
1
The Bangko Sentral and the PDIC signed the Supplemental Agreement to implement the SPRB Plus aimed at
strengthening the thrift and rural banking industry to effectively serve the countryside and improve the delivery
of financial services to rural communities.
2
The availability period for SPCB Plus was extended until 17 September 2015.

§§ X108.4 - X111
15.10.31
liabilities or acquisition of control under the SPCB paid-in capital, surplus and undivided
Plus, and all the other required documents profits, less:
shown in Appendix 94b - Annex B. a. Unbooked valuation reserves and
(M-2012-040 dated 08 August 2012,as amended by CL-2015- other capital adjustments as may be required
029 dated 06 May 2015, M-2015-008 dated 28 January 2015, M- by the Bangko Sentral;
2014-003 dated 27 January 2014 and M-2013-061 dated 23
b. Total outstanding unsecured credit
December 2013)
accommodations, both direct and indirect,
to directors, officers, stockholders, and their
Secs. X109 Consolidation Program for
related interests (DOSRI) granted by the
Rural Banks (CPRB). The CPRB aims to
bank proper;
strengthen the rural banking industry, in
c. Unsecured loans, other credit
recognition of the major role that RBs play
in financial inclusion. It intends to accommodations and guarantees granted to
promote mergers and consolidations subsidiaries and affiliates;
among RBs to bring about a less d. Deferred income tax;
fragmented banking system by enabling e. Appraisal increment reserve
them to improve financial strength, (revaluation reserve) as a result of
enhance viability, strengthen management appreciation or an increase in the book
and governance and expand market reach, value of bank assets;
among others. f. Equity investment of a bank in another
The CPRB shall be available for a bank or enterprise, whether foreign or
period of two (2) years from the signing of domestic, if the other bank or enterprise has
the Memorandum of Agreement among the a reciprocal equity investment in the
Bangko Sentral, the PDIC and the LBP. The investing bank, in which case, the
eligibility of the merging or consolidating investment of the bank or the reciprocal
RBs to qualify under the CPRB as well as investment of the other bank or enterprises,
the incentives thereunder shall be governed whichever is lower; and
by the CPRB Framework in Appendix 113 g. In the case of RBs/Coop Banks, the
and the Implementing Guidelines. government counterpart equity, except
(CL-2015-050 dated 18 August 2015) those arising from conversion of arrearages
under the Bangko Sentral rehabilitation
Secs. X110 (Reserved) program.
With respect to Item “b” hereof, the
D. CAPITALIZATION provision in Subsec. X326.1 shall apply
except that in the definition of stockholders
Sec. X111 (2008 - X106) Minimum in said Subsection, the qualification that his
Required Capital. The following provisions stockholdings, individually and/or together
shall govern the capital requirements for with his related interest in the lending bank,
banks. should at least amount to two percent (2%)
The term capital shall be synonymous or more of the total subscribed capital stock
to unimpaired capital and surplus, of the bank, shall not apply for the purpose
combined capital accounts and net worth of this Item.
and shall refer to the total of the unimpaired (As amended by Circular No. 560 dated 31 January 2007)

§ X111.1
14.12.31
§ X111.1 Minimum capitalization. The and (d) when majority of an RB’s total assets
minimum capitalization of banks shall be and/or majority of its total liabilities are
as follows: accounted for by branches located in areas
Required of higher classification as provided in
Minimum Subsec. X151.4 on the branching
Bank Category Capitalization
guidelines.
UBs
Head Office Only P3.00 billion For the grant of the following special
Up to 10 branches1/ 6.00 billion banking authorities:
11 to 100 branches 1/ 15.00 billion a. Quasi-banking functions for TBs;
1/
More than 100 branches 20.00 billion b. Trust and other fiduciary business
KBs
Head Office Only P2.00 billion
for U/KBs and TBs;
Up to 10 branches1/ 4 .00 billion c. Limited trust for TBs and RBs/Coop
11 to 100 branches 1/ 10.00 billion Banks;
More than 100 branches 1/
15.00 billion d. Foreign currency deposit unit/
TBs expanded foreign currency deposit unit
Head Office in National Capital Region (NCR)
Head Office Only P500 million
(FCDU/EFCDU);
Up to 10 branches1/ 750 million e. Issuance of foreign letters of credit
11 to 50 branches 1/ 1.00 billion (LCs) for TBs;
More than 50 branches 1/ 2.00 billion f. Acceptance of demand deposit and
Head Office in all Other Areas Outside NCR NOW accounts for TBs and RBs/Coop
Up to 10 branches1/ 300 million
Banks; and
11 to 50 branches 1/ 400 million g. Acting as third party custodian/
More than 50 branches 1/ P800 million registry;
RBs and Coop Banks the higher of (a) the required minimum
Head Office in NCR capital under this Subsection at the time of
the application for the grant of special
11 to 50 branches 1/ 100 million banking authority or (b) the amount
More than 50 branches 1/ 200 million specified in the applicable Sections/
Head Office in All Other Areas Outside NCR Subsections for the grant of special banking
(All Cities up to 3rd class municipalities) authorities shall be the required minimum
capital which shall be complied with on a
11 to 50 branches 1/ 40 million continuing basis.
More than 50 branches 1/ 80 million Transitory provisions. Banks which are
Head Office in All Other Areas Outside NCR existing, or which are already authorized by
(4th class to 6th class municipalities) the Monetary Board but not yet operating,
or persons from whom completed
11 to 50 branches 1/ 20 million applications have been received but
More than 50 branches 1/ 40 million pending action by the Bangko Sentral, shall
be allowed five (5) years from 19 November
The above shall also be the required 2014 within which to meet the above
minimum capitalization (a) upon minimum capital requirements. Banks
establishment of a new bank, (b) upon granted with special banking authorities/
conversion of an existing bank from a lower licenses which require compliance with
to a higher category bank and vice versa, minimum capital requirements shall be
(c) upon relocation of the head office of a given five (5) years from 19 November 2014
TB/RB in an area of higher classification, within which to comply.
1/
Branches- inclusive of Head Office

§§ X111.1 - X111.4
14.12.31
Banks which comply with the new a. A bank that has already entered into a
capital levels shall submit to the Bangko final agreement with a TPI to invest in the
Sentral a certification to this effect within bank, which amount of investment shall
thirty (30) calendar days from 19 November cover the full amount of the capital
2014. Banks not meeting the required deficiency, shall immediately submit the
minimum capital must submit to the Bangko subscription contract/written agreement
Sentral an acceptable capital build-up with the TPI to the Bangko Sentral. It is
program for this purpose within one (1) year understood that with the submission of such
from 19 November 2014. If the prescribed contract, the TPI has already agreed to infuse
minimum capital necessitates an increase the needed funds to cover the capital
in the authorized capital stock, affected deficiency.
banks shall cause the corresponding b. In case the transaction requires prior
amendments to their articles of Bangko Sentral approval under Subsec.
incorporation/cooperation. X126.2b, the bank shall submit the
The appropriate department of the SES following documentary requirements
will evaluate the continuing compliance of within fifteen (15) banking days from the
banks to the aforementioned capital build- submission of the aforementioned
up program. The Bangko Sentral may subscription contract/written agreement
require appropriate actions and/or impose or within the timeline prescribed by
sanctions for non-compliance with the Subsec. X126.2b1, whichever is earlier:
capital build-up program as provided under (1) Bank’s request (signed by the
existing banking laws and/or Bangko Sentral president or officer of equivalent rank) for
rules and regulations. Bangko Sentral aproval of the subject
(As amended by Circular Nos. 854 dated 29 October 2014, 715 transactions (accompanied by a Board
dated 04 March 2011, 696 dated 29 October 2010 and 682 dated Resolution of the TPI to that effect, if the
15 February 2010) TPI is a corporation);
(2) A certified copy of the Escrow
§ X111.2 (2008 - X106.2) Capital build-
Agreement between the bank, TPI and
up program.
escrow agent, and a certificate of escrow
deposit issued by the escrow agent
§ X111.3 (2008 - X106.3) Memorandum equivalent to at least the amount of the
of Understanding; Prompt Corrective proposed investment;
Action Program; Sanctions. (3) Documentary requirements under
(Deleted by Circular No. 696 dated 29 October 2010) Subsec. X126.2b; and
(4) Other documentary requirements
§ X111.4 Guidelines on proposed as may be required by the Bangko Sentral.
investment from third party investors c. The bank shall also comply with the
(TPIs) for purposes of complying with the requirements under Sec. X128 on the
minimum capital requirements. The treatment of deposit for stock subscription
following are the guidelines for capital as part of the equity, if applicable.
deficient banks with proposed investments d. In case a bank has a pending
from third party investor/s (TPIs) for application with the PDIC under the
purposes of addressing the capital SPRB Plus/SPCB Plus, the bank and the
deficiency: TPI shall submit a joint certification
1
sixty (60) calendar days from date of transaction or thirty (30) calendar days from receipt of corporate
secretary of the transaction, whichever comes first.

§§ X111.4 - 1115.2
14.12.31
signed by the president or officer of of two and a half percent (2.5%), comprised
equivalent rank of the bank and the TPI of CET1 capital, shall likewise be imposed.
concerned that there is a pending Existing capital instruments as of
application with the PDIC, together 31 December 2010 which do not meet the
with the acknowledgement receipt by eligibility criteria for capital instruments
PDIC of said application. under the revised capital framework shall
The investment of the TPI would not no longer be recognized as capital starting
be considered for purposes of addressing 01 January 2014. Capital instruments
the capital deficiency if the aforementioned issued from 01 February 2011 to 12 October
documentary requirements are not 2012 shall be recognized as qualifying
complied with. In this regard, it is capital until 31 December 2015.
(The BSP’s implementation plans for the
understood that mere submission to
New International Capital Standards or
Bangko Sentral of a TPI’s Letter of Intent
Basel 2 contained in the Basel Committee
(LOI) to invest in the bank shall not be
on Banking Supervision (BCBS) document
considered sufficient action to address the “International Convergence of Capital
bank’s capital deficiency. Measurement and Capital Standards: A
If the above requirements are not Revised Framework”, are shown in
submitted within the given period, the Appendix 63)
appropriate department of the Bangko (Circular No. 538 dated 04 August 2006, as amended by
Sentral may proceeed in recommending M-2014-019 dated 10 April 2014, Circular Nos. 822 dated
appropriate supervisory action/s on the 13 December 2013, and 781 dated 15 January 2013,
bank, if applicable. M-2013-056 dated 10 December 2013, Circular Nos. 762 dated
(M-2014-002 dated 27 January 2014) 25 July 2012, 750 dated 01 March 2012, 717 and 716 both dated
25 March 2011, 713 dated 14 February 2011, 709 dated
Secs. X112 - X114 (Reserved) 10 January 2011, M-2008-015 dated 19 March 2008, Circular
Nos.605 dated 05 March 2008 and 588 dated 11 December
E. RISK-BASED CAPITAL 2007,M-2007-019 dated 21 June 2007, Circular No. 560 dated
31 January 2007 and M-2006 022 dated 24 November 2006)
Sec. X115 Basel III Risk-Based Capital. The
guidelines implementing the revised risk- § X115.1 Scope. The Basel III guidelines
based capital adequacy framework for the apply to all UBs and KBs, as well as their
Philippine banking system to conform to subsidiary banks and QBs.
Basel III recommendations is provided in (As amended by Circular No. 781 dated 15 January 2013)
Appendix 63b.
The risk-based capital ratio of a bank, § X115.2 (Reserved)
expressed as a percentage of qualifying
§ 1115.2 (2008 - 1116.5) Market risk
capital to risk-weighted assets, shall not
capital requirement. UBs/KBs shall also
be less than ten percent (10%) for both
measure and apply capital charges for
solo basis (head office plus branches) and
market risk, in addition to the credit risk
consolidated basis (parent bank plus
capital requirement in this Section, in
subsidiary financial allied undertakings, accordance with the Guidelines to
but excluding insurance companies). Incorporate Market Risk in the Risk-Based
Other minimum capital ratios include Capital Adequacy Framework in Appendix 46.
Common Equity Tier (CET) 1 ratio and Tier The capital treatment of market risk
1 capital ratios of six percent (6.0%) and exposures arising from the holdings of
seven and a half percent (7.5%), Dollar-Linked Peso Notes (DLPNs) is
respectively. A capital conservation buffer indicated in Appendix 46a.

§§ 1115.2 - X115.5
14.12.31
The instructions for accomplishing the abovementioned reports shall be classified

report on computation of the Adjusted as Category A-1 reports.
Risk- Based Capital Adequacy Ratio covering All UBs and KBs as well as their
combined credit risk and market risk are subsidiary banks shall be subject to all other
shown in Appendices 46b (for UBs and KBs reporting requirements (i.e., Basel III Capital
with expanded derivatives authority), Adequacy Summary Report) under the
46c (for UBs and KBs with expanded Basel III risk-based capital as may be
derivatives authority but without options prescribed by the Bangko Sentral.
transactions) and 46d (for UBs and KBs Late and/or erroneous reporting of all
without expanded derivatives authority). reports in compliance with the Basel III
(As amended by M-2011-062 dated 13 December 2011 and requirements shall be subject to penalties
Circular No. 740 dated 16 November 2011) provided under Subsec. X192.2. Banks
failing to submit the required reports within
§ 2115.2 (Reserved) the prescribed deadline shall be subject to
monetary penalties applicable for delayed
§ 3115.2 (Reserved) reporting under existing regulations.
(Circular No. 842 dated 25 July 2014)
§ X115.3 (2008 - X116.8) Capital
treatment of exposures/investments in § X115.5 Domestic systemically
certain products. The guidelines on the important banks (DSIBs).
capital treatment of bank’s exposures/ It is the thrust of the Bangko Sentral to
investments in the following products are ensure that its capital adequacy framework
in Part VI: is consistent with the Basel principles.
a. Credit-linked notes in Sec. 1628 and Hence, the Bangko Sentral is adopting
its Subsections. policy measures for DSIBs, which are
b. Structured products in Subsec. 1635.4. essentially aligned with the documents
c. EFCDU investments in Subsec. 1636.4. issued by BCBS on global systemically
d. Investment in securities overlying important banks (GSIBs) and DSIBs. The
securitization structures in Subsec. 1648.4. broad aim of the policies is to reduce the
probability of failure of DSIBs by increasing
§ X115.4 Required reports. Banks shall their going-concern loss absorbency and to
submit a report of their risk-based capital reduce the extent or impact of failure of
adequacy ratio on a solo basis (head office DSIBs on the domestic/real economy.
plus branches) and on a consolidated basis The guidelines shall apply on a
(parent bank plus subsidiary financial allied consolidated basis to all UBs and KBs,
undertakings, but excluding insurance including branches of foreign banks
companies) quarterly to the appropriate established under R.A. No. 7721 (An Act
department of the SES in the prescribed Liberalizing the Entry and Scope of
forms within the deadlines, i.e., fifteen (15) Operations of Foreign Banks in the
banking days and thirty (30) banking days Philippines and for Other Purposes).
after the end of reference quarter, The framework for dealing with domestic
respectively. Only banks with subsidiary systemically important banks consists of 3
financial allied undertakings (excluding parts, as follows:
insurance companies) which under existing a. Assessment Methodology
regulations are required to prepare The impact of a DSIB’s failure to the
consolidated statements of condition on a domestic economy shall be assessed based
line-by-line basis shall be required to submit on bank-specific factors, to wit: (a) size;
report on a consolidated basis. The (b) interconnectedness; (c) substitutability/

§§ X115.5 - X115.6
15.10.31
financial institution infrastructure; and § X115.6 Basel III Leverage Ratio

(d) complexity. Ten (10) indicators related Framework.
to these categories shall be used to identify a. The Basel III Leverage Ratio is de-
DSIBs. These indicators reflect the factors signed to act as a supplementary measure
or criteria which makes a bank significant to the risk-based capital requirements. The
for the stability of the financial system and leverage ratio intends to restrict the build-
the economy. up of leverage in the banking sector to avoid
b. Higher Loss Absorbency (HLA) and destabilizing deleveraging processes which
Interaction with Other Elements of can damage the broader financial system
Basel III Framework and the economy. Likewise, it reinforces
Banks that will be identified as DSIBs the risk-based requirements with a simple,
shall be required to have HLA. The HLA non-risk based “backstop” measure.
requirement is aimed at ensuring that DSIBs The Basel III leverage ratio is defined as
have a higher share of their balance sheets the capital measure (the numerator) divided
funded by instruments which increase their by the exposure measure (the denominator),
resilience as a going concern, considering with this ratio expressed as percentage:
that the failure of a DSIB is expected to have
a greater impact on the domestic financial Capital Measure
(Tier 1 Capital)
system and economy. Basel III Leverage Ratio =
To determine banks' compliance with the Exposure Measure
additional CET1 requirement for DSIBs, the
minimum ratio should be complied with by The leverage ratio shall not be less than
the parent bank and its subsidiary banks and 5.0 percent computed on both solo (head
quasi-banks on both solo and consolidated office plus branches) and consolidated bases
bases. (parent bank plus subsidiary financial allied
c. Intensive Supervisory Approach undertakings but excluding insurance
Banks identified as DSIBs shall include companies).
in their Internal Capital Adequacy The guidelines implementing the Basel
Assessment Process (ICAAP) document III Leverage Ratio framework are provided
concrete and reasonable recovery plans in Appendix 111. The guidelines shall
which shall be implemented in case the apply to UBs and KBs and their subsidiary
bank breaches the HLA capital requirement. banks/QBs.
The recovery plans shall include guidelines Starting 31 December 2014 and every
and action plans to be taken to restore the quarter thereafter until 31 December 2016,
DSIB’s financial condition to viable level in concerned banks shall submit the Basel lll
cases of significant deterioration in certain Leverage Ratio reporting template, including
scenarios. This shall include specific required disclosure templates, on both solo
initiatives appropriate to the Bank’s risk and consolidated bases for monitoring
profile such as capital rising activities, purposes. For the periods ended 31 December
streamlining of businesses, restructuring 2014, 31 March 2015 and 30 June 2015, the
and disposal of assets, to improve capital reports shall be submitted within 30 banking
position. days from 30 June 2015 on both solo and
The guidelines on the framework for consolidated bases. For the succeeding
dealing with DSIBs is shown in Appendix 107. quarters, the report shall be submitted semi-
(Circular No. 856 dated 29 October 2014) annually, each submission covering

§§ X115.6 - X115.9
15.10.31
two quarters on both solo and consolidated § X115.7 – X115.8 (Reserved)

bases. Report submission shall be 15 banking
days and 30 banking days on solo and § X115.9 Sanctions.
consolidated bases, respectively, from the end a. For non-reporting of CAR breaches.
of the most recent reference quarter. The report It is the responsibility of the bank CEO to
submission is summarized below: cause the immediate reporting of CAR
breaches both to its Board and to the Bangko
Report Date Reference Date Deadline of Sentral. It is likewise the CEO’s responsibility
Submission
31 December 2014 30 June 2015 30 banking days on to ensure the accuracy of CAR calculations
31 March 2015 both solo and and the integrity of the associated
30 June 2015 consolidated bases monitoring and reporting system. Any
from end of
reference date willful violation of the above will be
considered as a serious offense for purposes
30 September 2015 31 December 15 banking days on
31 December 2015 2015 solo basis from end
of determining the appropriate monetary
of reference date penalty that will be imposed on the CEO.
31 March 2016 30 June 2016 and 30 banking In addition, the CEO shall be subject to the
30 June 2016 days on consolida-
ted basis from end following non-monetary sanctions:
30 September 2016 31 December of reference date 1) First offense – warning;
31 December 2016 2016 2) Second offense – reprimand;
During the monitoring period, the 3) Third offense – 1 month suspension
Bangko Sentral shall continue to assess the without pay; and
calibration as well as the treatment of the 4) Further offense – disqualification.
components of the leverage ratio. Final b. For non-compliance with required
guidelines shall be issued in view of the disclosures. Willful non-disclosure or
changes to the framework as well as erroneous disclosure of any item required to
migration from monitoring of the leverage be disclosed under this framework in either
ratio to a Pillar 1 requirement starting the Annual Report or the Published Statement
01 January 2017. Public disclosure of of Condition shall be considered as a serious
information relative to leverage ratio shall offense for purposes of determining the
not be required during the monitoring appropriate monetary penalty that will be
period, i.e., 31 December 2014 to imposed on the bank. In addition, the CEO
31 December 2016. and the Board shall be subject to the
b. Sanctions. Banks shall not be following non-monetary sanctions:
penalized on any breach on the 5.0 percent 1) First offense – warning on CEO and
minimum leverage ratio during the the Board;
monitoring period, i.e., 31 December 2014 2) Second offense – reprimand on CEO
to 31 December 2016. However, late and/or and the Board;
erroneous reports shall be subject to 3) Third offense – 1 month suspension
penalties provided under Subsection X192.2. of CEO without pay; and
Banks failing to submit the required reports 4) Further offense – possible
within the prescribed deadlines shall be disqualification of the CEO and/or the
subject to monetary penalties applicable for Board.
(Circular No. 538 dated 04 August 2006, as amended by Circular
delayed reporting under existing regulations. Nos. 762 dated 25 July 2012, 750 dated 01 March 2012, 717
For purposes of imposing monetary and 716 both dated 25 March 2011, 713 dated 14 February 2011,
penalties, the reports shall be classified as a 709 dated 10 January 2011, M-2008-015 dated 25 March 2008,
Category A-1 report. Circular Nos. 605 dated 05 March 2008, 588 dated 11 December
(Circular No. 881 dated 09 June 2015 and M-2015-026 dated 2007, M-2007-019 dated 21 June 2007, Circular No. 560 dated
16 July 2015) 31 January 2007 and M-2006-022 dated 24 November 2006)

§§ X116 - X118
15.10.31
Sec. X116 Basel I Risk-Based Capital. Sec. X118 Revised Risk-Based Capital
(Deleted by Circular No. 827 dated 28 February Adequacy Framework for Stand-Alone
2014) Thrift Banks, Rural Banks and
Cooperative Banks. The guidelines
§ X116.1 Scope. implementing the revised risk-based
(Deleted by Circular No. 827 dated 28 February
capital adequacy framework for Stand-
2014)
alone TBs, RBs, and Coop Banks 2 are in
§ X116.2 (2008 - X116.1) Qualifying Appendix 63c.
capital. Capital instruments issued by banks
(Deleted by Circular No. 827 dated 28 February starting 01 January 2014 shall be subject
2014) to the criteria for inclusion as qualifying
capital provided in Appendix 63b
§ X116.3 (2008 - X116.2) Risk-weighted Annexes A to C and Annexes E to F.
assets. a. The risk-based capital adequacy
(Deleted by Circular No. 827 dated 28 February ratio (CAR) of stand-alone TBs, RBs and
2014)
Coop Banks, expressed as a percentage of
qualifying capital to risk-weighted assets,
§ X116.4 (2008 - X116.3) Definitions.
shall not be less than ten percent (10%)
2014) for both solo basis (head office and
branches) and consolidated basis (parent
§ X116.5 (2008 - X116.4) Required bank and subsidiary financial allied
reports. undertakings).
(Deleted by Circular No. 827 dated 28 February Stand-alone TBs, RBs and Coop Banks
2014) shall comply with the provisions of this
Section starting 01 January 2012.
§ X116.6 Sanctions. b. Required reports. Banks shall submit
a report of their risk-based capital ratio on a
2014)
solo basis (head office plus branches) and
§ X116.7 Temporary relief. on a consolidated basis (parent bank plus
(Deleted by Circular No. 827 dated 28 February subsidiary financial allied undertakings [i.e.,
2014) RBs and Venture Capital Corporations
(VCC) for TBs, and RBs for Coop Banks]
Sec. X117 Internal Capital Adequacy quarterly in the prescribed forms within the
Assessment Process and Supervisory deadlines, i.e., fifteen (15) banking days and
Review Process1. The guidelines on banks’ thirty (30) banking days after the end of the
internal capital adequacy assessment reference quarter, respectively. Only banks
process (ICAAP) and Bangko Sentral’s with subsidiary financial allied undertakings
supervisory review process (SRP) are shown
(i.e., RBs and VCCs for TBs, and RBs for
in Appendices 90, 90a and 90b,
respectively. Coop Banks) which under the existing
The ICAAP guidelines shall apply to all regulations are required to prepare
UBs and KBs on a group-wide basis. consolidated financial statements on a line-
The guidelines took effect on 01 January by-line basis shall be required to submit
2011. report on consolidated basis. The
(Circular No. 639 dated 15 January 2009, as amended by abovementioned reports shall be classified
Circular Nos. 869 dated 30 January 2015, 731 dated 28 July as Category A-2 reports.
2011, 677 dated 29 December 2009)
1
All covered UBs and KBs were required to submit the interim ICAAP document until 30 April 2010 and the
final ICAAP document until 31 January 2011.
2
These refer to TBs, RBs and Coop Banks that are not subsidiaries of UBs and KBs.

§ X118
14.12.31
c. Sanctions (3) Third offense – 1 month suspension

1. For non-reporting of CAR breaches of President/or any officer holding
(a) It is the responsibility of the President equivalent position without pay
or any officer of the bank holding equivalent (4) Further offense – possible
position to cause the immediate reporting of disqualification of the President/or any
CAR breaches both to its Board of Directors officer holding equivalent position and/or
(BOD) and to the Bangko Sentral. It is likewise the BOD
the responsibility of the President/or any officer 3. For non-compliance with the
holding equivalent position to ensure the minimum CAR
accuracy of CAR calculations and the integrity (a) In case a bank does not comply with
of the associated monitoring and reporting the prescribed minimum CAR, the Monetary
system. Any willful violation of the above will Board may limit or prohibit the distribution of
be considered as a serious offense for purposes net profits by such bank and may require that
of determining the appropriate monetary part or all of net profits be used to increase
penalty that will be imposed on the President/ the capital accounts of the bank until the
or any officer holding equivalent position. In minimum requirements has been met. The
addition, the President/or any officer holding Monetary Board may, furthermore, restrict
equivalent position shall be subject to the non- or prohibit the acquisition of major assets
monetary sanctions: and the making of new investments by the
(1) First offense – warning bank, with the exception of purchases of
(2) Second offense – reprimand readily marketable evidences of
(3) Third offense – 1 month suspension indebtedness of the Republic of the
without pay Philippines and of the Bangko Sentral
(4) Further offense – disqualification included in paragraph 2, Item “a.ii” of Part
2. For non-compliance with required III, Appendix 63c and any other evidences
disclosures of indebtedness or obligations the servicing
(a) Willful non-disclosure or erroneous and repayment of which are fully guaranteed
disclosure of any item required to be by the Republic of the Philippines, until the
disclosed under this Framework in either the minimum requirement capital ratio has
Annual Report or the Published Balance been restored.
Sheet shall be considered as a serious offense (b) In case of a bank merger, or
for purposes of determining the appropriate consolidation, or when a bank is under
monetary penalty that will be imposed on rehabilitation program approved by the
the bank. In addition, the President/or any Bangko Sentral, the Monetary Board may
officer holding equivalent position and the temporarily relieve the surviving bank,
BOD shall be subject to the following non- consolidated bank, or constituent bank or
monetary sanctions: corporations under rehabilitation from full
(1) First offense – warning on President/ compliance with the required capital ratio
or any officer holding equivalent position under such conditions as it may prescribe.
and the BOD (c) A bank may also be subject to Prompt
(2) Second offense – reprimand on Corrective Action (PCA) framework when
President/or any officer holding equivalent either the total CAR, Tier 1 ratio or leverage
position and the BOD ratio falls below ten percent (10%),

§§ X118 - X119.1
14.12.31
six percent (6%), and five percent (5%), b. Denomination. The UnSD must be
respectively, or such other minimum levels issued in minimum denominations of
that may be prescribed for the said ratios under P500,000 or its equivalent if denominated
relevant regulations, and/or the combined in a foreign currency.
capital accounts fall below the minimum c. Mandatory provisions. If the UnSD
capital requirement prescribed under Subsec. is not scripless in form, the following
X111.1, pursuant to the provisions of Sec. provisions must appear in bolder prints on
X193. the face of every note, debenture or other
(Circular No. 688 dated 26 May 2010, as amended by Circular certificate evidencing the same:
Nos. 827 dated 28 February 2014, 781 dated 15 January 2013, (1) This obligation is not a deposit and
770 dated 28 September 2012, 762 dated 25 July 2012, is not insured by the PDIC;
750 dated 01 March 2012, 717 and 716 both dated 25 March (2) This obligation is neither secured nor
2011, 713 dated 14 February 2011 and 709 dated 10 January covered by the guarantee of (name of bank)
2011) or its subsidiaries and affiliates, or other
arrangement that legally or economically
F. CAPITAL INSTRUMENTS enhances the priority of the claim of any
holder of the UnSD as against depositors
Sec. X119 Unsecured Subordinated Debt. and other creditors (for LT2); depositors,
The following are the guidelines for the other creditors and holders of LT2 capital
issuance of unsecured subordinated debt instruments (for UT2); and depositors, other
(UnSD) eligible as Hybrid Tier 1 (HT1) and creditors and holders of LT2 and UT2 capital
Tier 2 capital: instruments (for HT1);
(As amended by Memorandum to All Banks dated 23 March (3) This obligation does not have a
2006)
priority claim, in respect of principal and
coupon payments in the event of winding
§ X119.1 Minimum features of up of the (name of bank), which is higher
unsecured subordinated debt.
than or equal with that of depositors and
a. Form. A UnSD that will be publicly
other creditors (for LT2); depositors, other
distributed may either be scripless in form
creditors and holders of LT2 capital
or evidenced by certificates such as:
instruments (for UT2); and depositors, other
promissory note, debenture or other
appropriate certificate of indebtedness. A creditors, holders of LT2 and UT2 capital
UnSD in scripless form shall comply with instruments (for HT1); and
the provisions of R.A. No. 8792, (4) The obligation is ineligible as
otherwise known as the “Electronic collateral for a loan granted by (name of
Commerce Act”, particularly on the Bank), its subsidiaries and affiliates.
existence of an assurance on the integrity, If the UnSD is scripless in form, the
reliability and authenticity of the UnSD foregoing provisions/information shall be
in electronic form. An independent third furnished every buyer/investor in a separate
party UnSD Registry shall maintain written instrument receipt of which must be
unissued UnSD certificates and the UnSD duly acknowledged by him.
Registry Book, which must be electronic if d. Term. The UnSD qualifying under
the UnSD is scripless in form. A UnSD that HT1 capital shall be perpetual. The
will be issued privately or on a negotiated minimum maturity of a UnSD qualifying
basis shall be evidenced by certificates. under UT2 and LT2 capital shall be ten (10)
All UnSD shall be registered in the name years and five (5) years, respectively.
of individuals or entities and pre-numbered (As amended by Memorandum to All Banks dated 23 March
serially. 2006)

§§ X119.2 - X119.4
14.12.31
§ X119.2 Prior Bangko Sentral of the Issuing Bank’s board of directors

approval. No UnSD shall be issued without authorizing the issuance of the UnSD
the prior approval of the Bangko Sentral. indicating, among others, the issue size,
terms and conditions, offering period,
§ X119.3 Pre-qualification purpose or intended use of proceeds thereof,
requirements of issuing bank. A bank the names of the Underwriter/Arranger,
applying for authority to issue a UnSD UnSD Registry, Selling Agent(s) and Market
shall comply with the following Maker(s), and Public Trustee;
requirements: (b) A certification by the corporate
a. It has complied with the minimum secretary that the issuance of the UnSD
amount of capital required under Subsec. has been approved by the stockholders
X111.1 or its paid-in capital is at least owning or representing at least two-thirds
equal to the amount required therein. (2/3) of the outstanding capital stock of
b. It has established a risk management the Issuing Bank if the UnSD has
system appropriate to its operations convertibility feature;
characterized by clear delineation of (c) A written confirmation from the
responsibility for risk management, president or officer of equivalent rank of the
adequate risk measurement systems, Issuing Bank stating that all the conditions/
appropriately structured risk limits, eligibility criteria for UnSD to qualify for
effective internal controls and complete, capital instruments under applicable and
timely and efficient risk reporting system. existing capital adequacy framework are
c. It is a locally incorporated bank. complied with and that such conditions/
eligibility criteria shall be contained in the
§ X119.4 Public issuance of unsecured UnSD Certificates if the UnSD is not in
subordinated debt. Public issuance of UnSD scripless form, in the Information Disclosure
is an issuance offered to the general public, and Purchase Advice.
which may or may not be qualified investors/ (d) A written undertaking from the
buyers as hereinafter defined. The Issuing president or officer of equivalent rank of the
Bank must be rated by an independent credit Issuing Bank not to support, directly or
rating agency recognized by the Bangko indirectly, by extending loans, issuing
Sentral and a Public Trustee shall be payment guarantees or otherwise, the buyer/
holder of the UnSD of the Issuing Bank;
appointed for investor protection.
(e) A written confirmation from the
a. Application for authority
president or officer of equivalent rank of the
(1) The application shall be signed by
Issuing Bank stating that the designated
the president or officer of equivalent rank
Underwriter/Arranger, UnSD Registry,
of the applicant bank; Selling Agent(s) and Market Maker(s) were
(2) The application for authority on each provided with a complete list of subsidiaries
UnSD issue/issue program shall be filed and affiliates of the Issuing Bank including
with the appropriate department of the SES: their subsidiaries and affiliates;
Provided, That the period of an issue (f) A written undertaking from the
program of two (2) or more tranches shall not president or officer of equivalent rank of the
exceed one (1) year from date of approval; and Issuing Bank to update the above-
(3) The application shall be mentioned list within three (3) banking days
accompanied by: from the date of change in composition
(a) A certified true copy of the resolution thereof;

§ X119.4
14.12.31
(g) Specimen of the UnSD; and (2) Within ten (10) banking days after
(h) A written external legal opinion that issuance of the initial and subsequent tranches:
all the conditions/eligibility criteria for (a) A written notice of the actual date of
UnSD to qualify for capital instruments issuance/offering of each initial and
under applicable and existing capital subsequent tranches.
adequacy framework and loss absorption c. Requirements for other parties
(for HT1 and UT2) features, have been involved
met; and The issuing bank shall be held
(i) A certification signed by the accountable for ensuring the continuous
president (or officer of equivalent rank) compliance by its chosen participant-FIs
and chief compliance officer of the issuing with the qualification requirements
bank stating the compliance of all parties prescribed by the Bangko Sentral.
to the UnSD transaction with the As such, the issuing bank shall make a
respective prequalification requirements careful and diligent evaluation of the parties
prescribed under Item “c” of Subsec. whom it shall engage to act as underwriter/
X119.4 arranger, UnSD registry, selling agent,
b. Additional requirements for the market maker and public trustee of its
issuance of UnSD UnSDs.
After a bank’s application to issue a The following qualification
UnSD has been approved, the applicant requirements shall be strictly complied
shall submit the following additional with prior to and on a continuing basis by
requirements to the appropriate department the issuing bank and FIs engaged to act as
of the SES: underwriter/arranger, UnSD registry,
(1) At least fifteen (15) banking days selling agent, market maker and public
before the date of offering: trustee while the UnSDs of the issuing
(a) A written confirmation from the bank remains outstanding:
president or officer of equivalent rank of (1) Underwriter/Arranger
the Issuing Bank stating that the bank has (a) It is either a UB or an IH: Provided,
been rated by an independent credit rating That if an offering is on a best effort basis,
agency duly recognized by the Bangko the Arranger may also be a KB: Provided,
Sentral; further, That if an offering is denominated
(b) Information disclosure of the UnSD in foreign currency, the Underwriter/
issuance prepared by the Underwriter Arranger may also be any reputable
Arranger; international investment bank.
(c) Promotional materials; (b) It must be an independent third
(d) Specimen of the proposed Purchase party that has no subsidiary/affiliate or any
Advice and Registry Confirmation; and other relationship with the Issuing Bank
(e) Copy of the agreements between that would undermine the objective
the Issuing Bank and the Underwriter/ conduct of due diligence.
Arranger/UnSD Registry/Selling Agent(s)/ (c) If Underwriter, it must have
Market Maker(s), and Public Trustee. adequate risk management and must be
The Bangko Sentral reserves the right to well capitalized, which for a local
suspend the date of offering, within the Underwriter, shall be evidenced by
fifteen (15) banking day period from compliance with the risk-based CAR
submission of the above-mentioned prescribed under applicable and existing
requirements. capital adequacy framework for the past

§ X119.4
14.12.31
sixty (60) days immediately preceding the (e) It must have a CAMELS composite
date of application where applicable. rating of at least “3” in the last regular
(2) UnSD Registry examination, where applicable.
(a) It may be a UB, a KB, or such other (3) Selling Agent
specialized entity that may be qualified by (a) It must be an FI with dealership or
the Monetary Board. brokering license.
(b) It must be a third party that has no (b) It must be a third party that has no
subsidiary/affiliate or any other subsidiary/affiliate or any other
relationship with the Issuing Bank that
relationship with the Issuing Bank that
would undermine its independence.
would undermine its independence.
(c) It must not be an Underwriter or a
Market Maker of the UnSD. (4) Market Maker
(d) It must have adequate facilities and (a) It must be an FI with a dealership
the organization to do the following: or brokering license.
(i) Maintain certificates of unissued UnSD (b) It must be a third party that has no
and the Registry Book which must be subsidiary/affiliate or any other
electronic if the UnSD is in scripless form; relationship with the Issuing Bank that
(ii) Deliver transactions within the would undermine its independence.
agreed trading period; and (c) It must have adequate risk
(iii) Issue Registry Confirmations and management and must be well capitalized
UnSD Certificates if they are not in as evidenced by compliance with the risk
scripless form to buyers/holders of UnSD. based CAR prescribed under applicable and
(Next Page is Part I - Page 29)
Part I - Page 28b Manual of Regulations for Banks

§ X119.4
14.12.31
existing capital adequacy framework for the (b) Prepares the prospectus/information
past sixty (60) days immediately preceding disclosure, including updates for multi-
the date of application where applicable. tranche UnSD issues;
There is no need for a Market Maker if (c) Formulates the distribution/
the UnSD is to be held on to maturity: allocation plan for the initial offering and
Provided, That this condition is properly ensures proper and orderly distribution of
disclosed in the Purchase Advice, Registry the primary offering of the UnSD;
Confirmation and Prospectus/Information (d) Disseminates information to
Disclosure. prospective investors of UnSD on the terms
(5) Public Trustee and conditions of the issue (including
(a) It must be an FI authorized by the information of non pre-termination at the
Bangko Sentral to engage in trust and other initiative of the holder and the liquidity
fiduciary business. mechanism in secondary trading) and the
(b) It must be a third party that has no rights and obligations of the holder, issuer,
subsidiary/affiliate or any other relationship Underwriter/Arranger, UnSD Registry,
with the Issuing Bank that would undermine Selling Agent, Market Maker and Public
its independence. Trustee; and
(c) It must have adequate risk (e) When selling to its clients, it must
management system and must be well perform the functions/responsibilities of
capitalized as evidenced by compliance the Selling Agent under Item “d(3)” hereof.
with the risk-based CAR prescribed under (2) UnSD Registry
applicable and existing capital adequacy (a) Keeps unissued UnSD certificates
framework for the past sixty (60) days and maintains UnSD Registry book, which
immediately preceding the date of must be electronic if UnSD is scripless in
application where applicable. The 60-day form;
compliance period with the risk-based CAR (b) Records initial issuance of the
shall be waived in evaluating a bank’s UnSD and subsequent transfer of
eligibility to act as Public Trustee for another ownership;
bank’s UnSD’s Tier 2 offering, if the former (c) Issues UnSD Certificates for primary
bank has instituted remedial measure to its offerings if UnSD is not scripless in form;
CAR deficiency by issuing Tier 2 capital. (d) Issues Registry Confirmation to
(d) It may also be the UnSD Registry. buyers/holders;
(e) A Public Trustee is mandatory if (e) Functions as paying agent for periodic
UnSD shall be offered to the general public interest and principal payments;
and optional if offering will be limited to (f) Monitors compliance with the
qualified investors/buyers. prohibitions on holdings of UnSD, as
d. Functions/Responsibilities of other prescribed under Subsec. X119.8 hereof; and
parties involved (g) Submits within ten (10) banking days
The respective parties shall have, among from end of reference month, an exception
others, the following functions/ report on Subsec. X119.8 to the appropriate
responsibilities: department of the SES. This report shall be
(1) Underwriter/Arranger classified as a “Category B” report.
(a) Conducts due diligence on the (3) Selling Agent
Issuing Bank and determines the valuation/ (a) Verifies identity of each investor to
pricing of the primary issue; ascertain that Subsec. X119.8 is not violated

§ X119.4
14.12.31
and applies appropriate standards to combat and sends a copy thereof to the UnSD
money laundering as required under existing Registry; and
Bangko Sentral regulations; (f) Ensures secondary market transfers
(b) Determines the suitability of the and registration in coordination with the
investor and ensures that he fully UnSD Registry.
understands the features of the UnSD and (5) Public Trustee
the risk involved therein; and (a) Monitors compliance of the Issuing
(c) Issues the Purchase Advice for the Bank with the terms and conditions of the
primary offering of the UnSD to the buyer UnSD;
and sends a copy thereof to the UnSD (b) Monitors compliance of the other
Registry. parties with their functions and
The sale or distribution of UnSD may responsibilities prescribed under this
also be performed by the issuer through its Memorandum;
head office and branches subject to the (c) Reports regularly to UnSD holders
following conditions: non-compliance of the Issuing Bank with
(i) The in-house distribution shall not the terms and conditions of the UnSD and
exceed fifty percent (50%) of the total issue; such other developments that adversely
(ii) The sale/distribution must be done affect their interest and advise them of the
under the supervision of an officer of the course of action they should take to protect
Issuing Bank who is capable of determining their interest; and
the suitability of the investor and ensuring (d) Act on behalf of the UnSD holders
that he fully understands the risk in UnSD; in case of bankruptcy of the Issuing Bank.
(iii) All personnel assigned to distribute e. Change of underwriter/arranger,
sell UnSD must be capable of determining UnSD registry, selling agent(s), market
the suitability of the investor and ensuring maker(s). After an application for authority
that he fully understands the risk in UnSD; to issue a UnSD has been approved by the
and Bangko Sentral, the Issuing Bank cannot
(iv) It must also perform the functions/ change its Underwriter/Arranger, UnSD
responsibilities of the Selling Agent. Registry, Selling Agent(s), Market Maker(s)
(4) Market Maker and Public Trustee without prior Bangko
(a) Sets an independent pricing for the Sentral approval.
secondary trading of UnSD; f. Agreements between issuing bank
(b) Posts daily the bid and offer prices and other parties involved. The
for the UnSD on the screen of at least one agreements between the Issuing Bank and
(1) of the information providers until the the UnSD Registry/Selling Agent(s)/Market
operation of a fixed income exchange for Maker(s)/ Public Trustee shall comply
UnSD; with the provisions of Subsec. X162.1 on
(c) Verifies identity of each investor to bank service contracts. The Issuing Bank
ascertain that Subsec. X119.8 is not violated shall be liable to investors for any damages
and applies appropriate standards to combat caused by actions of the UnSD Registry,
money laundering as required under existing Selling Agent(s) and Market Maker(s),
Bangko Sentral regulations; which are contrary to the agreements
(d) Determines the suitability of the entered into.
buyer and ensures that he fully understands g. Purchase advice and registry
the risk involved in a UnSD; confirmation. The Purchase Advice and
(e) Issues the Purchase Advice for the Registry Confirmation shall contain all the
secondary trading of the UnSD to the buyer terms and conditions on the issuance of

§ X119.4
14.12.31
UnSD and shall conspicuously state the This UnSD cannot be terminated by the
following caveat: holder (for HT1). This UnSD cannot be
(1) This UnSD is not a deposit and is terminated by the holder before (maturity
not insured by the PDIC. date) (for UT2 and LT2).
(2) This UnSD is neither secured nor However, it may be pre-terminated at
covered by a guarantee of the Issuer/ the instance of the Issuing Bank upon:
Underwriter/Arranger or related party of the (a) Prior approval of the Bangko Sentral
Issuer/Underwriter/Arranger or other subject to the following conditions:
arrangement that legally or economically (i) The repayment is in connection with
enhances the priority of the claim of any call option after a minimum of five (5) years
holder of the UnSD as against depositors from issue date, or even within the first five
and other creditors (for LT2); depositors, (5) years from issue date when:
other creditors and holders of LT2 capital (aa)The UnSD was issued for the
instruments (for UT2); and depositors, other purpose of a merger with or acquisition by
creditors and holders of LT2 and UT2 capital the Issuing Bank and the merger or
instruments (for HT1); acquisition is aborted;
(3) This UnSD does not have a priority (bb) There is a change in tax status of
claim, in respect of principal and coupon the UnSD due to changes in the tax laws
payments in the event of winding-up of the and/or regulations; or
Issuing Bank, which is higher than or equal (cc) The UnSD does not qualify as HT1,
with that of depositors and other creditors UT2 or LT2 capital, as the case may be, as
(for LT2); depositors, other creditors and determined by the Bangko Sentral; and
holders of LT2 capital instruments (for UT2); (ii) The debt is simultaneously replaced
and depositors, other creditors, holders of with the issues of new capital which is
LT2 and UT2 capital instruments (for HT1); neither smaller in size nor of lower quality
(4) This UnSD is ineligible as collateral than the original issue, unless the Issuing
for a loan granted by the Issuing Bank, its Bank’s capital adequacy ratio remains more
subsidiaries or affiliates; than adequate after redemption; and
(5) This UnSD cannot be terminated by (b) Prior notice to holders on record.
the holder nor by the Issuing Bank (for HT1). Negotiations/transfers from one (1)
This UnSD cannot be terminated by the holder to another do not constitute pre-
holder nor by the Issuing Bank before termination.
(maturity date) (for UT2 and LT2). However, for tax purposes, negotiations/
However, negotiations/ transfers from transfers from one (1) holder to another shall
one (1) holder to another do not constitute be subject to the pertinent provisions of the
pre-termination. National Internal Revenue Code of 1997,
For tax purposes, negotiations/transfers as amended, and BIR regulations.
from one (1) holder to another shall be In case there is a feature allowing one-
subject to the pertinent provisions of the time step-up in the coupon rate in
National Internal Revenue Code of 1997, conjunction with a call option, the step-up
as amended, and BIR regulations. shall be after a minimum of ten (10) years
However, negotiations/transfers from for HT1 and UT2 and five (5) years for LT2
one (1) holder to another do not constitute after the issue date, and shall not result in
pre-termination. an increase over the initial rate that is more
(Item “g(5)” above shall apply if the than:
Issuing Bank commits no pre-termination (i) 100 basis points less the swap spread
of the UnSD. Otherwise, it shall read as between the initial index basis and the
follows): stepped-up index basis; or

§ X119.4
14.12.31
(ii) Fifty percent (50%) of the initial credit (c) Upon appointment of receiver for
spread less the swap spread between the initial the Issuing Bank.
index basis and the stepped-up index basis. The rate of conversion shall be fixed
The swap spread shall be fixed at the at the time of the subscription of this
pricing date and reflect the differential in UnSD.
pricing on that date between the initial (12) The amount and timing of
reference security or rate and the stepped- coupons on this UnSD shall be
up reference security or rate; discretionary on the Issuing Bank where
(6) The holders/owners of this UnSD the Issuing Bank has not paid or declared
cannot set off any amount they owe to the a dividend on its common shares in the
Issuing Bank against this UnSD. preceding financial year, or determines
(7) All negotiations/transfers of this that no dividend is to be paid on such
UnSD prior to maturity must be coursed shares in the current financial year; and
through a Market Maker until the operation the Issuing Bank shall have full control
of a fixed income exchange. and access to waived payments (for HT1).
(8) The payment of principal may be The coupon payment on this UnSD shall
accelerated on this UnSD only in the event be deferred where the Issuing Bank has
of insolvency of the Issuing Bank. not paid or declared a dividend on its
(9) The coupon rate, or the formulation common shares in the preceding financial
for calculating coupon payments shall be year, or determines that no dividend is to
fixed at the time of the issuance of the UnSD be paid on such shares in the current
and may not be linked to the credit standing financial year (for UT2);
of the Issuing Bank; (13)The coupon on this UnSD shall be
(10) The payment of principal and non-cumulative. In case there is a feature
coupon due on this UnSD shall not be made allowing withheld cash coupon to be
to the extent that such payment will cause payable in scrip or shares of stock, the
the Issuing Bank to become insolvent (for shares of stock to be issued shall not be of
HT1 and UT2); lower quality capital than the UnSD (for
(11) The holders of the UnSD shall be HT1); and
treated as if they were holders of a specified (14)The coupon to be paid on this UnSD
class of share capital in any proceedings shall be paid only to the extent that the
commenced for the winding-up of the Issuing Bank has profit distributable
Issuing Bank (for HT1 and UT2); determined in accordance with existing
(Item “g(11)” above shall apply if such Bangko Sentral regulations (for HT1).
is the manner by which the UnSD is to be N.B.: The last five (5) items (i.e., 10, 11,
treated in loss situation. Otherwise, it shall 12, 13 and 14) are applicable only to UnSD
read as follows): qualifying under HT1 and UT2 capital, as
This UnSD shall be automatically the case may be. The foregoing information
converted into common shares or perpetual shall also be shown in the Prospectus/
and non-cumulative preferred shares (for Information Disclosure.
HT1) or into common shares or perpetual h. Pre-termination by the Issuer
and non-cumulative preferred shares or (1) The Issuing Bank may pre-terminate
perpetual and cumulative preferred shares the UnSD subject to the following
(for UT2) upon occurrence of certain trigger conditions:
events as follows: (a) The Information Disclosure, Purchase
(a) Breach of minimum capital ratio; Advice and Registry Confirmation shall
(b) Commencement of proceedings for include the information that the Issuing Bank
winding-up of the Issuing Bank; or has the option to pre-terminate the UnSD;

§§ X119.4 - X119.5
14.12.31
(b) Compliance with Items “a(2)(a)vii”, Confirmation to the buyer, in the case of
“b(1)(h)v” or “b(2)(c)iv” as may be secondary trading.
applicable; (As amended by Circular Nos. 834 dated 26 May 2014, 827
(c) Prior notification of thirty (30) dated 28 February 2014, 778 dated 14 December 2012, 716
dated 25 March 2011, 709 dated 10 January 2011, Memorandum
banking days or more to holders of record; to All Banks dated 23 March 2006)
and
(d) Notwithstanding any agreement to § X119.5 Private or negotiated issuance
the contrary, the Issuer shall shoulder the of unsecured subordinated debt
tax due, if any, on the interest income a. Private or negotiated issuance of
already earned by the holders. UnSD is the issuance of UnSD to qualified
(2) Within ten (10) banking days after investors/buyers, whether individuals or
the completion of the pre-termination institutions as defined under Subsec.
transaction, the Issuing Bank must submit a X119.7. There is no limit on the number of
written notice to the appropriate department qualified investors/buyers and on the sale
of the SES of the following: or negotiation of the UnSD: Provided, That
(a) Actual pre-termination date; and such sale or negotiation shall only be made
(b) New capital composition. to another qualified investor/buyer.
i. Primary offering/secondary trading b. Application for authority of the
(1) The primary offering of a UnSD shall Issuing Bank
be executed through an Underwriter under (1) The application shall be signed by
a firm commitment or through an Arranger the president or officer of equivalent ran of
on a best effort basis. Initial sale/distribution the Issuing Bank.
of UnSD shall be made by a Selling Agent, (2) The application for authority on each
the Underwriter/Arranger or, to a limited negotiated UnSD issue shall be filed with
extent, the Issuing Bank itself. Subsequent the appropriate department of the SES.
negotiations in secondary trading must be (3) The application shall be
executed through authorized Market accompanied by:
Maker(s) until the operation of a fixed income (a) A certified true copy of the resolution
exchange. of the Issuing Bank’s board of directors
The primary offering as well as the authorizing the private/negotiated issuance
secondary trading of a UnSD must be of UnSD indicating, among others, the
supported by Purchase Advice to be issued amount, duration/maturity, interest rate,
by the Selling Agent or the Market Maker, purpose or intended use of proceeds of the
as the case may be, with the original given UnSD;
to the buyer and a second copy to the UnSD (b) A Certification by the corporate
Registry. Upon presentation by the buyer secretary that the issuance of the UnSD has
of the original copy of Purchase Advice, the been approved by the stockholders owning
UnSD Registry shall: or representing at least two-thirds (2/3) of
(a) record the primary issuance in the the outstanding capital stock of the Issuing
Registry Book and issue a Registry Bank if the UnSD has convertibility feature;
Confirmation and the corresponding UnSD (c) A written confirmation from the
certificate to the buyer if it is not scripless president or officer of equivalent rank of the
in form; and Issuing Bank stating that all the conditions/
(b) register the transfer of ownership in eligibility criteria for UnSD to qualify for
the UnSD Registry Book and issue a Registry capital instruments under applicable and

§ X119.5
14.12.31
existing capital adequacy framework are (2) A copy of each of the duly signed
complied with and that such conditions/ Debt Agreements/Contracts between the
eligibility criteria shall be contained in the Issuing Bank and the investor/buyer as
UnSD Certificates, Prospectus/Information specified in the application for authority to
Disclosure and Debt Agreement/Contract. issue negotiated UnSD; and
(d) An undertaking from the president (3) A copy of the income tax return of
or officer of equivalent rank of the Issuing the investor/buyer in case of a natural
Bank that the UnSD shall be issued only to person.
qualified investors/buyers; d. Debt agreement/contract
(e) A certification from the president or The Debt Agreement/Contract shall
officer of equivalent rank of the Issuing Bank contain all the terms and conditions on the
that the investor/buyer shall not be among issuance of UnSD and shall conspicuously
those prohibited to hold UnSD under state the following caveat:
Subsec. X119.8 and that the Issuing Bank (1) This UnSD is not a deposit and is
has applied appropriate standards to combat not insured by the PDIC.
money laundering as required under existing (2) This UnSD is neither secured nor
Bangko Sentral regulations; covered by a guarantee of the Issuer or
(f) A written undertaking from the related party of the Issuer or other
president or officer of equivalent rank of the arrangement that legally or economically
Issuing Bank not to support, directly nor enhances the priority of the claim of any
indirectly, by extending loans, issuing holder of the UnSD as against depositors
payment guarantees or otherwise, the buyer/ and other creditors (for LT2); depositors,
holder of the UnSD of the Issuing Bank; and other creditors and holders of LT2 capital
(g) Specimen of the proposed Debt instruments (for UT2); and depositors, other
Agreement/Contract containing the terms creditors and holders of LT2 and UT2 capital
and conditions of the UnSD issuance instruments (for HT1).
(h) A written external legal opinion that (3) This UnSD does not have a priority
all the conditions for UnSD under claim, in respect of principal and coupon
applicable and existing capital adequacy payments in the event of winding-up of
framework including the subordination the Issuing Bank, which is higher than or
(for HT1, UT2 and LT2) and loss equal with that of depositors and other
absorption (for HT1 and UT2) features, creditors (for LT2); depositors, other
have been met. creditors and holders of LT2 capital
c. Additional requirements for the instruments (for UT2); and depositors,
private issuance of UnSD. Within ten (10) other creditors, holders of LT2 and UT2
banking days after issuance of the UnSD, capital instruments (for HT1);
the Issuing Bank shall submit the following (4) This UnSD is ineligible as collateral
additional requirements to the appropriate for a loan made by the Issuing Bank, its
department of the SES: subsidiaries or affiliates.
(1) A written notice of the actual date of (5) This UnSD cannot be terminated
full receipt of proceeds, accompanied by a by the holder nor by the Issuing Bank (for
certification from the president or officer of HT1). This UnSD cannot be terminated
equivalent rank of the Issuing Bank stating by the holder nor by the Issuing Bank
that the pre-qualification requirements under before (maturity date) (for UT2 and LT2).
Subsec. X119.3 have been complied with Item “d(5)” above shall apply if the
up to the time of full receipt of proceeds; Issuing Bank commits no pre-termination

§ X119.5
14.12.31
of the UnSD. Otherwise, it shall read as pricing date and reflect the differential in
follows: pricing on that date between the initial
This UnSD cannot be terminated by the reference security or rate and the stepped-
holder (for HT1). This UnSD cannot be up reference security or rate;
terminated by the holder before (maturity (6) This UnSD may only be sold,
date) (for UT2 and LT2). transferred or negotiated to another qualified
However, it may be pre-terminated at investor/buyer;
the instance of the Issuing Bank upon: (7) The holders/owners of this UnSD
(a) Prior approval of the Bangko Sentral cannot set off any amount they owe to the
subject to the following conditions: Issuing Bank against this UnSD.
(i) The repayment is in connection with (8) The payment of principal may be
call option after a minimum of five (5) years accelerated on this UnSD only in the event
from issue date, or even within the first five of insolvency of the Issuing Bank.
(5) years from issue date when: (9) The coupon rate, or the formulation
(aa)The UnSD was issued for the for calculating coupon payments shall be
purpose of a merger with or acquisition by fixed at the time of the issuance of the UnSD
the Issuing Bank and the merger or and may not be linked to the credit standing
acquisition is aborted; of the Issuing Bank;
(bb) There is a change in tax status of (10) The payment of principal and
the UnSD due to changes in the tax laws coupon due on this UnSD shall not be made
and/or regulations; or to the extent that such payment will cause
(cc) The UnSD does not qualify as HT1, the Issuing Bank to become insolvent (for
UT2 or LT2 capital, as the case may be, as HT1 and UT2);
determined by the Bangko Sentral; and (11) The holders of the UnSD shall be
(ii) The debt is simultaneously replaced treated as if they were holders of a specified
with the issues of new capital which is class of share capital in any proceedings
neither smaller in size nor of lower quality commenced for the winding up of the
than the original issue, unless the Issuing Issuing Bank (for HT1 and UT2);
Bank’s capital adequacy ratio remains more (Item “d(11)” above shall apply if such
than adequate after redemption; and is the manner by which the UnSD is to be
(b) Prior notice to investors/buyers. treated in loss situation. Otherwise it shall
In case there is a feature allowing one- read as follows):
time step-up in the coupon rate in This UnSD shall be automatically
conjunction with a call option, the step-up converted into common shares or perpetual
shall be after a minimum of ten (10) years and non-cumulative preferred shares (for
(for HT1 and UT2) and five (5) years (for HT1), or into common shares or perpetual
LT2) after the issue date, and shall not result and non-cumulative preferred shares or
in an increase over the initial rate that is perpetual and cumulative preferred shares
more than: (for UT2) upon occurrence of certain trigger
(i) 100 basis points less the swap spread events as follows:
between the initial index basis and the (a) Breach of minimum capital ratio;
stepped-up index basis; or (b) Commencement of proceedings for
(ii) Fifty percent (50%) of the initial credit winding up of the Issuing Bank; or
spread less the swap spread between the (c) Upon appointment of receiver for the
initial index basis and the stepped-up index Issuing Bank.
basis. The rate of conversion shall be fixed at
The swap spread shall be fixed at the the time of the subscription of this UnSD.

§§ X119.5 - X119.6
14.12.31
(12) The amount and timing of coupons (2) Within ten (10) banking days after
on this UnSD shall be discretionary on the the completion of the pre-termination
Issuing Bank where the Issuing Bank has not transaction, the Issuing Bank must submit a
paid or declared a dividend on its common written notice to the appropriate department
shares in the preceding financial year, or of the SES of the following:
determines that no dividend is to be paid (a) Actual pre-termination date; and
on such shares in the current financial year; (b) New capital composition.
and the Issuing Bank shall have full control f. Functions/Responsibilities of the
and access to waived payments (for HT1). Issuing Bank
The coupon payment on this UnSD shall (1) Prepares the Prospectus/Information
be deferred where the Issuing Bank has not Disclosure on the UnSD issues;
paid or declared a dividend on its common (2) Disseminates to prospective
shares in the preceding financial year, or investors/buyers information on the terms
determines that no dividend is to be paid and conditions of the UnSD (including
on such shares in the current financial year information on no pre-termination at the
(for UT2); initiative of the holder, and where
(13) The coupon on this UnSD shall be applicable, the liquidity mechanism in
non-cumulative. In case there is a feature secondary trading) and the rights and
allowing withheld cash coupon to be obligations of the holder and the issuer;
payable in scrip or shares of stock, the (3) Keeps unissued UnSD certificates
shares of stock to be issued shall not be of and maintains UnSD Register;
lower quality capital than the UnSD (for (4) Records initial issuance of UnSD and
HT1); and subsequent transfer of ownership;
(14) The coupon to be paid on this UnSD (5) Issues UnSD Certificates and Registry
shall be paid only to the extent tha the Issuing Confirmation to original investors/buyers;
Bank has profit distributable determined in (6) Issues Registry Confirmation to
accordance with existing Bangko Sentral subsequent buyers/holders where applicable;
regulations (for HT1). (7) Ensures compliance with Subsec.
N.B.: The last five (5) items (i.e., 10, 11, X119.8 and applies appropriate standards to
12, 13 and 14) are applicable only to UnSD combat money laundering as required under
qualifying under HT1 and UT2 capital, as existing Bangko Sentral regulations; and
the case may be. (8) Determines suitability of the
e. Pre-termination by the Issuer investors/buyers (original or subsequent)
(1) The Issuing Bank may preterminate and assures that he fully understands the
the negotiated UnSD subject to the risk involved in a UnSD.
following conditions: (As amended by Circular No. 827 dated 28 February 2014 and
(a) The Debt Agreement/Contract shall Memorandum to All Banks dated 23 March 2006)
include the information that the Issuing Bank
has the option to pre-terminate the UnSD; § X119.6 Issuance abroad of unsecured
(b) Compliance with call options as subordinated debt. The overseas issuance
provided in applicable and existing capital of UnSD shall also be subject to the
adequacy framework; provisions of Sec. X119 except for the
(c) Prior notification of thirty (30) following:
banking days or more to lender/investor; and a. Overseas issuance of UnSD may be
(d) Notwithstanding any agreement to allowed to be governed by the laws and
the contrary, the Issuer shall shoulder the applicable rules and regulations of the
tax due, if any, on the interest income already country where the UnSD is to be issued
earned by the holders. with respect to form, qualified investors/

§§ X119.6 - X119.9
14.12.31
buyers and subsequent sale or negotiation; § X119.8 Prohibitions on holdings of

b. The requirements under Subsecs. unsecured subordinated debt. The
X119.1 c(1), X119.4 g(1), and X119.5 d(1) and following persons and entities are
d(6) may be allowed to be dispensed with prohibited from purchasing/holding UnSD
in cases of overseas issuance of UnSD; and of the Issuing Bank:
c. The subsequent sale/negotiation in a. Subsidiaries and affiliates of the
the Philippines of the UnSDs originally Issuing Bank including their subsidiaries
issued overseas shall not be allowed unless and affiliates; and
all the requirements for domestic issuance b. Common trust funds (CTFs) managed
are complied with. by the Trust Department of the Issuing Bank,
It is however understood that the its subsidiaries and affiliates or other related
applicant/issuer shall also secure the entities: Provided, That other funds being
approval of the International Department managed by the Trust Department of the
(ID) of the Bangko Sentral for the overseas Issuing Bank, its subsidiaries and affiliates
issuance of foreign currency denominated or other related entities are allowed to
UnSD. purchase or invest in UnSD of the Issuing
(As amended by Memorandum to All Banks dated 23 March Bank subject to the following conditions:
2006) (1) That the fund owners give prior
authority/instruction to the Trust Department
§ X119.7 Qualified investors/buyers to purchase or invest in the UnSD of the
Qualified buyers of, or suitable investors in, Issuing Bank; and
a UnSD can be any of the following: (2) That the authority/instruction of the
a. Banks; fund owner and his understanding of the
b. Investment house (IH); risk involved in purchasing or investing in
c. Insurance company; UnSD are fully documented.
d. Pension or retirement fund of other For purposes of this Section, an affiliate
entities which have no subsidiary/affiliate refers to a related entity linked by means of
or any other relationship with the Issuing ownership of at least twenty percent (20%)
Bank; to not more than fifty percent (50%) of its
e. Investment company; outstanding voting stock.
f. Funds managed by another bank or
other entities duly authorized to engage in § X119.9 Accounting treatment
trust or other fiduciary business; Obligations arising from the issuance of
g. Domestic corporate or institutional UnSD (including the portion exceeding the
investors with total assets of at least P100.0 allowable ceiling for purposes of
million; determining the qualifying capital as
h. Foreign multilateral organizations provided in applicable and existing capital
such as, the ADB and IFC; adequacy framework shall be booked under
i. High net-worth individual investor/ the following General Ledger account titles:
buyer who is sophisticated enough to a. “Other Equity Instruments - Others”
understand and appreciate the significance for HT1 capital which shall be presented in
of and the risk involved in UnSD as may be the equity accounts section of the Balance
indicated by his/her educational Sheet which shall be accounted for in
background and/or employment/business accordance with the provisions of PAS 32; and
experience; and b. “Unsecured Subordinated Debt” for
j. Stockholder, director or officer with UT2 and LT2 capital, which shall be
the rank of at least a vice-president of the presented in the liability accounts section
Issuing Bank. of the balance sheet.

§§ X119.9 - X119.13
14.12.31
However, only the proceeds actually with the provisions of this Section and for
received from the UnSD issues, (i.e., net of non-disclosure or misrepresentation of
discounts, if any, and transaction costs) shall information, as follows:
be considered as HT1, UT2 or LT2 capital. a. On the issuing bank
The proceeds actually received from the (1) Suspension of its authority to issue
UnSD issues, (i.e., net of discounts, if any, remaining tranches, if any;
and transaction costs) eligible as UT2 or LT2 (2) Disqualification from future issuance
capital shall be considered in the of UnSD;
computation of loanable funds for purposes (3) Disqualification of all outstanding
of determining compliance with the issues as eligible Tier 2 capital; and
mandatory allocation of funds for agri-agra (4) Monetary penalty of P30,000 for
credit required under P.D. No. 717, as each violation.
amended. b. On the underwriter/arranger
A UnSD eligible as HT1, UT2 or LT2 (1) Disqualification from being
capital shall be accounted for in accordance underwriter/arranger for three (3) years; and
with PAS 32 and PAS 39. (2) Monetary penalty of P30,000 for
A UnSD denominated in foreign each violation.
currency eligible as HT1, UT2 or LT2 may c. On the UnSD registry
be recorded in the regular banking unit
(1) Disqualification from being
(RBU) or foreign currency deposit unit
appointed as UnSD Registry for three (3)
(FCDU/EFCDU) of the issuing bank:
years; and
Provided, That if booked in the FCDU/
(2) Monetary penalty of P30,000 for
EFCDU, the following conditions shall be
each violation.
strictly observed:
d. On the selling agent/market maker
a. The issuing bank shall indicate in its
(1) Disqualification from being
application that the UnSD shall be booked
appointed as selling agent or market maker
in its FCDU/EFCDU;
b. The UnSD shall remain in the FCDU/ for three (3) years; and
EFCDU books until full settlement; and (2) Monetary penalty of P30,000 for
c. The UnSD shall be issued only to each violation.
non-residents and offshore banking units e. On the public trustee
(OBUs) in accordance with Section 72.2.e (1) Disqualification from being
of CB Circular No. 1389, as amended. appointed as public trustee for three (3)
A UnSD eligible as HT1, UT2 or LT2 years; and
capital shall be accounted for in accordance (2) Monetary penalty of P30,000 for
with PAS 32 and PAS 39. each violation.
(As amended by Circular No. 827 dated 28 February 2014 and f. On the certifying officer - A fine of
Memorandum to All Banks dated 23 March 2006) P5,000 per day from the time of required
disclosure up to the time disclosure was
§§ X119.10 - X119.12 (Reserved)
made, or from the time misrepresentation
was made up to the time the information
§ X119.13 Sanctions. Without prejudice
was corrected, and a possible
to the other sanctions prescribed under
disqualification if warranted by the gravity
Sections 36 and 37 of R.A. No. 7653 and
the provisions of Section 16 of R.A. No. of the offense committed.
8791, sanctions shall be imposed g. On the responsible officer - A fine of
on BSP-supervised FIs for failure to comply P30,000 for participating in or tolerating the

§ X120
12.12.31
non-disclosure or misrepresentation of depositors, other creditors of the bank and

information, and a possible disqualification holders of LT2 and UT2 capital
if warranted by the gravity of the offense instruments;
committed. (4) The PDIC, as holder of the interim
FIs not supervised by the Bangko Sentral capital notes must not have a priority claim,
acting as selling agent and/or market maker in respect of its principal and coupon
of UnSDs and/or its concerned directors/ payments of the interim Tier 1 capital notes
officers that are found to violate rules and in the event of winding up of the bank,
regulations in the performance of their which is higher than or equal with that of
functions/responsibilities shall be subject to depositors, other creditors of the bank and
the provisions of Section 36 of R.A. No. holders of LT2 (e.g., limited life redeemable
7653 and shall, likewise, be referred to the preferred stock) and UT2 (e.g., perpetual and
SEC for appropriate action. cumulative preferred stock) capital
(As amended by Circular Nos. 778 dated 14 December 2012 instruments. The PDIC must waive its right
and 585 dated 15 October 2007) to set-off any amount it owes the bank
against any subordinated amount owed to
Sec. X120 Interim Tier 1 Capital for Banks it due to the interim Tier 1 capital notes;
Under Rehabilitation. The following are the (5) It must not be repayable without the
guidelines on the issuance of capital notes prior approval of the Bangko Sentral:
that will qualify as interim Tier 1 capital for Provided, That repayment may be allowed
banks under rehabilitation: only in connection with a call option after a
a. Banks under rehabilitation shall be minimum of five (5) years from issue date:
allowed, upon prior Bangko Sentral Provided, however, That a call option may
approval, to issue capital notes that shall be exercised within the first five (5) years
qualify as interim Tier 1 capital: Provided, from issue date upon entry of new investors:
That the PDIC shall be the holder of the Provided, further, That such repayment prior
said capital notes: Provided, further, That to maturity shall be approved by the Bangko
any transter from PDIC of said capital Sentral only if it is simultaneously replaced
notes shall require prior Bangko Sentral with issues of new capital which is neither
approval. smaller in size nor of lower quality than the
b. The interim Tier 1 capital notes original issue, unless the bank’s capital ratio
shall have the following minimum remains more than adequate after
features: redemption.
(1) It must be perpetual, unsecured and It must not contain any clause, which
subordinated; requires acceleration of payment of
(2) It must be issued and fully paid-up. principal, except in the event of insolvency.
Only the net proceeds received from the The agreement governing its issuance must
issuance shall be included as Tier 1 capital. not contain any provision that mandates or
The proceeds of the issuance must be creates an incentive for the bank to repay
immediately available without limitation to the outstanding principal of the interim
the bank; Tier 1 capital notes, e.g., a cross-default or
(3) It must neither be secured nor negative pledge or a restrictive covenant,
covered by a guarantee of the issuer or other than a call option, which may be
related party or other arrangement that exercised by the bank;
legally or economically enhances the (6) The PDIC, as holder of the interim
priority of the claim of the PDIC as against Tier 1 capital notes, shall have the right to

§ X120
08.12.31
convert, upon prior notice to the Bangko distributable determined in accordance with
Sentral, the interim Tier 1 capital notes into existing Bangko Sentral regulations. The
perpetual and non-cumulative preferred coupon rate, or the formulation for
shares convertible into common shares calculating coupon payments must be fixed
which may be sold to new investors: at the time of issuance of the interim Tier 1
Provided, That the rate of conversion shall capital notes and must not be linked to the
be fixed at the time of subscription of the credit standing of the bank;
interim Tier 1 capital notes; (10) It must not have step-up provisions
(7) The coupons must be non- in the coupon rate in conjunction with the
cumulative; call option;
(8) The bank must have full discretion (11) All other transactions involving the
over the amount and timing of coupon capital notes shall require prior Bangko
payments and it must have full control and Sentral approval.
access to waived payments; c. The bank must submit a written
(9) Any coupon to be paid must be paid opinion from its external auditor that the
only to the extent that the bank has profits features of the interim Tier 1 capital notes

(No pages 41 to 48)

§§ X120 - X126.1
14.12.31
shall be accounted for as equity instruments Particulars Ceiling

in accordance with PAS 32. (e) Voting shares of stock of a
(Circular No. 595 dated 11 January 2008) Filipino individual or a
Philippine non-bank
Secs. X121- X125 (Reserved) corporation in:
i.UB/KB and TB 40%
G. STOCK, STOCKHOLDERS ii.RB 60%
AND DIVIDENDS
Voting shares of stock of a
Sec. X126 Shares of Stock of Banks. The qualified Philippine
corporation in UB, KB, TB
following shall govern transactions affecting
and RB prior to the 60%
shares of stock of banks and the limits on
effectivity of R.A. No.
stockholdings in a single bank or in several 10641 (7 August 2014)
banks. (f) Combined ownership of
For purposes of this Section, the term an individual and
“corporations” shall include partnerships, corporation/s which is/are
cooperatives, associations and other wholly-owned or a majority
juridical persons/entities. of the voting shares of stock
(As amended by Circular No. 718 dated 26 April 2011) of which is owned by such
individual in:
§ X126.1 Limits of stockholdings in a i.UB/KB/TB 40%
single bank. The stockholdings of an ii.RB 60%
individual, corporation, family group, or
same group of persons in any bank shall be a. Any foreign individual or non-bank
subject to the limits prescribed in Sections corporation may each own or control up to
11, 12, and 13 of R.A. No. 8791, R.A. No. forty percent (40%) only of the voting stock
7906, R.A. No. 7353, as amended by R.A. of a UB, KB or TB: Provided, That the
No. 10574, R.A. No. 7721 as amended by aggregate foreign-owned voting stock
R.A. No. 10641, and other relevant laws as owned by foreign individuals and non-bank
summarized in the table below: corporations shall not exceed forty percent
(40%) of the voting stock of the UB/KB, and
Particulars Ceiling sixty percent (60%) in the case of TBs.
(a) Voting shares of stock of a For RBs, non-Filipino citizens, excluding
foreign individual or a foreign foreign banks, may each or in the aggregate,
non-bank corporation in: own, acquire or purchase, up to sixty
i.UB/KB and TB 40% percent (60%) of the voting stock in an RB.
ii.RB 60% The percentage of foreign-owned voting
(b) Aggregate ownership of the stock in a bank shall be determined by the
voting shares of stock of foreign citizenship of the individual or corporate
individuals and/or foreign non-
stockholders in that bank.
bank corporations in:
i.UB/KB 40% b. Qualified foreign banks may own or
ii.TB/RB 60% control up to 100% of the voting stock of a
(c) Voting shares of stock of a domestic bank.
qualified foreign bank in UB, 100% c. Any Filipino individual or a
KB, TB and RB domestic non-bank corporation may each
(d) Combined ownership of the own up to forty percent (40%) only of the
voting shares of stock of 100% voting stock of a UB, KB or TB, and up to
qualified foreign banks in UB, sixty percent (60%) only of the voting stock
KB,TB and RB of a rural bank.

§§ X126.1 - X126.2
14.12.31
d. An individual and a corporation or stockholders of the corporation, irrespective

corporations which are wholly-owned, or of the place of incorporation. For purposes
a majority of the voting stock of which is hereof, the term “controlling stockholders”
owned, by him, may own only up to a shall refer to stockholders holding more than
combined forty percent (40%) of the voting fifty percent (50%) of the voting stock of the
stock of a UB, KB or TB, and up to a corporate stockholders of the bank.
combined sixty percent (60%) of the voting In the case of RBs, a corporate
stock of a RB. stockholder thereof shall be deemed
e. Stockholdings of family groups or Filipino-owned if it is organized under the
related interests. Individuals related to each laws of the Philippines and at least sixty
other within the fourth degree of percent (60%) of its capital is owned by
consanguinity or affinity, whether legitimate, Filipino citizens.
illegitimate or common-law, shall be (3) The relationship of individuals who
considered family groups or related interests are stockholders of a bank shall be
and may each own up to forty percent (40%) determined in accordance with the
of the voting stock of a UB, KB or TB and provisions of Articles 963 to 966 of the Civil
up to sixty percent (60%) of the voting stock Code of the Philippines.
of an RB: Provided, That said relationship (As amended by Circular Nos. 858 dated 21 November 2014,
must be fully disclosed in all transactions 809 dated 23 August 2013, 718 dated 26 April 2011 and Circular
No. 682 dated 15 February 2010)
by such individuals or family groups or
related interests. § X126.2 Transactions involving voting
f. Two (2) or more corporations owned shares of stocks. The following regulations
or controlled by the same family group or shall govern all transactions involving voting
same group of persons shall be considered shares of stocks in banks.
related interests but may each own up to For purposes of this Subsection,
forty percent (40%) of the voting stock of a “transaction” shall refer to subscription/
UB, KB or TB and up to sixty percent (60%) issuance, purchase/sale, transfer, conversion
of the voting stock of an RB: Provided, That of preferred shares or debt instruments into
said relationship must be fully disclosed in voting shares of stock, and such act, contract,
all transactions by such individuals or family agreement or arrangement whereby a
groups or related interests. person, whether natural or juridical,
g. Ceiling on stockholdings in a Coop acquires voting shares of stock from one
Bank. The equity investment of any person, whether natural or juridical, or is
cooperative in any Coop Bank shall not vested the right to vote or the control of the
exceed forty percent (40%) of the subscribed voting shares of stock of a bank.
capital stock of such Coop Bank. a. Unlawful and void transactions
h. Determination of foreign-owned involving voting shares of stock of banks.
voting stock and citizenship of corporate The following transactions, to the extent of
stockholders in a bank as well as the the excess over any of the prescribed
relationship of stockholders of a bank. ceilings under R.A. No. 8791, R.A. No.
(1) The percentage of foreign-owned 7906, R.A. No. 7353, as amended by R.A.
voting stocks in a bank shall be determined No. 10574, R.A. No. 7721 as amended by
by the citizenship of all the stockholders in R.A. No. 10641 and other relevant laws are
that bank. hereby declared unlawful and void:
(2) The citizenship of the corporation, (1) Any transaction involving voting
which is a stockholder of a bank shall follow shares of stock of a bank, if such transaction,
the citizenship of the controlling in itself, or in relation with other/previous

§ X126.2
14.12.31
transaction/s shall result in the ownership accompanied by, in the case of transferee-
and control by an individual or corporation stockholder, the same papers/documents
of voting shares of stock in excess of any of required of incorporators/stockholders of
the prescribed limits of stockholdings in a newly established banks as provided in
bank. Appendix 37. The corporate secretary shall
(2) Any act, contract, agreement or hold in abeyance the registration of the
arrangement, such as voting trust agreement transaction until the required prior Bangko
or proxy, which vests in any person, whether Sentral approval is submitted as provided
natural or juridical, the right to vote or the in Subsec. X126.2.c.
control of the voting shares of stock of a bank, (3) In the case of additional subscription,
if such arrangement in itself, or in relation the bank shall not recognize the fund infused
with other/previous transaction/s, shall by the subscriber in its book as asset and
result in the acquisition of the right to vote liability or equity unless prior Monetary
or the control of voting shares of stock of Board approval is obtained. Pending
the bank, in excess of the prescribed approval by the Monetary Board, the fund
ceilings. infused by the subscriber shall be placed in
b. Transactions requiring prior Monetary an escrow in another bank.
Board approval (4) Sanctions. Any willful delay in the
(1) Prior approval of the Monetary Board submission by the transferor and transferee
shall be required on transaction involving of the request for prior Monetary Board
voting shares of stock of a bank, if such approval, together with the required
transaction, in itself or in relation with other/ supporting papers/documents, within sixty
previous transactions will: (60) calendar days from date of transaction
(a) result in ownership or control of more or thirty (30) calendar days from receipt by
than twenty percent (20%) of voting shares corporate secretary of request for
of stock of a bank by any person whether registration of the transaction, whichever is
natural or juridical or which will enable earlier, shall subject the transferor, the
such person to elect, or be elected as, a transferee, or both to the sanctions
director of such bank; or prescribed under Section 35 of R.A. No.
(b) effect a change in the majority 7653, without prejudice to the appropriate
ownership or control of the voting shares legal actions for the rescission and
of stock of the bank from one (1) group of invalidation of the transaction.
persons to another group: Provided, That in Moreover, any director and/or officer of
no case shall such transaction be approved a bank found to be acting in the interest of
unless the bank concerned shall an unregistered stockholder shall be subject
immediately comply with the prescribed to the applicable administrative sanctions
minimum capital requirement for new under Section 37 of R.A. No. 7653, without
banks, notwithstanding any approved prejudice to the filing of appropriate criminal
capital build-up program. charges as provided under Section 36 of R.A.
(2) The request for prior Monetary Board No. 7653.
approval shall be submitted jointly by the Furthermore, any violation of the
transferor-stockholder (or the bank in the provisions of Subsec. X126.2.b(3) hereof
case of additional subscription or shall subject the bank and/or its directors
conversion of preferred shares or debt and/or officers to the applicable
instruments) and the transferee-stockholder administrative sanctions under Section 37
thru the bank to the appropriate department of R.A. No. 7653, without prejudice to the
of the SES. The request shall be filing of appropriate criminal charges as

§ X126.2
14.12.31
provided under Section 36 of R.A. No. 7653. with the right to vote has controlling interest,
c. Duties of a corporate secretary. In all and the extent thereof;
transactions, which may lawfully come to (3) require the subscriber, purchaser,
the knowledge of the corporate secretary transferee or recipient of voting shares of
involving voting shares of stock of a bank stock to execute an affidavit (sample format
such as but not limited to subscription/ shown in Appendix 4) stating, among other
issuance, purchase/sale, transfer, conversion things, that the subscriber, transferee or
of preferred shares or debt instruments into recipient of voting shares of stock is a
voting shares of stock, or registration of bonafide owner of the said shares of stock,
voting trust agreements, or any form of that he/she is not an agent, assignee, proxy,
agreement vesting the right to vote or the nominee or a dummy of any person,
control of the voting shares of stock of the whether natural or juridical, and that he/
bank, the corporate secretary shall, before she acknowledges full awareness of:
registering the transaction or agreement in (a) the prohibitions against ownership
the stock and transfer book of the bank: of voting shares of stock in excess of the
(1) ascertain the identity and citizenship ceilings prescribed by laws/Bangko Sentral
of the subscriber, purchaser, transferee or regulations as provided in Subsec. X126.2.a;
recipient of voting shares of stock, voting and/or
trustee, proxy or person vested with the right (b) the requirement for prior Monetary
to vote, and for this purpose, he should Board approval for transactions resulting to
require the subscriber, transferee or significant ownership of voting shares of
recipient of voting shares of stock, voting stock of a bank by any person, whether
trustee, proxy or the person vested with the natural or juridical, or by one (1) group of
right to vote to submit proof of citizenship, persons, as provided in Subsec. X126.2.b.
which may consist, in case of a corporation, If the request for registration of
of a certified true copy of the articles of transaction will patently cause the voting
incorporation, accompanied by the affidavit shares of stocks of an individual or a
of the corporate secretary of the corporation, corporation to exceed the ceilings
certifying to the correctness and accuracy prescribed by laws/Bangko Sentral
of the list of stockholders, their citizenship regulations, the corporate secretary shall
and the percentage of shares owned by deny the registration of the transaction and
them; forthwith inform the parties to the
(2) require the subscriber, purchaser, transaction in writing.
transferee or recipient of voting shares of If the request for registration of
stock, voting trustee, proxy or person vested transaction would result to the significant
with the right to vote, at the time of the ownership of the voting shares of stock of a
receipt of the request for registration of bank by any person, whether natural or
transaction, to disclose all information with juridical, or by one (1) group of persons,
respect to persons related to the subscriber, requiring prior Monetary Board approval as
transferee or recipient of voting shares of provided in Subsec. X126.2.b, and no such
stock, voting trustee, proxy or person vested prior Monetary Board approval is submitted,
with the right to vote, within the fourth the corporate secretary shall hold in
degree of consanguinity or affinity, whether abeyance the registration of the transaction
legitimate, illegitimate or common-law, as and forthwith inform the parties to the
well as corporations, where the subscriber, transaction in writing.
transferee or recipient of voting shares of In the event the corporate secretary has
stock, voting trustee, proxy or person vested reason to doubt the legality of the transaction

§§ X126.2 - X126.3
14.12.31
sought to be registered, he/she may (2) A separate list containing the names
commence an action before the appropriate of stockholders who own voting shares of
body; stock in the bank and who are related to
(4) promptly inform stockholders each other within the fourth degree of
(a) who have reached any of the ceilings consanguinity or affinity, whether legitimate,
prescribed by laws/Bangko Sentral illegitimate or common-law (in the case of
regulations of their ineligibility to own or individuals) as well as corporations which
control more than the applicable ceiling are wholly-owned or a majority of the stock
or (b) who would own voting shares of of which is owned by any of such
stock requiring prior Monetary Board stockholders, including their subsidiaries;
approval; and and
(5) disclose the ultimate beneficial (3) An affidavit under oath (sample
owners of bank shares held in the name of format shown in Appendix 4) from each of
Philippine Central Depository (PCD) the stockholders attesting, among other
Nominee Corporation in the annual (or things, that he/she/it is the bonafide owner
quarterly whenever changes occur) report of the voting shares of stock of the bank in
on Consolidated List of Stockholders and his/her/its own right, and not as an agent,
Their Stockholdings (BSP 7-16-11), which assignee, proxy, nominee or a dummy of
report shall be made under oath by the any other person, natural or juridical.
(As amended by Circular Nos. 858 dated 21 November 2014,
corporate secretary. Any willful delay in the
809 dated 23 August 2013 and 718 dated 26 April 2011)
submission of said report, a Category A-2
report, shall subject the bank to the
§ X126.3 Other foreign equity
corresponding fines for delayed reports in
investment in domestic banks. Except as
accordance with the provisions of Subsec.
otherwise covered under Sec. X105 and
X192.2 to be reckoned on the day following
Subsec. X126.1, the following guidelines
the due date of submission until the correct shall be observed on equity investments of
report is submitted to the Bangko Sentral. foreigners in domestic banks:
Sanctions. The corporate secretary found a. The prior authority of the Monetary
to have willfully falsely certified/submitted Board shall be obtained by foreign banks,
misleading statements and/or violated any including their subsidiaries and their holding
of the provisions of Subsec. X126.2.c shall companies having majority holdings in such
be subject to the applicable administrative foreign banks, whenever acquiring more
sanctions under Section 37 of R.A. No. than forty percent (40%) of the voting stock
7653. The imposition of the said of a domestic bank, including foreign-owned
administrative actions is without prejudice shares outstanding and foreign-held as of 27
to the filing of appropriate criminal charges April 1973 and which continued to be held
as provided under Section 35 of R.A. No. by the foreign stockholder up to the date of
7653 for the willful making of false or the acquisition by the foreign banks.
misleading statement. b. (Deleted by Cir. No. 256 dated 15
d. Requirement for newly established August 2000)
banks. Entities which may hereinafter apply c. The prior authority of the Monetary
for a license to engage in banking business Board is not required if the foreign investor
shall, before being allowed to operate, is (1) an individual, (2) a non-financial entity,
submit - or (3) a non-bank financial entity which is
(1) An alphabetical list of stockholders not owned or controlled by a bank, its
with the number and percentage of voting subsidiary or holding company, and the
shares of stock owned by them; investor is acquiring foreign-owned shares

§§ X126.3 - X126.5
15.10.31
in existing domestic banks: Provided, That acquired by the holders by virtue of such
said shares were outstanding and foreign cumulative feature are not satisfied by the
held as of 27 April 1973 and which bank within a period of three (3) years
continued to be foreign-held up to the date from date of issue.
of acquisition by the foreign investor. d. Conversion of preferred shares of
d. The maximum stockholdings stock into voting/common shares of
foreigners may own in domestic banks stock, regardless of convertibility features
shall continue to be governed by existing and notwithstanding any provision of
provisions of law. existing Bangko Sentral regulations to the
e. Only foreign-owned shares directly contrary, shall be:
funded by inward remittance of foreign (1) effected only to the extent of the
exchange sold to the local banking system prescribed ceilings under existing laws;
are qualified for registration with the and
Bangko Sentral through its appropriate (2) subject to prior Monetary Board
department for capital repatriation and approval whenever said conversion will
remittance of profits/dividends privileges, result to significant ownership of the
in accordance with existing Bangko Sentral voting/common shares of stock of a bank
rules and regulations. by any person, whether natural or
juridical, or by one group of persons, as
§ X126.4 Convertibility of preferred provided in Subsec. X126.2.b.
stock to common stock. Out of the The foregoing provision must be
convertible preferred shares of stock specifically stated in the certificates of
which KBs/TBs may henceforth be preferred shares of stock.
authorized to issue, at least fifty percent (As amended by Circular No. 718 dated 26 April 2011)
(50%) of each such issue, shall be
convertible into common stock at the § X126.5 Issuance of redeemable
option of the holders thereof after five (5) shares: conditions; certification and
years from date of issue: Provided, report; sanctions.
however, That : a. Conditions. Banks may issue
a. The bank concerned may allow the redeemable shares subject to the
conversion of such preferred stock into following conditions:
common stock even before the lapse of (1) The applicant bank prior to the
five (5) years from date of issue; approval of the amendment of articles of
b. At the time of the sale of the incorporation to issue redeemable
preferred stock, both classes thereof (one preferred shares, has complied with the
with convertibility feature and the other requirements under Items “B1” to “B6”,
without convertibility feature) shall be Appendix 5.
offered to the purchasers, with the The articles of incorporation of an
purchasers having the option to acquire applicant bank shall incorporate the
either or both classes of preferred stock; conditions in Items “a (3)(a)”, “a(3)(b)”,
and “a(3)(c)” and “a(3)(d)” of this Subsection.
c. Preferred shares of stock with a (2) The applicant bank prior to the
cumulative feature issued by banks shall issuance of redeemable shares shall comply
automatically be convertible into common with, in addition to the conditions in Item “(1)”
shares of stock at the option of the holders above, the requirements under Items “B7”,
thereof whenever the right as may be “B8”, and “B12” to “B16”, Appendix 5.

§ X126.5
15.10.31
(3) The applicant bank after the requisites and conditions set forth in Items
issuance of redeemable shares shall “(a)” to “(d)” above;
comply with the following: (f) The conditions in Items “(3)(a)”,
(a) Redemption of shares shall be “(3)(b)”, “(3)(c)” and “(3)(d)” above shall
allowed at the specific dates or periods be incorporated in the certificates of
fixed for redemption only upon prior stock; and
approval of the Bangko Sentral and, where (g) Shares issued with the replacement
the conditions of the issuance specifically requirement upon redemption shall be
state, only if the shares redeemed are eligible as Upper Tier 2 capital for
replaced with at least an equivalent purposes of computing qualifying capital
amount of newly paid-in shares so that as provided in applicable and existing
the total paid-in capital stock is capital adequacy framework. Shares
maintained at the same level immediately issued without such condition shall be
prior to redemption: Provided, That the eligible as Lower Tier 2 capital.
redemption shall not be earlier than five b. Certification and report. The bank
(5) years after the date of issuance: shall submit within fifteen (15) days after
Provided, further, That such redemption every issuance of at least twenty percent
may not be made where the bank is (20%) of the redeemable shares whether
insolvent or if such redemption will cause issued in series or at one (1) time, a
insolvency, impairment of capital or certification signed by its President/
inability of the bank to meet its debts as Chairman under oath, stating that the
they mature; requirements under Items “a(1)” and “a(2)”
(b) A sinking fund for the redemption above, including all other conditions that
of preferred shares is to be created upon the Bangko Sentral may impose, have been
their issuance. This is to be effected by complied with. The applicant bank shall,
the transfer of free surplus to a restricted not later than ten (10) days from the end
surplus account. The fund shall not be of reference year, submit a yearly report
available for dividends. The guidelines for of issuances of preferred shares to the
the establishment and administration/ appropriate department of the SES
management of sinking fund for the indicating therein the name/s of the
redemption of redeemable private subscriber/s, the date the shares were
preferred shares are shown in Appendix issued and the number/amount of shares
47. issued.
(c) The issuing bank shall not treat in c. Sanctions. Any violation of the
any way redeemable preferred shares as foregoing provisions shall be subject to
time deposit, deposit substitute or other the following sanctions:
form of borrowings; (1) On the bank:
(d) No dividend shall be declared or (a) For failure to comply with Items
paid on redeemable shares in the absence “a(3)(a)” to “a(3)(d)” above:
of sufficient undivided profits, free i. Suspension of branching privilege;
surplus; ii. Prohibition against granting of new
(e) The issuing bank shall execute unsecured loans to DOSRI;
within ten (10) days after the first issuance iii. Prohibition against declaration of
a Deed of Undertaking (see Appendix 42), dividends;
to be signed by its directors and principal iv. Denial of access to Bangko Sentral
officers, binding them to comply with the rediscounting facilities;

§§ X126.5 - X126.10
15.10.31
v. Revocation of authority to accept found to be false, a fine of P5,000 per day

government deposits and to handle from the time the certification was made
government funds as a result of agency up to the time the certification was found
agreements with the BIR, SSS, etc. to be false, shall be imposed against the
(b) For failure to infuse capital in an certifying officer.
amount at least equivalent to amount of (As amended by Circular Nos. 888 dated 9 October 2015,
827 dated 28 February 2014 and 585 dated 15 October
redeemed shares as required in
2007)
Item “a(3)(a)”:
i. Sanctions in Item “(a)” above; § X126.6 Stock options/warrants. A
ii. No new loans and investments, bank may grant options/warrants to
except in government securities; subscribe at par to its capital stock:
iii. P1,000 fine per day until the Provided, That:
required infusion is made. a. Provisions authorizing such options
(c) If the certification submitted by the warrants shall be embodied in its articles
bank required in these guidelines is found of incorporation and in its by-laws; and
to be false, suspension of authority to b. Such options/warrants may be
issue preferred shares for one (1) year. granted for a maximum period of three (3)
(d) For failure to submit report of years from the date such options/warrants
issuance of redeemable preferred shares, become effective.
a fine of P1,200 for UBs/KBs; P600 for
TBs; and P180 for RBs/Coop Banks per §§ X126.7 - X126.9 (Reserved)
day of default until the report is submitted.
(2) On the directors and officers: § X126.10 Dealings with stockholders
(a) For violation of any of the terms of and their related interests. Dealings of a
the Deed of Undertaking, the following bank with any of its stockholders and their
shall be imposed against the officers and related interests shall be upon terms not
directors of the bank who signed the deed: less favorable to the bank than those
i. First offense - A fine of P500 per day offered to others. Towards this end, every
for each violation from the time the natural person acquiring shares
violation was committed or up to the time cumulatively amounting to at least two
the violation is corrected; percent (2%) of the total subscribed
ii. Second and subsequent offenses - capital of a domestic bank must disclose
A fine of P5,000 per day from the time all relevant information on all persons
the violation was committed up to the time related to him within the fourth degree of
the violation is corrected. consanguinity or affinity, whether
(b) If the certification submitted by the legitimate, illegitimate or common law as
bank as required in these guidelines is well as corporations, partnership or

§§ X126.10 - 2127.2
08.12.31
associations where he has controlling majority or all of the equity of which is

interests. A corporation acquiring shares owned by such person or family group,
amounting to at least two percent (2%) of owns more than forty percent (40%) of the
the total subscribed capital of a domestic voting stock of any UB or KB may not
bank must disclose its controlling acquire more than forty percent (40%) of
stockholders or group of stockholders as the voting stock in any other UB or KB,
well as the corporations, partnerships or even if the shares of stock are being
association where such controlling acquired from a natural person in a single
stockholders or group of stockholders have transaction and the stockholding is in
controlling interest. excess of forty percent (40%) of the bank’s
The foregoing information shall also be voting stock.
disclosed in cases of the following For purposes of determining
transactions: availment of credit facility applicability of the limitations provided in
from the bank; purchase or sale of asset this Section, stockholders shall be deemed
from/to the bank; leasing property from or as affiliated to each other through common
to the bank; providing janitorial, business interest or a business group in cases
messengerial, security and other services where the holdings of such stockholders
to the bank; and such other transactions as altogether constitute a majority or control
may be required to be disclosed by the in one (1) or more enterprises.
Monetary Board. Where the stockholdings
of such individual/organization together §§ 1127.2 - 1127.5 (Reserved)
with his/its related interests amount to at
least two percent (2%) of the total Sec. 2127 Shares of Stock of Thrift Banks
subscribed capital stock of the bank, the The following regulations shall also govern
foregoing transactions shall be subject to shares of stock in TBs.
the procedural requirements and the
reportorial requirements prescribed under § 2127.1 Moratorium on ownership
Secs. X334 and X335, respectively. ceilings1
(Deleted)
Sec. X127 (Reserved)
§ 2127.2 Preferred shares. Private
Sec. 1127 Shares of Stock of Universal/ development banks may also issue ordinary
Commercial Banks. The following preferred shares of stock to private persons,
guidelines shall also govern shares of stock other than the preferred stock representing
in UBs and KBs. government counterpart capital
contribution: Provided, That said preferred
§ 1127.1 Limits on stockholdings in stock sold to private persons shall be
several banks. Stockholders affiliated to governed by the pertinent BSP regulations
each other through a common interest for preferred stock issued to private
herein termed a business group or any investors.
corporation or association majority or all Preferred shares of stock of private
of the equity of which is owned by a development banks held by DBP/LBP and
business group may not control more sold thereafter to private persons may, at
than one (1) KB nor more than one (1) the option of the purchasers, be retained
UB or both. with the same rights as when such shares
Any natural person or a family group, of stock were held by DBP/LBP, or
who, together, with any corporation converted at not less than par to common
1
Stockholdings in a TB were exempted from the ownership ceilings prescribed under Subsec. X126.1 until
16 March 2005.
§§ 2127.2 - 3127.3
13.12.31
shares or to ordinary preferred shares of liquidation; and (c) preferred stock with
the class issued to private shareholders. such rights, voting powers, preferences and
restrictions, as may be approved by the
§§ 2127.3 - 2127.5 (Reserved) Monetary Board. Preferred and common
stocks shall have a minimum par value of
Sec. 3127 Shares of Stock of Rural Banks one peso (P1.00) per share: Provided, That
and Cooperative Banks. The following starting 2 July 2009, RBs which have a par
rules shall govern stockholdings in RBs and value per share higher than P1.00 and
Coop Banks: choose to lower the par value of their shares
of stock will be required to undertake the
§ 3127.1 Moratorium on ownership necessary steps and secure attendant
ceiling. Individual stockholdings in RBs in approvals from the BOD and stockholders
excess of the forty percent (40%) ceiling of the banks involved as well as from
as of 02 April 2002 and as provided in relevant regulatory agencies to ensure that
Section 11 of R.A. No. 8791 may be the reduction in par value shall not result
retained: Provided, That such excess to a dilution in the percentage holdings of
stockholdings were approved by the stockholders and that its effect shall not
Monetary Board: Provided, further, That prejudice the rights of creditor. An RB may
such stockholdings shall not be further not issue no-par value stock.
increased, but may be reduced and once In the case of an acquisition plan of an
reduced, shall not thereafter be increased RB already approved-in-principle by the
beyond the forty percent (40%) ceiling Monetary Board where the shares of stock
prescribed under said Section 11. of the target RB are at a par value per share
Any request for exemption from the higher than P1.00, the acquiring bank may
prescribed ownership ceilings of individual/ request from the Bangko Sentral the
non-bank/corporate stockholdings shall be incentive to value the shares of stock of the
submitted to the Monetary Board for to-be-acquired RB at the minimum par value
approval through the appropriate of P1.00: Provided, That the acquiring bank
department of the SES and the exemption will be responsible for securing the
shall be reflected in the required report on necessary approvals from its BOD and
stock transactions. In cases where stockholders as well as from the Bangko
unsubscribed shares of stock are sold to any Sentral and the SEC pursuant to Section 14
person other than the existing stockholders, of R.A. No. 8791 and Section 38 of the
the bank’s corporate secretary shall execute Corporation Code of the Philippines.
a certificate under oath that all the pertinent The LBP, the DBP, or any government-
requirements of the Corporation Code on a owned or-controlled bank or financial
valid stock transfer/subscriptions have been institution, on representation of the said
complied with. private shareholders but subject to the
investment guidelines, policies and
§ 3127.2 Government-held shares procedures of the bank or financial
The articles of incorporation of RBs or the institution and upon approval by the
articles of cooperation of Coop Banks Monetary Board of the Bangko Sentral, shall
shall provide for: (a) common stock with the subscribe to the capital stock of any RB,
power to vote; (b) preferred stock to which shall be paid in full at the time of
represent the counterpart capital of the LBP, subscription, in an amount equal to the fully
DBP or any government-owned or paid subscribed and unimpaired capital of
controlled bank or FI, which shall be the private stockholders or such amount as
non-voting and preferred as to assets upon the Monetary Board may prescribe as may

§§ 3127.2 - X128
14.12.31
be necessary to promote and expand rural incorporation shall be amended to reflect

economic development. the conversion, if any, of the preferred shares
(As amended by Circular Nos. 809 dated 23 August 2013 and of stock into common stock.
663 dated 10 September 2009) For this purpose, a certificate that all
preferred shares have been sold and
§ 3127.3 Limits on stockholdings in transferred to private shareholders shall be
several rural banks. Individuals, banks and issued, duly signed by the president, the
non-bank corporations may, subject to corporate secretary, and a majority of the
applicable ownership ceilings, own voting board of directors. The bank shall submit
shares in such number of RBs as may be copies of such certificate and the amended
authorized by the Monetary Board. articles of incorporation to the Bangko
(As amended by Circular No. 809 dated 23 August 2013) Sentral for the issuance of a certificate of
authority for the purpose of registering the
§ 3127.4 Convertibility of preferred
amended articles with the SEC.
stock to common stock. RBs may convert
(As amended by Circular No. 809 dated 23 August 2013)
their unissued preferred shares into common
stock.
§ 3127.5 Guidelines for selection. In
In the case of sale by the DBP, LBP or
determining the fitness and propriety of the
any government-owned or controlled bank
non-Filipino citizen, excluding foreign banks
or financial institution of preferred stock to
that will be allowed to invest in the voting
private persons, such stock may be stock of an RB, criteria, such as, but not
converted into common stock: Provided, limited to the following, shall be considered:
That such shares may be sold at any time at a. strategic objectives in investing in
adjusted book value: Provided further, That an RB;
pending amendment of the bank’s articles b. demonstrated capacity;
of incorporation, if necessary for the purpose c. good reputation and integrity; and
of reflecting the conversion, the transfer shall d. business model that is credible,
be recorded by the bank in its stock and innovative and consistent with the policy
transfer book and such shareholders shall objectives of R.A. No. 10574.
thereafter enjoy all the rights and privileges A foreign bank seeking to own, acquire
appurtenant to the converted stock. The or purchase up to 100% of the voting stock
certificates for the government preferred in an RB shall meet the qualification
stocks so transferred shall be surrendered requirements and selection criteria under
and cancelled and the corresponding Subsecs. X105.2 and X105.3, respectively.
common stock certificates shall be issued. (Circular No. 809 dated 23 August 2013, as amended by Circular
The corporate secretary of the bank shall No. 858 dated 21 November 2014)
submit to the appropriate department of the
SES and the SEC a report of every transfer of Sec. X128 Deposits for Stock Subscription.
preferred stock from the LBP, DBP or any Deposits for stock subscription refer to
government-owned or controlled bank or payments made by existing stockholders or
financial institution to private shareholders new subscribers of the bank on subscription
within five (5) banking days from the date to the increase in the authorized capital,
of such transfer. which may be recognized either as a liability
When all the preferred shares of stocks or equity.
held by the LBP, DBP or any government- Deposits for stock subscription shall be
owned or controlled bank or financial recognized as part of equity for prudential
institution have been sold to private reporting purposes when all of the following
shareholders, the bank’s articles of conditions are met:

§§ X128 - X136.1
15.10.31
a. The deposit for stock subscription Sec. X136 Dividends. The following rules
meets the definition of an equity instrument and regulations shall govern the declaration
under Philippine Accounting Standards of dividends on shares of stock, regardless
(PAS) 32 Financial Instruments: Presentation of feature, as well as interest payments on
such that the deposit for stock subscription unsecured subordinated debt which meet
shall not be interest-bearing nor the qualification requirements of Additional
withdrawable by the subscriber; Tier 1 or Hybrid Tier 1 capital as defined
b. The bank’s existing authorized capital under existing risk-based capital adequacy
is already fully subscribed; framework.
c. The bank’s stockholders and board Pursuant to Section 57 of R.A. No.
of directors have approved the proposed 8791, no bank shall declare dividends
increase in authorized capital; greater than its accumulated net profits then
d. The bank has filed an application for on hand, deducting therefrom its losses and
the amendment of its articles of bad debts. Neither shall the bank declare
incorporation for the increase in authorized dividends if, at the time of declaration, it
capital with the appropriate department of has not complied with the provisions of
the SES, duly supported by complete Subsec. X136.2.
documents as listed in Annex B of Circular (As amended by Circular No. 888 dated 09 October 2015)
Letter No. 2009-042 dated 14 May 2009.
Applications for the amendment of § X136.1 Definitions. For purposes of
articles of incorporation for the increase in
this Section, the following definitions shall
authorized capital, which have been
apply:
returned due to insufficiency of supporting
a. Bad debts - shall include any debt on
documents, shall not qualify for recognition
which interest is past due for a period of six
as an equity instrument; and
(6) months, unless it is well secured and in
e. The bank must have obtained
process of collection.
approval of the Monetary Board on
transactions involving significant ownership A loan payable in installments with an
of voting shares of stock by any person, automatic acceleration clause shall be
natural or juridical, or by one group of considered a bad debt within the
persons as provided in Item “b” of Subsec. contemplation of this Subsection where
X126.2, if applicable. installments or amortizations have become
Deposits for stock subscription, which past due for a period of six (6) months,
do not meet the abovementioned conditions unless the loan is well secured and in
shall be classified as a liability. process of collection. For a loan payable in
Deposits for stock subscription, which installment without an acceleration clause,
meet the conditions to be recognized as only the installments or amortizations that
equity shall form part of a bank’s qualifying have become past due for a period of six (6)
capital for purposes of computing the risk- months and which are not well secured and
based capital adequacy ratio under in the process of collection shall be
Sec. X115 for UBs/KBs as well as their considered bad debts within the
subsidiary banks and QBs, and Sec. X118 contemplation of this Section.
for standalone TBs, RBs and Coop Banks. b. Well secured - A debt shall be
(Circular 762 dated 25 July 2012) considered well secured (or fully secured),
if it is covered by collateral in the form of a
Secs. X129 - X135 (Reserved) duly constituted mortgage, pledge, or lien

§§ X136.1 - 3136.2
15.10.31
on real or personal properties, including b. Liquidity floor requirement for

securities, having a loan value sufficient to government funds;
discharge the debt in full, including accrued c. Minimum capitalization requirement
interest and other pertinent fees and expenses. and risk-based capital ratios as provided
c. In process of collection - A debt due under applicable and existing capital
to a bank shall be considered in process of adequacy framework;
collection when it is the subject of d. Capital conservation buffer
continuing extrajudicial or judicial requirement as defined in Appendix 63b,
proceedings aimed towards its full Part III, for universal and commercial banks
settlement or liquidation or otherwise to (UBs/KBs) and their subsidiary banks and
place it in current status. quasi-banks(QBs);
The extrajudicial proceedings, such as e. Higher loss absorbency requirement,
the writing of collection or demand letters, phased-in starting 1 January 2017 with full
must have been initiated by the bank and/ implementation by 1 January 2019, in
or its lawyers before the interest or accordance with Domestic Systemically
installments or amortizations on the debt Important Banks (DSIBs) Framework as
have become past due and unpaid for a provided under Subsec. X115.5, for UB/KBs
period of six (6) months. and their subsidiary banks and QBs that are
The debt shall continue to be considered identified as DSIBs; and
in process of collection for a period of f. Has not committed any unsafe or
six (6) months counted from date of the first unsound banking practice as defined under
collection or demand letter and if, within existing regulations and/or major acts or
this period, the debtor fails to make a omissions1 as may be determined by the
payment of at least twenty percent (20%) of Bangko Sentral to be ground for suspension
the outstanding balance of the principal on of dividend distribution, unless this has
his account, plus all interest which may have been addressed by the bank as confirmed
accrued thereon, the same shall by the Monetary Board or the Deputy
automatically be classified as bad debts Governor, SES, as may be applicable, upon
unless judicial proceedings are instituted. recommendation of the appropriate
The debt shall continue to be considered department of SES.
in process of collection during the pendency Banks shall ensure compliance with the
of the judicial proceedings. When judgment minimum capital requirements and risk-
against the debtor has been obtained, the based capital ratios even after the dividend
bank must be active in enforcing the distribution.
(As amended by Circular Nos. 888 dated 09 October 2015 and
judgment for the debt to continue to be 571 dated 21 June 2007)
considered in process of collection.
§ 3136.2 Limitations/Amount available
§ X136.2 Requirements on the for dividends declared by rural banks and
declaration of dividends. At the time of cooperative banks. The following rules shall
declaration, banks shall have complied with also govern the declaration of dividends by
the following: RBs and Coop Banks.
a. Clearing account with the Bangko a. Reserve for retirement of government
Sentral is not overdrawn; preferred stock. In addition to the requirements
1
Major acts or omissions is defined as bank individual failure to comply with the requirements of banking
laws, rules and regulations as well as Monetary Board directives having material impact on bank capital,
solvency, liquidity or profitability, and/or those violations classified as major offenses under the Report of
Examination, except those classified under unsafe or unsound practice.

§§ 3136.2 - X136.4
15.10.31
prescribed in Subsec. X136.2, an RB/Coop bank are not precluded from entering into
Bank may declare cash dividends only if the an agreement providing for rates of
amount of its reserve for retirement of gov- dividends other than those prescribed by
ernment preferred stock is at least equal to law.
the amount which should have been accu- (3) Held on or after 13 September 2013.
mulated had the bank transferred annually Shares held by the LBP, DBP, or by any
to the reserve account from its undivided government-owned or-controlled bank or FI
profits an amount equal to at least an aver- shall share in dividend distributions from
age of one-tenth (1/10) of the total amount the date of issuance in an amount based on
of preferred stock; and the lending benchmark approved by the
b. Applicability of other laws, rules and Bangko Sentral plus the prevailing non-
regulations for Coop Banks. Coop Banks prime spread of the government FI:
shall, likewise, comply with the provisions Provided, That the RB and the government-
governing the distribution of net surplus as owned or-controlled bank are not precluded
provided under Article 86 of R.A. 9520, the from entering into an agreement providing
Coop Bank’s By-laws as other laws, rules for rates of dividends other than those
and regulations. prescribed by law.
c. Dividends on government shares (Circular No. 888 dated 09 October 2015)
for RBs
(1) Held prior to 09 June 1992. X136.3 Net amount available for
Whenever dividends of not less than dividends. The net amount available for
fourteen percent (14%) are declared on dividends shall be the amount of
common stock, government preferred stock unrestricted or free retained earnings and
shall be entitled to a cash dividend not to undivided profits reported in the Financial
exceed two percent (2%) of total outstanding Reporting Package (FRP) as of the calendar/
preferred stock. Should the dividends fiscal year-end immediately preceding the
declared on common stock be less than date of divided declaration.
fourteen percent (14%), the dividend on The derivation of the amount of
preferred stock shall be proportionately dividends from the unrestricted/free retained
reduced. earnings shall be based on a sound
(2) Held on or after 09 June 1992. Shares accounting system and loss provisioning
held by the LBP, DBP, or by any processes under existing regulations which
government-owned or-controlled bank or FI takes into account relevant capital
shall share in dividend distributions from adjustments including losses, bad debts and
the date of issuance in the amount of four unearned profits or income1.
percent (4%) on the first and second years; (As amended by Circular No. 888 dated 09 October 2015)
six percent (6%) on the third and fourth
years; eight percent (8%) on the fifth and § X136.4 Reporting and verification.
sixth years; ten percent (10%) on the seventh Declaration of dividends shall be reported
and eighth years; and twelve percent (12%) by the bank concerned to the appropriate
on the ninth to the fifteenth years, which department of the SES within ten (10)
shall be cumulative: Provided, That the RB business days after date of declaration in
and the government-owned or controlled the following manner:
1
Unearned profits or income refers to unrealized items which are considered not available for dividend
declaration such as accumulated share/equity in net income of its subsidiaries, associates or joint venture
accounted for under the equity method, recognized deferred tax asset, foreign exchange profit arising from
revaluation of foreign exchange denominated accounts and others.

§§ X136.4 - X136.10
15.10.31
a. Submission of a duly notarized prior Bangko Sentral verification, disclosure

certification (Appendix 114) signed by the by means of a footnote should include a
President, or an officer of equivalent rank, statement to the effect that the dividend
and the Chief Compliance Officer stating declaration is subject to review by the
that the bank has complied with the Bangko Sentral.
requirements on the declaration of (As amended by Circular No. 888 dated 09 October 2015)
dividends provided under Subsec. X136.2,
and, in the case of rural banks and § X136.6 Issuance of fractional shares.
cooperative banks, Subsec. 3136.2, as Whenever the declaration of stock dividend
well as other existing applicable laws; and results in the issuance of fractional shares,
b. Submission of the Report on banks may observe the following guidelines:
Dividends Declared listed under a. The amount corresponding to the
Appendix 6, which shall be considered a fraction should be given in the form of cash
Category A-1 report. dividend; and
However, banks with major b. The certificate of stock issued
supervisory concerns such as those should be in whole numbers, and the
initiated under prompt corrective action fractional shares shall be issued in the
(PCA) or with specific MB directive to form of scrip certificates. In no case shall
suspend/refrain/restrict dividend the certificate of stock be issued including
declaration, shall be subject to prior Bangko such fractional share. The scrip certificate
Sentral verification by the appropriate is temporary in nature and should be
department of the SES. Pending verification redeemed in cash when the bank is in a
of abovementioned reports, no position to do so, or stockholders holding
announcement or communication on the such scrip certificates may negotiate with
declaration of dividends nor shall any other stockholders for the purchase or sale
payment be made thereon until receipt of of such shares to convert them into full
Bangko Sentral advice thereof. shares, subject to the limitations on
(As amended by Circular No. 888 dated 09 October 2015) stockholdings as provided by law.
§ X136.5 Recording of dividends. The § X136.7 – X136.9 (Reserved)

liability for dividends declared shall be taken
up in the bank’s books upon its declaration. § X136.10 Supervisory Enforcement
However, for dividend declarations that Actions. Consistent with Sec. X009, the
are subject to prior Bangko Sentral Bangko Sentral may deploy enforcement
verification, the liability for dividends actions to promote adherence with the rules
declared shall be taken up in the bank’s and regulations governing dividend
books upon receipt of Bangko Sentral advice declaration and bring about timely
thereof. A memorandum entry may be corrective actions. The Bangko Sentral may
made to record the dividend declaration on issue directives to suspend/refrain/
the date of approval by the board of restrict from performing a particular
directors. activity or impose sanctions to limit the
For full disclosure purposes, the level of or suspend any business activity
dividends declared shall be disclosed in the that has adverse effects on the safety or
financial statements either as a footnote in soundness of the bank, among others.
the statement of changes in equity or in the Sanctions may likewise be imposed on a
notes to the financial statements. For bank and/or its directors, officers and/or
dividends declared that is still subject to employees.

§§ X136.10 - X141.1
15.10.31
The imposition of sanctions shall be continuously strengthen corporate

without prejudice to the imposition of governance in its supervised financial
administrative sanctions under Section 37 institutions cognizant that this is central in
of R.A. No. 7653 including declaring as sustaining the resiliency and stability of the
unsafe or unsound (as defined under Section financial system. In this light, the Bangko
56 of R.A. No. 8791) the inappropriate Sentral is aligning its existing regulations
dividend declarations, and/or to the filing with international best practices that
of appropriate criminal charges against promote good corporate governance such
culpable persons as provided under Section as the “Principles for Enhancing Corporate
35 of R.A. No. 7653 for the willful making Governance” issued by the Basel Committee
of a false/misleading statement. on Banking Supervision.
Further, banks subsequently found to Applicability to branches of foreign
have violated the provisions on dividend banks. Branches of foreign banks shall
declaration or have falsely certified/ comply with the governance policies,
submitted misleading statements shall be practices and systems of the head office
reverted to the prior Bangko Sentral
as well as meet the applicable standards,
verification wherein the bank can only make
principles and requirements set forth
an announcement or communication on the
under Secs. X141, X142, and X174, except
declaration of dividends or payment of
the reportorial requirements under
dividends thereon1 upon receipt of Bangko
Subsec. X141.3c(9) on group structures.
Sentral advice thereof.
(Circular No. 888 dated 09 October 2015) Reports of assessment of the risk
management, compliance function and
Sec. X137 (Reserved) internal audit group of branches of foreign
banks shall be made available to the
Sec. 1137 (Reserved) Bangko Sentral, during on-site
examination or any time upon request.
Sec. 2137 (Reserved) (Circular No. 749 dated 27 February 2012)
Sec. 3137 Limitations/Amount Available on Sec. X141 Definition; Qualifications;

Dividends Declared by Rural Banks and Powers/Responsibilities and Duties of
Cooperative Banks. Board of Directors; Confirmation of the
(Deleted by Circular No. 888 dated 9 October 2015) Election/Appointments of Directors and
Officers; Place of Board of Directors’
§ 3137.1 Dividends on government
Meeting; Reports Required; Sanctions.
shares.
This Section shall also apply to Coop
Banks.
Secs. X138 - X140 (Reserved) (As amended by Circular No. 682 dated 15 February 2010)
H. DIRECTORS, OFFICERS AND § X141.1 Definition/limits.

EMPLOYEES a. Definition of directors. Directors
shall include:
Strengthening Corporate Governance. It (1) directors who are named as such
is the thrust of the Bangko Sentral to in the articles of incorporation;
1
Subject banks whose shares are listed with any domestic stock exchange may declare dividends and give
immediate notice of such declaration to the SEC and the stock exchanges, in compliance with pertinent rules
of the SEC: Provided, That, no record date is fixed for such dividend pending verification of the report on such
declaration by the appropriate department of the SES.

§§ X141.1
13.12.31
(2) directors duly elected in shall be at least five (5), and a maximum of
subsequent meetings of the stockholders fifteen (15) members of the board of
or those appointed by virtue of the charter directors of a bank: Provided, That in case
of government-owned banks; and of a bank/QB/trust entity merger or
(3) those elected to fill vacancies in the consolidation, the number of directors may
board of directors. be increased up to the total number of the
b. Limits on the number of the members members of board of directors of the
of the board of directors. Pursuant to merging or consolidating bank/QB/trust
Sections 15 and 17 of R.A. No. 8791, there entity as provided for in their respective

§§ X141.1 - X141.2
15.10.31
articles of incorporation, but in no case to majority of the directors must be residents

exceed twenty-one (21). The board shall of the Philippines.
determine the appropriate number of its e. Conduct of board meetings. The
members to ensure that the number thereof meetings of the board of directors may be
is commensurate to the size and conducted through modern technologies
complexity of the bank’s operations. such as, but not limited to,
To the extent practicable, the members teleconferencing and video conferencing
of the board of directors shall be selected as long as the director who is taking part
from a broad pool of qualified candidates. in said meetings can actively participate
A sufficient number of qualified non- in the deliberations on matters taken up
executive members shall be elected to therein: Provided, That every member of
promote the independence of the board the board shall participate in at least fifty
from the views of senior management. For percent (50%) and shall physically attend
this purpose, non-executive members of the at least twenty-five percent (25%) of all
board of directors shall refer to those who board meetings every year: Provided,
are not part of the day to day management further, That in the case of a director who
of banking operations and shall include the is unable to physically attend or
independent directors. participate in board meetings via
c. Minimum number of independent teleconferencing or video conferencing,
directors.1 At least twenty percent (20%) but the corporate secretary shall execute a
not less than two (2) members of the board notarized certification attesting that said
of directors shall be independent directors: director was given the agenda
Provided, That any fractional result from materials prior to the meeting and that his/
applying the required minimum proportion, her comments/decisions thereon were
i.e., twenty percent (20%), shall be rounded- submitted for deliberation/discussion and
up to the nearest whole number: Provided, were taken up in the actual board meeting,
further, That in the case of RBs, at least one and that the submission of said
(1) independent director shall be elected to certification shall be considered
the board: Provided, furthermore, That RBs compliance with the required
whose business model is deemed complex fifty percent (50%) minimum attendance
by the Bangko Sentral, shall have at least in board meetings.
twenty percent (20%) but not less than two (As amended by Circular Nos. 809 dated 23 August 2013, 757
(2) members of the board of directors as dated 08 May 2012 and 749 dated 27 February 2012)
independent directors: Provided, finally,
That any fractional result from applying the § X141.2 Qualifications of a director.
required minimum proportion, i.e. twenty a. A director shall have the following
percent (20%), shall be rounded-up to the minimum qualifications:
nearest whole number. (1) He shall be at least twenty-five (25)
d. Limitation on nationality of directors. years of age at the time of his election or
Non-Filipino citizens may become appointment;
members of the board of directors of a bank (2) He shall be at least a college
to the extent of the foreign participation in graduate or have at least five (5) years
the equity of said bank: Provided, That experience in business;
pursuant to Section 23 of the Corporation (3) He must have attended a special
Code of the Philippines (BP Blg. 68), a seminar on corporate governance for board
1
The required number of independent directors in the board and the definition of “independent director” shall
apply prospectively effective 17 March 2012 or in the succeeding election of the members of the board of
directors.

§ X141.2
15.10.31
of directors conducted or accredited by the Non-submission of complete documentary

Bangko Sentral: Provided, That incumbent requirements within the prescribed period
directors as well as those elected after shall be construed as his/her failure to
17 September 2001 must attend said establish his/her qualifications for the
seminar on or before 30 June 2003 or position and results in his/her removal from
within a period of six (6) months from date the Board.
of election for those elected after 30 June The members of the board of directors
2003, as the case may be: Provided, further, shall possess the foregoing qualifications for
That the following persons are exempted directors in addition to those required or
from attending said seminar: prescribed under R.A. No. 8791 and other
i. Foreign nationals who have attended existing applicable laws and regulations.
corporate governance training covering core b. Independent directors
topics in the Bangko Sentral -recommended In selecting independent directors, the
syllabus and certified by the Corporate number and types of entities where the
Secretary as having been made aware of the candidate is likewise elected as such, shall
general responsibility and specific duties be considered to ensure that he will be able
and responsibilities of the board of directors to devote sufficient time to effectively
and specific duties and responsibilities of a carry out his duties and responsibilities:
director prescribed under Items “b”, “c” and Provided, That the rules and regulations of
“d” of Subsec. X141.3; the SEC governing public and listed
ii. Filipino citizens with recognized companies on the maximum number of
stature, influence and reputation in the companies of the conglomerate in which
banking community and whose business an individual can serve as an independent
practices stand as testimonies to good director shall apply to independent
corporate governance; directors of all types of banks.
iii. Distinguished Filipino and foreign An independent director shall refer to a
nationals who served as senior officials in person who -
central banks and/or financial regulatory (1) is not or has not been an officer or
agencies, including former Monetary Board employee of the bank, its subsidiaries or
members; or affiliates or related interests during the past
iv. Former Chief Justices of the three (3) years counted from the date of his
Philippine Supreme Court; and election;
(4) He must be fit and proper for the (2) is not a director or officer of the
position of a director of the bank. In related companies of the institution’s
determining whether a person is fit and majority stockholder;
proper for the position of a director, the (3)) is not a stockholder with shares of
following matters must be considered: stock sufficient to elect one (1) seat in the
integrity/probity, physical/mental fitness, board of directors of the institution, or in
competence, relevant education/financial any of its related companies or of its
literacy/ training, diligence and knowledge/ majority corporate shareholders;
experience. (4) is not a relative, legitimate or
An elected director has the burden to common-law of any director, officer or
prove that he/she possesses all the foregoing stockholder holding shares of stock
minimum qualifications and none of the sufficient to elect one seat in the board of
disqualifications by submitting the documentary the bank or any of its related companies.
requirements listed in Appendix 98. For this purpose, relatives refer to the spouse,

§ X141.2
15.10.31
parent, child, brother, sister, parent-in-law, more intermediaries, is controlled by, or is

son-/daughter-in-law, and brother-/sister-in- under common control with the bank or its
law; affiliates.
(5) is not acting as a nominee or (d) Related interests as defined under
representative of any director or substantial Sections 12 and 13 of R.A. No. 8791 shall
shareholder of the bank, any of its related mean individuals, related to each other
companies or any of its substantial within the fourth degree of consanguinity
shareholders; and or affinity, legitimate or common law, and
(6) is not retained as professional two (2) or more corporations owned or
adviser, consultant, agent or counsel of the
controlled by a single individual or by the
institution, any of its related companies or
same family group or the same group of
any of its substantial shareholders, either in
persons.
his personal capacity or through his firm; is
(e) Control exists when the parent
independent of management and free from
any business or other relationship, has not owns directly or indirectly through
engaged and does not engage in any subsidiaries more than one-half (1/2) of the
transaction with the institution or with any voting power of an enterprise unless, in
of its related companies or with any of its exceptional circumstance, it can be clearly
substantial shareholders, whether by demonstrated that such ownership does not
himself or with other persons or through a constitute control. Control may also exist
firm of which he is a partner or a company even when ownership is one-half (1/2) or
of which he is a director or substantial less of the voting power of an enterprise
shareholder, other than transactions which when there is:
are conducted at arm’s length and could not i. Power over more than one-half
materially interfere with or influence the (1/2) of the voting rights by virtue of an
exercise of his judgment. agreement with other stockholders; or
An independent director of a bank may ii. Power to govern the financial and
only serve as such for a total of five (5) operating policies of the enterprise under a
consecutive years: Provided, That the statute or an agreement; or
maximum term and any “cooling off” period iii. Power to appoint or remove the
prescribed by the SEC for public and listed majority of the members of the board of
companies shall apply to all types of banks. directors or equivalent governing body; or
The foregoing terms and phrases used iv. Power to cast the majority votes at
in Items “(1) to (6)” of this Subsection shall meetings of the board of directors or
have the following meaning: equivalent governing body; or
v. Any other arrangement similar to
(a) Parent is a corporation which has
any of the above.
control over another corporation directly or
(f) Related company means another
indirectly through one (1) or more
company which is:
intermediaries;
i. Its parent or holding company;
(b) Subsidiary means a corporation ii. Its subsidiary or affiliate; or
more than fifty percent (50%) of the voting iii. A corporation where a bank or its
stock of which is owned or controlled majority stockholder own such number of
directly or indirectly through one (1) or more shares that will allow/enable him to elect at
intermediaries by a bank; least one (1) member of the board of
(c) Affiliate is a juridical person that directors or a partnership where such
directly or indirectly, through one (1) or majority stockholder is a partner.

§§ X141.2 - X141.3
15.10.31
(g) Substantial or major shareholder governance and corporate values. Further,

shall mean a person, whether natural or the board of directors is also responsible
juridical, owning such number of shares for monitoring and overseeing the
that will allow him to elect at least one (1) performance of senior management as the
member of the board of directors of a bank latter manages the day to day affairs of the
or who is directly or indirectly the institution.
registered or beneficial owner of more than c. Specific duties and responsibilities of
ten percent (10%) of any class of its equity the board of directors
security. (1) To approve and monitor the
(h) Majority stockholder or majority implementation of strategic objectives.
shareholder means a person, whether Consistent with the institution’s strategic
natural or juridical, owning more than objectives, business plans shall be
fifty percent (50%) of the voting stock of a bank. established for the bank including its trust
(As amended by Circular Nos. 887 dated 07 October 2015, 840 operations, and initiatives thereto shall be
dated 02 July 2014, 793 dated 05 July 2013,757 dated 08 May
implemented with clearly defined
2012, 749 dated 27 February 2012 and 682 dated 15 February
2010) responsibilities and accountabilities. These
shall take into account the bank’s long-term
§ X141.3 Powers/responsibilities and financial interests, its level of risk tolerance
duties of directors. and its ability to manage risks effectively.
a. Powers of the board of directors. The The board shall establish a system for
corporate powers of a bank shall be measuring performance against plans
exercised, its business conducted and all its through regular monitoring and reviews,
property controlled and held, by its board with corrective action taken as needed.
of directors. The powers of the board of The board shall likewise ensure that the
directors as conferred by law are original bank has beneficial influence on the
and cannot be revoked by the economy by continuously providing
stockholders. The directors hold their services and facilities which will be
office charged with the duty to exercise supportive of the national economy.
sound and objective judgment for the best (2) To approve and oversee the
interest of the bank. implementation of policies governing
b. General responsibility of the board major areas of banking operations. The
of directors. The position of a bank director board shall approve policies on all major
is a position of trust. A director assumes business activities, e.g., investments, loans,
certain responsibilities to different asset and liability management, trust,
constituencies or stakeholders, i.e., the bank business planning and budgeting. The
itself, its stockholders, its depositors and board shall accordingly define the bank’s
other creditors, its management and level of risk tolerance in respect of
employees, the regulators, deposit insurer said activities. A mechanism to ensure
and the public at large. These compliance with said policies shall also be
constituencies or stakeholders have the right provided.
to expect that the institution is being run in The board shall set out matters and
a prudent and sound manner. The board of authorities reserved to it for decision, which
directors is primarily responsible for include, among others major capital
approving and overseeing the expenditures, equity investments and
implementation of the bank’s strategic divestments. The board shall also establish
objectives, risk strategy, corporate the limits of the discretionary powers of each

§ X141.3
13.12.31
officer, committee, sub-committee and such (c) a clear delineation of lines of

other groups for purposes of lending, responsibilities for managing risk;
investing or any other financial undertaking (d) an adequate system for measuring
that exposes the bank to significant risks. risk; and
(3) To approve and oversee the (e) effective internal controls and a
implementation of risk management comprehensive risk-reporting process. The
policies. The board of directors shall be board of directors shall ensure that a robust
responsible for defining the bank’s level of
internal reporting system is in place that shall
risk tolerance and for the approval and
enable each employee to contribute to the
oversight of the implementation of policies
and procedures relating to the management appreciation of the bank’s overall risk
of risks throughout the institution, exposures.
including its trust operations. The risk The board of directors shall ensure that
management policy shall include: the risk management function is
(a) a comprehensive risk management given adequate resources to enable it to
approach; effectively perform its functions. The risk
(b) a detailed structure of limits, management function shall be afforded with
guidelines and other parameters used to adequate personnel, access to information
govern risk-taking; technology systems and systems

§ X141.3
13.12.31
development resources, and support and complexity of operations and risk profile of
access to internal information. the bank.
(4) To oversee selection and (d) The board of directors shall
performance of senior management. It is the regularly review policies, internal controls
primary responsibility of the board of and self-assessment functions (e.g.,
directors to appoint competent management internal audit, risk management and
team at all times, monitor and assess the compliance) with senior management to
performance of the management team based determine areas for improvement as well as
on established performance standards that to promptly identify and address
are consistent with the bank’s significant risks and issues. The board of
strategic objectives, and conduct directors shall set the frequency of review
regular review of bank’s policies with the taking into account the size, complexity of
management team. operations and risk profile of the bank.
(a) The board of directors shall apply fit The board of directors shall ensure that
and proper standards on key personnel. senior management’s expertise and
Integrity, technical expertise and knowledge shall remain relevant given the
experience in the institution’s business, bank’s strategic objectives, complexity of
either current or planned, shall be the key operations and risk profile.
considerations in the selection process. (5) To consistently conduct the affairs of
And because mutual trust and a close the institution with a high degree of
working relationship are important, the integrity. Since reputation is a very valuable
members of senior management shall asset, it is in the institution’s best interest
uphold the general operating philosophy, that in dealings with the public, it observes
vision and core values of the institution. The a high standard of integrity. The board of
board of directors shall replace members directors shall lead in establishing the tone
of senior management, when of good governance from the top and in
necessary, and have in place an setting corporate values, codes of conduct
appropriate plan of succession. and other standards of appropriate
(b) The board of directors shall regularly behavior for itself, the senior management
monitor the actions of senior management and other employees. The board of
and ensure that these are consistent with directors shall:
the policies that it has approved. It shall (a) Articulate clear policies on the
put in place formal performance standards handling of any transaction with DOSRI and
to be able to effectively assess the other related parties ensuring that there is
performance of senior management. The effective compliance with existing laws,
performance standards shall be consistent rules and regulations at all times and no
with the bank’s strategic objectives and stakeholder is unduly disadvantaged. In this
business plans, taking into account the regard, the board of directors shall define
bank’s long-term financial interests. “related party transaction”, which is
(c) The board of directors shall regularly expected to cover a wider definition than
meet with senior management to engage in DOSRI under existing regulations and a
discussions, question and critically review broader spectrum of transactions (i.e., not
the reports and information provided by the limited to credit exposures), such that
latter. The board of directors shall set the relevant transactions that could pose
frequency of meeting with senior material risk or potential abuse to the bank
management taking into account the size, and its stakeholders are captured.

§ X141.3
13.12.31
(b) Require the bank’s stockholders to questionable practices directly to the board
confirm by majority vote, in the annual of directors or to any independent unit.
stockholders’ meeting, the bank’s significant Policies shall likewise be set on how such
transactions with its DOSRI and other concerns shall be investigated and
related parties. addressed, for example, by an internal
(c) Articulate acceptable and control function, an objective external party,
unacceptable activities, transactions and senior management and/or the board itself; and
behaviors that could result or potentially (h) Articulate policies in
result in conflict of interest, personal gain communicating corporate values, codes of
at the expense of the institution, or conduct and other standards in the bank as
unethical conduct. well as the means to confidentially report
(d) Articulate policies that will prevent concerns or violations to an appropriate
the use of the facilities of the bank in body.
furtherance of criminal and other improper (6) To define appropriate governance
or illegal activities, such as but not limited policies and practices for the bank and for
to financial misreporting, money its own work and to establish means to
laundering, fraud, bribery or corruption. ensure that such are followed and
(e) Explicitly discourage the taking of periodically reviewed for ongoing
excessive risks as defined by internal improvement 1. The board of directors,
policies and establish an employees’ through policies and its own practices, shall
compensation scheme effectively aligned establish and actively promote,
with prudent risk taking. The communicate and recognize sound
compensation scheme shall be adjusted for governance principles and practices to
all types of risk and sensitive to the time reflect a culture of strong governance in the
horizon of risk. Further, the grant of bank as seen by both internal and external
compensation in forms other than cash shall stakeholders.
be consistent with the overall risk alignment (a) The board of directors shall ensure
of the bank. The board of directors shall that the bank’s organizational structure
regularly monitor and review the facilitates effective decision making and
compensation scheme to ensure that it good governance. This includes clear
operates and achieves the objectives as definition and delineation of the lines of
intended. responsibility and accountability, especially
(f) Ensure that employee pension funds between the roles of the chairman of the
are fully funded or the corresponding board of directors and chief executive
liability appropriately recognized in the officer/president.
books of the bank at all times. Further, the (b) The board of directors shall main-
board of directors shall ensure that all tain, and periodically update, organizational
transactions involving the pension fund are rules, by-laws, or other similar documents
conducted at arm’s length terms. setting out its organization, rights, respon-
(g) Allow employees to communicate, sibilities and key activities.
with protection from reprisal, legitimate (c) The board of directors shall
concerns about illegal, unethical or structure itself in a way, including in terms
1
Banks shall submit the following to the appropriate department of the SES on or before 15 June 2012:
(1) A Secretary’s Certificate attesting the approval of the board of directors to changes in the bank’s
policies aligning the same with the provisions of Subsecs. X141.1 to X141.3, X142.3 and X142.4 and Secs.
X175 to X176; and
(2) Acknowledgement receipt of copies of specific duties and responsibilities of the board of directors
and of a director and certification that they fully understand the same.

§ X141.3
13.12.31
of size, frequency of meetings and the use external facilitators. The composition of
of committees, so as to promote efficiency, the board shall also be reviewed regularly
critical discussion of issues and thorough with the end in view of having a balanced
review of matters. It shall meet regularly to membership. Towards this end, a system
properly discharge its functions. It shall also and procedure for evaluation shall be
ensure that independent views in board adopted which shall include, but not
meetings shall be given full consideration limited to, the setting of benchmark and
and all such meetings shall be duly peer group analysis.
minuted. (g) The board shall ensure that individual
(d) The board shall conduct and members of the board and the
maintain the affairs of the institution within shareholders are accurately and timely
the scope of its authority as prescribed in informed. It shall provide all its members
its charter and in existing laws, rules and and to the shareholders a comprehensive
regulations. It shall ensure effective and understandable assessment of the
compliance with the latter, which include banks’s performance, financial condition
prudential reporting obligations. Serious and risk exposures. All members of the
weaknesses in adhering to these duties and board shall have reasonable access to any
responsibilities may be considered as information about the institution at all times.
unsafe and unsound banking practice. The It shall also provide appropriate
board shall appoint a compliance officer information that flows internally and to the
who shall be responsible for coordinating, public.
monitoring and facilitating compliance with (7) To constitute committees to increase
existing laws, rules and regulations. The efficiency and allow deeper focus in
compliance officer shall be vested with specific areas. The board of directors shall
appropriate authority and provided with create committees, the number and nature
appropriate support and resources. of which would depend on the size of the
(e) The board of directors shall bank and the board, the complexity of
establish a system of checks and balances operations, long-term strategies and risk
which applies in the first instance to the tolerance level of the bank.
board itself. Among the members of the (a) The board of directors shall approve,
board, an effective system of checks and review and update at least annually or
balances must exist. The system shall also whenever there are significant changes
provide a mechanism for effective check and therein, the respective charters of each
control by the board over the chief committee or other documents that set out
executive officer and key managers and by its mandate, scope and working procedures.
the latter over the line officers of the bank. (b) The board of directors shall appoint
Checks and balances in the board shall be members of the committees taking into
enhanced by appointing a chairperson who account the optimal mix of skills and
is a non-executive, whenever possible. experience to allow the members to fully
(f) The board of directors shall assess understand, be critical and objectively
at least annually its performance and evaluate the issues. In order to promote
effectiveness as a body, as well as its objectivity, the board of directors, shall
various committees, the chief executive appoint independent directors and non-
officer, the individual directors, and the executive members of the board to the
bank itself, which may be facilitated by greatest extent possible while ensuring that
the corporate governance committee or such mix will not impair the collective skills,

§ X141.3
13.12.31
experience, and effectiveness of the audit department and for the appointment
committees. Towards this end, an of the internal auditor as well as the
independent director who is a member of independent external auditor who shall both
any committee that exercises executive or report directly to the audit committee. In
management functions that can potentially cases of appointment or dismissal of
impair such director’s independence external auditors, it is encouraged that the
cannot accept membership in committees decision be made only by independent and
that perform independent oversight/control non-executive audit committee members. It
functions such as the Audit, Risk shall monitor and evaluate the adequacy and
Oversight and Corporate Governance effectiveness of the internal control system.
committees, without prior approval of the The audit committee shall review and
Monetary Board. approve the audit scope and frequency. It
(c) The board of directors shall ensure shall receive key audit reports, and ensure
that each committee shall maintain that senior management is taking necessary
appropriate records (e.g., minutes of corrective actions in a timely manner to
meetings or summary of matters reviewed address the weaknesses, non-compliance
and decisions taken) of their deliberations with policies, laws and regulations and
and decisions. Such records shall document other issues identified by auditors.
the committee’s fulfillment of its The audit committee shall have explicit
responsibilities and facilitate the assessment authority to investigate any matter within
of the effective performance of its functions. its terms of reference, full access to and
(d) The board of directors shall cooperation by management and full
constitute, at a minimum, the following discretion to invite any director or
committees: executive officer to attend its meetings, and
(i) Audit committee. The audit adequate resources to enable it to effectively
committee shall be composed of at least discharge its functions. The audit
three (3) members of the board of directors, committee shall ensure that a review of the
wherein two (2) of whom shall be effectiveness of the institution’s internal
independent directors, including the controls, including financial, operational
chairperson, preferably with accounting, and compliance controls, and risk
auditing, or related financial management management, is conducted at least
expertise or experience commensurate with annually.
the size, complexity of operations and risk The audit committee shall establish and
profile of the bank. To the greatest extent maintain mechanisms by which officers and
possible, the audit committee shall be staff shall, in confidence, raise concerns
composed of a sufficient number of about possible improprieties or malpractices
independent and non-executive board in matters of financial reporting, internal
members. Further, the chief executive control, auditing or other issues to persons
officer, chief financial officer and/or or entities that have the power to take
treasurer, or officers holding equivalent corrective action. It shall ensure that
positions, shall not be appointed as arrangements are in place for the
members of the audit committee. independent investigation, appropriate
The audit committee provides oversight follow-up action, and subsequent resolution
over the institution’s financial reporting of complaints.
policies, practices and control and internal (ii) Risk oversight committee. The risk
and external audit functions. It shall be oversight committee shall be responsible for
responsible for the setting up of the internal the development and oversight of the risk

§ X141.3
13.12.31
management program for the bank and its committee shall conduct regular discussion
trust unit. The committee shall be composed on the institution’s current risk exposure
of at least three (3) members of the board of based on regular management reports and
directors including at least one (1) assess how the concerned units or offices
independent director, and a chairperson reduced these risks.
who is a non-executive member. The d. Review and revise the plan as
members of the risk oversight committee needed. The committee shall evaluate the
shall possess a range of expertise as well as risk management plan to ensure its
adequate knowledge of the institution’s risk continued relevance, comprehensiveness,
exposures to be able to develop and effectiveness. It shall revisit strategies,
appropriate strategies for preventing losses look for emerging or changing exposures,
and minimizing the impact of losses when and stay abreast of developments that
they occur. It shall oversee the system of affect the likelihood of harm or loss. The
limits to discretionary authority that the committee shall report regularly to the board
board delegates to management, ensure that of directors the entity’s overall risk exposure,
the system remains effective, that the limits actions taken to reduce the risks, and
are observed and that immediate corrective recommend further action or plans as
actions are taken whenever limits are necessary.
breached. The bank’s risk management unit (iii) Corporate governance committee.
and the chief risk officer shall communicate The corporate governance committee shall
formally and informally to the risk oversight assist the board of directors in fulfilling its
committee any material information relative corporate governance responsibilities. It
to the discharge of its function. The risk shall review and evaluate the qualifications
oversight committee, shall, where of all persons nominated to the board as
appropriate, have access to external expert well as those nominated to other positions
advice, particularly in relation to proposed requiring appointment by the board of
strategic transactions, such as mergers and directors. The committee shall be composed
acquisitions. of at least three (3) members of the board of
The core responsibilities of the risk directors, two (2) of whom shall be
oversight committee are to: independent directors, including the
a. Identify and evaluate exposures. The chairperson.
committee shall assess the probability of The committee shall be responsible for
each risk becoming reality and shall ensuring the board’s effectiveness and due
estimate its possible effect and cost. observance of corporate governance
Priority areas of concern are those risks that principles and guidelines. It shall oversee
are most likely to occur and are costly when the periodic performance evaluation of the
they happen. board and its committees and executive
b. Develop risk management management; and shall also conduct an
strategies. The risk oversight committee annual self-evaluation of its performance.
shall develop a written plan defining the The corporate governance committee may
strategies for managing and controlling the coordinate with external facilitators in
major risks. It shall identify practical carrying out board assessment, within the
strategies to reduce the chance of harm and frequency approved by the entire board. The
failure or minimize losses if the risk becomes corporate governance committee shall also
real. decide whether or not a director is able to
c. Oversee the implementation of the and has been adequately carrying out his/
risk management plan. The risk oversight her duties as director based on its own

§ X141.3
13.12.31
assessment or the assessment of external Any TB, RB and Coop Bank having at
facilitators, bearing in mind the director’s least (3) of the following characteristics shall
contribution and performance (e.g., be deemed a complex bank:
competence, candor, attendance, a. Total assets of at least P6 billion;
preparedness and participation). Internal b. Extensive branch network;
guidelines shall be adopted that address the c. Non-traditional financial products
competing time commitments that are faced and services by virtue of special authorities
when directors serve on multiple boards. (e.g. trust, quasi-banking, derivatives
The committee shall make licenses), as well as distinctive products like
recommendations to the board regarding the credit cards, remittance, trade-related
continuing education of directors, services, contract-to-sell (CTS) financing,
assignment to board committees, succession among other financial services;
plan for the board members and senior d. Use of non-conventional business
officers, and their remuneration model, such as those using non-traditional
commensurate with corporate and individual delivery platform such as electronic
performance. platforms; and
The corporate governance committee e. Business strategy characterized by
shall decide the manner by which the risk appetite that is aggressive and risk
board’s performance shall be evaluated and exposures which are increasing, such as
propose an objective performance criteria those with robust branch expansion
approved by the board. Such performance programs or acquisition plans.
indicators shall address how the board has TBs, RBs and Coop Banks classified as
enhanced long term shareholders’ value. “complex” banks shall designate a full-time
Provided, That in case of simple or chief compliance officer, and establish
non-complex banks, the board of directors audit, risk oversight and corporate
may, at a minimum, constitute only the governance committee.
audit committee: Provided, further, That the Non-complex bank that shall adopt
board shall discuss risk management and the reduced minimum requirement under
corporate governance matters in their board this Subsection on the creation of only an
meetings, with the views of the independent audit committee shall submit the
directors duly noted and minuted. following to the appropriate department
For this purpose, a bank’s business of the SES:
model is deemed simple if a bank is (1) A secretary’s certificate attesting the
primarily engaged in the business of approval of the board of directors to create
deposit-taking and lending: Provided, That only the audit committee/dissolve the other
a UB or KB shall be deemed a complex board-level committees if and when
bank while a TB, RB or Coop Bank shall approved by the Bangko Sentral; and
be deemed a simple bank. Nonetheless, a (2) A letter signed by the president/chief
UB or KB may apply with the Bangko executive officer requesting for approval for
Sentral for a reclassification as simple bank creating/maintaining only the audit
in order to avail of the reduced minimum committee.
requirement on the constitution of board (8) To effectively utilize the work
committees. The Bangko Sentral may conducted by the internal audit, risk
likewise declare a TB, RB or Coop Bank management and compliance functions and
as complex, and therefore necessitating the external auditors. The board of
complete compliance with the directors shall recognize and acknowledge
aforementioned requirements. the importance of the assessment of the

§ X141.3
13.12.31
independent, competent and qualified (c) To ensure that adequate resources

internal and external auditors as well as the are available for all the entities in the group
risk and compliance officers in ensuring the to effectively implement and meet the
safety and soundness of the operations of a governance policies, practices and systems.
bank on a going-concern basis and (d) To establish a system for monitoring
communicate the same through out the compliance of each entity in the group with
bank. This shall be displayed by all applicable policies, practices and
undertaking timely and effective actions on systems.
issues identified. (e) To define and approve policies and
Further, non-executive board members clear strategies for the establishment of new
shall meet regularly, other than in structures.
meetings of the audit and risk oversight (f) To understand the roles, the
committees, in the absence of senior relationships or interactions of each entity
management, with the external auditor and in the group with one another and with the
heads of the internal audit, compliance and parent company bank. The board of
risk management functions. directors shall understand the legal and
(9) In group structures, the board of operational implications of the group
directors of the parent company banks shall structure and how the various types of risk
have the overall responsibility for defining exposures affect the group’s capital, risk
an appropriate corporate governance profile and funding under normal and
framework that shall contribute to the contingent circumstances.
effective oversight over entities in the group. (g) To develop sound and effective
Towards this end, the board of directors of systems for generation and sharing of
the parent company bank shall ensure information within the group, management
consistent adoption of corporate of risks and effective supervision of the
governance policies and systems across the group.
group and shall carry-out the following (h) To require the risk management,
duties and responsibilities: compliance function and internal audit
(a) To define and approve appropriate group to conduct a periodic formal review
governance policies, practices and structure of the group structure, their controls and
that will enable effective oversight of the activities to assess consistency with the
entire group, taking into account nature and board approved policies, practices and
complexity of operations, size and the types strategies and to require said groups to
of risks to which the bank and its report the results of their assessment directly
subsidiaries are exposed. The board shall to the board.
also establish means to ensure that such (i) To disclose to the Bangko Sentral all
policies, practices and systems remain entities in the group (e.g., owned directly
appropriate in light of the growth, increased or indirectly by the parent company bank
complexity and geographical expansion of and/or its subsidiaries/affiliates including
the group. Further, it shall ensure that the special purpose entities (SPEs), and other
policies include the commitment from the entities that the bank exerts control over or
entities in the group to meet all governance those that exert control over the bank, or
requirements. those that are related to the bank and/or its
(b) To define the level of risk tolerance subsidiaries/affiliates either through common
for the group, which shall be linked to the ownership/directorship/officership) as well
process of determining the adequacy of as all significant transactions between
capital of the group. entities in the group involving any Bangko

§ X141.3
13.12.31
Sentral regulated entity in accordance with entities owned directly or indirectly by the
Appendix 6. For this purpose, significant parent company and/or its subsidiaries/
shall refer to transactions that would require affiliates including special purpose entities
board approval based on the bank’s internal (SPEs), and other entities that the bank
policies or as provided under existing exerts control over or those that are related
regulations: Provided, That the bank shall to the bank and/or its subsidiaries/affiliates
continue to submit any report required either through common ownership/
under existing regulations covering directorship/officership) as well as all
transactions between companies within the significant transactions between entities in
group. the group involving any BSP-regulated
In cases where the bank is a subsidiary/ entity in accordance with Appendix 6. For
affiliate of a non-BSP regulated parent this purpose, significant shall refer to
company, its board of directors shall transactions that would require board
carry out the following duties and approval based on the bank’s internal
responsibilities: policies or as provided under existing
(a) To ensure that the bank complies regulations. Provided, That the bank shall
with the governance policies, practices and continue to submit any report required
systems of the parent company as well as under existing regulations covering
transactions between companies within the
meets the standards and requirements set
group.
forth under existing laws, rules and
d. Specific duties and responsibilities of
regulations.
a director
(b) To define and approve policies and
(1) To remain fit and proper for the
clear strategies for the establishment of new
position for the duration of his term. A
structures (e.g., subsidiaries/affiliate of the
director is expected to remain fit and proper
bank). The board of directors shall also
for the position for the duration of his term.
report to the Bangko Sentral any plan to
He should possess unquestionable
create additional group structures. credibility to make decisions objectively and
(c) To understand the roles, resist undue influence. He shall treat board
relationships or interactions of each entity in directorship as a profession and shall have
the group with one another and with the a clear understanding of his duties and
parent company. The board of directors shall responsibilities as well as his role in
understand the legal and operational promoting good governance. Hence, he
implications of the group structure and how shall maintain his professional integrity and
the various types of risk exposures affect the continuously seek to enhance his skills,
bank’s capital, risk profile and funding under knowledge and understanding of the
normal and contingent circumstances. activities that the bank is engaged in or
(d) To require the risk management, intends to pursue as well as the
compliance function and internal audit developments in the banking industry
group of the bank to conduct a periodic including regulatory changes through
formal review of the group structure, their continuing education or training.
controls and activities to assess consistency (2) To conduct fair business transactions
with the board approved policies, practices with the bank and to ensure that personal
and strategies and to require said groups to interest does not bias board decisions.
report the results of their assessment directly Directors should, whenever possible, avoid
to the board. situations that would give rise to a conflict
(e) To disclose to the Bangko Sentral all of interest. If transactions with the
entities in the group (e.g., parent company, institution cannot be avoided, it should be

§§ X141.3
13.12.31
done in the regular course of business and exercise objective independent judgment
upon terms not less favorable to the on corporate affairs requiring the decision
institution than those offered to others. The or approval of such board.
basic principle to be observed is that a (7) To exercise independent judgment.
director should not use his position to make A director should view each problem/
profit or to acquire benefit or advantage for situation objectively. When a disagreement
himself and/or his related interests. He with others occurs, he should carefully
should avoid situations that would evaluate the situation and state his position.
compromise his impartiality. He should not be afraid to take a position
(3) To act honestly and in good faith, with even though it might be unpopular.
loyalty and in the best interest of the Corollarily, he should support plans and
institution, its stockholders, regardless of the ideas that he thinks will be beneficial to
amount of their stockholdings, and other the institution.
stakeholders such as its depositors, investors, (8) To have a working knowledge of
borrowers, other clients and general public. the statutory and regulatory requirements
A director must always act in good faith, affecting the institution, including the
with the care which an ordinarily prudent content of its articles of incorporation and
man would exercise under similar by-laws, the requirements of the Bangko
circumstances. While a director should Sentral and where applicable, the
always strive to promote the interest of all requirements of other regulatory agencies.
stockholders, he should also give due regard A director should also keep himself
to the rights and interests of other informed of the industry developments and
stakeholders. business trends in order to safeguard the
(4) To devote time and attention necessary institution’s competitiveness.
to properly discharge their duties and (9) To observe confidentiality. Directors
responsibilities. Directors should devote must observe the confidentiality of non-
sufficient time to familiarize themselves with public information acquired by reason of
the institution’s business. They must be their position as directors. They may not
constantly aware of the institution’s condition disclose said information to any other
and be knowledgeable enough to contribute person without the authority of the board.
meaningfully to the board’s work. They must e. Duties and responsibilities of the
attend and actively participate in board and chairperson of the board of directors:
committee meetings, request and review (1) To provide leadership in the board
meeting materials, ask questions, and request of directors. The chairperson of the board
explanations. If a person cannot give shall ensure effective functioning of the
sufficient time and attention to the affairs of board, including maintaining a relationship
the institution, he should neither accept his of trust with board members.
nomination nor run for election as member (2) To ensure that the board takes an
of the board. informed decision. The chairperson of the
(5) To act judiciously. Before deciding board shall ensure a sound decision
on any matter brought before the BOD, every making process and he should encourage
director should thoroughly evaluate the and promote critical discussion and ensure
issues, ask questions and seek clarifications that dissenting views can be expressed and
when necessary. discussed within the decision-making
(6) To contribute significantly to the process.
decision-making process of the board. (As amended by M-2013-035 dated 30 July 2013, Circular
Directors should actively participate and Nos.757 dated 08 May 2012 and 749 dated 27 February 2012)

§ X141.4
15.10.31
§ X141.4 Confirmation of the election/ minimum qualifications, or (iii) a different

appointment of directors/officers. The level of confirming authority as provided in
election/appointment of directors/officers of the first paragraph hereof, in the same bank
banks shall be subject to confirmation by or appointment/transfer to another bank,
the following: QB, trust entities other than stand-alone or
Confirming Authority Position Level trust corporation within a banking group:
a. Monetary Board Directors and senior
vice president and above Provided, That the director/officer
(or equivalent ranks) of concerned has been previously confirmed
UBs and KBs, and of or in the case of compliance officer or trust
Islamic Banks, TBs, RBs
and Coop Banks with officer who will be promoted to the rank of
total assets of at least senior vice president or above (or
P1.0 billion
b. An SES Committee to be Directors and senior vice
equivalent rank), previously approved/
composed of: president and above (or confirmed by the Monetary Board, or if
- Deputy Governor, SES equivalent ranks) of previously confirmed by the SES Committee,
- Heads os SES Sub-sectors I, I s l a m i c B a n k s , T B s ,
II, III RBs and Coop Banks his/her re-election/ promotion/transfer
with total assets of less requires the same level of confirming
than P1.0 billion authority as provided in the first paragraph
The election/appointment of hereof: Provided, further, That said director/
abovementioned directors/officers shall be officer has had continuous service within
deemed to have been confirmed by the the same bank or banking group. This
Bangko Sentral, if after sixty (60) banking days exemption shall apply to directors/officers
from receipt of the complete required reports, confirmed by the Monetary Board/SES
the appropriate supervising department of Committee starting 01 January 2011.
the SES does not advise the bank concerned The appointment of officers below the
against said election/appointment. rank of SVP shall be subject neither to
However, the confirmation by the Monetary Board approval nor Bangko
Monetary Board/SES Committee of the Sentral confirmation.
election/appointment to above-mentioned The appointment of compliance
position levels shall not be required in the officers and trust officers regardless of rank
following cases: shall be subject to prior Monetary Board
a. Re-election of a director (as a approval/confirmation as provided in
director) in the same bank or election of the Subsecs. X180.4 and X406.10, respectively.
same director in another bank, QB, trust For purposes of this Subsection, the
entities other than stand-alone or trust term banking group shall refer to the parent
corporation within a banking group; bank and its subsidiary banks, QBs, trust
b. Re-election of an independent entities other than stand-alone and trust
director (as an independent director or not) corporations as well as other banks, QBs,
in the same bank or election of the same trust entities other than stand-alone and trust
director (as an independent director or not) corporations over which the parent bank
in another bank, QB, trust entities other than has the power to exercise “control” as
stand-alone or trust corporation within a defined in Subsec. X141.2.
banking group; and The documentary requirements for the
c. Promotion of an officer, other than confirmation of the election/appointment of
to that which requires (i) prior Monetary directors/officers/trust officer, and approval
Board approval, or (ii) a different set of of the appointment of compliance officers

§§ X141.4 - X142.1
15.10.31
of banks/QBs/NBFI with trust authority/trust oath of the director/officer with rank of senior
corporations are shown in Appendix 98. vice president and above, and officer whose
Non-submission of complete documentary appointment requires prior Monetary Board
requirements within the prescribed period approval that he/she has all the prescribed
shall be construed as his/her failure to qualifications and none of the
establish his/her qualifications for the disqualifications within twenty (20) banking
position. days from the date of election/re-election of
A director/officer whose election/ the directors/meeting of the board of
appointment was not confirmed for failure directors in which the officers are
to submit the complete documentary appointed/promoted, in accordance with
requirements shall be deemed removed Appendix 6.
from office after due notice to the board of (As amended by Circular Nos. 887 dated 07 October 2015 and
directors of the bank, even if he/she has 758 dated 11 May 2012)
assumed the position to which he/she was
§ X141.10 Sanctions. Without prejudice
elected/appointed, pursuant to Section 16
to the other sanctions prescribed under
of R.A. No. 8791.
Section 37 of R.A. No. 7653 and to the
(CL-2011-045 dated 01 July 2011, as amended by Cir. Nos. 887
provisions of Section 16 of R.A. No. 8791,
dated 07 October 2015, 758 dated 11 May 2012 and Cir. No.
766 dated 17 August 2012)
any director of a bank who violates or fails to
observe and/or perform any of the above
§ X141.5 Place of board of directors’ responsibilities and duties shall, for each
meeting. Banks shall include in their by-laws violation or offense, be penalized as follows:
For directors of Amount
a provision that meetings of their board of
UBs/KBs P 30,000
directors shall be held only within the TBs/IBs 15,000
Philippines. RBs/Coop Banks (national) 5,000
Coop Banks (local) 1,000
§§ X141.6 - X141.8 (Reserved)
Sec. X142 Definition; Qualifications; and
§ X141.9 Certifications required. Duties and Responsibilities of Officers.
Banks shall furnish all of their first time This Section shall also apply to Coop
directors within a bank or banking group Banks.
with a copy of the general responsibility (As amended by Circular No. 682 dated 15 February 2010)
and specific duties and responsibilities of
the board of directors and of a director pre- § X142.1 Definition of officers. Officers
scribed under ltems “b”, “c” and “d” of shall include the president, executive vice
Subsec. X141.3 upon election. president, senior vice-president, vice president,
The bank must submit to the appropriate general manager, treasurer, secretary, trust
department of the SES, within twenty (20) officer and others mentioned as officers of the
banking days from date of election, a bank, or those whose duties as such are
certification under oath of the directors defined in the by-laws, or are generally known
concerned that they have received copies to be the officers of the bank (or any of its
of such general responsibility and specific branches and offices other than the head office)
duties and responsibilities and that they fully either through announcement, representation,
understand and accept the same, in publication or any kind of communication
accordance with Appendix 6. made by the bank: Provided, That a person
The bank must submit to the appropriate holding the position of chairman or vice-
department of the SES a certification under chairman of the board or another position in

§§ X142.1 - X142.3
15.10.31
the board shall not be considered as an officer (b) completed a relevant global or local
unless the duties of his position in the board professional certification program; and
include functions of management such as c. He must be fit and proper for the
those ordinarily performed by regular officers: position he is being proposed/appointed to.
Provided, further, That members of a group In determining whether a person is fit and
or committee, including sub-groups or sub- proper for a particular position, the
committees, whose duties include functions following matters must be considered:
of management such as those ordinarily integrity/probity, competence, education,
performed by regular officers, and are not diligence and experience/training.
purely recommendatory or advisory, shall In the case of Coop Bank, the manager
likewise be considered as officers. must have actual banking experience (at least
(As amended by Circular No. 562 dated 13 March 2007) manager or assistant manager).
An appointed officer has the burden to
§ X142.2 Qualifications of an officer. prove that he/she possesses all the foregoing
An officer shall have the following minimum minimum qualifications and none of the
qualifications: disqualifications by submitting the
a. He shall be at least twenty-one (21) documentary requirements listed in
years of age; Appendix 6. Non-submission of complete
b. He shall be at least a college graduate, documentary requirements within the
or have at least five (5) years experience in prescribed period shall be construed as his/
banking or trust operations or related her failure to establish his/her qualifications
activities or in a field related to his position for the position and results to his/her
and responsibilities, or have undergone removal therefrom.
training in banking or trust operations
The foregoing qualifications for officers
acceptable to the appropriate department of
shall be in addition to those required or
the SES: Provided, however, That the trust
prescribed under R.A. No. 8791 and other
officer who shall be appointed shall possess
existing applicable laws and regulations.
any of the following: (As amended by Circular Nos. 887 dated 07 October 2015, 766
(1) at least five (5) years of actual dated 17 August 2012, 682 dated 15 February 2010 and 665
experience1 in trust operations; dated 04 September 2009)
(2) at least three (3) years of actual
experience in trust operations and must have: § X142.3 Duties and responsibilities of
(a) completed at least ninety (90) training officers.
hours in trust, other fiduciary business, or (1) To set the tone of good governance
investment management activities from the top. Bank officers shall promote
acceptable to the Bangko Sentral; or the good governance practices within the
(b) completed a relevant global or local bank by ensuring that policies on
professional certification program; or governance as approved by the board of
(3) at least five (5) years of actual directors are consistently adopted across the
experience as an officer of a bank and must bank.
have: (2) To oversee the day-to-day
(a) completed at least ninety (90) training management of the bank. Bank officers shall
hours in trust, other fiduciary business, or ensure that bank’s activities and operations
investment management activities are consistent with the bank’s strategic
acceptable to the Bangko Sentral; or objectives, risk strategy, corporate values
1
Actual experience refers to exposures in trust operations either as officer of a trust entity or members
of trust committee
Part I - Page 77a Manual of Regulations for Banks

§§ X142.3 - X143.1
12.12.31
and policies as approved by the board of § X142.4 (2011 - X142.3) Appointment

directors. They shall establish a bank-wide of officers.
management system characterized by (Deleted by Circular No. 758 dated 11 May 2012)
strategically aligned and mutually
reinforcing performance standards across Sec. X143 Disqualification and
the organization. Watchlisting of Directors and Officers.
(3) To ensure that duties are effectively This Section shall also apply to Coop
delegated to the staff and to establish a Banks.
management structure that promotes (As amended by Circular No. 682 dated 15 February 2010)
accountability and transparency. Bank
officers shall establish measurable § X143.1 Persons disqualified to become
standards, initiatives and specific directors. Without prejudice to specific
responsibilities and accountabilities for provisions of law prescribing disqualifications
each bank personnel. Bank officers shall for directors, the following are disqualified
oversee the performance of these from becoming directors:
delegated duties and responsibilities and a. Permanently disqualified
shall ultimately be responsible to the Directors/officers/employees permanently
board of directors for the performance of disqualified by the Monetary Board from
the bank. holding a director position:
(4) To promote and strengthen checks (1) Persons who have been convicted by
and balances systems in the bank. Bank final judgment of a court for offenses involving
officers shall promote sound internal dishonesty or breach of trust such as, but not
controls and avoid activities that shall limited to, estafa, embezzlement, extortion,
compromise the effective dispense of their forgery, malversation, swindling, theft,
functions. Further, they shall ensure that robbery, falsification, bribery, violation of B.P.
they give due recognition to the Blg. 22, violation of Anti-Graft and Corrupt
importance of the internal audit, Practices Act and prohibited acts and
compliance and external audit functions. transactions under Section 7 of R.A. No. 6713
(As amended by Circular No. 749 dated 27 February 2012) (Code of Conduct and Ethical Standards for
(Next page is Part I - Page 78a)

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§§ X143.1 - X143.3
13.12.31
a penalty of suspension from office or fine manager, cashier, or accountant of a branch

is imposed, regardless whether the finding or extension office of a bank or their
of the Monetary Board is final and executory respective equivalent positions is
or pending appeal before the appellate disqualified from holding or being
court, unless execution or enforcement appointed to any of said positions in the
thereof is restrained by the court. The same branch or extension office.
disqualification shall be in effect during the c. Any appointive or elective official1,
period of suspension or so long as the fine whether full time or part time, except in
is not fully paid. cases where such service is incident to
(As amended by Circular Nos.584 dated 28 September 2007 financial assistance provided by the
and 513 dated 10 February 2006)
government or government owned or
§ X143.2 Persons disqualified to -controlled corporations (GOCCs) or in
become officers cases allowed under existing law.
a. The disqualifications for directors d. In the case of Coop Banks, any officer
mentioned in Subsec. X143.1 shall likewise or employee of CDA or any elective public
apply to officers, except those stated in Items official, except a barangay official.
“b(2)” and “b(7)”. e. Except as may otherwise be allowed
b. The spouses or relatives within the under Commonwealth Act No. 108,
second degree of consanguinity or affinity otherwise known as “The Anti-Dummy
are prohibited from holding officership Law”, as amended, foreigners cannot be
positions across the following functional officers or employees of banks.
(As amended by Circular Nos. 809 dated 23 August 2013 and
categories within a bank: 699 dated 17 November 2010)
1. Decision making and senior
management function, e.g., chairman, § X143.3 Effect of non-possession of
president, chief executive officer (CEO), qualifications or possession of
chief operating officer (COO), general disqualifications. A director/officer elected/
manager, and chief financial officer (CFO) appointed who does not possess all the
other than the treasurer or controller; qualifications mentioned under Subsecs.
2. Treasury function, e.g., Treasurer and X141.2 and X142.2 and/or has any of the
Vice President – Treasury; disqualifications mentioned under Subsecs.
3. Recordkeeping and financial X143.1 and X143.2 shall not be confirmed
reporting functions, e.g., controller and by the confirming authority under Subsec.
chief accountant; X141.4 and shall be removed from office
4. Safekeeping of assets, e.g., chief even if he/she has assumed the position to
cashier; which he/she was elected or appointed
5. Risk management function, e.g., chief pursuant to Section 16 of R.A. No. 8791. A
risk officer; confirmed director/officer or officer not
6. Compliance function, e.g., requiring confirmation found to possess any
compliance officer; and of the disqualifications, enumerated in the
7. Internal audit function, e.g., internal abovementioned Subsections shall be
auditor. subject to the disqualification procedures
The spouse or a relative within the provided under Subsec. X143.4.
second degree of consanguinity or affinity (As amended by Circular Nos. 758 dated 11 May 2012 and 513
of any person holding the position of dated 10 February 2006)
1
In the case of RB, appointive and elective public officials currently holding officership positions shall continue
holding such position until the end of their current terms effective 13 September 2013.
Manual of Regulations for Banks Part I - Page 78c

§ X143.4
08.12.31
§ X143.4 Disqualification procedures said failure to reply shall be deemed a waiver

a. The board of directors and and the appropriate department of the SES shall
management of every institution shall be proceed to evaluate the case based on
responsible for determining the existence of available records/evidence.
the ground for disqualification of the e. If the ground for disqualification is
institution’s director/officer or employee and delinquency in the payment of obligation, the
for reporting the same to the Bangko Sentral. concerned director or officer shall be given a
While the concerned institution may period of thirty (30) calendar days within
conduct it own investigation and impose which to settle said obligation or, restore it to
appropriate sanction/s as are allowable, this its current status or, to explain why he/she
shall be without prejudice to the authority should not be disqualified and included in
of the Monetary Board to disqualify a the watchlisted file, before the evaluation
director/officer/employee from being on his disqualification and watchlisting is
elected/ appointed as director/officer in any elevated to the Monetary Board.
FI under the supervision of the Bangko f. For directors/officers of closed banks,
Sentral. Grounds for disqualification made the concerned department of the SES shall
known to the institution, shall be reported make appropriate recommendation to the
to the appropriate department of the SES Monetary Board clearing said directors/
within seventy-two (72) hours from officers when there is no pending case/
knowledge thereof. complaint or evidence against them. When
b. On the basis of knowledge and there is evidence that a director/officer has
evidence on the existence of any of the committed irregularity, the appropriate
grounds for disqualification mentioned in department of the SES shall make
Subsecs. X143.1 and X143.2, the director recommendation to the Monetary Board
or officer concerned shall be notified in that his/her case be referred to the Office of
writing either by personal service or through Special Investigation (OSI) for further
registered mail with registry return receipt investigation and that he/she be included
card at his/her last known address by the in the masterlist of temporarily disqualified
appropriate department of the SES of the persons until the final resolution of his/her
existence of the ground for his/her case. Directors/officers with pending cases/
disqualification and shall be allowed to complaints shall also be included in said
submit within fifteen (15) calendar days from masterlist of temporarily disqualified
receipt of such notice an explanation on persons upon approval by the Monetary
why he/she should not be disqualified and Board until the final resolution of their cases.
included in the watchlisted file, together If the director/officer is cleared from
with the evidence in support of his/her involvement in any irregularity, the
position. The head of said department may appropriate department of the SES shall
allow an extension on meritorious ground. recommend to the Monetary Board his/her
c. Upon receipt of the reply explanation delisting. On the other hand, if the director/
of the director/officer concerned, the officer concerned is found to be responsible
appropriate department of the SES shall for the closure of the institution, the
proceed to evaluate the case. concerned department of the SES shall
The director/officer concerned shall be recommend to the Monetary Board his/her
afforded the opportunity to defend/clear delisting from the masterlist of temporarily
himself/herself. disqualified persons and his/her inclusion
d. If no reply has been received from the in the masterlist of permanently disqualified
director/officer concerned upon the expiration persons.
of the period prescribed under Item “b” above, g. If the disqualification is based on
Part I - Page 78d Manual of Regulations for Banks

§§ X143.4 - X143.5
12.12.31
dismissal from employment for cause, the the board on the director/officer involved.
appropriate department of the SES shall, as k. Persons who are elected or
much as practicable, endeavor to establish appointed as director or officer in any of
the specific acts or omissions constituting the BSP-supervised institutions for the first
the offense or the ultimate facts which time but are subject to any of the grounds
resulted in the dismissal to be able to for disqualification provided for under
determine if the disqualification of the Subsecs. X143.1 and X143.2, shall be
director/officer concerned is warranted or afforded the procedural due process
not. The evaluation of the case shall be prescribed above.
made for the purpose of determining if l. Whenever a director/officer is
disqualification would be appropriate and cleared in the process mentioned under
not for the purpose of passing judgment on Item “c” above or, when the ground for
the findings and decision of the entity disqualification ceases to exist, he/she
concerned. The appropriate department of the would be eligible to become director or
SES may decide to recommend to the officer of any bank, QB, trust entity or any
Monetary Board a penalty lower than institution under the supervision of the
disqualification (e.g., reprimand, suspension, Bangko Sentral only upon prior approval
etc.) if, in its judgment the act committed or by the Monetary Board. It shall be the
omitted by the director/officer concerned does responsibility of the appropriate
department of the SES to elevate to the
not warrant disqualification.
Monetary Board the lifting of the
h. All other cases of disqualification,
disqualification of the concerned director/
whether permanent or temporary shall be
officer and his/her delisting from the
elevated to the Monetary Board for approval
masterlist of watchlisted persons.
and shall be subject to the procedures
(As amended by Circular No. 584 dated 28 September 2007)
provided in Items “a”,”b”,”c” and “d” above.
i. Upon approval by the Monetary § X143.5 Watchlisting. To provide the
Board, the concerned director/officer shall Bangko Sentral with a central information
be informed by the appropriate department file to be used as reference in passing upon
of the SES in writing either by personal and reviewing the qualifications of persons
service or through registered mail with elected or appointed as director or officer
registry return receipt card, at his/her last of a bank, QB or trust entity, the SES shall
known address of his/her disqualification maintain a watchlist of persons disqualified
from being elected/appointed as director/ to be a director or officer of such entities
officer in any FI under the supervision of under its supervision under the following
Bangko Sentral and/or of his/her inclusion procedures:
in the masterlist of watchlisted persons so a. Watchlist categories. Watchlisting
disqualified. shall be categorized as follows:
j. The board of directors of the (1) Disqualification File “A”
concerned institution shall be immediately (Permanent) - Directors/officers/employees
informed of cases of disqualification permanently disqualified by the Monetary
approved by the Monetary Board and shall Board from holding a director/officer
be directed to act thereon not later than the position.
following board meeting. Within seventy- (2) Disqualification File “B”
two (72) hours thereafter, the corporate (Temporary) - Directors/officers/employees
secretary shall report to the Governor of the temporarily disqualified by the Monetary
Bangko Sentral through the appropriate Board from holding a director/officer
department of the SES the action taken by position.
Manual of Regulations for Banks Part I - Page 78e

§§ X143.5 - X144
15.10.31
b. Inclusion of directors/officers/ (1) Watchlist - Disqualification File “B”

employees in the watchlist. Directors/ (Temporary) -
officers/employees disqualified under (a) After the lapse of the specific period
Subsec. X143.4 shall be included in the of disqualification;
watchlist disqualification files “A” or “B”. (b) When the conviction by the court
c. Confidentiality. Watchlist files shall for crimes involving dishonesty, breach of
be for internal use only of the Bangko Sentral trust and/or violation of banking law
and may not be accessed or queried upon becomes final and executory, in which case
by outside parties including banks, QBs the director/officer/employee is relisted to
NBFIs with trust authority and trust Watchlist - Disqualification File “A”
corporations except with the authority of the (Permanent); and
person concerned (without prejudice to the (c) Upon favorable decision or clearance
authority of the Governor and the Monetary by the appropriate body, i.e., court, NBI,
Board to authorize release of the information) Bangko Sentral, bank, QB, trust entity or
and with the approval of the concerned SES such other agency/body where the
Department Head or SES Subsector Head concerned individual had derogatory
or the Deputy Governor, SES or the record.
Governor or the Monetary Board. Directors/officers/employees delisted
The Bangko Sentral will disclose from the Watchlist - Disqualification File
information on the persons included in its “B” other than those upgraded to Watchlist
watchlist files only upon submission of a - Disqualification File “A” shall be eligible
duly notarized authorization from the for re-employment with any bank, QB or
concerned person and approval of such trust entity.
request by the concerned SES Department (As amended by Circular No. 758 dated 11 May 2012, CL-2007-
Head or SES Subsector Head or the Deputy 001 dated 04 January 2007 and CL-2006-046 dated 21 December
2006)
Governor, SES or the Governor or the
Monetary Board. The prescribed Sec. X144 Bio-data of Directors and
authorization form to be submitted to the Officers.
appropriate department of the SES is in a. Banks shall submit to the appropriate
Appendix 76. department of the SES a bio-data with ID
Banks can gain access to said picture of their (i) directors/officers with rank
information in the said watchlist for the sole of senior vice president (SVP) and above (or
purpose of screening their nominees/ equivalent ranks), (ii) officers below the rank
applicants for directors/officers and/or of SVP requiring a different set of minimum
confirming their elected directors and qualifications, or (iii) officers whose
appointed officers. Banks must obtain the appointment requires prior Monetary Board
said authorization on an individual basis. approval upon every election/re-election/
d. Delisting. All delistings shall be appointment/promotion in a prescribed
approved by the Monetary Board upon form and for first time directors/officers with
recommendation of the operating rank of SVP and above (or equivalent ranks)
departments of SES except in cases of within a particular bank/banking group
persons known to be dead where delisting whose election/appointment requires
shall be automatic upon proof of death and Monetary Board/SES Committee
need not be elevated to the Monetary Board. confirmation or whose appointment
Delisting may be approved by the Monetary requires prior Monetary Board approval, the
Board in the following cases: duly notarized authorization form per
Part I - Page 78f Manual of Regulations for Banks

§ X144
15.10.31
Appendix 76, within twenty (20) banking true and correct, and that he/she:
days from the date of election/re-election of (1) Is not or has not been an officer or
the directors/meeting of the board of employee of the bank, its subsidiaries or
directors in which the officers are affiliates or related interests during the past
appointed/promoted, in accordance with three (3) years counted from the date of his
Appendix 6. election;
The bio-data shall be updated and (2) Is not a director or officer of the
submitted (i) in cases of change of name due related companies of the institution’s
to change in civil status and change of majority stockholder;
residential address, within twenty (20) (3) Is not a majority stockholder of the
banking days from the date the change institution, any of its related companies, or
occurred, and (ii) in cases of requests for prior of its majority shareholders;
Monetary Board approval of interlocks. (4) is not a relative, legitimate or
For other officers below the rank of SVP, common law of any director, officer or
the bank shall not be required to submit their stockholder holding shares of stock
bio-data to the Bangko Sentral. sufficient to elect one seat in the board of
b. The bank shall, however, keep a the bank or any of its related companies.
complete record of the bio-data of all its For this purpose, relatives refer to the spouse,
directors and officers and shall maintain a parent, child, brother, sister, parent-in-law,
system of updating said records which shall son-/daughter-in-law, and brother-/sister-in-
be made available during on-site examination law;
or when required by the Bangko Sentral for (5) Is not acting as a nominee or
submission for off-site verification. representative of any director or substantial
c. Banks shall also submit to the shareholder of the bank, any of its related
appropriate department of the SES, a duly
companies or any of its substantial
notarized list of the incumbent members of
shareholders;
the board of directors and officers (President
(6) Is not retained as professional
or equivalent rank, down the line, format
adviser, consultant, agent or counsel of the
attached as Appendix 98b), within twenty (20)
institution, any of its related companies or
banking days from the annual election of the
board of directors as provided in the bank’s any of its substantial shareholders, either in
by-laws, in accordance with Appendix 6. his personal capacity or through his firm; is
d. If after evaluation, the appropriate independent of management and free from
department of the SES shall find grounds for any business or other relationship, has not
disqualification, the director/officer so engaged and does not engage in any
elected/re-elected/appointed/promoted may transaction with the institution or with any
be recommended for removal from office of its related companies or with any of its
even if he/she has assumed the position to substantial shareholders, whether by himself
which he/she was elected/re-elected/ or with other persons or through a firm of
appointed/promoted pursuant to Section 16 which he is a partner or a company of which
of R.A. No. 8791. he is a director or substantial shareholder,
In the case of the independent directors, other than transactions which are conducted
the bio-data shall be accompanied by a at arms length and could not materially
certification under oath from the director interfere with or influence the exercise of
concerned that he/she is an independent his judgment; and
director as defined under Subsec. X141.1 (7) Complies with all the qualifications
that all the information thereby supplied are required of an independent director and
Manual of Regulations for Banks Part I - Page 78g

§§ X144 - X145
15.10.31
does not possess any of the disqualifications relationship cited in this Section to the
therefor; and has not withheld nor interests of the FIs involved, certain
suppressed any information material to his measures are still necessary to safeguard
or her qualification or disqualification as an against the disadvantages that could result
independent director. from indiscriminate concurrent
(As amended by Circular Nos. 887 dated 07 October 2015, 793 directorship.
dated 05 July 2013 and 758 dated 11 May 2012) (1) Except as may be authorized by the
Monetary Board or as otherwise provided
Sec. X145 Interlocking Directorships and/ hereunder, there shall be no concurrent
or Officerships. In order to safeguard directorships between banks or between a
against the excessive concentration of bank and a QB or an NBFI.
economic power, unfair competitive (2) Without the need for prior approval
advantage or conflict of interest situations of the Monetary Board, concurrent
to the detriment of others through the directorships between entities not involving
exercise by the same person or group of an investment house shall be allowed in the
persons of undue influence over the policy- following cases:
making and/or management functions of (a) Banks not belonging to the same
similar FIs while at the same time allowing category: Provided, That not more than one
banks, QBs and non-bank financial (1) bank shall have quasi-banking functions;
institutions (NBFIs) without quasi-banking (b) A bank and an NBFI;
functions to benefit from organizational (c) A bank without quasi-banking
synergy or economies of scale and effective functions and a QB; and
sharing of managerial and technical (d) A bank and one (1) or more of its
expertise, the following regulations shall subsidiary bank/s, QB/s and NBFI/s.
govern interlocking directorships and/or For purposes of the foregoing, a
officerships within the financial system husband and his wife shall be considered
consisting of banks, QBs and NBFIs. as one (1) person.
For purposes of this Section, QBs shall b. Interlocking directorships and
refer to investment houses, finance officerships
companies, trust entities and all other NBFIs In order to prevent any conflict of
with quasi-banking functions while NBFIs interest resulting from the exercise of
shall refer to investment houses, finance directorship coupled with the reinforcing
companies, trust entities, insurance influence of an officer’s decision-making
companies, securities dealers/brokers, credit and implementing powers, the following
card companies, non-stock savings and loan rules shall be observed:
associations (NSSLAs), holding companies, (1) Except as may be authorized by the
investment companies, government NBFIs, Monetary Board or as otherwise provided
asset management companies, insurance hereunder, there shall be no concurrent
agencies/brokers, venture capital directorship and officership between banks
corporations, FX dealers, money changers, or between a bank and a QB or an NBFI;
lending investors, pawnshops, fund and
managers, mutual building and loan (2) Without the need for prior approval
associations, remittance agents and all other of the Monetary Board, concurrent
NBFIs without quasi-banking functions. directorship and officership between a bank
a. Interlocking directorships and one (1) or more of its subsidiary bank/
While concurrent directorship may be s, QB/s and NBFI/s, other than investment
the least prejudicial of the various house/s, shall be allowed.
(Next page is Part 1 - Page 79)
Part I - Page 78h Manual of Regulations for Banks

§ X145
14.12.31
c. Interlocking officerships twenty percent (20%) of the equity of each

A concurrent officership in different FIs of the banks, QBs or NBFIs is owned by a
may present more serious problems of self- holding company or a bank/QB and the
dealing and conflict of interest. Multiple interlocking arrangement is necessary for
positions may result in poor governance or the holding company or the bank/QB to
unfair competitive advantage. Considering provide technical expertise or managerial
the full-time nature of officer positions, the assistance to its subsidiaries/affiliates.
difficulties of serving two (2) offices at the Aforementioned concurrent officerships
same time, and the need for effective and may be allowed, subject to the following
efficient management, the following rules conditions:
shall be observed: (a) that the positions do not involve any
As a general rule, there shall be no functional conflict of interests;
concurrent officerships, including (b) that any officer holding the positions
secondments, between banks or, between of president, chief executive officer, chief
a bank and a QB or an NBFI1. For this operating officer or chief financial officer or
purpose, secondment shall refer to the their equivalent may not be concurrently
transfer/detachment of a person from his appointed to any of said positions or their
regular organization for temporary equivalent;
assignment elsewhere where the seconded (c) that the officer involved, or his spouse
employee remains the employee of the or any of his relatives within the first degree
home employer although his salaries and of consanguinity or affinity or by legal
other remuneration may be borne by the adoption, or a corporation, association or
host organization. firm wholly- or majority-owned or
In the case of non-governmental controlled by such officer or his relatives
organizations (NGOs)/foundations that are enumerated above, does not own in his/its
engaged in retail microfinance operations, own capacity more than twenty percent
as defined under Subsec. X326.1.e(9), bank (20%) of the subscribed capital stock of the
officers are prohibited from holding entities in which the bank has equity
officership position or other positions that investments; and
may cause them to be involved in the daily (d) that where any of the positions
microfinance operations of related NGOs/ involved is held on full-time basis, adequate
foundations. justification shall be submitted to the
However, subject to prior approval of Monetary Board; or
the Monetary Board, concurrent (4) Concurrent officership positions in
officerships, including secondments, may the same capacity which do not involve
be allowed in the following cases: management functions, i.e., internal auditor,
(1) Between a bank and not more than corporate secretary, assistant corporate
two (2) of its subsidiary bank/s, QB/s, and secretary and security officer, between a
NBFI/s, other than investment house/s; or bank and one or more of its subsidiary
(2) Between a bank and not more than QB/s and NBFI/s, or between bank/s, QB/s
two (2) of its subsidiary QB/s and NBFI/s; and NBFI/s, other than investment house/s:
or Provided, That at least twenty percent (20%)
(3) Between two (2) banks, or between of the equity of each of the banks, QBs and
a bank and a QB or an NBFI, other than an NBFIs is owned by a holding company or
investment house: Provided, That at least by any of the banks/QBs within the group.
1
Bank officers, who concurrently held officership position or other positions that caused them to be
involved in the daily microfinance operations of related NGOs/ foundations, were given up to 30
September 2011 to relinquish such officer position.

§§ X145 - X146
14.12.31
(5) Concurrent officership positions as reflected in the by-laws of the bank, subject
corporate secretary or assistant corporate to the following guidelines:
secretary between bank/s, QB/s and NBFI/s, a. The base in any profit sharing program
other than investment house/s, outside of those shall be the net income for the year of the
covered under Item “c(4)” of this Section: bank as shown in its Consolidated Statement
Provided, That proof of disclosure to and of Income and Expenses for the year, net of
consent from all of the involved FIs, on the the following:
concurrent officership positions, shall be (1) All cumulative dividends accruing
submitted to the Bangko Sentral. to preferred stock to the extent not covered
For purposes of this Section, members by earned surplus;
of a group or committee, including sub- (2) Accrued interest receivable credited
groups or sub-committees, whose duties to income but not yet collected, net of
include functions of management such as reserves already set up for uncollected
those ordinarily performed by regular interest on loans;
officers, shall likewise be considered as (3) Unbooked valuation reserves on
officers. loans or the amount required to update
It shall be the responsibility of the valuation reserves in accordance with the
Corporate Governance Committee to schedule approved by the Monetary Board,
conduct an annual performance evaluation as well as all amortizations due on deferred
of the board of directors and senior charges;
management. When a director or officer has (4) Provisions for current year’s taxes;
multiple positions, the Committee should (5) Income tax deferred for the year.
determine whether or not said director or Provided, however, That in case of
officer is able to and has been adequately reversal of deferred income taxes which
carrying out his/her duties and, if necessary, were deducted from net income in
recommend changes to the board based computing for profit sharing of previous
upon said performance/review. years, the deferred income tax reversed
The general principles and standards to expense shall be added back to net
that will govern the business relationships income to arrive at the base for profit
between banks and their related NGOs/ sharing for the year during which the
foundations engaged in retail microfinance reversal is made;
are found in Appendix 27. (6) Accumulated profits not yet received
(As amended by Circular Nos. 851 dated 30 September 2014 but already recorded by a bank representing
and 725 dated 26 June 2011, M-2011-033 dated 15 June 2011, its share in profits of its subsidiaries under
Circular Nos. 646 dated 23 February 2009 and 592 dated 28
December 2007) the equity method of accounting; and
b. The bank may provide in its by-laws
§ X145.1 Representatives of for other priorities in the computation of
government. The provisions of this Section net profits for purposes of profit sharing:
shall apply to persons appointed to such Provided, That in no case shall profit
positions as representatives of the government sharing take precedence over any of the
or government-owned or controlled entities items in the preceding paragraph; and
unless otherwise provided under existing laws. c. Prior approval of the Monetary
(As amended by Circular No. 592 dated 28 December 2007) Board shall be necessary before a bank
which has received financial assistance
Sec. X146 Profit Sharing Programs. Profit from the Bangko Sentral may implement
sharing programs adopted in favor of its profit sharing program.
directors, officers and employees shall be Financial assistance shall refer to

§§ X146 - 3147
08.12.31
emergency loans and advances and such total amount of unbooked valuation reserves
other forms of credit accommodations and deferred charges shall be deducted from
which are intended to provide banks with the net income.
liquidity in times of need. b. Except for the financial assistance to
meet expenses for the medical, maternity,
Sec. X147 Compensation and Other education and other emergency needs of the
Benefits of Directors and Officers. To directors or officers or their immediate
protect the funds of depositors and family, the other forms of financial
creditors, the Monetary Board may regulate/ assistance may be suspended.
restrict the payment by the bank of c. When the total compensation
compensation, allowances, fees, bonuses, package including salaries, allowances, fees
stock options, profit sharing and fringe and bonuses of directors and officers are
benefits to its directors and officers in significantly excessive as compared with
exceptional cases and when the peer group averages, the Monetary Board
circumstances warrant, such as, but not may order their reduction to reasonable
limited to, the following: levels: Provided, That even if a bank is in
a. When the bank is under financial trouble, it may nevertheless be
controllership, conservatorship or when it allowed to grant relatively higher salary
has outstanding emergency loans and packages in order to attract competent
advances and such other forms of credit officers and quality staff as part of its
accommodation from the BSP which are rehabilitation program.
intended to provide it with liquidity in times The foregoing provisions founded on
of need; Section 18 of R.A. No. 8791 shall be
b. When the institution is found by the deemed part of the benefits and
Monetary Board to be conducting business compensation programs of banks.
in an unsafe or unsound manner;
c. When it is found by the Monetary Sec. 1147 (Reserved)
Board to be in an unsatisfactory financial
condition such as, but not limited to, the Sec. 2147 (Reserved)
following cases:
(1) Its capital is impaired; Sec. 3147 Bonding/Training of Directors,
(2) It has suffered continuous losses Officers and Employees. Officers and
from operations for the past three (3) years; employees handling funds or securities
(3) Its composite CAMEL(S) rating in the amounting to P5,000 or more in any one
latest examination is below “3”; and (1) year shall be bonded in an amount
(4) It is under rehabilitation by the BSP/ determined by the Monetary Board.
PDIC which rehabilitation may include Directors, officers and other personnel
debt-to-equity conversion, etc. of RBs/Coop Banks shall undergo such
In the presence of any one (1) or more training in banking as may be required by
of the circumstances mentioned above, the the BSP.
Monetary Board may impose the following
restrictions in the compensation and other Sec. X148 Real Estate and Chattel
benefits of directors and officers: Transactions with DOSRI and Employees
a. In the case of profit sharing, the The following regulations shall govern all
provision of Sec. X146 shall be observed real estate/chattel transactions (such as, but
except that for purposes of this Section, the not limited to, rentals or leases, purchases

§§ X148 - X148.1
11.12.31
and sales, of the bank’s owned property, approved by the bank’s board of directors
including foreclosed assets) entered and by the BSP.
between the bank and its director(s), The Certification on Real Estate/Chattel
officer(s), stockholder(s) or related Transactions with DOSRI and Employee(s)
interest(s), as defined under Items “a”, “b”, shall be accompanied by a certified true
“c”, and “e”, respectively, of Subsec. X326.1 copy of the resolution of the board of directors
or between the bank and its employee(s). authorizing said transaction(s) and shall be
Real estate/chattel transactions with signed by at least the majority members of
DOSRI and employee(s) shall require the the bank’s board of directors (excluding the
prior written approval of the majority director(s) concerned in the case of
members of the board of directors, with the transactions involving the director(s) or his
exclusion of the director(s) concerned in related interest(s)) who shall be required to
cases where the transaction involves the certify therein, that:
director or his related interest(s): (a) The transactions were approved by
Provided, however, That real estate/chattel a majority of the bank’s board of directors,
transactions with a bank’s officer(s)/ excluding the director(s) concerned (in the
employee(s) that are availed in strict case of transactions involving the director
conformity with the terms and conditions or his related interest(s)), in a meeting held
of a BSP-approved fringe benefit program for such purpose;
shall require the prior written approval of (b) A certified true copy of said approval
the bank’s duly authorized committee/ as manifested in a resolution passed by the
officer(s). board of directors is attached as an annex
Real estate/chattel transactions with to the certification;
DOSRI and/or employee(s) shall, at all times, (c) The reported transactions have been
be entered into in the best interest of the thoroughly reviewed and verified as having
bank. Records and supporting documents been entered into in the best interest of the
on such real estate/ chattel transactions shall bank; and
be adequately maintained and made (d)The records and underlying
available for inspection and/or submitted documents (e.g. contracts/agreements, etc.)
upon request of the BSP. supporting such transactions are adequately
(Circular No. 737 dated 19 September 2011) maintained and shall be made available for
inspection by BSP examiners and
§ X148.1 Certification on real estate/ submitted upon request of the appropriate
chattel transactions with DOSRI and department of the SES.
employee(s). Banks shall, within ten (10) Said Certification on Real Estate/
banking days from approval by a majority Chattel Transactions with DOSRI and
of its board of directors, submit to the Employee(s) shall, at a minimum, disclose
appropriate department of the SES, the the following information:
Certification on Real Estate/Chattel (a) Board resolution No. and date;
Transactions with DOSRI and Employee(s) (b) Name of DOSRI/employee;
(see prescribed format in Appendix 99), (c) Transaction date;
covering real estate/chattel transactions (d) Type of transaction (i.e., sale, lease,
between the bank and its director(s), etc.);
officer(s), stockholder(s), related interest(s) (e) Description of real estate or chattel
and employee(s), except those that are property (e.g., TCT No. or CCT No.,
availed of in strict conformity with the terms location and area in square meters in case
and of conditions of a fringe benefit program of real property, and certificate of

§§ X148.1 - X148.9
11.12.31
registration number, make, model number, Real Estate/Chattel Transactions with

motor number and/or chassis number, as DOSRI and Employee(s) and/or the certified
may be applicable, for chattels); true copy of the resolution of the bank’s
(f) Appraised or market value or board of directors. A bank which has been
prevailing rental rate; found to have willfully made a false or
(g) Reference or source of the amount misleading statement in the Certification on
reported under Item “(f)” above; Real Estate/Chattel Transactions with
(h) Net carrying value of the property; DOSRI and Employee(s) and/or the certified
and true copy of the resolution of the bank’s
(i) Transaction price (i.e., selling price, board of directors shall be subject to the
rental, etc.) monetary penalties applicable to less serious
(Circular No. 737 dated 19 September 2011) offenses under Appendix 67, for the willful
making of a false or misleading statement
§§ X148.2 – X148.8 (Reserved) which shall be reckoned on a daily basis
from the day following the due date of the
§ X148.9 Sanctions. The following said certification until such time that an
sanctions shall be imposed on the bank and/ amended or corrected Certification on Real
or its concerned directors/officers for Estate/Chattel Transactions with DOSRI and
violations noted: Employee(s) and/or certified true copy of the
a. On the bank resolution of the board of directors has been
1. Monetary fines. A bank which falls submitted to the Bangko Sentral.
to comply with the provisions of this Section b. On the concerned director/officer
shall be subject to monetary penalties under 1. For willful non-compliance.
Appendix 67. Directors/officers of the bank who willfully
(a) For non-submission of the fail/refuse to comply with the provisions of
Certification on Real Estate/Chattel this Section shall be subject to the monetary
Transactions with DOSRI and Employee(s) penalties applicable to less serious offenses
and/or the certified true copy of the under Appendix 67.
resolution of the bank’s board of directors. 2. For false/misleading statements.
A bank which fails to submit the Directors/officers which have been found
Certification on Real Estate/Chattel to have willfully falsely certified or willfully
Transactions with DOSRI and Employee(s) submitted misleading statements in the
and/or the certified true copy of the Certification on Real Estate/Chattel
resolution of the board of directors Transactions with DOSRI and Employee(s)
authorizing such transactions within the and/or the certified true copy of the
prescribed deadline shall be subject to the resolution of the board of directors shall be
monetary penalties applicable to less serious subject to the monetary penalties applicable
offenses under Appendix 67, which shall to less serious offenses under Appendix 67,
be reckoned on a daily basis from the day which shall be reckoned on a daily basis
following the due date of submission until from the day following the due date of the
the required Certification on Real Estate/ said certification until such time that an
Chattel Transactions with DOSRI and amended or corrected certification or
Employee(s) and/or the certified true copy certified true copy of the resolution of the
of the resolution of the board of directors is board of directors has been submitted to the
filed with the Bangko Sentral. Bangko Sentral.
(b) For the willful making of a false/ The imposition of the above sanctions
misleading statement in the Certification on is without prejudice to the filing of

§§ X148.9 - X149.9
14.12.31
appropriate criminal charges against whether or not the director or officer

culpable persons as provided under Section profited or will profit thereby. The list of
35 of R.A. No. 7653 for the willful making activities which may be considered unsafe
of a false/misleading statement. and unsound is shown in Appendix 48.
(Circular No. 737 dated 19 September 2011) (As amended by Circular No. 640 dated 16 January 2009)
Sec. X149 Conducting Business in an §§ X149.1 – X149.7 (Reserved)

Unsafe/Unsound Manner. Whether a
particular activity may be considered as § X149.8 Reportorial requirement. For
conducting business in an unsafe or purposes of determining market median
unsound manner, all relevant facts must be rates on deposits and monitoring banks that
considered. An analysis of the impact rely excessively on large, high-cost or
thereof on the bank’s operations and volatile deposits/borrowings specified in
financial conditions must be undertaken, Item “g” of Appendix 48, all banks shall
including evaluation of capital position, submit a quarterly report on bank deposit
asset condition, management, earnings interest rates which shall be included in the
posture and liquidity position. report of selected branch accounts.
In determining whether a particular act Guidelines on reportorial requirement
or omission, which is not otherwise for bank interest rates is provided in
prohibited by any law, rule or regulation Appendix 105.
affecting banks, may be deemed as (Circular No. 848 dated 08 September 2014)
conducting business in an unsafe or
unsound manner, the Monetary Board, upon § X149.9 Sanctions. The Monetary
report of the head of the supervising or Board may, at its discretion and based on
examining department based on findings in the seriousness and materiality of the acts
an examination or a complaint, shall or omissions, impose any or all of the
consider any of the following circumstances: following sanctions provided under Section
a. The act or omission has resulted or 37 of R.A. No. 7653 and Section 56 of R.A.
may result in material loss or damage, or No. 8791, whenever a bank conducts
abnormal risk or danger to the safety, business in an unsafe and unsound manner:
stability, liquidity or solvency of the a. Issue an order requiring the bank to
institution; cease and desist from conducting business
b. The act or omission has resulted or in an unsafe and unsound manner and may
may result in material loss or damage or further order that immediate action be taken
abnormal risk to the institution’s depositors, to correct the conditions resulting from such
creditors, investors, stockholders, or to the unsafe or unsound practice;
Bangko Sentral, or to the public in general; b. Fines in amounts as may be
c. The act or omission has caused any determined by the Monetary Board to be
undue injury, or has given unwarranted appropriate, but in no case to exceed
benefits, advantage or preference to the bank P30,000 a day on a per transaction basis
or any party in the discharge by the director taking into consideration the attendant
or officer of his duties and responsibilities circumstances, such as the gravity of the act
through manifest partiality, evident bad faith or omission and the size of the bank, to be
or gross inexcusable negligence; or imposed on the bank, their directors and/or
d. The act or omission involves entering responsible officers;
into any contract or transaction manifestly c. Suspension of interbank clearing
and grossly disadvantageous to the bank, privileges/immediate exclusion from
clearing;

§§ X149.9 - X151
15.10.31
d. Suspension of rediscounting be governed by the provisions of Sec. X105

privileges or access to Bangko Sentral credit on liberalized entry and scope of operations
facilities; of foreign banks and Sec. X153 on
e. Suspension of lending or foreign establishment of additional branches of
exchange operations or authority to accept foreign banks1.
new deposits or make new investments; For purposes of this Section and its
f. Suspension of responsible directors Subsections, the following definitions shall
and/or officers; apply:
g. Revocation of quasi-banking license; Branch shall refer to any permanent
and/or office or place of business in the Philippines
h. Receivership and liquidation under other than the head office where deposits
Section 30 of R.A. No. 7653. All other are accepted and/or withdrawals are
provisions of Sections 30 and 37 of R.A. serviced by tellers or other authorized
No. 7653, whenever appropriate, shall also personnel. It maintains a complete set of
be applicable on the conduct of business in books of accounts.
an unsafe or unsound manner. Extension office shall refer to any
The imposition of the above sanctions permanent office or place of business in the
is without prejudice to the filing of Philippines other than the head office or a
appropriate criminal charges against branch, where deposits are accepted and/
culpable persons as provided in Sections or withdrawals are serviced by tellers or
34, 35 and 36 of R.A. No. 7653. other authorized personnel. It does not
maintain a complete set of books of accounts
Sec. X150 Rules of Procedure on as its transactions are taken-up directly in
Administrative Cases Involving Directors the books of the head office or a branch to
and Officers of Banks. The rules of which it is attached. It shall be treated as a
procedure on administrative cases involving branch for purposes of this Section and its
directors and officers of banks are shown Subsections.
in Appendix 64. Other banking office (OBO) shall refer
to any permanent office or place of business
I. BANKING OFFICES in the Philippines other than the head office,
branch or extension office, which engages
Sec. X151 Establishment/Relocation/ in any or all of the following non-
Voluntary Closure/Sale of Branches. The transactional banking-related activities:
Bangko Sentral shall promote and maximize a. Market loans, deposits and other bank
the delivery of efficient and competitive products and services;
banking services especially to underserved b. Accept loan applications and conduct
markets and customers through innovative preliminary credit evaluation as well as
policies. Toward this end, the following are perform credit administration support
the rules and regulations that shall govern services;
the establishment, relocation, voluntary c. Host on-site automated teller
closure and sale of local branches of machines (ATMs);
domestic banks, including locally d. Perform customer care services;
incorporated subsidiaries of foreign banks e. Perform customer identification
and the establishment of branches of foreign process, receive account opening
banks in the Philippines shall continue to documents and facilitate account activation:
1
With additional special regulatory relief in areas affected by Tropical Depression “Yolanda” as provided
under Appendix 89a (Circular No. 820 dated 06 December 2013).

§§ X151 - X151.1
15.10.31
Provided, That account opening approval money out for electronic money (e-money)
and actual opening of deposit accounts shall transactions;
be done only at the head office/branches/ (7) Collect premiums/pay out benefits
extension offices; and from/to members of social security
f. Such other non-transactional banking institutions such as the Government Service
related activities as may be authorized by Insurance System (GSIS), Social Security
the Bangko Sentral. System (SSS), Philippine Health Insurance
An OBO may also be recognized as Corporation (Philhealth), Employees’
“microfinance-oriented”. A microfinance- Compensation Commission (ECC), and
oriented OBO (MF-OBO)/micro-banking other government authorized pension and
office (MBO) shall refer to an OBO that benefit systems;
primarily caters to the banking needs and (8) Pay out benefits under government
services of microfinance clients and overseas sponsored conditional cash transfer schemes;
Filipinos (OFs) and their beneficiaries. As (9) Accept utilities payment; and
contemplated under Appendix 45, (10)Purchase foreign currencies up to
“microfinance clients” are micro-credit the maximum equivalent of USD300 per
borrowers and/or micro-depositors. client per day for credit to micro-deposit accounts;
In addition to the non-transactional subject to the following conditions:
banking-related activities and services (a) An MF-OBO/MBO shall only perform
allowable for regular OBOs, MF-OBO/ the transactional activities it has specifically
MBOs may also engage in any or all of the applied for and had been authorized by the
following limited transactional banking Bangko Sentral to perform. Subsequent
activities and services: enhancements are likewise subject to prior
(1) Accept micro-deposits including Bangko Sentral approval;
initial deposit and service withdrawals (b) The bank shall ensure the timely
thereof. As contemplated under Appendix 45, accounting and proper recording of all
the monthly average daily savings account financial transactions of its OBOs and
balance for a micro-deposit account shall observe adequate internal control
not exceed Forty Thousand Pesos procedures to ensure the safety of funds and
(P40,000.00) unless a higher amount has reliability of financial records and reports
been approved by the Bangko Sentral; emanating from all transactions; and
(2) Accept check deposits of (c) The bank president shall submit
microfinance clients for collection and credit within thirty (30) calendar days from the end
to own deposit accounts; of a financial year a comprehensive
(3) Disburse/release proceeds of micro- statement under oath that all the bank’s
loans and collect loan amortization OBOs and their activities are duly
payments and related charges. Micro-loans authorized by the Bangko Sentral.
include all types of microfinance loans as (As amended by Circular No. 868 dated 26 January 2015,
defined under Appendix 45 as well as other M-2011-032 dated 06 June 2011, Circular Nos.694 dated
14 October 2010, 669 dated 22 October 2009 and 624 dated 13
loans to microfinance clients; October 2008)
(4) Present, market, sell and service
micro-insurance products in accordance § X151.1 Prior Monetary Board
with existing regulations; approval. No bank operating in the
(5) Receive/pay-out funds in connection Philippines shall establish branches,
with authorized remittance transactions; extension offices or other banking offices
(6) Act as a cash/money in and cash/ or transact business outside the premises

§§ X151.1 - X151.2
14.12.31
of its duly authorized principal office or (1) No unbooked as of date of

head office without the prior approval of valuation reserves application
(2) No deficiency in 12 weeks
the Monetary Board. regular and liquidity
(As amended by Circular No. 624 dated 13 October 2008) reserve requirements
on deposits and deposit
§ X151.2 Pre-requisites for the grant substitutes
of authority to establish a branch. With (3) No deficiency in 3 months
prior approval of the Monetary Board, banks asset and liquid asset
may establish branches subject to the cover for EFCDU/
FCDU liabilities
following pre-qualification requirements: (4) Compliant with 12 weeks
a. The bank has complied with the ceilings on loans
minimum capital requirement under to DOSRI
Subsec. X111.1, but not lower than (5) No deficiency in 3 months
liquidity floor on
P10 million, in the case of RBs. government deposits
In the case of branches to be established (6) Compliant with as of date of
in restricted areas pursuant to Subsec. the single borrower’s application
X151.4 Item “d”, the bank must have loan limit and limit on
combined capital accounts of at least total investment in real
estate and improvements
P10 billion for a UB/KB and at least P3 including bank equipment
billion for a TB: Provided, That a UB/KB (7) No past due obligation as of date of
with combined capital accounts of less than with the Bangko Sentral application
P10 billion or a TB with combined capital or with any FI
(8) No float items outstanding 3 months
accounts of less than P3 billion shall be in the “Due From/To Head
allowed to execute an undertaking to build Office/Branches/Offices”
up capital for a maximum period not later and “Due from BSP”
than 30 June 2014. accounts exceeding
one percent (1%) of the
b. The bank’s risk-based CAR at the time
total resources as of end
of filing the application is not lower than of the month
twelve percent (12%); (9) No uncorrected findings as of date of
c. The bank’s CAMELS composite rating of unsafe and unsound application
in the latest examination is at least “3”, with banking practices
(10) Has adequate accounting as of date of
management component score not lower records, systems, application
than “3”; procedures and internal
d. The bank has established a risk control
management system appropriate to its (11) Has generally complied as of date of
operations, characterized by clear with banking laws, rules application
and regulations, orders
delineation of responsibility for risk or instructions of the
management, adequate risk measurement Monetary Board and/or
system, appropriately structured risk limits, Bangko Sentral Management
effective internal control system and (12) It has neither unpaid as of date of
assessment due nor past application
complete, timely and efficient risk reporting due obligation with the
system; PDIC.
e. The bank has no major supervisory In the case of branches to be established
concerns outstanding on safety and in restricted areas, neither the bank nor any
soundness as indicated by the following of its subsidiary banks is under Prompt
during the period immediately preceding the Corrective Action (PCA) or if under PCA, it
date of application or as of the date of shall be compliant with PCA resolution
application: guidelines.

§ X151.2
14.12.31
f. For purposes of evaluating branch Provided, That:

applications and determining the number of (1) Applications received and approved
additional branches a bank may establish, up to 30 June 2012 shall be assessed the
theoretical capital shall be assigned to each amount of theoretical capital applicable on
branch to be established, including 14 July 2012, subject to subsequent
approved but unopened branches as reassessments using the increased amount
follows: of theoretical capital effective (i) 01 July
(In millions) 2012, (ii) 01 July 2013, and (iii) 01 July 2014,
Location of Date of RB
Branch Implementation UB/KB TB COOP respectively;
Metro Up to 30 P50 P15 P5. ( 2 ) Application received and approved
Manila June 2012
From 01 July P65 P18 P6.5
from 01 July 2012 to 30 June 2013 shall be
2012 to 30 assessed the amount of theoretical capital
June 2013 effective 01 July 2012, subject to subsequent
2013 to 30 reassessments using the increased amount
June 2014 of theoretical capital effective (i) 01 July
From 01 July P100 P25 P10 2013, and (ii) 01 July 2014, respectively;
2014
Cities of From 18 P25 P5.0 P2.5 (3) Applications received and approved
Cebu and January from 01 July 2013 to 30 June 2014 shall be
Davao 2006
1st to 3rd Up to 30 P25 P5.0 P2.5
assessed the amount of theoretical capital
class cities June 2012 effective 01 July 2013, subject to subsequent
From 01 July P25 P6.5 P2.5 reassessment using the increased amount
2012 to 30
June 2013 of theoretical capital effective 01 July 2014;
From 01 July P25 P8.0 P2.5 and
2013 to 30 (4) Applications received and approved
June 2014
From 01 July P25 P10 P2.5 starting 01 July 2014 shall be assessed using
2014 the increased amount of theoretical capital
4th to 6th Up to 30 P25 P5.0 P1.5
class cities June 2012
effective said date.
From 01 July P25 P6.5 P1.8 The assigned theoretical capital for the
2012 to 30 proposed branch/es shall be deducted from
June 2013
From 01 July P25 P8.0 P2.1 the applicant bank’s existing qualifying
2013 to 30 capital as defined under applicable and
June 2014 existing capital adequacy framework, solely
2014 for the purpose of determining whether its
1st to 3rd From 18 P20 P5.0 P1.0 qualifying capital can support the
class January 2006
municipal- Up to 30 P15 P2.5 P0.5
establishment of the additional branch/es.
ities 4th to June 2012 The applicant bank’s notional risk-based CAR,
6th class From 01 July P16.5 P3.3 P0.65 after deducting the applicable theoretical
cities 2012 to 30
June 2013 capital for the proposed branch/es from the
From 01 July P18 P4.1 P0.8 existing qualifying capital, shall not be less
2013 to 30 than the minimum requirement at the time
June 2014
From 01 July P20 P5.0 P1.0 of approval, provided also that at the time
2014 of opening of such branch/es the notional
5th to 6th From 18 P15 P2.5 P0.5
class January
CAR remains compliant with the minimum
municipal- 2006 requirement.
ities

§§ X151.2 - X151.3
14.12.31
If the applicant bank’s risk-based CAR Subsec. X102.3, so as to enable them to

after deducting the assigned capital for the raise their income levels and improve their
proposed branch from the existing qualifying living standards. Microfinance loans are
capital would be less than ten percent granted on the basis of the borrower’s cash
(10%), its application shall not be processed flow and are typically unsecured.
unless it infused such amount as may be A BMBE-oriented branch of a bank is a
necessary to maintain its risk-based CAR to branch that caters primarily to the credit
at least ten percent (10%); needs of BMBEs duly registered under R.A.
g. The bank has been operating No. 9178.
profitably for the year immediately preceding (As amended by Circular Nos. 827 dated 28 February 2014,
the date of application, or in the case of 728 dated 23 June 2011, 715 dated 04 March 2011, 682 dated
15 February 2010, 674 dated 10 December 2009 and 624 dated
newly-established banks, the submitted 13 October 2008)
projection showed that profitability will be
attained on the third year of operations, at § X151.3 Application for authority to
the latest; and establish branches. An application for
h. Additional requirements for the authority to establish a branch shall be
establishment of microfinance/BMBE- signed by the president of the bank or
oriented branches of banks which are not officer of equivalent rank and shall be
microfinance/BMBE-oriented are as follows: accompanied by the following
(1) The branch shall have a manual of
information/documents:
operations on microfinancing duly approved
a. Business plan detailing the primary
by the bank’s board of directors;
banking activities/products and services to be
(2) The branch shall have an adequate
offered; competition analysis to show that its
loan tracking system that allows daily
application will not lead to over banking in
monitoring of loan releases, collections and
the target market; and financial projections for
arrearages, and any restructuring and
the first three (3) years of operations showing
refinancing arrangements;
sustained viability, as may be required by the
(3) The proposed branch shall be
appropriate department of the SES: Provided,
managed by a person with adequate
That normally operating UBs, KBs, and TBs
experience or training in microfinancing
with total resources of P1 billion or more shall
activities; and
be exempt from the foregoing requirements.
(4) At least seventy percent (70%) of
A bank is not considered normally operating
the deposits generated by the branch to
if it is under PCA or is non-compliant with
be established shall be actually lent out
supervisory directives duly confirmed by the
to qualified microfinance/BMBE
Monetary Board. In the evaluation of the
borrowers and the microfinance/BMBE
business plan, due consideration shall be given
loans of said branch shall at all times be
to banks that are able or are committed to
at least fifty percent (50%) of its gross loan
invest or deploy branch resources in their area
portfolio.
of operations;
A microfinance-oriented branch is a
b. Certified true copy of the resolution
branch that provides financial services and
of the bank’s board of directors
caters primarily to the credit needs of basic
or disadvantaged sectors such as those authorizing the establishment of the
specified under the second paragraph of branch and indicating its proposed site;

§§ X151.3 - X151.4
12.12.31
c. Organizational set up of the number of branch applications received

proposed branch showing the proposed from each applicant bank, and the final
staffing pattern; and number of branch applications granted to
d. Certification/Undertaking signed by each applicant bank under Phase 1;
the president of the bank or officer of d. As a general rule, banks shall be
equivalent rank that the bank has complied allowed to establish branches anywhere in
or will comply, as the case maybe, with the Philippines, except in the cities of
the prerequisites for the grant of authority Makati, Mandaluyong, Manila, Parañaque,
to establish a branch under Subsec. X151.2. Pasay, Pasig, Quezon and San Juan
(As amended by Circular No. 624 dated 13 October 2008) (restricted areas). However, pursuant to the
policy of the Bangko Sentral to promote a
§ X151.4 Branching guidelines competitive market environment conducive
Branches may be established, subject to the to a better and improved quality of financial
following guidelines: services delivery, the branching restriction
a. A bank may apply to establish as in these eight (8) areas is lifted under a two
many branches as its qualifying capital can (2)-phased liberalization approach.
support consistent with the theoretical Under Phase 1, private domestically
capital requirement computed in incorporated UBs/KBs and TBs that have
accordance with the provisions of Subsec. less than 200 branches in the restricted
X151.2.f, taking into account any areas as of 31 December 2010 may apply
approved but unopened branch/es for branches in restricted areas starting 14 July
outstanding at the time of application. 2011 and will remain open up to 11 October
For branch applications in restricted 2011 and establish the same until 30 June
areas pursuant to Item “d” hereof, 2014. The branching restriction shall be fully
qualified banks may apply to establish as lifted starting 01 July 2014 under Phase 2:
many branches as their qualifying capital Provided, That branching applications in said
can support within Phase 1 period areas shall remain subject to the requirements
consistent with the theoretical capital on capital level of at least P10 billion and
requirement computed in accordance with P3 billion for U/KBs and TBs, respectively,
the provisions of Subsec. X151.2 Item “f”; non-PCA status, usual prerequisites and
b. Only applications submitted with procedures under Subsecs. X151.2 and
complete documentary requirements X151.3 including the theoretical capital
enumerated in Subsec. X151.3 shall be requirement and a special licensing fee of
accepted. Processing shall be on a first- P20 million and P15 million per approved
come, first-served basis; branch application of a U/KB and TB,
c. Industry/market notice of application respectively.
for authority to establish a branch shall be Government-owned banks may
posted at the Bangko Sentral website upon likewise apply for branches in the restricted
receipt thereof; areas subject to justification as to
For branch applications in restricted consistency with mandates under their
areas, the Bangko Sentral shall post on its respective charters: Provided, however, That
website, within a reasonable time from the RBs/Coop Banks shall not be allowed to
ninety (90) calendar day period in Item “d” establish branches in Metro Manila:
hereof, the list of applicant banks, the Provided, further, That -

§ X151.4
12.12.31
(1) Branches of microfinance-oriented (4) A TB with head office outside Metro

banks, microfinance-oriented branches of Manila and Cities of Cebu and Davao with
banks which are not microfinance- combined capital accounts of at least P500
oriented may be established anywhere, million may establish branches in the
subject to compliance with, among other Cities of Cebu and Davao.
requirements, the minimum capital (5) Subject to the restrictions in Items
requirement under Item “a” of Subsec. “6”, “7”, “8” and “9” hereof, an RB with
X151.2 and the following conditions: combined capital accounts of at least
(a) A microfinance-oriented TB or RB P10.0 million, may establish branches in
may be allowed to establish branches in cities/municipalities of higher classification
Metro Manila, including in the restricted and with corresponding higher
areas, if it has combined capital accounts capitalization requirements, except in
of at least P1.0 billion in case of a TB, or Metro Manila: Provided, That where the
at least P100.0 million in case of an RB; and majority of the RB’s total assets and/or
(b) A TB or RB/Coop Bank may be majority of its total deposit liabilities are
allowed to establish microfinance-oriented regularly accounted for by branches
branches in Metro Manila, including in the located in such cities/municipalities of
restricted areas, if it has combined capital higher classification, the RB shall comply
accounts of at least P1.0 billion in case of a with the required minimum capital under
TB, or at least P100.0 million in case of an Subsec. X111.1 for that city/municipality
RB/Coop Bank. of the highest classification within one (1)
(2) Subject to the submission of the year from the Bangko Sentral finding.
specific business purpose for establishing (6) An RB or a Coop Bank shall only be
the branch, among other justifications: allowed to establish branches if its combined
(a) A TB with head office located outside capital accounts is at least P10.0 million;
the restricted areas or an RB with head office (7) An RB with combined of at least
located outside the restricted areas but P10.0 million but less than P50.0 million
within Metro Manila with combined capital may establish branches anywhere within
accounts of at least P1.5 billion may be 2- hour normal travel time by land/sea
allowed to establish one (1) branch public transport from the head office, except
anywhere within the restricted areas if it has in Metro Manila;
no existing branch in said areas; and (8) An RB with combined capital
(b) An RB with head office located accounts of at least P50.0 million but less
outside Metro Manila with combined than P100.0 million may establish branches
capital accounts of at least P1.5 billion in any island group (Luzon, Visayas or
may be allowed to establish one (1) Mindanao) where the head office is located,
branch anywhere in Metro Manila, except in Metro Manila;
including in the restricted areas, if it has (9) An RB with combined capital
no existing branch/es in Metro Manila. accounts of at least P100.0 million capital
(3) A TB with head office outside Metro accounts may establish branches anywhere
Manila with combined capital accounts in the Philippines, except in Metro Manila
of at least P1.0 billion may establish unless qualified under Items “d(1)” and
branches in Metro Manila, except in the “d(2)” above; and
restricted areas. (10) In the case of Coop Banks:

§§ X151.4 - X151.5
15.10.31
a. The Coop Bank of the province may exceed the total number determined by the
set up branches/extension offices/other Monetary Board to be optimal over the
banking offices (OBOs) anywhere within Phase 1 period, each qualifying applicant
the province subject to compliance with bank shall be granted a pro-rata share based
the applicable branching rules and on the total number of branches applied for.
regulations as provided in Sec. X151; e. The Monetary Board may decide to
b. Coop Banks from other provinces disapprove an otherwise qualified branch
may set up branches/extension offices/ application if in its determination such
OBOs in cities or municipalities where branch application will lead to an
there are no other Coop Bank head office/ overbanking situation in the specific market.
branch/extension office; (As amended by Circular No. 759 dated 30 May 2012,
c. The establishment of branches/ CL-2011- 052 dated 27 July 2011, Circular Nos. 727 and 728
both dated 23 June 2011, 696 dated 29 October 2010, 692 dated
extension offices mentioned in Items “1” and 23 July 2010, 682 dated 15 February 2010 and 624 dated
“2” above shall be subject to the following 13 October 2008)
minimum combined capital requirement:
i. At least P10.0 million to establish § X151.5 Branch processing and special
branches/extension offices anywhere within licensing fee.
the province where its head office is located; a. Branch processing fee
ii. At least P50.0 million to establish The bank shall be immediately charged
branches/extension offices in any island with the total processing fee computed for
group (i.e., Luzon, Visayas, Mindanao) all branches approved, in accordance with
where the head office is located, except the following:
in Metro Manila; and
iii. At least P100.0 million to establish Bank Branch Processing Fees
branches/extension offices anywhere in the Category Metro Manila, 3rd to 6th
Cities of Cebu Class Muni -
country except in Metro Manila unless the
and Davao, nicipalities
Coop Bank is qualified to establish a All Other
branch/extension office in Metro Manila Cities, 1st to
and/or restricted areas as provided in Items 2nd Class
“d.1” and “d.2” of Subsec. X151.4 on the Municipalities
a. UBs/KBs/ P200,000 P100,000
branching guidelines; Affiliated TBs
iv. Other relevant branching rules and b. Non-affiliated P100,000 P50,000
regulations which are not inconsistent with TBs
the above provisions shall continue to be c. RBs/Coop P25,000 P25,000
Banks
governed by Sec. X151; and
d. Microfinance P5,000 5,000
v. For branches to be established in the -oriented banks
restricted areas, the maximum number of or microfinance
branches that may be established by -oriented branches
qualified banks under Phase 1 shall be of banks
subject to final adjustment by the Monetary Provided, That branches to be established
Board based on the total number of in unbanked cities and municipalities
applications received. Should the total shall be exempted from the processing
number of branch applications received by fee: Provided, further, That branches of
the Bangko Sentral under Item “d” above TBs, RBs and Coop Banks to be

§§ X151.5 - X151.6
15.10.31
established within the region where the score not lower than “3” in the latest
head office is located shall be exempted examination of the bank;
from the processing fee. d. Not under Prompt Corrective Action
In no case shall staggered payment for (PCA) or under conditions subject to PCA;
the total branch processing fee be allowed. e. No major supervisory concerns on
Moreover, failure to open an approved safety and soundness such as those
branch within the prescribed period shall enumerated under Item “e” of Subsec.
result in the forfeiture of the branch X151.2 as of the date of application; and
processing fee paid. f. Additional requirement for the
b. Special licensing fee establishment of MF-OBOs/MBOs:
For branch applications in the restricted 1) At least fifty percent (50%) of total
areas, the applicant bank shall upon transactions generated are with
acceptance of branch application pay a microfinance clients;
special licensing fee per branch depending 2) It shall have a maximum on-site cash
on the bank’s category, as follows: limit not exceeding P500,000 per day,
commensurate to its level of banking
Bank Category Licensing Fee Per Branch activities;
UB/KB P20 million 3) It shall have adequate physical
TB 15 million
facilities and security arrangements as well
Relocation of approved but unopened as information and transaction support
branches/OBOs under Subsec. X151.7, systems appropriate to the level of banking
branches/OBOs under Subsec. X151.9, and activities undertaken and services offered;
relocation of head offices under Sec. X152, 4) It shall be managed by a responsible
officer with adequate experience or training
shall be subject, in the manner therein
in microfinancing activities; and
provided, to the special licensing fees.
(As amended by Circular Nos. 868 dated 26 January 2015, 5) It shall have a manual of operations
847 dated 28 August 2014, 759 dated 30 May 2012, 728 dated appropriate to its authorized activities that
23 June 2011 and 624 dated 13 October 2008) is periodically reviewed and updated and
duly approved by the bank’s board of
§ X151.6 Establishment of other directors.
banking offices1. Other banking offices may The application to establish other
be established with prior Monetary Board banking offices shall be signed by the
approval, and subject to compliance with president of the bank or officer of equivalent
the following: rank and submitted to the appropriate
a. Minimum capital requirement under department of the SES together with the
Subsec. X111.1 but not lower than P10.0 following documents:
million in the case of RBs and Coop Banks; 1. Certified true copy of the resolution
b. Ten percent (10%) risk-based CAR; of the bank’s board of directors authorizing
c. CAMELS composite rating not lower the establishment of the other banking office
than “3”, with Management component and indicating its proposed site;
1
The bank is given up to 15 April 2011 to declare to the Bangko Sentral the desired classification
(regular or MF-OBO/MBO) of its existing OBOs: Provided, That all existing OBOs shall conform to
the provisions of Sec. X151 and this Subsection or phase out non-conforming activities by 04 May
2011: Provided, further, That the president of a bank with an existing OBO covered by this transitory
provision shall certify under oath to the Bangko Sentral within thirty (30) calendar days from 04 May
2011 that all existing OBOs conform to the provisions of Sec. X151 and this Subsection.

§§ X151.6 - X151.7
14.12.31
2. Purpose statement indicating the For whatever reason, failure to open the
bank’s objective or reason for establishing approved branch/es within the three (3) year
the other banking office; and period shall result in the forfeiture of the
3. Undertaking signed by the president bank’s right to open such branch/es.
of the bank or officer of equivalent rank that b. Approved OBOs shall be opened
said other banking office shall not accept within one (1) year from the date of approval
deposits and/or service withdrawals thru thereof and shall not be subject to any
tellers or other authorized personnel. extension.
OBOs may be established only in areas Approved but not yet opened
where the bank is allowed to establish branches/OBO may be relocated upon
branches as provided under Subsec. X151.4 prior approval by the Deputy Governor, SES,
on branching guidelines. subject to the presentation of justification
The processing guidelines on the and valid reason for the relocation, and
establishment of MF-OBOs/MBOs are in resubmission of the information/
Appendix 93. documents enumerated in Subsec. X151.3
(As amended by Circular No. 825 dated 07 February 2014, on application for authority to establish
M-2011-019 dated 29 March 2011, M-2010-040 dated
04 November 2010, Circular Nos. 694 dated 14 October 2010,
branches: Provided, That branches located
682 dated 15 February 2010 and 624 dated 13 October 2008) outside the restricted areas which will be
relocated to restricted areas shall be
§ X151.7 Opening of banking offices. subject to the special licensing fee under
Approved branches/OBOs shall be opened, Subsec. X151.5 upon approval of the
as follows: relocation: Provided, further, That the
a. Approved branches shall be opened, opening of the relocated branch/OBO shall
within three (3) years from the date of be made within the prescribed period
approval thereof and shall not be subject to mentioned above from date of Monetary
any extension. Board approval of its establishment and
The opening of approved branches may, shall not be subject to any extension.
however, be suspended or revoked by the As an incentive to merger/consolidation
appropriate department of the SES upon of banks or purchase/acquisition of majority
approval of the Deputy Governor, should or all of the outstanding shares of stock of a
any of the following conditions be found to distressed bank for the purpose of
exist: rehabilitating the same, opening or
(1) The bank’s qualifying capital is no relocation of approved but not yet opened
longer sufficient to support the remaining branches/OBOs may be allowed within two
unopened branches; (2) years from date of merger/consolidation
(2) The bank or any of its subsidiary or purchase/acquisition of majority or all of
bank is initiated under PCA or is under the outstanding shares of stock of a
condition/s subject to PCA or if already distressed bank for the purpose of
under PCA, continuously fails to comply rehabilitating the same.
with the MOU/PCA plan; Approved branches in the restricted
(3) The bank has major supervisory areas shall be opened on or before 30 June
concerns outstanding on safety and 2014. Reasonable extensions may be
soundness. authorized by the Monetary Board on a

§§ X151.7 - X151.9
14.12.31
case-to-case basis provided there are under Subsec. X181.4 and accessibility to
meritorious grounds: Provided, That disabled persons under Subsec. X160.10;
approved branches of banks that have (2) Posting in conspicuous places in the
executed an undertaking to build up the branch premises of the required notices,
required capital shall not be allowed to be schedules and other relevant information
opened until the capital requirement is met: pertaining to the branch’s lending and
Provided, further, That approved branches deposit operations;
of banks under PCA shall not be allowed to (3) Availability of efficient means of
be opened until the PCA status is lifted: reporting/communication facilities (to be
Provided, finally, That the approved specified) between the head office, branches
branching shall be suspended should PCA and extension office; and
be initiated on an applicant bank or any of (4) The requirements enumerated under
its subsidiary banks. Subsecs. X151.2/X151.6 as of the time of
Failure to open a branch within the actual opening of the branch/other banking
period authorized by the Monetary Board office.
may result in forfeiture of the branch A bank that fails to comply with any
licensing fee and the right to open such one (1) of the requirements in
branch. Subsecs.X151.2/X151.6 on the prerequisites
Approved branches with unexpired for the grant of authority to establish a
period to open as of 17 June 2012, shall be branch/establishment of OBOs as of the date
given three (3) years to open, reckoned from of the intended opening of the branch/OBO
their original dates of Monetary Board shall refrain from opening the branch/OBO
approval and shall not be subject to any on such date until it has complied with all
extension. of the requirements under Subsecs. X151.2/
(As amended by Circular Nos. 847 dated 28 August 2014, X151.6: Provided, That the provisions of
777 dated 13 December 2012, 759 dated 30 May 2012, Subsec. X151.7 on the date of opening of
728 dated 23 June 2011, 697 dated 29 October 2010 and
banks shall be observed.
(As amended by Circular Nos. 759 dated 30 May 2012, 697
dated 29 October 2010 and 624 dated 13 October 2008)
§ X151.8 Requirements for opening a
branch/other banking office. Not later than § X151.9 Relocation of branches/other
five (5) banking days from the date of banking offices1. Relocation of existing
opening, the bank shall submit to the branches/OBOs, whether to be opened at
appropriate department of the SES of the the new site on the next banking day or
following information/documents: within one (1) year from the date of closure
a. A written notice of the actual date of of the branch/OBO, shall be allowed in
opening of its branch/OBO; and accordance with the following procedures:
b. A certification signed by the chief a. Notice of relocation of branch/OBO
compliance officer and the head of the signed by the president of the bank or officer
branches department with the rank of a vice of equivalent rank, together with a certified
president, or its equivalent or by a higher true copy of the resolution of the bank’s
ranking officer on compliance with the board of directors authorizing said
following: relocation, and an undertaking that the bank
(1) Adequacy of banking facilities shall comply with the notification
including installation of security devices requirement under Item “b” below, shall be
1

§§ X151.9 - X151.10
14.12.31
submitted by the bank to the appropriate closure shall be submitted to the appropriate
department of the SES. The notice shall department of the SES;
include information as to the new relocation d. Within five (5) banking days from the
site, the timetable for said relocation, date date of opening of the relocated branch/
and manner of payment of special licensing OBO, a notice of such opening, together
fee under Subsec. X151.5, as may be with a certification signed by the CCO and
applicable, and the branch/OBO that will the head of the branches department with
handle the transactions of the branch/OBO the rank of a vice president or its equivalent
to be relocated, as may be applicable. rank or by a higher ranking officer that the
b. If no reply is received by the bank bank has complied with Items “b.1” to “b.4”
from the Bangko Sentral within thirty (30) of Subsec. X151.8 on the requirements for
calendar days from date of receipt by the opening a branch/OBO shall be submitted
Bangko Sentral of the said notification, to the appropriate department of the SES.
notice of relocation shall be sent by the bank Information as to the site of the branch/OBO
to the depositors’ and other creditors’ last that was closed and the date of such closure,
known addresses by registered mail service as well as the site of the branch/OBO that
of the Philippine Postal Corporation was opened and the date of such opening
(Philpost) or delivery service of other mail shall be indicated in the said notice;
couriers or electronic mail, and posters shall e. Branches/OBO may be relocated
also be displayed in conspicuous places in anywhere, subject to the branching
the premises of the branch/OBO to be guidelines under Subsec. X151.4: Provided,
relocated at least forty-five (45) calendar days That branches/OBOs located outside the
prior to the closure of the branch/OBO to restricted areas which will be relocated to
be relocated. Information as to the new restricted areas shall be subject to the special
relocation site, the date of the opening at licensing fee under Subsec. X151.5; and
the new site, and the address of the branch/ f. Relocation of branches/OBOs beyond
OBO that will handle the transactions of the one (1) year shall be deemed as permanent
branch/OBO to be relocated, as may be closure and surrender of license of the
applicable, shall be indicated in the said branch/OBO at the old site, and the opening
notice/posters. Proofs of receipt of notice by of a branch/OBO at the new site shall be
the depositors and the creditors shall be kept deemed as an establishment of a new
on file and made available upon request of branch/OBO, subject to the provisions of
the Bangko Sentral; Subsecs. X151.2/X151.6 on the
c. Within five (5) banking days from the prerequisites for the grant of authority to
date of closure of the branch/OBO to be establish a branch/establishment of OBOs.
relocated, a notice of such closure signed (As amended by Circular Nos. 847 dated 28 August 2014,
by the Chief Compliance Officer (CCO) and 783 dated 21 January 2013, 697 dated 29 October 2010 and
the head of the branches department with
the rank of a vice president or equivalent § X151.10 Temporary closure 1 ,
rank or by a higher ranking officer, together permanent closure and surrender of
with a certification that the notification branch/other banking office license, and
requirement in Item “b” above has been sale/acquisition of branches/other banking
complied with and, for branches/OBOs that offices
will be opened at the new site beyond the a. Temporary closure of existing
next banking day, an undertaking that the branches/OBOs. Temporary closure of
branch/OBO shall be opened at the new site existing branches/OBOs for the purpose of
within one (1) year from the date of such undertaking renovations/major repairs of
1
under Appendix 89a (Circular No. 820 dated 06 December 2013)

§ X151.10
13.12.31
office premises/facilities and for other valid officer, together with a certification that the
reasons may be allowed: Provided, That the notification requirement in Item “(2)” above
branch/OBO shall be reopened within a has been complied with and an undertaking
period of one (1) year from the date of that the branch/OBO shall be reopened
temporary closure in accordance with the within one (1) year from the date of such
following procedures: closure shall be submitted to the appropriate
(1) Notice of temporary closure signed department of the SES; and
by the president of the bank or officer of (4) Within five (5) banking days from the
equivalent rank, together with a certified date of reopening of the branch/OBO, a
true copy of the resolution of the bank’s notice of such reopening together with a
board of directors authorizing said certification signed by the CCO and the head
temporary closure and stating the of the branches department with the rank
justifications/reasons therefor; and an of vice president or its equivalent or by a
undertaking that the bank shall comply with higher ranking officer that the bank has
the notification requirement under Item “2” complied with Items “b.1” to “b.4” of
below, shall be submitted to the appropriate Subsec. X151.8 on the requirements for
department of the SES. The notice shall opening a branch/OBO shall be submitted
include information as to the timetable for to the appropriate department of the SES.
the said temporary closure and the branch/ Temporary closure of branches/OBOs
OBO that will handle the transactions of beyond one (1) year shall be deemed as
the branch/OBO to be temporarily closed; permanent closure and surrender of license
(2) If no reply is received by the bank from of the branch/OBO, and re-opening thereof
the Bangko Sentral within thirty (30) calendar shall be deemed as an establishment of a
days from the date of receipt by the Bangko new branch/OBO, subject to the provisions
Sentral of the said notification, notice of of Subsecs. X151.2/ X151.6 on the
temporary closure shall be sent by the bank prerequisites for the grant of authority to
to the depositors’ and other creditors’ last establish a branch/establishment of OBOs.
known addresses by registered mail service b. Permanent closure and surrender of
of the PhilPost or delivery service of other mail branch/other banking office license.
couriers or electronic mail, and posters shall Permanent closure and surrender of branch/
also be displayed in conspicuous places in OBO license may be effected only with prior
the premises of the branch/OBO at least forty- approval of the Monetary Board in
five (45) calendar days prior to the temporary accordance with the following procedures:
closure. Information as to the date of the (1) Request for Monetary Board approval
reopening and the address of the branch/OBO to the closure of the branch/OBO signed by
that will handle the transactions of the branch/ the president of the bank or officer of
OBO to be temporarily closed shall be equivalent rank, together with a certified
indicated in the said notice/posters. Proofs of true copy of the resolution of the bank’s
receipts of notice by the depositors and other board of directors authorizing said closure
creditors shall be kept on file and made and stating the justifications/reasons therefor,
available upon request of the Bangko Sentral; shall be submitted by the bank to the
(3) Within five (5) banking days from appropriate department of the SES;
the date of temporary closure of the branch/ (2) Upon receipt of the notice of
OBO, a notice of such closure, signed by Monetary Board approval but at least forty-
the CCO and the head of the branches five (45) calendar days prior to the closure,
department with the rank of a vice president notice of closure shall be sent by the bank
or equivalent rank or by a higher ranking to the depositors’ and other creditors’ last

§ X151.10
13.12.31
known addresses by registered mail service electronic mail, and posters shall also be
of the PhilPost or delivery service of other displayed in conspicuous places in the
mail couriers or electronic mail, and posters premises of the branch/OBO to be sold. Proofs
shall also be displayed in conspicuous places of receipt of notice by the depositors and other
in the premises of the branch/OBO to be creditors shall be kept on file and made
closed. Proofs of receipt of notice by the available upon request of the Bangko Sentral;
depositors and other creditors shall be kept (4) Within five (5) banking days from
on file and made available upon request of the date of closure of the branch/OBO, a
the Bangko Sentral; notice of such closure signed by the CCO
(3) Within five (5) banking days from the and the head of the branches department
date of closure of the branch/OBO, a notice with the rank of a vice president or equivalent
of such closure signed by the CCO and the rank or by a higher ranking officer, together
head of the branches department with the with a certification that the notification
rank of a vice president or equivalent rank, requirement under Item “3” above has been
or by a higher ranking officer, together with complied with, shall be submitted to the
a certification that the notification appropriate department of the SES;
requirement in Item “2” above has been (5) Request for Monetary Board
complied with, shall be submitted to the approval to acquire the branch/other
appropriate department of the SES; banking office signed by the president of
c. Sale/acquisition of branches/OBOs. the bank or officer of equivalent rank,
Sale/acquisition of existing/operating together with a certified true copy of the
branches/ OBOs may be allowed with prior resolution of the bank’s board of directors
approval of the Monetary Board in authorizing the acquisition shall be
accordance with the following procedures: submitted by the acquiring bank to the
(1) Prior written consent of the PDIC in appropriate department of the SES. The
the transfer of assets and assumption of acquiring bank shall likewise comply with
liabilities as provided under Section 21 of the following:
the PDIC Charter (R.A. No. 3591), as (a) Minimum capital requirement under
amended by R.A. No. 9302 shall be Subsec. X111.1 but not lower than ten P10.0
obtained by both the selling bank and the million in the case of of RBs and Coop
acquiring bank; Banks;
(2) Request for Monetary Board approval (b) Ten percent (10%) risk-based CAR;
to close the branch/OBO to be sold signed (c) CAMELS composite rating not lower
by the president of the bank or officer of than “3” with Management component
equivalent rank, together with a certified score not lower than “3” in the latest
true copy of the resolution of the bank’s examination of the bank; and
board of directors authorizing the sale shall (d) Ceiling on total investments of a
be submitted by the selling bank to the bank in real estate and improvements
appropriate department of the SES; thereon, including bank equipment.
(3) Upon receipt of the notice of Monetary A UB, KB or TB may purchase/acquire
Board approval but at least forty-five (45) branches/OBOs anywhere, including in
calendar days prior to the closure, notice of Metro Manila and in the restricted areas:
closure shall be sent to the depositors’ and Provided, That a TB may purchase/acquire
other creditors’ last known addresses by branches/OBOs in Metro Manila, including
registered mail service of the PhilPost or in the restricted areas, if it has combined
delivery service of other mail courier or capital accounts of at least P1.0 billion, and

§§ X151.10 - X151.19
14.12.31
purchase/acquire branches/OBOs in the § X151.12 Sanctions

Cities of Cebu and Davao, if it has combined a. Any violation of the provisions of
capital accounts of at least P500.0 million: Subsecs. X151.1 - X151.11 depending on
(6) The acquiring bank shall pay a the materiality or seriousness of the violation,
licensing fee per branch/OBO acquired, as may constitute a ground for considering the
follows: same as unsafe and unsound banking
Location of Branch/OBO practice and may be a ground for
Type of to be Acquired
Acquiring Within Outside
cancellation of the franchise and closure of
Bank Metro Manila Metro Manila any branch/OBO established herein without
UBs and KBs P 1.0 million P 0.5 million prejudice to the imposition of the applicable
TBs P 0.5 million P 0.25 million
and; criminal and administrative sanctions
(7) Within five (5) banking days from prescribed under Sections 36 and 37,
the date of opening of the acquired branch/ respectively, of R.A. No. 7653; and
OBO, a notice of such opening, together b. If any part of any certification
with a certification signed by the CCO and submitted by the bank as required in this
the head of branches department with the Section is found to be false, the following
rank of a vice president or its equivalent sanctions shall be imposed:
rank or by a higher ranking officer that the 1. On the bank. Suspension for one (1)
bank has complied with Items “b.1” to “b.4” year of the privilege to establish and/or open
of Subsec. X151.8 on the requirements for approved branches/other banking offices,
opening a branch/OBO shall be submitted and/or relocate branches/other banking
by the acquiring bank to the appropriate offices.
department of the SES. 2. On the certifying officer. A fine of
The forty-five (45) – days’ prior notice P5,000 per day (P200 per day for RBs/Coop
requirement for temporary closure of offices Banks) from the time the certification was
(required under X151.10) in affected areas made up to the time the certification was
is hereby waived for offices that have been found to be false for each branch/other
de facto closed since 08 November 2013. banking office opened, relocated, closed or
Banks are directed to post a notice to the sold without prejudice to the sanctions
effect that said office has been temporarily under Section 35 of R.A. No. 7653.
(As amended by Circular Nos. 694 dated 14 October 2010 and
closed, together with information on the 624 dated 13 October 2008)
new location to service clients.
(As amended by Circular Nos., 783 dated 21 January 2013, 727 §§ X151.13 - X151.18 (Reserved)
dated 23 June 2011, 697 dated 29 October 2010 and 624 dated
13 October 2008)
§ X151.19 (2008 - X155) Tellering
§ X151.11 Relocation/Transfer of booths. The following rules shall govern the
branch licenses of closed banks. Buyers of establishment of tellering booths in BIR
closed banks shall be allowed to relocate/ offices:
transfer acquired branches subject to the a. As a general policy, the establishment
conditions stated under Items “d” and “e” of tellering booths in BIR offices are not
of the first paragraph of Subsec. X151.9 on authorized. However, in cases where
relocation of branches/OBOs. tellering booths in offices are needed as
(As amended by Circular Nos. 847 dated 28 August 2014, determined by the BIR, banks shall secure
783 dated 21 January 2013, 697 dated 29 October 2010 and prior Monetary Board approval;
624 dated 13 October 2008) b. A bank’s application shall be
accompanied by a letter from the BIR

§§ X151.19 - X152
14.12.31
Commissioner or Deputy Commissioner or other creditors by registered mail or POD

other officer specifically authorized by the service of the Philpost or other mail
Commissioner to sign such letter, stating that couriers, and poster shall be displayed in
the BIR has agreed to allow the applicant conspicuous places in the premises of the
bank to establish a tellering booth in the head office to be relocated: Provided, That
specified BIR office; said notification period may be reduced to
c. The applicant bank has complied with forty-five (45) calendar days under any of
the standard prequalification requirements the following circumstances:
prescribed in Appendix 5; and (1) As an incentive to merger or
d. Tax collections received shall be consolidation of banks;
subject to rules on government deposits. (2) As an incentive to the purchase or
acquisition of majority or all of the
Sec. X152 Relocation of Head Offices outstanding shares of stock of a distressed
Relocation of a bank’s head office shall bank for the purpose of rehabilitating the
require prior approval of the Monetary same; or
Board in accordance with the following (3) The proposed relocation site is
procedures: within the same municipality/city of the
a. Request for Monetary Board approval head office to be relocated.
of the relocation of the bank’s head office c. Within five (5) banking days from the
signed by the president of the bank or officer date of relocation, a notice of relocation,
of equivalent rank shall be submitted to the together with a certification signed by the
appropriate department of the SES together president of the bank or officer of equivalent
with the following documentary rank that the notification requirement under
requirements: Item “b” above and the installation of the
(1) A certified true copy of the resolution required security devices under Item “b” of
of the bank’s board of directors authorizing Subsec. X181.4 on minimum security measures
the proposed relocation/transfer of the head have been complied with, shall be submitted
office, and stating the justification/reasons to the appropriate department of the SES.
therefor; A bank’s head office may be relocated
(2) A certified true copy of stockholders’ anywhere it is allowed to establish branches
resolution authorizing the amendment of the as provided in Subsec X151.4 on branching
articles of incorporation of the bank; guidelines: Provided, That head offices
(3) Description of the building and/or located outside the restricted areas which
place of relocation, manner of occupancy, will be relocated to restricted areas shall be
i.e., whether lease or purchase, estimate of subject to the special licensing fee under
the total costs to be incurred in connection Subsec. X151.5 upon approval of the
with the transfer, and the proposed timetable relocation.
for such relocation; and The executive offices of the bank shall
(4) Plan for the disposition of the original not be separated from the head office, i.e.,
site. these shall be located where the bank’s head
b. Upon receipt of the notice of office is located.
Monetary Board approval but at least three Relocation of any other department/unit
(3) months prior to the relocation, notice of of the bank not performing front-office
relocation shall be sent to depositors and operation, i.e., not dealing with the banking

§§ X152 - X153.4
14.12.31
public, shall not require prior Monetary b. Proposed business plan for the sub-
Board approval: Provided, however, That branch/es.
within five (5) banking days from date of (As amended by Circular No. 858 dated 21 November 2014)
relocation, a notice of relocation signed by
a vice president or officer of equivalent rank § X153.2 Requirements for
or by a higher ranking officer, together with establishment of sub-branches. In addition
a certified true copy of the resolution of the to the standard pre-qualification requirement
bank’s board of directors authorizing the for the grant of banking authorities in
relocation, shall be submitted to the Appendix 5, the applicant foreign bank shall
appropriate department of the SES. be subject to the branch processing fee
(As amended by Circular Nos. 847 dated 28 August 2014, provided in Subsec. X151.5: Provided, That
697 dated 29 October 2010 and 624 dated 13 October 2008) sub-branch applications in the cities of
Makati, Mandaluyong, Manila, Paranaque,
§ X152.1 Sanctions. If any part of the
Pasay, Pasig, Quezon and San Juan in Metro
certification submitted by the bank as
Manila shall also be subject to the special
required in this Section is found to be false,
licensing fee under Subsec. X151.5, as
the sanctions under Subsec. X151.12 shall
applicable.
be imposed. (As amended by Circular Nos. 858 dated 21 November 2014
Sec. X153 Establishment of Sub-branches
of Foreign Bank Branches. Authority to § X153.3 Date of opening. The opening
establish sub-branches of foreign banks may of approved sub-branches shall be subject
be granted subject to Monetary Board to the provisions of Subsec. X151.7.
approval. The following guidelines shall (As amended by Circular Nos. 858 dated 21 November 2014
and 783 dated 21 January 2013)
govern the establishment of sub-branches
of foreign banks in the Philippines pursuant § X153.4 Requirements for opening a
to R.A. No. 7721, as amended by R.A. sub-branch. After a foreign bank’s
No. 10641. application to establish a sub-branch has
been approved, it may open the same
subject to the following conditions:
§ X153.1 Application for authority to
a. Submission by the applicant foreign
establish sub-branches. An application for
bank of a written notice at least thirty (30)
authority to establish sub-branches shall be
days prior to the intended date of opening,
signed by the Country Manager or the
accompanied by the following:
highest ranking officer in the Philippines of
(1) Proof or evidence of inward
the applicant foreign bank, and shall be
remittance needed to meet the additional
accompanied by the following information/
capital requirements under Subsec. X111.1,
documents:
as applicable;
a. Certified true copy of the resolution of
(2) List of principal and junior officers of
the foreign bank’s board of directors
the proposed sub-branch/es and their
authorizing the foreign bank’s Country
respective designations and salaries;
Manager or highest ranking officer in the
(3) Personal information sheet (bio-data)
Philippines to apply for authority to
for each of the officers to enable the Bangko
establish sub-branch/es and represent the
Sentral to evaluate their qualifications as
bank in connection therewith; and
officers; and

§§ X153.4 - X154
14.12.31
(4) A certification signed by the bank’s c. Issuance by the Governor of the

Philippine Country Manager that the permit to open and operate the approved
requirements enumerated under Subsec. branch/es.
X153.2 has been complied with up to the Banks shall submit a written notice to the
date of the aforementioned written notice. appropriate department of the SES of the actual
A bank that fails to continuously comply date of opening of sub-branches not later than
with the requirements under Subsec. X153.2 ten (10) banking days from such opening.
shall be given an extension of time to open (As amended by Circular Nos. 858 dated 21 November 2014
such branch after it has shown compliance
for another test period of the same § X153.5 Limitations on establishment
duration required of each requirement in of sub-branches
Subsec. X153.2: Provided, That the A foreign bank authorized to establish
provisions of Subsec. X153.3 shall be branches in the Philippines pursuant to the
observed if the branch cannot open within provisions of R.A. No. 7721, as amended
six (6) months from the date of approval by R.A. No. 10641, may open up to five (5)
thereof: Provided, further, That before such sub-branches as may be approved by the
branch opens for business, the bank shall Monetary Board.
submit to the Bangko Sentral the (As amended by Circular No. 858 dated 21 November 2014)
requirements under Subsec. X153.4a with
the certification to the effect that the bank § X153.6 Sanctions. If a bank fails to
has complied with requirements of Subsec. submit any certification as required in this
X153.2 up to the date of the written notice Section, or any part of the certification
within the period prescribed therein; submitted by the bank as required in this
b. The foreign bank branch has adequate Section is found to be false, the sanctions
staff, equipment, and other facilities to meet under Subsec. X151.12 shall be imposed.
the needs of its commercial banking
operations: Provided, That the bank’s Sec. X154 Establishment of Offices Abroad
premises, vault and office equipment, after The following rules shall govern the
inspection by the representatives of the SES establishment by domestic banks of
shall have been found to be substantially in branches and other offices abroad.
compliance with specifications on security For purposes of this Section, the term
standards and ready for use by the bank; offices shall include branches, agencies,
and representative offices, remittance centers,
remittance desk offices and other offices.

§§ X154.1 - X154.3
08.12.31
§ X154.1 Application for authority to (2) Substantial income derived from

establish an office abroad. An application international banking operations; and
for authority to establish an office abroad (3) Established correspondent
shall be signed by the president of the bank relationship with reputable banks.
and shall be accompanied by the following
information/documents: § X154.3 Conditions attached to the
a. Certified true copy of the resolution approved application. An approved
of the bank’s board of directors authorizing application to establish a banking office
the establishment of that office indicating abroad shall be subject to the following
its proposed site; conditions:
b. Economic justification for such a. Without prejudice to the
establishment, indicating among other qualification requirements in the country
things, the services to be offered, the where the office is to be established, the
minimum outlay such as capital proposed officer(s), at the time of
requirement of the host country, outlay for appointment must be at least:
furniture, fixture and equipment, rental and (1) Twenty-five (25) years of age;
other expenses; (2) A college graduate, preferably with
c. Organizational set up of the training and experience abroad;
proposed office showing the proposed (3) With three (3) years experience in
positions and the names, qualifications international banking operations; and
and experience of the proposed manager (4) Must not possess any of the
and other officers; disqualification of an officer as provided for
d. Certification signed by the under existing regulations;
president or the executive vice president b. The applicant bank shall comply
that the bank has complied with the with the licensing requirements of the host
standard pre-qualification requirements for country and the necessary license to
the grant of banking authorities operate shall be secured from the
enumerated in Appendix 5; and appropriate government agency of the
e. Certification from the host country host country;
that the duly authorized personnel/ c. The outward investment
examiners of the Bangko Sentral will be representing initial capital outlay and other
authorized to examine the proposed office. outlays shall be subject to existing
regulations;
§ X154.2 Requirements for establishing d. The proposed office shall submit
an office abroad. In addition to the periodic reports on its financial condition
standard prequalification requirements of and profitability and such other reports that
Appendix 5, the applicant bank shall may be required by the Bangko Sentral;
comply with the following: e. An office not authorized to perform
a. The citizenship requirements, banking business (e.g., representative and
ownership ceilings and other limitations liaison offices) shall not carry any of the
on voting stockholdings in banks under business of a bank as contemplated within
existing law and regulations; the context of the Philippine banking
b. Experience and expertise in system; and
international banking operations as shown by: f. The applicant shall defray the
(1) Its international banking operations necessary cost and expenses to be
for at least three (3) years prior to the date incurred by the appropriate department
of application; of the SES.

§§ X154.4 - X155.1
13.12.31
§ X154.4 Date of opening. The opening period prescribed therein.

of any office abroad shall be subject to the
provisions of Subsec. X151.7. § X154.6 Sanctions. If any part of the
(As amended by Circular No. 783 dated 21 January 2013) certification submitted by the bank as
required in this Section is found to be false,
§ X154.5 Requirements for opening an the sanctions under Subsec. X151.12 shall
office abroad. After a bank’s application to be imposed.
establish a branch has been approved, it
may open the same subject to the following §§ X154.7 - X154.8 (Reserved)
conditions:
a. Submission by the applicant bank of § X154.9 Establishment of a foreign
a written notice at least thirty (30) days prior subsidiary by a bank subsidiary. The
to the intended date of opening, establishment of a foreign subsidiary by a
accompanied by the following: bank subsidiary are subject to the guidelines
(1) Proof or evidence of outward in Subsec. X382.8.
remittance needed to meet the capital
requirements prescribed by the host Sec. X155 (2008 - X502) Mobile Foreign
country; Exchange Booth; Off-site Automatic Multi-
(2) List of principal and junior officers Currency Money Changers. The operation
of the proposed branch/es and their of mobile foreign currency booths and off-
respective designations and salaries; and site automatic multi-currency money
(3) Personal information sheet (Bio-data) changers (OAMMC) shall be governed by
for each of the officers to enable the Bangko this Section.
Sentral to evaluate their qualifications as
officers; and § X155.1 (2008 - X502.1) Mobile
b. A certification signed by the bank’s foreign exchange booths. Without prior
president or executive vice president that authority from the Bangko Sentral, banks
the standard pre-qualification requirements may operate mobile foreign currency booths,
enumerated in Appendix 5 have been subject to the following guidelines:
complied with up to the date of the a. The bank shall advise the Bangko
aforementioned written notice. Sentral of the number of mobile foreign
A bank that fails to continuously comply currency booths it will operate, the date
with the requirements shall be given an it will start operations, the areas of
extension of time to open such office after operation and the branch where the
it has shown compliance for another test foreign exchange acquisition will be
period of the same duration required of turned over and booked;
each requirement: Provided, That the b. The services of the mobile foreign
provisions of Subsec. X151.7 shall be currency booths shall be solely for changing
observed if the branch cannot open within foreign exchange currency into peso notes
six (6) months from the date of approval and coins, and not pesos to other foreign
thereof: Provided, further, That before such currency;
branch opens for business, the bank shall c. The mobile foreign currency booths
submit to the Bangko Sentral the shall not accept deposit or perform other
requirements under Subsec. X154.5a banking functions other than purchase of
together with a certification stating that the foreign currencies;
bank has complied with the standard pre- d. The internal control system of the
qualification requirements in Appendix 5 proposed mobile foreign currency booths
up to the date of the written notice within the shall be submitted to the appropriate

§§ X155.1 - X156
13.12.31
department of the SES, as well as other Mondays to Fridays unless otherwise

security measures adopted therein; and authorized by the Bangko Sentral in the
e. The mobile foreign currency booths interest of the banking public. On these days,
shall be covered by insurance to protect said institution shall transact business for at
adequately the bank against losses of least six (6) hours each day.
whatever nature arising from its operations. Subject to compliance with other
relevant laws, banks, and/or their branches,
§ X155.2 (2008 - X502.2) Off-site EOs or OBOs, may opt to observe a banking
automatic multi-currency money changers week in excess of the five (5) days after
With prior approval of the Bangko Sentral, reporting to the Bangko Sentral the
banks which have shown general compliance additional days during which such banks
with banking laws, rules and regulations may or their branches or offices shall transact
install an OAMMC, subject to the following business for at least three (3) hours each
conditions: day.
a. The OAMMC shall be installed only Banks and/or their branches, EOs or
in centers of activities like shopping centers, OBOs are allowed to close on certain days
supermarkets, hotels and airports: Provided, in celebration of important historical and/
That the site is within the area where the or religious events in the locality where
applicant bank has a regular branch to these banks operate, even in the absence of
service the money changers; a Presidential Proclamation approving the
b. The applicant bank shall maintain local holiday: Provided, That said closure
adequate internal control and security has the prior approval of the bankers
measures, which shall include immediate association in the locality and in the case of
rejection and detection of fake currencies bank branches, their respective head offices:
by the machines; Provided, further, That said closure will only
c. The transactions of the money be allowed in the municipality or city where
changers shall be booked in specific the festivities are centered: Provided, finally,
branches which must be identified at the that banks and/or their branches, EOs or
time of application for the putting up of an OBOs shall submit, either individually or
OAMMC; and through their head offices, to the Supervisory
d. The services of the OAMMC shall Data Center, a prior notice of their intended
be solely for changing foreign exchange closure on account of a specific local festivity
currency into peso notes and coins, and not not covered by a Presidential Proclamation
pesos to other foreign currencies. at least two (2) working days before the
intended date of closure.
J. BANKING DAYS AND HOURS The required notice under the previous
paragraph shall be supported by a
Sec. X156 Banking Days and Hours certification jointly signed by the President
Banks and/or their branches, extension of the bank or officer of equivalent position
offices (EOs) or other banking offices and the head of the branches department, if
(OBOs), doing business in the Philippines, any, that:
shall observe for the conduct of their a) On the date of the temporary closure,
business a regular banking week of five (5) the bank and/or their branches, EOs or OBOs
days, except when such days are non- which are microfinance-oriented/micro-
working holidays, including local holidays, banking office will maintain a skeletal force
declared by Presidential Proclamations. The to handle “out-of town” clearing items in
regular banking week should fall on line with the provisions of Section X205;

§§ X156 - X156.2
14.12.31
b) The notice of the bank’s closure and to open its head office and/or branch/es and/
the reason thereof shall be posted or extension offices, shall submit to the
conspicuously in the bank’s premises; and appropriate department of the SES at least
c) For branches of banks, the closure has two (2) working days before the intended
the prior approval of their respective head date of opening of the bank’s head office
offices. and/or branches and/or extension offices, a
The copy of the resolution of the local notice signed by its president or officer of
bankers association and in the case of bank equivalent rank, of its intention to open
branches, their respective head offices, during the holidays, together with a copy
approving said closure shall be filed in the of the board resolution approving the same:
premises of the banking unit concerned, Provided, further, That the notice shall
which resolution shall be made available specify which office (head office and/or
during on-site examination or when required branch/es and/or extension offices) will
by the Bangko Sentral for submission for off- open on what dates and their schedule of
site verification. banking hours.
In cases of closure of the bank and/or Subject to submission of a notice signed
their branches/EOs/OBOs due to approved by the bank president or officer of
local holidays covered by a Presidential equivalent rank, authorized agent banks of
Proclamation, no notice of temporary the BIR (BIR-AABs), and/or its branch/es
closure to the Bangko Sentral shall be and/or extension offices, are allowed to
required. open for two (2) Saturdays prior to April 15
(As amended by Circular Nos. 802 dated 21 June 2013, of every year, and daily from April 1 to
634 dated 05 December 2008 and 624 dated 13 October 2008) income tax payment deadline, to extend
banking hours from 3:00 PM to 5:00 PM to
§ X156.1 Banking hours beyond the
receive internal revenue tax payments. The
minimum; banking services during
notice, which shall specify which office
holidays. Banks may, at their discretion,
(head office and/or branch/es and/or
remain open beyond the minimum six (6)
extension offices) will open or extend
hours and for as long as they find it
banking hours on what dates, shall be
necessary, even before 8:00 AM or after
submitted to the appropriate department of
8:00 PM, subject to the submission of prior
the SES on or before the last banking day of
written notice required under
March of every year.
Subsec. X156.2 on report of, and changes
(As amended by Circular Nos. 835 dated 05 June 2014 and
in, banking days and hours, and compliance 634 dated 5 December 2008)
with the provisions of Subsecs. X156.3 on
posting of schedule of banking days and § X156.2 Report of, and changes in,
hours, and X181.4 on minimum security banking days and hours. The banking days
measures. and hours selected for each of the offices of
Banks and/or their branch/es and/or banks shall be reported in writing to the
extension offices may opt to remain open appropriate department of the SES. Banks
during any or all of their regular banking may change the banking days and hours
days that were covered by holidays for the previously reported to the Bangko Sentral
purpose of servicing deposits and by giving prior written notice: Provided, That
withdrawals: Provided, That a bank opting changes in banking days or hours shall not

§§ X156.2 - X160.2
13.12.31
be made oftener than once every thirty (30) shall govern the premises and other fixed
days, except during emergencies. assets of banks.
Emergency shall mean (a) condition of an
area or locality proclaimed by the President § X160.1 (2008 - X606.1) Appreciation
of the Philippines as in a state of emergency; or increase in book value. Bank premises,
or (b) an event or occasion or a combination furniture, fixtures and equipment shall be
of circumstances equivalent to a public accounted for using the cost model under
calamity resulting from fire, flood, or like PAS 16 “Property, Plant and Equipment.”1
disaster, or through some unusual Outstanding appraisal increment as of
occurrence or pressing necessity not 13 October 2005 arising from mergers and
reasonably subject to anticipation calling for consolidation and other cases approved by
immediate action or remedy. the Monetary Board, shall be deemed part
The prior written notice to the Bangko of the cost of the assets. However, appraisal
Sentral on changes in banking days and increment previously allowed to be booked
hours shall be given through the fastest shall be reversed.
means of communication, at least seven (7) Accordingly, the booking of
banking days before the intended effectivity appreciation or increase in the book value
of the change in banking hours or days. In of bank premises and other fixed assets in
case a bank, due to an emergency, has to cases where the market value of the property
open outside, or close during, the banking has greatly increased since the original
hours or days reported to the Bangko Sentral, purchase is no longer allowed.
a written report submitted within twenty- (As amended by Circular No. 520 dated 20 March 2006)
four (24) hours from opening or closing, as
the case may be, will suffice. The report shall § X160.2 (2008 - X606.2) Ceiling on
state the specific nature of the emergency total investments. The total investment of a
and the period the bank opened or closed bank in real estate and improvements
or shall open or close by reason of thereon, including bank equipment, shall not
emergency. exceed fifty percent (50%) of the bank’s net
worth. In determining compliance with
§ X156.3 Posting of schedule of such ceiling, the following rules shall apply:
banking days and hours. The schedule of a. The investment shall include all real
banking days and hours reported to the estate and equipment necessary for the
Bangko Sentral shall be posted bank’s immediate use in the transaction of
conspicuously at all times in the bank’s its business, such as:
premises. (1) Bank Premises - Land and Buildings,
Buildings under Construction, Leasehold Rights
Secs. X157 - X159 (Reserved) and Improvements and Furniture, Fixtures and
Equipment (as defined in the Manual of
K. BANKING PREMISES Accounts for All Banks), owned and used by
the bank in the conduct of its business, including
Sec. X160 (2008 - X606) Bank Premises and staff houses, recreational facilities and
Other Fixed Assets. The following rules landscaping costs, net of accumulated
1

§§ X160.2 - X160.3
10.12.31
depreciation: Provided, however, That equivalent to the amount obtained by

appraisal increment on bank premises shall applying the percentage of the equity of
not be included in the total investment in said stockholders/directors/officers in the
real estate and improvements for purposes lessor to the cost of that portion of the
of these guidelines; and property being leased by the bank, or
(2) Real properties, equipment or (b) the amount obtained by applying the
other chattels purchased by the bank in percentage of the equity of the stockholders/
its name for the benefit of its officers and directors/officers in the lessor to any
employees, net of depreciation and in the outstanding loans of the corporation with
case of land or other non-depreciable the bank, the proceeds of which were used
property, net of payments already made to purchase, construct or develop the real
to the bank by the officers and employees estate used for the bank’s purposes.
for whose benefits the property was The equity investment of a bank in a
bought, where such property has not yet corporation engaged primarily in real
been fully paid and ownership has not yet estate shall be included in the
been transferred to them. computation of the bank’s total investment
b. The following shall be included in in real estate, unless otherwise provided
the computation of a bank’s total by the Monetary Board.
investment in bank premises:
(1) (a) The cost of real estate leased in § X160.3 (2008 - X606.3) Reclassification
whole or in part by the bank from a of real and other properties acquired
corporation, other than a corporation (ROPA) to bank premises, furniture, fixture
primarily engaged in real estate in which and equipment; Sanctions. Banks may
the bank has equity, equivalent to the reclassify ROPA to bank premises, furniture,
amount obtained by applying the fixture and equipment, subject to the
percentage of the equity of the bank in the following conditions:
lessor to the cost of that portion of the (a) Prior written approval of the
property being leased, or majority of the members of the board of
(b) the amount of equity in the lessor, directors has been obtained for such
whichever is lower, plus the amount reclassification. The approval shall be
obtained by applying the percentage of the manifested in a resolution passed by the
equity of the bank in the lessor to any board of directors during a meeting and shall
outstanding loans of the lessor with the contain the following information:
bank, the proceeds of which were used to (1) Date ROPA was acquired;
purchase, construct or develop the real (2) Description of ROPA property;
estate used for the bank’s purposes. (3) Outstanding balance of ROPA at the
(2) The lower of - time of reclassification;
(a) the cost of real estate leased in (4) Specific purpose for reclassifying
whole or in part by the bank from a said property to bank premises, furniture,
corporation in which any or a group of fixture and equipment; and
stockholders owning ten percent (10%) or (5) Justification and plan for expansion,
more of the voting stock of the bank, in the case of real and other property
directors and/or officers of the bank, hold earmarked for future use.
or own more than fifteen percent (15%) of Said resolution shall also be made
the subscribed capital stock of the lessor, available for inspection by BSP examiners,

§§ X160.3
10.12.31
together with the supporting records and A bank which fails to comply with the
documents involving the ROPA account; provisions of this Subsection shall be subject
and to monetary penalties under Appendix 67.
(b) Only such acquired asset, or a 1) For non-submission of the required
portion thereof, that will be (i) immediately certification
used, or (ii) ready and available for use A bank which fails to submit the
within a two (2)-year period from date of required Certification on Compliance with
reclassification (in case of ROPA earmarked Regulations on the ROPA to Bank Premises,
for future use) may be reclassified to bank Furniture, Fixture and Equipment or the
premises, furniture, fixture and equipment; certified true copy of the resolution of the
(c) ROPA reclassified to bank board of directors authorizing said
premises, furniture, fixture and equipment reclassification within the prescribed
shall be recorded at its net carrying amount deadline shall be subject to monetary
where the amounts booked as cost, penalties applicable to minor offenses under
accumulated depreciation and allowances Appendix 67 which shall be reckoned on a
for losses for bank premises, furniture, daily basis from the day following the due
fixture and equipment shall correspond to date of submission until the required
the balance of these accounts under ROPA certification on compliance or the certified
at the time of reclassification. As such, the true copy of the resolution of the board of
reclassification shall not give rise to any directors is filed with the BSP.
gains/(losses) being recognized in the bank 2) For false/misleading statements
books; and A bank which has been found to have
(d) Said reclassification shall not willfully made a false or misleading
cause the bank to exceed the prescribed statement in the required Certification on
ceiling on investment in real estate and Compliance with Rules and Regulations on
improvements thereon, including bank the ROPA to Bank Premises, Furniture,
equipment, provided under Subsec. Fixture and Equipment or in the certified true
X160.2. copy of the resolution of the bank board of
Within five (5) banking days from date directors shall be subject to the monetary
of reclassification, the bank shall submit penalties applicable to minor offenses under
the Certification on Compliance with Appendix 67 for the willful making of a false
Regulations on the Reclassification of or misleading statement which shall be
ROPA to Bank Premises, Furniture, reckoned on a daily basis from the day
Fixture and Equipment (Appendix 96) following the due date of the said
signed by the president of the bank or certification until such time that an amended
officer of equivalent rank, to the or corrected certification on compliance or
appropriate department of the SES. Said certified true copy of the resolution of the
certification shall be accompanied by the board of directors has been submitted to the
certified true copy of the resolution of the BSP.
bank’s board of directors authorizing the 2. On the concerned directors/officers
reclassification. of the bank.
Sanctions. The following sanctions a. For willful non-compliance
shall be imposed for violations noted: Directors/officers of the bank who
1. On the bank willfully fail/refuse to comply with the
a. Monetary fines provisions of this Subsection shall be subject

§§ X160.3 - X161
13.12.31
to the monetary penalties applicable to granted or issued unless the owner or

minor offenses under Appendix 67. operator thereof shall install and incorporate
b. For false/misleading statements in such building, establishment or public
Directors/officers of the bank which utility, such architectural facilities or
have been found to have willfully falsely structural features as shall reasonably
certified or willfully submitted misleading enhance the mobility of disabled persons
statements in the required Certification on such as sidewalks, ramps, railings and the
Compliance with the Regulation on the like. If feasible, all such existing buildings,
Reclassification of ROPA to Bank Premises, institutions, establishments, or public
Furniture, Fixture and Equipment or in the utilities may be renovated or altered to
certified true copy of the resolution of the enable the disabled persons to have access
bank’s board of directors shall be subject to them.
to the monetary penalties applicable to
minor offenses under Appendix 67, which § X160.11 Republic Act No. 9994 – An
shall be reckoned on a daily basis from the Act Granting Additional Benefits and
day following the due date of the said Privileges to Senior Citizens, Further
certification until such time that an amended Amending Republic Act No. 7432 of 1992
or corrected certification on compliance or as Amended by Republic Act No. 9257 of
certified true copy of the resolution of the 2003. To be able to give full support to the
board of directors has been submitted to improvement of the total well-being of the
the Bangko Sentral. elderly and their full participation in society,
The imposition of the above sanctions and to motivate and encourage them to
is without prejudice to the filing of contribute to nation building, senior citizens
appropriate criminal charges against shall be provided with express lanes in all
culpable persons as provided under Section banking establishments, including all their
35 of R.A. No. 7653 for the willful making branches and other offices. If the provision
of a false/misleading statement. of express lanes is logistically impossible in
(As amended by Circular No. 701 dated 13 December 2010) any particular branch or office of any bank,
said branch or office shall ensure that senior
§§ X160.4 - X160.9 (Reserved) citizens are accorded priority service. The
provision of express lanes and/or priority
§ X160.10 (2008 - X606.10) Batas service shall be made known to the general
Pambansa Blg. 344 - An Act to Enhance public through a clearly written notice
the Mobility of Disabled Persons by prominently displayed in the transaction
Requiring Certain Buildings, Institutions, counters of all banks and/or offices.
Establishments and Public Utilities to (Circular No. 805 dated 08 August 2013)
Install Facilities and Other Devices. In
order to promote the realization of the rights
of disabled persons to participate fully in L. MANAGEMENT CONTRACTS AND
the social life and the development of the OUTSOURCING OF BANKING
societies in which they live and the FUNCTIONS
enjoyment of the opportunities available to
other citizens, no license or permit for the Sec. X161 (2008 - X168) Management
construction, repair or renovation of public Contracts
and private buildings for public use, a. Management contracts of banks with
educational institutions, airports, sports and management firms shall be limited to
recreation centers and complexes, shopping consultancy and advisory services;
centers or establishments, public parking b. Only a natural person may be
places, workplaces, public utilities, shall be elected or appointed as an officer of a bank,

§§ X161 - X162.4
12.12.31
without prejudice to such person being a functions. No bank shall outsource inherent
nominee of a management corporation: banking functions such as:
Provided, That the responsibility and/or a Services normally associated with
accountability of anyone elected or placement of deposits and withdrawals
appointed to an officer position shall be including the recognition based on
personal in nature and cannot be delegated recording of movements in the deposit
to a corporation; and accounts;
c. Any bank that enters into contracts b. Granting of loans and extension of
contrary to this policy shall be denied the other credit exposures;
credit facilities of the Bangko Sentral. c. Position-taking and market risk-taking
activities;
Sec. X162 Statement of Principle on d. Managing of risk exposures; and
Outsourcing. An institution may outsource e. Strategic decision-making.
banking support and marketing activities (As amended by Circular No. 765 dated 03 August 2012)
subject to the provisions set forth below.
Accordingly, an institution is exposed to § X162.3 Definition. Outsourcing shall
operational risks as a result of outsourcing. refer to any contractual arrangement
As such, an institution that avails of between a bank and a qualified service
outsourcing should have in place provider for the latter to perform designated
appropriate mechanisms to ensure the activities on a continuing basis on behalf of
effective management of attendant risks. the bank.
(As amended by Circular No. 765 dated 03 August 2012) (Circular No. 765 dated 03 August 2012)
§ X162.1 Governance in all cases of § X162.4 Managing outsourcing-related

outsourcing of banking functions risks. No bank may outsource banking
When outsourcing is allowed by law, a activities unless it has in place the
bank shall: appropriate processes, procedures, and
a. Be responsible for the performance information system that can adequately
of the outsourced activity in the same identify, monitor and mitigate operational
manner and to the same extent as if it was risks that are borne by the bank as a result
performing directly the said activity; of its outsourcing activities.
b. Comply with all laws and regulations A bank shall determine the materiality
applicable in the Philippines including labor of its outsourcing arrangements when
laws and those governing the banking activities/ establishing guidelines, processes and
services performed by the qualified service controls in managing outsourcing risks. An
providers on the bank’s behalf; outsourcing arrangement is considered
c. Monitor and review on an ongoing material if the activity, when disrupted, has
basis the performance of the service the potential to significantly impact the
providers undertaking the outsourced bank’s business operations, reputation,
activity and/or service; and profitability or regulatory responsibilities. A
d. Update as necessary its assessment bank may take into consideration the
of the extent of the materiality of its following factors in determining
outsourcing arrangements vis-à-vis the the materiality of its outsourcing
adequacy of its risk management system. arrangements:
(As amended by Circular No. 765 dated 03 August 2012) a. Importance of the activity to be
outsourced and the potential impact of
§ X162.2 (2008 - X169.1) Prohibition outsourcing on earnings, solvency, liquidity,
against outsourcing of inherent banking funding and capital and risk profile;

§§ X162.4 - X162.8
12.12.31
b. Consideration on the bank’s representatives of the Bangko Sentral for

reputation and ability to achieve its inspection.
objectives, strategy and plans, should the (Circular No. 765 dated 03 August 2012)
service provider fail to perform the services;
c. Aggregate exposure to a particular § X162.7 Intra-group outsourcing
service provider in cases where the bank The guidelines and requirements of
outsources various functions to the same outsourcing to third-party service providers
service provider; shall be observed when outsourcing within
d. Ability to maintain appropriate a business group including its head office,
internal controls and meet regulatory another branch or related company.
requirements, if there are operational When the bank is the service provider,
problems faced by the service provider; and the bank may only render services it
e. Exposure to risk of confidentiality, performs in the ordinary course of its
integrity and availability of customer and banking business: Provided, That (i) the
bank data. service is rendered to subsidiaries, affiliates
After due evaluation of a bank’s risk and companies related to it by at least five
management processes with respect to percent (5%) common ownership; or (ii) the
outsourcing, the Bangko Sentral may require service is rendered to its own depositors on
the bank to terminate, modify, make account of the bank being a depository.
alternative arrangements or re-integrate the The bank, acting as a service provider
activity into the bank, as may be necessary, within its group, shall uphold the
in cases where the risk infrastructure is following:
deemed inadequate for purposes of a. Confidentiality of deposits and
managing outsourcing-related risks.
investments in government bonds as defined
under R.A. No. 1405, as amended; and
b. Prohibition on cross-selling except
§ X162.5 Authority to outsource. Only
as allowed under applicable regulations.
those banks with a CAMELS composite
rating of at least “3” and a Management
rating of not lower than “3” shall be allowed
to outsource designated activities without § X162.8 Offshore outsourcing
prior Bangko Sentral approval. Otherwise, Offshore outsourcing exists when the
the bank must secure prior approval from service provider is located outside the
the appropriate department of the SES country. Subsec. X162.7 on intra-group
whose evaluation will be based on the outsourcing likewise applies in cases of
bank’s ability to manage risks attendant to offshore outsourcing. In addition, offshore
outsourcing. outsourcing of bank’s domestic operations
(Circular No. 765 dated 03 August 2012) is permitted only when the service provider
operates in jurisdictions which uphold
§ X162.6 Documentations. The confidentiality.
bank should maintain necessary When the service provider is located in
documentation to show that outsourcing other countries, the bank should take into
arrangements are properly reviewed and the account and closely monitor, on
appropriate due diligence has been continuing basis, government policies and
undertaken prior to implementation. other conditions in countries where the service
The bank shall keep in its file the provider is based during risk assessment
documents shown in Appendix 100 and the process. The bank shall also develop
same shall be made available to authorized appropriate contingency and exit strategies.

§§ X162.8 - X172.1
14.12.31
The Bangko Sentral examiners shall be the requirements provided herein upon
given access to the service provider and renewal of the agreements.
those relating to the outsourced domestic (Circular No. 765 dated 03 August 2012)
operations of the bank. Such access may be
fulfilled by on-site examination through § X162.11 (2008 - X169.19) Penalties
coordination with host authorities, if Violation of this Section shall be subject
necessary. The domestic branch of foreign to Sections 34, 35, 36 and 37 of R.A. No.
bank shall be principally liable in cases 7653, the New Central Bank Act. If the
where the clients are prejudiced due to offender is a director or officer or a bank,
errors, omissions and frauds of the service the Monetary Board may also suspend or
provider located offshore.
remove such director or officer.
The Bangko Sentral may require the bank
to terminate, modify, make alternative
outsourcing arrangement or re-integrate the
outsourced activity into the bank, as may Secs. X163 - X171 (Reserved)
be necessary, if confidentiality of customer
information, effective customer redress M. BANK OFFICES AS OUTLET OF
mechanisms or the ability of the Bangko FINANCIAL PRODUCTS OF ALLIED
Sentral to carry out its supervision functions UNDERTAKINGS/INVESTMENT
cannot be assured. HOUSE
Sec. X1721 (2008 - 1631.1; 2012 - 1172.1)
§ X162.9 Service providers. The bank Statement of Principles. The Bangko Sentral
shall carry out due diligence in selecting recognizes that bank premises may serve
service providers. It must ensure the as the point for the presentation and
integrity, technical expertise, operational distribution of a range of financial products.
capability, financial capacity and suitability However, this distribution mechanism can
of the service provider to perform the give an understanding that these financial
outsourced activity. In cases where the products are created by the bank and thus
clients are prejudiced due to errors, could lead to an impression that the bank
omissions and frauds by the service ultimately bears the responsibility for their
provider, the bank shall be liable in performance. The Bangko Sentral, therefore,
providing the appropriate remedies as may provides an enabling environment for cross-
be allowed by laws or regulations, without selling activities which defines the
prejudice to recourse by the bank to the responsibilities of banks for managing the
service provider. attendant risks and upholding consumer
(Circular No. 765 dated 03 August 2012) protection.
(As amended by Circular Nos. 844 dated 11 August 2014 and
§ X162.10 Transitory provision. All 801 dated 27 June 2013)
outsourcing agreements must be aligned § X172.1 Definition. The following

with the provisions of Sec. X162. Existing terms as used in this Section are governed
outsourcing agreements which are not in by the following definition-
accordance with this Section will not be a. Cross-selling means the presentation
unwound. However, it must comply with and/or sale of a financial product, other than
1
Within thirty (30) calendar days from 30 August 2014, the bank shall review all its existing cross-selling
arrangements and determine its compliance with the revised rules. All deviations shall be reported to the
Bangko Sentral within the same period. If the bank is fully compliant, it shall issue a certification to the Bangko
Sentral to this effect. All financial products that had been allowed and/or approved for cross-selling prior to
30 August 2014 shall be given up to 31 August 2015 within which to comply with the requirements as set forth
under this Section.

§§ X172.1 - X172.3
14.12.31
bank’s own financial product, to a bank Simple retailed financial products which
client inside bank premises through written do not create exposure to investment risks
or verbal communications. may be cross-sold inside bank premises.
b. Financial conglomerate refers to a These include:
group of interrelated entities providing a. Retail lending or loan products such
significant services in at least two (2) as credit cards, home mortgage loans,
different financial sectors (banking, personal loans, auto loans and other related
securities and insurance). A banking group retail loan products;
is subsumed within the context of a financial b. Other retail financial products such
conglomerate. A financial product provider as cash cards, debit cards and other related
must have been disclosed and reported as products; and
part of the group structure pursuant to c. Other similar financial products as
Subsec. X141.3. may be authorized by the Monetary Board.
c. Financial product of an allied Simple insurance products such as
undertaking under Section 20 of the General traditional life (whole life, term,
Banking Law refers to financial products endowment), non-life (marine, fire, casualty,
created by a financial product provider suretyship), and other similar protection-
belonging to the same financial type insurance products, except variable
conglomerate. insurance contracts, as governed by the
d. Financial product provider means a Insurance Code are considered as simple
financial entity which creates the financial retail financial products. These may be
product. The financial product provider cross-sold inside bank premises regardless
should be regulated or supervised by either of whether the financial product provider
the Bangko Sentral, the Securities and belongs to the same financial conglomerate
Exchange Commission (SEC) or the or not.
Insurance Commission (IC). Collective investment schemes (CIS) of
e. Bank premises refer to the physical financial product providers belonging to the
area occupied by the bank’s head office, same financial conglomerate may be cross-
branches and other offices. sold inside bank premises. These refer to:
f. Investment risk refers to the potential a. Mutual funds registered with the
loss of the principal amount (either full or SEC;
partial) invested by the investor. It also refers b. UITFs as authorized by the Bangko
to the possibility of not achieving targeted Sentral;
rate of returns for a given investment c. Variable unit-linked life insurance
transaction. policy (VULs) as governed by the Insurance
(Circular No. 801 dated 27 June 2013, as amended by Circular Code or under the relevant rules and
No. 844 dated 11 August 2014) regulations as may be issued by the IC.
(As amended by Circular Nos.844 dated 11 August 2014 and
§ X172.2 (2008 - 1631; 2012 – 1172) 801 dated 27 June 2013)
Financial products. Unless otherwise
provided, financial products should be § X172.3 Governance. The board of
created by a financial product provider directors of the bank (or its equivalent in
belonging to the same financial the case of foreign bank branches) shall
conglomerate. Moreover, such financial oversee the implementation of its policies
products should have been duly approved relating to cross-selling arrangements.
by the respective regulator, as provided The bank shall exercise due care and
under its rules, before these can be presented diligence in carrying out cross-selling
and/or sold inside bank premises. activities. This process shall extend to both

§§ X172.3 - 1172.4
14.12.31
the financial products and financial product Bank employees authorized to market and/
providers. The bank shall put in place a or sell CIS shall be clearly identified.
formal written policy to assess the nature of c. The presentation and/or sale of CIS
the financial product and its suitability for shall be conducted in an area distinct from
target customer segments. This written areas where own bank products are sold.
policy should, at the very least, enable the (Circular No. 801 dated 27 June 2013, as amended by Circular
bank to reach an objective assessment of No. 844 dated 11 August 2014)
the suitability of the financial product to be
§ X172.4 (2008 - 1631.1; 2012 –
cross-sold.
1172.3) Minimum documentary
The bank shall recognize the customers’
requirements. The bank should maintain
right to product choice, to refuse bundled
necessary documentation to support that
or tiered financial products or services under
cross-selling arrangements are properly
cross-selling arrangements, and to substitute
reviewed and appropriate due diligence has
equivalent financial products by reputable
been undertaken.
competitors.
This shall, at a minimum, include the
The bank shall ensure that a mechanism
following:
is in place to address any complaints that
a. Approval of the board of directors
may arise from cross-selling transactions.
of both the bank and the financial product
This mechanism shall form part of the
provider to use the former’s bank premises
agreement between the bank and the
for the presentation and sale of the latter’s
financial product provider.
financial products;
The bank shall periodically review all
b. Audited financial statements of the
of its cross-selling arrangements. In
financial product provider for the last three
particular, the bank shall take into account
(3) years;
operational and reputational risks that may
c. Detailed description of the financial
arise in the arrangement. The results of the
product and proof of regulatory approval, if
continuing review shall be reported to the
any;
board of directors of the bank. The bank shall
d. Registration and/or accreditation of
likewise maintain a register of its cross-
the financial product provider from the
selling arrangements particularly on the list
respective regulator;
of financial products and financial product
e. Contract between the bank and the
providers.
financial product provider;
To avoid any impression that the
f. Sample of contracts between the
fulfillment of promises of the CIS products
financial product provider and its clients;
cross-sold within bank premises are
g. Promotional materials; and
guaranteed by the bank, the following shall
h. Training profile and necessary
be observed, at all times:
license, if required, of representatives who
a. Unless specifically trained and
will be handling the cross-selling activity.
qualified for the purpose, the role of bank
These documents shall be made
employees in cross-selling CIS shall be
available when requested by Bangko
limited to the referral of bank clients to the
Sentral examiners.
representatives of financial product (As amended by Circular No. 801 dated 27 June 2013)
providers. Clients should give prior consent
before any such referral. § 1172.4 (2008 - 1631.4) Financial
b. There shall be clear distinction ratios and other related requirements
between representatives of financial product (Deleted by Circular No. 801 dated 27 June 2013)
providers who sell CIS and bank employees.

§§ X172.5 - X172.6
14.12.31
§ X172.5 (2013-X172.6;2012-1172.5; “This contract is between (name of

2008-1631.5) Fair and balanced view of the client) and (name of financial product
product. Advertising materials and contracts provider). All transactions arising out of or
must give a fair and balanced view of the related to this contract shall be binding only
product. These materials may be considered between these two (2) contracting parties.
fair and balanced when they are clear and It is understood that this transaction is
easily understood; highlight the purpose and neither insured by the Philippine Deposit
risks of the financial product; and do not Insurance Corporation (PDIC) nor
omit any material information if such guaranteed by the (name of bank).”
omission would cause the materials to be (As amended by Circular Nos. 844 dated 11 August 2014 and
misleading. 801 dated 27 June 2013)
Promotional materials. The bank shall
§ X172.6 Cross-selling of collective
ensure that the identity of the financial
investment schemes and its suitability to
product provider is prominently displayed
customers. In the cross-selling of CIS,
in the relevant marketing and advertising
enhanced consumer protection standards
materials. The relationship of the bank with
are necessary since bank clients who
the financial product provider may be
invest in these products are exposed to
reflected in the promotional materials as
investment risk. At the onset, banks must
long as it does not create an impression that
ensure that CIS as financial products are
it is the product of the bank whose premises
compliant with relevant prudential
are used.
regulations issued by the respective
The promotional materials should
government bodies and agencies
explicitly state that the product is not a
governing their issuance before entering
deposit. The information contained in any
into any cross-selling arrangements. With
document used in the presentation and sale
respect to consumer protection features,
of financial products inside bank premises
a cross-selling bank must ensure that
must contain, at a minimum, the words:
financial product providers observe the
“financial product/s of (financial product
following minimum practices:
provider) is/are not insured by the Philippine
a. Product Highlight Sheet (PHS).
Deposit Insurance Corporation and is/are
Potential clients must be provided with a
not guaranteed by the (name of bank)”, as
PHS. This succinct document summarizes
the case may be. This shall be printed in
the key information of the financial
capital letters, black letters against light
product which will be material to the
background/white letters against dark
proper understanding by the client of the
background with the following print size:
product, its features and risks. The PHS
should at least be a separate document but
Size of Promotional
may form part of the prospectus or
Material Print Size
contract.
Legal/letter size 12
Among the key questions that must be
15" x 20" 24
covered in the PHS are:
19" x 25" 36 (1) What are you investing in and who
are you investing with?
Contracts. The following paragraph shall (2) What are the key risks of this
be printed at the end of the contract in the investment?
print size as the rest of the contract, or font (3) What are the fees and charges for
size 12 whichever is bigger, in capital letters this investment?
and in bold font: (4) How often are valuation available?

§§ X172.6 - X172.8
14.12.31
(5) How can you exit from this X172.5. The text should be in bold with a
investment and what are the risks and costs minimum font size of 12.
in doing so? The cross-selling bank shall maintain
(6) How do you contact us? adequate documentation, available for
(7) What other important information inspection by the Bangko Sentral examiners,
should you know before you invest? to evidence that above requisites are
b. Client Suitability Assessment (CSA) properly undertaken.
A CSA of each client shall be undertaken (Circular No. 844 dated 11 August 2014)
prior to the acquisition of an investment
product by the client. The CSA should § X172.7 Financial product providers
determine the client’s understanding of, The bank shall exercise due care and
tolerance for and capacity in managing diligence in selecting financial product
various risks. providers. The bank shall consider the
c. Investment Policy Statement (IPS). As integrity, operational capability, financial
a complement to a CSA, an IPS must have capacity and track record of the financial
been generated for a bank client. The IPS product provider. In particular, the bank
formalizes the investment philosophy of the shall ensure that the financial product
client as well as any investment directive of provider has in place a mechanism to resolve
the client with respect to the handling of all queries, problems and other concerns
his investible funds. arising from cross-selling activities.
d. Disclosure of conflict of interest. It is the responsibility of the financial
Financial product providers should disclose product provider to assess its
any material information which can give rise representatives in terms of sufficient
to an actual or potential conflict of interest knowledge of the financial product,
to the client. Financial product providers adequate training and necessary license,
should take all reasonable steps to ensure when required.
fair dealings with client. The Bangko Sentral should be satisfied
e. Standard disclosure statement. All that the bank and the financial product
promotional materials, product highlights provider belong to the same financial
sheet and contracts of collective investment conglomerate, as applicable, before cross-
schemes should contain a standard selling arrangements may be allowed.
disclosure statement which reads as: When the financial product provider is
“This is not a deposit product. Earnings under the supervision of the Bangko Sentral,
are not assured and principal amount the financial product provider must have a
invested is exposed to risk of loss. This CAMELS composite rating of at least “3” or
product cannot be sold to you unless its its equivalent.
(Circular No. 801 dated 27 June 2013, as amended by Circular
benefits and risks have been thoroughly No. 844 dated 11 August 2014)
explained. If you do not fully understand
this product, do not purchase or invest in § 1172.7 (2008 - 1631.7) Training
it.” (Deleted by Circular No. 801 dated 27 June 2013)
This disclosure statement shall be
placed in the front cover of any material used § X172.8 (2012 – 1172.2; 2008 -
within bank premises for cross-selling 1631.2) Authority to cross-sell. Banks with
purposes. This is in addition to the CAMELS composite rating of at least “3”
minimum information provided in Subsec. or its equivalent and without major
supervisory concerns may be given

§§ X172.8 - X172.10
14.12.31
authority to engage in cross- selling confirmation by the Monetary Board prior

activities. to effectivity.
The bank shall secure the approval of For any product approval, the Bangko
the Monetary Board before it can engage in Sentral reserves the right to validate on the
cross-selling activities. bank’s representation of compliance with
The application letter to engage in cross- cross-selling rules and regulations as
selling activities shall be signed by the circumstances may warrant.
President, or the Country Officer in the case The Monetary Board may suspend any
of foreign bank branches, and shall be or all cross-selling activities whenever a
submitted to the appropriate supervising bank no longer meets the original conditions
department of the SES. For the initial of the approval and/or by virtue of any
financial products for cross-selling, the subsequent issuances by the Bangko Sentral
application letter shall also contain an governing the conduct of cross-selling
explanation of the relationship of the bank activities. The bank may re-submit an
with the financial product provider in the application to enter into cross-selling
context of the financial conglomerate, as arrangements only when the CAMELS
applicable. It shall also contain brief composite rating or its equivalent is at least
description of the financial products and “3” in the latest report of examination or any
justification of the cross-selling noted major supervisory concerns have
arrangements. been satisfactorily addressed as determined
In addition, the bank shall submit the by the appropriate supervising department
following: of the SES.
a. Notarized Secretary’s Certificate on (As amended by Circular Nos. 844 dated 11 August 2014 and
the approval of the board of directors of the 801 dated 27 June 2013)
cross-selling of financial products;
b. Notarized Certification, signed by § 1172.8 (2008 - 1631.8) Other
the bank’s President or the Country Officer requirements.
(Deleted by Circular No. 801 dated 27 June 2013)
in the case of foreign bank branches and
Compliance Officer, of the bank’s
§ X172.9 Complaints handling. The bank
compliance with pertinent banking laws,
shall be jointly responsible with the financial
rules and regulations on cross-selling.
product provider in the resolution of any
Once approved, the bank may
complaint arising from cross-selling
continuously undertake cross-selling
transactions. For this purpose, the bank shall
activities unless otherwise ordered by the
establish an effective redress mechanism
Monetary Board.
which shall specifically include processes
The bank may subsequently apply for
and procedures for handling any complaint
additional financial products for cross-
arising from cross-selling transactions.
selling. The application shall be supported
(Circular No. 801 dated 27 June 2013, as amended by Circular
by a notarized certification as indicated in
No. 844 dated 11 August 2014)
Item “b” above. Approval of the same is
delegated to the SES Subsector Head with § X172.10 (2008 - 1631.11; 2012 –
responsibility for the bank, except for the 1172.11) Sanctions. Violations of the
CIS-type financial products, the approval of provisions of this Section shall constitute
which is delegated to the Deputy Governor, grounds for the imposition on the bank and/
SES: Provided,That all such approvals under or its directors/officers of any or a
delegated authority are subject to combination of the following:

§§ X172.10 - 2172
14.12.31
a. Monetary penalty - Any amount as A TB which intends to avail of the

may be authorized by the Monetary Board option to market or sell microinsurance
not to exceed P30,000 a day for each products shall ensure that microinsurance
violation from the time the violation was products presented and marketed are clearly
committed until it is corrected; and distinguishable from bank products.
b. Non-monetary sanction - Any Towards this end, all organic documents,
sanctions that the Monetary Board may informational and promotional materials
deem appropriate and allowed by law used in the presentation and sale of these
considering the gravity of the offense. products shall prominently display both the
(As amended by Circular Nos.844 dated 11 August 2014 and name of the issuing insurance provider and
801 dated 27 June 2013) a clause stating that the insurance product/s
of (name of issuing insurance provider) is/
Sec. 2172 Marketing, Sale and Servicing of
are not insured by the PDIC and is/are not
Microinsurance Products by Thrift Banks
guaranteed by the (name of bank)”. The bank
In order to better serve microfinance clients
shall also ensure compliance with pertinent
pursuant to the financial inclusion thrust of
laws and rules on the sale of microinsurance
National Strategy and Regulatory
products set by the Insurance Commission.
Framework for Microinsurance, a TB,
As part of product due diligence, the bank
including its authorized branch/es, extension
should check whether the microinsurance
office/s and other banking offices (OBOs),
can present, market and sell microinsurance product-issuing insurance provider has a
products as defined under the Insurance functioning customer care and claims-
Commission’s Memorandum Circular (IMC) handling mechanism to handle consumer
No. 1-20101 dated 29 January 2010: Provided, protection issues.
That the microinsurance product is duly A bank, prior to selling and/or marketing
approved by the Insurance Commission. microinsurance products, shall submit
The presentation, marketing and sale of the following documents to the Bangko
microinsurance products by TB has been Sentral as bases for the latter’s
determined to be a necessary and evaluation:
complementary component of the primary 1. Copy of the approval of the bank’s
business of TB considering the relationship board of directors on the presentation, sale
of the latter with their microfinance clients. and servicing (i.e. collect premiums and pay
For this purpose, the Monetary Board has claims) of microinsurance products;
defined that for TBs, microinsurance 2. Copy of duly executed written
products as defined under IMC Nos. agreement between the bank and the
9-2006 1 dated 25 October 2010 and insurance provider on the presentation, sale
1-20102 dated 29 January 2010 shall serve and servicing by the bank of the financial
as a “financial product of an allied products of the latter, including the terms
undertaking” under Section 20 of the of compensation for the services;
General Banking Law. 3. Copy of the letter of approval from
A TB can also service (i.e., collect the Insurance Commission covering each
premiums and pay claims) microinsurance of the microinsurance product to be
products as collection and payment agents marketed or sold by the bank;
pursuant to Section 53.3 of the General 4. Copy of the corresponding Certificate
Banking Law. of Authority from the Insurance
1
Dated 25 October 2006
2
Dated 29 January 2010

§ 2172
11.12.31
Commission of the insurance provider/s 5. Bank’s license from the Insurance

issuing the microinsurance products to be Commission as a microinsurance agent or
marketed or sold; and broker, as may be applicable.1
1
To act as a microinsurance agent of an authorized insurance provider, a bank needs to acquire the appropriate
license from the lC. The requirements for such application consist of: (i) attendance in prescribed microinsurance
training course and passing the qualifying examination at the end of the course; and (ii) amending a bank’s
articles of incorporation (AOl). In view of the latter requirement, applicant banks shall amend their AOI by
including a secondary purpose of acting as a microinsurance agent, and shall submit simultaneously the
amended AOI to the appropriate BSP office and the lC. (See lC Memo Circular No. 6-2011 dated 15 February
2011)

§§ 2172 - X173
12.12.31
6. Certification from the bank president 8. Such other information that may be
that he/she ascertained and will ensure required by the Bangko Sentral.
continuing compliance with the following: (Circular No. 683 dated 23 February 2010, M-2011-015 dated
a. The product is authorized for cross 18 March 2011)
selling under existing Bangko Sentral rules
and regulations; Sec. 3172 Marketing, Sale and Servicing of
b. The microinsurance product is Microinsurance Products by Rural and
approved by the Insurance Commission and Cooperative Banks. The marketing, sale and
issued by an entity duly licensed and held servicing of microinsurance products by
in good standing by the Insurance RBs and Coop Banks shall comply with the
Commission; guidelines in Sec. 2172.
c. The bank conducted product due (Circular No. 683 dated 23 February 2010)
diligence to be suitable to its customers;
d. The organic, informational and N. RISK MANAGEMENT
promotional materials for the
Sec. X173 Supervision by Risks. The
microinsurance products comply with
guidelines on supervision by risk to provide
Bangko Sentral requirements; and guidance on how many banks should
e. The bank personnel concerned has identify, measure, monitor and control risks
undertaken the necessary training and are shown in Appendix 72.
passed the qualifying examination for the
presentation and sale of microinsurance The guidelines set forth the expectations
products, in compliance with the of the Bangko Sentral with respect to the
requirements set forth by the Insurance management of risks and are intended to
Commission on marketing personnel for provide more consistency in how the risk-
insurance products. focused supervision function is applied to
7. A letter of undertaking from the bank these risks. The Bangko Sentral will review
president that he/she will ensure the the risks to ensure that a bank’s internal risk
retention of the following: management processes are integrated and
a. Copies of the latest Certificate of comprehensive. All banks should follow the
Authority from the Insurance Commission guidelines in their risk management efforts.
Applicability to branches of foreign
covering all insurance companies whose
banks. Branches of foreign banks shall
microinsurance products are being
comply with the governance policies,
marketed or sold by the bank; practices and systems of the head office as
b. Copies of the letters of approval from well as meet the applicable standards,
the Insurance Commission covering all the principles and requirements set forth under
microinsurance products to be marketed or Secs. X141, X142, X174, except the
sold; reportorial requirements under Subsec.
c. Bank’s license from the Insurance X141.3c(9) on group structures.
Commission as a microinsurance agent or Reports of assessment of the risk
broker or in lieu of a bank’s license as a management, compliance function and
microinsurance agent or broker, copies of internal audit group of branches of foreign
the license from the Insurance Commission banks shall be made available to the Bangko
covering all its marketing personnel for Sentral, during on-site examination or any
microinsurance products; and time upon request.
(As amended by Circular Nos. 749 dated 27 February 2012 and
510 dated 19 January 2006)

§§ X174 - X175
12.12.31
Sec. X174 Risk Management Function. The The CRO shall have sufficient stature,
risk management function is generally authority and seniority within the bank. This
responsible for: will be assessed based on the ability of the
a. identifying the key risk exposures and CRO to influence decisions that affect the
assessing and measuring the extent of risk bank’s exposure to risk. The CRO shall have
exposures of the bank and its trust the ability, without compromising his
operations; independence, to engage in discussion with
b. monitoring the risk exposures and the board of directors, chief executive officer
determining the corresponding capital and other senior management on key risk
requirement in accordance with the Basel issues and to access such information as he
capital adequacy framework and based on deems necessary to form his or her
the bank’s internal capital adequacy judgment. The CRO shall meet with the
assessment on an on-going basis; board of directors/risk oversight committee
c. monitoring and assessing decisions on a regular basis and such meetings shall
to accept particular risks whether these are be duly minuted and adequately
consistent with board approved policies on documented.
risk tolerance and the effectiveness of the CROs shall be appointed and replaced
corresponding risk mitigation measures; and with prior approval of the board of
d. reporting on a regular basis to senior directors. In cases, when the CRO will be
management and to the board of directors replaced, the bank shall report the same to
of the results of assessment and monitoring. the appropriate department of the SES within
Risk management personnel shall five (5) days from the time it has been
possess sufficient experience and approved by the board of directors. TBs, RBs
qualifications, including knowledge on the and Coop Banks, may appoint a CRO, or
banking business, the developments in the any equivalent position, who shall be
market, industry and product lines, as well subject to the independence and
as mastery of risk disciplines. They shall qualification requirements applicable to
have the ability and willingness to challenge CROs for UBs and KBs.
business lines regarding all aspects of risk (Circular Nos. 757 dated 08 May 2012 and 749 dated
arising from the bank’s activities. 27 February 2012)
Sec. X175 (2011 - X174) Market Risk

§ X174.1 Chief Risk Officer (CRO)
Management. The guidelines on market risk
UBs/KBs shall appoint a CRO, or any
management in Appendix 73 set forth the
equivalent position, who shall be
expectations of the Bangko Sentral with
independent from executive functions and
respect to the management of market risk
business line responsibilities, operations and
and are intended to provide more
revenue-generating functions. This
consistency in how the risk-focused
independence shall be displayed in practice
supervision function is applied to this risk.
at all times as such, albeit the CRO may
Banks are expected to have an integrated
report to the President or Senior
approach to risk management to identify,
Management, he shall have direct access to
measure, monitor and control risks. Market
the board of directors and the risk oversight
risk should be reviewed together with other
committee without any impediment. In this
risks to determine overall risk profile.
regard, the board of directors shall confirm
The Bangko Sentral is aware of the
the performance ratings given by the
increasing diversity of financial products and
President or Senior Management to the CRO.
that industry techniques for measuring and

§§ X175 - X177.2
14.12.31
managing market risk are continuously to address risks associated with emerging
evolving. As such, the guidelines are trends in technology and growing concerns
intended for general application; specific on cyber security.
application will depend to some extent on (Circular No. 511 dated 03 February 2006, as amended by Circular
Nos. 808 dated 22 August 2013, 757 dated 08 May 2012 and
the size, complexity and range of activities
749 dated 27 February 2012)
undertaken by individual banks.
The guidelines on risk management for § X177.1 Declaration of policy. A
derivatives are shown in Appendix 25. growing number of Bangko Sentral
(Circular No. 544 dated 15 September 2006, as amended by
supervised institutions (BSIs) employ the
Circular Nos.757 dated 08 May 2012, and 749 dated 27 February
2012) advances in technology as leverage to offer
innovative products, deliver fast and efficient
Sec. X176 (2011 - X175) Liquidity Risk service at affordable prices, and venture to
Management. The guidelines on liquidity risk new markets. Moreover, technology drives
management in Appendix 74 set forth the the efficiency of operations and financial
expectations of the Bangko Sentral with accounting of these institutions, and
respect to the management of liquidity risk improves their decision-making process. As
and are intended to provide more consistency technology becomes an integral part of the
in how the risk-focused supervision function business and operations of BSIs, such
is applied to this risk. Banks are expected to technology usage and dependence, if not
have an integrated approach to risk properly managed, may heighten technology
management to identify, measure, monitor and risks. The Bangko Sentral expects BSIs to
control risks. Liquidity risk should be reviewed have the knowledge and skills necessary to
together with other risks to determine overall understand and effectively manage
risk profile. technology risks. These institutions are
The guidelines are intended for general required to have an integrated approach to
application; specific application will depend risk management to identify, measure,
on the size and sophistication of a particular monitor and control risks.
bank and the nature and complexity of its
activities. § X177.2 Purpose and scope. The
The guidelines on risk management for enhanced guidelines aim to provide
derivatives are shown in Appendix 25. guidance in managing risks associated with
(Circular No. 545 dated 15 September 2006, as amended by
Circular Nos. 757 dated 08 May 2012 and 749 dated 27 February use of technology. The guidelines outlined
2012) are based on international standards and
recognized principles of international
Sec. X177 Information Technology Risk practice for ITRM and shall serve as Bangko
Management (ITRM). The enhanced Sentral’s baseline requirement for all BSIs.
guidelines on ITRM keep abreast with the The guidelines shall apply to BSIs which
aggressive and widespread adoption of include banks, non-banks with quasi-
technology in the financial service industry banking function (NBQB), non-bank
and consequently strengthen existing electronic money issuers and other non-bank
Bangko Sentral framework for IT risk institutions which under existing Bangko
supervision. ITRM should be considered a Sentral rules and regulations and special
component and integrated with the laws are subject to Bangko Sentral
institutions’ risk management program. The supervision and/or regulation. Moreover,
guidelines likewise provide practical plans subject guidelines shall also apply to BSIs

§§ X177.2 - X177.4
14.12.31
with offshore data processing as may be affected or lowly impacted by IT-related

appropriate to their situation. The risks.
framework covers different facets of ITRM, However, to facilitate classification, a
some of which are supplemented with TB, RB or Coop Bank shall be deemed as a
detailed guidelines in Appendices 75a, 75b, simple BSI, while UBs and KBs, which
75c, 75d, 75e and 75f. The Bangko Sentral generally have more complex types of
shall keep the Appendices updated and, in products and services, shall be deemed as
the future, issue additional regulations on complex BSIs. Nonetheless, a UB or KB
new and emerging products, services, may apply with the Bangko Sentral for a
delivery channels, and other significant reclassification as simple BSI in order to
applications of technology. avail of reduced compliance with the
Subject guidelines, including the provisions of this Section. The Bangko
Appendices 75a, 75b, 75c, 75d, 75e and Sentral may likewise declare a TB, RB or
75f, are not “one-size-fits-all” and Coop Bank as complex based on the
implementation of these need to be risk- assessment of the BSIs IT profile report
based and commensurate with size, nature (pursuant to Subsection X176.8) and other
and types of products and services and internal supervisory tools. Said banks shall
complexity of IT operations of the individual receive notification in writing from the
BSIs. BSIs shall exercise sound judgment in Bangko Sentral informing them of the
determining applicable provisions relevant deviation from the default classification and
to their risk profile. the basis for classifying them as complex
(Circular No. 808 dated 22 August 2013, as amended by BSIs.
Circular No. 833 dated 28 May 2014) Non-bank institutions which under
existing Bangko Sentral rules and regulations
§ X177.3 Complexity of IT risk profile
and special laws are subject to Bangko
The Bangko Sentral shall risk profile all BSIs
Sentral supervision/regulation shall likewise
and classify them as either “Complex” or
be notified in writing of their classification
“Simple”. The assessment of complexity of
immediately after 14 September 2013.
IT risk profile is based largely on the degree (Circular No. 808 dated 22 August 2013)
of adoption of technology and considers
size, nature and types of products and
§ X177.4 IT rating system. The Bangko
services and complexity of IT operations
Sentral, in the course of its on-site
among the risk factors. In assessing IT
examination activities, shall evaluate BSIs’
operations, the nature of IT organization,
ITRM system and measure the results based
degree of automation of core processes and
on Bangko Sentral’s IT rating system. A
applications and extent and reach of online
composite rating is assigned based on a “1”
branch network are likewise considered.
to “4” numerical scale, as follows:
A BSI with “Complex” IT risk profile is
highly dependent on technology. IT
components are integral to the core business 4 BSIs with this rating exhibit strong
activities that major weaknesses on IT performance in every respect. Noted
systems, maintenance and support, if not weaknesses in IT are minor in nature
properly addressed, may cause operational and can be easily corrected during
inefficiencies, business disruptions and/or the normal course of business.
financial losses. On the other hand, a BSI
with “Simple” IT risk profile relies or 3 BSIs with this rating exhibit
depends less on technology in the satisfactory performance but may
operations of its business, thus, is not demonstrate modest weaknesses
in operating performance,

§§ X177.4 - X177.5
13.12.31
monitoring, management Terminology Definitions

processes or system development. Cyberfraud A deliberate act of
omission or
2 BSIs with this rating exhibit less commission by any
than satisfactory performance and person carried out
require considerable degree of using the Internet and/
supervision due to a combination or other electronic
of weaknesses that may range channels, in order to
from moderate to severe. communicate false or
fraudulent
1 BSIs with this rating exhibit representations to
deficient IT environment that may prospective victims,
impair the future viability of the to conduct fraudulent
entity, thereby requiring transactions, or to
immediate remedial action. transmit the proceeds
(Circular No. 808 dated 22 August 2013) of fraud to FIs
connected with the
§ X177.5 Definition of terms. In these perpetrator. Examples
guidelines, terms are used with the of cyberfraud in the
following meanings: financial industry may
include, but are not
Terminology Definitions
limited to, theft of
credit card data,
Board of The governing body
computer hacking,
Directors elected by the
electronic identity
(Board) stockholders that
theft, phishing scams,
exercises the corporate
ATM skimming and
powers of a locally
non-delivery of
incorporated BSI. In
merchandise
case of a BSI
purhased online,
incorporated or
among others.
established outside
Electronic The delivery of
the Philippines, this
Products and banking and financial
may refer to the
Services products and services
functional oversight
through electronic,
equivalent such as
interactive
the Country Head
communication
(for foreign banks) or
channels which
management
include automated
committee or body
teller machines
empowered with
(ATMs), point of sales
oversight and
(POS) terminals,
supervision
internet, mobile
responsibilities.
phones, touch tone

§§ X177.5
13.12.31
Terminology Definitions Terminology Definitions

telephones and Enterprise- Extending throughout
other similar wide Level or involving an entire
electronic devices. institution rather than
These encompass a single business
electronic banking, department or function.
electronic payments, In this document, the
electronic money and words "enterprise-wide"
other electronic products and "organization-wide"
and services offered are interchangeably
by BSIs. used.
EMV (stands It is a global standard Information Encompass people and
for Europay, for credit, Asset/ organization, IT
Mastercard debit and prepaid Resources processes, physical
and Visa) payment cards based infrastructure (i.e.
on chip card facilities, equipment),
technology. EMV chip- IT infrastructure
based payment cards, (including computing
also known as smart hardware, network
cards, contain an infrastructure,
embedded middleware) and other
microprocessor, a type enterprise architecture
of small computer. The components (including
microprocessor chip information,
contains the information applications).
needed to use the card Information The protection of
for payment, and is Security information assets from
protected by various unauthorized access,
security features. Chip use, disclosure,
cards are a more secure disruption, modification
alternative to traditional or destruction in order
magnetic stripe payment to provide
cards. confidentiality, integrity
Encryption A data security and availability.
technique used to Information A single or a series of
protect information Security unwanted or
from unauthorized Incident unexpected
inspection or alteration. information security
Information is encoded events that have a
so that data appears as significant probability
meaningless string of of compromising
letters and symbols business operations
during delivery or and threatening the
transmission. Upon confidentiality, integrity
receipt, the information or availability of BSI's
is decoded using an information or
encryption key. information systems.

§ X177.5
13.12.31

Information Automated means of support. The related
Technology originating, processing, IT service is integral to
(IT) storing and the provision by BSI of
communicating a financial service and
information and covers the BSI is dependent
recording devices, on the service on an
communications ongoing basis.
network, computer IT Risk Any potential adverse
systems (including outcome, damage, loss,
hardware and software violation, failure or
components and data) disruption associated
and other electronic with the use of or
devices. reliance on computer
IT Group/ The unit of an hardware, software,
Department organization within a devices, systems,
BSI responsible for the applications and
activities of IT networks.
operations control, IT Strategic A long-term plan (i.e.,
monitoring of IT Plan three- to five-year
services, infrastructure horizon) in which
support and a business and IT
combination of management
technology, people cooperatively describe
and processes. how IT resources will
IT Operations Encompasses all contribute to the
processes and services institution's strategic
that are provisioned by objectives.
an IT Unit to internal IT Risk Risk management
and external clients. Management system that enables a
IT An arrangement under System BSI to identify, measure,
Outsourcing which another party (ITRMS) monitor and control
(either an affiliated IT-related risks.
entity within a Management A general term for the
corporate group or an Information computer systems in an
entity external to the System (MIS) institution that provide
corporate group) information about its
undertakes to provide business operations.
to a BSI all or part of an Network Two or more
IT function or service. computer systems that
A BSI would use IT are grouped together to
outsourcing for share information,
functions ranging from software and hardware.
infrastructure to Offshore BSIs Have their critical
software development, system processing and
maintenance and data located outside of

§§ X177.5 - X177.6
13.12.31

the Philippines. These will be provided and
are usually maintained for what fee.
and operated by Triple Data A mode of the DES
organizations within Encryption encryption algorithm
the same business group Standard that encrypts data three
that the BSIs belong to, (3DES) times. Three 64-bit keys
such as their head office, are used, instead of one,
subsidiary and/or for an overall key length
affiliate. Locally- of 192 bits (the first
maintained systems, if encryption is encrypted
any, are limited to non- with second key, and
core supporting the resulting cipher text
applications such as is again encrypted with
collaboration systems a third key.
and report processing (Circular No. 808 dated 22 August 2013)
tools.
Project Planning, monitoring § X177.6 Description of IT-related
Management and controlling an risks. As BSIs increase their reliance on IT
activity. to deliver products and services,
Senior Officers of the inappropriate usage of IT resources may
Management/ institution given the have significant risk exposures. While IT
Management authority by the Board does not trigger new types of risks, it brings
to implement the in new dimensions to traditional banking
policies it has laid risks (i.e. strategic risk, credit risk, market
down in the conduct risk, liquidity risk and operational risk) that
of the business of the require new or enhanced control activities
institution. (e.g. a failure of a credit risk measurement
Service Level Establishes mutual application is an IT failure and, therefore, a
Agreement expectations and systems failure in the sense of operational
provide a baseline to risk). Moreover, IT is an implied part of any
measure IT system of internal controls, regardless of the
performance. An SLA type of risk and, consequently, forms an
should contain, important element in organization-wide risk
among others, the management. Among the risks associated
specified level of with the use of IT are the following:
service, support 1. Operational risk is the risk to earnings
options, enforcement and capital arising from problems with
or penalty provisions service or product delivery. This risk is a
for services not provided, function of internal controls, IT systems,
a guaranteed level of employee integrity and operating processes.
system performance as Operational risk exists in all products and
it relates to downtime services;
or uptime, a specified 2. Strategic risk is the risk to earnings
level of customer and capital arising from adverse business
support and what decisions on IT-related investments or
software or hardware improper implementation of those

§§ X177.6 - X177.7
14.12.31
decisions. The risk is a function of the in magnitude.

compatibility of an organization’s strategic Management of IT risks and information
goals, the business strategies developed to security issues becomes a necessity and an
achieve those goals, the resources deployed important part of BSIs’ risk management
against these goals and the quality of system. BSIs are therefore required to
implementation. The resources needed to establish a robust ITRM system covering four
carry out business strategies are both (4) key components: 1) IT governance,
tangible and intangible which include 2) risk identification and assessment, 3) IT
communication channels, operating controls implementation, and 4) risk
systems, delivery networks and managerial measurement and monitoring.
capacities and capabilities; 1. IT Governance. This is an integral part
3. Reputation risk is the risk to earnings of BSIs’ governance framework and consists
and capital arising from negative public of the leadership and organizational
opinion. This affects the institution’s ability structures and processes that ensure the
to establish new relationships or services alignment of IT strategic plan with BSIs’
or continue servicing existing relationships. business strategy, optimization of resources
The risk can expose the institution to management, IT value delivery, performance
litigation, financial loss or damage to its measurement and the effective and efficient
reputation; and use of IT to achieve business objectives and
4. Compliance risk is the risk to earnings effective IT risk management implementation.
and capital arising from the violations of, BSIs must establish an effective IT
or non-conformance with laws, rules and governance framework covering the
regulations, prescribed practices or ethical following:
standards. Compliance risk also arises in a. Oversight and organization of IT
situations where the laws and rules functions. Accountability is a key concern
governing certain products activities of the of IT governance and this can be obtained
BSI’s clients may be ambiguous or untested. with an organizational structure that has
Compliance risk exposes the institution to well-defined roles for the responsibility of
monetary penalties, non-monetary sanctions information, business processes,
and possibility of contracts being annulled applications, IT infrastructure, etc.
or declared unenforceable. The board of directors is ultimately
responsible for understanding the IT risks
confronted by a BSI and ensuring that they
§ X177.7 IT Risk Management System
are properly managed, whereas the Senior
(ITRMS). As BSIs become more dependent
Management is accountable for designing
on IT systems and processes, technology
and implementing the ITRMS approved by
risks and information security issues have
the Board. For Complex BSIs, the Board may
become progressively more complex and
delegate to an IT Steering Committee (ITSC)
pressing in recent years. Information
or its equivalent IT oversight function to
security is just as important as the new
cohesively monitor IT performance and
technologies being installed by BSIs. As
institute appropriate actions to ensure
progress in technology shifts to higher gear,
achievement of desired results. The ITSC,
the trend in cyber-attacks, intrusions, and
at a minimum, should have as members a
other form of incidents on computer systems
non-executive Board director who oversees
shows that it will not only persist but will
the institution’s IT function, the head of IT
continue to increase in frequency and spread
group/department, and the highest rank

§ X177.7
14.12.31
officer who oversees the business user of executive management with direct
groups. The head of control groups should involvement in key decisions for the BSI and
participate in ITSC meetings in advisory usually reports directly to the President or
capacity only. Chief Executive Officer.
A charter should be ratified by the Board A clear description of roles and
to clearly define the roles and responsibilities for individual IT functions
responsibilities of the ITSC. Formal minutes should be documented and approved by the
of meeting should be maintained to Board. Proper segregation of duties within
document its discussions and decisions. The and among the various IT functions should
ITSC should regularly provide adequate be implemented to reduce the possibility
information to the Board regarding IT for an individual to compromise a critical
performance, status of major IT projects or process. A mechanism should be in place
other significant issues to enable the Board to ensure that personnel are performing only
to make well-informed decisions about the the functions relevant to their respective jobs
BSIs’ IT operations. and positions. In the event that an institution
BSIs should develop an IT strategic plan finds it difficult to segregate certain IT control
that is aligned with the institution’s business responsibilities, it should put in place
strategy. This should be undertaken to adequate compensating controls (e.g. peer
manage and direct all IT resources in line reviews) to mitigate the associated risks.
with the business strategy and priorities. IT b. IT policies, procedures and
strategic plan should focus on long term standards. IT controls, policies, and
goals covering three (3) to five (5) year procedures are the foundation of IT
horizon and should be sufficiently governance structure. It helps articulate the
supplemented by tactical IT plans which rules and procedures for making IT
specify concise objectives, action plans and decisions, and helps to set, attain, and
tasks that are understood and accepted by monitor IT objectives.
both business and IT. The IT strategic plan BSIs should adopt and enforce IT-related
should be formally documented, endorsed policies and procedures that are well-
by the Board and communicated to all defined and frequently communicated to
stakeholders. It should be reviewed and establish and delineate duties and
updated regularly for new risks or responsibilities of personnel for better
opportunities to maximize the value of IT to coordination, effective and consistent
the institution. performance of tasks, and quicker training
BSIs should also create an organization of new employees. Management should
of IT functions that will effectively deliver ensure that policies, procedures, and
IT services to business units. For “Complex” systems are current and well-documented.
BSIs, a full-time IT Head or equivalent rank The ITSC should review IT policies,
should be designated to take the lead in key procedures, and standards at least on an
IT initiatives and oversee the effectiveness annual basis. Any updates and changes
of the IT organization. In addition to should be clearly documented and properly
managing the delivery of day-to-day IT approved. IT policies and procedures
services, the IT Head should also oversee should include at least the following areas:
the IT budget and maintain responsibility for • IT Governance/ Management;
performance management, IT acquisition • Development and Acquisition;
oversight, professional development and • IT Operations;
training. The IT Head should be a member • Communication networks;

§ X177.7
14.12.31
• Information security; In case in-house IT audit expertise is not

• Electronic Banking/Electronic available, such as for a simple BSI, the IT
Products and Services; and audit support may be performed by external
• IT Outsourcing/Vendor Management. specialists and auditors of other institutions
For simple BSIs, some of the above areas consistent with existing Bangko Sentral rules
(i.e. development, electronic banking, etc.) and regulations on outsourcing. (Detailed
may not be applicable, thus sound judgment guidelines/standards on IT Audit are shown
should be employed to ensure that the BSI’s in Appendix 75a)
IT policies and procedures have adequately d. Staff competence and training. The
covered all applicable areas. rapid development in technology demands
c. IT audit. Audit plays a key role in appropriate, skilled personnel to remain
assisting the Board in the discharge of its competent and meet the required level of
corporate governance responsibilities by expertise on an ongoing basis.
performing an independent assessment of BSIs should have an effective IT human
technology risk management process and resources management plan that meets the
IT controls. requirements for IT and the business lines it
Auditors provide an assurance that supports. Management should allocate
important control mechanisms are in place sufficient resources to hire and train
for detecting deficiencies and managing risks employees to ensure that they have the
in the implementation of IT. They should expertise necessary to perform their job and
be qualified to assess the specific risks that achieve organizational goals and objectives.
arise from specific uses of IT. BSIs should Management needs to ensure that
establish effective audit programs that cover staffing levels are sufficient to handle present
IT risk exposures throughout the and expected work demands, and to cater
organization, risk-focused, promote sound reasonably for staff turnover. Appropriate
IT controls, ensure the timely resolution of succession and transition strategies for key
audit deficiencies and periodic reporting to officers and personnel should be in place
the Board on the effectiveness of institution’s to provide for a smooth transition in the
IT risk management, internal controls, and event of turnover in vital IT management or
IT governance. Regardless of size and operations functions.
complexity, the IT audit program should e. Management Information Systems
cover the following: (MIS). The BSIs’ IT organization often
• Independence of the IT audit provides an important support role for their
function and its reporting relationship to the MIS. Accurate and timely MIS reports are
Board or its Audit Committee; an essential component of prudent and
• Expertise and size of the audit staff reasonable business decisions. At the most
relative to the IT environment; senior levels, MIS provides the data and
• Identification of the IT audit information to help the Board and
universe, risk assessment, scope, and management make strategic decisions. At
frequency of IT audits; other levels, MIS allows management to
• Processes in place to ensure timely monitor the institution’s activities and
tracking and resolution of reported distribute information to other employees,
weaknesses; and customers, and members of management.
Advances in technology have increased
• Documentation of IT audits,
the volume of information available to
including work papers, audit reports, and
management and directors for planning and
follow-up.
decision-making. However, if technology

§ X177.7
14.12.31
is not properly managed, the potential for ITRM processes should be integrated
inaccurate reporting and flawed decision into the enterprise-wide risk management
making increases. Because report processes to allow BSIs to make well-
generation systems can rely on manual data informed decisions involving business plans
entry or extract data from many different and strategies, risk responses, risk tolerance
financial and transaction systems, levels and capital management, among
management should establish appropriate others.
control procedures to ensure information is 2. Risk identification and assessment.
correct, relevant, and adequately protected. BSIs should maintain a risk assessment
Since MIS can originate from multiple process that drives response selection and
equipment platforms and systems, the controls implementation. An effective IT
controls should ensure all information assessment process begins with the
systems have sufficient and appropriate identification of the current and prospective
controls to maintain the integrity of the IT risk exposures arising from the
information and the processing institution’s IT environment and related
environment. Sound fundamental principles processes. The assessments should identify
for MIS review include proper internal all information assets, any foreseeable
controls, operating procedures, safeguards, internal and external threats to these assets,
and audit coverage. the likelihood of the threats, and the
f. IT risk management function. adequacy of existing controls to mitigate the
Management of risk is a cornerstone of IT identified risks. Management should
Governance. BSIs should have a policy continually compare its risk exposure to the
requiring the conduct of identification, value of its business activities to determine
measurement, monitoring and controlling of acceptable risk levels.
IT risks for each business function/service Once management understands the
on a periodic basis. BSIs should define and institution’s IT environment and analyzes
assign these critical roles to a risk the risk, it should rank the risks and prioritize
management unit or to a group of persons its response. The probability of occurrence
from different units collectively performing and the magnitude of impact provide the
the tasks defined for this function. foundation for reducing risk exposures or
The function should have a formal establishing mitigating controls for safe,
technology risk acknowledgement and sound, and efficient IT operations
acceptance process by the owner of risk to appropriate to the complexity of the
help facilitate the process of reviewing, organization. Periodic risk assessment
evaluating and approving any major process should be done at the enterprise-
incidents of non-compliance with IT control wide level and an effective monitoring
policies. The process can be supported by program for the risk mitigation activities
the following: should be manifested through mitigation or
• a description of risk being corrective action plans, assignment of
considered for acknowledgement by owner responsibilities and accountability and
of risk and an assessment of the risk that is management reporting.
being accepted; 3. IT controls implementation. Controls
• identification of mitigating controls; comprise of policies, procedures, practices
• formulation of a remedial plan to and organizational structures designed to
reduce risk; and provide reasonable assurance that business
objectives will be achieved and undesired
• approval of risk acknowledgement
events will be mitigated. Management
from the owner of the risk and senior
should establish an adequate and effective
management.

§ X177.7
14.12.31
system of internal controls based on the management and have sufficient

degree of exposure and the potential risk of independence to perform his mandate. The
loss arising from the use of IT. Controls for ISO should perform the tasks of a risk
IT environment generally should address the manager and not a production resource
overall integrity of the environment and assigned to the IT department. In the case
should include clear and measurable of simple BSIs, hiring a personnel to
performance goals, the allocation of specific specifically perform the function of an ISO
responsibilities for key project may not be necessary. The ISO function
implementation, and independent may be assigned to an existing independent
mechanisms that will both measure risks officer who meets the requirements
and minimize excessive risk-taking. BSI mentioned in this Subsection. (Detailed
Management should implement satisfactory guidelines/standards on Information Security
control practices that address the following are shown in Appendix 75b)
as part of its overall IT risk mitigation b. Project management/development
strategy: 1) Information security; 2) Project and acquisition and change management.
management/development and acquisition BSIs should establish a framework for
and change management; 3) IT operations; management of IT-related projects. The
4) IT outsourcing/Vendor management; and framework should clearly specify the
5) Electronic banking, Electronic payments, appropriate project management
Electronic money and other Electronic methodology that will govern the process
products and services. of developing, implementing and
a. Information security. Information is maintaining major IT systems. The
a vital asset that must be managed to support methodology, on the other hand, should
BSI management in making decisions. BSIs cover allocation of responsibilities, activity
should have a comprehensive information breakdown, budgeting of time and
security program, approved by the Board, resources, milestones, checkpoints, key
to maintain the confidentiality, integrity, and dependencies, quality assurance, risk
availability of computer systems for reliable assessment and approvals, among others.
and timely information. Unauthorized In the acquisition and/or development of IT
access, destruction, or disclosure of solutions, BSIs should ensure that business
confidential information can adversely affect and regulatory requirements are satisfied.
earnings and capital. The program should (Detailed guidelines/standards on Project
monitor information security function Management/Development and Acquisition
throughout the organization’s business and Change Management are shown in
processes and establish clear accountability Appendix 75c)
for carrying out security responsibilities. c. IT operations. IT has become an
The Board or Senior Management integral part of the day-to-day business
should appoint an independent information operation, automating and providing
security officer (ISO) who will be support to nearly all of the business
responsible and accountable for the processes and functions within the
organization-wide IS program. The duly institution. Therefore, the IT systems should
appointed ISO should have sufficient be reliable, secure and available when
knowledge, background, and training, as needed which translates to high levels of
well as organizational position, to enable service and dependency on IT to operate.
him to perform assigned tasks. To ensure One of the primary responsibilities of
appropriate segregation of duties, the ISO IT operations management is to ensure the
should report directly to the Board or senior institution’s current and planned
Manual of Regulations for Banks Part I - Page 114i

§ X177.7
14.12.31
infrastructure is sufficient to accomplish its BSI management should implement an

strategic plans. BSI management should effective outsourcing oversight program that
ensure that IT operates in a safe, sound, and provides the framework for management to
efficient manner throughout the institution. understand, monitor, measure, and control
Given that most IT systems are the risks associated with outsourcing. BSIs
interconnected and interdependent, failure outsourcing IT services should have a
to adequately supervise any part of the IT comprehensive outsourcing risk
environment can heighten potential risks for management process which provides
all elements of IT operations and the guidance on the following areas: 1) risk
performance of the critical business lines of assessment; 2) selection of service
the BSIs. Such scenario necessitates the providers; 3) contract review; and
coordination of IT controls throughout the 4) monitoring of service providers. Detailed
institution’s operating environment. guidelines/standards on IT Outsourcing/
(Detailed guidelines/standards on IT Vendor Management and on the adoption
Operations are shown in Appendix 75d) of outsourced cloud computing model are
d. IT outsourcing/vendor management shown in Appendix 75e.
program. IT outsourcing refers to any e. Electronic products and services. The
contractual agreement between a BSI and a evolution in technology revolutionized the
service provider or vendor for the latter to way banking and financial products and
create, maintain, or reengineer the services are delivered. Physical barriers
institution’s IT architecture, systems and were brought down enabling clients to
related processes on a continuing basis. A access their accounts, make transactions or
BSI may outsource IT systems and processes gather information on financial products and
except those functions expressly prohibited services anywhere they are, at any time of
by existing regulations. The decision to the day and at their own convenience. As
outsource should fit into the institution’s development in technology continues to
overall strategic plan and corporate accelerate, innovative electronic products
objectives and said arrangement should and services are foreseen to bring more
comply with the provisions of existing accessibility and efficiency. However, BSIs
Bangko Sentral rules and regulations on may be confronted with challenges relating
outsourcing. Although the technology to capacity, availability and reliability of the
needed to support business objectives is electronic services. Likewise, fraudulent
often a critical factor in deciding to activities via electronic channels are also
outsource, managing such relationships rising in number.
should be viewed as an enterprise-wide BSIs should protect customers from
corporate management issue, rather than a fraudulent schemes done electronically.
mere IT issue. Otherwise, consumer confidence to use
While IT outsourcing transfers electronic channels as safe and reliable
operational responsibility to the service method of making transactions will be
provider, the BSIs retain ultimate eroded. To mitigate the impact of cyber
responsibility for the outsourced activity. fraud, BSIs should adopt aggressive security
Moreover, the risks associated with the posture such as the following:
outsourced activity may be realized in a i. The entire ATM system shall be
different manner than if the functions were upgraded/converted to allow adoption of
inside the institution resulting in the need end-to-end Triple DES (3DES) encryption
for controls designed to monitor such risks. standards by 01 January 2015. The 3DES
Part I - Page 114j Manual of Regulations for Banks

§ X177.7
14.12.31
encryption standards shall cover the whole should be submitted to management to

ATM network which consists of the host provide assurance that established controls
processors, switches, host security module are functioning effectively, resources are
(HSM), automated teller machines (ATMs), operating properly and used efficiently and
point-of-sale (POS) terminals and all IT operations are performing within
communication links connected to the established parameters. Any deviation noted
network; in the process should be evaluated and
ii. ATMs to be installed after management should initiate remedial action
04 September 2014 should be 3DES to address underlying causes. The scope
compliant; and and frequency of these performance
iii. ATMs, POS terminals and payment measurement activities will depend on the
cards are also vulnerable to skimming complexity of the BSI’s IT risk profile and
attacks due to the lack of deployment of should cover, among others, the following:
globally recognized EMV enabled a. Performance vis-à-vis approved IT
technology by BSIs. Magnetic stripe only strategic plan. As part of both planning and
ATMs, POS Terminals and cards are largely monitoring mechanisms, BSI management
defenseless against modern fraud should periodically assess its uses of IT as
techniques. Therefore, all concerned BSIs part of overall business planning. Such an
should shift from magnetic stripe technology enterprise-wide and ongoing approach
to EMV chip-enabled cards, POS Terminals helps to ensure that all major IT projects are
and ATMs. The entire payment card network consistent with the BSI’s overall
should be migrated to EMV by 01 January strategic goals. Periodic monitoring of IT
2017. This requirement shall cover both performance against established plans shall
issuing and acquiring programs of confirm whether IT strategic plans remain
concerned BSIs. A written and Board- in alignment with the business strategy and
approved EMV migration plan should be the IT performance supports the planned
submitted to the Bangko Sentral within strategy.
six (6) months from 22 August 2013. The b. Performance benchmarks/service
guidelines on Europay, Mastercard and Visa levels. BSIs should establish performance
(EMV) Implementation 1 are shown in benchmarks or standards for IT functions
Appendix 108. and monitor them on a regular basis. Such
Detailed guidelines/standards on monitoring can identify potential problem
Electronic Products and Services are shown areas and provide assurance that IT
in Appendix 75f. functions are meeting the objectives. Areas
4. Risk measurement and monitoring. to consider include system and network
BSI Management should monitor IT risks availability, data center availability, system
and the effectiveness of established controls reruns, out of balance conditions, response
through periodic measurement of IT time, error rates, data entry volumes, special
activities based on internally established requests, and problem reports.
standards and industry benchmarks to assess Management should properly define
the effectiveness and efficiency of existing services and service level agreements (SLA)
operations. Timely, accurate, and complete that must be monitored and measured in
risk monitoring and assessment reports terms understandable to the business units.
1
All BSIs shall support migration to EMV standards. Consequently, all cards issued and card-accepting devices
should be EMV-compliant by 1 January 2017.
Manual of Regulations for Banks Part I - Page 114k

§§ X177.7 - X177.9
14.12.31
SLA with business units and IT department channels, processes and other relevant
should be established to provide a baseline information regarding the use of technology,
to measure IT performance. BSIs are required to submit the following:
c. Quality assurance/quality control. a. Annual IT Profile, electronically to the
BSI should establish quality assurance (QA) Bangko Sentral Supervisory Data Center
and quality control (QC) procedures for all (SDC) within twenty five (25) days from the
significant activities, both internal and end of reference year (Guidelines to be
external, to ensure that IT is delivering value observed in the preparation and submission
to business in a cost effective manner and of this report was issued under Bangko
promotes continuous improvement through Sentral Memorandum to All Banks No.
ongoing monitoring. QA activities ensure M-2012-011 dated 17 February 2012);
that product conforms to specification and b. Report on breach in information
is fit for use while QC procedures identify security, especially incidents involving the
weaknesses in work products and to avoid use of electronic channels, pursuant to the
the resource drain and expense of redoing provisions of Items “a” or “b” of Subsec.
a task. The personnel performing QA and X192.4 following the guidelines provided
QC reviews should be independent of the in Item “d” of the same Subsection
product/process being reviewed and use Depending on the nature and seriousness
quantifiable indicators to ensure objective of the incident, Bangko Sentral may require
assessment of the effectiveness of IT the BSI to provide further information or
activities in delivering IT capabilities and updates on the reported incident until the
services. matter is finally resolved; and
d. Policy compliance. BSIs should c. Notification letter to the Core
develop, implement, and monitor processes Information Technology Specialist Group
to measure IT compliance with their (CITSG) of the Bangko Sentral of disruption
established policies and standards as well of IT services/operations that resulted to the
as regulatory requirements. In addition to activation of disaster recovery and business
the traditional reliance on internal and third continuity plan immediately upon activation
party audit functions, BSIs should perform of the plan.
self-assessments on a periodic basis to gauge (Circular No. 808 dated 22 August 2013)
performance which often lead to early
§ X177.9 Sanctions and penalties. BSIs
identification of emerging or changing risks
should make available IT policies and
requiring policy changes and updates.
procedures on the foregoing and other related
e. External assessment program.
documents during the on-site examination as
Complex BSIs may also seek regular
well as provide a copy thereof when written
assurance that IT assets are appropriately
request was made to determine their
secured and that their IT security risk
compliance with this Section.
management framework is effective. This
Any violation of the provisions of this
may be executed through a formal external
Section, its appendices and annexes, shall be
assessment program that facilitates a
subject to the monetary and non-monetary
systematic assessment of the IT security risk
sanctions provided under Section 37 of
and control environment over time.
(Circular No. 808 dated 22 August 2013, as amended by Circular
R.A. No. 7653. Enforcement actions shall be
Nos. 859 dated 24 November 2014 and 833 dated 28 May 2014) imposed on the basis of the overall assessment
of BSIs’ ITRMS. Whenever a BSI’s ITRMS is
§ X177.8 Reports. To enable the Bangko rated “1” pursuant to Subsec. X177.4, the
Sentral to regularly monitor IT risk profile following additional sanctions may be
and electronic products, services, delivery imposed:
Part I - Page 114l Manual of Regulations for Banks

§§ X177.9 - X178.1
14.12.31
a. Suspension/revocation of authority to individual legal entities but also across the

provide electronic products and services; and subsidiaries within the consolidated banking
b. Prohibition against offering/provision organization. It will not restrict the scope of
of new electronic products and services. the credit risk-taking activities of an FI, so
(Circular No. 808 dated 22 August 2013) long as the FI is authorized to engage in such
activities and:
Sec. X178 Credit Risk Management; a. Understands, measures, monitors
Statement of Policy1. It is the policy of the and controls the risk assumed;
Bangko Sentral to ensure that FIs under its b. Adopts risk management practices
supervision have adequate and effective whose sophistication and effectiveness are
credit risk management systems commensurate to the risk being taken; and
commensurate to their credit risk-taking c. Maintains capital commensurate
activities. Towards this end, the following with the risk exposure assumed.
guidelines on credit risk management set If the Bangko Sentral determines that an
forth the expectations of the Bangko Sentral FI’s risk exposures are excessive relative to
with respect to the comprehensive the FI’s capital, or that the risk assumed is
management of credit risk. The guidelines not well-managed, the Bangko Sentral will
further articulate sound principles and
direct the FI to reduce its exposure to an
practices that shall be embedded in the
appropriate level and/or to strengthen its risk
credit risk management framework of FIs
management systems. In evaluating the
and shall cover the following areas:
above parameters, the Bangko Sentral
a) establishing an appropriate credit risk
expects FIs to have sufficient knowledge,
environment; b) operating under a sound
skills and appropriate system and
credit granting process; and c) maintaining
appropriate credit administration, technology necessary to understand and
measurement, monitoring and control effectively manage their credit risk
processes over credit risk. While FIs may exposures.
employ different approaches in the The principles set forth in the credit risk
management of their credit risk, the Bangko management guidelines shall be used in
Sentral expects that all these areas are determining the adequacy and effectiveness
effectively addressed. of an FI’s credit risk management process
For purposes of these guidelines, FIs and adequacy of capital relative to exposure.
refer to UBs, KBs, TBs RB and Coop Banks The Bangko Sentral shall consider the
and their respective credit-granting financial following factors:
subsidiaries (if any) as well as stand-alone (1) The FI’s business strategies, operating
QBs. environment, and the competencies of its
(Circular No. 855 dated 29 October 2014) officers and personnel; and
(2) The major sources of credit risk
§ X178.1 Evaluation of credit risk exposure and the complexity and level of
management system. The Bangko Sentral risk posed by the assets, liabilities, and off-
shall evaluate the FI’s credit risk balance sheet activities.
management system not only at the level of (Circular No. 855 dated 29 October 2014)
1
FIs shall be given six (6) months from 19 November 2014 to: (1) perform a gap analysis of their current
practices vis-à-vis this Section and (2) propose an action plan duly approved by the board of directors to
achieve full compliance within a reasonable period of time but in no case longer than two (2) years from
19 November 2014.
All action plans shall be subject to acceptance by the Bangko Sentral through the Deputy Governor,
Supervision and Examination Sector. All requests for regulatory relief shall be subject to prior Monetary Board
approval.
Any FI that fails to comply with the obligations prescribed during this transition period shall be subject to
the imposition of appropriate monetary and/or non-monetary sanctions.
Manual of Regulations for Banks Part I - Page 114m

§§ X178.2 - X178.3
14.12.31
A. Establishing an Appropriate Credit Risk b. Depending on the size,

Environment complexity and scope of credit activities,
and in addition to the roles and
§ X178.2 Role of the board and senior responsibilities of the board and senior
management management, an FI’s credit risk
a. Board of directors. The board of management organization may be broadly
directors shall be responsible for the classified into three functional lines of
approval and regular review of credit risk activities: the front, back and middle
strategy and credit policy, as well as the offices, to properly segregate
oversight of the implementation of a accountabilities, ensure that no individual
comprehensive and effective credit risk is assigned conflicting responsibilities,
management system appropriate for the size, and effectively monitor and control the
complexity and scope of operations of an risks being taken.
FI. The board shall ensure that the system c. The front office function performs
provides for adequate policies, procedures credit originating; recommends internal
and processes to identify, measure, monitor credit ratings, classifications and allowances
and control all credit risks inherent in an for losses including changes thereon, when
FIs products and activities, both at the necessary; and the on-going monitoring of
individual and portfolio levels on a credit exposures of borrowers on a day-to-
consistent and continuing basis; and that an day basis.
independent assessment of the system is d. The back office provides support in
periodically performed, the results of which the overall credit administration, including,
shall be reported to it or to a board-level among others: ensuring complete
committee for appropriate action. documentation, credit disbursement and
b. Senior management. Senior recording of payments received;
management shall be responsible for maintenance of credit and collateral files;
ensuring that the credit risk-taking activities and compilation of management information
of an FI are aligned with the credit risk reports.
strategy approved by the board of directors. e. The middle office performs risk
It shall also be responsible for developing management and control functions that are
and implementing an FI’s credit policies and independent from the credit originating and
procedures that lay down the conditions and administration functions. The risk
guidelines for an effective credit risk management function provides meaningful
management process, as well as proper inputs in policy formulation and limits
channels of communication to ensure that setting; designs and implements the FI’s
these policies are clearly communicated and internal credit risk rating system; and
adhered to by all levels of the organization. performs periodic exposure and exception
(Circular No. 855 dated 29 October 2014) monitoring. The risk management function
shall report directly to the Risk Management
§ X178.3 Credit risk management
Committee (RMC) or appropriate board-
structure
level committee or the board.
a. Senior management or an appropriate
f. An independent credit review is a
level of management shall implement a
function within the middle office that
board-approved credit risk management
performs an unbiased assessment of the
structure that clearly delineates lines of
quality of individual credits and the
authority, establish accountabilities and
aggregate credit portfolio, including
responsibilities of individuals involved in the
appropriateness of credit risk rating,
different phases of the credit risk
classification and adequacy of allowance
management process.
Part I - Page 114n Manual of Regulations for Banks

§§ X178.3 - X178.5
14.12.31
for loan losses. In the case of simple FIs, § X178.4 Credit risk strategy. The credit
such independent credit review function risk strategy must reflect the FI’s profitability
may be concurrently performed by and portfolio growth targets, and must be
qualified personnel fulfilling other consistent with the credit risk tolerance and
independent control oversight functions overall corporate strategy and business
(e.g. compliance, internal audit). goals of the FI.
g. The workout or problem loan a. In formulating the credit risk strategy,
management is another function within the the FI shall articulate the desired market
middle office that is independent from the segments and types of credit exposures
credit originating function to ensure that (e.g., commercial credits, retail credits, real
problem loans are managed effectively to estate, investments, trading products, credit
minimize potential losses. For simple FIs, commitments and/or guarantees); specific
however, the function may still be characteristics of clients, economic sector,
performed by the credit originating function geographical location; the portfolio mix that
and/or unit responsible for monitoring the reflects the acceptable level of diversification
quality of such credit. and concentration; and consider the risk/
h. The structure shall likewise provide reward trade-off by factoring in, to the
for independent audits, i.e., internal audit greatest extent possible, price and non-price
and compliance, to conduct independent (e.g. collateral, restrictive covenants, etc.)
credit and compliance audits of the credit terms as well as likely downside scenarios
risk management system of the FI. The scope and their possible impact on the obligors.
of internal audit shall include the evaluation The FI shall likewise define acceptable
of the independence and overall and unacceptable types of credits, clients,
effectiveness of the credit review function. activities, transactions and behaviors that
i. Regardless of the organizational could result or potentially result in conflict
structure that an FI adopts, the board shall of interest, personal gain at the expense of
ensure that the aforementioned key the FI, or unethical conduct.
functions are considered and independence b. The credit risk strategy shall consider
and control oversight functions are effective the cyclical aspects of the economy and the
to avoid or address any potential conflict of varying effects of the economic cycle on the
interest. credit portfolio of the FI.
j. Personnel or staff involved in all (Circular No. 855 dated 29 October 2014)
phases of the credit risk management
§ X178.5 Credit policies, processes and
process shall be qualified, competent and
procedures. FIs shall have in place a sound,
have the necessary training and experience
comprehensive and clearly defined credit
to exercise prudent judgment in assessing,
policies, processes and procedures
managing and/or controlling credit risk, and
consistent with prudent standards, practices,
a solid understanding of an FI’s strategic
and relevant regulatory requirements
direction, policies, procedures, risk
adequate for the size, complexity and scope
tolerance and limits. Their qualification
of an FI’s operations. The board-approved
standards, roles and responsibilities shall
policies, processes and procedures shall
be clearly defined in the credit operating
cover all phases of the credit risk
policies and procedures manual of the FI.
management system.
The board and senior management shall
a. FIs shall establish appropriate
ensure that adequate resources and
processes and procedures to implement the
appropriate level of staffing are allocated to
credit policy and strategy. These processes
execute all kinds of credit activities.
(Circular No. 855 dated 29 October 2014) and procedures, as well as the credit policy,
Manual of Regulations for Banks Part I - Page 114o

§§ X178.5 - X178.7
14.12.31
shall be documented in sufficient detail, and individuals and sufficient controls to

effectively communicated throughout the ensure acceptable credit quality at
organization to provide guidance to staff, origination.
and periodically reviewed and updated to (Circular No. 855 dated 29 October 2014)
take into account new activities and
products, as well as new lending § X178.7 Credit granting and loan
approaches. Subsequent major changes evaluation/analysis process and
must be approved by the board. underwriting standards. Consistent with
b. The credit policy shall likewise safe and sound banking practice, an FI shall
provide for the maintenance of an audit trail grant credits only in amounts and for the
documenting that the credit risk periods of time essential for the effective
management process was properly observed completion of the activity to be financed and
and identifying the unit, individual(s) and/ after ascertaining that the obligor1 is capable
or committee(s) providing input into the of fulfilling his commitments to the FI.
process. Towards this end, an FI shall establish well-
c. The credit culture, which reflects the defined credit-granting criteria and
FI’s credit values, beliefs and behaviors, underwriting standards, which shall include
shall likewise be articulated in the credit a clear indication of the FI’s target market
policy and communicated to credit officers and a thorough understanding of the obligor
and staff at all levels through the strategic or counterparty, as well as the purpose and
plan. The credit practices shall be assessed structure of the credit and its source of
periodically to ensure that the officers and repayment.
staff conform to the desired standard and a. FIs shall conduct comprehensive
value. assessments of the creditworthiness of their
(Circular No. 855 dated 29 October 2014) obligors, and shall not put undue reliance
on external credit assessments. Credit shall
B. Operating Under a Sound Credit be granted on the basis of the primary source
Granting Process of loan repayment or cash flow, integrity
and reputation of the obligor or counterparty
§ X178.6 Credit approval process. The as well as their legal capacity to assume the
approval process for new credits as well as liability.
the amendment, renewal and refinancing of b. Depending on the type of credit
existing credit exposures shall be aligned exposure and the nature of the credit
with the credit risk management structure relationship, the factors to be considered
and clearly articulated in an FI’s written and documented in approving credits
credit policy. The process shall include the shall include, but are not limited to, the
different levels of appropriate approving following:
authority and the corresponding approving (1) The purpose of the credit which
authority limits, which shall be shall be clearly stated in the credit
commensurate with the risks of the credit application and in the contract between
exposures, as well as expertise of the approving the FI and the obligor;
individuals involved. It shall also include an (2) The current risk profile (including the
escalation process where approval for nature and aggregate amounts of risks, risk
restructuring of credits, policy exceptions or rating or credit score, pricing information)
excesses in internal limits is escalated to units/ of the borrower, collateral, other credit
officer with higher authorities. Further, there enhancements and its sensitivity to
shall be proper coordination of relevant units economic and market developments;
1
Obligor refers to an individual or entity that owes another person or entity a certain debt or duty. For purposes
of these guidelines, obligor can also be used interchangeably with borrower or debtor.
Part I - Page 114p Manual of Regulations for Banks

§ X178.7
14.12.31
(3) The sources of repayment, to determine the source and volatility of

repayment history and current capacity to credit exposure.
repay based on financial analysis from f. When granting consumer credits, an
historical financial trends and indicators FI shall conduct its credit assessment in a
such as equity, profitability, turnover, holistic and prudent manner, taking into
leverage, and debt servicing ability via cash account all relevant factors that could
flow projections, under various scenarios; influence the prospect for the loan to be
(4) For commercial credits, the repaid according to its terms and conditions.
borrower’s business expertise, its credit This shall include an appropriate
relationships including its shareholders and consideration of the potential obligor’s other
company directors, as applicable, and the debt obligations and repayment history and
status of the borrower’s economic sector an assessment of whether the loan can be
and its track record vis-à-vis industry peers; expected to be repaid from the potential
(5) The proposed terms and conditions obligor’s own resources without causing
of the credit (i.e., type of financing, tenor, undue hardship and over-indebtedness.
repayment structure, acceptable collateral) Adequate checkings, including with relevant
including covenants designed to limit credit bureaus, shall be made to verify the
changes in the future risk profile of the obligor’s credit applications and repayment
obligor; records.
(6) Use of credit reports; and g. FIs shall factor into their credit-granting
(7) Where applicable, the adequacy, decisions the likelihood of providing
valuation and enforceability of collateral or allowance for identified and expected losses
guarantees. and holding adequate capital to absorb
c. In performing the financial analysis, unexpected losses for credits with apparent
FIs shall use, to the extent available, credible weaknesses.
audited financial statements and other h. FIs may utilize physical collateral (like
relevant documents and sources. FIs may real estate), financial guarantees and other
opt to use financial information/data from instruments to help mitigate risk in credit
other sources provided that the process for
exposures. However, these shall not
arriving at such disposition and an
substitute for a comprehensive assessment
evaluation of how much reliance or value
of the obligor or fully compensate for
was attached into the financial information
insufficient information.
used is clearly articulated and documented.
i. FIs shall establish adequate policies in
d. When participating in loan
determining the acceptability of various
syndications, an FI shall not place undue
forms of credit mitigants and appropriate
reliance on the credit analysis done by the
collateral value limits; procedures for
lead underwriter and shall perform its own
analysis and review of syndicate terms. It regularly assessing the value of physical
shall analyze the risk and return on collaterals and availability of financial
syndicated loans in the same manner as guarantees; and a process to ensure that
directly sourced loans and ensure that the these are, and continue to be, enforceable,
loan is consistent with its credit risk strategy. realizable and marketable. Finally, FIs need
e. When an FI purchases securities to consider that the realizable value of the
issued by an obligor that is different from physical collateral or the quality of financial
the counterparty (e.g. asset swaps), it shall guarantees and other credit mitigants may
also analyze issuer risk. For treasury and be impaired by the same factors that have
capital market activities, the structure of led to the diminished recoverability of the
products and transactions shall be analyzed credit.
Manual of Regulations for Banks Part I - Page 114q

§§ X178.7 - X178.9
14.12.31
In the case of guarantees, the level of (1) Upon re-establishment of the

coverage being provided in relation to the creditworthiness of the obligor using the
credit quality, financial and legal capacity same credit-granting criteria for the
of the guarantor shall be evaluated. evaluation and approval of new loans; and
For credit exposures secured by deposits, (2) When the corresponding accrued
FIs shall likewise require obligors to provide interest receivable has been paid.
a written waiver of his rights under existing b. A policy on clean-up of principal,
laws to the confidentiality of his deposits, either partial or full, shall be established and
and make this available for inspection and/ appropriate controls put in place to prevent
or examination by the appropriate continuous renewal or extension over a long
department of the SES. period of time without reduction in
j. Netting arrangements also mitigate principal; otherwise, such credits and other
risks, especially in interbank and off-balance accommodations shall be subject to
sheet transactions. In order to actually classification and allowance for credit
reduce risk, such agreements need to be losses.
sound and legally enforceable in all relevant c. Specific and reasonable standards
jurisdictions. shall be provided for renewals or extensions
k. For more complex credit risk of certain types of credit exposures that take
exposures, (e.g., asset securitization, credit into consideration the following factors:
derivatives, credit-linked notes, credit (1) Borrower’s normal operating, trade
granted internationally, etc.), a more or production cycle, in the case of credit
sophisticated tool shall be used for exposures for working capital, trade
identifying, measuring, monitoring and financing, production, and/or other similar
controlling credit, country and transfer risks. purposes to ensure a realistic repayment
Each complex credit risk product or activity, schedule;
especially those that are new to banking, (2) Transaction history such as frequency
shall be subject to a thorough analysis in of renewal or extension, rate of utilization
addition to the regular assessment that is of facilities granted, and business
done with traditional credit-granting requirements;
activities. (3) Status of collateral and other
l. For new products and activities, the guarantees in the case of secured credit
credit risk shall be appropriately identified exposures, including requiring the FI to re-
and managed through a formal risk appraise the property especially when there
assessment program. FIs shall ensure that is a material change in market conditions
they fully understand the risk involved in or in the physical aspects of the property
new products and activities and put in place that threatens the collateral protection; and
adequate policies, procedures and controls (4) Age of the account, utilization rate,
before being introduced or undertaken. average balance carried, delinquency status,
(Circular No. 855 dated 29 October 2014) payment history, and account profitability
(if available) in the case of retail credits.
§ X178.8 Renewal or extension of (Circular No. 855 dated 29 October 2014)
maturity date of credits. FIs shall adopt and
adhere to the following explicit standards § X178.9 Credit limits, large exposures,
that control the use of renewals and and credit risk concentrations. An FI is
extensions of maturity date of credits: exposed to various forms of credit risk
a. Credits and other accommodations concentration which if not properly
shall only be renewed or its maturity date managed, monitored and controlled may
extended: cause significant losses that could threaten
Part I - Page 114r Manual of Regulations for Banks

§§ X178.9 - X178.10
14.12.31
its financial strength and undermine public trading books and off-balance sheet
confidence in the FI. Concentration risk can transactions.
arise from excessive exposures to c. Defining limit structure on each of
individual obligors, groups of connected the foregoing categories. Limits shall
counterparties and groups of meaningfully aggregate credit exposures,
counterparties with similar characteristics both in the banking, trading book and on
(e.g., counterparties in specific geographical and off the balance sheet and shall be
locations, economic or industry sectors) or reasonable in relation to the FI’s level of risk
entities in a foreign country or a group of tolerance, historical loss experience, capital
countries with strongly interrelated and resources. Such limits can be based in
economies. part on the internal risk rating assigned to
While concentration of credit risks is the obligor or counterparty.
inherent in banking and cannot be totally d. Procedures shall ensure that limits
eliminated, this can be mitigated by adopting are not exceeded and are clearly
policies and processes that would limit and communicated, periodically reviewed and
control credit exposures and employing modified, as appropriate. Should exceptions
portfolio diversification strategies. Policies to policy be allowed, the circumstances
and procedures may include, but are not under which limits may be exceeded and
limited to the following: the party authorized to approve such
a. Policies and procedures for excesses shall be clearly articulated in the
identifying, reviewing, managing and credit policy.
reporting large exposures and concentration (Circular No. 855 dated 29 October 2014)
risks of the FI.
b. Segmenting its portfolio into the § X178.10 Country and transfer risks
following diverse categories or such other Country risk refers to uncertainties arising
segmentations consistent with the FI’s credit from economic, social and political
strategy. conditions of a country which may cause
(1) Various types of borrowers/ obligors in that country to be unable or
counterparties or loan category (e.g., unwilling to fulfill their obligations. Transfer
government, banks and other FIs, corporate risk exists when an obligor is unable to
and individual borrowers, including secure foreign exchange to service external
exchanges, electronic communication obligations due to restrictions imposed by
networks or ECNs and clearing houses); the country on foreign exchange remittance
(2) A group of connected borrowers/ or repayment on foreign-currency
counterparties (includes aggregating denominated assets to a foreign lender. FIs
exposures to groups of accounts exhibiting that have cross-border credit risk exposures
financial or economic interdependence, shall have adequate internal capacity for
including corporate or non-corporate, identifying, measuring, monitoring and
where they are under common ownership controlling country and transfer risks in its
or control or with strong connecting links, international lending and investment
e.g. common management, familial ties); activities, and shall not place undue reliance
(3) Individual industry sectors; on external ratings. An FI shall consider the
(4) Geographic regions or countries; following:
(5) Loan structure, collateral, and tenor; a. Establishing credit-granting criteria
and taking into consideration country risk factors
(6) Various types of investments, that shall include the potential for default of
including other credit instruments in the foreign private sector obligors arising from
Manual of Regulations for Banks Part I - Page 114s

§§ X178.10 - X178.12
14.12.31
country-specific economic, social and affiliates, and other related parties, ensuring
political factors, the enforceability of loan that there is effective compliance with existing
agreements, and the timing and ability to laws, rules, and regulations at all times and
realize collateral under the national legal that no stakeholder is unduly disadvantaged.
framework. The results of the country risk a. All extensions of credit must be made
analysis shall be integrated into the internal on an arm’s-length basis, in accordance with
credit risk rating of the obligor. These the FI’s credit-granting criteria and in the
country risk factors shall be regularly regular course of business, and upon terms
monitored. An FI shall also assess an not less favorable to the FI than those offered
obligor’s ability to obtain foreign exchange to non-related borrowers.
to service cross-currency debt and honor b. FI policies shall cover standards that
contracts across jurisdictions. require directors and/or officers to avoid
b. Country risk limits shall be put in placing themselves in a position that creates
place and regularly reviewed to determine conflict of interest or the appearance of
that approved limits still reflect the FI’s conflict of interest. The board and
business strategy in line with the changing management shall likewise establish and
market conditions. FIs shall ensure that implement policies that require full
country exposures are reported and disclosure of personal interests that they
monitored against these limits. Significant may have in credit transactions. Directors
country risks shall be assessed and and officers with personal interest in a
highlighted in credit proposals submitted to transaction shall not participate in any
management for approval. deliberation, approval, or voting on the
c. Credit policy shall clearly articulate
matter.
appropriate countermeasures that an FI shall
(Circular No. 855 dated 29 October 2014)
take in the event of an adverse development
in a particular country where it has
C. Maintaining an Appropriate Credit
exposures. These measures shall include
Administration, Measurement, and
closer analysis of the obligor’s capacity to
Monitoring Process
repay, provisioning and preparation of
contingency plans if country risk continues
§ X178.12 Credit administration. FIs
to deteriorate. It shall consider in its monitoring
shall have in place a system for the ongoing
and evaluation of country and transfer risks,
administration of their various credit
the internal and external country risk rating
portfolios. Credit administration refers to
transitions and economic social and political
the back office activities that support and
developments of the relevant countries. Any
significant changes to the conditions of a control extension and maintenance of
country shall also be elevated to the BOD credit. FIs shall ensure the efficiency and
promptly particularly if the FI has substantial effectiveness of the following credit
exposure to that country. administration functions:
(Circular No. 855 dated 29 October 2014) a. Credit documentation. Procedures
shall be put in place to ensure completeness
§ X178.11 Credits granted to related of documentation in accordance with policy
parties. Consistent with sound corporate including a file documentation tickler
governance practices, the board and senior system;
management shall articulate and implement b. Disbursement. Proper approval shall
clear policies in handling transactions with be obtained and complete documentation
directors, officers, stockholders, their related ensured prior to disbursement. Exceptions,
interests (DOSRI), the FI’s subsidiaries and if any, shall be duly approved;

§§ X178.12 - X178.13
14.12.31
c. Billing and repayment. Payments integral part of the process of evaluation and
received shall be properly recorded. review of prospective and existing
Measures shall be in place to ensure that exposures. Credit underwriting criteria shall
late payments are tracked and collected; and become progressively more stringent as
d. Maintenance of credit files. Credit credit rating declines;
files shall include sufficient and updated (2) It must be fully documented and
information necessary to ascertain the shall address topics such as coverage, rating
financial condition of the obligor or criteria, responsibilities of parties involved
counterparty and include documents in the ratings process, definition of what
covering the history of an FI’s relationship constitutes a rating exception, parties that
with the obligor. All loan and collateral have authority to approve exceptions,
documents shall be kept in a secured area frequency of rating reviews, and
under joint custody. management oversight of the rating process.
(Circular No. 855 dated 29 October 2014) In addition, FIs must document the rationale
for its choice of rating criteria and must be
§ X178.13 Credit risk measurement,
able to provide analyses demonstrating that
validation and stress testing. FIs shall adopt
the rating criteria and procedures are likely
sound and appropriate risk measurement
to result in ratings that meaningfully
methodologies which shall provide a
differentiate risk;
framework to control and monitor the
(3) All credit exposures shall be rated
quality of credit as well as total loan
for risk. Where individual credit risk ratings
portfolio.
are not assigned, e.g., small-denomination
a. Internal credit risk rating system. FIs performing loans, FIs shall assign the
shall develop and utilize an internal risk portfolio of such exposures a composite
rating system appropriate to the nature, size credit risk rating that adequately defines its
and complexity of the FI’s activities in order risk, i.e., repayment capacity and/or loss
to help the board and senior management potential;
differentiate risks across the individual (4) The board shall receive sufficient
credits and groups and to facilitate informed information to oversee management’s
decision making. implementation of the process. Migration
FIs shall have sophisticated rating analysis/transition matrix of ratings shall be
systems involving sufficiently granular regularly reported to show the actual
rating grades. Simple FIs may adopt simpler performance of the rating system over time;
systems. In all cases, however, FIs shall (5) The risk rating system shall
demonstrate the influence of the internal risk encompass an adequate number of ratings.
rating system in the following important FIs shall ensure that “pass” credits are
functions: i) credit approval and sufficiently differentiated and more precisely
underwriting; ii) loan pricing; defined. There shall be a proper process to
iii) relationship management and credit map the internal rating system to regulatory
administration; iv) allowance for credit classification. The FI shall readjust the
losses and capital adequacy; and v) portfolio mapping after every review of its internal
management and board reporting. risk rating methodology. For FIs whose
Internal risk rating systems shall internal rating systems have several pass
generally observe the following standards: grades, special mention loans may pertain
(1) It must be operationally integrated to several risk ratings while substandard,
into the FI’s internal credit risk management doubtful and loss generally correspond to
process. Its output shall accordingly be an the lowest three risk ratings;

§ X178.13
14.12.31
(6) Risk ratings must be reasonable, migration in order to eventually track the
timely and dynamic. Ratings shall be predictive power of the risk rating system.
reviewed at least annually and shall be As used in these standards, a default is
modified whenever the borrower’s considered to have occurred in the following
creditworthiness changes; cases:
(7) The rating criteria shall reflect an (a) If a credit obligation is considered
established blend of qualitative (e.g., the non-performing under existing rules and
quality of management, willingness to regulations;
repay, etc.) and quantitative (e.g., cash flow, (b) If a borrower/obligor has sought or
profitability, and leverage) factors. The has been placed in bankruptcy, has been
criteria for assigning each rating shall be found insolvent, or has ceased operations
clearly defined; in the case of businesses;
(8) The rating policy shall indicate a time (c) If the bank sells a credit obligation
horizon for the risk rating. Generally, the at a material credit-related loss 1 ,
time horizon used for probability of default i.e., excluding gains and losses due to
estimation is one year. However, FIs may interest rate movements. Banks’ board-
use a different time horizon to cover one approved internal policies that govern the
business cycle; use of their internal rating systems must
(9) Ratings shall reflect the risks posed specifically define when a material credit-
by both the borrower’s expected related loss1 occurs; and
performance and the transaction’s structure. (d) If a credit obligation of a borrower/
The ratings output of internal credit risk obligor is considered to be in default, all
rating systems must contain both a borrower credit obligations of the borrower/obligor
and a facility dimension. The borrower with the same bank shall also be considered
dimension shall focus on factors that affect to be in default.
the inherent credit quality of each borrower. b. Credit scoring model. FIs may use a
The facility dimension, on the other hand, credit scoring model in measuring credit risk
shall focus on security/collateral for pools of loans that are similar in
arrangements and other similar risk purpose,risk characteristics and/or general
influencing factors of each transaction; exposure to groups, industries or
(10) The rating assigned to a credit shall geographical locations granted in small
be well supported and documented in the denomination; Provided, That the FI ensures
credit file; and that the credit scoring model sufficiently
(11) Rating histories on individual captures the credit behavior and other
accounts shall be maintained, which shall characteristics of the targeted borrowers.
include the ratings of the account, the dates These loans include retail loans, loans to
the ratings were assigned, the methodology micro and small enterprises, microfinance
and key data used to derive the ratings and loans and unsecured small business loans,
the analyst who gave the ratings. The identity and consumer loans (i.e., housing loans, car
of borrowers and facilities that default, and or auto loans, loans for the purchase of
the timing and circumstances of such appliance and furniture and fixtures, loans
defaults, must be retained. FIs must also for payment of educational and hospital
retain data on the realized default rates bills, salary loans and loans for personal
associated with rating grades and ratings consumption, including credit card loans).
1
This refers to economic loss, thus shall include discount effects, as well as direct and indirect costs associated
with collecting on the credit obligation. The FIs’ board-approved internal policies that govern the use of their
internal rating systems must include specific policies and procedures that shall be followed in the determination
of economic loss.

§ X178.13
14.12.31
Risks for these types of portfolio are impact of market dislocations and changes
generally measured at portfolio level. in economic conditions or key risk factors
c. Other credit risk measurement/ on its profile and earnings.
methodologies. FIs may likewise adopt (1) Whether stress tests are performed
other appropriate credit risk measurement manually, or through automated modeling
methodologies/models to estimate expected techniques, FIs shall ensure that:
losses from credit portfolio. (a) Policies and processes –
d. Validation of internal rating systems. (i) Are adequate and clearly
Validation is a process to assess the documented, rational, easily understood and
performance of risk component approved by the board and senior
measurement systems consistently and management; and
meaningfully, to ensure that the realized risk (ii) Includes methodology for
measures are within an expected range. It constructing appropriate and plausible
not only increases the reliability of a model, single and multi-factor stress tests, and
but also promotes improvements and a possible events, scenarios, or future changes
clearer understanding of a model’s strengths in economic conditions that could have
and weaknesses among management and adverse impact on credit exposures, and
user groups. assess the FI’s ability to withstand such
FIs shall establish comprehensive changes;
policies and procedures on effective (b) The inputs are reliable and relate
validation of the rating system (e.g. review directly to the subject portfolios;
of model design/developmental evidence, (c) The process includes frequency of test
backtesting, benchmarking and assessment and procedures for convening periodic
of the discriminatory power of the ratings) meetings to identify the principal risk factors
and rating process (e.g. review of data affecting the portfolio, setting loss limits and
quality, internal reporting, problem handling the authority for setting these limits, and
and how the rating system is used by the monitoring stress loss limits;
credit officers). This shall be adequately (d) Assumptions are well documented
documented and results reported to and conservative;
appropriate levels of the FI. The process shall (e) Models (if any) are subject to a
likewise be subject to periodic review by comprehensive validation process;
qualified, independent individuals. (f) Exceptions to limits and stress testing
Moreover, FIs shall periodically conduct results are reported to the senior
back-testing in evaluating the quality of their management and board of directors for
credit risk assessment models and establish appropriate remedial actions; and
internal tolerance limits for differences (g) Results are discussed and actions and
between expected and actual outcomes and resolutions are made arising from the
processes for updating limits as conditions discussion.
warrant. The policy shall also include (2) The linkages between different
remedial actions to be taken when risk categories of risk that are likely to emerge
tolerances are exceeded. in times of crisis shall be fully identified. In
e. Stress testing. When appropriate, an case of adverse circumstances, there may
FI shall conduct stress testing and scenario be a substantial correlation of various risks,
analysis of its credit portfolio including off- especially credit, liquidity, and market risk.
balance sheet exposures, both at an f. FIs shall develop a contingency plan
individual and group levels to assess the for scenarios and outcomes that involve

§§ X178.13 - X178.15
14.12.31
credit risk in excess of the FI’s established (4) Aggregate credit exposures to
risk tolerances. This plan may include individual borrowers and counterparties as
increasing monitoring, limiting portfolio well as to a group of accounts under
growth, and hedging or exit strategies for common ownership or control;
both significant individual transactions and (5) Permit additional analysis of the
key portfolio segments. credit portfolio, including stress testing; and
(Circular No. 855 dated 29 October 2014) (6) Maintain a database for research and
use of analytical techniques, report
§ X178.14 Credit risk management exposures, track quality and account
information and reporting systems. FIs performances, and maintain limits.
shall render accurate, reliable and timely b. The credit policy shall clearly define
information and reports. Thus, adequate the types of information and reports to be
management information and reporting generated, frequency of reporting, deadline
systems shall be in place to identify and of submission, and the users/ recipients of
measure credit risk inherent in all on- and and personnel responsible for the
off-balance sheet activities and ensure the preparation of such information and reports.
overall effectiveness of the risk management c. FIs shall provide sufficient controls
process. The information generated from to ensure integrity of the MIS. Reports shall
such systems shall enable the board and all be periodically reviewed to ensure
levels of management to fulfill their adequacy of scope and reliability and
respective oversight roles, including accuracy of the information generated.
determining the level of capital Internal audit shall also periodically assess
commensurate to the credit risk exposure the controls over MIS.
of the FI. (Circular No. 855 dated 29 October 2014)
a. At a minimum, an effective
management information system (MIS) shall § X178.15 Credit monitoring. FIs shall
enable FIs to: develop and implement comprehensive
(1) Provide adequate information on the processes, procedures and information
quality and composition of the credit systems to effectively monitor the condition
portfolio (including off-balance sheet and quality of individual credits and group
accounts); of credits across the FIs’ various portfolios.
(2) Determine accurately the level of These shall include criteria that identify and
credit risk exposures of an FI through its report problem credits to reasonably assure
various activities (e.g. renewal and that they are appropriately monitored as
extension of loans, collection process, status well as administered and provided for.
of delinquent accounts, write-offs, a. The system shall be able to, among
provisioning, among others); others, provide measures to ensure that the
(3) Timely identify and monitor credit board and management are kept informed
risk concentrations, exposures approaching of the current financial condition of the
risk limits, exceptions to credit risk limits borrower and the various credit portfolios;
and overrides to ensure that policy and loan covenants are consistently adhered to;
underwriting deviations as well as breaches cash flow projections meet repayment
and other potential problems are promptly requirements; prudential and internal limits
reported to the board and management for are not exceeded; portfolios are stress-
appropriate corrective action; tested; and potential problem credits and

§§ X178.15 - X178.16
14.12.31
other transactions are identified. adequacy of loan-loss provisioning;

Exceptions, breaches and potential determine trends; and identify problems
problems noted shall be promptly reported (e.g., risk concentration, risk migration,
to management for corrective action, deficiencies in credit administration and
possible classification and/or provisioning monitoring processes).
and more frequent monitoring. b. FIs may employ an appropriate
b. Personnel or unit assigned to sampling methodology to determine the
monitor, on an ongoing basis, credit quality scope of credit review. At a minimum, credit
and underlying physical collateral and review shall be conducted on all individual
financial guarantees shall ensure that obligors with substantial exposures, and on
relevant information is communicated to a consolidated group basis to factor in the
those personnel or unit assigned to provide business connections among related entities
internal credit risk ratings. in a borrowing group. Credit review for
c. FIs shall perform post-validation of credits that are similar in purpose or risk
the actual use of funds to determine that characteristics may be performed on a
credits were drawn down for their intended portfolio basis. The portfolio sample
purposes. Should funds be diverted for selected for review shall provide reasonable
purposes other than what has been applied assurance that all major credit risk issues
for and approved, the FI shall immediately have been assessed and valid conclusions
re-evaluate its approval or if necessary can be drawn. Moreover, sampling
terminate the credit accommodation and methodology shall be documented and
demand immediate repayment of the periodically reviewed to ensure its quality
obligation. and minimize bias.
d. FIs shall monitor individual and c. Credit review shall also evaluate
aggregate exposures against prudential and credit administration function and ensure
internal limits on a regular basis. Large that credit files are complete and updated,
exposures shall be subject to more intensive and all loan approvals and other necessary
monitoring. documents have been obtained.
e. FIs shall develop a system that d. Credit reviews shall be performed at
allows monitoring of asset quality indicators least annually, and more frequently for
(e.g. non-performing loans, collateral values, substantial exposures, new accounts and
etc.) and trends in loan growth to identify classified accounts. Assessments shall be
potential weaknesses in the portfolio. promptly discussed with the officers
(Circular No. 855 dated 29 October 2014) responsible for the credit activities and
escalated to senior management.
e. Results of the credit review shall be
D. Maintaining an Appropriate Credit promptly reported to the board of directors
Control Process or the appropriate board-level committee for
their appropriate action. The board shall
§ X178.16 Credit review process mandate and track the implementation of
a. FIs shall implement an independent corrective action in instances of unresolved
and objective credit review process to deficiencies and breaches in policies and
determine that credits are granted in procedures. Deficiencies shall be addressed
accordance with the FI’s policies; assess the in a timely manner and monitored until
overall asset quality, including resolved/corrected.
appropriateness of classification and (Circular No. 855 dated 29 October 2014)

§ X178.17
15.10.31
§ X178.17 Credit classification and relationship with the FI. Basic

Provisioning1. characteristics include, but are not limited
a. Classification of loans and other to, any of the following:
credit accommodations2. FIs shall have in (i) Deficiencies in underwriting,
place a reliable credit classification system documentation, structure and/or credit
to promptly identify deteriorating credit administration that can compromise an FI’s
exposures and determine appropriate ability to control credit relationship if
allowance for credit losses. Classification economic or other events adversely affect
can be done on the basis of internal credit the borrower;
risk rating system, including payment (ii) Continuous renewal/extension
deliquency status. All credit classifications, without reduction in principal, except when
not only those reflecting severe credit the capacity to pay of the borrower has been
detoriation, shall be considered in clearly re-established;
determining the appropriate allowance for (iii) Adverse economic or market
credit losses. conditions, that in the future may affect the
(1) All FIs shall map their classification borrower’s ability to meet scheduled
of loans and other credit accommodations repayments. Loans and other credit
against the regulatory classification criteria accommodations affected by these
provided below. However, FIs are characteristics may retain the EM
encouraged and not precluded from using classification in the next examination should
additional criteria appropriate to their the same adverse conditions persist,
internal credit risk rating system provided provided that the loans remain current; or
they are consistent with the regulatory (iv) Intermittent delays or inadequate
classification as follows: repayment of principal, interest or periodic
(a) Pass. These are loans and other credit amortizations of loans and other credit
accommodations that do not have a greater- accommodations granted by the FI or by
than-normal credit risk. The borrower has other FIs, where such information is
the apparent ability and willingness to satisfy available.
his obligations in full and therefore no loss (c) Substandard. These are loans and
in ultimate collection is anticipated. other credit accommodations that have
(b) Especially Mentioned (EM). These are well-defined weakness/(es), that may
loans and other credit accommodations that jeopardize repayment/liquidation in full,
have potential weaknesses that deserve either in respect of the business, cash flow
management’s close attention. If left or financial position, which may include
uncorrected, these weaknesses may affect adverse trends or developments that affect
the repayment of the loan. Some degree of willingness or repayment ability of the
structural weakness may be found in borrower. Basic characteristics include any
virtually any aspect of the loan arrangement of the following:
or type of loan, and the presence of one (or (i) Weak financial condition and results
more) need not be indicative of an overall of operation that leads to the borrower’s
credit weakness deserving criticism. inability to generate sufficient cash flow for
Instead, the FI must evaluate the relative debt servicing, except for start-up firms
importance of such factors in the context of which shall be evaluated on a case-to-case
the borrower’s overall financial strength, the basis;
condition of the borrower’s industry or (ii) Past due secured loans and other
market, and the borrower’s total credit accommodations where properties
1
See Appendix 89
2
Other credit accommodations include other credits such as accounts receivables, sales contract receivables,
accrued interest receivables and advances.

§ X178.17
15.10.31
offered as collateral have been found with category for loans and other credit
defects as to ownership or with other accommodations which have been
adverse information; identified as requiring write-off during the
(iii) Breach of any key financial current reporting period even though partial
covenants/agreements that will adversely recovery may be obtained in the future.
affect the capacity to pay of the borrower; or Their basic characteristics include any of the
(iv) Classified “Especially Mentioned” as following:
of the last credit review without adequate (i) When the borrower’s and co-makers’/
corrective action. guarantors’ whereabouts are unknown, or
(d) Doubtful. These are loans and other they are insolvent, or their earning power is
credit accommodations that exhibit more permanently impaired; or
severe weaknesses than those classified as (ii) Where the collaterals securing the
“Substandard”, whose characteristics on the loans are without recoverable values.
basis of currently known facts, conditions (2) Split classification may apply for non-
and values make collection or liquidation performing secured loans and other credit
highly improbable, however the exact accommodations, depending on the
amount remains undeterminable as yet. recoverability and liquidity of the collateral.
Classification as “Loss” is deferred because The secured portion may be classified as
of specific pending factors which may
“substandard” or “doubtful”, as appropriate,
strengthen the assets. Some basic
while the unsecured portion shall be
characteristics include any of the following:
classified “loss” if there is no other source
(i) Secured loans and other credit
of payment other than the collateral.
accommodations where properties offered
(3) In the case of syndicated loans, each
as collateral are either subject to an adverse
participating FI shall maintain credit
claim rendering settlement of the loan
information on the borrower, and grade and
through foreclosure doubtful or whose
make provision for its portion of the
values have materially declined without the
borrower offering additional collateral for syndicated loan in accordance with the
the loan/s to cover the deficiency; or requirements of these guidelines. The lead
(ii) Loans and other credit FI shall provide participating FIs with the
accommodations wherein the possibility of credit information on the borrower upon
loss is extremely high but because of certain request by the participating FI and inform
important and reasonable pending factors the latter if the loan will be classified so as
(i.e., merger, acquisition, or liquidation to achieve uniform classification of the
procedures, capital infusion, perfecting liens syndicated loan.
on additional collateral, and refinancing (4) FIs may upgrade a classified loan or
plans) that may work to the advantage and restore it to a pass rating provided that it
strengthening of the asset, its classification does so on the basis of a written policy on
as an estimated loss is deferred until the next the upgrading of classification or rating and
credit review. the credit review function is reliable and
(e) Loss. These are loans and other effective. Such policy shall include a
credit accommodations which are comprehensive analysis of the repayment
considered uncollectible or worthless and capability/financial strength of the borrower
of such little value that their continuance as and the corrective actions made on the
bankable assets is not warranted although weaknesses noted to support the upgrade
the loans may have some recovery or salvage in classification. Upgrading may be
value. This shall be viewed as a transitional supported by the following developments:

§ X178.17
15.10.31
(a) When all arrears or missed and responsibilities of the FI’s board of
payments on principal and interests directors and senior management;
including penalties have been cleared (b) A detailed analysis of the entire loan
rendering the account to be fully portfolio, including off-balance sheet
compliant with the original terms of the facilities, performed on a regular basis;
loan; (c) A realistic view of its lending
(b) Upon establishing that the activities and adequately consider
weaknesses were substantially addressed uncertainty and risks inherent in those
and that the borrower has exhibited a activities in preparing accounting
sustained trend of improvement and information. Loan accounting policies and
willingness and capability to fully pay its practices shall be selected and applied in
loans and advances in a timely manner to a consistent way that reasonably assures
justify the upgrade; that loan and loan loss provision
(c)Offering of new or additional information is reliable and verifiable;
collateral security; or (d) Identification of loans to be
(d) In the case of restructured loans, evaluated individually and segmentation of
the classification shall only be upgraded the remaining portfolio into groups of loans
after establishing a satisfactory track with similar credit risk characteristics for
record of at least six (6) consecutive collective assessment.
payments of the required amortization of (i) Individually assessed loans. FIs
principal and interest, or until the shall establish a materiality threshold for
borrower has sufficiently exhibited that significant credit exposures that will
the loan will be fully repaid (continued warrant an individual assessment, which
collection in accordance with the terms threshold shall be regularly reviewed.
of the loans is expected) and the loan The loan loss estimates shall reflect
meets the criteria of lower loan consideration of the facts and circumstances
classification. that affect the repayment of each individual
b. Loan Loss Estimation Methodology, loan as of the evaluation date. The following
Provisioning and Allowance for Credit factors are relevant in estimating loan losses
Losses for individually assessed loans:
(1) All FIs shall develop and document (aa) Significant financial difficulty of the
a sound loan loss methodology that can borrower;
reasonably estimate provisions for loans (bb) Probable bankruptcy or other
and other credit accommodations and risk financial reorganization of the borrower;
assets in a timely manner, using their (cc) Breach of contract, such as a default
experience and research and this guidance or delinquency in interest or principal
to ensure that the specific and collective payments; or
allowance for credit losses 1 (ACL) are (dd) Concession granted by the FI, for
adequate and approximates the expected economic or legal reasons relating to the
losses in their credit portfolio. borrower’s financial difficulty, which would
An FI’s loan loss methodology shall not otherwise be considered.
consider the following: The methodology shall include
(a) Written policies and procedures for procedures describing the determination
the credit risk systems and controls and measurement of the amount of any
inherent in the methodology, including roles impairment, the impairment measurement
1
ACL represents the aggregate amount of individual and collectively assessed probable credit losses.

§ X178.17
15.10.31
techniques available and steps performed (i) Use experienced credit judgment.
to determine which technique is most Assessment of expected losses shall not be
appropriate in a given situation. based solely on prescriptive rules or formula
(ii) Collectively assessed loans. FIs but must be enhanced with experienced
may use different methods to group loans credit judgment by the appropriate levels of
for the purpose of assessing credit risk and management2 in as much as historical loss
valuation. More sophisticated credit risk experience or observable data may be
assessment models or methodologies for limited or not fully relevant to current
estimating expected future cash flows, circumstances. However, the scope for
including credit risk grading processes, may actual discretion shall be prudently within
combine several of the following the following constraints:
characteristics: loan type, product type, (i) Experienced credit judgments shall
market segment, estimated default be subject to established policies and
probabilities or credit risk grading and procedures;
classification, collateral type, geographical (ii) With approved and documented
location and past-due status. analytical framework for assessing loan
Estimated credit losses shall reflect quality applied consistently over time;
consideration of the FI’s historical net (iii) Estimates shall be based on
charge-off rate1 of the groups, adjusted for reasonable and verifiable assumptions and
changes in trends, conditions and other supported by adequate documentation; and
relevant factors that affect repayment of the (iv) Assumptions concerning the impact
loans in these groups as of the evaluation on borrowers of changes in general
date, and applied consistently over time; economic activity, both favorable and
(e) Methods used to determine whether unfavorable, shall be made with sufficient
and how loans individually evaluated, but prudence.
not considered to be individually impaired, The method of determining loan loss
shall be grouped with other loan (excluding provisions shall reasonably assure the timely
individually assessed loans that are recognition of loan losses. While historical
impaired) that share similar credit risk loss experience and recent economic
characteristics for collective impairment conditions are a reasonable starting point
evaluation; for the institution’s analysis, these factors
(f) The quality and net realizable values are not, by themselves, sufficient basis to
of physical collateral and other financial determine the appropriate level of aggregate
guarantees and credit risk mitigants loan loss provisions. Management shall also
incorporated in the loan agreement, where consider any current factors that are likely
applicable; to cause loan losses to differ from historical
(g) Address the methods used to loss experience, including changes in the
validate models for credit risk assessment; following:
(h) The analyses, estimates, reviews • Lending policies and procedures,
and other provisioning methodology including underwriting standards and
functions shall be performed by competent collection, charge-off, and recovery
and well-trained personnel and be well practices;
documented, with clear explanations of the • International, national and local
supporting analyses and rationale; and economic and business conditions and
1
The historical net charge-off rate is generally based on the annualized historical gross loan charge-offs, less
recoveries, recorded by the FI.
2
There may be instances when no adjustments are needed to the data in the recognition and measurement of
loan losses because the data are consistent with current conditions.
Manual of Regulations for Banks Part I - Page 115i

§ X178.17
15.10.31
developments, including the condition of prescribed in Appendix 18: Provided, That

various market segments; the FIs notify the Bangko Sentral, through
• Trend, volume and severity of past their respective Central Points of Contact,
due loans and loans graded as low quality, of this preference. Nevertheless, such FIs
as well as trends in the volume of impaired shall still use experienced credit judgment,
loans, troubled debt restructurings and other subject to the criteria prescribed in this
loan modifications; Subsection, in determining the ACL.
• The experience, ability, and depth of (3) FIs shall set up general loan loss
lending management and staff; provision equivalent to one percent (1%) of
• Changes related to new market the outstanding balance of individually and
segments and products; collectively assessed loans for which no
• Quality of the FI’s loan review system specific provisions are made and/or for
and the degree of oversight by senior which the estimated loan losses are less than
management and board of directors; one percent (<1%), less loans which are
• The existence and effect of any considered non-risk under existing laws,
concentrations of credit, and changes in the rules and regulations.
level of such concentrations; and (4) FIs shall ensure the adequacy of the
• Credit risk profile of the loan portfolio individual and collective ACL for the entire
as a whole as well as the effect of external loan portfolio. They shall have a policy for
factors such as competition and legal and the regular review of the ACL, which shall
regulatory requirements on the level of be conducted at least semi-annually after
estimated credit losses in the FI’s current considering results of the credit review, level
portfolio. of classified loans, delinquency reports,
Experienced credit judgment shall also historical losses and market conditions.
be used to determine an acceptable period Failure to make adequate provisions for
that will yield reliable historical loss rates estimated future losses results in material
as loss rate periods shall not be restricted to misrepresentation of an FI’s financial
a fixed time period to determine the average condition.
historical loss experience for any group of (Circular No. 855 dated 29 October 2014, as amended by
loans with similar credit risk characteristics. M-2015-035 dated 07 October 2015, M-2015-009 dated 28 January
2015, M- 2015-005 dated 20 January 2015, M-2014-039 dated
An FI shall maintain sufficient historical loss 01 October 2014, M-2014-031 dated 08 August 2014 and
data over a full credit cycle to provide robust M-2014-006 dated 12 February 2014)
and meaningful statistical loan loss estimates
for establishing the level of collective § X178.18 Credit workout and remedial
impairment losses for each group of loans management of problem credits. FIs shall
with similar credit risk characteristics. develop and maintain a disciplined and
When applying experienced credit vigorous process for the early identification
judgment, an FI shall provide a sound and intervention for potential or existing
rationale for excluding any historical loss problem credits. The process shall ensure
data that is deemed not representative of the that timely and adequate management
performance of the portfolio. action is taken to maintain the quality of
(2) FIs with credit operations that may the credit portfolio, prevent further
not economically justify a more deterioration, and minimize the likelihood
sophisticated loan loss estimation of future losses.
methodology or whose practices fell short a. Problem credits refer to credits that
of expected standards shall, at a minimum, display signs of potential problems and/or
be subject to the regulatory guidelines in well-defined weaknesses such as those not
setting up allowance for credit losses performing according to the terms of the
Part I - Page 115j Manual of Regulations for Banks

§ X178.17
15.10.31
contract, or with credit quality impairment, into account the borrower’s capacity to pay
or deficiencies relating to their approval his obligation and available credit
and/or conduct that are not in keeping with enhancements such as financial guarantees
sound and prudent credit policies. These and physical collateral. Thus, except in
shall include past due loans, non-performing special cases which also require approval
loans and restructured loans. by the Monetary Board, such as loans
b. FIs shall adopt appropriate and cost funded by foreign currency obligations, FIs
effective workout, restructuring or remedial shall have full discretion on whether to
management policies, processes and restructure loans in order to provide
strategies to revive and recover problem flexibility in arranging the repayment of such
credits. The strategies shall take into account loans without impairing or endangering the
the specific condition of the obligor and the FI’s interest.
FI’s interest, and shall be approved by the (2) Accounts shall not be restructured
board of directors or management, in unless the financial capacity of the obligor
accordance with internal policy. to repay has been re-established, the events
c. At a minimum, the policies and or crises that triggered the financial stress
strategies shall cover the following areas: had been identified, and the nature and
(1) authority and responsibilities of extent of protection of the FI’s exposure had
been determined, to justify the need for
officers and staff in managing problem
restructuring.
credits;
(3) At a minimum, the classification and
(2) collection strategy to be adopted for
provisioning of a loan, prior to the execution
different types of loans;
of the restructuring agreement shall be
(3) restructuring and handling of
retained until the borrower has sufficiently
restructured accounts and/or loans for
exhibited that the loan will be fully repaid.
workout;
(4) A second restructuring of a loan
(4) supervision and monitoring of loan
shall be allowed only if there are reasonable
recovery performance; justifications: Provided, That it shall be
(5) management and disposal of real and considered a non-performing loan and
other properties acquired (ROPA), including classified, at least, “Substandard”. The
appraisal process; restoration to a performing loan status and/
(6) management information system to or upgrading of loan classification, e.g.,
support the reporting, monitoring and from “Substandard” to “Especially
decision making processes; Mentioned”, may be allowed if
(7) defined timelines and provision for circumstances warrant an upgrading in
regular monitoring; and accordance with this Subsection.
(8) other strategies, such as the use of (5) When restructuring of exposures to
collection agencies, and criteria for hiring a DOSRI and other related parties is pursued,
consultant on problem credits. this shall be upon terms not less favorable
d. Restructuring strategies to the FI than those offered to others and
(1) Restructuring may be resorted to for shall be approved by the board, excluding
the purpose of lessening the financial the concerned director.
difficulty of the obligor towards full (6) Physical collaterals offered, such as
settlement of his obligation, and real estate, shall be appraised by an
restructuring agreements shall always take independent appraisal company (not a
Manual of Regulations for Banks Part I - Page 115k

§§ X178.18 - X178.20
14.12.31
subsidiary or an affiliate of the FI) acceptable reasonable period of time within which to
to the Bangko Sentral at the time of write off loans already classified as “Loss”.
restructuring and every year thereafter to There shall be no undue delay in
ensure that current market values are being implementing write-offs. Notice of write-
used. A credit exposure benchmark of P1.0 off of problem credits shall be submitted in
million for simple FIs and P5.0 million for the prescribed form to the Bangko Sentral
all other FIs shall be observed, such that through the appropriate Central Point of
physical collaterals for credit exposures Contact within thirty (30) business days after
beyond this amount will require an every write-off with a sworn statement
independent appraisal. signed by the President of the FI or officer
e. Problem credits, including of equivalent rank that write-off did not
restructured accounts, shall be subjected to include transactions with DOSRI and was
more frequent review and monitoring. undertaken in accordance with board-
Regular reports on the status of loan approved internal credit policy.
accounts and progress of any remedial plan An effective monitoring and reporting
shall be submitted to senior management system shall be in place to monitor debts
to facilitate an informed decision whether written off and future recoveries. Progress
escalated remedial actions are called for. on recovery shall be periodically reported
(Circular No. 855 dated 29 October 2014) to the board and senior management. A
database of loan accounts written off shall
§ X178.19 Writing off problem credits be maintained and must be periodically
Policies for writing off problem credits must reviewed for updates on individual loan
be approved by the board of directors in obligor’s information.
accordance with defined policies, and shall (Circular No. 855 dated 29 October 2014)
incorporate, at a minimum, well-defined
criteria (i.e., circumstances, conditions and § X178.20 Enforcement actions. The
historical write-off experience) under which Bangko Sentral reserves the right to deploy
credit exposures may be written off. its range of supervisory tools to promote
Procedures shall explicitly narrate and adherence to standards and principles set
document the necessary operational steps forth in these guidelines, bring about timely
and processes to execute the policies. corrective actions and compliance with
Policies and procedures shall be Bangko Sentral directives and ensure that
periodically reviewed and if necessary, FIs continuously observe the said standards.
revised in a timely manner to address Persistent non-observance of the provisions
material internal changes (e.g., change in of Sec. X178 and its subsections, which may
business focus) or external circumstances lead to material misstatement of the
(e.g., changes in economic conditions). financial condition or illiquidity of the FI,
FIs shall write off problem credits, may be a ground for declaration of unsafe
regardless of amount, against ACL or current or unsound practices under Section 56 of
operations within a reasonable period as R. A. No. 8791 and subject the FI to
soon as such problem credits are appropriate sanctions.
determined to be worthless as defined in Enforcement actions shall be based on
the FIs’ written policies. However, problem a holistic assessment to determine if FIs
credits to DOSRI shall be written off only adopt appropriate risk management
upon prior approval of the Monetary Board. practices and maintain capital
Policies shall define and establish the commensurate with the risk assumed based
Part I - Page 115l Manual of Regulations for Banks

§§ X178.20 - X180.1
14.12.31
on existing rules and regulations. These (5) Other appropriate non-monetary

may include, but are not limited to, the enforcement actions that the Monetary Board
following: may impose.
a. Corrective actions. These are (Circular No. 855 dated 29 October 2014)
measures intended to primarily require FIs
to rectify any deviations from the standards Sec. X179 (Reserved)
and principles expected in the conduct of
its credit risk-taking activities to address the Sec. X180 (2008 - X170) Compliance
negative impact of such deviation. System; Compliance Officer.1 The Bangko
Corrective actions generally include Sentral actively promotes the safety and
issuance of specific directives to address soundness of the Philippine banking system
supervisory concerns within a reasonable through an enabling policy and oversight
timeframe. environment. Such an environment is
b. Sanctions. The Monetary Board may governed by the high standards and accepted
impose sanctions on an FI and/or its Board, practices of good corporate governance as
directors and officers, as provided under collectively defined by the Bangko Sentral and
existing laws, Bangko Sentral rules and its supervised institutions. Towards this end,
regulations proportionate to the gravity/ a robust, dynamically-responsive and
seriousness of offense. distinctly-appropriate compliance system shall
c. Other enforcement actions. Subject be put in place as an integral component of an
to prior Monetary Board approval, the institution’s internal controls.
Bangko Sentral, when warranted, may Subject to the provisions of Subsec.
deploy other enforcement actions such as: X180.4, a full-time Chief Compliance
(1) Initiation into the prompt corrective Officer (CCO) shall be appointed to
action (PCA) framework whenever grounds oversee the design of compliance system and
for PCA exist; promote its effective implementation.
(2) Issuance of cease and desist order (As amended by Circular No. 747 dated 06 February 2012)
(CDO) in case of persistence of unsafe/
§ X180.1 Definition of business risk. A
unsound banking practices and/or violation
compliance system shall be designed to
of any banking law or any order, instruction
specifically identify and mitigate business
or regulation issued by the Monetary Board
risks which may erode the franchise value
or any order, instruction or ruling issued by
of the bank. Business risk refers to
the Governor;
conditions which may be detrimental to a
(3) Additional capital infusion in case
bank’s business model and its ability to
hazardous lending practices resulted in
generate returns from operations, which in
excessive provisions for credit losses leading
turn erodes its franchise value. Combining
to capital deficiency;
business risk with the financial risks arising
(4) Requiring the FI to gross up the
from the use of borrowed funds generates
amount of required allowance for credit
total corporate risk of the bank. Business
losses based on the examination of a
risks shall include, but not be limited to, the
representative sample of loans, if in the
following:
course of the Bangko Sentral examination,
a. Risks to reputation that arise from
a high incidence of non-reporting/
internal decisions that may damage a bank’s
concealment of past due and/or problem
market standing;
loans is noted; or
1
Except for Subsec. X180.6 on cross border compliance issues, all provisions of this Section shall be complied
with on or before 01 July 2012.
Manual of Regulations for Banks Part I - Page 115m

§§ X180.1 - X180.3
12.12.31
b. Risks to reputation that arise from The charter or other formal document
internal decisions and practices that defining the status of the compliance
ultimately impinge on the public’s trust of a function shall be communicated
bank; throughout the organization.
c. Risks from the actions of a bank that (As amended by Circular No. 747 dated 06 February 2012)
are contrary to existing regulations and
identified best practices and reflect weaknesses § X180.3 (2011 - X180.1) Compliance
in the implementation of codes of conduct and system. The compliance system shall have
standards of good practice; and the following basic elements.
d. Legal risks to the extent that changes a. A formal written document (i.e.,
in the interpretation or provisions of compliance manual) that reflects the
regulations directly affect a bank’s business compliance program approved by the board
model. of directors:
(As amended by Circular No. 747 dated 06 February 2012) 1. The compliance program shall be
distinguished from the risk program and the
§ X180.2 (2011 - X180.5) Status of the
internal audit program. While compliance
compliance function. The compliance
mitigates business risks as defined in Subsec.
function shall have a formal status within
X180.1, the risk program covers financial
the organization. It shall be established by
risks that arise from the balance sheet
a charter or other formal document
exposures of the institution. The internal
approved by the board of directors that
audit program, on the other hand, shall
defines the compliance function’s standing,
review on an ex-post basis whether
authority and independence, and addresses
prescribed guidelines of the bank were
the following issues:
followed in administering transactions,
a. measures to ensure the independence
handling procedures, making decisions and
of the compliance function from the undertaking related activities.
business activities of the bank; 2. The compliance program shall take
b. the organizational structure and into account the size and complexity of
responsibilities of the unit or department operations of the banks. It must clearly
administering the compliance program; identify the avenues through which business
c. the relationship of the compliance risks may occur for the bank.
unit/department with other functions or Correspondingly, compliance measures
units of the organization, including the effectively suited to the operations of the
delineation of responsibilities and lines of bank in order to mitigate said business risks
cooperation; shall be institutionalized in the bank through
d. its right to obtain access to the compliance program.
information necessary to carry out its 3. An appropriate organizational
responsibilities; structure must be in place to manage the
e. its right to conduct investigations of compliance function and execute the
possible breaches of the compliance policy; approved compliance program. The
f. its formal reporting relationships to compliance function shall be manned by
senior management, the board of directors, full-time officers/staff either embedded in
and the appropriate board-level committee; operating departments, or in a department
and operating on its own. Coordination with the
g. its right of direct access to the board respective department heads shall be the
of directors and to the appropriate responsibility of the CCO.
board-level committee.
Part I - Page 115n Manual of Regulations for Banks

§§ X180.3 - X180.4
12.12.31
4. In addition to the organizational § X180.4 (2011 - X180.2) Chief

structure, the duties and responsibilities of Compliance Officer (CCO)
the CCO and other personnel involved in a. The CCO is the lead senior officer
the compliance function must be defined for purposes of administering the
explicitly. compliance program and interacting with
5. A compliance system which does not the Bangko Sentral on compliance-related
consistently ensure the integrity and the issues. The principal function of the CCO
accuracy of documentary submissions shall is to oversee the design of an appropriate
be deemed as a basis to assess a bank as compliance system, promote its effective
involved in unsafe and unsound practices. implementation and address breaches that
The President and the CCO shall may arise. The CCO shall also be
execute an affidavit, under oath, that the responsible for ensuring the integrity and
compliance system has been approved by accuracy of all documentary submissions
the board of directors and that the to the Bangko Sentral.
compliance manual reflects said approved b. Banks shall appoint a full-time CCO
system. to manage the compliance program. Given
The program shall be updated at least the importance of the compliance
annually to incorporate changing responses function, the CCO is a senior officer
to evolving internal and external conditions. functionally reporting to the bank’s board
b. A constructive working relationship of directors. Such appointment/
between the bank and Bangko Sentral. designation shall require prior approval of
The bank, through its CCO and/or other the Monetary Board. The bio-data with ID
authorized compliance officers, may consult picture of the proposed CCO, together
the Bangko Sentral for clarification on with the documentary requirements
specific provisions of related laws and prescribed in Appendix 98 shall be
regulations. Similarly, Bangko Sentral may submitted to the appropriate department
initiate a dialogue with a bank to discuss of the SES. The CCO’s qualifications shall
the compliance program of a bank and its be subject to the provisions of Subsec.
record of implementation of the same. X142.2 enumerating the qualifications of
The bank is enjoined to discuss bank officers, particularly considering fit
clarifications of pertinent laws and regulations and proper criteria such as integrity/
with other appropriate agencies that issue probity, competence, education, diligence
market regulations and/or tax guidelines. and experience/training.
c. Clear and open communication lines c. The CCO shall have commensurate
within the bank to educate and address skills and expertise to provide appropriate
compliance matters. guidance and direction to the bank on the
Officers and staff shall be trained in the development, implementation and
normal course of bank operation with maintenance of the compliance program.
respect to the compliance program of the d. Banks with wholly-owned
bank and the identified business risks. The subsidiary banks may appoint a CCO for
processes for imparting to bank personnel the banking group: Provided, That the
and its affiliated parties the necessary parent bank can show to the Bangko
appreciation of the bank’s compliance Sentral that the compliance function is
culture shall form part of the compliance conducted on a group-wide basis.
manual. e. Subject to prior Monetary Board
(As amended by Circular No. 747 dated 06 February 2012) approval, banks operating on a business
Manual of Regulations for Banks Part I - Page 115o

§§ X180.4 - X181
12.12.31
model deemed “simple” by the Bangko by the board of directors. However, any
Sentral by virtue of its scale and complexity material breaches of the compliance
of activities may designate a non-executive program shall be reported to and promptly
director to serve as the CCO in a concurrent addressed by the CCO within the
capacity. A non-executive director is a mechanisms defined by the compliance
member of the board of directors who is manual.
not part of the executive committee or day- A compliance system found to be
to-day management of banking operations. materially inadequate shall be construed as
For this purpose, a bank’s business unsafe and unsound banking practice.
model is deemed simple if a bank is (As amended by Circular No. 747 dated 06 February 2012)
primarily engaged in the business of deposit-
taking and lending: Provided, That a UB or § X180.6 (2008 - X 170.8; 2011 -
KB shall be deemed a complex bank while X180.8) Cross-border compliance issues
a TB, RB or Coop Bank shall be deemed a The compliance function for institutions that
simple bank. Nonetheless, a UB or KB may conduct business in other jurisdictions
apply with the Bangko Sentral for a should be structured to ensure that local
reclassification as a simple bank. The Bangko compliance concerns are satisfactorily
Sentral may likewise declare a TB, RB or addressed within the framework of the
Coop Bank as complex. compliance policy for the organization as a
(As amended by Circular Nos. 758 dated 11 May 2012, 747 whole. As there are significant differences
dated 06 February 2012, CL-2011-045 dated 01 July 2011 and in legislative and regulatory frameworks
Circular No. 598 dated 11 January 2008) across countries or from jurisdiction to
jurisdiction, compliance issues specific to
§ X180.5 (2011 - X180.4) each jurisdiction should be coordinated
Responsibilities of the board of directors within the structure of the institution’s
and senior management on compliance group-wide compliance policy. The
Aside from the duties and responsibilities organization and structure of the
of the board of directors mentioned under compliance function and its responsibilities
Subsec. X141.3, the board shall ensure that should be in accordance with local legal
a compliance program is defined for the and regulatory requirements.
bank and that compliance issues are resolved (As amended by Circular No. 747 dated 06 February 2012)
expeditiously. For this purpose, a board-level
committee, chaired by a non-executive § X180.7 (2011 - X180.9) Outsourcing
director, shall oversee the compliance of compliance risk assessment and testing
program. The review, assessment and testing of the
Ensuring that bank personnel and compliance program may be outsourced to
affiliated parties adhere to the pre-defined qualified third parties. The handling and
compliance standards of the banks rests management of this outsourcing arrangement
collectively with senior management, of shall be governed by Sec. X162.
which the CCO is the lead operating officer (As amended by Circular No. 747 dated 06 February 2012)
on compliance. Senior management,
through the CCO, should periodically report Sec. X181 (2008 - X171) Bank Protection
to the board of directors or its designated Each bank shall adopt an adequate security
committee matters that affect the design and program commensurate to its operations,
implementation of the compliance program. taking into consideration its size, location,
Any changes, updates and amendments to number of offices and business operations.
the compliance program must be approved
Part I - Page 115p Manual of Regulations for Banks

§§ X181.1 - X181.3
14.12.31
§ X181.1 (2008 - X171.1) Objectives § X181.3 Qualification and

These regulations are designed to: responsibilities of the CSO
a. Promote maximum protection of life a. Before appointing its CSO, the board
and property against crimes (e.g. robbery, of directors must ensure that its security
hold-up, theft, etc.) and other destructive officer-designate meets the following
causes; minimum qualifications:
b. Prevent and discourage perpetration (1) Be at least 30 years of age;
of crimes against bank; and (2) Be a college graduate;
c. Assist law enforcement agencies in (3) Have at least five (5) years
the identification, apprehension and experience in the field of law enforcement
prosecution of the perpetrators of crimes and/or security operations, two (2) years of
committed against banks. which is in a managerial position; and
(As amended by Circular No. 620 dated 03 September 2008) (4) Possess all the qualifications and
none of the disqualifications provided for
§ X181.2 (2008 - X171.2) Designation under Secs. X142 and X143.
of a chief security officer1. The board of In the event that the senior officer, acting
directors of each bank, or the country head concurrently as the bank’s CSO, does not
in the case of a foreign bank branch, shall meet the minimum experience defined
designate a chief security officer (CSO). under Item “c”, said officer shall be
A full-time CSO shall be designated supported by a competent consultant/
whenever the bank operates an extensive adviser who may be a person or a firm
physical network of branches and other independent of the bank with special
offices that regularly handle cash. For knowledge, skill and experience on security
purposes of this section, extensive branch management matters. The hiring of said
network means a bank has at least ten (10) consultant/adviser shall be approved by the
branches and/or other cash handling board of directors of the bank or the country
banking offices. head in the case of a foreign bank branch.
A bank that falls outside the preceding When assessing competency, the board
criteria is considered to have reduced of directors of the bank should consider the
security risk exposure and may designate a reputation and integrity, the extent of
senior officer to act as concurrent CSO relevant education/training and the
provided that such designation shall not knowledge and experience of the consultant/
result to a conflict of interest situation. adviser on security management matters.
In banking group or conglomerate b. All CSOs, including those acting in
structure, the parent bank or the primary concurrent capacity shall be responsible for:
bank may establish a group-wide security (1) Developing and administering a
management system to facilitate a security program appropriate to the risk
consolidated approach in handling profile of the bank;
security risks. This, however, does not (2) Constituting a security management
relieve each bank from appointing its team, as appropriate;
own CSO. (3) Conducting a security awareness
(As amended by Circular Nos. 823 dated 10 January 2014 and program among bank employees on a
620 dated 03 September 2008) continuing basis;
1
Banks were given three (3) months from 03 February 2014 to submit a certification to the appropriate
department of the SES whether or not they are compliant with subsections X181.2 and X183.3. Within the
same period, non-compliant banks where required to submit an acceptable plan of action to achieve compliance
within six (6) months from 03 February 2014.
Manual of Regulations for Banks Part I - Page 115q

§§ X181.3 - X181.5
14.12.31
(4) Investigating bank robberies/ hold-ups, and defining responsibility for their
recommending the filing of appropriate implementation;
charges in court as the evidence may v. Provision for the training and periodic
warrant and assisting in the prosecution of re-training of employees in their respective
the perpetrator(s) thereof; areas of responsibility under the security
(5)Establishing an effective working program, including the proper use of security
relationship with the Bangko Sentral, PNP devices and proper employee conduct
and other law enforcement agencies in the during and after an emergency situation;
prevention of bank crimes and other natural vi. Contingency measures for security
and man-made hazards; and rescue operations in emergency
(6)Implementing new techniques, situations;
methods and equipment to enhance bank vii. Provision for the posting of adequate
protection measures in a cost effective number of security personnel in all vital and/
manner. or critical areas in the bank’s premises, and
(As amended by Circular Nos. 823 dated 10 January 2014 and the minimum number of hours when each
620 dated 03 September 2008) personnel shall be on duty; and
viii. Such other provisions/measures as
§ X181.4 (2008 - X171.3) Security
the president of the bank or country head
program. The security program of each bank
in the case of a foreign bank branch may, in
shall be in writing, duly approved by its
consultation with its security officer, deem
board of directors or the country head in
appropriate.
the case of a foreign bank branch. In
(As renumbered by Circular No. 823 dated 10 January 2014,
addition, the security program shall define amended by Circular No. 620 dated 03 September 2008)
measures and procedures to detect and
prevent the commission of bank crimes, as § X181.5 (2008 - X171.4) Minimum
well as provide contingency plans in case security measures
of calamities, terrorist attacks and other a. Guard system. All banking offices
emergency situations. The security program shall be manned by an adequate number of
shall include the following: security personnel to be determined by the
i. Installation of the prescribed minimum bank, taking into consideration its size,
security devices; location, costs and overall bank protection
ii. A schedule for the periodic requirement: Provided, That cash centers
inspection, testing and servicing of all shall be manned by an adequate number of
security devices installed in each of the security guards as may be necessary during
bank’s offices, designation of an officer or banking hours. For this purpose, cash
employee responsible for ensuring that such centers shall refer to branches which also
devices are inspected, tested, serviced and handle the cash requirements of other
kept in good working order, and requiring branches of the same bank.
record of such inspections, testing and servicing; b. Security devices. Within 120 calendar
iii. Standard operating procedures for the days from 23 September 2008 in the case
safekeeping of all currencies, negotiable of existing offices and before opening for
securities and similar valuables in vaults or business in the case of offices to be opened
safes; after 23 September 2008, banks shall effect
iv. Provision for other security measures the installation, operation and maintenance,
and procedures aimed at giving added as individually appropriate, of the following
protection to the bank, e.g., procedures for security devices in each banking office;
the transport of funds and other cash items, (1) A time delay device in the cash vault/
Part I - Page 115r Manual of Regulations for Banks

§ X181.5
14.12.31
safe; standards prescribed herein.

(2) A lighting system for illuminating the c. Vaults and safes. Vault walls, ceilings
area around the vault, if the vault is visible and floors, shall be made of steel-reinforced
from outside the banking office; concrete or such other equally safe
(3) Tamper-resistant locks on exterior materials/specifications. Vault doors shall be
doors and windows; made of steel or other drill and torch
(4) A robbery alarm system or other resistant material, equipped with a dual
appropriate device for promptly notifying combination lock and time-delay device,
the nearest law enforement office either and provided with inner and outer grill
directly or through an intermediary of an doors: Provided, That all vaults constructed
attempted, ongoing or perpetrated robbery; after 23 September 2008 shall be equipped
(5) Anti-burglary or intrusion system with a breathing/ventilation device and
capable of detecting promptly an attack on emergency button capable of giving audible
the outer doors, walls, floor or ceiling of and visible signal in case of accidental
the bank premises, including the vault(s); lock-up.
and A vault record book shall be maintained
(6) Such other devices like the closed to record all activities relative to the opening
circuit television (CCTV) and video and closing of the vault.
recording system appropriate to deter the Safes should be sufficiently heavy or be
commission of bank crimes and assist in securely anchored to the premises where
the identification and apprehension of the located. The door shall be equipped with a
culprit/s: combination lock with a time-delay device
Provided, That the bank security officer shall if used for safekeeping cash and other
consider, among other things, the following: valuables. The body shall consist of steel
(i) The incidence of crimes against the with an ultimate tensile strength of 50,000
particular banking office and other business pounds per square inch or the equivalent in
establishments in the area where the metric system.
banking office is located; Safe and vault combinations must be
(ii) The amount of currency or other changed whenever the custodian is
valuables exposed to robbery and other terminated or transferred to another place
man-made hazards; of assignment. A record of the names of the
(iii) The distance of the banking office holder of the keys and combinations shall
from the nearest law enforcement office and be maintained for each lock, safe, vault and
the time ordinarily required for law- compartment. Changing of combinations
enforcement officers to arrive at the banking shall be documented to pinpoint
office; responsibility and to ensure confidentiality
(iv) The cost of the security devices; and proper observance of this requirement.
(v) Other existing security measures in d. Security of the premises. For
effect at the banking office; and emergency purposes and where applicable,
(vi) The physical characteristics of the each banking office shall be provided with
banking office structure and its a back door with a steel or grill door which
surroundings. shall be used as an alternative exit door for
Each bank shall install, operate and evacuation in case of fire, flood, bomb
maintain security devices which are threats, wind damage, explosion, civil
expected to give a general level of bank disturbance, earthquake, or other
protection equivalent, at least, to the emergency.

§§ X181.5 - X181.7
14.12.31
Steel grills, where applicable, shall provided with at least two (2) armed guards
support exterior glass doors and windows and its operations must be supervised by at
of all banking offices for protection against least two (2) officers of the bank.
any forcible entry. Access to the back door All canvass bags that contain cash and
shall be limited to authorized bank other items of value shall be provided with
personnel. Opening and closing thereof padlocks for security and control purposes.
before and after banking hours shall be Armored cars shall not be operated a mobile
recorded in a registry. bank.
Firearms and other deadly weapons shall (As renumbered by Circular No. 823 dated 10 January 2014,
not be allowed inside bank premises except amended by Circular No. 620 dated 03 September 2008)
when so authorized by the bank. A signage
for this purpose shall be conspicuously § X181.6 (2008 - X171.5) Reports.
placed near the main entrance door of the Banks shall conduct a review and self-
bank. Specific guidelines as to when to allow assessment of their security program to
firearms and other deadly weapons inside ensure their compliance with prescribed
bank premises should be incorporated in the security requirements. Any substantive
security program. amendment thereto shall be approved by
A bank shall maintain within its the bank’s board of directors or country
premises a record of the addresses and head in the case of branches of foreign
telephone numbers of the nearest law banks. The self-assessment of compliance
enforcement agencies, hospitals, rescue with prescribed security requirements
agencies and fire departments. together with the updated security program
The security officer of each bank shall (if amended during the year) shall be
conduct, at least annually, a security survey submitted annually to the appropriate
of bank premises and make available the department of the SES on or before 30
inspection report to Bangko Sentral January of the following year in accordance
examiners during regular examination. with the format shown in Appendix 10. The
The bank shall conduct fire, earthquake self-assessment together with the updated
and bomb threat drill at least once a year. security program shall be considered
e. ATM. ATM sites shall be provided Category A-2 reports.
with adequate security. Where there are no (As renumbered by Circular No. 823 dated 10 January 2014,
security personnel assigned to secure the amended by Circular No. 620 dated 03 September 2008)
ATM, an anti-tampering device shall be
installed or the ATM and its immediate
§ X181.7 (2008 - X171.6) Bangko
surroundings shall be regularly inspected to
Sentral inspection. During regular
promptly detect any attempt to rob or
examination, the Bangko Sentral reserves the
destroy the same.
right to perform a compliance assessment
f. Armored Car Operation. To ensure
of the adequacy of a bank’s security
the protection of crew members and
arrangements. The Bangko Sentral, with
valuables, all armored vehicles shall be built
approval of the Governor, may also conduct
with bullet-resistant materials capable of
at any time a targeted inspection of the
withstanding the firepower of high-powered
bank’s implementation of its security
firearms, e.g., M16 and M14 rifles.
program to determine compliance with
Moreover, armored vehicles shall be
regulations. For this purpose, the Bangko
equipped with a vault or safe or a partition
Sentral may avail of the services of experts
wall with a combination lock designed to
as resource persons.
prevent retrieval of the cargo while in transit. (As renumbered by Circular No. 823 dated 10 January 2014,
When in use the armored vehicles shall be amended by Circular No. 620 dated 03 September 2008)

§§ X181.8 - X185.1
15.10.31
§ X181.8 (2008 - X171.8) Sanctions. for promoting high ethical and integrity
Any violation of the provisions of this standards; establishing the appropriate
Section, as well as non-compliance with the culture that emphasizes, demonstrates and
minimum standards set forth or any promotes the importance of internal control;
directive of the Monetary Board issued and designing and implementing processes
pursuant hereof, shall be subject to the for the prevention and detection of fraud.
administrative sanctions provided under a. The board of directors shall be
Section 37 of R.A. No. 7653 and may, ultimately responsible for ensuring that
depending on the materiality or seriousness senior management establishes and
of the violation, constitute a ground for maintains an adequate, effective and
considering the same as an unsafe and efficient internal control framework
unsound banking practice. commensurate with the size, risk profile
(As amended by Circular No. 620 dated 03 September 2008) and complexity of operations of the bank.
The board of directors shall also ensure that
Secs. X182 - X184 (Reserved) the internal audit function has an
appropriate stature and authority within the
Sec. X185 (2008 - X163) Internal Control bank and is provided with adequate
Framework. Internal control is a process resources to enable it to effectively carry out
designated and effected by the board of its assignments with objectivity.
directors, senior management, and all levels Further, the board of directors shall, on
of personnel to provide reasonable a periodic basis:
assurance on the achievement of objectives (1) conduct discussions with
through efficient and effective operations; management on the effectiveness of the
reliable, complete and timely financial and internal control system;
management information; and compliance (2) review evaluations made by the audit
with applicable laws, regulations, committee on the assessment of
supervisory requirements, and the effectiveness of internal control made by
organization’s policies and procedures. management, internal auditors and external
Banks shall have in place adequate and auditors;
effective internal control framework for the (3) ensure that management has
conduct of their business taking into promptly followed up on recommendations
account their size, risk profile and and concerns expressed by auditors and
complexity of operations. The internal supervisory authorities on internal control
control framework shall embody weaknesses; and
management oversight and control culture; (4) review and approve the
risk recognition and assessment; control remuneration of the head and personnel of
activities; information and communication; the internal audit function. Said
and monitoring activities and correcting remuneration shall be in accordance with
deficiencies. the bank’s remuneration policies and
(As amended by Circular No. 871 dated 05 March 2015) practices and shall be structured in such a
way that these do not create conflicts of
§ X185.1 (2014 - Proper accounting interest or compromise independence and
records; 2008 - X163.1) Management objectivity.
oversight and control culture. Consistent The board of directors of UBs/KBs shall
with the principles provided under Subsecs. likewise commission an assessment team
X141.3 and X142.3, the board of directors outside of the organization to conduct an
and senior management shall be responsible independent quality assurance review of the

§ X185.1
15.10.31
internal audit function at least every five (5) In particular, the audit committee shall
years. be responsible for:
b. The audit committee shall be (1) ensuring independence of the
responsible for overseeing senior internal audit service provider;
management in establishing and (2) reporting to the board of directors
maintaining an adequate, effective and on the status of accomplishments of the
efficient internal control framework. It shall outsourced internal audit activities,
ensure that systems and processes are including significant findings noted during
designed to provide assurance in areas the conduct of the internal audit;
including reporting, monitoring compliance (3) ensuring that the internal audit
with laws, regulations and internal policies, service provider comply with sound internal
efficiency and effectiveness of operations, auditing standards such as the Institute of
and safeguarding of assets. Internal Auditors’ International Standard for
The audit committee shall oversee the the Professional Practice of Internal Auditing
internal audit function and shall be and other supplemental standards issued by
responsible for: regulatory authorities/ government agencies,
(1) monitoring and reviewing the as well as with relevant code of ethics;
effectiveness of the internal audit function; (4) ensuring that the audit plan is aligned
(2) approving the internal audit plan, with the overall plan strategy and budget of
scope and budget; the bank and is based on robust risk
(3) reviewing the internal audit reports assessment; and
and the corresponding recommendations to (5) ensuring that the internal audit
address the weaknesses noted, discussing service provider has adequate human
the same with the head of the internal audit resources with sufficient qualifications and
function and reporting significant matters skills necessary to accomplish the internal
to the board of directors; audit activities.
(4) ensuring that the internal audit c. Senior management shall be
function maintains an open communication responsible for maintaining, monitoring and
with senior management, the audit evaluating the adequacy and effectiveness
committee, external auditors, and the of the internal control system on an ongoing
supervisory authority; basis, and for reporting on the effectiveness
(5) reviewing discoveries of fraud and of internal controls on a periodic basis.
violations of laws and regulations as raised Management shall develop a process that
by the internal audit function; identifies, measures, monitors and controls
(6) reporting to the board of directors risks that are inherent to the operations of
the annual performance appraisal of the the bank; maintain an organizational
head of the internal audit function; structure that clearly assigns responsibility,
(7) recommending for approval of the authority and reporting relationships; ensure
board of directors the annual remuneration that delegated responsibilities are effectively
of the head of the internal audit function carried out; implement internal control
and key internal auditors; policies and ensure that activities are
(8) appointing, reappointing or removing conducted by qualified personnel with the
the head of the internal audit function and necessary experience and competence.
key internal auditors; and Management shall ensure that bank
(9) selecting and overseeing the personnel undertake continuing professional
performance of the internal audit service development and that there is an appropriate
provider. balance in the skills and resources of the

§§ X185.1 - X185.3
15.10.31
front office, back office, and control Internal controls shall be revised to address
functions. Moreover, Management shall any new or previously uncontrolled or
promptly inform the internal audit function unidentified risks.
of the significant changes in the bank’s risk (Circular No. 871 dated 05 March 2015)
management systems, policies and
processes. § X185.3 (2014 - Division of duties and
d. All personnel need to understand responsibilities; 2008 - X163.3) Control
their roles and responsibilities in the internal activities. Control activities shall form part
control process. They should be fully of the daily activities of the bank and all
accountable in carrying out their levels of personnel in the bank. Control
responsibilities effectively and they should activities are designed and implemented to
communicate to the appropriate level of address the risks identified in the risk
management any problem in operations, assessment process. These involve the
action or behavior that is inconsistent with establishment of control policies and
documented internal control processes and procedures, and verification that these are
code of ethics. being complied with.
(Circular No. 871 dated 05 March 2015) Banks shall have in place control
activities defined at every business level,
§ X185.2 (2014 - Independent which shall include a system that provides
balancing; 2008 - X163.2) Risk recognition for top and functional level reviews;
and assessment. An effective internal checking compliance with exposure limits
control system shall identify, evaluate and and follow-up on noncompliance; a system
continually assess all material risks that of approvals and authorizations, which
could affect the achievement of the bank’s shall include the approval process for new
performance, information and compliance products and services; and a system of
objectives. The potential for fraud shall be verification and reconciliation.
considered in assessing the risks to the Control activities complement existing
achievement of said objectives. Further, the policies, procedures and other control
risk assessment shall cover all risks facing systems in place such as, among others,
the bank, which include, among others, having clearly defined organizational
credit; country and transfer; market; interest structure and reporting lines, and
rate; liquidity; operational; compliance; arrangements for delegating authority;
legal; and reputational risks. adequate accounting policies, records and
Effective risk assessment identifies and processes; robust physical and
considers both internal (e.g., complexity of environmental controls for tangible assets
the organization’s structure, nature of the and access controls to information assets;
bank’s activities and personnel profile) and and appropriate segregation of conflicting
external (e.g., economic conditions, functions.
technological developments and changes in a. Clear arrangements for delegating
the industry) factors that could affect the authority. The functions and scope of
internal control framework. The risk authority and responsibility of each
assessment shall be conducted at the level personnel should be adequately defined,
of individual business units and across all documented and clearly communicated.
bank activities/groups/units and The extent to which authorities may be
subsidiaries, in the case of a parent bank. delegated and the corresponding

§§ X185.3
15.10.31
accountabilities of the personnel involved within the third degree of consanguinity or

shall be approved by the appropriate level affinity shall not be made joint custodians;
of management or the board of directors. (3) adopting dual control wherein the
b. Adequate accounting policies, work of one (1) person is to be verified by a
records and processes. Banks shall maintain second person to ensure that the transaction
adequate financial policies, records and is properly authorized, recorded and settled;
processes. These records shall be kept (4) incorporating sequence number
up-to-date and contain sufficient detail to control in the accounting system which shall
establish an audit trail. Further, banks shall also be used in promissory notes, checks
conduct independent balancing and and other similar instruments. Management
reconciliation of records and reports to shall also put in place appropriate controls
ensure the integrity of the reported data and to monitor the usage, safekeeping and
balances. Banks shall also put in place a recording of accountable forms;
reliable information system that covers all (5) restricting access to information
of its significant activities which shall allow assets by classifying information as to degree
the board of directors and management of sensitivity and criticality and identifying
access to data and information relevant to information owners or personnel with
decision making such as, among others, authority to access particular classifications
financial, operations, risk management, based on job responsibilities and the
compliance and market information. necessity to fulfill one’s duties; and
Moreover, these systems shall be secured, (6) implementing authentication and
monitored independently and supported access controls prior to granting access to
by adequate contingency arrangements. information such as, among others,
c. Robust physical and environmental implementing password rules. This shall
controls to tangible assets and access be supplemented by appropriate monitoring
controls to information assets. Banks shall mechanisms that will allow audit of use of
adopt policies and practices to safeguard information assets.
its tangible and information assets. These d. Segregation of conflicting functions.
shall include, but shall not be limited to: Banks shall ensure that areas of potential
(1) identifying officers with authorities conflicts of interest shall be identified,
to sign for and on behalf of the bank. Signing minimized and subjected to independent
authorities shall be approved by the board monitoring. Further, appropriate
of directors and the extent of authority at segregation of functions shall be observed
each level shall be clearly defined; in identified areas that may pose potential
(2) implementing joint custody on conflict of interest. Moreover, periodic
certain assets. Joint custody shall mean the reviews of responsibilities and functions
processing of transactions in the presence, shall be conducted to ensure that personnel
and under the direct observation, of a second are not in a position to conceal
person. Both persons shall be equally inappropriate actions.
accountable for the physical protection of Examples of internal control measures
the items and records involved: Provided, are in Appendix 112.
That persons who are related to each other (Circular No. 871 dated 05 March 2015)

§§ X185.4 - X185.12
15.10.31
§ X185.4 (2014 - Joint custody; 2008 - Evaluations of the effectiveness of the

X163.4) Information and communication. internal control system and the
An effective internal control system requires corresponding monitoring activities may be
that there are adequate and comprehensive done by personnel from the same
internal financial, operational and operational area in the form of self-
compliance data, as well as external assessment or from other areas such as
information about events and conditions internal audit: Provided, That, self-
that are relevant to decision making. assessment done by business units shall be
Information shall be reliable, timely, subject to independent validation.
accessible, and provided in a consistent Evaluations done shall be adequately
format. Banks shall have in place a reliable documented and internal control
management information system that covers deficiencies and weaknesses identified shall
significant activities of the bank and has the be reported on a timely basis to the
capability to generate relevant and quality appropriate level of management or the
information to support the functioning of board of directors, where necessary, and
internal control. addressed promptly.
Banks shall also establish effective (As amended by Circular No. 871 dated 05 March 2015)
channels of communication to ensure that
all personnel fully understand and adhere § X185.6 (2008 - X163.6) Dual control.
to policies and procedures and control (Deleted by Circular No. 871 dated 05 March 2015)
measures relevant to their duties and
responsibilities and that relevant § X185.7 (2008 - X163.7) Number
information is reaching the appropriate control.
personnel. Management shall also ensure (Deleted by Circular No. 871 dated 05 March 2015)
that all personnel are cognizant of their duty
to promptly report any deficiency to § X185.8 (2008 - X163.8) Rotation of
appropriate levels of management or to the duties.
board of directors, where required. These (Deleted by Circular No. 871 dated 05 March 2015)
shall enable them to quickly respond to
changing conditions and avoid unnecessary § X185.9 (2008- X163.9) Independence
costs. of the internal auditor.
Circular No. 871 dated 05 March 2015) (Deleted by Circular No. 871 dated 05 March 2015)
§ X185.5 (2014 - Signing authorities; § X185.10 (2008 - X163.10)

2008 - X163.5) Monitoring activities and Confirmation of accounts.
correcting deficiencies. The overall (Deleted by Circular No. 871 dated 05 March 2015)
effectiveness of the internal controls shall
be monitored on an ongoing basis. § X185.11 (2008 - X163.11) Other
Monitoring functions and activities shall be internal control standards.
adequately defined by management, (Deleted by Circular No. 871 dated 05 March 2015)
integrated in the operating environment and
should produce regular reports for review. § X185.12 (2008 - X163.12) Internal
In this regard, all levels of review shall be control procedures for dormant/inactive
adequately documented and results thereof accounts.
reported on a timely basis to the appropriate (Deleted by Circular No. 871 dated 05 March 2015)
level of management.

§ X186
15.10.31
Sec. X186 (2008 - X164) Internal Audit outsourcing framework as provided under
Function. Internal audit is an independent, Sec. X162. In this respect, the head of the
objective assurance and consulting function internal audit function of the parent bank
established to examine, evaluate and shall define the internal audit strategies,
improve the effectiveness of internal control, methodology, scope and quality assurance
risk management and governance systems measures for the entire group: Provided, That
and processes of an organization, which this shall be done in consultation and
helps management and the board of coordination with the respective board of
directors in protecting the bank and its directors and of the subsidiary or affiliate
reputation. The internal audit function shall BSFI: Provided, further, That, the board of
both assess and complement operational directors of the subsidiary or affiliate BSFI,
management, risk management, compliance shall remain ultimately responsible for the
and other control functions. In this respect, performance of the internal audit activities.
internal audit shall be conducted in c. Outsourcing of internal audit
frequencies commensurate with the assessed activities. Banks may outsource, in
levels of risk in specific banking areas. accordance with existing Bangko Sentral
a. Permanency of the internal audit regulations on outsourcing, internal audit
function. Each bank shall have a permanent activities except for areas covered under
internal audit function. In the case of group existing statutes on deposit secrecy.
structures involving a parent bank and Outsourcing of internal audit activities shall
subsidiary or affiliate Bangko Sentral- however, be done on a limited basis to have
supervised financial institutions (BSFIs), the access to certain areas of expertise that are
internal audit function shall either be not available to the internal audit function
established in each of the BSFI or centrally or to address resource constraints: Provided,
by the parent bank. That the internal audit activity shall not be
b. Internal audit function in group outsourced to the bank’s own external
structures. In case each BSFI belonging to auditor/audit firm nor to internal audit
group structures has its own internal audit service provider that was previously
function, said internal audit function shall engaged by the bank in the same area
be accountable to the financial institution’s intended to be covered by the internal audit
own board of directors and shall likewise activity that will be outsourced, without a
report to the head of the internal audit one-year “cooling off” period: Provided,
function of the parent bank within a further, That the head of the bank’s internal
reasonable period and frequency prescribed audit function shall ensure that the
by the board of directors of the parent bank. knowledge or inputs from the outsourced
On the other hand, in case the parent experts shall be assimilated into the bank to
bank’s internal audit function shall cover the greatest extent possible.
the internal audit activities in the subsidiary Non-complex TB, RB and Coop banks
or affiliate BSFI, the board of directors of on the other hand, shall be allowed to
the parent bank shall ensure that the scope outsource internal audit activities covering
of internal audit activities is adequate all areas of bank operations except for areas
considering the size, risk profile and covered by existing statutes on deposit
complexity of operations of the subsidiary secrecy: Provided, That the board of
or affiliate concerned. directors, through the audit committee, shall
The establishment of internal audit be ultimately responsible for the conduct of
function centrally by the parent bank in audit on areas covered by existing statutes
group structures shall not fall under the on deposit secrecy.

§§ X186 - X186.1
15.10.31
d. Internal audit function of branches of a. The head of the internal audit function
foreign banks. Branches of foreign banks of a UB or a KB must be a Certified Public
may establish their own internal audit Accountant (CPA) or a Certified Internal
function or may be covered by the regional/ Auditor (CIA) and must have at least five (5)
group internal audit function: Provided, years experience in the regular audit
That in case the regional/group internal (internal or external) of a UB or KB as
audit function performs the internal audit auditor-in-charge, senior auditor or audit
activities in branches of foreign banks, the manager. He must possess the knowledge,
Senior Management team in branches of skills, and other competencies to examine
foreign banks shall conduct a periodic self- all areas in which the institution operates.
assessment of the effectiveness of internal Professional competence as well as
control, risk management and governance continuing training and education shall be
systems and processes in the branch and required to face up to the increasing
report the results thereof to the regional/ complexity and diversity of the institution’s
group internal audit function to ensure that operations.
the scope of internal audit activities is b. The head of the internal audit function
adequate considering the size, risk profile of a complex TB, RB and Coop Bank; QB
and complexity of operations of the branch: and; trust entity must be a graduate of any
Provided, further, That the regional/group accounting, business, finance or economics
internal audit function shall likewise inform course with technical proficiency on the
the senior management team in branches conduct of internal audit and must have at
of foreign banks of the results of internal least five (5) years experience in the regular
audit conducted: Provided, finally, That in audit (internal or external) of a TB, national
cases when the risk assessment of the senior Coop Bank or, at least three (3) years
management team in branches of foreign experience in the regular audit (internal or
banks or of the Bangko Sentral differs from external) of a UB or KB.
the risk assessment of the regional/group c. The head of the internal audit function
internal audit function, the senior of a simple or non-complex TB, RB and
management team in branches of foreign Coop Bank; and NSSLA must be a graduate
banks or the Bangko Sentral may require the of any accounting, business, finance or
regional/group internal audit function to economics course with technical
subject the branch to an immediate or more proficiency on the conduct of internal audit
frequent internal audit. and must have at least two (2) years
(As amended by Circular No. 871 dated 05 March 2015) experience in the regular audit (internal or
external) of a UB, KB, TB, RB, Coop Bank,
§ X186.1 (2008 - X164.1) Qualifications QB or NSSLA.
of the head of the internal audit function. A qualified head of the internal audit
The head of the internal audit function must function of a UB or a KB shall be qualified
have an unassailable integrity, relevant to audit TBs, RB, Coop Banks, QBs, trust
education/experience/training, and has an entities, NSSLAs, subsidiaries and
understanding of the risk exposures of the affiliates engaged in allied activities, and
bank, as well as competence to audit all other financial institutions under Bangko
areas of its operations. He must also possess Sentral supervision. A qualified internal
the following qualifications: auditor of a complex TB, RB, and Coop
(Next page is Part I - Page 124a)

§§ X186.1 - X186.3
15.10.31
Bank; QB and trust entity shall likewise covers regulatory matters. The head of the
be qualified to audit non-complex TB, RB internal audit function shall also ensure that
and Coop Bank and NSSLA. the audit plan, including any revisions
The head of the internal audit function thereto, shall be approved by the audit
shall be appointed/reappointed or replaced committee;
with prior approval of the audit committee. e. To ensure that the internal audit
In cases when the head of the internal audit function has adequate human resources
function will be replaced, the bank shall with sufficient qualifications and skills
report the same and the corresponding necessary to accomplish its mandate. In this
reason for replacement to the appropriate regard, the head of the internal audit
supervising department of the Bangko function shall periodically assess and
Sentral within five (5) days from the time it monitor the skill-set of the internal audit
has been approved by the board of directors. function and ensure that there is an adequate
(As amended by Circular No. 871 dated 05 March 2015) development program for the internal audit
staff that shall enable them to meet the
§ X186.2 (2014 - Scope; 2008 - X164.2) growing technical complexity of banking
Duties and responsibilities of the head of operations.
the internal audit function or the chief (As amended by Circular No. 871 dated 05 March 2015)
audit executive.
a. To demonstrate appropriate § X186.3 (2014 - Qualifications and
leadership and have the necessary skills to standards of the internal auditor; 2008 -
fulfill his responsibilities for maintaining the X164.3) Professional competence and
unit’s independence and objectivity; ethics of the internal audit function. The
b. To be accountable to the board of internal audit function shall be comprised
directors or audit committee on all matters of professional and competent individuals
related to the performance of its mandate who collectively have the knowledge and
as provided in the internal audit charter. The experience necessary in the conduct of an
head of the internal audit function shall effective internal audit on all areas of
submit a report to the audit committee or bank’s operations. The skill set of the
board of directors on the status of internal audit staff shall be complemented
accomplishments of the internal audit unit, with appropriate audit methodologies and
including findings noted during the conduct tools as well as sufficient knowledge of
of the internal audit as well as status of auditing techniques in the conduct of audit
compliance of concerned departments/units. activities.
c. To ensure that the internal audit All internal audit personnel shall act
function complies with sound internal with integrity in carrying-out their duties
auditing standards such as the Institute of and responsibilities. They should respect
Internal Auditors’ International Standards for the confidentiality of information acquired
the Professional Practice of Internal Auditing in the course of the performance of their
and other supplemental standards issued by duties and should not use it for personal gain
regulatory authorities/government agencies, or malicious actions. Moreover, internal
as well as with relevant code of ethics; audit personnel shall avoid conflicts of
d. To develop an audit plan based on interest. Internally-recruited internal auditors
robust risk assessment, including inputs shall not engage in auditing activities for
from the board of directors, audit committee which they have had previous responsibility
and senior management and ensure that before a one-year “cooling off” period has
such plan is comprehensive and adequately elapsed. The internal audit personnel shall
Part I - Page 124a Manual of Regulations for Banks

§§ X186.3 - X186.5
15.10.31
adhere at all times to the bank’s Code of competence and expertise to avoid
Ethics as well as to an established code of unwarranted effects of continuously
ethics for internal auditors such as that of performing similar tasks or routine jobs that
the Institute of Internal Auditors. may affect the internal auditor’s judgment
(As amended by Circular No. 871 dated 05 March 2015) and objectivity.
(Circular No. 871 dated 05 March 2015)
§ X186.4 (2014 - Code of Ethics and
Internal Auditing Standards; 2008 - X164.4) § X186.5 Internal audit charter. Banks
Independence and objectivity of the shall have an internal audit charter approved
internal audit function. The internal audit by the board of directors. The internal audit
function must be independent of the charter shall be periodically reviewed by
activities audited and from day-to-day the head of the internal audit function and
internal control process. It must be free to any changes thereto shall be approved by
report audit results, findings, opinions, the board of directors.
appraisals and other information through The internal audit charter shall establish,
clear reporting line to the board of directors among others, the following:
or audit committee. It shall have authority a. Purpose, stature and authority, and
to directly access and communicate with responsibilities of the internal audit function
any officer or employee, to examine any as well as its relations with other control
activity or entity of the bank, as well as to functions in the bank. The charter shall
access any records, files or data whenever recognize the authority of the internal audit
relevant to the exercise of its assignment. function, to initiate direct communication
If independence or objectivity of internal with any bank personnel; to examine any
audit function is impaired, in fact or activity or entity; and to access any records,
appearance, the details of the impairment files, data and physical properties of the
must be disclosed to the audit committee. bank, in performing its duties and
Impairment to organizational independence responsibilities;
and individual objectivity may include, but b. Standards of independence,
is not limited to, personal conflict of interest, objectivity, professional competence and
scope limitations, restrictions on access to due professional care, and professional
records, personnel, and properties, and ethics;
resource limitations, such as funding. c. Guidelines or criteria for
The internal audit function shall inform outsourcing internal audit activities to
senior management of the results of its external experts;
audits and assessment. Senior management d. Guidelines for consulting or advisory
may consult the internal auditor on matters services that may be provided by the internal
related to risks and internal controls without audit function;
tainting the latter’s independence: Provided, e. Responsibilities and accountabilities
That, the internal auditor shall not be of the head of the internal audit function;
involved in the development or f. Requirement to comply with sound
implementation of policies and procedures, internal auditing standards such as the
preparation of reports or execution of Institute of Internal Auditor’s International
activities that fall within the scope of his Standards for the Professional Practice of
review. Internal Auditing and other supplemental
Staff of the internal audit function shall standards issued by regulatory authorities/
be periodically rotated, whenever government agencies, as well as with
practicable, and without jeopardizing relevant code of ethics; and
Manual of Regulations for Banks Part I - Page 124b

§§ X186.5 - X189
15.10.31
g. Guidelines for coordination with the 12 August 2009, binding the Bangko Sentral,
external auditor and supervisory authority. SEC, Professional Regulation Commission
(Circular No. 871 dated 05 March 2015) (PRC)– Board of Accountancy (BOA) and
the Insurance Commission (IC) for a
§ X186.6 Scope. All processes, systems, simplified and synchronized accreditation
units, and activities, including outsourced requirements for external auditor and/or
services, shall fall within the overall scope auditing firm, following are the revised rules
of the internal audit function. The scope of and regulations that shall govern the
internal audit shall cover, among others, the selection and delisting by the Bangko Sentral
following: of covered institutions which under special
a. Evaluation of the adequacy, efficiency laws are subject to Bangko Sentral
and effectiveness of internal control, risk supervision.
management and governance systems in the Statement of policy. It is the policy of
context of current and potential future risks; the Bangko Sentral to ensure effective audit
b. Review of the reliability, effectiveness and supervision of banks, QBs, trust entities
and integrity of management and financial and/or NSSLAs including their subsidiaries
information systems, including the and affiliates engaged in allied activities and
electronic information system and electronic other FIs which under special laws are
banking services; subject to Bangko Sentral supervision, and
c. Review of the systems and procedures to ensure that reliance by Bangko Sentral
of safeguarding the bank’s physical and and the public on the opinion of external
information assets; auditors and auditing firms by prescribing
d. Review of compliance of trading the rules and regulations that shall govern
activities with relevant laws, rules and the selection, appointment, reporting
regulations; requirements and delisting for external
e. Review of the compliance system and auditors and auditing firms of said
the implementation of established policies institutions, subject to the provisions of and
and procedures; and implementing regulations issued pursuant
f. Review of areas of interest to to the aforesaid MOA.
regulators such as, among others monitoring a. Rules and regulations. The revised
of compliance with relevant laws, rules and rules and regulations that shall govern the
regulations, including but not limited to the selection and delisting by the Bangko Sentral
assessment of the adequacy of capital and of covered institutions which under special
provisions; liquidity level; regulatory and laws are subject to Bangko Sentral
internal reporting. supervision are shown in Appendix 43.
(Circular No. 871 dated 05 March 2015) b. Sanctions. The applicable sanctions/
penalties prescribed under Sections 36 and
Secs. X187 - X188 (Reserved) 37 of R.A. No. 7653 to the extent applicable
shall be imposed on the covered institution,
Sec. X189 (2008 - X165) Selection, its audit committee and the directors
Appointment, Reporting Requirements and approving the hiring of external auditors/
Delisting of External Auditors and/or auditing firm who/which are not in the
Auditing Firm; Sanctions; Effectivity. Bangko Sentral list of selected auditors for
Pursuant to Section 58, R.A. No. 8791, and covered institutions for hiring, and/or
the existing provisions of the executed retaining the services of the external auditor/
Memorandum of Agreement (MOA) dated auditing firm in violation of any of the
Part I - Page 124c Manual of Regulations for Banks

§§ X189 - X190.1
09.12.31
provisions of this Section and for non- that no material weakness or breach in the
compliance with the Monetary Board internal control and risk management
directive under Item “K” in Appendix 43. systems was noted in the course of the audit
Erring external auditors/auditing firms may of the bank to the board of directors or
also be reported by the Bangko Sentral to country head; and (c) the absence of any
the PRC for appropriate disciplinary action. direct or indirect financial interest and other
(As amended by Circular Nos. 660 dated 25 August 2009 and circumstances that may impair the
529 dated 11 May 2006) independence of the external auditor;
(2) Reconciliation Statement between the
Sec. X190 (2008 - X166) Audited Financial AFS and the balance sheet and income
Statements of Banks. The following rules statement for bank proper (regular and
shall govern the utilization and submission FCDU) and trust department submitted to
of AFS of banks. the Bangko Sentral including copies of
For purposes of this Section, AFS shall adjusting entries on the reconciling items;
include the balance sheets, income and (3) other information that may be
statements, statements of changes in equity, required by the Bangko Sentral.
statements of cash flows and notes to In addition, the external auditor shall be
financial statements which shall include required by the bank to submit to the board of
among other information, disclosure of the directors or country head, a LOC indicating
volume of past due loans as well as loan- any material weakness or breach in the
loss provisions. On the other hand, financial institution’s internal control and risk
audit report shall refer to the AFS and the management systems within thirty (30)
opinion of the auditor. The AFS of banks calendar days after submission of the financial
with subsidiaries shall be presented side by audit report. If no material weakness or
side on a solo basis (parent) and on a breach is noted to warrant the issuance of
consolidated basis (parent and subsidiaries). an LOC, a certification under oath stating
that no material weakness or breach in the
§ X190.1 (2008 - X166.1) Financial internal control and risk management
audit. Banks shall cause an annual financial systems was noted in the course of the audit
audit by an external auditor acceptable to of the bank shall be submitted in its stead,
the Bangko Sentral not later than thirty (30) together with the financial audit report.
calendar days after the close of the calendar Material weakness shall be defined as
year or the fiscal year adopted by the bank. a significant control deficiency, or
Report of such audit shall be submitted to combination of deficiencies, that results in
the board of directors or country head, in more than a remote likelihood that a material
the case of foreign bank branches, and the misstatement of the financial statements will
appropriate department of the SES not later not be detected or prevented by the entity’s
than 120 calendar days after the close of the internal control. A material weakness does
calendar year or the fiscal year adopted by not mean that a material misstatement has
the bank. The report to the Bangko Sentral occurred or will occur, but that it could
shall be accompanied by the: occur. A control deficiency exists when the
(1) certification by the external auditor on design or operation of a control does not
the: (a) dates of start and termination of audit; allow management or employees, in the
(b) date of submission of the financial audit normal course of performing their assigned
report and certification under oath stating functions, to prevent or detect misstatements

§ X190.1
09.12.31
on a timely basis. A significant deficiency reliably in accordance with generally

is a control deficiency, or combination of accepted accounting principles. The phrase
control deficiencies, that adversely affects more than remote likelihood shall mean that
the entity’s ability to initiate, authorize, future events are likely to occur or are
record, process, or report financial data reasonably possible to occur.

§ X190.1
08.12.31
The board of directors, in a regular or concern such as material weakness/breach

special meeting, shall consider and act on in internal control and/or risk management
the financial audit report and the certification systems, the Monetary Board may, upon
under oath submitted in lieu of the LOC and recommendation of the appropriate
shall submit, within thirty (30) banking days department of the SES, require the financial
after receipt of the reports, a copy of its audit to be conducted by an external auditor
resolution to the appropriate department of acceptable to the Bangko Sentral, at the
the SES. The resolution shall show, among expense of the institution concerned:
other things, the actions(s) taken on the Provided, further, That when circumstances
reports and the names of the directors such as, but not limited to loans from
present and absent. multilateral FIs, privatization, or public
The board shall likewise consider and listing warrant, the financial audit of the
act on the LOC and shall submit, within institution concerned by an acceptable
thirty (30) banking days after receipt thereof, external auditor may also be allowed.
a copy of its resolution together with said Banks and other FIs under the
LOC to the appropriate department of the concurrent jurisdiction of the Bangko Sentral
SES. The resolution shall show the action(s) and COA shall, however, submit a copy of
taken on the findings and recommendations the annual audit report (AAR) of the COA
and, the names of the directors present and to the appropriate department of the SES
absent, among other things. within thirty (30) banking days after receipt
The country head of foreign banks with of the report by the board of directors. The
branches in the Philippines shall submit a AAR shall be accompanied by the:
report on the action taken by management (1) certification by the institution concerned
(head office, regional, or country, as the case on the date of receipt of the AAR by the
may be) on the financial audit report and board of directors; (2) reconciliation
the certification under oath submitted in lieu statement between the AFS in the AAR and
of the LOC within thirty (30) banking days the balance sheet and income statement of
after receipt thereof. bank proper (regular and FCDU) and trust
The country head shall likewise submit department submitted to the Bangko Sentral,
a report on the action taken by management including copies of adjusting entries on the
on the LOC within thirty (30) banking days reconciling items; and (3) other information
after receipt thereof. that may be required by the Bangko Sentral.
The LOC shall be accompanied by the The board of directors of said
certification of the external auditor of the institutions, in a regular or special meeting,
date of its submission to the board of shall consider and act on the AAR, as well
directors or country head, as the case as on the comments and observations and
may be. shall submit, within thirty (30) banking days
Government-owned or-controlled after receipt of the report, a copy of
banks, including their subsidiaries and its resolution to the appropriate department
affiliates, as well as other FIs under Bangko of the SES. The resolution shall show the
Sentral supervision which are under the action(s) taken on the report, including on
concurrent jurisdiction of the Commission the comments and observations and the
on Audit (COA) shall be exempt from the names of the directors present and absent,
aforementioned annual financial audit by an among other things.
acceptable external auditor: Provided, The financial audit report required to
That when warranted by supervisory be submitted shall in all respect be PFRS/
PAS compliant: Provided, That banks shall

§§ X190.1 - X190.4
14.12.31
submit to the Bangko Sentral adjusting by the bank’s assets.

entries reconciling the balances in the The disclosure of information by the
financial statements for prudential reporting external auditor to the Bangko Sentral shall
with that in the audited annual financial not be a ground for civil, criminal or
statements. disciplinary proceedings against the former.
Banks as well as external auditors shall Bank management shall be present
strictly observe the requirements in the during discussions or at least be informed
submission of the financial audit report and of the adverse findings in order to preserve
reports required to be submitted under the concerns of the supervisory authority
Appendix 61. and external auditors regarding the
The reports and certifications of confidentiality of information.
institutions concerned, schedules and b. Sanction. The auditing firm(s) shall
attachments required under this Subsec. be blacklisted by the Monetary Board for
shall be considered Category B a period as the Board may deem
reports, delayed submission of which shall appropriate for their failure to perform
be subject to the penalties under Subsec. their duty of reporting to the Bangko
X192.2b(1)b. Sentral any matter adversely affecting the
(As amended by Circular Nos. 554 dated 22 December 2006 and condition or soundness of the bank.
540 dated 09 August 2006) Banks shall not be allowed to engage
the services of the blacklisted auditing firm.
§ X190.2 (2008 - X166.2) Posting of
audited financial statements. Local banks § X190.4 (2008 - X166.4) Disclosure
shall post in conspicuous places in their requirement in the notes to the audited
head offices, all their branches and other financial statements. Banks shall require
banking offices, as well as in their respective their external auditors to include the
websites, their latest financial audit following additional information in the
report. notes to financial statements:
The abovementioned documents shall a. Basic quantitative indicators of
also be posted by foreign bank branches in financial performance such as return on
all their banking offices in the Philippines.
average equity, return on average assets and
net interest margin;
For purposes of computing the
§ X190.3 (2008 - X166.3) Disclosure
indicators, the following formulas shall be
of external auditor’s adverse findings to
used:
the Bangko Sentral; sanction
a. Findings to be disclosed. Banks shall (1) Return on Average Equity (%) =
require their external auditors to report to Net Income (or Loss) after Income Tax x 100
Average Total Capital Accounts
the Bangko Sentral any matter adversely
affecting the condition or soundness of the Where:
bank, such as, but not limited to: Average Total = Sum of Total Capital Accounts as of the 12
Capital month-ends in the calendar/fiscal year
(1) Any serious irregularity, including Accounts adopted by the Bank
those involving fraud or dishonesty, that may 12
jeopardize the interest of depositors and (2) Return on Average Assets (%) =
Net Income (or Loss) after Income Tax x 100
creditors; Average Total Assets
(2) Losses incurred which substantially
Where:
reduce the capital funds of the bank; and Average = Sum of Total Assets as of the 12 month-ends in
(3) Inability of the auditor to confirm Total the calendar/fiscal year adopted by the Bank
that the claims of creditors are still covered Assets 12

§§ X190.4 - X190.5
14.12.31
(3) Net Interest = Net Interest Income x 100 i. Accounting policies which shall
Margin (%) Average Interest Earning Assets
include, but shall not be limited to, general
Where: accounting principles, changes in
Net = Total Interest Income – Total Interest Expense
accounting policies/practices, principles of
Interest
Income consolidation, policies and methods for
Average = Sum of Total Interest Earning Assets as of the determining when assets are impaired,
Interest 12 month-ends in the calendar/fiscal year
Earning adopted by the Bank
recognizing income on impaired assets and
Assets 12 losses on non-performing credits, income
recognition, valuation policies and
b. Risk-based capital adequacy ratio accounting policies on securitizations,
under Section 34 of R.A. No. 8791 and foreign currency translations, loan fees,
applicable and existing capital adequacy premiums and discounts, repurchase
framework; agreements, premises/fixed assets, income
c. Concentration of credit as to taxes and derivatives.
(As amended by Circular No. 827 dated 28 February 2014)
industry/economic sector where
concentration is said to exist when total loan
§ X190.5 (2008 - X166.5) Disclosure
exposures to a particular industry/economic
requirements in the annual report. UBs,
sector exceeds thirty percent (30%) of total
KBs, and TBs with at least P1.0 billion
loan portfolio;
resources shall prepare an annual report
d. Breakdown of total loans as to
which shall include, in addition to the
secured and unsecured and breakdown of
audited financial statements and other usual
secured loans as to type of security;
information contained therein, a discussion
e. Total outstanding loans to bank’s
and/or analysis of the following information:
DOSRI, percent of DOSRI loans to total loan
a. Financial performance;
portfolio, percent of unsecured DOSRI loans
b. Financial position and changes
to total DOSRI loans, percent of past due
therein;
DOSRI loans to total DOSRI loans and
c. Overall risk management philosophy
percent of non-performing DOSRI loans to
(i.e., a general statement of the risk management
total DOSRI loans;
policy adopted by the bank's board of
f. Nature and amount of
directors which serves as the basis for the
contingencies and commitments arising
establishment of its risk management system),
from off-balance sheet items [include direct
risk management system and structure;
credit substitutes (e.g., export LCs
d. Qualitative and quantitative
confirmed, underwritten accounts unsold),
information on risk exposures (credit,
transaction-related contingencies (e.g.,
market, liquidity, operational, legal and
performance bonds, bid bonds, standby
other risks); and
LCs), short-term self-liquidating trade-related
e. Basic business management and
contingencies arising from the movement of
corporate governance information such as
goods (e.g., sight/usance domestic LCs,
the bank’s organizational structure, incentive
sight/usance import LCs), sale and
structure including its remuneration policies,
repurchase agreements not recognized in the
nature and extent of transactions with
balance sheet; interest and foreign exchange
affiliates and related parties.
rate related items; and other commitments];
Additional disclosure requirements are
g. Provisions and allowances for
found under Parts IX and V of Appendices
losses and how these are determined;
63b and 63c, respectively.
h. Aggregate amount of secured
(Circular No. 781 dated 15 January 2013)
liabilities and assets pledged as security; and

§§ X190.6 - X191.2
15.10.31
§ X190.6 (2008 - X166.6) Posting and Bangko Sentral follow the account
submission of annual report. A copy of the definitions in the Bangko Sentral-prescribed
latest annual report shall be posted by the Manual of Accounts: Provided, further, That
bank in a conspicuous place in its head the mathematical formulas for reconciling
office, all its branches and other offices. such published statements and submitted
Covered banks shall submit the Annual reports with the general ledger accounts of
Report Assessment Checklist (ARAC) 1 the bank are submitted to the appropriate
together with the Annual Report. The ARAC department of the SES: Provided, finally, That
identifies the pages and sections of the said banks prepare for Bangko Sentral use,
Annual Report corresponding to the reconciliations of their ledger accounts with
disclosures. the Bangko Sentral prescribed Manual of
Accounts during regular or special bank
The deadline for the submission of the
examinations.
annual report and ARAC to the appropriate
Any bank which fails or refuses to adopt
department of the SES is 180 calendar days
the prescribed Manual of Accounts, or any
after the close of the calendar or fiscal year of the applicable accounts contained
adopted by the bank. therein, or adopts any general ledger
(As amended by M-2014-007 dated 04 March 2014) account not specified in the said Manual of
Accounts without prior written approval of
Sec. X191 (2008 - X161) Records. Banks the Governor of the Bangko Sentral, shall
shall have a true and accurate account, be penalized by revocation or suspension
record or statement of their daily of its authority to engage in quasi-banking
transactions, particularly those referring to function.
their deposit liabilities. The making of any
false entry or the willful omission of entries § X191.2 (2008 - X162.16) Financial
relevant to any transaction, is a ground for Reporting Package. In line with the
the imposition of administrative sanctions adoption of the Philippine Financial
under Section 37 of R.A. No. 7653 and the Reporting Standards (PFRS) and Philippine
disqualification from office of any director Accounting Standards (PAS) effective the
or officer responsible therefor under Section annual financial reporting period beginning
9-A of R.A. No. 337, as amended. This is 01 January 2005, the Manual of Accounts
without prejudice to their criminal liability and the Bangko Sentral reportorial
under Sections 35 and 36 of R.A. No. 7653 requirements consisting of the Consolidated
Statement of Condition (CSOC),
and/or the applicable provisions of the
Consolidated Statement of Income and
Revised Penal Code.
Expense (CSIE) and their supporting
schedules are amended through the issuance
§ X191.1 (2008 - X161.1) Adoption of of the new Financial Reporting Package
the Manual of Accounts. Banks shall strictly (FRP) for banks.
adopt the Manual of Accounts prescribed The general features as well as the
by the Bangko Sentral for recording daily implementing guidelines of the FRP is
transactions including reportorial and provided in Appendix 77.
publication requirements. (Circular No. 512 dated 03 February 2006, as amended by
Local branches of foreign banks may Circular Nos. 888 dated 09 October 2015, 886 dated 08 Sep-
tember 2015, 880 dated 22 May 2015 and 837 dated 18 June
continue using their parent bank’s general
2014, M-2014-009 dated 17 March 2014, Circular No. 691 dated
ledger accounts: Provided, That published 23 June 2010, M-2010-016 dated 16 June 2010 and Circular No.
statements and reports submitted to the 568 dated 08 May 2007)
1
Effective 01 January 2014.

§ X191.3
12.12.31
§ X191.3 (2008 - X161.2) Philippine associates, including insurance subsidiaries/

Financial Reporting Standards/Philippine associates, shall also be accounted for using
Accounting Standards. the equity method; and
Statement of policy. It is the policy of c. Banks shall be required to meet the
the Bangko Sentral to promote fairness, Bangko Sentral recommended valuation
transparency and accuracy in financial reserves.
reporting. It is in this light that the Bangko Government grants extended in the
Sentral aims to adopt all Philippine form of loans bearing nil or low interest
Financial Reporting Standards (PFRS) and rates shall be measured upon initial
Philippine Accounting Standards (PAS) recognition at its fair value (i.e., the
issued by the Accounting Standards present value of the future cash flows of
Council (ASC) to the greatest extent possible. the financial instrument discounted using
Banks shall adopt the PFRS and PAS the market interest rate). The difference
which are in accordance with generally between the fair value and the net
accepted accounting principles in recording proceeds of the loan shall be recorded
transactions and in the preparation of under “Unearned Income-Others”, which
financial statements and reports to Bangko shall be amortized over the term of the
Sentral. However, in cases where there are loan using the effective interest method.
differences between Bangko Sentral The provisions on government grants
regulations and PFRS/PAS as when more shall be applied retroactively to all
than one (1) option are allowed or certain outstanding government grants received.
maximum or minimum limits are prescribed FIs that adopted an accounting treatment
by the PFRS/PAS, the option or limit other than the foregoing shall consider the
prescribed by Bangko Sentral regulations adjustment as a change in accounting
shall be adopted by banks. policy, which shall be accounted for in
For purposes hereof, the PFRS/PAS shall accordance with PAS 8.
refer to issuances of the ASC and approved Notwithstanding the exceptions in
by the Professional Regulation Commission Items “a”, “b” and “c”, the audited annual
(PRC). financial statements required to be
Accounting treatment for prudential submitted to the Bangko Sentral in
reporting. For prudential reporting, banks accordance with the provision of Subsec.
shall adopt in all respect the PFRS and PAS X190.1 shall in all respect be PFRS/PAS
except as follows: compliant: Provided, That FIs shall submit
a. In preparing consolidated financial to the Bangko Sentral adjusting entries
statements, only investments in financial reconciling the balances in the financial
allied subsidiaries except insurance statements for prudential reporting with that
subsidiaries shall be consolidated on a line- in the audited annual financial statements.
by-line basis; while insurance and non- Guidelines on the adoption of PFRS 9.
financial allied subsidiaries shall be The guidelines governing the
accounted for using the equity method. implementation/early adoption of the
Financial/non-financial allied/non-allied Philippine Financial Reporting Standards
associates shall be accounted for using the (PFRS 9) Financial Instrument are shown in
equity method in accordance with the Appendix 97.
provisions of PAS 28 “Investments in Penalties and sanctions. The following
Associates”. penalties and sanctions shall be imposed
b. For purposes of preparing separate on FIs and concerned officers found to
financial statements, financial/non- violate the provisions of Appendix 97:
financial allied/non-allied subsidiaries/ (1) Fines to be imposed on FIs for each

§§ X191.3 - X192.1
15.10.31
violation, reckoned from the date the However, the Bangko Sentral cannot
violation was committed up to the date it presently guarantee the security/
was corrected: confidentiality of data in the course of
(i) P20,000/day for UBs; electronically transmitting reports to
(ii) P10,000/day for KBs; Bangko Sentral. Bangko Sentral
(iii) P2,000/day for TBs; and recommends that sensitive or confidential
(iv) P1,000/day for RBs/Coop Banks. information be provided by ordinary post
(2) Sanctions to be imposed on or courier. The Bangko Sentral will accept
concerned officers: no responsibility for electronic messages/
(i) First offense – reprimand the officers reports/information that may be hacked
responsible for the violation; and or cracked, intercepted, copied or
(ii) Subsequent offenses - suspension of disclosed outside Bangko Sentral’s
ninety (90) days without pay for officers information system.
responsible for the violation.
(As amended by Circular Nos. 761 dated 20 July 2012, § X192.1 (2008 - X162.1) Categories
733 dated 05 August 2011 and 708 dated 10 January 2011 and and signatories of bank reports.
572 dated 22 June 2007) a. Categories of reports. Reports
required to be submitted to the Bangko
§§ X191.4 - X191.9 (Reserved) Sentral by banks are grouped into
Category A-1, Category A-2, Category A-3
§ 1191.9 (Reserved)
and Category B reports as indicated in
§ 2191.9 (Reserved) Appendix 6.
b. Authorized signatories
§ 3191.9 (2008 - 3161.9) Retention and (1) Category A-1 reports shall be
disposal of records of rural/cooperative signed by the bank’s chief executive
banks. To guide RBs/Coop Banks in the officer or, in his absence, by the
disposition of their records and documents executive vice president, and by the
which no longer need to be retained and in comptroller or, in his absence, by the
determining which of the records are of chief accountant, or officers holding
permanent value and therefore should be equivalent positions.
preserved, RBs/Coop Banks shall follow the (2) Category A-2 reports shall be signed
guidelines on retention and disposal of by the president, executive vice president,
records in Appendix 50. vice president or by an officer holding
(As amended by Circular No. 720 dated 06 May 2011) equivalent position.
(3) Category A-3 and Category B reports
Sec. X192 (2008 - X162) Reports. Banks shall be signed by officers or their alternates,
shall submit to the appropriate department duly designated by the board of directors.
of the SES all their statements and/or periodic The designated signatories of Categories
reports listed in Appendix 6 in such A-1, A-2, A-3 and B reports including their
frequency and deadlines indicated therein. specimen signatures shall be contained in a
In the preparation of said statements/ resolution approved by the board of directors.
reports, banks shall use and strictly follow A copy of the board resolution covering the
the forms prescribed by the Bangko initial designation and subsequent change(s)
Sentral. in signatories as well as specimen signatures
In line with the policy direction of R.A of the signatories and alternates, shall be made
No. 8792 (E-Commerce Act), the Bangko available for inspection by Bangko Sentral
Sentral is strongly encouraging banks to examiners and submitted to the Bangko Sentral
submit their regular reports to the Bangko upon request of the appropriate supervising
Sentral in electronic form. department of the SES.

§§ X192.1 - X192.2
15.10.31
(4) Reports in computer media that are reports shall refer to the failure of any bank
submitted by banks shall be subject to the to submit on time the report defined in Item
same requirements regarding authorized “a(1)” above. Failure to submit a report on
signatories. time due to fortuitous events, such as fire
(5) Any report submitted to the Bangko and other natural calamities, and public
Sentral that is signed by an officer who is not disorders including strike or lockout
listed or included in any of the resolutions affecting a bank as defined in the Labor
mentioned above, shall be considered as not Code, or of a national emergency affecting
having been submitted at all. operations of banks, shall not be considered
(6) All authorized agent banks shall as willful delay1.
submit to the Director, Branch Operations, (3) Examination shall include, but need
Bangko Sentral, the updated specimen not be limited to, the verification, review,
signatures of Senior Bank Officers in their audit, investigation and inspection of the
respective Head Offices who are authorized books and records, business affairs,
to authenticate the signatures of their administration and financial condition of any
provincial branch officers transacting
bank including the reproduction of banking
business with the Bangko Sentral Regional
records, as well as the taking possession of
Offices/Branches.
the books and records and keeping them
The Bangko Sentral Branch Operations
under Bangko Sentral’s custody after giving
shall be advised of any changes in authorized
proper receipts therefor.
branch signatories, as well as authenticating
It shall also include the interview of the
Head Office Senior Officers.
c. Deadline for submission of reports directors and personnel of any bank
(1) Regular reports. Unless otherwise including its Electronic Data Processing
specified, the deadlines for submission of (EDP) servicer. Books and records shall
reports enumerated in Appendix 6, shall be include, but not limited to, data and
reckoned on the basis of banking days. For information stored in magnetic tapes, discs,
this purpose, banking days shall be diskettes, printouts, logbooks and manuals
understood to mean Monday through Friday kept and maintained by the bank or by the
or banking days of the Bangko Sentral. EDP servicer, that are necessary and incidental
(2) Call Reports. The deadline of to the use of EDP systems by the bank.
submission of call reports shall be specified (4) Refusal to permit examination shall
in the letter calling for the report. mean any act or omission which impedes,
(As amended by M-2015-15 dated 16 March 2015 and Circular delays or obstructs the duly authorized
No. 870 dated 20 February 2015) Bangko Sentral officer/examiner/employee
from conducting an examination, including
§ X192.2 (2008 - X162.2) Sanctions in the act of refusing to accept or honor a letter
case of willful delay in the submission of of authority to examine presented by any
reports/refusal to permit examination. officer/examiner/employee of the Bangko
For willful delay in the submission of reports, Sentral.
specific sanctions shall be imposed in b. Fines for willful delay in the
accordance with the following rules: submission of reports.
a. Definitions. For purposes of this (1) Amount of fine. Any bank which shall
Subsection, the following definitions shall incur willful delay in the submission of
apply. required reports shall pay a fine in
(1) Report shall refer to any report or accordance with the following schedule:
statement required to be submitted by a bank (a) For Category A-1, A-2 and A-3 reports
to the Bangko Sentral. (1) UBs/KBs - P1,200
(2) Willful delay in the submission of (2) TBs - 600
1
See Appendix 89

§ X192.2
14.12.31
(3) RBs/Coop Banks - P 180 examination.

per day of default until the report is filed (1) Amount of fine - A bank which shall
with the Bangko Sentral; and willfully refuse to permit examination shall
(b) For Category B reports pay a fine of P3,000 daily from the day of
(i) UBs/KBs - P 240 refusal and for as long as such refusal lasts.
(ii) TBs - 120 (2) Basis and effectivity of the imposition
(iii) RBs/Coop Banks - 60 of fine.
per day of default until report is filed with (a) The Bangko Sentral officer/examiner/
the Bangko Sentral. employee shall report the refusal of the bank
In the implementation of the foregoing to permit examination to the head of the
rules, delay or default shall start to run on appropriate department of the SES, who shall
the day following the last day required for forthwith make a written demand upon the
the submission of reports. However, bank concerned for such examination. If the
should the last day of filing fall on a non- bank continues to refuse said examination
working day in the locality where the without any satisfactory explanation thereof,
reporting bank is situated, delay or default the Bangko Sentral officer/examiner/employee
shall start on the day following the next concerned shall submit a report to that effect
banking day. The due date/deadline for to the said department head.
submission of reports to Bangko Sentral (b) The fine shall be imposed starting
as prescribed under Sec. X192 governing on the day following the receipt by the
the frequency and deadlines indicated in said department of the written report
Appendix 6 shall be automatically moved submitted by the Bangko Sentral officer/
to the next banking day whenever a examiner/ employee concerned regarding
halfday suspension of business operations the continued refusal of the bank to permit
in government offices is declared due to an the desired examination.
emergency such as typhoon, floods, etc. d. Manner of payment or collection
Delayed schedules/attachments and of fines. Subsec. X902.1 shall be observed
amendments shall be considered late
in the collection of fines from banks for
reporting subject to the above penalties.
willful delay in the submission of reports
(2) Manner of filing. For the purpose of
or for refusal to permit examination.
establishing delay or default, the submission
e. Other penalties. The imposition of the
of reports shall be effected by filing them
foregoing penalties shall be without
with the appropriate department of the SES
prejudice to imposition of the other
or with the Bangko Sentral Regional Offices,
administrative sanctions and to the filing of
or by sending them by registered mail or by
a criminal case as provided for in other
special delivery through a private courier,
provisions of law.
unless otherwise specified in the circular or
f. Appeal to the Monetary Board. An
memorandum of the Bangko Sentral.
In the first case, the date of aggrieved bank may appeal to the Monetary
acknowledgment by the appropriate Board any fine imposed by the Bangko
department of the SES or the Bangko Sentral Sentral.
(Circular No. 850 dated 8 September 2014, M-2014-039 dated
Regional Office appearing on the copies of 01 October 2014, M-2014-031 dated 08 August 2014,
such reports filed or submitted, and in the M-2014-006 dated 12 February 2014, M-2013-050 dated
second case, the date of mailing postmarked 15 November 2013, M-2013-046 dated 30 October 2013,
on the envelope or the date of the registry M-2013-045 dated 23 October 2013, M-2013-042 dated 25 September
receipt or the date of special delivery receipt, 2013, M-2013-040 dated 03 September 2013, M-2013-001 dated
14 January 2013, M-2012-060 dated 27 December 2012,
shall be considered as the date of filing. M-2012-051 dated 09 November 2012, M-2012-044 dated 24 August
c. Fines for refusal to permit 2012, M-2012-042 dated 17 August 2012, M–2012–001 dated

§§ X192.2 - X192.3
15.10.31
03 January 2012, M-2011-056 dated 10 November 2011, concerned officers for violations of Item “b”,
M-2011-055 dated 17 October 2011, M-2011-043 dated 12 August of this Subsection:
2011, M-2011-007 dated 04 February 2011, M-2010-39 dated 1. On the bank
03 November 2010, M-2010-007 dated 23 April 2010, (a) For willful delay to submit the
M-2009-040 dated 30 October 2009, M-2009-038 dated documents required under Item “b” of this
08 October 2009, M-2009-037 dated 15 October 2009, Subsection. A bank failing to submit the
M-2009-036 dated 07 October 2009 and Circular 585 dated required reports which shall be classified
15 October 2007) as a Category A-2 report, within the
prescribed deadline, shall be subject to
§ X192.3 (2008 - X162.3) Submission monetary penalties applicable for delayed
of certain required information. reporting under existing regulations.
a. Banks shall submit to the appropriate (b) For the willful making of a false/
department of the SES the following: misleading statement in the documents
(1) Information on bank’s profile required under Item “b” of this Subsection.
required in Appendix 7. Any change in any A bank which has been found to have
of the required information submitted, after willfully made a false or misleading
the initial submission, shall be reported to statement in the documents required under
the said department immediately. Item “b” of this Subsection shall be subject
(2) Any or all of the documents/ to the monetary penalties applicable to less
information on bank’s organization structure serious offenses under Appendix 67. The
and operational policies enumerated in
willful making of a false or misleading
Appendix 8. Any subsequent change/
statement shall be reckoned on a daily basis
issuance should be furnished the department
from the day following the due date of the
within fifteen (15) banking days from such
said certification until such time that an
change/issuance.
amended or corrected document has been
b. Banks registered with SEC to act as
submitted to the Bangko Sentral.
broker, dealer or transfer agent pursuant to
Sections 28 and 39 of R.A. No. 8799 and 2. On the concerned officer
SRC Rules 28.1 and 36.4 and those (a) For willful non-compliance. The
accredited by DOF-BTr as GSEDs pursuant concerned officer/s of the bank who
to DOF Department Order No. 20-10, shall willfully fail/refuse to comply with the
submit to the appropriate SES department provisions of Item “b” of this Subsection shall
not later than December 15 every year, the be subject to the monetary penalties
following reports: applicable to less serious offenses under
(1) List of bank personnel acting as Appendix 67.
salesmen or associated persons; (b) For false/misleading statements. The
(2) List of licenses granted by SEC and/ concerned officers which have been found
or DOF-BTr (as broker, dealer, broker- to have willfully falsely certified or willfully
dealer, GSED and/or transfer agent); and submitted misleading statements in the
(3) Notarized certification stating that certification and/or in the list of bank
the lists submitted pursuant to Items “b(1)” personnel required to be submitted under
& “b(2)” of this Subsection are complete and Items “b(1)” & “b(2)” of this Subsection, shall
accurate lists and that the personnel acting as be subject to the monetary penalties
salesmen or associated persons are duly applicable to less serious offenses under
licensed/authorized by the SEC to act as such. Appendix 67, which shall be reckoned on a
The notarized certification shall be daily basis from the day following the due date
signed by the president or officer of of the said certification/list until such time
equivalent rank. that an amended or corrected certification
c. Sanctions. The following sanctions and/or list of bank personnel have been
shall be imposed on the bank and/or its submitted to the Bangko Sentral.

§§ X192.3 - X192.4
15.10.31
The imposition of the above sanctions required under Item “a” of this Subsection.
is without prejudice to the filing of A bank which has been found to have willfully
appropriate criminal charges against the made a false or misleading statement in the
culpable persons as provided under documents required under Item “a” of this
Section 35 of R.A. No. 7653 for the wilful Subsection shall be subject to the monetary
making of a false/misleading statement. penalties applicable to less serious offenses
(As amended by Circular No. 866 dated 07 January 2015) under Appendix 67. The willful making of a
false or misleading statement shall be reckoned
§ 1192.3 Submission of certain required on a daily basis from the day following the
information by UBs. due date of the said certification until such
a. UBs registered with the SEC as time that an amended or corrected document
Underwriters pursuant to PD No. 129 (The has been submitted to the Bangko Sentral.
Investment Houses Law), R.A. No. 8791 2. On the concerned officer
(The General Banking Law), R.A. No. 8799 (a) For willful non-compliance. The
(The Securities Regulations Code) and the concerned officer/s of the bank who
Omnibus Rules and Regulations for willfully fail/refuse to comply with the
Investment Houses and UBs registered as provisions of this Subsection shall be
Underwriters of Securities shall submit to subject to the monetary penalties
the appropriate SES department not later than applicable to less serious offenses under
December 15 every year, the following Appendix 67.
reports: (b) For false/misleading statements. The
(1) List of bank personnel performing concerned officers which have been found
underwriting functions; and to have willfully falsely certified or willfully
(2) Notarized certification stating that the submitted misleading statements in the
list submitted pursuant to Item “a(1)” of this certification and/or in the list of bank
Subsection is a complete and accurate list and personnel required under Item “a” of this
that the personnel performing underwriting Subsection, shall be subject to the monetary
functions are duly licensed/authorized by the penalties applicable to less serious offenses
SEC to perform such functions. under Appendix 67, which shall be
The notarized certification shall be reckoned on a daily basis from the day
signed by the President or officer of following the due date of the said
equivalent rank. certification/list until such time that an
b. Sanctions. The following sanctions amended or corrected certification and/or
shall be imposed on the bank and/or its list of bank personnel have been submitted
concerned officers for violations of this to the Bangko Sentral.
Subsection: The imposition of the above sanctions
1. On the bank is without prejudice to the filing of
(a) For willful delay to submit the appropriate criminal charges against the
documents required under Item “a” of this culpable persons as provided under
Subsection. A bank failing to submit the Section 35 of R.A. No. 7653 for the willful
required reports which shall be classified making of a false/misleading statement.
as a Category A-2 report, within the (Circular No. 866 dated 07 January 2015)
prescribed deadline, shall be subject to
monetary penalties applicable for delayed § X192.4 (2008 - X162.4) Report on
reporting under existing regulations. crimes/losses. Banks shall report on the
(b) For the willful making of a false/ following matters to the appropriate
misleading statement in the documents department of the SES.

§ X192.4
08.12.31
a. Crimes whether consummated, (4) Falsification - a crime committed

frustrated or attempted against property/ by a person who falsifies a document by
facilities (such as robbery, theft, swindling (a) Counterfeiting or imitating any
or estafa, forgery and other deceits) and handwriting, signature or rubric;
other crimes involving loss/destruction of (b) Causing it to appear that persons
bank property when the amount involved, have participated in any act or proceeding
in each crime is P20,000 or more. when they did not in fact so participate;
Crimes involving bank personnel, (c) Attributing to persons who have
regardless of whether or not such crimes participated in an act or proceeding
involve the loss/destruction of bank statements other than those in fact made by
property, even if the amount involved is less them;
than P20,000, shall likewise be reported to (d) Making untruthful statements in a
the BSP. narration of facts;
b. Incidents involving material loss, (e) Altering true dates;
destruction or damage to the bank’s (f) Making any alteration or
property/facilities, other than arising from intercalation in a genuine document which
a crime, when the amount involved per changes its meaning;
incident is P100,000 or more. (g) Issuing in an authenticated form a
c. Definition of terms. For the purpose document purporting to be a copy of an
of this regulation, the following definitions original document when no such original
shall apply: exists, or including in such a copy a
(1) Estafa - a crime committed by a statement contrary to, or different from, that
person who defrauds another causing the of the genuine original; or
latter to suffer damage by means of any of (h) Intercalating any instrument or note
the following: relative to the issuance thereof in a protocol,
(a) unfaithfulness or abuse of confidence; registry, or official book and other acts
(b) false pretense; or falling under Articles 169, 171 and 172 of
(c) fraudulent acts/means, under the Revised Penal Code, as amended.
Articles 315 to 317 of the Revised Penal (5) Credit-card related crimes - crimes
Code, as amended. arising through the use of credit cards.
(2) Theft - a crime committed by a (6) Other crimes that may cause
person who, with intent to gain but without loss to the bank - crimes committed that
violence against or intimidation of persons cannot be appropriately classified under
nor force upon things, shall take personal any of the above classifications.
property of another without the latter’s (7) Negligence - the failure to
consent pursuant to Article 308 and other exercise the care which an ordinarily
pertinent provisions of Chapter III, Title X prudent person would use under the
of the Revised Penal Code, as amended. circumstances in the discharge of the duty
(3) Robbery - a crime committed by a then resting upon him (People v. Aguilar,
person who, with intent to gain, shall take 2899-R, 18 October 1949).
any personal property belonging to another, (8) Non-crime related loss - Incidents
by means of violence against or intimidation that may cause the bank to suffer a loss
of any person, or using force upon anything arising from fortuitous events.
pursuant to Article 295 and other pertinent (9) Insider - person involved include
provisions of Chapter 1, Title X of the Revised stockholders, directors, officers and
Penal Code, as amended. employees of the bank.

§ X192.4 - X192.5
11.12.31
(10) Outsider - persons involved other (1) The Branch or Head Office unit’s
than an insider. Report on Crimes and Losses shall be
(11) Perpetrator - a person, whether an submitted to the BSP through the bank’s
insider or outsider, who is responsible for head office unit and shall be certified
the commission of crime either by direct correct by the compliance officer. The
participation, inducement or cooperation, report shall be assigned a prescribed
including accomplices and accessories as reference number by the bank using the
defined under Articles 18 and 19 of the format mm-yyyy-xxx with mm and yyyy
Revised Penal Code, as amended. as numeric code for the month and year
(12) Victim - an insider or outsider other of reporting respectively and xxx as
than the perpetrator, who is the aggrieved sequence no. (e.g. 01-2007-001) which
party to the crime and may as a result of the shall be a continuing series until the end
incident, suffered the loss. of the year.
(13) Attempted crime - a crime is The report shall be prepared using the
attempted when the perpetrator commences new format in two (2) copies and shall be
the commission of the crime directly by submitted to the SDC and to the BSP
overt acts but does not perform all of the Security Coordinator, thru the Director,
acts of execution which constitute the crime Security, Investigation and Transport
by reason of some cause or act other than Department (SITD) within ten (10)
his own voluntary desistance under Article calendar days from knowledge of the
6 of the Revised Penal Code, as amended. crime/incident;
(14) Frustrated crime - a crime is (2) Where a thorough investigation and
classified as frustrated, when the perpetrator evaluation of facts is necessary to complete
performs all the acts of execution which the report, an initial report submitted within
should produce the crime as a consequence deadline may be accepted: Provided, That
but which, nevertheless, do not produce it a complete report is submitted not later than
by reason of causes independent of the will twenty (20) calendar days from termination
of the perpetrator under Article 6 of the of investigation.
Revised Penal Code, as amended. Moreover, final reports on crimes and
(15) Consummated crime - a crime is losses with incomplete information as
consummated when all the acts of execution required under SES Form 6G shall be
which constitute the crime was performed. considered erroneous reports and the
As a result, the bank may have suffered a concerned bank shall be required to submit
loss, the recoverable portion of which amended reports subject to penalties on late
should be deducted to arrive at the probable reporting for Category B reports under
loss incurred by the bank. Subsec. X192.2; and
(16) Termination of the investigation - an (3) Proof of submission of the report
investigation is said to be terminated when shall be determined by the date of postmark,
all the material facts/information which are if the report was sent by mail or by the date
sufficient to support a conclusion relative received, if handcarried to the SDC and
to the matters involved have already been SITD.
gathered and a finding/conclusion may be (As amended by Circular No. 587 dated 26 October 2007)
made based on the gathered information.
d. The following guidelines shall be § X192.5 (2008 - X162.5) Report on real
observed in the preparation and submission estate/chattel transactions.
of the report: (Deleted by Circular No. 737 dated 19 September 2011)

§§ X192.6 - X192.9
15.10.31
§ X192.6 (2008-X162.6) Reconciliation Offices: Provided, That the head office of

of head office and branch transactions. a bank may submit to the SDC in electronic
Banks shall prepare reconciliation form the batched copy of all its banking
statements covering transactions between units’ Quarterly Statement of Condition and
the head office and all its branches within Statement of Income and Expenses by
thirty (30) banking days after the end of Banking Unit in behalf of its branches and
each month. other offices;
The reconciliation statement shall be b. Where a particular report form calls
made available for inspection by Bangko for distribution of copies to other
Sentral examiners and submitted to the departments of the Bangko Sentral, the
Bangko Sentral upon request of the bank concerned shall furnish said
appropriate supervising department of the copies of the report directly to the
SES. respective departments of the Bangko
(As amended by Circular No. 870 dated 20 February 2015) Sentral; and
c. As an exception to Item “a” above,
§ X192.7 (2008 - X162.7) List of the duplicate copy of the bio-data for
stockholders and their stockholdings. directors/officers shall be submitted to the
a. Banks shall submit to the SDC of the Bangko Sentral.
appropriate department of the SES
annually a complete list of stockholders § X192.9 (2008 - X162.9) Publication/
and their stockholdings in the prescribed Posting of balance sheet.
form within the deadline indicated in a. UBs/KBs, TBs, RBs and Coop Banks
Appendix 6. with resources of P1.0 billion and above
b. Any change in the list shall also be (1) Banks belonging to this category
reported to the said department in such shall accomplish the prescribed form and
frequency and within the deadline publish their quarterly Balance Sheet (BS)
indicated in Appendix 6, indicating the as of the cut-off date indicated in the call
name(s) and/or stockholdings involved letter issued by the SES.
which is/are to be cancelled or replaced, The Consolidated Balance Sheet (CBS)
and the new name(s) and/or of a bank and its subsidiaries and affiliates
stockholdings which shall be included shall be published side by side with the BS
for that quarter. In case no change of its head office and its branches/other
occurred during a particular quarter, the offices.
report shall provide a notation, viz “no (2) The CBS of the bank and its
change(s) since last report submitted for subsidiaries and affiliates shall be
quarter ended, , 20 ”. prepared in accordance with the rules of
consolidation provided under the
§ X192.8 (2008 - X162.8) Bangko Financial Reporting Package (FRP), in
Sentral offices, where reports are which case, only financial allied
submitted. Submission of Bangko Sentral subsidiaries, except subsidiary insurance
periodic or call reports shall be as follows: companies, shall be consolidated on a
a. All banking offices shall submit line-by-line basis, while non-financial
the required reports in accordance with allied subsidiaries including subsidiary
Appendix 6 to the Bangko Sentral, Manila insurance companies shall be accounted
or to the nearest Bangko Sentral Regional for using the equity method.

§ X192.9
13.12.31
(3) Such BS, and CBS where applicable, market, barangay hall and barangay public
shall be published in a newspaper of general market where the head office and all its
circulation in the city/province where the branches are located. The posting shall be
principal office, in the case of a domestic printed on 12”x18” white paper,
bank, or the principal branch/office, in the preferably white buff paper (cartolina) and
case of a foreign bank, is located, but if no shall be made within twenty (20) banking
newspaper is published in the same days from the end of the reference quarter
province, then in a newspaper published and for a period of thirty (30) successive
in Metro Manila or in the nearest city/ calendar days.
province. (2) (a) A TB, RB and Coop Bank that
(4) The names and position/ shall publish/post its quarterly BS shall
designation of the members of the board submit a soft copy of the same to the SDC
of directors, president and executive vice within twenty (20) banking days after the end
presidents (senior vice presidents, if there of the reference quarter.
are no executive vice presidents), shall be (b) Banks that are incapable of
published and shown in the right side submitting the BS in electronic form shall
column of the published BS as of June of submit the same in hard copy to the SDC
every year. within the said deadline.
(5) (a) Before publication, a soft copy (c) I n e i t h e r c a s e , a n a f f i d a v i t
of the BS shall be submitted to the SDC executed by the president, or in his
within twelve (12) banking days from the absence, the vice-president or manager,
date of the call letter. as the case may be, shall likewise be
Further, a hard copy of the control proof submitted to the SDC within the said
list for the said report shall likewise be deadline.
submitted to the SDC within the said c. Additional information required
deadline. Banks shall disclose the following
(b) B a n k s t h a t a r e i n c a p a b l e o f information in the quarterly published/
submitting the BS in electronic form posted BS:
shall submit the same in hard copy to (1) Solo BS (Head Office and Branches/
the SDC within the said deadline. Other Offices)
(c) The published BS with the (a) Gross total loan portfolio (TLP);
publisher’s certificate shall be submitted (b) Specific allowance for credit losses
within twenty (20) banking days after the on the TLP ;
date of said call letter to the SDC. (c) Non-performing loans (NPLs):
b. TBs/RBs/Coop Banks with (i) Gross NPLs;
resources of less than P1 billion (ii) Ratio of gross NPLs to gross TLP (%);
(1) A TB, RB and Coop Bank (iii) Net NPLs;
belonging to this category shall either (iv) Ratio of net NPLs to gross TLP (%);
publish its quarterly BS as of the cut-off (d) Classified loans and other risk assets,
date indicated in the call letter issued by gross of allowance for credit losses;
the SES of the Bangko Sentral, in a (e) DOSRI loans and receivables, gross
newspaper of general circulation as in of allowance for credit losses ;
Item “a(3)” above or post the same in the (f) Ratio of DOSRI loans and receivables,
most conspicuous area of its premises, in gross of allowance for credit losses, to gross
the municipal building, municipal public TLP (%);

§§ X192.9 - X192.11
13.12.31
(g) Gross non-performing DOSRI loans NIAT accounts (December -

multiplied by September) divided by10.
and receivables; 1.33333.
(h) Ratio of gross non-performing DOSRI Dec. Year end Sum of end-month capital
loans and receivables to gross TLP (%); NIAT accounts (December -
December) divided by 13.
(i) Percent compliance with Magna Carta d. Deferment of publication
• 8% for micro and small enterprises; requirement.
• 2% for medium enterprises; The abovementioned publication
(j) Return on equity (ROE) (%); requirement may be deferred by the
(k) CAR on solo basis, as prescribed un- Monetary Board by at least five (5)
der existing regulations: affirmative votes upon application by the
(i) Total CAR bank concerned during periods of national
(ii) Tier 1 CAR and/or local emergency or of imminent
(iii) CET 1 CAR panic which directly threaten monetary
(l) Deferred charges not yet written and banking stability.
down; and The amended prescribed form for the
(m) Unbooked allowance for credit published BS shall be used starting with the
losses on financial instruments received. quarter-end March 2013 reports.
(2) Consolidated Balance Sheet (parent (As amended by Circular Nos. 788 dated 26 February 2013, 781
bank and financial allied subsidiaries dated 15 January 2013 and 576 dated 08 August 2007)
excluding subsidiary insurance companies)
(a) List of financial allied subsidiaries § X192.10 (2008-X162.10) Consolidated
(excluding subsidiary insurance companies) financial statements of banks and their
(b) List of subsidiary insurance subsidiaries engaged in financial allied
companies undertakings. Banks shall submit after the
(c) CAR on consolidated basis, as end of the calendar year or the end of the
prescribed under existing regulations: fiscal year adopted by the bank their
(i) Total CAR consolidated financial statements and
(ii) Tier 1 CAR supported by the individual annual
(iii) CET 1 CAR financial statements of their subsidiaries
For purposes of additional information, engaged in financial allied undertakings.
all amounts and ratios shall be as of the same For purposes of this Subsection, the
call date. However, the basis for computing consolidated financial statements shall
the ROE shall be the latest quarter conform to the guidelines of PAS 27
immediately preceding the call date using
“Consolidated and Separate Financial
the following formula:
Statements” except that for purposes of
Return on Average Equity (%) = consolidated financial statements, the
Net Income (or Loss) after Income Tax x 100 provisions of Subsec. X191.3a shall
Average Total Capital Accounts
apply.
Where net income/(loss) after tax and The consolidated financial statements
average total capital accounts shall be: and the supporting individual financial
statements of their subsidiaries shall be
Net Income submitted to the appropriate department of
After Tax Average Total Capital
Quarter (loss) (NIAT) Accounts the SES within the deadline indicated in
March Quarter end Sum of end-month capital Appendix 6.
NIAT accounts (December -
multiplied by 4. March) divided by 4.
June Semester end Sum of end-month capital § X192.11 (2008 - X162.11) Reports
NIAT accounts (December - of other banking offices. Extension offices
multiplied by 2. June) divided by 7.
Sept. Nine (9) mos. Sum of end-month capital
of banks which maintain separate books of

§§ X192.11 - X192.12
08.12.31
accounts shall be subject to all reporting foreign affiliate concerned shall be

requirements of a regular branch. requested to submit to the appropriate
An extension office whose record of department of the SES, through its domestic
transactions/accounts is consolidated daily investor-bank, copies of its quarter/interim
with its mother unit shall submit only the reports to stockholders or the call reports in
Selected Financial Accounts form as listed the case of U.S. banks;
in Appendix 6. d. Audited financial statements (AFS)
Convenience Banking Centers (CBCs) of the foreign banking offices and
are not required by Bangko Sentral to submit subsidiaries; and
Statement of Condition (SOC) and e. Examination reports done by the
Statement of Income and Expenses (SIE). A foreign bank supervisory authority.
CBC is not considered as a branch but as The submission of the documents in
an extension office of a bank without Items “d” and “e” to Bangko Sentral shall
separate books of accounts which directly not be later than thirty (30) banking days
reports its transactions to its mother branch. from date of submission/release of said
reports to the foreign banking offices and
§ X192.12 (2008 - X162.12) Reports subsidiaries of Philippine banks. Material
required of foreign subsidiaries/affiliates/ findings, if any, contained in said reports
banking offices or non-bank entities of should be highlighted.
domestic banks. The submission of f. For purposes of this Subsection,
periodic reports of a foreign subsidiary/ affiliate shall refer to an entity linked directly
affiliate/banking offices or non-bank or indirectly to a bank by means of:
entities of domestic banks shall be (1) Ownership, control or power to
governed by the following rules: vote, of ten percent (10%) or more of the
a. For foreign subsidiaries/affiliates of outstanding voting stock of the entity,
domestic banks, the local investor-bank(s) or vice-versa;
concerned shall regularly submit to the (2) Interlocking directorship or
appropriate department of the SES a officership, except in cases involving
quarterly statement of condition and independent directors as defined under
quarterly/annual report of income and existing regulations;
expenses concerning the operations of the (3) Common stockholders owning ten
foreign subsidiaries/affiliates, including percent (10%) or more of the outstanding
such other periodic reports which may be voting stock of each financial intermediary
required from time to time in the forms and the entity;
prescribed by the Bangko Sentral for (4) Management contract or any
domestic financial intermediaries to the arrangement granting power to the bank
extent that their operations are applicable; to direct or cause the direction of
b. For foreign subsidiaries/affiliates of management and policies of the entity, or
domestic banks, the appropriate department vice-versa; and
of the SES shall be furnished by said (5) Permanent proxy or voting trusts in
domestic banks copies of the annual report favor of the bank constituting ten percent
prescribed by any of the supervisory/ (10%) or more of the outstanding voting
regulatory authorities in the country of stock of the entity, or vice-versa.
operations; For purposes of this Manual, the above
c. When material changes noted in the definition of affiliate shall be adopted except
annual financial statements warrant an where the provision of the regulation
interim comprehensive evaluation, the expressly states otherwise.

§§ X192.13 - X192.16
14.12.31
§ X192.13 Report on cross-border to each day of the week. Delayed

financial positions. The Report on Cross- submission of the notarized certification
Border Financial Positions is designed to shall be subject to monetary penalty, as
measure and monitor the cross-border follows:
financial claims and liabilities of UBs and Daily Penalty
KBs and their subsidiary TBs to provide the 1st banking day of P6,000.00 (equivalent
Bangko Sentral with a comprehensive view delay P1,200.00 per day for
of potential financial risks and transmission five (5) report dates covered
channels emanating from foreign by the certification on the
assumption that the five (5)
counterparties of Philippines banks.
weekdays of the reference
All UBs/KBs and their subsidiary TBs week are all banking days)
shall submit the Report on Cross-Border 2nd banking day of P1,200.00/day
Financial Positions on a solo basis in delay and onwards
accordance with the Guidelines on the
completion of the Report in Appendix 106. § 2192.13 (Reserved)
This report shall be considered
Category B report. § 3192.13 (Reserved)
(Circular No. 850 dated 08 September 2014)
§ X192.14 (2008 - X162.14) Reports
§ 1192.13 (2008 - §1162.13) Additional of strikes and lockouts. Banks through
reports from UBs/KBs their president or chief executive officer
a. Volume and weighted average shall immediately apprise the Deputy
interest rates of deposits and loans. Data on Governor of the SES of the Bangko Sentral
the volume of transactions and weighted on the status of strikes/lockouts involving
average interest rates of certificates of time their banks, if unsettled after seven (7)
deposits and secured/unsecured loans granted, calendar days. The bank shall disclose the
classified by maturity, and outstanding savings following pertinent information on the
deposits classified by interest rates, shall be strike/lockout:
prepared daily (except data on savings deposits a. Cause of the strike/lockout and
which shall be prepared weekly) and bank management’s position on its
submitted weekly by all head offices of UBs/ legality; and
KBs to the Department of Economic Research b. Bank operations affected.
of the Bangko Sentral not later than 4:00 PM
on Thursday after end of reference week. § X192.15 (2008 - X162.15) Report on
b. Short-term prime rates. All UBs and the Sworn Statement on Real Estate/
KBs shall submit in the prescribed form a Chattel Transactions.
report on the volume and interest rates on (Deleted by Circular No. 737 dated 19 September 2011)
credit line availments under short-term
prime rates in such frequency and within § X192.16 Notarized contracts/
the deadline indicated in Appendix 6. agreements between banks and
c. (Deleted by Cir. No. 405 dated their related microfinance (MF)
28 August 2003). non-governmental organizations
d. Foreign Exchange Position Report (NGO’s)/foundations. Business relationships
Banks may be allowed to submit on a weekly between banks and their related MF NGO’s/
basis the notarized certification signed by the foundations shall be covered by notarized
bank’s president/CEO/country manager and contracts/agreements specifying the nature of
the treasurer to cover the daily hard copies of transactions and enumerating the terms and
Schedule 13, FX Form I and CFXPR pertaining conditions thereof.

§§ X192.16 - X196.2
11.12.31
Banks shall submit said notarized financial condition.

contracts/agreements within fifteen (15) The framework for the enforcement of
banking days from the date of meeting of PCA on banks and other FIs under BSP
the board of directors approving said supervision is in Appendix 69.
contracts/agreements. (Circular No. 523 dated 23 March 2006, as amended by Circular
Said notarized contracts/agreements Nos. 729 dated 08 July 2011, 664 dated 15 September 2009)
shall be considered Category A-3 reports.
Submission of said reports shall become Secs. X194 - X195 (Reserved)
effective starting with the reporting period
ended 30 September 2011. P. LIQUIDATION AND RECEIVERSHIP
(Circular No. 725 dated 16 June 2011)
Sec. X196 Voluntary Liquidation
O. PROMPT CORRECTIVE ACTION The following guidelines shall be observed
FRAMEWORK when a bank decides to undertake
voluntary liquidation as a consequence of
Sec. X193 (2008 - X106.4) Prompt voluntary dissolution, such as (i) by vote
Corrective Action Framework. A bank may of the board of directors and stockholders,
be subject to PCA whenever any or all of where no creditors are affected;
the following conditions obtain: (ii) judgment of the SEC after hearing the
(1) When either of the Total Risk-Based petition for voluntary dissolution;
CAR, Tier 1 risk-based ratio, or leverage (iii) amending the articles of incorporation
ratio (total capital/total assets) falls below to shorten the corporate term.
ten percent (10%), six percent (6%) and five
percent (5%), respectively, or such other § X196.1 Prior Monetary Board
minimum levels that may be prescribed for approval. Upon voluntary dissolution of
the said ratios under relevant regulations, a bank pursuant to the provisions of the
and/or the combined capital account falls Corporation Code, voluntary liquidation
below the minimum capital requirement may be undertaken by the bank itself
prescribed under Subsec. X111.1; through its board of directors, by a trustee
(2) CAMELS composite rating is less appointed by the bank, or by a receiver
than three “3” or a Management component appointed to the bank: Provided,
rating of less than three “3”; and however, That no voluntary dissolution
(3) A serious supervisory concern has shall be undertaken by a bank without
been identified that places a bank at prior approval of the Monetary Board:
more-than-normal risk of failure in the Provided, further, That requests for
opinion of the Director of the examination approval of a voluntary dissolution shall
department concerned, which opinion is be accompanied by a liquidation plan
confirmed by the Monetary Board. Such which lays down the procedure to be
concerns could include, but are not limited, adopted by the bank in the event of
to any one (1) or a combination of the liquidation: Provided, finally, That written
following; notice shall be sent to the Monetary Board
(a) Finding of unsafe and unsound before actual liquidation is undertaken in
activities that could adversely affect the accordance with the liquidation plan
interest of depositors and/or creditors; previously approved by the Monetary
(b) A finding of repeat violations of Board.
law or continuing failure to comply with
Monetary Board directives; and § X196.2 Liquidation plan
(c) Significant reporting errors that The minimum requirements to be set forth
materially misrepresent the bank’s in a liquidation plan are the following:

§§ X196.2 - X198.2
08.12.31
a. Inventory/Appraisal of assets and § X196.8 Final liquidation report. The

liabilities. Submission to the Monetary board of directors/trustee/receiver shall
Board within thirty (30) days from written submit to the Monetary Board a final
notice of liquidation, a schedule/inventory liquidation report after winding up the
and status/appraisal reports on assets and affairs of the bank.
liabilities of the bank.
b. Notice to creditors requirement. Sec. X197 (Reserved)
Notice by registered mail to all recorded
claimants of the bank, and notice by Sec. X198 Insolvency or Receivership
publication in a newspaper of general of Banks. The rules and regulations
circulation at least once a week for two (2) governing insolvency and receivership
consecutive weeks, to be made within are as follows:
thirty (30) days from submission of
aforesaid inventory of assets and liabilities. § X198.1 Definition of term. A “bank
c. Conversion of assets into money. declared insolvent or placed under
Projected timetable in the conversion, receivership by the Monetary Board”
manner of sale (public auction, sealed shall refer to a banking institution that has
bidding, or on negotiated basis), notice by been forbidden from doing business in
publication requirement, and report on the Philippines by the Monetary Board
liquidation to be submitted to the Monetary under the applicable grounds provided
Board. for under Section 30 of R.A. No. 7653
d. Final notice to claimants/creditors. and placed under receivership of the
Undertaking of the board of directors/ PDIC.
trustee/receiver to cause, within thirty (30)
days from conversion into money of all or § X198.2 Prohibited acts. Any director
substantially all of the assets of the bank, or officer of a bank declared insolvent
the publication in a newspaper of general or placed under receivership by the
circulation at least once a week for two (2) Monetary Board shall not commit any of
consecutive weeks of a notice giving the following acts:
claimants/creditors fifteen (15) days within a. refusing to turn over the bank’s
which to file their claims. records and assets to the designated
e. Inventory of remaining claims receivers;
against the bank. Submission to the b. tampering with bank records;
Monetary Board of a complete list of all c. appropriating for himself or
remaining claims against the bank, within another party, or destroying or causing
thirty (30) days from the deadline given in misappropriation and destruction of the
the final notice to claimants/creditors. bank’s assets;
f. Plan for distribution of proceeds d. receiving or permitting or causing
of sales and distribution of liquidating to be received in said bank any deposit,
dividends. Submission to the Monetary collection of loans and/or receivables;
Board of a distribution plan of assets e. paying out or permitting or
within thirty (30) days from conversion causing to be paid out any funds of said
of all or substantially all of the assets of bank; and
the bank. f. transferring or permitting or
causing to be transferred any securities or
§§ X196.3 - X196.7 (Reserved) property of said bank.

§§ X198.3 - X199
08.12.31
§§ X198.3 - X198.8 (Reserved) Q. GENERAL PROVISION ON

SANCTIONS
§ X198.9 Penalties and sanctions. Any
director or officer of a bank declared Sec. X199 General Provision on
insolvent or placed under receivership by Sanctions. Except as otherwise provided,
the Monetary Board who commits any of any violation of the provisions of this Part
the foregoing acts shall be subject to the shall be subject to Sections 36 and 37 of
sanctions under Sections 36 and 37 of R.A. R.A. No. 7653.
No. 7653, in correlation with Section 66 of The guidelines for the imposition of
R.A. No. 8791. Moreover, any such director monetary penalty for violations/offenses
or officer thereby sanctioned shall be with sanctions falling under Section 37
included in the watchlist files of directors/ of R.A. No. 7653 on banks, their
officers disqualified by the Monetary Board directors and/or officers are shown in
from holding any position in any bank or FI. Appendix 67.

§§ X201 - X201.3
10.12.31
PART TWO
DEPOSIT AND BORROWING OPERATIONS
A. DEMAND DEPOSITS deposits has been approved, it may actually

accept such deposits, subject to the
Section X201 Authority to Accept or following conditions:
Create Demand Deposits. Banks may a. Submission of a certification signed
accept or create demand deposits subject by the President/Chairman of the Board of
to withdrawal by check. the bank stating that the requirements
A UB/KB may accept or create demand enumerated under Subsec. X201.1 have
deposits subject to withdrawal by check, been complied with up to the day before
without prior authority from the Bangko the checking account services are actually
Sentral. offered/extended to the public;
A TB/RB/Coop Bank may accept or b. That if it is not a member of the
create demand deposits upon prior authority Philippine Clearing House Corporation
of the Bangko Sentral. (PCHC), it has appointed a commercial
bank, or a normally operating thrift bank
§ X201.1 Prerequisites to accept or which is a direct participant in the clearing
create demand deposits for thrift banks/ with the PCHC/Bangko Sentral and has
rural banks/cooperative banks. In addition complied with the minimum capital required
to the Standard Pre-qualification for commercial banks, thru which it shall
Requirements for the Grant of Banking participate in the check clearing system;
Authorities enumerated in Appendix 5, a and
TB/RB/Coop Bank applying for authority to c. That it has complied with all other
accept or create demand deposits shall also conditions that the Bangko Sentral may
comply with the following requirements: impose.
a. The applicant TB/RB/Coop Bank The applicant bank shall submit a written
must have complied with the minimum notice to the appropriate supervising and
capital required under Subsec. X111.1. examining department of the Bangko Sentral
The terms capital and net assets shall of the actual date when the demand deposit
have the same meaning as in Sec. X111. service is offered to the public not later than
b. It has neither unpaid assessment due ten (10) banking days from such offering of
nor past due obligations with the PDIC; and the service.
c. The applicant bank must have been
examined by the Bangko Sentral within one § X201.3 Sanctions. If any part of the
(1) year prior to the date of submission of certification submitted by the bank as
complete documentary requirements with required in these guidelines is found to be
the appropriate department of the SES. false, the following sanctions shall be
(As amended by Circular Nos. 696 dated 29 October 2010, imposed, without prejudice to the sanctions
674 dated 10 December 2009 and 667 dated 01 October 2009) under Section 35 of R.A. No. 7653.
a. On the bank
§ X201.2 Requirements for accepting Suspension of its authority to accept or
demand deposits. After a TB’s/RB’s/Coop create demand deposits for one (1) year.
Bank’s application to accept demand b. On the certifying officer
Manual of Regulations for Banks Part II - Page 1

§§ X201.3 - X203
10.12.31
A fine of P5,000 per day from the time of funds shall be returned not later than 7:30
the certification was made up to the time a.m. on the clearing day immediately
the certification was found to be false. following the original date of presentation
of the COCI to PCHC or RCC.1
Sec. X202 Temporary Overdrawings; Peso DDAs maintained by foreign
Drawings Against Uncollected Deposits correspondent banks with UBs/KBs shall not
The following regulations shall govern be subject to the above-mentioned
temporary overdrawings and drawings regulations: Provided, That:
against uncollected deposits (DAUDs). (a) The maintenance of non-resident
a. Temporary overdrawings. correspondent bank’s peso DDAs and
Temporary overdrawings against demand overdrawings therefrom are covered by
deposit account (DDA) shall not be reciprocal arrangement;
allowed, unless caused by normal bank (b) Temporary overdrawings are
charges and other fees incidental to covered within fifteen (15) banking days
handling such accounts. from the date overdrawings are incurred;
Banks which violate these regulations and
shall be subject to a fine of one-tenth of one (c) Such accounts are credited only
percent (1/10 of 1%) per day of violation, through foreign exchange inward
computed on the basis of the amount of remittance.
overdrawing or fines in amounts as may be b. DAUDs. DAUDs shall be
determined by the Monetary Board, but not prohibited except when the drawings are
to exceed P30,000 a day for each violation. made against uncollected deposits
Technical overdrawings arising from representing manager’s/cashier’s/treasurer’s
“force posting” in-clearing checks shall be checks, treasury warrants, postal money
debited by banks under “Returned Checks orders and duly funded “on us” checks
and Other Cash Items (RCOCI)” which is which may be permitted at the discretion
part of “Other Assets” in the Balance Sheet. of each bank.
Items to be lodged under this account shall (As amended by Circular Nos. 705 dated 29 December 2010
consist only of in-clearing checks which and 681 dated 08 February 2010)
may result in “technical overdrawn”
Sec. X203 Returned Checks
accounts and shall be immediately reversed
a. Checks without sufficient funds/
the following day, value dated on date of
with stop payment orders. To complement
original presentation of Checks and Other
the provisions of Batas Pambansa Blg. 22,
Cash Item (COCI) to PCHC for Integrated
(An Act Penalizing the Making or Drawing
Greater Manila local exchanges (Integrated
and Issuance of a Check Without Sufficient
GM LX) or to Regional Clearing Center
Funds or Credit), the following regulations
(RCC) for regional local exchanges (RLX). 1
shall govern checks drawn against
The checks lodged under “RCOCI”
insufficient funds and checks drawn against
which were dishonored due to insufficiency
closed accounts:
______________________
1
The revised clearing and settlement process shall become effective as follows:
Clearing Exchanges From To

1.Integrated Greater Manila Local Exchanges (Integrated GM LX) 01 January 2011 24 January 2011
2.Regional Local Exchanges (RLX) 01 January 2011 01 July 2011
Provided, That for RLX, the extended deferral from 24 January 2011 to 01 July 2011 shall refer only to the provision on
the mandatory return of checks drawn against insufficient funds or credit, checks drawn against closed accounts and/or
checks with stop payment orders, (i.e., not later than 7:30 AM of the next clearing day following the original presentation
to PCHC or RCC), subject to the condition that checks returned due to insufficiency of funds or credit shall no longer be
allowed to be covered or funded after the day they were presented to PCHC or RCC.
Part II - Page 2 Manual of Regulations for Banks

§ X203
10.12.31
1. The drawee bank shall affix to the original date of presentation of the COCI to
check a return stamp, indicating therein the PCHC or RCC. 1
date when the check is returned and the (1) For Local Exchanges
reason for the refusal to pay the same to the There shall only be one (1) clearing
holder thereof. windows for COCIs returned due to
2. For checks which shall be insufficient funds or credit, closed account
dishonored or returned by reason of and/or stop payment order in the Integrated
insufficiency of funds or credit, the drawee GM LX and RLX.1
bank shall indicate the remark or notation The settlement of interbank transactions
“Drawn Against Insufficient Funds”, “No vis-à-vis covering reserve requirement/
Funds” or “Insufficient Funds” on the return deficiency of banks’ DDA is shown in
stamp. For checks which shall be Appendix 39.
dishonored or returned for the reason that The AM returned COCI clearing
such is drawn against a closed account, the window for COCIs dishonored due to
drawee bank shall indicate the remark or insufficiency of funds or credit, closed
notation “Account Closed”. account and/or stop payment order in the
3. Notwithstanding receipt of an order Integrated GM LX and in the RLX shall be
to stop payment, the drawee bank shall conducted from 2:00 AM to 7:30 AM on
likewise indicate in the return stamp, the the clearing 1 day immediately following the
remarks or notations mentioned in Item “2” original date of presentation of the COCI to
hereof indicating that there were no PCHC or RCC.
sufficient funds in or credit with such bank Returned COCI in the AM clearing
for the payment in full of such check or the windows shall be given value on the same
account is closed, if such be the fact. The date as the date of original presentation of
bank shall also indicate receipt of a stop the COCI to PCHC or RCC. The amount of
payment order. debits and credits on the date of original
For checks which shall be dishonored presentation shall be reversed to the extent
for the reason that payment has been of the amount of credits and debits arising
stopped, the following shall be observed: from the returned COCI. The process
(a) The drawee bank shall affix to the restores the balances of the demand deposits
check a return stamp indicating therein the of banks with the Bangko Sentral to their
date when the check is returned and the position prior to the settlement of the
reason for the refusal to pay the same to the clearing results affected by the COCI later
holder thereof. returned due to insufficient funds or credit,
(b) The drawee bank shall indicate the closed account and/or stop payment order.
remark or notation “Payment Stopped” or (2) For Integrated GM Outward to
“With Stop Payment Order” on the return Region, Integrated GM Inward From Region
stamp. and Region to Region Clearing Operations
A COCI dishonored for the reason that A COCI dishonored by reason of
such is drawn against insufficient funds or insufficiency of funds or credit, drawn
credit, or is drawn against a closed account, against a closed account and/or stop
or payment thereof has been stopped shall payment order shall continue to be covered
be returned by the drawee bank to the by regulations issued by Bangko Sentral and
negotiating bank not later than 7:30 AM on relevant PCHC Clearing House Rules and
the clearing day immediately following the Regulations.1
1
See schedule of revised clearing and settlement process shown as footnote of Section X202

§§ X203 - X204
10.12.31
(3) COCI not coursed through the presentation shall be reversed to the extent
Clearing System of the amount of credits and debits arising
A COCI dishonored by reason of from the returned COCI. The process
insufficiency of funds or credit, drawn restores the balances of the demand deposits
against a closed account and/or stop of banks with the Bangko Sentral to their
payment order which was not coursed position prior to the settlement of the
through the clearing system shall be clearing results affected by the COCI later
returned by the drawee bank to the holder returned due to technical reasons.
or the negotiating bank, as the case may be, (b) PM Returned COCI Clearing – The
not later than the banking day following the PM returned COCI clearing window for
date the COCI is presented for payment with COCIs dishonored due to technical reasons
the drawee bank. shall coincide with the afternoon regular
The negotiating bank shall, in turn, clearing. Such returned COCI shall be given
return a COCI dishonored by reason of value on the date the returned COCI was
insufficiency of funds or credit, drawn presented to PCHC for the Integrated GM
against a closed account and/or stop LX or to RCC for the RLX.
payment order to the holder not later than (2) For Integrated GM Outward to
the banking day following its receipt of the Region, Integrated GM Inward from Region
dishonored COCI from the drawee bank. and Region to Region Clearing Operations
b. Checks dishonored due to technical A COCI dishonored due to technical
reasons. A COCI dishonored due to reasons continues to be covered by circulars
technical reasons shall be returned by the issued by Bangko Sentral and relevant
drawee bank to the negotiating bank not later PCHC Clearing House Rules and
than the afternoon regular clearing. Regulations1.
(1) For Local Exchanges (3) COCI not Coursed Through the
There shall be two (2) separate clearing Clearing System
windows for COCIs returned due to A COCI dishonored due to technical
technical reasons in the Integrated GM LX reasons which was not coursed through the
and RLX. clearing system shall be returned by the
The settlement of interbank transactions drawee bank to the holder or the negotiating
vis-àvis covering reserve requirement/ bank, as the case may be, not later than the
deficiency of banks’ DDA is shown in banking day following the date the COCI is
Appendix 39. presented for payment with the drawee
(a) AM Returned COCI Clearing – The bank.
AM returned COCI clearing window for The negotiating bank shall, in turn,
COCIs dishonored due to technical reasons return a COCI dishonored due to technical
in the Integrated GM LX and in the RLX shall reasons to the holder not later than the
be conducted from 2:00 AM to 7:30 AM banking day following its receipt of the
on the clearing day immediately following dishonored COCI from the drawee bank.
the original date of presentation of the COCI (As amended by Circular Nos. 705 dated 29 December 2010
to PCHC or RCC. 1 and 681 dated 08 February 2010)
Returned COCI in the AM clearing
window shall be given value on the same Sec. X204 Current Accounts of Bank
date as the date of original presentation of Officers and Employees. As a general rule,
the COCI to PCHC or RCC. The amount of officers and employees of banks, their
debits and credits on the date of original spouses and relatives within the second
1

§§ X204 - X205
10.12.31
degree of consanguinity and affinity, shall be monitored by a designated officer

including partnerships, associations or who shall be responsible for ensuring that
corporations in which such officers and accounts of officers and staff are properly
employees, their spouses and relatives maintained. Any irregularity in the account
within the second degree of consanguinity activity shall be promptly investigated and
and affinity, individually or as a group, own reported to the appropriate management
or control at least a majority of the capital level;
are prohibited from maintaining demand (3) Access controls. Access to all data,
deposits or current accounts with the application software, operating systems and
banking office in which they are assigned. utilities must be restricted to authorized
However, officers and employees without persons through appropriate identification
direct access and involvement in the mechanisms and access codes and such
handling of transactions and/or records authentication and authorization controls
pertaining to demand deposit operations must be fully documented and auditable. No
may be allowed to maintain demand officer or employee, regardless of rank or
deposits or current accounts in the banking position, shall be allowed to process any
office where they are assigned subject to transaction from initiation to final
the following conditions: authorization;
a. It shall be the responsibility of the (4) Data capture. Operating procedures
bank concerned to identify the officers, for data capture, update and retrieval must
employees, departments or units with direct be strictly adhered to. The operating system
involvement in its demand deposit shall maintain a permanent record of each
operations and/or deposit records; authenticated user session including every
b. The opening of current accounts of user input; and
officers and employees shall be subject to (5) Audit trails. Detailed records and
approval of the head of the branches audit trails shall be maintained to
department or any designated higher ranking substantiate the processing of all
officer; and transactions. Audit trails must be reviewed
c. The following minimum operating periodically by a designated officer
control measures shall be implemented to commensurate with the risk level of the
ensure systems integrity and mitigate information system. The review process
technology-related risks: must ensure that the reviewer does not
(1) Tagging of accounts. Savings and review his/her own activity.
demand deposits of officers and employees, (As amended by Circular No. 508 dated 24 January 2006)
their spouses and relatives within the
second degree of consanguinity and affinity, Sec. X205 (2008 - X603) Check Clearing
including partnerships, associations or Rules for Banks Authorized to Accept
corporations in which such officers and Demand Deposits. 1 The following are the
employees, their spouses and relatives check clearing rules for banks authorized
within the second degree of consanguinity to accept demand deposits:
and affinity, individually or as a group, own a. Banks authorized to accept
or control at least a majority of the capital demand deposits may participate in the
shall be tagged in the bank’s current clearing process conducted by the PCHC,
accounts/savings accounts (CA/SA) system; subject to the latter’s accreditation rules,
(2) Monitoring of accounts. All accounts either through (i) direct participation in
maintained by officers, employees and said clearing operations; or (ii) indirect
relatives including their business interests participation through conduit
1

§ X205
10.12.31
arrangements with UBs/KBs. Other banks month, two (2) months prior to the date of
may indirectly participate through application with the DLC; otherwise, its
maintenance of DDAs with UBs/KBs as outward clearing items shall be subject to
settlement account for demand deposit or second day value dating.
NOW accounts of TBs/RBs. Other banks may also apply for
b. Banks authorized to participate collateralized OCL in any amount.
directly in the clearing in PCHC shall be (3) Provided the overdraft does not
subject to the following measures to manage exceed the ceiling as defined in Item “2”
the settlement risks: hereof, the bank may avail of the clean/
(1) Settlement of both inward and collateralized OCL. The availments against
outward items shall be value dated on the the approved clean/collateralized OCL shall
day the checks are originally presented to bear interest at a rate equivalent to one-tenth
PCHC or RCC, net of AM returns. For this of one percent (1/10 of 1%) per day or the
purpose, the value date or settlement date ninety-one (91)-day T-Bill rate of the last
referred to herein shall be defined uniformly auction immediately preceding the
as the date of original presentation of the availment, plus three percentage (3%)
COCI to PCHC for the Integrated GM LX points, whichever is higher.
and to the RCC for the RLX. For the (4) The availment shall be for a
Integrated GM Outward to Region, maximum period of five (5) consecutive
Integrated GM Inward from Region and clearing days or five (5) clearing days within
Region to Region clearing, the value date or any thirty (30)-day rolling calendar period,
settlement date shall be on the day the after which the OCL shall be suspended.
COCIs are received and processed at (5) Should the overdraft exceed the
PCHC. ceiling, as defined in Item “2” hereof, no
(2) A ceiling shall be set on the amount availment of the clean/collateralized OCL
of overdraft a bank may incur due to failure shall be allowed.
to cover clearing losses through interbank (i) In the case of end-of-day overdraft,
borrowings and/or repurchase agreements the Payments and Settlements Office (PSO)
with the Bangko Sentral. The ceiling is shall advise the PCHC of the amount
defined as the sum of clean Overdraft Credit available for settlement of the drawee bank’s
Line (OCL) equivalent to fifteen percent net clearing loss, beyond which amount
(15%) of rediscounting line with the Bangko inward clearing items will be unwound in
Sentral, and the collateralized OCL that will accordance with the PCHC Clearing House
be extended by Bangko Sentral. A bank not Rules and Regulations.
meeting the following criteria: (ii) In the case of final overdraft, i.e.,
(i) CAMELS composite rating of at after AM returns, where unwinding is no
least “3”; longer possible, the bank shall be excluded
(ii) CAR of at least ten percent (10%); from next clearing. The PSO shall advise
or the PCHC of such exclusion upon prior
(iii) No chronic reserve deficiencies for Monetary Board approval.
the immediately preceding one (1) year, or (6) The collateralized OCL may be
other measures as may be defined by the converted into an emergency loan provided
Bangko Sentral for this purpose, should the bank complies with the guidelines
apply for collateralized OCL in an amount governing the grant of emergency loans
equivalent to at least five percent (5%) of under Subsec. X272.2 or may be subject to
their demand deposit liabilities as of end of foreclosure of collateral.

§§ X205 - X213
14.12.31
The guidelines implementing Item “b” Sec. X207 Check Clearing Operations
of this Section are in Appendix 31. During Public Sector Holidays. The
c. In indirect participation through guidelines on check clearing operations
conduit arrangement, where the clearing during public sector holidays are shown in
results of participating TBs/RBs are Appendix 84.
consolidated with those of the conduit UBs/ (M-2008-025 dated 13 August 2008)
KBs, caps shall be set on the net clearing
losses to be passed on to the conduit UB/ Secs. X208 - X212 (Reserved)
KB by the TB/RB.
The cap is defined as the combined value B. SAVINGS DEPOSITS
of the following amounts:
(1) the TB/RB’s DDA with the Bangko Sec. X213 Servicing Deposits Outside Bank
Sentral; and Premises. Banks may be authorized by the
(2) the value of clean/collateralized Bangko Sentral to solicit and accept deposits
overdraft credit line that may be extended outside their bank premises, subject to the
by the conduit UB/KB to the TB/RB. following conditions:
The conduit arrangement should include a. Minimum capital requirement is met;
provisions setting aforementioned cap on the b. No major supervisory concerns
net clearing losses. affecting safety and soundness;
(As amended by Circular Nos. 705 dated 29 December 2010 and
681 dated 08 February 2010)
c. The area of operations shall be within
one (1)-hour normal travel time by land/sea
Secs. 1205 (Reserved) from any head office or branch, except in
remote areas where more than one (1)- hour
Sec. 2205 Check Clearing Rules for Thrift normal travel time may be allowed; and
Banks Authorized to Accept Demand d. Applicant bank shall institute and
Deposits maintain the following minimum
(Deleted by Circular No. 825 dated 07 February 2014) safeguards:
(1) All deposit solicitors shall be initially
Sec. 3205 Check Clearing Rules for Rural bonded for at least P1,000 subject to the
Banks Who Are Members of the Philippine increase thereof to approximate their daily
Clearing House Corporation collections;
(Deleted by Circular No. 825 dated 07 February 2014) (2) Deposit solicitors shall be provided
with proper identification cards with
Sec. X206 (2008 - X603) Clearing photograph and signature of each respective
Operations. Banks shall observe the clearing solicitor, certified to by the appropriate
procedures in accordance with the PCHC officer of the bank. Said identification cards
Clearing House Rules and Regulations for shall be worn by each solicitor at all times
the clearing of checks1. at the upper breast of his outer garment
(As amended by Circular Nos. 705 dated 29 December 2010 when soliciting deposits; and
(Next Page is Part II - Page 7)
1
Manual of Regulations for Banks Part II - Page 6a

§§ X213 - X215
08.12.31
(3) Adequate insurance coverage for (9) Places of assignments of bank

funds in transit (representing deposits solicitors shall be rotated at least quarterly.
collected outside banking premises) shall
be secured by applicant bank from Sec. X214 Withdrawals. Banks are
insurance companies not included in the prohibited from issuing/accepting
list of companies blacklisted by the withdrawal slips or any other similar
Insurance Commissioner; instruments designed to effect withdrawals
(4) Deposit slips shall be in booklet of savings deposits without requiring the
form, prenumbered, in triplicate copies and depositors concerned to present their
in three (3) colors - the original to be issued passbooks and accomplishing the necessary
to the depositor, the second copy to be withdrawal slips, except for banks
used for posting reference, and the third authorized by the Bangko Sentral to adopt
copy to be retained in the booklet; the no passbook withdrawal system:
(5) All collections shall be turned over to Provided, That banks which are already
the cashier at the end of each day accompanied adopting the no passbook withdrawal
by a Collection Summary Report to be system shall be given six (6) months from
accomplished in duplicate which shall contain 09 March 1999 to seek approval from the
the following minimum information: Bangko Sentral.
(a) Date of the report; The provisions of Sec. X202b shall also
(b) Names and addresses of the apply to withdrawals from savings deposits.
depositors;
(c) Deposit slip numbers; Sec. X215 Rental Deposits of Lessees
(d) Amounts of deposit; The following guidelines shall govern the
(e) Savings account and passbook opening and handling by banks of deposits
numbers; and made by lessees under Section 5(b) of
(f) Name and signature of solicitor Batas Pambansa Blg. 25, otherwise known
rendering the report; as the Rent Control Law:
(6) Depositors shall always be a. The deposit made by the lessee
required to accomplish a Signature Card shall only be accepted by the bank under a
when opening an account, which card special savings account in the name of the
shall be used always as reference in lessor;
checking the genuineness/authenticity of b. The bank shall require the lessee
signatures affixed on withdrawal slips or to submit a copy of the written notice sent
authorizations for withdrawal; to the lessor for the deposit made, stating
(7) Deposits/withdrawals shall be among other things, the date and amount
recorded by the bookkeeper or any ledger of the deposit and the name and address
clerk, except any bank solicitor, in the of the lessor;
depositor’s ledger cards and passbooks on c. The bank, at its option, may require
the same day that such deposits/ the lessee to submit any supporting document,
withdrawals are accepted. Passbooks shall such as the lease contract or official receipts
be returned to the depositors not later than of previous rentals paid, which will show the
the following business day; specimen signature of the lessor, or other
(8) At the end of each month, papers to identify the lessor;
depositors shall be advised in writing of d. The bank shall segregate from its
the balances of their deposits with the bank, regular savings deposit accounts and
the advise slips of which shall never be maintain a separate subsidiary control
handcarried by the solicitors themselves; ledger for deposits made under Section 5(b)

§§ X215 - X223.2
10.12.31
of Batas Pambansa Blg. 25; § X223.1 Prerequisites to accept

e. Any withdrawal against these negotiable order of withdrawal accounts
special savings deposit accounts may only for thrift banks/rural banks/cooperative
be allowed in favor of the lessee concerned banks. In addition to the Standard
before the amount deposited under Pre-qualification Requirements for the Grant
consignation has been accepted by the of Banking Authorities enumerated in
lessor, or when authorized by the lessor; Appendix 5, a TB/RB/Coop Bank applying
f. The expenses which may be for authority to accept NOW accounts
incurred by the bank with respect to such shall also comply with the following
rental deposits shall be charged against the requirements:
lessor; a. The applicant TB must have
g. All the minimum internal control complied with the minimum capital required
standards applicable to savings deposit under Subsec. X111.1.
accounts prescribed in Sec. X185 shall be In the case of RB/Coop Bank, it must
complied with; and have net assets of at least P5.0 million:
h. The acceptance of such rental Provided, That RBs which have been
deposits, however, shall be optional or authorized to accept or create NOW
discretionary only upon the bank concerned. accounts prior to the approval of R.A. No.
7353 (Rural Banks Act of 1992) shall be
Secs. X216 - X220 (Reserved) allowed to continue servicing such
deposits.
Sec. X221 Peso Savings Deposit Accounts The terms capital and net assets shall
of Embassy Officials. Embassy officials have the same meaning as in Sec. X111.
are allowed to open peso savings deposit b. It has neither unpaid assessment
accounts with Philippine banks: Provided, due nor past due obligations with the PDIC.
That they submit proof of conversion of (As amended by Circular Nos. 696 dated 29 October 2010 and
foreign currency to peso with Philippine 674 dated 10 December 2009)
banks.
(M-2007-021 dated 15 September 2007) § X223.2 Requirements for accepting
negotiable order of withdrawal accounts
Sec. X222 (Reserved) After a TB’s/RB’s/Coop Bank’s application
to accept NOW account has been
C. NEGOTIABLE ORDER OF approved, it may actually accept the same
WITHDRAWAL ACCOUNTS subject to the following conditions:
a. Submission of a certification signed
Sec. X223 Authority to Accept Negotiable by the president/chairman of the board of
Order of Withdrawal Accounts. Negotiable the bank stating that the requirements
Order of Withdrawal (NOW) accounts are enumerated under Subsec. X223.1 have
interest-bearing deposit accounts that been complied with up to the day before
combine the payable on demand feature of the NOW account services are actually
checks and investment feature of savings offered/extended to the public; and
accounts. b. That it has complied with all other
A UB/KB may offer NOW accounts conditions that the Bangko Sentral may impose.
without prior authority of the Monetary Board. The applicant bank shall submit a
A TB/RB/Coop Bank may accept NOW written notice to the appropriate
accounts upon prior approval of the department of the SES of the actual date
Monetary Board. when the NOW account deposit service

§§ X223.2 - X232
10.12.31
is offered to the public not later than ten Nothing herein shall be construed as
(10) banking days from such offering of the precluding a TB, RB or Coop Bank from
service. applying for authority to accept both
demand deposits and NOW accounts.
§ X223.3 Sanctions. If any part of the
certification submitted by the bank as Sec. X225 Minimum Features. The order of
required in these guidelines is found to be withdrawal form shall have a size of three
false, the following sanctions shall be (3) inches by seven (7) inches, and shall be
imposed, without prejudice to the sanctions printed on security/check paper. It shall
under Section 35 of R.A. No. 7653: contain, as a minimum, the features of the
a. On the bank pro-forma order of withdrawal shown in
Suspension of its authority to accept or Appendix 11.
create NOW accounts for one (1) year.
b. On the certifying officer Sec. X226 Clearing of Negotiable Order
A fine of P5,000 per day from the time of Withdrawal Accounts. Any NOW
the certification was made up to the time account which may be deposited with a
the certification was found to be false. bank other than the drawee bank may be
cleared through the PCHC in accordance
Sec. X224 Rules on Servicing Negotiable with the PCHC Clearing House Rules and
Order of Withdrawal Accounts. The Regulations1. Nothing in this Section shall
following rules shall be observed in prevent direct settlement between the
servicing NOW accounts: parties concerned. The provision of Sec.
a. Prior to or simultaneous with the X202 shall also apply for withdrawals on
opening of a NOW account, the bank shall NOW accounts.
inform the depositor of its terms and (As amended by Circular Nos. 705 dated 29 December 2010
conditions; and 681 dated 08 February 2010)
b. The bank shall be responsible for
the proper identification of its depositors; it Secs. X227 - X230 (Reserved)
shall require, among other things, two (2)
specimen signatures and such other D. TIME DEPOSITS
pertinent information;
c. Deposits shall be covered by Sec. X231 Term of Time Deposits. Time
deposit slips in duplicate duly validated and deposits shall be issued for a specific period
initialed by the teller receiving the deposit. of term.
A copy of the deposit slip shall be furnished
the depositor; Sec. X232 Special Time Deposits
d. NOW accounts shall be kept and Authority shall be automatically granted
maintained separately from the regular to any accredited banking institution
savings deposits; which may participate in the supervised
e. Blank NOW forms shall be credit program to accept special time
prenumbered and shall be controlled as in deposits from the Agrarian Reform Fund
the case of unissued blank checks; Commission with interest lower than the
f. A bank statement shall be sent to rate allowed on time deposits accepted
each depositor at the end of each month for from the general public. Such deposits
confirmation of balances; and shall be exempt from the legal reserve
g. Banks must use the form prescribed requirements, as an exception to the
by present rules for NOW accounts. existing policies on the matter.
1
see schedule of revised clearing and settlement process shown as footnote of Section X202

§§ X233 - X233.5
09.12.31
Sec. X233 Certificates of Time Deposit SES of the actual date when the NCTDs are
a. Negotiable Certificates of Time actually issued to the public not later than
Deposit (NCTDs) ten (10) banking days from such issuance.
(1) UBs/KBs may issue NCTDs without
approval of the Bangko Sentral. § X233.3 Minimum features
(2) TBs/RBs/Coop Banks may issue a. Form; denomination - NCTDs may
NCTDs upon the prior approval of the be issued in bearer or other form denoting
Bangko Sentral. negotiability and shall have a standard
b. Non-Negotiable Certificates of Time format to be prescribed by the Bangko
Deposit Sentral which shall be prenumbered serially
Banks may issue long-term non- and predenominated. The minimum
negotiable tax-exempt certificates of time denomination shall be at the discretion of
deposit without approval of the Bangko the issuing bank. No certificate payable to
Sentral. bearer shall contain words prohibiting its
negotiation.
§ X233.1 Prerequisites to issue b. Term - The minimum maturity of the
negotiable certificates of time deposits for certificates shall be 731 days.
thrift banks/rural banks/cooperative banks c. Manner of issuance - The certificates
In addition to the Standard Pre-qualification shall be issued only upon receipt of funds
Requirements for the Grant of Banking equivalent to their face value.
Authorities enumerated in Appendix 5, a TB/ d. Manner of printing - NCTDs shall
RB/Coop Bank applying for authority to be printed on security paper by the Security
issue NCTDs shall also comply with the Plant Complex (SPC) of the Bangko Sentral.
following requirements: Orders for the printing of the desired
a. Applicant’s capital must be at least forms shall not exceed a total value
P150.0 million. For this purpose, capital shall equivalent to twenty percent (20%) of the
have the same meaning as in Sec. X111; and issuing bank’s capital accounts (based on
b. It has neither assessment due nor the quarter immediately preceding the
past due obligations with the PDIC. request for printing) at any one time.
(As amended by Circular No. 674 dated 10 December 2009) Additional orders for printing which shall
result in an excess over the prescribed
§ X233.2 Requirements for issuing benchmark shall require prior Bangko
negotiable certificates of time deposits Sentral approval.
After a TB’s/RB’s/Coop Bank’s application
to issue NCTDs has been approved, it may § X233.4 Insurance coverage. The
actually issue the same subject to the NCTDs shall be insured with the PDIC.
following conditions: Banks issuing bearer certificates shall
a. Submission of a certification signed imprint on the instrument the following:
by the president/chairman of the board of “For purposes of deposit insurance by
the bank stating that the requirements the PDIC, the holder shall have his name
enumerated under Subsec. X233.1 have been registered in the books of the issuing bank.”
complied with up to the day before the NCTDs
are actually issued to the public; and § X233.5 Desistance from issuing new
b. That it has complied with all other negotiable certificates of time deposits
conditions that the Bangko Sentral may Unless authorized by the Bangko Sentral,
impose. TBs/RBs/Coop Banks with outstanding
The applicant bank shall submit a written NCTDs shall immediately desist from
notice to the appropriate department of the issuing new NCTDs.

§§ X233.5 - X233.9
15.10.31
All outstanding NCTDs shall be valid and requirements under Item “(c)1”of this
negotiable up to their maturity dates and Subsection up to the time of the last offering
shall not be subject to renewal. of its approved and listed LTNCTDs.
c. Pre-qualification requirements
§ X233.6 Sanctions. If any part of the The issuing bank shall be held accountable
certification submitted by the bank as for ensuring the continuous compliance by its
required in these guidelines is found to be chosen participant-FIs with the qualification
false, the following sanctions shall be requirements prescribed by the Bangko Sentral.
imposed, without prejudice to the sanctions As such, the issuing bank shall make a
under Section 35 of R.A. No. 7653. careful and diligent evaluation of the parties
a. On the bank whom it shall engage to act as underwriter/
Suspension of its authority to issue arranger, registry bank and selling agent of
NCTDs for one (1) year. its LTNCTDs.
b. On the certifying officer The following qualification requirements
A fine of P5,000 per day from the time shall be strictly complied with prior to and
the certification was made up to the time on a continuing basis by the issuing bank
the certification was found to be false. and FIs engaged to act as underwriter/
arranger, registry bank and selling agent
§§ X233.7 - X233.8 (Reserved) while the LTNCTD of the issuing bank
remains outstanding.
§ X233.9 Long-term negotiable (1) Issuing bank
certificates of time deposit. The following A bank applying for authority to issue
guidelines shall govern the issuance of an LTNCTD shall comply with the following
longterm negotiable certificates of time requirements:
deposit (LTNCTDs) with a minimum (a) It has complied with the following
maturity of five (5) years: capital adequacy requirements:
a. Prior Bangko Sentral approval. No (i) Minimum capitalization as defined
LTNCTD shall be issued without the prior under Sec. X111; and
approval of the Bangko Sentral. (ii) Risk-based capital adequacy ratio
b. Application for authority of the under Sec. X115 within the sixty (60) days
issuing bank. An application for authority immediately preceding the date of
on each issue/issue program of LTNCTD application;
shall be filed with the appropriate (b) It has not incurred net weekly reserve
department of the SES. deficiencies within eight (8) weeks
The application shall be signed by the immediately preceding the date of application;
president/country manager (branch of a (c) It has generally complied with
foreign bank) of the bank. It shall be banking laws, rules and regulations, orders
accompanied by: (i) a certified true copy of or instructions of the Monetary Board and/
the resolution of the bank’s board of or Bangko Sentral Management in the last
directors authorizing the issuance of two (2) preceding examinations prior to the
LTNCTD indicating, among others, the date of application, more particularly:
issue size, offering period, purpose or (i) The ceilings on credit
intended use of proceeds thereof, registry accommodations to DOSRI;
bank, underwriter/arranger, selling agent(s); (ii) Liquidity floor requirements for
and (ii) a Letter of Undertaking (LOU) signed government deposits;
by the president/country manager that the (iii) Single borrower’s loan limit; and
issuing bank will ensure its continuous (iv) Investment in bank premises and
compliance with the prequalification other fixed assets;

§ X233.9
15.10.31
(d) It maintains adequate provisions for (bb) Deliver transactions within the
probable losses commensurate to the quality agreed trading period; and
of its asset portfolio but not lower than the (cc) Issue registry confirmations to
required valuation reserves as determined holders of LTNCTDs.
by the Bangko Sentral; (iii) It must have a CAMELS Composite
(e) It does not have float items Rating of at least “3” in the last regular
outstanding for more than sixty (60) calendar examination.
days in the “Due From/To Head Office/ (3) Underwriter/Arranger
Branches/Offices” accounts and the “Due
(a) It is either a UB or an IH: Provided,
From Bangko Sentral“ account exceeding
That if an offering is on a best-efforts basis,
one percent (1%) of the total resources as
of date of application; such arranger may also be a KB;
(f) It has no past due obligations with the (b) It must be a third party, such that:
Bangko Sentral or with any government FI; (i) it has no subsidiary/affiliate
(g) It has established a risk management relationship with the issuing bank; and
system appropriate to its operations (ii) it is not related in any manner that
characterized by clear delineation of would undermine the objective conduct of
responsibility for risk management, adequate due diligence.
risk measurement systems, appropriately (c) Underwriters must be well capitalized
structured risk limits, effective internal and must have adequate risk management as
controls and complete, timely and efficient evidenced by compliance with Items “c(1)(a),
risk reporting system; (d), (g) and (h)” as may be applicable.
(h) It has a CAMELS Composite Rating of (4) Selling agent
at least “3” in the last regular examination; and It must be an FI with dealership or
(i) It has neither unpaid assessment due brokering license.
nor past due obligations with the PDIC. d. Listing of LTNCTD 1 with an
(2) Registry bank accredited exchange 2. LTNCTDs duly
(a) It may be a UB, a KB, or such other
approved by the Monetary Board shall be
specialized entity that may be qualified by
issued and immediately listed on an
the Monetary Board;
accredited exchange: Provided, That banks
(b) In the case of a UB or a KB:
(i) It must be a third party: which opt to issue portions of the approved
(aa) with no subsidiary/affiliate amount in tranches shall immediately list
relationship with the issuing bank; and such tranche issuance: Provided further,
(bb) which is not related to the issuing That if within one (1) year from approval of
bank in any manner that would undermine the Monetary Board, the entire amount of
its independence. the approved LTNCTDs shall not have been
(ii) It must have adequate facilities and issued, the bank’s authority to issue the
the organization to do the following: unissued portion of the approved amount
(aa) Maintain the Electronic Registry shall be deemed revoked, and said unissued
Book (ERB); portion shall no longer be issued.
1
Approved applications and outstanding LTNCTDs as of 22 February 2014 shall not be covered by the new
requirements.
2
A bank shall be allowed to issue LTNCTDs subject to the condition that the bank shall submit a deed of
undertaking to the Bangko Sentral that all LTNCTDs issued after 22 February 2014 shall be applied for listing
on an accredited exchange within one (1) day after the LTNCTD platform commences operation.
The platform for the listing of the LTNCTDs will be available on 01 September 2014. In this regard, banks that
issued LTNCTDs after 22 February 2014 shall apply for listing by 02 September 2014.

§ X233.9
15.10.31
Banks which fail to list their LTNCTDs (c) Formulates the distribution/allocation
on an accredited exchange within the plan for the initial offering and ensures
prescribed period shall be subject to the proper and orderly distribution of the
sanctions under Item “(o)(1)” of this primary sale/issue of the LTNCTDs;
Subsection. (d) Disseminates information to
e. Additional requirements for the prospective depositors/ investors of LTNCTDs
issuance of LTNCTD. The following on the terms and conditions of the issue
additional requirements shall be submitted (including information of non-pretermination
to the appropriate department of the SES by the depositor prior to original maturity
within ten (10) calendar days after issuance and the liquidity mechanism in secondary
of the initial offering/tranche: trades) and the rights and obligations of the
(1) Written waiver of the secrecy of holder, issuer, selling agent, underwriter/
deposits on said LTNCTD by the issuing arranger and registry bank; and
bank, its subsidiaries, affiliates and wholly (e) When selling to its clients, it must
or majority-owned or -controlled entities of perform the functions/responsibilities of the
such subsidiaries and affiliates; selling agent under Items “e(3)(a) and (b)”.
(2) Information disclosure and the terms (3) Selling agent
and conditions of the LTNCTD issuance; (a) Verifies identity of each investor and
(3) Promotional materials; and applies other standards to combat money
(4) Specimen of the proposed registry laundering as required under Sec. X801; and
confirmation and purchase advice from (b) Issues the purchase advice for the
each selling agent which will evidence sale primary offering of the LTNCTDs.
of the LTNCTD. g. Change of underwriter/arranger,
The bank shall, likewise, submit within registry bank, selling agent(s).
ten (10) calendar days after issuance of the The issuing bank shall notify the
initial and subsequent tranches, a written appropriate department of the SES in writing
notice to the appropriate department of the of any change in the identity of its registry
SES of the actual date of initial/tranche offering. bank, underwriter/arranger and selling agent
f. Functions/responsibilities of the parties within ten (10) calendar days from date of
involved. The respective parties shall have, such change.
among others, the following functions/ Said written notice shall state the
responsibilities: (i) reasons for the change, (ii) identity of the
(1) Registry bank newly-designated FI(s), and (iii) effectivity of
(a) Generates and maintains the ERB; the engagement.
(b) Records any transfer of ownership; h. Prohibition on holdings of LTNCTDs.
(c) Issues and sends registry confirmation The issuing bank including its related
to holders; companies (subsidiaries and affiliates and
(d) Functions as paying agent for periodic wholly or majority-owned or -controlled
interest and principal payments; and entities of such subsidiaries and affiliates)
(e) Monitors compliance with the cannot be a holder of the LTNCTDs of the
prohibition on holdings of LTNCTD, as issuing bank.
prescribed under Item “h” hereof. The issuing bank shall provide the
(2) Underwriter/Arranger registry bank with an updated list of all
(a) Conducts due diligence on the related companies. This report shall be a
issuing bank and determines the valuation/ “Category B” report.
pricing of the primary issue; For purposes of this Subsection, an
(b) Prepares the prospectus/information affiliate is an entity, at least twenty percent
disclosure/updates for multi-tranche issues; (20%) but not exceeding fifty percent (50%)

§ X233.9
15.10.31
of the outstanding voting stock of which is, of the National Internal Revenue Code of
owned by the issuing bank. 1997, as amended and Bureau of Internal
i. Agreements between issuing bank and Revenue (BIR) regulations.
registry bank/selling agent(s). The The caveat shall apply if the issuing bank
agreements between the issuing bank and commits no pretermination. Otherwise, it
the registry bank /selling agents shall comply shall read as follows:
with the provisions of Sec. X162 on bank “This LTNCTD cannot be terminated by
service contracts. The issuing bank shall be the holder before (maturity date). However,
liable for any damages to investors/ it may be preterminated at the instance of
depositors caused by actions of said registry the Issuing Bank upon prior notice to the
bank, selling agent(s) contrary to the holder on record. Negotiations/transfers
agreements entered into. from one (1) holder to another do not
j. Minimum features constitute pretermination”
(1) Form; denomination - An LTNCTD For tax purposes, negotiations/transfers
shall be in scripless form with a third party from one (1) holder to another shall be
registry bank maintaining the ERB. To have subject to the pertinent provisions of the
legal effect, it shall comply with the provisions National Internal Revenue Code of 1997,
of R.A. No. 8792 (Electronic Commerce Act) as amended and Bureau of Internal Revenue
particularly on the existence of an assurance (BIR) regulations”; and
on the integrity, reliability and authenticity of (b) “All negotiations/transfers of this
the LTNCTD in electronic form. LTNCTDs LTNCTD prior to maturity must be coursed
shall be registered in the name of individuals through an accredited exchange”.
or corporations, negotiable and prenumbered (2) The selling agent shall issue a
serially. The minimum denomination shall be Purchase Advice to evidence initial purchase
at the discretion of the issuing bank. of LTNCTD with the original copy given to
(2) Currency - Denomination shall be the holder.
in Philippine pesos. (3) The registry bank shall issue a
(3) Term - The minimum maturity of the Registry Confirmation to evidence
LTNCTDs shall be five (5) years. ownership of the LTNCTD, with the original
(4) Primary Offering/Secondary Trading- copy given to the holder.
The initial offering shall be executed through l. Deposit insurance coverage. The
an underwriter or an arranger. Subsequent LTNCTDs shall be insured with the PDIC,
negotiations in secondary trading must be subject to applicable rules and regulations,
executed through an accredited exchange. among others, on maximum insurance
k. Purchase Advice and Registry coverage.
Confirmation m. Pretermination by the issuer.
(1) The Purchase Advice and Registry LTNCTDs may be preterminated by the
Confirmation shall conspicuously contain issuing bank, subject to the following
the following caveat: conditions:
(a) “This LTNCTD cannot be (1) The Information Disclosure,
terminated by the holder nor the Issuing Purchase Advice and Registry Confirmation
Bank before (maturity date). However, shall include the information that the
negotiations/ transfers from one (1) holder LTNCTD may be preterminated by the
to another do not constitute issuing bank;
pretermination.” (2) 30- day prior notification must be
For tax purposes, negotiations/ given to the appropriate department of the
transfers from one (1) holder to another SES together with the justification for the
shall be subject to the pertinent provisions pretermination;

§§ X233.9 - X233.11
15.10.31
(3) 30- day prior notification to holders Disqualification to be a registry bank for
of record; one (1) year and a monetary penalty of
(4) Notwithstanding any agreement to P30,000 for each violation.
the contrary, the issuer shall shoulder the (3) On the selling agents -
tax due on the interest income already Disqualification to be appointed as selling
earned by the holders; and agent for one (1) year and a monetary penalty
(5) The issuing bank’s reserve positions of P30,000 for each violation.
shall be recomputed retroactively based on (4) On the certifying officer - A fine of
the applicable reserve rate(s) for regular P5,000 per day from the time of required
time deposits during the affected periods. disclosure up to the time disclosure was
If the recomputed amounts result in a made; or from the time misrepresentation
reserve deficiency, the issuing bank shall was made up to the time the information
be fined with the corresponding monetary was corrected.
penalties. The preceding monetary (5) On the responsible officer - A fine of
penalty, however, shall not be imposed if P30,000 for participating or confirming in
pretermination by the issuer is due to a the non-disclosure or misrepresentation of
change in law or regulation that will information.
increase the cost of maintaining the FIs not supervised by the Bangko Sentral
LTNCTDs. acting as selling agent of LTNCTDs and/or
n. Non-pretermination by the holder. its concerned directors/officers that are
Presentation of the LTNCTD to the issuing found to violate rules and regulations in the
bank for payment before the maturity date is performance of their functions/
not allowed. However, negotiation or transfer responsibilities shall be subject to the
from one (1) holder to another shall not provisions of Section 36 of R.A. No. 7653
constitute pretermination of the LTNCTD. and shall, likewise, be referred to the SEC
For tax purposes, negotiations/ for appropriate action.
transfers from one (1) holder to another p. Supervisory Enforcement Actions. The
shall be subject to the pertinent provisions Bangko Sentral reserves the right to deploy
of the National Internal Revenue Code of its range of supervisory tools provided in
1997, as amended and Bureau of Internal Sec. X009 to ensure compliance with the
Revenue (BIR) regulations. provisions of this Subsection.
o. Sanctions. Without prejudice to the (As amended by Circular No. 877 dated 22 May 2015,
other sanctions prescribed under Sections M-2014-034 dated 27 August 2014, Circular No. 834 dated
26 May 2014, M-2014-023 dated 23 May 2014, Circular Nos.
36 and 37 of R.A. No. 7653 and the 824 dated 30 January 2014, 822 dated 13 December 2013,
provisions of Section 16 of R.A. No. 8791, 810 dated 30 August 2013, 674 dated 10 December 2009 and
the following sanctions will be imposed 585 dated 15 October 2007)
on Bangko Sentral-supervised FIs for
failure to comply with the provisions of § X233.10 (Reserved)
this Subsection and for non-disclosure or
misrepresentation of information: § X233.11 Long-term non-negotiable
(1) On the issuing bank - Suspension tax-exempt certificates of time deposit.
of its authority to issue LTNCTDs, The issuance of long-term non-negotiable
disqualification from future issuance of tax-exempt certificates of time deposit shall
LTNCTDs and a monetary penalty of be governed by the following rules:
P30,000 for each violation. a. Minimum features
(2) On the registry bank - (1) Form; denomination - The certificate

§§ X233.11 - X234.2
08.12.31
shall contain words denoting its non- a. Borrowing funds for the borrower’s
negotiability and shall be issued by banks own account;
only in the name of individuals with b. Twenty (20) or more lenders at any
denominations in increments of P1,000.00. one (1) time;
(2) Term - The minimum maturity of the c. Methods of borrowing are issuance,
certificate shall be five (5) years. endorsement, or acceptance of debt
(3) Manner of issuance - The certificate instruments of any kind, other than deposits,
shall be issued only upon receipt of funds such as acceptances, promissory notes,
equivalent to their face value. participations, certificates of assignments or
(4) Manner of printing - The certificate similar instruments with recourse, trust
shall be printed on security paper. certificates, repurchase agreements, and
such other instruments as the Monetary
(5) Pre-termination - In case of pre-
Board may determine; and
termination, the deposit shall be subject to
d. The purpose of which is (1) relending,
income tax as provided under Section
or (2) purchasing receivables or other
24(B)(1) of the Tax Reform Act of 1997 which
obligations.
states that “xxx a final tax shall be imposed
on the entire income and shall be deducted
§ X234.2 Definition of terms and
and withheld by the depository bank from
phrases. The following terms and phrases
the proceeds of the long-term deposit or
shall be understood as follows:
investment certificate based on the
a. Borrowing shall refer to all forms of
remaining maturity thereof:
obtaining or raising funds through any of the
(a) Four (4) years to less than
methods and for any of the purposes provided
five (5) years 5%
in Subsec. X234.1 whether the borrower’s
(b) Three (3) years to less than
liability thereby is treated as real or contingent.
four (4) years 12%
b. For the borrower’s own account shall
(c) Less than three (3) years 20%
refer to the assumption of liability in one’s
xxx”
own capacity and not in representation, or
b. Insurance coverage. The deposits as an agent or trustee, of another.
shall be insured with the PDIC, subject to c. Purchasing of receivables or other
applicable rules and regulations, among
obligations shall refer to the acquisition of
others, on maximum insurance coverage.
claims collectible in money, including
c. Reserves against long-term non-
interbank borrowings or borrowings
negotiable certificates of time deposit. The
between FIs, or of acquisition of securities,
rate and form of required reserves on regular
of any amount and maturity, from domestic
time deposit shall also apply to the required
or foreign sources.
reserves on long-term non-negotiable tax-
d. Relending shall refer to the extension
exempt certificates of time deposit.
of loans by an institution with antecedent
borrowing transactions.
E. DEPOSIT SUBSTITUTE OPERATIONS
Relending shall be presumed, in the
(QUASI-BANKING FUNCTIONS)
absence of express stipulations, when the
Sec. X234 Scope of Quasi-Banking Functions. institution is regularly engaged in lending.
The following rules and regulations shall e. Regularly engaged in lending shall
govern the quasi-banking operations of banks. refer to the practice of extending loans,
advances, discounts or rediscounts as a
§ X234.1 Elements of quasi-banking. matter of business, as distinguished from
The essential elements of quasi-banking are: isolated lending transactions.

X234.3
08.12.31
§ X234.3 Transactions not considered their own needs or the needs of their agents
quasi-banking. The following shall not or dealers; and
b. The mere buying and selling without
constitute quasi-banking:
recourse of instruments mentioned in
a. Borrowing by commercial, industrial Subsec. X234.1: Provided, That:
and other non-financial companies through (1) The institution buying and selling
any of the means listed in Subsec. X234.1 without recourse shall indicate in
hereof, for the limited purpose of financing conspicuous print on its instrument the
(Next page is Part II - Page - 17)

§§ X234.3- X234.5
08.12.31
phrase without recourse, sans recourse or once the Monetary Board has granted the
words of similar import that will convey quasi-banking license.
the absence of liability or guarantee by said In addition to the Standard
institution; and Pre-qualification Requirements for the
(2) In the absence of the phrase Grant of Bank Authorities enumerated in
“without recourse”, “sans recourse” or Appendix 5, a TB securing BSP authority
words of similar import, the instrument so to engage in quasi-banking functions must
issued, endorsed or accepted, shall meet the following requirements:
automatically be considered as falling a. The bank must have a networth or
within the purview of these regulations: combined capital of at least P650.0 million
Provided, further, That any of the following computed in accordance with Sec. X111;
practices or practices similar and/or b. The bank is well capitalized with
tantamount thereto in connection with a risk-based capital adequacy ratio of not
without recourse transaction is hereby lower than twelve percent (12%) at the
prohibited: time of filing the application;
(a) Issuance of postdated checks by a c. The bank’s operation during the
financial intermediary, whether for its own preceding calendar year and for the period
account or as an agent of the debt immediately preceding the date of
instrument issuer, in payment of the debt application has been profitable;
instrument, sold, assigned or transferred d. The bank has elected at least two
without recourse; or (2) independent directors and all its
(b) Issuance by a financial intermediary directors have attended the required
of any form of guaranty on sale transactions seminar for directors of banks conducted
or on negotiations or assignment of debt or accredited by the BSP;
instruments without recourse; and e. The bank has established a risk
(c) Payment with its own funds by a management system appropriate to its
financial intermediary which assigned, sold operations characterized by clear
or transferred the debt instrument without delineation of responsibility for risk
recourse, unless the financial intermediary management, adequate risk measurement
can show that the issuer has with the said systems, appropriately structured risk
financial intermediary funds corresponding limits, effective internal controls, and
to the amount of the obligation. complete, timely and efficient risk
reporting system; and
§ X234.4 Pre-conditions for the f. The bank has a CAMELS
exercise of quasi-banking functions. No Composite Rating of at least “3” in the last
bank shall engage in quasi-banking regular examination with management
functions without authority from the BSP: rating of not lower than “3”.
Provided, however, That banks authorized
by the BSP to perform universal or § X234.5 Certificate of Authority from
commercial banking functions shall the Bangko Sentral. A bank securing BSP’s
automatically have the authority to engage Certificate of Authority to engage in
in quasi-banking functions: Provided, quasi-banking functions shall file an
further, That the authority to obtain funds application with the appropriate
from the public, which shall mean twenty department of the SES. The application
(20) or more persons under Section 8.2 of shall be signed by the bank president or
R.A. 8791, is not a condition but an officer of equivalent rank and shall be
authorization for the bank or quasi-bank, accompanied by the following documents:

§§ X234.5 - X234.6
08.12.31
a. Certified true copy of the resolution That in case, the TB has no approved
of the bank’s board of directors authorizing capital build-up program, the minimum
the application; capital requirement may be substituted by
b. A certification signed by the a capital build-up program for a period of
president or the officer of equivalent rank not more than five (5) years from
that the institution has complied with all 11 November 2004 and which must be
conditions/prerequisites for the grant of approved by the Monetary Board. Such
authority to engage in quasi-banking capital build-up program shall be in equal
functions; annual or diminishing amounts and shall
c. An information sheet; be submitted to the appropriate
d. Bio-data signed under oath, of the department of the SES within three (3)
members of the managerial staff who will months from 11 November 2004.
undertake quasi-banking operations; TBs which fail to comply with the
e. Borrowing-investment program for required capitalization upon expiration of
one (1) year which should include at the said two (2) year period given them or
minimum: those which fail to comply with approved
(1) planned distribution of portfolios capital build-up program shall liquidate
as to - their quasi-banking operations within one
(a) underwriting; (1) year and shall be considered revoked/
(b) commercial paper markets; cancelled. The license of a TB with
(c) stocks and bonds; authority to engage in quasi-banking
(d) government securities; functions but has not actually engaged in
(e) receivables financing, discounting quasi-banking functions and has not
and factoring; complied with the above minimum capital
(f) leasing; and requirements as of 11 November 2004,
(g) direct loans; shall automatically be revoked.
(2) expected sources of funds to
support investment program classified § X234.6 Sale, discounting, assignment
as to - or negotiation by banks of their credit
(a) maturity: short, medium and rights arising from claims against the
long-term; BSP. Pursuant to the policy of the BSP to
(b) interest rates; and promote investor protection and
(c) domestic or foreign sources transparency in securities transactions as
whether institutional or personal. important components of capital markets
TBs authorized to engage and are development, credit rights in Special
actually performing quasi-banking functions Deposit Account (SDA) placements and
but do not meet the new capital reverse repo agreements with the BSP,
requirement are hereby given a period of shall not be subject of sale, discounting,
two (2) years reckoned from 11 November assignment or negotiation on a with or
2004 within which to comply with the without recourse basis.
minimum capital requirement in Subsec. Any violation of the provisions of this
X234.4 (a): Provided, That in case the TB Subsection shall be considered a less
has an approved capital build-up program serious offense and shall subject the bank
under Subsec. X501.2, for its FDCU and the director/s and/or officer/s
license, the approved capital build-up concerned to the sanctions provided under
program, may be considered compliance Section X299.
with this requirement: Provided, further, (Circular No. 636 dated 17 December 2008)

§§ X235 - X235.3
08.12.31
Sec. X235 Deposit Substitute Instruments. be the maturity period or the word
Any deposit substitute transaction by a bank “demand”, if it is a demand instrument.
performing quasi-banking functions shall be c. The payee may be identified by his
limited to its own promissory notes, trust account/deposit account number in
repurchase agreements, and certificates of both negotiable and non-negotiable
assignment/participation with recourse. instruments.
d. Securities which are the subject of a
§ X235.1 Prohibition against use of repurchase agreement or a certificate of
acceptances, bills of exchange and trust assignment/participation with recourse,
certificates. Acceptances, bills of exchange, shall be particularly described on the face
and trust certificates shall not be used by of said instruments or on a separate
banks as evidence of deposit substitute instrument attached and specifically referred
liabilities in connection with their quasi- to therein and made an integral part thereof
banking functions. This prohibition shall not as to the maker, value, maturity, serial
apply to the acceptance or negotiation of number, and such other particulars as shall
bills of exchange in connection with trade clearly identify the securities.
transactions, or to the issuance of trust e. The instrument shall provide for the
certificates creating trust relationships. payment of liquidated damages, in addition
to stipulated interest, in case of default by
§ X235.2 Negotiation of promissory the maker or issuer, as well as attorney’s
notes. Negotiable promissory notes fees and costs of collection in case of suit.
acquired by banks in connection with their f. A conspicuous notice at the lower
quasi-banking functions shall not be center margin of the face of the instrument
negotiated by mere indorsements and/or that the transaction is not insured by the
delivery, if they do not conform with the PDIC shall be indicated.
minimum features prescribed under Subsec. g. The corporate name of the issuer shall
X235.3. If these notes do not contain the be printed at the upper center margin of the
features, their negotiation shall be covered instrument and directly below which shall
by any of the appropriate deposit substitute be a designation of the instrument, such as
instruments abovementioned. “Promissory Note” or “Repurchase
Agreement”.
§ X235.3 Minimum features. Deposit h. The words “duly authorized officer“
substitute instruments issued by entities shall be placed directly below the signature
performing quasi-banking functions shall of the person signing for the maker or issuer.
have the following minimum features: i. Each instrument shall be serially pre-
a. The present value and maturity value numbered.
and/or the principal amount and interest rate j. The copy delivered to the payee shall
and such other information as may be bear the word “Original” and the copies
necessary to enable the parties to determine retained by the issuer shall be identified as
the cost or yield of the borrowing or “Duplicate”, “File Copy” or words of similar
placement shall be specified. import.
b. The date of issuance shall be k. Only security paper with adequate
indicated at the upper right corner of the safeguards against alteration or falsification
instrument, and directly below which shall shall be used.

§§ X235.3 - X235.5
15.10.31
Borrowings of banks from the loans and central securities depository in accordance
discounts window of other banks or non- with the guidelines set forth in Appendix 68.
bank financial intermediaries shall be The securities custodian shall hold the
exempted from the documentation securities in the name of the borrower/
requirements prescribed in this Subsection: seller, but shall keep said securities
Provided, That the exemption from the segregated from the proprietary securities
documentation requirements prescribed in account of the borrower/seller if the
this Subsection shall not be construed or borrower/seller has an existing securities
interpreted as exempting said borrowings account with the custodian: Provided, That
from other regulations standardizing deposit a bank authorized by the Bangko Sentral to
substitute instruments and from other perform custodianship function may not be
Bangko Sentral regulations on deposit allowed to be custodian of securities issued
substitutes. or owned by said bank, its subsidiaries or
Deposit substitute instruments shall affiliates, or of securities in bearer form.
conform to the language prescribed by the The delivery shall be effected upon
Bangko Sentral. Any substantial deviation payment and shall be evidenced by a
there from or any additional stipulation securities delivery receipt duly signed by
therein shall be referred to the Bangko authorized officers of the custodian and
Sentral for prior approval. The size and delivered to both the lender/purchaser and
appearance of these instruments, shall not seller/borrower.
be similar to the size and appearance of Sanctions. Violation of any provision of
checks. Rubber stamping, typewriting or Item “a” shall be subject to the following
handwriting some provisions shall not be sanctions/penalties:
considered compliance with said (1) Monetary penalties
regulations. (Shown in Appendix 12 are the First offense - Fine of P10,000 a day for
samples of standardized instruments as each violation reckoned from the date the
evidence of deposit substitute liabilities.) violation was committed up to the date it
was corrected.
§ X235.4 Interbank loan transactions. Subsequent offenses - Fine of P20,000
Except for interbank borrowings which are a day for each violation reckoned from the
settled through the banks’ respective DDAs date the violation was committed up to the
with the Bangko Sentral via PhilPaSS, all date it was corrected.
interbank borrowings shall be evidenced by (2) Other sanctions
deposit substitute instruments containing the First offense - Reprimand for the directors/
minimum features prescribed in Subsec. officers responsible for the violation.
X235.3. Subsequent offense -
(As amended by Circular No. 703 dated 23 December 2010) (a) Suspension for ninety (90) days
without pay of directors/officers responsible
§ X235.5 Delivery of securities. for the violation;
a. Securities, warehouse receipts, (b) Suspension or revocation of the
quedans and other documents of title which accreditation to perform custodianship
are the subject of quasi-banking functions, function;
such as repurchase agreements,shall be (c) Suspension or revocation of the
delivered to a Bangko Sentral accredited authority to engage in quasi-banking
securities custodian or an SEC authorized function; and/or

§§ X235.5- X235.11
15.10.31
(d) Suspension or revocation of the (3) Suspension for 120 days without pay
authority to engage in trust and other of the directors/officers responsible for the
fiduciary business. violation.
b. The guidelines to implement the (As amended by Circular Nos. 873 dated 25 March 2015,
delivery by the seller of securities to the 714 dated 10 March 2011, M-2007-002 dated 23 January 2007,
M-2006-009 dated 06 July 2006, M-2006-002 dated 05 June
buyer or to his designated securities 2006 and Circular No. 524 dated 31 March 2006)
custodian or central securities depository
are shown in Appendix 68. § X235.6 Other rules and regulations
The guidelines on the delivery of governing the issuance and treatment of
government securities to the investor’s deposit substitute instruments.
principal securities account with the a. If there is any stipulation that
Registry of Scripless Securities (RoSS) are in payment of the deposit substitute shall be
Appendix 68a. chargeable against a particular deposit
Sanctions. Without prejudice to the account, it shall further provide that the
penal and administrative sanctions provided liability of the maker or issuer of the
for under Sections 36 and 37, respectively instrument shall not be limited to the
of R.A. No. 7653 (The New Central Bank outstanding balance of said account.
Act), violation of any provision of the b. Any agreement allowing the issuer
guidelines in Appendix 68 shall be subject or maker to substitute the underlying
to the following sanctions/penalties securities shall further provide that the
depending on the gravity of the offense: actual substitution shall be with the prior
(a) First offense - written consent of the payee.
(1) Fine of up to P10,000 a day for the c. Automatic renewal upon maturity of
institution for each violation reckoned from the instrument may be effected only under
the date the violation was committed up to terms and conditions previously stipulated
the date it was corrected; and by the parties.
(2) Reprimand for the directors/officers d. Stipulations between the maker or
responsible for the violation. issuer and the payee which are embodied
(b) Second offense - in separate instruments shall be specifically
(1) Fine of up to P20,000 a day for referred to in the deposit substitute instruments
th e i n s t i t u t i o n f o r e a c h v i o l a t i o n and made an integral part thereof.
reckoned from the date the violation e. In the case of repurchase
was committed up to the date it was agreements and certificates of assignment/
corrected; and participation with recourse, the stipulation
(2) Suspension for ninety (90) days shall clearly state either (1) that the
without pay of directors/officers responsible underlying securities are being delivered to
for the violation. the buyer or assignee as collaterals or (2)
(c) Subsequent offenses - that the ownership thereof is being
(1) Fine of up to P30,000 a day for the transferred to the buyer or assignee.
institution for each violation from the date f. The regulations on interbank loan
the violation was committed up to the date transactions prescribed in Sec. X343 shall
it was corrected; also apply to interbank borrowings.
(2) Suspension or revocation of the (As amended by Circular No. 703 dated 23 December 2010)
authority to act as securities custodian and/
or registry; and §§ X235.7 - X235.11 (Reserved)

§§ X235.12
15.10.31
§ X235.12 Repurchase agreements not documented in accordance with existing

covering government securities, Bangko Sentral regulations and that the bank
commercial papers and other negotiable has strictly complied with the pertinent rules
and non-negotiable securities or of the SEC and the Bangko Sentral on the
instruments. The following regulations shall proper sale of securities to the public and
govern repurchase agreements covering performed the necessary representations and
government securities, commercial papers disclosures on the securities particularly the
and other negotiable and non-negotiable following:
securities or instruments of banks as well (a) Informed the clients that such
as sale on a without recourse basis of said securities are not deposits and as such,
securities by banks. do not benefit from any insurance
a. Proper recording and documentation otherwise applicable to deposits such as,
of repurchase agreements. but not limited to, R.A. No. 3591, as
Banks shall have a true and accurate amended, otherwise known as the
account, record or statement of their daily PDIC law;
transactions. As such, repurchase (b) Informed and explained to the
agreements covering government client all the basic features of the security
securities, commercial papers and other being sold on a without recourse basis, such
negotiable and non-negotiable securities as but not limited to:
or instruments must be properly (i) issuer and its financial conditions;
recorded and documented in accordance (ii) term and maturity date;
with existing Bangko Sentral regulations. (iii) applicable interest rate and its
The absence of proper documentation computation;
for repurchase agreements is tantamount (iv) tax features (whether taxable, tax
to willful omission of entries relevant to paid or tax-exempt);
any transaction, which shall be a ground (v) risk factors and investment
for the imposition of administrative considerations;
sanctions and the disqualification from (vi) liquidity feature of the instrument:
office of any director or officer responsible (aa) procedures for selling the security
therefor under existing laws and in the secondary market (e.g., OTC or
regulations. exchange);
b. Responsibilities of the chief (bb) authorized selling agents; and
executive officer (CEO) or officer of (cc) minimum selling lots.
equivalent rank. (vii) disposition of the security:
It shall be the responsibility of the CEO or (aa) registry (address and contact
the officer of equivalent rank in a bank to: numbers);
(1) Institute policies and procedures to (bb) functions of the registry; and
prevent undocumented or improperly (cc) pertinent registry rules and
documented repurchase agreements procedures.
covering government securities, commercial (viii) collecting and paying agent of the
papers and other negotiable and interest and principal; and
non-negotiable securities or instruments; (ix) other pertinent terms and
(2) Ascertain and ensure that the bank conditions of the security and if possible, a
did not enter into a repurchase agreement copy of the prospectus or information sheet
covering government securities, commercial of the security.
papers and other negotiable and non- (c) Informed the client that pursuant to
negotiable securities or instruments that are Subsecs. X235.5 and X238.1:

§§ X235.12 - X237
15.10.31
(i) Securities sold under repurchase (3) Suspension of access to Bangko

agreements shall be delivered in accordance Sentral rediscounting facilities;
with the guidelines set forth in (4) Suspension of lending or foreign
Appendix 68. exchange operations or authority to accept
(ii) Securities sold on a without recourse new deposits or make new investments;
basis are required to be delivered in (5) Revocation of quasi-banking license;
accordance with the guidelines set forth in (6) Revocation of authority to perform
Appendix 68. trust operations; and
(d) Clearly stated to the client that: (7) Suspension for 120 days without pay
(i) The bank does not guarantee the of the directors/ officers responsible for the
payment of the security sold on a “without violation.
recourse basis” and in the event of default (As amended by Circular Nos. 873 dated 25 March 2015 and
by the issuer, the sole credit risk shall be 870 dated 20 February 2015)
borne by the client; and
(ii) The bank is not performing any Sec. X236 Minimum Trading Lot and
advisory or fiduciary function. Minimum Term of Deposit Substitute.
(3) Report to the appropriate a. The minimum size of any single
department of the SES any undocumented deposit substitute transaction shall be
repurchase agreement within
P50,000.
seventy-two (72) hours from knowledge
No bank performing quasi-banking
of such transactions.
functions shall issue deposit substitute
c. Treatment as Deposit Substitutes.
instruments in the name of two (2) or more
All sales of government securities,
persons or accounts except those falling
commercial papers and other negotiable
under the following relationships in which
and non-negotiable securities or
cases, commingling may be allowed:
instruments that are not documented in
(a) husband and wife; (b) persons related to
accordance with existing Bangko Sentral
regulations shall be deemed to be deposit each other within the second degree of
substitutes subject to regular reserves. consanguinity; and (c) “in trust for” (ITF)
d. Sanctions. The Monetary Board may, arrangements.
at its evaluation and discretion, impose any (As amended by Circular No. 703 dated 23 December 2010)
or all of the following sanctions to a bank
or the director/s or officer/s found to be Sec. X237 Money Market Placements of
responsible for repurchase agreements Rural Banks. Banks shall not accept money
covering government securities, market placements from any RB unless the
commercial papers and other negotiable latter presents a certification under oath
and non-negotiable securities or stating: (a) that it has no overdue special
instruments that are not documented in time deposits; (b) that it has no past due
accordance with existing Bangko Sentral obligations with the Bangko Sentral or
regulations: other government financial institutions; (c)
(1) Fine of up to P30,000 a day to the the amount of its current obligations, if
concerned entity for each violation from the any, with said government financial
date the violation was committed up to the institutions; and (d) the amount of its total
date it was corrected; outstanding money market placements.
(2) Suspension of interbank clearing However, in no case shall such banks sell
privileges/immediate exclusion from clearing; receivables to RBs without recourse.

§§ X237.1 - X238
08.12.31
§ X237.1 Definition of terms. As used securities the servicing and repayment of

in this Section, the following terms shall which are guaranteed by the Republic of
have the following meanings: the Philippines.
a. Money market placements shall
include investments in debt instruments, § X237.3 Sanctions. Violations of the
including purchase of receivables with provisions of this Section shall be subject
recourse to the lending institution, except to the following sanctions/penalties:
purchase of government securities on an a. Monetary penalties
outright basis. First offense - Fines of P3,000 a day,
b. Government securities shall include reckoned from the date placement started
evidences of indebtedness of the Republic up to the date when said placement was
of the Philippines, the Bangko Sentral and withdrawn, for each violation shall be
other evidences of indebtedness or assessed on the bank.
obligations of government entities the Subsequent offenses - Fines of P5,000 a
servicing and repayment of which are fully day, reckoned from the date placement
guaranteed by the Republic of the started up to the date placement was
Philippines. withdrawn, for each violation shall be
c. Persistent violation shall mean the assessed on the bank.
violation of any of the provisions of these b. Other sanctions
rules by the director or officer concerned First offense - Reprimand for the
for four (4) or more times within a twelve directors/officers who approved the
(12)-month period from the date the first acceptance/placement with a warning that
offense was committed. subsequent violations will be subject to
more severe sanctions.
§ X237.2 Conditions required on Subsequent offenses -
accepted placements not covered by (1) Suspension for ninety (90) days
prohibition. Placements accepted which are without pay for directors/officers who
otherwise not covered by the above approved the placement.
prohibition must comply with the following (2) Suspension or revocation of the
conditions: authority to engage in quasi-banking
a. That total money market placements functions.
of an RB as stated in the certification,
including the placement being accepted by Sec. X238 Without Recourse Transactions.
the entity concerned, shall not exceed the No bank shall sell, discount, assign, or
RB’s combined capital accounts or net worth negotiate, in whole or in part, such as thru
less current obligations with the Bangko syndications, participations and other
Sentral or other government financial similar arrangements, any notes,
entities; receivables, loans, debt instruments and any
b. The maturity of the money market type of financial asset or claim, except
placement shall not exceed sixty (60) days; and government securities, or be a party in any
c. That placements shall be evidenced capacity in any of the above transactions,
in all cases by promissory notes of accepting on a without recourse basis unless such
entities/repurchase agreements and/or receivables, notes, loans, debt instruments
certificates of participation/assignment with and financial assets or claims are registered
recourse and that underlying instruments with the SEC. This prohibition includes
shall be certificates of indebtedness issued transactions between a bank and its trust
by the Bangko Sentral or other government department.

§§ X238 - X238.1
15.10.31
Unregistered commercial papers may authorized officer of the custodian/central

be sold, discounted, assigned, or negotiated securities depository and delivered to the
by banks to the following: purchaser.
a. other banks; Sanctions. Violation of any provisions of
b. QBs; Item “a” shall be subject to the following
c. IHs; sanctions/penalties:
d. insurance companies; (1) Monetary penalties
e. finance companies; First offense - Fine of P10,000 a day for
f. investment companies; each violation reckoned from the date the
g. pension or retirement plan maintained violation was committed up to the date it
by the government of the Philippines or any was corrected.
political subdivision thereof or managed by Subsequent offenses - Fine of P20,000 a
a bank or other persons authorized by the day for each violation reckoned from the
Bangko Sentral to engage in trust functions; date the violation was committed up to the
h. funds managed by another bank or date it was corrected.
other entities duly authorized to engage in (2) Other sanctions
trust or other fiduciary business; and First offense - Reprimand for the directors/
i. such other person as the SEC may by officers responsible for the violation.
rule determine as qualified buyers, on the Subsequent offense -
basis of such factors as financial (a) Suspension for ninety (90) days
sophistication, net worth, knowledge, and without pay of directors/officers responsible
experience in financial and business matters, for the violation;
or amount of assets under management. (b) Suspension or revocation of the
accreditation to perform custodianship
§ X238.1 Delivery of securities. function;
a. Securities sold on a without recourse (c) Suspension or revocation of the
basis allowed under Sec. X238 shall be authority to engage in quasi-banking
delivered directly to the purchaser or to the function; and/or
purchaser’s designated Bangko Sentral (d) Suspension or revocation of the
accredited securities custodian or SEC authority to engage in trust and other
authorized central securities depository in fiduciary business.
accordance with the guidelines set forth in b. The guidelines to implement the
Appendix 68. The securities custodian shall delivery by the seller of securities to the
hold the securities in the name of the buyer: buyer or to his designated securities
Provided, That a bank authorized by the custodian or central securities depository
Bangko Sentral to perform custodianship are shown in Appendix 68.
function or an SEC-authorized central The guidelines on the delivery of
securities depository may not be allowed government securities to the investor’s
to be custodian/depository of securities principal securities account with the RoSS
issued or sold by said custodian or central are in Appendix 68a.
securities depository, by entities belonging Sanctions. Violation of any provision of
to the same financial conglomerate or the guidelines in Appendix 68 shall be
banking group as that of the custodian or subject to the sanctions/penalties under
depository, or of securities in bearer form. Item “b” of Subsec. X235.5.
The delivery shall be effected upon (As amended by Circular Nos. 873 dated 25 March 2015,
714 dated 10 March 2011, M-2007-002 dated 23 January 2007,
payment and shall be evidenced by a M-2006-009 dated 06 July 2006 and M-2006-002 dated 05 June
securities delivery receipt duly signed by the 2006, Circular No. 524 dated 31 March 2006)

§§ X238.2 - X239.4
15.10.31
§ X238.2 Sanctions. Unless specific Rules on Registration of Long-Term

sanctions are prescribed under these rules, Commercial Papers promulgated by the SEC
any violation of the provisions of this Section (Appendix 13).
shall be subject to any or all of the following
sanctions: § X239.3 Notice to Bangko Sentral ng
a. Suspension of quasi-banking authority Pilipinas. Within three (3) days from
for a period of six (6) months; and approval by SEC of its bond issue, the bank
b. Monetary penalty of P500 per day per concerned shall notify the appropriate
transaction for each officer of the bank department of the SES of the approval
involved in any capacity in any transaction attaching thereto the documents required
violative of these regulations. by the SEC for the issuance and registration
of the bond issue.
§ X238.3 Securities custodianship
operations. § X239.4 Minimum features. Bonds
(Deleted by Circular No. 873 dated 25 March 2015)
issued by banks shall have the following
Sec. X239 Issuance of Bonds. The following minimum features:
guidelines shall govern the issuance of a. Form; issue price; denomination -
bonds by banks with quasi-banking The trust indenture and the name of the
authority. indenture trustee shall be indicated on the
face of the bond certificate.
§ X239.1 Definition of terms. For The SEC-assigned bond registration
purposes of this Section, unless the context number and expiry date, if any, shall
clearly indicates otherwise, the following likewise be indicated, stamped on the face
shall have the meaning as indicated: of each bond certificate issued.
a. Government securities shall refer to Bonds may be issued at face value, at a
evidences of indebtedness of the Republic discount or at a premium. Minimum
of the Philippines or its instrumentalities, or denomination shall be P20,000.
of the Bangko Sentral, and must be freely b. Term - The minimum term of the
negotiable and regularly serviced. bonds shall be four (4) years. No optional
b. Net book value shall refer to the redemption before the fourth year shall be
acquisition cost of property or accounts plus allowed.
additions and improvements thereon less c. Interest; manner; form of payment -
valuation reserves, if any. The bonds shall not be subject to interest
c. Current market value shall refer to the rate ceilings prescribed by the Monetary
value of the property as established by a duly Board or Act No. 2655, as amended.
licensed and independent appraiser. d. Trust indenture; collaterals; sinking
fund - A trust indenture shall be executed
§ X239.2 Compliance with Securities between the issuer and a qualified trust
and Exchange Commission rules on corporation as trustee, which shall neither
registration of bond issues. All banks with be an affiliate nor a subsidiary of the issuer.
quasi-banking authority issuing or intending The following shall be deemed as
to issue bonds shall comply with the New eligible collateral and shall be maintained

§§ X239.4 - X240.1
08.12.31
at respective values indicated in relation to F. GOVERNMENT DEPOSITS

the face value of the bond issue:
Sec. X240 Statement of Policy. As a
(1) Government - Aggregate general policy, cash balances of the
securities current Government, its political subdivisions and
market value instrumentalities as well as of government-
of 100% owned or controlled corporations shall be
(2) Readily marketable - Aggregate
deposited with the Bangko Sentral, with
private securities current
listed in the big board market value
only minimum working balances to be
of stock exchanges of 150% held by government-owned banks and
(3) Real estate - Net book such other banks incorporated in the
value of 100% Philippines as the Monetary Board may
(4) Unmatured - Net book designate: Provided, That such banks may
receivables acquired value of 150% be authorized by the Monetary Board to
with recourse hold deposits of the political subdivisions
(5) Unmatured - Net book and instrumentalities of the Government
receivables acquired value of 200% beyond their minimum working balances
without recourse whenever such subdivisions and
instrumentalities have outstanding loans
Government and private securities, with said banks.
certificates of title and documents For purposes of this Section:
evidencing receivables offered as security a. The term government-owned or
shall be physically delivered to the indenture controlled corporations shall refer to
trustee. Substitution of collaterals shall be government-owned or-controlled
allowed: Provided, That in no case shall the corporations which are created by special
collateral fall below the herein required ratios. laws. It shall exclude government FIs such
The issuer may, at his option, provide as DBP, LBP and Al-Amanah Islamic
for the retirement at maturity of the bond Investment Bank of the Philippines,
issue through the sinking fund to be corporations which are created under the
deposited with and managed by the provisions of the Corporation Law (Act No.
indenture trustee. 1459, as amended) or the Corporation Code
e. Bond registry - The bonds shall be (BP Blg. 68) and private corporations which
fully registered as to principal and interest. are taken over by government-owned or-
The issuer, its trustee, agent or underwriter controlled corporations.
must maintain a bond registry duly approved b. Minimum working balances shall
by the SEC for recording initial and represent the minimum amounts necessary
subsequent transfers the names of to enable the government instrumentality/
transferees, date of transfer, purchase price political subdivision making the deposit to
and serial numbers of bonds transferred. transact business efficiently and effectively
as determined by the Department of
§ X239.5 Issuance of commercial Finance.
papers. The issuance of other forms of
commercial papers by banks with quasi- § X240.1 Prior Monetary Board
banking authority shall be subject to the approval. No private bank shall, without
new rules on registration of short-term and prior approval of the Monetary Board,
long-term commercial papers appended accept, as depository, any fund or money
hereto as Appendices 13 and 14. from the Government, its political
* No page 28

§§ X240.1 - X240.3
10.12.31
subdivisions and instrumentalities, and the nearest government bank or Bangko

government-owned or -controlled Sentral office is inaccessible by ordinary
corporations; nor shall a private bank transportation, or transporting/withdrawing
borrow any fund or money therefrom, the government deposits to and from the said
through the issuance or sale of its office is impractical or risky, the province,
acceptances, notes or other evidences of as well as cities and municipalities located
indebtedness. therein, may seek approval of the Monetary
Board to consider all their funds eligible for
§ X240.2 Banks which may accept deposits with a qualified private depository
government funds bank within the province, city or
a. Banks, the majority of the capital of municipality, as the case may be.
which is owned by the Government, may d. Banks acting as official depository of
act as depository of funds of the government funds may accept demand,
Government, its political subdivisions and savings or time deposits.
instrumentalities, and government-owned e. The authority of a bank to accept
or-controlled corporations. government deposits does not obligate the
b. Private banks incorporated in the Government, its subdivisions and
Philippines may act as depository of instrumentalities and government-owned or-
government funds only with the prior controlled corporations to deposit with that
approval of the Bangko Sentral. Local bank. Thus, even if a TB or RB is authorized
government units may maintain depository by the Monetary Board to accept
accounts preferably in government banks government deposits, a municipality is not
and, in exceptional cases and with the prior obligated to deposit with that TB or RB.
approval of the Monetary Board, in the name Similarly, a bank which is authorized to
of their respective government units, in accept deposits of the Government or a
private banks located in or nearest to their government corporation because of
respective areas of jurisdiction but the outstanding loans granted by the bank
depository bank(s) must also seek the prior cannot demand as a matter of right that the
approval of the BSP: Provided, That a TB/ Government or government corporation
RB/Coop Bank may only act as official make deposits unless there is a stipulation
depository of government funds pursuant to in the loan agreement.
R.A. Nos. 7906, 7353 and 6938, as follows:
(1) a TB may only act as official § X240.3 Prerequisites for the grant of
depository of national agencies, and of authority to accept deposits from the
municipal, city or provincial funds in the Government and government entities. In
municipality, city or province where the TB addition to the Standard Pre-qualification
is located; Requirements for the Grant of Banking
(2) an RB may only act as official Authorities enumerated in Appendix 5,
depository of municipal, city or provincial private banks applying for authority to
funds in the municipality, city or province accept deposits from the Government, its
where the RB is located; and subdivisions and instrumentalities and
(3) a Coop Bank may accept deposits of government-owned or-controlled
all government departments, agencies and corporations and government banks
units of the national and local governments applying for authority to accept government
including government-owned or-controlled deposits in excess of minimum working
corporations. balances shall also comply with the
c. Where there is no government bank following conditions:
or Bangko Sentral office in the province and a. The applicant bank must have

§§ X240.3 - X240.5
13.12.31
complied with the minimum capital required c. In case of the National Government,
under Subsec. X111.1; its unincorporated branches, agencies and
b. It has neither unpaid assessment due instrumentalities, a written authority to open
nor past due obligations with the PDIC; and deposit accounts and/or deposit government
c. The bank’s CAMELS composite rating funds signed by the duly authorized official
in its latest examination is not lower than of the Department of Finance/Bureau of the
three (3) with Management component Treasury (DOF/BTr) and of the department,
score of not lower than three (3). bureau, agency, or office making the
(As amended by Circular Nos. 696 dated 29 October 2010, deposit.
674 dated 10 December 2009 and 526 dated 10 April 2006) The resolution or authority should state
the name and location of the depository
§ X240.4 Application for authority. An
bank, type and terms of the deposit, and
application for authority to accept
that the amount to be deposited represents
government deposits shall be signed by the
working balances.
president of the bank and shall be filed with (As amended by Circular No. 811 dated 13 September 2013)
the appropriate department of the SES. The
application shall be accompanied by a § X240.5 Limits on funds of the
certification by the bank president or Government and government entities that
executive vice-president that the bank has may be deposited with banks
complied with all the requirements a. Funds of the Government, its
enumerated under Subsec. X240.3. subdivisions and instrumentalities and
Banks authorized to accept government government-owned or-controlled
funds as depository shall continuously corporation, deposited with banks
comply with the conditions enumerated authorized to receive deposits shall be
under Subsec. X240.3 even after the limited to the minimum working balance
authority to accept government deposits has of the depositor.
been granted and during the period while With prior Monetary Board approval,
the banks actually hold government deposits, government or private banks may be
otherwise, any violation may be a basis for authorized to accept amounts in excess of
the imposition of sanctions against the bank, minimum working balances if the
its directors and officers, or revocation of Government or government entity making
the authority to accept government deposits. the deposit has outstanding loan obligations
Deposits maintained by the to the depository bank but such amounts
Government, its subdivisions and shall not exceed the amount of its
instrumentalities and government -owned outstanding loan obligations to the
or -controlled corporations shall be depository bank. The amount of non-
supported by the following documents transferable and non-negotiable government
whenever applicable: securities with market or below market
a. A copy of the resolution of the interest rate at the time of issue, issued by
barangay, municipal or city council the National Government to the depository
(Sangguniang Bayan/Panglunsod) or the bank shall be considered as “outstanding
provincial board (Sangguniang loans” of the National Government to said
Panlalawigan) authorizing the deposit of bank within the meaning of Section 113 of
municipal, city or provincial funds; R.A. No. 7653.
b. A copy of the resolution of the board b. The aggregate amount of government
of directors of the government-owned or- funds which a private bank can hold at any
controlled corporations authorizing the given time shall not exceed 200% of the
deposit of funds of said corporations; or bank’s net worth.

§§ X240.5 - X240.6
08.12.31
c. Where any director, officer or a. The free portion of the “Due from
stockholder of a private bank, as defined Bangko Sentral - Local Currency” after
under Subsec. X326.1, is also an elective satisfying the legal and other reserve
or appointive official of a municipality, city requirements;
or province, said bank is prohibited from b. NDC Agri-Agra ERAP Bonds, which
accepting deposits from said municipality, are not being used as alternative
city or province unless it is the only bank compliance with PD 717. Such bonds shall
existing therein: Provided, That this not in any way be encumbered or be
provision shall not be construed as a grant subject to any transaction without prior
of authority to such elective or appointive approval of the BSP;
public official to act as director or officer of c. Securities backed by the
a private bank. unreleased Internal Revenue Allotments
(IRA) of local government units (issued by
§ X240.6 Liquidity floor. Unless a Special Purpose Trust administered by
otherwise prescribed by the Monetary the DBP under the IRA Monetization
Board, authorized government depository Program of the Union of Local Authorities
banks other than the BSP, and authorized of the Philippines) the release of which IRA
private banks shall, inclusive of the on scheduled date of payment has been
required reserves against deposits and/or certified by the Department of Budget
deposit substitutes, maintain a fifty percent Management (DBM) as not being subject
(50%) liquidity floor with respect to to any conditionalities: Provided, That such
deposits of, borrowings from, and all other securities shall be eligible only to the extent
liabilities to, the Government and of the present value of the bond computed
government entities, in the form of using the original yield to maturity (as of
transferable government securities which auction/issue date);
represent direct obligations of the National d. Tobacco Excise Tax Receivables
Government. Monetization Program Investment
Government securities representing Certificates (TEXTR Certificates) backed
direct obligations of the National by receivables representing the
Government regardless of maturity, issued unreleased portion of the obligation of the
pursuant to the provisions of R.A. No. 245, National Government to its LGU for their
as amended by P.D. No. 142, which are share of the Tobacco Excise Taxes under
not otherwise earmarked or used as part R.A. No. 7171 amounting to P1.85 billion
of other reserve requirements of the BSP, and covering the years 2001 and 2002:
shall be eligible as liquidity reserves. Provided, That such securities shall be
Securities received pursuant to the eligible only to the extent of the present
Domestic Debt Exchange Offer of the value of the securities computed using the
Republic of the Philippines in exchange original yield to maturity as of auction/issue
for securities that are eligible reserves for date; and
liquidity floor requirement shall, likewise e. Placement of banks in their SDA
be eligible as liquidity reserves. with the BSP, effective 10 May 2007.
Eligible securities being used as such For purposes of computing the fifty
reserve shall not in any way be encumbered percent (50%) liquidity floor requirement
or be subject to any transaction without prior on all government funds held by
approval of the BSP. authorized banks, banks shall adopt a
Also eligible for liquidity floor are the one (1)-week lag system, effective
following: 04 May 2001.

§§ X240.6 - X240.9
08.12.31
Banks authorized to accept government § X240.8 Reports. Banks shall submit

deposits shall specify in the prescribed to the appropriate department of the SES a
reports submitted to the SDC of the BSP report of their government deposits from
the balance of government deposits subject all sources in the aggregate in the
to liquidity floor requirement and, if any, prescribed form.
the corresponding GS earmarked for
subject purpose. § X240.9 Sanctions. Any violation of
(As amended by Circular Nos. 566 dated 03 May 2007 and 509 this Section shall be a ground for the
dated 01 February 2006) imposition of the following sanctions:
a. The deposit account with the BSP
§ X240.7 Exempt transactions. The of the bank concerned shall be debited by
following deposits of, borrowings from the Accounting Department of the BSP in
and/or liabilities to, the Government and the amount of the unauthorized deposit or
government entities shall be exempt borrowing upon receipt of a report or
from the liquidity floor: notice from the appropriate department of
a. Obligations to the BSP arising from the SES and the deposit account of the
rediscounting facilities and sale of government institutions with the BSP shall
government securities under repo be credited for the same amount. A copy
agreements made in connection with the of said report or notice of the SES shall be
provisions of Sec. X269 and Subsec. X601.1; furnished each to the bank concerned and
b. Special time deposits (STDs) and the government institutions.
deposit substitutes under the special b. The withdrawal of previously
financing program of the Government granted authority to accept government
and/or international FIs; funds;
c. Obligations to the BSP consisting c. Without prejudice to the sanctions
of emergency advances, overdraft under Section 35 of R.A. No. 7653, the
facilities, and those arising from peso swap following administrative sanctions shall be
differentials and supervision and imposed if any part of the certification as
examination fees; required in this Section is found to be false
d. Marginal deposits on importations; or misleading:
e. Due to the Treasurer of the On the bank - Cancellation of the
Philippines (unclaimed deposit balances); authority to accept government deposits if
f. Funds held by participating one has already been granted and/or
financial institutions (PFIs) under the GSIS disqualification to act as a government
Housing Loan Programs: Provided, That depository for not more than one (1) year.
the agreement between GSIS and the On the certifying officer - A fine of
conduit banks specify that such funds may P5,000 per day from the time the
be held by the conduit banks for a period certification was found to be false, for each
of not more than seven (7) calendar days application filed with the BSP.
prior to their release to the borrower and d. Any bank with deficiency in the
prior to the remittance by the conduit required liquidity floor against deposits of,
banks of payment to the GSIS; and/or borrowings from, the Government
g. Deposits of the BIR and BOC; and and government entities or with excess
h. Any other form of deposits, holdings of such deposits shall: (1) be
borrowings and/or liabilities specifically denied the credit facilities of the BSP; and
authorized by law or exempted by the (2) if the deficiency lasts for four (4)
Monetary Board. consecutive weeks, the bank shall be

§§ X240.9 - X243
08.12.31
prohibited from declaring cash dividends § X242.1 Time of payment of interest

and making new loans and investments, on time deposits/deposit substitutes
except investments in government Interest or yield on time deposit/deposit
securities. The prohibition shall be lifted by substitute may be paid at maturity or upon
the Governor of the Bangko Sentral, upon withdrawal or in advance: Provided,
certification by the appropriate department however, That interest or yield paid in
of the SES that the bank has had no advance shall not exceed the interest for
deficiency in its liquidity floor and no excess one (1) year.
holdings of government deposits for at least
four (4) consecutive weeks. § X242.2 Treatment of matured time
deposits/deposit substitutes
§§ X240.10 - X240.14 (Reserved) a. A time deposit not withdrawn or
renewed on its due date shall be treated as
§ X240.15 Acceptance by banks with a savings deposit and shall earn interest
internet banking facility of payment of fees from maturity to the date of actual
for account of government entities withdrawal or renewal at a rate applicable
Domestic private banks with BSP- to savings deposits.
approved internet banking facility are b. A deposit substitute instrument not
allowed to accept payment of fees/other withdrawn or renewed on its maturity
charges of similar nature for the account date shall from said date become payable
of the departments, bureaus, offices and on demand and shall earn an interest or
agencies of the government as well as all yield from maturity to actual withdrawal
GOCCs: Provided, That the funds so or renewal at a rate applicable to a deposit
accepted/collected shall be treated as substitute with a maturity of fifteen (15)
deposit liabilities subject to existing days.
regulations on government deposits and Banks performing quasi-banking
shall not exceed the minimum working functions shall continue to consider matured
balance of the said government entities. and unwithdrawn deposit substitutes as such
These banks are required to notify the and subject to reserves.
appropriate department of the SES that
supervises the bank, copy furnished the Sec. X243 Disclosure of Effective Rates of
Head of the Technical Working Group on Interest. Banks are required to disclose to
E-Banking, SDC, of the names of the depositors the following information on
government institutions that will interface interest computation and payments:
with their systems and any changes that a. Type/kind of deposit;
may subsequently be made on the b. Nominal rate of interest and period
arrangements. covered;
c. Manner of interest payment,
Sec. X241 (Reserved) i.e., whether credited in advance or otherwise;
d. Basis of interest payment,
G. INTEREST i.e., whether based on average daily balance
compounded quarterly or otherwise;
Sec. X242 Interest on Deposits/Deposit e. Effective rate of interest expressed
Substitutes. Demand, savings, NOW as a simple annual rate, on the basis of
accounts, time deposits and deposit the information above given and
substitutes shall not be subject to interest indicating the formula used to arrive at the
ceilings. effective rate of interest; and

§§ X243 - X253.1
14.12.31
f. Illustration of basis of computing RBs/

interest on a hypothetical deposit account. UBs/KBs TBs Coop Banks
a. Demand
Copies of the abovementioned Deposits2 20% 8% 5%
information shall be made available to each b. NOW Accounts2 20% 8% 5%
and every depositor by attaching these c. Savings
Deposits2 20% 8% 3%
copies to savings deposit passbooks and d. Time Deposits,
time deposit certificates. Negotiable CTDs,
Long-Term Non-
Posters disclosing the above information Negotiable Tax
and aggregate deposit rates shall also be Exempt CTDs2 20% 8% 3%
displayed conspicuously within the bank e. Long-term
Negotiable certificate
premises. of Time Deposits
1. LTNCTDs under
Secs. X244 - X252 (Reserved) Circular No. 304 4% 4% 4%
2. LTNCTDs under
Circular No. 8421 7% 7% 7%
H. RESERVES AGAINST DEPOSIT f. Deposit
Substitute (DS)2 20% 8% NA
AND DEPOSIT SUBSTITUTE g. DS evidenced by
LIABILITIES repo agreement2 4% 4% NA
h. IBCL 0% 0% 0%
(Sec. X343)
Sec. X253 Accounts Subject to Reserves; i. Bonds2 6% 6% NA
Amounts Required. The following rules and j. Mortgage/CHM cert.2 NA 6% NA
regulations shall govern the reserves against k. Peso deposits
deposit and deposit substitute liabilities. lodged under Due
to foreign banks2 20% NA NA
l. Peso deposits
§ X253.1 Required reserves against
lodged under Due
deposit and deposit substitute liabilities
to Head Office/
The rates of required reserves against deposit
Branches/Agencies
and deposit substitute liabilities in local Abroad (Philippine
currency of banks shall be as follows: branch of a foreign
bank)2 20% NA NA
1
As of 22 February 2014 the required reserves for LTNCTD shall be increased from three percent (3%) to
six percent (6%). However, approved applications & outstanding LTNCTDs as of 22 February 2014 shall
not be covered by the new requirements.
2
For reserve week starting 11 April 2014, the required reserves for UBs/KBs and TBs shall be as follows:
UBs/KBs TBs UBs/KBs TBs

a. Demand Deposits 19% 7%
b. NOW Accounts 19% 7% g. Bonds 5% 5%
c. Savings Deposit 19% 7% h. Mortgage/CHM cert. NA 5%
d. Time Deposits, i. Peso deposits lodged
Negotiable CTDs, under Due to foreign Banks 19% NA
Long-Term Non-Negotiable j. Peso deposits lodged
Tax Exempt CTDs 19% 7% under Due to Head
e. Deposit Substitute (DS) 19% 7% Office/Branches/Agencies
f. DS evidenced by Abroad (Philippine Branch
repo agreements 3% 3% of a foreign bank) 19% NA

§§ X253.1 - 254
14.12.31
Item “g” refers to deposit substitutes (As amended by Circular Nos. 832 dated 27 May 2014,
evidenced by repo agreements covering 830 dated 03 April 2014, 824 dated 30 January 2014, 753 dated
government securities up to the amount 29 March 2012, 732 dated 03 August 2011, 726 dated 27 June
equivalent to the adjusted Tier 1 capital 2011 and 632 dated 19 November 2008)
of the bank: Provided, That such rate
shall apply only to repo agreements, the § X253.2 Liquidity reserves
(Deleted by Circular No. 753 dated 29 March 2012)
documentation of which conforms with,
and were delivered to a BSP-accredited
Sec. X254 Composition of Reserves
third party custodian as required under
a. Composition of required reserves. The
existing Bangko Sentral regulations. required reserves shall be kept in the form of
Items “k” and “l” refer to peso deposits, deposits placed in banks’ demand deposit
except those utilized as capital of foreign accounts (DDAs) with the Bangko Sentral.
banks (incuding Head Office/Branches/ b. Transitory provisions. Banks may
Agencies abroad of local branches of continue to utilize the following as eligible
foreign banks) booked under the “Due to forms of compliance with the reserve
Foreign Banks” and “Due to Head Office/ requirement in accordance with the following
Branches/Agencies Abroad” accounts as guidelines:
provided under Subsec. X191.1, as i. Government securities. Government
amended. securities which are used as compliance with
the regular and/or liquidity reserve

§§ X254 - X254.1
12.12.31
requirement as of 06 April 2012, shall The reserve eligibility of government

continue to be eligible as compliance with securities used as collateral in the reverse
the reserve requirement until they mature. repo operations of the Bangko Sentral shall
For purposes of this Section, be suspended during the term of the reverse
government securities which may form part repo agreement.
of the reserves against deposits/deposit The phrase non-reserve eligible shall be
substitute liabilities of banks shall refer to stamped on the face of the custodian receipt
bonds or other evidences of indebtedness being issued by the Bangko Sentral to buyer
representing direct obligations of the FIs.
Government of the Republic of the ii. Reserve deposit account (RDA)
Philippines: Provided, That such securities Deposit placements that are maintained by
shall have the following minimum features/ banks in the RDA with the Bangko Sentral,
conditions: which are used as compliance with the
(1) The securities must bear an interest liquidity reserve requirement as of 06 April
rate of not more than four percent (4%) per 2012, shall continue to be eligible as
annum, must be non-negotiable and shall compliance with the reserve requirement
carry Bangko Sentral support; until they mature.
(2) The amount, maturity date and rate All new deposits in the RDA shall be
of interest must be definite and stated in the given a maturity date of 04 April 2012.
certificate itself; and The RDA facility shall be discontinued
(3) The government securities may not and the Bangko Sentral shall no longer
be hypothecated or encumbered in any way accept new RDA placements from banks
or earmarked for any other purpose. effective 06 April 2012.
The government securities held as Outstanding placements in the RDA
reserves under Item “b.i” above shall be facility on 06 April 2012 shall be paid
valued at cost of acquisition and the bank interest at maturity based on existing
may freely alter its composition: Provided, regulations.
That any substitution or acquisition iii. Cash in vault (CIV). Banks’ existing
satisfies the eligibility requirements CIV shall be eligible as compliance with the
prescribed above: Provided, further, That reserve requirements until 06 April 2012.
the bank notifies the Bangko Sentral of any Henceforth, such mode of compliance shall
such change in the prescribed forms not no longer be allowed.
later than the reporting day following the The CIV component of available
change. reserves shall be based on the actual CIV
Only the buying/lending bank in a balance outstanding with a one (1) banking
resale agreement covering eligible day lag, for purposes of computing the
government securities may use such reserve position of the current day.
securities as reserves against deposits/ (As amended by Circular Nos. 753 and 752 dated 29 March
deposit substitutes. Conversely, the 2012, 551 dated 17 November 2006 and 539 dated 09 August
2006)
selling/borrowing bank in a repo
agreement covering eligible government § X254.1 Allowable drawings against
securities may not use such securities as reserves. Deposit with the Bangko Sentral
reserves against deposits/deposits to comply with reserve requirements are not
substitutes. regular current accounts. The use, therefore,

§§ X254.1 - X256
12.12.31
of Bangko Sentral checks for drawings b. STDs from the Agrarian Reform Fund
against reserve deposits shall be limited to Commission and special savings deposits
(a) settlement of obligations with the Bangko from farmer-borrowers; and
Sentral, and (b) withdrawals to meet cash c. Unclaimed balances of deposit
requirements. liabilities already reported to the Treasurer
of the Philippines in accordance with the
§ X254.2 Exclusion of uncleared checks Unclaimed Balances Act (Act No. 3936, as
and other cash items. COCIs which have amended) and transferred/reclassified from
not been cleared yet through the Clearing the deposit liability/other credit accounts to
Office should not be debited to the account the liability account “Due to the Treasurer
Due from the Bangko Sentral and should not of the Philippines”.
be considered as available reserves against Local banks may deduct from the
deposit/deposit substitute liabilities. Such amount of their gross demand deposits, the
items shall be debited to the COCIs account. total of their Due from Local Banks -
Only after the COCIs have been cleared Demand and Due from PNB - Clearing in
through the Clearing Office can the bank an amount not exceeding the total of their
debit the Due from the Bangko Sentral Demand Deposits-Banks and Due to Local
account for said items. Banks. As used herein, the term gross
demand deposits shall mean the sum of all
§ X254.3 Interest income on reserve individual deposits, including deposits
deposits. Deposits maintained by banks with made by other local banks, the Philippine
the Bangko Sentral in compliance with the Government, its political subdivisions and
reserve requirement shall no longer be paid instrumentalities, and GOCCs.
interest effective 06 April 2012.
(As amended by Circular No. 753 dated 29 March 2012) Sec. X256 Computation of Reserve
Position. The reserve position of any bank
§ X254.4 Book entry method for and the penalty on reserve deficiency shall
reserve securities. In the implementation of be computed based on a seven (7)-day
the book entry system for transactions in week, starting Friday and ending Thursday,
government securities eligible for reserves, including Saturdays, Sundays, public
transactions concerning reserve-eligible special/legal holidays, non-banking days or
securities shall be entered in the respective declared half-day holidays and days when
securities account of each bank with the there is no clearing: Provided, That with
Bangko Sentral and shall be evidenced by reference to public special/legal holidays,
securities account debit or credit advices to non-banking days, unexpected declared
be promptly furnished the institution/s non-banking days, declared half day
concerned. No certificate shall be issued for holidays and days when there is no clearing,
any purpose. Transactions with third parties the reserve position as calculated at the close
other than the Bangko Sentral shall not be of the business day immediately preceding
recognized. such public special/legal holidays, non-
banking days and unexpected declared non-
Sec. X255 Exemptions from Reserve banking days and declared half-day holidays
Requirements. The following shall be and days when there is no clearing, shall
exempt from reserve requirements: apply thereon. For this purpose, the principal
a. All collections credited to the special office in the Philippines and all other
account “Due to BSP - Internal Revenue banking offices located therein shall be
Account (Other Cities and Municipalities)”; treated as a single unit.

§§ X256 - X257
14.12.31
The guidelines on the computation of a in Subsec. X256.1, shall also be adopted in

banks’ reserve position during public sector the calculation of the two percent (2%)
holidays are shown in Appendix 84. statutory reserve requirements for repo
(As amended by M-2008-025 dated 13 August 2008) agreements covering government securities.
d. Deposit substitutes evidenced by
§ X256.1 Measurement of reserve repo agreements covering government
requirement. The required reserves in the securities in excess of the adjusted Tier 1
current period (reference reserve week) capital shall be treated as regular deposit
shall be computed based on the substitutes and shall be subject to the regular
corresponding levels of deposit and statutory and liquidity reserve requirements
deposit substitute liabilities of the prior under existing regulations.
week. (As amended by Circular No. 827 dated 28 February 2014)
§§ X256.2 – X256.4 (Reserved) Sec. X257 Reserve Deficiencies; Sanctions

Whenever the reserve position of any bank
§ X256.5 Guidelines in calculating and computed in the manner specified in Sec.
reporting to the Bangko Sentral the X256 is below the required minimum, it
required reserves on deposit substitutes shall pay the Bangko Sentral one-tenth of
evidenced by repurchase agreements one percent (1/10 of 1%) per day on the
covering government securities amount of the deficiency or the prevailing
a. The SDC shall determine the ninety-one (91) day T-Bill rate plus three (3)
maximum allowable amount of repo percentage points, whichever is higher:
agreements covering government securities Provided, however, That a bank shall be
that will qualify for the reduced statutory permitted to offset any reserve deficiency
reserve requirements of two percent (2%). occurring one (1) or more days of the week
It shall be based on the amount reported by covered by the report against excess reserves
banks in their weekly Consolidated Daily which it may hold on other days of the same
Report of Condition. The adjusted Tier 1 week, and shall be required to pay the
capital reported daily should approximate penalty only on the average daily net
the quarterly adjusted Tier 1 capital as deficiency during the week1.
submitted by banks in compliance with the In case of abuse, a bank shall
risk-based CAR presented under applicable automatically lose the privilege of
and existing capital adequacy framework. offsetting reserve deficiency in the
b. Any material differences that may aforesaid manner until such time that it
be noted by the SDC between the daily maintains its daily reserve position at the
and the quarterly report shall be required minimum for at least two (2)
considered as erroneous reporting and consecutive weeks.
shall be subject to the penalties under As used in this Section, “abuse” in the
existing regulations. The SDC shall also privilege of offsetting reserve deficiencies
make a re-run of its computation of the against excess reserves shall mean having
bank’s reserve position and in the event reserve deficiencies occurring four (4) or
that the reserve position resulted to more times during any given week for two
reserve deficiency/ies, the corresponding (2) consecutive weeks, whether or not
penalties on reserve deficiencies shall also resulting in net weekly deficiencies.
apply. (M-2014-031 dated 08 August 2014, M-2014-006 dated
c. The lagged system in the measurement 12 February 2014, M-2013-050 dated 15 November 2013,
of a bank’s reserve requirement, as provided M-2013-046 dated 30 October 2013, M-2013-045 dated
23 October 2013, M-2013-040 dated 03 September 2013,
1
See Appendix 89

§§ X257 - X260
14.12.31
M-2013-001 dated 14 January 2013, M-2012-060 dated least five (5) consecutive banking days. If
27 December 2012, M-2012-051 dated 09 November 2012, its clearing account is overdrawn for five
M-2012-044 dated 24 August 2012, M-2012 042 dated 17 August
2012, M-2012-001 dated 03 January 2012, M-2011-056 dated (5) consecutive banking days, it shall be
10 November 2011, M-2011-055 dated 17 October 2011, prohibited from (a) making new loans or
M-2011-043 dated 12 August 2011, M 2011-007 dated 04 February investments, except investment in
2011, M-2010-039 dated 03 November 2010, M-2010-007 dated government securities with Bangko Sentral
23 April 2010, M-2009-040 dated 30 October 2009, M-2009-037
support; (b) declaring cash dividends until
dated 15 October 2009,M-2009-38 dated 08 October 2009, and
M-2009-036 dated 07 October 2009) it has maintained credit balances in its
Bangko Sentral clearing account for at least
§ X257.1 Chronic reserve deficiency; fifteen (15) consecutive banking days; and
penalties. In cases where the bank has (c) establishing branches. The denial from
chronic reserve deficiency in deposit/ availment of credit facilities of the Bangko
deposit substitute liabilities, the bank shall Sentral shall continue for as long as the
be denied the credit facilities of the Bangko bank has not maintained credit balances
Sentral; and the Monetary Board may: with the Bangko Sentral for at least fifteen
(a) limit or prohibit the making of new (15) consecutive banking days.
loans or investments by the bank; and For purposes of computing the total
(b) prohibit the declaration of cash available reserves against deposit/deposit
dividends. The board of directors of said substitute liabilities, the total amount of
bank shall be notified of such chronic overdrawing in the clearing account with
reserve deficiency and the penalties therefor, the Bangko Sentral shall be deducted from
and be required to immediately correct the available reserves after the required
reserve position of the bank. reserves against deposit/deposit substitute
As used in this Subsection, “chronic liabilities shall have been satisfied.
reserve deficiency” shall mean having net (As amended by Circular Nos. 705 dated 29 December 2010
reserve deficiencies for two (2) consecutive
weeks.
§ X257.3 Payment of penalties on
§ X257.2 Failure to cover overdrawings reserve deficiencies. Penalties if unpaid
with the Bangko Sentral. Any bank which within fifteen (15) days from receipt of the
incurs an overdrawing in its deposit assessment, shall be charged against the
account with the Bangko Sentral shall fully demand deposit accounts of banks with the
cover said overdraft not later than the next Bangko Sentral: Provided, That where the
clearing day including interest thereon bank’s credit balance is insufficient and it
equivalent to one-tenth of one percent (1/ fails to settle the assessment, the Monetary
10 of 1%) per day or the prevailing ninety- Board may limit or prohibit the making of
one (91) day T-Bill plus three (3) new loans or investments by the bank.
percentage points, whichever is higher. In
case a bank fails to cover its overdrawings, Sec. X258 Report on Compliance. Every
it shall be excluded from clearing on such bank shall make a weekly report to the
day and it shall also be denied the credit Bangko Sentral of its daily required and
facilities of the Bangko Sentral. Such available reserves on deposit/deposit
exclusion from clearing shall continue for substitute liabilities in the prescribed forms.
as long as it has not maintained credit
balances with the Bangko Sentral for at Secs. X259 - X260 (Reserved)

§§ X261 - X262
08.12.31
I. SUNDRY PROVISIONS clearing cut-off time until the close of the

ON DEPOSIT OPERATIONS regular banking hours shall be booked as
deposits on the day of receipt.
Sec. X261 Booking of Deposits and
Withdrawals. The following regulations § X261.4 Booking of non-cash deposits
shall govern the booking of deposits and Deposits of checks including “on us” checks,
withdrawals of banks. manager’s/cashier’s/ treasurer’s checks and
demand drafts, which are drawn against the
§ X261.1 Clearing cut-off time. As a depository bank and all its offices, as well
general rule, all deposits and withdrawals as treasury warrants and postal money
during regular banking hours shall be orders, received after the selected clearing
credited or debited to deposit liability cut-off time until the close of the regular
accounts on the date of receipt or payment banking hours, may, at the option of the bank,
thereof: Provided, however, That a bank may be booked as deposits on the day of receipt.
set a clearing cut-off time for its head office Other non-cash deposits received after
not earlier than two (2) hours before the start the selected clearing cut-off time shall be
of clearing at the BSP, and not earlier than treated as contingent accounts on the day
three and one-half (3-1/2) hours before the of receipt and shall be booked as deposits
start of clearing for all its branches, agencies the following banking day.
and extension offices doing business in the
Philippines, after which time, deposits § X261.5 Booking of deposits after
received shall be booked as hereinafter regular banking hours. Deposits, whether
provided: Provided, further, That banks cash or non-cash, received after the close
which are located in areas where there are of the regular banking hours shall be treated
no BSP regional/clearing arrangements may as contingent accounts on the day of receipt
set a clearing cut-off time not earlier than two and shall be booked as deposits the
(2) hours before the start of their local clearing following banking day.
after which time, deposits received shall be
booked likewise as hereinafter provided. § X261.6 Other records required. For
record and control purposes, banks shall
§ X261.2 Definitions. As used in this prepare a daily abstract of deposit
Section, the following terms shall have the transactions treated as contingent accounts.
following meanings:
a. Regular banking hours shall refer to § X261.7 Notice required. Banks shall
the banking hours reported to the BSP post at a conspicuous place near each
pursuant to Sec. X156, including the teller’s window a notice to depositors
extended banking hours reported for indicating their selected clearing cut-off time
servicing deposits and withdrawals; and and a statement to the effect that non-cash
b. Clearing cut-off time shall mean the items deposited after said cut-off time shall
bank’s closing time for the acceptance of be treated as transactions for the next
deposits in the form of checks, bills and banking day.
other demand items for clearing on the day
of their receipt. Sec. X262 Miscellaneous Rules on
Deposits. Banks shall also be governed by
§ X261.3 Booking of cash deposits the following miscellaneous rules on
Cash deposits received after the selected deposits.

§§ X262.1 - X263
11.12.31
§ X262.1 Specimen signatures, of six (6) months without being considered

identification photos. All banking a regular/permanent employee.
institutions are required to set a minimum
of three (3) specimen signatures to be Sec. X263 Service and Maintenance Fees
simultaneously required from each of their Banks may impose and collect service
depositors and to update the specimen charges and/or maintenance fees on savings
signatures of their depositors every five (5) and demand deposit accounts, whether
years or sooner, at the discretion of the bank. active or dormant, that fall below the
Banks may, at their option, require their required minimum monthly average daily
depositors to submit ID photos together with balance (ADB), subject to the following
the specimen signatures. conditions:
a. the imposition of such charges or
§ X262.2 Insurance on deposits. All fees is clearly stated among the terms and
banks shall indicate the coverage of the conditions of the deposit;
PDIC in each passbook, certificate of time b. the rate or amount of such charges
deposit and/or cover of checkbook for or fees is properly disclosed among the
demand deposit/NOW accounts stating, terms and conditions of the deposit;
among other things, the maximum amount c. the deposit account balances have
of insurance. fallen below the required minimum monthly
ADB for dormant accounts and for at least
§ X262.3 Certification of compliance two (2) consecutive months for active
with Subsection 55.4 of R.A. No. 8791 accounts;
Banks shall submit to the appropriate d. the required minimum monthly
supervising and examining department of the ADB of deposits are properly disclosed
BSP, through the Deputy Governor of SES, a among the terms and conditions of the
statement within seven (7) banking days after deposit; and
end of June and December, signed solely by e. in the case of charges and fees for
the Vice-President for Administration or dormant accounts or dormancy fee, the
Human Resource or Personnel, or by any period of dormancy as prescribed under
officer assuming equivalent responsibility, Subsec. X185.12 shall be properly disclosed
certifying their institution’s compliance with among the terms and conditions of the
Subsection 55.4 of R.A. No. 8791, which deposit, and that the depositors shall be
prohibits banks from employing casual, informed by registered mail with return card
nonregular personnel or too lengthy or Proof of Delivery (POD) service of the
probationary personnel in the conduct of its Philippine Postal Corporation and other
business involving bank deposits. A format for mail couriers on his last known address at
the certification of compliance is shown in least sixty (60) days prior to the imposition
Appendix 49. of dormancy fee.
The definition contained in Articles 280- Said Proof of Delivery Receipt will be
281 of the Labor Code of the Philippines for accomplished upon the addressee-
private banks and Section 2 of the Civil Service depositor’s receipt of the letter, with the
Commission Memorandum Circular No. 40 postal personnel or courier required to
and Rule VII of Civil Service: Laws and Rules obtain and safekeep a copy of the signed
for government banks shall apply in classifying POD, for submission to the sender/bank.
employee/personnel as casual, regular or The PhilPost system likewise employs
probationary. Personnel with too lengthy a Delivery/Monitoring Report that tallies the
probationary status are employees who are number of mails with POD received,
allowed to work after a probationary period delivered and returned per client/bank,

§§ X263 - X265
11.12.31
indicating the name of the letter carrier, his other alternative modes of communication
signature and date signed. Said POD and on the depositor’s last known address at
Delivery/Monitoring Report may be system least sixty (60) days prior to implementation
generated by the bank so as not to rely on shall be considered sufficient notice:
the manual inscription of the required Provided, further, That failure of the
information by the PhilPost and/or other depositor to manifest or register his
mail courier personnel. objection to the new service charges and
Regardless of the forms adopted by the maintenance fees or any change in their terms
PhilPost and/or other mail couriers, the and conditions in writing within thirty (30)
proper implementation of the POD service days from receipt of written notice of
requires as a minimum, that the following amendment shall be deemed to constitute
information be stated clearly: acceptance of such changes, for purposes of
(1) name and address of the addressee/ this Subsection.
depositor; Banks shall likewise post said
(2) actual date of delivery/receipt; information on their respective websites,
(3) name and address of sender/bank; Automated Teller Machine on-screen
and messages, and in conspicuous places within
(4) name of recipient and relationship the bank premises and other places near the
to the addressee/depositor. bank’s own Automated Teller Machine at
Banks which erroneously charged service least sixty (60) days prior to implementation.
or maintenance fees shall reverse or credit
back the amount of such charges to the Sec. X264 Unclaimed Balances. All
respective deposit accounts that meet the unclaimed balances, which include credits or
required monthly ADB, within three (3) deposits of money, bullion, securities or other
months from 03 June 2011. Depositors evidences of indebtedness of any kind, and
whose accounts were erroneously charged interest thereon already reported to the
with these fees since 23 June 2005 but whose Treasurer of the Philippines in accordance
deposit accounts have since been closed shall with the Unclaimed Balances Act (Act No.
likewise be given appropriate notices sent to 3936, as amended) shall be transferred/
their last known mailing address. Notices on reclassified from the deposit liability/other
the proper interpretation of the regulations on credit accounts to the liability account, “Due
the imposition of service charges and to the Treasurer of the Philippines,” until
maintenance fees on deposit accounts shall they are deposited with or turned over to
likewise be posted in conspicuous places the Treasurer of the Philippines upon order
within the premises of all banks. of the court that the same have been escheated
(As amended by M-2011-030 dated 03 June 2011) in favor of the Government of the Republic of
the Philippines and as such, the unclaimed
§ X263.1 Amendments to terms and deposit liabilities shall no longer be covered
conditions for the imposition of service by reserves required of deposit liabilities.
charges/fees. Any change in the terms and
conditions for the imposition of service Sec. X265 Acceptance, Encashment or
charges and/or maintenance fees, e.g., Negotiation of Checks Drawn in Favor of
increase in the amount of such charges and Commissioner/Collector of Customs. All
fees or increase in the required minimum checks payable to the Commissioner/
monthly average daily balance of deposits, Collector of Customs shall be accepted for
shall take effect only after due notice to the deposit only to the account of the
depositor: Provided, That information by Commissioner/Collector of Customs. Banks
regular mail, statement of account messages, where the Commissioner/Collector of
electronic mail, courier delivery and/or Customs has no account shall not encash,

§§ X265 - X266
08.12.31
accept nor negotiate checks payable to the vehicles in the following cases/
Commissioner/Collector of Customs. circumstances:
Any attempt to defraud the government (a) On an unscheduled request;
or the bank through the irregular or Provided, That:
unauthorized encashment or deposit of (i) all armored vehicles have already
these checks to accounts other than that of been fielded and the request has to be served
the Commissioner/Collector of Customs immediately; and
shall be reported immediately by the head (ii) it is within a five (5) kilometer radius
of the banking office to the BOC, copy of a servicing banking office.
furnished the BSP. (b) In rugged terrain/mountainous
roads or roads not suitable for heavy
Sec. X266 Deposit Pick-up/Cash Delivery armored vehicles;
Services. The following are the guidelines (c) In critical or rebel-infested areas
on the deposit pick-up/cash delivery where there are peace and order problems as
services of banks; certified by the local police authorities; and
a. As a general rule, deposit pick-up/ (d) In island provinces where the
cash delivery services shall be limited to the transport of cash to a branch or office may be
following: made only with the use of a ferry boat:
(1) To service the need of valued clients Provided, That the non-armored vehicles
whose daily average deposit amounts to: are equipped with dual control safe and
P500 thousand – for Metro Manila and supported with adequate security back-up.
Metro Cebu clients/depositors Their movements may be coordinated with
P300 thousand – for outside Metro law enforcement authorities.
Manila and Metro Cebu clients/depositors (3) The risk of loss involved in the pick-
(2) To be serviced during regular banking up of deposits/cash delivery shall be
hours and days only, unless the nature of the adequately covered by insurance, and the
business and the volume of the deposits/cash armored car/non-armored car to be used
would warrant servicing beyond regular shall be provided, with at least two (2) armed
banking hours and days, in which case guards and supervised by at least two (2)
justification therefore should be submitted to officers of the bank;
the satisfaction of the appropriate department (4) The deposit/cash delivery
of the SES (Central Point of Contact transactions shall be booked in accordance
Department (CPCD) I, CPCD II, Integrated with existing regulation;
Supervision Department (ISD) I, and ISD II). (5) The strictest measure of safeguards,
b. Prior BSP authority is not required control and confidentiality will be adopted
before banks can engage in deposit pick-up/ in implementing the services;
cash delivery services: Provided, That the (6) A separate record/log book for each
following conditions are complied with: armored car/non-armored car shall be
(1) Pick-up of deposits/cash delivery shall maintained by the bank which shall contain
be made with the use of armored cars, which the information on the deposit pick-up/cash
shall not be operated as a mobile bank used delivery activities of the armored car/non-
in soliciting deposits from the general public, armored car to be supported by “trip tickets”
or in any manner in carrying out banking signed by a responsible officer of the bank;
transactions/services other than to afford and
security of deposit/cash items in transit; (7) Records and/or such other reports
(2) Pick-up of deposits/cash delivery that may be required of the bank from time
may be made with the use of non-armored to time shall be made available for

§§ X266 - X267
11.12.31
examination/inspection by the authorized Sec. 3266 Qualifying Criteria Before a

representative(s) of the appropriate Rural/Cooperative Bank Engages in Deposit
department of the SES during on-site Pick-up Services
examination; a. An RB/Coop Bank desiring to
c. If the use of the non-armored car undertake deposit pick-up service must meet
under Item “b(2)(a)” becomes regular, the the following criteria:
bank shall engage an armored car to take (1) Its total resources should not be less
its place. Regularity shall mean daily (i.e., than P100.0 million and its net assets should
regular banking days) or periodic (e.g., every be at least P10.0 million or the minimum
15th or end of the month) servicing of a capital required under Subsec. X111.1,
valued client within a three (3) month period. whichever is higher;
d. Pick-up of deposits/cash delivery (2) It should not be deficient in its
services to be made on days other than the networth-to-risk assets ratio;
bank’s regular banking days shall be (3) Its past due loan ratio should not be
allowed without prior Bangko Sentral more than fifteen percent (15%);
authority: Provided, That a notarized (4) It has no past due obligations with the
certification (using the format shown in Bangko Sentral or with any government FI;
Appendix 82) stating that the bank complies (5) It should have continuous profitable
with all the conditions set forth in Sec. X266, operations; and
jointly signed by the bank’s executive vice (6) It must show adherence to law, and
president or officer of equivalent rank and Bangko Sentral rules and regulations.
by the bank’s compliance officer, shall be b. An RB/Coop Bank that meets the
submitted to the appropriate department of above criteria shall submit for evaluation,
the SES at least five (5) banking days before the following justifications on the need for
bank’s intended starting date of its deposit the RB/Coop Bank and its branches to
pick-up/cash delivery services beyond undertake such service which should
regular banking hours and days to clients. contain, among other things, the following:
e. If any of the above conditions is not (1) the names of clients/companies to
met, the Bangko Sentral may suspend the be serviced, estimated daily average deposit
deposit pick up/cash delivery operations of and distance/proximity of client from
the bank without prejudice to the imposition applicant bank;
of sanctions under Section 37 of R.A. No. 7653. (2) the names and number of banks,
(As amended by Circular No. 614 dated 14 July 2008) branches, if any, in the area where depositor
is situated;
§ X266.1 Operation of armored cars (3) the arrangement in writing between
Except for Item “b(2)” of this Section, banks the bank and the client desiring to avail of
shall use armored cars to afford security in the service, which arrangement shall define
collection and/or delivering cash or and specify the respective responsibilities
securities and other valuables from or to of the parties; and
their clients, branch or extension offices or (4) such other information pertinent to
the Bangko Sentral, provided such armored the application.
cars are not operated as mobile banks.
Sec. X267 Automated Teller Machines
Sec. 1266 (Reserved)
a. Off-site ATMs. Banks may establish
off-site ATMs, subject to the following
conditions:

§§ X267 - X268.2
13.12.31
(1) Banks shall submit a report to the total credit score under the Credit
appropriate department of the SES on ATMs Information System (CRIS). The scoring
which they establish; system under the CRIS shall consider the
(2) The off-site ATMs shall be installed only following factors:
in centers of activity like shopping centers, a. Management and risk management
supermarkets, hospitals, university campuses: system;
Provided, That adequate internal control and (1) Management; and
security measures shall be adopted and (2) Risk management system;
submitted to the Bangko Sentral; and b. Financial indicators;
(3) Only banks which have shown (1) Capital adequacy;
general compliance with laws, rules and (2) Asset quality;
regulations shall be allowed to open off-site (3) Profitability; and
ATMs. (4) Liquidity;
b. Mobile ATMs. Banks may also c. Credit experience;
establish mobile ATMs, subject to the (1) Compliance with the terms and
following conditions: conditions of the loan and other Bangko
(1) The mobile ATMs should be Sentral regulations; and
allowed to visit only centers of activity as (2) Credit experience with other FIs.
mentioned in Item “a(2)” above; The CRIS guidelines shall be reviewed on
(2) The bank shall secure insurance a regular basis by a Credit Committee created
coverage or adopt a self-insurance scheme under MB Resolution No. 832 dated 02 July
to protect itself against losses of whatever 2008, to maximize its effectiveness in managing
nature in its mobile ATM operations; and the credit risk of the Bangko Sentral.
(3) The bank shall notify the appropriate (Circular No. 515 dated 06 March 2006 as amended by Circular
department of the SES of the actual date a No. 630 dated 11 November 2008)
mobile ATM becomes operational and when
§ X268.2 Application Procedures
no longer in operation.
Banks applying for a rediscounting line shall
submit their application in the prescribed
J. BORROWINGS FROM THE form (RL Form No. 1) to the Department of
BANGKO SENTRAL Loans and Credit (DLC), Bangko Sentral-
Manila, together with the following
Sec. X268 Rediscounting Line. The following documents:
guidelines shall govern the operations of the a. Board resolution duly signed by the
BSP’s rediscounting line by banking board of directors of the applicant bank,
institutions. authorizing the bank to apply for a
Coop Banks shall be given the same rediscounting line with the Bangko Sentral and
privileges and incentives granted to RBs, designating the officer/s of the bank to sign
TBs, UBs and KBs to rediscount notes with and endorse documents pertaining
the Bangko Sentral, the Land Bank of the thereto, together with their specimen
Philippines, and other government banks. signature/s;
(Circular No. 515 dated 06 March 2006 as amended by Circular b. Articles of incorporation (for new
No. 682 dated 15 February 2010) applicants only) and amendments, if any;
c. Organizational chart (for new
§ X268.1 Credit Information System applicants only);
The rediscounting availments of all eligible d. List of board of directors and principal
banks shall be drawn against their officers (top three (3) executive officers) and
rediscounting line which is based on their their education/training and work

§§ X268.2 - X268.3
14.12.31
experience; percent (5%) based on latest available report

e. Annual report/AFS for the of the SDC.
immediately preceding year; and Banks applying for the microfinance
f. For banks applying for microfinance facility shall also comply with the following
facility, a copy of the Manual of Operations requirements based on the latest available
pertaining to microfinance operations. report of the SES:
(Circular No. 515 dated 06 March 2006, as amended by Circular a. At least one (1) year track record in
Nos. 806 dated 15 August 2013, 684 dated 15 March 2010, 648 microfinance;
dated 02 March 2009 and 630 dated 11 November 2008)
b. At least 500 active microfinance
borrowers;
§ X268.3 Approval/Renewal of the line c. A portfolio at risk ratio (PAR) of not
The approval/renewal of rediscounting line more than five percent (5%);
shall be subject to the bank’s full d. The ratio of total collections
compliance with the following (excluding prepayments) during the
requirements: preceding 12-month period to total
a. Minimum capital prescribed under collectibles (past due microfinance loans
Subsecs. X111.1 and X111.2 based on the beginning, plus matured loans/principal
latest available report of the SDC; amortizations due for the period) should not
b. CAR as required under applicable be less than ninety-five percent (95%); and
and existing capital adequacy framework, e. Officers and staff responsible for
based on the latest available report of the microcredit operations shall have
SDC except those with capital build-up completed: (1) a training course on
program approved by the Monetary microfinance; and (2) at least one (1) year
Board; experience in microlending activities.
c. Required reserves against deposit The approval, disapproval, extension,
liabilities/deposit substitutes for two (2) amendment, cancellation, suspension and
consecutive weeks based on the latest restoration of the rediscounting line shall be
available report of the SDC; delegated to a Credit Committee composed
d. NPL ratio lower or equal to the of the Assistant Governor/Managing
industry average adjusted upward by two Director (MD) of the Monetary Operations
percent (2%) based on the latest available Sub-Sector, MD of the Regional Monetary
report of the SDC, or the allowable NPL Affairs Sub-Sector, and the Director of the
ratio approved by the Monetary Board; DLC.
e. Positive DDA balance with the Banks with approved rediscounting line
Bangko Sentral as of date of application; shall, thereafter, submit the following:
f. No past due obligations or collateral a. Rediscounting line agreement (RL
deficiencies on account of matured notes/ Form No. 3); and
unremitted collections/missing collaterals or b. For new applicant rural/cooperative
ineligible papers with the Bangko Sentral banks with designated custodian bank, a
as of date of application; tripartite depository agreement (RL Form No.
g. A CAMELS composite rating of “3” 2) by and among the applicant bank,
or higher based on the latest general designated depository bank (duly concurred
examination of the appropriate department by its Head Office) and the DLC.
of the SES; and For newly merged or consolidated
h. The ratio of past due direct and banks, a temporary line not exceeding fifty
indirect loans to DOSRI to the aggregate past percent (50%) of its adjusted net worth as
due loans should not be more than five of latest date may be granted for a period of

§§ X268.3 - X268.10
14.12.31
180 days while awaiting the required § X268.10 Constitutional prohibition

reports/data from the appropriate The following regulations shall govern the
department of the SES, renewable for implementation of Section 16, Article XI of
another 180 days or until such time that the the Constitution, which reads as follows:
required reports/data are made available, “Sec. 16. No loan, guaranty, or other
whichever comes earlier, subject to the form of financial accommodation for any
following conditions1: business purpose may be granted, directly
a. Compliance with the requirements or indirectly, by any government-owned or
cited under Items “e” and “f”, and other controlled corporation or financial
guidelines issued by the DLC; and institution to the President, the Vice-
b. One (1) of the merging or President, the Members of the Cabinet, the
consolidating banks has CAMELS composite Congress, the Supreme Court, and the
rating of at least “3” and minimum CAR of Constitutional Commissions, the
ten percent (10%) based on the latest Ombudsman, or to any firm or entity in
available SDC data. which they have controlling interest, during
(Circular No. 515 dated 06 March 2006, as amended by Circular their tenure.”
Nos. 827 dated 28 February 2014, 806 dated 15 August 2013, a. Definition
776 dated 07 December 2012,684 dated 15 March 2010,
648 dated 02 March 2009 and 630 dated 11 November 2008)
(1) The terms “loan”, “guaranty” or “other
form of financial accommodation” as used in
§ X268.4 Amount of line. The amount these regulations shall refer to transactions
of rediscounting line shall be based on the which involve the grant, renewal or extension
total credit score obtained by the applicant to a bank by the Bangko Sentral of any loan,
bank computed under the CRIS guidelines advance, discount, rediscount or credit in
which ranges from fifty percent (50%) to any form whatsoever.
200% of adjusted networth. (2) Controlling interest in a bank. Any
(Circular No. 515 dated 06 March 2006, as amended by Circular of the government officials mentioned in
No. 630 dated 11 November 2008) Section 16, Article XI of the Constitution
(the “Official”) shall be deemed to have a
§ X268.5 Term of the line. The term of controlling interest in a bank if he owns
the line shall be for one (1) year unless more than fifty percent (50%) of the voting
sooner cancelled, suspended, amended or stock of such bank. For the purpose of this
extended by the Credit Committee. The line Subsection, the stockholdings of the spouse
is renewable annually upon submission of or minor child of the Official shall be
application one (1) month before the expiry included in determining if he has such
of said line. Should there be special controlling interest.
circumstances or information from the SES b. Certification required. A bank
that may adversely affect the credit applying for a loan or financial
worthiness of a bank in the intervening accommodation with the Bangko Sentral
period, the rediscounting line of the bank shall submit, together with the application,
concerned will be reviewed immediately a certification under oath of the President
and acted upon accordingly. of the bank that the bank and/or any of its
(Circular No. 515 dated 06 March 2006, as amended by Circular
No. 630 dated 11 November 2008)
stockholders do not fall within the
prohibition under Section 16, Article XI of
§ X268.6 - X268.9 (Reserved) the Constitution.
1
These conditions shall not limit the Monetary Board from granting rediscounting line incentives to merged/
consolidated banks pursuant to Subsec. X108.3.

§§ X269 - X269.2
14.12.31
Sec. X269 Rediscounting Availments. Banks c. Past due loans;

may avail of the rediscounting facility under d. Unsecured loans;
two separate rediscounting windows, e. Personal consumption loans;
Rediscounting Window I (RW I) 1 for f. Loans to NBFIs; and
universal and commercial banks and g. Loans funded from other borrowings,
Rediscounting Window II (RW II)2 for thrift, e.g., government FIs or multi-lateral
rural and cooperative banks. agencies.
Banks shall enroll in the Electronic Credit instruments offered as collateral
Rediscounting System (eRS) by executing and shall be subject to the eligibility requirements
submitting to the DLC a notarized Electronic provided under Section 82 of R.A. No. 7653.
Rediscounting System Participation Agreement a. Commercial credits - Bills,
before availing of the rediscounting facility of acceptances, promissory notes (PNs) and
the Bangko Sentral. other credit instruments with maturities of
(Circular No. 515 dated 06 March 2006, as amended by Circular not more than 180 days from the date of
Nos. 806 dated 15 August 2013 and 630 dated 11 November their rediscount, discount or acquisition by
2008)
the Bangko Sentral and resulting from
§ X269.1 Eligibility requirements at the transactions related to:
time of availment. Banks availing of the (1) the importation, exportation,
Bangko Sentral rediscounting facility must purchase or sale of readily saleable goods
have at the time of availment: and products, or their transportation within
a. A positive DDA balance; the Philippines; or
b. No past due obligations; and (2) the storing of non-perishable goods
c. No collateral deficiencies on account and products which are duly insured and
of matured notes, unremitted collections, deposited, under conditions assuring their
missing collaterals or ineligible papers; and preservation, in authorized bonded
d. No chronic reserve deficiency in warehouses or in other places approved by
deposit/deposit substitute liabilities the Monetary Board.
immediately preceding the loan drawdown/ Credit instruments acquired under
availment. commercial credits shall be secured either by:
For purposes of determining compliance
with the reserve requirement, a bank will Type of Collateral Collateral Value
(1) Duly notarized Shall equal or
be considered non-compliant with the assignment of export exceed the
reserve requirement for the reference week or domestic letters of outstanding balance
credit, confirmed of the credit
when its actual net reserve position for said purchase order sales instrument
reference week cannot be determined due contract, quedans
to delayed submission or non-submission (2) Trust Receipts Shall equal or
exceed the
of the relevant reserve report. outstanding balance
(Circular No. 515 dated 06 March 2006, as amended by Circular of the credit
Nos. 861 dated 01 December 2014 and 630 dated instrument
11 November 2008) (3) Duly registered 70% of the
mortgage on real appraised value
property shall equal or
§ X269.2 Eligible papers and collaterals exceed the
The Bangko Sentral shall accept credit outstanding
instruments covering all economic activities balance of the PN
(4) Credit guarantees/ Shall equal or
except the following: sureties issued by exceed the
a. Interbank loans; the lGLF, the Small outstanding
b. Extended/Restructured loans; Business Corporation balance of the PN
1
By 15 November 2023, all banks shall access only RW I.
2
From 15 November 2013, TBs are given a sunset period of five (5) years (i.e., until 15 November 2018) to
access RW II, while RBs and Coop Banks are given ten (10) years (i.e., until 15 November 2023)

§ X269.2
13.12.31
Type of Collateral Collateral Value not more than ten (10) years from date of
(SBC) and the national their rediscount, discount or acquisition of
government
(5) Credit guarantees/ Shall equal or the Bangko Sentral. Dollar-term loans to
sureties issued by exceed 80% of finance capital expenditures (plant
the Credit Surety the outstanding
Fund (CSF) jointly balance of the PN
expansion/modernization) by exporters are
established by also considered eligible papers for
cooperatives and rediscounting under the EDYRF provided
local government
units they are booked in the regular banking units.
(6) Marketable debt Current market Credit instruments acquired under other
instruments issued by the value shall equal credit shall be secured by:
NG and all its or exceed the Type of Collateral Collateral Value
instrumentalities, including outstanding balance (1) Duly registered 70% of the appraised
Republic of the Philippines of the PN mortgage on real value shall equal or
US$ denominated bonds or property exceed the
ROPs outstanding balance
of the PN
The outstanding National Food (2) Duly notarized Shall equal or
Authority papers that a bank can rediscount assignment of exceed the
shall not exceed the rediscounting bank’s receivables from outstanding
service contract balance of the PN
SBL (twenty five percent [25%] of its net (3) Credit guarantees/ Shall equal or
worth) or P3.0 billion, whichever is lower. sureties issued by the exceed the
IGLF, the SBC and the outstanding
Dollar-denominated trust receipts national government balance of the PN
covering importation of goods and raw (4) Credit guarantees Shall equal or
materials are also considered eligible papers sureties issued by the exceed 80% of
CSF jointly established the outstanding
for rediscounting under the Exporters’ Dollar by cooperatives and balance of the PN
and Yen Rediscount Facility (EDYRF). LGUs
b. Production credits - Bills, (5) Marketable debt Current market
instruments issued by value shall equal
acceptances, PNs and other credit
the NG and all its or exceed the
instruments having maturities of not more instrumentalities, outstanding balance
than 360 days from the date of their including Republic of the PN
rediscount, discount or acquisition by the of the Philippines
Bangko Sentral and resulting from US$ denominated
bonds or ROPs
transactions related to the production or
processing of agricultural, animal, mineral, For housing loans, the lien or mortgage
industrial and other products. shall cover the property being financed.
Credit instruments acquired under An Original Certificate of Title issued
production credits shall be secured by a duly by virtue of Free Patent, covering
registered mortgage on real property, agricultural lands, may be accepted as
seventy percent (70%) of the appraised value underlying collateral for loans offered for
of which equals or exceeds the outstanding rediscounting with the Bangko Sentral after
balance of the PN. the expiry of the prescription period of five
c. Other credits - Special credit years from date of the approval of the order
instruments not otherwise rediscountable to issue the patent. The 5-year restriction is
under the immediately preceding Items “a” not applicable for residential lands acquired
and “b” such as, but not limited to, under free patent as provided under Section
microfinance, housing, services, agricultural 9 of R.A No. 10023.
loans with long gestation period and other A Land Title, with P.D. No. 1271 1
eligible economic activities with maturity of annotation, may be accepted as underlying
1
An act nullifying decrees of registration and certificates of title covering lands within the Baguio Townsite
Reservation issued in Civil Reservation Case No. 1, GLRO Record No. 211 pursuant to R.A. No. 931, as
amended, but considering as valid certain titles of such lands that are alienable and disposable under certain
conditions and for other purposes.
§§ X269.2 - X269.5
13.12.31
collateral for loans offered for rediscounting § X269.3 Loan availment procedures
with the Bangko Sentral subject to the Banks availing of the rediscounting facility
following conditions: shall submit their loan applications
1. The land titles submitted specify that electronically to the Bangko Sentral using
the original registration date was on or their eRS registered computers.
before 31 July 1973; and Upon receipt of the confirmation of loan
2. The lands covered by titles are not approval:
within any government, public or quasi- a. Banks shall execute the PNs with
public reservation, forest, military or Trust Receipt Agreement and Deed of
otherwise, as certified by appropriate Assignment (PNTRADA) in favor of the
government agencies. Bangko Sentral (RL Form No. 7 for peso and
Unsecured loans may be accepted for RL Form No. 8 for dollar and yen), signed
rediscounting provided they are: by the authorized officer/s of the bank.
a. Microfinance loans; or b. Banks authorized to hold-in trust the
b. Loans secured by a duly registered rediscounted credit instruments and
mortgage on real property of the bank, underlying collaterals shall segregate and
seventy percent (70%) of the appraised value keep the same together with the PNTRADA
of which equals or exceeds the outstanding at a secured place within their premises
balance of the unsecured PN and other under the custody of the accountable officer.
collaterals acceptable to the Bangko Sentral, c. Banks with custodianship agreements
e.g., marketable debt instruments issued by shall deposit with their respective
the NG and all its instrumentalities, depositary/custodian bank the rediscounted
including Republic of the Philippines US$ credit instruments, underlying collaterals
denominated bonds or ROPs. and the PNTRADA not later than the next
For real estate properties covered by banking day from date of loan grant, receipt
Section 7 of R.A. No. 26 offered as collateral, of which shall be acknowledged by the
the following conditions must be met: depositary bank in the List of Rediscounted
1. The 2-year period from date of entry Loans.
of the notation has already expired; (Circular No. 515 dated 06 March 2006, as amended by Circular
2. The bank has already filed the petition No. 630 dated 11 November 2008)
with the court for the cancellation thereof; and
§ X269.4 Loan value. The loan value of
3. The bank shall submit prior to the
all eligible papers shall be eighty percent
release of the loan a surety bond issued by an
(80%) of the outstanding balance of the
insurance/surety company which is acceptable
borrower’s credit instrument but not higher
to the Bangko Sentral and is not affiliated with
than seventy percent (70%) of the appraised
the bank or its subsidiaries, or their
value of the underlying collateral.
stockholder, directors or officers, equivalent (Circular No. 515 dated 06 March 2006, as amended by Circular
to the loan value of the property plus interest Nos. 684 dated 15 March 2010, 648 dated 02 March 2009 and
and other charges that may fall due, to answer 630 dated 11 November 2008)
for the payment of the obligations in the event
that the petition for cancellation is denied or § X269.5 Maturities. The maturities of
the notation is not cancelled on or before the Bangko Sentral rediscounts are, as follows:
maturity of the loan.
Type of Credit Maturity Date
(Circular No. 515 dated 06 March 2006, as amended by Circular
RW I RW II
Nos. 807 and 806 both dated 15 August 2013, M-2011-036 dated a. Commercial Credits 180 days from 180 days from
05 July 2011, M-2011-017 dated 18 March 2011, Circular Nos. (1) Export Packing date of rediscount date of rediscount
648 dated 02 March 2009 and 630 dated 11 November 2008) (2) Trading but shall not go but shall not go
(3) Transport beyond the beyond the
(4) Quedan maturity date of maturity date of

§§ X269.5 - X269.7
14.12.31
RW I RW II b. Dollar/Yen Rediscounts
the credit the credit
instrument instrument Based on the 90-day London Inter-bank
(5) Export Bills (EBs) Offered Rate (LIBOR) plus 200 bps plus term
At sight Fifteen (15) days Fifteen (15) days premia for longer maturities, as follows:
from date of from date of
Term Premium
purchase purchase
1-90 days 90-day LIBOR + 200 bps
Usance EB Term of draft Term of draft
91-180 days 90-day LIBOR + 200 bps + 6.25 bps
but not to but not to
181-360 days 90-day LIBOR + 200 bps + 12.50 bps
exceed sixty (60) exceed sixty (60)
days from days from The lending rates of banks on their
shipment date shipment date rediscounted papers shall not be subject to
b. Production Credits 180 days from 360 days from
date of date of
any ceiling but the spreads of the banks on
rediscount but rediscount but these papers shall be closely monitored by
shall not go shall not go the Bangko Sentral to ensure that these are
beyond the beyond the
maturity date maturity date consistent with the prevailing market rates.
of the PN. of the PN. Past due Bangko Sentral loans and
Renewable, not unpaid matured notes shall be levied
to exceed
180 days. liquidated damages equivalent to
c. Other Credits 180 days from 360 days from five percent (5%) per annum1.
date of date of (Circular No. 515 dated 06 March 2006, M-2014-039 dated
rediscount but rediscount but
01 October 2014, M-2014-031 dated 08 August 2014,
shall not go shall not go
beyond the beyond the
M-2014-006 dated 12 February 2014, Circular Nos. 807 and 806
maturity date maturity date both dated 15 August 2013, M-2013-050 dated 15 November
of the PN. of the PN 2013, M-2013-046 dated 30 October 2013, M-2013-045 dated
(renewable (renewable 23 October 2013, M-2013-040 dated 03 September 2013,
depending on depending on M-2013-001 dated 14 January 2013, M-2011-056 dated
the type of the type of 10 November 2011, M-2011-055 dated 17 October 2011,
credit). credit). M-2011-043 dated 12 August 2011, M-2011-007 dated
(Circular No. 515 dated 06 March 2006, as amended by Circular 04 February 2011, M-2010-039 dated 03 November 2010,
Nos. 806 dated 15 August 2013 and 630 dated 11 November M-2010-007 dated 23 April 2010, Circular No. 679 dated
2008) 01 February 2010, M-2009-040 dated 30 October 2009,
M-2009-037 dated 15 October 2009, M-2009-38 dated
§ X269.6 Rediscount/Lending rates and 08 October 2009, and M-2009-036 dated 07 October 2009,
liquidated damages. The rediscount rates for Circular Nos.648 dated 02 March 2009 and 630 dated
peso, dollar and yen loans shall be, as 11 November 2008)
follows:
a. Peso Rediscounts § X269.7 Release of proceeds. The
RW I RW II
proceeds of the rediscounting availment
Interest Rate Bangko Sentral one (1)- Bangko Sentral shall be released, as follows:
month repurchase overnight a. Peso rediscounts - automatically
(R/P) rate plus reverse
term premium: repurchase
credited to the borrowing bank’s DDA or
(O/N RRP) its depository bank’s DDA with the Bangko
rate plus term Sentral on the same day for loan application
premium)
30 days Bangko Sentral one (1)- submitted to the Bangko Sentral before 4:30
month R/P rate pm during banking days.
90 days Bangko Sentral one (1)- Bangko Sentral b. Dollar/Yen rediscounts - released
month R/P rate+0.0625 O/N RRP rate
180 days Bangko Sentral one (1)- Bangko Sentral through the Treasury Department, Bangko
month R/P rate +0.1250 O/N RRP rate Sentral, for credit to the designated foreign
+ 0.0625
360 days n/a Bangko Sentral
correspondent bank of the borrowing bank,
O/N RRP rate as follows:
+ 0.1250 (1) Same banking day credit for dollar
loan application submitted to the Bangko
1
See Appendix 89

§§ X269.7- X269.8
14.12.31
Sentral before 11:00 am, during banking corresponding to the remittance instruction
days; and to its designated correspondent bank. The
(2) Following banking day credit for yen payment shall cover total collections or
loan application submitted to the Bangko payment of maturing loans plus interest due
Sentral before 11:00 am, during banking thereon. In case of short payment, the bank’s
days. DDA with the Bangko Sentral shall
(Circular No. 515 dated 06 March 2006, as amended by Circular automatically be debited for the peso
No. 630 dated 11 November 2008) equivalent of the shortage.
If the foreign currency denominated
§ X269.8 Repayments/ Remittance of
loans are not settled on maturity date, the
collections/ arrearages1 . The following shall
borrowing bank’s DDA with the Bangko
govern repayments, remittance of
Sentral shall be debited automatically for the
collections, and arrearages:
peso equivalent of the matured obligation
a. Repayments -
plus accrued interest due thereon. The
(1) Peso rediscounts
foreign exchange (FX) rate at the time of the
(a) The loan value of the rediscounted
loan repayment shall not be lower than the
credit instruments or the amortization plus
FX rate at the time of loan availment and
interest due thereon shall automatically be
any FX loss arising from default or
debited against the borrower bank’s DDA
repayment shall be for the account of the
with the Bangko Sentral at maturity/
borrower and not for the Bangko Sentral.
amortization due date.
b. Remittance of collections -
(b) For microfinance loans, the DDA of
(1) Total collections received by the
the borrower bank shall automatically be
borrowing bank before the maturity date of
debited on the amortization due date for the
the rediscounted credit instruments shall be
loan value of the amortization plus interest
remitted not later than five (5) banking days
due thereon. For loans with daily, weekly
following the date of receipt of collections
or semi-monthly amortizations, the
to the following:
borrower bank’s DDA shall automatically
Peso Rediscounts - Bangko Sentral
be debited on the last amortization due date Dollar Rediscounts - Federal Reserve Bank of
of said month for the total loan value of the New York for the
amortizations for the month plus interest account of Bangko
due thereon. Sentral
(c) The loan value of unremitted Yen Rediscounts - Bank of Tokyo for the
collections and of the rediscounted credit account of Bangko Sentral
instruments and/or underlying collaterals (i) Total collections shall refer to the loan
found to be missing, ineligible or with value of the principal amount collected from
exceptions not corrected within fifteen (15) rediscounted credit instruments plus
days from receipt of notice plus interest due accrued interest due on the outstanding
thereon shall automatically be debited balance of subject credit instruments.
against the borrowers bank’s DDA with the (ii) For banks with Bangko Sentral loans
Bangko Sentral. under past due status, total collections shall
(2) Dollar/Yen rediscounts include all collections on principal, interest
Dollar and yen loans shall be repaid in and penalty.
the same currency under which they were (iii) In the case of negotiated EBs, the
released. For this purpose, the bank shall receipt by the borrowing bank of payment
submit online to the Bangko Sentral its from its correspondent bank either through
payment instruction one (1) day before the actual remittance or credit advice; or
payment date or the maturity date of the loan through book entries made by the
1
See Appendix 89

§§ X269.8 - X269.11
14.12.31
borrowing bank charging its correspondent “moderate” or “low” probability of default

bank before receipt of advice shall constitute on the settlement of the banks’
receipt of collection. rediscounting obligations with the Bangko
(2) The bank shall ensure that adequate Sentral.
records are maintained in its Head Office (Circular No. 515 dated 06 March 2006,as amended by Circular
on the collections made by the branches. Nos. 806 dated 15 August 2013 and 630 dated 11 November
2008)
c. Arrearages. The Bangko Sentral shall
undertake all necessary collection measures § X269.11 Penalties/sanctions. The
allowed by law, such as foreclosure following penalties and sanctions shall be
proceedings against banks with past due imposed on the erring bank and/or the
loans. bank’s authorized/certifying officers.
(Circular No. 515 dated 06 March 2006, M-2014-039 dated
a. For serious offense
01 October 2014, M-2014-031 dated 08 August 2014,
Aggregate Amount/
M-2014-006 dated 12 February 2014, Circular No. 807 dated
Penalty Range Minimum Maximum
15 August 2013, M-2013-050 dated 15 November 2013,
P50K or less P83 P250
M-2013-046 dated 30 October 2013, M-2013-045 dated
Above P50K
23 October 2013, M-2013-040 dated 03 September 2013,
to 100K 250 750
M- 2013-001 dated 14 January 2013, M-2011-056 dated
Above P100K
10 November 2011, M-2011-055 dated 17 October 2011,
to P500K 1,000 3,000
M-2011-043 dated 12 August 2011, M-2011-007 dated 04 February
Above P500K
2011, M-2010-39 dated 03 November 2010, M-2010-007 dated
to 1M 2,500 7,500
23 April 2010, M-2009-040 dated 30 October 2009, M-2009-37
Above P1M 5,000 15,000
dated 15 October 2009, M-2009-38 dated 08 October 2009, and
M-2009-036 dated 07 October 2009, Circular Nos. 648 dated
02 March 2009 and Circular No. 630 dated 11 November 2008) b. For less serious offense
P50K or less P63 P188
§ X269.9 Prohibited transactions. The Above P50K
to 100K 188 563
following shall not be allowed without prior Above P100K
approval of the Bangko Sentral: to P500K 750 2,250
a. Substitution of rediscounted credit Above P500K
instruments and underlying collateral real to 1M 1,875 5,625
Above P1M 3,750 11,250
properties on outstanding loans with the
Bangko Sentral; c. Minor offense
b. Renewal of rediscounted credit P50K or less P42 P125
instruments without remitting payment Above P50K
while the loan released against the to 100K 125 375
rediscounted credit instrument is still Above P100K
to P500K 500 1,500
outstanding with the Bangko Sentral; and Above P500K
c. Acceptance of properties as payment to 1M 1,250 3,750
(dacion en pago). Above P1M 2,500 7,500
(Circular No. 515 dated 06 March 2006 as amended by Circular
No. 630 dated 11 November 2008) The following definition of terms shall
apply:
§ X269.10 Monitoring and credit (1) Offense shall refer to a violation that
examination of borrowing banks. The DLC connotes infraction of the terms and
shall conduct an off-site analysis of the conditions of the loans granted by the
Bangko Sentral’s credit exposure to Bangko Sentral and of the applicable laws,
borrowing banks and a risk-based on-site rules and regulations, Bangko Sentral credit
credit examination that will focus primarily policies and non-compliance with the
on determining whether there is a “high”, Bangko Sentral/Monetary Board directives.

§ X269.11
08.12.31
(2) Serious offense – This refers to acts aggregate amount of the following under the
or omissions constituting violation of the current examination:
terms and conditions of the loans granted (a) Under serious offense:
to the bank and of the applicable laws, rules Total loan value of the following:
and regulations that constitute unsafe and (i) Rediscounted ineligible papers with
unsound banking practices; and the serious offense, fictitious loans or spurious
misrepresentation of facts and warranties loan documents as determined by the
committed by the bank/ individual(s) that Bangko Sentral or Office of Special
influenced the approval and amount of the Investigation;
rediscounting loan/line granted, such as: (ii) Undeposited vital loan documents
(a) Rediscounting of ineligible papers, and underlying collaterals as of examination
fictitious borrowers/loans/titles or date; and
submission of spurious documents; (iii) Collections on principal of
(b) Absence of or failure to execute vital rediscounted loans which were not remitted
loan documents; to the Bangko Sentral within the prescribed
(c) Failure or delay in the deposit of period of five (5) banking days from date of
rediscounted loan documents with the receipt of collections.
custodian bank, except those caused by (b) Under less serious offense:
fortuitous events; and Total loan value of rediscounted
(d) Failure to remit to the Bangko Sentral ineligible papers with less serious offense
collections on principal of the rediscounted as determined by the Bangko Sentral.
loans within the prescribed period of five (c) Under minor offense:
(5) banking days from date of actual receipt Total loan value of rediscounted
of collections except collections from ineligible papers with minor offense as
microfinance loans. determined by the Bangko Sentral.
(3) Less serious offense – This refers to (6) Minimum penalty – refers to the
acts or omissions constituting violation of range of penalties to be imposed if the
the terms and conditions of the loans mitigating factor(s) outweighs the
granted to the bank and of the applicable aggravating circumstances, to wit:
laws, rules and regulations that constitute (a) The act or omission is not intentional
unsafe and unsound banking practices but or the bank acted in “good faith” when the
not falling under the serious offense error, deficiency, violation or the absence/
category; however, the deficiencies noted lack of the required action were committed.
should be addressed immediately to mitigate (b) The bank is willing to take immediate
the credit risk of the Bangko Sentral. action or has started to rectify the
(4) Minor offense – This includes acts deficiencies/violations noted or undertakes
or omissions which are procedural in to correct the deficiencies within fifteen (15)
nature, not intentional, may not result in any days from receipt of notice.
loss or damage to or any significant increase (c) The bank has voluntarily disclosed
in the risk of the creditor Bangko Sentral the offense/violation committed before it is
and can be resolved immediately during the discovered by the Bangko Sentral or has
normal course of business. For purposes of remitted to the Bangko Sentral the total
classifying the nature of the offense, this amount due plus accrued interest.
includes all other acts or omissions which (7) Maximum penalty – refers to the
cannot be classified under serious or less
range of penalties to be imposed if the
serious offenses.
aggravating circumstances outweigh the
(5) Aggregate amount - shall refer to the
mitigating factor(s), to wit:

§§ X269.11 - X269.12
08.12.31
(a) The act or omission carries with it Bangko Sentral and/or administrative and
the intention to commit or cover up a criminal sanctions that may be charged
violation or to defraud the Bangko Sentral. against its culpable officers.
(b) Commission or omission of a specific (Circular No. 515 dated 06 March 2006 as amended by Circular
offense corrected in the past but found
repeated in another transaction in § X269.12 Interlocking directorship/
subsequent examination. officership. Banks owned or managed by
(c) Additional interest charges on unpaid the same owners, stockholders, directors,
penalty. officers or family/business group may also
An additional interest of twelve percent be suspended from availment of the
(12%) per annum shall be assessed on rediscounting facility by the Credit
nonpayment of the penalties, from date of Committee once the rediscounting line of
demand until full settlement thereof. any of the banks belonging to the same group
The foregoing monetary penalties shall is suspended, until such time that the
be without prejudice to the cancellation of suspension of the erring bank is lifted.
the bank’s rediscounting line with the (Circular No. 515 dated 06 March 2006 as amended by Circular
Part II - Page 52b Manual of Regulations for Banks

§§ X270 - X272.1
08.12.31
Sec. X270 Repurchase Agreements with § X271.3 Limit. Availment by any bank
the Bangko Sentral. Repo agreements with under this facility shall not exceed ten
the BSP shall be governed by Sec. X601. percent (10%) of its net worth, as defined
under Sec. X111 as of the end of the quarter
Sec. X271 Bangko Sentral Liquidity preceding the date of application. In the
Window. The following guidelines shall case of branches of foreign banks, the quota
govern the grant by the BSP of credit shall be ten percent (10%) of the assigned
accommodations through a liquidity capital as of the date of application.
window to banks. Additionally, a bank or a branch of a foreign
bank may avail itself of this facility to the
§ X271.1 Nature of liquidity window extent equivalent to a further five percent
The window shall meet the liquidity needs (5%) of its net worth, as defined under
of the financial system under normal Sec. X111 or assigned capital, as the case
conditions and shall be distinct from may be, as of the end of the quarter
overdrafts and emergency advances. preceding the date of availment. Any
availment of the liquidity window shall
§ X271.2 Terms of credit fall within the unavailed basic rediscount
a. Interest rate. The rate of interest ceiling of the bank or the branch of a
chargeable on availments under the foreign bank as the case may be.
liquidity window shall be the rate
equivalent to the reference rate for ninety Sec. X272 Emergency Loans or Advances
(90) days determined and announced by to Banking Institutions. The emergency
the BSP for floating rate loans, plus or loan or advance to banking institutions is
minus a rate to be determined by the BSP governed by the provisions of Sections 84
on the basis of the prevailing monetary to 88 of R.A. No. 7653, otherwise known
situation. as The New Central Bank Act. The
The additional or discount rate following guidelines shall govern the BSP’s
established for any given time shall be made emergency loans and advances.
public by the BSP and applied uniformly to (Circular No. 517 dated 06 March 2006)
all borrowers during that period.
The additional rate to be imposed over § X272.1 Nature of emergency loans
and above the reference rate shall not be or advances. An emergency loan or
less than two (2) percentage points, with advance is a credit facility that is intended
the applicable additional rate to be to assist a bank experiencing serious
determined by the BSP on the basis of the liquidity problems arising from causes not
prevailing monetary situation. attributable to, or beyond the control of,
b. Security. Any paper, irrespective the bank management. The grant of such
of maturity, eligible under Section 82 of facility is discretionary upon the
R.A. No. 7653. Monetary Board, and is intended only as
c. Loan values. The loan values of the a temporary remedial measure to help a
paper offered as collateral should be eighty solvent bank overcome serious liquidity
percent (80%) of the amount still due problems. As provided under Sections 84
outstanding on the paper offered as to 88 of R.A. No. 7653, no emergency
collateral. loan or advance may be granted except
d. Repayment period. The term of the on a fully secured basis and the Monetary
credit accommodation shall not exceed Board may prescribe additional
seven (7) days. conditions, which the borrowing banks

§§ X272.1 - X272.3
08.12.31
must satisfy in order to have access to the § X272.3 Allowable amount of

credit facility of the BSP. emergency loan or advance. The
(Circular No. 517 dated 06 March 2006) maximum amount of an emergency loan
or advance shall be limited to the amount
§ X272.2 When an emergency loan or needed by the applicant bank to overcome
advance may be availed of. An emergency the emergency or financial predicament
loan or advance may be granted: but not to exceed the sum of fifty percent
a. In periods of national and/or local (50%) of its total deposits and deposit
emergency or of imminent financial panic substitutes as of the last banking day of the
which directly threaten monetary and month preceding the date of emergency
banking stability, i.e., situations involving loan application: Provided, That, in no case
bank runs, massive movements by depositors shall such maximum amount exceed the
of their funds from certain banks to other loan values of the collaterals submitted, as
banks, bank holidays and voluntary cessation determined by the BSP.
of business, or when there are movements The amount approved by the Monetary
which endanger the economy, or when the Board shall be released in tranches. The first
international stability of the peso is threatened, tranche shall not exceed twenty-five percent
or when there is an exchange crisis. (25%) of the total deposits and deposit
b. During normal periods for the substitutes of the bank as of the last banking
purpose of assisting a bank in a precarious day of the month preceding the date of
financial condition or under serious financial emergency loan application and shall be
pressures brought about by unforeseen released only after the submission of the
events or events which though foreseeable, collaterals and required documents under
cannot be prevented by the bank concerned. Subsecs. X272.4 and X272.5: Provided,
Provided, That there is a concurrent however, That upon request of the applicant
vote of at least five (5) members of the bank, the Monetary Board may authorize a
Monetary Board and the latter has first tranche in an amount greater than twenty-
ascertained that the bank is not insolvent: five percent (25%) of the bank’s total deposits
Provided, further, That banks with positive and deposit substitutes if the circumstances
CAR of not more than six percent (6%) surrounding the emergency or financial
based on adjusted books of accounts shall predicament warrant the release of such
submit a Business Improvement Plan (BIP) greater amount and the same is adequately
acceptable to the BSP within six (6) months secured by first class collaterals.
from date of advice by the appropriate Except as provided in Subsec.
department of the SES. For this purpose, X272.7(d) hereof, the proceeds of the
the appropriate department of the SES shall emergency loan or advance shall be
warn the concerned banks that failure to utilized exclusively to service net
submit the required BIP in accordance with withdrawals of deposits and deposit
the criteria of the appropriate department substitutes, i.e., amount of the bank’s total
of the SES shall disqualify the bank from withdrawals less total deposits.
access to the BSP’s emergency loan facility. The principal amount of the emergency
Banks with zero to negative CAR should loan or advance shall not exceed the
have an existing BSP-approved difference between the highest level of the
rehabilitation plan and on track with the bank’s deposit and deposit substitutes of
Plan to be eligible to avail itself of the immediately preceding thirty (30)-day
emergency loan. period from date of emergency loan
(Circular No. 517 dated 06 March 2006) application and the current level of deposits

§§ X272.3 - X272.4
08.12.31
and deposit substitutes as determined by loan or advance under Subsec. X272.2, the
the appropriate department of the SES. appropriate department of the SES shall
(Circular No. 517 dated 06 March 2006) prepare a memorandum to the Monetary
Board stating among others, the following:
§ X272.4 Application procedures a. Validation of the eligibility of
Banks applying for an emergency loan applicant bank.
or advance shall submit an application b. Financial condition of applicant bank.
(EL Form No. 1) with the appropriate c. Volume of deposits and expected
department of the SES, copy furnished the withdrawals of deposits.
DLC. During normal periods, the d. Amount and terms of the loan.
applicant-bank shall state the reasons for e. Whenever applicable, circumstances
the proposed loan availment and other that warrant the grant of the first tranche
details showing the precarious financial greater than twenty-five percent (25%) of
condition or the serious financial pressures the total deposits and deposit substitutes
being experienced by the bank. as provided by law.
The bank shall submit together with the The applicant bank shall submit to the
application, the following documents: DLC, prior to the release of the first tranche,
a. Certified Statement of Condition the following documents together with the
(under oath) as of the last banking day of copy of the application:
the month preceding the date of a. Listing of assets that are good and
emergency loan application. available for collateral purposes as certified
b. A duly notarized secretary’s by the bank’s duly appointed external
certificate (EL Form No. 2) together with a auditor (EL Form No. 3).
resolution of the board of directors of the bank: b. Listing of collaterals in the
(1) Authorizing the availment by the prescribed formats (EL Form Nos. 4/4a/
bank of an emergency loan or advance 4b) as well as a 3.5” diskette containing
from the BSP. the database, (in MS Excel format),
(2) Signifying the bank’s commitment together with the documents of title and/
to comply with the guidelines set forth or evidences of ownership of the
herein and the terms and conditions that collaterals offered including the following
may be imposed by the Monetary Board. documents:
(3) Designating the chairman and the (1) Appraisal reports of not more than
president or in their absence, any of the next one (1) year conducted by an independent
two (2) highest officers, as duly authorized appraiser acceptable to the BSP in
signatories for the emergency loan or accordance with BSP’s terms of reference.
advance application, promissory notes, and (2) Latest tax declarations.
all undertakings. Designated authorized (3) Current tax receipts, tax clearances
officers not lower than senior vice president, and other documents needed for
or equivalent position, may be authorized to registration of mortgages and deeds of
execute all accessory documents for the assignment.
emergency loan or advance. (4) Current insurance policies covering
(4) Authorizing the Bangko Sentral to improvements and official receipts of
evaluate other assets of the bank certified premium payments.
by its auditors to be good and available (5) Department of Agrarian Reform
for collateral purposes should the grant (DAR) certification that agricultural
of subsequent tranches be applied for. properties offered as collaterals are not
After determining the eligibility of the covered by the Comprehensive Agrarian
applicant bank to avail of the emergency Reform Program (CARP).

§ X272.4
08.12.31
(6) Current original promissory notes commitment by the directors, principal

of bank’s borrowers duly endorsed in favor officers with the equivalent rank of
of the BSP. vice-president and up, all the controlling
(7) Special power of attorney or stockholders, and every person or group
stockholder’s resolution, when appropriate. of persons and their respective spouses,
c. Notarized Deed of Undertaking whose stockholdings are sufficient to elect
executed by the above-mentioned officers at least one (1) director not to withdraw any
of the bank to: (1) register with the Registry portion of their deposits and deposit
of Deeds all the covering legal documents substitutes as of date of release of the first
before loan release at the expense of the tranche while the emergency loan remains
bank and that, in the event the BSP agrees outstanding. In the event of a compelling
to release the proceeds of the loan before reason to withdraw, payment of the
said documents are registered, the same emergency loan or advance in an amount
shall be registered by the bank at its own equivalent to the deposits to be withdrawn
expense; and (2) submit the documents shall be made (EL Form No. 7).
needed to complete the requirements of f. Notarized Surety Agreement
the tranche not later than fifteen (15) days executed by the controlling stockholders
from release of the emergency loan or and every person or group of persons
advance. (EL Form No. 5). whose stockholdings are sufficient to elect
In case of failure by the bank to register at least one (1) director obligating
the covering legal documents within fifteen themselves jointly and severally with the
(15) days from date of release of loan bank to pay promptly on maturity, or when
proceeds, the BSP shall register said due, the Bangko Sentral, its successors
documents for the account of the applicant or assigns, all promissory notes covering
bank, and all costs and expenses shall, at the emergency loan or advance.
the option of BSP, be deducted from any (The Government, its subdivisions,
subsequent availments of the bank or from instrumentalities and agencies, and
its DDA or be added to its liability account government entities are exempted from
with the BSP. this requirement.) (EL Form No. 8)
d. Notarized Joint and Several g. Notarized Deed of Negative
Undertaking executed by all the Pledge executed by the controlling
controlling stockholders [owning more stockholders and every person or group of
than fifty percent (50%) of the voting stocks] persons whose stockholdings are sufficient
of the bank and every person or a group of to elect at least one (1) director, together
persons whose stockholdings are sufficient with their respective certificates of stock.
to elect at least one (1) director to (The Government, its subdivisions,
indemnify and hold harmless from suit the instrumentalities and agencies, and
BSP, its Monetary Board members, government entities are exempted from this
Governor, officers and personnel, and the requirement.) (EL Form No. 9).
conservator whose appointment the h. Certification under oath executed
Monetary Board may find necessary at any by the chairman and president of the
time. The Department of Finance or bank that the bank or any of its
stockholder of record will sign the joint and stockholders does not fall within the
several undertaking if the government is a prohibition under Section 16, Article XI
stockholder (EL Form No. 6). of the Constitution (EL Form No. 10).
e. Notarized Deed of Undertaking Prior to the release of the subsequent
with waiver of secrecy of deposits and tranches, the bank shall submit to DLC the

§§ X272.4 - X272.6
08.12.31
documents of title and/or evidences of in Favor of the BSP (EL Form No. 11/11a),
ownership of the collaterals, together with Notarized Deed of Real Estate Mortgage
the other documents referred to in Item “b” (EL Form No. 12-Bank Assets/12a-Stockholder/
of the immediately preceding paragraph of Third Party Assets), Notarized Deed of Pledge
this Subsection for the amount being applied (EL Form No.13- Individual/Corporation/13a-
for release and, where necessary, such other Stockholders’/Third Party Assets), Notarized
acceptable security which, in the judgment Deed of Assignment of Mortgages (EL Form
of the Monetary Board, would be adequate No. 14), Hold-out on Foreign Currency
to supplement the assets tendered to Deposits with BSP (EL Form No. 15) and
collateralize the subsequent tranche. Joint Affidavit executed by the bank’s
Banks availing of emergency loan or chairman and president and the Individual
advance may decline to submit either item Mortgagor (EL Form No. 16- Individual) or
“f” or “g” or both, but the loan values the Corporate-Mortgagor’s chairman and
specified in Items “b” and “d” of Subsec. president (EL Form 16a- Corporation).
X272.6 shall be reduced. (Circular No. 517 dated 06 March 2006)
§ X272.6 Acceptable collaterals and
§ X272.5 Other documentary their corresponding loan values. All
requirements. Before release of any availments of the emergency loan or
emergency loan or advance, the applicant advance shall be secured by first class
bank shall, aside from the documentary collaterals, i.e., assets and securities which
requirements already mentioned above, have relatively stable and clearly definable
submit such other requirements/ value and/or greater liquidity and free from
documentation as may be required by the lien and encumbrances, to the extent of
DLC, e.g., duly Notarized Promissory Note their applicable loan values, as follows:
ACCEPTABLE COLLATERALS With Surety With Surety With No Surety

Agreement Pledge Negative Agreement
and but no Pledge but and no
Negative Negative no Surety Negative
Pledge Pledge Agreement Pledge
a. Government securities - based on the current market 80% 80% 80% 80%
value of the securities
b. Unencumbered real estate properties in the name of
the bank
1. Initial rate - based on the appraised value (AV) of the
land and insured improvements 40% 35% 30% 25%
2. Final rate - based on the AV of the land and insured 70% 65% 60% 55%
improvements determined by a licensed and
independent appraiser acceptable to the BSP in
accordance with BSP's terms of reference
c. Hold-outs on foreign currency deposits with the BSP 80% 80% 80% 80%
- based on current market value
d. Mortgage credits (with remaining maturities of not
more than 360 days)
1. Initial rate - based on the AV of the property securing 40% of AV or 35% of AV or 30% of AV or 25% of AV or
the loan evidenced by negotiable instruments or the 50% of the 40% of the 40% of the 40% of the
outstanding balance of such loan whichever is lower outstanding outstanding outstanding outstanding
balance balance balance balance
2. Final rate - based on the AV of the property securing 70% of AV or 65% of AV or 60% of AV or 55% of AV or
the loan evidenced by negotiable instruments as 80% of the 75% of the 70% of the 65% of the
determined by a licensed and independent appraiser outstanding outstanding outstanding outstanding
acceptable to the BSP in accordance with BSP's terms balance balance balance balance
of reference or the outstanding balanceof such loan
whichever is lower.
e. Commercial papers ("AAA") 80% 80% 80% 80%

§§ X272.6 - X272.7
08.12.31
Assets of stockholders and of other third parties, the latter acceptable only in instances
provided under the last paragraph of Subsec. X272.8, are acceptable as collaterals for
emergency loan with corresponding loan values, as follows:
ACCEPTABLE COLLATERALS With Surety With Surety With No Surety

Agreement Pledge Negative Agreement
and but no Pledge but and no
Negative Negative no Surety Negative
Pledge Pledge Agreement Pledge
I. Asset of stockholders to secure new loan releases if the
bank has no available first class collaterals:
a. Unencumbered real estate
1. Initial rate - based on the AV of the land and insured 35% 30% 25% 20%
improvements
b. Government Securities 80% 80% 80% 80%
c. Commercial papers ("AAA") 80% 80% 80% 80%
II. Assets of other third parties to cover deficiency arising
from unpaid interest and liquidated damages, reduction
in loan value of existing colaterals and conversion of
overdrafts into emergency loan:
a. Unencumbered real estate
1. Initial rate - based on the AV of the land and 30% 25% 20% 15%
insured improvements
b. Government securities 80% 80% 80% 80%
c. Commercial papers ("AAA") 80% 80% 80% 80%
Other types of assets may be a. The grant of emergency loan or

acceptable as collateral for emergency loan advance shall bear the concurrent vote of
as the Monetary Board may approve. at least five (5) members of the Monetary
The initial valuation rate shall apply in Board.
case the appraisal reports of independent b. The emergency loan or advance
appraiser acceptable to the BSP for real shall have a ninety (90)-day availability
estate collaterals are not available or not period from date of Monetary Board
in accordance with BSP’s terms of reference approval, non-renewable, non-extensible.
or the collaterals themselves are with Request for extension or renewal shall be
rectifiable minor deficiencies as treated as new loan application to be
determined by DLC, but will be adjusted evaluated by the appropriate department
upon compliance with the foregoing of the SES if qualified under Subsec.
requirements. X272.2.
All collateralization expenses, such as c. The amount approved by the
registration fees, documentary stamps, etc., Monetary Board may be disbursed in one
shall be borne by the applicant bank. (1) or more releases as dictated by the
(Circular No. 517 dated 06 March 2006) needs of the bank and availability of first
class collateral.
§ X272.7 Manner and conditions of d. The proceeds of the emergency
release. The manner and conditions of loan or advance shall be applied first to
release of emergency loan or advance shall the advance interest, and then to any
be as follows: outstanding overdrawings that may have

§§ X272.7 - X272.10
08.12.31
been incurred by the bank in its demand shall be photographed as well as recorded
deposit with the BSP. in video tape.
e. The bank shall submit to the DLC (Circular No. 517 dated 06 March 2006)
a board resolution confirming every receipt
of proceeds of emergency loan or § X272.9 General terms and
advance. Likewise, the bank shall submit conditions. A bank with an outstanding
a board resolution confirming the emergency loan or advance shall comply
undertakings executed by the officers with the following conditions:
under Subsec. X272.4. a. The bank shall not, without the
(Circular No. 517 dated 06 March 2006) prior authorization of the Monetary Board,
expand its outstanding loans or
§ X272.8 Interest rates, liquidated investments as of the date of application
damages, and penalties. The interest rate for emergency loan, except for investment
that shall be charged on emergency loan in government securities.
or advance shall be based on the BSP b. The bank shall not declare cash
lending rate plus two percent (2%) per dividends.
annum. Interest shall be collected in c. The bank shall not grant new
advance from the borrowing bank. loans to DOSRI or to affiliates and
An additional five percent (5%) per subsidiaries.
annum shall be imposed as liquidated d. The bank shall accept the BSP
damages on the past due emergency loan designated Comptroller to be assisted by
or advance. examiners recommended by the
A penalty of one-tenth of one percent appropriate department of the SES and the
(1/10th of 1%) per day of delay on DLC to monitor the operations of the bank
unremitted/delayed remittance of under the Terms of Reference as
collections received by the bank from determined by the Monetary Board.
promissory notes covering the assigned e. The bank shall not be allowed to
mortgage credits or the proceeds of sale avail of the BSP rediscounting facility.
from assigned/mortgaged real estate f. The bank shall comply with any
properties commencing on the day other terms and conditions that may be
following the deadline prescribed in imposed by the Monetary Board.
Subsec. X272.11 shall be imposed on the (Circular No. 517 dated 06 March 2006)
erring bank.
Any shortfall in collateral due to unpaid § X272.10 Maturity/Conditions for
accrued interest, liquidated damages, renewals. The term of any emergency loan
reduction in loan value of existing or advance shall not exceed 180 days
collaterals and conversion of overdraft into including renewals.
emergency loan may be covered by third Any request for renewal of an
party assets after the assets of the bank emergency loan or advance shall be
have been exhausted. treated as a new loan and shall be
A Joint Affidavit (EL Form No. 16/ considered only upon the bank’s
16a) between the bank’s chairman and compliance with the following:
president and the corporate-mortgagor’s a. All the requirements of the
chairman and president or the individual previous tranche/s;
mortgagor to be signed and notarized in b. Remittance of collections/proceeds
the BSP shall be submitted in support of of sales under Subsec. X272.11;
the mortgage documents. The signing c. Payment of advance interest;

§§ X272.10 - X272.12
08.12.31
d. Submission of a duly notarized The bank shall ensure that adequate

promissory note in favor of the Bangko records on the collections and sale made
Sentral; and by the branches are maintained in its Head
e. Other requirements that may be Office.
imposed by the Monetary Board on the c. Increases in the deposit level of the
borrowing bank. borrowing bank equivalent to the recovery
The Director of the DLC shall approve of the net withdrawal of deposits, shall be
the renewal of an emergency loan or remitted to the BSP or debited against the
advance. bank’s demand deposit account in payment
(Circular No. 517 dated 06 March 2006) of the emergency loan or advance, net of
refund of interest.
§ X272.11 Remittance of collections/ d. The loan value of the collaterals of
repayments/arrearages. The following the emergency loan or advance, i.e.,
shall govern remittance of collections, sale mortgaged credits and properties,
proceeds, repayments and arrearages: discovered by the BSP falling short of its
a. Total collections received on loan criteria of first class collaterals, shall be
accounts assigned to the BSP shall be held debited against the bank’s DDA with the
in trust for, and remitted to the BSP not BSP, net of refund of interest.
later than five (5) banking days following e. The BSP shall undertake all
the date of receipt in payment of the bank’s necessary collection measures allowed by
outstanding emergency loan or advance, law, such as foreclosure proceedings
net of refund of interests, if any. against banks, whether operating or
b. Proceeds from the sale of closed, with past due loans.
properties assigned/mortgaged to the In the event the bank fails to comply
BSP shall be held in trust for, and with any of the foregoing, the DLC shall
remitted to the BSP not later than five (5) notify, copy furnished the bank, the
banking days following the date of borrowers of the assignment of their
receipt in payment of the bank’s outstanding loans to the BSP and advise
outstanding emergency loan or advance, them to remit payment directly to the BSP
net of refund of interests, if any. (EL Form 17).
For banks with emergency loan or (Circular No. 517 dated 06 March 2006)
advance under current status, “total
collections” and “proceeds from the sale” § X272.12 Default. The following shall
shall pertain to the loan value of the constitute events of default which shall
mortgaged credits and properties. render the emergency loan or advance due
For banks with emergency loan or and demandable and shall be sufficient
advance under past due status: cause for the BSP to stop further releases
(1) Total collections shall pertain to of funds, without prejudice to any action
total collections from the mortgaged the BSP may decide to take in accordance
credits, i.e. principal plus interest and with R.A. No. 7653:
penalty. a. Insolvency or bankruptcy of the
(2) Proceeds from the sale shall pertain bank.
to net proceeds from the sale of assigned/ b. Appointment of a receiver for the
mortgaged properties or the total BSP bank.
claims pertaining to the sold properties, c. The bank’s property and business
i.e., loan value plus interest and penalty, is taken possession of or its business
whichever is higher. suspended or closed by the lawfully

§§ X272.12 - X275
08.12.31
authorized governmental agency or c. Loan values. The loan value of

authority. paper offered as collateral shall be eighty
d. Violation of any of the terms and percent (80%) of the amount still due and
conditions of all loan and collateral outstanding on the paper offered as
documents. collateral.
e. Non-compliance with the d. Repayment period. The term of the
undertakings executed by the borrowing credit accommodation may not exceed
bank. ninety (90) days and shall be non-
(Circular No. 517 dated 06 March 2006) renewable.
Sec. X273 Facility to Committed Credit § X273.4 Ceiling. If availment of this

Line Issuers. The following guidelines shall credit facility is outside the other rediscount
govern the grant by the BSP of special ceiling of the bank, it shall be limited to
credit accommodations to banks which the extent of fifteen percent (15%) of the
establish committed credit line in favor of net worth of the bank.
corporations proposing to issue
commercial paper. Sec. X274 (Reserved)
§ X273.1 Nature of special credit Sec. 1274 (Reserved)

accommodations. The BSP may extend a
loan to any bank which on its own or as a Sec. 2274 Countryside Financial
member of a group of banks, provides a Institutions Enhancement Program
committed credit line facility to a (CFIEP) for Thrift Banks. The CFIEP shall
corporation proposing to issue commercial be implemented under the terms of
paper. reference indicated in Appendix 16.
§ X273.2 Conditions to access. A bank Sec. 3274 Countryside Financial

applying for a loan pursuant to the Institutions Enhancement Program for
provisions of this Section shall submit to Rural and Cooperative Banks. The CFIEP
the BSP documents showing that it has shall be implemented under the terms of
extended a committed credit line to a reference indicated in Appendix 16.
commercial paper issuer and that such
issuer has availed itself of said credit line. Sec. X275 Recording and Reporting of
Borrowings. The bank’s liability for papers
§ X273.3 Terms of credit discounted and/or rediscounted “with
a. Interest rate. The rate of interest recourse” with the BSP and/or other
chargeable on the availment of this credit financial institutions shall be recorded and
facility shall be that which is equivalent to shown as “Bills Payable” in all reports
eighty percent (80%) of the total of interest submitted to the BSP.
and fees received by the bank from the The loans and discounts, bills
issuer, net of provision for gross receipts purchased, acceptances and other accounts
tax paid by the bank on such income. affected by such discounting and/or
b. Security. The promissory note rediscounting transactions shall remain as
executed by the commercial paper issuer part of the bank’s loan portfolio. A footnote
in favor of the bank for the amount drawn in the financial statement shall indicate the
against the committed credit line shall be outstanding balances of the discounted and/
the security for this credit facility. or rediscounted loans.

§§ X276 - 3277.1
08.12.31
Sec. X276 Rediscounting Window for Low- (4) The BSP will automatically debit
Cost Housing as Defined by the Housing the demand deposit account of the UB/KB
and Urban Development Coordinating upon maturity of the rediscounting loan.
Council (HUDCC). The rules and (5) The chief executive officer of the
regulations governing the rediscounting of bank or his equivalent must certify that the
housing loan papers of qualified banks rediscounted commercial paper is still
under the low-cost housing program of the outstanding as of the time of assignment.
HUDCC are shown in Appendix 40. (6) The UBs/KBs shall comply with the
documentary requirements of the DLC.
Sec. X277 (Reserved) c. Duration
Qualified UBs/KBs may avail of this
Sec. 1277 Rediscounting Window facility until December 2000.
Available to All Universal and
Commercial Banks for the Purpose of Sec. 2277 Rediscounting Window
Providing Liquidity Assistance to Available to TBs for the Purpose of
Investment Houses. The following Providing Liquidity Assistance to Support
implementing guidelines shall govern the and Promote Microfinance Programs. TBs
new rediscount window available to all availing of rediscounting facility for purposes
UBs and KBs under Section 82(c) of R.A. of providing liquidity assistance to support
No. 7653, for the purpose of providing and promote microfinance programs shall
liquidity assistance to IH: comply with the guidelines under Sec.
a. Criteria for eligibility 3277, except for the requirement of a
(1) Eligible papers custodian bank under Subsec. 3277.4a(6).
Promissory note of the UB/KB
executed in favor of the BSP and secured Sec. 3277 Rediscounting Window
by a Deed of Pledge or Assignment of Available to Rural and Cooperative Banks
unencumbered/unhypothecated for the Purpose of Providing Liquidity
commercial papers with a rating of triple Assistance to Support and Promote
“A” and double “A”. Microfinance Programs. The following
(2) Loan limit guidelines shall govern the rediscounting
Availments against this facility shall be facility available to RBs and Coop Banks
charged against the rediscount ceiling of for the purpose of providing liquidity
the borrowing bank (100% of net worth) as assistance to support and promote
of the end of the quarter immediately microfinance programs.
preceding the date of application.
b. Terms and conditions § 3277.1 Eligibility requirements
(1) The loan shall be assessed an a. Eligible borrowers . RBs and Coop
annual interest rate equivalent to one Banks with at least one (1) year track record
percent (1%) below the weighted average in microfinance and at least 500 active
of the ninety-one (91)-day Treasury Bill rate borrowers, ratio of past due microfinance
for the last auction of the immediately loans to total outstanding microfinance
preceding month. loans of not more than five percent (5%)
(2) The loan shall have a term of 180 as of end of the month preceding loan
days from date of availment. application and collection ratio of not less
(3) The loan value shall be ninety than ninety-five percent (95%) based on
percent (90%) of the face value of the ratio of total collections (excluding
commercial paper. prepayments) during the preceding twelve

§§ 3277.1 - 3277.2
08.12.31
(12)-month period to the sum of past due experience of one (1) year and have
microfinance loans at the beginning of said completed a training course in
period and amount of matured loans microlending activities.
including principal amortizations during f. Prescribed financial ratios and
the same twelve (12) - month period. regulations. Applicant bank must comply
b. Eligible papers. Promissory Note with the following financial ratios and
(PN) of the RB or Coop Bank executed in regulations:
favor of the BSP and secured by duly (1) Minimum capital prescribed under
endorsed PN of microcredit borrowers. Subsec. X111.1;
c. Manual of operations. Written (2) Risk-based capital ratio of not less
policies on microfinance operations must than ten percent (10%);
be set forth and documented in a policy (3) Reserves against deposit liabilities
manual duly approved by the bank’s board prescribed under existing regulations;
of directors. The manual should include the (4) Ratio of past due direct and indirect
following minimum features: loans to DOSRI to the bank’s aggregate past
(1) Scope of microfinance activities due loans of not more than ten percent
and the types of services or products offered (10%);
to clients; (5) Loans-to-deposits ratio of at least
(2) Authorities and responsibilities of: seventy-five percent (75%);
(a) Board of directors; (6) Reports required to be submitted
(b) Management; to the various departments and/or offices
(c) Chief executive officer or its of the BSP;
equivalent; (7) CAMELS rating of “3” or better; and
(d) Credit officers; and (8) Ratio of past due loans to total loan
(e) Other officers involved in the portfolio of not more than the industry
microfinance operations; average for RBs as of the preceding quarter.
(3) Policies and procedures covering
microfinance program/project; § 3277. 2 Microcredit line
(4) Client evaluation process which a. Application for MCR Line shall be
should involve at least: client orientation, filed with the DLC, BSP at its head office
pre-application, credit investigation, and in Manila or the appropriate BSP Regional
loan application process; Loans and Credit Unit (BSPRLCU). The
(5) Loan processing, documentation term of the MCR line shall not exceed one
and release of proceeds; (1) year from the date it is granted. The line
(6) Accounts monitoring system; may be renewed for another year upon
(7) Accounts delinquency management; submission of an application at least two
(8) Management Information System; (2) months before expiry, subject to full
(9) Accounting policies, systems and compliance with the prescribed eligibility
procedures; and requirements and the credit review by the
(10) Internal controls and audit policies, DLC.
systems and procedures. b. Total availments against the facility,
d. A copy of System of Reviewing which shall be charged against the
Asset Accounts and Setting Up of Adequate approved MCR line, shall form part of the
Valuation Reserves submitted. total authorized rediscount ceiling of the
e. Staff training and experience. Key borrowing bank. The rediscount ceiling for
officers and staff responsible for microcredit microfinance shall be equivalent to one
operations must have a minimum hundred percent (100%) of the bank’s net

§§ 3277.2 - 3277.4
08.12.31
worth, net of valuation reserves and other within Metro Manila and not later than four
capital adjustments as recommended by (4) banking days following the date of
the appropriate department of the SES as receipt of collections by the Head Office/
of the last regular examination of the bank. branches located outside Metro Manila as
c. The proceeds of availment or provided under Subsec. 3277.5.
drawdown against the approved MCR line g. A penalty of five percent (5%) per
shall be credited to the account of the RB annum shall be imposed on matured and
or Coop Bank maintained with the unpaid bank PNs in favor of the BSP.
depository bank or with BSP. The RB or Full compliance at all times with the
Coop Bank shall be notified in writing/ eligibility requirements as prescribed
electronically of the credit of such account under Subsec. 3277.1.
on the same banking day that the proceeds
are released. § 3277.4 Documentary requirements
a. Application for MCR Line. RBs or
§ 3277. 3 Terms and conditions Coop Banks applying for an MCR line shall
a. The loan value shall be equivalent submit a letter of application to DLC or the
to eighty percent (80%) of the outstanding appropriate BSPRLCU accompanied by the
balance of the microfinance borrower’s PN. following documents:
b. The RB or Coop Bank’s loan from (1) Certificate of the Secretary (original)
the BSP shall have a term of not more than and copy of the resolution duly signed by
360 days. The maturity date of the the board of directors of the applicant bank,
microfinance borrower’s PN shall in no authorizing the bank to apply for an MCR
case be beyond the maturity date of the line with the BSP and designating the
RB or Coop Bank’s PN. officer authorized under Subsec. 3277.3(e)
c. The loan shall be assessed an to endorse the PNs and sign all papers
annual interest rate equivalent to the 91- pertaining to the rediscounting line in the
day Treasury Bill rate for the last auction prescribed format.
date of the preceding month. (2) Certification of the applicant bank
d. The demand deposit account of the that it has complied with the financial and
RB or Coop Bank will be automatically regulatory ratios, conditions, and reportorial
debited at the maturity date of the BSP loan requirements prescribed under the
for the full amount due excluding collections eligibility requirements for rediscounting
from microfinance borrowers which were as provided under Subsec. 3277.1.
credited to the Special Savings Account of (3) Consolidated Financial Statements.
the BSP with the borrowing bank. Statement of Condition as of the end of the
e. Any responsible officer who is month immediately preceding the date of
holding a position that is not lower than application together with the
manager or equivalent rank must, upon corresponding Statement of Income and
approval by the bank’s Board, endorse the Expenses covering the results of
rediscounted PNs and certify that the same operations for the last three (3) years.
are still outstanding as of the time of (4) Report on required and available
application. reserves covering the past two (2)
f. Collections made on amortizations consecutive weeks immediately
due and maturing PNs shall be remitted to preceding the date of application.
the DLC not later than two (2) banking days (5) Rediscounting Line Agreement
following the date of receipt of collections executed by the CEO of the RB or Coop
by the Head Office/branches located Bank.

§§ 3277.4 - 3277.8
08.12.31
(6) Notarized custodian agreement demand deposit account with BSP. Check
executed among the CEO of the RB or payments and demand drafts shall be given
Coop Bank, the third party custodian and value when cleared.
the BSP.
b. Availment of MCR Line. For § 3277.6 Reports required. A monthly
availment of MCR line, the RB or Coop report on microfinance transactions shall
Bank shall submit the following be submitted to DLC or the appropriate
documents: BSPRLCU within the deadline set in
(1) Application for MCR Line Appendix 6.
Availment - original and one (1) copy in
prescribed form duly accomplished and § 3277.7 Accounts verification. The
signed by the CEO of the applicant bank; microcredit accounts rediscounted shall be
(2) Rediscount Schedule (RS); and subject to verification and confirmation by
(3) Notarized PNs in favor of the BSP - authorized DLC or the appropriate
original and two (2) copies. BSPRLCU representatives to determine
their eligibility and acceptability for
§ 3277.5 Remittance of collections/ rediscounting.
payments/repayments. Collections made
on amortizations due and maturing PNs § 3277.8 Sanctions. Any misrepresentation
shall be remitted to the DLC not later and/or violation of the provisions of this
than two (2) banking days following the Section shall subject the RB or Coop Bank
date of receipt of collections by the Head and/or the erring directors/officers to any
Office/branches located within Metro of the following sanctions:
Manila and not later than four (4) banking a. Erring RB or Coop Bank
days following the date of receipt of (1) Fines in amounts as may be
collections by the Head Office/branches determined by the Monetary Board to be
located outside Metro Manila. As an appropriate, but in no case to exceed Thirty
alternative, collections may be deposited thousand pesos (P30,000) a day for each
in a Special Savings Deposit Account violation;
(SSDA) which shall be maintained by the (2) Suspension of rediscounting
BSP with the borrower-bank and remitted privileges or access to BSP credit facilities;
to DLC or the appropriate BSPRLCU on and/or
the last banking day of every month. The (3) Reduction of rediscounting line.
SSDA shall earn interest of one percent b. Erring directors/officers
(1%) lower than the 91-day Treasury Bill For violation of any of the provisions
rate for the last auction date of the of this Section the following shall be
preceding month. imposed against the directors and
On due date of the PN, the RB or Coop officers of the bank:
Bank shall remit to the BSP the unpaid (1) 1st offense - a warning that a
balance of such PN: Provided, That any repetition of the same or similar offense
amount credited to the SSDA shall be shall subject the erring director/officer to
applied as payment of the PN in favor of monetary penalties and/or sanctions;
BSP. The remittance shall be reported (2) 2nd offense - a fine of P500 per day
under DLC Form No. 5. The remittance to for each violation from the time the
BSP shall be in the form of cash, demand violation was committed up to the time it
draft, manager’s check or based on is corrected without prejudice, however,
authority issued by the bank to debit its to the imposition of higher penalties; and

§§ 3277.8 - X284
10.12.31
(3) 3rd and subsequent offenses - a fine a. STDs and deposit substitutes of
of P5,000 per day from the time the violation specialized government banks and private
was committed up to the time it is corrected banks arising from their lending operations
without prejudice, however, to the under the special financing programs of the
imposition of higher penalties. Government and/or international FIs; and
If any of the documentary requirements b. Funds held by participating financial
submitted by the bank as required under institutions (PFIs) under the GSIS Housing
Subsec. 3277.4 is found to be false, a fine Loan Programs: Provided, That the
of P5,000 per day, from the time the agreement between the GSIS and the
certification was made up to the time the conduit banks specify that such funds may
certification was found to be false, shall be be held by the conduit banks for a period
imposed against the certifying officer. of not more than seven (7) calendar days
prior to their release to the borrower and
Sec. X278 Enhanced Intraday Liquidity prior to the remittance by the conduit
Facility. The ILF is a smoothening banks of payments to the GSIS.
mechanism which is available to eligible c. Borrowings by accredited FIs under
participant banks in the Philippine the Wholesale Lending Program for SMEs
Payments and Settlements System of the SBGFC.
(PhilPaSS) to support their liquidity
requirements and avoid payment gridlocks Sec. X282 Borrowings from Trust
in PhilPaSS. The revised features of the Departments or Investment Houses
enhanced intraday liquidity facility are in Funds borrowed by banks from trust
Appendix 21-B. departments or managed funds of banks or
(As superseded by the MOA between the BSP, BTr, BAP and IHs are not considered as interbank
Money Market Association of the Philippines dated 25 March borrowings and therefore are subject to the:
2008) a. Reserve requirement on deposit
substitutes; and
Secs. X279 - X280 (Reserved) b. Minimum trading lot rule.
(As amended by Circular No. 703 dated 23 December 2010)
K. OTHER BORROWINGS
Sec. X283 (Reserved)
Sec. X281 Borrowings from the
Government. Except as may be authorized Sec. 1283 (Reserved)
by existing statutes, no private bank shall,
whether or not performing quasi-banking Sec. 2283 Mortgage/CHM Certificates of
functions, borrow any fund or money from Thrift Banks. With prior approval of the
the Government and government entities, Monetary Board, TBs may issue and deal
through the issuance or sale of its in mortgage and CHM certificates. The
acceptances, notes or other evidences of rules and regulations governing the
debt. issuance of said certificates is shown in
Appendix 17.
§ X281.1 Exemption from reserve
requirement. The following borrowings Sec. 3283 (Reserved)
shall not be subject to the reserve
requirements: Sec. X284 (Reserved)

§§ 1284 - X299
08.12.31
Sec. 1284 (Reserved) the RBs to BSP, which are entered in

their books as “Bills Payable-BSP,” do
Sec. 2284 (Reserved) not presently fall under the category
of deposit substitutes.
Sec. 3284 Borrowings of Rural Banks/
Cooperative Banks. RBs and Coop Banks Secs. X285 - X298 (Reserved)
may rediscount papers with any bank.
The obligations of RBs arising from Sec. X299 General Provision on
availments of rediscounting facilities and Sanctions. Any violation of the provisions
other borrowings from the BSP, will be of this Part shall be subject to Sections 36
considered as deposit substitutes. and 37 of R.A. No. 7653.
However, with the qualification in the Tax The guidelines for the imposition of
Code of 1997 that the term public means monetary penalty for violations/offenses
borrowing from twenty (20) or more with sanctions falling under Section 37
individual or corporate lenders at any one of R.A. No. 7653 on banks, their directors
(1) time, it is clear that the obligations of and/or officers are shown in Appendix 67.

§§ X301 - X301.6
14.12.31
PART THREE
LOANS, INVESTMENTS AND SPECIAL CREDITS
Section X301 Lending Policies interdependence, which shall consider,

(Deleted by Circular No. 855 dated 29 October 2014) among others, significant dealings or
transactions of one or more counterpart(y/
§ X301.1 (Reserved) ies) that impact the financial capacity or
ability to repay the obligations of the other
§ 1301.1 Rules and regulations to govern counterpart(y/ies).
the development and implementation of In cases where the criteria do not
banks’ internal credit risk rating systems automatically imply an economic
(Deleted by Circular No. 855 dated 29 October 2014) dependence that results in two (2) or more
counterparties being connected, the FI shall
§ 2301.1 (Reserved) provide evidence to Bangko Sentral that a
counterparty which is economically
§ 3301.1 (Reserved) connected to another, still can pay its
liabilities even if the latter’s financial
§§ X301.2 - X301.5 (Reserved) condition weakens.
b. Scope of application. Large exposures
§ X301.6 Large exposures and credit of FIs and their subsidiaries and affiliates to
risk concentrations third parties across the relevant regulatory
a. Definition. “Large exposures” shall consolidation group shall be aggregated and
refer to exposures to counterparty or a group compared with the group’s qualifying capital.
of connected counterparties equal or c. Exclusions. Loans, other credit
greater than five percent (5%) of the FI’s accommodations and guarantees that are
qualifying capital as defined under excluded from the single borrower’s limit
applicable and existing capital adequacy (SBL) under Sec. X303 and Subsec. X303.4
framework. as well as intraday and end-of-day
“Connected counterparties” refer to a interbank exposures arising from interbank
group of counterparties that are connected payment and settlement processes shall be
through (a) direct or indirect control of one excluded from large exposures.
of the counterparties over the other(s) or d. Notification requirements. An FI
(b) economic interdependencies, and must must immediately inform the Bangko
be treated as a single counterparty. Control Sentral when it has concerns that its large
shall be determined in accordance with exposures or credit risk concentrations
Subsec. X303.1(g). have the potential to impact materially
“Economic Interdependence” refers to a upon its capital adequacy, along with
situation where counterparties are reliant proposed measures to address these
on each other, such that if one of the concerns.
counterparties experiences financial e. Reporting. FI’s records on
problems in repaying its obligations, the monitoring of large exposures shall be
creditworthiness of the other(s) would also made available to the Bangko Sentral
likely deteriorate. FIs shall define in their examiners for verification at any given time.
credit policy criteria in determining When warranted, the Bangko Sentral may
connectedness based on economic impose additional reporting requirements
Manual of Regulations for Banks Part III - Page 1

§§ X301.6 - X303
14.12.31
on the FI in relation to its large exposures bank. The basis for determining compliance
and credit risk concentrations. with the single borrower’s limit (SBL) is the
f. Sanction. Any failure or delay in total credit commitment of the bank to or
complying with the requirements under on behalf of the borrower.
Items “d” and “e” of this Subsection shall be b. The total amount of loans, credit
subject to penalty applicable to those accommodations and guarantees prescribed
involving major reports. in the first paragraph may be increased for
(As amended by Circular Nos. 855 dated 29 October 2014 and each of the following circumstances:
827 dated 28 February 2014) 1. By an additional ten percent (10%)
of the net worth of such bank: Provided,
Sec. X302 Loan Portfolio and Other Risk
That the additional liabilities are adequately
Assets Review System.
secured by trust receipts, shipping
documents, warehouse receipts or other
§ X302.1 Provisions for losses; booking similar documents transferring or securing
(Deleted by Circular No. 855 dated 29 October 2014) title covering readily marketable, non-
perishable goods which must be fully
§ X302.2 Sanctions. covered by insurance;
2. By an additional twenty-five percent
§ X302.3 Regulatory relief for banks (25%) of the net worth of such bank:
under rehabilitation program approved by Provided, That the additional loans, credit
the Bangko Sentral. Banks may be allowed accommodations and guarantees are for the
to charge their outstanding unbooked purpose of undertaking infrastructure and/
allowance for probable losses directly to or development projects under the Public-
retained earnings, on one-time basis, subject Private Partnership (PPP) Program of the
to the following conditions: government duly certified by the Secretary
a. That this is in connection with a of Socio-Economic Planning: Provided,
comprehensive rehabilitation program further, That the total exposures of the bank
approved by the Bangko Sentral; and to any borrower pertaining to such
b. The effects thereof, if these had been infrastructure and/or development projects
charged to profit and loss, shall be fully under the PPP Program shall not exceed
disclosed in the audited financial twenty-five percent (25%) of the net worth
statements, annual reports and published of such bank: Provided, furthermore, That
statement of condition. the additional twenty-five percent (25%)
(Circular No. 763 dated 03 August 2012) shall only be allowed for a period of six (6)
years from 28 December 2010: Provided,
A. LOANS IN GENERAL finally, That the credit risk concentration
arising from total exposures to all borrowers
Sec. X303 Credit Exposure Limits to a pertaining to such infrastructure and/or
Single Borrower development projects under the PPP
a. Consistent with national interest, the Program shall be considered by the bank in
total amount of loans, credit its internal assessment of capital adequacy
accommodations and guarantees that may relative to its overall risk profile and
be extended by a bank to any person, operating environment. Said loans, credit
partnership, association, corporation or accommodations and guarantees based on
other entity shall at no time exceed twenty the contracted amount as of the end of the
five percent (25%) of the net worth of such six (6)-year period shall not be increased but
Part III - Page 2 Manual of Regulations for Banks

§ X303
14.12.31
may be reduced and once reduced, said who owns or controls a majority interest in
exposures shall not be increased thereafter; a corporation, partnership, association or
and any other entity, the liabilities of said entities
3. By an additional fifteen percent (15%) to such bank; (3) in the case of a corporation,
of the net worth of such bank: Provided, all liabilities to such bank of all subsidiaries
That the additional loans, credit in which such corporation owns or controls
accommodations and guarantees are granted a majority interest; and
to finance oil importation of oil companies, (4) in the case of a partnership,
which are not affiliates of the lending bank, association or other entity, the liabilities of
engaged in energy and power generation: the members thereof to such bank.
Provided, further, That the oil companies d. Even if a parent corporation,
qualify under the credit underwriting partnership, association, entity or an
standards of the lending bank and the individual who owns or controls a majority
lending bank shall comply with Subsec. interest in such entities has no liability to
X301.6 on the guidelines in managing large the bank, the liabilities of subsidiary
exposures and credit risk concentration: corporations or members of the partnership,
Provided, furthermore, That the credit risk association, entity or such individual shall
concentration arising from total exposures be combined under certain circumstances,
to all oil companies shall be considered by including but not limited to any of the
the bank in its internal assessment of capital following situations: (1) the parent
adequacy relative to its overall risk profile corporation, partnership, association, entity
and operating environment and shall be or individual guarantees the repayment of
incorporated in the Internal Capital the liabilities; (2) the liabilities were incurred
Adequacy Assessment Process (ICAAP) for the accommodation of the parent
document required to be submitted under corporation or another subsidiary or of the
Sec. X117: Provided, finally, That the partnership or association or entity or such
additional fifteen percent (15%) shall only individual; or (3) the subsidiaries though
be allowed for a period of three (3) years separate entities operate merely as
from 03 March 2011 or, until 03 March departments or divisions of a single entity.
2014. Said additional loans, credit e. For purposes of this Section, loans,
accommodations and guarantees other credit accommodations and
outstanding as of the end of the three (3)- guarantees shall exclude: (1) loans and other
year period and in excess of twenty five credit accommodations secured by
percent (25%) of the lending bank’s net obligations of the Bangko Sentral or of the
worth shall not be increased but shall be Philippine Government; (2) loans and other
reduced and once reduced, said exposures credit accommodations fully guaranteed by
shall not be increased thereafter. the government as to the payment of
c. The above prescribed ceilings shall principal and interest; (3) loans and other
include: (1) the direct liability of the maker credit accommodations secured by U.S.
or acceptor of paper discounted with or sold Treasury Notes and other securities issued
to such bank and the liability of a general by central governments and central banks
endorser, drawer or guarantor who obtains of foreign countries with the highest credit
a loan or other credit accommodation from quality given by any two (2) internationally
or discounts paper with or sells papers to accepted rating agencies; (4) loans and other
such bank; (2) in the case of an individual credit accommodations to the extent covered

§§ X303 - X303.1
14.12.31
by the hold-out on or assignment of, institutions like the LBP and the DBP shall
deposits maintained in the lending bank and not be covered by the SBL imposed under
held in the Philippines; (5) loans, credit R.A. No. 8791.
accommodations and acceptances under In municipalities and cities where
letters of credit to the extent covered by there are no government banks, the
margin deposits; and (6) other loans or credit deposits of RBs/Coop Banks in private
accommodations which the Monetary Board banks in said areas shall not be subject to
may from time to time specify as non-risk the SBL imposed under R.A. No. 8791.
items. Deposits in private banks located in
f. The wholesale lending activities of municipalities/cities where there are
government banks to participating financial government banks shall be subject to the
institutions (PFIs) for relending to end-user limits as prescribed in the second
borrowers shall at no time exceed a separate paragraph above.
limit of thirty-five percent (35%) of net worth, The outstanding balance of the demand
subject to the following guidelines: (1) it deposit account in a private depository bank
shall apply only to loans granted to PFIs on being used by the TBs/RBs/Coop Banks with
a wholesale basis for on-lending to end-user authority to accept/create demand or current
borrowers; (2) it shall apply only to loan deposits, to fund checks cleared through
programs funded by multilateral, the said private depository bank shall also
international or local development agencies, be exempt from the SBL imposed under R.A.
organizations or institutions especially No. 8791 even if there is a government-
designed for wholesale lending activities of owned or controlled financial institution in
government banks; (3) the end-user the area.
borrowers of the PFIs shall be subject to the h. Loans, credit accommodations and
twenty-five percent (25%) SBL, not the guarantees to any person, partnership,
increased ceiling of thirty-five percent association, corporation or other entity or
(35%); and (4) government banks shall group of companies in excess of the
observe appropriate criteria for accrediting applicable SBL arising from acquisition,
PFIs and for the grant/renewal of credit lines merger or consolidation of borrower-
to accredited PFIs. corporations, which loans, credit
g. Loans and other credit accommodations and guarantees were
accommodations and usual guarantees by granted prior to and are outstanding as of
a bank to any non-bank entity, whether date of acquisition, merger or consolidation
locally or abroad, shall be subject to the of borrower-corporations shall not be
limits as herein prescribed. increased, but shall be reduced and once
Loans and other credit accommodations reduced, shall not be increased beyond the
as well as deposits and usual guarantees by applicable SBL.
a bank to any other bank, whether locally It is expected that FIs would generally
or abroad, shall be subject to the limits as observe a lower internal single borrower’s
herein prescribed or P100.0 million, limit than the prescribed limit of twenty-five
whichever is higher: Provided, That the percent (25%) as a matter of sound practice.
lending bank shall exercise proper due (As amended by Circular Nos. 855 dated 29 October 2014,
diligence in selecting a depository bank and 803 dated 05 July 2013, 779 dated 9 January 2013, 734 dated
16 August 2011, 712 dated 9 February 2011 and 700 dated
shall formulate appropriate policies to 06 December 2010)
address the corresponding risks involved in
the transactions. § X303.1 Definition of terms. For
Deposits of RBs/Coop Banks with purposes of this Section, the following
government-owned or controlled financial definitions shall apply:

§ X303.1
14.12.31
a. Total credit commitment shall include (1) Power over more than one-half of
outstanding loans and other credit the voting rights by virtue of an agreement
accommodations, deferred letters of credit with other investors; or
less margin deposits, and guarantees. Except (2) Power to govern the financial and
as specifically provided, total credit operating policies of the enterprise under a
commitment shall be reckoned on credit statute or an agreement; or
risk-weighted basis consistent with existing (3) Power to appoint or remove the
regulations. majority members of the board of directors
b. Loans shall refer to all the accounts or equivalent governing body; or
under the loan portfolio of a bank as (4) Power to cast the majority votes at
enumerated in the Manual of Accounts for meetings of the board of directors or
Banks. equivalent governing body; or
c. Other credit accommodations shall (5) Any other arrangement similar to any
refer to credit and specific market risk of the above.
exposures of banks arising from h. Subsidiary shall refer to a corporation
accommodations other than loans such as or firm more than fifty percent (50%) of the
receivables (sales contract receivables, outstanding voting stock of which is directly
accounts receivables and other receivables), or indirectly owned, controlled or held with
and debt securities booked as investments. power to vote by its parent corporation.
d. Bank guarantee. A bank guarantee is i. Credit risk transfer shall refer to any
an irrevocable commitment of a bank arrangement that allows the bank to transfer
binding itself to pay a sum of money in the the credit risk associated with its loan or
event of non-performance of a contract by other credit accommodation to a third party.
a third party. The guarantee is a commitment j. Readily marketable goods shall mean
separate and distinct from the principal debt articles of commerce, agriculture or industry
or contract. of such uses as to make them the subject of
e. Net worth shall mean the total of the constant dealings in ready markets with such
unimpaired paid-in capital including paid- frequent quotations as to make their prices
in surplus, retained earnings and undivided easily and definitely ascertainable, or which
profit, net of unbooked valuation reserves lend themselves easily to disposal by sale
and other adjustments as may be required at any time to pay the obligations secured
by the Bangko Sentral. by the said goods.
f. Qualifying capital shall mean capital k. Bill of exchange drawn in good faith
under applicable and existing capital against actually existing values shall mean
adequacy framework. one (1) which is drawn by a seller on the
g. The term “control of majority interest” purchaser for the purchase price of
shall be synonymous to “controlling commodities sold. A bill of exchange,
interest” and exists when the parent owns whether drawn against goods for exports or
directly or indirectly through subsidiaries against goods to be sold locally, which is
more than one half of the voting power of discounted or purchased by a bank is a bill
an enterprise unless, in exceptional drawn against existing values only when it
circumstance, it can be clearly demonstrated is accompanied by shipping documents,
that such ownership does not constitute warehouse receipts or other papers,
control. Control of majority interest may also securing title to the goods sold. However,
exist even when the parent owns one-half bills of exchange drawn in good faith against
or less of the voting power of an enterprise actually existing values as defined in this
when there is: paragraph, which are past due or the

§§ X303.1 - X303.4
14.12.31
maturities of which have been extended, the SBL until such papers are paid by the
shall be considered as additional loans borrowers.
authorized under the second paragraph of
this section and shall be subject to the ten § X303.3 Credit risk transfer. Subject
percent (10%) limitation provided therein. to prior approval of the Bangko Sentral,
l. Commercial or business paper actually loans and other credit accommodations
owned by the person negotiating the same covered by a legally effective credit risk
shall mean a paper arising from an actual transfer arrangement such as guarantee,
business transaction. A trade acceptance or letter of indemnity, standby letter of credit
promissory note actually owned by the or credit derivative, may be excluded from
person negotiating the same is a commercial the total credit commitment of the bank to a
or a business paper. However, if a bill is borrower in reckoning compliance with the
drawn against an agent or fictitious drawee, SBL.
or if a promissory note is executed by an
agent or fictitious drawee, neither is a § X303.4 Exclusions from loan limit
commercial nor a business paper. a. The discount of bills of exchange
Commercial or business papers actually drawn in good faith against actually existing
owned and discounted by the person values, and the discount of commercial or
negotiating the same, which are past due or business paper which are actually owned
the maturity of which have been extended, by the person, company, corporation or
shall be considered as money borrowed and association negotiating the same;
shall be subject to the limitation of twenty- b. Credit accommodations to finance
five percent (25%) provided in the first the importation of rice and corn to the extent
paragraph of this Section: Provided, That of 100% of the net worth of the bank
commercial or business papers purchased concerned shall be excluded in determining
by banks from SMEs which became past due the SBL prescribed herein, subject to the
or the maturities of which have been following conditions:
extended, shall be considered additional (1) The importation shall be made in
loan by the bank to the purchaser of goods pursuance of a national policy duly
or services from the SME and shall be enunciated by the National Government;
entitled to an increased SBL equivalent to (2) The importation shall have been
ten percent (10%) of the net worth of the approved by the National Economic
concerned bank if the purchasers are Development Authority (NEDA);
companies with credit ratings of at least (3) The letter of credit shall specify that
“AA-” or equivalent from a Bangko Sentral- importation shall be made with certification
recognized rating agency. from the National Food Authority (NFA),
(As amended by Circular Nos. 827 dated 28 February 2014) or the consular establishment of the
Philippine government at the source of any
§ X303.2 Rediscounted papers included such establishment of the Philippine
in loan limit. The liabilities to the bank of government at the source of any such
borrowers whose papers were rediscounted shipment to the effect that the commodity
by banks with the Bangko Sentral shall not be being imported is either rice or corn; and
deemed as having been extinguished by the (4) The related bills of lading shall
rediscount, but shall be considered as still specify in addition to the name of the
existing and shall be included in determining importer concerned, that the NFA shall be
1
It shall cover all new underwritten debt and equity securities issued from 15 February 2013.

§§ X303.4 - X303.5
13.12.31
the consignee of the shipment; i. Foreign securities lending under Sec.

c. The portion of loans and other credit X531 and other domestic securities lending
accommodations covered by the guarantee of programs duly recognized by the Bangko
IGLF; Sentral containing safeguards consistent
d. The total liabilities of a commercial with best international practices, to protect
paper issuer for commercial paper held by securities lenders’ risk exposures.
a UB acting as a firm underwriter of said (As amended by Circular Nos. 784 dated 25 January 2013, 578
dated 17 August 2007 and 550 dated 17 November 2006)
commercial paper shall not be counted in
determining compliance with the SBL § X303.5 Sanctions. Violations of the
within a period of ninety (90) calendar days provisions of this Section shall be subject
from the issuance of the commercial paper1: to the following:
Provided, That in no case shall such a. Monetary penalties2 - Fines of one-
liabilities exceed five percent (5%) of the tenth of one percent (1/10 of 1%) of the
net worth of the UB beyond normal excess over the ceiling but not to exceed
applicable SBL; P30,000.00 a day for each SBL violation
e. The portion of loans and other credit shall be assessed on the bank to be reckoned
accommodations covered by guarantees of from the date the excess started up to the
international/regional institutions/ date when such excess was eliminated:
multilateral FIs where the Philippine Provided, That a maximum fine of P500.00
Government is a member/shareholder, such a day for each violation shall be imposed
as the IFC and the ADB; against banks with total resources of less
f. Loans and other credit than P50.0 million at the time of granting of
accommodations or portion thereof, loan/credit accommodation.
specifically provided for with valuation b. Other sanctions
reserve: Provided, That the bank has no First offense – Reprimand for the
unbooked valuation reserves; directors/officers who approved the credit
g. Loans and other credit availment which resulted in the excess with
accommodations as a result of an a warning that subsequent violations will
underwriting or sub-underwriting be subject to more severe sanctions.
agreement of debt securities outstanding for
Subsequent offenses –
a period not exceeding thirty (30) calendar
(1) Fine of P1,000.00 for directors/
days. Said other credit accommodations
officers who approved the credit availment
shall include, among others, inventories of
which resulted in the excess.
debt securities such as, but not limited to,
(2) Suspension of the bank’s branching
bonds and notes purchased by the UB out
privileges and access to Bangko Sentral
of its underwriting commitments1;
rediscounting facilities until the excess is
h. Loans granted to foreign embassies.
eliminated.
These loans are considered as loans to their
(3) Other penalties as the Monetary
respective central governments and as such
Board may impose depending on the gravity
shall be considered non-risk; and
of the offense.
1
It shall cover all new underwritten debt and equity securities issued from 15 February 2013.
2
Outstanding credit commitments of a bank as of 02 May 2004 which are within the ceiling prescribed under
the regulations existing prior to said date but will exceed the limitations prescribed in this Section shall not be
subject to penalty for a period of one (1) year or until said credit commitments become past due or are
extended, renewed or restructured whichever comes later. Said credit commitments shall, however, be re-
ported to the Bangko Sentral within fifteen (15) banking days from 02 May 2004.

§§ X303.6 - X303.8
08.12.31
§§ X303.6 – X303.7 (Reserved) b. The thirty-five percent (35%) SBL

shall apply only to loan programs funded
§ X303.8 Limit for wholesale lending by multilateral, international or local
activities of government banks. There shall developmental agencies, organizations or
be a separate SBL of thirty-five percent (35%) institutions specially designed for wholesale
of unimpaired capital and surplus for the lending activities of government banks;
wholesale lending activities of government c. The end-user borrowers of the PFIs
banks to PFIs for relending to end-user shall be subject to the twenty-five percent
borrowers, subject to the following (25%) SBL, not to the increased ceiling of
guidelines: thirty-five percent (35%); and
a. Government banks’ SBL of thirty-five d. Government banks shall observe the
percent (35%) of unimpaired capital and minimum criteria for accrediting PFIs and
surplus shall apply only to loans granted to for the grant/renewal of credit lines to
PFIs on a wholesale basis for on-lending to accredited PFIs as set forth in Appendix 41.
end-user borrowers;
(Next page is Part III page 11)

(No pages 9 to 10)

§§ X304 - X304.4
14.12.31
Sec. X304 Grant of Loans and Other Credit (2) Those whose income has been
Accommodations. In addition to the subjected to final withholding tax;
principles and standards provided under (3) Senior citizens not required to file a
Section X178, the following regulations return pursuant to R.A. No. 7432, as
shall be observed in the grant of loans and amended by R.A. No. 9257, in relation to
other credit accommodations. the provisions of the National Internal
(As amended by Circular No. 855 dated 29 October 2014) Revenue Code (NIRC) or the Tax Reform
Act of 1997; and
§X304.1 Additional requirements. FIs (4) An individual who is exempt from
shall require submission and maintain on income tax pursuant to the provisions of the
file updated ITRs of the borrower, and his NIRC and other laws, general or special; and
co-maker, if applicable, duly stamped as f. Loans to borrowers, whose only
received by the BIR together with supporting source of income is compensation and the
financial statements, as applicable. FIs shall corresponding taxes on which has been
likewise require borrowers to execute a withheld at source: Provided, That the
waiver of confidentiality of client borrowers submitted, in lieu of the ITR, a
information and/or an authority of the FI to copy of their Employer’s Certificate of
conduct random verification with the BIR Compensation Payment/Tax Withheld (BIR
in order to establish authenticity of these Form 2316) or their payslips for at least three
documents. (3) months immediately preceding the date
Should the document(s) submitted of loan application.
prove to be incorrect in any material detail, g. Loans and other credit
the FI may terminate any loan or other credit accommodations not exceeding P3.0
accommodation granted on the basis of said million; or
document(s) and shall have the right to h. Loans to start up enterprise
demand immediate repayment or borrowers during the first three (3) years
liquidation of the obligation. of their operations or banking
The required submission of such relationship.
documents shall not cover the following (As amended by Circular Nos. 855 dated 29 October 2014,
credit exposures: 746 dated 03 February 2012, 694 dated 14 October 2010,
a. Microfinance loans as defined under 622 dated 16 September 2008, 607 dated 30 April 2008 and
Subsec. X361.1 (a); 549 dated 09 October 2006)
b. Loans to registered Barangay Micro-
§ X304.2 Purpose of loans and other
Business Enterprises (BMBEs); credit accommodations.
c. Interbank loans; (Deleted by Circular No. 855 dated 29 October 2014)
d. Loans secured by hold-outs on or
assignment of deposits or other assets § X304.3 Prohibited use of loan
considered non-risk by the Monetary Board; proceeds. Banks are prohibited from
e. Loans to individuals who are not requiring their borrowers to acquire shares
required to file ITRs under BIR regulations, of stock of the lending bank out of the loan
as follows: or other credit accommodation proceeds
(1) Individuals whose gross from the same bank.
compensation income does not exceed their
total personal and additional exemptions, § X304.4 Signatories. Banks shall
or whose compensation income derived require that loans and other credit
from one (1) employer does not exceed accommodations be made under the
P60,000 and the income tax on which has signature of the principal borrower and, in
been correctly withheld; the case of unsecured loans and other credit

§§ X304.4 - X304.11
10.12.31
accommodations to an individual borrower, § X304.10 Minimum required

at least one (1) co-maker, except that a co- disclosure1. Banks shall provide a table of
maker is not required when the principal the applicable fees, penalties and interest
borrower has the financial capacity and a rates on loan transactions, including the
good track record of paying his obligations. period covered by and the manner of and
(As amended by Circular No. 622 dated 16 September 2008) reason for the imposition of such penalties,
fees and interests; fees and applicable
§ X304.5 - X304.8 (Reserved) conversion reference rates for third currency
transactions, in plain sight and language,
§ X304.9 Policies on loans to non- on materials for marketing loans, such as
immigrants and embassy officials. Banks are brochures, flyers, primers and advertising
allowed to extend peso loans to the materials, on loan application forms, and
following: on billing statements: Provided, That these
a. Non-immigrants holding visas issued disclosures of the fees, charges and interest
under Secs. 9(d) and 9(g) of the Immigration rates in the terms and conditions of the loan
Act of 1940, Special Investor’s Resident Visa agreement: Provided further, That such table
(SIRV) and visas issued by the Philippine of fees, penalties and interest rates shall be
Economic Zone Authority: Provided, That printed in plain language and in bold black
such loans shall be limited to peso letters against a light or white background,
consumer loans including credit cards, auto and using the minimum Arial 12 theme font
loans and appliance loans, but excluding and size, or its equivalent in readability, and
real estate or housing loans: Provided, on the first page, if the applicable document
further, That the lending bank institutes has more than one (1) page.
measures to mitigate credit risk such as (Circular No. 702 dated 15 December 2010)
requiring the submission of a Comfort Letter
from the visa holder’s employer, limiting the § X304.11 Unfair collection practices
term of the loan to the period of the visa’s Banks, collection agencies, counsels and
validity, submission of SIRV identification other agents may resort to all reasonable
card, as well as subjecting the visa holder and legally permissible means to collect
to the usual credit processes/requirements; amounts due them under the loan agreement:
and Provided, That in the exercise of their rights
b. Embassy officials [foreign diplomats and performance of duties, they must
and career consular officials and employees observe good faith and reasonable conduct
who are physically residing in the and refrain from engaging in unscrupulous
Philippines for a term of one (1) year or or untoward acts. Without limiting the
more]: Provided, That such loans shall be general application of the foregoing, the
limited to consumer loans, including credit following conduct is a violation of this
cards, auto loans, appliance loans and others Subsection:
that may henceforth be allowed by the a. the use or threat of violence or other
Monetary Board: Provided, further, That the criminal means to harm the physical person,
lending bank institutes measures to mitigate reputation, or property of any person;
credit risk such as requiring the submission b. the use of obscenities, insults, or
of a Comfort Letter from the Embassy profane language which amount to a
employing said officials. criminal act or offense under applicable
(M-2007-021 dated 15 August 2007) laws;
1
Banks were given a period of 120 days from 06 January 2011 or up to 06 May 2011 to fully implement the
required disclosure requirements.

§§ X304.11 - X304.12
10.12.31
c. disclosure of the names of borrowers and procedures to ensure that personnel

who allegedly refuse to pay debts, except handling the collection of accounts, whether
as allowed under Subsec. X304.12; these are in-house collectors, or third-party
d. threat to take any action that cannot collection agents, shall disclose his/her full
legally be taken; name/true identity to the borrower.
e. communicating or threat to (As amended by Circular No. 702 dated 15 December 2010)
communicate to any person credit information
which is known to be false, including failure § X304.12 Confidentiality of
to communicate that a debt is being disputed; information. Banks shall keep strictly
f. any false representation or deceptive confidential the data on the borrower or
means to collect or attempt to collect any consumer, except under the following
debt or to obtain information concerning a circumstances:
borrower; and a. disclosure of information is with the
g. making contact at unreasonable/ consent of the borrower or consumer;
inconvenient times or hours which shall be b. release, submission or exchange of
defined as contact before 6:00 A.M. or after customer information with other financial
10:00 P.M., unless the account is past due institutions, credit information bureaus,
for more than sixty (60) days or the borrower lenders, their subsidiaries and affiliates;
has given express permission or said times c. upon orders of court of competent
are the only reasonable or convenient jurisdiction or any government office or
opportunities for contact. agency authorized by law, or under such
Banks shall inform their borrowers in conditions as may be prescribed by the
writing of the endorsement of the collection Monetary Board;
of their account to a collection agency/ d. disclosure to collection agencies,
agent, or the endorsement of their account counsels and other agents of the bank to
from one collection agency/agent to another, enforce its rights against the borrower;
at least seven (7) days prior to the actual e. disclosure to third party service
endorsement. The notification shall include providers solely for the purpose of
the full name of the collection agency and assisting or rendering services to the bank
its contact details: Provided, That the in the administration of its lending
required notification in writing shall be business; and
included in the terms and conditions of the f. disclosure to third parties such as
loan agreement. Banks shall adopt policies insurance companies, solely for the purpose
(Next Page is Part III - Page 15)

* No page 14

§§ X304.12 - X305.3
13.12.31
of insuring the bank from borrower default pertaining to a loan or forbearance of money,
or other credit loss, and the borrower from goods or credits may stipulate that the rate
fraud or unauthorized charges. of interest agreed upon may be increased in
(Circular No. 702 dated 15 December 2010) the event that the applicable maximum rate
of interest is increased by the Monetary
§§ X304.13 - X304.14 (Reserved) Board: Provided, That such stipulation shall
be valid only if there is also a stipulation in
§ X304.15 Sanctions.Violations of the the agreement that the rate of interest agreed
provisions of Subsecs. X304.10 to X304.12 upon shall be reduced in the event that the
shall be subject to any or all of the applicable maximum rate of interest is
following sanctions depending upon their reduced by law or by the Monetary Board:
severity: Provided, further, That the adjustment in the
a. First offense. Reprimand for the rate of interest agreed upon shall take effect
directors/officers responsible for the on or after the effectivity of the increase or
violation; decrease in the maximum rate of interest.
b. Second offense. Disqualification of
the bank concerned from the credit facilities § X305.3 Floating rates of interest. The
of the Bangko Sentral except as may be rate of interest on a floating rate loan during
allowed under Section 84 of R. A. No. 7653; each interest period shall be stated on the
c. Subsequent offense/s: basis of Manila Reference Rates (MRRs),
i. Prohibition on the bank concerned T-Bill Rates or other market based reference
from the extension of additional credit rates plus a margin as may be agreed upon
accommodation against personal security; by the parties.
and The MRRs for various interest periods
ii. Penalties and sanctions provided shall be determined and announced by the
under Sections 36 and 37 of R. A. No. 7653. Bangko Sentral every week and shall be
(Circular No. 702 dated 15 December 2010) based on the weighted average of the
interest rates paid during the immediately
Sec. X305 Interest and Other Charges. The preceding week by the ten (10) KBs with
rate of interest, including commissions, the highest combined levels of outstanding
premiums, fees and other charges, on any deposit substitutes and time deposits, on
loan, or forbearance of any money, goods promissory notes issued and time deposits
or credits regardless of maturity and received by such banks, of P100,000 and
whether secured or unsecured shall not be over per transaction account, with maturities
subject to any regulatory ceiling. corresponding to the interest periods for
which such MRRs are being determined.
§ X305.1 Rate of interest in the absence Such rates and the composition of the
of stipulation. The rate of interest for the sample KBs shall be reviewed and
loan or forbearance of any money, goods determined at the beginning of every
or credits and the rate allowed in judgments, calendar semester on the basis of the banks’
in the absence of expressed contract as to combined levels of outstanding deposit
such rate of interest, shall be six percent substitutes and time deposits as of 31 May
(6%) per annum. or 30 November, as the case may be.
(As amended by Circular No. 799 dated 21 June 2013) The rate of interest on floating rate loans
existing and outstanding as of
§ X305.2 Escalation clause; when 23 December 1995 shall continue to be
allowable. Parties to an agreement determined on the basis of the MRRs

§§ X305.3 - X306.1
14.12.31
obtained in accordance with the provisions documents shall show repayment schedules
of the rules existing as of 01 January 1989: in a manner consistent with this provision.
Provided, however, That the parties to such Marketing materials and presentations shall
existing floating rate loan agreements are likewise be consistent with this provision.
not precluded from amending or modifying To enhance loan transaction
their loan agreements by adopting a floating transparency, Effective Interest Rate (EIR)
rate of interest determined on the basis of calculation models illustrative of common
the TBR or other market based reference loan features are presented in Appendix 91
rates. for guidance. It is understood, however, that
Where the loan agreement provides for an EIR calculation model, founded on
a floating interest rate, the interest period, established principles of discounted cash
which shall be such period of time for flow analysis, for a loan should be based
which the rate of interest is fixed, shall be on the actual features thereof. A bank shall
such period as may be agreed upon by the be solely responsible for the propriety and
parties. accuracy of its EIR calculation model.
For the purpose of computing the MRRs, However, for purposes of determining
banks shall accomplish the report forms, compliance with this Section, the Bangko
RS Form 2D and Form 2E (BSP 5-17-34A). Sentral’s determination of the
reasonableness and accuracy of an EIR
§ X305.4 Accrual of interest earned on calculation model prevails.
loans. Accrual of interest earned on loans (Circular No. 730 dated 20 July 2011 and M-2011-040 dated 28
shall only be allowed if the loans and other July 2011)
credit accommodations are current and
performing (i.e., no condition of financial Sec. X306 Past Due Accounts. Past due
difficulties or inability to meet financial accounts of a bank shall, as a general rule,
obligations as they mature). However, refer to all accounts in its loan portfolio, all
interest income on past due loans arising receivable components of trading account
from discount amortization (not from the securities and other receivables, as defined
contractual interest of the accounts) shall in the Manual of Accounts for Banks, which
be accrued in accordance with PAS 39. are not paid at maturity1.
(M-2014-039 dated 01 October 2014, M-2014-031 dated 08
Accrued interest receivable shall be August 2014, M-2014-006 dated 12 February 2014, M-2013-050
classified in accordance with their dated 15 November 2013, M-2013-046 dated 30 October 2013,
respective loan accounts and provided with M-2013-045 dated 23 October 2013, M-2013-042 dated
Allowance for Uncollected Interest on 25 September 2013, M-2013-040 dated 03 September 2013,
Loans. M-2013-001 dated 14 January 2013, M-2012-060 dated
27 December 2012, M-2012-051 dated 09 November 2012,
(As amended by Circular No. 855 dated 29 October 2014) M-2012-044 dated 24 August 2012, M-2012- 042 dated 17 August
2012, M–2012–001 dated 03 January 2012 M-2011-056 dated
§ X305.5 Method of computing interest 10 November 2011, M-2011-055 dated 17 October 2011,
Banks may only charge interest based on M-2011-043 dated 12 August 2011, M-2011-007 dated
04 February 2011, M-2010-039 dated 03 November 2010,
the outstanding balance of a loan at the M-2010-007 dated 23 April 2010, M-2009-040 dated 30 October
beginning of an interest period. 2009, M- 2009-037 dated 15 October 2009, M-2009-038 dated
For a loan where principal is payable 08 October 2009 and M-2009-036 dated 07 October 2009)
in installments, interest per installment
period shall be calculated based on the § X306.1 Accounts considered past due
outstanding balance of the loan at the The following shall be considered as
beginning of each installment period. past due:
Towards this end, all loan-related a. Loans or receivables payable on
1
See Appendix 89

§ X306.1
14.12.31
demand - If not paid on the date indicated number of installments in arrears: Provided,
on the demand letter, or within three (3) further, That for modes of payment other
months from date of grant, whichever than those listed above (e.g., daily, weekly
comes earlier; or semi-monthly), the entire outstanding
b. Bills discounted and time loans, balance of the loan/receivable shall be
whether or not representing availments considered as past due when the total
against a credit line - If not paid on the amount of arrearages reaches ten percent
respective maturity dates of the promissory (10%) of the total loan/receivable balance;
notes; For this purpose, the term “installments”
c. Customers’ liability on drafts under shall refer to principal and/or interest
letters of credit/trust receipts: amortizations that are due on several dates as
(1) Sight Bills - If dishonored upon indicated/specified in the loan documents.
presentment for payment or not paid within f. Credit card receivables - If the
thirty (30) days from date of original entry, minimum amount due or minimum
whichever comes earlier; payment required is not paid within two (2)
(2) Usance Bills - If dishonored upon cycle dates, the total amount due stated in
presentment for acceptance or not paid on the monthly billing statement: Provided,
due date, whichever comes earlier; and however, That the total outstanding balance
(3) Trust receipts - If not paid on due which includes amortization/s of any fixed
date. monthly installment plan or deferred
d. Bills and other negotiable instruments payment scheme shall be considered and
purchased - If dishonored upon presentment reported past due when the number of
for acceptance/payment or not paid on monthly installments in arrears is three (3)
maturity date, whichever comes earlier: or more: Provided, further, That the bank
Provided, however, That an out-of-town shall have the right to demand the obligation
check and a foreign check shall be in full in case of default in any installment
considered as past due if outstanding for thereon if the contract between the bank and
thirty (30) days and forty-five (45) days, the cardholder contains an “acceleration
respectively, unless earlier dishonored; clause”;
e. Loans/receivables payable in g. (Deleted by Circular No. 202 dated
installments - The total outstanding balance 27 May 1999)
thereof shall be considered past due in h. Microfinance loans - Past Due/
accordance with the following schedule: Portfolio-at-Risk (PAR) is the outstanding
Minimum No. principal amount of all loans that have at
of Installments least one (1) installment past due for one (1)
Mode of Payment In Arrears or more days. The amount includes the
Monthly 3 unpaid principal balance but excludes
Quarterly 1 accrued interest. Under PAR, loans are
Semestral 1 considered past due if a payment has fallen
Annual 1 due and remained unpaid. Loan payments
are applied first to any interest due, then to
Provided, however, That when the total any installment of principal that is due but
amount of arrearages reaches twenty percent unpaid, beginning with the earliest
(20%) of the total outstanding balance of installment. The number of days of lateness
the loan/receivable, the total outstanding delinquency is based on the due date of the
balance of the loan/receivable shall be earliest loan installment that has not been
considered as past due, regardless of the fully paid; and

§§ X306.1 - X307
14.12.31
For the purpose of determining § X306.6 Writing-off microfinance

delinquency in the payment of obligations loans as bad debts.
as defined in Item “b (3)” of Subsec. X143.1, (Deleted by Circular No. 855 dated 29 October 2014)
any due and unpaid loan installment or
portion thereof, from the time the obligor § X306.7 Updating of information
defaults, shall be considered past due. provided to credit information bureaus.
i. Restructured loans shall be Banks which have provided adverse
considered past due in case of delay of any information, such as the past due or
of its principal or interest payments. litigation status of loan accounts, to credit
Restructured loans are loans the information bureaus, or any organization
principal terms and conditions of which performing similar functions, shall submit
have been modified in accordance with a monthly reports to these bureaus or
restructuring agreement setting forth a new organizations on the full payment or
plan of payment or a schedule of payment settlement of the previously reported
on a periodic basis. The modification may accounts within five (5) banking days from
include, but is not limited to, change in the end of the month when such full
maturity, interest rate, collateral or increase payment was received. For this purpose, it
in the face amount of the debt resulting from shall be the responsibility of the reporting
the capitalization of accrued interest/ banks to ensure that their disclosure of any
accumulated charges. Items in litigation and information about their borrowers/clients is
loans subject of judicially approved with the consent of borrowers/clients
compromise, as well as those covered by concerned.
(Circular No. 589 dated 18 December 2007)
petitions for suspension or for new plans of
payment approved by the court or the SEC, Sec. X307 “Truth in Lending Act”
shall not be classified as restructured loans. Disclosure Requirement. Banks are
(Circular No. 409 dated 14 October 2003, as amended by Circular
Nos. 855 dated 29 October 2014 and 607 dated 30 April 2008)
required to strictly adhere to the
provisions of R.A. No. 3765, otherwise
§ X306.2 Demand loans. Banks shall, known as the “Truth in Lending Act”, and
in case of non-payment of a demand loan, shall make the true and effective cost of
make a written demand within three (3) borrowing an integral part of every loan
months following the grant of such loan. The contract.
demand shall indicate a period of payment The following regulations shall apply
which shall not be later than three (3) months to all banks engaged in the following types
from date of said demand. of credit transactions:
a. Any loan, mortgage, deed of trust,
§ X306.3 Renewals/extensions. advance and discount;
(Deleted by Circular No. 855 dated 29 October 2014) b. Any conditional sales contract, any
contract to sell, or sale or contract of sale
§ X306.4 Restructured loans. of property or services, either for present
(Deleted by Circular No. 855 dated 29 October 2014) or future delivery, under which part or all
of the price is payable subsequent to the
§ X306.5 Write-off of loans, other making of such sale or contract;
credit accommodations, advances and c. Any rental-purchase contract;
other assets as bad debts. d. Any contract or arrangement for the
(Deleted by Circular No. 855 dated 29 October 2014) hire, bailment, or leasing of property;

§§ X307 - X307.1
11.12.31
e. Any option, demand, lien, pledge, or transaction, net of finance charges collected
other claim against, or for delivery of, at the time the credit is extended (if any).
property or money; c. Down Payment represents the
f. Any purchase, or other acquisition of, amount paid by the debtor at the time of the
or any credit upon security of any obligation transaction in partial payment for the
or claim arising out of any of the foregoing; property or service purchased.
and d. Trade-in represents the value of an
g. Any transaction or series of asset agreed upon by the bank and debtor,
transactions having a similar purpose or given at the time of the transaction in partial
effect. payment for the property or service
The following categories of credit purchased.
transactions are outside the scope of these e. Non-finance charges correspond to
regulations: the amounts advanced by the bank for items
(1) Credit transactions which do not normally associated with the ownership of
involve the payment of any finance charge the property or of the availment of the
by the debtor; and service purchased which are not incident
(2) Credit transactions in which the to the extension of credit. For example, in
debtor is the one specifying a definite and the case of the purchase of an automobile
fixed set of credit terms such as bank on credit, the creditor may advance the
deposits, insurance contracts, sale of bonds, insurance premium as well as the
etc. registration fee for the account of the debtor.
f. Amounts to be financed consist of the
§ X307.1 Definition of terms cash price plus non-finance charges less the
a. Person means any individual, amount of the down payment and value of
partnership, corporation, association or other the trade-in.
organized group of persons, or the legal g. Finance charge includes interest, fees,
successor or representative of the foregoing, service charges, discounts, and such other
and includes the Philippine Government or charges incident to the extension of credit.
any agency thereof or any other government, h. Simple annual rate is the uniform
or any of its political subdivisions, or any percentage which represents the ratio
agency of the foregoing. between the finance charge and the amount
b. Cash price or delivered price, in case to be financed under the assumption that
of trade transactions, is the amount of money the loan is payable in one (1) year with single
which would constitute full payment upon payment upon maturity and there are no
delivery of property (except money) or service upfront deductions to principal.
purchased at the bank’s place of business. In For loans with terms different from the
the case of financial transactions, cash price above assumptions, the EIR shall be
represents the amount of money received by calculated and disclosed to the borrower as
the debtor upon consummation of the credit the relevant true cost of the loan

(No page 20)

§§ X307.1 - X308
12.12.31
comparable to the concept of simple annual department of the SES.

rate.
For loans with contractual interest rates § X307.4 Posters. Banks shall post in
stated on monthly basis, the effective conspicuous places in their principal place
interest rate may be expressed as a monthly of business and branches, the information
rate. as contained in the revised format of
In accordance with the Philippine disclosure statement in Appendix 19. The
Accounting Standards (PAS) definition, posters shall include an explicit notification
EIR is the rate that exactly discounts that the disclosure statement is a required
estimated future cash flows through the attachment to the loan contract and the
life of the loan to the net amount of the customer has a right to demand a copy of
loan proceeds. For consistency, such disclosure.
methodology and standards for (As amended by Circular No. 730 dated 20 July 2011)
discounted cash flow models shall be
prescribed to be used for the purpose. § X307.5 Sanctions and penal
(As amended by Circular No. 730 dated 20 July 2011) provisions. Non-compliance with any of the
provisions of this Section shall be
§ X307.2 Information to be disclosed regarded at least as a less serious offense,
As a general rule, loan terms shall be depending on the severity of non-disclosure,
disclosed to all types of borrower. For small number of loans and amount involved in
business/retail/consumer credit, the the violation. In addition to sanctions
following are the minimum information to under R.A. No. 3765, the following
be disclosed (sample form in Appendix 19): sanctions may be imposed:
a.The total amount to be financed; a. First offense. Reprimand on the erring
b.The finance charges expressed in officer/s;
terms of pesos and centavos; b. Second offense. Reprimand on the
c. The net proceeds of the loan; and entire board of directors; and
d.The percentage that the finance c. Subsequent offense/s:
charge bears to the total amount to be i. Suspension of the erring officer/s and/
financed expressed as a simple annual rate or entire board of directors; and
or an EIR as described in Item “h” of Subsec. ii. Restriction on lending activities.
X307.1. EIR may also be quoted as a This is without prejudice to other
monthly rate in parallel with the quotation penalties and sanctions provided under
of the contractual rate. Sections 36 and 37 of R.A. No. 7653.
(Circular No. 754 dated 17 April 2012)
Banks are required to furnish each
borrower a copy of the disclosure statement,
Sec. X308 Amortization on Loans and
prior to the consummation of the
Other Credit Accommodations. The
transaction.
(As amended by Circular No. 730 dated 20 July 2011)
amortization schedule of bank loans and
other credit accommodations shall be
§ X307.3 Inspection of contracts adapted to the nature of the operations to
covering credit transactions. Banks shall be financed.
keep in their offices or places of business In case of loans and other credit
copies of contracts which involve the accommodations with maturities of more
extension of credit by the bank and the than five (5) years, provisions must be
payment of finance charges therefor. Such made for periodic amortization payments,
copies shall be available for inspection or but such payments must be made at least
examination by the appropriate annually: Provided, however, That when

§§ X308 - X309.4
14.12.31
the borrowed funds are to be used for with Sec. X306, i.e., the entire outstanding
purposes which do not initially produce balance of the loan/receivable shall be
revenues adequate for regular considered as past due when the total
amortization payments, the bank may amount of arrearages reaches ten percent
permit the initial amortization payment to (10%) of the total loan/receivable balance.
be deferred until such time as said d. Restructured loans shall be
revenues are sufficient for such purpose, considered non-performing except when as
but in no case shall the initial amortization of restructuring date: (i) the principal and
date be later than five (5) years from the interest payments have been updated and
date on which the loan or other credit (ii) the loan is yielding a rate of interest that
accommodation is granted: Provided, fully compensates the FI for its cost of funds
further, That in the case of agriculture and and credit risk.
fisheries projects with long gestation The restoration to a performing loan
periods, the initial amortization payment shall only be effective after a satisfactory
may be deferred for a longer period based record of at least three (3) consecutive
on the economic life of the project as payments of the required amortizations of
provided under Section 24 of R.A. No. principal and/or interest.
8435 and implemented under Sec. X349. A restructured loan which has been
restored to a performing loan status shall
Sec. X309 Non-Performing Loans be immediately considered non-performing
in case of default of any principal or interest
§ X309.1 Accounts considered payment.
non-performing; definitions e. All items in litigation as defined in
The following accounts shall comprise the Manual of Accounts for Banks shall be
a bank’s gross non-performing loans (NPLs): considered non-performing.
a. Non-performing loans shall, as a f. In the case of microfinance loans, past
general rule, refer to loan accounts whose due/portfolio-at-risk (PAR) accounts as
principal and/or interest is unpaid for thirty defined in Subsec. X361.1(b) shall be
(30) days or more after due date or after they considered NPL.
have become past due in accordance with Effective 01 January 2013, as a
existing rules and regulations. This shall complementary measure to computing gross
apply to loans payable in lump sum and NPLs, banks shall likewise compute their
loans payable in quarterly, semi-annual or net NPLs, which shall refer to gross NPLs
annual installments, in which case, the less specific allowance for credit losses on
total outstanding balance thereof shall be the total loan portfolio: Provided, That such
considered non-performing. specific allowance for credit losses on the
b. In the case of loans payable in total loan portfolio shall not be deducted
monthly installments, the total outstanding from the total loan portfolio for purposes of
balance thereof shall be considered computing the net NPL ratio.
non-performing when three (3) or more (As amended by Circular Nos. 855 dated 29 October 2014,
installments are in arrears. 772 dated 16 October 2012 and 607 dated 30 April 2008)
c. In the case of loans payable in daily,
weekly or semi-monthly installments, the § X309.2 - X309.3 (Reserved)
total outstanding balance thereof shall be
considered non-performing at the same time § X309.4 Reporting requirement
that they become past due in accordance (Deleted by Circular No. 772 dated 16 October 2012)

§§ X309.5 - X311.4
14.12.31
§ X309.5 Reportorial requirement § X311.1 Loans secured by junior

Banks shall submit reports for NPL mortgage on real estate.
movements and aging in formats to be (Deleted by Circular No. 855 dated 29 October 2014)
prescribed by the Bangko Sentral. The report
shall be submitted to the appropriate § X311.2 (Reserved)
department of the SES, within fifteen (15)
banking days after end of every reference § 1311.2 (Reserved)
quarter. Such report shall be considered a
Category A-1 report for purposes of § 2311.2 (Reserved)
implementing fines in the submission of
required reports pursuant to existing § 3311.2 Eligible real estate collaterals
regulations. on rural/cooperative bank loans.
(Circular 814 dated 27 September 2013) (Deleted by Circular No. 855 dated 29 October 2014)
Sec. X310 (Reserved) § X311.3 Insurance on real estate

improvements.
B. SECURED LOANS
Sec. X311 Secured Loans and Other Credit § X311.4 Participation in foreclosure
Accommodations. A loan may be proceedings. Foreign banks which are
considered secured by collateral to the authorized to do banking business in the
extent the estimated value of net proceeds Philippines through any of the modes of
at disposition of such collateral can be used entry under Subsec. X105.1 shall be
without legal impediment to settle the allowed to bid and take part in foreclosure
principal and accrued interest of such loan: sales of real property mortgaged to them,
Provided, That such collateral must have an as well as to avail of enforcement and
established market and the valuation other proceedings, and accordingly take
methodology used is sound, and: Provided possession of the mortgaged property, for
further, That in the case of real estate a period not exceeding five (5) years from
collateral, the maximum collateral value actual possession which excludes the
shall be sixty percent (60%) of its value as redemption period, as defined under
appraised by an appraiser acceptable to the Subsec. X311.5, unless actual possession
Bangko Sentral. was acquired earlier: Provided, That in no
A loan may also be considered as event shall title to the property be
secured to the extent covered by a third transferred to such foreign bank.
party financial guarantee or surety In case said bank is the winning
arrangement where the credit enhancement bidder, it shall, during the said five (5)-year
provider is itself considered to be of high period, transfer its rights to a qualified
credit quality (credit rating of at least AA or Philippine national, without prejudice to
equivalent) or is considered to be such by a borrower’s rights under applicable laws.
the Bangko Sentral. Should the bank fail to transfer such
Finally, a loan may be secured by a property within the five (5)-year period, it
combination of acceptable collateral and shall be penalized one half (1/2) of one
guarantee arrangements as defined above, percent (1%) per annum of the price at
provided such arrangements are which the property was foreclosed until it
independent of one another for credit is able to transfer the property to a qualified
enhancement purposes. Philippine national.
(As amended by Circular No. 855 dated 29 October 2014) To enable the Bangko Sentral to

§§ X311.4 - 3311.4
14.12.31
determine compliance with the foregoing, and executions of judgment thereon

the foreign bank shall maintain, and make involving real properties levied upon by a
readily available for inspection, information sheriff shall be exempt from the publications
pertaining to individual mortgaged in newspapers now required by law where
properties foreclosed. the total amount of loan, excluding interests
This provision does not limit the right due and unpaid, does not exceed P100,000
of the mortgagee-bank to own condominium or such amount as the Monetary Board may
units as provided under existing laws. prescribe as may be warranted by prevailing
(Circular No. 858 dated 21 November 2014) economic conditions. It shall be sufficient
publication in such cases if the notices of
§ 1311.4 (Reserved) foreclosure and execution of judgment are
posted in the most conspicuous area of the
§ 2311.4 Foreclosure by thrift banks municipal building, the municipal public
The foreclosure of mortgages covering market, the RB, the barangay hall, and the
loans granted by TBs and executions of barangay public market, if any, where the
judgment thereon involving real properties land mortgaged is situated during the period
levied upon by a sheriff shall be exempt from of sixty (60) days immediately preceding the
the publications in newspapers now public auction of execution of judgment.
required by law where the total amount of Proof of publication as required herein
loan, excluding interests due and unpaid, shall be accomplished by an affidavit of the
does not exceed P100,000 or such amount sheriff or officer conducting the foreclosure
as the Monetary Board may prescribe as may sale or execution of judgment and shall be
be warranted by prevailing economic attached with the records of the case:
conditions and by the nature of service of Provided, That when a homestead or free
customers served by each category of the patent is foreclosed, the homesteader or free
TB. It shall be sufficient publication in such patent holder, as well as his heirs shall have
cases if the notices of foreclosure and the right to redeem the same within one (1)
execution of judgment are posted in the year from the date of foreclosure in the case
conspicuous area of the TB’s premises, of land not covered by a Torrens Title or
municipal building, municipal public one (1) year from the date of the registration
market, the barangay hall, and the barangay of the foreclosure in the case of land covered
public market, if there be any, where the by a Torrens Title. Provided, further, That
land mortgaged is situated within a period in any case, borrowers, especially those
of sixty (60) days immediately preceding the who are mere tenants, need only to secure
public auction of execution of judgment. their loans with the produce corresponding
Proof of publication as required herein shall to their share.
be accomplished by an affidavit of the sheriff In the case of Coop Banks, the
or officer conducting the foreclosure sale or foreclosure of mortgages and execution of
execution of judgment and shall be attached judgment thereon involving real properties
with the records of the case. levied upon by a sheriff shall be exempt from
A TB shall be allowed to foreclose lands the publications in newspaper now required
mortgaged to it: Provided, That said lands by law where the total amount of loan,
shall be covered under R.A. No. 6657. excluding interests due and unpaid, does
not exceed P250,000 or such amount as the
§ 3311.4 Foreclosure by rural/ Bangko Sentral may prescribe as may be
cooperative banks. The foreclosure of warranted by prevailing economic
mortgages covering loans granted by RBs conditions and by the nature and character

§§ 3311.4 - X311.5
14.12.31
of the Coop Banks. It shall be sufficient borrower’s right under applicable laws.
publication in such cases if the notices of Should said unqualified RB fail to transfer
foreclosure and execution of judgment are such property within the five (5) year period,
posted in conspicuous areas in the bank’s it shall be penalized at one-half (1/2) of one
premises, municipal hall, the municipal percent (1%) per annum of the price at
public market, the barangay hall and the which the property was foreclosed until the
barangay public market, if any, where the property is transferred to a qualified
property mortgaged is situated during the Philippine national.
period of sixty (60) days immediately To enable the Bangko Sentral to
preceding the public auction or execution determine compliance with the foregoing,
of judgment. Proof of publication as RBs not qualified to acquire or hold land in
required herein shall be accomplished by the Philippines shall maintain, and make
an affidavit of the sheriff or officer readily available for inspection, information
conducting the foreclosure sale or execution pertaining to individual mortgaged properties
of judgment and shall be attached to the foreclosed.
records of the case. Transitory provisions. An RB
An RB/Coop Bank shall be allowed to established and operating prior to the
foreclose lands mortgaged to it including effectivity of R.A. No. 10574, and which is
lands covered by R.A. No. 6657 (The considered as an RB not qualified to acquire
Comprehensive Agrarian Reform Law of or hold land in the Philippines starting
1988), as amended: Provided, That said 13 September 2013, shall:
lands shall be subject to the retention limits a. submit to the appropriate
provided under R.A. No. 6657: Provided, department of the SES a divestment plan for
further, That a rural bank’s power to the disposal of its title/interest in all land
foreclose lands mortgaged to it shall be properties held by it; and
subject to the limitations in the succeeding b. transfer for a period of five (5) years
paragraph. existing owned or acquired properties to
RBs which are not qualified to acquire qualified Philippine nationals; Provided, That
or hold land in the Philippines pursuant to upon the expiry of the said five (5)-year period,
existing laws shall be allowed to bid and RBs not qualified to acquire or hold land in
take part in foreclosure sales of real property the Philippines which fail to transfer their
mortgaged to them, as well as to avail of properties to qualified Philippine nationals
enforcement and other proceedings, and shall be subject to the penalties under
accordingly to take possession of the Subsec. 3311.4.
mortgaged property, for a period not (As amended by Circular Nos. 858 dated 21 November 2014,
exceeding five (5) years from actual 809 dated 23 August 2013 and 682 dated 15 February 2010)
possession which excludes the redemption
period, as defined under Subsec. X311.5, § X311.5 Redemption of foreclosed real
unless actual possession was acquired estate mortgage. In the event of foreclosure,
earlier: Provided, That in no event shall title whether judicially or extrajudicially, of any
to the property be transferred to such RB. mortgage on real estate, the mortgagor or
In case the RB, which is not qualified debtor shall have the right within one (1)
to acquire or hold land in the Philippines, year after the sale of the real estate, to
is the winning bidder, it shall, during the redeem the property by paying the amount
said five (5) year period, transfer its rights due under the mortgage deed, with interest
to a qualified Philippine national as defined thereon at the rate specified in the mortgage,
under existing laws without prejudice to a and all costs and expenses incurred by the
Manual of Regulations for Banks Part III - Page 24a

§§ X311.5 - X313
14.12.31
bank or institution from the sale and foreclosure sale with the applicable Register
custody of said property less the income of Deeds which in no case shall be more
derived therefrom. However, the than three (3) months after foreclosure,
purchaser at the auction sale concerned whichever is earlier.
shall have the right to enter upon and take
possession of such property immediately Sec. X312 Loans and Other Credit
after the date of the confirmation of the Accommodations Secured By Chattels
auction sale and administer the same in and Intangible Properties.
accordance with the law. (Deleted by Circular No. 855 dated 29 October 2014)
Juridical persons whose property is
being sold pursuant to an extra-judicial Sec. X313 Loans and Other Credit
foreclosure, shall have the right to redeem Accommodations Secured By Personal
the property in accordance with this Properties.
provision until, but not after, the (Deleted by Circular No. 855 dated 29 October 2014)
registration of the certificate of
(Next Page is Part III - Page 25)
Part III - Page 24b Manual of Regulations for Banks

§§ X314 - X320.1
14.12.31
Sec. X314 Increased Loan Values and and services, cash advances, annual
Terms of Loans for Home Building. membership/renewal fees as well as interest,
(Deleted by Circular No. 855 dated 29 October 2014) penalties, insurance fees, processing/service
fees and other charges.
Sec. X315 Loans Secured by Certificates c. Minimum amount due or minimum
of Time Deposit. payment required. Means the minimum
amount that the credit cardholder needs to
Secs. X316 - X318 (Reserved) pay on or before the payment due date for
a particular billing period/cycle as defined
C. UNSECURED LOANS under the terms and conditions or reminders
stated in the statement of account billing
Sec. X319 Loans Against Personal Security statement which may include: (1) total
(Deleted by Circular No. 855 dated 29 October 2014) outstanding balance multiplied by the
required payment percentage or a fixed
§ X319.1 General guidelines. amount whichever is higher; (2) any amount
(Deleted by Circular No. 622 dated 16 September 2008) which is part of any fixed monthly
installment that is charged to the card;
§ X319.2 Proof of financial capacity of (3) any amount in excess of the credit line;
borrower. and (4) all past due amounts, if any.
(Deleted by Circular No. 622 dated 16 September 2008)
d. Default or delinquency. Shall mean
§ X319.3 Signatories. non-payment of, or payment of any amount
(Deleted by Circular No. 622 dated 16 September 2008) less than, the “Minimum Amount Due” or
“Minimum Payment Required” within two
Sec. X320 Credit Card Operations; General (2) cycle dates, in which case, the “Total
Policy. The Bangko Sentral shall foster the Amount Due” for the particular billing
development of consumer credit through period as reflected in the monthly statement
innovative products such as credit cards of account may be considered in default or
under conditions of fair and sound delinquent.
consumer credit practices. The Bangko e. Acceleration clause. Shall mean any
Sentral likewise encourages competition provision in the contract between the bank
and transparency to ensure more efficient and the cardholder that gives the bank the
delivery of services and fair dealings with right to demand the obligation in full in case
customers. of default or non-payment of any amount
Towards this end, the following rules due or for whatever valid reason.
and regulations shall govern the credit card f. Subsidiary refers to a corporation or
operations of banks and subsidiary/affiliate firm more than fifty percent (50%) of the
credit card companies, aligned with global outstanding voting stock of which is directly
best practices. or indirectly owned, controlled or held with
the power to vote by a bank or other FI.
§ X320.1 Definition of terms g. Affiliate refers to an entity linked
a. Credit card. Means any card, plate, directly or indirectly to a bank or other FI
coupon book or other credit device existing through any one or a combination of any of
for the purpose of obtaining money, the following:
property, labor or services on credit. (1) Ownership, control or power to vote,
b. Credit card receivables. Represents whether by permanent or temporary proxy
the total outstanding balance of credit or voting trust, or other similar contracts,
cardholders arising from purchases of goods by a bank or other financial institution of at

§§ X320.1 - X320.2
14.12.31
least ten percent (10%) or more of the k. Credit card business activity report -
outstanding voting stock of the entity, or report which contains the quantitative data
vice-versa; on credit card industry.
(2) Interlocking directorship or l. Credit card issuer- refers to a bank or
officership, except in cases involving a corporation that offers the use of its credit
independent directors as defined under card.
existing regulations; m. Pre-approved credit cards are
(3) Common stockholders owning at unsolicited credit cards issued by credit card
least ten percent (10%) of the outstanding issuers to consumers who have not applied
voting stock of each FI and the entity; or for such credit cards. Acts described under
(4) Management contract or any Appendix 103 and other similar acts are
arrangement granting power to the bank or deemed tantamount to the act of issuing pre-
other FI to direct or cause the direction of approved credit cards, notwithstanding any
management and policies of the entity, or contrary stipulations in the contract.
vice-versa. n. Application is a documented request
h. Simple annual rate is the uniform of the credit card applicant to a credit card
percentage which represents the ratio issuer for the availment of a credit card. The
between the finance charge and the amount intention and consent for the availment of
to be financed under the assumption that the credit card must be clear and explicit.
the loan is payable in one (1) year with single (As amended by Circular Nos. 845 dated 15 August 2014,
812 dated 23 September 2013 and 754 dated 17 April 2012)
payment upon maturity and there are no
upfront deductions to principal. § X320.2 Risk management system. To
For loans with terms different from the safeguard their interests, banks and
above assumptions, the effective annual subsidiary/affiliate credit card companies
interest rate shall be calculated and disclosed are required to establish an appropriate
to the borrower as the relevant true cost of system for managing risk exposures from
the loan comparable to the concept of credit card operations which shall be
simple annual rate. documented in a complete and concise
For loans with contractual interest rates manner. The risk management system shall
stated on monthly basis, the effective interest cover the organizational set-up, records and
rate may be expressed as a monthly rate. reports, accounting, policies and procedures
In accordance with the PAS definition, and internal control.
effective interest rate is the rate that exactly Written policies, procedures and
discounts estimated future cash flows internal control guidelines shall be
through the life of the loan to the net amount established on the following aspects of credit
of loan proceeds. For consistency, card operations:
methodology and standards for discounted a. Requirements for application;
cash flow models shall be prescribed to be b. Solicitation and application
used for the purpose. processing;
i. Credit card acquirer- refers to the c. Determination and approval of credit
institution that accepts and facilitates the limits;
processing of the credit card transaction d. Issuance, distribution and activation
which is initially accepted by the merchant. of cards;
j. Credit cardholder- refers to a person e. Supplementary or extension cards;
who owns and benefits from the use of a f. Cash advances;
credit card. g. Billing and payments;

§§ X320.2 - X320.4
14.12.31
h. Deferred payment program or special itemized, which are paid or to be paid by

installment plans; the cardholder in connection with the
i. Collection of past due accounts; transaction but which are not incident to
j. Handling of accounts for write-off; the extension of credit;
k. Suspension, cancellation and c. the percentage that the finance charge
withdrawal or termination of card; bears to the total amount to be financed
l. Renewal of cards, upgrade or expressed as a simple annual rate or an
downgrade of credit limit; annual effective interest rate, as described
m. Lost or stolen cards and their in Item “h” of Subsec. X320.1. EIR may also
replacement; be quoted as a monthly rate in parallel with
n. Accounts of DOSRI and employees; the quotation of the contractual rate;
o. Disposition of errors and/or d. for installment loans, the number of
questions about the billing statement/ installments, amount and due dates or
statement of account and other customers’ periods of payment schedules to repay the
complaints; and indebtedness;
p. Dealings with marketing agents/ e. the default, late payment/penalty fees
collection agents. or similar delinquency-related charges
(As amended by Circular No. 702 dated 15 December 2010) payable in the event of late payments;
f. the conditions under which interest
§ X320.3 Minimum requirements may be imposed, including the time period,
Banks and their subsidiary or affiliate credit within which any credit extended may be
cards companies shall not issue pre- repaid without interest;
approved credit cards as provided under g. the method of determining the balance
Appendix 103, notwithstanding any upon which interest and/or delinquency
contrary stipulations in the contract. charges may be imposed;
(As amended by Circular Nos.845 dated 15 August 2014 and
702 dated 15 December 2010) h. the method of determining the amount
of interest and/or delinquency charges,
§ X320.4 Information to be disclosed including any minimum or fixed amount
Banks or their subsidiaries/affiliate credit imposed as interest and/or delinquency
card companies shall disclose to each charge;
person to whom the credit card privilege is i. where one (1) or more periodic rates
extended in the agreement, contract or any may be used to compute interest, each such
equivalent document governing the issuance rate, the range of balances to which it is
or use of the credit card or any amendment applicable, and the corresponding simple
thereto or in such other statement furnished annual rate; and
the cardholder from time to time, prior to j. for transactions made in foreign
the imposition of the charges and to the currencies and/or outside the Philippines,
extent applicable, the following for dual currency accounts (peso and dollar
information: billings), as well as payments made by credit
a. the finance charges, individually cardholders in any currency other than the
itemized, which are paid or to be paid by billing currency: the application of
the cardholder; payments; the manner of conversion from
b. non-finance charges, individually the transaction currency and payment
(No page 28)

(Next page is Part III - page 29)

§§ X320.4 - X320.8
12.12.31
currency to Philippine pesos or billing and using the minimum Arial 12 theme font
currency; definition or general description and size, or its equivalent in readability, and
of verifiable blended exchange conversion on the first page, if applicable document has
rates (e.g., MASTERCARD and/or VISA more than one page.
International rates on the day the item was Transitory provisions. Banks and their
processed/posted to the billing statement, subsidiary or affiliate credit card companies
plus mark-up, if any) including conversion shall be given a period of 120 days from 06
January 2011 to fully implement the
commission; and/or other currency
required disclosure requirements.
conversion charges and costs arising from (As amended by Circular No. 754 dated 17 April 2012 and
the purchase by the card company of foreign Circular No. 702 dated 15 December 2010)
currency to settle the customer’s transactions
shall also be disclosed. § X320.5 Interest accrual on past due
Banks and their subsidiary or affiliate loans. Interest income on past due loans
credit card companies shall also provide the arising from discount amortization (and not
following information to their cardholders: from the contractual interest of the accounts)
1. A table of the applicable fees, shall be accrued as provided in PAS 39.
penalties and interest rates on credit card
transactions, including the period covered § X320.6 Method of computing interest
by and the manner of and reason for the Banks and/or subsidiaries/affiliate credit
imposition of such penalties, fees and card companies shall only charge interest
interests; fees and applicable conversion based on the outstanding balance of a loan
reference rates for third currency at the beginning of an interest period.
For a loan where the principal is payable
transactions, in plain sight and language, on
in installments, interest per installment
materials for marketing credit cards, such
period shall be calculated based on the
as brochures, flyers, primers and advertising outstanding balance of the loan at the
materials, on credit card application forms, beginning of each installment period.
and on credit card billing statements: Towards this end, all loan-related
Provided, That these disclosures are in documents shall show repayment schedules
addition to the full disclosure of the fees, in a manner consistent with this provision.
charges and interest rates in the terms and Marketing materials and presentations shall
conditions of the credit card agreement likewise be consistent with this provision.
found elsewhere on the application form (As amended by Circular No. 754 dated 17April 2012)
and billing statement; and
2. A reminder to the cardholder in the § X320.7 (2011- X320.6) Finance
monthly billing statement, or its equivalent charges. The amount of finance charges in
document, that payment of only the connection with any credit card transaction
minimum amount due or any amount less charged to the cardholder includes interest,
than the total amount due for the billing fees, service charges, discounts, and such
other charges incident to the extension of
cycle/period, would mean the imposition
credit.
of interest and/or other charges: (As amended by Circular No. 754 dated 17 April 2012)
Provided, That such table of fees, penalties
and interest rates and reminder shall be § X320.8 (2011- X320.7) Deferral
printed in plain language and in bold black charges. The bank and the cardholder may,
letters against a light or white background, prior to the consummation of the

§§ X320.8 - X320.13
12.12.31
transaction, agree in writing to a deferral of Monetary Board;

all or part of one (1) or more unpaid d. disclosure to collection agencies,
installments and the bank may collect a counsels and other agents of the bank or
deferral charge which shall not exceed the card company to enforce its rights against
rate previously disclosed pursuant to the the cardholder;
provisions on disclosure. e. disclosure to third party service
(As amended by Circular No. 754 dated 17 April 2012) providers solely for the purpose of assisting
or rendering services to the bank or card
§ X320.9 (2011- X320.8) Late payment/ company in the administration of its credit
penalty fees. No late payment or penalty card business; and
fee shall be collected from cardholders f. disclosure to third parties such as
unless the collection thereof is fully insurance companies, solely for the purpose
disclosed in the contract between the issuer of insuring the bank from cardholder default
and the cardholder: Provided, That late or other credit loss, and the cardholder from
payment or penalty fees shall be based on fraud or unauthorized charges.
the unpaid minimum amount due or a (As amended by Circular No. 754 dated 17 April 2012)
prescribed minimum fixed amount:
Provided, further, That said late payment or § X320.11 (2011- X320.10) Suspension,
penalty fees may be based on the total termination of effectivity and reactivation.
outstanding balance of the credit card Banks or their subsidiary/affiliate credit card
obligation, including amounts payable companies shall formulate criteria or
under installment term or deferred payment parameters for suspension, revocation and
schemes, if the contract between the issuer reactivation of the right to use the card and
and the cardholder contains an shall include in their contract with
“acceleration clause” and the total cardholders a provision authorizing the
outstanding balance of the credit card is issuer to suspend or terminate its effectivity, if
classified and reported as past due. circumstances warrant.
(As amended by Circular No. 754 dated 17 April 2012) (As amended by Circular No. 754 dated 17 April 2012)
§ X320.10 (2011-X320.9) Confidentiality § X320.12 (2011- X320.11) Inspection

of information. Banks and subsidiary affiliate of records covering credit card
credit card companies shall keep strictly transactions. Banks or their subsidiary/
confidential the data on the cardholder or affiliate credit card companies shall make
consumer, except under the following available for inspection or examination by
circumstances: the appropriate department of the SES
a. disclosure of information is with the complete and accurate files on card
consent of the cardholder or consumer; applicant/cardholder to support the
b. release, submission or exchange of consideration for approval of the application
customer information with other financial and determination of the credit limit which
institutions, credit information bureaus, shall be in accordance with the verified debt
credit card issuers, their subsidiaries and repayment ability and/or net worth of the
affiliates; card applicant/cardholder.
c. upon orders of court of competent (As amended by Circular No. 754 dated 17 April 2012)
jurisdiction or any government office or
agency authorized by law, or under such § X320.13 (2011- X320.12) Offsets. For
conditions as may be prescribed by the purposes of transparency and adequate

§§ X320.13 - X320.15
12.12.31
disclosure, the credit card issuer shall billing error or apply against the credit limit
inform/notify the credit cardholder in the of the cardholder the amount indicated to
agreement, contract or any equivalent be in error.
document governing the issuance or use of (As amended by Circular No. 754 dated 17 April 2012)
the credit card that, pursuant to the
provisions of Articles 1278 to 1290 of the § X320.15 (2011-X320.14) Unfair
New Civil Code of the Philippines, as collection practices. Banks, subsidiary/
amended, the use of his credit card will affiliate credit card companies, collection
subject his deposit/s with the bank to offset agencies, counsels and other agents may
against any amount/s due and payable on resort to all reasonable and legally
his credit card which have not been paid in permissible means to collect amounts due
accordance with the terms of the agreement/ them under the credit card agreement:
contract. Provided, That in the exercise of their rights
(As amended by Circular No. 754 dated 17 April 2012) and performance of duties, they must
observe good faith and reasonable conduct
§ X320.14 (2011- X320.13) Handling of and refrain from engaging in unscrupulous
complaints. Banks or subsidiary affiliate credit or untoward acts. Without limiting the
card companies shall give cardholders at least general application of the foregoing, the
twenty (20) calendar days from statement following conduct is a violation of this
date to examine charges posted in his/her Subsection:
statement of account and inform the bank/ a. the use or threat of violence or other
subsidiary credit card companies in writing criminal means to harm the physical person,
of any billing error or discrepancy. Within reputation, or property of any person;
ten (10) calendar days from receipt of such b. the use of obscenities, insults, or profane
written notice, the bank/subsidiary credit language which amount to a criminal act or
card company shall send a written offense under applicable laws;
acknowledgment to the cardholder unless c. disclosure of the names of credit
the action required is taken within such ten cardholders who allegedly refuse to pay debts,
(10)-day period. except as allowed under Subsec. X320.9;
Not later than two (2) billing cycles or d. threat to take any action that cannot
two (2) months which in no case shall legally be taken;
exceed ninety (90) days after receipt of the e. communicating or threat to
notice and prior to taking any action to communicate to any person credit information
collect the contested amount, or any part which is known to be false, including failure
thereof, banks/subsidiary credit card to communicate that a debt is being disputed;
companies shall make appropriate f. any false representation or deceptive
corrections in their records and/or send a means to collect or attempt to collect any
written explanation or clarification to the debt or to obtain information concerning a
cardholder after conducting an cardholder; and
investigation. Nothing in this Subsection g. making contact at unreasonable/
shall be construed to prohibit any action by inconvenient times or hours which shall be
the bank/subsidiary credit card company to defined as contact before 6:00 A.M. or after
collect any amount which has not been 10:00 P.M., unless the account is past due for
indicated by the cardholder to contain a more than sixty (60) days or the cardholder

§§ X320.15 - X320.17
13.12.31
has given express permission or said times are R.A. No. 3765, the following sanctions
the only reasonable or convenient may be imposed:
opportunities for contact. a. First offense. Reprimand on the
Banks and their subsidiary/affiliate erring officer/s;
credit card companies shall inform their b. Second offense. Reprimand on the
cardholder in writing of the endorsement entire board of directors; and
of the collection of their account to a c. Subsequent offense/s:
collection agency/agent, or the endorsement i. Suspension of the erring officer/s
of their account from one (1) collection
and/or entire board of directors; and
agency/agent to another, at least seven (7)
ii. Restriction on lending activities.
days prior to the actual endorsement. The
notification shall include the full name of This is without prejudice to other
the collection agency and its contact details: penalties and sanctions provided under
Provided, That the required notification in Sections 36 and 37 of R.A. No. 7653.
(As amended by Circular Nos. 754 dated 17 April 2012 and 702
writing shall be included in the terms and
dated 15 December 2010)
conditions of the credit card agreement.
Banks and their subsidiary/affiliate credit § X320.17 Submission of credit card
card companies shall adopt policies and business activity report. For purposes of
procedures to ensure that personnel
transparency and availability of data on
handling the collection of accounts, whether
credit card operations and in the light of
these are in-house collectors, or third-party
collection agents, shall disclose his/her full ensuring consumer protection, as well as
name/true identity to the cardholder. managing risks involved in credit
(As amended by Circular No. 754 dated 17 April 2012) transactions, banks including their
subsidiaries and affiliates, shall submit a
§ X320.16 (2011- X320.15) Sanctions monthly quantitative report to Bangko
and penal provisions. Violations of the Sentral covering the following data on credit
provisions of Subsecs. X320.1, X320.5, and card issuers/acquirers, cardholders, credit
X320.7 to X320.14 shall be subject to any card complaints, and usage location:
or all of the following sanctions depending
upon their severity: Credit Card Unit of
a. Disqualification of the bank Issuance Expression
concerned from the credit facilities of the I. Cards-in-force per Number
Bangko Sentral except as may be allowed network/brand
II.Cards-in-force per card Number
under Section 84 of R.A. No. 7653; type
b. Prohibition of the bank concerned from III. Approved credit card Number
the extension of additional credit applications
accommodation against personal security; and IV. Cards issued by status Number
c. Penalties and sanctions provided V. Cards issued per credit Peso amount
under Sections 36 and 37 of R.A. No. 7653. limit
VI. Billings per mode of Peso amount
Non-compliance with the provisions of transactions
Subsecs. X320.2 to X320.4, and X320.6 and VII. Billings per network/ Peso amount
X320.15 shall be regarded at least as a brand
less serious offense, depending on the VIII. Billed fees/charges Peso amount
IX. Gross payment Peso amount
severity of non-disclosure, number of X. Receivables Peso amount
loans and amount involved in the XI. Rates/charges per Peso amount/
violation. In addition to sanctions under cardholder percentage

§§ X320.17 - X321.2
15.10.31
Cardholder Profile salary, pension or other fixed compensation,

I.Cardholder Number where repayment would come from such
information (age,
future cash flows, either through salary
occupation, gender, civil status,
educational attainment, deductions, debits from the borrower’s
geographic location) deposit account, mobile payments, pay-
II. Cardholder by type of Number through collections, over-the-counter
payment payments or other type of payment
arrangement agreed upon by the borrower
Complaints
I. Cardholder issues Number
and lender.
II. Complaint/request resolution Number b. Transactions covered. Salary-based
III. External service provider Number general-purpose consumption loans may
include credit accommodations for
Usage Location education, hospitalization, emergency,
I.Incoming Peso amount travel, household and other personal
II. Outgoing Peso amount
consumption needs.
c. Exclusions. Credit cards, motor
(As amended by Circular Nos. 812 dated 23 September 2013, vehicles and other personal loans which are
754 dated 17 April 2012 and 702 dated 15 December 2010) covered by other existing applicable
regulations are excluded from the coverage
Sec. X321 Policies on Salary-Based General- of this Section.
Purpose Consumption loans1. Statement of d. Report. For the purpose of reporting
Policy. The Bangko Sentral recognizes the in the Financial Reporting Package, financial
helpful role of salary-based, consumer assistance under an approved fringe benefit
lending schemes in allowing an individual program should be reported/classified
borrower to manage his/her cash flows according to the purpose of the financial
provided these are granted under sound assistance (e.g., housing/real estate, motor
credit standards and fair consumer vehicle, salary-based general-purpose
practices. The Bangko Sentral likewise consumption, etc.)
encourages competition and transparency (Circular No. 837 dated 18 June 2014, as amended by Circular
to promote efficient and innovative delivery No. 886 dated 08 September 2015)
of financial services and fair dealing with
customers. § X321.2 Credit granting.
(Circular No. 837 dated 18 June 2014, as amended by Circular a. Policies of financial institutions (Fls)
No. 886 dated 08 September 2015) shall be consistent with best practices and
sound credit processes prescribed under
§ X321.1 Definition; Transactions Bangko Sentral regulations, including a
covered; Exclusions; Report. comprehensive assessment of the
a. Definition. Salary-based general- borrower’s creditworthiness, and shall not
purpose consumption loans. Refer to be reliant on mere formula such as those
unsecured loans for a broad range of automatically granted based on certain
consumption purposes, granted to multiples of monthly salary or other regular
individuals mainly on the basis of regular compensation.
1
This Section shall apply to all salary-based general purpose consumption loans as defined herein including
those outstanding prior to 26 September 2015.
Fls shall be given six (6) months from 08 September 2015 to adopt/amend their policies, procedures and credit
risk strategy on salary-based general-purpose consumption loans to comply with the provisions contained
herein.
Manual of Regulations for Banks Part III - Page 30c

§§ X321.2 - X326.1
15.10.31
b. Individual borrowing capacity should D. RESTRUCTURED LOANS

be prudently assessed considering
reasonable estimates of total personal and Sec. X322 Restructured Loans; General
household indebtedness as well as Policy.
disposable income available for family and (Deleted by Circular No. 855 dated 29 October 2014)
personal needs after considering debt
servicing. § X322.1 Definition; when to
c. Original loan term shall not exceed consider performing/non-performing.
three (3) years but may have longer maturity
in meritorious cases provided that in no § X322.2 Procedural requirements.
case shall maturity exceed five (5) years; (Deleted by Circular No. 855 dated 29 October 2014)
No loan renewal shall be granted
without re-assessing borrowing capacity § X322.3 Restructured loans
and establishing continuing creditworthiness. considered past due.
Further, no loan renewal shall be allowed (Deleted by Circular No. 855 dated 29 October 2014)
without payment of accrued interest
§ X322.4 Classification.
receivable and substantial reduction in
principal.
d. ln the case of loan “takeout” from Secs. X323 - X325 (Reserved)
another Fl, the Fl taking out the loan(s)
should ensure that the loan from the E. LOANS AND OTHER CREDIT
originating Fl has been fully settled. Fls are ACCOMMODATIONS TO DIRECTORS,
expected to institute adequate controls over OFFICERS, STOCKHOLDERS AND
loan “takeout” such as: (a) directly releasing THEIR RELATED INTERESTS
the loan proceeds to the Fls where the loan
will be taken out; and (b) obtaining a copy Sec. X326 General Policy. Dealings of a bank
of the official receipt evidencing full with any of its DOSRI should be in the regular
settlement of account from the originating course of business and upon terms not less
Fl, among others. favorable to the bank than those offered to others.
(Circular No. 886 dated 08 September 2015)
§ X326.1 Definitions. For purposes of
§ X321.3 Consumer protection. Fls are
these regulations, the following definitions
required to strictly adhere to Bangko Sentral
shall apply:
regulations on Financial Consumer
a. Directors shall refer to bank directors
Protection as prescribed under Part Ten
as defined in Subsec. X141.1.
entitled Consumer Protection.
(Circular No. 886 dated 08 September 2015) b. Officers shall refer to bank officers as
defined in Subsec. X142.1.
§ X321.4 Sanctions. The Monetary c. Stockholder shall refer to any stockholder
Board may, at its evaluation and discretion, of record in the books of the bank, acting
impose sanctions on an Fl and/or its Board, personally, or through an attorney-in-fact; or
directors and officers, proportionate to the any other person duly authorized by him or
gravity/seriousness of the offense in cases through a trustee designated pursuant to a proxy
of persistent non-observance of the or voting trust or other similar contracts, whose
provisions contained herein. stockholdings in the lending bank, individual
(Circular No. 886 dated 08 September 2015) and/or collectively with the stockholdings of:
(Next page is Part III - page 31)
Part III - Page 30d Manual of Regulations for Banks

§ X326.1
12.12.31
(i) his spouse and/or relative within the such corporation, association or firm, except
first degree by consanguinity or affinity or (a) where the securities of such corporation,
legal adoption; (ii) a partnership in which association or firm are listed and traded in
the stockholder and/or the spouse and/or the big board or commercial and industrial
any of the aforementioned relatives is a board of domestic stock exchanges and less
general partner; and (iii) corporation, than fifty percent (50%) of the voting stock
association or firm of which the stockholder thereof is owned by any one (1) person or
and/or his spouse and/or the by persons related to each other within the
aforementioned relatives own more than fifty first degree of consanguinity or affinity; or
percent (50%) of the total subscribed capital (b) where the director, officer or stockholder
stock of such corporation, association or of the bank sits as a representative of the
firm, amount to one percent (1%) or more bank in the board of directors of such
of the total subscribed capital stock of the corporation: Provided, That the bank
bank. representative shall not have any equity
d. Substantial stockholder shall mean a interest in the borrower corporation except
person, or group of persons whether natural for the minimum shares required by law,
or juridical, owning such number of shares rules and regulations, or by the by-laws of
that will allow such person or group to elect the corporation, or (c) where the corporation
at least one (1) member of the board of is at least ninety-nine percent (99%) owned
directors of a bank or who is directly or by a non-stock corporation as defined in
indirectly the registered or beneficial owner Section 87 of the Corporation Code of the
of more than ten percent (10%) of any class Philippines: Provided, That the purpose of
of its equity security. the loan is to finance hospitals and other
e. Related interest shall refer to any of medical services: Provided, further, That the
the following: loan is fully secured: Provided, furthermore,
(1) Spouse or relative within the first That in the case of Items “(a)”, “(b)” and “(c)”
degree of consanguinity or affinity, or above, the borrowing corporation is not
relative by legal adoption, of a director, among those mentioned in Items “e(5)”,
officer or stockholder of the bank; “e(6)”, “e(7)” and “e(8)” of this Section;
(2) Partnership of which a director, (5) Corporation, association or firm of
officer, or stockholder of a bank or his spouse which any or a group of directors, officers,
or relative within the first degree of stockholders of the lending bank and/or
consanguinity or affinity, or relative by legal their spouses or relatives within the first
adoption, is a general partner; degree of consanguinity or affinity, or
(3) Co-owner with the director, officer, relative by legal adoption, hold or own at
stockholder or his spouse or relative within least twenty percent (20%) of the subscribed
the first degree of consanguinity or affinity, capital of such corporation, or of the equity
or relative by legal adoption, of the property of such association or firm;
or interest or right mortgaged, pledged or (6) Corporation, association or firm
assigned to secure the loans or other credit wholly or majority-owned or controlled by
accommodations, except when the any related entity or a group of related
mortgage, pledge or assignment covers only entities mentioned in Items “e(2)”, “e(4)” and
said co-owner’s undivided interest; “e(5)” of this Section;
(4) Corporation, association, or firm of (7) Corporation, association or firm
which a director or officer of the bank, or which owns or controls directly or indirectly
his spouse is also a director or officer of whether singly or as part of a group of

§ X326.1
12.12.31
related interest at least twenty percent (20%) are not subject to an assignment or
of the subscribed capital of a substantial hold-out agreement or any other encumbrance.
stockholder of the lending bank or which h. Book value of the paid-in capital
controls majority interest of the bank contribution shall mean the proportional
pursuant to Subsec. X303.1; amount of the bank’s total capital accounts
(8) Corporation, association or firm (net of such unbooked valuation reserves
which has an existing management contract and other capital adjustments as may be
or any similar arrangement with the parent required by the Bangko Sentral) as the
of the lending bank; and corresponding paid-in capital contribution
(9)Non-governmental organizations of each of the bank’s directors, officers,
(NGOs)/foundations that are engaged in stockholders and their related interests
retail microfinance operations which are bear to the total paid-in capital of the
incorporated by any of the stockholders bank: Provided, That as a basis for
and/or directors and/or officers of related determining the individual ceiling referred
banks. to in Sec. X330, the corresponding book
The general principles and standards value of the shares of stock of said
that will govern the business relationships directors, officers, stockholders and their
between banks and their related NGOs/ related interests which are the subject of
foundations engaged in retail microfinance pledge, assignment or any other
are found in Appendix 27. encumbrance shall be deducted
f. Subsidiary shall refer to a corporation therefrom.
or firm more than fifty percent (50%) of the i. Net worth shall mean the total of
outstanding voting stock of which is directly the unimpaired paid-in capital including
or indirectly owned, controlled or held with paid-in surplus, retained earnings and
power to vote by its parent corporation. undivided profit, net of valuation reserves
g. Unencumbered deposits shall refer and other adjustments as may be required
to savings, time and demand deposits, which by the Bangko Sentral.
(No pages 33 to 34)


§§ X326.1 - X327
12.12.31
j. Total loan portfolio shall refer to the property is retained by the bank; and
the sum of all loan accounts outstanding, (8) Customer’s liability-import bills
gross of valuation reserves, as reflected under trust receipts outstanding for not more
in the bank’s consolidated statement of than thirty (30) days from date of booking:
condition, excluding outstanding loans Provided, That the booking under trust
financed by special/specific funds from receipts shall have been made not later than
the government FIs. the thirty-first day from the date of original
k. Secured loan, borrowing or other entry referred to in Item “(6)” above.
credit accommodation shall refer to any l. Unsecured loan, borrowing or other
loan, or credit accommodation or portion credit accommodation shall refer to any
thereof referred to in Sec. X327 which is loan, or other credit accommodation or
secured by: portion thereof referred in Sec. X327 which
(1) Real estate mortgage, chattel is not secured in accordance with Item “k”
mortgage on tangible assets, and pledge of above.
jewelry, precious stones and other valuable (M-2012-016 dated 27 March 2012, As amended by Circular
articles1; Nos. 725 dated 16 June 2011, M-2011-33 dated 15 June 2011,
(2) Assignment of intangible assets such Circular No. 695 dated 22 October 2010 and 560 dated 31
January 2007)
as patents, trademarks, trade names and
copyrights;
(3) Unconditional payment guarantees Sec. X327 Transactions Covered. The terms
such as standby letters of credit and letter loans, other credit accommodations and
of indemnity issued by banks/multilateral FIs; guarantees as used herein shall refer to
(4) Assignment of, or hold-out on, transactions of the bank which involve the
deposits or deposit substitutes maintained grant of any loan, advance or other credit
in the lending bank; accommodation in any form whatsoever,
(5) Cash margin deposits; or whether renewal, extension or increase, and
assignment or pledge of government shall include:
securities or readily marketable bonds and a. Any advance by means of an
other high-grade debt securities and incidental or temporary overdraft, cash item,
“blue-chip” stocks, except those issued by “vale”, etc.;
the lending entity, or by its parent b. Any advance of unearned salary or
company which owns more than fifty other unearned compensation for periods
percent (50%) of its outstanding shares of in excess of thirty (30) days;
stocks, subject to the additional provision c. Any advance by means of DAUDs;
that the issuer corporation has a net worth d. Outstanding availments under an
of at least P1.0 billion and with annual established credit line;
net earnings during the immediately e. Drawings against an existing letter
preceding five (5) years; of credit;
(6) Customer’s liability under import f. The acquisition of any note, draft,
bills outstanding for not more than thirty bill of exchange or other evidence of
(30) days from date of original entry; indebtedness upon which the bank’s
(7) Sales contract receivables arising from DOSRIs may be liable as makers, drawers,
sale of real property on credit where title to acceptors, endorsers, guarantors or sureties;
1
The “real estate mortgage” must be registered with the Registry of Deeds and the “chattel mortgage
on tangible assets” must be registered with the Registry of Deeds or other appropriate registry (e.g.,
Land Transportation Office, in case of motor vehicles, or Maritime Industry Authority, in case of
vesssels) in order for the loan, borrowing or other credit accommodation to be considered secured
under the said regulation.

§§ X327 - X328.1
08.12.31
g. Indirect lending such as loans or Provided, That the transaction shall

other credit accommodations granted by automatically be subject to the ceilings as
another financial intermediary to said herein provided once the DOSRI who is a
DOSRIs from funds of the bank invested in party to the transaction becomes directly
the other institution’s trust or other liable to the bank;
department when there is a clear d. Transactions with a foreign bank
relationship between the transactions; which has stockholdings in the local bank
h. The increase of an existing where the foreign bank acts as guarantor
indebtedness, as well as additional through the issuance of letters of credit or
availments under a credit line or additional assignment of a deposit in a currency eligible
drawings against a letter of credit; as part of the international reserves and held
i. The sale of assets, such as shares of in a bank in the Philippines to secure other
stock, on credit; and credit accommodations granted to another
j. Any other transactions as a result person or entity: Provided, That the foreign
of which the bank’s DOSRIs become bank stockholder shall automatically be
subject to the ceilings as herein provided in
obligated or may become obligated to
the event that its contingent liability as
the lending bank, by any means guarantor becomes a real liability; and
whatsoever to pay money or its e. Interbank call loan transactions.
equivalent.
§ X328.1 Applicability to credit card
Sec. X328 Transactions Not Covered. The operations. The credit card operations of
terms loans, other credit accommodations banks shall not be subject to these
and guarantees as used herein shall not refer regulations where the credit cardholders are
to the following: bank’s DOSRI: Provided, That (a) the
a. Advances against accrued privilege of becoming a credit cardholder
compensation, or for the purpose of is open to all qualified persons on the basis
providing payment of authorized travel, of selective criteria which are applied by
legitimate expenses or other transactions for the bank to all applicants thereof; and (b)
the account of the bank or for utilization of the bank’s DOSRIs reimburse/pay the bank
maternity and other leave credits; for the billed amount in full on or before
b. The increase in the amount of the payment due date in the billing or
outstanding credit accommodations as a statement of account, as set by the bank for
result of additional charges or advances all other qualified credit card holders on
made by the bank to protect its interest such availments made for the same period on their
as taxes, insurance, etc.; credit cards. However, the transaction shall
c. The discount of bills of exchange be subject to applicable DOSRI regulations
drawn in good faith against actually if the bank’s DOSRIs:
existing values, and the discount of a. fail to reimburse/pay the bank within
commercial or business paper actually the period mentioned herein; or
owned by the person negotiating the same, b. on the outset, opt for deferred
including, but not limited to, the payment scheme, and the availment is
acquisition by a domestic bank of export booked by the bank.
bills from any of its DOSRI which are For purposes of this Section,
drawn in accordance with the terms and stockholders and related interests refer to
conditions of the covering letters of credit: individual credit card holders.

§§ X328.2 - X328.5
09.12.31
§§ X328.2 - X328.4 (Reserved) further, That these subsidiaries and

affiliates are not related interests of any
§ X328.5 Loans, other credit of the director, officer, and/or stockholder
accommodations and guarantees granted of the lending bank, except where such
to subsidiaries and/or affiliates director, officer or stockholder sits in the
a. Statement of policy. Dealings of a board of directors or is appointed officer
bank with its subsidiaries and/or affiliates of such corporation as representative of
shall be in the regular course of business the bank.
and upon terms not less favorable to the c. Exclusions from the ceilings.
bank than those offered to others. Loans, other credit accommodations and
b. Ceilings. The total outstanding loans, guarantees secured by assets considered
other credit accommodations and as non-risk under existing BSP regulations
guarantees to each of the bank’s subsidiaries as well as interbank call loans shall be
and affiliates shall not exceed ten percent excluded in determining compliance with
(10%) of the net worth of the lending bank: the ceilings prescribed under Item “b”
Provided, That the unsecured loans, other above.
credit accommodations and guarantees to d. Procedural requirements. The
each of said subsidiaries and affiliates shall following provisions shall apply if a bank
not exceed five percent (5%) of such net grants a loan, other credit accommodation
worth: Provided, further, That the total or guarantee to any of its subsidiaries and
outstanding loans, other credit affiliates.
accommodations and guarantees to all (1) Approval of the board, when to
subsidiaries and affiliates shall not exceed obtain. Except with prior written approval
twenty percent (20%) of the net worth of of the majority of all the members of the
the lending bank: Provided, finally, That board of directors, no loan, other credit
these subsidiaries and affiliates are not accommodation and guarantee shall be
related interest of any of the director, officer, granted to a subsidiary or affiliate.
and/or stockholder of the lending (2) Approval by the board, how
manifested. The approval shall be
bank,except where such director, officer or
manifested in a resolution passed by the
stockholder sits in the board of directors or
board of directors during a meeting and
is appointed officer of such corporation as
made of record.
representative of the bank.
Loans, other credit accommodations (3) Determination of majority of all the
and guarantees granted by a bank to its members of the board of directors. The
subsidiaries and affiliates engaged in energy determination of the majority of all the
members of the board of directors shall be
and power generation consistent with the
based on the total number of directors of
medium-term Philippine development plan/
the bank as provided in its articles of
medium-term public investment program of
incorporation and by-laws.
the National Government duly certified as
such by the Secretary of the Socio-economic (4) Contents of the resolution. The
Planning shall be subject to a separate resolution of the board of directors shall
individual limit of twenty-five percent (25%) contain the following information:
of the net worth of the lending bank: (a) Name of the subsidiary or affiliate;
Provided, That the unsecured portion thereof (b) Nature of the loan or other credit
shall not exceed twelve and one-half percent accommodation or guarantee, purpose,
(12.5%) of such net worth: Provided, amount, credit basis for such loan or other

§§ X328.5 - X329
09.12.31
credit accommodation or guarantee, of the following sanctions:

security and appraisal thereof, maturity, (1) Restriction or prohibition on the
interest rate, schedule of repayment and bank from declaring dividends for non-
other terms; compliance with the herein prescribed
(c) Date of resolution; ceilings until the outstanding loans, other
(d) Names of the directors who credit accommodations and guarantees
participated in the deliberation of the have been reduced to within the herein
meeting; and prescribed ceilings;
(e) Names in print and signatures of the (2) For the duration of each violation,
directors approving the resolution: Provided, imposition of a fine of one tenth (1/10) of
That in instances where a director who one percent (1%) of the excess over the
participated in the board meeting and who ceilings per day but not to exceed P30,000
approved such resolution failed to sign, the a day on the following:
corporate secretary may issue a certification (a) The lending bank;
to this effect indicating the reason for the (b) Each of the directors voting for the
failure of the said director to sign the approval of the loan, other credit
resolution. accommodation or guarantee in excess of
(5) Transmittal of copy of board any of the ceilings prescribed above.
approval; contents thereof. A copy of the g. Transitory provisions. Outstanding
written approval of the board of directors, loans, other credit accommodation and
as herein required, shall be submitted to the guarantees to subsidiaries/affiliates that will
appropriate department of the SES within exceed the ceilings mentioned above shall
twenty (20) banking days from the date of not be subject to penalty until 09 April 2007
approval. The copy may be a duplicate of or until said accommodations become past
the original, or a reproduction copy showing due, or are extended, renewed or
clearly the signatures of the approving restructured, whichever comes later.
directors: Provided, That if a reproduction (Circular No. 560 dated 31 January 2007, as amended by 654
copy is to be submitted, it shall be duly dated 12 May 2009)
certified by the corporate secretary that it is
a reproduction of the original written Sec. X329 Direct or Indirect Borrowings
approval. Loans, other credit accommodations and
e. Reportorial requirements. Each bank guarantees to DOSRI shall be considered
shall maintain a record of loans, other credit direct or indirect borrowings in accordance
accommodations and guarantees covered by with the following criteria:
these regulations in a manner and form that a. Direct borrowing. If the director,
will facilitate verification of such officer or stockholder of the lending bank is
transactions by BSP examiners. a party to any of the transactions
The appropriate department of the SES enumerated in Sec. X327 for himself, or as
may require banks to furnish such data or the representative or agent of others, or if
information as may be necessary for he acts as a guarantor, endorser or surety
purposes of implementing the provisions of for loans from the bank, or if the loan or
the foregoing rules. other credit accommodation to another
f. Sanctions. Without prejudice to party is secured by a property interest or
the criminal sanctions under Section 36 of right of the director, officer or stockholder.
R.A. No. 7653 (The New Central Bank Act), b. Indirect borrowing. If in any of the
any violation of the provisions of the transactions in Sec. X327 the borrower,
foregoing rules shall be subject to any or all guarantor, endorser or surety is a related

§ X329 - X330.1
13.12.31
interest as defined in Item “e”, Subsec. (4) Debt securities issued by the U.S.
X326.1. government;
Other cases of direct/indirect (5) Debt securities issued by central
borrowing shall be resolved on a case-to- governments, central banks of foreign
case basis. countries and multilateral financial
It shall be the responsibility of the institutions such as International Finance
bank concerned to ascertain whether the Corporation, Asian Development Bank and
borrower, guarantor, endorser or surety World Bank, with the highest credit quality
is related or connected with the bank or given by any two (2) internationally accepted
with any of the directors, officers or rating agencies; and
stockholders of the bank in any of the (6) Deposits of clients of related non-
capacities mentioned in Item “e” of governmental organizations (NGOs)/
Subsec. X326.1. foundations, that are engaged in retail
In determining indirect borrowings, as microfinance operations, and are
enumerated above, only those cases maintained with the related lending bank
involving living relatives shall be and held in the Philippines: Provided, That
considered. all of the following conditions are met:
(i) existing regulations on the opening
Sec. X330 Individual Ceilings. The total of deposit accounts and other deposit
outstanding loans, other credit transactions shall apply except when
accommodations and guarantees to each of specifically stated otherwise;
the bank’s DOSRI shall be limited to an (ii) depositors shall issue waivers of
amount equivalent to their respective confidentiality of their deposits and enter
unencumbered deposits and book value of hold-out agreements with the lending bank;
their paid-in capital contribution in the bank: (iii) interest rates on such deposits shall
Provided, however, That unsecured loans, not be more than those of similar type of
other credit accommodations and deposit accounts;
guarantees to each of the bank’s DOSRI shall (iv) collected but undeposited capital
not exceed thirty percent (30%) of their build-up funds from clients shall be recorded
respective total loans, other credit in a temporary liability account in the books
accommodations and guarantees. of related NGOs/foundations and shall be
deposited with the related bank not later
§ X330.1 Exclusions from individual than fifteen (15) calendar days from date of
ceiling. The following loans, other credit collection;
accommodations and guarantees shall be (v) total loans, other credit
excluded in determining compliance with accommodations and guarantees granted to
the individual ceiling. the related NGO/foundation shall not
a. Loans, other credit exceed, at any time, the total deposits
accommodations and guarantees secured by owned by its clients; and
assets considered as non-risk by the (vi) That the NGO/foundation shall
Monetary Board; consider as payments to the clients’
Assets considered as non-risk shall refer obligations any deposits used by the
to the following: lending bank to settle any unpaid
(1) Cash; obligation(s) of the NGO/foundation.
(2) Debt securities issued by the Bangko b. Loans, other credit accommodations
Sentral or the Philippine government; and advances to officers in the form of
(3) Deposits maintained in the lending fringe benefits granted in accordance with
bank and held in the Philippines; existing regulations; and

§§ X330.1 - X334
13.12.31
c. Loans, other credit accommodations Sec. X332 Exclusions from Aggregate

and guarantees extended by a Coop Bank Ceiling. The following loans, other credit
to its cooperative shareholders. accommodations and guarantees shall be
The general principles and standards that excluded in determining compliance with
will govern the business relationships between the aggregate ceiling:
banks and their related NGOs/foundations a. Credit accommodations or portions
engaged in retail microfinance are found in thereof to the extent secured by assets
Appendix 27. considered as non-risk by the Monetary
d. The portion of loans and other credit Board;
accommodations covered by guarantees of b. Credit accommodations to a
international/regional institutions/multilateral corporate stockholder which meets all the
financial institutions where the Philippine following conditions:
Government is a member/shareholder, such (1) The corporation is a non-financial
as the International Finance Corporation and institution;
the Asian Development Bank. (2) Its shares are listed and traded in
(As amended by Circular Nos. 785 dated 25 January 2013 and the domestic stock exchanges; and
725 dated 16 June 2011 and M-2011-033 dated 15 June 2011) (3) No person or group of persons
related within the first degree of
Sec. X331 Aggregate Ceiling; Ceiling on consanguinity or affinity holds/owns more
Unsecured Loans, Other Credit than twenty percent (20%) of the subscribed
Accommodations and Guarantees capital of the corporation.
Except with the prior approval of the Monetary c. Credit accommodations to
Board, the total outstanding loans, other credit government-owned or controlled
accommodations and guarantees to DOSRI corporations, in cases where a director,
shall not exceed fifteen percent (15%) of the officer or stockholder of the lending bank is
total loan portfolio of the bank or 100% of net a representative of the government in the
worth whichever is lower: Provided, That in borrowing corporation and does not hold
no case shall the total unsecured loans, other any proprietary interest in such corporation:
credit accommodations and guarantees to said Provided, That other rules on loans to
DOSRI exceed thirty percent (30%) of the DOSRI, such as procedural and reportorial
aggregate ceiling or the outstanding loans, requirements under Sections X334 and
other credit accommodations and guarantees, X335 are followed.
whichever is lower. For the purpose of d. Exclusions from individual ceiling
determining compliance with the ceiling on mentioned under Items “(b)”, “(c)” and “(d)”
unsecured loans, other credit of Subsec. X330.1.
accommodations and guarantees, banks shall (As amended by Circular 785 dated 25 January 2013)
be allowed to average their ceiling on
unsecured loans, other credit Sec. X333 Applicability to Branches and
accommodations and guarantees every week. Subsidiaries of Foreign Banks. The
In evaluating requests for extension of individual and aggregate ceilings as well as
loans in excess of the aggregate ceiling, the ceilings on unsecured credit
Bangko Sentral shall consider the credit accommodations prescribed herein shall
standing of the borrower, viability of the also apply to branches and subsidiaries of
projects financed by such other credit foreign banks in the Philippines.
accommodations in relation to national
objectives, collateral or security and other Sec. X334 Procedural Requirements. The
pertinent considerations. following provisions shall apply if the bank’s
DOSRI are parties to, or act as representatives

§§ X334 - X336
08.12.31
or agents of others in, any of the transactions of the said director to sign the resolution.
enumerated under Sec. X327: e. Transmittal of copy of board
a. Approval of the board, when to approval; contents thereof. A copy of the
obtain. Except with prior written approval written approval of the board of directors,
of the majority of the directors, excluding as herein required, shall be submitted to
the director concerned, no loan, other the appropriate department of the SES
credit accommodation and guarantee shall within twenty (20) banking days from the
be granted nor shall any of the date of approval. The copy may be a
transactions enumerated under Sec. X327 duplicate of the original, or a reproduction
be entered into. copy showing clearly the signatures of the
b. Approval by the board, how approving directors: Provided, That if a
manifested. The approval shall be reproduction copy is to be submitted, it
manifested in a resolution passed by the shall contain on its face or reverse side a
board of directors during a meeting and signed certification by the secretary that
made of record. it is a reproduction of the original written
c. Determination of majority of the approval: Provided, further, That such
directors. The determination of the majority written approval shall not be required for
of the directors, excluding the director loans, other credit accommodations
concerned, shall be based on the total and advances granted to officers
number of directors of the bank as provided under a fringe benefit plan approved by
in its articles of incorporation and by-laws. the Bangko Sentral.
d. Contents of the resolution. The
resolution of the board of directors shall Sec. X335 Reportorial Requirements. Each
contain the following information: bank shall maintain a record of loans, other
(1) Name of the director or officer credit accommodations and guarantees
concerned and his involvement as regards covered by these regulations in a manner and
the credit accommodation, such as form that will facilitate verification of such
principal, endorser, spouse of borrower, transactions by Bangko Sentral examiners.
etc.; The appropriate department of the SES
(2) Nature of the loan or other credit may require banks to furnish such data or
accommodation, purpose, amount, credit information as may be necessary for
basis for such loan or other credit purposes of implementing the provisions of
accommodation, security and appraisal the foregoing rules.
thereof, maturity, interest rate, schedule of
repayment and other terms of the loan or Sec. X336 Sanctions. Any violation of the
other credit accommodation; provisions of the foregoing rules shall be
(3) Date of resolution; subject to any or all of the following
(4) Names of the directors who sanctions:
participated in the deliberations of the a. Restriction or prohibition on the
meeting; and bank from declaring dividends for
(5) Names in print and signatures of non-compliance with the prescribed ceiling
the directors approving the resolution: on DOSRI until the outstanding loans and
Provided, That in instances where a other credit accommodations have been
director who participated in the board reduced to within the herein prescribed
meeting and who approved such ceilings;
resolution failed to sign, the corporate b. After due notice to the board of
secretary may issue a certification to this directors of the bank, the office of any bank
effect indicating the reason for the failure director or officer who violates the

§§ X336 - X338.1
14.12.31
provisions of this Section may be declared law, whichever is lower, shall be required
vacant and the director or officer shall be by the lending bank to waive the secrecy of
subject to the penal provisions of the New his deposits of whatever nature in all banks
Central Bank Act; in the Philippines. Any information obtained
c. Application of (1) the borrowing from an examination of his deposits
director’s or officer’s share in the bank’s shall be held strictly confidential and may
profit sharing program; and (2) the share of be used by the examiners only in
the director voting for the approval of the connection with their supervisory and
loan or other credit accommodation, against examination responsibility or by the
the excess of such loan or other credit Bangko Sentral in an appropriate legal
accommodation over any of the herein action it has initiated involving the deposit
prescribed ceilings; and account.
d. For the duration of each violation,
imposition of a fine of one-tenth of one Sec. X338 Financial Assistance to Officers
percent (1/10 of 1%) of the excess over the and Employees. Banks may provide financial
ceilings per day but not to exceed P30,000 assistance to their officers and employees, as
a day on the following: part of their fringe benefits program, to meet
(1) The lending bank; the housing, transportation, household and
(2) The director, officer or stockholder personal needs of their officers and employees.
whose borrowing exceeds his individual Financing plans and amendments thereto,
ceiling; and shall be with prior approval of the Bangko
(3) Each of the directors voting for the Sentral1.
approval of the loan or other credit (M-2014-039 dated 01 October 2014, M-2014-031 dated
accommodation in excess of any of the 08 August 2014, M-2014-006 dated 12 February 2014,
M-2013-050 dated 15 November 2013, M-2013-046 dated
ceilings prescribed in Secs. X330 and X331. 30 October 2013, M-2013-045 dated 23 October 2013,
The penalty for exceeding the individual M-2013-040 dated 03 September 2013, M-2013-001 dated
ceiling, aggregate ceiling and ceiling on 14 January 2013, M-2012-060 dated 27 December 2012,
unsecured loans shall be computed on the M-2012-051 dated 09 November 2012, M-2012-044 dated
average amount of loans in excess of said 24 August 2012, M-2012- 042 dated 17 August 2012,
M–2012–001 dated 03 January 2012, M-2011-056 dated
ceilings during the same week. 10 November 2011, M-2011-055 dated 17 October 2011,
M-2011-043 dated 12 August 2011, M-2011- 007 dated 04 February
Sec. X337 Waiver of Secrecy of Deposit 2011, M-2010-039 dated 03 November 2010, M-2010-007 dated
Any director, officer or stockholder who, 23 April 2010, M-2009-040 dated 30 October 2009, M-2009-037
dated 15 October 2009, M-2009-038 dated 08 October 2009
together with his related interest, contracts and M-2009-036 dated 07 October 2009)
a loan or any form of financial
accommodation from: § X338.1 Mechanics. The mechanics of
a. his bank; or such financing plan shall have the following
b. from a bank minimum features:
(1) which is a subsidiary of a bank a. Participation shall be limited to
holding company of which both his bank fulltime and permanent officers and
and the lending bank are subsidiaries; or employees of the bank;
(2) in which a controlling proportion of b. Financial assistance shall only be for
the shares is owned by the same interest the following purposes:
that owns a controlling proportion of the (1) The acquisition of a residential house
shares of his bank, in excess of five percent and lot, or the construction, renovation or
(5%) of the capital and surplus of the bank, repair of a residential house on a lot owned
or in the maximum amount permitted by and to be occupied by the officer or
1
See Appendix 89

§ X338.1
12.12.31
employee; personal use of the officer or employee or

(2) The acquisition of vehicles, his immediate family; or
household equipment and appliances for the (3) To meet expenses for the medical,
(Next Page is Part III- Page 43)

§§ X338.1 - 1338.2
08.12.31
maternity, education, emergency and other on the financing plan before the officer/
personal needs of the officer or employee employee is allowed to re-avail him self of
or his immediate family; the same financing plan.
c. Financial assistance for purposes An officer or employee (or his spouse)
mentioned in Items “b(1)” and “b(2)” of this who already owns a residential house and
Subsection shall be granted in the form of a lot shall not be qualified to avail himself of
loan, advance or other credit financial assistance for purposes of
accommodation, installment sale, lease with acquiring a residential house and/or lot.
option to purchase or lease-purchase These prohibitions notwithstanding,
arrangement where the lessee is obliged to financial assistance for the repair or
purchase the real estate or equipment; renovation of a residential house may be
d. The amount and maturity of allowed subject to such limitation as may
financial assistance for each purpose shall be prescribed by the bank pursuant to Item
be determined by the bank in consonance “d “ of this Subsection;
with the normal requirements thereof: g. Availment of the financing plan for
Provided, That the maximum amount shall the acquisition of a specific type of
be stated as percentage or multiple of the equipment or appliance shall be allowed
total monthly compensation of the officer not oftener than once every three (3) years:
or employee and shall be within the paying Provided, That re-availment shall be
capacity of the borrowing officer or allowed only after previous obligations in
employee. connection with the acquisition of the same
Total monthly compensation shall type of equipment or appliances have been
include the basic salary and all fixed and fully liquidated; and
regular monthly allowances of the officer h. The bank shall adopt measures to
or employee. Payments for sickness benefits protect itself from losses such as by
and other special emoluments which are incorporating in the plan or contract
not fixed or regular in nature, or the provisions requiring co-makers or co-signor,
commutation into cash of unused leave chattel, or real estate mortgages, fire
credits shall not be included in the insurance, mortgage redemption insurance,
computation of total monthly compensation; assignment of money value of leave credits,
e. The amortization payment shall pension or retirement benefits.
include amounts necessary to cover
mortgage redemption insurance and fire § X338.2 (Reserved)
insurance premiums, taxes, special
assessments, and other related fees and § 1338.2 Funding by foreign banks. In
charges; the case of local branches of foreign banks,
f. Availment of the financing plan to financial assistance for their officers and
construct or acquire a residential house and employees may be funded, through any of
lot shall be allowed only once during the the following means:
officer’s or employee’s tenure with the a. Through a local affiliate by special
bank, except where the right over the real arrangement with the head office abroad in
estate previously acquired or constructed any of the following forms:
under the financing plan is absolutely (1) Inward remittance from the head
transferred or assigned to another officer or office of the affiliate; or
employee of the bank or to a third party: (2) Assignment to the affiliate of
Provided, That the bank must be fully paid equivalent amounts of profits otherwise
or reimbursed for the outstanding availment remittable abroad under existing

§§ 1338.2 - X339
08.12.31
regulations; or c. The aggregate outstanding loans and

(3) Direct loans by the foreign bank to other credit accommodations granted under
the affiliate; or the bank’s fringe benefits program, inclusive
b. Through the local branch itself by: of those granted to officers in the nature of
(1) Segregation or transfer of undivided lease with option to purchase, shall not
profits normally remitted to the head office exceed five percent (5%) of the bank’s total
abroad equivalent to the loans to officers loan portfolio.
and employees which shall be lodged Banks providing financial assistance to
under “Other Liabilities-Head Office their officers/employees shall submit a
Accounts”. This account shall at all times regular report on “availments of financial
have a balance equivalent to the outstanding assistance to officers and employees” to the
loans to officers/employees financed under BSP within fifteen (15) banking days after
this scheme; or end of reference semester.
(2) Inward remittance; or The appropriate department of the SES
c. Through the local branch from local may further require banks to submit such
sources without earmarking an equivalent data or information as may be necessary to
amount of undivided profits: Provided, That facilitate verification of such transactions by
the aggregate ceilings on such loans as BSP examiners.
provided under existing regulations shall
apply. Sec. X339 Transitory Provisions
Loans under Items “b(1)” and “b(2)” of a. The sanctions contained under
this Subsection shall be treated in the branch Sec. X336 shall not apply to outstanding
books as loans granted by its head loans, other credit accommodations and
office. The documentation and collection of guarantees, as well as availments of
such loans shall be handled by the previously approved loans and committed
branch for the account of the head office. credit lines not considered as DOSRI
Loans financed under Items “a” and “b” accounts prior to 10 April 2004, for a period
shall be excluded from the computation of of up to 09 April 2007 or until said loans,
the capital to risk assets ratio. other credit accommodations and
guarantees become past due, or are
§ 2338.2 (Reserved) extended, renewed or restructured,
whichever comes later.
§ 3338.2 (Reserved) b. Unsecured outstanding loans, other
credit accommodations and guarantees, as
§ X338.3 Other conditions/limitations well as availments of previously approved
a. The investment by a bank in loans and committed credit lines not
equipment and other chattels under its fringe considered as DOSRI accounts prior to
benefits program for officers and employees 10 April 2004, shall not be deducted from
shall be included in determining the extent capital accounts for a period of up to
of the investment of the bank in real estate 09 April 2007 or until such time that said
and equipment for purposes of Section 51 loans, other credit accommodations and
of R.A. No. 8791. guarantees become past due, or are
b. The investment by a bank in extended, renewed or restructured,
equipment and other chattels contemplated whichever comes later.
under these guidelines shall not be for the c. Banks shall, however, disclose the
purpose of profits in the course of business following information in their financial
for the bank. statements, annual report and the reports

§§ X339 - X340
11.12.31
being submitted to BSP: clarifications:

(1) DOSRI; a. Loans, other credit accommodations,
(i) Loans, other credit accommodations and/or guarantees to the Republic of the
and guarantees classified as DOSRI accounts Philippines and/or its agencies/departments/
under regulations existing prior to 10 April bureaus shall be considered: (1) non-risk;
2004; and and (2) not subject to any ceiling;
(ii) New DOSRI loans, other credit Investments in GPNs shall be
accommodations and guarantees granted excluded by government financial
starting 10 April 2004. institutions in determining compliance with
(2) Non-DOSRI prior to 10 April 2004 DOSRI ceilings;
Loans, other credit accommodations and b. Loans, other credit accommodations,
guarantees, as well as availments of and/or guarantees to: (1) GOCCs; and
previously approved loans and committed (2) corporations where the Republic of the
credit lines not considered DOSRI accounts Philippines, its agencies/departments/
prior to 10 April 2004 but are allowed a bureaus, and/or GOCCs own at least twenty
transition period as provided above. percent (20%) of the subscribed capital stock
(As amended by Circular No. 532 dated 19 May 2006) shall be considered indirect borrowings of
the Republic of the Philippines and shall
§§ X339.1 - X339.3 (Reserved) form part of the individual ceiling as well
as the aggregate ceiling: Provided, That the
§ X339.4 Reportorial requirements following loans, other credit
Financing plans and amendments thereto accommodations, and/or guarantees to
shall be submitted to BSP within thirty (30) GOCCs and corporations where the
calendar days from approval thereof by the
Republic of the Philippines, its agencies/
bank’s board of directors. The appropriate
departments/bureaus, and/or GOCCs own
department of the SES may require the banks
at least twenty percent (20%) of the
concerned to submit a regular report
subscribed capital stock, shall be excluded
monitoring the various transactions under
from the thirty percent (30%) ceiling on
the bank’s financing plans for officers/
unsecured loans under Secs. X330 and
employees.
X331:
All banks providing financial assistance
(1) Loans, other credit accommodations,
to bank officers/employees shall submit a
and/or guarantees for the purpose of
report on “Availments of Financial
undertaking priority infrastructure projects
Assistance to Officers and Employees” to
consistent with the Medium-Term
the BSP within fifteen (15) banking days
Development Plan/Medium-Term Public
after end of reference semester.
Investment Program of the National
Government, duly certified as such by the
Sec. X340 Applicability of DOSRI Rules and
Secretary of Socio-Economic Planning;
Regulations to Government Borrowings in
Government-Owned or - Controlled
and/or guarantees granted to PFIs in the
Banks. The provisions of Secs. X326 to X337
lending programs of the government
shall also apply to loans, other credit
wherein the funds borrowed are intended
accommodations, and/or guarantees
for relending to other PFIs or end-user
granted to the National Government or
borrowers; and
Republic of the Philippines, its political
subdivisions and instrumentalities as well
and/or guarantees granted for the purpose
as GOCCs, subject to the following

§§ X340 - X341.1
11.12.31
of providing (i) wholesale and retail loans not be excluded in the deliberation as well
to the agricultural sector and micro, small as in the determination of majority of the
and medium enterprises (MSMEs); and/or directors in cases of loans, other credit
(ii) rediscounting and guarantee facilities for accommodations, and guarantees to the
loans granted to the said sector or Republic of the Philippines and/or its
enterprises; agencies/departments/bureaus; and
c. Loans, other credit accommodations, h. A director of the lending institution
and/or guarantees granted to state shall be excluded in the deliberation as well
universities and colleges (SUCs) shall be as in the determination of majority of the
excluded from the thirty percent (30%) directors in cases of loans, other credit
ceiling on unsecured loans under accommodations, and guarantees to the
Secs. X330 and X331. borrowing government entity other than the
d. In view of the fiscal autonomy Republic of the Philippines, its agencies,
granted under R.A. No. 7653 and the departments or bureaus where said director
independence prescribed under the is also a director, officer or stockholder
Constitution, the BSP shall be considered under existing DOSRI regulations.
an independent entity, hence, not a related (Circular No. 514 dated 06 March 2006 as amended by M-2011
-020 dated 30 March 2011, Circular Nos. 635 dated
interest of the Republic of the Philippines
10 November 2008, 616 dated 30 July 2008, 580 dated
and/or its agencies/departments/bureaus. 09 September 2007, and 547 dated 21 September 2006)
Loans, other credit accommodations and
guarantees of the BSP shall be considered: F. MANDATORY CREDITS
(1) non-risk; and (2) not subject to any
ceiling; Sec. X341 Agriculture and Agrarian Reform
e. LGUs shall be considered separate Credit. Pursuant to R.A. No. 10000, The
from the Republic of the Philippines, other Agri- Agra Reform Credit Act of 2009, the
government entities, and from one another following guidelines shall govern the grant
due to the full autonomy in the exercise of of agrarian reform credit by banks,
their proprietary functions and in the government or private.
management of their economic enterprises (As amended by Circular No. 736 dated 20 July 2011)
granted to them under the Local
Government Code of the Philippines, § X341.1 Definition of terms. For
subject to certain limitations provided by purposes of this Section, the following
law, hence, not a related interest of the definitions shall apply:
Republic of the Philippines and/or its a. Accredited rural financial institutions
agencies/departments/bureaus; (Fls) shall refer to Fls like RBs, Coop Banks,
f. Local Water Districts (LWDs), farmer’s cooperatives and farmer’s
although GOCCs, shall be considered cooperative insurance or mutual benefit
separate from the Republic of the associations whose portfolios are
Philippines, other government entities, and substantially agri-agra related and have been
from one another due to their fiscal certified as such either by the BSP, in the
independence from the national case of banks, or by the DA, or by an agency
government, hence, not a related interest of duly-authorized by the DA, in the case of
the Republic of the Philippines and/or its NBFIs.
agencies/department/bureaus, for purposes b. Agrarian reform beneficiaries shall
of these regulations; refer to farmers who were granted lands
g. A director who acts as a government under P.D. No. 27 or the “Emancipation of
representative in the lending institution shall Tenants from the Bondage of the Soil,

§ X341.1
11.12.31
Transferring to Them the Ownership of the (iii) acquisition of work animals, farm
Land They Till and Providing the lnstruments and fishery equipment and machinery;
and Mechanism Therefor”, R.A. No. 6657 (iv) acquisition of seeds, fertilizers,
or the “Comprehensive Agrarian Reform poultry, livestock, feeds and other similar
Law” and R.A. No. 9700 or the items;
“Comprehensive Agrarian Reform Extension (v) acquisition of lands authorized under
with Reforms” and regular farmworkers the Agrarian Reform Code of the Philippines
who are landless, irrespective of tenurial and its amendments;
arrangement, who benefited from the (vi) construction, acquisition and repair
redistribution of lands, regardless of crops of facilities for production, processing,
or fruits produced, to include the totality of storage, and marketing and such other
factors and support services designed to lift facilities in support of agriculture and
the economic status of the beneficiaries and fisheries;
all other alternative arrangements to the (vii) efficient and effective merchandising
physical distribution of lands, such as of agricultural and fishery commodities
production or profit-sharing, labor stored and/or processed by the facilities
administration, and the distribution of shares aforecited in domestic and foreign
of stock under the stock distribution option commerce; and
scheme, which will allow beneficiaries to (viii) other activities identified in
receive a just share of the fruits of the lands Section 23 of R.A. No. 8435, otherwise
they work, which farmers and farmworkers known as the “Agriculture and Fisheries
shall be endorsed by the nearest office of Modernization Act of 1997”, as follows:
the DAR. (a) Agriculture and fisheries production
The term shall, likewise, include including processing of fisheries and
registered agrarian reform beneficiaries’ agri-based products and farm inputs;
cooperatives/associations/other farm groups (b) Acquisition of work animals, farm
respectively endorsed as comprising of and fishery equipment and machinery;
agrarian reform beneficiaries by the nearest (c) Acquisition of seeds, fertilizer,
office of the DAR. poultry, livestock, feeds and other similar
c. Agrarian reform credit shall refer to items;
loans granted to agrarian reform (d) Procurement of agriculture and
beneficiaries for agricultural and agrarian fisheries products for storage, trading,
reform purposes. processing and distribution;
d. Agricultural credit shall refer to loans (e) Acquisition of water pumps and
granted to borrowers for agricultural installation of tube wells for irrigation;
purposes. (f) Construction, acquisition and repair
e. Agricultural lessee shall refer to any of facilities for production, processing,
person who, with or without help from his/ storage, transportation, communication,
her immediate farm household, cultivates marketing and such other facilities in
the land owned by another for a certain price support of agriculture and fisheries;
in money, in produce or in both. (g) Working capital for agriculture and
f. Agriculture and agrarian reform credit fisheries graduates to enable them to engage
shall refer to loans granted for the following in agriculture and fisheries-related economic
activities and purposes: activities;
(i) agricultural production; (h) Agribusiness activities which support
(ii) promotion of agribusiness and soil and water conservation and
exports; ecology-enhancing activities;

§ X341.1
11.12.31
(i) Privately-funded and LGU-funded who has not obtained a substantially

irrigation systems that are designed to equivalent and regular farm employment.
protect the watershed; n. Farmer’s cooperatives shall refer to
(j) Working capital for long-gestating organizations composed primarily of small
projects; and agricultural producers, farmers,
(k) Credit guarantees on uncollateralized farmworkers, or other agrarian reform
loans to farmers and fisherfolk. beneficiaries who voluntarily organize
g. Agro-industry Modernization Credit themselves for the purpose of pooling land,
and Financing Program (AMCFP) refers to manpower, technological, financial or other
the umbrella credit/financing program of the economic resources, and operate on the
government for the agriculture and fisheries principle of one (1) member, one (1) vote.
sector created under R. A. No. 8435. A juridical person may be a member of a
h. Amortizing owners shall refer to cooperative, with the same rights and
landowners who still amortize payment for duties as a natural person.
the land to a private individual or to the State. o. Farmer’s and fisherfolk’s
i. BSP-accredited rural financial organizations or associations shall refer to
institutions (Fls) shall refer to banks that are farmer’s and fisherfolk’s cooperatives,
accredited by the BSP in accordance with associations or corporations duly registered
criteria set forth in Subsec. X341.8. with appropriate government agencies and
j. Compact farmers shall refer to those which are composed primarily of small
farmers with adjoining farms operating as a agricultural producers, farmers,
single unit under one management, farm farmworkers, agrarian reform beneficiaries
plan and budget. or fisherfolk who voluntarily join together
k. Farm to market road shall refer to to form business enterprises or non-business
roads linking the agriculture and fisheries organizations which they themselves own,
production sites, coastal landing points and control and patronize.
post-harvest facilities to the market and p. Fisherfolk shall refer to people
arterial roads and highways. directly or personally and physically
l. Farmer shall refer to a natural person engaged in taking and/or culturing and
whose primary livelihood is cultivation of processing, fishery and/or aquatic resources.
land or the production of agricultural crops, q. Fisheries shall refer to all activities
agroforest products, livestock and/or relating to the act or business of fishing,
fisheries, either by himself/herself, or culturing, preserving, processing,
primarily with the assistance of his/her marketing, developing, conserving and
immediate farm household, whether the managing aquatic resources and the fishery
land is owned by him/her or by another areas, including the privilege to fish or take
person under a leasehold or share tenancy aquatic resource thereof.
agreement or arrangement with the owner r. Fishworker shall refer to a person
thereof. whether or not regularly employed in
m. Farmworker shall refer to a natural commercial fishing and related industries,
person who renders service for value as an whose income is either from wages, profit
employee or laborer in an agricultural sharing or stratified sharing basis, including
enterprise or farm regardless of whether his/ those working in fishpens, fish corral/traps,
her compensation is paid on a daily, weekly, fishponds, prawn farms, sea farms, salt
monthly or “pakyaw” basis. The term beds, fish ports, fishing boat or trawlers, or
includes an individual whose work has fish processing and/or packing plants, but
ceased as a consequence of, or in excluding administrators, security guards
connection with, a pending agrarian dispute and overseers.

§§ X341.1 - X341.3
11.12.31
s. Loanable funds shall refer to total infrastructure and transportation facilities

funds generated from 20 April 2010, the supporting post-harvest activities.
computation of which is described in x. Public infrastructure shall refer to
Subsec. X341.6. facilities including, but not limited to,
t. National Food Authority, otherwise market buildings, slaughterhouses, holding
known as the NFA, shall refer to the pens, warehouses, market information
government entity created through P.D. centers, connecting roads, transport and
No. 4 dated 26 September 1972. It is communication, processing plants, ice
currently vested with the function of plants and cold storage facilities, grain
ensuring food security and stability of price dryers, warehouses, grain silos and cold
and supply of staple grain-rice through storage used by the farmers and fisherfolk
procurement of paddy from individual in the production, processing, storage,
bonafide farmers and their organizations, transportation, communication, marketing
buffer stocking, processing activities, of their produce and such other facilities in
dispersal of paddy and milled rice to support of agriculture and fisheries.
strategic locations, distribution of the staple y. Settlers shall refer to persons who
grain to various marketing outlets at range from the forest-clearing pioneers,
appropriate times of the year and other including indigenous people, with a,
similar activities. As used in these rules, its subsistence economy to the better equipped
role shall be limited to the issuance of and more experienced farmers.
warehouse receipts, which may be used as z. Tenant farmer shall refer to one (1)
collateral for bank loans and loans who cultivates another’s land under a
under the AMCFP value chain financing sharing leasehold agreement.
facility. (As amended by Circular No. 736 dated 20 July 2011)
As a government non-financial agency,
the NFA can not and will not perform any § X341.2 Qualified borrowers
lending function consistent with the Qualified borrowers for agriculture and
provisions of R.A. No. 8435. agrarian reform credit shall refer to farmers,
u. Owner-cultivators shall refer to fisherfolk, agrarian reform beneficiaries,
natural persons who own lands by settlers, agricultural lessees, amortizing
purchase, inheritance, or land distribution owners, farmworkers, fishworkers,
by the State. Owner-cultivators can operate owner-cultivators, compact farmers, tenant
the farm themselves, supervise wage labor farmers, as well as farmer’s and fisherfolk’s
or delegate operations to farmers. cooperatives, organizations and associations
v. Post-harvest activities shall refer to in good standing, regardless of
threshing, drying, milling, grading, storing, capitalization, based on the feasibility of the
and handling of produce and such other project and their paying capacity, their
activities of a similar nature such as estimated production, and/or securities they
stripping, winnowing, chipping and can provide as well as such assets as may
washing. be acquired by them from the proceeds of
w. Post-harvest facilities shall refer to the loan.
threshers, moisture meters, dryers, (As amended by Circular No. 736 dated 20 July 2011)
weighing scales, milling equipment, fish
ports, fish landings, ice plants and cold § X341.3 Required allocation for
storage facilities, processing plants, agriculture and agrarian reform credit
warehouses, buying stations, market Banks shall set aside at least twenty-five

§§ X341.3 - X341.5
11.12.31
percent (25%) of their total loanable funds recourse” basis from other banks and Fls.
for agriculture and agrarian reform credit b. Ten percent (10%) mandatory
in general, of which at least ten percent agrarian reform credit allocation through
(10%) of the total loanable funds shall be the following modes of compliance that
made available for agrarian reform are undertaken after 20 April 2010:
beneficiaries. (1) Actual extension of loans to agrarian
Excess compliance in the ten percent reform beneficiaries (gross of allowance
(10%) agrarian reform credit may be used for probable losses), for purposes of
to offset a deficiency, if any, in the fifteen financing agriculture and agrarian reform
percent (15%) other agricultural credit, in activities under Item no. “f” of Subsec.
general, but not vice versa. X341.1, other than (a) loans rediscounted
(As amended by Circular No. 736 dated 20 July 2011) with UBs/KBs, or (b) loans to the extent
funded by proceeds from bonds, in the case
§ X341.4 Direct compliance. Total of DBP/LBP, and/or SDAs and/or wholesale
loanable funds as computed under Subsec. lending of other banks, in the case of BSP-
X341.6 shall be made available by banks accredited rural Fls listed under Item nos.
for agriculture and agrarian reform credit. “a(1)(a)” to “a(1)(c)” above, or
a. Twenty five percent (25%) mandatory (2) Purchase of eligible loans listed in
agriculture and agrarian reform credit Item no. “b(1)” above on a “without
allocation through the following modes of recourse” basis from other banks and Fls.
compliance that are undertaken after (As amended by Circular No. 736 dated 20 July 2011)
20 April 2010:
(1) Actual extension of loans to qualified § X341.5 Allowable alternative
borrowers (gross of allowance for probable compliance. The following alternative
losses), for purposes of financing agriculture modes of compliance to the mandatory
and agrarian reform activities under Item agriculture and agrarian reform credit shall
no.“f” of Subsec. X341.1, other than (1) loans be allowed:
rediscounted with UBs/KBs, or (2) loans to a. Twenty five percent (25%) mandatory
the extent funded by proceeds from any of agriculture and agrarian reform credit
the following: (1) Eligible securities (gross of allowance
(a) Bond issues for the exclusive purpose for probable losses but net of unamortized
of on-lending to the agriculture and agrarian premium or discount) that are issued after
reform sector that have been expressly 20 April 2010:
declared as eligible by the DA, or by an (a) Investment in bonds issued by the
agency duly authorized by the DA, in the DBP and the LBP that have been expressly
case of the DBP/LBP, declared as eligible by the DA, or by an
(b) SDAs maintained for the exclusive agency duly-authorized by the DA, the
purpose of on-lending to the agriculture and proceeds of which shall be used exclusively
agrarian reform sector, in the case of for on-lending to the agriculture and
BSP-accredited rural Fls, or agrarian reform sector;
(c) Wholesale lending of other banks for (b) Investments in other debt securities
the exclusive purpose of on-lending to the that have been declared as eligible by the
agriculture, fisheries and agrarian reform DA, or by an agency duly-authorized by
sector, in the case of BSP-accredited rural the DA, the proceeds of which shall be used
Fls, or to finance activities identified under
(2) Purchase of eligible loans listed in Section 23 of R.A. No. 8435, as defined under
Item no. “(1)” above on a “without Item no. “f(viii)” of Subsec. X341.1; or

§§ X341.5
11.12.31
(c) Paid subscription of shares of stock (d) Actual extension of loans intended
in the following institutions, subject to for the construction and upgrading of
existing rules and regulations governing infrastructure, including, but not limited to,
equity investments of banks: farm-to-market roads, as well as the
(i) Accredited rural Fls (preferred shares provision of post harvest facilities and other
only); public infrastructure as defined under
(ii) Quedan and Rural Credit Guarantee Subsec. X341.1, for the benefit of the
Corporation (Quedancor); or agriculture and agrarian reform sector;
(iii) Philippine Crop Insurance (e) Actual extension of loans to
Corporation (PCIC). borrowers for purposes of financing
The eligibility of securities under Item activities identified under Section 23 of R.A
“a(1)” shall be subject to the following No. 8435, as defined under Item no.
conditions: “f(viii)” of Subsec. X341.1;
(i) Such securities shall neither be (f) Extension of loans to:
hypothecated, encumbered, earmarked for (i) NFA-registered warehousemen/
any other purposes, sold/lent in repurchase millers/wholesalers for purposes of
agreement/securities lending transactions, financing activities identified under Section
used as additional collateral in repurchase 23 of R.A. No. 8435, as defined under Item
agreements, nor used as collateral by the no. “f(viii)” of Subsec. X341.1; or
borrowing bank in securities borrowing (ii) The NFA: Provided, That the NFA
transactions; shall not use the proceeds of said loans for
(ii) Such securities shall be segregated relending; or
from the bank’s investment portfolio; and (g) Purchase of eligible loans listed
(iii) The securities under ltem nos. under Item nos. “a(2)(b)” to “a(2)(f)” on a
“a(1)(a)” to “a(1)(c)” above shall not be “without recourse” basis from other banks
funded by proceeds from the issuance of and Fls:
bonds under Item no. “a(1)(a)”, in the case Provided, That the loans under Item nos.
of DBP/LBP, and/or SDAs under Item no. “a(2)(d)” to “a(2)(g)” are not rediscounted
”a(2)(a)” and/or wholesale lending of other with UBs/KBs: Provided, further, That the
banks under Item no. “a(2)(b)”, in the case activities identified under Item nos.
of BSP-accredited rural Fls. “a(2)(a)” to “a(2)(g)” shall not be funded by
(2) Loans and other credit (gross of proceeds from the issuance of bonds under
allowance for probable losses) that are Item no. “a(1)(a)”, in the case of DBP/LBP,
granted after 20 April 2010: and/or the acceptance of SDAs under Item
(a) Investments in SDAs of BSP- no. “a(2)(a)” and/or wholesale lending of
accredited rural Fls, the proceeds of which other banks under Item no. “a(2)(b)”, in the
shall be used exclusively for on-lending to case of BSP-accredited rural Fls.
the agriculture and agrarian reform sector; b. Ten percent (10%) mandatory
(b) Wholesale lending granted to agrarian reform credit
accredited rural Fls for the exclusive purpose (1) Eligible securities (gross of allowance
of on-lending to the agriculture and agrarian for probable losses but net of unamortized
reform sector; premium or discount) that are issued after
(c) Rediscounting facility granted by 20 April 2010:
UBs/KBs to other banks covering eligible (a) Investments in bonds issued by the
agricultural and agrarian reform credits, DBP and the LBP that have been expressly
including loans covered by guarantees of declared as eligible by the DA, or by an
the Quedancor or the PCIC; agency duly-authorized by the DA, upon

§§ X341.5 - X341.6
11.12.31
due consultation and timely coordination Provided, That the loans under Item nos.
with DAR, the proceeds of which shall be “b(2)(d)” to “b(2)(e)”, are not rediscounted
used exclusively for on-lending to agrarian with UBs/KBs: Provided, further, That the
reform beneficiaries; or activities identified under Item nos.
(b) Investment in other debt securities “b(2)(a)” to “ b(2)(e)” shall not be funded
that have been declared as eligible by the by proceeds from the issuance of bonds
DA, or by an agency duly-authorized by the under Item no. “b(1)(a)”, in the case of
DA, upon due consultation and timely DBP/LBP, and/or the acceptance of SDAs
coordination with DAR, the proceeds of under Item no. “b(2)(a)” and/or
which shall be used to finance activities wholesale lending of other banks under
identified under Sec. 23 of R.A No. 8435, Item no. “b(2)(b)”, in the case of BSP-
as defined under Item no. “f(viii)” of accredited rural Fls.
Subsec. X341.1: Provided, That said For purposes of implementing the
activities shall generally benefit agrarian provisions of this Section, the DA, or its
reform beneficiaries. duly-authorized agency, shall furnish the
The eligibility of securities under Item BSP with information on the debt securities
no. “b(1)” shall be subject to the same eligible as alternative compliance with the
conditions required for securities under Item mandatory agri-agra credit.
no. “a(1)”. (As amended by Circular Nos. 736 dated 20 July 2011, 678
(2) Loans and other credits (gross of dated 06 January 2010 and M-2008-015 dated 19 March 2008)
allowance for probable losses) that are
granted after 20 April 2010: § X341.6 Computation of loanable
(a) Investments in SDAs of BSP- funds. Loanable funds shall be computed,
accredited rural Fls, the proceeds of which as follows:
shall be used exclusively for on-lending to a. The net increase from 20 April 2010
agrarian reform beneficiaries; to date of the report of the individual
(b) Wholesale lending granted to accounts booked under the Regular Banking
accredited rural Fls for the exclusive Unit which represent the following:
purpose of on-lending to agrarian reform (1) Total peso deposit (demand, savings,
beneficiaries; now, time and negotiable CTD accounts)
(c) Rediscounting facility granted by excluding:
UBs/KBs to other banks covering eligible (a) Deposits of banks,
agrarian reform credits, including loans (b) Deposits of the National
covered by guarantees of the Quedancor or Government, including its political
the PCIC; subdivisions and instrumentalities, such as,
(d) Actual extension of loans to but not limited to, the BIR, BOC, and LGUs,
borrowers, for purposes of financing and
activities identified under Section 23 of R.A (c) Deposits of government-owned
No. 8435, as defined under Item no. “f(viii)” and-controlled corporations,
of Subsec. X341.1: Provided, That said (2) Bills payable excluding:
activities shall generally benefit agrarian (a) Borrowings from the BSP in the form
reform beneficiaries; or of the following:
(e) Purchase of eligible loans listed (i) rediscounting,
under Item nos. “b(2)(b)” to “b(2)(d)” on a (ii) emergency advances,
“without recourse” basis from other banks (iii) availment of overdraft facilities, or
and Fls: (iv) other obligations,

§§ X341.6 - X341.7
11.12.31
(b) Interbank loans payable, (1) Debt and equity securities

(c) Other deposit substitutes, in the acquired in settlement of loans, net,
form of the following: (2) Sales contract receivable, net,
(i) Repurchase agreements with the (3) Accrued interest income from
BSP, financial assets, net,
(ii) Repurchase agreements with (4) Equity investment in subsidiaries,
banks, associates and joint ventures, net,
(iii) Certificates of assignment/ (5) Bank premises, furniture, fixture
participation with recourse with banks, and equipment, net,
(iv) Securities lending and borrowing (6) Real and other properties acquired
agreements with banks, and (ROPA), net,
(v) Other deposit substitutes with (7) Non-current assets held for sale, net,
banks, (8) Goodwill, net,
(d) Proceeds from special on-lending (9) Other intangible assets, net,
programs to the agriculture and agrarian (10) Deferred tax assets,
reform sector, including SDAs issued by (11) Other assets, net,
BSP-accredited rural Fls, the proceeds of (12) Required reserves against a week
which shall be exclusively used for ago level of the following accounts:
on-lending to the agriculture and agrarian (a) deposits liabilities,
reform sector, (b) deposits substitutes,
(e) Proceeds from special on-lending (c) trust and other fiduciary accounts-
programs, other than for agriculture and others (TOFA), and
agrarian reform, including Time (d) others, and
Certificates of Deposit-Special (13)Security deposit for the faithful
Financing, and performance of trust duties,
(f) Other deposit substitutes in the c. Less/(Add) provisions for liquidity
form of emergency advances from the equivalent to fifteen percent (15%) of the
PDIC, and net increase/(decrease) from 20 April 2010
(3) Bonds payable, net of unamortized in total peso deposit liabilities as defined
premium or discount, other than bond under Item no. “a(1)” of this Subsection.
issuances of the DBP and LBP, the (As amended by Circular No. 736 dated 20 July 2011)
proceeds of which shall be used
exclusively for on-lending to the § X341.7 Computation of total equity
agriculture and agrarian reform sector, The computation of total equity for
purposes of computing total loanable
(4) Unsecured subordinated debt, net
funds under Subsec. X341.6 shall be,
of unamortized premium or discount,
as follows:
(5) Redeemable preferred shares, net Total Equity under
of unamortized premium or discount, RBU xxx
(6) Total equity accounts, as provided Less:
under Subsec. X341.7, (1)Retained Earnings -
Reserves
b. Less/(Add) the net increase/ (a) Trust Business xxx
(decrease) from 20 April 2010 to date of (b) Self-Insurance xxx
the report of the following accounts (c) Contingencies, and xxx
booked under the Regular Banking Unit (d) Others xxx (xxx)
(2) Other Comprehensive
(RBU):
Income

§§ X341.7 - X341.8
11.12.31
(a) Net Unrealized Gains/Losses xxx equivalent, that the bank shall comply with
on Available for Sale Financial the regulations, directives and instructions
Assets
(b) Gains/Losses on Fair Value xxx of the BSP; and
Adjustment of Hedging (2) A notarized certification, signed by
Instruments the president and compliance officer or
(c) Cumulative Foreign xxx equivalent, that the bank’s loan portfolio
Currency Translation
(d) Others xxx (xxx)
is substantially agri-agra related.
Total Equity, net of exclusions xxx b. Qualification requirements. A
certificate of accreditation will be issued
In the case of foreign bank branches, the by the appropriate supervising department
total equity for purposes of computing total of the SES to the rural Fl should the rural Fl
loanable funds under Subsec. X341.6 shall satisfy the following criteria based on the
be, as follows: last four (4) quarters prior to application:
Total Equity, exclusive of Due (1) Total loan portfolio is greater than
From/To Head Office/Branches its total investments; and
Agencies Abroad, under RBU xxx
Less: (2) Average credit exposure to agri-
(1)Retained Earnings - agra is greater than any exposure to the
Reserves other economic sectors as reported in
(a) Trust Business xxx Schedule 11.d of the FRP.
(b) Self-Insurance xxx
(c) Contingencies, and xxx
c. Certificate of accreditation. The
(d) Others. xxx (xxx) certificate of accreditation issued to the
(2) Other Comprehensive qualified rural Fl will include an
Income accreditation reference number specific to
(a) Net Unrealized Gains/ xxx the rural Fl, the date of accreditation and a
Losses on Available for Sale
Financial Assets statement that the rural Fl has satisfied the
(b) Gains/Losses on Fair Value xxx above criteria and has sworn to comply
Adjustments Of Hedging with the regulations, directives and
Instruments instructions of the BSP.
(c) Cumulative Foreign xxx
Currency Translation
(1) The rural Fl, once accredited and
(d) Others xxx (xxx) issued with the certificate of accreditation,
(3) Due from Head Office/ (xxx) is required to comply with the following:
Branches/ Agencies Abroad (a) Provide the lending bank with a copy
Add: Due to Head Office/ of the certificate of accreditation with the
Branches/ Agencies Abroad xxx
Total Equity, net of exclusions xxx relevant accompanying details (i.e.,
accreditation reference number and date
(Circular No. 736 dated 20 July 2011) of accreditation); and
(b) Submit on an annual basis to the
§ X341.8 Accreditation of banks as appropriate department of the SES a
rural financial institutions notarized certification, signed by its
a. Application for accreditation. A rural president and compliance officer or
Fl applying for accreditation shall submit equivalent, that its loan portfolio remains
to the appropriate department of the SES a substantially agri-agra related. Such
letter stating its intent to apply for such notarized certification for annual
accreditation together with the following submission by the rural Fl shall be
information/documents: reckoned from the original date of
(1) A notarized undertaking, signed by accreditation and should be received by
the president and compliance officer or the appropriate department of the SES

§§ X341.8 - X341.12
11.12.31
within ten (10) banking days before the regulations applicable both to the lead
lapse of one (1) year. Non-compliance bank and other participating bank(s).
with the required submission of the Accordingly, the booking of loans shall
annual certification will serve as basis for only be for the amount of actual
the BSP to revoke accreditation of the participation of each syndicate bank
rural Fl. concerned. Memorandum entries,
(2) The lending bank, as part of its references or notations shall be made for
disclosure to the BSP, is required to the other participating bank(s).
include the following in its Agri-Agra (As amended by Circular No. 736 dated 20 July 2011)
report in compliance with the reportorial
requirements of the BSP: § X341.10 Interest and other charges
(a) Name of rural Fl/s and Interest, service fees and other charges shall
corresponding aggregate amount of be governed by existing rules and
exposure to each rural Fl; and regulations.
(As amended by Circular No. 736 dated 20 July 2011)
(b) For each rural Fl in Item “C(2)(a)”,
the accreditation reference number date of § X341.11 Submission of reports. A
accreditation. quarterly report on the compliance with
(3) The exposure of the lending bank to the mandated credit allocation for agri-
the rural Fl shall be eligible for purposes of agra credit under R.A. No. 10000, which
determining compliance with the shall be considered a Category A-3 report,
mandatory agri-agra credit allocation for as shall be submitted to the Supervisory Data
long as the rural Fl remains accredited with Center (SDC) of the SES within fifteen (15)
the BSP. banking days from the end of the
d. Purpose of accreditation. The reference quarter.
accreditation is solely for the purpose of Banks shall submit the revised
ascertaining that the portfolio of the rural Fl reportorial starting with the reporting
is substantially agri-agra related pursuant to period ending 31 December 2011.
R.A. No. 10000 and should not serve as an (M-2011-064 dated 15 December 2011, Circular No. 736 dated
endorsement by the BSP on the soundness 20 July 2011)
of the rural Fl. The accreditation is not
intended to take the place of the conduct of § X341.12 Consolidated compliance
due diligence and prudent credit The compliance with agri-agra mandatory
underwriting standards required from the allocation of funds under R.A. No. 10000
lending bank in determining the credit shall be allowed on a groupwide basis
worthiness of the rural Fl. (i.e., consolidation of parent/foreign bank
(As amended by Circular No. 736 dated 20 July 2011) branch and subsidiary bank/s) so that
excess compliance of any bank in the
§ X341.9 Syndicated type of group can be used as compliance for any
agrarian reform credit/agricultural deficient bank in the group: Provided,
credit. Banks may grant a syndicated That the subsidiary bank/s is/are at least
type of loan for agrarian reform credit/ directly or indirectly majority owned by
agricultural credit in general, either the parent bank and/or head office, in the
between or among themselves. The case of foreign bank branches: Provided,
mechanics, including the recording of further, That the parent bank/foreign bank
such syndicated type of loan transactions, branch shall be held responsible for the
shall follow existing practices and compliance of the group.

§§ X341.12 - X341.15
11.12.31
The consolidated report shall be agra credit under R.A. No. 10000 in
submitted by the parent bank/foreign bank accordance with the provisions of Subsec.
branch in the prescribed form and shall be X192.2, to be reckoned on the day following
supported by the individual reports of the the due date of submission until the proper
parent bank/foreign bank branch within the report is filed with the BSP: Provided, That
group and subsidiary bank/s duly signed by a bank which fails to submit its agri-agra
each bank’s authorized signatory. quarter-end report up to the submission
(As amended by Circular No. 736 dated 20 July 2011) deadline of the succeeding quarter-end
report, shall be subject to the monetary
§§ X341.13 – X341.14 (Reserved)
penalties applicable to less serious offenses
for willful delay in the submission of the
§ X341.15 Sanctions. The following
agri-agra report under Appendix 67, which
sanctions shall be applicable for any
shall be reckoned on a daily basis from the
violation of this Section:
day following the due date of submission
a. Penalties/sanctions applicable to
of the report until the report is filed with
banks:
the BSP.
(1) Monetary fines
(c) For false/misleading statements
(a) For non-compliance/under-
A bank which has been found to have
compliance
made a false or misleading statement in its
Annual penalty of one-half of one
required report on compliance with the
percent (0.5%) of amount of non-
mandated credit allocation for agri-agra
compliance/undercompliance shall be
credit shall be subject to the monetary
computed on a quarterly basis following this
penalties applicable to less serious offenses
formula:
for willful making of a false or misleading
Penalty = 0.00125 x amount of
statement under Appendix 67, which shall
non-compliance/under-compliance as of the
be reckoned on a daily basis from the day
end of the reference quarter
following the due date of submission of the
Amount of non-compliance/under-
affected report until an amended report has
compliance =
been submitted to the BSP.
(i) ten percent (10%) of total loanable
(2) Non-monetary fines
funds less reported amount of compliance
In addition to the above daily
with the mandatory agrarian reform credit,
monetary fines, any or all of the
plus
administrative sanctions, as provided
(ii) fifteen percent (15%) of total loanable
under Section 37 of R.A. No. 7653, may
funds less reported amount of compliance
be imposed upon any bank for willful
with the mandatory other agricultural credit
delay or refusal to submit reports or willful
in general:
making of a false or misleading statement
Provided, That excess compliance in the
to the BSP, without prejudice to criminal
ten percent (10%) agrarian reform credit may
sanctions against culpable persons
be used to offset a deficiency, if any, in the
provided under Sections 34, 35 and 36 of
fifteen percent (15%) other agricultural
R.A. No. 7653.
credit, in general, but not vice versa.
b. Penalties/sanctions applicable to
(b) For delayed/amended reports
directors/officers concerned of the bank
A bank shall be subject to the fines for
Directors/officers of a bank which have
delayed/amended reports on compliance
been found to have willfully falsely
with the mandated credit allocation for agri-
certified/submitted misleading statements

§§ X341.15 - X342.1
14.12.31
and/or willfully violated any of the Enterprises (MSMEs).

provisions of this Section shall be subject (As amended by Circular No. 625 dated 14 October 2008)
to the monetary penalties provided under
Appendix 67 applicable to less serious § X342.1 Definition of terms. For
offenses and/or the other administrative purposes of this Section, the following
sanctions under Section 37 of R.A. No. definitions shall apply:
7653. a. Lending institutions shall refer to all
The imposition of the above sanctions banks, namely: UBs, KBs, TBs and RBs/
is without prejudice to the filing of Coop Banks, including government-owned
appropriate criminal charges against banks.
culpable persons as provided under Section b. Total loan portfolio shall include all
35 of R.A. No. 7653 for the willful making loans and receivables, other than those
of a false/misleading statement. booked in the FCDU/EFCDU as defined in
c. Disposition of penalties collected the Manual of Accounts section of the FRP
Ninety percent (90%) of the total under Subsec. X191.2 (gross of allowance
penalties collected on non-compliance/ for credit losses) excluding the following:
under-compliance with the mandatory (1) Interbank loans receivable, other
agri-agra credit under Item no. “a(1)(a)” than (a) wholesale lending of a bank to
above shall be remitted by the Bangko conduit banks/QBs for on-lending to
Sentral to the Agricultural Guarantee Fund MSMEs, and (b) rediscounting facility
Pool (AGFP) and the PCIC, in accordance granted to another bank for loans to MSMEs;
with the following percentage allocation: (2) Wholesale lending of a bank to
conduit non-bank FIs without quasi-banking
Recipient Percent Allocation authority, other than those for on-lending
AGFP 50% to MSMEs;
PCIC 50% (3) Loans granted under special
financing programs, other than those for
The percentage allocation may be MSMEs;
amended by the Secretary of DA in (4) Loans granted to MSMEs, other than
consultation with the Agricultural Credit to BMBEs, to the extent funded by wholesale
Policy Council (ACPC), PCIC and the lending of, or rediscounted with, another
Secretary of DAR, according to the needs bank;
of the agri-agra sector. (5) Agrarian reform credits/other
The remaining, ten percent (10%) of the agricultural loans granted under R.A. No.
total penalties collected on non-compliance/ 10000, other than those eligible for
under-compliance with the mandatory agri- compliance with the mandatory allocation
agra credit under Item no. “(1)a” shall be of credit for MSMEs; and
retained by the Bangko Sentral to cover its (6) Loans and receivables arising from
administrative expenses. repo agreements, certificates of assignment/
(As amended by Circular No. 736 dated 20 July 2011 and 585 participation with recourse and securities
dated 15 October 2007) lending and borrowing transactions.
c. MSMEs shall refer to any business
Sec. X342 Mandatory Allocation of Credit activity within the major sectors of the
Resources to Micro, Small and Medium economy, namely: industry, trade, services,
Enterprises. The following rules shall including the practice of one’s profession,
govern the mandatory allocation of credit the operation of tourism-related
resources to Micro, Small and Medium establishments, and agri-business, which for
Manual of Regulations for Banks Part III - Page 52e

§ X342.1
14.12.31
this purpose refers to any business activity office, plant and equipment are situated,
involving the manufacturing, processing, must have a value falling under the
and/or production of agricultural produce, following categories:
whether single proprietorship, cooperative,
partnership or corporation: Micro : not more than P 3,000,000
Small : more than P 3,000,000 to P 15,000,000
(1) whose total assets, inclusive of those Medium : more than P 15,000,000 to P 100,000,000
arising from loans but exclusive of the land
on which the particular business entity’s and
Part III - Page 52f Manual of Regulations for Banks

§§ X342.1 - X342.3
14.12.31
(2) duly registered with the appropriate a. For MSEs

agencies as presently provided by law except (1) Actual extension of loans to eligible
in the case of microenterprises as defined MSEs, other than to BMBEs which are
above. covered in Item “c(3)” hereof: Provided,
(As amended by Circular Nos.858 dated 21 November 2014 and however, That loans granted to MSEs other
625 dated 14 October 2008) than BMBEs, to the extent funded by
wholesale lending of, or rediscounted with,
§ X342.2 Period covered; prescribed another bank shall not be eligible as
portions of loan portfolio to be allocated compliance with the mandatory credit
Banks shall for a period of ten (10) years allocation; or
from 17 June 2008 to 16 June 2018, allocate (2) Loans granted to export, import, and
at least eight percent (8%) for micro and domestic micro and small scale traders,
small enterprises (MSEs) and at least two other than to BMBEs which are covered in
percent (2%) for medium enterprises (MEs) Item “c(3)” hereof: Provided, however, That
of their total loan portfolio based on their loans granted to MSEs other than BMBEs,
balance sheet as of the end of previous to the extent funded by wholesale lending
quarter, and make it available for MSME of, or rediscounted with another bank shall
credit. not be eligible as compliance with the
Banks may be allowed to report mandatory credit allocation; or
compliance on a groupwide (3) Purchase of eligible MSE loans listed
(i.e., consolidation of parent and subsidiary in Items “(1)” and “(2)” above on a “without
bank/s) basis so that excess compliance of recourse” basis from other banks
any bank in the group can be used as and FIs; or
compliance for any deficient bank in the (4) Purchase/discount on a “with or
group: Provided, That the subsidiary bank/s without recourse” basis of MSE receivables,
is/are at least majority owned by the parent other than BMBE receivables which are
bank: Provided, further, That the parent bank covered in Item “c(3)” hereof; or
shall be held responsible for the compliance (5) Wholesale lending or rediscounting
of the group. facility granted to PFIs for on-lending to
The consolidated report shall be MSEs, other than to BMBEs which are
submitted by the parent bank in the covered in Item “c(3)” hereof; or
prescribed form and shall be supported by (6) Wholesale lending or rediscounting
the individual reports of the bank and its facility granted to PFIs for on-lending to
subsidiaries duly signed by each bank’s export, import, and domestic micro and
authorized signatory. small scale traders, other than to BMBEs
For purposes of determining compliance which are covered in Item “c(3)”
with the mandated allocation of credit hereof; or
resources to MSMEs, only eligible credit (7) Commercial letters of credit
exposures as enumerated in Subsec. X342.3, outstanding, net of margin deposits, issued
other than those booked in the FCDU/ for the account of MSEs.
EFCDU shall be considered. b. For MEs
(As amended by Circular No. 625 dated 14 October 2008) (1) Actual extension of loans to eligible
MEs: Provided, however, That loans granted
§ X342.3 Eligible credit exposures to MEs to the extent funded by wholesale
Funds set aside in accordance with the lending of, or rediscounted with, another
foregoing requirement shall be made bank shall not be eligible as compliance
available for any of the following: with the mandatory credit allocation; or

§§ X342.3 - X342.7
08.12.31
(2) Loans granted to export, import, and § X342.5 Rights/remedies available to

domestic medium scale traders: lending institutions not qualified to
Provided, however, That loans granted to acquire or hold lands of public domain
MEs to the extent funded by wholesale Lending institutions which are not qualified
lending of, or rediscounted with, another to acquire or hold lands of the public domain
bank shall not be eligible as compliance in the Philippines shall be permitted to bid
with the mandatory credit allocation; or and take part in sales of mortgaged real
(3) Purchase of eligible ME loans listed property in case of judicial or extra-judicial
in Items “(1)” and “(2)” above on a “without foreclosure, as well as avail of receivership,
recourse” basis from other banks enforcement and other proceedings, solely
and FIs; or upon default of a borrower, and for a period
(4) Purchase/discount on a “with or not exceeding five (5) years from actual
without recourse” basis of ME possession: Provided, That in no event shall
receivables; or title to the property be transferred to such
(5) Wholesale lending or rediscounting lending institution. If the lending institution
facility granted to PFIs for on-lending to MEs; is the winning bidder, it may, during said
or five (5) year period, transfer its rights to a
(6) Wholesale lending or rediscounting qualified Philippine national, without
facility granted to PFIs for on-lending to prejudice to a borrower’s rights under
export, import, and domestic medium scale applicable laws.
traders; or (As amended by Circular No. 625 dated 14 October 2008)
(7) Commercial letters of credit
outstanding, net of margin deposits, issued § X342.6 Submission of reports. Banks
for the account of MEs. shall submit reports on compliance with the
c. Alternative compliance for either or mandatory credit allocation on a quarterly
both MSEs or/and MEs basis within fifteen (15) banking days from
(1) Paid subscription/purchase of liability the end of reference quarter to SDC of the
instruments as may be offered by the SB Bangko Sentral. Said report shall be
Corporation; or considered Category A-3 report. It shall
(2) Paid subscription of preferred shares become effective starting with the reporting
of stock of the SB Corporation; or period ending 31 December 2008.
(3) Loans from whatever sources granted Banks shall maintain appropriate
to BMBEs as provided under Subsec. records/details of the reported loans to
X365.5. MSMEs and shall make these available to
(As amended by Circular Nos. 625 dated 14 October 2008 and Bangko Sentral.
570 dated 24 May 2007) (As amended by Circular No. 625 dated 14 October 2008)
§ X342.4 Ineligible credit instruments § X342.7 Sanctions. The following

The purchase of government notes, administrative sanctions shall be imposed
securities and negotiable instruments other on banks:
than the instruments offered by SB a. For non-compliance/under
Corporation, and the granting of loans to compliance with the prescribed portions of
MSMEs, other than to BMBEs, to the extent loan portfolio to be allocated to MSEs and MEs:
funded by wholesale lending of, or (1) For zero compliance for both MSEs
rediscounted with, another bank shall not and MEs – P500,000;
be deemed compliance with the foregoing (2) For under compliance:
requirement. (a) For MSEs – percentage of
(As amended by Circular No. 625 dated 14 October 2008) undercompliance multiplied by P400,000

§§ X342.7 - X343.2
10.12.31
(b) For MEs – percentage of under- G. SPECIAL TYPES OF LOANS

compliance multiplied by P100,000
to be computed as of end of each quarter. Sec. X343 Interbank Loans. Interbank loan
(3) For willful making of a false or transactions shall include, among other
misleading statement to the BSP - P500,000 things, (a) interbank call loan (IBCL)
per quarter-end report without prejudice transactions; (b) interbank term loan
to the sanctions under Section 35 of transactions; (c) borrowings evidenced by
R.A. No. 7653. deposit substitute instruments; and
The imposition of the fines in Items (d) purchases of receivables with recourse:
“(1)” to “(2)” shall be without prejudice to Provided, however, That only IBCL
the other administrative sanctions under transactions which are settled through the
Section 37 of R.A. No. 7653. banks’ respective DDAs with the BSP via
(b) For non-submission/delayed PhilPaSS shall be subject to the reserve
submission of reports on compliance with requirement prescribed for IBCL in Subsec.
both the prescribed portions of loan X253.1: Provided, further, That funds
portfolio to be allocated to MSEs and MEs, borrowed by banks from trust departments
respectively: of banks or IHs shall be excluded from the
(1) UBs/KBs - P1,200 herein definition of interbank loan
(2) TBs - 600 transactions.
(3) RBs/Coop Banks - 180 (As amended by Circular Nos. 703 dated 23 December 2010
per calendar day of delay. and 689 dated 16 June 2010)
(As amended by Circular No. 625 dated 14 October 2008 and
§ X343.1 Systems and procedures for
interbank call loan transactions. IBCL
§ X342.8 Disposition of penalties transactions of banks shall be governed
collected. Ninety percent (90%) of by the Agreement for the PhilPaSS
penalties collected under Subsec. X342.7 executed on 12 December 2002
above shall be remitted by the BSP to the between the BSP and the Bankers
MSME Development Council Fund, while Association of the Philippines (BAP)/
the remaining ten percent (10%) shall be Chamber of Thrift Banks (CTB)/Rural
retained by the BSP to cover its Bankers Association of the Philippines
administrative expenses. (RBAP) and any subsequent
(Circular No. 625 dated 14 October 2008)
amendments thereto.
(As superseded by the agreement between the BSP and
BAP/CTB/RBAP dated 12 December 2002)
§§ X342.9 - X342.14 (Reserved)
§ X342.15 Accreditation guidelines for § X343.2 Accounting procedures

Rural and Thrift Banks under the SME a. Both lending and borrowing
Unified Lending Opportunities for National banks shall immediately pass the
Growth (SULONG). Without prejudice to corresponding entries in their books.
the refinements as may be suggested by b. I B C L t r a n s a c t i o n s s h a l l b e
DTI and DOF, the Twelve (12)-Point recorded by the lending bank as
Accreditation Guidelines for RBs and TBs, Interbank Call Loans Receivable and by
and the lending features of short and long the borrowing bank as Bills Payable
term loans for direct or retail lending by Interbank - Call Loans.
participating government FIs under the c. B a n k s s h a l l r e c o n c i l e t h e i r
SULONG, are shown in Appendix 55. demand deposit accounts with the BSP

§§ X343.2 - X344.2
10.12.31
against monthly statements of account determined that:

to be furnished by the BSP Financial (1) The resources of the RB are
Accounting Department, Comptrollership inadequate to meet the legitimate credit
Sub-Sector. needs of the locality wherein the RB is
(As amended by Circular No. 689 dated 16 June 2010) established;
(2) There is dearth of private capital
§ X343.3 Settlement procedures for in said locality; and
interbank loan transactions. Interbank (3) I t i s n o t p o s s i b l e f o r t h e
loan transactions (call and term) among stockholders of the RB to increase the
banks shall be settled gross with finality paid-up capital thereof.
subject to the availability of balances in The appropriate department or office
the deposit reserves maintained by of the BSP may prescribe and require
banks in the BSP in accordance with the the submission by the RB of papers and
provisions of the Agreement for the documents necessary for such
PhilPaSS executed on 12 December determination.
2002 between the BSP and the BAP/ b. Qualifications for loan. In order
CTB/RBAP and any subsequent to qualify for the financial assistance
amendments thereto. under said provision of law, the RB
(As superseded by the agreement between the BSP and the shall first meet the following
BAP/CTB/RBAP dated 12 December 2002) requirements:
(1) Its capital-to-risk assets ratio
Sec. X344 Loans to Thrift/Rural/ during the last six (6) months immediately
Cooperative Banks preceding the loan application should be
at least ten percent (10%);
§ X344.1 Loans under Section 12 of (2) Its past due loans are not more
R.A. No. 7353, Section 10 of R.A. No. 7906 than twenty-five percent (25%);
and Article 102, R.A. No. 6038, as amended (3) It has no deficiency in allowance
by RA. No. 9520. Banks may rediscount for probable losses on loans and other
papers of TBs/RBs/Coop Banks. Banks shall risk assets;
specify the nature of papers acceptable for (4) I t m u s t n o t h a v e i n c u r r e d
rediscounting as well as the rediscount rate. deficiency in its reserves against deposit
(As amended by Circular No. 682 dated 15 February liabilities for the last six (6) months
2010) preceding the filing of the application;
(5) It must have been operating
§ X344.2 Loans under Section 14 of R.A. profitably for the last three (3) years;
No. 7353. T h e f o l l o w i n g a r e t h e (6) Its arrearages with the BSP or
guidelines in the grant by the LBP, DBP other government FIs, if any, are being
or any government-owned or controlled liquidated through an approved plan of
bank or FI of a loan to an RB under payment, the conditions of which are
Section 14 of R.A. No. 7353. being complied with; and
a. Issuance of certification. Subject to (7) It is operating substantially in
the qualifications of the RBs prescribed in accordance with applicable laws and BSP
Item “b” hereof, the Monetary Board shall rules and regulations.
issue the certification required under c. Extension of loan. The LBP, the DBP
Section 14 of R.A. No. 7353, which shall or any government-owned or controlled
be final, after the Monetary Board has bank or FI shall, within sixty (60) days from

§§ X344.2 - X348.2
12.12.31
issuance by the Monetary Board of the reimburse the bank on the same condition
certification, and subject to their loan and as the bank has paid.
investment policies, extend to an RB a loan (As amended by Circular No. 536 dated 18 July 2006)
or loans from time to time, repayable in
ten (10) years, with concessional rates of § X347.2 Ceiling
interest, against security/ies which the (Deleted by Circular No. 773 dated 13 November 2012)
stockholder or stockholders of the RB may
offer. § X347.3 Reports
(Deleted by Circular No. 773 dated 13 November 2012)
Secs. X345 - X346 (Reserved)
Sec. X348 Committed Credit Line for
Sec. X347 Standby Letters of Credit. The Commercial Paper Issues. The following
following shall govern the issuance of guidelines shall govern committed credit
standby letters of credit. line agreements as a prerequisite for
corporations proposing to issue
§ X347.1 Domestic standby letters of commercial paper, pursuant to the New
credit. Domestic standby letters of credit Rules on the Registration of Short-Term
may be issued or used in transactions Commercial Papers (Appendix 14).
other than those involving movement of
goods under the following guidelines: § X348.1 Who may grant line facility
a. The bank’s obligation to pay shall A bank with a net worth of at least P1.0
be either unconditional (as against billion as defined in Sec. X111, may
presentation of a clean draft) or provide a committed credit line facility to
conditional only upon the presentation of a commercial paper issuer.
documents and not upon actual existence The bank shall exercise proper caution
or non-existence of facts, i.e., the bank in ascertaining that the party, in whose
must not be called upon to determine favor the credit line shall be granted, is
disputed questions of facts or law; capable of fulfilling his commitments to
b. The bank’s obligation shall be the bank under the credit line agreement.
limited to a fixed maximum amount; A bank or a group of banks may enter
c. The bank’s obligation shall have into a committed credit line agreement
an expressed expiration date; with any corporation proposing to issue
d. The standby letters of credit commercial paper. Where a group of
accommodation shall not violate any law banks is involved, a lead bank shall be
or existing Bangko Sentral directives, rules designated from among themselves.
and regulations, such as the SBL and
DOSRI ceilings; § X348.2 Ceilings. The aggregate
e. The party who opened the standby commitments under committed credit line
letters of credit or the ultimate borrower agreements entered into by each bank
shall not have any past due obligation with pursuant to this Section shall not exceed
the issuing bank for the ninety (90)-day an amount equivalent to thirty percent
period preceding the date of issuance of (30%) of its net worth, reckoned as of the
the letter of credit; and date of execution of the latest agreement:
f. The party who opened the letter Provided, That in no case shall a bank
of credit (borrower or principal obligor) extend commitments to a single issuer for
must have an unqualified obligation to more than twenty-five percent (25%) of its

§§ X348.2 - X348.5
13.12.31
net worth exclusive of other exposures to resolution shall also provide for the
the said issuer. designation of the alternate signatories
who shall likewise be a member of the
§ X348.3 Terms; conditions; board of directors and a senior financial
restrictions. The committed credit line officer of the corporation;
agreement shall incorporate the following f. That the extent of the commitment
terms, conditions and restrictions: of each participant in a group of banks
a. That the credit line agreement is under a credit line agreement shall be
executed pursuant to the provisions of this stipulated in the agreement; and
Section; g. That the commitment of the bank
b. That the bank or banks are under the credit line agreement shall be a
committed to make available to the issuer net risk to the bank and the practice of
funds equivalent to at least twenty percent requiring the commercial paper issuer to
(20%) of the aggregate of the commercial maintain a compensating deposit with the
paper issued and outstanding at any time; bank shall be prohibited.
c. That the commitment of the bank
or banks shall be firm and irrevocable and § X348.4 Reports to the Bangko
effective for as long as the issues under a Sentral. The bank or the lead bank, as the
particular permit are outstanding, subject case may be, shall report to the Bangko
to renewal by the bank; Sentral:
d. That availments pursuant to the a. All commitments entered into with
credit line agreement shall be for the commercial paper issuers within ten (10)
exclusive purpose of meeting obligations banking days after the issuer shall have
arising from commercial paper issues in been authorized by the SEC; and
accordance with the provisions of the b. Any availment under the
Rules on Registration of Commercial committed credit line agreement within
Papers, which availments shall be three (3) banking days from date of
honored not earlier than three (3) banking drawdown.
days prior to the date of payment of
obligation arising from outstanding § X348.5 Loan limit. The liabilities of a
commercial paper; commercial paper issuer to a bank arising
e. That the request to avail of the from the availment by the issuer of the credit
credit line agreement shall be addressed line agreement shall not be counted in
to the bank or to the lead bank acting for determining compliance by the bank with
a group of banks, which request shall be the SBL for a period of ninety (90) calendar
duly signed by a member of the board of days from each availment of the credit line1:
directors and a senior ranking officer of Provided, That in no case shall they exceed
the commercial paper issuer duly five percent (5%) of the net worth of the
authorized for the purpose through an bank beyond the normal applicable SBL.
appropriate board resolution, which (As amended by Circular No. 784 dated 25 January 2013)
1
This shall cover all new underwritten debt and equity securities issued from 15 February 2013.

§§ X349 - X361.1
14.12.31
Sec. X349 Agriculture and Fisheries Projects § X349.5 Non-performing loans. The
with Long Gestation Periods. Pursuant to rule on non-performing loans under Sec.
Section 24 of R.A. No. 8435 (Agriculture and X309 shall apply except that the reckoning
Fisheries Modernization Act of 1997), date shall be the grace period and not the
agriculture and fisheries projects with long original maturity of the loan.
gestation periods shall be entitled to longer
grace periods in repaying the loan based on Secs. X350 - X360 (Reserved)
the economic life of the project. For purposes
of this Section, the following definitions and Sec. X361 Microfinance Loans. Pursuant to
guidelines shall govern the grant of loans for Sections 40, 43 and 44 of R.A. No. 8791
long-gestating agriculture and fisheries the following rules, regulations and
projects. standards shall govern microfinancing
operations of banks.
§ X349.1 Definition of terms In the implementation of this Section,
a. Gestation period shall refer to the banks should be guided by the Notes on
span of time from the commencement of Microfinance in Appendix 45.
the project to the time that it is (As amended by Circular Nos. 841 dated 04 July 2014,
economically productive and producing 782 dated 21 January 2013,744 dated 28 December 2011,694
dated 14 October 2010 and 607 dated 30 April 2008)
revenues; and
b. Grace period under this Section
§ X361.1 Definition
shall refer to the period that the initial
a. Microfinance loans refer to the
amortization payment on the loan is
amortized cost of loans granted under the
deferred. All payments, however, must be
bank’s microfinance loan products that meet
made on or before the maturity of the loan.
the general features provided under
Appendix 45, Item “e”.
§ X349.2 Grace period. Banks are
b. Past Due/Portfolio-at-Risk (PAR) is
allowed to extend loans/guarantees with a
the outstanding principal amount of all loans
grace period of up to seven (7) years to
that have at least one (1) installment past
viable long-gestating agriculture and
due for one (1) or more days. The amount
fisheries projects.
includes the unpaid principal balance but
Suggested gestation and grace periods
excludes accrued interest. Under PAR, loans
for some of the long-gestating projects are
are considered past due if a payment has
in Appendix 36.
fallen due and remained unpaid. Loan
payments are applied first to any interest
§ X349.3 Responsibility of lending
due, then to any installment of principal that
banks. Lending banks shall institute the
is due but unpaid, beginning with the earliest
necessary safeguards and precautions to
installment. The number of days of lateness
ascertain the viability of the projects financed
is based on the due date of the earliest loan
and the capability of the borrower in
installment that has not been fully paid.
fulfilling his commitments.
c. Restructured loans are loans that have
been renegotiated or modified to either
§ X349.4 Past due loans. The rule on
lengthen or postpone the original scheduled
past due accounts under Sec.X306 shall
installment payments or substantially alter the
apply except that the reckoning date shall
original terms of the loans. Any increase in
be the grace period and not the original
the face amount of the debt resulting from
maturity of the loan.
accrued interest and accumulated charges

§§ X361.1 - X361.4
14.12.31
which have been capitalized or made part of be reversed and no accrual of interest shall
the principal of restructured loans shall be be allowed after the microfinance loan has
recorded in the unearned income/deferred become past due as defined in
credit account “Capitalized Interest and Other Subsec. X306.1(h).
Charges - Restructured Loans”. Upon receipt
of payment, the realized portion shall be § X361.3 Credit information exemption
amortized/credited to income. In cases of microfinancing loans which meet
d. Refinanced loans are loans that have the criteria in Subsec X361.2, a bank may
been disbursed to enable repayment of prior not require from its credit applicants, a
loans that would not have been paid in statement of assets and liabilities, and of
accordance with the original installment their income and expenditures and such
schedule. Loans granted within a week or information as may be prescribed by law
less from the date an original loan with more or by rules and regulations of the Monetary
than thirty percent (30%) of the original Board to enable the bank to properly
principal still outstanding had been paid in evaluate the credit application which
advance shall be considered as refinanced includes the corresponding financial
loans. Refinanced loans shall be classified statements submitted for taxation purposes
and reported as restructured loans. to the BIR, as prescribed under Section 40
(Circular No. 272 dated 30 January 2001, as amended by Circular of R.A. No. 8791.
Nos. 836 dated 13 June 2014, 694 dated 14 October 2010,
607 dated 30 April 2008, and 409 dated 14 October 2003) § X361.4 Exemptions from rules on
unsecured loans. In view of the unique
§ X361.2 Loan limit; amortization; characteristics of microfinance loans, i.e.,
interest small unsecured and based on cash flow of
a. The maximum principal amount of borrowers, these loans may be exempted
microfinance loans shall not exceed from rules and regulations which may be
P150,000. This is equivalent to the issued by the Monetary Board with respect
maximum capitalization of a to unsecured loans under Section 41 of the
microenterprise under R.A. No. 8425. General Banking Law of 2000: Provided,
b. The schedule of loan amortization That the bank has:
shall take into consideration the projected a. well-defined standards, credit policies
cash flow of the borrowers which is and procedures for microfinance loans
adopted into the terms and conditions which are in conformity with microfinance
formulated. Hence, microfinance loans may international best practices;
be amortized on a daily, weekly, bi-monthly b. specific measures to be undertaken
or monthly basis, depending on the cash to ensure collection such as close
flow conditions of the borrowers. supervision of borrowers’ projects and
c. Interest on such microfinancing operations; and
loans shall be reasonable and just as may c. Loan Portfolio and Other Risk Assets
be determined by management to be Review System required under Sec. X302
consistent with its credit policies. which would serve as:
The interest rate shall not be lower than the (1) An adequate loan tracking system
prevailing market rates to enable the lending that allows daily monitoring of the status of
institution to recover the financial and loan releases, collection and arrearages, any
operational costs incidental to this type of restructuring or refinancing; and
microfinance lending. (2) A regular monitoring of past due
d. Interest accrued and/or booked shall loans and portfolio at risk.

§ X361.5
14.12.31
§ X361.5 Housing microfinance loan sustainable microfinance programs,

The Bangko Sentral adopts a holistic including acceptable portfolio-at-risk
approach in addressing social and economic (PAR) levels as evaluated against
objectives through microfinance. prevailing Bangko Sentral standards.
Microfinance has been confined to mean (b) The bank must have an appropriate
financing for microenterprises or small housing microfinance product manual
livelihood activities. It has been proven, where the product will be included in the
however, that clients of microfinance also bank’s microfinance manual as one of the
need a wide range of financial services types of services or products offered to
including housing finance. Further, it is prospective clients. Loan/account officers
typical that some microfinance clients also must be trained about the housing
use their access to credit for their homes. microfinance product and that the details
Housing microfinance involves the of the program can be communicated
application of microfinance principles and clearly to the clients.
methodologies to the provision of housing (c) Appropriate verification of the
finance and consists mainly of loans to following prudential requirements:
existing clients of microfinance institutions (i) latest CAMELS rating of at least “3“
and other poor and low-income households. and a management score of at least “3”;
With adequate and appropriate risk (ii) CAR of not lower than 12%;
management measures, the product will (iii) no major supervisory concerns as
enable institutions to appropriately service to warrant initiation of Prompt Corrective
the housing needs of those who are unable Action (PCA) under existing regulations;
to access traditional housing finance. The (iv) no arrearages in microfinance
provision of housing microfinance is also borrowings; and
seen as a way to improve the living d) Appropriate certification of the bank’s
conditions of the enterprising poor and the commitment to implement the housing
low-income households which will microfinance product following the
contribute to better health, productivity and guidelines set forth in the submitted manual.
quality of life. (2) Basic product characteristics. The
Housing as a shelter is a necessity. As a housing microfinance product shall have
sector, it spurs economic activity and creates the following basic characteristics:
employment through the multiplier effects Subject Particulars
Purpose ·House construction
generated in the downstream industries by ·House and/or lot acquisition
the procurement of construction materials. ·Lot acquisition should be for
housing/business
It is therefore important to support this ·Home improvement/repairs
sector. Eligibility ·Existing microfinance clients
The following rules and regulations shall ·New clients who will normally
be eligible for microfinance
govern the granting of housing microfinance loans based on banks’ policies
products: ·Borrowers who have qualified
(1) Minimum criteria to determine for the Credit Surety Fund credit
enhancement program provided
bank’s capacity to grant housing they qualify with the banks policies
microfinance – Banks planning to grant Loan Amount ·Up to P300,000 for house
construction and/or lot acquisition
housing microfinance loans shall ensure (must show tenure security)
that the following requirements are ·Up to P150,000 for home
complied with: improvement/repairs
·incremental loan amounts to
(a) The bank must have a track record support incremental building
of at least two (2) years in implementing

§ X361.5
14.12.31
Subject Particulars microfinance manual;

Loan Value ·Up to ninety percent (90%) of
the appraised value in case of REM (e) Additional risk cover may be availed
·Acceptable valuation in cases of from government guarantee program;
usufruct, leases, etc. (f) A lien or mortgage covering the house
·Capacity to pay based on household
cash flow analysis and/or lot financed by the loan shall be
Payment ·Frequent amortization executed by the borrower in favor of the
·With savings component
·Loan payments should not
lending bank; and
exceed a reasonable percentage of (g) Mortgage redemption insurance shall
clients income as determined by be required to cover against death or
cash flow analysis and capacity to
pay determined through a permanent disability.
clear credit process (4) Regulatory treatment. The housing
Terms ·Up to fifteen (15) years for microfinance product will be considered as
house construction and house
and/or lot acquisition subject to a microfinance loan and will have the
banks’ credit policies following incentives in addition to existing
·Up to 5 years for home
improvement/repairs
incentives available for microfinance loans:
(a) The loans shall have an assigned risk-
The product must share the weight of fifty percent (50%) when not
characteristics of the microfinance loan as guaranteed and zero percent (0%) when
described under this Section and Appendix guaranteed by the HGC.
45 except for the following: (b) For housing microfinance loans
(a) The maximum loan amount may be secured by REM, a ninety percent (90%) loan
P300,000. valuation may be allowed for loans with a
(b) The loans have longer terms with a government guarantee component.
maximum of five (5) years for home (c) Secure tenure instruments such as
improvement/repairs and fifteen (15) years freehold, usufruct, leasehold and right to
for house construction and house/lot occupy and/or build shall be recognized as
acquisition. collateral/collateral substitute subject to
(c) For house construction and house/ approved loan valuations (Appendix 81).
lot acquisition loans, secure tenure Banks that will offer housing
instruments will be used as collateral. (See microfinance shall also comply with the
Appendix 81) following:
(3) Appropriate risk management. Due (1) The bank must maintain a subcontrol
to a risk profile that may be different from ledger for the housing microfinance product.
the typical microfinance loan, the following (2) The housing microfinance loans shall
risk management elements must be not exceed thirty percent (30%) of the total
highlighted and embedded in the product: loan portfolio.
(a) Clients ability to repay based on cash (3) Recording of PAR and the provisioning
flow analysis and affordability especially the requirements shall be strictly in accordance
new clients; with applicable Bangko Sentral regulations.
(b) Opening of a savings account shall (5) Notarized certificate of compliance.
be required for clients with no existing The bank president or officer or equivalent
savings account; rank and the compliance officer shall submit
(c) Secure tenure instruments as a notarized certificate of compliance, attesting
collateral/collateral substitutes for loans over that the bank meets the minimum prudential
P150,000; requirements and that the housing
(d) Adequate loan monitoring, microfinance loan complies with the
collection, control, provisioning which is prescribed product characteristics/features.
also to be included in the banks’ housing (Appendix 102)

§§ X361.5 - X361.7
14.12.31
The notarized certificate shall be the foregoing sanctions shall be without

submitted within fifteen (15) banking days prejudice to the imposition of other
from the date of meeting of the board of administrative sanctions, as provided in
directors approving the housing other regulations in this Manual.
microfinance loan product. (Circular No. 736 dated 20 July 2011, M-2008-015 dated 19
(6) Sanctions. March 2008, as amended by Circular Nos. 825 dated 07 February
2014, 817 dated 06 November 2013 and 678 dated 06 January
(a) In case the submitted certificate of 2010)
compliance is found later, during on-site
examination, to be erroneous and/or untrue, § X361.6 (Reserved)
the bank may be sanctioned under Sec. 37
of R.A. No. 7653 for willful making of a § X361.7 Micro-agri loans
false or misleading statement. Statement of policy. The Bangko Sentral
(b) In addition to the above-mentioned adopts a holistic approach in addressing social
penalty, subject bank is not allowed to grant and economic objectives through
any new housing microfinance loan and its microfinance. Microfinance utilizes an
transaction shall be limited only to the innovative technology and methodology that
collection of outstanding microfinance has proven successful in providing the
housing loan receivables. This prohibition appropriate financing for microentrepreneurs
shall remain until bank’s compliance with who were previously underserved by the
the prescribed regulations are verified to be formal financial system. Through the years, it
in order by the appropriate department/ has been evident that the microfinance
group of the SES. technology and methodology can be
(c) Banks, with certificates of appropriately utilized to deliver other types of
compliance, found to be in order shall financial services in a sound, prudent and
continue to comply with the prescribed sustainable manner, including credit for small
prudential requirements. If found later on farming activities.
that the bank is non-compliant with any or A. Minimum criteria to determine
all of the requirements, it shall be given one bank’s capacity to grant micro-agri loans.
examination-cycle to correct any deficiency. Banks planning to grant micro-agri loans
If the bank remains non-compliant after the shall ensure that the following requirements
lapse of one examination-cycle, the granting are complied:
of housing microfinance loan shall be 1. To ensure that the banks have the
deemed suspended effective on the day after financial capacity, managerial and technical
the corrective period has expired. While the capabilities to offer micro-agri loans; the
suspension is in effect, the bank’s following prudential requirements must be
transactions shall be limited to the complied at all times:
collections of outstanding housing a) CAMELS rating of at least “3” and a
microfinance loan receivables. ‘Management’ score of at least “3”;
For the purpose of this provision, b) CAR of not lower than twelve percent
one (1) examination-cycle is defined as the (12%);
period commencing from the date the bank c) no major supervisory concerns as to
is formally informed of the findings/ warrant initiation of prompt corrective
exceptions of the last general examination action under existing regulations; and
up to the date of the exit conference of the d) no arrearages on microfinance
immediately succeeding general borrowings (bills payable) from Bangko
examination. Sentral or other creditors.
(d) Other sanctions. The imposition of Banks authorized to offer a micro-agri

§§ X361.7
13.12.31
loan product shall continually comply with Subject Particulars

the above-mentioned prudential fixed assets, among others
Eligibility - Multiple income generation
requirements. Banks found to be non- activities (farm and off-farm)
compliant with any or all of the requirements - Farm activities at least 2 years
shall be given one (1) examination cycle to in operation
correct non-compliance with any or all of - Existing borrowers with good
track record based on banks’
the prudential requirements, provided the
policies
bank submits a viable plan to rectify Loan Amount - Up to P150,000
pertinent non-compliance. If the bank - Loans to start small and increase
remains non-compliant after the lapse of incrementally based on banks’
one (1) examination cycle, its authority to policies
Loan Value - Capacity to pay based on
offer micro-agri loan shall be deemed household cash flow analysis
suspended effective on the day after the Payment - Frequent amortization (weekly,
corrective period has expired. While the semi-monthly, monthly)
suspension is in effect, bank’s micro-agri - Lump sum payment may be
considered an option of up to 40%
loan transactions shall be limited to
of loan amount
collections of outstanding receivables. Security - Like microfinance loans, collateral
For the purpose of this Subsection, one substitutes may be required
(1) examination-cycle is defined as the period
commencing from the date of the exit C. Appropriate risk management.
conference of the last general examination up Micro-agri loans shall be subject to the same
to the date of the exit conference of the risk management mechanisms required for
immediately succeeding general examination. microfinance loans including, but not
2. The bank must have a track record limited to the following:
of at least two (2) years in implementing 1. Clients’ ability to repay based on cash
sustainable microfinance programs, including flow analysis and affordability especially the
acceptable portfolio-at-risk (PAR) levels as new clients. The prospective client must
evaluated against prevailing Bangko Sentral have other sources of income sufficient for
standards; and the periodic payment of the loan while the
3. The bank must have well-defined loan project is not yet generating income,
policies covering the micro-agri loan evaluated through household cash flow
product to be included in the bank’s analysis;
microfinance manual as one of the types of 2. Adequate management information
services or products to be granted to and loan tracking systems, loan monitoring,
prospective clients. Loan/account officers collection, control, provisioning consistent
must be trained about the micro-agri loan with existing Bangko Sentral regulations;
product and that the details of the program 3. The loan product is included in the
can be communicated clearly to the clients. banks’ microfinance manual as one (1) of
B. Basic product characteristics. The the types of services or products offered to
micro-agri loan product shall have the prospective clients; and
criteria/characteristics of a microfinance 4. The micro-agri loans must have a
loan as provided in existing regulations in subcontrol ledger.
addition to the following product D. Other micro-agri products. No
characteristics: provision in the micro-agri product
inconsistent with this Subsection shall be
Subject Particulars allowed except upon prior Bangko Sentral
Purpose/Term - Short term purposes only (up to approval. The Bangko Sentral shall allow
12 months) whether it is for farm deviation from the provisions of this
activities, agri-business, agri-related
Subsection provided appropriate risk

§§ X361.7 - 3361.8
13.12.31
management system compensates for the after the lapse of one examination cycle,
additional risks involved. the granting of micro-agri loan shall be
E. Regulatory treatment. The micro-agri deemed suspended effective on the day
loan product will be considered as after the exit conference, during which the
microfinance loan and will have the same management shall be informed of its
regulatory treatment as provided by existing failure to make proper corrective actions
microfinance regulations. within the prescribed period. While the
F. Reportorial requirement. Notarized suspension is in effect, the bank’s
certificate of compliance. The bank transactions shall be limited to the
president or officer of equivalent rank and collections of outstanding micro-agri loan
the compliance officer shall submit a receivables.
notarized certificate of compliance, For the purpose of this provision, one
attesting that the bank meets the minimum examination-cycle is defined as the period
prudential requirements and that the commencing from the date the bank is
micro-agri loan complies with the formally informed of the findings/exceptions
prescribed product characteristics/ of the last general examination up to the date
features. (Appendix 102) of the exit conference of the immediately
The notarized certificate shall be succeeding general examination.
submitted within fifteen (15) banking days 4. Other sanctions. The imposition of
from the date of meeting of the board of the foregoing sanctions shall be without
directors approving the micro-agri loan prejudice to the imposition of other
product. administrative sanctions, as provided in
G. Sanctions. In case of non- other regulations in this Manual.
compliance, the bank shall be subject to the (Circular No. 680 dated 03 February 2010, as amended by
following: Circular Nos. 817 dated 06 November 2013 and 748 dated 13
1. In case the submitted certificate of February 2012)
compliance is found later, during on-site
examination, to be erroneous and/or untrue, § X361.8 (Reserved)
the bank may be sanctioned under Sec. 37
of R.A. No. 7653 for willful making of a § 1361.8 (Reserved)
false or misleading statement.
2. In addition to the above-mentioned § 2361.8 Marketing, sale and servicing
penalty, subject bank shall not be allowed of microinsurance products by thrift
to grant any new micro-agri loan and its banks. A TB including its authorized branch/
transaction shall be limited only to the es, extension office/s and OBOs shall
collection of outstanding micro-agri loan comply with Sec. 2172 for the presentation,
receivables. This prohibition shall remain marketing and sale of micro insurance
until bank’s compliance with the prescribed products.
regulations are verified to be in order by (Circular No. 683 dated 23 February 2010)
the appropriate department/group of the SES.
3. Banks, with certificates of compliance, § 3361.8 Marketing, sale and servicing
found to be in order shall continue to comply of microinsurance products by rural and
with the prescribed prudential requirements. cooperative banks. An RB/Coop banks
If found later on that the bank is non-compliant including its authorized branch/es, extension
with any or all of the requirements, it shall be office/s and OBOs shall comply with Sec.
given one examination cycle to correct any 3172 for the presentation, marketing and
deficiency. If the bank remains non-compliant sale of micro insurance products.
(Circular No. 683 dated 23 February 2010)

§§ X361.9 - X365.2
14.12.31
§ X361.9 Required Reports. Banks, with c. Penalties and sanctions provided

retail microfinance operations, shall be under Sections 36 and 37 of R.A. No. 7653.
required to submit the “Report on
Microfinance Products” on a monthly basis, Secs. X362 - X364 (Reserved)
and the “Income Statement on Retail
Microfinance Operations” on a quarterly Sec. X365 Loans to Barangay Micro
basis. Both reports shall be submitted Business Enterprises. The following are the
within fifteen (15) banking days after the end rules and regulations to implement
of the reference month and quarter, Section 9 and the second paragraph of
respectively. Section 13 of R.A. No. 9178, otherwise
Banks with no microfinance operations, known as the “Barangay Micro Business
either retail or wholesale, are expected to fill Enterprises (BMBEs) Act of 2002”.
up only Item “3.1.B”, “Other Microenterprises
Loans”, under “Additional Information” of the § X365.1 Credit delivery. The LBP, the
“ Report on Microfinance Products”. On the DBP, the SBGFC, and the Peoples Credit
other hand, banks engaged solely in wholesale and Finance Corporation (PCFC) shall set
microfinance operations are expected to fill up a special credit window that will service
up only Item “2”, “Wholesale Microfinance the financing needs of duly registered
Operations”, and its related sub-accounts BMBEs consistent with Bangko Sentral
under “Additional Information” of the ‘Report policies, rules and regulations. Said special
on Microfinance Products”. These banks, credit window shall service the credit needs
however, are required to submit the quarterly of BMBEs either through retail or wholesale
“Income Statement on Retail Microfinance lending, or both, as the concerned FIs may
Operations”, indicating that the required data deem consistent with their corporate
are not applicable. Otherwise, these banks policies and objectives. The GSIS and the
will be sanctioned for incomplete submission SSS shall likewise set up special credit
of reports. window that will serve the financing needs
Late and/or erroneous reporting of said of their respective members who may wish
reports shall be subject to penalties to establish a BMBE.
prescribed for category A-2 report under Said FIs are encouraged to wholesale
Subsec. X192.2. funds to accredited private FIs including
(Circular No. 836 dated 13 June 2014) community based organizations such as
cooperatives, NGOs and people’s
§ X361.10 Sanctions. Violations of the organizations engaged in granting credit, for
provisions of this Section shall be subject relending to BMBEs.
to any or all of the following sanctions: Private banking and other FIs are
a. Disqualification of the bank encouraged to lend to BMBEs.
concerned from the credit facilities of the
Bangko Sentral except as may be allowed § X365.2 Interest on loans to Barangay
under Section 84 of R.A. No. 7653; Micro Business Enterprises. Interest on
b. Prohibition of the bank concerned BMBE loans shall be just and reasonable as
from the extension of additional may be determined by management of the
microfinance loans; and concerned entity to be consistent with its credit
policies.

§§ X365.3 - X365.8
11.12.31
§ X365.3 Amortization of loans to BMBEs shall be eligible as part of alternative

Barangay Micro Business Enterprises. The compliance for R.A. No. 6977, as amended,
schedule of loan amortization shall take into of the government-owned banks and the
consideration the projected cash flow of the accredited private banks at the maximum
borrowers. Thus, loans granted to BMBEs amount of 100% of their outstanding
may, at the discretion of the lender, be balance each:
amortized daily, weekly, monthly or at such Provided, further, That loans used as
interval as the conditions of the business of alternative compliance with R.A. No. 6977,
the BMBEs may warrant. as amended, computed at either twice their
outstanding balance or their maximum
§ X365.4 Waiver of documentary amount of 100% may be used as alternative
requirements. Banks and other FIs shall not compliance for either or both the prescribed
require from duly registered BMBE portions of loan portfolio to be allocated to
borrowers the submission of ITR as a MSEs and MEs, respectively, as long as the
condition to the grant of loans considering aggregate amount used does not exceed twice
that BMBEs are exempted from income tax their outstanding balance or their maximum
for income arising from their operations. amount of 100%, as the case may be.
They may, at their discretion, also waive b. Any existing laws to the contrary
the requirement of submission of financial notwithstanding, interests, commissions
statements from BMBEs: Provided, That and discounts derived from the loans by the
before granting any loan, banks shall LBP, DBP, PCFC, SBGFC granted to BMBEs
undertake reasonable measures to as well as loans extended by the GSIS and
determine that the borrower is capable of SSS to their respective member-employees
fulfilling his/its commitments. under BMBEs Act and this Section shall be
exempt from gross receipt tax (GRT).
§ X365.5 Incentives to participating (As amended by Circular Nos. 736 dated 20 July 2011 and 625
financial institutions. To encourage BMBE dated 14 October 2008)
lendings, the following incentives shall be
granted to banks and other FIs as may be § X365.6 Credit guarantee. The SBGFC
applicable: and the Quedancor under the DA, in case
a. All loans from whatever sources of agri-business activities, shall set up a
granted to BMBEs under R.A. No. 9178 special guarantee window to provide credit
(BMBEs Act) shall be considered as part of guarantee to BMBEs under their respective
alternative compliance to R.A. No. 6977, guarantee programs.
as amended.
For purposes of compliance with R. A. § X365.7 Record. The LBP, DBP, PCFC
No. 6977, as amended, loans granted to and SBGFC shall maintain separate records
BMBEs under the BMBEs Act shall be of loans granted to BMBEs and the GSIS and
computed at twice the amount of the SSS shall maintain records of loans extended
outstanding balance of the loans: Provided, to their respective members who wish to
That funds loaned by or rediscounted with establish BMBEs.
government-owned banks and other
government FIs to accredited private § X365.8 Reports to Congress. The LBP,
banking and other FIs for on-lending to DBP, PCFC, SBGFC, SSS, GSIS and

§§ X365.8 - X376.5
09.12.31
Quedancor shall report annually to the e. It has exceeded the individual and
appropriate Committees of both Houses of aggregate ceilings as well as the ceiling on
Congress, the status of their implementation unsecured credit accommodations to
of the provisions of Section 9 of R.A. No. DOSRI; and
9178. f. Its ratio of past due loans to total loan
portfolio exceeds twenty percent (20%).
§ X365.9 Administrative sanctions
Any violation by the concerned government §§ X376.2 - X376.4 (Reserved)
FI of the provisions of Section 9 of R.A. No.
9178 shall be subject to a fine of not less § X376.5 Guidelines for major
than P500 thousand to be imposed by the investments. The following are the
Bangko Sentral and which shall be payable guidelines for major acquisitions or
to the BMBE Development Fund. In case of investments by a bank including corporate
a banking institution, the foregoing fine shall affiliations or structures to implement
be without prejudice to the administrative Section 50 of R.A. No. 8791.
sanctions provided for under Section 37 of a. Definition. Major investments are those
R.A. No. 7653. investments in allied or non-allied
undertakings including corporate affiliations
Secs. X366 - X375 (Reserved) or structures that give the bank significant
interest and/or control, such as stockholdings
H. EQUITY INVESTMENTS sufficient to elect one (1) member to the
acquired entity’s board of directors.
Sec. X376 Scope of Authority. The following b. Criteria for major investments.
rules shall govern the investment of banks Any major investment by a bank should be
in the equities of allied undertakings, approved by the bank’s board of directors.
whether financial or non-financial, and non-
In acting on such investments the Board
allied undertakings, as well as the
shall consider the following:
establishment/acquisition of subsidiaries
(1) Such investment must be in
and affiliates abroad.
accordance with the bank’s business plan
and management objectives, taking into
§ X376.1 Conditions for investment in
consideration the economic developments
equities. A bank shall not invest in the equity
and future prospects. The interests of the
of any enterprise, if the investing bank is in
different stakeholders of the bank -
any of the following situations:
shareholders, depositors and creditors -
a. Its capital is impaired, whether by
should always be considered before any
actual losses or unbooked valuation reserves
required by the Bangko Sentral; investment is made.
b. Its lending operations had been (2) Such investments will complement/
suspended on account of reserve or capital support the main business of the banks.
deficiency, until such suspension shall have Extra caution should be taken when
been lifted for at least one (1) year and investing in activities where the bank has
sufficient reserves or capital shall have been no managerial or technical expertise, or
maintained; businesses/industries, which are high-risk.
c. It incurred losses from its operations (3) Bank management shall provide for
during the preceding year; an efficient and effective “exit
d. It has not fully booked the valuation mechanism” or contingency plan in case
reserves and other capital adjustments the investee’s operations fail or do not
required by the Bangko Sentral; prosper.

§§ X376.5 - X377
09.12.31
c. Prior Bangko Sentral approval; The Bangko Sentral shall have the
information/ documents required. Subject to authority to seek corrective action, to issue
prior approval of the Bangko Sentral, banks orders to terminate activities with or divest
may invest in allied or non-allied undertakings, an interest in an investee company, if it
including corporate affiliations or structures. believes that such action is necessary to
A bank intending to make such investment prevent or redress unsafe or unsound
shall submit the following information/ practice by such company that poses a
documents to the appropriate department material risk to the financial safety,
of the SES for evaluation: soundness or stability of a bank.
(1) Name of the company; (As amended by Circular No. 671 dated 27 November 2009)
(2) Type of business activities;
(3) Board of directors’ approval on such Sec. X377 Financial Allied Undertakings
investments; With prior Bangko Sentral approval, banks
(4) Certification from the bank’s board may invest in equities of the following
of directors that the criteria enumerated in financial allied undertakings, subject to the
Item “b” are complied with; limits prescribed under Sec. X378:
(5) Management contract; a. Leasing companies including
(6) Financial information and other leasing of stalls and spaces in a
information about financial strengths, e.g., commercial establishment: Provided, That
projected balance sheet and income bank investment in/acquisition of shares
statements for the first three (3) years; of such leasing company shall be limited/
(7) Members of the board and senior applicable only in cases of conversion of
management; outstanding loan obligations into equity;
(8) Interest to be held by the bank and the b. Banks;
manner in which such interest will be held; and c. IHs;
(9) Conformity of the investee company d. Financing companies;
for Bangko Sentral to examine its books. e. Credit card companies;
The Bangko Sentral may impose f. FIs catering to small and medium
conditions on any approval, including scale industries including venture capital
conditions to address financial, managerial, corporation (VCC), subject to the
safety and soundness, compliance, or other provisions of Sec. X379 and its
concerns. Further, the Bangko Sentral may
subsections;
disapprove a proposed investment if it finds
g. Companies engaged in stock
that the proposal would constitute an unsafe
brokerage/securities dealership; and
and unsound practice, or would violate any
h. Companies engaged in foreign
law, regulation, Monetary Board directive,
exchange dealership/brokerage.
or any condition imposed by, or written
In addition, UBs may invest in the
agreement with, the Bangko Sentral.
following as financial allied undertakings:
The Bangko Sentral may prescribe other
guidelines/regulations as it may consider (1) Insurance companies; and
necessary to ensure that banks’ major (2) Holding company: Provided, That
investments do not expose the banks to the investments of such holding company
undue risks or hinder effective supervision. are confined to the equities of allied
d. Examination and inspection. undertakings and/or non-allied
Whenever deemed necessary, Bangko undertakings of UBs allowed under
Sentral shall have the authority to examine Bangko Sentral regulations.
investee companies or to verify information The Monetary Board may declare such
provided by other supervisory authorities other activities as financial allied
such as the SEC. undertakings of banks.

§§ X377 - X379
14.12.31
The determination of whether the A publicly-listed UB or KB may own

corporation is engaged in a financial up to 100% of the voting stock of only
allied undertaking shall be based on its one (1) other UB or KB. Otherwise, it shall
primary purpose as stated in its articles of be limited to a minority holding.
incorporation and the volume of its The guidelines in determining
principal business. compliance with ceilings on equity
investments in financial allied
Sec. X378 Limits on Investment in the undertakings are shown in Appendix 79.
Equities of Financial Allied (As amended by Circular Nos. 858 dated 21 November 2014,
Undertakings. The equity investment of a 710 dated 19 January 2011, 671 dated 27 November 2009,
581 dated 14 September 2007 and 530 dated 19 May 2006)
bank in a single financial allied undertaking
shall be within the following ratios in
relation to the total subscribed capital stock Sec. X379 Investments in Venture Capital
and to the total voting stock of the allied Corporations. The following rules and
undertaking: regulations shall implement Presidential
To promote competitive conditions, the Decree No. 1688 entitled “Authorizing
Monetary Board may further limit the equity Banks to Invest in the Equity of Venture
investments in QBs of UBs and KBs to forty
percent (40%).
ACTIVITIES INVESTOR
Allied Enterprises UB KB TB RB Coop Banks
Financial Allied Publicly- Not Publicly- Not
Undertaking listed listed listed listed
UBs 100% 49% 100% 49% 49% 49% 49%

KBs 100 49 100 49 49 49 49
TBs 100 100 49 49 49
RBs 100 100 49 49 100
Coop Banks NA NA NA NA 30
Insurance
Companies 100 NA NA NA NA
VCCs 60 60 60 49 49
Trust Corporation 100 49 40 40 40
Others 100 49 40 40 40

§§ X379 - X379.2
09.12.31
Capital Corporations to Assist Small and e. The combined equity investments

Medium- Scale Enterprises”. in, and loans of, the bank to its VCC shall
For purposes of this Section, a VCC shall not exceed fifteen percent (15%) of the
refer to an entity organized jointly by private bank’s net worth; and
banks, the National Development f. The aggregate investments in
Corporation and the Technology Livelihood equities by a bank, including equity
and Resource Center and/or such other investments in a VCC, shall not exceed the
government agency as may be authorized prescribed ceilings under Sec. X383 on other
by the appropriate authority, the primary limitations and restrictions.
purpose of which is to develop, promote The guidelines in determining
and assist, thru debt or equity financing or compliance with ceilings on equity
any other means, any small and medium- investments in a VCC are shown in
scale enterprise in the country. Appendix 79.
Banks with acquired shares of stock
§ X379.1 Requirements for investors of VCCs in excess of limits provided in
Banks may invest in a VCC organized to this Subsection which have not been
assist small and medium-scale enterprises, previously confirmed by the Monetary
subject to the following conditions: Board shall seek confirmation of the
a. The bank shall have a minimum Monetary Board of such acquisition not
capital of P100.0 million as defined in later than ninety (90) banking days from
Sec. X111; 20 December 2009: Provided, That said
b. Two (2) or more banks may own confirmation shall be subject, among
up to sixty percent (60%) of the total voting others, to the condition that such shares
equity and of the total equity of a VCC. A of stock shall be disposed of within a
bank shall not be allowed to invest in the reasonable period not to exceed five (5)
equity of more than one VCC; years from the date of acquisition thereof.
c. The initial paid-in capital of VCC shall (As amended by Circular Nos.671 dated 27 November 2009 and
not exceed P5.0 million. Any subsequent 581 dated 14 September 2007)
increase in paid-in capital of the VCC in which
a bank owns equity shall be subject to prior § X379.2 Equity investments of
approval of the Monetary Board; venture capital corporations. Equity
d. Loans which the investor-bank may investment of a VCC in small and medium-
grant to a VCC shall be limited to such scale enterprises shall be subject to the
amounts as would enable the VCC to following conditions:
promote equity financing to viable small a. Equity financing by a VCC may be
and medium scale enterprise: Provided, extended to a small and medium-scale
however, That unless otherwise authorized enterprise engaged in an industry certified
by the Monetary Board, the aggregate as desirable by the Department of Trade and
outstanding loans of such bank to a VCC Industry; and
shall not exceed twice the amount of its b. The total assets of the enterprises
equity investment in the VCC: Provided, shall not exceed P4.0 million, including
further, That loans to the VCC, or the small the VCC’s equity investment. Should the
and medium-scale enterprises shall not be total assets of the small and medium-scale
subject to the ceilings on DOSRI, except enterprise subsequently exceed the
where bank DOSRI are likewise prescribed P4.0 million maximum, the
stockholders in the VCC or in the small and VCC equity investment therein made
medium-scale enterprise; before the total assets of the enterprise

§§ X379.2 - X380
09.12.31
exceeded P4.0 million, may be maintained (3) Safe deposit box companies;
but shall not be increased. (4) Companies primarily engaged in
the management of mutual funds but not in
§ X379.3 Business name of venture the mutual funds themselves;
capital corporations. A VCC shall be (5) Management corporations engaged
known by any name not otherwise or to be engaged in an activity similar to the
appropriated: Provided, however, That the management of mutual funds;
words “venture capital corporation” are (6) Companies engaged in providing
made a part thereof. computer services;
(7) Insurance agencies/brokerages;
§ X379.4 Reportorial requirements; (8) Companies engaged in home
examination by Bangko Sentral. A VCC in building and home development;
which a bank owns equity shall be (9) Companies providing drying and/
subject to BSP reportorial requirements or milling facilities for agricultural crops
prescribed for non-bank financial such as rice and corn;
intermediaries and may be subject to (10) Service bureaus, organized to
examination by the BSP. perform for and in behalf of banks and NBFIs
the services allowed to be outsourced
§ X379.5 Interlocking directorships enumerated in Sec. X162: Provided, That
and/or officerships. Subject to prior data processing companies may be allowed
approval of the Monetary Board, a person to invest up to forty percent (40%) in the
may concurrently hold the position of a equity of service bureaus;
director or officer in a bank and a VCC. (11) Philippine Clearing House
Corporation (PCHC), Philippine Central
Sec. X380 Non-Financial Allied Undertakings Depository, Inc. and Fixed Income
A bank may acquire up to 100% of the Exchange; and
equity of a non-financial allied undertaking: (12) Such other similar activities as the
Provided, That the equity investment of a Monetary Board may declare as
TB/RB in any single enterprise shall remain non-financial allied undertakings of banks.
less than fifty percent (50%) of the voting UBs may further invest in health
shares in that enterprise: Provided, further, maintenance organizations (HMOs).
That prior Monetary Board approval is In addition, TBs may also invest in the
required if the investment is in excess of forty equities of companies enumerated in Item
percent (40%) of the total voting stock of “b” of this Section.
such allied undertaking. b. RBs/Coop Banks
The determination of whether the RBs/Coop Banks may invest, as a non-
corporation is engaged in a non-financial financial undertaking, in the equities of
allied undertaking shall be based on the companies engaged in the following:
primary purpose as stated in its articles of (1) Warehousing and other postharvest
incorporation and the volume of its principal facilities;
business. (2) Fertilizer and agricultural chemical
a. UBs/KBs/TBs and pesticides distribution;
UBs/KBs and TBs may invest in equities (3) Farm equipment distribution;
of the following non-financial allied (4) Trucking and transportation of
undertakings: agricultural products;
(1) Warehousing companies; (5) Marketing of agricultural products;
(2) Storage companies; (6) Leasing;

§§ X380 - 1381.2
09.12.31
(7) Automated Teller Machine (ATM) or in connection with the Government’s

networks; and privatization program; and
(8) Other undertakings as may be d. Such other broad categories as the
determined by the Monetary Board. Monetary Board may declare as appropriate:
The guidelines in determining Provided, further, That the bank shall submit
compliance with ceilings on equity within thirty (30) banking days after the
investments in non-financial allied investment, the following information/
undertakings are shown in Appendix 79. documents to the appropriate department
(As amended by Circular Nos. 671 dated 27 November 2009, of the SES:
581 dated 14 September 2007 and 563 dated 16 March 2007) (1) The amount of investment;
(2) The name of investee company; and
Sec. X381 (Reserved) (3) The nature of business,
accompanied by such pertinent documents
Sec. 1381 Investments in Non-Allied or as articles of incorporation, articles of
Non-Related Undertakings. Only UBs may partnership or registration certificate,
invest in the equity of an enterprise engaged whichever may be applicable.
in non-allied or non-related activities. (As amended by Circular No. 671 dated 27 November 2009)
The guidelines in determining
compliance with ceilings on equity § 1381.2 Limits on investments in
investments in non-allied or non-related non-allied enterprises
undertakings are shown in Appendix 79. a. The equity investment of a UB, or
(As amended by Circular Nos. 671 dated 27 November 2009, of its wholly or majority-owned subsidiaries,
581 dated 14 September 2007) in a single non-allied enterprise shall not
exceed thirty-five percent (35%) of the total
§ 1381.1 Non-allied undertakings equity in that enterprise nor shall it exceed
eligible for investment by universal banks thirty-five percent (35%) of the voting stock
The broad category of non-allied undertakings in that enterprise.
in which a UB may invest directly or through For the purpose of determining
its subsidiary shall require prior approval compliance with the ceiling prescribed in
of the Monetary Board: Provided, That the preceding paragraph, (i) the equity
individual equity investments in the investment of the bank; and (ii) the equity
following broad categories shall not require investment of the bank’s subsidiaries, shall
prior Monetary Board approval, except as be combined.
may be required in Subsec. X376.5: b. In no case shall the total equity
a. Enterprises engaged in physically investments in a single non-allied enterprise
productive activities in agriculture, mining of UBs, NBFIs performing QB functions and
and quarrying, manufacturing, public their subsidiaries, whether or not the parent
utilities, construction, wholesale trade and financial intermediaries have equity
community and social services following the investments in the enterprise, amount to fifty
industrial groupings in the Philippine percent (50%) or more of the voting stock
Standard Industrial Classification (PSIC) as of that enterprise: Provided, however, That
enumerated in Appendix 22; equity investments in excess of the ceilings
b. Industrial park projects and/or prescribed herein as of 01 April 1980 may
industrial estate developments; be maintained but may not be increased and
c. Financial and commercial complex if reduced, shall not be increased thereafter
projects (including land development and beyond the ceiling prescribed herein.
buildings constructed thereon) arising from (As amended by Circular No. 671 dated 27 November 2009)

§§ 1381.3 - X382.3
10.12.31
§ 1381.3 Report on outstanding equity authorities in Appendix 5, the applicant bank

investments in and outstanding loans to shall comply with the following:
non-allied enterprises. a. The citizenship, ownership ceilings
(Deleted by Circular No. 671 dated 27 November 2009) and other limitations on voting
stockholdings in banks under existing law
Sec. X382 Investments in Subsidiaries and regulations; and
and Affiliates Abroad. The b. The experience and expertise in
establishment or acquisition of international banking operations with proof
subsidiaries or affiliates abroad shall to the effect that:
require prior approval of the BSP. (1) It must have conducted
international banking for at least three (3)
§ X382.1 Application for authority to years prior to the date of application; and
establish or acquire subsidiaries and (2) Its international banking
affiliates abroad. The application for such operations must have contributed a
authority shall be signed by the president of substantial portion to its total earnings.
the bank and shall be accompanied, as a
minimum, by the following information/ § X382.3 Conditions for approval of
documents: application. The approval of the application
a. Certified true copy of the resolution to establish or acquire a subsidiary of an
of the bank’s board of directors authorizing affiliate abroad shall be subject to the
the establishment or acquisition of a following conditions:
subsidiary or an affiliate abroad; a. Without prejudice to the
b. Economic justification for such qualification requirements of the country
establishment, indicating the services to be where the subsidiary or the affiliate is to
offered, the minimum outlay for furniture, be established, the proposed officer(s), at
fixture and equipment, rental and other the time of appointment, must be at least:
expenses; (1) Twenty-five (25) years of age;
c. A certification that an application for (2) A college graduate, preferably with
such establishment has been filed with the training and experience abroad;
appropriate government agency of the host (3) With three (3) years experience in
country; international banking; and
d. Organizational set-up of the (4) Must not be disqualified as an
proposed banking office showing the officer under existing regulations.
proposed positions and the names, b. The applicant shall also comply
qualifications and experience of the with the licensing requirements of the host
proposed manager and other officers; and country and the necessary license to
e. Certification signed by the president operate shall be secured from the
or the executive vice-president that the bank appropriate government agency of the
has complied with all the requirements host country;
enumerated under Subsec. X382.2. c. The outward investment
representing initial capital outlay and other
§ X382.2 Requirements for establishing outlays shall be subject to existing
subsidiaries or affiliates abroad. In addition regulations;
to the standard pre-qualification d. All dividends earned shall be
requirements for the grant of banking inwardly remitted to the Philippines no later

§§ X382.3 - X382.8
10.12.31
than sixty (60) days after the date of reserves and other capital adjustments, if
payment. For purposes of this Subsection, any; and
re-investment of said dividend proceeds or (3) Its operations in the preceding
deposits/placements thereof in accounts of three (3) years were profitable; otherwise,
the investor banks with foreign the feasibility study on the proposed
correspondent banks abroad shall be subsidiary should show profits in the first
deemed compliance with the requirements two (2) years of operations.
of this Subsection; c. The application for authority of a
e. The proposed subsidiary or bank subsidiary shall be accompanied by
affiliate shall submit the reports required the following:
by the Bangko Sentral; (1) Certified true copy of the resolution
f. The proposed subsidiary or authorizing the investment by the board of
affiliate shall not carry any of the business directors of the parent bank and the bank
of a bank contemplated within the context subsidiary;
of the Philippine banking system; (2) Feasibility studies on the proposed
g. The proposed subsidiary or affiliate subsidiary indicating, among others, the
shall not engage in stock trading activity; economic justification, the type of industry
h. The applicant shall submit a and organizational expenses to be incurred,
certification from the host country that the duly including the capital expenditures; and
authorized personnel/examiners of the Bangko (3) Proposed organizational structures,
Sentral will be authorized to examine the including the proposed officers and their
proposed subsidiary or affiliate; and qualifications.
i. The applicant shall defray the d. The applicant parent subsidiary
necessary cost and expenses to be shall comply with the licensing
incurred by the appropriate department requirements of the host country and the
of the SES in the examination of the necessary license to operate shall be
foreign subsidiary. secured from the appropriate government
(As amended by Circular No. 692 dated 23 July 2010) agency of the host country;
e. The proposed subsidiary may
§§ X382.4 - X382.7 (Reserved) invest in another subsidiary with prior
approval of the Bangko Sentral;
§ X382.8 Investment of a bank subsidiary f. Any outward investment
in a foreign subsidiary. The following representing initial capital and other
guidelines shall govern the investment in a outlays shall be subject to existing
foreign subsidiary by a bank subsidiary: regulations;
a. The investment of a bank g. At least fifty percent (50%) of the
subsidiary in the equity of a subsidiary yearly net profits of the proposed
located abroad shall be subject to prior subsidiary shall be declared and paid as
Bangko Sentral approval; cash dividends to the parent subsidiary;
b. The bank subsidiary may invest in h. The proposed subsidiary shall be
a subsidiary if it meets the following subject to -
pre-qualification requirements: (1) the applicable reportorial
(1) It has complied with the minimum requirements such as the submission of
capital requirement of the host country; quarterly SOC and SIE; and
(2) It has booked the required valuation (2) the supervision and examination

§§ X382.8 - X388
13.12.31
by the Bangko Sentral and the cost of such such acquisition not later than ninety (90)
examination shall be charged against the banking days from 20 December 2009:
grandparent bank; and Provided, That said confirmation shall be
i. Any additional funding or advances subject, among others, to the condition
of the parent bank in the Philippines to its that such shares of stock shall be disposed
subsidiaries abroad or the subsidiary will of within a reasonable period not to
require prior Bangko Sentral approval. exceed five (5) years from the date of
acquisition thereof.
Sec. X383 Other Limitations and (As amended by Circular Nos. 822 dated 13 December 2013,
784 dated 25 January 2013, 671 dated 27 November 2009 and
Restrictions. The following limitations and 581 dated 14 September 2007)
restrictions shall also apply regarding equity
investments of banks. Sec. X384 (Reserved)
a. In any single enterprise. The equity
investments of UBs and KBs in any single Sec. X385 Sanctions. The following
enterprise shall not exceed at any time sanctions shall be imposed for equity
twenty-five percent (25%) of the net worth investments made without prior Monetary
of the investing banks as defined in Sec. Board approval:
X111 and Subsec. X105.4.b. a. First offense - If the investment
b. A g g r e g a t e l i m i t s . T h e t o t a l is not allowable under existing
amount of investments in equities in all regulations, divestment of the
enterprises shall not exceed the investment and reprimand on officer/
following ratios in relation to the net director who recommended/approved
worth of the investing bank: the investment.
UB KB TB RB Coop Bank
b. Subsequent offense -
LIMIT: 50% 35% 25% 25% 25% On the Bank. If the investment is not
allowable under existing regulations,
c. Exclusion of underwriting exposure divestment of the investment.
from ceiling. The exposure of a bank with On the director/officer. Fine of P20,000
UB authority arising from the firm for each investment to be imposed on the
underwriting of equity securities of members of the board and the executive
enterprises shall not be counted in officers who recommended/approved the
determining compliance with the ceilings investment per investment and to be
prescribed in this Section and Subsec. shouldered personally by the officer/
1381.2 for a period of ninety (90) calendar director: Provided, That if the subsequent
days from the issuance of such equity offense is an investment in a non-allied
securities1. enterprise, the fine shall be P40,000.
d. The guidelines in determining
compliance with the other limitations and I. (RESERVED)
restrictions on equity investments of
banks are shown in Appendix 79. Secs. X386 - X387 (Reserved)
Banks with acquired shares of stock
in excess of limits provided in this Section J . OTHER OPERATIONS
which have not been previously confirmed
by the Monetary Board shall seek Sec. X388 Purchase of Receivables and
confirmation of the Monetary Board of Other Obligations. The following
1
It shall cover all new underwritten debt and equity securities issued from from 15 February 2013.

§§ X388 - X388.3
08.12.31
regulations shall govern the purchase of promissory notes resulting from the
receivables and other obligations. purchase of receivables on a without
recourse basis shall be subject to the SBL
§ X388.1 Yield on purchase of of the bank: Provided, That the bank shall
receivables. The rate of yield, including evaluate the credit worthiness of the maker
commissions, premiums, fees and other of such promissory notes.
charges, from the purchase of receivables
and other obligations, regardless of § X388.3 Purchase of commercial
maturity, that may be charged or received paper. Before purchasing registered
by banks shall not be subject to any commercial paper, banks authorized to
regulatory ceiling. engage in quasi-banking functions shall -
a. Require the issuing entity to
§ X388.2 Purchase of receivables on submit a duly certified true copy of its
a “without recourse” basis. The total Certificate of Registration and Authority
exposure of a bank to a maker of to Issue Commercial Paper; and
(Next page is Part III - Page 73)

§§ X388.3 - X388.5
13.12.31
b. Ascertain that the registration Sentral, and any other evidences of

number and expiry date indicated in the indebtedness or obligations the servicing
commercial paper are the same as those in and repayment of which are guaranteed by
the certificate of registration submitted. the Republic of the Philippines.
Any violation or failure to comply with b. The classification, accounting
the provisions of this Subsection shall procedures, valuation and sales and
subject the erring bank to suspension or transfers of investments in all debt securities
revocation of its authority to engage in and marketable equity securities shall be in
quasi-banking functions. accordance with the guidelines in
Appendices 33 and 33a.
§ X388.4 Reverse repurchase Penalties and sanctions1. The following
agreements with Bangko Sentral. Reverse penalties and sanctions shall be imposed on
repo agreements with the Bangko Sentral FIs and concerned officers found to violate
shall be governed by Subsec. X601.2. the provisions of Item “b”:
(1) Fines to be imposed on FIs for each
§ X388.5 Investment in debt and readily violation, reckoned from the date the
marketable equity securities. The following violation was committed up to the date it
rules and regulations shall govern was corrected:
investment in debt securities and marketable (i) P20,000/day for UBs;
equity securities. (ii) P10,000/day for KBs;
a. Banks may invest in the following: (iii) P2,000/day for TBs; and
(1) Readily marketable bonds and other (iv) P1,000/day for RBs/Coop Banks.
debt securities which are of such use or (2) Sanctions to be imposed on
demand as to make them the subject of concerned officers:
constant dealings in securities markets, with (i) First offense - reprimand the officers
such frequent quotations of price as to make responsible for the violation; and
the price easily and definitely ascertainable, (ii) Subsequent offenses - suspension of
and the security easy to realize upon sale at ninety (90) days without pay for officers
any time: Provided, That the bonds and other responsible for the violation.
debt securities have complied with the new Regular banking unit (RBU) of UBs/KBs
rules on registration of commercial papers: and TBs are prohibited from purchasing
Provided, further, That in the case of RBs/ Philippine debt papers representing debt
Coop Banks, the bonds and other securities papers of Philippine public sector and
have been approved by the Bangko Sentral. private sector obligors which were
TBs may invest in evidences of restructured during the period of moratorium
indebtedness which are registered with the in the payment of external debt. They may,
SEC but are not readily marketable however, invest in, or purchase, other
securities: Provided, That these evidences foreign currency denominated debt
of indebtedness shall be acquired with instruments, subject to applicable rules and
recourse against a bank or a QB. regulations, particularly on risk management:
It shall be the responsibility of the Provided, That the RBU of TBs may invest only
investing bank to undertake the necessary in readily marketable foreign currency
investigation to satisfy itself with regard to denominated debt instrument as defined
the particular security. under Sec. 72 of Part V (MORFXT).
(2) Evidences of indebtedness of the (As amended by Circular Nos. 813 dated 27 September 2013,
Republic of the Philippines or the Bangko 761 dated 20 July 2012, 738 dated 11 October 2011, 707 dated
1
The Penalties and Sanctions provided shall be imposed on FIs and officers concerned found to have violated
any of the provisions of Secs. 3 and 4 of App. 97

§§ X388.5 - X393
13.12.31
07 January 2011, 670 dated 18 November 2009, 628 dated 31 Deposit Account (SDA) Facility. The SDA
October 2008, 626 dated 23 October 2008 and 585 dated 15 facility is a monetary policy instrument
October 2007, M-2007-006 dated 28 February 2007; Circular
Nos. 558 dated 22 January 2007, 546 dated 17 November 2006
deployed by the Bangko Sentral for the
and 509 dated 01 February 2006) purpose of managing excess domestic
liquidity in the financial system. It should
Sec. X389 (Reserved) not be made available for opportunistic
investment activities funded from non-
Sec. 1389 Guidelines on the Investment resident sources. Further, placement in
of Universal Banks and Commercial SDA facility is contractual in nature and
Banks in Credit-Linked Notes, Structured thus shall be governed by the intent of the
Products and Securities Overlying contracting parties. In keeping with the
Securitization Structures. In line with the nature of this facility, all banks and trust
policy of encouraging banks to diversify departments, which are counterparties of
their investment portfolios and to foster the Bangko Sentral, shall comply with the
the development of a market for new Guidelines on the Prohibition Against
financial products, the Bangko Sentral has Non-Residents from Investing in the SDA
issued guidelines on the investment of Facility shown in Appendix 78b.
UBs and KBs in (1) CLNs and similar (M-2012-034 dated 13 July 2012)
products (Sec. 1628), (2) foreign currency
denominated structured products (Secs. Sec. 2390 Prohibition Against Non-
1635 and 1636) and (3) securities overlying Residents from Investing in the SDA
securitization structures (Sec. 1648). Facility. The SDA facility is a monetary
No prior Bangko Sentral approval is policy instrument deployed by the Bangko
required to enter into authorized Sentral for the purpose of managing excess
transactions. However, it shall be the domestic liquidity in the financial system.
responsibility of UBs/KBs to fully comply It should not be made available for
with appropriate risk management opportunistic investment activities funded
standards including, as a minimum, those from non-resident sources. Further,
prescribed under relevant Sections. The placement in SDA facility is contractual
regulatory requirements enumerated in in nature and thus shall be governed by
Appendix 66 shall be fully complied with the intent of the contracting parties. In
by UBs/KBs investing in products allowed keeping with the nature of this facility, all
under Secs./Subsec. 1628, 1635 and banks and trust departments, which are
X115.3. counterparties of the Bangko Sentral, shall
The guidelines on the accounting for comply with the Guidelines on the
investments in CLNs and other SPs, in Prohibition Against Non-Residents from
addition to those prescribed under PAS 39, Investing in the SDA Facility shown in
Appendix 78b.
is provided in Appendix 66a.
(M-2012-034 dated 13 July 2012)
(As amended by Circular No. 708 dated 01 January 2011 and
M-2008-010 dated 07 March 2008) Sec. 3390 (Reserved)
Sec. 2389 - 3389 (Reserved) Secs. X391 - X392 (Reserved)
Sec. X390 (Reserved) K. MISCELLANEOUS PROVISIONS
Sec. 1390 Prohibition Against Non- Sec. X393 Loans-to-Deposits Ratio. The
Residents from Investing in the Special following policies and guidelines shall

§§ X393 - X393.3
08.12.31
govern the loans-to-deposits ratio (LDR) of § X393.3 Computation of the

head offices and branches. regional loans-to-deposits ratio. The
(As amended by Circular No. 613 dated 18 June 2008) individual bank’s regional LDR shall be
computed by dividing a bank’s aggregate
§ X393.1 Statement of policy. It is loans by its aggregate deposit liabilities on
the policy of the Bangko Sentral to promote a per region basis as of the same reporting
healthy competition within the banking cut-off date. A bank, in computing its regional
system as well as provide enhanced banking LDR, shall be guided by the following:
statistics necessary for informed decision- a. Loans shall be reported by a bank
making. in the region where the loan proceeds
(As amended by Circular No. 613 dated 18 June 2008)
were utilized or channeled to, i.e.,
location of the end-users.
§ X393.2 Regional loans-to-deposits b. Deposits, on the other hand, shall
ratio. An individual bank’s regional LDR be reported by a bank in the region
is a measure of the extent of its lending wherein these were generated.
activity vis-à-vis deposits generated in a
For purposes of this Section, loans shall
region. On an aggregate basis, the regional
refer to the amortized cost of a bank’s total
LDR for the banking system is an indicator
loan portfolio, excluding “Loans to Bangko
of the level of bank deposits which have
Sentral”, “Interbank Loans Receivable” and
been transformed into investments in a
loans granted by a bank’s FCDU/EFCDU.
region. The latter may be used by banks
Deposits, on the other hand, shall refer to a
as a benchmark in assessing their regional
bank’s total deposit liabilities, excluding
lending and deposit operations as against
FCDU/EFCDU deposits.
that of the industry and their peer group.
(As amended by Circular No. 613 dated 18 June 2008) (As amended by Circular No. 613 dated 18 June 2008)
(Next page is Part III- Page 75)

§ X394 - X394.2
13.12.31
Sec. X394 Acquired Assets in Settlement of the foreclosed/purchased asset shall be

of Loans. The following rules shall govern conducted by an independent appraiser
assets acquired in settlement of loans. acceptable to the Bangko Sentral.
b. The carrying amount of ROPA shall
§ X394.1 Posting. Banks shall post at be allocated to land, building, other
all times in a conspicuous place in the non financial assets and financial assets (e.g.,
premises of their head office and each of receivables from third party or equity interest
their branches and other banking offices a in an entity) based on their fair values, which
list of acquired assets together with the allocated carrying amounts shall become
corresponding lowest price at which the their initial costs.
bank is willing to sell such property. c. The non financial assets portion of
However, this requirement shall not ROPA shall remain in ROPA and shall be
relieve the bank from the requirement accounted for as follows:
under Section 52 of R.A. No. 8791 to (1) Land and buildings shall be
dispose of such acquired assets. accounted for using the cost model under
PAS 40 “Investment Property”;
§ X394.2 Booking (2) Other non financial assets shall be
a. ROPA in settlement of loans accounted for using the cost model under
through foreclosure or dation in payment PAS 16 “Property Plant and
shall be booked under the ROPA account Equipment”;
as follows: (3) Buildings and other non-financial
(1) Upon entry of judgment in case of assets shall be depreciated over the
judicial foreclosure; remaining useful life of the assets, which
(2) Upon execution of the Sheriff’s shall not exceed ten (10) years and three
Certificate of Sale in case of extrajudicial (3) years from the date of acquisition,
foreclosure; and respectively; and
(3) Upon notarization of the Deed of (4) Land, buildings and other
Dacion in case of dation in payment non-financial assets shall be subject to the
(dacion en pago). impairment provisions of PAS 36
ROPA shall be booked initially at the “Impairment”1.
carrying amount of the loan (i.e., d. Financial assets, shall be
outstanding loan balance adjusted for any reclassified and booked according to
unamortized premium or discount less intention under HFT, DFVPL, AFS, HTM,
allowance for credit losses computed INMES, Unquoted Debt Securities
based on PAS 39 provisioning Classified as Loans or Loans and Receivable
requirements, which take into account the and accounted for in accordance with the
fair value of the collateral) plus booked provisions of PAS 39, except interests in
accrued interest less allowance for credit subsidiaries, associates and joint ventures,
losses (computed based on PAS 39 which shall be booked under Equity
provisioning requirements) plus Investments in Subsidiaries, Associates and
transaction costs incurred upon acquisition Joint Ventures and accounted for in
(such as non refundable capital gains tax accordance with the provisions of PAS 27,
and documentary stamp tax paid in 28 and 31, respectively.
connection with the foreclosure/purchase e. ROPAs that comply with the
of the acquired real estate property): provisions of PFRS 5 “Non-Current Assets
Provided, That if the carrying amount of Held for Sale” shall be reclassified and
ROPA exceeds P5.0 million, the appraisal accounted for as such.
1
under Appendix 89a (Circular No. 820 dated 06 December 2013)
§§ X394.2 - X394.3
13.12.31
f. Claims arising from deficiency testing, which shall be reckoned from the
judgments rendered in connection with the time of acquisition.
foreclosure of mortgaged properties shall be (As amended by Circular Nos. 555 dated 12 January 2007 and
lodged under the real account “Deficiency 520 dated 20 March 2006)
Judgment Receivable”; while probable
claims against the borrower arising from the § X394.3 Sales contract receivable
foreclosure of mortgaged properties shall be a. Sales Contract Receivable (SCR)
lodged under the contingent account shall be recorded based on the present
“Deficiency Claims Receivable”. value of the installments receivables
g. Appraisal of properties. Before discounted at the imputed rate of interest.
foreclosing or acquiring any property in Discount shall be accreted over the life of
settlement of loans, it must be properly the SCR by crediting interest income using
appraised to determine its true economic the effective interest method. Any
value. If the amount of ROPA to be booked difference between the present value of
exceeds P5.0 million, the appraisal must the SCR and the derecognized assets shall
be conducted by an independent appraiser be recognized in profit or loss at the date
acceptable to the Bangko Sentral. An in- of sale in accordance with the provisions
house appraisal of all ROPAs shall be made of PAS 18 “Revenue”: Provided,
at least every other year: Provided, That furthermore, That SCR shall be subject to
immediate re-appraisal shall be conducted impairment provision of PAS 39.
on ROPAs which materially decline in value. The provisions of this Subsection shall
h. Non-cash payment for interest. FIs be applied retroactively to all outstanding
that accept non-cash payments for interest ROPAs and SCRs: Provided: That for
on their borrowers’ loans shall book the properties acquired before 01 January
acquired assets as ROPA. The amount to be 2005, the carrying amount of the acquired
booked as ROPA shall be the booked properties when initially booked under
accrued interest less allowance for credit ROPA shall be the cost subject to
losses (computed based on PAS 39 depreciation and impairment testing,
provisioning requirements): Provided, That which shall be reckoned from the time of
if the carrying amount of ROPA exceeds P5.0 acquisition.
million, the appraisal of the foreclosed/ b. SCRs which meet all the
purchased asset shall be conducted by an requirements/conditions enumerated below
independent appraiser acceptable to the are hereby considered performing assets and
Bangko Sentral. The carrying amount of therefore, not subject to classification:
ROPA shall be allocated in accordance with (1) That there has been a downpayment
Item “b” and shall be subsequently of at least twenty percent (20%) of the
accounted for in accordance with Item “c” agreed selling price or in the absence
of this Subsection. thereof, the installment payments on the
The provisions of this Subsection shall principal had already amounted to at least
be applied retroactively to all outstanding twenty percent (20%) of the agreed selling
ROPAs and sales contract receivables: price;
Provided: That for properties acquired (2) That payment of the principal must
before 01 January 2005, the carrying be in equal installments or in diminishing
amount of the acquired properties when amounts and with maximum intervals of
initially booked under ROPA shall be the one (1) year;
cost subject to depreciation and impairment

§§ X394.3 - X394.15
12.12.31
(3) That any grace period in the payment §§ X394.11 - X394.14 (Reserved)
of principal shall not be more than two (2)
years; and §§ X394.15 Joint venture of banks with
(4) That there is no installment payment real estate development companies
in arrear either on principal or interest: a. Statement of policy. It is the policy
Provided, That an SCR account shall be of the Bangko Sentral to encourage banks
automatically classified “Substandard” and to dispose of their ROPAs in settlement of
considered non-performing in case of loans and other advances either through
non-payment of any amortization due: foreclosure or dacion en pago as well as
Provided, further, That an SCR which has other properties acquired as a consequence
been classified “Substandard” and considered of a merger/consolidation which are no
non-performing due to non-payment of any longer necessary for their banking
amortization due may only be upgraded operations. Towards this end, banks are
restored to unclassified and/or performing hereby authorized to enter into Joint Venture
status after a satisfactory track record of at Agreements (JVA) with real estate
least three (3) consecutive payments of the development companies for the
required amortization of principal and/or development of said properties, subject to
interest has been established. the requirements prescribed under this
(As amended by Circular No. 520 dated 20 March 2006) Subsection.
b. For purposes of this Subsection,
§§ X394.4 - X394.9 (Reserved) joint venture shall refer to a contractual
arrangement/undertaking between a
§ X394.10 Transfer/sale of non- bank and a duly registered real estate
performing assets to a special purpose development company (developer) for
vehicle or to an individual. The procedures the purpose of developing the
governing the transfer/sale of non-performing abovementioned properties of the bank.
assets (NPAs) to a Special Purpose Vehicle The bank contributes said properties to the
(SPV) or to an individual that involves a single undertaking while the developer
family residential unit, or transactions contributes all the development funds,
involving dacion en pago by the borrower resources, technical expertise, equipment,
or third party of an NPL, for the purpose of personnel and all other requirements
obtaining the Certificate of Eligibility (COE) desired or needed for the implementation
which is required to avail of the incentives and completion of the undertaking
provided under R.A. No. 9182 are including marketing, where applicable.
presented in Appendix 56. The bank and the developer shall be bound
The accounting guidelines on the sale by the contract that establishes joint control
of NPAs to SPVs and to qualified of the undertaking. Although the developer
individuals for housing under the SPV Act may be designated as operator or manager
of 2002 are presented in Appendix 56a. of the undertaking, it does not, however,
The significant timelines related to the absolutely control the undertaking but only
implementation of R.A. No. 9182, also acts in accordance with the authorities
known as the “Special Purpose Vehicle granted to him under the JVA.
Act” as amended by R.A. No. 9343 are c. Forms of a joint venture. A bank
presented in Appendix 56b. and a developer may undertake a joint
(As amended by M-2012-036 dated 24 July 2012, M-2008-014 venture under the following forms:
dated 17 March 2008, M-2008-005 dated 04 February 2008, (1) A jointly-controlled operation/
M-2007-013 dated 11 May 2007 and M-2006-001 dated 11 May 2006) undertaking, which does not involve the

§ X394.15
08.12.31
establishment of a corporation, partnership (3) The bank shall not recognize income
or other entity, or a financial structure that out of its contribution to the joint venture,
is separate from the bank and the regardless of the agreed valuation of said
developer themselves. Under this form of properties.
joint venture, the rights and obligations of (4) The bank shall not provide funds
the bank and the developer shall be to the joint venture either as a loan or
governed primarily by their contract that capital contribution.
must clearly specify the following: (5) The JVA or contractual
(a) authority of the developer to arrangement shall clearly stipulate the
develop/subdivide the property and rights and obligations of the bank and the
subsequently, to sell the individual lots developer.
under a special power of attorney; (6) The bank shall secure prior
(b) sharing in the sales proceeds of the Monetary Board approval of the JVA.
developed ROPAs or in the developed lots; e. Application for authority to enter
(c) sharing in taxes; into JVA. A bank desiring to enter into a
(d) sharing in the assets of the joint JVA with a developer for the purpose of
venture particularly in the developed/ developing its ROPAs and other properties
subdivided lots should there still be unsold acquired as a consequence of its merger/
lots at the time of termination of the joint consolidation with another bank/FI shall
venture; and secure prior Monetary Board approval of
(e) name under which the subdivided said agreement. For that purpose, the
lots shall be registered pending their sale. concerned bank shall submit an application
(2) A jointly-controlled entity, which for Monetary Board approval to the
involves the establishment of a new appropriate department of the SES. The
juridical entity, preferably a corporation application shall be signed by the bank’s
that is separate and distinct from the bank president or officer of equivalent rank and
and the developer. A jointly controlled shall be accompanied by the following
corporation may be established either for documents/information:
the purpose of developing properties of (1) The name of the developer;
banks for immediate sale or converting (2) Name of the principal stockholders
them into earning assets such as hotels and and officers as well as members of the
shopping malls. board of directors of said company;
d. Requirements and limitations in a (3) Relationship of the bank with the
joint venture. A bank desiring to enter into developer, if any;
a JVA with a developer for the purpose of (4) List and brief description of the
developing its ROPAs and/or other properties to be contributed by the bank
properties acquired as a consequence of including their market values, book values
merger/consolidation shall comply with the and the valuation agreed upon under the
following: proposed JVA;
(1) The JVA shall be approved by the (5) Certification by the bank’s
board of directors of the bank. president or officer of equivalent rank that
(2) The bank’s contribution to the joint the JVA is strictly in compliance or will
venture, in whatever form undertaken, strictly comply with the requirements of
shall be limited to ROPAs and properties this Subsection; and
acquired as a consequence of the bank’s (6) Such other documents/information
merger/consolidation with another bank/ that the concerned department of the SES
financial institution. may require.

§§ X394.15 - X395
08.12.31
f. Non-financial allied undertaking. All excess of the value of the capital stock
types of banks are hereby authorized to received by the bank over the book value of
invest in the equities of companies engaged the contributed properties shall be credited
in real estate development as a non- to the account “Deferred Credits”.
financial allied undertaking, subject to the (3) Properties invested in equities of
following conditions: developers shall be booked in accordance
(1) Investments shall be limited to with the PAS: Provided, That the bank shall
ROPAs and other properties acquired as a not recognize income out of the properties
consequence of a bank’s merger/ invested if there is already an existing
consolidation with another bank/FI; subsidiary or affiliate relationship between
(2) Investments shall be subject to the bank and the investee corporation prior
existing Bangko Sentral requirements to the investment, regardless of the agreed
applicable to investments in non-financial valuation of said properties. The excess of
allied undertakings; and the agreed valuation of said properties over
(3) If there is already an existing their book value shall be booked as
subsidiary or affiliate relationship between “Deferred Credits”.
the bank and the investee corporation prior h. Coverage. The provisions of this
to the investment, the bank shall not Subsection shall apply to ROPAs
recognize income out of its invested existing, as well as those which may be
properties. The excess of the value of the acquired by banks in settlement of non-
capital stock received by the bank over the performing o r p a s t d u e l o a n s a n d
book value of its invested properties shall advances outstanding, as of 09 March
be booked as “Deferred Credits”. 2006 and to properties acquired as a
g. Accounting treatment. Accounting consequence of merger or consolidation
treatment of the properties contributed by a which are outstanding in the books of
bank to a joint venture or invested in the banks as of said date.
equities of developers. i. Sanctions. Any violation of the
(1) In a joint venture in the form of a provisions of this Subsection and/or any
jointly controlled operations/undertaking, misrepresentation in the certification and
which does not involve the establishment information required to be submitted to the
of a corporation or other entity, the bank Bangko Sentral under this Subsection shall
shall continue to recognize in its books the subject the bank and the officer or officers
properties contributed to the undertaking. responsible therefore, to the penalties
However, the regular provisioning against provided under Sections 35, 36 and 37 of
probable losses required under existing R. A. No. 7653.
regulations may be discontinued upon (Circular No. 518 dated 09 March 2006)
execution and implementation of the JVA.
(2) In a joint venture in which a Sec. X395 Credit Policies of Government-
corporation is created, the bank shall book Owned Corporations. Government-owned
the properties contributed to the corporations which perform banking or
undertaking as investment pursuant to the credit functions shall coordinate their
provisions of PAS 31. It shall also recognize general credit policies with the Schedule of
its interest in the corporation using the Credit Priorities embodied in Appendix 23.
proportionate consolidation method or the Within the provision of their respective
equity method as long as it continues to have charters, these corporations shall limit their
joint control over the corporation: Provided, credits to the economic activities falling
That the bank shall not recognize income out under Priority II of said schedule to fifty percent
of its contribution to the joint venture. The (50%) of their outstanding loans at any time.

§§ X396 - 1397
14.12.31
Sec. X396 Parcellary Plans on Crop Loans acquisition and development of land and/or
Banks shall require the submission of construction of buildings and structures,
parcellary plans a requisite for granting crop including housing units for sale/lease and/
loans to sugarcane planters. or for use in retail/wholesale, manufacturing
or other income-generating purposes,
Sec. X397 (Reserved) including loans for the land development
and construction of residential properties.
Sec. 1397 Limits on Real Estate Exposures It shall not include loans for
and Other Real Estate Property of UBs/KBs construction of highways, streets, bridges,
1. Real Estate Loan Limit. Total real tunnels, railways, and other infrastructure
estate loans of UB/KBs, excluding Items “a” for public use.
to “d” below, shall not exceed twenty Purchase by banks of receivables under
percent (20%) of the total loan portfolio, net Contract to Sell (CTS) executed between the
of interbank loans: real estate developers and home buyers on
a. Loans extended to individual a with recourse basis shall be considered
households for purposes of financing the loans to real estate developers and shall be
acquisition, construction, and/or classified as commercial real estate loans.
improvement of housing units and Trust departments of UBs/KBs shall be
acquisition of any associated land that is or exempted from the prescribed limit on real
will be occupied by the borrower, regardless estate loans.
of amount; Under existing HUDCC guidelines,
b. Loans extended to land developers/ socialized and low-cost housing loans are
construction companies for the purpose of defined as follows:
development and/or construction of Housing Loan Ceiling
socialized and low-cost residential Package
properties as defined under existing
guidelines of the HUDCC for the Low-cost
implementation of government housing Level 1-A 400,000 and below
(Socialized)
programs, which are intended for sale to
individual households; Level 1-B Above P400,000
to P500,000
c. Loans to the extent guaranteed by
the HGC; and Level 2 Above P500,000
d. Loans to the extent collateralized by to P1,250,000
non-risk assets under existing regulations.
Level 3 Above P1,250,000
For this purpose, real estate loans shall
to P3,000,000
refer to loans granted to:
(1) individual households for the 2. Real Estate Stress Test (REST) Limits
acquisition, construction and/or improvement A prudential limit is set for real estate
of housing units and acquisition of any exposures and other real estate property of
associated land that is or will be occupied by UBs/KBs. Real estate exposures shall refer to:
the borrower, including loans granted to bank a. Real estate loans (RELs), which shall
officers and employees for the same purpose consist of:
which are covered by bank’s fringe benefit (1) Residential real estate loans to
plan and which plan was approved by the individual households for occupancy; and
Monetary Board; and (2) Commercial real estate loans,
(2) land developers/construction which shall refer to loans granted to the
companies and other borrowers for the following:

§§ 1397 - 2397
14.12.31
(a) Individuals; The prudential REST limits, which shall

(b) Land developers/construction be complied with at all times by UBs/KBs,
companies; and are six percent (6%) of Common Equity
(c) other borrowers, such as Tier I (CET1) capital ratio and ten percent
(i) real estate brokers; (10%) of risk-based capital adequacy ratio,
(ii) real estate lessors; on a solo and consolidated basis, under the
(iii) property management companies; prescribed write-off rate.
(iv) holding companies; and A UB/KB which does not meet either
(v) others, including other corporate or both the REST limits shall be directed to
borrowers; explain why its exposures do not warrant
for purposes of financing real estate immediate remedial action. The Monetary
activities; Board, upon the report of the appropriate
b. Investments in debt securities issued supervising department of the SES, shall
by land developers/construction companies determine whether the UB/KB has been
and other corporate borrowers, such as real able to render sufficient explanation,
estate brokers, real estate lessors, property otherwise, the UB/KB shall be directed to
management companies and holding submit an action plan, within thirty (30)
companies, for purposes of financing real calendar days from date of notification, to
estate activities; and meet the REST limits within a reasonable
c. Investments in equity securities time frame.
issued by land developers/construction A UB/KB which fails to submit an action
companies and other corporate borrowers, plan or persistently breaches the REST limits
such as real estate brokers, real estate lessors due to non-compliance with the
and property management companies, for commitments in its submitted action plan
purposes of financing real estate activities. may be considered to be engaging in unsafe
Equity securities issued by holding and unsound practice, to be determined in
companies are likewise covered, if proceeds accordance with Section 56 of R.A. No.
from the issue shall be/has been invested 8791 as implemented by Section X149, and
by the holding company in its subsidiary shall subject the UB/KB to appropriate
corporation/s that is/are engaged in real sanctions.
estate activities. (As amended by Circular No. 839 dated 27 June 2014,
Real estate exposures shall not include M-2012-046 dated 21 September 2012, M-2011-035 dated
23 June 2011, Circular No. 600 dated 04 February 2008)
loans and investments in debt and equity
securities for construction of highways,
Sec. 2397 Limits on Real Estate Exposures
streets, bridges, tunnels, railways, and other
and Other Real Estate Property of TBs. A
infrastructure for public use.
prudential limit is set for real estate
Other real estate property shall include
exposures as defined under Item 2 of Section
those recorded under Real and Other
1397, and other real estate property of TBs.
Properties Acquired and Non-Current
Other real estate property shall include
Assets Held for Sale.
those recorded under Real and Other
For this purpose, a stress test will be
Properties Acquired and Non-Current Assets
undertaken on a UB’s/KB’s REEs (Real Estate
Held for Sale. For this purpose, a stress test
Exposures) and other real estate property
will be undertaken on a TB’s REEs and other
under an assumed write-off rate of twenty-
real estate property under an assumed write-
five percent (25%).
off rate of twenty five percent (25%).

§§ 2397 - X398.5
14.12.31
The prudential REST limits which shall operation on monetary aggregates, the price
be complied with at all times by TBs are: level and the balance of payments, pursuant
a. six percent (6%) of Common Equity to Section 123 of R.A. No. 7653. The
Tier I capital, for TBs that are subsidiaries guidelines that will govern the domestic
of UBs/KBs; borrowings of LGUs in line with R.A. No.
b. six percent (6%) of Tier I capital, for 7653 (The New Central Bank Act), as well
stand-alone TBs1; and as other pertinent laws/regulations is shown
c. ten percent (10%) of risk-based in Appendix 57.
capital adequacy ratio for all TBs. (Circular No.769 dated 26 September 2012, as amended by
Circular No. 819 dated 12 November 2013)
A TB which does not meet either or both
the REST limits shall be directed to explain § X398.2 Debt service limit on local
why its exposures do not warrant government borrowings. To ensure the
immediate remedial action. The Monetary effective implementation of the debt service
Board, upon the report of the appropriate limit on local government borrowings as
supervising department of the SES, shall stipulated in Section 324 (b) of the Local
determine whether the TB has been able to Government Code of 1991, all banks shall
render sufficient explanation, otherwise, the require each borrowing LGU to present a
TB shall be directed to submit an action plan, certificate of its debt service and borrowing
within thirty (30) calendar days from date capacity, duly certified by the Bureau of
of notification, to meet the REST limits within Local Government Finance – Department
a reasonable time frame. of Finance (BLGF DOF).
A TB which fails to submit an action (CL-2012-030 dated 29 April 2012, Circular No. 769 dated
plan or persistently breaches the REST limits 26 September 2012)
due to non-compliance with the
commitments in its submitted action plan §X398.3 - §X398.4 (Reserved)
may be considered to be engaging in unsafe
and unsound practice, to be determined in §X398.5 Enforcement actions. Banks
accordance with Section 56 of R.A. No. which will release, in full or partial
8791, as implemented by Section X149, and amounts, borrowings within the Philippines
shall subject the TB to appropriate sanctions. of the Government or any of its political
(Circular No. 839 dated 27 June 2014) subdivisions or instrumentalities, without
the submission by the borrower of the
Sec. 3397 (Reserved) Monetary Board opinion on the probable
effects of the proposed borrowings on
Sec. X398 Monetary Board Opinion on monetary aggregates, the price level and the
Domestic Borrowings of Government balance of payments as required under
Section 123 of R.A. No. 7653:
§ X398.1 Domestic borrowings by local a. First offense – Monetary penalty
government units pursuant to Section 123 computed in accordance with Appendix 67,
of R.A. No. 7653. This Section shall govern with stern warning to the bank that
the borrowings of LGUs within the subsequent offenses shall be dealt with
Philippines, the procedures to be observed, stiffer non-monetary sanctions;
as well as documentary requirements, for b. Second offense – Suspension of the
requests for Monetary Board opinion on the lending operations of the erring bank to the
probable effects of the proposed credit Government or any of its political
1
TBs that are not subsidiaries of UBs and KBs

§§ X398.5 - X399
13.12.31
subdivisions or instrumentalities for a L. GENERAL PROVISION

period of six (6) months, and written ON SANCTIONS
reprimand to the officer/s or members of
the committee and/or board of directors Sec. X399 General Provision on Sanctions
who approved the loan; and Any violation of the provisions of this Part
c. Third offense – Suspension of the shall be subject to Sections 36 and 37 of
lending operations of the erring bank to R.A. No. 7653.
the Government or any of its political The guidelines for the imposition of
subdivision or instrumentalities, for monetary penalty for violations/offenses
one (1) year. with sanctions falling under Section 37 of
(Circular No. 797 dated 22 May 2013) R. A. No. 7653 on banks, their directors
and/or officers are shown in Appendix 67.

§ X401
14.12.31
PART FOUR
TRUST, OTHER FIDUCIARY BUSINESS AND INVESTMENT

MANAGEMENT ACTIVITIES
Section X401 Statement of Principles proprietary assets and from one (1) fiduciary/
The cardinal principle common to all trust trust/investment management account to
and other fiduciary relationships is fidelity. another.
Policies predicated upon this principle shall e. Keeping and rendering accounts. A
be directed towards observance of the true and accurate account or record of
following: transactions entered into shall be kept.
a. Prudent administration. The trust, Reports on the trust, investment management
investment management and other fiduciary and other fiduciary accounts shall be
accounts shall be administered in rendered to the trustor, principal, beneficiary,
conformity with the intention and purpose or other party in interest, or the court
of the client as manifested in the terms of concerned, or any party duly designated by
the agreement, and with the skill, care, a court order, as the case may be, in accordance
prudence and diligence necessary under the with Secs. X421 and X425. Likewise, all
circumstance then prevailing that a prudent material facts within the knowledge or
man acting in like capacity and familiar with reasonably discoverable by the TE, particularly
such matters would exercise in the conduct information that would enable clients to
of an enterprise of like character and with make well-informed decisions, shall be
similar aims. promptly transmitted/relayed to clients for
b. Undivided loyalty and utmost care. them to protect their interests.
In the discharge of fiduciary responsibility, Furthermore, practices shall be carried
the interests of clients shall be placed above out in accordance with the basic standards
those of the bank. Clear policies and (Appendix 83) and Risk Management
procedures shall be developed in dealing Guidelines (Appendix 83a) for trust, other
with conflict of interest situations. The fiduciary and investment management
fiduciary assets shall be objectively and accounts.
fairly administered, invested and distributed A bank authorized to engage in trust
giving due regard to the beneficiaries’ and fiduciary business is under no
respective interests. obligation, either legal or moral, to accept
c. Non-delegation of responsibilities. any such business being offered nor has it
The administration of the trust, investment the right to accept if the same is contrary to
management, or fiduciary responsibilities or law, rules, regulations, public order and
the performance of acts that should be public policy. It shall advertise its services
personally performed shall not be delegated in a dignified manner and enter such
as the client’s confidence is reposed on the business only when demand for such service
trust entity (TE). is evident, when specially equipped to
d. Preserving and protecting property. render such service and upon full
Reasonable care and diligence shall be appreciation of the responsibilities involved.
observed to preserve and protect the It shall be ready and willing to give full
property entrusted. Fiduciary assets shall be disclosure of the services being offered and
kept legally separate and distinct from shall conduct its dealing with transparency.
Manual of Regulations for Banks Part IV - Page 1

§§ X401 - X403
14.12.31
Harmonious relationship shall likewise be including investment management activities;

pursued with other professions to achieve B. Investment Management Activities
the common goal of mutual service to the shall apply to banks without trust authority
public and protection of its interest. but with authority to engage in investment
Banks may not receive or hold as trustee, management activities; and
agent, administrator, financial manager, or C. General Provisions shall apply to both.
other similar capacity, any fund or money
from the Government and government Sec. X403 Definitions. For purposes of
entities, except government financial regulating the operations of trust and other
institutions. Government-owned banks may fiduciary business and investment
receive or hold as trustee, agent, management activities, unless the context
administrator, financial manager, or other clearly connotes otherwise, the following
similar capacity, the following: shall have the meaning indicated.
a. Funds of local government units a. Trust entity (TE) shall refer to a:
(LGUs) which are expected to be available (1) bank or an NBFI, through its
for investment purposes for a relatively long specifically designated business unit to
period of time: Provided, further, That the perform trust functions; or
amounts held in trust or otherwise (2) trust corporation, authorized by the
managed/advised for and in behalf of the Bangko Sentral to engage in trust and other
LGUs shall be invested only in government fiduciary business under Section 79 of R.A.
securities, specifically, evidences of No. 8791 (The General Banking Law of
indebtedness of the National Government, 2000) or to perform investment management
the Bangko Sentral and other evidences of services under Section 53 of R.A. No. 8791.
indebtedness or obligations of government b. Trust business shall refer to any
entities, the servicing and repayment of activity resulting from a trustor-trustee
which are fully guaranteed by the National relationship (trusteeship) involving the
Government; and appointment of a trustee by a trustor for the
b. Funds of government and government administration, holding, management
entities which are authorized by special laws of funds and/or properties of the trustor by
to be placed in trust. the trustee for the use, benefit or advantage
(As amended by Circular Nos.828 dated 11 March 2014, 766 of the trustor or of others called
dated 17 August 2012, 721 dated 13 May 2011 and 618 dated 20 beneficiaries.
August 2008) c. Other fiduciary business shall refer
to any activity of a trust-licensed bank
Sec. X402 Scope of Regulations. These resulting from a contract or agreement
regulations shall govern the grant of whereby the bank binds itself to render
authority to and the management, services or to act in a representative
administration and conduct of trust, other capacity such as in an agency, guardianship,
fiduciary business and investment administratorship of wills, properties and
management activities (as these terms are estates, executorship, receivership, and
defined in Sec. X403) of banks. other similar services which do not create
The regulations are divided into three or result in a trusteeship. It shall exclude
(3) Sub-Parts where: collecting or paying agency arrangements
A. Trust and Other Fiduciary Business and similar fiduciary services which are
shall apply to banks authorized to engage inherent in the use of the facilities of the
in trust and other fiduciary business other operating departments of said bank.
Part IV - Page 2 Manual of Regulations for Banks

§ X403
12.12.31
Investment management activities, which called an agent, under a contract to enter

are considered as among other fiduciary into transactions in his behalf.
business, shall be separately defined in the m. Agent shall refer to a person who
succeeding item to highlight its being a acts in representation or on behalf of
major source of fiduciary business. another with the latter’s authority.
d. Investment management activity n. Trust department shall refer to then
shall refer to any activity resulting from a department, office, unit, group, division or
contract or agreement primarily for any aggrupation which carries out the trust
financial return whereby the bank (the and other fiduciary business of a bank.
investment manager) binds itself to handle o. Trust officer shall refer to the
or manage investible funds or any designated head or officer-in-charge of the
investment portfolio in a representative trust department.
capacity as financial or managing agent, p. Trust account shall refer to an
adviser, consultant or administrator of account where transactions arising from a
financial or investment management, trusteeship are kept and recorded.
advisory, consultancy or any similar q. Common trust fund (CTF) shall
arrangement which does not create or refer to a fund maintained by a bank
result in a trusteeship. authorized to perform trust functions
e. Trust is a relationship or an under a written and formally established
arrangement whereby a person called a plan, exclusively for the collective
trustee is appointed by a person called a investment and reinvestment of certain
trustor to administer, hold and manage money representing participation in the plan
funds and/or property of the trust or for the received by it in its capacity as the trustee.
benefit of a beneficiary. r. Fiduciary account shall refer to an
f. Trust agreement is an instrument account where transactions arising from
in writing covering the terms and any of the other fiduciary businesses are
conditions of the trust. kept and recorded.
g. Trustee is any person who holds s. Investment Manager shall refer to any
legal title to the funds and/or property of a person or entity engaged in investment
trust. management activities as herein defined.
h. Trustor is any person who creates t. Investment Management Department
a trust. shall refer to the department, unit, group,
i. Beneficiary is any person for division or any aggrupation which carries
whose benefit a trust is created. out the investment management activities of
j. Fiduciary shall refer to any person a bank that does not have an authority to
or entity engaged in any of the other engage in trust and other fiduciary
fiduciary business as herein defined where business.
no trustor-trustee relation exists. u. Investment Management Officer shall
k. Agency shall refer to a contract refer to the designated head or officer-in-
whereby a person binds himself to charge of the investment management
render some service or to do something in department of a bank which does not have
representation or on behalf of another, with the authority to engage in trust and other
the consent or authority of the latter. fiduciary business.
l. Principal shall refer to the person v. Investment Management Account
who grants authority to another person shall refer to an account where

§§ X403 - X404.3
12.12.31
transactions arising from investment with the appropriate department of the SES.
management activities are kept and The application shall be signed by the bank’s
recorded. president or officer of equivalent rank and
(As amended by Circular No.766 dated 17 August 2012) shall be accompanied by the following
documents:
a. Certified true copy of the resolution
A. TRUST AND OTHER of the institution’s board of directors
FIDUCIARY BUSINESS authorizing the application; and
b. A certification signed by the
Sec. X404 Authority to Perform Trust and president or the officer of equivalent rank
Other Fiduciary Business. With prior that the institution has complied with all
approval of the Monetary Board, banks may conditions/prerequisites for the grant of
engage in trust and other fiduciary business authority to perform trust and other
under Chapter VII of R.A. No. 337, as fiduciary business.
amended.
If a bank is found to engage in § X404.2 Required capital. Banks
unauthorized trust and other fiduciary applying for authority to perform trust and
business and/or investment management other fiduciary business must have
activities, whether as its primary, secondary minimum capital accounts as follows:
or incidental business, the Monetary Board UBs/KBs. The amount required under
may impose administrative sanctions against Sec. X111 or such amount as may be
such bank or its principal officers and/or required by the Monetary Board in the
majority stockholders or proceed against future.
them in accordance with law. Branches of foreign banks. The amount
The Monetary Board may take such action required under Sec. X105 or such amount
as it may deem proper such as, but may not as may be required by the Monetary Board
be limited to, requiring the transfer or in the future.
turnover of any trust and other fiduciary and/ TBs. P650.0 million or such amounts
or investment management account (IMA) as may be required by the Monetary Board
to duly incorporated and licensed entities in the future.
of the choice of the trustor, beneficiary or Banks authorized to perform and are
client, as the case may be. actually performing trust and other fiduciary
No bank shall advertise or represent business prior to 20 August 2002 whose
itself as being engaged in trust and other capital accounts are lower than the
fiduciary business or in investment management above-prescribed minimum capital
activities or represent itself as trustee or accounts shall, before declaring any
investment manager or use words of similar dividend, carry to surplus at least fifty
import; and/or use in connection with its percent (50%) of their net income from all
business title the words trust, trust corporation, operations since the last preceding dividend
trust company, trust plan or words of similar until such time that their capital accounts
import, without having obtained the meet the above requirement.
required authority to do so.
§ X404.3 Prerequisites for engaging in
§ X404.1 Application for authority to trust and other fiduciary business. Before
perform trust and other fiduciary business it may engage in trust and other fiduciary
Banks desiring to perform trust and other business, a bank shall comply with the
fiduciary business shall file an application following requirements:

§ X404.3
09.12.31
a. The applicant has been duly licensed (2) attendance by every member of the
or incorporated as a bank or created as such board of directors in a special seminar for
by special law or charter; board of directors conducted or accredited
b. The articles of incorporation or by the Bangko Sentral;
governing charter of the institution shall (3) the ceilings on credit
include among its powers or purposes, accommodations to DOSRI;
acting as trustee or administering any trust (4) liquidity floor requirements for
or holding property in trust or on deposit government deposits;
for the use, or in behalf of others; (5) single borrower’s limit; and
c. The by-laws of the institution shall (6) investment in bank premises and
include among other things, provisions on other fixed assets;
the following; h. It maintains adequate provisions for
(1) The organization plan or structure probable losses commensurate to the
of the department, office or unit which shall quality of its asset portfolio but not lower
conduct the trust and other fiduciary than the required valuation reserves as
business of the institution; determined by the Bangko Sentral;
(2) The creation of a trust committee, i. It does not have float items
the appointment of a trust officer and outstanding for more than sixty (60)
subordinate officers of the trust department; calendar days in the “Due From/To Head
and Office/Branches/Other Offices” accounts
(3) A clear definition of the duties and and the “Due from Bangko Sentral” account
responsibilities as well as the line and exceeding one percent (1%) of the total
staff functional relationships of the various resources as of date of application;
units, officers and staff within the j. It has no past due obligations with the
organization; Bangko Sentral or with any government
d. The bank’s operation during the financial institution;
preceding calendar year and for the period k. It has established a risk management
immediately preceding the date of system appropriate to its operations
application has been profitable; characterized by clear delineation of
e. The bank is well capitalized whose responsibility for risk management,
risk-based capital adequacy ratio is not adequate risk measurement systems,
lower than twelve percent (12%) at the time appropriately structured risk limits,
of filing the application; effective internal controls and complete,
f. It has not incurred net weekly reserve timely and efficient risk reporting system;
deficiencies during the eight (8)-week l. It has a CAMELS composite rating of
period immediately preceding the date of at least “3” in the last regular examination
application; with management rating of not lower than
g. It has generally complied with “3”; and
banking laws, rules and regulations, orders m. It has neither unpaid assessment due
or instructions of the Monetary Board and/ nor past due obligations with the PDIC.
or Bangko Sentral Management in the last Compliance with the foregoing as well
two (2) preceding examinations prior to the as with other requirements under existing
date of application, particularly on the regulations shall be maintained up to the
following: time the trust license is granted. A bank that
(1) election of at least two (2) fails in this respect shall be required to show
independent directors; compliance for another test period of the

§§ X404.3 - 2404
12.12.31
same duration. (2) administration of properties.

(As amended by Circular No. 674 dated 10 December 2009) c. Application for authority to engage
in limited trust business. A TB desiring to
§ X404.4 Pre-operating requirements engage in a limited trust business shall file
A bank authorized to engage in trust and an application with the Centralized
other fiduciary business shall, before Application and Licensing Group (CALG)
engaging in actual operations, submit to the of the SES. The application shall be signed
Bangko Sentral the following: by the bank president or officer of
a. Government securities acceptable to equivalent rank and shall be accompanied
the Bangko Sentral amounting to P500,000 by the following documents:
as minimum basic security deposit for the (1) Certified true copy of the resolution
faithful performance of trust and other of the bank’s board of directors authorizing
fiduciary duties required under Subsec. the application; and
X405.1; (2) Certification signed by the bank
b. Organization chart of the trust department president or officer of equivalent rank that
which shall carry out the trust and other the bank has complied with all the
fiduciary business of the bank; and conditions/pre-requisites for the grant of
c. Names and positions of individuals authority to engage in a limited trust
designated as chairman and members of the business.
trust committee, trust officer and other d. Required capital. A TB applying for
subordinate officers of the trust department authority to engage in limited trust business
with their respective bio-data and statement must have minimum capital accounts
of duties and responsibilities. under existing regulations or P100.0
million, whichever is higher, or such
Sec. 1404 (Reserved) amounts as may be required by the
Monetary Board in the future.
Sec. 2404 Grant of Authority to Engage in e. Pre-requisites for the grant of authority
Limited Trust Business to Thrift Banks to engage in limited trust business. A TB
a. Statement of policy. It is hereby applying for authority to engage in limited
declared the policy of the Bangko Sentral trust business must comply with the
to promote healthy competition in order to following requirements:
improve the delivery of banking services (1) The bank’s operation during the
especially in the countryside. Towards this preceding calendar year and for the period
end, authority to engage in limited trust immediately preceding the date of
business shall be granted to qualified TBs application has been profitable;
which meet the minimum capital required (2) The bank is well capitalized whose
for the grant of such authority, among others. risk-based CAR is not lower than twelve
b. Scope of limited trust business percent (12%) at the time of filing the
Limited trust business shall be confined to: application;
(1) court trusts or trusts under orders of (3) It has not incurred net weekly
court of competent jurisdiction, such as reserve deficiencies within eight (8) weeks
acting as: immediately preceding the date of
(a) executor or administrator of a will; application;
and (4) It has generally complied with
(b) guardian of the estate of a minor or banking laws, rules and regulations, orders
incompetent; and or instructions of the Monetary Board and/

§ 2404
12.12.31
or Bangko Sentral Management in the last trust business. A TB authorized to engage

two (2) preceding examinations prior to the in limited trust business shall comply with
date of application, more particularly: the following requirements:
(a) election of at least two (2) (1) The articles of incorporation of the
independent directors; bank shall include among its powers or
(b) attendance by every member of the purposes, acting as trustee or administering
board of directors in a special seminar for trust or holding property in trust or on
board of directors conducted or accredited deposit for the use, or in behalf of others;
by the Bangko Sentral; (2) The by-laws of the bank shall include
(c) the ceilings on credit among others, provisions on the following:
accommodations to DOSRI; (a) The organization plan or structure of
(d) liquidity floor requirements for the department, office or unit which shall
government deposits; conduct the trust and other fiduciary
(e) SBL; and business of the bank;
(f) investment in bank premises and (b) The creation of a trust committee, to
other fixed assets; be composed of at least three (3) members
(5) It maintains adequate provisions for who are all members of the board of
probable losses commensurate to the directors and who are not operating
quality of its asset portfolio but not lower officers of the bank, and at least two (2) of
than the required valuation reserves as whom are independent directors: Provided,
determined by the Bangko Sentral; That if the bank decides to have a trust
(6) It does not have float items committee composed of at least five (5)
outstanding for more than sixty (60) members, the provisions of Subsec. X406.2
calendar days in the “Due From/To Head shall apply;
Office/Branches/Offices” accounts and the (c) The appointment of a trust officer and
“Due From Bangko Sentral” account exceeding subordinate officers of the trust department,
one percent (1%) of the total resources as office or unit: Provided, That the trust
of date of application; officer shall have the following:
(7) It has no past due obligations with (i) At least two (2) years of actual
the Bangko Sentral or with any government experience in trust operations; or
FI; (ii) At least one (1) year of actual
(8) It has established a risk management experience in trust operations and:
system appropriate to its operations 1) completion of a training program in
characterized by clear delineation of trust, other fiduciary business, or investment
responsibility for risk management, adequate management activities acceptable to the
risk measurement systems, appropriately Bangko Sentral; or
structured risk limits, effective internal 2) completion of a relevant global or
controls and complete, timely and efficient local professional certification program; or
risk reporting system; (iii) At least two (2) years of actual
(9) It has a CAMELS composite rating of experience as officer of a bank/NBFI or
at least “3” in the last regular examination related activities; and
with Management rating not lower than 1) completion of a training program in
“3”; and trust, other fiduciary business, or investment
(10) It has neither unpaid assessment management activities acceptable to the
due nor past due obligations with the PDIC; Bangko Sentral; or
f. Requirements for engaging in limited 2) completion of a relevant global or

§§ 2404 - 3404
12.12.31
local professional certification program; acting as:

(d) A clear definition of the duties and (a) executor or administrator of a will; and
responsibilities as well as the line and staff (b) guardian of the estate of a minor or
functional relationships of the various units, incompetent; and
officers and staff within the organization. (2) administration of properties.
g. Administration of properties held in c. Application for authority to engage
trust. The properties held in trust or other in limited trust business. An RB desiring to
fiduciary capacity shall be administered in engage in a limited trust business shall file
accordance with the terms of the instrument an application with the CALG of the SES.
creating the trust and/or order of the court. The application shall be signed by the bank
Unless otherwise directed in writing by the president or officer of equivalent rank and
court, investments of fiduciary funds shall shall be accompanied by the following
be limited to: documents:
(1) Bank deposits; and (1) Certified true copy of the resolution
(2) Evidences of indebtedness of the of the bank’s board of directors authorizing
Republic of the Philippines or of the Bangko the application; and
Sentral, and any other evidences of (2) Certification signed by the bank
indebtedness or obligations the servicing president or officer of equivalent rank that
and repayment of which are fully guaranteed the bank has complied with all the
by the Republic of the Philippines; conditions/pre-requisites for the grant of
h. Applicability of the rules and authority to engage in a limited trust
regulations on trust, other fiduciary business business.
and investment management activities. The d. Required capital. An RB applying for
provision of this Part which are not authority to engage in limited trust business
inconsistent with the provisions of this must have minimum capital accounts of
Section shall apply to TBs authorized to P100.0 million, or such amounts as may be
engage in limited trust business. required by the Monetary Board in the
((Circular No. 583 dated 24 September 2007, as amended by future.
Circular Nos. 766 dated 17 August 2012 and 674 dated 10 e. Pre-requisites for the grant of
December 2009)
authority to engage in limited trust business
An RB applying for authority to engage in
Sec. 3404 Grant of Authority to Engage in
limited trust business must comply with the
Limited Trust Business to Rural Banks
following requirements:
a. Statement of policy. It is hereby
(1) The bank’s operation during the
declared the policy of the Bangko Sentral
preceding calendar year and for the period
to promote healthy competition in order to
immediately preceding the date of
improve the delivery of banking services
application has been profitable;
especially in the countryside. Towards this
(2) The bank is well capitalized whose
end, authority to engage in limited trust
risk-based CAR is not lower than twelve
business shall be granted to qualified RBs
percent (12%) at the time of filing the
which meet the minimum capital required
application;
for the grant of such authority, among others.
(3) It has not incurred net weekly
b. Scope of limited trust business
reserve deficiencies within eight (8) weeks
Limited trust business shall be confined to:
immediately preceding the date of
(1) court trusts or trusts under orders of
application;
court of competent jurisdiction, such as
(4) It has generally complied with

§ 3404
12.12.31
banking laws, rules and regulations, orders in limited trust business shall comply with
or instructions of the Monetary Board and/ the following requirements:
or Bangko Sentral Management in the last (1) The articles of incorporation of the
two (2) preceding examinations prior to the bank shall include among its powers or
date of application, more particularly: purposes, acting as trustee or administering
(a) election of at least two (2) trust or holding property in trust or on
independent directors; deposit for the use, or in behalf of others;
(b) attendance by every member of the (2) The by-laws of the bank shall include
board of directors in a special seminar for among others, provisions on the following:
board of directors conducted or accredited (a) The organization plan or structure of
by the Bangko Sentral; the department, office or unit which shall
(c) the ceilings on credit conduct the trust and other fiduciary
accommodations to DOSRI; business of the bank;
(d) liquidity floor requirements for (b) The creation of a trust committee, to
government deposits; be composed of at least three (3) members
(e) SBL; and who are all members of the board of
(f) investment in bank premises and directors and who are not operating officers
other fixed assets; of the bank, and at least two (2) of whom
(5) It maintains adequate provisions for are independent directors: Provided, That if
probable losses commensurate to the quality the bank decides to have a trust committee
of its asset portfolio but not lower than the composed of at least five (5) members, the
required valuation reserves as determined provisions of Subsec. X406.2 shall apply;
by the Bangko Sentral; (c) The appointment of a trust officer and
(6) It does not have float items subordinate officers of the trust department,
outstanding for more than sixty (60) calendar office or unit: Provided, That the trust officer
days in the “Due From/To Head Office/ shall have the following:
Branches/Offices” accounts and the “Due (i) At least two (2) years of actual
From Bangko Sentral” account exceeding experience in trust operations; or
one percent (1%) of the total resources as (ii) At least one (1) year of actual
of date of application; experience in trust operations and:
(7) It has no past due obligations with 1) completion of a training program in
the Bangko Sentral or with any government FI; trust, other fiduciary business, or investment
(8) It has established a risk management management activities acceptable to the
system appropriate to its operations Bangko Sentral;or
characterized by clear delineation of 2) completion of a relevant global or
responsibility for risk management, adequate local professional certification program; or
risk measurement systems, appropriately (iii) At least two (2) years of actual
structured risk limits, effective internal experience as officer of a bank/NBFI or
controls and complete, timely and efficient related activities and:
risk reporting system; 1) completion of a training program in
(9) It has a CAMELS composite rating of trust, other fiduciary business, or investment
at least “3” in the last regular examination management activities acceptable to the
with Management rating not lower than Bangko Sentral; or
“3”; and 2) completion of a relevant global or
(10) It has neither unpaid assessment local professional certification program;
due nor past due obligations with the PDIC. (d) A clear definition of the duties and
f. Requirements for engaging in limited responsibilities as well as the line and staff
trust business. An RB authorized to engage functional relationships of the various units,

§§ 3404 - X405.2
15.10.31
officers and staff within the organization. of PERA Administrator shall be separately
g. Administration of properties held in accounted for and calculated as prescribed
trust. The properties held in trust or other under Section X960 and Appendix 34a of
fiduciary capacity shall be administered in this Manual.
accordance with the terms of the instrument (As amended by Circular Nos. 878 dated 22 May 2015 and 509
creating the trust and/or order of the court. dated 01 February 2006)
Unless otherwise directed in writing by the
court, investments of fiduciary funds shall § X405.2 Eligible securities.
be limited to: Government securities which shall be
(1) Bank deposits; and deposited in compliance with the above
(2) Evidences of indebtedness of the basic security deposit shall consist of:
Republic of the Philippines or of the Bangko a. Evidences of indebtedness of the
Sentral, and any other evidences of Republic of the Philippines and of the
indebtedness or obligations the servicing and Bangko Sentral and any other evidences of
repayment of which are fully guaranteed by indebtedness or obligations the servicing
the Republic of the Philippines; and repayment of which are fully guaranteed
h. Applicability of the rules and by the Republic of the Philippines; and such
regulations on trust, other fiduciary business other kinds of securities which may be
and investment management activities. The declared eligible by the Monetary Board:
provision of this Part which are not Provided, That such securities shall be free,
inconsistent with the provision of this unencumbered, and not utilized for any
Section shall apply to RBs authorized to other purpose: Provided, further, That such
engage in limited trust business. securities shall have remaining maturity of
(Circular No. 583 dated 24 September 2007, as amended by not more than three (3) years from the date
Circular Nos. 766 dated 17 August 2012 and 674 dated 10 of deposit with the Bangko Sentral; and
December 2009) b. NDC Agri-Agra ERAP Bonds which
are not being used as alternative
Sec. X405 Security for the Faithful compliance with P.D. No. 717. The
Performance of Trust and Other Fiduciary requirement that the securities used shall
Business. have a remaining maturity of not more than
three (3) years shall not apply.
§ X405.1 Basic security deposit. A bank c. Five (5)- and Ten (10)-year SPTBs to
authorized to engage in trust and other finance the CARP-related expenditures,
fiduciary business shall deposit with the provided such bonds shall not be
Bangko Sentral eligible government hypothecated in any way or earmarked for
securities as security for the faithful any other purpose and they meet the three
performance of its trust and other fiduciary (3)-year remaining maturity requirement to
duties equivalent to at least one percent (1%) ensure that such bonds are liquid.
of the book value of the total volume of trust, d. Securities backed by the unreleased
other fiduciary and investment management IRAs of LGUs (issued by a Special Purpose
assets: Provided, That at no time shall such Trust administered by the DBP under the
deposit be less than P500,000. IRA Monetization Program of the Union of
Scripless securities under the Registry Local Authorities of the Philippines) the
of Scripless Securities (RoSS) System of the release of which IRA on scheduled date of
Bureau of Treasury (BTr) may be used as payment has been certified by the DBM as
basic security deposit for trust and other not being subject to any conditionalities:
fiduciary duties using the Guidelines Provided, That such securities shall be
enumerated in Appendix 34 of this Manual. eligible only to the extent of the present
The security for the faithful performance value of the bond computed using the

§§ X405.2 - X405.4
08.12.31
original yield to maturity (as of auction/ The base amount for the basic security
issue date): Provided, further, That for deposit shall be the average of the month-
reserve for trust and other fiduciary duties, end balances of total trust, investment
the remaining maturities of the securities management and other fiduciary assets of
shall not exceed three (3) years; and the immediately preceding calendar quarter.
e. Zero Coupon Bond Issue by the HGC
of up to P7.0 billion five (5)-year regular § X405.4 Compliance period; sanctions.
series and up to P3.0 billion seven (7)-year The trustee or fiduciary shall have thirty (30)
special series to finance its guaranty calendar days after the end of every calendar
servicing of socialized and low-cost quarter within which to deposit with the
housing projects: Provided, That they meet Bangko Sentral the securities required under
the three (3)-year remaining maturity this Section.
requirement to ensure that such bonds are The following sanctions shall be
liquid: Provided, further, That such bonds imposed for any deficiency in the basic
shall qualify as eligible reserve for trust and security deposit for the faithful
other fiduciary duties only to the extent of performance of trust, investment
the present value of the bond computed management and other fiduciary duties:
using the original yield to maturity (as of a. On the bank:
auction/issue date). i. Monetary penalty/ies:
f. Tobacco Excise Tax Receivable
Monetization Program Investment Offense Third and
Certificates (TEXTR Certificates) backed by Trust First Second subsequent
receivables representing the unreleased portion Asset Size offense(s)
of the obligation of the National Government TBs/RBs with
to its LGUs for their share of the Tobacco Limited Trust P300.00 P400.00 P500.00
Excise Taxes under R.A. No. 7171 amounting Authority
to P1.85 billion and covering the years 2001 Up to
and 2002: Provided, That such securities P500 P600.00 P700.00 P800.00
shall be eligible only to the extent of the million
UBs/KBs/TBs with Full Trust Authority and with Trust Assets of
present value of the securities computed Above

using the original yield to maturity as of P500
Policy per calendar day
auction/issue date. million P1,000.00 P1,250.00 P1,500.00

g. Securities received, pursuant to the but not
Domestic Debt Exchange Offer of the Republic exceeding
of the Philippines, in exchange for securities P1 billion
that are eligible reserves for trust duties. Above
(As amended by Circular No. 509 dated 01 February 2006) P1 billion
but not P2,000.00 P3,000.00 P4,000.00
§ X405.3 Valuation of securities and exceeding
basis of computation of the basic security P10 billion
deposit requirement. For purposes of Above
determining compliance with the basic P10 billion
security deposit under this Section, the but not P5,000.00 P6,000.00 P7,000.00
amount of securities so deposited shall be exceeding
based on their book value, that is, cost as P50 billion
increased or decreased by the corresponding Above
discount or premium amortization. P50 billion P8,000.00 P9,000.00 P10,000.00

§§ X405.4 - X405.5
15.10.31
ii. Non-monetary penalty beginning § X405.5 Reserves 1 against peso-

with the third offense (all banks) - Prohibition denominated common trust funds and
against the acceptance of new trust and other trust and other fiduciary accounts -
fiduciary accounts, and from renewing others.
expiring trust and other fiduciary contracts a. Reserves against peso-denominated
up to the time the violation is corrected. CTFs. In addition to the basic security
b. On the trust officer and/or other deposit, a bank authorized to engage in trust
officer(s) responsible for the deficiency/non- and other fiduciary business shall maintain
compliance: reserves on:
(1) First offense - warning that subsequent (1) peso-denominated CTF; and
violations shall be dealt with more severely; (2) such other managed peso funds
(2) Second offense - written reprimand which partake the nature of collective
with a stern warning that subsequent investment of a peso-denominated CTF as
violations shall be subject to suspension; may be indicated by the presence of the
(3) Third offense - thirty (30) calendar following features:
day-suspension without pay; and (a) The funds are composed of
(4) Subsequent offense(s) - sixty (60) contributions from two (2) or more investors;
calendar day-suspension without pay. (b) The funds are managed/administered
For purposes of determining the frequency as a vehicle for collective investment and
of the violation, the bank’s compliance profile reinvestment;
for the immediately preceding three (3) years (c) The trustee/administrator/agent has
or twelve (12) quarters will be reviewed: the exclusive management and control over
Provided, That for purposes of determining the funds and the sole right at any time to
appropriate penalty on the trust officer and/or sell, convert, invest, exchange, transfer or
other responsible officer(s), any offense otherwise change or dispose of the assets
committed outside the preceding three (3) year comprising the funds; and
or twelve (12) quarter- period shall be (d) Investments/contributions to, or
considered as the first offense: Provided, withdrawals from, the funds are being
further, That in the case of trust officer, all allowed at anytime or as of a fixed date in
offenses committed by him in the past as trust the future, and/or the income, net of all
officer of other institution(s) shall also be expenses incurred in the management of the
considered: Provided, finally, That if the fund plus the fee of the trustee/administrator/
offense cannot be attributed to any other officer agent, are being distributed among the
of the bank, the trust officer shall be participants of the funds, without the need
automatically held responsible since the to liquidate all assets of the funds.
ultimate responsibility for ensuring compliance The required reserves against
with the regulation rests upon him, as evidence peso-denominated CTFs and such other
may warrant. managed peso funds which partake the
(As amended by Circular Nos. 617 dated 30 July 2008 and nature of a collective investment of
585 dated 15 October 2007) peso-denominated CTFs shall be as follows:
1
Reserve week starting 11 April 2014, the required reserves shall be as follows:
For reserves against peso –denominated CTFs
UBs/KBs 19%
TBs 8%
For reserves against TOFA-Others
UBs/KBs 16%
TBs 8%
Increase in reserve requirements shall take effect on the reserve week starting 30 May 2014.

§§ X405.5 - X405.7
15.10.31
UBs/KBs - 20%1 fiduciary business with the Bangko Sentral

TBs - 9%1 in compliance with the reserve requirement
RBs - 4%1 shall no longer be paid interest effective
06 April 2012.
b. Reserves against TOFA - Others. In (As amended by Circular No. 753 dated 29 April 2012)
addition to the basic security deposit, banks/
institution authorized to engage in trust and § X405.7 Computation of reserve
other fiduciary business shall maintain position. A bank authorized to engage in
reserves on TOFA - Others, except accounts trust and other fiduciary business shall
held under (1) Administratorship; (2) Bond calculate daily the required and available
Issues/Other Obligations Under Deed of reserves on the value per books of its peso-
Trust or Mortgage; (3) Custodianship and denominated CTFs and such other managed
Safekeeping; (4) Depository and peso funds, as well as on TOFA-Others,
Reorganization; (5) Employee Benefit Plans based on the seven-day week, starting
Under Trust; (6) Escrow; (7) P e r s o n a l Friday and ending Thursday including
Trust (testamentary or living trust); Saturdays, Sundays, holidays, non-banking
(8) Executorship;(9) Guardianship; (10) Life days or days when there is no clearing:
Insurance Trust; (11) Pre-need Plans Provided, That with reference to holidays,
(institutional/ individual); and (12) Personal non-banking days and days where there is
no clearing, the reserve position at the close
Equity and Retirement Account (PERA).
of banking day immediately preceding such
The required reserves against TOFA-
holidays, non-banking days or days where
Others shall be as follows:
there is no clearing, shall apply. For the
UBs/KBs - 17%1
purpose of computing reserve position, the
TBs - 9%
principal office in the Philippines and all
RBs - 4%
branches and agencies located therein shall
(As amended by Circular Nos. 878 dated 22 May 2015, 832
dated 27 May 2014, 830 dated 03 April 2014, 753 dated 29 be treated as a single unit.
March 2012, 551 dated 17 November 2006 and 539 dated 09 The required reserves in the current
August 2006) period (reference reserve week) shall be
computed based on the corresponding
§ X405.6 Composition of reserves. levels of peso-denominated CTFs and such
The provisions of Sec. X254 shall other managed peso funds, as well as on
govern the composition of reserves against TOFA-Others of the prior week.
peso-denominated CTFs and such other For purposes of computing the required
managed peso funds, as well as TOFA- and available statutory and liquidity reserves
Others, of banks authorized to engage in for peso-denominated CTFs and such other
trust and other fiduciary business. managed peso funds, as well as TOFA-
For purposes of this Subsection, a separate Others, the term value per books shall refer
deposit account shall be maintained by banks to the total volume of CTFs, other managed
with the Bangko Sentral exclusively for trust peso funds, as well as TOFA-Others less
reserves. Deposits maintained by banks booked “Allowance for Probable Losses”.
authorized to engage in trust and other (As amended by Circular No. 535 dated 04 July 2006)
1
Reserve week starting 11 April 2014, the required reserves shall be as follows:
For reserves against peso –denominated CTFs
UBs/KBs 19%
TBs 8%
For reserves against TOFA-Others
UBs/KBs 16%
TBs 8%
Increase in reserve requirements shall take effect on the reserve week starting 30 May 2014.

§§ X405.8 - X406.1
08.12.31
§ X405.8 Reserve deficiencies; activities.

sanctions. The provisions of Sec. X257 shall No bank shall undertake any of the trust
govern the computation of reserve and other fiduciary business and, whenever
deficiencies for peso-denominated CTFs and applicable, investment management
such other managed peso funds, as well as activities outside the direct control, authority
TOFA-Others, of banks authorized to engage and management of the trust department or
in trust and other fiduciary business, including through any department or office which is
the sanctions provided in said Section. involved in the other businesses of the bank,
such as the Treasury, Funds Management
§ X405.9 Report of compliance. Every or any similar department, otherwise, any
bank shall submit a report to the Bangko
such business shall be considered part of
Sentral of its daily required and available
the bank’s real liabilities.
reserves on peso-denominated CTFs and
The bank proper and the trust
such other managed peso funds, as well as
department may share the following
TOFA- Others, in such frequency and within
activities: (1) electronic data processing;
the deadline stated in Appendix 6.
(2) credit investigation; (3) collateral
Sec. X406 Organization and Management. appraisal; and (4) messengerial, janitorial
and security services.
§ X406.1 Organization. A bank b. The trust department, trust officer
authorized to engage in trust and other and other subordinate officers of the trust
fiduciary business shall, pursuant to Subsec. department shall only be directly
X404.1, include in its by-laws, provisions responsible to the bank’s trust committee
on the organization plan or structure of which shall, in turn, be only directly
the department, office or unit which shall responsible to the bank’s board of
conduct such business. The by-laws shall directors.
also include provisions on the creation of No director, officer or employee
a trust committee, the appointment of a taking part in the management of trust
trust officer and other subordinate officers and other fiduciary accounts shall
and a clear definition of their duties and perform duties in other departments or
responsibilities as well as their line and the audit committee of the bank and
staff functional relationships within the vice versa. However, branch managers
organization which shall be in accordance duly authorized by the board of directors
with the following guidelines. may, for or on behalf of the trust officer,
a. Trust and other fiduciary business sign predrawn trust instruments such as
of a bank shall be carried out through a CTFs.
trust department which shall be c. The organization structure and
organizationally, operationally, definition of duties and responsibilities of
administratively and functionally separate the trust committee, officers and
and distinct from the other departments employees of the trust department shall
and/or businesses of the institution. reflect adherence to the minimum internal
A bank which is also engaged in control standards prescribed by the
investment management activities, shall Bangko Sentral.
conduct the same only through its trust d. Provisions shall be made by the
department and the responsibilities of the bank to have legal assistance readily
board of directors, trust committee and available in the review of proposed and/
trust officer shall be construed to include or existing trust and fiduciary agreements
the proper administration and and documents and in the handling of
management of investment management legal and tax matters related thereto.

§ X406.2
12.12.31
§ X406.2 Composition of trust including the chairperson, may be any of

committee. The Trust Committee shall be the following: (1) non-executive
composed of at least five (5) members directors1 or independent directors2 who are
including the (1) president or any senior both not part of the audit committee; or
officer of the bank; and (2) the trust officer. (2) those considered as qualified “independent
The remaining committee members,
(Next page is Part IV- page 15)
1
As defined under Subsec. X141.1
2
As defined under Subsec. X141.2
Manual of Regulations for Banks Part IV - Page 14a

§§ X406.2 - X406.3
12.12.31
professionals”: Provided, That, the department shall be staffed by persons of

Philippine branch of a foreign bank may competence, integrity and honesty.
appoint its resident manager or chief Directors, committee members and officers
executive officer in lieu of the president charged with the administration of trust and
while the positions allotted for members of other fiduciary activities shall, in addition
the board may be filled up by the area to meeting the qualification standards
manager and/or officers/representatives prescribed for directors and officers of banks
from the Head Office, or affiliates or or for qualified “independent professionals”,
subsidiaries of the head office who are not possess the necessary technical expertise and
involved in audit-related activities; Provided, relevant experience in such business which
further, That, in case of more than five (5) may be indicated by any of the following:
trust committee membership, majority shall a. at least one (1) year of actual
be composed of qualified non-executive experience in trust, other fiduciary business,
members. or investment management activities;
A qualified “independent professional” b. at least three (3) years of professional
shall refer to a person who – experience in relevant field such as banking,
a. is not a director/officer/employee of finance, economics, law, and risk
the bank during the last twelve (12) months management;
counted from the date of committee c. completion of at least ninety (90)
membership; training hours on trust, other fiduciary
b. is not a relative within the fourth business, or investment management
degree of consanguinity or affinity, activities acceptable to the Bangko Sentral;
legitimate or common-law of any executive or
director or those involved in the day to day d. completion of a relevant global or
management of institution’s operations or local professional certification program.
officer of the bank; and A Trust Committee member should be
c. is not engaged or does not engage familiar with Philippine laws, rules and
in any transactions with the bank whether regulations on trust business, as well as
by himself or with other persons or through uphold at all times ethical and good
a firm of which he is a partner, other than governance standards.
transactions which are conducted at arm’s The trust officer who shall be appointed
length and could not materially interfere shall possess any of the following:
with or influence the exercise of his a. at least five (5) years of actual
judgment. experience in trust operations;
An independent professional may be b. at least three (3) years of actual
appointed as a Trust Committee member of experience in trust operations and must
other banks that belong to the same financial have:
conglomerate. (1) completed at least ninety (90) training
For purposes of this Subsection, the hours in trust, other fiduciary business, or
definition of officer under Subsec. X142.1 investment management activities
shall apply. acceptable to the Bangko Sentral; or
(As amended by Circular No. 766 dated 17 August 2012) (2) completed a relevant global or local
professional certification program; or
§ X406.3 Qualifications of committee c. at least five (5) years of actual experience
members, officers and staff. The bank’s trust as an officer of a bank and must have:

§§ X406.3 - X406.9
12.12.31
(1) completed at least ninety (90) training (5) oversee and evaluate performance
hours in trust, other fiduciary business, or of the trust officer;
investment management activities (6) conduct regular meetings at least
acceptable to the Bangko Sentral; or once every quarter, or more frequently as
(2) completed a relevant global or local necessary, depending on the size and
professional certification program. complexity of the fiduciary business; and
For the purpose of this Subsection, actual (7) report regularly to the BOD on
experience refers to exposures in trust matters arising from fiduciary activities.
operations either as officer of a trust entity c. Trust Officer
or member of trust committee. The management of day-to-day fiduciary
(As amended by Circular Nos. 766 dated 17 August 2012 and activities shall be vested in the trust officer.
665 dated 04 September 2009) In this regard, the trust officer shall:
(1) ensure adherence to the basic
§ X406.4 Responsibilities of
standards in the administration of trust,
administration
other fiduciary and investment management
a. Board of Directors (BOD)
accounts pursuant to Appendix 83;
The responsibilities of the BOD in
(2) develop and implement relevant
relation to trust activities of a bank shall be
policies and procedures on fiduciary
those set forth under Subsec. X141.3. The
activities;
BOD shall ensure an appropriate degree of
(3) observe sound risk management
independence between the activities of the
practices and maintain necessary controls
bank proper and its trust department.
to protect assets under custody and held in
b. Trust Committee
trust or other fiduciary capacity;
The trust committee is a special
(4) carry out investment and other
committee which reports directly to the
fiduciary activities in accordance with
board of directors and is primarily
agreements with clients and parameters set
responsible for overseeing the fiduciary
by the trust committee as approved by the
activities of the bank. In discharging its
board of directors;
function, it shall:
(5) report regularly to the trust committee
(1) ensure that fiduciary activities are
on business performance and other matters
conducted in accordance with applicable
requiring its attention;
laws, rules and regulations, and prudent
(6) maintain adequate books, records
practices;
and files for each trust or other fiduciary
(2) ensure that policies and procedures
account and provide timely and regular
that translate the board’s objectives and risk
disclosure to clients on the status of their
tolerance into prudent operating standards
accounts; and
are in place and continue to be relevant,
(7) submit periodic reports to regulatory
comprehensive and effective;
agencies on the conduct of the trust
(3) oversee the implementation of the
operations.
risk management framework and ensure that
internal controls are in place relative to the
fiduciary activities; §§ X406.5 - X406.8 (Reserved)
(4) adopt an appropriate organizational
structure/staffing pattern and operating § X406.9 Outsourcing services in trust
budgets that shall enable the trust departments
department to effectively carry out its (Deleted by Circular No. 765 dated 03 August 2012)
functions;

§§ X406.10 - X407
12.12.31
§ X406.10 Confirmation of the is no obligation on the part of the trustee,

appointment/designation of trust officer fiduciary or investment manager to
and independent professional. An guarantee returns on the funds or properties
independent professional and trust officer regardless of the results of the investment.
must be fit and proper to discharge their The trustee, fiduciary or investment manager
respective functions. In determining is entitled to fees/commissions which shall
whether a person is fit and proper for the be stipulated and fixed in the contract or
position, regard shall be given to the indenture and the trustor or principal is
following: Integrity/probity, physical/mental entitled to all the funds or properties and
fitness, competence, relevant education/ earnings less fees/commissions, losses and
financial literacy/training, diligence and other charges. Any agreement/arrangement
knowledge/experience. that does not conform to these shall not be
The appointment or designation of considered as trust, other fiduciary and/or
independent professional and trust officer investment management relationship.
shall be subject to confirmation by the The following shall not constitute a trust,
Monetary Board. The bio-data of the other fiduciary and/or investment
proposed independent professional and trust management relationship
officer shall be submitted to the Bangko a. When there is a preponderance of
Sentral, in a prescribed form indicated in purpose or of intent that the arrangement
Appendix 6, within seven (7) banking days creates or establishes a relationship: other
from approval of the board of directors or than a trust, fiduciary and/or investment
its functional oversight equivalent which management;
shall include the country head in case of b. When the agreement or contract is
foreign banks. Moreover, the independent itself used as a certificate of indebtedness
professional shall certify that he/she in exchange for money placement from
possesses the qualifications as herein clients and/or as the medium for confirming
prescribed and that all the information placements and investment thereof;
thereby supplied are true and correct.
c. When the agreement or contract of
If after evaluation, the Monetary Board
an account is accepted under the signature(s)
shall find grounds for disqualification, the
of those other than the trust officer or
concerned bank shall be informed thereof
subordinate officer of the trust department
and the independent professional and trust
or those authorized by the board of directors
officer so appointed or delegated shall be
to represent the trust officer;
removed from office even if he/she has
d. Where there is a fixed rate or guaranty
assumed the position to which he/she was
of interest, income or return in favor of its
appointed or delegated.
(Circular No. 665 dated 04 September 2009 and CL-045 dated client or beneficiary: Provided, however,
01 July 2011, as amended by Circular Nos. 766 dated 17 August That where funds are placed in fixed
2012 and 758 dated 11 May 2012) income-generating investments, a quotation
of income expectation or like terms, shall
Sec. X407 Non-Trust, Non-Fiduciary and/ neither be considered as arrangements with
or Non-Investment Management Activities a fixed rate nor a guaranty of interest, income
The basic characteristic of trust, other or return when the agreement or indenture
fiduciary and investment management categorically states in bold letters that the
relationship is the absolute non-existence quoted income expectation or like terms is
of a debtor-creditor relationship, thus, there neither assured nor guaranteed by the trustee

§§ X407- X408
09.12.31
or fiduciary and it does not, therefore, entitle unsafe or unsound manner all relevant facts
the client to a fixed interest or return on his must be considered. An analysis of the
investments: Provided, further, That any of impact thereof on the bank’s operations and
the following practices or practices similar financial conditions must be undertaken,
and/or tantamount thereto shall be including evaluation of capital position,
construed as fixing or guaranteeing the rate asset condition, management, earnings
of interest, income or return: posture and liquidity position.
(1) Issuance of certificates, side In determining whether a particular act
agreements, letters of undertaking or other or omission, which is not otherwise
similar documents providing for fixed rates prohibited by any law, rule or regulation
or guaranteeing interest, income or return; affecting banks, may be deemed as
(2) Paying trust earnings based on conducting business in an unsafe or
indicated or expected yield regardless of the unsound manner, the Monetary Board,
actual investment results; upon report of the head of the supervising
(3) Increasing or reducing fees in order or examining department based on findings
to meet a quoted or expected yield; in an examination or a complaint, shall
(4) Entering into any arrangement, consider any of the following
scheme or practice which results in the circumstances:
payment of fixed rates or yield on trust a. The act or omission has resulted or
investments or in the payment of the may result in material loss or damage, or
indicated or expected yield regardless of the abnormal risk or danger to the safety,
actual investment results; and stability, liquidity or solvency of the bank;
e. Where the risk or responsibility is b. The act or omission has resulted or
exclusively with the trustee, fiduciary or may result in material loss or damage or
investment manager in case of loss in the abnormal risk to the bank’s depositors,
investment of trust, fiduciary or investment creditors, investors, stockholders or to the
management funds, when such loss is not Bangko Sentral or to the public in general;
due to the failure of the trustee or fiduciary c. The act or omission has caused any
to exercise the skill, care, prudence and undue injury, or has given unwarranted
diligence required by law. benefits, advantage or preference to the bank
Trust, other fiduciary and investment or any party in the discharge by the director
management activities involving any of the or officer of his duties and responsibilities
foregoing which are accepted, renewed or through manifest partiality, evident bad faith
extended after 16 October 1990 shall be or gross inexcusable negligence; or
reported as deposit substitutes and shall be d. The act or omission involves entering
subject to the reserve requirement for into any contract or transaction manifestly
deposit substitutes from the time of and grossly disadvantageous to the bank,
inception, without prejudice to the whether or not the director or officer
imposition of the applicable sanctions profited or will profit thereby.
provided for in Sections 36 and 37 of R.A. The list of activities which may be
No. 7653. considered unsafe and unsound is shown
in Appendix 48.
Sec. X408 Unsafe and Unsound Practices In line with the statement of principles
Whether a particular activity may be governing trust and other fiduciary business
considered as conducting business in an under Sec. X401, the trustee, fiduciary or

§§ X408 - X409.1
09.12.31
investment manager shall desist from the determined by the Monetary Board to be
following unsound practices: appropriate, but in no case to exceed
a. Entering in an arrangement whereby P30,000 a day on a per transaction basis
the client is at the same time the borrower taking into consideration the attendant
of his own fund placement, or whereby the circumstances, such as the gravity of the act
trustor or principal is a borrower of other or omission and the size of the bank, to be
trust, fiduciary or investment management imposed on the bank, their directors and/or
funds belonging to the same family or responsible officers;
business group of such trustor or principal; c. Suspension of interbank clearing
b. Granting loans or accommodations privileges/immediate exclusion from
to any trust committee member, officer and clearing;
employee of the trust department except d. Suspension of rediscounting
where such loans are obtained by said privileges or access to Bangko Sentral credit
persons as members of an employee benefit facilities;
fund of the trustee’s own institution; e. Suspension of lending or foreign
c. Borrowing from, or selling trust, other exchange operations or authority to accept
fiduciary and/or investment management new deposits or make new investments;
assets to, the bank proper to cover portfolio f. Suspension of responsible directors
losses and/or to guarantee the return of and/or officers;
principal or income; g. Revocation of quasi-banking license;
d. Granting new loans to any borrower and/or
who has a past due and/or classified loan h. Receivership and liquidation under
account with the bank proper or the trust Section 30 of R.A. No. 7653.
department; and All other provisions of Sections 30 and
e. Requiring clients to sign documents 37 of R.A. No. 7653, whenever appropriate,
in blank. shall also be applicable on the conduct of
(As amended by Circular No. 640 dated 16 January 2009) business in an unsafe or unsound manner.
The imposition of the above sanctions
§§ X408.1 - X408.8 (Reserved) is without prejudice to the filing of
appropriate criminal charges against
§ X408.9 Sanctions. The Monetary culpable persons as provided in Sections 34,
Board may, at its discretion and based on 35 and 36 of R.A. No. 7653.
the seriousness and materiality of the acts
or omissions, impose any or all of the Sec. X409 Trust and Other Fiduciary
following sanctions provided under Section Business. The conduct of trust and other
37 of R.A. No. 7653 and Section 56 of R.A. fiduciary business shall be subject to the
No. 8791, whenever a bank conducts following regulations.
business in an unsafe and unsound manner:
a. Issue an order requiring the bank to § X409.1 Minimum documentary
cease and desist from conducting business requirements. Each trust or fiduciary
in an unsafe and unsound manner and may account shall be covered by a written
further order that immediate action be taken document establishing such account, as
to correct the conditions resulting from such follows:
unsafe or unsound practice; a. In the case of accounts created by an
b. Fines in amounts as may be order of the court or other competent

§§ X409.1 - X409.2
13.12.31
authority, the written order of said court or § X409.2 Lending and investment
authority. disposition. Assets received in trust or in
b. In the case of accounts created by other fiduciary capacity shall be
corporations, business firms, organizations administered in accordance with the terms
or institutions, the voluntary written of the instrument creating the trust or other
agreement or indenture entered into by the fiduciary relationship.
parties, accompanied by a copy of the board When a trustee or fiduciary is granted
resolution or other evidence authorizing the discretionary powers in the investment
establishment of, and designating the disposition of trust or other fiduciary funds
signatories to, the trust or other fiduciary and unless otherwise specifically
account. enumerated in the agreement or indenture
c. In the case of accounts created by and directed in writing by the client, court
individuals, the voluntary written agreement of competent jurisdiction or other
or indenture entered into by the parties. competent authority, loans and investments
The voluntary written agreement or of the fund shall be limited to:
indenture shall include the following a. Evidences of indebtedness of the
minimum provisions: Republic of the Philippines and of the
(1) Title or nature of contractual Bangko Sentral, and any other evidences of
agreement in noticeable print; indebtedness or obligations the servicing
(2) Legal capacities, in noticeable print, and repayment of which are fully guaranteed
of parties sought to be covered; by the Republic of the Philippines or loans
(3) Purposes and objectives; against such government securities;
(4) Funds and/or properties subject of b. Loans fully guaranteed by the
the arrangement; Republic of the Philippines as to the
(5) Distribution of the funds and/or payment of principal and interest;
properties; c. Loans fully secured by a hold-out on,
(6) Duties and powers of trustee or assignment or pledge of deposits maintained
fiduciary; either with the bank proper or other banks,
(7) Liabilities of the trustee or fiduciary; or of deposit substitutes of the bank, or of
(8) Reports to the client; mortgage and chattel mortgage bonds issued
(9) Termination of contractual by the trustee or fiduciary;
arrangement and, in appropriate cases, d. Loans fully secured by real estate or
provision for successor-trustee or fiduciary; chattels in accordance with Section 78 of
(10) The amount or rate of the R.A. No. 337, as amended, and subject to
compensation of trustee or fiduciary; the requirements of Sections 75, 76, and
(11) A statement in noticeable print to 77 of R.A. No. 337, as amended; and
the effect that trust and other fiduciary e. Investment in the Bangko Sentral
business are not covered by the PDIC and special deposit account (SDA) facility made
that losses, if any, shall be for the account in accordance with the guidelines in
of the client; and Appendix 78 and subject to the provisions
(12) Disclosure requirements for of Sec. 1390 for UBs/KBs and Sec. 2390
transactions requiring prior authority and/ for TBs and Appendices 78a to 78c.
or specific written investment directive from The specific directives required under
the client, court of competent jurisdiction this Subsection shall consist of the following
or other competent authority. information:

§§ X409.2 - X409.3
13.12.31
(1) The transaction to be entered into; b. Purchase or acquire property or debt

(2) The borrower’s name; instruments from any of the departments,
(3) Amount involved; and directors, officers, stockholders, or
(4) Collateral security(ies), if any. employees of the trustee or fiduciary, or
(As amended by M-2013-021 dated 17 May 2013, M-2012-034 relatives within the first degree of
dated 13 July 2012, M-2007-038 dated 29 November 2007 and
consanguinity or affinity, or the related
M-2007-011 dated 08 May 2007)
interest of such directors, officers and
§ X409.3 Transactions requiring prior stockholders; or from any corporation where
authority. A trustee or fiduciary shall not the trustee or fiduciary owns at least fifty
undertake any of the following transactions percent (50%) of the subscribed capital or
for the account of a client, unless prior to voting stock in its own right and not as
its execution, such transaction has been fully trustee nor in a representative capacity;
disclosed and specifically authorized in c. Invest in equities of, or in securities
writing by the client, beneficiary, other underwritten by, the trustee or fiduciary or
party-in-interest, court of competent a corporation in which the trustee or
jurisdiction or other competent authority: fiduciary owns at least fifty percent (50%)
a. Lend, sell, transfer or assign money of the subscribed capital or voting stock in
or property to any of the departments, its own right and not as trustee nor in a
directors, officers, stockholders or representative capacity; and
employees of the trustee or fiduciary, or d. Sell, transfer, assign, or lend money
relatives within the first degree of or property from one trust or fiduciary
consanguinity or affinity, or the related account to another trust or fiduciary account
interest of such directors, officers and except where the investment is in any of
stockholders; or to any corporation where those enumerated in Items “a” to “d” of
the trustee or fiduciary owns at least fifty Subsec. X409.2.
percent (50%) of the subscribed capital DOSRIs covered by this Subsection
or voting stock in its own right and not as shall be those considered as such under
trustee nor in a representative capacity; existing regulations on loans to DOSRI in
(Next Page is Part IV - Page 21)
Manual of Regulations for Banks Part IV - Page 20a

§§ X409.3 - X409.6
09.12.31
Part III - E of this Manual. The procedural b. Provisions of Section 4(e) of the New
and reportorial requirements in said Rules on Registration of Short-Term
regulations shall also apply. Commercial Papers and Section 7(f) of the
The disclosure required under this New Rules on Registration of Long-Term
Subsection shall consist of the following Commercial Papers issued by the SEC
minimum information: (Appendices 13 and 14).
(1) The transactions to be entered into; c. Criteria for past due accounts; and
(2) Identities of the parties involved in d. Qualitative appraisal of loans,
the transactions and their relationships (shall investments and other assets that may require
not apply to Item “d” of this Subsection); provision for probable losses which shall be
(3) Amount involved; and booked in accordance with the Financial
(4) Collateral security(ies), if any. Reporting Package for Trust Institutions
The above information shall be made (FRPTI);
known to clients in a separate instrument e. Requirements of Sections 3 and 8
or in the very instrument creating the trust of the Securities and Regulation Code (SRC);
or fiduciary relationship. and
f. Provisions of Section 44 - Investments
§ X409.4 Ceilings on loans. Loans by Philippine residents - of the BSP Manual
funded by trust accounts shall be subject of Regulations on Foreign Exchange
to the SBL and DOSRI ceilings imposed Transactions (MORFXT), such that the
on banks under Secs. X303, X330 and cross-currency investments of peso trust and
X331. For purposes of determining other fiduciary accounts, including peso unit
compliance with said ceilings, the total investment trust (UIT) funds, shall be subject
amount of said loans granted by the trust to the following conditions:
department and the bank to the same (1) All cash flows of the trustee or
person, firm or corporation shall be fiduciary shall only be in pesos. In case the
combined. foreign exchange acquired or received by
the trustee or fiduciary as dividends/earnings
§ X409.5 Funds awaiting investment or divestment proceeds on such investment
or distribution. Funds held by the trustee are intended for reinvestment abroad, the
or fiduciary awaiting investment or same proceeds are not required to be
distribution shall not be held uninvested inwardly remitted and sold for pesos
or undistributed any longer than is through authorized agent banks: Provided,
reasonable for the proper management of That such proceeds are reinvested abroad
the account. within two (2) banking days from receipt of
the funds abroad;
§ X409.6 Other applicable regulations (2) The trustee or fiduciary shall
on loans and investments. The loans and purchase, invest, reinvest, sell, transfer or
investments of trust and other fiduciary dispose foreign currency-denominated
accounts shall be subject to pertinent laws, financial instruments, including securities as
rules and regulations for banks that shall defined in Section 3 of the SRC, through a
include but need not be limited to the distributor or underwriter duly authorized
following: or licensed by the government of the issuer
a. Requirements of Sections 39 and 40 of such instruments, or a counterparty FI
of R.A. No. 8791 (The General Banking (seller or buyer) accredited by the trustee or
Law of 2000; fiduciary: Provided, That, the conduct,
Manual of Regulations for Banks Part IV- Page 21

§§ X409.6 - X409.8
09.12.31
documentation, and settlement of any of twenty percent (20%) final tax under Section
these transactions shall be outside 24(B)(1) of R.A. No. 8424 (The Tax Reform
Philippine jurisdiction; Act of 1997):
(3) The trustee of fiduciary shall record a. The tax exemption shall apply to
cross-currency investment transactions in trust indentures/agreements contracted on
the peso regular books at their foreign or after 03 January 2000;
currency amounts and their local currency b. The trust indenture/agreement shall
equivalent using the Philippine Dealing only be between individuals who are
System peso/US dollar closing rate and the Filipino citizens or resident aliens and
New York US dollar/third currencies closing banks acting as trustee. The trust indenture/
rate; and agreement shall be non-negotiable and
(4) The trustee or fiduciary shall comply non-transferable;
with the reportorial requirements that may be c. The trust indenture/agreement shall
prescribed by the BSP, which shall include as indicate that pursuant to Section 24(B)(1)
a minimum, the foreign currency amount and of R.A. No. 8424, interest income of the
the local currency equivalent of the total cross trust fund derived from investments in
currency investments with details on: (a) type interest-bearing instruments (e.g., time
of investments; and (b) amount of cash flow deposits, government securities, loans and
converted. other debt instruments) which are
For purposes of this Subsection, otherwise subject to the twenty percent
“resident”, as defined under Section 1 of the (20%) final tax shall be exempt from said
FX Manual, shall refer to the (a) trustee or final tax provided the fund was held by
fiduciary that administers the assets received the trustee-bank for at least five (5) years.
in trust or in other fiduciary capacity; or (b) If said fund was held for a period less than
principal that engages the services of the five (5) years, interest income shall be
investment manager under an investment subject to a final tax based on the following
management agreement. schedule –
(As amended by Circular No. 676 dated 29 December 2009)
Holding Period Rate of Tax
§ X409.7 Operating and accounting
Four (4) years to less than five (5) years 5%
methodology. Trust and other fiduciary Three (3) years to less than four (4) years 12%
accounts shall be operated and accounted Less than three (3) years 20%
for in accordance with the following:
a. The trustee or fiduciary shall Necessarily, the trust indenture/
administer, hold or manage the fund or agreement shall clearly indicate the date
property in accordance with the instrument when the trustee-bank actually received the
creating the trust or other fiduciary trust funds which shall serve as basis for
relationship; and determining the holding period of the
b. Funds or property of each client funds.
shall be accounted separately and distinctly d. A trustee may accept additional
from those of other clients herein referred funds for inclusion in trust accounts which
to as individual account accounting. have been established as tax-exempt under
R.A. No. 8424. However, the receipt of
§ X409.8 Tax-exempt individual trust additional funds shall be properly
accounts. The following shall be the documented by indicating that they are part
features/requirements of individual trust of existing tax-exempt trust accounts and
accounts which may be exempted from the that the interest income of the additional
Part IV- Page 22 Manual of Regulations for Banks

§§ X409.8 - X409.9
08.12.31
funds derived from investments in interest- (1) the purpose or intention of the trust;
bearing instruments shall be exempt from (2) the nature and value of the property
the twenty percent (20%) final tax under or sum of money that comprise the trust;
the same conditions mentioned in the (3) the trustee’s investment powers;
preceding item. The document shall also (4) the name(s) of the beneficiaries; and
indicate the date when the funds were (5) the terms and conditions under
received by the trustee-bank to serve as which the income and/or principal of the
basis for determining the minimum five trust is to be paid or to be disposed of during
(5)- year holding period for tax exemption the lifetime and ultimately, upon the death
purposes of the additional funds; and of the trustor or upon the occurrence of a
e. Tax-exempt individual trust accounts specified event(s).
established under this Subsection shall be A living trust may either be revocable
subject to the provisions of Subsecs. X409.1(c) or irrevocable.
and X409.2 up to X409.7. b. Minimum criteria. In line with such
definition, transactions considered as living
§ X409.9 Living trust accounts. The trust accounts should meet the following
guidelines on living trust accounts are as minimum criteria:
follows: (1) Minimum entry amount and
a. Definition. Living trust is defined under maintaining balance shall at least be
the Manual of Accounts for Trust, as a personal P100,000: Provided, That living trust accounts
trust created by agreement.It becomes with balances of up to P500,000 shall only
operational during the lifetime of the trustor as be invested in deposits and government
soon as the agreement is accomplished. securities;
Under a living trust, the trustor (also (2) Living trust accounts shall be
known as settlor) conveys property or a sum maintained for a minimum period of six
of money to be managed by the trustee, as (6) months. The termination of the living
the agreement dictates, for the benefit of trust agreement, for any cause, within the
the trustor and third person(s) or third minimum holding period shall render the
person(s) only. However, the trustor/s cannot trustor ineligible from opening a new living
create a trust with himself/themselves as the trust account within a period of one (1) year
sole beneficiary/(ies). The functions and from termination date;
authorities of the trustee as defined in the (3) Reversion of any part of the
agreement shall include: principal to the trustor, except in cases
(Next Page is Part IV - Page 23)
Manual of Regulations for Banks Part IV- Page 22a

§ X409.9
08.12.31
provided under the dispositive portion, shall consideration the frequency of redemption;
be allowed only upon termination of the the respective interests of each beneficiary;
living trust agreement: Provided, That in and to whom the proceeds shall be payable.
no case can there be a complete or Redemption of funds shall strictly be in
substantial reversion of the principal accordance with the said terms and
pursuant to the dispositive portion within conditions; and
the minimum holding period nor can the (6) A living trust account may be
principal fall below P100,000; opened jointly under one (1) living trust
(4) Any living trust account that does agreement by related individuals up to the
not meet the requirement on the minimum second degree of consanguinity or affinity;
entry and minimum maintaining balance Provided, That the requirements under Item
or is not invested in qualified outlets shall “5” above are fully complied with.
be considered as other fiduciary accounts Unrelated individuals or those beyond the
subject to applicable reserve and other second degree of consanguinity or affinity
requirements; may likewise open a joint living trust
(5) Pre-printed living trust agreements account under one (1) living trust
may be allowed for expediency: Provided, agreement: Provided, That the minimum
That the sections for the trust purpose and contribution of each individual is at least
the dispositive provision are left blank and P100,000: Provided further, That the trust
shall only be filled-up upon the client’s is for a common purpose and: Provided
signing thereof. The purpose shall finally, That the requirements under Item
categorically state the real intention of the “5” are fully complied with.
trustor, which may include, but need not c. Marketing. Officers and personnel
be limited to: of the bank proper, including branch
(a) providing his/her and beneficiary/ managers, shall not be allowed to market
(ies) present and/or future financial support; living trust products and sign pre-printed
(b) protecting his/her beneficiary/(ies) living trust agreements. However, branch
against his/her inexperience in business managers/officers may be allowed to refer
matters; clients to the Trust Department and give
(c) preventing him/her from making short introduction on the living trust
imprudent expenditures; products to prospective clients.
(d) prevent the beneficiary/(ies) from d. Transitory provision. Outstanding
living beyond their means in case of living trust accounts that do not meet the
outright disposition of assets in their favor; foregoing additional requirements shall be
(e) protecting the beneficiary/(ies) given twelve (12)1 months from 11 April
against unforeseen contingencies such as 2006 to comply with the aforestated
incompetency, incapacity, physical requirements; otherwise, such accounts
disability or similar misfortune; and shall be considered as Other Fiduciary
(f) setting aside and segregating Accounts subject to applicable reserve
particular assets, proceeds or payments for requirements.
administration and distribution pursuant to e. Sanctions. Any violation of the
a court decree or by agreement. provisions of this Subsection shall be
The dispositive provision should clearly subject to the sanctions provided under
and specifically define the terms and Section 37 of R.A. No. 7653 (The New
conditions under which the principal and/or Central Bank Act).
income shall be distributed in order to (Circular Nos. 553 dated 22 December 2006 and 521 dated
accomplish such purpose/(s), by taking into 21 March 2006)
1
Original 6 months transitory period under Cir. 521 extended by another 6 months under Cir. 553

§§ X409.10 - X409.16
08.12.31
§§ X409.10 - X409.15 (Reserved) of more than ten percent (10%) of any class
of its equity security.
§ X409.16 Qualification and e. Investment and management of
accreditation of private banks acting as the funds. A domestic bank designated as
trustee on any mortgage or bond issuance trustee of a mortgage or bond issuance may
by any municipality, government-owned or hold and manage, in accordance with the
controlled corporation, or any body politic provisions of the trust indenture or
a. Applicability. Private banks duly agreement, the proceeds of the mortgage
accredited by the BSP may act as trustee or bond issuance and such assets and funds
on any mortgage or bond issued by any of the issuing municipality, corporation, or
municipality, GOCC, or any body politic. body politic as may be required to be
b. Application for accreditation. A delivered to the trustee under the trust
private bank desiring to act as trustee on indenture/agreement, subject to the
any mortgage or bond issued by any following conditions/restrictions:
municipality, GOCC, or any body politic (1) Pending the utilization of such funds
shall file an application for accreditation pursuant to the provisions of the trust
with the appropriate supervising and indenture/agreement, the same shall only be
examining department of SES. The deposited in any bank, other than the trustee/
application shall be signed by the president bank proper, its subsidiary or affiliate
or officer of equivalent rank of the bank authorized to accept deposits from the
and shall be accompanied by the following Government or government entities, or
documents: invested in peso-denominated treasury bills
(1) certified true copy of the resolution acquired/purchased from any securities
of the institution’s board of directors dealer/entity, other than the trustee or any of
authorizing the application; its unit/department, its subsidiary or affiliate.
(2) a certification signed by the (2) Investments of funds constituting or
president or officer of equivalent rank that forming part of the sinking fund created as
the institution has complied with all the the primary source for the payment of the
qualification requirements for accreditation. principal and interests due the mortgage
c. Qualification requirements. A bank or bonds shall also be limited to deposits
applying for accreditation to act as trustee in any bank, other than the trustee/bank
on any mortgage or bond issued by any proper, its subsidiary or affiliate, authorized
municipality, government-owned or to accept deposits from the Government
controlled corporation, or any body politic or government entities and investments in
must comply with the requirements in government securities that are consistent
Appendix 5b. with such purpose which must be acquired/
d. Independence of the trustee. A purchased from any securities dealer/entity,
bank is prohibited from acting as trustee of other than the trustee or any of its unit/
a mortgage or bond issuance if any elective department, its subsidiary or affiliate.
or appointive official of the LGU, GOCC, f. Waiver of confidentiality. A bank
or body politic which issued said mortgage designated as trustee of any mortgage or
or bond and/or his related interests own bond issued by any municipality, GOCC,
such number of shares of the bank that will or any body politic shall submit to the
allow him or his related interests to elect appropriate supervising and examining
at least one (1) member of the board of department of SES a waiver of the
directors of such bank or is directly or confidentiality of information under
indirectly the registered or beneficial owner Sections 2 and 3 of R.A. No. 1405, as

§§ X409.16 - X409.17
08.12.31
amended, duly executed by the issuer of the date the violation was committed up to
the mortgage or bond in favor of the BSP. the date it was corrected;
g. Reportorial requirements. A bank (b) Suspension or revocation of the
authorized by the BSP to act as trustee of trust license;
the proceeds of mortgage or bond issuance (c) Suspension for one hundred twenty
of a municipality, GOCC or controlled (120) days without pay of the directors/
corporation, or body politic shall comply officers responsible for the violation.
with reportorial requirements that may be
prescribed by the BSP. § X409.17 Trust fund of pre-need
h. Applicability of the rules and companies. The following rules and
Regulations on Trust, Other Fiduciary regulations shall govern the acceptance,
Business and Investment Management management and administration of the trust
Activities. The provisions of the Rules and funds of pre-need companies by banks and
Regulations on Trust, Other Fiduciary other entities authorized to perform trust
Business and Investment Management and other fiduciary functions.
Activities not inconsistent with the a. Administration of trust fund. In line
provisions of this Subsection shall form part with the policy of providing greater
of these rules. protection to pre-need planholders,
i. Sanctions. Without prejudice to the prudential measures are hereby laid out in
penal and administrative sanctions the administration of trust funds of preneed
provided for under Sections 36 and 37, companies. The trust fund, inclusive of
respectively, of the R.A. No. 7653, violation earnings, shall be administered and
of any provision of this Subsection shall be managed by the trustee with the skill, care,
subject to the following sanctions/penalties prudence and diligence necessary under
depending on the gravity of the offense: the circumstances then prevailing that a
(1) First offense – prudent man, acting in the same capacity
(a) Fine of up to P10,000 a day for the and familiar with such matters, would
institution for each violation reckoned from exercise in the conduct of an enterprise of
the date the violation was committed up a like character and similar aims.
to the date it was corrected; and The trustee shall have exclusive
(b) Reprimand for the directors/officers management and control over the trust
responsible for the violation. fund and the right at any time to sell,
(2) Second offense – convert, invest, change, transfer or
(a) Fine of up to P20,000 a day for the otherwise dispose of the assets comprising
institution for each violation reckoned from the funds.
the date the violation was committed up b. Trustee. No trust entity shall act as a
to the date it was corrected; trustee or administer or hold a trust fund
(b) Suspension for ninety (90) days established by a pre-need company, which
without pay for directors/officers is a subsidiary or affiliate, as defined under
responsible for the violation; and existing BSP regulations, of such trust entity.
(c) Revocation of the authority to act Trust entities currently holding or
as trustees on any mortgage or bond administering trust funds of an affiliate
issuance by any municipality, GOCCs, or pre-need company may continue to act as
body politic. trustee of such funds after the transition
(3) Subsequent offense – period provided under Item “g” only upon
(a) Fine of up to P30,000 a day for the prior approval of the Monetary Board on
institution for each violation reckoned from the basis of a clear showing that no potential

§§ X409.17 - X410
08.12.31
conflict of interest will arise. An absence of purchase or acquire property from, or sell,
any exception or finding on conflicts of transfer, assign or lend money or property
interest during an examination of the trust to, or purchase debt instruments of, any of
entity shall be deemed as prima facie the departments, directors, officers,
evidence that no potential conflict of interest stockholders, employees, subsidiaries and
will arise. affiliates of the trustee and/or the trustor,
c. Investment of the trust fund. Unless and relatives within the first degree of
otherwise allowed under existing laws or consanguinity or affinity, or the related
regulations issued by the agency having interests, of such directors, officers and
jurisdiction and supervision over pre-need stockholders, without prejudice to any rule
companies, or with prior written approval that may be issued by the agency having
by said agency, loans and investments of jurisdiction and supervision over such
the trust funds shall be limited to: preneed company allowing such transaction
(1) Evidences of indebtedness of the with the prior written approval of such
Republic of the Philippines and of the BSP, agency. Such written approval shall clearly
and any other evidences of indebtedness specify the amount of the loan and/or
or obligations wherein the servicing and investment including the name of the
repayment of which are fully guaranteed concerned director, officer, stockholder and
by the Republic of the Philippines or loans their related interests.
against such government securities; e. Applicability of the Rules and
(2) Commercial papers duly registered Regulations on Trust, Other Fiduciary
with the SEC with a credit rating of one (1) Business and Investment Management
for short term and “AAA” for long-term or Activities (Trust Rules). The provisions of the
their equivalent; Trust Rules consistent with the provisions of
(3) Loans fully guaranteed by the this Subsection shall supplementarily apply
Republic of the Philippines, as to the to trust funds of pre-need companies.
payment of principal and interest; f. Penalties and sanctions. Any
(4) Loans fully secured by a hold-out violation of the provisions of this Subsection
on, assignment or pledge of deposits shall be a ground for prohibiting the
maintained either with the bank proper or concerned entity from accepting, managing
other banks, and/or of deposit substitutes and administering trust funds of pre-need
or of mortgage and chattel mortgage bonds companies without prejudice to the
issued by the trustee/fiduciary or by other imposition of the applicable sanctions
banks; prescribed or allowed under the Trust Rules.
(5) Loans fully secured by real estate g. Transitory provisions. Banks which
in accordance with Section 37 and subject are presently administering and managing
to the requirements of Sections 39 and 40 trust funds of pre-need companies are
of R.A. No. 8791 and their implementing hereby given a period of one (1) year from
regulations; and 25 April 2006 to comply with the
(6) Loans fully secured by requirements hereof.
unconditional payment guarantees (such as (Memorandum to All Banks and NBFIs dated 28 March 2006)
standby letters of credit and letter of
indemnity) issued by banks/multilateral Sec. X410 Unit Investment Trust Funds/
financial institutions. Common Trust Funds.1 The following rules
d. Transactions with DOSRI. The and regulations shall govern the creation,
trustee shall not, for the account of the administration and investment/s of Unit
trustor or the beneficiary of the trust, Investment Trust (UIT) Funds.
1
The regulations on common trust funds (CTFs) were relocated to Appendix 60. UIT Funds regulations took effect on
01 October 2004 (effectivity of Circular 447 dated 03 September 2004).

§§ X410 - X410.3
15.10.31
The rules and regulations on Common Sentral under existing Bangko Sentral
Trust Funds (CTFs) are in Appendix 60. regulations.
i. Multi-class fund. A UIT fund structure
§ X410.1 Definitions. which has more than one (1) class of units
a. Unit Investment Trust Funds. Unit in the fund and is invested in the same pool
Investment Trust Funds are open-ended of securities and the same portfolio,
pooled trust funds denominated in pesos investment objectives and policies.
or any acceptable currency, which are j. Related party/company. For the
operated and administered by a trust entity purpose of this Section, the term refers to
and made available by participation. The another entity which is the trust entity’s
term Unit Investment Trust Funds is (a) parent or holding company or
synonymous to CTFs. As an open-ended (b) subsidiary or affiliate, and wholly or
fund, participation or redemption is allowed majority-owned or controlled-entities of
as often as stated in its plan rules. such subsidiaries.
UIT Funds shall not include long term (As amended by Circular Nos. 853 dated 21 October 2014 and
funds designed for the primary purpose of 767 dated 21 September 2012)
availing the tax incentives/exemption under
Section 24(B)(1) of R.A. No. 8424 (The Tax § X410.2 Establishment of a Unit
Reform Act of 1997). Investment Trust Fund. Any trust entity
b. Trust entity. Trust entity as defined authorized to perform trust functions may
under Section X403. establish, administer and maintain one (1)
c. Board of directors. For this purpose, or more UIT Funds subject to applicable
the term shall include a trust entity’s duly provisions under this Section. A UIT Fund
constituted board of directors or its may be allowed to operate as a 1) feeder
functional oversight equivalent which shall fund, 2) fund-of-funds and/or 3) multi-class
include the country head in the case of fund: Provided, That the plan rules and
foreign banks. related documents shall state that the UIT
d. Collective investment scheme. An Fund is a feeder fund or a fund-of-funds,
investment vehicle where funds are solicited and/or multi-class fund, and provide an
from investors for collective investment and explanation or illustration of such
which are managed for the account of such structures. A UIT Fund may also be allowed
investors. to have a unit-paying feature where the
e. Feeder fund. A UIT Fund structure income of the fund is distributed in the form
that mandates the fund to invest at least of units called unit income.
(As amended by Circular Nos. 876 dated 20 April 2015,
ninety percent (90%) of its assets in a single 853 dated 21 October 2014 and 767 dated 21 September 2012)
collective investment scheme.
f. Fund-of-funds. A UIT Fund structure § X410.3 Administration of a Unit
that mandates the fund to invest at least Investment Trust Fund. The trustee shall
ninety percent (90%) of its assets in more have exclusive management and control
than one (1) collective investment scheme. of each UIT Fund under its
g. Target fund. A local or foreign administration, and the sole right at any
collective investment scheme in which the time to sell, convert, reinvest, exchange,
UIT Fund invests all or a portion of its transfer or otherwise change or dispose
assets. of the assets comprising the fund:
h. Investor fund. A UIT Fund created Provided, That no participant in a UIT
to take the form of a feeder fund or a fund- Fund shall have or be deemed to have any
of-funds and is approved by the Bangko ownership or interest in any particular

§§ X410.3 - X410.6
15.10.31
account or investment in the UIT Fund but units. Total Net Assets is a summation of
shall have only its proportionate beneficial the market value of each investment less
interest in the fund as a whole. fees, taxes, and other qualified expenses,
as defined under the plan rules.
§ X410.4 Relationship of trustee with When there is a different fee structure
Unit Investment Trust Fund. A trustee for each class, the NAVPu of each class shall
administering a UIT Fund shall not have any be computed by dividing total net assets of
other relationship with such fund other a class by the total outstanding units of such
than its capacity as trustee of the UIT Fund: class; where the net assets of each class shall
Provided, however, That a trustee which represent its proportionate share on the net
simultaneously administers other trust, assets of the multi-class fund less the trustee
fiduciary or investment management funds fee and expenses attributable to that class.
may invest such funds in the trustee’s UIT The net assets of the multi-class fund is the
Fund, if allowed under a policy approved summation of the market value of each
by the board of directors. investment less fees, taxes, and other
qualified expenses, but gross of trustee fees
§ X410.5 Operating and accounting and expenses attributable to a particular
methodology. A UIT Fund shall be class, as defined under the plan rules.
operated and accounted for in accordance e. For a UIT Fund with unit-paying
with the following: feature, the trustee may distribute the
a. The total assets and accountabilities income of the Fund subject to the minimum
of each fund shall be accounted for as a conditions enumerated hereunder.
single account referred to as pooled-fund (1) Distribution of income shall be made
accounting method. The investments of a only from cash received from interest
multi-class fund shall remain as one (1) pool income earned and cash dividends;
and are not separately allocated to classes. (2) Distribution of income shall be made
b. Contributions to each fund by clients after the trust entity has taken into
shall always be through participation in units consideration the following:
of the fund and each unit shall have uniform (a) Income for the period; and
rights and privileges, as any other unit; in the (b) The investment objective and
case of multi-class fund, units shall be distribution policy of the fund;
issued as units in a class of a fund. (3) Distribution of income to
c. All such participations shall be participants shall be after deduction of taxes
pooled and invested as one (1) account and expenses (net distribution);
(referred to as collective investments). (4) Distribution of income shall be
d. The beneficial interest of each effected through conversion of the income
participation unit shall be determined under for distribution into its equivalent units
a unitized net asset value per unit (NAVPu) based on the NAVPu as at the first business
valuation methodology defined in the day when units in the fund are quoted ex-
written plan of the UIT Fund, and no distribution1. Participants shall be entitled
participation shall be admitted to, or to his/her pro-rata share of said units which,
redeemed from, the fund or class of a fund, on distribution date, shall be automatically
except on the basis of such valuation. To considered redeemed;
arrive at a fund’s NAVPu, the fund’s total (5) The Plan rules shall state the
Net Assets is divided by the total outstanding distribution policy, including the sources of
1
Cum-distribution and ex-distribution refer to the date before and after distribution, respectively.

§§ X410.5 - X410.6
15.10.31
income to be distributed and the intended c. Risk disclosure. The Plan rules shall
frequency of distribution; state both the general risks and risks specific
(6) For monitoring purposes, the trustee to the type of fund.
shall separately account for the fund’s d. Investment powers of the trustee
income due for distribution; with respect to the fund, including the
(7) Where a distribution is made, a character and kind of investments, which
notice to each participant on his/her unit may be purchased, by the fund. There must
income shall be made available containing be an unequivocal statement of the full
information on the total amount of income discretionary powers of the trustee as far as
for distribution by the trustee, NAVPu ex- the fund’s investments are concerned. These
distribution and its basis, total number of powers shall be limited only by the duly stated
units for distribution, and unit income. Unit investment objective and policies of the fund.
income refers to the number of units for e. The unitized NAVPu valuation
every unit held by the participant entitled methodology as prescribed under Subsec.
for distribution. X410.5.d shall be employed. The plan rules
(As amended by Circular Nos. 876 dated 20 April 2015, 853 shall also provide the method of determining
dated 21 October 2014) the proportionate share of the classes of units
to the value of the assets of the fund.
§ X410.6 Plan rules. Each UIT Fund f. Terms and conditions governing the
shall be established, administered and admission or redemption of units of
maintained in accordance with a written participation in the fund. The Plan rules shall
trust agreement drawn by the trustee, state that the trustee, prior to admission of a
referred to as the “Plan” which shall be client’s initial participation in the UIT Fund,
approved by the board of directors of the shall conduct a client suitability assessment
trustee and a copy of which shall be to profile the risk-return orientation and
submitted to the Bangko Sentral for suitability of the client to the specific type
processing and approval prior to its of fund. If the frequency of admission or
implementation. Each new UIT Fund Plan redemption is other than daily; that is, any
filed for approval shall be charged a business day, the same should be explicitly
processing fee of P10,000.00. stated in the Plan rules: Provided, That the
The Plan shall contain the following admission and redemption prices shall be
minimum elements: based on the end of day NAVPu of the fund
a. Title of the Plan. This shall or of the class of a fund, if applicable,
correspond to the product/brand name by computed after the cut-off time for fund
which the UIT Fund is proposed to be participation and redemption for that
known and made available to its clients. reference day, in accordance with existing
The Plan rules shall state the classification Bangko Sentral regulations on mark to
of the UIT Fund (e. g., money market fund, market valuation of investment securities.
bond fund, balanced fund and equity fund). g. Aside from the regular audit
b. Manner by which the fund is to be requirement applicable to all trust accounts,
operated. A statement of the fund’s investment an external audit of each UIT Fund shall be
objectives, policies and limitations, and, if conducted annually by an independent
applicable, income distribution policies, auditor acceptable to the Bangko Sentral and
distinctive features of the different classes of the results thereof made available to
units such as the level of trustee fees and participants. The external audit shall be
expenses for each class and other peculiarities conducted by the same external auditor
which the Bangko Sentral may allow. engaged for the audit of the trust entity.

§§ X410.6- X410.7
14.12.31
h. Basis upon which the fund may be enhance the value of the fund, (2) payable
terminated. The Plan rules shall state the to a third party covered by a separate
rights of participants in case of termination contract, and (3) disclosed to participants.
of the fund. Termination of the fund shall The trustee shall secure prior Bangko Sentral
be duly approved by the trustee’s board of approval for outsourcing services provided
directors and a copy of the resolution under existing regulations. No other fees
submitted to the appropriate department of shall be charged to the fund.
the Bangko Sentral. Sales, distribution, marketing and/or
i. Liability clause of the trustee. There other promotional related expenses shall be
must be a clear and prominent statement for the account of the trustee and shall be
adjacent to where a client is required to presumed covered by the trust fee.
sign the participating trust agreement that In the case of a multi-class fund that have
(1) the UIT Fund is a trust product and different level of trustee fees and expenses,
not a deposit account or an obligation of, there shall be a policy on the equitable
or guaranteed, or insured by the trust allocation of any costs, charges, and
entity or its affiliates or subsidiaries; expenses payable out of the multi-class fund,
(2) the UIT Fund is not insured or governed which are not attributable to any particular
by the PDIC; (3) due to the nature of the class.
investment, yields and potential yields k. Such other matters as may be
cannot be guaranteed; (4) any loss/income necessary or proper to define clearly the rights
arising from market fluctuations and price of participants in the UIT Fund. The provisions
volatility of the securities held by the UIT of the Plan shall govern participation in the
Fund, even if invested in government fund including the rights and benefits of
securities, is for the account of the client/ persons having interest in such participation,
participant; (5) as such, the units of as beneficiaries or otherwise. The Plan may
participation of the investor in the UIT Fund, be amended by a resolution of the board of
when redeemed, may be worth more or be directors of the trustee: Provided, however,
worth less than his/her initial investment/ That participants in the fund shall be
contributions; (6) historical performance, immediately notified of such amendments
when presented, is purely for reference and shall be allowed to withdraw their
purposes and is not a guarantee of similar participations within a reasonable time but
future result; and (7) the trustee is not liable in no case less than thirty (30) calendar
for losses unless upon willful default, bad days after the amendments are approved,
faith or gross negligence. if they are not in conformity with the
j. Amount of fees/commission and other amendments made thereto: Provided
charges to be deducted from the fund. The further, That amendments to the Plan shall
amount of fees that shall be charged to a be submitted to the Bangko Sentral within
fund shall cover the fund’s fair and equitable ten (10) business days from approval of the
share of the routine administrative expenses amendments by the board of directors. For
of the trustee such as salaries and wages, purposes of imposing monetary penalties
stationery and supplies, credit investigation, provided under Subsec. X192.2 for delayed
collateral appraisal, security, messengerial submission of reports, the amendments to
and janitorial services, EDP expenses, the Plan shall be considered as “Category
Bangko Sentral supervision fees and internal A-3” report. The amendments shall be
audit fees. However, the trustee may charge deemed approved after thirty (30) business
a UIT Fund for special expenses in case such days from date of completion of
expenses are (1) necessary to preserve or requirements.

§§ X410.6 - X410.7
15.10.31
A copy of the Plan shall be available at (a) The designated name and
the principal office of the trustee during classification of the fund, the fund’s trustee,
regular office hours, for inspection by any and the classes of a UIT fund, if any
person having an interest in the fund or by . (b) Minimum information regarding:
his authorized representative. Upon request, (i) The general investment policy and
a copy of the Plan shall be furnished such applicable risk profile. There shall be a clear
interested person. description/explanation of the general risks
(As amended by Circular Nos. 876 dated 20 April 2015, 853 attendant with investing in a UIT Fund,
dated 21 October 2014 and 593 dated 08 January 2008) including risk specific to a type of fund.
§ X410.7 Minimum disclosure Technical terms should likewise be defined
in laymen’s terms1.
requirements.
(ii) Particulars including administrative
a. Key Information and Investment
and marketing details, such as but not
Disclosure Statement. This document
limited to, pricing, cut-off time for
shall contain the key features and the
participation and redemption, early
prospective and outstanding investments
redemption penalty/ies, and any special
of a UIT Fund. It shall use plain language
features of the UIT fund, as applicable. For
presented in a concise manner, and shall
a UIT Fund with unit-paying feature, the
comply substantially with the format
marketing materials shall provide relevant
prescribed in Appendix 62. This
information on this feature including, but
document shall be updated and made
not limited to, disclosures that distributions
available to participants at least every
are not guaranteed and shall be determined
calendar quarter thereof.
by the trustee in accordance with the plan
For investments of feeder funds/fund
rules; and that income distribution may
of-funds, the trustee shall likewise make
result in an immediate decrease in NAVPu
available to all UIT Fund clients all
by the amount of distribution.
relevant information on the target fund/s.
(iii) All charges made/to be made
For a UIT Fund with unit-paying feature,
against the fund or class of a UIT Fund,
the KIIDS shall include the intended
including trust fees and other related charges.
frequency of income distribution and the
(iv) The availability of the Plan Rules
last five distribution dates, with information
governing the fund, upon the client’s request
on the unit income and the distribution
and the contact details of the trustee.
yield: Provided, further, That the KIIDS shall
(v) Client and Product Suitability
disclose that distributions are not guaranteed
Standards. Prior to admission, the trustee
and are determined by the trustee in
shall perform a client profiling process for
accordance with the plan rules; and that
all UIT Fund participants under the general
income distribution may result in an
principles on client suitability assessment
immediate decrease in NAVPu by the
to guide the client in choosing investment
amount of the distribution. outlets that are best suited to his objectives,
b. Distribution of investment units. risk tolerance, preferences and experience.
The trustee may issue such conditions or The profiling process shall, at the minimum,
rules, as may affect the distribution of require the trustee to obtain client
investment units, subject to the minimum information through the Client Suitability
conditions enumerated hereunder. Assessment (CSA) form, classify the client
(1) Marketing materials. All marketing according to his financial sophistication
materials related to the sale of a UIT Fund and communicate the CSA results to the
shall clearly state:
1
Example: "Fixed income securities" does not really mean a guarantee of fixed earnings on the investor's participation;
"Risk-free" government securities which may be sovereign "risk-free" but not interest rate "risk-free"

§§ X410.7
14.12.31
subject client. The general principles on investment/contributions; (6) historical

CSA shall also require the trustee to adopt performance, when presented, is purely for
a notice mechanism whereby clients are reference purposes and is not a guarantee of
advised and/or reminded of the explicit similar future result; and (7) the trustee is not
requirement to notify the trustee or its UIT liable for losses unless upon willful default,
Fund marketing personnel of any change bad faith or gross negligence.
in their characteristics, preferences or In addition to the agreement, every UIT
circumstances to enable the trustee to Fund participant shall be provided with -
update client’s profile at least every (1) CSA form to be accomplished
three (3) years. during the profiling process required under
(c) The participation is not a “deposit the general principles on CSA. This is
account” but a trust product; and that any designed to ensure that based on relevant
loss/income is for the account of the information about the client, his investment
participant; that the trustee is not liable for profile is matched against the investment
losses unless upon willful default, bad faith parameters of the UIT Fund. At the
or gross negligence. minimum, client information shall include
(d) A balanced assessment of the personal or institutional data, investment
possible gains and losses of the UIT Fund objective, investment horizon, investment
and that the participation does not carry experience, and risk tolerance; and
any guaranteed rate of return, and is not (2) Risk disclosure statement, which in
insured by the PDIC. reference to Subsec. X410.6c, shall describe
(e) An advisory that the investor must the attendant general and specific risks that
read the complete details of the fund in the may arise from investing in the UIT Fund.
Plan Rules, make his/her own risk This statement shall be accomplished by the
assessment, and when necessary, he/she client every time he participates in a different
must seek independent/professional fund and shall be substantially in the form
opinion, before making an investment. as shown in Annex A of Appendix 62a.
(2) Evidence of participation. Every UIT Both documents shall be signed by the
Fund participant shall be given - client/participant and the UIT marketing
(a) A participating trust agreement. personnel who assessed and explained to
Such agreement shall clearly indicate that the concerned client his/her ability to bear
(1) the UIT Fund is a trust product and not a the risks and potential losses.
deposit account or an obligation of, or (b) A confirmation of participation and
guaranteed, or insured by the trust entity or redemption made to/from the fund that shall
its affiliates or subsidiaries; (2) the UIT Fund contain the following information:
is not insured or governed by the PDIC; (i) NAVPu of the fund on day of
(3) due to the nature of the investment, yields purchase/redemption;
and potential yields cannot be guaranteed; (ii) Number of units purchased/
(4) any loss/income arising from market redeemed; and
fluctuations and price volatility of the (iii) Absolute peso or foreign currency
securities held by the UIT Fund, even if value.
invested in government securities, is for the No indicative rates of return shall be
account of the client/participant; (5) as such, provided in the trust participating
the units of participation of the investor in the agreement. Marketing materials may present
UIT Fund, when redeemed, may be worth relevant historical performance purely for
more or be worth less than his/her initial reference and with clear indication that past

§§ X410.7- X410.8
15.10.31
results do not guarantee similar future (1) Duties and responsibilities of all UIT
results. marketing personnel;
(3) A participating trust agreement or (2) Conduct of due diligence check on
confirmation of contribution/redemption the fitness and propriety of all UIT marketing
need not be manually signed by the trustee personnel which includes monitoring and
or his authorized representative if the same reviewing on an ongoing basis their
is in the form of an electronic document performance; and
that conforms with the implementing rules (3) Conduct of continuing training and
and regulations of R.A. No. 8792, otherwise education especially on updates relative to
known as the E-Commerce Act. the fund products.
c. Regular computation and For purposes of this Subsection, a UIT
availability of NAVPu and other Fund may be sold by a bank employee
information. The trustee managing a UIT belonging to the same financial
fund shall: conglomerate as the trustee, subject to the
(1) Compute the NAVPu daily; provision of the cross-selling framework.
(2) Publish at least weekly the NAVPu To ensure the competence and integrity
in one (1) or more newspapers of national of all duly designated UIT marketing
circulation: Provided, That a pooled weekly personnel, all personnel involved in the sales
publication of such NAVPu shall be of these funds shall be required to undergo
considered as substantial compliance with standardized training program in
this requirement. The said publication, at accordance with the guidelines of this
the minimum, shall clearly state the name Subsection. This training program may be
of the fund, its general classification, the conducted by their respective trust entities
fund’s NAVPu and the moving return on in accordance with the minimum training
investment (ROI) of the fund on a year-to- program guidelines provided by the Trust
date (YTD) and year-on-year (YOY) basis; Officers Association of the Philippines
and (TOAP). Such training program shall
(3) Make available the historical net asset however be regularly validated by TOAP.
value per unit, declaration of trust or its (As amended by Circular Nos. 876 dated 20 April 2015, 852
equivalent document, disclosure dated 21 October 2014, 767 dated 21 September 2012 and 593
dated 08 January 2008)
documents, and other pertinent information
about a UIT Fund via its website or the Trust
Officers Association of the Philippines § X410.8 Exposure limits. The
(TOAP)-administered website. For a UIT combined exposure of the UIT Fund to any
Fund with unit-paying feature, it shall also entity and its related parties shall not exceed
disclose when there is an income fifteen percent (15%) of the market value of
declaration, the total amount of income for the UIT Fund: Provided, That, a UIT Fund
distribution, NAVPu ex-distribution and its invested, partially or substantially, in
basis, total number of units for distribution, exchange traded equity securities shall be
unit income and historical distributions, if subject to the fifteen percent (15%) exposure
any. limit to a single entity/issuer: Provided,
d. Marketing personnel. The trustee further, That, in the case of an exchange
shall ensure that there are board-approved traded equity security which is included in
policies and procedures covering the an index and tracked by the UIT Fund, the
following: exposure of the UIT Fund to a single entity
(Next page is Part IV - Page 33)
Manual of Regulations for Banks Part IV- Page 32a

§§ X410.8 - X410.9
15.10.31
shall be the actual benchmark weighting of administering the UITF and acting as lender,
the issuer or fifteen percent (15%), with due notice to its counterparty and the
whichever is higher. market operator; and
This limitation shall not apply to (g) Units/shares in collective investment
non-risk assets as defined by the Bangko schemes (CIS), i.e., target fund, shall include
Sentral. exchange traded fund (ETF) and other CIS,
In the case of feeder fund/fund-of-funds, subject to the following:
the exposure limit shall be applied on the (1) The investment objectives of the
target fund’s underlying investments. target fund are aligned with that of the
Furthermore, the investments in any one (1) investor fund;
target fund shall not exceed ten percent (2) The underlying investments of target
(10%) of the total net asset value of the target funds are limited to the allowable
fund. investment outlets set forth in this
In case the limits prescribed above are subsection;
breached due to the marking-to-market of (3) The target fund has no investment in
certain investment/s or any extraordinary other collective investment schemes; and
circumstances, e.g., abnormal redemptions (4) The target fund is supervised by a
which are beyond the control of the trustee, regulatory authority, as follows:
the trustee shall be given thirty (30) days (a) a local target fund shall either be
from the time the limit is breached, or in approved by the Bangko Sentral or registered
case of investor funds thirty (30) days from with the SEC.
date of receipt of report indicating the net (b) a target fund constituted in another
asset value of the fund, to correct the same. jurisdiction shall be registered/authorized/
(As amended by Circular Nos. 767 dated 21 September 2012 approved, as the case may be, and is
and 577 dated 17 August 2007) recognized as a collective investment
scheme in its home jurisdiction by a
§ X410.9 Allowable investments and regulatory authority that is a member of the
valuation. UIT Fund investments shall be International Organization of Securities
limited to bank deposits and the following Commissions (IOSCO); or any regulatory
financial instruments: authority acceptable to the Bangko Sentral
(a) Securities issued by or guaranteed to supervise the CIS.
by the Philippine government, or the (h) Such other tradable investment
Bangko Sentral; outlets/categories as the Bangko Sentral may
(b) Tradable securities issued by the allow:
government of a foreign country, any Provided, That the investment of the peso
political subdivision of a foreign country or UIT Fund in tradable foreign currency
any supranational entity; denominated financial instruments shall be
(c) Exchange-listed securities; subject to Items “e” and “f” of Subsec.
(d) Marketable instruments that are X409.6.
traded in an organized exchange; Provided, further, That a financial
(e) Loans traded in an organized instrument is regarded as tradable if quoted
market; and two-way prices are readily and regularly
(f) Loans arising from repo agreements available from an exchange, dealer, broker,
which are transacted through an exchange industry group, pricing service or regulatory
recognized by the SEC, subject to the agency, and those prices represent actual
condition that the repo contracts may be pre- and regularly occurring market transactions
terminated lawfully by the trust entity on an arm’s length basis: Provided, finally,

§§ X410.9 - X410.12
15.10.31
That the financial instrument is easy to market of the fund’s financial instruments
realize upon sale at any time. shall be in place at all times. In this
The UIT Fund may avail itself of respect, a daily reconcilement of the fund’s
financial derivatives instruments solely for resultant marked-to-market value with the
the purpose of hedging risk exposures of unrealized market losses and gains
the existing investments of the Fund, (respective contra asset balance) versus the
provided these are accounted for in book value of the fund for investments in
accordance with existing Bangko Sentral financial instruments shall be done and
hedging guidelines as well as the trust all differences resolved within the day.
entity’s risk management and hedging b. Custody of securities. Investments
policies duly approved by the Trust in securities of a UIT Fund shall be held
Committee and disclosed to participants. for safekeeping by Bangko Sentral
The use of hedging instruments shall accredited third party custodians which
also be disclosed in the “Plan” as provided shall perform independent marking-to-
in Item “c” of Subsec. X410.6 and specified market of such securities.
in the key information and investment Investments in target funds of a UIT
disclosure statement as provided in Item “a” Fund structured as an investor fund shall
of Subsec. X410.7. be held for safekeeping by an institution
(As amended by Circular Nos. 876 dated 20 April 2015, 852 registered/authorized/approved by a
dated 21 October 2014 and 767 dated 21 September 2012 , relevant regulatory authority in its home
M-2010-033 dated 04 October 2010, Circular Nos. 676 dated
29 December 2009 and 675 dated 22 December 2009) jurisdiction to act as third party custodian.
§ X410.10 Other related guidelines on
§ X410.12 Counterparties.
valuation of allowable investments.
a. Dealings with related interests/bank
a. In pricing debt securities, the
proper/holding company/subsidiaries/
provision of Appendix 33a under the “Other
affiliates and related companies. A trustee
Guidelines” section shall apply for non-
of a UIT Fund shall be transparent at all
benchmark securities.
times and maintain an audit trail for all
b. In case outstanding UIT Fund
transactions with related parties or entities.
investments may deteriorate in quality, i.e.,
The trustee shall observe the principle of
no longer tradable as defined under Subsec.
best execution and no purchase/sale shall
X410.9, the trustee shall immediately
be made with related counterparties
provision to reflect fair value in accordance
without considering at least two (2)
with generally accepted accounting
competitive quotes from other sources.
principles or as may be prescribed by the
Consistent with the provisions of
Bangko Sentral. If no fair value is available,
Subsec. X410.4, a trustee may invest the
the instrument shall be assumed to be of no
funds of a UIT Fund structured as an
market value.
(As amended by Circular No. 813 dated 27 September 2013) investor fund in a target fund that is
administered by the trustee or its related
§ X410.11 Unit Investment Trust Fund party/company: Provided, That:
administration support. (i) there shall be no cross-holding
a. Backroom operations. Administrative between the investor fund and the target
rules on backroom under Sec. X421 shall fund, where cross-holding refers to the
be applicable to UIT Fund. Adequate holding of shares/units of participation in
systems to support the daily marking-to- one another by two (2) or more funds;

§§ X410.12- X411.1
08.12.31
(ii) all initial charges on the target fund a. In the case of accounts created by
are waived; and corporations, business firms,
(iii) the trust/management fee shall be organizations or institutions, the voluntary
charged only once, either at the level of the written agreement or indenture entered
investor fund or at level of the target fund. into by the parties, accompanied by a
b. Accreditation of counterparties. The copy of the board resolution or other
Fund shall only invest with approved evidence authorizing the establishment of
counterparties qualified in accordance with and designating the signatories to, the
the policy duly approved by the Trust investment management account.
Committee. Counterparties shall be subject b. In the case of accounts created by
to appropriate limits in accordance with individuals, the voluntary written
sound risk management principles. agreement or indenture entered into by
(As amended by Circular No. 767 dated 21 September 2012) the parties.
The voluntary written agreement or
§ X410.13 Foreign currency- contract shall include the following
denominated unit investment trust funds. minimum provisions:
UIT Fund denominated in any acceptable (1) Pre-numbered contractual agreement
form;
foreign currency provided under existing
(2) Title or nature of contractual
Bangko Sentral rules and regulations may
agreement in noticeable print;
be established. Such fund may only be
(3) Legal capacities, in noticeable print,
invested in allowable investments
of parties sought to be covered;
denominated in pesos or any acceptable
(4) Purposes and objectives;
foreign currency as expressly allowed under
(5) The initial amount of funds and/or
the fund’s plan rules and properly disclosed
value of securities subject of the
to fund participants.
arrangement delivered to the investment
manager;
§ X410.14 Exemptions from statutory (6) Statement in underlined noticeable
and liquidity reserves, single borrower’s print that:
limit, director, officers, stockholders and (a) The agreement is an agency and not
their related interests. The provisions on a trust agreement. As such, the client shall
reserves, single borrower’s limit and DOSRI at all times retain legal title to funds and
ceilings under Subsec. X405.5, and properties subject of the arrangement;
Secs. X303, X330 and X331, respectively, (b) The arrangement does not guaranty
applicable to trust funds in general shall not a yield, return or income by the investment
be made applicable to UIT Funds. manager. As such, past performance of the
account is not a guaranty of future
Sec. X411 Investment Management performance and the income of investments
Activities. The conduct of investment can fall as well as rise depending on
management activities shall be subject to the prevailing market conditions; and
following regulations. (c) The investment management
agreement is not covered by the PDIC and
§ X411.1 Minimum documentary that losses, if any, shall be for the account
requirements. An investment management of the client;
account shall be covered by a written (7) Duties and powers of the investment
document establishing such account, as manager;
follows: (8) Liabilities of the investment manager;
Part IV- Page 34a Manual of Regulations for Banks

§§ X411.1- X411.5
08.12.31
(9) Reports to the client; When an investment manager is granted

(10) The amount or rate of the discretionary powers in the investment
compensation of the investment manager; disposition of investment management
(11) Terms and conditions governing funds and unless otherwise specifically
withdrawals from the account; enumerated in the agreement or indenture
(12) Termination of contractual and directed in writing by the client, loans
arrangement; and and investments of the fund shall be limited
(13) Disclosure requirements for to:
transactions requiring prior authority and/ a. Evidences of indebtedness of the
or specific written investment directives Republic of the Philippines and of the
from the client. Bangko Sentral, and any other evidences of
A sample investment management indebtedness or obligations the servicing
agreement which conforms to the foregoing and repayment of which are fully guaranteed
requirements is shown as Appendix 24. by the Republic of the Philippines or loans
against such government securities;
§ X411.2 Minimum size of each b. Loans fully guaranteed by the
investment management account. No Republic of the Philippines as to the
investment management account shall be payment of principal and interest;
accepted or maintained for an amount less c. Loans fully secured by a hold-out on,
than P1.0 million. An investment assignment or pledge of deposits maintained
management account reduced to less than either with the bank proper or other banks,
P1.0 million due to investment losses shall or of deposit substitutes of the bank, or
be exempt from this requirement. mortgage and chattel mortgage bonds issued
by the investment manager; and
§ X411.3 Commingling of funds. d. Loans fully secured by real estate or
Two (2) or more individual investment chattels in accordance with Sections 37 and
management accounts shall not be 38 of R.A. No. 8791, and subject to the
commingled except for the purpose of requirements of Sections 39 and 40 of R.A.
investing in government securities or in duly No. 8791.
registered commercial papers: Provided, The specific directives required under
That the participation of each of the this Subsection shall consist of the following
aforementioned accounts in the information:
commingled account shall not be less than (1) The transaction to be entered into;
P1.0 million: Provided, further, That such (2) Borrower’s name;
commingling has been duly disclosed and (3) Amount involved; and
specifically agreed in writing by the clients. (4) Collateral security(ies), if any.
§ X411.4 Lending and investment § X411.5 Transactions requiring prior

disposition. Assets received in investment authority. An investment manager shall not
management capacity shall be administered undertake any of the following transactions
in accordance with the terms of the for the account of a client, unless prior to
instrument creating the investment its execution, such transaction has been fully
management relationship. disclosed and specifically authorized in
writing by the client:
(Next Page is Part IV- page 35)
Manual of Regulations for Banks Part IV- Page 34b

§§ X411.1- X411.5
08.12.31
(9) Reports to the client; When an investment manager is granted

(10) The amount or rate of the discretionary powers in the investment
compensation of the investment manager; disposition of investment management
(11) Terms and conditions governing funds and unless otherwise specifically
withdrawals from the account; enumerated in the agreement or indenture
(12) Termination of contractual and directed in writing by the client, loans
arrangement; and and investments of the fund shall be limited
(13) Disclosure requirements for to:
transactions requiring prior authority and/ a. Evidences of indebtedness of the
or specific written investment directives Republic of the Philippines and of the
from the client. Bangko Sentral, and any other evidences of
A sample investment management indebtedness or obligations the servicing
agreement which conforms to the foregoing and repayment of which are fully guaranteed
requirements is shown as Appendix 24. by the Republic of the Philippines or loans
against such government securities;
§ X411.2 Minimum size of each b. Loans fully guaranteed by the
investment management account. No Republic of the Philippines as to the
investment management account shall be payment of principal and interest;
accepted or maintained for an amount less c. Loans fully secured by a hold-out on,
than P1.0 million. An investment assignment or pledge of deposits maintained
management account reduced to less than either with the bank proper or other banks,
P1.0 million due to investment losses shall or of deposit substitutes of the bank, or
be exempt from this requirement. mortgage and chattel mortgage bonds issued
by the investment manager; and
§ X411.3 Commingling of funds. d. Loans fully secured by real estate or
Two (2) or more individual investment chattels in accordance with Sections 37 and
management accounts shall not be 38 of R.A. No. 8791, and subject to the
commingled except for the purpose of requirements of Sections 39 and 40 of R.A.
investing in government securities or in duly No. 8791.
registered commercial papers: Provided, The specific directives required under
That the participation of each of the this Subsection shall consist of the following
aforementioned accounts in the information:
commingled account shall not be less than (1) The transaction to be entered into;
P1.0 million: Provided, further, That such (2) Borrower’s name;
commingling has been duly disclosed and (3) Amount involved; and
specifically agreed in writing by the clients. (4) Collateral security(ies), if any.
§ X411.4 Lending and investment § X411.5 Transactions requiring prior

disposition. Assets received in investment authority. An investment manager shall not
management capacity shall be administered undertake any of the following transactions
in accordance with the terms of the for the account of a client, unless prior to
instrument creating the investment its execution, such transaction has been fully
management relationship. disclosed and specifically authorized in
writing by the client:
(Next Page is Part IV- page 35)
Manual of Regulations for Banks Part IV- Page 34b

§§ X411.5 - X411.8
09.12.31
a. Lend, sell, transfer or assign money (1) The transaction to be entered into;
or property to any of the departments, (2) Identities of the parties involved in
directors, officers, stockholders, or the transaction and their relationships
employees of the investment manager, or (shall not apply to Item “d” of this
relatives within the first degree of Subsection);
consanguinity or affinity, or the related (3) Amount involved; and
interests of such directors, officers and (4) Collateral security(ies), if any.
stockholders; or to any corporation where The above information shall be made
the investment manager owns at least fifty known to clients in a separate instrument
percent (50%) of the subscribed capital or or in the very instrument creating the
voting stock in its own right and not as investment management relationship.
trustee nor in a representative capacity;
b. Purchase or acquire property or debt § X411.6 Title to securities and other
instruments from any of the departments, properties. Securities such as promissory
directors, officers, stockholders, or notes, shares of stocks, bonds and other
employees of the investment manager, or properties of the portfolio shall be issued
relatives within the first degree of or registered in the name of the principal
consanguinity or affinity, or the related or of the investment manager: Provided,
interests of such directors, officers and That in case of the latter, the instrument
stockholders; or from any corporation shall indicate that the investment manager
where the investment manager owns at least is acting in a representative capacity and
fifty percent (50%) of the subscribed capital that the principal’s name is disclosed
or voting stock in its own right and not as thereat.
trustee nor in a representative capacity;
c. Invest in equities of, or in securities § X411.7 Ceilings on loans. Loans
underwritten by, the investment manager funded by IMAs shall be subject to the
or a corporation in which the investment DOSRI ceilings imposed on banks and IHs
manager owns at least fifty percent (50%) under Secs. X330 and X331. For purposes
of the subscribed capital or voting stock in of determining compliance with said
its own right and not as trustee nor in a ceilings, the total amount of said loans
representative capacity; and granted by the trust department and the bank
d. Sell, transfer, assign or lend money proper to the same person, firm or
or property from one trust, fiduciary or corporation shall be combined.
investment management account to
another trust, fiduciary or IMA except where § X411.8 Other applicable regulations
the investment is in any of those enumerated on loans and investments. The loans and
in Items “a” to “d” of Subsec. X411.4. investments of IMAs shall be subject to
Directors, officers, stockholders, and pertinent laws, rules and regulations for
their related interests covered by this banks that shall include, but need not be
Subsection shall be those considered as limited to, the following:
such under existing regulations on loans a. Requirements of Sections 39 and 40
to DOSRI in Part III-E of this Manual. The of R.A. No. 8791 (The General Banking
procedural and reportorial requirements in Law of 2000);
said regulations shall also apply. b. Provisions of Section 4(e) of the New
The disclosure required under this Rules on Registration of Short-Term
Subsection shall consist of the following Commercial Papers and Section 7(f) of the
minimum information: New Rules on Registration of Long-Term

§§ X411.8 - X411.10
09.12.31
Commercial Papers issued by the SEC closing rate and the New York US dollar/
(Appendices 13 and 14); third currencies closing rate; and
c. Criteria for past due accounts; (4) The investment manager shall
d. Qualitative appraisal of loans, comply with the reportorial requirements
investments and other assets that may that may be prescribed by the BSP, which
require provision for probable losses which shall include as a minimum, the foreign
shall be booked in accordance with the currency amount and the local currency
FRPTI; equivalent of the total cross currency
e. Requirements of Sections 3 and 8 investments with details on: (a) type of
of the SRC; and investments; and (b) amount of cash flow
f. Provisions of Section 44 – converted.
Investments by Philippine Residents – of the For purposes of this Subsection,
FX Manual, such that the cross-currency “resident”, as defined under Section 1 of the
investments of peso IMAs, shall be subject FX Manual, shall refer to the principal that
to the following conditions: engages the services of the investment
(1) All cash flows of the investment manager under an investment management
manager shall only be in pesos. In case the agreement.
foreign exchange acquired or received by (Circular No. 676 dated 29 December 2009)
the principal as dividends/earnings or
divestment proceeds on such investment are § X411.9 Operating and accounting
intended for reinvestment abroad, the same methodology. IMAs shall be operated and
proceeds are not required to be inwardly accounted for in accordance with the
remitted and sold for pesos through following:
authorized agent banks: Provided, That such a. The investment manager shall
proceeds are reinvested abroad within two administer, hold, or manage the fund or
(2) banking days from receipt of the funds property in accordance with the instrument
abroad; creating the investment management
(2) The investment manager shall relationship; and
purchase, invest, reinvest, sell, transfer or b. Funds or property of each client
dispose foreign currency-denominated shall be accounted separately and distinctly
financial instruments, including securities from those of other clients herein referred
as defined in Section 3 of the SRC, through to as individual account accounting.
a distributor or underwriter duly (As amended by Circular No. 676 dated 29 December 2009)
authorized or licensed by the government
of the issuer of such instruments, or a § X411.10 Tax-exempt individual
counterparty financial institution (seller or investment management accounts. The
buyer) authorized in writing by the following shall be the features/requirements
principal and/or accredited by the of IMAs of individuals which may be
investment manager: Provided, That, the exempted from the twenty percent (20%)
conduct, documentation, and settlement final tax under Section 24(B)(1) of R.A. No.
of any of these transactions shall be 8424 (The Tax Reform Act of 1997):
outside Philippine jurisdiction; a. The tax exemption shall apply to
(3) The investment manager shall investment management agreements
record cross-currency investment contracted on or after 03 January 2000;
transactions in the peso regular books at b. The investment management
their foreign currency amounts and their agreement shall only be between individuals
local currency equivalent using the who are Filipino citizens or resident aliens
Philippine Dealing System peso/US dollar and investment manager-banks. The

§§ X411.10 - X412.2
09.12.31
agreement shall be non-negotiable and date when the additional funds were
non-transferable; received by the investment manager-bank
c. The minimum amount of investment to serve as basis for determining the
for an IMA shall be P1.0 million; minimum five (5)-year holding period for tax
d. The investment management exemption purposes of the additional funds;
agreement shall indicate that pursuant to and
Section 24(B)(1) of R.A. No. 8424, interest f. Tax-exempt individual IMAs
income of the investment management established under this Subsection shall be
funds derived from investments in subject to the provisions of Subsecs.
interest-bearing instruments (e.g., time X411.1(b) and X411.2 up to X411.8.
deposits, government securities, loans (As amended by Circular No. 676 dated 29 December 2009)
and other debt instruments) which are
otherwise subject to the twenty percent Sec. X412 Foreign Currency Deposit Unit/
(20%) final tax, shall be exempt from said Expanded Foreign Currency Deposit Unit
final tax provided the funds are held under Trust Accounts; Other Fiduciary or
investment management by the investment Investment Management Accounts. Only a
manager for at least five (5) years. If said bank with authority to operate a foreign
funds are held by the investment manager currency deposit unit (FCDU) or an
for a period less than five (5) years, interest expanded foreign currency deposit unit
income shall be subject to a final tax which (EFCDU) under R.A. No. 6426, as amended,
shall be deducted and withheld from the may accept foreign currency-denominated
proceeds of the IMA based on the trust, other fiduciary or IMAs.
following schedule– (As amended by Circular No. 666 dated 24 September 2009)
Holding Period Rate of Tax § X412.1 Banks with trust authority or

investment management authority. A bank
Four (4) years to less than five (5) years 5% authorized to engage in trust business under
Three (3) years to less than four (4) years 12%
Less than three (3) years 20% Section 79 of R.A. No. 8791, or in
investment management activities only
Necessarily, the investment under Subsection 53.4 of R.A. No. 8791,
management agreement shall clearly which is also authorized to operate an
indicate the date when the investment FCDU or EFCDU under R.A. No. 6426, as
manager actually received the funds which amended, shall include FCDU/EFCDU trust
shall serve as basis for determining the other fiduciary or IMAs among those
holding period of the funds; managed or administered by its trust/
e. The investment manager may investment management department under
accept additional funds for inclusion in the responsibility of the board of directors,
IMAs which have been established as tax- the trust/investment management committee
exempt under R.A. No. 8424. However, the and the trust/investment management
receipt of additional funds shall be properly officer.
documented by indicating that they are part (As amended by Circular No. 666 dated 24 September 2009)
of existing tax-exempt IMAs and that the
interest income of the additional funds § X412.2 Additional deposit for the
derived from investments in interest-bearing faithful performance of trust duties or
instruments shall be exempt from the investment management activities. A bank
twenty percent (20%) final tax under the authorized to engage in trust business or
same conditions mentioned in the preceding investment management activities that
item. The document shall also indicate the accepts FCDU/EFCDU trust other fiduciary

§§ X412.2 - X414.1
12.12.31
or IMAs shall deposit with the Bangko capital stock and no part of such surplus
Sentral additional eligible government shall at any time be paid out in dividends
securities under Subsec. X405.2 as security but losses accruing in the course of its
for the faithful performance of trust duties business may be charged against surplus.
or investment management activities
equivalent to at least one percent (1%) of B. INVESTMENT MANAGEMENT
the value of the FCDU/EFCDU trust or ACTIVITIES
investment management assets based on the
average of the month-end balances of such Sec. X414 Authority to Perform
assets during the immediately preceding Investment Management. Banks may be
quarter as converted in the local currency authorized by the Monetary Board to act as
at the prevailing foreign exchange rate. Such managing agent, adviser, consultant or
securities shall be deposited within thirty administrator of investment management/
(30) banking days after the end of every advisory/consultancy account under Section
calendar quarter. 53.4 of R.A. No. 8791. However, such
(As amended by Circular No. 666 dated 24 September 2009) authority shall not be construed to include
the authority to engage in trust and other
§ X412.3 Applicability of rules and fiduciary business under Chapter IX of R.A.
regulations. Unless otherwise revised by the No. 8791.
provisions of this Section, the rules and If a bank is found to engage in
regulations governing the administration of unauthorized investment management
trust, other fiduciary or IMAs, including activities, the Monetary Board may impose
UITFs, shall be observed. Also applicable administrative sanctions against such bank
are rules and regulations on the operations or its principal officers and/or majority
of FCDUs/EFCDUs that include, among stockholders or proceed against them in
other things, regulations on acceptable accordance with law.
foreign currencies, eligible and ineligible The Monetary Board may take such
foreign currency sources; foreign currency action as it may deem proper such as, but
cover requirements; and allowable loans and may not be limited to, requiring the transfer
investments. or turnover of any IMA to duly incorporated
(As amended by Circular No. 666 dated 24 September 2009) and licensed entities of the choice of the
client.
§ X412.4 Liquidity requirement for A bank not authorized to engage in
foreign currency deposit unit/expanded investment management activities shall not
foreign currency deposit unit common advertise or represent itself as being
trust funds engaged in investment management
(Deleted by Circular No. 666 dated 24 September 2009) activities or represent itself as investment
manager or use words of similar import.
Sec. X413 Required Surplus. A bank
authorized to engage in trust and other fiduciary § X414.1 Required capital. Banks
business shall, before the declaration of applying for authority to perform investment
dividends, carry to surplus at least ten percent management activities must have minimum
(10%) of its net profits realized out of its trust, capital accounts of not less than P300
investment management and other fiduciary million or such amount as may be required
business since the last preceding dividend by the Monetary Board or other regulatory
declaration until the surplus shall amount to agency.
twenty percent (20%) of its authorized (As amended by Circular No. 756 dated 24 April 2012)

§§ X414.2 - X415.3
12.12.31
§ X414.2 Prerequisites for engaging in faithful performance of investment

investment management activities. A bank management duties required under Subsec.
before it may engage in investment X415.1;
management activities shall comply with the b. Organization chart of the investment
following requirements: management department which shall carry
a. The bank has been duly licensed by out the investment management activities of
the Bangko Sentral or created by special law the bank; and
or charter. c. Names and positions of individuals
b. The articles of incorporation or designated as chairman and members of the
charter of the bank shall include among its investment management committee,
powers or purposes the authority to engage investment management officer and other
in investment management activities. subordinate officers of the investment
c. The by-laws of the bank shall include, management department.
among other things: (As amended by Circular No. 756 dated 24 April 2012)
(1) The organization plan or structure
of the department, office or unit which shall Sec. X415 Security for the Faithful
conduct the investment management Performance of Investment Management
activities of the institution; Activities
(2) The creation of an investment
§ X415.1 Basic security deposit. A bank
management committee, the appointment
authorized to engage in investment
of an investment management officer and
management activities shall deposit with the
subordinate officers of the investment
Bangko Sentral eligible government
management department; and
securities as security for the faithful
(3) A clear definition of the duties and
performance of its investment management
responsibilities as well as the line and staff
activities equivalent to at least one percent
functional relationships of the various units, (1%) of the book value of the total
officers and staff within the organization. investment management assets: Provided,
d. The applicant shall also meet the That at no time shall such deposit be less
additional requirements under Subsec. than P500,000.
X404.3d to m. Scripless securities under the RoSS
Compliance with the foregoing as well system of the BTr may be used as basic
as with other requirements under existing security deposit for the faithful performance
regulations, shall be maintained up to the of investment management activities
time the investment management authority using the guidelines enumerated in
is granted. A bank that fails in this respect Appendix 33.
shall be required to show compliance for
another test period of the same duration. § X415.2 Eligible securities. Securities
(As amended by Circular No. 756 dated 24 April 2012) enumerated in Subsec. X405.2 shall be eligible
as security deposit for faithful performance of
§ X414.3 Pre-operating requirements investment management activities.
A bank authorized to engage in investment
management activities shall, before engaging § X415.3 Valuation of securities and
in actual operations, submit to the Bangko basis of computation of the basic security
Sentral the following: deposit requirement. For purposes of
a. Government securities acceptable to determining compliance with the basic
the Bangko Sentral amounting to P500,000 security deposit under this Section, the
as minimum basic security deposit for the amount of securities so deposited shall be

§§ X415.3 - X415.4
08.12.31
based on their book value, that is, cost as ii. Non-monetary penalty beginning
increased or decreased by the corresponding with the third offense (all banks) -
discount or premium amortization. Prohibition against the acceptance of new
The base amount for the basic security IMAs and from renewing expiring
deposit shall be the average of the month- investment management contracts up to the
end balances of the total assets of investment time the violation is corrected.
management funds of the immediately b. On the Head of the Investment
preceding calendar quarter. Management Department and/or other
officers responsible for the deficiency/
§ X415.4 Compliance period; sanctions non-compliance:
The investment manager shall have thirty (1) First offense - warning that
(30) calendar days after the end of every subsequent violations shall be dealt with
calendar quarter within which to deposit more severely;
with the Bangko Sentral securities required (2) Second offense - written reprimand
under this Section. with a stern warning that subsequent
The following sanctions shall be violations shall be subject to suspension;
imposed for any deficiency in the basic (3) Third offense - thirty (30) calendar
security deposit for the faithful performance day-suspension without pay; and
of investment management activity: (4) Subsequent offense(s) - sixty (60)
a. On the bank: calendar day-suspension without pay.
i. Monetary penalty/ies: For purposes of determining the
Offense Third and frequency of the violation, the bank’s
Trust First Second subsequent compliance profile for the immediately
Asset Size offense(s) preceding three (3) years or twelve (12)
TBs/RBs with quarters will be reviewed: Provided, That
Limited Trust P300.00 P400.00 P500.00 for purposes of determining appropriate
Authority penalty on the head of the Investment
Up to Management Department and/or other
P500 P600.00 P700.00 P800.00 responsible officer(s), any offense
UBs/KBs/TBs with Full Trust Authority and with Trust Assets of
million committed outside the preceding three (3)

Above year or twelve (12) quarter - period shall
Penalty per Calendar Day
P500 be considered as the first offense:

million P1,000.00 P1,250.00 P1,500.00 Provided, further, That in the case of the
but not head of the Investment Management
exceeding Department, all offenses committed by
P1 billion him in the past as the head of the
Above Investment Management Department of
P1 billion other institution(s) shall also be
but not P2,000.00 P3,000.00 P4,000.00 considered: Provided, finally, That if the
exceeding offense cannot be attributed to any other
P10 billion officer of the bank, the head of the
Above Investment Management Department
P10 billion shall be automatically held responsible
but not P5,000.00 P6,000.00 P7,000.00 since the ultimate responsibility for
exceeding ensuring compliance with the regulation
P50 billion rests upon him, as evidence may warrant.
Above (As amended by Circular Nos. 617 dated 30 July 2008 and
P50 billion P8,000.00 P9,000.00 P10,000.00 585 dated 15 October 2007)

§§ X416 - X421
09.12.31
Sec. X416 Organization and Management but losses accruing in the course of its
The provisions of Sec. X406 up to Subsec. business may be charged against surplus.
X406.9 shall govern the organization and
management of banks without trust license C. GENERAL PROVISIONS
which are engaged in investment
management activities only. The following Sec. X421 Books and Records. The bank’s
terms shall, however, be used: trust department or investment management
a. Investment management activities, department shall keep books and records
in lieu of trust and other fiduciary business; on trust, other fiduciary and IMAs separate
b. Investment management accounts, and distinct from the books and records of
in lieu of trust and other fiduciary accounts; its other businesses and shall follow the
c. Investment management committee, FRPTI prescribed by the BSP.
in lieu of trust committee; Each trust, other fiduciary or IMA shall
d. Investment management officer, in have a record separate from all other
lieu of trust officer; and accounts except only in the case of CTFs
e. Investment management department, where the trustee can maintain common
in lieu of trust department. records utilizing pooled fund accounting
(As amended by M-2007-009 dated 22 March 2007) method for each fund: Provided, That the
trustee shall clearly indicate in the records
Sec. X417 Non-Investment Management the trustors owning participation in the
Activities. The provisions of Sec. X407 shall CTF and the extent of the interest of such
apply in determining non-investment trustors.
management activities except that the terms Books and records shall contain full
trust, other fiduciary, trustee and fiduciary information relative to each trust, other
shall be disregarded. fiduciary or IMA and shall be supported by
duplicate signed copies of related
Sec. X418 Unsound Practices. The documents. Said records and duplicate
provisions of Sec. X408 shall govern the signed copies of related documents shall be
unsound practices for IMAs. compiled and kept as to allow inspection
by BSP examiners and submission of
Sec. X419 Conduct of Investment information or reports as may be required
Management Activities. The provisions of by competent authorities.
Secs. X411 and X412 shall govern the The bank’s trust department or
conduct of investment management investment management department shall
activities of a bank without a trust license. maintain separate general ledger accounts
(As amended by Circular No. 666 dated 24 September 2009) and other relevant sub-accounts for tax-
exempt individual trust accounts, CTFs and
Sec. X420 Required Surplus. A bank individual management accounts
authorized to engage in investment established under Section 24(B)(1) of
management activities shall, before the R.A. No. 8424 and Subsecs. X409.8,
declaration of dividends, carry to surplus at X411.9, and Item “8” of Appendix 60. The
least ten percent (10%) of its net profits bank’s trust department or investment
realized out of its investment management management department shall also adopt
activities since the last preceding dividend appropriate systems, internal control
declaration until the surplus shall amount procedures and audit trail mechanisms to
to twenty percent (20%) of its authorized ensure that the correct amount of final tax
capital stock and no part of such surplus is withheld or exempted from such accounts.
shall at any time be paid out in dividends, (As amended by Circular No. 653 dated 05 May 2009)

§§ X422 - X424
08.12.31
Sec. X422 Custody of Assets. All moneys, persons or entities unless the rebates, fees
properties or securities received by a bank and other payments shall accrue to the
in its capacity as trustee, fiduciary, or benefit of the trust, other fiduciary or IMA
investment manager shall be kept physically or the beneficiaries thereof.
separate and distinct from the assets of its Officers and employees of the trust
other businesses and shall be under the joint department or investment management
custody of at least two (2) persons, one of department of banks, while serving as such,
whom shall be an officer of the trust or shall be prohibited from retaining any
investment management department, compensation for acting as co-trustee or
designated for that purpose by the board of fiduciary in the administration of a trust,
directors. other fiduciary or IMA.
The investment of each trust, other No bank shall collect, for its own
fiduciary or investment management account, referral and/or arrangement fees,
account shall be kept physically separated or any other fees that take the nature of
from those of other trust, other fiduciary or payment to the bank from whatever source,
IMAs, and adequately identified as the assets in connection with loans sourced from trust
or property of the relevant account. funds managed by its trust department:
Provided, That if such fees are collected, the
Sec. X423 Fees and Commissions. A bank same shall be properly disclosed to the
acting as trustee, fiduciary or investment trustor, and shall accrue to the benefit of
manager shall be entitled to reasonable fees the trust, in accordance with the provisions
and commissions which shall be of Secs. X401 and X407.
determined on the basis of the cost of (As amended by Circular No. 541 dated 30 August 2006)
services rendered and the responsibilities
assumed: Provided, That where the trustee, Sec. X424 Taxes. The terms and conditions
fiduciary or investment manager is acting of trust, other fiduciary or investment
as such under appointment by a court, the management agreements including CTF
compensation shall be that allowed or plans shall contain provisions regarding the
approved by the court: Provided, further, applicability of regulations governing
That in the case of CTFs, the fee which a taxation on the income of trust, other
trustee may charge each participant shall be fiduciary or IMAs. For this purpose, the
fully disclosed by the trustee in the CTF plan, trustee, fiduciary or investment manager
prospectus, flyers, posters and in all forms shall maintain adequate records and shall
of advertising materials to market the funds include information such as the amount of
and in the documents given to clients as final income tax withheld at source and the
proof of participation in the fund. In no case amount withheld by the trustee, fiduciary
shall such fees and commissions be based or investment manager in the periodic
on the excess of the income of the trust, reports submitted to trustors, beneficiaries,
other fiduciary or investment management principals and other parties in interest.
funds over a certain amount or percentage. With respect to tax-exempt CTFs,
No trustee, fiduciary or investment individual trust and IMAs established under
manager shall solicit or receive rebates on Section 24(B)(1) of R.A. No. 8424, the
commissions, fees and other payments for bank’s trust department or investment
the services rendered to the trust, other management department shall be
fiduciary or IMA or beneficiaries of the trust, responsible for obtaining the tax-exemption
other fiduciary or IMA by stockbrokers, real certifications which may be required by the
estate brokers, insurance agents and similar BIR for the interest-bearing instruments

§§ X424 - X425.3
15.10.31
where the CTFs, individual trust funds and c. The reports shall be prepared in
investment management funds will be such frequency as required under the
invested. Likewise, the banks shall ensure agreement but shall not in any case be longer
that the correct amount of final tax on the than once every quarter; and
interest income on the interest-bearing d. The reports shall be made available
instruments is withheld/deducted from the to clients not later than twenty (20) calendar
proceeds from the CTF participation, trust days from the end of the reference date/
or IMA and remitted to the BIR in the event period in Item “c” above.
said tax becomes due such as when funds
are withdrawn before the required five (5)- § X425.2 To the Bangko Sentral. A bank
year holding period or when corporations acting as trustee, fiduciary or investment
happen to invest in the tax-exempt trust manager shall submit periodic reports
instruments created within the purview of prescribed by the appropriate department
R.A. No. 8424. of the SES on the bank’s trust and other
fiduciary business and investment
Sec. X425 Reports Required. management activities within the deadlines
indicated in Appendix 6.
§ X425.1 To trustor, beneficiary, (As amended by Circular No. 880 dated 22 May 2015)
principal. A bank acting as trustee, fiduciary
or investment manager shall render reports § X425.3 Audited financial statements.
on the trust, other fiduciary or IMAs to the The trust/investment management
trustor, beneficiary, principal or other party department shall adopt the provisions of the
in interest or the court concerned or any Philippine Financial Reporting Standards
party duly designated by the court order, as (PFRS)/Philippine Accounting Standards
the case may be, under the following (PAS) in all respect, for purposes of
guidelines: preparing the AFS of its trust and other fiduciary
a. The reports shall be in such forms and investment management activities. The
as to apprise the party concerned of the following guidelines shall likewise be
significant developments in the observed in the preparation of the AFS:
administration of the account and shall (a) The provisions of PFRS/ PAS shall
consist of: be adopted effective the annual financial
(1) A balance sheet; statements beginning 01 January 2008;
(2) An income statement; (b) A complete set of financial
(3) A schedule of earning assets of the statements shall comprise of the following:
account; and (1) Balance sheet as of the end of the
(4) An investment activity report. period;
b. Items (3) and (4) above shall include (2) Income statement for the period;
at least the following: (3) Statement of changes in
(1) Name of issuer or borrower; accountabilities, which shall show a
(2) Type of instrument; reconciliation of the net carrying amount at
(3) Collateral, if any; the beginning and end of the period of the
(4) Amount invested; following accounts:
(5) Earning rate or yield; (i) principal;
(6) Amount of earnings; (ii) accumulated income; and
(7) Transaction date; and (iii) net unrealized gains/(losses) on
(8) Maturity date; available for sale financial assets, separately

§§ X425.3 - X426.1
15.10.31
disclosing the changes in each of the in the notes to financial statements: Provided,
foregoing accounts; further, That comparative periods shall be
(4) Notes, which shall comprise of a presented in the AFS for the financial reporting
summary of significant accounting policies period beginning 01 January 2009 and
and other disclosure requirements thereafter.
provided under PFRS/PAS: Provided, That (e) The following transitory rules and
for purposes of complying with the regulations shall govern the accounting
disclosure of the nature and extent of risks treatment of specific items for purposes of
arising from financial instruments as preparing the AFS for the financial reporting
required under PFRS 7, disclosure period beginning 01 January 2008:
statements may be made based on the (1) The provisions of PFRS/PAS shall
general categories of contractual only be applied to accounts outstanding as
relationships (i.e., UITF-trust, institutional- of end-December 2008;
trust, and individual-trust; other fiduciary; (2) Reclassification of previously
institutional-agency, and individual- recognized financial instruments shall no
agency; and special purpose trust) of the longer be allowed except as allowed under
trust/investment management department existing regulations;
of a bank with its clients; and (3) The fair value of ROPA and
(5) Balance sheet as at the beginning of Investment Properties as of the date of
the earliest comparative period when a trust/ transition to PFRS/PAS may be used as the
investment management department applies deemed cost of said properties as of that
an accounting policy retrospectively or date: Provided, That said ROPA and
when it makes a retrospective restatement Investment Properties shall be subsequently
of items in the financial statements, or when accounted for in accordance with the
it reclassifies items in the financial provisions of the FRPTI.
statements. (Circular No. 653 dated 05 May 2009)
(c) The balance sheet, income statement
and statement of changes in accountabilities § X425.4 Post-bond flotation report.
(Superseded by Circular No.769 dated 26
shall be presented for each of the general September 2012)
categories of contractual relationships (i.e.,
UITF-trust, institutional-trust, and individual- Sec. X426 Audits.
trust; other fiduciary; institutional-agency,
and individual-agency; and special purpose § X426.1 Internal audit. The bank’s
trust) of the trust/investment management internal auditor shall include among his
department of a bank with its clients; functions, the conduct of annual audit of
(d) Comparative information for periods the trust department or investment
before 01 January 2008 need not be management department. However, should
presented in the AFS for the financial the board of directors, in a resolution entered
reporting period beginning 01 January in its minutes, require the internal auditor
2008: Provided, That disclosure to adopt a suitable continuous audit system
statements on the end-2007 balances of to supplement and/or to replace the
total assets of the general categories of performance of the annual audit, the audit
contractual relationships of the trust/ may be conducted in intervals
investment management department of a commensurate with the assessed levels of
bank with its clients prepared based on the risk in trust and investment management
Generally Accepted Accounting Principles operations: Provided, That such intervals
(GAAP) previously applied, shall be presented shall be supported and reassessed regularly

§§ X426.1 - X428
15.10.31
to ensure appropriateness given the current contractual relationships (i.e., UITF-trust,

risk and volume of the trust and investment institutional-trust, and individual trust; other
management operations. In any case, the fiduciary; institutional-agency, and
audit shall ascertain whether the institution’s individual-agency; and special purpose trust)
trust and other fiduciary business and of the trust/investment management
investment management activities have department of a bank with its clients
been administered in accordance with laws, following the format in Appendix 87.
Bangko Sentral rules and regulations, and (As amended by Circular No. 653 dated 05 May 2009)
sound trust or fiduciary principles.
(As amended by Circular No. 871 dated 05 March 2015) § X426.3 Board action. A report of the
foregoing audits, together with the actions
§ X426.2 External audit. The trust and thereon, shall be noted in the minutes of
other fiduciary business and investment the board of directors of the bank.
management activities of a bank shall be
included in the annual financial audit by Sec. X427 Authority Resulting from Merger
independent external auditors required or Consolidation. In merger of FIs, the
under Subsec. X190.1. authority to engage in trust and other
The audit of the assets and fiduciary business and in investment
accountabilities of the trust department/ management activities shall continue to be
investment management department of a in effect if the surviving institution has such
bank authorized to engage in trust and other authority and the same has not been
fiduciary business, investment management withdrawn by the Bangko Sentral. In case
activities, which shall cover at the minimum the surviving institution does not have
a review of the trust investment management previous authority but desires to engage in
operations, practices and policies, including trust and other fiduciary business and in
audit and internal control system, shall be investment management activities, it shall
subject to auditing standards to the extent secure the prior approval of the Monetary
necessary to express an opinion on the Board to engage in such business as part of
financial statements. its application for merger to enable it to
The audit of the trust/investment incorporate such among its powers or
management department of a bank purpose clause in its articles of
authorized to engage in trust and other incorporation, articles of merger, by-laws
fiduciary business/investment management and such other pertinent documents.
activities shall be covered by a separate In the consolidation of FIs where the
resulting entity is an entirely new one, it shall
supplemental audit report to be submitted
secure from the Monetary Board an authority
to the bank’s board of directors and to the
to engage in trust and other fiduciary
Bangko Sentral within the prescribed period
business or in investment management
containing, among other things, the
activities before it may engage in such
complete set of financial statements of the
business.
trust/ investment management department
of a bank prepared in accordance with the Sec. X428 Receivership. Whenever a
provisions of Subsec. X425.3 together with receiver is appointed by the Monetary Board
the other information required by the for a bank which is authorized to engage in
Bangko Sentral to be submitted under trust and other fiduciary business or in
Subsec. X190.1: Provided, That a investment management activities, the
reconciliation statement of the balance sheet receiver shall, pursuant to the instructions
in the AFS and the FRPTI shall be prepared of the Monetary Board, proceed to close the
for each of the general categories of trust, other fiduciary and IMAs promptly

§§ X428 - X441.4
15.10.31
and/or transfer all other accounts to to the sanctions/penalties under Subsec.

substitute trustees, fiduciaries or investment X441.29.
managers acceptable to the trustors, (As amended by Circular Nos 873 dated 25 March 2015.
beneficiaries, principals or other parties in 714 dated 10 March 2011, M-2007-002 dated 23 January 2007,
M-2006-009 dated 06 July 2006, M-2006-002 dated 05 June
interest: Provided, That where the trustee, 2006 and Circular No. 524 dated 31 March 2006)
fiduciary or investment manager is acting
as such under appointment by a court, the § X441.1 Statement of policy. It is the
receiver shall proceed pursuant to the policy of the Bangko Sentral to promote the
instructions of said court. protection of investors in order to gain their
confidence and encourage their participation
Sec. X429 Surrender of Trust or Investment in the development of the domestic capital
Management License. Any bank which has market. Therefore, the following rules and
been authorized to engage in trust and other regulations are promulgated to enhance
fiduciary business or in investment transparency of securities transactions with
management activities and which intends the end in view of protecting investors.
to surrender said authority shall file with the
Bangko Sentral a certified copy of the § X441.2 Applicability of this
resolution of its board of directors regulation. This regulation shall govern
manifesting such intention. The appropriate securities custodianship and securities
department of the SES shall then conduct registry operations of banks and NBFIs under
an examination of the bank’s trust, other Bangko Sentral supervision. It shall cover
fiduciary business and investment all their transactions in securities as defined
management activities. If the bank is found in Section 3 of the Securities Regulation
to have satisfactorily discharged its duties Code (SRC), whether exempt or required to
and responsibilities as trustee, fiduciary or be registered with the SEC, that are sold,
investment manager, and has provided for borrowed, purchased, traded, held under
the orderly closure or transfer of its trust, custody or otherwise transacted in the
fiduciary or investment management Philippines where at least one (1) of the
accounts, the Monetary Board, on the basis parties is a bank or an NBFI under Bangko
of the recommendation of the examining Sentral supervision. However, this
department, shall order the withdrawal of regulation shall not cover the operations of
the bank’s authority to engage in trust and stock and transfer agents duly registered
other fiduciary management activities. with the SEC pursuant to the provisions of
SRC Rule 36-4.1 and whose only function
Secs. X430 – X440 (Reserved) is to maintain the stock and transfer book
for shares of stock.
Sec. X441 Securities Custodianship and
Securities Registry Operations. The § X441.3 Prior Bangko Sentral
following rules and regulations shall govern approval. Banks may act as securities
securities custodianship and securities custodian and/or registry only upon prior
registry operations of banks under Bangko Monetary Board approval.
Sentral regulations.
The guidelines to implement the delivery § X441.4 Application for authority. A
of securities are provided in Appendix 68. bank desiring to act as securities custodian
Violation of any provision of the and/or registry shall file an application
guidelines in Appendix 68 shall be subject with the appropriate supervising

§§ X441.4 - X441.5
13.12.31
and examining department of the Bangko operations) and other related documents
Sentral. The application shall be signed by embodying the risk management system
the highest ranking officer of the bank and must be submitted to the appropriate
shall be accompanied by a certified true supervising and examining department at
copy of the resolution of the bank’s board the time of application for authority and
of directors authorizing the bank to engage within thirty (30) days from updates;
in securities custodianship and/or registry f. It must have adequate technological
and, in the case of a branch of a foreign capabilities and the necessary technical
bank, approval by its highest ranking expertise to ensure the protection, safety and
regional officer with proof of delegated integrity of client assets, such as:
authority from the bank’s board of directors. (1) It can maintain an electronic registry
dedicated to recording of accountabilities
§ X441.5 Pre-qualification requirements to its clients; and
for a securities custodian/registry (2) It has an updated and
a. The securities custodian must be a comprehensive computer security system
bank that is authorized to engage in covering system, network and
investment management or trust business. telecommunication facilities that will:
The securities registry must be a bank. (a) limit access only to authorized
b. It must have complied with the users;
minimum capital accounts required under (b) preserve data integrity; and
existing regulations, as follows: (c) provide for audit trail of
(1) Domestic banks. The minimum transactions.
capital required under Subsec. X111.1 or the g. It has complied, during the period
minimum capital required for TBs operating immediately preceding the date of
in Metro Manila, whichever is higher. application, with the following:
(2) Branches of foreign banks. The (1) ceilings on credit accommodation
minimum capital required under Subsec. to DOSRI; and
X105.4.b. (2) single borrower’s limit.
c. Its risk-based capital adequacy ratio h. It has no reserve deficiencies during
is not lower than twelve percent (12%) at the eight (8) weeks immediately preceding
the time of filing the application; the date of application;
d. It must have a CAMELS composite i. It has set up the prescribed
rating of at least “4” (as rounded off) in the allowances for probable losses, both general
last regular examination; and specific, as of date of application;
e. It must have in place a j. It has not been found engaging in
comprehensive risk management system unsafe and unsound practices during the last
approved by its board of directors (or six (6) months preceding the date of
equivalent management committee in the application;
case of foreign bank branches) appropriate k. It has generally complied with laws,
to its operations characterized by a clear rules and regulations, orders or instructions
delineation of responsibility for risk of the Monetary Board and/or Bangko
management, adequate risk measurement Sentral Management;
systems, appropriately structured risk limits, l. It has submitted additional
effective internal control and complete, documents/information which may be
timely and efficient risk reporting systems. requested by the appropriate supervision
In this connection, a manual of operations and examination department, such as, but
(which includes custody and/or registry not limited to:

§§ X441.5 - X441.8
13.12.31
(1) Standard custody/registry agreement in respect of dividends, interest earnings or

and other standard documents; proceeds from the sale/redemption/maturity
(2) Organizational structure of the of securities held under custodianship:
custody/registry business; Provided, That the custodian shall immediately
(3) Transaction flow; and make known to the securities owner all
(4) For those already in the custody or collections received and payments made with
registry business, a historical background for respect to the securities under custody.
the past three (3) years; j. In addition to the above basic
m. It shall be conducted in a separate functions, it may perform the value-added
unit headed by a qualified person with at service of securities lending as agent:
least two (2) years experience in custody/ Provided, That it complies with the
registry operations; pre-qualification requirements under Item
n. It can interface with the clearing and “o” of Subsec. X441.5: Provided, further,
settlement system of any recognized That the securities lending service shall be
exchange in the country capable of covered by a Securities Lending
achieving a real time gross settlement of Authorization Agreement (SLAA) which
trades; and shall be attached to the custody contract.
o. A securities custodian which A securities custodian which renders the
provides the value-added service of value-added service of securities lending
securities lending involving securities that involving securities that are sold, offered and
are sold, offered for sale or distributed within distributed within the Philippines shall
the Philippines must be a duly-licensed comply with all other pertinent rules
lending agent registered with the SEC. and regulations of the SEC on securities
(As amended by Circular Nos. 822 dated 13 December 2013 lending and borrowing operations.
and 714 dated 10 March 2011) (As amended by Circular No. 714 dated 10 March 2011)
§ X441.6 Functions and responsibilities § X441.7 Functions and responsibilities

of a securities custodian. A securities of a securities registry
custodian shall have the following basic a. Maintains an electronic registry
functions and responsibilities: book;
a. Safekeeps the securities of the client; b. Delivers confirmation of transactions
b. Holds title to the securities in a and other documents within agreed trading
nominee capacity; periods;
c. Executes purchase, sale and other c. Issues registry confirmations for
instructions; transfers of ownership as it occurs;
d. Performs at least a monthly d. Prepares regular statement of
reconciliation to ensure that all positions are securities balances at such frequency as may
properly recorded and accounted for; be required by the owner on record but not
e. Confirms tax withheld; less frequent than every quarter; and
f. Represents clients in corporate e. Follows appropriate legal
actions in accordance with the direction documentation to govern its relationship
provided by the securities owner; with the Issuer.
g. Conducts mark-to-market valuation
and statement rendition; § X441.8 Protection of securities of the
h. Does earmarking of encumbrances customer. A custodian must incorporate the
or liens such as, but not limited to, Deeds following procedures in the discharge
of Assignment and court orders; and of its functions in order to protect
i. Acts as a collecting and paying agent the securities of the customer:

§§ X441.8 - X441.9
15.10.31
a. Administration of securities c. Documentation. The appropriate

custodianship accounts of banks. 1 documentation for custodianship shall be
Securities custodianship accounts shall be made and it shall clearly define, among
administered in the Trust Unit of a bank. others, the authority, role, responsibilities,
As an exception, however, a custodian fees and provision for succession in the event
bank may be allowed to administer the custodian can no longer discharge
custodianship accounts in the Bank Proper: its functions. It shall be accepted
Provided, That this is limited to in writing by the counterparties.
custodianship accounts wherein the The governing custodianship agreement
securities custodian performs the basic shall be pre-numbered and this number shall
functions and responsibilities provided be referred to in all amendments and
under Subsec. X441.6: Provided, further, supplements thereto.
That the custodian bank secures prior MB d. Confirmation of custody. The custodian
approval on this arrangement: Provided, shall issue a custody confirmation to the
finally, That a custodian bank that is purchaser or borrower of securities to
seeking exemption from the general evidence receipt or transfer of securities as
requirement should be able to demonstrate they occur. It shall contain, as a minimum,
that it has instituted adequate risk the following information on the securities
management systems and prudential under custody:
controls in the Bank Proper to ensure the (1) Owner of securities;
protection of client assets, maintain (2) Issuer;
proper segregation of functions and (3) Securities type;
prevent conflict of interest situations that (4) Identification or serial numbers;
may arise in the administration (5) Quantity;
of securities custodianship accounts (6) Face value; and
b. Accounting and recording for (7) Other information, which may be
securities. Custodians must employ requested by the parties.
accounting and safekeeping procedures that e. Periodic reporting. The custodian
fully protect customer securities. It is shall prepare at least quarterly (or as frequent
essential that custodians segregate customer as the owner of securities will require)
securities from one another and from its securities statements delivered to the
proprietary holdings to protect the same registered owner’s address on record. Said
from the claims of its general creditors. statement shall present detailed information
Securities held under custodianship such as, but not limited to, inventory of
shall be recorded in the books of the securities, outstanding balances, and market
custodian at the face value of said securities values.
in the off-balance sheet account “Securities (As amended by Circular No. 714 dated 10 March 2011)
Held Under Custodianship by Bank
Proper”, if booked in the Bank Proper, or § X441.9 Independence of the registry
the other fiduciary sub-account and securities custodian. A Bangko Sentral-
“Custodianship”, if booked in the Trust accredited securities registry must be a third
Department. party that does not belong to the same
Securities held under custodianship financial conglomerate or banking group as
where the custodian performs the that of the issuer of securities. A Bangko
value-added service of securities Sentral-accredited securities custodian must
lending as agent shall be booked in the Trust be a third party that does not belong to the
Department. same financial conglomerate or banking
1
Existing Bangko Sentral-accredited custodian banks which intend to administer their securities custodianship business in
the bank proper shall be given thirty (30) banking days from 01 April 2011 to comply with the provisions of the Subsection.

§§ X441.9 - X441.13
15.10.31
group as that of the issuer and seller of registry shall not disclose to any
securities held under custody. A bank unauthorized person any information
accredited by Bangko Sentral as securities relative to the securities under its
custodian may, however, continue holding custodianship/registry. The Management
securities it sold under the following cases: shall likewise ensure the confidentiality of
a. where the purchaser is a related entity client accounts of the custody or registry
acting in its own behalf and not as agent or unit from other units within the same
representative of another; organization.
b. where the purchaser is a non-resident
with existing global custody agreement § X441.12 Compliance with Anti-
governed by foreign laws and conventions Money Laundering laws/regulations. For
wherein the bank is designated as custodian purposes of compliance with the
or sub-custodian; and requirements of R.A. No. 9160, otherwise
c. upon approval by the Bangko Sentral, known as the “Anti-Money Laundering Act
where the purchaser is an insurance of 2001,” as amended, particularly
company whose custody arrangement is the provisions regarding customer
either governed by a global custody identification, record keeping and reporting
agreement where the bank is designated as of suspicious transactions, a Bangko Sentral-
custodian or sub-custodian or by a direct accredited custodian may rely on referral
custody agreement with features at par with by the seller issuer of securities: Provided,
the standards set under this Subsection That it maintains a record of such referral
drawn or prepared by the parent company together with the minimum identification,
owning more than fifty percent (50%) of the information/documents required under the
capital stock of the purchaser and executed law and its implementing rules and
by the purchaser itself and its custodian. regulations.
Purchases by non-residents and insurance A Bangko Sentral-accredited custodian
companies that are exempted from the must maintain accounts only in the true and
independence requirement of this Section full name of the owners of the security.
shall, however, be subject to all other However, said securities owners may be
provisions of this Subsection. identified by number or code in reports and
(As amended by Circular No. 873 dated 25 March 2015)
correspondences to keep his identity
§ X441.10 Registry of Scripless confidential.
Securities of the Bureau of the Treasury. Securities subject of pledge and/or deed
The Registry of Scripless Securities (RoSS), of assignment as of 14 October 2004 (date
operated by the Bureau of the Treasury, of Circular 457), may be held by a lending
which is acting as a registry for government bank up to the original maturity of the loan
securities is deemed to be automatically or full payment thereof, whichever comes
accredited for purposes of this Section and is earlier.
likewise exempted from the independence
requirement under Subsec. X441.9. Securities § X441.13 Basic security deposit.
registered under the RoSS shall be delivered Securities held under custodianship whether
in accordance with the guidelines set forth in booked in the Trust Department or carried
Appendices 68 and 68a. in the regular books of the bank shall be
(As amended by Circular No. 873 dated 25 March 2015) subject to a security deposit for faithful
performance of duties at the rate of 1/25 of
§ X441.11 Confidentiality. A Bangko one percent (1%) of the total face value or
Sentral-accredited securities custodian/ P500,000 whichever is higher.

§§ X441.13 - X499
12.12.31
However, securities held under c. Subsequent offenses –

custodianship where the custodian also (1) Fine of up to P30,000 a day for the
performs securities lending as agent shall institution for each violation from the date
be subject to a higher basic security deposit the violation was committed up to the date
of one percent (1%) of the total face value. it was corrected;
Compliance shall be in the form of (2) Suspension or revocation of the
government securities deposited with the authority to act as securities custodian and/
Bangko Sentral eligible pursuant to existing or registry; and
regulations governing security for the faithful (3) Suspension for one hundred twenty
performance of trust and other fiduciary (120) days without pay of the directors/
business. officers responsible for the violation.
(As amended by Circular No.714 dated 10 March 2011)
Secs. X442 – X498 (Reserved)
§ X441.14 Reportorial requirements
An accredited securities custodian shall D. GENERAL PROVISION ON
comply with reportorial requirements that SANCTIONS
may be prescribed by the Bangko Sentral,
which shall include as a minimum, the face Sec. X499 Sanctions. Any violation of the
and market value of securities held under provisions of this Part shall be subject to
custodianship. Sections 36 and 37 of R.A. No. 7653
without prejudice to the imposition of
§§ X441.15 – X441.28 (Reserved) other sanctions as the Monetary Board
may consider warranted under the
§ X441.29 Sanctions. Without prejudice circumstances that may include the
to the penal and administrative sanctions suspension or revocation of a bank’s
provided for under Sections 36 and 37,
authority to engage in trust and other
respectively, of the R.A. No. 7653,
fiduciary business or in investment
violation of any provision of this Section management activities, and such other
shall be subject to the following sanctions/ sanctions as may be provided by law.
penalties: In the case of non-compliance with
a. First offense – the requirements of Secs. X401, 2404
(1) Fine of up to P10,000 a day for the Items “(i) – (iii)” and 3404 Items “(i) –
institution for each violation reckoned from (iii)” and Subsecs. X406.2 to X406.4 and
the date the violation was committed up to X406.10 additional sanction may be
the date it was corrected; and imposed, which may include but not
(2) Reprimand for the directors/officers limited to, curtailment of fiduciary
responsible for the violation. activities and/or introduction of new
b. Second offense - business. 1
(1) Fine of up to P20,000 a day for the The guidelines for the imposition of
institution for each violation reckoned from monetary penalty for violations/offenses
the date the violation was committed up to with sanctions falling under Section 37 of
the date it was corrected; and R.A. No. 7653 on banks, their directors
(2) Suspension for ninety (90) days and/or officers are shown in Appendix 67.
without pay of directors/officer responsible (As amended by Circular No. 766 dated 17 August 2012)
for the violation.
________________
1
Trust entities of banks that do not meet the requirements shall be given twelve (12) months from
10 September 2012 to comply.

PART FIVE
MANUAL OF REGULATIONS ON
FOREIGN EXCHANGE TRANSACTIONS
For the updated version of the Manual of Regulations on Foreign Exchange Transactions,
please refer to http://www.bsp.gov.ph/downloads/Regulations/MORFXT/MORFXT.pdf
Manual of Regulations for Banks Part V- Page 1

§§ X601 - X601.1
08.12.31
PART SIX
TREASURY AND MONEY MARKET OPERATIONS
A. OPEN MARKET OPERATIONS disqualification, the BSP shall proceed to

collect said amount in accordance with the
Section X601 Open Market Operations preceding paragraph.
The following rules and regulations shall d. Reverse repo agreements covering
govern the buying and selling of the sale of portion of the security holdings
government securities in the open market, of the BSP portfolio may be made under
pursuant to Section 91 of R.A. No. 7653. the terms provided for in Subsec. X601.2.
a. The BSP may buy and sell in the e. The purchase and sale of
open market for its own account: government securities by the National
(1) Evidences of indebtedness issued Treasury and government-owned or
directly by the Government of the controlled corporations shall be made only
Philippines or its political subdivisions; and with (a) the BSP; (b) the DBP, the LBP, the
(2) Evidences of indebtedness issued SSS, the GSIS, the Al-Amanah Islamic
by government instrumentalities and fully Investment Bank of the Philippines and
guaranteed by the Government. banks that are wholly-owned or controlled
The above evidences of indebtedness by these institutions; and (c) the Philippine
must be freely negotiable and regularly Veterans Bank. Transactions shall be done
serviced. Purchases and sales in the open with the bank proper and not through its
market shall be made through banks, QBs trust department.
and accredited government securities
dealers. § X601.1 Repurchase agreements
b. Outright purchases and sales of with Bangko Sentral
government securities shall be effected at a. Repo agreements may be effected
prevailing market prices. with the BSP subject to the following terms
c. Repo agreements shall be open to and conditions:
banks (except RBs), QBs, and accredited (1) Rate. The rates on the repo
government securities dealers and shall be agreement facility shall be set by the
made under the terms provided for in Treasury Department, with the
Subsec. X601.1 and the following: concurrence of the Governor, taking into
(1) The repo agreement may be paid account prevailing liquidity/market
at any time before maturity, subject to conditions.
mutual agreement of both parties; (2) Term. At the option of the Treasury
(2) In the event the securities covered Department, availments may be for a
by the repo agreement are not repurchased minimum of one (1) day (overnight) and a
by the issuer of such agreement, the same maximum of ninety-one (91) days.
may be sold in the open market or (3) Security. Only obligations of the
transferred to the BSP portfolio; and National Government and its
(3) Should an issuer of a repo instrumentalities and political subdivisions,
agreement become no longer qualified as which are fully guaranteed by the
such, its outstanding repo agreement shall Government, with a remaining maturity of
immediately become due and payable. not more than ten (10) years and which are
If settlement of the amount due is not made freely negotiable and regularly serviced,
within three (3) days from the date of its shall be eligible as underlying instruments
Manual of Regulations for Banks Part VI - Page 1

§§ X601.1 - X601.2
09.12.31
for repo agreements subject to the collateral sanctions to a bank and/or its director/s or
requirement prescribed by the BSP. officer/s found to be responsible for
(4) Delivery. Delivery of the underlying violation of the provisions on the terms and
instruments shall be made to the BSP at the conditions of the USD denominated repo
prescribed time. For overnight repo agreement with the BSP:
agreements, delivery of the underlying (1) Termination of eligibility and
instruments shall be made not later than pre-termination of any outstanding balance
12:00 noon of the date of transaction. through repayment and/or sale of the
Government securities which are held collateral;
by the issuer of the repo agreement under (2) Fine of up to P30,000 per
the book-entry system with the BSP may transaction per day of violation reckoned
be used as underlying instruments only from the time the violation was committed
with the conformity of the BSP. up to the date it is corrected;
(5) Upon termination of the repo (3) Suspension of interbank clearing
agreement, the issuer of such agreement privileges/immediate exclusion from
shall claim and take delivery of the clearing;
underlying instruments at the Treasury (4) Suspension of access to BSP
Department, BSP. Failure to claim and take rediscounting facilities;
delivery of the underlying instruments (5) Suspension of lending or foreign
immediately upon such termination shall exchange operations or authority to accept
relieve the BSP of any liability or new deposits or make new investments;
responsibility for the loss or misplacement (6) Revocation of authority to perform
of said instruments. trust operations;
b. US dollar (USD) denominated repo (7) Revocation of quasi-banking
agreement facility may likewise be effected license;
with the BSP, subject to the following terms (8) Suspension for 120 days without
and conditions, and as may be provided pay of the officers and/or directors
under the repo agreement facility: responsible for the violation; and
(1) Eligible borrowers. The USD (9) Other sanctions as may be
denominated repo agreement facility shall provided by law.
only be available to banks with legitimate (As amended by Circular Nos. 631 dated 12 November 2008,
foreign currency denominated funding 627 dated 23 October 2008, M-2008-034 dated 12 November
needs as may be provided under the repo 2008 and M-2008-031 dated 23 October 2008)
agreement facility: Provided, That the
borrowing shall be for the account of the § X601.2 Reverse repurchase
applicant bank and shall not be used to fund agreements with Bangko Sentral. Reverse
liquidity requirements of foreign branches, repo agreements may be effected with the
affiliates, or subsidiaries. BSP subject to the following terms and
(2) Collateral. Only USD denominated conditions:
obligations of the National Government of a. Rate. The rates shall be set by the
the Republic of the Philippines shall be Treasury Department, with the concurrence
eligible as collateral. of the Governor, taking into account the
(3) The guidelines on the availment of prevailing liquidity/market conditions.
USD denominated repo agreement with b. Term. At the option of the Treasury
the BSP are shown in Appendix 86. Department, availments may be for a
The Monetary Board may, at its minimum of one (1) day (overnight) and a
discretion, impose any or all of the following maximum of 364 days.
Part VI - Page 2 Manual of Regulations for Banks

§§ X601.2 - X611
09.12.31
c. Security. The collateral shall consist the last on or before 03 April 2009: Provided,
of obligations of the National Government further, That payments due shall be deducted
and other freely negotiable securities in the from the Regular Demand Deposit Account
BSP portfolio valued at 100%. (RDDA) of concerned banks. The BSP shall
d. Delivery. No delivery of the issue the certificate of final withholding tax
collateral shall be made, but a custody reflecting the amount of the FWT paid; and
receipt shall be issued instead. (3) Concerned banks shall issue the
e. Reservation. Prepayment may be corresponding debit authority to the BSP to
made by the BSP at its option anytime before cover the twenty percent (20%) FWT on
maturity. their overnight reverse repo agreements with
Effective 01 July 2003, published the BSP as mentioned in Item “2” above.
interest rates that will be applied on BSP’s (As amended by Circular Nos. 647 dated 03 March 2009 and
reverse repo agreements with banks shall 619 dated 22 August 2008)
be inclusive of Value Added Tax (VAT).
Reverse repo agreements entered into § X601.3 Settlement procedures on the
by the BSP with any AAB are included in purchase and sale of government securities
the definition of the term “deposit under repurchase agreements with the
substitutes” under Sec. 22 (y) Chapter 1 of Bangko Sentral. Purchase and sale of
the National Internal Revenue Code of 1997. government securities under repo
The BSP shall withhold twenty percent agreements (GS/repo agreements) between
(20%) Final Withholding Tax (FWT) on its and among banks and QBs and BSP in
overnight reverse repo agreements starting connection with the latter’s open market
01 January 2008, under the following operations shall be settled in accordance
guidelines: with the provisions of the agreement for the
(1) All overnight reverse repo PhilPaSS executed on 12 December 2002
agreements with the BSP shall be subject between the BSP and BAP/CTB/RBAP and
to the twenty percent (20%) FWT in the any subsequent amendments thereto.
same manner as term reverse repo (As superseded by the agreement between the BSP and BAP/
agreements, which tax is deducted on each CTB/RBAP dated 12 December 2002)
maturity date and remitted to the BIR;
(2) With respect to the overnight RRPs §§ X601.4 - X601.5 (Reserved)
from 01 January 2008 to 22 August 20081,
the concerned banks shall reimburse the BSP § X601.6 Bangko Sentral trading
the amount equivalent to forty percent (40%) windows and services during public sector
of the twenty percent (20%) FWT due holidays. The guidelines on BSP’s trading
thereon. However, banks which choose to windows and services during public sector
pay the whole twenty percent (20%) FWT holidays are shown in Appendix 84.
shall remit the amount equivalent to the sixty (M-2008-025 dated 13 August 2008)
percent (60%) balance thereof to the BIR,
through the BSP as withholding agent. In Secs. X602 - X610 (Reserved)
both cases, payment of the FWT to the BSP
shall be made on or before 03 April 2009, B. FINANCIAL INSTRUMENTS
either in full or in three (3) installments:
Provided, That a bank which intends to Sec. X611 (2008 - X602) Derivatives. A
pay in installments shall remit the first bank may engage in authorized derivatives
payment on or before 06 March 2009, the activities: Provided, That the bank:
second on or before 20 March 2009 and a. Understands, measures, monitors
1
Interest income payments from 01 January 2008 to 26 August 2008.

§ X611
08.12.31
and controls the risks assumed from its Financial derivatives activities shall
derivatives activities; also include transactions in cash
b. Adopts effective risk management instruments with embedded derivatives
practices whose sophistication are that reshape the risk-return profile of the
commensurate to the risks being monitored host instrument, such as credit-linked
and controlled; and notes (“CLNs”) and other structured
c. Maintains capital commensurate products (“SPs”).
with the risk exposures assumed. A market participant may take any of
Further, a bank may likewise engage in the following roles in a derivatives
financial derivatives activities in accordance transaction:
with these guidelines. The transacting bank a. A n end-user is defined as a
shall have the responsibility to comply with financial market participant that enters,
the guidelines set out in this Section, for its own account, in a derivatives
including the relevant appendices, and other transaction for legitimate economic
applicable laws, rules and regulations purposes. These purposes may include,
governing derivatives transaction. In case of but are not limited to, the following:
derivatives instruments involving foreign hedging, proprietary trading, managing
currencies and/or other foreign currency- capital or funding costs, obtaining
denominated assets, the transacting indirect exposures to desired market
bank shall observe the pertinent FX factors, investment, yield-enhancement,
rules and regulations. For purposes of and/or altering the risk-reward profile
these guidelines, a bank that transacts of a particular item or an entire balance
(i.e., transacting bank) whether as end-user, sheet.
broker or dealer, in derivatives instruments An end-user may be classified according
is considered to be engaging in a derivatives to its financial sophistication:
activity. (1) Market counterparty - refers to any
Derivative is broadly defined as a UB or KB, only with respect to the
financial instrument that primarily derives instruments for which it is authorized to
its value from the performance of an engage in as a dealer.
underlying variable. For purposes of these (2) Institutional counterparty - refers to
guidelines, a financial derivative is any an institution which is not a market
financial instrument or contract with all of counterparty and has the level of net worth,
the following characteristics: knowledge, expertise, and experience to
a. Its value changes in response to a deal with financial derivatives.
change in a specified interest rate, financial (3) Sophisticated individual end-user -
instrument price, commodity price, FX rate, refers to an individual who has
index of prices or rates, credit spread, credit demonstrated to the bank as having the
rating or credit index or other variables not level of net worth, knowledge and
prohibited under existing laws, rules and experience in dealing with financial
regulations (the “underlying”); products, including financial derivatives.
b. It requires either no initial net An individual may register as a
investment or an initial net investment that sophisticated individual end-user with the
is smaller than would be required for other Centralized Applications and Licensing
types of contracts that would be expected Group of the BSP.
to have a similar response to changes in (4) Other end-user - This refers to all
market factors; and other institutional or individual clients not
c. It is settled at a future date. categorized as market counterparty,

§ X611
08.12.31
institutional counterparty or sophisticated an authorized dealer.

individual end-user. c. A dealer is defined as a financial
b. A broker is a financial market market participant that engages in a
participant that facilitates a derivatives derivatives activity as an originator of
transaction between a dealer and its client, derivatives products or as market-maker in
for a fee or commission. The counterparties derivatives products. A dealer can distribute
to the derivatives contract are the client and
(Next page is Part VI - Page 5)
Manual of Regulations for Banks Part VI - Page 4a

§§ X611 - X611.1
08.12.31
its own derivatives products, including hedging its own risks: Provided, That it
those of others. A dealer can also act as observes all the requirements for hedging
broker and/or end-user of derivatives transactions under PAS.
instruments. (b) A UB or KB may trade with
(As amended by Circular No. 594 dated 08 January 2008) counterparties in order to take positions for
its own account in “organized market” -
§ X611.1 (2008 - X602.1) Generally traded financial instruments enumerated
authorized derivatives activities. A bank under Item “1” above. It can also take long
may engage in the following derivatives positions in naked FX options with a tenor
activities without need of prior Bangko of three (3) years or less.
Sentral approval: Provided, That it observes (c) RBU and EFCDU of UBs and KBs,
the provisions of Appendix 25 and meets including its trust departments, may invest,
the following conditions: for their own account, in the following SPs:
a. UBs and KBs may transact in the (i) Principal-protected foreign currency-
following derivatives in the capacities denominated SPs, the revenue streams of
specified: which are linked to interest rate indices,
(1) As a dealer. A UB or KB may interest rate instruments, listed equity shares
originate and distribute the following or indices, FX rates, credit rating or index,
“organized market”-traded financial or gold: Provided, That the maximum
derivatives: contractual maturity shall be five (5) years;
(a) FX forwards, FX swaps, currency (ii) Plain vanilla single-name CLNs where
swaps and analogous financial futures with the reference asset is an obligation issued or
a tenor of three (3) years or less; and guaranteed by the Republic of
(b) Interest rate swaps, forward rate the Philippines.
agreements and analogous financial futures Provided, That the bank or trust entity
with a tenor of ten (10) years or less: shall comply with the following conditions:
Provided, That the issuance of sub- (aa) Total carrying value of all
participation in any derivatives held as an investments in SPs shall not exceed 100%
end-user shall be deemed as undertaking of the bank’s qualifying Tier 1 capital or fifty
the role of a dealer: Provided, further, That percent (50%) of a trust entity’s trust
the dealer UB or KB observes the provisions assets; and
of Appendix 26 and other pertinent (bb) For investments in SPs under the
securities laws, rules and regulations. EFCDU, total carrying value of SPs as
For purposes of this Subsection, an defined herein shall also not exceed
organized market refers to an exchange or twenty percent (20%) of the total FCDU
a BSP-recognized over-the-counter market assets: Provided, That SPs which are not
governed by transparent and binding market booked in an investment account (e.g.,
conventions on price transparency, trade booked as inter-bank loans), for this purpose,
reporting, market surveillance and orderly shall be considered as part of the EFCDU
conduct/operations of the market. assets.
(2) As end-user1. An SP is considered principal-protected
(a) A UB or KB, including its trust if the minimum all-in return for such
department, may enter in any financial investment is at least zero and such
derivatives transaction for the purpose of minimum all-in return is guaranteed by an
1
All transactions involving warrants issued under the ROP’s “Paired Warrants Program” shall be considered
as among the generally authorized derivatives activities that banks (including TBs and RBs/Coop Banks)
may engage in as end-user, without need for additional derivatives authority required under this Subsection:
Provided, That banks holding such instruments shall comply with the requirements of Appendix 25,
where applicable.

§§ X611.1 - X611.2
14.12.31
entity (i.e., issuer or a third party) rated at derivatives transactions under Subsec.
least “A” or its equivalent by an international X611.1(a)(2). Any trust entity may also apply
rating agency acceptable to the Bangko for Type 3 authority in order to transact as
Sentral or fully collateralized by an asset end-user on behalf of its trustor/principal/s
with equivalent credit quality. with derivatives instrument outside those
(3) As a broker. A UB or KB may enumerated under Subsec. X611.1(a)(2).
facilitate derivatives transactions between (As amended by Circular Nos. 605 dated 05 March 2008 and
dealers and market and/or institutional 594 dated 08 January 2008)
counterparties and/or sophisticated
individual end-users: Provided, That the UB/ § X611.2(2008 - X602.2) Activities
KB, acting as broker, ensures that its client requiring additional derivatives authority
fully understands its limited responsibility A bank shall apply for prior Bangko Sentral
as a broker: Provided further, That the approval of additional derivatives authority
bank adheres to procedures for evaluating to engage in all other financial derivatives
client suitability, including risk activities not expressly allowed in Subsec.
disclosures, as prescribed in Appendix 26: X611.1. A bank may apply for two (2) or
Provided finally, That the bank complies more additional authorities. A bank applying
with other pertinent securities laws, rules for additional derivatives authority/ies must
and regulations. have and maintain a risk management
b. TBs, RBs and Coop Banks may enter system commensurate to the additional
in derivatives transactions as end-user with authority/ies being applied for, in
Bangko Sentral - authorized dealers and accordance with the provisions of
brokers solely for hedging purposes: Appendix 25 and meet other conditions
Provided, That they observe all the specified under this Subsection.
requirements for hedging transactions under a. Classification of additional
PAS1. A TB, RB or Coop Bank may apply derivatives authority
for a Type 3 authority to enter into (1) Type 1 - Expanded dealer authority
derivatives transactions as end-user for
A UB or KB may apply for a Type 1
purposes other than hedging: Provided, That
authority. A bank with Type 1 authority may
the applicant bank agrees to be covered by
transact in any financial derivatives as a
all regulations prescribing capital for market
dealer: Provided, That a bank with Type 1
risk, notwithstanding any provision to the
authority shall comply with the sales and
contrary; and
marketing guidelines prescribed in
c. A trust department of a UB or KB may
Appendix 26. A bank with Type 1 authority
transact, as an institutional counterparty,
may likewise transact in any financial
with financial derivatives instruments
derivatives as a broker and an end-user.
enumerated under Subsec. X611.1(a)(2) on
The Bangko Sentral expects banks
behalf of its trustor/principal/s as may be
applying for Type 1 authority to institutionalize
authorized by such trustor/principal/s:
Provided, That the trust department observes a (a) comprehensive and integrated risk
the relevant provisions of Appendices 25 management system; and (b) sales and
and 26. Trust entities other than that within marketing practices that are deemed
a UB or KB may apply for a Type 3 authority appropriate and adequate for the different
to enter on behalf of its trustor/principal/s in derivatives activities it expects to engage
1
All transactions involving warrants issued under the ROP’s “Paired Warrants Program” shall be considered
as among the generally authorized derivatives activities that banks (including TBs and RBs/Coop Banks)
may engage in as end-user, without need for additional derivatives authority required under this Subsection:
Provided, That banks holding such instruments shall comply with the requirements of Appendix 25,
where applicable.

§ X611.2
14.12.31
in. It must be rated at least CAMELS (or than that within a UB or KB, a Type 3
ROCA for branches of foreign banks) of “4” authority will enable said bank/entity to
or better over-all, notwithstanding any transact as end-user of a derivative
provision to the contrary. instrument as may be applied for by the
(2) Type 2 - Limited dealer authority bank/entity.
A UB or KB may apply for a Type 2 (4) Type 4 - Special broker authority
authority. A bank with Type 2 authority may A bank, other than a UB or KB, may
operate as a dealer in specific types of apply for a Type 4 authority. A bank with
derivatives products with specific Type 4 authority may facilitate a derivatives
underlying reference, as applied for by the transaction between a UB or KB, as dealer,
bank, outside those financial derivatives and market and institutional counterparties
instruments under Subsec. X611.1(a)(1): and sophisticated individual end-users:
Provided, That a bank with Type 2 authority Provided, That the bank, acting as broker,
shall comply with the sales and marketing ensures that its client fully understands its
guidelines prescribed in Appendix 26. The limited responsibility as a broker and
Type 2 authority also carries authority to observes the provisions of Appendix 26.
transact as broker and end-user of the said A UB or KB may likewise apply for a
specific derivatives instruments. Type 4 authority to enable itself to broker a
A TB with an existing authority to issue derivatives transaction for or with other
foreign letters of credit and pay/accept/ end-users.
negotiate import/export drafts/ bills of A bank with additional Type 1, 2 or 4
exchange under Subsec. 2101.1 may apply authorities shall be responsible for
for a Type 2 authority to operate as a dealer complying with pertinent securities laws,
of deliverable FX forwards in order to rules and regulations.
service the trade-related hedging For purposes of this Subsection, the
requirements of its clients: Provided, That types of derivatives are classified as follows:
the tenor of the FX forwards dealt shall forwards, swaps and options. Underlying
match the term of the underlying trade reference pertains to the following: interest,
transaction: Provided, further, That the FX, equity, credit and commodity.
applicant bank shall be covered by all b. Qualification requirements. A bank
regulations prescribing capital for market applying for additional authority to engage
risk, notwithstanding any provision to the in expanded derivatives activities shall:
contrary: Provided, furthermore, That the TB (1) Demonstrate adequate competence
shall comply with the sales and marketing in its general operations as evidenced by:
guidelines prescribed in Appendix 26. The (a) CAMELS (or ROCA for branches of
Type 2 authority also carries the authority foreign banks) composite rating of at least
to transact as a broker and an end-user of “3” with a similar rating for Management;
deliverable FX forwards. (b) No unresolved major safety and
(3) Type 3 - Limited user authority soundness issues that threaten liquidity or
Any bank may apply for a Type 3 solvency; and
authority. A bank with Type 3 authority may (c) Substantial compliance with
transact, as an end-user, in specific types of regulations on anti-money laundering,
derivatives products, with specific corporate governance and risk management.
underlying reference, as applied for by the (2) Hold capital commensurate to the
bank, outside of those instruments under risks assumed or to be assumed from the
Subsec. X611.1(a)(2). However, as regards derivatives activities. The Bangko Sentral
a TB, RB or Coop Bank and trust entity other expects a bank applying for or holding

§ X611.2
14.12.31
additional derivatives authority to have (d) Analysis of the risks involved in

adequate capital to accommodate existing transacting in each type of derivatives;
and future risks from additional and (e) Procedures/methodologies that the
generally authorized derivatives activities as bank will implement to measure, monitor
well as risks arising from the bank’s other (including risk management reports) and
business activities. For this purpose, the control the risks inherent in the types of
Bangko Sentral may require capital higher derivatives;
than the minimum required under (f) Relevant accounting guidelines,
prudential regulations. including pro-forma accounting entries;
(3) Have and maintain a risk (g) Analysis of any actual or potential
management system that conforms to the legal/regulatory restrictions; and
principles and complies with the minimum (h) Process flow chart, from deal
standards prescribed in Appendix 25. initiation to risk reporting, indicating the
c. Applicability to trust entities. Trust departments and personnel involved in
entities may apply for Type 3 authority: identified processes.
Provided, That they comply with the (4) Payment of a non-refundable
requirements prescribed and observe the processing fee amounting to:
provisions of Appendix 26.
d. Application procedures. The applicant Authority Amount
shall submit to the Capital Markets Type 1 P 200,000
Type 2 100,000 (UBs and KBs)
Specialist Group, SES of the Bangko Sentral Type 3 50,000
a written application for additional 25,000 (other applicants)
derivatives authority/ies accompanied by: Type 4 25,000 (all banks)
(1) A copy of the board resolution (or
equivalent management review body in the (5) The Bangko Sentral will not accept
case of branches of foreign banks or trust applications lacking any of the above-stated
committee, in case of trust entities) requirements. The Bangko Sentral, however,
approving the application for a specific type may require additional documents to aid its
of derivatives authority; evaluation of the application. By virtue of
(2) A notarized certification signed the application, the applicant automatically
jointly by the president, treasurer and authorizes the Bangko Sentral to conduct
compliance officer of the applicant-bank (or an on-site evaluation of the applicant’s risk
two (2) authorized signatories of equivalent management capabilities, if this is deemed
rank of the trust committee in case of trust necessary.
entities), stating that the bank complies with (6) Type 1 authority shall be subject to
all the requirements for the authority being approval by the Governor, upon
applied for specified in Subsec. X611.2; and recommendation of the Deputy Governor,
(3) A list of the types of derivatives and SES. All other applications for additional
underlying reference the bank intends to authority/ies shall be subject to approval by
engage in, including the following the Deputy Governor, SES.
information for each derivatives class or (7) A bank whose application for
type: additional derivatives authority/ies or an
(a) Target customers for such derivatives; upgrade thereof (e.g., from Type 2 to Type
(b) The capacity in which the bank 1 authority) has been denied cannot submit
intends to engage in such derivatives; a new application for additional derivatives
(c) Description of each type of derivatives authorities until after six (6) months from
and underlying reference with which it will deal; receipt of denial. The same rule applies for

§§ X611.2 - X611.3
14.12.31
a bank whose authorities have been additional derivatives authority.

limited or downgraded. (As amended by Circular Nos. 864 dated 22 December 2014
(8) A bank that holds an additional and 594 dated 08 January 2008)
derivatives authority may apply for
additional derivatives authorities (e.g., § X611.3 (2008 - X602.3) Intra-group
currently holding Type 3 authority who transactions. All derivatives transactions
wish to apply for Type 4 authority) or an between a bank and any of its subsidiaries
upgrade thereof only after the lapse of and affiliates shall comply with minimum
six (6) months from the grant of the previous risk management standards for related-

§§ X611.3 - X611.6
08.12.31
party transactions outlined in Appendix 25, subject to monetary penalties applicable

as part of the bank’s internal control for delayed reporting under existing
procedures. The BSP expects banks to regulations. Moreover, submission of
establish internal reporting and monitoring incomplete, uncertified or improperly
system for derivatives activities for related- certified or otherwise erroneous reports
party transactions. Failure to comply with shall be considered non-reporting, subject
minimum standards shall be a ground for to applicable penalties for amended/
citing non-compliance with Subsecs. delayed reports. For purposes of imposing
X611.1 and X611.2 without prejudice to monetary penalties, the reports shall be
other BSP rules and regulations such as classified as a Category A-1 report.
those related to corporate governance and Habitual delayed or erroneous reporting
unsafe and unsound banking practices. may be a ground for further sanction,
(As amended by Circular No. 594 dated 08 January 2008) including limitation of generally authorized
activities and/or additional authorities
§ X611.4 (2008 - X602.4) Accounting and/or suspension of authority to engage
guidelines. A bank that engages in in such derivatives activities.
derivatives activities must strictly account for c. Non-compliance with the
such transactions in accordance with PAS. provisions of Sec. X611 and its Subsections
(As amended by Circular No. 594 dated 08 January 2008) and Appendices 25 and 26. Any bank/trust
entity found violating any of the provisions
§ X611. 5 (2008 - X602.5) Reporting of Sec. X611 and its Subsections, and/or
requirements. A bank or trust department/ Appendices 25 and/or 26 shall be
entity engaged in any derivatives sanctioned with the penalties prescribed
transaction shall submit, in addition to the under Sections 36 and 37 of R.A. No. 7653
derivatives reports enumerated under the in accordance with the gravity/seriousness
BSP FRP, a monthly report on derivatives of the offense taking into consideration the
transactions/outstanding derivatives within number of times the offense was
fifteen (15) banking days from end of the committed, possible consequent losses on
reference month. The reports shall be the clients, effect on the financial markets
certified by the treasurer. and other relevant factors.
(As amended by Circular No. 594 dated 08 January 2008) d. Curtailment of derivatives authority.
The BSP reserves the right to suspend,
§ X611.6 (2008 - X602.6) Sanctions modify, downgrade, limit or revoke any
a. Unauthorized transactions. bank’s derivatives authority (including
Sanctions prescribed under Sections 36 and any or all of those generally authorized
37 of R.A. No. 7653 shall be imposed on activities) for prudential reasons as may
any bank (including its directors and be evidenced by any or all of the
officers) found to have engaged in an following:
unauthorized derivatives activity. (1) The bank is assigned a CAMELS
A bank undertaking unauthorized (or ROCA in the case of branches of foreign
derivatives activities may be considered banks) composite rating or component
as conducting its business in an unsafe and management rating of lower than that
unsound manner under Section 56 of prescribed under Subsec. X611.2, in the
R.A. No. 8791. most recent regular examination.
b. Delayed/erroneous/inaccurate (2) The bank has not maintained
reporting. Banks failing to submit the adequate risk management systems given
reports required under Subsec. X611.5 the level and type of derivatives activities
within the prescribed deadline shall be it has engaged in as may be determined

§§ X611.6 - X625.2
08.12.31
by the BSP in any on-site evaluation and customers may, thru FX forwards, hedge
confirmed by the Monetary Board. their market risks arising from FX
(3) The Monetary Board has confirmed obligations and/or exposures: Provided,
an SES finding that the bank has conducted That forward sale of FX (deliverable and
business in an unsafe and unsound manner. non-deliverable) may only be used when
An erring bank may apply for the underlying transaction is eligible for
reinstatement of its derivatives authority servicing by the banking system under
only after six (6) months from lapse of the Circular No. 1389 dated 13 April 1993, as
implementation of the sanction: Provided, amended. Customers may, likewise, cover
That the bank has satisfactorily addressed their funding requirements thru FX swaps.
all BSP concerns. Banks may only engage in FX forwards
Transitory provisions. Expanded or any and swap transactions with customers if the
other derivatives authority granted prior to latter is hedging market risk or covering
30 January 2008 shall be operative for one funding requirements. There shall be no
(1) year from the said date: Provided, That a double/multiple hedging such that at any
bank undertaking any derivatives activities given point in time, the total notional
pursuant thereto shall immediately comply amount of the FX derivatives transaction/s
with the pertinent provisions of Appendices shall not exceed the amount of the
25 and 26. A bank which intends to continue underlying FX obligation/exposure.
its existing derivatives authority not covered The customer shall no longer be
by those generally authorized under Subsec. allowed to buy FX from the banking
X611.1, must submit an application for the system for FX obligations/exposures that
appropriate additional derivatives authority are fully covered by deliverable FX
within the one (1) - year transitory period. forwards and FX swaps.
After the lapse of the one (1) - year transitory The following guidelines, as well as
period, a bank can only perform those minimum documentary requirements, shall
activities which are permissible under cover FX forward and swap transactions
Sec. X611 and its Subsections. involving the Philippine peso between
A bank whose SPs, as of 30 January 2008, authorized dealer banks and their customers.
exceed the prudential limits prescribed (As amended by Circular No. 591 dated 27 December 2007)
under Subsec. X611.1(a)(3) may maintain
existing positions but cannot increase its § X625.2 (2008 - X602.15) Definition
exposures or invest in additional SPs until of terms
such time when its exposure levels are a. Credit default swaps (CDS) - refers
within the prescribed limits. to a financial contract between two (2)
(As amended by Circular No. 594 dated 08 January 2008) parties, the protection buyer and protection
seller, with reference to a certain notional
Secs. X612 - X624 (Reserved) value of a reference credit or a basket of
reference credits, whereby the former
Sec. X625 (2008 - X602.14) Forward and pays a premium to the latter, and in return
Swap Transactions. The following the latter agrees to make certain protection
guidelines shall govern the forward and payments to the former contingent upon
swap transactions in Philippine peso the occurrence of a credit event with
respect to the reference entity(ies)/asset(s).
§ X625.1 (2008 - X602.14) Statement b. Credit-linked note (CLN) - refers to
of policy. It is the policy of the BSP to a pre-funded credit derivative instrument
support the deepening of the Philippine under which the note holder effectively
financial markets. In line with this policy, accepts the transfer of credit risk pertaining

§ X625.2
08.12.31
to a reference asset or basket of assets g. FX obligation - refers to an actual FX

issued by a reference entity/ies. The commitment to a non-resident or any AAB
repayment of the principal to the note where the amount, payment tenor and party
holder is contingent upon the occurrence have been determined.
of a defined credit event. In consideration h. FX options - refers to option
thereof, the note holder receives an contracts which convey the right or the
economic return reflecting the underlying obligation depending upon whether the
credit risk of the reference assets. For bank is the purchaser or the writer,
purposes of Sec. X611, the term shall respectively to buy or sell at a specified
generically include similar instruments price by a specified future date, for a fee
such as credit-linked deposits (CLDs) and or a premium, two (2) different currencies
credit-linked loans (CLLs). Unless at a specified exchange rate.
otherwise stated, the term shall refer only i. FX swaps - refers to an agreement
to plain vanilla CLNs. Plain vanilla CLNs involving an initial exchange of two (2)
are composed of a debt or deposit currencies, usually at the prevailing spot
instrument and a CDS. Non-plain vanilla rate, and a simultaneous commitment to
CLNs are those that are leveraged and/or reverse the exchange of the same two (2)
include features of other SPs (e.g., coupon currencies at a date further in the future at
payments linked to interest or FX rate a rate (different from the rate applied to the
movements) and/or contains more than initial exchange) agreed on deal date.
one (1) embedded derivative. j. Interest rate swaps (IRS) - refers to
c. Currency swaps - refers to an an agreement in which the parties agree to
arrangement in which two parties exchange interest cash flows on a principal
exchange a series of cash flows in one (1) amount at certain times in the future
currency for a series of cash flows in according to an agreed upon formula.
another currency, at specified exchange k. Non-deliverable forward (NDF) -
and/or interest rates and at agreed intervals refers to a forward FX contract where only
over an agreed period. the net difference between the contracted
d. Forward FX contracts - refers to an forward rate and the market rate shall be
agreement for delayed delivery of a foreign settled at maturity.
currency in which the buyer agrees to l. Non-resident - refers to an individual,
purchase and the seller agrees to deliver a corporation or other juridical person not
at a specified future date a specified amount included in the definition of resident.
at a specified exchange rate. m. Resident - refers to:
e. Forward rate agreement (FRA) - (1) An individual citizen of the
refers to an agreement fixing the interest Philippines residing therein; or
rates for a specified period whereby the (2) An individual who is not a citizen
buyer receives (or pays) and the seller pays of the Philippines but is permanently
(or receives) the interest rate differential if residing therein; or
the reference rate rises above (or falls (3) A corporation or other juridical
below) the contract rate, respectively. person organized under the laws of the
f. FX exposure - refers to an FX risk Philippines; or
arising from an existing commitment to or (4) A branch, subsidiary, affiliate,
from a non-resident or AAB which leads extension office or any other unit of
to payment of an FX obligation or receipt corporations or juridical persons which are
of an FX asset based on verifiable organized under the laws of any country and
documents on deal date. operating in the Philippines, except OBUs.

§§ X625.2 - X625.6
13.12.31
n. Structured product (SP) - refers to a than: (i) the maturity of the underlying FX
financial instrument where the total return obligation; or (ii) the approximate due date
is a function of one (1) or more underlying or settlement of the FX exposure. For
indices, such as interest rates, equities and deliverable FX forward contracts, the tenor/
exchange rates. It is composed of a host maturity shall be co-terminus with the
contract (e.g., plain vanilla debt or equity maturity of the underlying obligation or the
securities) and an embedded derivative approximate due date or settlement of the
(e.g., swaps, forwards or options) that FX exposure. This shall not preclude
re-shape the risk-return pattern of the pretermination of the contract due to
hybrid instrument. For purposes of prepayment of the underlying obligation
guidelines under Sec. X611, the term SP or exposure: Provided, That for foreign
does not include asset-backed securities. currency loans, prior Bangko Sentral
Provisions under Sec. 1648 shall continue approval has been obtained for the
to apply for securities overlying prepayment and a copy of such approval is
securitization structures. presented to the bank counterparty.
(As amended by Circular Nos. 594 dated 08 January 2008 and b. FX Swaps - No restriction on tenor.
591 dated 27 December 2007) c. Settlement of NDFs - All NDF
contracts with residents shall be settled in
§ X625.3 (2008 - X602.16) Documentation pesos.
Minimum documentary requirements for d. Remittance of FX proceeds of
FX forward and swap transactions in deliverable forward and swap contracts
Appendix 58 shall be presented on or FX proceeds of deliverable forward and
before deal date to the banks unless swap contracts shall be delivered by the
otherwise indicated. bank counterparty directly to the
FX selling banks shall stamp the beneficiaries concerned except for foreign
supporting documents upon presentation investments where said FX proceeds are
by customers as follows: reconverted to Philippine pesos and
a. For hedging transactions: “FX reinvested in eligible peso instrument
hedged/deliverable” or “FX hedged/ such as those listed in Item “A.2.2” of
non-deliverable"; Appendix 58. For this purpose,
b. For funding transactions: “FX sold”, beneficiaries shall refer to the FCDU of a
indicating the contract date and amount bank or a nonresident entity (e.g., creditor,
involved, and signed by the bank’s supplier, investor) to whom the customer
authorized officer. Copies of all duly is committed to pay/remit FX.
marked supporting documents shall be (As amended by Circular No. 591 dated 27 December 2007)
retained by the banks and made available
to the Bangko Sentral for verification. The § X625.5 (Reserved)
retained copies shall also be marked
“Documents Presented as Required” and § 1625.5 (2008 - 1602) Forward
signed by the bank’s authorized officer. contracts with non-residents.
(As amended by Circular No. 591 dated 27 December 2007) (Deleted by Circular No. 790 dated 06 March 2013)
§ X625.4 (2008 - X602.17) Tenor/ § 2625.5 (Reserved)

maturity and settlement
a. Forward sale of FX (whether § 3625.5 (Reserved)
deliverable or non-deliverable). The tenor/
maturity of such contracts shall not be longer § X625.6 (2008 - X602.18) Cancellations,

§§ X625.6 - X625.9
13.12.31
roll overs or non-delivery of FX forward ii. Banks in breach of the limits shall be
contracts. All cancellations, roll-overs or required to submit remedial plan to comply
non-delivery of all FX deliverable forward with the limits.
contracts and the forward leg of swap b. Subsequent Offense- Bank will be
contracts shall be subject to the following subject to any or all of the following, as may
guidelines to determine the validity thereof: be recommended by the SES to the
a. Eligibility test - Contracts must be Monetary Board:
supported by documents listed in i. Restriction or prohibition on the bank
Appendix 58 hereof. from requesting new authority and/or
b. Frequency test - the reasonableness licenses of any sort;
of the cancellation, roll-over or non-delivery ii. Restriction or prohibition on the bank
shall be based on the results of the evaluation from declaring dividends; and
of the justification/explanation submitted by iii. Issuance of an order requiring the
banks as evidenced by appropriate bank to cease and desist from conducting
documents. business in an unsafe and unsound manner
c. Counterparty test - the cancellation and may further order that immediate action
or roll-over of contracts must be duly be taken to correct the conditions resulting
acknowledged by the counterparty to the from such unsafe or unsound practice.
contract as shown in documents submitted (As amended by Circular No. 790 dated 06 March 2013)
by banks, e.g., there should be conforme of
counterparty as evidenced by the § X625.8 (2008 - X602.20) Compliance
counterparty signature on pertinent with anti-money laundering rules. All
documents. transactions under Sec. X625 and Subsecs.
d. Mark-to-Market test - the booking or X625.1 to X625.9 shall comply with existing
recording in the books of accounts of the profit regulations on anti-money laundering under
or loss on contracts and cash flows/settlement Sec. X801.
to counterparties must be fully supported by (As amended by Circular No. 591 dated 27 December 2007)
appropriate documents such as
authenticated copy of debit/credit tickets, § X625.9 (2008 - X602.21) Reporting
schedules showing among others, mark-to- requirements. Banks duly authorized to
market valuation computation, etc. engage in derivatives transactions shall
(As amended by Circular No. 591 dated 27 December 2007) continue to be covered by the Bangko
Sentral’s existing reporting requirements
§ X625.7 (2008 - X602.19) Non- on financial derivatives. Cancellations,
deliverable forward contracts involving the roll-overs or non-delivery of deliverable
Philippine peso. NDF contracts involving FX forward contracts and under the
the Philippines peso shall be covered by the forward leg of swap contracts shall be
provisions of Appendix 101. reported electronically in Excel format to
Any violation of the provisions of the Bangko Sentral not later than five (5)
Appendix 101 shall constitute grounds for banking days after reference month as
the imposition on the bank/director(s)/ indicated in Appendix 6.
officer(s) of the following: Swap contracts with counterparties
a. First Offense involving purchase of FX by banks at the
i. Reprimand for the directors/officers initial leg shall likewise be reported
responsible for the violation with a warning electronically in Excel format to the
that subsequent violations will be subject Bangko Sentral not later than five (5)
to more severe sanctions. banking days after reference month as

§§ X625.9 - X625.14
08.12.31
indicated in Appendix 6. (1) “chronic”, i.e., when the violation

The reports shall be transmitted to the continues beyond three (3) banking days
International Department at within a calendar month, but the excess
iod@bsp.gov.ph, copy furnished the SDC position is less than thirty percent (30%) of
at the following addresses: the allowable limit; and
sdcfxkbdom@bsp.gov.ph (for domestic (2) “abusive”, i.e., when the violation
banks) and sdcfxkbfor@bsp.gov.ph (for continues beyond three (3) business days
foreign banks). within a calendar month and excess position
(As amended by Circular No. 591 dated 27 December 2007) is thirty percent (30%) or more of the
allowable limit.
§§ X625.10 - X625.13 (Reserved)
“Chronic” Suspension of the bank’s
§ X625.14 (2008 - X602.26) Sanctions violation rediscounting privileges,
Violations of Sec. X625 and Subsecs. X625.1 cash dividend declaration
to X625.9 shall be subject to the penalty and branching privileges
until the violation is
provisions under R.A. No. 7653 (The New corrected but in no case
Central Bank Act) and other existing shall such suspension be
banking laws and regulations. less than thirty (30)
Failure to comply with Subsec. X625.6 calendar days.
shall result in the exclusion of the forward “Abusive” Suspension of the bank’s
contracts in the computation of the bank’s violation rediscounting privileges,
consolidated daily position starting from cash dividend declaration
day one, i.e., when the individual and branching privileges
until the violation is
contracts were entered into. Violations
corrected but in no case
of the prescribed FX position limits shall shall such suspension be
be subject to the following sanctions less than sixty (60)
provided under Circular Letter dated calendar days.
13 March 1998:
a. Monetary Penalties c. The Monetary Board may impose
Per Calendar Month Daily Penalty other non-monetary sanctions on a bank
for violations determined by Bangko
1st banking day P10,000 Sentral as “chronic” or “abusive” on a
nd
2 banking day 20,000 case-to-case basis, pursuant to Sec. 37
3rd banking day of 30,000 of R.A. No. 7653.
violation, and onwards, d. Banks shall be duly advised by
or if the excess FX position the Bangko Sentral of their violations
of the bank is thirty percent and the corresponding sanctions
(30%) or more of the imposed for such violations.
allowable limits in any e. A monetary penalty imposed on a
banking day, regardless of bank shall be paid to the Bangko Sentral
whether a bank is in the first, Cash Department, within three (3) banking
second, third or more days of days from the bank’s receipt of advice of
violation said penalty imposition.
For purposes of imposing sanctions for
b. In addition, the following delayed, erroneous or unsubmitted reports,
non-monetary sanctions shall be imposed reports required under Subsec. X625.9 are
on the bank committing violations classified as Category B reports and subject
considered as: to corresponding penalties.

§ X625.14 - 1628.3
14.12.31
Counterparties that habitually cancel defined above on the principle that such
deliverable forwards without proper banks have already demonstrated a more
justification may be subject of a Bangko sophisticated ability to manage risks. Subject
Sentral watchlist. to the provisions in Sec. 1648, they may also
(As amended by Circular No. 591 dated 27 December 2007) invest in SPV-issued CLNs that co-exist with
other CLNs of different seniority of claims
Secs. X626 - X628 (Reserved) against the reference asset pool. As an
exception to the general rule, a UB/KB
Sec. 1628 (2008 - 1633) Credit-linked Notes without expanded derivatives authority may
and Similar Credit Derivative Products. The invest in single name CLNs where the
following are the guidelines for the capital reference asset is a direct ROP obligation or
treatment of investments in credit-linked an obligation fully guaranteed by the ROP.
notes and similar credit derivative products
such as credit-linked deposits and credit § 1628. 3 (2008 - 1633) Capital
linked loans. treatment of investments in CLNs
(1) Banking book. Positions in CLNs in
§ 1628.1(2008 - 1633) Definitions the banking book shall be reported in the
(1) A credit-linked note (CLN) pertains computation of the risk-based capital
to a pre-funded credit derivative instrument adequacy ratio covering credit risks under
under which the note holder effectively applicable and existing capital adequacy
accepts the transfer of credit risk pertaining framework.
to a reference asset or basket of assets issued Through holding a CLN, a bank
by a reference entity/ies. The repayment of acquires credit exposure on two (2) fronts
the principal to the note holder is contingent - to the reference entity of the note and also
upon the occurrence of a defined credit to the note issuer. The on-balance sheet
event. In consideration, the note holder exposure arising from the CLN should be
receives an economic return reflecting the weighted by the higher of the risk weight of
underlying credit risk of the reference asset/s. the reference entity or the risk weight of the
All references to CLNs in this Section note issuer. The amount of exposure is the
shall be taken to generically include similar book value of the note. If the CLN principal
instruments, such as Credit-Linked Deposits is fully collateralized by securities that are
(CLDs) and Credit-Linked Loans (CLLs). acceptable as credit risk mitigant under
(2) An SPV, for purposes of this Section,
applicable and existing capital adequacy
refers to an entity specifically established
framework and provided such collateral is
to issue CLNs of a single, homogeneous risk
constituted in a legally effective manner as
class that are fully collateralized as to
to give priority to the note holders’ interest
principal by high-grade securities purchased
in the event of bankruptcy of the note issuer,
out of the proceeds of the note issuance.
the risk weight of the note issuer is substituted
Collateral shall be limited to securities with
with the risk weight associated with the
an assignable risk weight of not more than
relevant security.
twenty percent (20%) under existing
When the CLN is referenced to a basket
regulations.
of reference entities and the contract
§ 1628.2 (2008 - 1633) Qualified banks terminates and pays out on the first entity to
In general, only banks with expanded default in the basket, capital should be held
derivatives authority may invest in CLNs as to consider the cumulative risk of all the

§ 1628.3
14.12.31
reference entities in the basket. This means A CLN which is referenced to entities
that the risk weights of all the reference in the basket proportionately should be
entities are added up and the sum compared risk-weighted according to each reference
with the risk weight of the note issuer. If the entity’s share of protection under the
sum of the risk weights of all the reference contract. Thus, if there are two (2)
entities in the basket is higher than the risk reference entities in a P100.0 million
weight of the note issuer, then this sum is contract, one (1) with a 100% risk weight
adopted. The resultant risk-weighted and a twenty percent (20%) share and the
exposure to the basket is, however, capped other with a twenty percent (20%) risk
at ten (10) times the book value of the note. weight and an eighty percent (80%) share,
Accordingly, the maximum capital charge the risk weighted exposure is P36.0
is 100% of the book value of the note. The million, i.e., P100.0 million x 20%
multiplier ten (10) is the reciprocal of the x 100% + P100.0 million x 80% x 20%.
BSP-required minimum capital adequacy The corresponding capital charge is
ratio of ten percent (10%). P3.6 million (P36.0 million x 10%).
If, on the other hand, the risk weight of (2) Trading book. Positions in CLNs
the note issuer is still higher than the sum taken up in the trading book should be
of the risk weights of all the reference reported in the computation of the adjusted
entities in the basket, then the risk weightof risk-based capital adequacy ratio covering
the note issuer is adopted. combined credit risk and market risk under
When the contract terminates and pays Appendix 46.
out on the nth (other than the first) entity to (a) Standardized approach
default in the basket, the treatment above The following describes the positions
shall apply except that in aggregating the risk to be reported for investments in CLNs for
weights of reference entities, the risk purposes of calculating specific risk and
weight/s of n–1 entity/ies is/are excluded general market risk charges under the
from the computation. The bank may choose standardized approach.
which entity/ies to exclude. A CLN investment is treated as a
If a CLN that pays out on the nth entity position in the note itself, with an
to default is rated such that it meets the embedded credit default product. The
criteria of a security with the “highest credit CLN is subject to the specific risk
quality” as defined under Appendix 46, only associated with the issuer or the collateral
the highest risk weight in the basket of when the issuer is an SPV. In addition, it
reference entities is compared with the risk is subject to general market risk that is a
weight of the note issuer. function of the maturity and coupon or
If the CLN is issued by an SPV, the bank interest rate of the note. The embedded
is exposed to both the reference entity and credit default product creates a notional
the collateral held by the SPV. Thus, the risk position in the specific risk of the
weight/s of the reference entity/ies should reference obligation (with no additional
be compared with the risk weight of the general market risk position created).
riskiest eligible collateral for purposes of Specific risk
computing the risk-weighted exposure of the A CLN investment should be reported
note and the corresponding capital charge. as a long position on the reference
Subject to prior Bangko Sentral clearance, obligation and a long position on the note
a bank may disapply the additive rule when a itself.
very strong correlation among the reference When a CLN is referenced to multiple
entities in the basket can be demonstrated. obligations in a basket, the positions

§§ 1628.3 - 1628.6
14.12.31
reported shall depend on the structure of While some banks may not be able to
the contract. When the contract terminates run full internal models to calculate market
and pays out on the first obligation to default risk capital charges, they may, with the
in the basket, the note should be reported necessary expertise and systems, use
as long positions in each of the reference preprocessing techniques to calculate
obligations in the basket, with the total capital charge for CLNs. Banks wishing to
capital charge for the product capped at the adopt these techniques should seek Bangko
book value of the note. Sentral’s prior consent. The preprocessing
When the contract terminates and pays models are subject to verification by the
out on the nth (other than the first) entity to Bangko Sentral.
default in the basket, the treatment above (As amended by Circular No. 827 dated 28 February 2014)
shall apply except that in aggregating the
risk weights of the reference obligations, the § 1628.4 (2008 - 1633) Risk management
risk weight/s of n-1 obligations is/are CLN structures are considered to be
excluded from the computation. The bank exposed to greater risks than comparable
may choose which obligations to exclude. investments in direct obligations. In
Subject to prior Bangko Sentral particular, investing banks should be
clearance, a bank may disapply the additive aware of the potential legal risk arising
rule when a very strong correlation among from an unenforceable contract. They
the reference obligations in the basket can should consult their legal advisors about
be demonstrated. these and related legal issues before
The additive treatment may also be engaging in such transactions. In addition,
disapplied when an nth-to-default CLN is all investments in CLNs must be duly
rated such that it meets the criteria of a approved by a bank’s board of directors
security with the “highest credit quality” as and subjected to appropriate risk
defined under Appendix 46. Positions in the management procedures.
reference obligations can be reported as a
single long position in a debt security with § 1628.5 (2008 - 1633) Transitional
the “highest credit quality”. A long position arrangements. Banks which have
on the note should also be reported whether outstanding investments in CLNs, but
or not the CLN meets the criteria of a which have not been authorized under
security with the “highest credit quality”. this Section to invest in such, shall be
When the CLN is referenced to multiple given a period of ninety (90) calendar days
obligations under a proportionate structure, from 25 February 2004 (effectivity of
positions in the reference obligations should Circular No. 417) to divest themselves of
be reported according to their respective such investments.
proportions in the contract.
General market risk § 1628.6 (2008 - 1633) Bangko Sentral
A CLN investment creates a long approval not required. No prior Bangko
position in the note itself. Sentral approval is required to invest in CLNs
(b) Internal models approach and similar products. However, it shall be the
Banks may seek the Bangko Sentral’s responsibility of UBs/KBs to fully comply with
approval to include CLNs in their appropriate risk management standards
recognized models for calculating capital including, as a minimum, those prescribed
charges. The detailed requirements relating under this Section. The regulatory
to the use of internal models are set out in requirements enumerated in Appendix 66
Annex A of Appendix 46. shall be fully complied with by UBs/KBs

§§ 1628.6 - 1635.4
11.12.31
investing in products allowed under this capital commensurate to the risks inherent
Section. in these products.
Investment in credit-linked notes (CLNs)
and similar structured products with § 1635.2 Definition. A structured product
embedded credit derivatives, as defined refers to a financial instrument where the
under Section 1628.1, including those that return is a function of one (1) or more
were reclassified from HFT to Available for underlying indices, such as interest rates,
Sale (AFS)/Held to Maturity (HTM)/ equities and exchange rates. There may also
Unquoted Debt Securities Classified as be embedded derivatives such as swaps,
Loans (UDSCL) or from AFS to HTM/UDSCL forwards, options, caps, and floors that
in accordance with the reclassification rules reshape the risk-return pattern. For purposes
under Circular No. 626 dated 23 October of this Subsection, structured products do
2008 and Circular No. 628 dated 31 not include asset-backed securities, credit-
October 2008, shall be classified and linked notes and other similar instruments.
measured at FVPL upon initial application
of PRFS 9. § 1635.3 Qualified banks. As a general
The accounting treatment for rule, only UBs and KBs with expanded
investments in CLNs and other structured derivatives license may obtain exposures in
products under BSP Memorandum structured products. Banks without
M-2008-10 dated 07 March 2008 and the expanded derivatives license may only
guidelines on reclassification of CLNs and invest in structured products duly approved
other similar instruments that are linked to by the Bangko Sentral.
the ROP under Memorandum M-2009-12
dated 16 April 2009 shall no longer apply § 1635.4 Capital treatment of banks’
to financial assets that are accounted for in exposures to structured products
accordance with FPRS 9. a. Banking book
(As amended by Circular Nos. 733 dated 05 August 2011 and (1) Risk weights. Capital charge for
708 dated 10 January 2011) structured products held in the banking
book shall depend on the rating of the
issuing entity, or rating of the collateral in
case of structured products issued by
special purpose vehicles (SPVs), given by
the following BSP-recognized international
credit rating agencies:
(a) Moody’s;
Sec. 1635 Banks’ Exposures to Structured
(b) Standard & Poor’s;
Products. The following rules and
(c) Fitch Ratings; and
regulations shall govern the capital treatment
(d) Such other international rating
of banks’ exposures to structured products.
agencies as may be approved by the
Monetary Board.
§ 1635.1 Statement of policy. The
In cases where there are two (2) or more
Bangko Sentral aims to foster the
types of collateral, capital charge shall
development of a market for new financial
depend on the lowest rated collateral.
products in the country, while at the same
The mapping of ratings to the
time ensure that banks hold sufficient
corresponding risk weights shall be a follows:

§§ 1635.4 - 1635.5
08.12.31
Risk weight Moody’s Standard Fitch cases where there are two (2) or more
& Poor's Ratings
50% Aaa to Aa3 AAA to AA- AAA to AA-
ratings which map into different risk
100% A1 to A3 A+ to A- A+ to A- weights, the higher of the lowest two (2)
150% Baa1 to Baa3 BBB+ to BBB+ to
BBB- BBB-
risk weights should be used.
Deduction b. Trading book. Capital charge for
from total structured products held in the trading book
of Tier 1 and Below Baa3 Below BBB- Below BBB-
Tier 2 capital Unrated
shall be determined in accordance with
Appendix 46.
(2) Use of ratings. If an issuer of a § 1635.5 Bangko Sentral approval not
structured product has only one (1) rating required. No prior BSP approval is required
by any of the BSP-recognized international to enter into authorized transactions.
rating agencies, that rating shall be used to However, it shall be the responsibility of
determine the risk weight of the product; in UBs/KBs to fully comply with appropriate

§§ 1635.5 - 1636.3
08.12.31
risk management standards including, as b. Credit quality of issuer - Acceptable

a minimum, those prescribed under this issuers are banks and SPVs collateralized
Section. The regulatory requirements by securities rated at least “A” or its
enumerated in Appendix 66 shall be fully equivalent by an international rating
complied with by UBs/KBs investing in agency acceptable to the Monetary Board.
products allowed under this Section. c. Booking - Investments in structured
products as herein defined shall be booked
Sec. 2635 (Reserved) under banking book accounts as follows:
(1) DFVPL, (2) AFS, (3) Held to Maturity
Sec. 3635 (Reserved) (HTM); or (4) Unquoted Debt Securities
Classified as Loans, which shall be
Sec. X636 (Reserved) accounted for in accordance with Subsecs.
X186.1, X388.5 and Appendix 33, but not
Sec. 1636 Expanded Foreign Currency under the HFT category.
Deposit Units Investments in Foreign d. Prudential limits - The total carrying
Currency Denominated Structured value of all investments in structured
Products. The following guidelines allow products as defined herein at any given
UBs and KBs without expanded derivatives point in time must not exceed twenty
authority to invest in certain specified percent (20%) of the total investment
structured products. portfolio of the EFCDU [combined amount
of Trading Account Securities (TAS), ASS
§ 1636.1 Statement of policy. The BSP and IBODI].
encourages banks to diversify their EFCDU e. Risk management - Investing banks
investment portfolios in order to stabilize must have established internal processes to
earnings, control maturity mismatches and identify, evaluate, monitor and manage the
minimize over concentration of exposures. risk exposures, e.g., credit risk, market risk,
liquidity risk, operational risk, legal risk,
§ 1636.2 Scope. EFCDUs of UBs and compliance risk, created by their investments
KBs without expanded derivatives authority in structured products. As a minimum:
may invest, for their own account, in foreign (1) Such investments must be specifically
currency-denominated structured products approved by the board of directors and be
issued by banks and SPVs of high credit subject to appropriate internal limits and
quality: Provided, That the revenue streams periodic reporting to the Board.
of such products may only be linked to (2) Banks must comply with generally
interest rate indices and/or foreign exchange accepted accounting and disclosure
rates other than those that involve the standards and/or rules and regulations
Philippine Peso: Provided, further, That the prescribed by the BSP.
minimum all-in return of such investments (3) An independent risk management
may not be lower than zero. For purposes of function must be in place.
this Section, structured products do not (4) Banks should have the ability to
include asset backed securities, credit-linked value their investments on a continuing and
notes and other similar instruments. consistent basis and to measure their
sensitivity to market movements. This
§ 1636.3 Other conditions should include performing, at regular
a. Maturity - The maximum intervals, stress tests that reflect extreme
contractual maturity of any investment in market conditions. As part of the valuation
structured products shall be five (5) years. exercise, banks should be able to obtain bid

§§ 1636.3 - 1648.4
08.12.31
prices from the issuers of the investment § 1648.1 Statement of policy. The BSP
instruments on a monthly basis. aims to foster the development of a market
(5) Management should ensure that the for new financial products in the country
risks of the investments are accurately and provide banks with expanded
aggregated in risk reports on a timely basis. opportunities for investment diversification,
while at the same time ensure that they
§ 1636.4 Capital treatment of hold sufficient capital commensurate to the
structured products. The capital treatment risks inherent in these products.
shall be in accordance with existing rules
and regulations as modified for structured § 1648.2 Definition. Securitization
instruments. structures refer to:
a. structures where the cash flow from
§ 1636.5 Bangko Sentral approval not an underlying pool of exposures is used to
required. No prior BSP approval is required service at least two (2) different stratified
to enter into authorized transactions. risk positions or tranches reflecting
However, it shall be the responsibility of different degrees of credit risk (also known
UBs/KBs to fully comply with appropriate as traditional securitization); or
risk management standards including, as b. structures with at least two (2)
a minimum, those prescribed under this different stratified risk positions or tranches
Section. The regulatory requirements that reflect different degrees of credit risk,
enumerated in Appendix 66 shall be fully where credit risk of an underlying pool of
complied with by UBs/KBs investing in exposures is transferred, in whole or in
products allowed under this Section. part, through the use of credit derivatives
or guarantees that serve to hedge the credit
§ 1636.6 Sanctions. Non-compliance risk of the portfolio (also known as
with the provisions of this Section shall synthetic securitization).
subject the bank to a fine of one-tenth of one
percent (1/10 of 1%) of the outstanding § 1648.3 Qualified banks. UBs/KBs with
investment per day, but not to exceed expanded derivatives authority may invest
P30,000 per day, to be reckoned from the in securities overlying any tranches of
day the bank is deemed in violation of securitization structures. UBs/KBs without
regulations, until the day the bank has expanded derivatives authority may also
complied with the requirements. Banks may invest but only in securities overlying
also be temporarily or permanently tranches of securitization structures that are
prohibited from such investments as rated at least “A”, or its equivalent, by a BSP-
circumstances may warrant. recognized credit rating agency.
Sec. 2636 (Reserved) § 1648.4 Capital treatment of

investments in securities overlying
Sec. 3636 (Reserved) securitization structures
a. Credit risk
Secs. X637 - X648 (Reserved) (1) Risk weights. Capital charge for
investments in securitization structures held
Sec. 1648 Investments in Securities in the banking book shall be based on the
Overlying Securitization Structures. The latest rating given by any of the following
following rules shall govern banks’ BSP-recognized credit rating agencies:
investments in securities overlying (a) International rating agencies:
securitization structures. (i) Moody’s;

§§ 1648.4 - X651.1
08.12.31
(ii) Standard & Poor’s; § 1648.5 Bangko Sentral approval not

(iii) Fitch IBCA; and required. No prior BSP approval is required
(iv) Other international rating agencies to invest in securities overlying
as may be approved by the Monetary securitization structures. However, it shall
Board be the responsibility of UBs/KBs to fully
(b) Domestic rating agencies: comply with appropriate risk management
(i) PhilRatings; and standards including, as a minimum, those
(ii) Other domestic rating agencies as prescribed under this Section. The
may be approved by the Monetary Board regulatory requirements enumerated in
The assignment of risk weights Appendix 66 shall be fully complied with
corresponding to agency ratings shall be by UBs/KBs investing in products allowed
as follows: under this Section.
Risk weight Moody’s Standard Fitch PhilRatings Sec. 2648 (Reserved)

& Poor’s IBCA
20% Aaa to AAA to AAA to Aaa to Aa
Aa3 AA- AA- Sec. 3648 (Reserved)
50% A1 to A3 A+ to A- A+ to A- A
100% Baa1+ BBB+ BBB+ Baa Secs. X649 - X650 (Reserved)
to Baa3 to BBB- to BBB-
Deduction Below Below Below Below Baa Sec. X651 Asset-Backed Securities. The
from total Baa3 BBB- BBB- following regulations shall govern the
of Tier 1 and
Tier 2 capital Unrated
origination, issuance, sale, servicing and
administration of asset-backed securities
(2) Use of ratings. Ratings of BSP (ABS) by any bank including its
recognized credit rating agencies shall be subsidiaries and affiliates engaged in
used as follows: allied activities, which are domiciled in
(a) Securities overlying securitization the Philippines.
structures created within the Philippines
may be rated by any BSP-recognized § X651.1 Definition of terms
international or domestic credit rating a. Assets shall mean loans or
agency, while securities overlying receivables existing in the books of the
securitization structures created outside originator prior to securitization. Such
of the Philippines may only be rated by assets are generated in the ordinary course
any of the international credit rating of business of the originator and may
agencies that are recognized by the BSP; include mortgage loans, consumption
and loans, trade receivables, lease receivables,
(b) In cases when overlying securities credit card receivables and other similar
have split ratings which map into different financial assets.
risk weights, the higher risk weight should b. Asset-backed securities shall refer
be used. to the certificates issued by a Special
b. Market risk. Capital charge for Purpose Trust (SPT) representing undivided
securities overlying securitization ownership interest in the asset pool.
structures held in the trading book shall be c. Asset pool shall mean a group of
determined in accordance with Appendix identified, self-amortizing assets that is
46 and the use of agency ratings for such conveyed the SPT issuing the ABS and such
purpose shall be consistent with the above other assets acquired as a consequence of
principles. the securitization.

§§ X651.1 - X651.4
08.12.31
d. Clean-up call shall refer to an and selling of the ABS either on guaranteed
option granted to the seller to purchase the or best effort basis.
remaining assets in the asset pool.
e. Credit enhancement shall refer to § X651.2 Prior Bangko Sentral approval
any legally enforceable scheme that is Any bank including its subsidiaries and
intended to enhance the marketability of affiliates engaged in allied activities, may
the ABS and increase the probability that securitize its assets upon prior approval of
investors receive payment of amounts due the BSP.
them.
f. Guarantor shall refer to an entity § X651.3 Board approval requirement
that guarantees the repayment of principal The originator/seller shall have the
and interest on loans or receivables securitization program approved by its
included in the asset pool in the event of board of directors. The originator/seller
default by the borrower. shall integrate such securitization program
g. Investible funds shall refer to the into its corporate strategic plan. The board
proceeds of collection of loans or of directors shall ensure that the
receivables included in the asset pool which securitization of assets is consistent with
are not yet due for distribution to investors. such program.
h. Issuer shall refer to the SPT that
issues the ABS. § X651.4 Minimum documents required
i. Originator shall refer to a bank The application to securitize must be
and/or its subsidiary or affiliate engaged in accompanied by the following documents
allied activities that grants or purchases as a minimum requirement:
loans or receivables and assembles them a. Trust indenture evidencing the
into a pool for securitization. conveyance of the assets from the seller
j. Residual certificates shall refer to to the Issuer or SPT, the features of which
certificates issued representing claims on shall include the following:
the remaining value of the asset pool after (1) Title or nature of the contract in
all ABS holders are paid. noticeable print;
k. Seller shall refer to the entity which (2) The parties involved, indicating in
conveys to the SPT the assets that constitute noticeable print, their respective legal
the asset pool. capacities, responsibilities and functions;
l. Servicer shall refer to the entity (3) Features and amount of ABS;
designated by the Issuer primarily to collect (4) Purposes and objectives;
and record payment received on the Assets, (5) Description and amount of assets
to remit such collections to the Issuer and comprising the asset pool;
perform such other services as may be (6) Representations and warranties;
specifically required by the issuer excluding (7) Credit enhancements;
asset management or administration. (8) Distribution of funds;
m. Special Purpose Trust shall refer to (9) Authorized investment of
a trust administered by a trustee and investible funds;
created solely for the purpose of issuing (10) Rights of the investor;
and administering an ABS. (11) Reports to investors; and
n. Trustee shall refer to the entity (12) Termination and final settlement.
designated to administer the SPT. The trust indenture shall include as
o. Underwriter shall refer to the entity annexes the servicing agreement
engaged in the act or process of distributing between the trustee and the servicer and

§§ X651.4 - X651.7
08.12.31
the underwriting agreement between the inviting investment, application to

seller and the underwriter. purchase ABS and the certificate itself:
b. Prospectus. As a minimum a. The ABS do not represent deposits
requirement, it shall contain the following: or liabilities of the originator, servicer or
(1) Summary of the contents of the trustee and that they are not insured with
prospectus; PDIC;
(2) Description of each class of b. The investor has an investment risk;
certificate, including such matters as c. The trustee does not guarantee the
probable yields, payment dates and priority capital value of the ABS or the collectibility
of payments; of the asset pool; and
(3) Description of the assets d. The right of an investor.
comprising the Asset Pool as well as the The investors shall be required to sign
representations and warranties set forth by an acknowledgment indicating that they
the originator and/or seller; have read and understood the disclosures.
(4) Assumptions underlying the cash
flow projections for each class of § X651.7 Conveyance of assets
certificate; a. The conveyance of the assets
(5) Description of any credit comprising the asset pool shall be done
enhancements; within the context of a true sale and, for
(6) Identity of the servicer; and this purpose, the seller may not retain in
(7) Disclosure statements as required its books the ABS, except the residual
under Subsec. X651.6. certificate, if any.
c. Specimen of application to b. The seller shall have no obligation
purchase ABS. It shall include the terms to repurchase or substitute an asset or any
and conditions of the purchase and the part of the asset pool at any time, except
disclosures required under Subsec. X651.6. in cases of a breach of representation or
d. Specimen of certificate. It shall warranty, or under a revolving structure,
indicate the features of the ABS and the to replace performing assets which have
disclosures required under Subsec. X651.6. been paid out in part or full.
c. The seller shall be under no
§ X651.5 Minimum features of asset- obligation to provide additional assets to
backed securities.The ABS shall be the SPT to maintain a “coverage ratio” of
pre-numbered and printed on security collateral to outstanding ABS. A breach
paper. The ABS shall be signed and of this requirement will be considered a
authenticated by the trustee.They are credit enhancement and should be
transferable by endorsement of the charged against capital. However, this
certificate. The transfer shall be recorded will not apply to an asset pool conveyed
in the books of the trustee, indicating the under a revolving structure such as the
names of the parties to the transaction, the securitization of credit card receivables.
date of the transfer and the number of the d. Securitized assets shall be
certificate transferred. considered the subject to a true sale
The minimum denomination of any between the seller and the SPT. Sold
ABS shall be P10,000. assets shall be taken off the books of the
seller and shall be transferred to the
§ X651.6 Disclosure requirements books of the SPT.
The following disclosures must be provided For accounting purposes, the transfer
in a conspicuous manner in any document shall only be considered a true sale if the

§§ X651.7 - X651.11
08.12.31
following three (3) conditions have been affiliates has agreed to pay damages arising
satisfied: out of any breach of representation or
(1) the transferred assets have been warranty.
isolated and put beyond the reach of the
seller and its creditor; § X651.9 Third party review. A due
(2) the SPT has the right to pledge or diligence review by an independent entity
exchange its interest in the assets; and mutually agreed upon by the seller and the
(3) the seller does not effectively Issuer shall be done before the assets are
maintain control over the transferred assets sold.
by any concurrent agreement.
e. All expenses incidental to § X651.10 Originator and seller
underwriting, conveyance of the asset pool a. The seller may itself be the
including expenses for credit enhancement originator, and may likewise be designated
may be paid by the originator/seller: as the servicer.
Provided, That no further expenses shall b. The seller or originator shall deliver
be borne by the originator/seller after the to the trustee all original documents or
asset pool has been conveyed to the SPT. instruments with respect to each asset sold.
§ X651.8 Representations and § X651.11 Trustee and issuer

warranties a. The trustee shall be the trust
a. Standard representations and department of a bank licensed to do
warranties refer to an existing state of facts business in the Philippines.
that the originator, seller or servicer can b. The trustee shall have the right to
either control or verify with reasonable due manage or administer the asset pool. The
diligence at the time the assets are sold. trustee shall see to it that necessary
Any breach of representation or warranty measures are taken to protect the asset
may give rise to legal recourse. pool.
b. The representations or warranties c. The trustee shall undertake a
shall be clear and explicit and, in particular, performance review of the asset pool at
shall not relate to the future least quarterly and shall prepare a report
creditworthiness of the assets in the asset to investors indicating, among others,
pool or the performance of the SPT or the collections, fees and other expenses as
securities issued. well as defaults, which report shall be
c. Any agreement to pay damages as made available to the investors at anytime
a result of breach of warranties and after thirty (30) days from end of the
representations shall hold only where: reference quarter.
(1) there is a well-documented d. The trustee shall initiate all civil
negotiation of the agreement in good faith; actions including foreclosure of mortgaged
(2) the burden of proof for a breach of properties to effect collection of
representation or warranty rests with the receivables in the asset pool. The servicer
other party; or any other party may be designated by
(3) damages are limited to the loss the trustee to perform such function on a
incurred as a result of the breach; and case-by-case basis.
(4) there is a written notice of claim e. The trustee may invest the
specifying the basis for the claim. Investible funds only in obligations issued
The BSP shall be notified of any and/or fully guaranteed by the government
instance where a bank or its subsidiaries/ of the Republic of the Philippines or by the

§§ X651.11 - X651.15
08.12.31
BSP and such other high-grade readily administered by its trust department, the
marketable debt securities as the BSP may trust departments of its subsidiaries/
approve. affiliates, the trust department of its parent
f. The trustee shall designate a bank or the trust department of its parent
replacement of the servicer if the latter fails bank’s subsidiaries/affiliates.
to satisfactorily perform its duties and e. The underwriter may not extend
responsibilities according to the terms and credit for the purpose of purchasing the
conditions of the servicing agreement. ABS which such UB/IH underwrites or that
which is underwritten by its subsidiaries/
§ X651.12 Servicer affiliates, its parent bank or its parent bank’s
a. The servicer shall perform its duties subsidiaries/affiliates.
according to the terms and conditions of
the servicing agreement and such other § X651.14 Guarantor
written instructions as the trustee may issue a. Only an entity the regular business
on a case-by-case basis. Collections made of which includes the issuance of
by the servicer shall be remitted promptly guarantees or similar undertaking may act
to the trustee or as may be agreed upon by as guarantor.
the parties in the servicing agreement, but b. The guarantor must have the
in no case shall the remittance period be financial capacity to perform its
longer than one (1) month. responsibilities in accordance with the
b. The servicer shall prepare periodic terms and conditions of the guarantee
reports as may be required by the trustee. agreement. It shall submit to the trustee at
c. The servicer shall report to the trustee least once in every six (6) months such
within thirty (30) days, any borrower which financial reports as the trustee may require.
fails to pay its debt at maturity date or any c. The originator or seller may not
adverse development that may affect the issue a counter-guarantee in favor of the
collectibility of any loan account or guarantor.
receivable comprising the asset pool.
d. The servicer shall have no authority § X651.15 Credit enhancement. Credit
to waive penalties and charges except with enhancement may be provided in any of
a written authority from the trustee. the following manner:
a. Standby letter of credit issued by a
§ X651.13 Underwriter UB/KB other than the originator/seller or
a. A UB or IH shall have written its subsidiary/affiliate, its parent bank or the
policies and procedures on underwriting parent bank’s subsidiary/affiliate, and
of ABS. trustee or its subsidiary/affiliate;
b. The underwriter shall perform its b. Surety bond issued by any
functions according to the terms and insurance company other than the
conditions of the underwriting agreement. originator’s/seller’s subsidiary or affiliate,
c. An underwriter may deal in ABS, the subsidiary or affiliate of the originator’s/
except those administered by its trust seller’s parent bank and the trustee or its
department, the trust departments of its subsidiary/affiliate;
subsidiaries/affiliates, the trust department c. Guarantee issued by any entity
of its parent bank or the trust department other than the originator/seller or its
of its parent bank’s subsidiaries/affiliates. subsidiary/ affiliate, its parent bank or the
d. A UB/IH may act as underwriter, parent bank’s subsidiary/affiliate, and
on a firm basis, of ABS except those trustee or its subsidiary/affiliate;

§§ X651.15 - X651.19
08.12.31
d. Overcollateralization provided by § X651.17 Prohibited activities

the originator/seller wherein the assets a. The seller may not, under any
conveyed to the SPT exceed the amount circumstance, designate its trust department,
of securities to be issued. the trust department of its subsidiaries/
Losses arising from overcollateralization affiliates, the trust department of its parent
shall be recognized by the originator/seller bank or the trust department of its parent
upfront. Such losses shall be treated as capital bank’s subsidiaries/affiliates as trustee.
charges. b. Any director, officer or employee
e. Spread account wherein the of the originator, seller or servicer may not
income from the underlying pool of serve as a member of the board of directors
receivables is made available to cover any or trust committee of the trustee or vice
shortfall in the repayment of ABS. The versa for the duration of the securitization.
spread account shall be handled by the c. The trust indenture shall not contain
trustee which shall account for it any stipulation whereby the seller, its
separately. If not needed, this "spread" subsidiaries/affiliates, its parent bank or the
generally reverts to the holder of the parent bank’s subsidiaries/affiliates shall
residual certificate. commit to extend any credit facility to the
f. Subordinated securities that are issuer and/or trustee.
lower ranking, or junior to other obligations d. The ABS shall not be eligible as
and are paid after claims to holders of senior collateral for a loan extended by a bank
securities are satisfied. which originated/sold the underlying assets
g. Other credit enhancements as may of such ABS.
be approved by the Monetary Board. e. The trust department of a bank that
To be consistent with the concept of has discretion in the management of any
true sale, subordinated securities shall be trust or investment management account
sold to third party investors other than may not purchase for said trust/investment
originator’s/seller’s parent company or its management account ABS administered
subsidiary/affiliate and the trustee or its by the trust department of the same bank,
subsidiary/affiliate or, if held by the the trust department of such trustee’s
seller, capital charges should be booked subsidiaries/affiliates, the trust department
upfront. Otherwise, the subordinated of such trustee’s parent bank and the trust
securities shall be treated as deposit department of the parent bank’s
substitute subject to legal reserves. subsidiaries/affiliates.
f. The trustee may not designate its
§ X651.16 Clean-up call. A clean-up subsidiary/affiliate, its parent or the parent’s
call may be exercised by the seller once subsidiaries/affiliates as servicer or vice
the outstanding principal balance of the versa.
receivable component of the asset pool falls
to ten percent (10%) or less of the original § X651.18 Amendment of trust
principal balance of the asset pool. Where indenture. Any amendment to the trust
the asset pool includes foreclosed and other indenture shall require the prior approval
assets, such assets shall be included in the of the BSP.
clean-up call and the consideration thereof
shall be at current market value. Such a § X651.19 Trustee or servicer in
clean-up call shall not be considered securitization. Without prior approval of
recourse or in violation of Subsec. X651.7 the BSP, a bank or any entity supervised
on conveyance of assets. by the BSP may act as trustee or servicer

§§ X651.19 - X699
11.12.31
in a securitization scheme originated by an foreign currency amount and local currency

entity not supervised by the BSP: Provided, equivalent;
That the assets which are the subject of such b. Investments in GPNs that are
securitization are existing in the books of classified at fair value shall be subject to
the entity prior to securitization: Provided, mark-to-market valuation and shall be
further, That such entity acting as trustee or valued similar to other foreign currency-
servicer is not a subsidiary/affiliate of the denominated securities traded abroad;
originator/seller, its parent bank or the c. Investments in GPNs shall be
parent bank’s subsidiaries/affiliates or vice subject to a credit risk weight of twenty
versa: Provided, finally, That such entity percent (20%) for purposes of computing a
acting as trustee may not designate its bank’s risk-based CAR;
subsidiaries/affiliates, its parent or the d. Investments in GPNs shall be
parent’s subsidiaries/affiliates as servicer or excluded in the computation of a bank’s
vice versa. daily net foreign exchange position;
e. Trading of GPNs shall be subject to
§ X651.20 Report to Bangko Sentral pertinent securities laws and provisions,
The trustee bank shall submit a report of including the appropriate licensing of dealers;
every securitization scheme in formats to f. Pursuant to Sec. X340, investments
be prescribed by the BSP. The report shall in GPNs shall be excluded by government
be submitted to the appropriate department FIs in determining compliance with DOSRI
of the SES, within fifteen (15) banking days ceilings; and
after end of every reference quarter. Such g. Risks attendant to investments in
report shall be considered a Category A GPNs shall be captured under a bank’s
report for purposes of implementing fines Internal Capital Adequacy Assessment
in the submission of required reports Process such that investing institutions must
pursuant to existing regulations. manifest their approach in handling the risks
attendant to holding/trading GPNs.
Secs. X652 - X659 (Reserved) (M-2010-028 dated 08 September 2010, as amended by
M-2011-020 dated 30 March 2011)
Sec. X660 Global Peso Notes. The Secs. X661 - X698 (Reserved)
following are the guidelines on the
regulatory treatment of investments of banks Sec. X699 General Provision on Sanctions
in Global Peso Notes (GPNs) issued by the Any violation of the provisions of this Part
Republic of the Philippines: shall be subject to Sections 36 and 37 of
a. Investments in GPNs shall be R.A. No. 7653.
recorded in the RBU books of a bank as a The guidelines for the imposition of
foreign currency-denominated asset in monetary penalty for violations/offenses
accordance with the provisions of the with sanctions falling under Section 37 of
Philippine Financial Reporting Standards/ R. A. No. 7653 on banks, their directors
Philippine Accounting Standards at their and/or officers are shown in Appendix 67.

§§ X701 - X701.2
08.12.31
PART SEVEN
ELECTRONIC BANKING SERVICES AND OPERATIONS
Section X701 (2008 - X621) Electronic (4) Integrity - assures that data have not
Banking Services. The following are the been altered; and
guidelines concerning electronic (5) Confidentiality - assures that no one
banking activities. except the sender and the receiver of the
data can actually understand the data.
§ X701.1 (2008 - X621.1) Application c. The system had been tested prior
Banks wishing to provide and/or enhance to its implementation and that the test
existing electronic banking services shall results are satisfactory. As a minimum
submit to the BSP an application describing standard, appropriate systems testing and
the services to be offered/enhanced and user acceptance testing should have been
how it fits the bank’s overall strategy. This conducted; and
shall be accompanied by a certification d. A business continuity planning
signed by its president or any officer of process and manuals have been adopted
equivalent rank and function to the effect which should include a section on
that the bank has complied with the electronic banking channels and systems.
following minimum pre-conditions:
a. An adequate risk management § X701.2 (2008 - X621.2) Pre-screening
process is in place to assess, control, of applicants
monitor and respond to potential risks a. The BSP, thru the Technical
arising from the proposed electronic Working Group on Electronic Banking,
banking activities; shall pre-screen the overall financial
b. A manual on corporate security condition as well as the applicant-bank’s
policy and procedures exists that shall compliance with BSP rules and regulations
address all security issues affecting its based on the latest available Bank
electronic banking system, particularly the Performance Rating (BPR) and Report of
following: Examination (ROE) including CAMELS
(1) Authentication - establishes the Rating.
identity of both the sender and the b. The Working Group shall ensure
receiver; uses trusted third parties that that the applicant bank’s overall financial
verify identities in cyberspace; condition can adequately support its
(2) Non-repudiation - ensures that electronic banking activities and that it shall
transactions can not be repudiated or have complied with certain comprehensive
presents undeniable proof of participation prudential requirements such as, but not
by both the sender and the receiver in a limited to, the following:
transaction; (1) Minimum capital requirement and
(3) Authorization - establishes and net worth to risk assets ratio;
enforces the access rights of entities (both (2) Satisfactory solvency, liquidity and
persons and/or devices) to specified profitability positions;
computing resources and application (3) CAMELS composite rating of at
functions; also locks out unauthorized least 3, (this number, however can be
entities from physical and logical access flexible depending on other circumstances
to the secured systems; prevailing), and with at least a moderate
Manual of Regulations for Banks Part VII - Page 1

§§ X701.2 - X701.5
08.12.31
risk assessment system (RAS) based on the (3) A list of software and hardware
latest regular examination. components indicating the purpose of the
(4) There are no uncorrected major software and hardware in the electronic
findings/exceptions noted in the latest BSP banking infrastructure;
examination. (4) A description of the security policies
and procedures manual containing:
§ X701.3 (2008 - X621.3) Approval in (i) description of the bank’s security
principle organization;
a. Based on the recommendation of (ii) definition of responsibilities for
the Technical Working Group on Electronic designing, implementing, and monitoring
Banking, the Deputy Governor, SES, shall information security measures; and
approve in principle the application so that (iii) established procedures for
banks may immediately launch and/or evaluating policy compliance, enforcing
enhance their existing electronic banking disciplinary measures and reporting
services. security violations;
b. Banks shall be informed of the (5) A brief description of the
conditional approval of the DG, SES and contingency and disaster recovery plans
they shall in turn notify the BSP on the actual for electronic banking facilities and event
date of its launching/enhancement. scenario/problem management plan/
program to resolve or address problems,
§ X701.4 (2008 - X621.4) Documentary such as complaints, errors and intrusions
requirements and the availability of back-up facilities;
a. Within thirty (30) calendar days (6) Copy of contract with the
from such launching/enhancement, banks communications carrier, arrangements for
shall submit to the BSP thru the SDC for any liability arising from breaches in the
evaluation, the following documentary security of the system or from
requirements: unauthorized/fraudulent transactions;
(1) A discussion on the banking (7) Copy of the maintenance
services to be offered/enhanced, the agreements with the software/hardware
business objectives for such services and provider/s; and
the corresponding procedures, both (8) Latest report on the periodic
automated and manual, offered through the review of the system, if applicable.
electronic banking channels; b. If after the evaluation of the
(2) A description or diagram of the submitted documents, the Working Group
configuration of the bank’s electronic banking has still some unresolved issues and gray
system and its capabilities showing: areas, the bank may be required to make
(i) how the electronic banking system a presentation of its electronic banking
is linked to other host systems or the transactions to BSP.
network infrastructure in the bank;
(ii) how transaction and data flow § X701.5 (2008 - X621.5) Conditions
through the network; for Monetary Board approval. Upon
(iii) what types of telecommunications completion of evaluation, the appropriate
channels and remote access capabilities recommendation shall be made to the
(e.g., direct modem dial-in, internet access, Monetary Board. The following shall be
or both) exist; and the standard conditions for approval:
(iv) what security controls/measures are a. Existence at all times of appropriate
installed; top-level risk management oversight;
Part VII - Page 2 Manual of Regulations for Banks

§§ X701.5 - X701.12
08.12.31
b. Operation of electronic banking § X701.6 (2008 - X621.6)

system outsourced to a third party service Requirements for banks with pending
provider taking into consideration the applications. The same procedure and
existence of adequate security controls and requirements stated in the foregoing shall
the observance of confidentiality [as apply to all banks with pending applications
required in R.A. No. 1405 (Bank Secrecy with the Bangko Sentral, except on the
Law)] of customer information; submission of the documents enumerated
c. Adoption of measures to properly in Subsec. X701.4. Banks which have
educate customers on safeguarding of user already submitted all the required
ID, PIN and/or password, use of bank’s information/documents need not comply
products/services, actual fees/bank charges with this requirement.
thereon and problem/error resolution
procedures; § X701.7 (2008 - X621.7) Exemption
d. Clear communication with its Electronic banking services that are purely
customers in connection with the terms informational in nature are exempted from
and condition which would highlight how these regulations: Provided, however, That
any losses from security breaches, systems should such services be upgraded to
failure or human error will be settled transactional service, then prior Bangko
between the bank and its customers; Sentral approval shall be required.
e. Customer’s acknowledgement in
§ X701.8 (2008 - X621.8)
writing that they have understood the
Transitory provision. Banks with existing
terms and conditions and the
electronic banking services but do not
corresponding risks that entail in availing
qualify as a result of the pre-screening
electronic banking service;
process mentioned in Item “b”, Subsec.
f. The bank’s oversight process shall
X701.1, shall be given three (3) months from
ensure that business expansion shall not
21 December 2000, within which to show
put undue strains on its systems and risk proof of improved overall financial
management capability; condition and/or substantial compliance
g. The establishment of procedures with Bangko Sentral's prudential
for the regular review of the bank’s requirements, otherwise, their electronic
security arrangements to ensure that such banking activities will be temporarily
arrangements remain appropriate having suspended until such time that the same
regard to the continuing developments in have been complied with.
security technology;
h. Strict adherence to Bangko Sentral §§ X701.9 - X701.11 (Reserved)
regulations on fund transfers in cases where
clients use the electronic banking services § X701.12 (2008 - X621.12) Sanctions
to transfer funds; For failure to seek Bangko Sentral approval
i. The electronic banking service before launching/enhancing/implementing
shall not be used for money laundering or electronic banking services, and/or submit
other illegal activities that will undermine within the prescribed deadline the required
the confidence of the public; and information/documents, the following
j. The Bangko Sentral shall be notified monetary penalties and/or suspension of
in writing thirty (30) days in advance of any electronic banking activities or both, shall
enhancements that may be made to the be imposed on erring banks and/or its
online electronic banking service. officers:

§§ X701.12 - X780.2
13.12.31
Monetary penalties Amount § X705.4 (2008 - App. 70) Minimum

a. For responsible officer/s a one time disclosure requirements
and/or director/s - for penalty of (Transferred to X177.7 pursuant to Circular No. 808 dated
failure to seek prior Bangko P200,000 22 August 2013)
Sentral approval and/or
for non-submission delayed § X705.5 (2008 - App. 70) Complaint
submission of required resolution
information/documents (Transferred to X177.7 pursuant to Circular No. 808 dated
22 August 2013)
b. On the bank - for failure P30,000 per
to seek prior Bangko Sentral day starting § X705.6 (2008 - App. 70) Applicability
and/or for non-submission/ from the day (Transferred to X177.7 pursuant to Circular No. 808 dated
delayed submission of the offense 22 August 2013)
required information/ was committed
documents up to the time
the same was
Sec. X780 Issuance and Operations of
corrected.
Electronic Money. The following guidelines
shall govern the issuance of electronic
money (e-money) and the operations of
§ X701.13 (2008 - X621.13) Outsourcing
electronic money issuers.
of internet and mobile banking services (Circular No. 649 dated 09 March 2009)
(Deleted by Circular No. 765 dated 03 August 2012)
§ X780.1 Declaration of policy. It is the
Secs. X702 – X704 (Reserved) policy of the Bangko Sentral to foster the
development of efficient and convenient
Sec. X705 (2008 - X624 and App. 70) retail payment and fund transfer
Consumer Protection for Electronic Banking mechanisms in the Philippines. The
(Transferred to X177.7 pursuant to Circular No. 808 dated availability and acceptance of e-money as a
22 August 2013)
retail payment medium will be promoted
by providing the necessary safeguards and
§ X705.1 (2008 - App. 70) E-Banking
controls to mitigate the risks associated in
oversight function
an e-money business.
(Transferred to X177.7 pursuant to Circular No. 808 dated
22 August 2013)
§ X780.2 Definitions
§ X705.2 (2008 - App. 70) E-Banking risk
E-money shall mean monetary value as
managment and internal control
(Transferred to X177.7 pursuant to Circular No. 808 dated represented by a claim on its issuer, that is -
22 August 2013) a. electronically stored in an instrument
or device;
§ X705.3 (2008 - App. 70) Compliance b. issued against receipt of funds of an
with consumer awareness program amount not lesser in value than the
(Transferred to X177.7 pursuant to Circular No. 808 dated monetary value issued;
22 August 2013) c. accepted as a means of payment by

§§ X780.2 - X780.4
09.12.31
persons or entities other than the issuer; b. EMIs shall put in place a system to
d. withdrawable in cash or cash maintain accurate and complete record of
equivalent; and e-money instruments issued, the identity
e. issued in accordance with this of e-money holders, and the individual
Section. and consolidated balances thereof. The
Electronic money issuer (EMI) shall be system must have the capability to monitor
classified as follows: the movement of e-money transactions and
a. Banks (hereinafter called EMI-Bank);
link e-money instruments issued to
b. NBFI supervised by the Bangko
common e-money holders. The
Sentral (hereinafter called EMI-NBFI); and
susceptibility of a system to intentional or
c. Non-bank institutions registered with
the Bangko Sentral as a monetary transfer unintentional misreporting of transactions
agent under Sec. 4511N of the MORNBFI and balances shall be sufficient ground for
(hereinafter called EMI-Others). imposition by the Bangko Sentral of
For purposes of this Section: sanctions, as may be applicable.
a. Electronic instruments or devices c. E-money may only be redeemed at
shall mean cash cards, e-wallets accessible face value. It shall not earn interest nor
via mobile phones or other access device, rewards and other similar incentives
stored value cards, and other similar convertible to cash, nor be purchased at a
products. discount. E-money is not considered a
b. E-money issued by banks shall not deposit, hence, it is not insured with the
be considered as deposits. PDIC.
(Circular No. 649 dated 09 March 2009) d. EMIs shall ensure that e-money
§ X780.3 Prior Bangko Sentral approval instruments clearly identify the issuer who
Banks planning to be an EMI-Bank shall is ultimately responsible to the e-money
apply in accordance with Sec. X701 relating holders. This shall be communicated to the
to the guidelines on electronic banking client who shall acknowledge the same in
services and with Sec. X162 on outsourcing writing.
of banking functions, when applicable. e. It is the responsibility of EMIs to
(Circular No. 649 dated 09 March 2009) ensure that their distributors/e-money agents
comply with all applicable requirements of
§ X780.4 Common provisions. The the Anti-Money Laundering Law, rules and
following provisions are applicable to all regulations.
EMIs: f. EMIs shall provide an acceptable
a. E-money instrument issued shall be redress mechanism to address the
subject to aggregate monthly load limit of complaints of its customers.
P100,000 unless a higher amount has
g. EMIs shall disclose in writing and
been approved by the Bangko Sentral. In
its customers shall signify agreement to the
case an EMI issues several e-money
information embodied in Item “c” above
instruments to a person (e-money holder),
the total amount loaded in all the e-money upon their participation in the e-money
instruments shall be consolidated in system. In addition, it shall provide clear
determining compliance with the guidance in English and Filipino on
aggregate monthly load limit; consumers’ right of redemption, including
(No pages 6 to 8)
(Next page is Part VII page 9)

§§ X780.4 - X780.6
09.12.31
conditions and fees for redemption, if any. in addition to merchant Point of Sale
Information on available redress procedures terminals);
for complaints together with the address and (2) Change in technology service
contact information of the issuer shall also providers and other major partners in the
be provided. e-money business (excluding partner
h. Prior to the issuance of e-money, merchants), if any; and
EMIs should ensure that the following (3) Other changes or enhancements.
minimum systems and controls are in (Circular No. 649 dated 09 March 2009)
place:
(1) Sound and prudent management, § X780.5 (Reserved)
administrative and accounting procedures
and adequate internal control mechanisms; § X780.6 Sanctions. Monetary penalties
(2) Properly-designed computer and other sanctions for the following
systems which are thoroughly tested prior violations committed by EMI-Banks shall be
to implementation; imposed:
(3) Appropriate security policies and
measures intended to safeguard the integrity, Nature of Violation/ Sanction/Penalties
authenticity and confidentiality of data and Exception
operating processes; 1. Issuing e-money Applicable penalties
(4) Adequate business continuity and without prior BSP under Sections 36 &
approval 37 of R.A. No. 7653;
disaster recovery plan; and
Watchlisting of
(5) Effective audit function to provide owners/partners/
periodic review of the security control principal officers
environment and critical systems. 2. Violation of any Applicable penalties
i. EMIs shall provide the SDC of the provisions of prescribed under the
quarterly statements containing, among R.A. No. 9160 (Anti- Act
others, information on investments, volume Money Laundering
of transactions, total outstanding e-money Law of 2001 as
balances, and liquid assets in such forms amended by R.A.No.
as may be prescribed later on. 9194) and its
implementing rules
j. EMIs shall notify the BSP in writing
and regulations
of any change or enhancement in the 3. Violation/s of Penalties and sanctions
e-money facility thirty (30) days prior to this Section under the
implementation. If said change or abovementioned laws
enhancement requires prior BSP approval, and other applicable
the same shall be evaluated accordingly. laws rules and
Any change or enhancement that shall regulations
expand the scope or change the nature of
the e-money instrument shall be subject to In addition, the susceptibility of a
prior approval of the Deputy Governor, SES. system to intentional or unintentional
These changes or enhancements may misreporting of transactions and balances
include the following: shall be sufficient ground for appropriate
(1) Additional capabilities of the BSP action or imposition of sanctions,
e-money instrument/s, like access to new whenever applicable.
channels (e.g. inclusion of internet channel (Circular No. 649 dated 09 March 2009)

§§ X780.7 - X799
10.12.31
§ X780.7 Transitory provisions. EMI- Sanctions. Violations committed by

Banks granted authority to issue e-money EMIs pertaining to outsourcing activities to
prior to 26 March 2009 may continue to EMNSP shall be subject to monetary
exercise such authority: Provided, That it penalties as graduated under Appendix 67
shall submit to the BSP, within one (1) and/or other non-monetary sanctions under
month from 26 March 2009, a certification Section 37 of RA No. 7653.
signed by the President or Officer with Transitory provisions. EMIs that were
equivalent rank and function that it is in granted an authority to outsource their E-
compliance with all the applicable money activities to an EMNSP may continue
requirements of this Section. Otherwise, to exercise such authority provided that they
they are required to submit within the same have to conform to the provisions of
period the measures they will undertake, Appendix 95 within a six-month period from
with the corresponding timelines, to 20 January 2011.
conform to the provisions that they have not (Circular 704 dated 22 December 2010)
complied with subject to BSP approval.
(Circular No. 649 dated 09 March 2009) Secs. X781 - X798 (Reserved)
§ X780.8 - § X780.10 (Reserved) Sec. X799 (2008 - X199) General Provision

on Sanctions. Except as otherwise provided,
§ X780.11 Outsourcing of services by any violation of the provisions of this Part
Electronic Money Issuers (EMIs) to shall be subject to Sections 36 and 37 of
Electronic Money Network Service R.A. No. 7653.
Providers (EMNSP). The guidelines on The guidelines for the imposition of
outsourcing of services by Electronic Money monetary penalty for violations/offenses
Issuers (EMIs) to Electronic Money Network with sanctions falling under Section 37 of
Service Providers (EMNSP) are shown in R. A. No. 7653 on banks, their directors
Appendix 95. and/or officers are shown in Appendix 67.

§§ X801 - X803
11.12.31
PART EIGHT
ANTI-MONEY LAUNDERING REGULATIONS
Sec. X801 Declaration of Policy conducted in the head office. A bank and
The BSP adopts the policy of the State to its branches and offices shall be treated as
protect the integrity and confidentiality of one (1) unit.
bank accounts and to ensure that the Whenever local applicable laws and
Philippines in general and the covered regulations of a branch, office, subsidiary
institutions herein described in particular or affiliate based outside the Philippines
shall not be used respectively as a money prohibit the implementation of this Part or
laundering site and conduit for the proceeds any of the provisions of the AMLA, as
of an unlawful activity as hereto defined. amended, its RIRR, and the supervising
(Circular No. 706 dated 05 January 2011) authority in that foreign country issues a
directive forbidding said branch, office,
Sec. X802 Scope of Regulations. These subsidiary or affiliate, the covered
regulations shall apply to all covered institution shall notify the BSP of this
institutions supervised and regulated by the situation and furnish a copy of the
BSP. The term “covered institution” shall supervising authority’s directive.
refer to banks, OBUs, QBs, trust entities, (Circular No. 706 dated 05 January 2011)
NSSLAs, pawnshops, FX dealers, money
changers, remittance agents, electronic Sec. X803 Definitions of Terms. Except as
money issuers and other FIs which under otherwise defined herein, all terms used
special laws are subject to BSP supervision shall have the same meaning as those terms
and/or regulation, including their that are defined in the AMLA, as amended,
subsidiaries and affiliates as herein defined and its RIRR.
wherever they may be located: a. Money laundering is a crime
a. A subsidiary means an entity more whereby the proceeds of an unlawful
than fifty percent (50%) of the outstanding activity as herein defined are transacted,
voting stock of which is owned by a bank, thereby making them appear to have
QB, trust entity or any other institution originated from legitimate sources. It is
supervised and/or regulated by the BSP. committed by the following:
b. An affiliate means an entity the voting (1) Any person knowing that any
stock of which, to the extent of fifty percent monetary instrument or property represents,
(50%) or less, is owned by a bank, QB, trust involves, or relates to, the proceeds of any
entity, or any other institution supervised unlawful activity, transacts or attempts to
and/or regulated by the BSP. transact said monetary instrument or
Pursuant to Section 20 of the General property;
Banking Law of 2000, a bank authorized (2) Any person knowing that any
by BSP to establish branches or other monetary instrument or property involves
offices within or outside the Philippines the proceeds of any unlawful activity,
shall be responsible for all business performs or fails to perform any act as a
conducted in such branches and offices to result of which he facilitates the offense of
the same extent and in the same manner as money laundering referred to in paragraph
though such business had all been “(1)” above; and
Manual of Regulations for Banks Part VIII - Page 1

§ X803
11.12.31
(3) Any person knowing that any trading orders, transaction tickets and
monetary instrument or property is required confirmations of sale or investments and
under the act to be disclosed and filed with money market instruments;
the Anti-Money Laundering Council, fails to (4) Contracts or policies of insurance,
do so. life or non-life, and contracts of suretyship;
b. Covered transaction (CT) is a and
transaction in cash or other equivalent (5) Other similar instruments where
monetary instrument involving a total title thereto passes to another by
amount in excess of P500,000 within one endorsement, assignment or delivery.
(1) banking day. e. Transaction refers to any act
c. Suspicious transactions (ST) are establishing any right or obligation or
transactions with covered institutions, giving rise to any contractual or legal
regardless of the amount involved, where relationship between the parties thereto. It
any of the following circumstances exist: also includes any movement of funds by any
(1) There is no underlying legal or means with a covered institution.
trade obligation, purpose or economic f. Unlawful activity refers to any act
justification; or omission or series or combination thereof
(2) The client is not properly identified; involving or having direct relation to the
(3) The amount involved is not following:
commensurate with the business or (1) Kidnapping for ransom under
financial capacity of the client; Article 267 of Act No. 3815, otherwise
(4) Taking into account all known known as the Revised Penal Code (RPC),
circumstances, it may be perceived that the as amended;
client’s transaction is structured in order to (2) Sections 4, 5, 6, 8, 9, 10, 12, 13,
avoid being the subject of reporting 14, 15 and 16 of R.A. No. 9165, otherwise
requirements under the AMLA, as amended; known as the Comprehensive Dangerous
(5) Any circumstance relating to the Drug Act of 2002;
transaction which is observed to deviate (3) Section 3 paragraphs “B”, “C”, “E”,
from the profile of the client and/or client’s “G”, “H” and “I” of R.A. No. 3019, as
past transactions with the covered amended, otherwise known as the
institutions; Anti-Graft and Corrupt Practices Act;
(6) The transaction is in any way related (4) Plunder under R.A. No. 7080, as
to an unlawful activity or any money amended;
laundering activity or offense under the (5) Robbery and extortion under
AMLA, as amended, that is about to be, is Articles 294, 295, 296, 299, 300, 301 and
being or has been committed; or 302 of the RPC, as amended;
(7) Any transaction that is similar or (6) Jueteng and Masiao punished as
analogous to any of the foregoing. illegal gambling under P.D. No. 1602;
d. Monetary instrument refers to: (7) Piracy on the high seas under the
(1) Coins or currency of legal tender of RPC, as amended, and P.D. No. 532;
the Philippines, or of any other country; (8) Qualified theft under Article 310 of
(2) Drafts, checks and notes; the RPC, as amended;
(3) Securities or negotiable instruments, (9) Swindling under Article 315 of the
bonds, commercial papers, deposit RPC, as amended;
certificates, trust certificates, custodial (10) Smuggling under R.A. Nos. 455
receipts or deposit substitute instruments, and 1937;
Part VIII - Page 2 Manual of Regulations for Banks

§ X803
11.12.31
(11) Violations under R.A. No. 8792 , (4) Is not subject to inspection by the
otherwise known as the Electronic authority that licensed it to conduct
Commerce Act of 2000; banking activities.
(12) Hijacking and other violations j. Beneficial owner refers to natural
under R.A. No. 6235; destructive arson and person(s) who ultimately owns or controls
murder, as defined under the RPC, as a customer and/or the person on whose
amended, including those perpetrated by behalf a transaction is being conducted.
terrorists against non-combatant persons It also incorporates those persons who
and similar targets; exercise ultimate effective control over a
(13) Fraudulent practices and other legal person or arrangement.
violations under R.A. No. 8799, otherwise k. Politically Exposed Person or PEP
known as the Securities Regulation Code refers to an individual who is or has been
of 2000; and entrusted with prominent public positions
(14) Felonies or offenses of a similar in the Philippines or in a foreign state,
nature that are punishable under the penal including heads of state or of government,
laws of other countries. senior politicians, senior national or local
g. Customer refers to any person or government, judicial or military officials,
entity that keeps an account, or otherwise senior executives of government or state
transacts business, with a covered -owned or -controlled corporations and
institution and any person or entity on important political party officials.
whose behalf an account is maintained or l. Correspondent banking refers to
a transaction is conducted, as well as the activities of one bank (the correspondent
beneficiary of said transactions. A customer bank) having direct connection or friendly
also includes the beneficiary of a trust, an service relations with another bank (the
investment fund, a pension fund or a respondent bank).
company or person whose assets are m. Fund/wire transfer refers to any
managed by an asset manager, or a grantor transaction carried out on behalf of an
of a trust. originator (both natural and juridical)
h. Shell company refers to a legal entity through an FI (Originating Institution) by
which has no business substance in its own electronic means with a view to making an
right but through which financial amount of money available to a beneficiary
transactions may be conducted. at another FI (Beneficiary Institution). The
i. Shell bank refers to a shell company originator person and the beneficiary person
incorporated as a bank or made to appear may be the same person.
to be incorporated as a bank but has no n. Cross border transfers refers to
physical presence and no affiliation with a any wire transfer where the originating and
regulated financial group. It can also be a beneficiary institutions are located in
bank that: different countries. It shall also refer to any
(1) Does not conduct business at a chain of wire transfer that has at least one
fixed address in a jurisdiction in which cross border element.
the shell bank is authorized to engage; o. Domestic transfer refers to any wire
(2) Does not employ one or more transfer where the originating and
individuals on a full time basis at this fixed beneficiary institutions are located in the
address; same country. It shall refer to any chain of
(3) Does not maintain operating wire transfer that takes place entirely within
records at this address; and the borders of a single country, even though

§§ X803 - X805
11.12.31
the system used to effect the fund/wire Sec. X804 Basic Principles and Policies
transfer may be located in another to Combat Money Laundering. In line
country. with the declaration of policy, covered
p. Originating institution refers to the institutions shall apply the following
entity utilized by the originator to transfer principles:
funds to the beneficiary and can either a. Conduct business in conformity
be: with high ethical standards in order to
(1) A covered institution as specially protect its safety and soundness as well as
defined by this Part and as generally the integrity of the national banking and
defined by the AMLA, as amended, and its financial system;
RIRR; or b. Know sufficiently your customer at
(2) An FI operating outside the all times and ensure that the financially or
Philippines that is other than covered socially disadvantaged are not denied
institutions referred to in Item “(1)” but access to financial services while at the
conducts business operations and activities same time prevent suspicious individuals
similar to them. or entities from opening or maintaining an
q. Beneficiary institution refers to the account or transacting with the covered
entity that will pay out the money to the institution by himself or otherwise;
beneficiary and can either be: c. Adopt and effectively implement a
(1) A covered institution as specifically sound AML and terrorist financing risk
defined by this Part and as generally management system that identifies,
defined by the AMLA, as amended, and its assesses, monitors and controls risks
RIRR; or associated with money laundering and
(2) An FI operating outside the terrorist financing;
Philippines that is other than covered d. Comply fully with this Part and
institutions referred to in Item “(1)” but existing laws aimed at combating money
conducts business operations and activities laundering and terrorist financing by
similar to them. making sure that officers and employees are
r. Intermediary institution refers to the aware of their respective responsibilities and
entity utilized by the originating and carry them out in accordance with superior
beneficiary institutions where both have no and principled culture of compliance; and
correspondent banking relationship with e. Fully cooperate with Anti-Money
each other but have established relationship Laundering Council (AMLC) for the
with the intermediary institution. It can effective implementation and enforcement
either be: of the AMLA, as amended, and its RIRR.
(1) A covered institution as specifically (Circular No. 706 dated 05 January 2011)
defined by this Part and as generally
defined by the AMLA, as amended, and its A. RISK MANAGEMENT
RIRR; or
(2) An FI operating outside the Sec. X805 Risk Management. All covered
Philippines that is other than covered institutions shall develop sound risk
institutions referred to in Item “(1)” but management policies and practices to ensure
conducts business operations and activities that risks associated with money-laundering
similar to them. such as counterparty, reputational,
(Circular No. 706 dated 05 January 2011) operational, and compliance risks are

§§ X805 - X805.2
11.12.31
identified, assessed, monitored, mitigated (1) Ensure compliance by all

and controlled, as well as to ensure effective responsible officers and employees with this
implementation of this part, to the end that Part, the AMLA, as amended, the RIRR and
covered institutions shall not be used as a its own MLPP. It shall conduct periodic
vehicle to legitimize proceeds of unlawful compliance checking which covers, among
activity or to facilitate or finance terrorism. others, evaluation of existing processes,
The four (4) areas of sound risk policies and procedures including on-going
management practices are adequate and monitoring of performance by staff and
active board and senior management officers involved in money laundering and
oversight, acceptable policies and terrorist financing prevention, reporting
procedures embodied in a money channels, effectivity of the electronic money
laundering and terrorist financing laundering transaction monitoring system
prevention compliance program, and record retention system through sample
appropriate monitoring and Management testing and review of audit or examination
Information System and comprehensive reports. It shall also report compliance
internal controls and audit. findings to the board or any board-level
(Circular No. 706 dated 05 January 2011) committee;
(2) Ensure that infractions, discovered
§ X805.1 Board and senior either by internally initiated audits or by
management oversight. Notwithstanding special or regular examination conducted
the provisions specifying the duties and by the BSP, are immediately corrected;
responsibilities of the compliance office and (3) Inform all responsible officers and
internal audit, it shall be the ultimate employees of all resolutions, circulars and
responsibility of the board of directors to other issuances by the BSP and the AMLC
fully comply with the provisions of this Part, in relation to matters aimed at preventing
the AMLA, as amended, and its RIRR. For money laundering and terrorist financing;
this reason, it shall ensure that oversight on (4) Alert senior management, the board
the institution’s compliance management is of directors, or the board-level or approved
adequate. committee if it believes that the institution
is failing to sensibly address anti-money
§ X805.1.a Compliance office laundering and terrorist financing issues;
Management of the implementation of the and
covered institution’s Money Laundering and (5) Organize the timing and content of
Terrorist Financing Prevention Program AML training of officers and employees
(MLPP) shall be a primary task of the including regular refresher trainings as
compliance office. To ensure the stated in Sec. X809.
independence of the office, it shall have a (Circular No. 706 dated 05 January 2011)
direct reporting line to the board of
directors or any board-level or approved § X805.2 Money laundering and
committee on all matters related to AML and terrorist financing prevention program. All
terrorist financing compliance and their risk covered institutions shall adopt a
management. It shall be principally comprehensive and risk-based MLPP geared
responsible for the following functions toward the promotion of high ethical and
among other functions that may be delegated professional standards and the prevention
by senior management and the board, to wit: of the bank being used, intentionally or

§ X805.2
11.12.31
unintentionally, for money laundering and transactions to the AMLC when their
terrorism financing. The MLPP shall be aggregated amounts breach the threshold.
consistent with the AMLA, as amended, and The ST reporting shall include a reporting
the provisions set out in this Part and chain under which a suspicious transaction
designed according to the covered will be processed and the designation of a
institution’s corporate structure and risk board-level or approved committee who
profile. It shall be in writing, approved by will ultimately decide whether or not the
the board of directors or by the country/ covered institution should file a report to
regional head or its equivalent for local the AMLC. If the resources of the covered
branches of foreign banks, and well institution do not permit the designation of
disseminated to all officers and staff who a committee, it may designate the
are obligated by law and by their program compliance officer to perform this function
to implement the same. Where a covered instead: Provided, That the board of directors
institution has branches, subsidiaries, is informed of his decision.
affiliates or offices located within and/or b. An effective and continuous
outside the Philippines, it shall adopt an anti-money laundering and countering
institution-wide MLPP that shall be of terrorist financing training program for
implemented on a consolidated basis. all directors, and responsible officers and
The MLPP shall also be readily available employees, to enable them to fully comply
in user-friendly form, whether in hard or soft with their obligations and responsibilities
copy. The covered institution must put up a under this Part, the AMLA, as amended, its
procedure to ensure an audit trail evidencing RIRR and their internal policies and
dissemination process for new and amended procedures as embodied in the MLPP. The
policies and procedures. The program shall training program shall also include refresher
embody the following at a minimum: trainings to remind these individuals of their
a. Detailed procedures of the covered obligations and responsibilities as well as
institution's compliance and implementation update them of any changes in AML laws,
of the following major requirements of the rules and internal policies and procedures.
AMLA, as amended, its RIRR, and this Part, c. An adequate screening and
to wit: recruitment process to ensure that only
(1) Customer identification process qualified personnel who have no criminal
including acceptance policies and on-going record/s are employed to assume sensitive
monitoring processes; banking functions;
(2) Record keeping and retention; d. An internal audit system in
(3) Covered transaction reporting; and accordance with Subsec. X805.4;
(4) Suspicious transaction reporting e. An independent audit program with
including the adoption of a system, written scope of audit that will ensure the
electronic or manual, of flagging, completeness and accuracy of the
monitoring and reporting of transactions that information and identification documents
qualify as suspicious transactions, obtained from clients, the covered and
regardless of amount or that will raise a “red suspicious transactions reports submitted to
flag” for purposes of conducting further the AMLC, and the records retained in
verification or investigation, or transactions compliance with this Part as well as
involving amounts below the threshold to adequacy and effectiveness of the training
facilitate the process of aggregating them for program on the prevention of money
purposes of future reporting of such laundering and terrorism financing;

§§ X805.2 - X805.4
11.12.31
f. A mechanism that ensures all § X805.3 Monitoring and reporting

deficiencies noted during the audit and/or tools. All covered institutions shall adopt
BSP regular or special examination are an AML and terrorist financing monitoring
immediately corrected and acted upon; system that is appropriate for their
g. Cooperation with the AMLC; and risk-profile and business complexity and in
h. Designation of an AML compliance accordance with this Part. The system
officer, who shall at least be at senior should be capable of generating timely,
officer level, as the lead implementor of the accurate and complete reports to lessen the
program within an adequately staffed likelihood of any reputational and
compliance office. The AML compliance compliance risks, and to regularly apprise
officer may also be the liaison between the the board of directors and senior
covered institution, the BSP and the AMLC management on anti-money laundering and
in matters relating to the covered terrorist financing compliance.
institution’s AML compliance. Where (Circular No. 706 dated 05 January 2011)
resources of the covered institution do not
permit the hiring of an AML compliance § X805.3.a Electronic monitoring and
officer, the compliance officer shall also reporting systems for money laundering
assume the responsibility of the former. UBs and KBs shall adopt an electronic AML
(Circular No. 706 dated 05 January 2011) system capable of monitoring risks
associated with money-laundering and
§ X805.2.a Submission of the revised terrorist financing as well as generating
and updated MLPP1; Approval by the board timely reports for the guidance and
of directors or country head. Within 180 information of its board of directors and
days from 27 January 2011, all covered senior management in addition to the
institutions shall prepare and have available functionalities mentioned in Subsec.
for inspection an updated MLPP embodying X807.2.
the principles and provisions stated in this
Part. The compliance officer shall submit § X805.3.b Manual monitoring. For
to the Anti-Money Laundering Specialist covered institutions other than UBs and
Group, SES I, a sworn certification that the KBs, it need not have an electronic system
revised MLPP had been prepared, duly but must ensure that it has the means of
noted and approved by the board of complying with Subsec. X805.3.
directors or the country head or its equivalent (Circular No. 706 dated 05 January 2011)
for local branches of foreign banks.
Henceforth, each MLPP shall be § X805.4 Internal audit. The internal
regularly updated at least once every two audit function associated with money
(2) years to incorporate changes in AML laundering and terrorist financing should be
policies and procedures, latest trends in conducted by qualified personnel who are
money laundering and terrorist financing independent of the office being audited. It
typologies, and latest pertinent BSP must have the support of the board of
issuances. Any revision or update in the directors and senior management and have
MLPP shall likewise be approved by board a direct reporting line to the board or a board-
of directors or the country/regional head or its level audit committee.
equivalent for local branches of foreign banks. The internal audit shall, in addition to
(Circular No. 706 dated 05 January 2011 and M-2011-045 dated those specified by this Part, be responsible
16 August 2011) for the periodic and independent evaluation
1
RBs are given a three (3) months extension or up to 26 October 2011, within which to submit to the AMLSG
the Sworn Certification.

§§ X805.4 - X806.1.a
11.12.31
of the risk management, degree of this line, it shall formulate a risk-based

adherence to internal control mechanisms and tiered customer acceptance policy,
related to the customer identification customer retention policy and customer
process, such as the determination of the identification process that involves reduced
existence of customers and the completeness customer due diligence (CDD) for
of the minimum information and/or potentially low risk clients and enhanced
documents establishing the true and full CDD for higher risk accounts.
identity of, and the extent and standard of (Circular No. 706 dated 05 January 2011)
due diligence applied to, customers, CT and
ST reporting and record keeping and § X806.1 Customer acceptance policy
retention, as well as the adequacy and Every covered institution shall develop clear,
effectiveness of other existing internal written and graduated acceptance policies
controls associated with money laundering and procedures that will ensure that the
and terrorist financing. financially or socially disadvantaged are not
For UBs and KBs with electronic money denied access to financial services while at
laundering transaction monitoring system, the same time prevent suspicious
in addition to the above, the internal audit individuals or entities from opening an
shall include determination of the efficiency account.
of the system’s functionalities as required (Circular No. 706 dated 05 January 2011)
by Subsecs. X805.3 and X807.2.
The results of the internal audit shall § X806.1.a Criteria for type of
be timely communicated to the board of customers: low, normal and high risk;
directors and shall be open for scrutiny standards for applying reduced, average
by BSP examiners in the course of the and enhanced due diligence. Covered
regular or special examination without institutions shall specify the criteria and
prejudice to the conduct of its own description of the types of customers that
evaluation whenever necessary. Results of are likely to pose low, normal or high risk
the audit shall likewise be promptly to their operations as well as the standards
communicated to the compliance office in applying reduced, average and enhanced
for its appropriate corrective action. The due diligence including a set of conditions
Compliance Office shall regularly submit for the denial of account opening.
reports to the board to inform them of Enhanced due diligence shall be applied
management’s action to address to customers that are assessed by the
deficiencies noted in the audit. covered institution or by this Part as high
(Circular No. 706 dated 05 January 2011) risk for money laundering and terrorist
financing.
B.Customer Identification Process For customers assessed to be of low
risk such as an individual customer with
Sec. X806 Customer Identification regular employment or economically
A covered institution shall maintain a productive activity, small account balance
system of verifying the true identity of their and transactions, and a resident in the area
customers and, in case of corporate and of the covered institution’s office or
juridical entities, require a system of branch, the covered institutions may
verifying their legal existence and apply reduced due diligence. Some entities
organizational structure as well as the may likewise be considered as low risk
authority and identification of all persons clients, i.e., banking institutions, trust
purporting to act on their behalf. Along entities and QBs authorized by the

§§ X806.1.a - X806.1.c
11.12.31
BSP to operate as such, publicly-listed (a) In cases of individual customers,

companies subject to regulatory obtain a list of banks where the individual
disclosure requirements, government has maintained or is maintaining an
agencies including GOCCs. account, list of companies where he is a
In designing a customer acceptance director, officer or stockholder, and
policy, the following factors shall be taken banking services to be availed of.
into account: (b) For entities assessed as high risk
(1) Background and source of funds; customers, such as shell companies,
(2) Country of origin and residence or covered institutions shall, in addition to
operations; minimum information and/or documents
(3) Public or high profile position of the enumerated above, obtain additional
customer or its directors/trustees, information including, but not limited to, prior
stockholders, officers and/or authorized or existing bank references, the name, present
signatory; address, date and place of birth, nature of work,
(4) Linked accounts; nationality and source of funds of each of the
(5) Watchlist of individuals and primary officers (President, Treasurer and
entities engaged in illegal activities or authorized signatory/ies), stockholders
terrorist-related activities as circularized by owning at least 2% of the voting stock, and
BSP, AMLC, and other international directors/trustees/partners as well as their
entities or organizations, such as the Office respective identification documents.
of Foreign Assets Control (OFAC) of the (2) Conduct validation procedures on
U.S. Department of the Treasury and United any or all of the information provided in
Nations Sanctions List; accordance with Subsec. X806.1.c.
(6) Business activities; and (3) Obtain senior management approval
(7) Type of services/products/ for establishing business relationship.
transactions to be entered with the covered Where additional information cannot be
institution. obtained, or any information or document
In all instances, the covered institutions provided is false or falsified, or result of the
shall document how a specific customer validation process is unsatisfactory, the
was profiled (low, normal or high) and what covered institution shall deny banking
standard of CDD (reduced, average or relationship with the individual or entity
enhanced) was applied. without prejudice to the reporting of a
(Circular No. 706 dated 05 January 2011) suspicious transaction to the AMLC when
circumstances warrant.
§ X806.1.b Enhanced due diligence (Circular No. 706 dated 05 January 2011)
Whenever enhanced due diligence is
applied as required by this Part or by the § X806.1.c Minimum validation
covered institution’s customer acceptance procedures. Validation procedures for
policy, the covered institution shall, in individual customers shall include, but is
addition to profiling of customers and not limited to, the following:
monitoring of their transactions, do the (1) Confirming the date of birth from a
following: duly authenticated official document;
(1) Obtain additional information other (2) Verifying the permanent address
than the minimum information and/or through evaluation of utility bills, bank or
documents required for the conduct of credit card statement or other documents
average due diligence as enumerated showing permanent address or through
under Subsec. X806.2.a and X806.2.b. on-site visitation;

§§ X806.1.c - X806.1.e.1
11.12.31
(3) Contacting the customer by phone, covered institution may open an account
email or letter (such as sending of “thank under the official name of these entities with
you letters”); and only no. 4 of those required under Subsec.
(4) Determining the authenticity of the X806.2.b (board resolution duly certified by
identification documents through validation the corporate secretary authorizing the
of its issuance by requesting a certification signatory to sign on behalf of the entity)
from the issuing authority or by any other obtained at the time of account opening.
means. (Circular No. 706 dated 05 January 2011)
For corporate or juridical entities,
validation procedures shall include, but not § X806.1.e Face-to-face contact. No
limited to, the following: new accounts shall be opened and created
(1) Requiring the submission of audited without face-to-face contact and personal
financial statements conducted by a interview between the covered institution’s
reputable accounting/auditing firm; duly authorized personnel and the
(2) Inquiring from the supervising potential customer except under Subsecs.
authority the status of the entity; X806.1.e.1 to e.3.
(3) Obtaining bank references; (Circular No. 706 dated 05 January 2011)
(4) On-site visitation of the company;
and § X806.1.e.1 Account opened through
(5) Contacting the entity by phone, a trustee, agent, nominee, or intermediary
email or letter (such as “thank you letters”). Where the account is opened through a
(Circular No. 706 dated 05 January 2011) trustee, agent, nominee or intermediary, the
covered institution shall establish and
§ X806.1.d Reduced due diligence record the true and full identity and
Whenever reduced due diligence is applied existence of both the (a) trustee, nominee,
in accordance with the covered institution’s agent or intermediary and (b) trustor,
customer acceptance policy, the following principal, beneficial owner, or person on
rules shall apply: whose behalf the account is being opened.
(1) For individual customers, a covered The covered institution shall determine the
institution may open an account under the true nature of the parties’ capacities and
true and full name of the account owner or duties by obtaining a copy of the written
owners and defer acceptance of the document evidencing their relationship and
minimum information. Deferred acceptance apply the same criteria for assessing the risk
of minimum information shall mean profile and determining the standard of due
obtaining information numbers 1 to 7 of diligence to be applied to both.
Subsec. X806.2.a at the time of account In cases of several trustors, principals,
opening while the rest, numbers 8 to 11, beneficial owners, or persons on whose
may be obtained within a reasonable time behalf the account is being opened where
but not exceeding ninety (90) days from the trustee, nominee, agent or intermediary
account opening. opens a single account but keeps therein
(2) For corporate, partnership, and sole sub-accounts that may be attributable to
proprietorship entities, and other entities each trustor, principal, beneficial owner, or
such as banking institutions, trust entities person on whose behalf the account is
and QBs authorized by the BSP to operate being opened, the covered institution shall,
as such, publicly listed companies subject at the minimum, obtain the true and full
to regulatory disclosure requirements, name, place and date of birth or date of
government agencies including GOCCs, a registration, as the case may be, present

§§ X806.1.e.1 - X806.2.a
13.12.31
address, nature of work or business, and Subsec. X806.2.e.1 has already conducted
source of funds as if the account was opened the requisite face-to-face contact on its own
by them separately. Where the covered customer who was referred to a covered
institution is required to report a CT or the institution, the latter may rely on the
circumstances warrant the filing of an ST, it representation of the third party that it has
shall obtain such other information on every already conducted face-to-face contact:
trustor, principal, beneficial owner, or Provided, That the pertinent requirements
person on whose behalf the account is in Subsec. X806.2.e.1 are also met.
being opened in order that a complete and (Circular No. 706 dated 05 January 2011)
accurate report may be filed with the AMLC.
In case a covered institution entertains § X806.2 Customer identification
doubts that the trustee, nominee, agent or Covered institutions shall establish and
intermediary is being used as a dummy in record the true identity of its customers
circumvention of existing laws, it shall apply based on valid identification1 document/s
enhanced due diligence in accordance with specified in Subsec. X806.2.c2.
(Circular No. 706 dated 05 January 2011, as amended by
Subsec. X806.1.b. M-2013-052 dated 22 November 2013)
§ X806.2.a New individual customers
§ X806.1.e.2 Outsourcing Covered institutions shall develop a
arrangement. Subject to existing rules on systematic procedure for establishing the
outsourcing of specified banking activities, true and full identity of new individual
a covered institution, without prior customers and shall open and maintain the
Monetary Board approval, may outsource account only in the true and full name of
to a counterparty the conduct of the the account owner or owners.
requisite face-to-face contact: Provided, That Unless otherwise stated in this Part,
such arrangement is formally documented average due diligence requires that the
and: Provided, further, That the conditions covered institution obtain, at the time of
under Subsec. X806.2.d are met. account opening, all the following
If the counterparty is an entity other than minimum information and confirming these
a covered institution as herein defined, information with the valid identification
covered institutions shall ensure that the documents stated in Subsec. X806.2.c from
employees or representatives of the individual customers and authorized
counterparty conducting the face-to-face signatory/ies of corporate and juridical entities:
contact undergo equivalent training (1) Name;
program as that of its frontliners undertaking (2) Present address;
a similar activity. Covered institutions shall (3) Date and place of birth;
likewise monitor and review annually the (4) Nature of work, name of employer
performance of the counterparty to assist or nature of self-employment/business;
them in determining whether or not to (5) Contact details;
continue with the arrangement. (6) Specimen signature;
(Circular No. 706 dated 05 January 2011) (7) Source of funds;
(8) Permanent address;
§ X806.1.e.3 Third party reliance
(9) Nationality;
Where a third party as defined under
(10) Tax identification number (TIN),
1
Temporarily relaxed until 31 December 2013 for the victims of Super Typhoon Yolanda for transactions
P50,000 and below and subject to conditions prescribed under Memorandum No. 2013-052 dated
22 November 2013.
2

§§ X806.2.a - X806.2.c
12.12.31
SSS number or GSIS number, if any; and (7) Source of funds and nature of
(11) Name, present address, date and business;
place of birth, nature of work and source of (8) Name, present address, date and
funds of beneficial owner or beneficiary, place of birth, nature of work and source of
whenever applicable. funds of beneficial owner or beneficiary, if
(Circular No. 706 dated 05 January 2011) applicable; and
(9) For entities registered outside the
§ X806.2.b New corporate and juridical Philippines, similar documents and/or
entities. Covered institutions shall develop information shall be obtained, duly
a systematic procedure for identifying authenticated by the Philippine Consulate
corporate, partnership and sole where said entities are registered.
proprietorship entities as well as the (Circular No. 706 dated 05 January 2011)
stockholders/partners/owners, directors,
officers and authorized signatories of these § X806.2.c Valid identification
entities. It shall open and maintain accounts documents. The following guidelines govern
only in the true and full name of the entity the acceptance of valid ID cards for all types
and shall have primary responsibility to of financial transaction by a customer and
ensure that the entity has not been, or is not the authorized signatory/ies of a corporate
in the process of being dissolved, struck-off, or juridical entity, including financial
wound-up, terminated, or otherwise placed transactions involving Overseas Filipino
under receivership or liquidation. Workers (OFWs), in order to promote
Unless otherwise stated in this Part, access of Filipinos to services offered by
average due diligence requires that the formal FIs, particularly those residing in the
covered institution obtain the following remote areas, as well as to encourage and
minimum information and/or documents facilitate remittances of OFWs through the
before establishing business relationships: banking system:
(1) Certificates of Registration issued by (1) Customers and the authorized
the Department of Trade and Industry for signatory/ies of a corporate or juridical
single proprietors, or by the SEC for entity who engage in a financial transaction
corporations and partnerships, and by the with covered institutions for the first time
Bangko Sentral for money changers/foreign shall be required to present the original and
exchange dealers and remittance agents; submit a clear copy of at least one (1) valid
(2) Articles of Incorporation or photo bearing ID document issued by an
Association and By-Laws; official authority.
(3) Principal business address; For this purpose, the term official
(4) Board or Partners’ Resolution duly authority shall refer to any of the following:
certified by the Corporate/Partners’ Secretary (a) Government of the Republic of the
authorizing the signatory to sign on behalf Philippines;
of the entity; (b) Its political subdivisions and
(5) Latest General Information Sheet instrumentalities;
which lists the names of directors/trustees/ (c) GOCCs; and
partners, principal, stockholders owning at (d) Private entities or institutions
least twenty percent (20%) of the outstanding registered with or supervised or regulated
capital stock and primary officers such as either by the Bangko Sentral, SEC or IC.
the President and Treasurer; Valid IDs include the following:
(6) Contact numbers of the entity and 1. Passport including those issued by
authorized signatory/ies; foreign governments;

§§ X806.2.c - X806.2.d
13.12.31
2. Driver’s license; (5) A covered institution may classify

3. PRC ID; identification documents based on its
4. NBI clearance; reliability and ability to validate the
5. Police clearance; information indicated in the identification
6. Postal ID; document with that provided by the customer.
7. Voter’s ID; (6) Whenever it deems necessary, a
8. TIN; covered institution may accept other IDs not
9. Barangay certification; enumerated in this Subsection: Provided,
10. GSIS e-Card; That it shall not be the sole means of
11. SSS card; identification.
12. Senior Citizen card; (7) In case the identification documents
13. Overseas Workers Welfare mentioned above or other identification
Administration ID; documents acceptable to the covered
14. OFW ID; institution do not bear any photo of the
15. Seaman’s book; customer or authorized signatory, or the
16. Alien Certificate of Registration/ photo-bearing ID or a copy thereof does not
Immigrant Certificate of Registration; clearly show the face of the customer or
17. Government office and GOCC ID authorized signatory, a covered institution
(e.g., AFP, HDMF IDs); may utilize its own technology to take the
18. ID issued by the National Council photo of the customer or authorized signatory.
on Disability Affairs; (Circular No. 706 dated 05 January 2011, as amended by Circular
19. DSWD certification; No. 792 dated 03 May 2013 and M-2012-21 dated 27 April
2012)
20. IBP ID;
21. Company IDs issued by private § X806.2.d Outsourcing of the
entities or institutions registered with or gathering of minimum information and/or
supervised or regulated either by the Bangko documents. Except for deposit taking, which
Sentral, SEC or IC; and is an inherent banking function that cannot
22. PhilHealth Health Insurance Card be outsourced and subject to existing rules
ng Bayan. on outsourcing of specified banking
(2) Students who are beneficiaries of activities, a covered institution may, without
remittances/fund transfers and who are not prior Monetary Board approval, outsource
yet of voting age, may be allowed to present to a counterparty, which may or may not
the original and submit a clear copy of one be a covered institution as herein defined,
(1) valid photo-bearing school ID duly signed the gathering of the minimum information
by the principal or head of the school. and/or documents required to be obtained
(3) Where the customer or authorized by this Part: Provided, That the ultimate
signatory is a non-Philippine resident, responsibility for knowing the customer
similar IDs duly issued by the foreign and for keeping the identification documents
government where the customer is a shall lie with the covered institution
resident or a citizen may be presented. and compliance with the following
(4) A covered institution shall require conditions:
their customers or authorized signatory to For covered institution counterparty:
submit a clear copy of one (1) valid ID on a (1) There is a written service level
one (1)-time basis only at the agreement approved by the board of
commencement of business relationship. directors of both covered institutions;
They shall require their clients to submit (2) The counterparty has a reliable and
an updated photo and other relevant acceptable customer identification system
information on the basis of risk and materiality.

§§ X806.2.d - X806.2.e.1.a
11.12.31
and training program in place; and to both.

(3) In line with requirement no.1 above, In case it entertains doubts as to
all identification information and/or whether the trustee, nominee, agent or
documents shall be turned over within a intermediary is being used as a dummy in
period not exceeding ninety (90) calendar circumvention of existing laws, it shall apply
days to the covered institution, which shall enhanced due diligence in accordance with
carefully review the documents and conduct Subsec. X806.1.b.
the necessary risk assessment of the (Circular No. 706 dated 05 January 2011)
customer.
For non-covered institution counterparty: § X806.2.e.1 Where the customer
(1) All conditions required for covered transacts through a trustee, nominee, agent
institutions counterparty; or intermediary which is a third party as
(2) The covered institution outsourcing herein defined (Third Party Reliance). A
the activity shall likewise ensure that the covered institution may rely on the customer
employees or representatives of the identification process undertaken by a third
counterparty establishing the true and full party. For purposes of this Subsection, the
identity of the customer undergo equivalent “third party” shall refer to a:
training program as that of the covered (a) covered institution as herein
institution's own employees undertaking a specifically defined and as generally defined
similar activity; and by AMLA, as amended, and its RIRR; or
(3) Annual monitoring and review by the (b) an FI operating outside the
covered institution of the performance of the Philippines that is covered by equivalent
counterparty to assist it in determining customer identification requirements.
whether or not to continue with the A Bangko Sentral-accredited custodian
arrangement. may likewise rely in accordance with this
(Circular No. 706 dated 05 January 2011) Part on the face-to-face contact and
gathering of minimum information to
§ X806.2.e Trustee, nominee, agent or establish the existence and full identity of
intermediary account. Where any the customer conducted by the seller or
transaction is conducted by a trustee, issuer of securities or by the global
nominee, agent or intermediary, either as an custodian provided the latter has an
individual or through a fiduciary relationship, equivalent customer identification
a corporate vehicle or partnership, on behalf requirements.
of a trustor, principal, beneficial owner or (Circular No. 706 dated 05 January 2011)
person on whose behalf a transaction is
§ X806.2.e.1.a Third party is a covered
being conducted, covered institutions shall
institution specifically defined by this Part
establish and record the true and full identity
and as generally defined by AMLA, as
and existence of both the (1) trustee,
amended, and its RIRR. A covered institution
nominee, agent or intermediary and the
may rely on the identification process
(2) trustor, principal, beneficial owner or
conducted by a third party: Provided, That the
person on whose behalf the transaction is
covered institution shall obtain from the third
being conducted. The covered institution
party a written sworn certification containing
shall determine the true nature of the parties’
the following:
capacities and duties by obtaining a copy of
(1) The third party has conducted the
the written document evidencing their
requisite customer identification
relationship and apply the same standards
requirements in accordance with this Part
for assessing the risk profile and determining
and its own MLPP including the face-to-face
the standard of due diligence to be applied

§§ X806.2.e.1.a - X806.2.h
11.12.31
contact requirement to establish the if the customer identification process is not

existence of the ultimate customer and has diligently followed. Covered institutions
in its custody all the minimum information therefore shall endeavor to establish and
and/or documents required to be obtained record the true and full identity of these
from the customer; and customers and establish a policy on what
(2) The relying covered institution shall standard of due diligence will apply to them.
have the ability to obtain identification They shall also require approval by a senior
documents from the third party upon request officer other than the private banking/wealth
without delay. management/similar activity relationship
(Circular No. 706 dated 05 January 2011) officer or the like for acceptance of
customers of private banking, wealth
§ X806.2.e.1.b Third party is an FI management and similar activities.
operating outside the Philippines that is (Circular No. 706 dated 05 January 2011)
other than covered institutions referred to
in Subsec. X806.2.e.1.a but conducts § X806.2.g Politically exposed person
business operations and activities similar A covered institution shall endeavor to
to them. All the contents required in the establish and record the true and full
sworn certification mentioned in Subsec. identity of PEPs as well as their immediate
X806.2.e.1.a shall apply with the additional family members and the entities related to
requirement that the laws of the country them and establish a policy on what
where the third party is operating has equal standard of due diligence will apply to them
or more stringent customer identification taking into consideration their position and
process requirement and that it has not been the risks attendant thereto.
cited in violation thereof. It shall, in (Circular No. 706 dated 05 January 2011)
addition to performing normal due diligence
measures, do the following: § X806.2.h Correspondent banking
(1) Gather sufficient information about Because of the risk associated with dealing
the third party and the group to which it with correspondent accounts where it may
belongs to understand fully the nature of its unknowingly facilitate the transmission, or
business and to determine from publicly holding and management of proceeds of
available information the reputation of the unlawful activities or funds intended to
institution and the quality of supervision, finance terrorist activities, covered
including whether it has been subject to institutions shall adopt policies and
money laundering or terrorist financing procedures for correspondent banking
investigation or regulatory action; activities and designate an officer
(2) Document the respective responsible in ensuring compliance with
responsibilities of each institution; and these policies and procedures. A covered
(3) Obtain approval from senior institution may rely on the customer
management at inception of relationship identification process undertaken by the
before relying on the third party. respondent bank. In such case, it shall
(Circular No. 706 dated 05 January 2011) apply the rules on third party reliance
under Subsec. X806.2.e.1, treating the
§ X806.2.f Private banking/wealth respondent bank as the third party as
management operations. These services, defined therein. In addition, the
which by their nature involve high measure correspondent bank shall:
of client confidentiality, are more open to (1) Gather sufficient information about
the elements of reputational risk especially the respondent institution to understand fully

§§ X806.2.h - X806.2.i
11.12.31
the nature of the respondent’s business and same person, the beneficiary institution may
to determine from publicly available rely on the customer due diligence
information the reputation of the institution conducted by the originating institution
and the quality of supervision, including provided the rules on third party reliance
whether it has been subject to money under Subsec. X806.2.e.1 are met, treating
laundering or terrorist financing the originating institution as third party as
investigation or regulatory action. therein defined.
(2) Assess the respondent institution’s (2) The originating institution shall not
anti-money laundering and terrorist accept instructions to fund/wire transfer
financing controls. from a non-customer originator, unless it
(3) Obtain approval from senior has conducted the necessary customer due
management before establishing diligence to establish the true and full
correspondent relationships. identity and existence of said originator.
(4) Document the respective (3) In cross border transfers, if the
responsibilities of each institution. originator is a high risk customer as herein
(5) With respect to “payable-through described, the beneficiary institution shall
accounts”, be satisfied that the respondent conduct enhanced due diligence on the
bank has verified the identity of, and beneficiary and the originator. Where
performed on-going due diligence on, the additional information cannot be obtained, or
customers having direct access accounts of any information or document provided is false
the correspondent and that it is able to or falsified, or result of the validation process
provide relevant customer identification data is unsatisfactory, the beneficiary institution
upon request by the correspondent bank. shall refuse to effect the fund/wire transfer or
Correspondent banking customers the pay-out of funds without prejudice to the
presenting greater risk, including shell reporting of a suspicious transaction to the
companies, shall be subject to enhanced due AMLC when circumstances warrant.
diligence. (4) Whenever possible, manually
(Circular No. 706 dated 05 January 2011) initiated fund transfer (MIFT) instructions
should not be the primary delivery method.
§ X806.2.i Fund/Wire transfer Every effort shall be made to provide client
Because of the risk associated with dealing with an electronic banking solution.
with fund/wire transfers, where a covered However, where MIFT is utilized, the
institution may unknowingly transmit following validation procedures shall apply:
proceeds of unlawful activities or funds (i) Prior to the bank accepting from a
intended to finance terrorist activities, it customer a manually initiated funds
shall establish policies and procedures transfer request, the customer must
designed to prevent it from being utilized execute and sign an agreement which
for that purpose which shall include, but preferably is part of the account opening
not limited to, the following: documentation, wherein are outlined the
(1) The beneficiary institution shall not manual instruction procedures with
accept instructions to pay-out fund transfers related security procedures including
to non-customer beneficiary, unless it has customer agreement to accept
conducted the necessary customer due responsibility for fraudulent or erroneous
diligence to establish the true and full instructions provided the bank has
identity and existence of said beneficiary. complied with the stated security
Should the originator and beneficiary be the procedures.

§§ X806.2.i - X806.2.j
11.12.31
(ii) It is mandatory that written MIFT designated by the customer in the MIFT
instructions are signature verified. In agreement. The party called is to be
addition, one (1) of the following primary documented on the instructions. The callback
security procedures must be applied: a must be made by someone other than (a) the
recorded callback to the customer to confirm person receiving the original instructions and
the transaction instructions, or testword (b) effecting the signature verification.
arrangement/ verification. The callback or (5)1 Cross border and domestic fund/
test word requirement may be substituted wire transfers and related message
by any of the following validity checks: use amounting to P50,000 or more or its
of a controlled PIN or other pre-established equivalent shall include accurate and
code; sequential numbering control of meaningful originator information. The
messages; pre-established verifiable forms; following are the originator information that
same as prior transmissions; standing/pre- shall remain with the transfer or related
defined instructions; or value for value message through the payment chain:
transactions. (a) Name of the originator;
(iii) It is mandatory that faxed MIFT (b) Address or in its absence the national
instructions are signature verified and the identity number or date and place of birth
fax machine be located in a secured of the originator; and
environment with limited and controlled (c) Account number of the originator or
staff access which permits visual in its absence, a unique reference number
monitoring. If monitoring is not possible, must be included.
the equipment must be secured or (6) Should any wire transfer amounting
programmed to receive messages into a to P50,000 or more or its equivalent be
password protected memory. unaccompanied by the required originator
Faxed MIFT transactions below a certain information, the beneficiary institution shall
threshold (approved by the President/ exert all efforts to establish the true and full
Country Manager (for branches of foreign identity and existence of the originator by
banks) or Business Risk Manager) may be requiring additional information from the
processed with the mandatory procedure originating institution or intermediary
described above and an enhanced security institution. It shall likewise apply enhanced
procedure such as (a) a recorded callback due diligence to establish the true and full
to the customer to confirm the transaction identity and existence of the beneficiary.
instructions and/or (b) test word Where additional information cannot be
arrangement/verification, and/or (c) obtained, or any information or document
utilization of secured forms that incorporate provided is false or falsified, or result of the
verifiable security procedures such as validation process is unsatisfactory, the
watermarks or codes, and/or (d) beneficiary institution shall refuse to effect
transmission encryption. the fund/wire transfer or the pay-out of funds
(iv) Telephone callback numbers and without prejudice to the reporting of a
contacts must be securely controlled. The suspicious transaction to the AMLC when
confirmation callback is to be recorded and circumstances warrant.
made to the signatory/(ies) of the customer’s (Circular No. 706 dated 05 January 2011)
individual account(s). For commercial and
company accounts the callback will be § X806.2.j Buyers of cashier’s,
made to the signatory/(ies) of the account manager’s or certified checks. A covered
or, if so authorized, another person institution may sell cashier’s, manager’s or
1
The implementation of the originator information requirement is deferred for one (1) year, or until 26 July 2012
(M-2011-049 dated 07 September 2011)

§§ X806.2.j - X806.2.k
11.12.31
certified checks only to its existing acceptance and identification policies and
customers and shall maintain a register of as required under Subsecs. X806.2.j and
said checks indicating the following X806.2.j.1 of this Part;
information: (3) A register of said checks indicating
(1) True and full name of the buyer or all the information required under Subsec.
the applicant if buying on behalf of an X806.2.j shall be maintained;
entity; (4) A covered institution which issues
(2) Account number; as well as those which accepts as deposits,
(3) Date of issuance and the number of said cashier’s, manager’s or certified checks
the check; or other similar instruments issued in blank
(4) Name of the payee; or payable to cash, bearer or numbered
(5) Amount; and account shall take such measure(s) as may
(6) Purpose of such transaction. be necessary to ensure that said instruments
(Circular No. 706 dated 05 January 2011) are not being used/resorted to by the buyer
or depositor in furtherance of a money
§ X806.2.j.1 Buyers of cashier’s, laundering activity;
manager’s or certified checks other than (5) The deposit of said instruments shall
an existing customer. Where an be subject to the same requirements of
individual or an entity other than an scrutiny applicable to cash deposits; and
existing customer applies for the issuance (6) Transactions involving said
of cashier’s, manager’s or certified checks, instruments should be accordingly reported
the covered institution shall, in addition to to the AMLC if there is reasonable ground
the information required in Subsec. to suspect that said transactions are being
X806.2.j, obtain all the identification used to launder funds of illegitimate origin.
documents and minimum information (Circular No. 706 dated 05 January 2011)
required by this Part to establish the true
and full identity and existence of the § X806.2.k Second-endorsed checks. A
applicant. In no case shall reduced due covered institution shall enforce stricter
diligence be applied to the applicant and, guidelines in the acceptance of second
where circumstances warrant, enhanced -endorsed checks including the application
due diligence should be applied. of enhanced due diligence to ensure that
they are not being used as instruments for
§ X806.2.j.2 Buyers of cashier’s, money laundering or other illegal activities.
manager’s or certified checks in blank or For this purpose, a covered institution shall
payable to cash, bearer or numbered limit the acceptance of second-endorsed
account. A covered institution may issue checks from properly identified customers
cashier’s, manager’s or certified checks or and only after establishing that the nature
other similar instruments in blank or payable of the business of said customer justifies, or
to cash, bearer or numbered account subject at least makes practical, the deposit of second-
to the following conditions: endorsed checks. In case of isolated
(1) The amount of each check shall not transactions involving deposits of second-
exceed P10,000; endorsed checks by customers who are not
(2) The buyer of the check is properly engaged in trade or business, the true and full
identified in accordance with its customer identity of the first endorser shall be established

§§ X806.2.k - X806.2.m
11.12.31
and the record of the identification shall also the Financial Action Task Force (FATF)
be kept for five (5) years. recommendations, or presents greater risk
(Circular No. 706 dated 05 January 2011) for crime, corruption or terrorist financing
is considered a high risk customer.
§ X806.2.l Foreign exchange dealers/ Information relative to these are publicly
money changers/remittance agents available such as in the websites of FATF,
A covered institution shall require their FATF Style Regional Bodies (FSRB) like the
customers, who are foreign exchange Asia Pacific Group on Money Laundering
dealers, money changers and remittance and the Egmont Group, national authorities
agents, to submit a copy of the certificate of like the OFAC of the U.S. Department of
registration issued to them by the Bangko the Treasury, or other reliable third parties
Sentral as part of their customer such as regulators or exchanges, which shall
identification document. The certificate of be a component of a covered institution’s
registration shall be for each head office, customer identification process.
branch agent, sub-agent, extension office or When dealing with high risk customers,
business outlet of foreign exchange dealers, a covered institution should take extreme
money changers and remittance agents. caution and vigilance. In no case shall
Foreign exchange dealers, money reduced diligence be applied to high risk
changers and remittance agents customers customers. On the other hand, in case the
presenting greater risk, such as shell covered institution determines, based on its
companies shall be subject to enhanced due standards, that dealing with the high risk
diligence. customer calls for, or this Part requires, the
application of enhanced due diligence, it
§ X806.2.m High risk customer shall apply the minimum requirements for
A customer from a country that is enhanced due diligence in accordance with
recognized as having inadequate Subsec. X806.1.b. In all instances of
internationally accepted anti-money acceptance of a high risk customer, approval
laundering standards, or does not of the covered institution’s senior officer
sufficiently apply regulatory supervision or shall be necessary.
(Next page is Part VIII - Page 19)
Manual of Regulations for Banks Part VIII - Page 18a

§§ X806.2.n - X806.3.a
11.12.31
§ X806.2.n Shell company/shell bank § X806.3 On-going monitoring of

A covered institution shall undertake customers, accounts and transactions
banking relationship with a shell company Covered institutions shall ensure that they
with extreme caution and always apply have established the true and full identity
enhanced due diligence on both the entity of their customers and shall update all
and its beneficial owner/s. identification information and documents
Because of the dubious nature of shell required to be obtained by the AMLA, as
banks, no shell bank shall be allowed to amended, its RIRR and this Part, of existing
operate or be established in the Philippines. customers on the basis of materiality and
A covered institution shall refuse to enter risk.
into, or continue, correspondent banking With respect to monitoring of
relationship with them. It shall likewise transactions, in order that a covered
guard against establishing relations with institution may be able to control and reduce
foreign FIs that permit their accounts to be risk associated with money laundering and
used by shell banks. terrorist financing, it is necessary that it has
(Circular No. 706 dated 05 January 2011) a system that will enable it to understand
the normal and reasonable account activity
§ X806.2.o Numbered accounts of customers and detect unusual or
No peso and foreign currency non-checking suspicious patterns of account activity.
numbered accounts shall be allowed Thus, a risk and materiality based on-going
without establishing the true and full identity monitoring of customer’s accounts and
and existence of customers and applying transactions should be part of a covered
enhanced due diligence in accordance with institution’s customer due diligence.
Subsec. X806.1.b. (Circular No. 706 dated 05 January 2011)
Peso and foreign currency non-checking
numbered accounts existing prior to § X806.3.a Enhanced due diligence
17 October 2001 shall continue to exist but Covered institutions shall apply enhanced
the covered institution shall establish the true due diligence on its customer in accordance
and full identity and existence of the with Subsec. X806.1.b if it acquires
beneficial owners of such accounts and information in the course of its customer
applying enhanced due diligence in account or transaction monitoring that:
accordance with Subsec. X806.1.b. (1) Raises doubt as to the accuracy of
(Circular No. 706 dated 05 January 2011) any information or document provided or
the ownership of the entity;
§ X806.2.p Prohibited accounts (2) Justifies re-classification of the
A covered institution shall maintain customer from low or normal risk to
accounts only in the true and full name of high-risk pursuant to this Part or by its own
the account owner. The provisions of criteria; or
existing law to the contrary notwithstanding, (3) Any of the circumstances for the
anonymous accounts, accounts under filing of a suspicious transaction exists such
fictitious names, numbered checking as but not limited to the following:
accounts, and all other similar accounts shall (a) Transacting without any underlying
be absolutely prohibited. legal or trade obligation, purpose or
economic justification;

§§ X806.3.a - X807.1
11.12.31
(b) Transacting an amount that is not 18 March 2009, the following are
commensurate with the business or financial considered as “non-cash, no/low risk
capacity of the customer or deviates from covered transactions” the reporting of
his profile; which to the AMLC are deferred:
(c) Structuring of transactions in order a. Transactions between banks and the
to avoid being the subject of covered Bangko Sentral;
transaction reporting; or b. Transactions between banks
(d) Knowing that a customer was or is operating in the Philippines;
engaged or engaging in any unlawful activity c. Internal operating expenses of banks;
as herein defined. d. Transactions involving transfer of
Where additional information cannot be funds from one deposit account to another
obtained, or any information or document deposit account of the same person within
provided is false or falsified, or result of the the same bank;
validation process is unsatisfactory, the e. Roll-overs of placements of time
covered institution shall immediately close deposit; and
the account and refrain from further f. Loan/Interest principal payment
conducting business relationship with the debited against borrower’s deposit account
customer without prejudice to the reporting maintained with the lending bank.
of a suspicious transaction to the AMLC In addition, pursuant to AMLC
when circumstances warrant. Resolution No. 292 dated 24 October
(Circular No. 706 dated 05 January 2011) 2003, covered institutions, other than
banks, shall file CTRs on transactions in
C. Covered and Suspicious
cash or foreign currency or other monetary
Transaction Reporting
instruments (other than checks) or
properties. Due to the nature of the
Sec. X807 Covered and Suspicious
transactions in the stock exchange, only the
Transaction Reporting 1 . Covered
brokers-dealers shall be required to file
institutions shall report to the AMLC all
CTRs and STRs2.
covered and suspicious transactions within
The Philippine Stock Exchange,
ten (10) working days from occurrence
Philippine Central Depository (PCD),
thereof.
Securities Clearing Corporation of the
Should a transaction be determined to
Philippines (SCCP) and transfer agents are
be both a covered and suspicious
exempt from filing CTRs. They are however
transaction, the covered institution shall be
required to file STRs when the transactions
required to report the same as a suspicious
that pass through them are deemed
transaction.
suspicious.
The Bangko Sentral may consider other
§ X807.1 Deferred reporting of certain transactions as “no/low risk covered
covered transactions. Pursuant to AMLC transactions” and propose to the AMLC that
Resolution No. 58 dated 25 June 2005 as they be likewise subject to deferred
amended by AMLC Resolution No. 24 dated reporting by covered institutions.
(Circular No. 706 dated 05 January 2011; CL-2011-035 dated
25 May 2011)
1
Submission of the hard copies of the STRs to the AMLC is deferred until further advice.
2
The filing of a CTR by a broker is deferred when the mode of payment is by checks or if the settlement between
brokers/dealers and their customers is made through fund transfers or “debiting and crediting” of their respective
accounts.

§§ X807.2 - X807.4
11.12.31
§ X807.2 Electronic monitoring system § X807.3 Manual monitoring

for money laundering. UBs and KBs are Covered institutions, other than UBs and
required to adopt an electronic money KBs, need not have an electronic system
laundering transaction monitoring system of flagging and monitoring transactions
which at the minimum shall detect and raise but shall ensure that the system has the
to the bank’s attention, transactions and/or means of flagging and monitoring the
accounts that qualify either as CTs or STs transactions mentioned in Subsec.
as herein defined. X807.2. They shall maintain a register of
The system must have at least the all STs that have been brought to the
following automated functionalities: attention of senior management whether
a. Covered and suspicious transaction or not the same was reported to the
monitoring – performs statistical analysis, AMLC.
profiling and able to detect unusual patterns (Circular No. 706 dated 05 January 2011)
of account activity;
b. Watch list monitoring – checks § X807.4 Electronic submission of
transfer parties (originator, beneficiary, and reports. The CTR and STR shall be
narrative fields) and the existing customer submitted to the AMLC in a secured
database for any listed undesirable manner, in electronic form and in
individual or corporation; accordance with the reporting procedures
c. Investigation – checks for given prescribed by the AMLC. The covered
names throughout the history of payment institutions shall provide complete and
stored in the system; accurate information of all the mandatory
d. Can generate all the CTRs of the fields required in the report. In order to
covered institution accurately and provide accurate information, the covered
completely with all the mandatory field institution shall regularly update customer
properly filled up; identification information at least once
e. Must provide a complete audit trail; every three (3) years.
f. Capable of aggregating activities of For the purpose of reporting in a
a customer with multiple accounts on a secured manner, all covered institutions
consolidated basis for monitoring and shall register with the AMLC within ninety
reporting purposes; and (90) days from 27 January 2011 by directly
g. Has the capability to record all STs coordinating with that office for the
and support the investigation of alerts proper assignment of their institution code
generated by the system and brought to the and facilitation of the reporting process.
attention of senior management whether or All covered institutions that have
not a report was filed with the AMLC. previously registered need not re-register.
UBs and KBs with existing electronic Only their respective compliance
system of flagging and monitoring officers or duly authorized officers shall
transactions already in place shall ensure electronically sign their covered
that their existing system is updated to be transaction reports and suspicious
fully compliant with functionalities as those transaction reports.
required herein. For this purpose, they shall Electronic copies of CTRs and STRs shall
be given ninety (90) days from 27 January be preserved and safely stored for at least
2011 within which to make their system for at least five (5) years from the dates the
fully operational and automated with all the same were reported to the AMLC.
functionalities stated above. (Circular No. 706 dated 05 January 2011, as amended by
(Circular No. 706 dated 05 January 2011) CL-2011-078 dated 11 October 2011)

§§ X807.5 - X808
11.12.31
§ X807.5 Exemption from Bank Secrecy D. Record Keeping and Retention

Laws. When reporting covered or
suspicious transactions to the AMLC, Sec. X808 Record Keeping. All customer
covered institutions and their officers and identification records of covered institutions
employees shall not be deemed to have shall be maintained and safely stored as long
violated R.A. No. 1405, as amended, R.A. as the account exists. All transaction
No. 6426, as amended, R.A. No. 8791 and records, including all unusual or suspicious
other similar laws, but are prohibited from patterns of account activity, whether or not
communicating, directly or indirectly, in any an STR was filed with the AMLC, of covered
manner or by any means, to any person, the institutions shall be maintained and safely
fact that a covered or suspicious transaction stored for five (5) years from the date of
report was made, the contents thereof, or transaction.
any other information in relation thereto. In Said records and files shall contain the
case of violation thereof, the concerned full and true identity of the owners or
officer and employee of the covered holders of the accounts involved in the
institution shall be criminally liable in transactions such as the ID card and
accordance with the provision of the AMLA, photo of individual customers and the
as amended. documents mentioned in Subsec.
(Circular No. 706 dated 05 January 2011) X806.2.b for entities, customer
information file, signature card of
§ X807.6 Confidentiality provision authorized signatory/ies, and all other
When reporting CTs and STs to the AMLC, pertinent customer identification
covered institutions, their directors, officers documents as well as all factual
and employees are prohibited from circumstances and records involved in the
communicating directly or indirectly, in any transaction. Covered institutions shall
manner or by any means, to any person or undertake the necessary adequate security
entity, the media, the fact that a covered or measures to ensure the confidentiality of
suspicious transaction report was made, the such file. Covered institutions shall
contents thereof, or any other information prepare and maintain documentation, in
in relation thereto. Neither may such accordance with the aforementioned
reporting be published or aired in any client identification requirements, on their
manner or form by the mass media, customer accounts relationships and
electronic mail, or other similar devices. In transactions such that any account,
case of violation thereof, the concerned relationship or transaction can be
officer and employee of the covered reconstructed as to enable the AMLC, and/
institution and media shall be held or the courts to establish an audit trail for
criminally liable. money laundering.
Whenever a bank engaged in
§ X807.7 Safe harbor provision microfinance operations has tagged a
No administrative, criminal or civil microfinance client, as defined under BSP
proceedings shall lie against any person for regulations, as low risk in accordance with
having made a CTR or an STR in the regular Subsec. X806.1.a, the customer’s
performance of his duties in good faith, identification and transaction records shall
whether or not such reporting results in any be retained for five (5) years except that said
criminal prosecution under the AMLA, as retention period may be reduced to three
amended, its RIRR or any other law. (3) years provided that sufficient documents
(Circular No. 706 dated 05 January 2011) duly support the low risk profile of said

§§ X808 - X809
11.12.31
customer and the covered institutions keep E. Training Program

a record of the names of these low risk
customers after the lapse of three (3) years. This Sec. X809 AML Training Program
provision is subject to Subsec. X808.2 when a Covered institutions shall formulate an
money laundering case is filed in court. annual AML training program aimed at
(Circular No. 706 dated 05 January 2011) providing all their responsible officers and
personnel with efficient, adequate and
§ X808.1 Closed accounts. With respect continuous education program to enable
to closed accounts, the records on customer them to fully and consistently comply with
identification, account files and business all their obligations under this Part, the
correspondences shall be preserved and AMLA, as amended, and its RIRR.
safely stored for at least five (5) years from Trainings of officers and employees shall
the date of closure. include awareness of their respective duties
and responsibilities under the MLPP
§ X808.2 Retention of records in case particularly in relation to the customer
a money laundering case has been filed in identification process, record keeping
court. If a money laundering case, based requirements and CT and ST reporting and
on any report kept by the covered institution ample understanding of the internal
concerned, has been filed in court, said file processes including the chain of command
must be retained beyond the five (5) year for the reporting and investigation of
retention period and until it is confirmed suspicious and money laundering activities.
that the case has been finally resolved or The program shall be designed in a
terminated by the court. manner that will comprise of various
(Circular No. 706 dated 05 January 2011) focuses for new staff, front-line staff,
compliance office staff, internal audit staff,
§ X808.3 Safekeeping of records and officers, senior management, directors and
documents. The covered institution shall stockholders. Regular refresher trainings
designate at least two (2) officers who will shall likewise be provided in order to
be jointly responsible and accountable in guarantee that officers and staff are informed
the safekeeping of all records and of new developments and issuances related
documents required to be retained by the to the prevention of money laundering and
AMLA, as amended, its RIRR and this Part. terrorism financing as well as reminded of
They shall have the obligation to make these their respective responsibilities vis-à-vis the
documents and records readily available covered institution’s processes, policies and
without delay during Bangko Sentral regular procedures.
or special examinations. Covered institution’s annual AML
(Circular No. 706 dated 05 January 2011) training program and records of all AML
seminars and trainings conducted by the
§ X808.4 Form of records. Records covered institution and/or attended by its
shall be retained as originals or copies in personnel (internal or external), including
such form as are admissible in court copies of AML seminar/training materials,
pursuant to existing laws, such as the shall be appropriately kept by the
E-Commerce Act and its implementing rules compliance office/unit/department, and
and regulations, and the applicable rules should be made available during periodic
promulgated by the Supreme Court. or special Bangko Sentral examination.
(Circular No. 706 dated 05 January 2011) (Circular No. 706 dated 05 January 2011)

§§ X810 - X811
12.12.31
F. Bangko Sentral Authority and line officers, not necessarily according to

Enforcement Actions priority:
a. Written reprimand;
Sec. X810 Bangko Sentral Authority to b. Suspension or removal from the
Examine Deposits and Investments; office they are currently holding; and/or
Additional Exception to the Bank Secrecy c. Disqualification from holding any
Act; Annual Testing of Numbered position in any covered institution.
Accounts. To ensure compliance with the In addition to the non-monetary
AMLA, as amended, its RIRR, and this Part, sanctions stated above, the Bangko Sentral
the Bangko Sentral may inquire into or may also impose monetary penalties
examine any deposit or investment with any computed in accordance with existing
banking institution or NBFI and their regulations and in coordination with the
subsidiaries and affiliates when the AMLC.
examination is made in the course of a Enforcement actions shall be imposed
periodic or special examination, in on the basis of the overall assessment of
accordance with the Rules of Examination the covered institution’s AML risk
of the Bangko Sentral. management system. Whenever a covered
The Bangko Sentral may likewise institution’s AML compliance system is
conduct annual testing solely limited to the found to be grossly inadequate, this may
determination of the existence and true be considered as unsafe and unsound
identity of the owners of numbered and banking practice that may warrant
similar accounts. initiation of prompt corrective action.
In the course of the periodic and special To implement the enforcement action
examination for purposes of complying with provision of this Part along with the AML
the provisions of the AMLA, as amended, Risk Rating System (ARRS), the following
its RIRR, and this Part, the covered rules shall apply:
institutions, their officers and employees, and 1. An AML Composite rating of 4 and
the Bangko Sentral, shall not be deemed to 3 will require no enforcement action.
have violated the provisions of R. A. No. 2. An AML composite rating of 2 to 1
1405, as amended, R.A. No. 6426, as will require submission by the covered
amended, R.A. No. 8791 and other similar institution to the AMLSG, SES, of a written
laws, and Subsec.X807.6 when disclosing action plan duly approved by the BOD
information to Bangko Sentral relative to aimed at correcting the noted inefficiency
covered and suspicious transaction reports in BOD and SM oversight, inadequacy in
filed with the AMLC. AML and TF policies and procedures,
weakness in internal controls and audit,
and/or ineffective implementation within a
Sec. X811 Enforcement Action. In line with
reasonable period of time.
the objective of ensuring that covered
The AMLSG shall assess the viability
institutions maintain high anti-money
of the plan and shall monitor the covered
laundering standards in order to protect its
institution’s performance.
safety and soundness as well as protecting
In the event of non-submission of an
the integrity of the national banking and
acceptable plan within the deadline or
financial system, violation of these Rules
failure to implement its action plan, AMLSG
shall constitute a major violation subject to
shall recommend appropriate enforcement
the following enforcement actions against the
actions on the covered institution and its
board of directors, senior management and

§ X811
12.12.31
responsible officers including monetary penalties computed on a daily and

penalties to be computed on a daily basis continuing basis from the time the covered
until improvements are satisfactorily institutions is notified until corrective
implemented. measures are satisfactorily effected. The
3. An AML rating of 1 shall also be penalty may be imposed on the covered
considered as an unsafe and unsound institution itself or directly on the Board of
banking practice. For this reason, prompt Directors as a body, or the individual
corrective action shall also be automatically directors who have direct oversight, or the
initiated on the covered institution. line officers involved in the management of
Monetary penalty guidelines. These money laundering and terrorist financing
guidelines are divided into three (3) parts. prevention.
Part I – Monetary penalty matrices. The Part III – Aggravating and mitigating
monetary penalty matrices, where monetary factors.
penalties are categorized based on the (1) a. Aggravating factors
Composite rating and (2) Asset size of the (1) Frequency of the commissions or
Bangko Sentral covered institution. omissions of specific violation- Majority of
Part II – Guiding principles. the following violations were noted:
1. The first step is to determine the (a) Deficient Know Your Customer
over-all risk rating of the Bangko Sentral process
covered institution for purposes of (b) Unsatisfactory Covered Transaction
identifying which penalty matrix will be reporting system
used. If the Composite rating is “1” or “2”, (c) Non-reporting of and Improper
penalty matrix A or B, respectively shall be Suspicious Transaction reporting
used. If the over-all rating is “3” and “4”, no (d) Non-compliance with the Record
monetary penalty shall be imposed. keeping requirement
2. Second step is to establish the asset (e) Inadequate AML Training Program
size of the Bangko Sentral covered (f) Deficient AML Electronic system
institution as of the cut-off period of (2) Duration of violations prior to
examination; notification- This pertains to the length of
3. Third step is to identify the time prior to the latest notification on the
violation. Violations that have been
aggravating and mitigating factors. If the
existing for a long time before it was
aggravating factors are more than the
revealed/discovered in the examination or
mitigating factors, then the maximum range
are under the evaluation for a long time due
shall be used. On the other hand, if the
to pending requests or correspondences
mitigating factors are more than the
from covered institutions on whether a
aggravating factors, then the minimum range
violation has actually occurred shall be dealt
shall be applied. In case there are no
with through this criterion. Violations
aggravating and mitigating factors or there
outstanding for more than one (1) year prior
is a tie, the medium range shall be used.
to notification, at the minimum, will
4. For Composite ratings of 1 and 2
qualify as violations outstanding for a long
where the covered institution concerned
time.
was required to submit within a reasonable (3) Continuation of offense or omission
period of time an acceptance plan, non- after notification- This pertains to the
submission of the plan within the deadline persistence of an act or omission after the
or failure to implement the action plan shall latest notification on the existence of the
be a basis for imposition of monetary violation, either from the appropriate SES

§§ X811 - X899
12.12.31
Group, Department or from the Monetary individual/entity.

Board and/or Deputy Governor, in cases (2) Full cooperation- covered
where the violation has been elevated institution’s personnel or the covered
accordingly. This covers the period after the institution immediately took action to
final notification of the existence of the correct the violation after it is brought to its
violation until such time that the violation attention either verbally or in writing.
has been corrected and/or remedied. The (3) With positive measures- covered
corrective action shall be reckoned with institution’s personnel or the covered
from the date of notification. institution commits to undertake concrete
(4) Concealment- This factor pertains to action to correct the violation but is being
the cover up of a violation. In evaluating this restrained by valid reasons to take
factor, one shall consider the intention of immediate action.
the party/ies involved and whether (4) Voluntary disclosure of offense-
pecuniary benefit may accrue accordingly. covered institution’s personnel or the
The act of concealing an act or omission covered institution disclosed the violation
constituting the violation carries with it the before it is discovered in the course of a
intention to defraud regulators. Moreover, regular or special examination or off-site
the amount of pecuniary benefit, which may monitoring.
or may not accrue from the offense or (Circular No. 706 dated 05 January 2011 as amended by
omission, shall also be considered under this M-2012-017 dated 04 April 2012)
factor.
Concealment may be apparent when a Sec. X812 (Reserved)
covered institution’s personnel purposely
complicate the transaction to make it Sec. X813 Separability Clause. If any
difficult to uncover or refuse to provide provisions, sections of this Part, or its
information and/or document that would application to any person or circumstance
support the violation/offense committed. is held invalid, the other provisions or
(5) Loss or risk of loss to bank- In sections of this Part, and the application of
asserting this factor, “potential loss” refers such provisions or section to other persons
to any time at which the covered institution or circumstance shall not be affected
was in danger of sustaining a loss. thereby.
b. Mitigating factors (Circular No. 706 dated 05 January 2011)
(1) Good faith - is the absence of
intention to violate on the part of the erring Secs. X814 - X899 (Reserved)

§§ X901 - X902
15.10.31
PART NINE
OTHER BANKING REGULATIONS
A. BANKING FEES/CHARGES Securities held under custodianship

shall be exempt from annual fees.
Section X901 (2008 - X608) Assessment Annual fees to be collected from
Fees on Banks. Banks shall contribute to banks shall be debited from their
the Bangko Sentral an annual fee to help respective deposit accounts with the
defray the cost of maintaining the Bangko Sentral by the Comptrollership
appropriate department of the SES in Department upon receipt of the notice of
accordance with the following guidelines. the assessment from the appropriate
(M-2012-010 dated 17 February 2012, M-2011-029 dated department of the SES.
26 May 2011) Where the deposit account is
insufficient to cover the assessment fee,
§ X901.1 (2008 - X608.1) Annual fees the Comptrollership Department shall bill
on banks. For purposes of computing the the bank for the full amount of the annual
annual fees chargeable against banks, the fee or for the balance thereof not covered
term “Total Assessable Assets” shall be the by its deposit account, as the case may
amount referred to as the total assets under be.
Section 28 of R. A. No. 7653 (end-of-month Within thirty (30) calendar days from
total assets per balance sheet, after receipt of the bill, the bank shall make the
deducting cash on hand and amounts due corresponding remittance to the BSP
from banks, including the Bangko Sentral Accounting Department. Failure to pay
and banks abroad), plus Trust Department the bill within the prescribed period shall
accounts and personal equity and retirement subject the bank to administrative
accounts (PERA) administered by the bank. sanctions.
Average Assessable Assets shall be the The guidelines in the collection of the
summation of the end-of-month total annual supervisory fees for the year 2013
assessable assets divided by the number of are provided in Appendix 88.
months in operation during a particular (As amended by Circular No. 878 dated 22 May 2015, M-2015-
assessment period. 022 dated 06 May 2015, M-2014-014 dated 20 March 2014,
Beginning assessable year 2013, the Circular No. 791 dated 03 April 2013, M-2013-015 dated 18 April
rates of annual fees for banks for the current 2013, M-2012-010 dated 17 February 2012, M-2011-029 dated
year shall be, as follows: 26 May 2011, Circular No. 714 dated 10 March 2011, M-2010 -
a. UBs/KBs - 1/28 of 1% 013 dated 31 May 2010, Circular No. 687 dated 21 May 2010,
b. TBs - 1/28 of 1% M-2009-046 dated 17 November 2009, M-2009-004 dated 12
c. RBs/Coop Banks - 1/40 of 1% February 2009 and Circular No. 643 dated 10 February 2009)
multiplied by the Average Assessable Assets Sec. X902 (2008 - X609) Collection of
of the preceding year: Provided, That the Fines and Other Charges from Banks. The
applicable rates for future assessable years following regulations shall govern the
shall be subject to review1. payment of fines and other charges by banks.
1
Manual of Regulations for Banks Part IX - Page 1

§ X902.1
09.12.31
§ X902.1 (2008 - X609.1) Guidelines day”, “per business day”, “per day” and/or
on the imposition of monetary penalties. “a day” as used in this Manual, and other
The following are the guidelines on the Bangko Sentral rules and regulations shall
imposition of monetary penalties on banks, mean “per calendar day” and/or “calendar
their directors and/or officers: day” as the case may be.
a. Definition of terms. For purposes of c. Additional charge for late payment
the imposition of monetary penalties, the of monetary penalty. Late payment of
following definitions are adopted: monetary penalty shall be subject to an
(1) Continuing offenses/violations are additional charge of six percent (6%) per
acts, omissions or transactions entered into, annum to be reckoned from the banking day
in violation of laws, Bangko Sentral rules immediately following the said penalty
and regulations, Monetary Board directives, becomes due and payable up to the day of
and orders of the Governor which persist actual payment. The penalty shall become
from the time the particular acts were due and payable fifteen (15) calendar days
committed or omitted or the transactions from receipt of the Statement of Account
were entered into until the same were from the Bangko Sentral. For banks which
corrected/rectified by subsequent acts or maintain DDA with the Bangko Sentral,
transactions. They shall be penalized on a penalties which remain unpaid after the
per calendar day basis from the time the acts lapse of the fifteen-day period shall be
were committed/omitted or the transactions automatically debited against their
were effected up to the time they were corresponding DDA on the following
corrected/rectified. banking day without additional charge. If
(2) Transactional offenses/violations the balance of the concerned bank’s DDA
are acts, omissions or transactions is insufficient to cover the amount of the
entered into in violation of laws, penalty, said penalty shall already be subject
Bangko Sentral rules and regulations, to an additional charge of six percent (6%)
Monetary Board directives, and orders per annum to be reckoned from the banking
of the Governor which cannot be day immediately following the end of said
corrected/rectified by subsequent acts fifteen (15)-day period up to the day of actual
or transactions. They shall be meted payment.
with one-time monetary penalty on a per d. Appeal or request for
transaction basis. reconsideration. A one time appeal or
(3) Continuing penalty refers to the request for reconsideration on the monetary
monetary penalty imposed on continuing penalty approved by the Governor/
offenses/violations on a per calendar day Monetary Board to be imposed on the bank,
basis reckoned from the time the offense/ its directors and/or officers shall be allowed:
violation occurred or was committed until Provided, That the same is filed with the
the same was corrected/rectified. appropriate department of the SES within
(4) Transactional penalty refers to a fifteen (15) calendar days from receipt of
one-time penalty imposed on a transactional the Statement of Account/billing letter. The
offense/violation. appropriate department of the SES shall
b. Basis for the computation of the evaluate the appeal or request for
period or duration of penalty. The reconsideration of the bank/individual and
computation of the period or duration of all make recommendations thereon within
penalties shall be based on calendar days. thirty (30) calendar days from receipt
For this purpose the terms “per banking thereof. The appeal or request
Part IX - Page 2 Manual of Regulations for Banks

§§ X902.1 - X903.1
09.12.31
for reconsideration on the monetary (15) days will be debited against the bank’s
penalty approved by the Governor/ corresponding demand deposit account with
Monetary Board shall be elevated to the the BSP. A debit advice showing invoices
Monetary Board for resolution/decision. paid shall be sent to the head office of the
The running of the penalty period in case bank concerned.
of continuing penalty and/or the period (As amended by Circular No. 585 dated 15 October 2007)
for computing additional charge shall be
interrupted from the time the appeal or § X902.4 (2008 - X609.4) Check/
request for reconsideration was received by demand draft payments to the Bangko
the appropriate department of the SES up to Sentral of thrift, cooperative and rural
the time that the notice of the Monetary banks. TBs, Coop Banks and RBs shall make
Board decision was received by the bank/ all check and demand draft payments for
individual concerned. transactions other than those required to be
(As amended by Circular Nos. 662 dated 09 September 2009 paid through the banks DDA either to the
and 585 dated 15 October 2007) BSP Cash Department or to BSP Regional
Offices and Branches. Such payments shall
§ X902.2 (2008 - X609.2) Payment of be accompanied by appropriate payment
fines by banks. Banks shall pay the fines form as shown in Appendix 35. Payments
within fifteen (15) calendar days from receipt not accompanied by the required payment
of the statement of account from the BSP. forms shall be presumed to be additions to
For banks which maintain demand reserves and shall be credited to the demand
deposit account with the BSP, fines which deposit account of the paying bank.
are unpaid after the lapse of the fifteen (15)- Check payments shall be value dated
day period shall be automatically debited when the check is cleared.
against the corresponding demand deposit (As amended by Circular Nos. 662 dated 09 September 2009
account of the bank concerned: Provided, and 585 dated 15 October 2007)
That if the balance of the bank’s account is
insufficient to cover the fines due, such fines B. BANK AS COLLECTION/
shall be paid not later than the following REMITTANCE AGENTS
banking day. For the purpose of this
Subsection, banking day means a day on Sec. X903 (2008 - X604) Collection of
which the BSP head office and the head Customs Duties/Taxes/Levies and Other
office of the bank are open for business. Revenues. The following regulations shall
For uniform implementation of the govern the collection and reporting of
above regulations, the procedural guidelines customs duties, taxes, levies and other
embodied in Appendix 29 shall be revenues through the banking system.
observed.
(As amended by Circular Nos. 662 dated 09 September 2009 § X903.1 (2008 - X604.1) Coverage
and 585 dated 15 October 2007) All presently accredited agent banks with
demand deposit accounts with the BSP and
§ X902.3 (2008 - X609.3) Cost of checks government banks are authorized to collect
and documentary stamps. Banks are given (a) customs duties, taxes and other levies,
fifteen (15) days from receipt of invoice to (b) import processing fees, and (c) export/
settle their accounts with the BSP Security premium duties: Provided, however, That
Printing Plant for transactions representing the collection of taxes from GOCCs shall
the cost of printed checks and documentary be made only through banking offices of
stamps. Accounts not settled within fifteen government banks.

§§ X903.2 - X903.4
08.12.31
§ X903.2 (2008 - X604.2) Collection of Payment (OPs), ORs, Release Certificates

and reporting of internal revenue taxes (RCs) and commercial invoices on the same
Banks which are duly accredited by the BIR day to the offices indicated in the form; and
to accept payment of internal revenue taxes e. The Head Office of the participating
shall be governed by the relevant BIR banks shall consolidate all reports of
Revenue Regulations. collections with those of its branches and
Deposits of the BIR shall be limited to submit the original of the Consolidated
those arising from tax collection. Report on Daily Collections of Customs
The Authorized Agent Banks (AABs) Duties, Taxes and Other Levies (RC 82-005)
shall transfer the deposit collection to the to the Comptrollership Department, BSP,
account of the Treasurer of the Philippines Manila on the 10th calendar day following
with the BSP on the sixth day from the day the date of collection. Simultaneously, the
of deposit of the BIR collections. remaining copies shall be distributed to the
offices indicated in the form.
§ X903.3 (2008 - X604.3) Collection Deposits of the BOC shall be limited to
and reporting of customs duties and import those arising from customs collection.
processing fees. Participating banks are The AABs shall transfer the deposit
authorized to accept payment of customs collection to the account of the Treasurer
duties, taxes and other levies, and import of the Philippines with the BSP on the
processing fees under the following eleventh day from the day of deposit of the
procedures: BOC collections.
a. The collecting bank shall
acknowledge receipt of payments of § X903.4 (2008 - X604.4) Collection
customs duties, taxes and other levies, and and reporting of export/premium duties
import processing fees by issuing Official Participating banks are authorized to accept
Receipts (ORs) in forms to be requisitioned payment of export premium duties under
by the Head Office from the General the following procedures:
Services Division, Bureau of Customs, a. The collecting bank shall deduct
Manila; from the export proceeds the estimated
b. The collecting bank shall book all amount of export/premium duties due
such collections and credit the same to the from the export shipment upon negotiation
special account “Due to BSP - Bureau of of the shipping documents but shall
Customs”; collect the exact and correct amount of
c. The branch shall report by such duties upon presentation of the OP
telephone, telex or other means to its Head issued by the Export Coordinating
Office, at the end of each day, total Division, Bureau of Customs (For Port of
collections for the day and the inclusive Manila) or the Collector of Customs
serial numbers of ORs issued, to be used as concerned;
basis for the preparation by the Head Office b. The collecting bank shall issue the
of the Consolidated Report of Daily corresponding ORs in forms to be
Collections of Customs Duties, Taxes and requisitioned by the Head Office from the
Other Levies (RC 82-005); General Services Division, Bureau of
d. The Head Office and its branches Customs, Manila;
shall accomplish the Abstract of Daily c. The collecting bank shall book all
Collections of Customs Duties, Taxes and such collections and credit the same to the
Other Levies (RC 82-006) and submit the special account “Due to BSP-Export/
same, duly supported with copies of Orders Premium Duty”;

§§ X903.4 - X903.8
08.12.31
d. The branch/extension office/agency on the 10th calendar day from the date of
shall: collection (based on either forms RC 82-005,
(1) Report by telephone, telex or other RC 82-007 or RC 82-011). Said Department
means to its Head Office, at the end of each shall also credit on the same day the account
day, total collections for the day and the of the Treasurer of the Philippines for all
inclusive serial numbers of ORs issued, to such remittances of tax collections, duties,
be used as basis for the preparation by the fees and other levies.
Head Office of the Consolidated Report on Copies of debit/credit advices to AABs
Daily Collections of Export/Premium Duty shall be furnished by the Comptrollership
(RC 82-007); and Department, BSP.
(2) A c c o m p l i s h t h e A b s t r a c t o f
Daily Collections of Export/Premium § X903.6 (2008 - X604.6) Reconciliation
Duty (RC 82-008) and submit the same, of revenue collections. The Bureau of
duly supported with copies of OPs and Customs shall report to the appropriate
ORs, within ten (10) calendar days from department of the SES, BSP, Manila, any
date of collection to the offices indicated unreported collection or other discrepancies
in the form. discovered for proper examination. The BSP
e. The Head Office of the collecting shall take appropriate action, through the
bank shall: Comptrollership Department, either by
(1) Consolidate its report of collection debiting or crediting the DDA of the bank
with those of its branches/extension offices/ concerned, upon advice by the appropriate
agencies and submit to the Bureau of department of the SES on the results of the
Customs the Consolidated Report of Daily investigation.
Collections of Export/Premium Duty
(RC 82-009) on the day following the date § X903.7 (2008 - X604.7) Penalty for
of collection; and willful delay on the reporting of
(2) Consolidate the Abstract of Daily collections/remittances. In the event
Collections of Export/Premium Duty the Bureau of Customs shall discover,
(RC 82-010) with those received from in the course of its verification, any
branches/extension offices/agencies. The willful delay in the reporting of collections
original of the Consolidated Abstract of and remittances by banks, said Bureau
Collection of Export/Premium Duty shall advise the Comptrollership
(RC 82-011) shall be submitted to the Department of the BSP to debit the DDA
Comptrollership Department, BSP, Manila, of the bank concerned with the
on the 10th calendar day following the date corresponding penalty therefor, in
of collection. accordance with Subsec. X903.8.
Simultaneously, the remaining
copies, with the supporting OPs and § X903.8 (2008 - X604.8) Fines for
ORs, shall be submitted to the Bureau delayed reports/remittances of collections
of Customs. Any bank authorized to collect customs
duties, taxes and other levies and export/
§ X903.5 (2008 - X604.5) Remittances premium duty, which shall willfully delay
thru debit/credit advices. The the submission of reports and remittance
Comptrollership Department, BSP, of its collection to the BSP within the
Manila, shall debit the DDAs of the period prescribed thereon, shall pay fines
banks concerned for the total daily in accordance with the following
collection, which is due for remittance schedule:

§§ X903.8 - X903.10
09.12.31
Per delay in For delay in covering imports, collect from the

submission remittance applicant/importer a deposit equivalent to
of report of collection
a. Per day of P 60 plus 1/30 of 1% on the full amount of import duties due on
default for the amount of the importation covered by such LC. The
the first 5 delayed deposit shall not be withdrawable and
days of remittance
default shall be utilized only by crediting the
same to the import duties due on the
b. Per day of P 90 plus 1/15 of 1% on
importation.
default for the the amount
next 5 days of delayed
b. Amount of import duties. The import
of default remittance duties due shall be determined and declared
by the applicant for the LC subject to the
c. Per day of P 120 plus 1/10 of 1% on penalties prescribed under the Tariff and
default for the amount of Customs Code.
the succeeding delayed c. Other payment arrangements. The
days of default remittance
requirement of a deposit shall likewise apply
Provided, That: even if the importation is effected under
(1) Fines imposed above shall not be in other types of payment arrangements or on
excess of P30,000 a day; a deferred payment basis. The deposit
(2) The default shall start to run on the should be made upon presentation of the
day following the last day required for import documents to the agent bank.
submission of the report or remittance, as d. Validation of official receipt. Such
the case may be. However, should the last deposits shall be validated by official
day of filing fall on a non-banking day in receipts of the FIs concerned and shall be
the locality where the reporting bank is credited in the final computation of the
situated, the default shall start on the day import duties, taxes and other charges due
following the next banking day; and on the importation, upon the filing of the
(3) The manner of payment or collection corresponding import entry.
of fines enumerated under Subsec. X902.1 e. Collection of deficiency and refund
shall apply. of excess deposits. Any deficiency in the
(As amended by Circular No. 585 dated 15 October 2007) deposit made as against the actual import
duties, taxes and other charges due on the
§ X903.9 (2008 - X604.9) Liquidity floor importation shall be collected by the
requirement on revenue collections Bureau of Customs from the importer
Revenue collections of AABs shall be prior to the release or withdrawal of the
subject to the liquidity floor requirement shipment. Any excess deposit shall be
under Subsec. X240.6. refunded by the Bureau of Customs to the
importer.
§ X903.10 (2008 - X604.10) Collection f. Remittance of collection. The BSP
of import duties at the time of opening of DDA of the FIs concerned shall be debited
letters of credit. The following rules and for the deposits collected, in accordance
regulations shall govern the collection of with Subsec. X903.5
import duties at the time of opening of letters Under e2m ports
of credit (LC) covering imports and for other a. Collection of deposits of import
purposes: duties. All FIs shall, prior to opening of the
Under Non-e2m ports LC covering imports, collect from the
a. Collection of deposits of import applicant/importer a deposit equivalent to
duties. All FIs shall, upon opening of the LC the full amount of advance import duties

§ X903.10
09.12.31
due on the importation covered by such statement to the effect that it is duty-
LC. The deposit which shall be effected exempt and citing the specific basis/
through an electronic Import Entry authority of such exemption, supported by
Declaration (IED) lodged thru a Value a copy of the applicable certification/
Added Service Provider (VASP), shall not approval/letter of authority of the
be withdrawable and shall be utilized government agency concerned.
only by crediting the same to the import d. Transmittal of the ADPI to the
duties due on the importation. AABs. The ADPI shall be transmitted by
b. Amount of advance deposit. The the BOC to the PCHC Payment Gateway
import duties due shall be computed by the which shall have responsibility for
Electronic to Mobile (e2m) system based on forwarding the same to the AAB
the applicant's declared descriptions, concerned.
ASEAN Harmonized Tariff Nomenclature e. Collection by debit from
(AHTN), quantities and values in the IED. designated bank account. The collection
The LC applicant must ensure that the of the advance deposit as well as of the
particulars of the LC application and the final duties, taxes and other charges
supporting pro-forma invoice correspond to payable on the importation shall be by
those declared in the IED and any debit from the applicant’s bank account
undervaluation, misclassification and designated in the ADPI or in the Final
misdeclaration in the IED shall subject the Payment Instruction (FPI) and credited to
LC applicant to the penalties prescribed the BOC’s account.
under Section 2503 of the Tariff and f. Validation of advance deposits.
Customs Code, as amended. The amount Payment of advance deposits shall be
payable to the AAB, which shall be the full validated by official receipts, such as
advance duty payable on the importation electronic Advance Payment
taking into account exemptions obtained, Confirmations (APC) prepared and
shall be notified to the AAB thru an transmitted by the AAB using the payment
electronic Advance Deposit Payment subsystem of the e2m system via the
Instruction (ADPI). PCHC Payment Gateway.
The net amount payable must be paid g. Other payment arrangements. The
within the IED validity period which is requirement of a deposit as stated in Item
reckoned as seven (7) calendar days from “a” hereof shall likewise apply even if the
date the payment instruction is generated importation is effected under other types
by the e2m system. Beyond the validity of payment arrangements or on a deferred
period, the IED status will be indicated payment basis. The deposit should be
as expired. For expired lEDs, AABs shall made upon presentation of the import
not accept payment. Importers will have documents to the AAB.
to file a new IED. h. Confirmation of advance duties
c. Duty exempt imports. If the collected. The e2m system shall provide
importer/applicant declares in the IED that the importer’s VASP the APC. The VASP
the importation is exempt from duties, shall in turn notify the importer by e-mail
such claim shall be taken at face value in of its receipt of the APC and provide the
the determination by the Bureau of importer a printed copy thereof upon
Customs (BOC) of the amount of advance request.
deposit. However, AABs shall, as a i. Collection of final duties and tax
requirement for the opening of the LC, payable. The final duties and tax payable as
require from the applicant a sworn computed by the e2m system shall be

§§ X903.10 - X906
14.12.31
notified to the AAB concerned thru an The funds collected by banks shall be
electronic FPI. After collecting the amount handled by the bank proper and not the trust
in the FPI, the AAP shall transmit to BOC department: Provided, however, That such
via the PCHC Payment Gateway a Final deposits shall be subject to the reserve
Payment Confirmation (FPC). requirements and the liquidity floor
j. Statement of duties and taxes requirements on government deposits.
availment (SDTA). Upon receipt of the FPC (As amended by Circular Nos. 831 dated 02 May 2014 and
from the AAB, the BOC shall provide the 722 dated 17 May 2011)
importer electronically an SDTA which shall
Sec. X905 (2008 - X605.3) Collection
be his proof of having settled all duties,
Agents of PhilHealth. Banks are authorized
taxes, and other charges on the importation.
to act as collecting agents of the Philippine
k. Phased implementation. The e2m
Health Insurance Corporation (PhilHealth)
system shall be rolled out nationwide in
phases. Importations to be cleared thru under which agency:
Customs Collection Districts already a. PhilHealth members may pay their
operating the e2m system shall be paid thru premium contributions to PhilHealth
payment system prescribed under this through the said banks and the funds thus
Section. However, importations to be collected shall be remitted to PhilHealth in
cleared thru non-e2m customs ports shall accordance with PhilHealth’s agreed
follow the old payment system during the remittance schedule which in no case shall
migration period. exceed thirty (30) days from receipt thereof;
Violations. Any violation of the b. During the period that such premium
provisions of this Subsection shall be contributions are in the custody of banks,
penalized under the pertinent provisions of such funds shall not earn interest; and
the Tariff and Customs Code of the c. The banks shall not collect from
Philippines, as amended, and/or under PhilHealth any service charge for such
Section 37 of Republic Act No. 7653. agency.
(As amended by Circular No.638 dated 09 January 2009) The funds collected by the banks shall
be handled by the operating departments
Sec. X904 Collection Agents of the Social (cash departments) of the banks concerned
Security System. Banks duly accredited by and not their trust operations: Provided,
the SSS are authorized to act as collection however, That such funds shall be subject
agents under which agency, members of the to the reserve requirement on deposits and
SSS may pay their contributions for social to the liquidity floor on government
security and employees compensation to the deposits.
SSS through the said banks. Such banks are
also authorized to receive from SSS members Sec. X906 (2008 - X660) Disclosure of
amortization payments for loans granted by Remittance Charges and Other Relevant
the SSS and such other payments due to SSS. Information. It is the policy of the Bangko
The funds thus collected shall be Sentral to promote the efficient delivery of
remitted to the SSS within the period competitively-priced remittance services
prescribed by the SSS. Any form of business/ by banks and other remittance service
compensation arrangement to the collection providers by promoting competition and the
agents shall be in accordance with the terms use of innovative payment systems,
and conditions agreed upon by the parties. strengthening the financial infrastructure,

§§ X906 - X907.2
15.10.31
enhancing access to formal remittance C. SECURITIES BROKERING

channels in the source and destination ACTIVITIES OF BANKS
countries, deepening the financial literacy
of consumers, and improving transparency Sec. X907 Segregation of Customer Funds
in remittance transactions, consistent with and Securities Received by Banks in the
sound banking practices. Performance of their Securities Brokering
Towards this end, banks providing Functions.
overseas remittance services shall disclose
to the remittance sender and to the recipient/ § X907.1 Statement of policy. Pursuant
beneficiary, the following minimum items to the Bangko Sentral’s policy of promoting
of information regarding remittance the development of domestic capital markets
transactions, as defined herein: by upholding investor protection and
a. Transfer/remittance fee - charge for transparency in securities transactions,
processing/sending the remittance from the following are the guidelines relating to the
country of origin to the country of segregation, handling and reporting of
destination and/or charge for receiving the customer funds and securities received by
remittance at the country of destination; banks in the performance of their securities
b. Exchange rate - rate of conversion brokering functions.
from foreign currency to local currency, e.g., The limited coverage of the guidelines
peso-dollar rate; shall not relieve the bank acting as securities
c. Exchange rate differential/spread - broker of its obligation to comply with other
foreign exchange mark-up or the difference requirements of the Securities Regulation
between the prevailing Bangko Sentral Code (SRC) and its Implementing Rules and
reference/ guiding rate and the exchange/ Regulations (IRR).
conversion rate; (Circular No. 885 dated 14 August 2015)
d. Other currency conversion charges -
commissions or service fees, if any; § X907.2 Definition of terms.
e. Other related charges - e.g., a. Securities brokering- A securities
surcharges, postage, text message or brokering transaction refers to the act of
telegram; buying and selling evidences of
f. Amount/currency paid out in the indebtedness, shares and all types of
recipient country - exact amount of money securities by order of and for the account of
the recipient should receive in local currency customers.
or foreign currency; and b. Securities broker – A securities broker
g. Delivery time to recipients/ refers to an entity which is duly-registered
beneficiaries - delivery period of remittance by the SEC to engage in securities brokering
to beneficiary stated in number of days, transactions.
hours or minutes. c. Customer – A customer refers to any
Banks shall likewise post said person from whom, or on whose behalf, a
information in their respective websites and securities broker receives, acquires or holds
display them prominently in conspicuous funds or securities for the account of such
places within their premises and/or person.
remittance/service centers. d. Customer securities – Customer
(Circular No. 534 dated 26 June 2006) securities refer to (1) securities received by
Manual of Regulations for Banks Part IX - Page 8a

§§ X907.2 - X907.4
15.10.31
a securities broker in behalf of any that may arise in the conduct of securities
customer; (2) securities carried long by a brokering activities within the bank.
securities broker for the account of any (Circular No. 885 dated 14 August 2015)
customer; (3) securities sold to, or bought
for, a customer, by a securities broker. § X907.4 Accounting and record
e. Customer funds- This shall refer to keeping. A bank shall make and keep
funds received from a customer by a broker current books and records relating to
under a securities brokering arrangement. customer funds and securities which shall
f. Broker customer account for be maintained in the principal office of the
settlement of customer trades- This shall bank.
refer to the separate cash account and a. Customer funds received by banks in
margin account of the customer which shall its brokering activities shall be recorded in
be used exclusively for the settlement of the liability account “Broker Customer
securities brokering transactions. Account for Settlement of Customer
g. Broker customer securities account- Trades.” This account shall be governed by
This shall refer to customer securities held the following guidelines:
in accordance with securities brokering (1) All funds under this account are held
agreements such as securities held as margin by the bank in a fiduciary capacity.
and/or prior to the settlement of a customer (2) It shall be free from any and all liens
securities transaction. on the bank’s assets and shall not be held
(Circular No. 885 dated 14 August 2015) to answer for any liability of the bank.
(3) It shall not earn interest and will not
§ X907.3 Segregation of customer funds be included under the coverage of an
and securities. A bank which receives insured deposit under R.A. No. 3591, as
customer funds and securities in the amended.
performance of their securities brokering (4) It shall also be excluded from the
transactions shall keep these funds and monies/assets for which the Bangko Sentral
securities separate from its own assets and requires reserves.
liabilities. b. Securities received by banks in its
a. For securities brokering purposes, brokering activities such as securities held
separate accounts, shall be opened and as margin and/or held prior to the settlement
maintained by/for the customers, designated of customer securities transaction shall be
as follows: recorded as an off-balance sheet item under
(1) “Broker Customer Account for the “Broker Customer Securities Account”
Settlement of Customer Trades” where all in the books of the bank proper. This
funds pertinent to securities brokering account shall be governed by the following
transactions shall be lodged; and guidelines:
(2) “Broker Customer Securities (1) All securities under this account are
Account” where all securities pertinent to held by the bank in a fiduciary capacity.
securities brokering transaction of the (2) This shall be free from any and all
customers shall be lodged. liens on the bank’s assets and shall not be
b. The bank must institute adequate risk held to answer for any liability of the bank.
management systems and controls to ensure (3) This shall also be excluded from the
protection of customer funds and securities, monies/assets for which the Bangko Sentral
proper segregation of functions and provides reserve requirements.
prevention of conflict of interest situations (Circular No. 885 dated 14 August 2015)
Part IX - Page 8b Manual of Regulations for Banks

§§ X907.5 - X931.2
15.10.31
§ X907.5 Receivership. Whenever a from 30 September 2015 upon due notice

receiver is appointed by the Monetary to the banks concerned.
Board for a bank which is authorized to (Circular No. 885 dated 14 August 2015)
engage in securities brokering activities,
the receiver shall, pursuant to the Secs. X908 - X930 (Reserved)
instructions of the Monetary Board,
proceed to close the securities business
D. CREDIT RATING AGENCIES
promptly and arrange for another
Exchange Member, where such bank is a
Sec. X931 (2008 - X654) Recognition and
member of an Exchange, to take over any
outstanding contracts and inform the Derecognition of Domestic Credit Rating
affected customers in writing that their Agencies for Bank Supervisory Purposes.
accounts have been transferred. The following regulations shall govern the
Where the bank is not a member of an recognition and derecognition of domestic
Exchange, the receiver pursuant to the credit rating agencies (CRAs) for bank
instructions of the Monetary Board, shall supervisory purposes.
notify the affected customers, if any, of the
placement of such bank under receivership § X931.1 (2008 - X654.1) Statement of
and require that they transfer their accounts policy. The introduction in the financial
to another broker. market of new and innovative products
(Circular No. 885 dated 14 August 2015) create increasing demand for and reliance
on CRAs by the industry players and
§ X907.6 Reportorial requirements. All regulators as well. As a matter of policy, the
banks with securities brokering license shall
Bangko Sentral wants to ensure that the
submit to the appropriate unit of the SES on
reliance on credit ratings is not misplaced.
a monthly basis an additional report listed
The following rules and regulations that shall
in Appendix 6. This report shall be
considered a Category A-1 report and shall govern the recognition/derecognition of
contain the end-of-week balances of cash domestic CRAs for bank supervisory
and securities that are held in accordance purposes.
with the securities brokering arrangement
with its clients. § X931.2 (2008 - X654.2) Minimum
Transitory Provisions. Banks acting as eligibility criteria. Only ratings issued by
securities brokers shall report their securities CRAs recognized by the Bangko Sentral
brokering transactions in the FRP report shall be considered for Bangko Sentral bank
format (both solo and consolidated basis) supervisory purposes. The Bangko Sentral,
listed in Appendix 6, beginning with the through the Monetary Board, may officially
reporting period ending 30 September 2015.
recognize a credit rating agency upon
The submission of the additional report
required shall commence from the reporting satisfaction of the following requirements:
period ending 30 September 2015. This a. Organizational structure
report shall be submitted every 15th banking (1) A domestic CRA must be a duly
day after end of reference month. The registered company under the SEC; and
additional report shall be considered a (2) A domestic CRA must have at least
provisional report template which may be five (5) years track record in the issuance of
revised by the Bangko Sentral six (6) months reliable and credible ratings. In the case of
Manual of Regulations for Banks Part IX - Page 8c

§ X931.2
08.12.31
new entrants, a probationary status may be assessed/rated entities as a routine

granted: Provided, That the CRA employs component of the surveillance process;
professional analytical staff with experience (c) The CRA shall establish a Rating
in the credit rating business. Committee composed of adequately
b. Resources qualified and knowledgeable individuals in
(1) Human Resources the rating business, majority of whom must
(a) The size and quality of the CRA’s have at least five (5) years experience in
credit rating business;
professional analytical staff must have the
(d) The directors of the CRA must possess
capability to thoroughly and competently a high degree of competency equipped with
evaluate the assessed/rated entity’s the appropriate education and relevant
creditworthiness; experience in the rating business;
(b) The size of the CRA’s professional (e) The directors, officers, members of
analytical staff must be sufficient to allow the rating committee and professional
substantial on-going contact with senior analytical staff of the CRA have not at any
management and operational levels of time been convicted of any offense
(Next page is Part IX - Page 9)
Part IX - Page 8d Manual of Regulations for Banks

§ X931.2
08.12.31
involving moral turpitude or violation of e. Transparency

the Securities Regulation Code; and (1) A general statement of the
(f) The directors, officers, members of assessment methodology used by the CRA
the rating committee and professional should be publicly available;
analytical staff of the CRA are not currently (2) The CRA shall disseminate to the
involved as a defendant in any litigation public thru a well-circularized publication,
connected with violations of the Securities all assigned ratings disclosing whether the
Regulation Code nor included in the BSP rating issued is solicited or unsolicited;
watchlist. (3) The rationale of ratings issued and
(2) Financial resources risk factors considered in the assessment
(a) The CRA must have the financial should be made available to the public;
capability to invest in the necessary (4) The ratings issued by the CRA
technological infrastructure to ensure should be available both to domestic and
speedy acquisition and processing of data/ foreign institutions with legitimate
information and timely release of reliable interest; and
and credible ratings; and (5) Publication of changes in ratings
(b) The CRA must have financial together with the basis for the change
independence that will allow it to should be done on a timely basis.
operate free from economic and political f. Disclosure requirements
pressures. (1) Qualitative disclosures
c. Objectivity (a) Definition of ratings along with
(1) The CRA must use a rigorous and corresponding symbols;
systematic assessment methodology that (b) Definition of what constitutes a
has been established for at least one (1) default, time horizon within which a
year; however, a three (3)-year period is default is considered and measure of loss
preferable; given a default; and
(2) The assessment methodology of (c) Material changes within the CRA
the CRA must be based both on qualitative (i.e., changes in management or
and quantitative approaches; and organizational structure, rating personnel,
(3) The CRA must use an assessment modifications of rating practices, financial
methodology that is subject to on-going deterioration) that may affect its ability to
review and is responsive to changes in the provide reliable and credible ratings.
operations of assessed/rated entities. (2) Quantitative disclosures
d. Independence (a) Actual default rates experienced in
(1) The CRA must be free from control each rating category; and
of and undue influence by the entities it (b) Rating transitions of assessed/
assesses/rates; rated entities over time (i.e., likelihood
(2) The assessment process must be of an AAA credit rating transiting to AA
free from ownership pressures to allow etc. over time).
management to exercise independent g. Credibility
professional judgement; (1) The CRA must have a general
(3) Persons directly involved in the reputation of high standards of integrity
assessment process of the CRA are free and fairness in dealing with its clients and
from conflicts of interest with assessed/ conducts its business in an ethical
rated entities; and manner;
(4) The CRA does not assess/rate an (2) The CRA is generally accepted by
associate entity. predominant users in the market

§§ X931.2 - X931.3
08.12.31
(i.e., issuers, investors, bankers, financial § X931.3 (2008 - X654.3) Pre-

institutions, securities traders); and qualification requirements
(3) The CRA must carry out its rating The application of a domestic CRA
activities with due diligence to ensure for BSP recognition shall be submitted
ratings are fair and appropriate. to the appropriate department of the SES
For purposes of this Section, a of the BSP together with the following
subsidiary refers to a corporation, more information/documents:
than fifty percent (50%) of the voting stock a. An undertaking
of which is owned or controlled directly or (1) That the CRA shall comply with
indirectly by the CRA while an affiliate regulations, directives and instructions
refers to a corporation, not more than fifty which the BSP or other regulatory
percent (50%) but not less than ten percent agency/body may issue from time to
(10%) of the voting stock of which is owned time; and
or controlled directly or indirectly by the (2) That the CRA shall notify the BSP
CRA. in writing of any material changes within
“Control” exists when the parent the organization (i.e., changes in
owns directly or indirectly through management or organizational structure,
subsidiaries more than one-half of the rating personnel, modifications of its rating
voting power of an enterprise unless, in practices, financial deterioration) that may
exceptional circumstance, it can be affect its ability to provide reliable and
clearly demonstrated that such credible ratings.
ownership does not constitute control. b. Other documents/information:
Control may also exist even when (1) Brief history of the CRA, major
ownership is one-half or less of the voting rating activities handled including
power of an enterprise when there is: information on the name of the client,
(a) power over more than one-half of type of instruments rated, size and year
the voting rights by virtue of an agreement of issue;
with other stockholders; (2) Audited financial statements for
(b) power to govern the financial and the past three (3) years and such other
operating policies of the enterprise under information as the Monetary Board
a statute or an agreement; may consider necessary for selection
(c) power to appoint or remove the purposes;
majority of the members of the board of (3) For new entrants, employment of
directors or equivalent governing body; professional analytical staff with
(d) power to cast the majority votes at experience in the credit rating business;
meetings of the board of directors or (4) List of major stockholders/partners
equivalent governing body; or (owning at least ten percent (10%) of the
(e) any other arrangement similar to voting stocks of the CRA directly or along
any of the above. with relatives within the 1st degree of
h. Internal compliance procedures consanguinity or affinity);
(1) The CRA must have the necessary (5) List of directors, officers,
internal procedures to prevent misuse or members of the rating committee and
unauthorized disclosure of confidential/ professional analytical staff of the CRA;
non-public information; and including their qualifications, experience
(2) The CRA must have rules and related to rating activities, directorship
regulations that prevent insider trading and and shareholdings in the CRA and in
other conflict of interest situations. other companies, if any;

§§ X931.3 - X932.1
08.12.31
(6) List of subsidiaries and affiliates b. Procedure for derecognition. A CRA

including their line of business and the shall only be derecognized upon prior notice
nature of interest of the CRA in these and after being given the opportunity to
companies; defend itself.
(7) Details of the denial of a previous
request for recognition, if any § X931.6 (2008 - X654.6) Recognition
(i.e., application date, date of denial, reason of PhilRatings as domestic credit rating
for denial etc.); and agency for bank supervisory purposes
(8) Details of all settled and pending Credit ratings assigned by Philippine
litigations connected with the securities Rating Services Corporation (PhilRatings)
market against the CRA, its directors, may be used, among others, for
officers, stockholders, members of the rating determining appropriate risk weights in
committee and professional analytical staff, ascertaining compliance with existing
if any. rules and regulations on risk-based capital
requirements.
§ X931.4 (2008 - X654.4) Inclusion in
Bangko Sentral list. The BSP will regularly Sec. X932 (2008 - X659) Internationally
circularize to all banks and NBFIs an Accepted Credit Rating Agencies
updated list of recognized CRAs. The BSP, Internationally accepted CRAs are
however, shall not be liable for any damage recognized for bank supervisory purposes
or loss that may arise from its recognition to undertake local and national ratings:
of CRAs to be engaged by users. Provided, That said CRAs shall have at least
a representative office in the Philippines.
§ X931.5 (2008 - X654.5) Derecognition Accordingly, credit ratings assigned by said
of credit rating agencies CRAs may be used, among others, as basis
a. Grounds for derecognition. Credit for determining appropriate risk weights in
rating agencies may be derecognized from ascertaining compliance with existing rules
the list of BSP recognized CRAs under the and regulations on risk-based capital
following circumstances: requirements.
(1) Failure to maintain compliance
with the requirements under Subsec. § X932.1 (2008 - X659.6) Recognition
X931.2 or any willful misrepresentation in of Fitch Singapore Pte., Ltd. as International
the information/documents required under credit rating agency for bank supervisory
Subsec. X931.3; purposes. The national or domestic credit
(2) Involvement in illegal activities such ratings of Fitch Singapore Pte. Ltd., a BSP-
as ratings blackmail; creation of a false recognized international credit rating agency
market or insider trading; divulging any with representative office in the Philippines,
confidential information about a client is hereby recognized by the BSP for bank
without prior consent to a third party supervisory purposes. Accordingly, national
without legitimate interest; indulging in or domestic credit ratings assigned by Fitch
unfair competition (i.e., luring clients of Singapore Pte. Ltd. may be used, among
another rating agency by assuring higher others, as basis for determining appropriate
ratings etc.); and risk weights in ascertaining compliance
(3) Any violations of applicable laws, with existing rules and regulations on risk-
rules and regulations. based capital requirements.

§§ X933 - § X934.3
10.12.31
Sec. X933 (Reserved) 1. Brief history of the MIRA, major

rating activities handled including
Sec. X934 Recognition and Derecognition of information on the name of the client, type
Microfinance Institution Rating Agencies of instruments rated, size and year of
The following regulations shall govern the issue;
recognition and derecognition of 2. Audited financial statements for
Microfinance Institution Rating Agencies the past three (3) years and such other
(MIRA) that provide ratings for banks with information that may be considered
microfinance operation. relevant for selection purposes;
(Circular No. 685 dated 07 April 2010) 3. List of major stockholders/partners
(owning at least ten percent (10%) of the
§ X934.1 Statement of policy. Third- voting stocks of the MIRA directly or
party ratings of FIs provide an independent together with relatives within the 1st degree
assessment which will ultimately benefit of consanguinity or affinity);
stakeholders, including the management of 4. List of directors, officers, members
the covered FI. For microfinance institutions, of the rating committee and professional
the enhanced transparency and independent analytical staff of the MIRA; including their
assessment can materially improve access qualifications, experience related to rating
to capital of qualified institutions and activities, directorship and shareholdings in
generate a useful benchmark vis-à-vis other the MIRA and in other companies, if any;
microfinance institutions. As a matter of 5. List of subsidiaries and affiliates
policy, the BSP supports an enabling including their line of business and the
environment for the appropriate use of nature of interest of the MIRA in these
objective, credible and competent third-party companies;
ratings of microfinance institutions. 6. Details of the denial of a previous
(Circular No. 685 dated 07 April 2010) request for recognition, if any (such as
application data, date of denial, reason for
§ X934.2 Pre-qualification requirements denial, etc.); and
The application of a MIRA for BSP 7. Details of all previous and pending
recognition shall be submitted to the litigations connected with the securities
appropriate department of the SES together market against the MIRA, its directors,
with the following information/documents: officers, stockholders, members of the rating
a. An undertaking that: committee and professional analytical staff,
1. the MIRA shall comply with if any.
regulations, directives and instructions which (Circular No. 685 dated 07 April 2010)
the BSP may issue from time to time; and
2. the MIRA shall notify the BSP in § X934.3 Minimum eligibility criteria
writing of any material changes within the The BSP will review the application based
organization (such as but not limited to on the following basic principles:
changes in management or organizational 1. The proposed rating framework that
structure, rating personnel, modifications of will be used by the applicant-MIRA reflects
its rating practices and financial all the material facets of microfinance
deterioration) that may affect its ability to operations, its attendant risks and
provide reliable and credible ratings. operational challenges; and
b. Other documents/information: 2. The applicant-MIRA demonstrates

§§ X934.3
10.12.31
the technical capability, experience and (d) The directors of the MIRA must
organization to provide microfinance ratings possess a high degree of competency
that are objective, credible and transparent. equipped with the appropriate education
Based on the above principles, the BSP, and relevant experience in the rating
through the Monetary Board, may officially business;
recognize a MIRA upon satisfaction of the (e) The directors, officers, members of
following requirements. The official the Rating Committee and professional
recognition shall be valid for a period of analytical staff of the MIRA have not at any
three (3) years and may be renewed upon time been convicted of any offense involving
assessment that the following requirements moral turpitude or violation of the Securities
are satisfied. Regulation Code; and
a. Organizational structure ( f ) The directors, officers, members of
1. A MIRA must be duly registered the Rating Committee and professional
with the SEC and have the necessary permits analytical staff of the MIRA are not currently
to operate; involved as a defendant in any litigation
2. A MIRA must have at least five (5) connected with violations of the Securities
years track record in the issuance of reliable Regulation Code nor included in the BSP
and credible ratings with particular watchlist.
experience in microfinance; and 2. Financial resources
3. An international MIRA that will (a) The MIRA must have financial
undertake local ratings shall have a capability to support viable operations such
representative office in the Philippines. as, but not limited to, the necessary
b. Resources technology and infrastructure to ensure the
1. Human resources effective processing of data/information and
(a) A MIRA must be staffed by full-time the timely release of reliable and credible
analysts who have the demonstrated ratings; and
capability to competently assess the credit- (b) The MIRA must have financial
worthiness of a microfinance institution independence that will allow it to operate
(MFI). The analysts referred herein preclude free from economic and political pressures.
support staff engaged in other functions such c. Objectivity
as, but not limited to, marketing and 1. The MIRA must employ an
administration; assessment methodology which is accepted
(b) A MIRA must have a sufficient as a global standard. Where the MIRA uses
number of analyst so as to allow substantive its own proprietary framework, said
interaction with the senior management and methodology must have been in market use
operating units of the assessed/rated entities for at least three (3) years with demonstrable
as a routine component of the surveillance credibility;
process; 2. The assessment methodology used
(c) The MIRA shall establish a Rating by the MIRA must be based both on
Committee, independent of its analysts, qualitative and quantitative approaches; and
whose members have unquestionable 3. Said assessment methodology must
expertise in the rating business, majority of be subjected to periodic review to ensure
whom must have at least five (5) years direct that it is responsive to changes in the
professional experience in rating operations of assessed/rated entities.
institutions; d. Independence
Manual of Regulations for Banks Part IX - Page 12a

§§ X934.3
10.12.31
1. The MIRA must be free from control v. any other arrangement similar to
of and undue influence by the entities it any of the above.
assesses/rates; e. Transparency
2. The assessment process must be 1. A general statement of the
free from ownership pressures to allow the assessment methodology used by the MIRA
management of the MIRA to exercise should be publicly available;
independent professional judgment; 2. The rationale of ratings issued and
3. Persons directly involved in the risk factors considered in the assessment
assessment process of the MIRA are free should be made available to the public; and
from conflicts of interest with assessed/rated 3. The ratings issued by the MIRA
entities; and should be available both to domestic and
4. The MIRA cannot assess/rate its foreign institutions with legitimate interest.
affiliate or subsidy or any other entity in f. Disclosure Requirements
which the MIRA has control. 1. Qualitative Disclosures
For purposes of this section, a subsidiary (a) Definition of ratings along with
refers to a corporation, more than fifty corresponding symbols; and
percent (50%) of the voting stock of which (b) Material changes within the MIRA
is owned or controlled directly or indirectly (such as but not limited to changes in
by the MIRA, while an affiliate refers to a management or organizational structure,
corporation, not more than fifty percent rating personnel, modification of rating
(50%) but not less than ten percent (10%) practices, financial deterioration) that may
of the voting stock of which is owned or affect its ability to provide reliable and
controlled directly or indirectly by the MIRA. credible ratings.
“Control” exists when the parent owns 2. Quantitative Disclosures. Rating
directly or indirectly through subsidiaries transitions of assessed/rated entities over
more than one half (1/2) of the voting power time, i.e., the likelihood that the current
of an enterprise unless, in exceptional rating of an entity will change to another
circumstance,; It can be clearly rating (either higher or lower) over time.
demonstrated that such ownership does not g. Credibility
constitute control. Control may also exist 1. The MIRA must have a general
even when ownership is one half(1/2) or less reputation of high standards of integrity and
of the voting power of an enterprise when fairness in dealing with its clients and
there is: conducts its business in ethical manner;
i. power over more than one half 2. The MIRA is generally accepted by
(1/2) of the voting rights by virtue of an predominant users in the market (i.e.,
agreement with other stockholders; issuers, investors, bankers, FIs, securities
ii. power to govern the financial and traders); and
operating policies of the enterprise under a 3. The MIRA must carry out its rating
statute or an agreement; activities with due diligence to ensure
iii. power to appoint or remove the ratings are fair and appropriate.
majority of the members of the board of h. Internal compliance procedures
directors or equivalent governing body; 1. The MIRA must have the necessary
iv. power to cast the majority votes at internal procedures to prevent misuse or
meeting of the board of directors or unauthorized disclosure of confidential/non-
equivalent governing body; or public information; and
Part IX - Page 12b Manual of Regulations for Banks

§§ X934.3 - X950
15.10.31
2. The MIRA must have rules and branches as outlets and/or selling such
regulations that prevent insider trading and financial products without prior Bangko
other conflict of interest situations. Sentral approval.
Sec. 1948 (2008 - 1650) Offering in the
§ X934.4 Derecognition of MIRA. Philippines of Products by Parent Bank and
a. Grounds for derecognition. MIRAs Branches Abroad of the Parent Bank.
may be derecognized, upon evaluation of Philippine branches and subsidiaries of
the appropriate department of the SES, under foreign banks shall:
the following circumstances: a. Inform/notify the Bangko Sentral if
1. Any willful misrepresentation and/ their parent bank and/or branches abroad
or falsification of information/documents of their parent bank offer or market products
required under this Section. in the Philippines, either through electronic
2. Failure to maintain compliance with means (website) or through its local desks
the requirements under this Section. (within bank premises); and
3. Involvement in illegal activities such b. In cases when there are products
as ratings blackmail; creation of a false being offered, to submit to the appropriate
market or insider trading; divulging any department of the SES within ten (10)
confidential information about a client banking days from receipt of Circular Letter
without prior consent to a third party dated 12 April 2005, the list of products
without legitimate interest; indulging in offered/marketed, the corresponding
unfair competition (such as luring clients of manuals containing the policies and
another rating agency by assuring higher procedures, the flow chart of transaction and
ratings, etc.) the risk management system for each
4. Failure to deliver credible, objective particular product.
and transparent ratings as prescribed in this
Section; and Sec. 2948 (Reserved)
5. Any violation of applicable laws,
rules and regulations. Sec. 3948 (Reserved)
b. Procedure for derecognition. A
MIRA shall only be derecognized upon prior Sec. X949 (Reserved)
notice and after being given the opportunity
to defend itself. E. PHILIPPINE & FOREIGN
CURRENCY NOTES & COINS
Secs. X935 - X946 (Reserved) Sec. X950 (2008 - X610) Philippine and
Foreign Currency Notes and Coins. The
Sec. X947 (2008 - X632) Prohibition on the following rules and regulations shall govern
Sale of Foreign-Based Mutual Funds by the treatment and disposition of counterfeit
Banks. Criminal and administrative Philippine and foreign currency notes and
sanctions prescribed under Sections 36 and coins, the reproduction and/or use of
37, respectively, of R.A. No. 7653 (The facsimiles of legal tender Philippine
New Central Bank Act) shall be imposed currency notes and coins, the replacement
on banks marketing/selling foreign-based and redemption of legal tender Philippine
mutual funds using any or all of their currency notes and coins considered

§§ X950 - X950.2
14.12.31
mutilated or unfit for circulation, and the § X950.2 (2008 - X610.2) Treatment
treatment and disposition of Philippine and disposition of counterfeit Philippine
currency notes and coins called in for and foreign currency notes and coins.
replacement. Any person or entity, public or private,
The guidelines and procedures governing who receives or takes hold of a note or
currency deposits and withdrawals of banks coin which is counterfeit or whose
for credit to and debit from their DDAs with genuineness is questionable, whether
the Bangko Sentral is provided in Appendix 80. Philippine or foreign currency, shall issue
(As amended by Circular Nos. 829 dated 13 March 2014 and M- a temporary receipt to its owner/holder
2009-021 dated 16 June 2009) and must indicate therein his name,
address and community tax certificate
§ X950.1 (2008 - X610.1) Definition number or a reference number sourced
of terms. For purposes of this Section, the from any Philippine government-issued ID
following terms are defined: or passport number, or in case of a
a. Legal Tender Philippine Currency foreigner, the date of receipt, the
- Notes and coins issued and circulating denomination, serial number of the note
in accordance with R.A No. 265, as or the coin series as the case may be. The
amended, and/or R.A. No. 7653, which owner/holder shall be required to
when offered for the payment of public countersign the receipt and in case of
or private debt must be accepted. refusal, the reason shall be stated in the
b. Counterfeit Note - An imitation of receipt.
a legal and genuine note intended to Any person or entity, public or private,
deceive or to be taken for that which is who receives, takes hold or has in his
original, legal and genuine. possession a note or a coin which is
c. Counterfeit Coin - An imitation or counterfeit or whose genuineness is
forged design of a genuine and legal coin questionable, whether Philippine or
regardless of its intrinsic value or metallic foreign currency, shall forward the same
composition, intended to deceive or pass within five (5) working days from date
for the genuine coin. of receipt/possession thereof, together
d. Unauthorized Reproduction of with a copy of the temporary receipt
Legal Tender Philippine Note - A required herein for examination to:
reproduction of a facsimile or any
illustration or object bearing the likeness THE CURRENCY ISSUE AND
or similitude of legal tender Philippine INTEGRITY OFFICE
currency note or any part thereof, without Security Plant Complex
prior authority from the Governor of Bangko Sentral ng Pilipinas
Bangko Sentral or his duly authorized East Avenue, Diliman
1101 Quezon City
representative.
e. Unauthorized Reproduction of
In cases where personal delivery to
Legal Tender Philippine Coin - A
the Currency Issue and Integrity Office
reproduction of a facsimile or any object
(CIIO), Bangko Sentral ng Pilipinas,
in metal form bearing the likeness or
Quezon City, is not feasible, delivery of
similitude of legal tender Philippine
the aforestated notes or coins may be
currency coin or any part thereof, without
made through any of the following
prior authority from the Governor of
agencies:
Bangko Sentral or his duly authorized
(1) The Bangko Sentral Regional
representative.
Offices/Branches; or
(As amended by Circular No. 829 dated 13 March 2014)

§§ X950.2 - X950.3
14.12.31
(2) Any banking institution under the The Bangko Sentral shall extend
supervision of the Bangko Sentral. assistance as may be requested of it in the
Any law enforcement agency which investigation, apprehension and/or
conducted any seizure of notes and coins, prosecution of person/s responsible for
whether Philippine or foreign, which are counterfeiting of notes and coins, both
counterfeits or suspected to be counterfeit Philippine or foreign.
currency, shall within five (5) working days (As amended by Circular No. 829 dated 13 March 2014)
from date of seizure, advise in writing the
CIIO, Bangko Sentral ng Pilipinas, Quezon § X950.3 (2008 - X610.3) Reproduction
City of said seizure enclosing therewith a and/or use of facsimiles of legal tender
copy of the receipt and inventory taken on Philippine currency notes. No person or
the seized items. All seized notes or coins entity, public or private, shall design,
which are not or no longer needed as engrave, print, make or execute in any other
evidence in any investigation/legal manner, or utter, issue, distribute, circulate
proceedings shall be immediately turned or use any handbill, advertisement, placard,
over to the CIIO, Bangko Sentral ng circular, card, or any other object
Pilipinas, for proper disposition. whatsoever bearing the facsimile, likeness
The CIIO, Bangko Sentral ng Pilipinas, or similitude of any legal tender Philippine
after examining all notes and coins, whether currency note, or any part thereof, whether
Philippine or foreign, submitted to it for in black and white or any color or
examination and/or determination as to its combination of colors, without prior
genuineness, shall: authority therefor having been secured from
(a) Issue a corresponding certification the Governor, Bangko Sentral or his duly
for the currency examined, if needed; authorized representative.
(b) Stamp the word “COUNTERFEIT” on The reproduction and/or use of
both the front and the back of each note facsimiles or any illustration bearing the
found to be counterfeit; and likeness or similitude of legal tender
(c) Return to the owner/holder, and/or Philippine currency notes referred to above
sender the Philippine or foreign currency may be authorized by the Governor, Bangko
notes or coins found to be genuine in Sentral, or his duly authorized
accordance with existing accounting and representative, for printed illustrations in
auditing regulations. articles, books, journals, newspapers, or
All notes and coins, whether Philippine other similar materials and strictly for
or foreign, determined by the CIIO, Bangko numismatic, educational, historical,
Sentral ng Pilipinas, to be counterfeit newsworthy or other purposes which will
currency, shall not be returned to the maintain, promote or enhance the integrity
owner/holder, but shall be retained and later and dignity of said note: Provided, however,
disposed of in accordance with such That any such facsimile or illustration shall
guidelines as may be adopted by the Bangko be of a size less than three-fifths (3/5) or
Sentral, except those which will be used as more than one and one-half (1-1/2) times in
evidence in an investigation or legal size of the currency note being illustrated
proceedings, in which case, the same shall and that there will be no deviation from the
be retained and preserved by the Bangko purpose for which the notes will be used.
Sentral for evidentiary purposes. (As amended by Circular No. 829 dated 13 March 2014)

§§ X950.4 - X950.5
14.12.31
§ X950.4 (2008 - X610.4) Reproduction b. Banks shall provide securely sealed

and/or use of facsimiles of legal tender bags or containers separately for the clean
Philippine currency coins. No person or or fit notes and for the dirty or unfit notes
entity, public or private, shall design, accompanied by a deposit slip for each
engrave, make or execute in any other type/category. The deposit slip for the unfit
manner, or use, issue, distribute any currency notes shall be clearly labelled
object whatsoever bearing the likeness or as unfit.
similitude as to design, color or the c. To facilitate handling of deposits,
inscription thereon of any legal tender banks' deposits shall be packed in
Philippine currency coin or any part sealed bags or containers in standard
thereof, in metal form, irrespective of size quantity of twenty (20) full bundles per
and metallic composition, without prior denomination (each bundle containing
authority from the Governor, Bangko 1,000 notes in ten (10) equal straps,
Sentral or his duly authorized each strap containing 100 notes).
representative. d. Provincial branches of banks may
The reproduction and/or use of make direct deposits of currency notes,
facsimiles or of any object bearing the duly identified and sorted, with the
likeness or similitude of legal tender nearest Bangko Sentral Regional Office/
Philippine currency coins referred to Branch. In areas where there are no
above may be authorized by the Governor, Bangko Sentral Regional Offices/
Bangko Sentral, or his duly authorized Branches, provincial branches of banks
representative, strictly for numismatic, shall arrange with their respective Head
educational, historical and other purposes Offices the shipment of their unfit or
which will maintain, promote or enhance dirty notes for deposit with the CD,
the integrity and dignity of said coins. Bangko Sentral in Quezon City. Cost of
(As amended by Circular No. 829 dated 13 March 2014) shipment and other related expenses to
be incurred shall be solely for the
§ X950.5 (2008 - X610.5) Clean note account of the bank concerned.
and coin policy. To effect an expeditious e. In order to ensure compliance with
withdrawal from circulation of unfit Philippine the Bangko Sentral’s Clean Note Policy,
currency notes classified under banks shall incorporate measures on the
Subsec. X950.6, banks and their branches implementation thereof in their
shall observe the following guidelines and compliance program.
procedures when making cash deposits with the Coins submitted by banks to Bangko
Cash Department (CD) or any of the Regional Sentral for deposit/determination of
Offices/Branches of the Bangko Sentral. redemption value shall be packed/bagged
a. Banks shall classify their cash deposits in accordance with the following
according to: (1) clean or fit notes and procedure:
(2) dirty or unfit notes, in accordance with a. Coins shall be free from adhesive
the Currency Guide for Bank Tellers, Money tapes;
Counters and Cash Custodians prepared by b. Coins shall be sorted into fit, unfit
CIIO, Bangko Sentral. The notes thus or mutilated, per denomination and per
classified shall be further sorted by series series;
and by denomination.

§§ X950.5 - X950.6
14.12.31
c. Each bag of coins shall contain the design and size of the note; or
following standard number of pieces and (2) The original size of the note has been
amount per denomination: reduced/lost through wear and tear or has
been otherwise torn, damaged, defaced or
Denomination Pieces Amount perforated through action of insects,
Per Bag Per Bag chemicals or other causes; or
10-piso 1,200 12,000.00
5-piso 1,500 7,500.00 (3) It is scorched or burned to such an
1-piso 2,000 2,000.00 extent that although recognizable as such,
25-sentimo 3,000 750.00 it has become frail and brittle as to render
10-sentimo 4,500 450.00 further handling thereof impossible without
5-sentimo 5,000 250.00
disintegration or breaking; or
1-sentimo 5,000 50.00
(4) It is split edgewise; or
Provided, however, That in the case of unfit (5) It has lost all the signatures inscribed
or mutilated coins, these could be packed thereon; or
in amounts of One Thousand Pesos (6) The Embedded Security Thread or
(P1,000.00) for denomination 10-,5-, and Windowed Security Thread placed on the
1-piso; and fifty pesos (P50.00) for 25-, banknote is lost.
10-, 5-, and 1-sentimo. c. Unfit currency coin. A currency coin
The CD and the Regional Offices/ shall be considered unfit for circulation
Branches of Bangko Sentral may refuse when:
acceptance of cash deposits that do not (1) It is bent or twisted out of shape or
conform to these guidelines and procedures. defaced, but its genuineness and/or
(As amended by Circular No. 829 dated 13 March 2014) denomination can still be readily and clearly
determined/identified; or
§ X950.6 (2008 - X610.6) Replacement (2) It has been considerably reduced in
and redemption of legal tender Philippine weight by natural abrasion/wear and tear.
currency notes and coins considered d. Mutilated currency coin. A currency
mutilated or unfit for circulation coin shall be considered mutilated when:
a. Unfit currency note. A currency note (1) It shows signs of filing, clipping or
shall be considered unfit for circulation perforation; or
when: (2) It shows signs of having been burned
(1) It contains heavy creases which or has been so defaced, that its genuineness
break the fiber of the paper and indicate that and/or denomination cannot be readily and
disintegration has begun; or clearly identified.
(2) It is badly soiled/contaminated and/ e. Currency notes and coins considered
or with writings even if it has proper life or unfit for circulation shall not be re-
sizing; or circulated, but may be presented for
(3) It presents a limp or raglike exchange to or deposited with any bank.
appearance and/or it can not sustain its f. Banks shall accept from the public
upright position when held at the mid mutilated notes and coins for referral/
portion of one of the shorter borders. transmittal to CIIO, Bangko Sentral –
b. Mutilated currency note. A currency Quezon City or any of the Bangko Sentral
note shall be considered mutilated when: Regional Offices/Branches for determination
(1) Torn parts of banknote are joined of redemption value. Banks may charge
together with adhesive tape aimed at reasonable handling fees from clients and/
preserving as nearly as possible the original or the general public relative to the handling/

§§ X950.6 - X954
14.12.31
transporting to Bangko Sentral of mutilated period as may be determined by the

notes and coins. Monetary Board.
g. The Bangko Sentral shall replace or The CD or Regional Offices/Branches
redeem notes and coins considered unfit for of the Bangko Sentral shall exchange the
circulation or mutilated except under the notes/coins called in for replacement if
following conditions: presented to the Bangko Sentral within the
(1) Identification of notes and coins is redemption period as determined by the
impossible; or Monetary Board and subsequently dispose
(2) Coins that show signs of filing, the same in accordance with Bangko Sentral
clipping or perforations; or procedures for disposal.
(3) Notes which have lost more than (As amended by Circular No. 829 dated 13 March 2014)
two-fifths (2/5) of their surface or all of the
signatures inscribed thereon; or § X950.8 (2008 - X610.8) Penalties
(4) Notes which are split edgewise Any violation of the provisions of Subsecs.
resulting in the loss of the whole of or part X950.3 and X950.4, shall subject the
of, either the face or back portion of the offender to imprisonment of not less than
banknote paper; or five (5) years, but not more than ten (10)
(5) Notes where the Embedded Security years. In case the Revised Penal Code
Thread or Windowed Security Thread provides for a greater penalty, then that
placed thereon is completely lost except penalty shall be imposed.
when the damage appears to be caused by (As amended by Circular No. 829 dated 13 March 2014)
wear and tear, accidental burning, action
of water or chemical or bites of rodents/ Secs. X951 - X953 (Reserved)
insects and the likes.
Notes and coins falling under any of the Sec. X954 Service Fee for New/Fit Note
classifications mentioned under Item “g” Deposits with the Bangko Sentral. The
above shall be withdrawn from circulation following are the guidelines on the
and demonetized without compensation to imposition of service fee on new and fit
the owner/bearer. note deposit of banks with the Cash
(As amended by Circular No. 829 dated 13 March 2014) Department (CD), Currency Management
Sub-Sector (CMSS) and the Regional
§ X950.7 (2008 - X610.7) Treatment Offices and Branches, Regional Monetary
and disposition of Philippine currency notes Affairs Sub- Sector (RMASS):
and coins called in for replacement. Any a. A service fee of P100 for every
person or entity, public or private, who 1,000 pieces of new/fit note deposits of
receives, takes, holds or has in his banks shall be charged effective 04
possession Philippine currency notes and January 2010 and 01 October 2010,
coins called in for replacement shall respectively.
forward the same during the redemption b. Banks shall issue a letter of
period to: authority in favor of the Bangko Sentral,
a. Any authorized agent banks of the through the CMSS to debit their respective
Bangko Sental when the notes are still DDA maintained with the Bangko Sentral,
considered legal tender, within one (1) year for the service fee on their new/fit note
from the date of call; or mixed with unfit deposits found by CD
b. The CD or Regional Offices/Branches during processing using the Automated
of the Bangko Sentral, within the redemption Bank Processing Machines (ABPMs);

§§ X954 - X960.2
14.12.31
c. New/Fit notes of bundled new and fit notes packed in

(1) New notes shall be deemed to sealed containers in uniform quantity of
include notes in original Bangko Sentral twenty (20) complete bundles of one (1)
wrappers/bundles and notes in uncirculated various denominations.
condition in individual bank wrappers. (M-2009-044 dated 09 November 2009, as amended by M-2014-
(2) Fit notes shall be deemed to include: 021 dated 03 May 2014, M-2010-030 dated 22 September 2010)
(a) Clean notes such that the prints are
clear and the genuineness is obvious; Secs. X955 - X959 (Reserved)
(b) Notes without writing and/or heavy
creases; Sec. X960 Personal Equity and Retirement
(c) Notes that can maintain their upright Account (PERA) Market Participants and
position when held at the mid portion of one PERA Investment Products. The following
(1) of the shorter borders; and are the guidelines on the qualification/
(d) Notes falling under Items “(a)” to “(c)”, accreditation of PERA Market Participants
which are found upon processing, mixed with and PERA Investment Products which are
unfit notes deposited by a bank. being issued pursuant to R.A. No. 9505, also
Deposits of fit note falling under Item known as the PERA Act of 2008 (PERA Act),
“(c)(2)(d)” shall be charged a service fee of and its implementing Rules and Regulations
P100.00 per 1,000 pieces provided that (the PERA Rules).
deposit of said notes of less than 1,000 pieces The operational guidelines on the
shall be charged the proportionate service fee administration of the personal equity and
of P10.00 per wrapper or fraction thereof. retirement account are found in Appendix 109.
Deposits of wrappers of fit notes, (Circular No. 860 dated 28 November 2014)
including those mixed with unfit notes, shall
be charged the applicable service fee which §X960.1 Applicability. These guidelines
shall be debited against the demand deposit apply to banks, trust entities1 and other entities
account of the bank concerned with the determined by the Bangko Sentral as eligible
Bangko Sentral on the day the deposits are that seek to be qualified/accredited and are
processed by CD. qualified/accredited as PERA Market
d. Banks shall continue to prepare separate Participants, and to PERA Investment Products
deposit slip/s for new, fit and unfit notes which that are considered eligible by the Bangko
will serve as basis for the imposition of Sentral for PERA purposes.
applicable service fees for fit and new notes. (Circular No. 860 dated 28 November 2014)
e. The applicable service fee shall be
debited against the DDA of the bank §X960.2 Eligibility criteria
concerned with the Bangko Sentral on the day a. PERA investment products. The
of deposit based on the deposit slip/s; following PERA investment products are
f. Banks in Metro Manila shall deposit considered to be Bangko Sentral-eligible
new/fit notes in separate sealed transparent PERA investment products: Provided, That
containers of twenty (20) bundles per with respect to Items "1" and "2" below,
denomination. The CD may refuse to accept they are issued by Bangko Sentral-supervised
mixed deposits of new, fit and unfit notes. entities with CAMELS rating of not lower
g. The Bangko Sentral Regional Offices than “3” or its equivalent, to wit:
and Branches may, however, accept deposit (1) Unit investment trust fund (UITF);
1
Trust entity shall refer to a (a) bank or non-bank financial institution, through its specifically designated
business unit to perform trust functions, or (b) trust corporation, authorized by the Bangko Sentral ng Pilipinas
(BSP) to engage in trust and other fiduciary business under Section 79 of R.A. No. 8791 (the General Banking
Law of 2000) or to perform investment management services under Section 53 of R.A. No. 8791.

§§ X960.2 - X960.3
14.12.31
(2) Debt-instruments such as, but not in capital, surplus and undivided profits, less:
limited to, long term negotiable certificate (a) The one percent (1%) of the book
of deposits and unsecured subordinated debt; value of the total volume of PERA assets
(3) Deposits; and administered and other capital adjustments
(4) Government-issued securities.
as may be required by the Bangko Sentral;
In the case of UITF, the existing approval
process shall be observed. The Bangko (b) Total outstanding unsecured credit
Sentral may allow other category of accommodations, both direct and indirect,
investment products or outlets for PERA extended by the Administrator to DOSRI; and
purposes: Provided, That the product is non- (c) Appraisal surplus or appreciation
speculative, readily marketable, and with a credit as a result of appreciation or an
track record of regular income payments to increase in the book value of the assets of
investors.
the Administrator.
b. PERA market participants
PERA Market Eligible Entities
DOSRI cited in Item "1(b)" above shall
Participants refer to that provided in Subsec. X326.1:
Administrator Banks, trust entities and Provided, That for purposes of this
other entities as may be provision, references to a bank as an entity
determined by the Bangko
shall be understood to include references
Sentral as eligible to act
as PERA to any other type of entity acting as
Administrator Administrator.
Investment Trust entities and other (2) It has adopted a Manual of
Manager entities as may be Corporate Governance approved by the
determined by the Bangko
Sentral as having the
Bangko Sentral, and is in full compliance
qualifications to be therewith.
accredited as PERA (3) It has a clear and sufficient
Investment Manager organization plan or structure of its
Cash Custodian Banks personnel who will perform the PERA
Securities Banks and trust entities
administration functions, stating the
Custodian
Investment Any Bangko Sentral- definition of the duties and responsibilities
Product Provider supervised entity that as well as the line and staff functional
wishes to offer relationships.
PERA Investment Product (4) It possesses adequate systems and
to Contributors
technological capabilities, and the
(Circular No. 860 dated 28 November 2014) necessary technical expertise and personnel
to administer all types of PERA investment
§X960.3 Qualification/Accreditation
products, ensure the proper recording and
requirements
tracking of a contributor’s PERA, and
a. As an Administrator. The Bangko
perform the other required functions of an
Sentral shall issue a Qualification Certificate
Administrator.
as Administrator to an entity upon
(5) It has sufficient personnel who
compliance with the following
have undergone the requisite training
requirements:
prescribed by the Bangko Sentral to educate
(1) The applicant maintains a net worth
the contributor on:
of at least Php100 million at all times.
Net worth shall refer to the combined (a) The nature of a PERA;
capital accounts of the Administrator which (b) Privileges, conditions and
shall mean the total of the unimpaired paid- requirements of a PERA;

§ X960.3
14.12.31
(c) The risks and benefits of each type management;

of PERA investment products; and (3) Certified true copy of educational,
(d) Respective roles of the Administrator, professional/technical or other academic
Investment Manager and Custodian. qualifications of its principal officers;
(6) It has adopted the following forms that (4) Copy of its form contract to be
the Administrator shall use in dealing with the utilized. The agreement between the
Contributor and his PERA: contributor and the Investment Manager
(a) Pre-Acceptance Disclosure Policy shall contain the following minimum
described in PERA Rule 6.A.2.a; contents:
(b) Client Suitability Assessment (a) Overall investment philosophy,
standards and practices of the Investment
Questionnaire referred to in PERA Rule
Manager; and
6.A.2.b(i); (b) Validation of contributor’s Client
(c) Risk Disclosure Statement, which Suitability Assessment and Investment
shall include the standard minimum Policy Statement made by contributor’s
information referred to in PERA Rule 6.A.2.d; Administrator referred to in PERA Rule
and 6.A.2.b (i) and (ii); and
(d) Contract between the Contributor and (5) A schedule of commission charges
the Administrator referred to in PERA Rule and/or other fees it will charge for its
services.
6.A.2.c.
c. As a Custodian
(7) It has a board-approved policy on
Cash custodian. In addition to the
fees and charges to be imposed for its
standard pre-qualification requirements for
services as Administrator which shall be
the grant of banking authorities enumerated
subject to Bangko Sentral approval.
in Appendix 5, banks applying for authority
Failure to satisfy any of the above
to act as cash custodian for PERA shall also
requirements shall be a ground for the denial
comply with the following conditions:
of the application, without prejudice to the
(1) The applicant bank must have
re-filing of an application.
complied with the minimum capital required
An Administrator who has been issued
under Subsec. X111.1; and
with a “Qualification Certificate” shall then
(2) The Bank’s CAMELS composite
file an application for accreditation with the
rating in its latest examination is not lower
PERA Processing Office of the BIR to
than “3” with Management component score
complete its application process to become
of not lower than “3”.
a PERA Administrator.
Securities custodian. Only banks and
b. As an Investment Manager. The
other entities with trust license which have
Bangko Sentral shall accredit an entity as an
complied with the requirements under
Investment Manager upon submission of a
Subsec. X441.5 may be accredited as
written application certified by the Chief
securities custodian.
Executive Officer (CEO) together with the
For purposes of this Subsection, the
following documentary requirements:
Bangko Sentral may provide for such other
(1) Written supervision and control
requirements or qualifications as it may
procedures for the conduct of the investment
deem necessary for the qualification/
management functions;
accreditation of a supervised entity as a PERA
(2) Proof of at least five (5) years of
Market Participant.
experience in professional investment
(Circular No. 860 dated 28 November 2014)

§§ X960.4 - X960.5
14.12.31
§X960.4 Application for qualification/ of its duties as evidenced by a final and

accreditation. An eligible supervised entity executory court order: Provided, further,
seeking qualification/accreditation as PERA That the Administrator shall not withdraw,
Market Participant (Administrator, transfer or replace such earmarked securities
Investment Manager, Cash Custodian or without prior written instruction from the
Securities Custodian) shall file an Bangko Sentral. The security for the faithful
application for qualification/accreditation performance of the Administrator’s duties
with the appropriate department of the SES. shall be in addition to and shall be treated
The application shall be signed by the CEO separately from the capital, surplus, and
and shall be accompanied by the following undivided profits of the Administrator.
documents: For this purpose, eligible government
a. Certified true copy of the resolution securities shall consist of evidences of
of the entity’s board of directors authorizing indebtedness of the Republic of the
the application; Philippines and of the Bangko Sentral and
b. Certification signed by the CEO that any other evidences of indebtedness or
the entity has complied with all the relevant obligations the servicing and repayment of
qualification/accreditation requirements which are fully guaranteed by the Republic
enumerated under Subsec. X960.3 and an of the Philippines and such other kinds of
undertaking to comply with the securities which may be declared eligible
aforementioned requirements while it acts by the Monetary Board: Provided, That,
as an Administrator, Investment Manager, such securities shall be free, unencumbered,
Cash Custodian and/or Securities and not utilized for any other purpose:
Custodian; and Provided further, That such securities shall
c. Relevant PERA forms, Board- have remaining maturities of not more than
approved policy on fees and charges, and three (3) years from the date the securities
proof of compliance with Subsec. have been earmarked in favor of the Bangko
X960.3.a.(5) insofar as the application of the Sentral.
Administrator is concerned. a. Valuation of securities and basis of
The qualification/accreditation of PERA computation of the basic security deposit
Market Participants and accreditation of requirement. For purposes of determining
PERA Investment Products granted by the compliance with the security for the faithful
Bangko Sentral shall be valid until revoked. performance of Administrators under the
(Circular No. 860 dated 28 November 2014) PERA Act, the amount of securities so
earmarked shall be based on their book
§X960.5 Security for the faithful value, that is, cost as increased or decreased
performance of Administrators. As a by the corresponding discount or premium
security for the faithful performance of its amortization. The base amount for the
duties under the PERA Act, an Administrator security shall be the average of the month-
shall hold eligible government securities, end balances of administered assets for the
equivalent to at least one percent (1%) of quarter.
the book value of the total volume of PERA b. Compliance period; Sanctions. The
assets administered, earmarked in favor of Administrator shall have one (1) week from
the Bangko Sentral: Provided, That the the end of every calendar quarter within
Administrator shall issue an authorization which to replenish any deficiency in the
in favor of the Bangko Sentral to withdraw, security requirements as abovementioned.
dispose and disburse the proceeds thereof Any non-compliance with the security
to settle any claims arising from the breach requirements shall be subject to Sections 36

§§ X960.5 - X960.7
14.12.31
and 37 of R.A. No. 7653 also known as the under the PERA Rules, these guidelines or
New Central Bank Act without prejudice has failed to maintain compliance with any
to the imposition of other sanctions as the of them;
Monetary Board may consider warranted e. Failed to carry on and manage its
under the circumstances that may include PERA-related business and activities in a
the suspension or revocation of the entity’s proper, diligent and efficient manner to the
authority to engage in PERA administration, prejudice of the Contributor;
and such other sanctions as may be provided f. Been subject to regulatory sanctions
by law. for (a) violations, which the Bangko Sentral
(Circular No. 860 dated 28 November 2014) determines to affect its operating conditions
and ability as a PERA Market Participant,
§X960.6 Grounds for suspension or such as but not limited to violations affecting
revocation of qualification/accreditation of required capitalization and/or solvency, or
Administrator, Investment Manager or (b) any act or behavior prejudicial to the
Custodian. The qualification of an PERA Contributors;
Administrator, and the accreditation of an g. Been enjoined or restrained by a
Investment Manager and Custodian may be competent body from engaging in securities,
refused, restricted, suspended or revoked banking or insurance activities;
by the Bangko Sentral if, after due notice h. Failed to enforce or monitor PERA
and hearing, the Bangko Sentral determines contribution limits entitled to tax incentives; or
that the applicant or licensee has: i. Failed to manage or adequately
a. Willfully violated any provision of address conflicts of interest in the
the PERA Act, the PERA Rules or any performance of its functions, which may be
regulations and issuances by the Bangko identified by the Bangko Sentral as
Sentral made pursuant thereto, or any other prejudicial to the interests of the PERA
law administered by the Bangko Sentral Contributor.
relevant to its function as a PERA Market For purposes of this subsection, the term
Participant, or providing prudential “competent body” shall include a foreign
standards for asset management or has court of competent jurisdiction and a foreign
aided, abetted, counseled, commanded, financial regulator.
induced or procured such violation; (Circular No. 860 dated 28 November 2014)
b. Failed to supervise, with a view to
preventing such violation, a person §X960.7 Penalty. A fine of not less than
associated to the applicant or licensee by Php50 thousand nor more than Php200
virtue of an agreement or other types of thousand or imprisonment of not less than
arrangement and who commits such violation; six (6) years and one (1) day to not more
c. Willfully made or caused to be made than twelve (12) years or both, such fine and
a materially false or misleading statement in imprisonment at the discretion of the court,
the application for qualification/ accreditation shall be imposed upon any person,
or report filed with the Bangko Sentral, or association, partnership or corporation, its
has willfully omitted to state any material officer, employee or agent, who, acting
fact that is required to be stated therein or alone or in connivance with others, shall:
necessary to make the statement therein not a. Act as Administrator, Custodian or
misleading; Investment Manager without being properly
d. Failed to maintain the qualifications
qualified or without being granted prior
or requirements for accreditation prescribed
accreditation by the Bangko Sentral;

§§ X960.7 - X999
14.12.31
b. Invest the contribution without the administrative sanctions provided for in

written or electronically authenticated applicable laws such as those set forth in
authority from the Contributor, or invest the Section 37 of R.A. No. 7653.
contribution in contravention of the The above penalties shall be without
instructions of the Contributor; prejudice to whatever civil and criminal
c. Knowingly and willfully make any liability provided for under applicable
statement in any application, report, or laws for the same act or omission such as
document required to be filed under the those set forth in Sections 35 and 36 of
PERA Act, which statement is false or R.A. No. 7653.
misleading with respect to any material fact; (Circular No. 860 dated 28 November 2014)
d. Misappropriate or convert, to the
prejudice of the Contributor, contributions § X960.8 Reportorial requirements
to and investments or income from the PERA; An entity qualified/accredited by the
e. By gross negligence, cause any loss, Bangko Sentral to be a PERA Market
Participant shall comply with the
conversion, or misappropriation of the
reportorial requirements that may be
contributions to, or investments from the prescribed by the Bangko Sentral.
PERA; or (Circular No. 860 dated 28 November 2014)
f. Violate any provision of the PERA
Act or rules and regulations issued pursuant Secs. X961 - X998 (Reserved)
to the PERA Act.
Notwithstanding the foregoing, any Sec. X999 (2008 - X199) General Provision
willful violation by the accredited on Sanctions. Except as otherwise provided,
any violation of the provisions of this Part
Administrator, Custodian or Investment
shall be subject to Sections 36 and 37 of
Manager of any of the provisions of the
R.A. No. 7653.
PERA Act, the PERA Rules, relevant rules The guidelines for the imposition of
and regulations issued by the Bangko Sentral monetary penalty for violations/offenses
or other terms and conditions of the with sanctions falling under Section 37 of
authority to act as Administrator, Custodian R. A. No. 7653 on banks, their directors
or Investment Manager may be subject to and/or officers are shown in Appendix 67.

§§ X1001 - X1001.2
14.12.31
PART TEN
BSP REGULATIONS ON FINANCIAL CONSUMER PROTECTION
A. CONSUMER PROTECTION responsibilities to senior management and/

OVERSIGHT FUNCTION or committees created for the purpose but
not the function of overseeing compliance
Section X1001 Consumer Protection with the Bangko Sentral-prescribed
Oversight Function. The Board of Directors Consumer Protection Framework and the
(Board) of BSP-Supervised Financial BSFI's own Consumer Protection Framework.
Institutions (BSFI) is ultimately responsible (Circular No. 857 dated 21 November 2014)
in ensuring that consumer protection
practices are embedded in the BSFI's § X1001.2 Consumer protection risk
business operations. BSFIs must adhere to management system (CPRMS). All BSFIs,
the highest service standards and embrace regardless of size, should have a CPRMS that
a culture of fair and responsible dealings in is part of the corporate-wide risk
the conduct of their business through the management system. The CPRMS is a means
adoption of a bank's Financial Consumer by which a BSFI identifies, measures,
Protection Framework that is appropriate to monitors, and controls consumer protection
the BSFI's corporate structure, operations, risks inherent in its operations. These
and risk profile. The BSFI's Financial include both risks to the financial consumer
Consumer Protection Framework shall be and the BSFI. The CPRMS should be directly
embodied in its Board-approved Financial proportionate to the BSFI's asset size,
Consumer Protection Manual. structure, and complexity of operatiom. A
(Circular No. 857 dated 21 November 2014) carefully devised, implemented, and
monitored CPRMS provides the
§ X1001.1 Role and responsibility of foundation for ensuring a bank's
the board and senior management. The adherence to consumer protection
board and senior management are standards of conduct and compliance with
responsible for developing the BSFI's consumer protection laws, rules and
consumer protection strategy and regulations, thus ensuring that the BSFI's
establishing an effective oversight over the consumer protection practices address
BSFI's consumer protection programs. The and prevent identified risks to the bank and
board shall be primarily responsible for associated risk of financial harm or loss to
approving and overseeing the consumers.
implementation of the BSFI's consumer a. Board and senior management
protection policies as well as the oversight. The board is responsible for
mechanism to ensure compliance with developing and maintaining a sound
said policies. While senior management CPRMS that is integrated into the overall
is responsible for the implementation of framework for the entire product and
the consumer protection policies approved service life-cycle. The board and senior
by the board, the latter shall be responsible management should periodically review
for monitoring and overseeing the the effectiveness of the CPRMS, including
performance of senior management in how findings are reported and whether
managing the day to day consumer the audit mechanisms in place enable
protection activities of the BSFI. The board adequate oversight. The quality and
may also delegate other duties and timeliness of the information provided to
Manual of Regulations for Banks Part X - Page 1

§§ X1001.2 - X1002
14.12.31
the board and senior management regarding d. Internal audit function. Independent
the BSFI's CPRMS are especially important for of the compliance function, the BSFI’s audit
assessing the program's effectiveness. The function should review its consumer
board and senior management must also protection practices, adherence to internal
ensure that sufficient resources have been policies and procedures, and compliance
devoted to the program. The ability to achieve with existing laws, rules and regulations.
the consumer protection objectives depends, The BSFI’s internal audit of the different
in large part, on the authority and business units/functions should include the
independence of the individuals directly consumer protection audit program. A
responsible for implementing the CPRMS and well-designed and implemented consumer
for performing audit/review activities, and the protection audit program ensures that the
support provided by the board and senior board or its designated committee shall be
management. The board and senior able to make an assessment on the
management must also make certain that effectiveness of implementation as well as
CPRMS weaknesses are addressed and adequacy of approved policies and
corrective actions are taken in a timely manner. standards in meeting the established
b. Compliance program. A Consumer consumer protection objectives.
Protection Program is an essential e. Training. Continuing education of
component of the CPRMS. The BSFIs should personnel about consumer protection laws,
establish a formal, written Consumer rules and regulations as well as related bank
Protection Compliance Program that is part policies and procedures is essential to
of the over-all Compliance System and maintaining a sound consumer protection
should be in accordance with the Revised compliance program. BSFIs should ensure
Compliance Framework for Banks under that all relevant personnel specifically those
Sec. X180. A well planned, implemented, whose roles and responsibilities have
and maintained Consumer Protection customer interface, receive specific and
Compliance Program should prevent or comprehensive training that reinforces and
reduce regulatory violations and protect helps implement written policies and
consumers from non-compliance and procedures on consumer protection. The
associated harms and loss. BSFI should institute a consumer protection
c. Policies and procedures. An effective training program that is appropriate to its
CPRMS should have consumer protection organization structure and the activities it
policies and procedures in place, approved engages. The training program should be
by the Board. A comprehensive and fully able to address changes in consumer
implemented policies help to communicate protection laws, rules and regulations and
the board’s and senior management’s to policies and procedures and should be
commitment to compliance as well as provided in a timely manner.
expectations. Overall, policies and procedures (Circular No. 857 dated 21 November 2014)
should a) be consistent with consumer
protection policies approved by the board; B. CONSUMER PROTECTION
b) ensure that consumer protection practices STANDARDS OF CONDUCT FOR BSFIs
are embedded in the BSFI’s business
operations; 3) address compliance with Sec. X1002 Consumer Protection
consumer protection laws, rules, and Standards. The following consumer
regulations; and 4) reviewed periodically protection standards reflect the core
and kept-to-date as it serve as reference for principles, which BSFIs are expected to
employees in their day-to-day activities. observe at all times in their dealings with
Part X - Page 2 Manual of Regulations for Banks

§§ X1002 - X1002.1
14.12.31
financial consumers. These should be warranted, reference to the T&C should be

embedded into the corporate culture of the made while transacting with the consumer
BSFI, enhancing further its defined and before consummating the transaction,
governance framework while addressing if such reference is material to the
conflicts that are inimical to the interests of understanding of the consumer of the nature
the financial consumer. of the product or service, as well as its
(Circular No. 857 dated 21 November 2014) benefits and risks.
As a written document, the T&C must
§ X1002.1 Disclosure and be complete but concise, easily
transparency. BSFIs must take affirmative understandable, accurate, and presented in
action to ensure that their consumers have a manner that facilitates the consumer’s
a reasonable holistic understanding of the comprehension. The latter is taken to mean
products and services, which they may be that the text of the document should be
acquiring or availing. In this context, full according to Subsec. X320.4 (Amended
disclosure and utmost transparency are the Regulations to Enhance Consumer
critical elements that empower the Protection in the Credit Card Operations of
consumer to make informed financial Banks and Their Subsidiary or Affiliate
decisions. This is made possible by Credit Card Companies).
providing the consumer with ready access The T&C should include at least the
to information that accurately represents the following:
nature and structure of the product or (a) The full price or cost to the customer
service, its terms and conditions, as well as including all interest, fees, charges, and
its fundamental benefits and risks. penalties. The T&C must clearly state
The BSFI demonstrates the competencies whether interest, fees, charges, and
required of this principle if it complies with penalties can change over time. The method
the following: for computing said interest, fees, charges,
a. Key information and penalties shall be presented in
(1) Ensures that offering documents of accordance with Subsec. X305.5;
products and services contain the (b) General information about the
information necessary for customers to be operation of the products or services
able to make an informed judgment of the including the customer’s obligations and
product or service and, in particular, meet liabilities;
the full disclosure requirements specified (c) Cooling-off period, if applicable.
under existing laws or regulations. All key (d) Cancellation, return and exchange
features and risks of the products should be policies, and any related cost;
highlighted prominently in a succinct (e) The actions and remedies which the
manner. Where a product is being offered BSFI may take in the event of a default by
on a continuous basis, its offering the customer;
documents should be updated in (f) Procedures to report unauthorized
accordance with the requirements set out transactions and other contingencies, as well
in the regulations. as the liabilities of parties in such case; and
(2) Readily and consistently makes (g) A summary of the BSFI’s complaints
available to the customer a written copy handling procedure.
of the terms and conditions (T&C) that (3) Advises customers to read and
apply to a product or service. The contents understand the applicable T&C, when
of the T&C must be fully disclosed and considering a product or service.
explained to financial customers before (4) Ensures that its staff communicates
initiating a transaction. Where and when in such a manner that clients can understand

§ X1002.1
14.12.31
the terms of the contract, their rights and customers. Communication channels
obligations. Staff should communicate with employed for such targeted marketing
techniques that address literacy limitations initiatives may be accordingly calibrated.
(e.g., materials are available in local (11) Offers enhanced disclosure for
language). more complex products, highlighting the
(5) Provides customers adequate time to costs and risks involved for the customer.
review the T&C of the product or service, For structured investment products, a
asks questions and receives additional Product Highlight Sheet (PHS) is required.
information prior to signing contracts or The PHS should be clear, concise, and
executing the transaction. The staff of the easily understandable by individual
BSFI should be available to answer the customers. It should contain information
questions and clarifications from the that empowers the customer to appreciate
financial customer. the key features of the product and its
(6) Ensures that staff assigned to deal risks. It is prepared in a format that
directly with customers, or who prepare facilitates comparison with other
advertisement materials (or other material products. The PHS should be available
of the BSFI for external distribution) or who at no cost to the public and made available
markets any product or service should be to consumers upon request. Before
fully knowledgeable about these products signing any contract, the BSFI should
and services, including statutory and ensure that the customer has freely signed
regulatory requirements, and are able to a statement to the effect that the customer
explain the nuances to the consumer. has duly received, read, and understood
(7)Uses a variety of communication the PHS.
channels to disclose clear and accurate (12) Notifies the customer in writing of
information. Such communication channels any change in:
should be available to the public without (a) Interest rate to be paid or charged
need for special access requirements, which on any account of the customer as soon as
may entail additional expense. possible; and
Communication channels should be (b) A non-interest charge on any account
sufficiently responsive to address the literacy of the customer within a number of days as
limitations of the financial consumer. Said provided under existing regulations prior to
channels may be written and/or verbal as the effective date of the change.
may be warranted. If the revised terms are not acceptable
(8) Discloses pricing information in to the customer, he or she should have
public domains (e.g., websites). the right to exit the contract without
(9) Updates customers with relevant penalty, provided such right is exercised
information, free of charge in a clear, within a reasonable period. The customer
understandable, comprehensive, and should be informed of this right whenever
transparent manner, for the duration of the a notice of change is made.
contract. Such information covers the (13) Provides customers with a proof
characteristics and the risks of the products of the transaction immediately after the
sold by the BSFI and their authorized transaction has been completed. The
agents. customer should be given a hard copy of
(10) Imparts targeted information to the each of the documents signed by the
specific groups of clients to whom specific clients (including, but not limited to the
products are being marketed, with a contract) with all terms and conditions.
particular consideration for vulnerable The BSFI ensures that documents signed

§§ X1002.1 - X1002.2
14.12.31
by the customer are completely filled and the BSFI or its staff has an interest in a
that there are no blank terms. direct/cross transaction with a consumer.
(14) Regularly provides customers with (2) Discloses the limited availability
clear and accurate information regarding of products to consumers when the BSFI
their accounts (e.g., Statement of accounts only recommends products which are
that includes, among others, covering issued by their related companies,
period, opening balance/value of particularly when commissions or rebates
transactions, all kinds of interest, fees and are the primary basis for recommending
charges, closing balance, inquiries for the particular product to consumers.
outstanding balances, proof of payments for (3) Discloses the basis on which the
loans). BSFI is remunerated at the pre-contractual
(15) Informs customers of their rights stage.
and responsibilities including their right to (4) Ensures that adequate systems and
complain and the manner of its submission. controls are in place to promptly identify
b. Advertising and promotional issues and matters that may be detrimental
materials to a customer’s interest (e.g., cases in
(1) Ensures that advertising and which advice may have been given merely
marketing materials do not make false, to meet sales targets, or may be driven by
misleading, or deceptive statements that financial or other incentives).
may materially and/or adversely affect the (Circular No. 857 dated 21 November 2014)
decision of the customer to avail of a service
or acquire a product. § X1002.2 Protection of client
(2) Ensures that advertising and information. Financial consumers have
promotional materials are easily readable the right to expect that their financial
and understandable by the general public. transactions, as well as relevant personal
It should disclose clear, accurate, updated, information disclosed in the course of a
and relevant information about the product transaction, are kept confidential.
or service. It should be balanced/ Towards this end, BSFIs must ensure that
proportional (reflecting both advantages and they have well-articulated information
risks of the product or service); visible/ security guidelines, well-defined
audible; key information is prominent and protocols, a secure database, and
not obscured; print is of sufficient size and periodically re-validated procedures in
clearly legible. handling the personal information of their
(3) Ensures that promotional materials financial consumers. This should be an
are targeted according to the specific groups end-to-end process that should cover,
of consumers to whom products are among others, the array of information that
marketed and the communication channels will be pre-identified and collected, the
employed for marketing financial services. purpose of gathering each information,
(4) Ensures that all advertising and how these will be sourced from the client,
promotional materials disclose the fact that it the IT-security infrastructure of the BSFI,
is a regulated entity and that the name and and the protocols for disclosure, both
contact details of the regulator are indicated. within the BSFI and especially to third
c. Conflict of interest parties.
(1) Discloses properly to the consumer The BSFI demonstrates the ability to
prior to the execution of the transaction that protect client information if it is able to:

§ X1002.2
14.12.31
a. Confidentiality and security of client changes in the firm’s business or operations,

information or the results of security testing and
(1) Have a written privacy policy to monitoring.
safeguard its customers’ personal (4) Have appropriate policies and
information. This policy should govern the practices for employee management and
gathering, processing, use, distribution, training to assess and address the risks to
storage, and eventual disposal of client customer information. These include:
information. The BSFI should ensure that (a) Checking references and doing
privacy policies and sanctions for violations background checks before hiring employees
are implemented and strictly enforced. who will have access to customer
(2) Ensure that privacy policies are information.
regularly communicated throughout the (b) Asking new employees to sign an
organization. Opportunities include agreement to follow BSFI confidentiality and
employees’ initial training sessions, regular security standards for handling customer
organization-wide training programs, information.
employee handbooks, posters and posted (c) Limiting access to customer
signs, company intranet and internet information to employees who have a
websites, and brochures available to clients. business reason to see it.
(3) Have appropriate systems in place (d) Controlling access to sensitive
to protect the confidentiality and security information by requiring employees to use
of the personal data of its customers “strong” passwords that must be changed
against any threat or hazard to the security on a regular basis.
or integrity of the information and against (e) Using automatic time-out or log-off
unauthorized access. This includes a controls to lock employee computers after
written information security plan that a period of inactivity.
describes its program to protect customer (f) Training employees to take basic
personal information. The plan must be steps to maintain the security,
appropriate to its size and complexity, confidentiality, and integrity of customer
nature and scope of its activities, and the information. These may include locking
sensitivity of customer information it rooms and file cabinets where records are
handles. As part of its plan, the BSFI must: kept; ensuring that employee passwords are
(a) Designate employee accountable not posted in work areas; encrypting
to coordinate its Information Security sensitive customer information when
transmitted electronically via public
Program.
networks; referring calls or other requests
(b) Identify and assess the risks to
for customer information to designated
customer information in each relevant area
individuals who have been trained in how BSFI
of the BSFI operation, and evaluate the
safeguards personal data; and reporting
effectiveness of the current safeguards for
suspicious attempts to obtain customer
controlling these risks.
information to designated personnel.
(c) Design and implement a
(g) Regularly reminding all employees
safeguards program, and regularly monitor
of company policy to keep customer
and test it. information secure and confidential.
(d) Select service providers that can (h) Imposing strong disciplinary
maintain appropriate safeguards. measures for security policy violations.
(e) Evaluate and adjust the program in (i) Preventing terminated employees
light of relevant circumstances, including from accessing customer information by

§§ X1002.2 - X1002.3
14.12.31
immediately deactivating their passwords completeness of the information and have

and user names and taking other measures. these amended as appropriate.
(5) Have a strong IT System in place to (4) Appropriate penalties should be
protect the confidentiality, security, imposed by the BSFI to erring employees
accuracy, and integrity of customer’s for exposing or revealing client data to third
personal information. This includes parties without prior written consent from
network and software design, and client.
information processing, storage, (Circular No. 857 dated 21 November 2014)
transmission, retrieval, and disposal.
Maintaining security throughout the life- § X1002.3 Fair treatment. Fair
cycle of customer information, from data treatment ensures that financial consumers
entry to disposal, includes: are treated fairly, honestly, professionally
(a) Knowing where sensitive customer and are not sold inappropriate and harmful
information is stored and storing it securely. financial products and services. BSFIs
Make sure only authorized employees have should ensure they have the necessary
resources and procedures in place, internal
access.
monitoring, and control mechanisms, for
(b) Taking steps to ensure the secure
safeguarding the best interest of their
transmission of customer information.
customers. These include general rules,
(c) Disposing customer information in such as those addressing ethical staff
a secure way. behavior, acceptable selling practices as well
(d) Maintaining up-to-date and as regulating products and practices where
appropriate programs and controls to customers are more likely to be offered
prevent unauthorized access. services that are inappropriate for their
(e) Using appropriate oversight or audit circumstances.
procedures to detect the improper disclosure The BSFI demonstrates the principle of
or theft of customer information. fair treatment towards financial consumers
(f) Having a security breach response if it is able to:
plan in the event the BSFI experiences a data a. Affordability and suitability of product
breach. or service
b. Sharing of customer information (1) When making a recommendation to
(1) Inform its customers in writing and a consumer:
explain clearly to customers as to how it (a) Gather, file, and record sufficient
will use and share the customer’s personal information from the customer to enable the
information. BSFI to offer an appropriate product or
(2) Obtain the customers’ written service to the customer. The information
consent, unless in situations allowed as an gathered should be commensurate to the
exception by law or BSP-issued regulations nature and complexity of the product or
on confidentiality of customer’s service either being proposed to or sought
information, before sharing customers’ by the customer and should enable the BSFI
personal information with third parties such to provide an appropriate level of
as credit bureau, collection agencies, professional service. As a minimum,
marketing and promotional partners, and information includes the customers’
other relevant external parties. financial knowledge and experience,
(3) Provide access to customers to the financial capabilities, investment objectives,
information shared and should allow time horizons, needs, priorities, risk
customers to challenge the accuracy and affordability, and risk profile.

§ X1002.3
14.12.31
(b) Offer products or services that are in b. Prevention of over-indebtedness

line with the needs/risk profile of the (1) Have appropriate policies for good
consumer. The BSFI should provide for and repayment capacity analysis. The loan
allow the customer to choose from a range approval does not rely solely on guarantees
of available products and services that can (co-signers or collateral) as a substitute for
meet his needs and requirements. Sufficient good capacity analysis.
and right information on the product or (2) Properly assess the creditworthiness
service should enable the customer to select and conduct appropriate client repayment
the most suitable and affordable product or capacity analysis when offering a new credit
service. product or service significantly increasing
(2) Inform or warn the customers that if the amount of debt assumed by the customer.
they do not provide sufficient information (3) Ensure to have an appropriate
regarding their financial knowledge and system in place for credit analysis and
experience, the BSFI is not in a position to decisions including appropriate criteria to
accurately determine whether the product limit the amount of credit.
or service is appropriate to them, given the (4) Monitor enforcement of policies to
limited information available. This prevent over-indebtedness. The board and
information or warning may be provided in senior management of the BSFIs should be
a standardized format. aware of and concerned about the risks of
(3) Ensure that the customer certifies in over-indebtedness of its customers.
writing the accuracy of the personal (5) Draw the customer’s attention to the
information provided. consequences of signing a contract that may
(4) Ensure to offer market-based pricing. affect his financial position and his collateral
(5) Design products that are appropriate in case of default in payment of a loan/
to the varying needs and interests of different obligation.
types of consumers, particularly the more (6) Prepare and submit appropriate
vulnerable consumers. Adequate product reports (e.g., loan quality, write-offs,
approval should be in place. Processes restructured loans) to management.
should be proper to ensure that products (7) Ensure that corrective measures are
and services are fit for the targeted in place for poor long-term quality of loan
consumer. portfolio linked to over-indebtedness.
(8) Have specific procedures to
(6) Do not engage in abusive or
actively work out solutions (i.e., through
deceptive acts or practices.
workout plan) for restructured loans/
(7) Seek customer feedback for product refinancing/writing-off on exceptional
design and delivery and use this feedback basis for clients in default who have the
to enhance product development and “willingness” but without the capacity to
improve existing products. Likewise, repay, prior to seizing the assets.
investigate reasons for client drop out. c. Cooling-off period
(8) Do not use high pressure/aggressive (1) As may be appropriate, provide the
sales techniques and do not force clients to customer with a “cooling-off” period of a
sign contracts. reasonable number of days (at least
(9) Have a system in place for approval two (2) banking days) immediately
when selling high-risk instruments to following the signing of any agreement or
consumers. contract, particularly for financial products

§ X1002.3
14.12.31
or services with a long-term savings (4) Ensure that the customer’s suitability
component or those subject to high pressure and affordability are assessed against
sales contracts. specific risks of the investment products:
(2) Permit the customer to cancel or treat (a) Financial Needs Analysis (FNA) and
the agreement as null and void without penalty Client Suitability - to assess the customer’s
to the customer of any kind on his or her risk profile and suitability of the product.
written notice to the BSFI during the cooling- (b) Customer’s Declaration Form - to
off period. The BSFI may however collect or confirm his acceptance and understanding
recover reasonable amount of processing fees. of the highlighted features of the product.
It is further recognized that there may be a (c) FNA, Client Suitability and
need for some qualification to an automatic Declaration Form should be duly
right of cooling off. For example, the right completed to make sure that the product
should not apply where there has been a sold is suitable and affordable for the
drawdown of a credit facility and a BSFI customer.
should be able to recover any loss arising e. Institutional culture of fair and
from an early withdrawal of a fixed rate term responsible treatment of clients
deposit which loss arises because of a (1) There should be a Code of Conduct
difference in interest rates. This would be in (Code) applicable to all staff, spelling out
addition to any reasonable administrative fees the organizational values and standards of
associated with closure of the term deposit. professional conduct that uphold protection
d. Objectivity of customers. This Code should be reviewed
(1) Deal fairly, honestly, and in good and approved by the Board. The staff signs
faith with customers and avoid making a document by which they acknowledge that
statements that are untrue or omitting they will abide by the Code and not engage
information which are necessary to prevent in the behaviors prohibited as provided for
the statement from being false or misleading. in the Code . To ensure adherence to the
(2) Present a balanced view when Code, the BSFI is required to implement
selling a product or service. While the BSFI measures to determine whether the
highlights the advantages of a product/ principles of consumer protection are
service, the customer’s attention should also observed, the clients’ concerns are
be drawn to its disadvantages and downside appropriately addressed and problems are
risks. resolved in a timely manner. These may
(3) Ensure that recommendations made include among others, the regular conduct
to customer are clearly justified and of customer satisfaction survey.
explained to the customer and are properly (2) Ensure that recruitment and training
documented. If the requested products are policies are aligned around fair and
of higher risk rating than a customer’s risk responsible treatment of clients.
tolerance assessment results, the BSFI should (3) Ensure that staff, specifically those who
draw to the customer’s attention that the interact directly with customers, receive
product may not be suitable for him in view adequate training suitable for the complexity
of the risk mismatch. In such instances, of the products or services they sell.
there should be a written disclosure of (4) Ensure that collection practices are
consequences which is accepted by the covered during the initial training of all staff
client. involved in collections (loan officers,

§§ X1002.3 - X1002.4
14.12.31
collections staff, and branch managers). In manner that encourages responsible

particular, collection staff should receive business conduct, fair treatment and
training in acceptable debt collection avoidance/mitigation of conflicts of interest.
practices and loan recovery procedures. (2) Disclose to the customers the
(5) Strictly comply with Bangko Sentral’s remuneration structure where appropriate,
existing regulation on what constitutes such as when potential conflicts of interest
unfair debt collection practices. The BSFI’s cannot be managed or avoided.
Code of Conduct should clearly spell out (3) Ensure adequate procedures and
the specific standards of professional controls so that sales staff are not
conduct that are expected of all staff remunerated based solely on sales
involved in collection (including outsourced performance but that other factors, including
staff). customer’s satisfaction (in terms of number
(6) Institute policy that guarantees that of customer complaints served/settled) and
clients receive a fair price for any foreclosed compliance with regulatory requirements,
assets and has procedures to ensure that best practices guidelines, and Code of
collateral seizing is respectful of clients’ Conduct in which certain principles are
rights. related to best interest of customers,
(7) Ensure that managers and supervisors satisfactory audit/compliance review results
review ethical behavior, professional and complaint investigation results, are
conduct, and quality of interaction with taken into account.
customers as part of staff performance (Circular No. 857 dated 21 November 2014)
evaluations.
(8) Have a system or internal processes § X1002.4 Effective recourse. Financial
in place to detect and respond to customer consumers should be provided with
mistreatment as well as serious infractions. accessible, affordable, independent, fair,
In case of violation of Code of Conduct (e.g., accountable, timely, and efficient means for
harassment,) sanctions shall be enforced. resolving complaints with their financial
transactions. BSFIs should have in place
(9) Inform staff of penalties for non-
mechanisms for complaint handling and
compliance with Code of Conduct. redress.
(10) Perform appropriate due diligence The bank demonstrates the ability to
before selecting the authorized agents/ provide effective recourse if it is able to:
outsourced parties (such as taking into a. Establish an effective Consumer
account the agents’ integrity, Assistance Management System (CAMS).
professionalism, financial soundness, Appendix 110 (MORB) provides for the
operational capability and capacity, and minimum requirements of an effective
compatibility with the FI’s corporate culture) CAMS.
and implement controls to monitor the b. Develop internal policies and
agents’ performance on a continuous basis. practices, including time for processing,
The BSFI retains ultimate accountability for complaint response, and customer access.
outsourced activities. c. Maintain an up-to-date log and
(11) Disseminate the main aspect of the records of all complaints from customers
Code of Conduct to clients through printed subject to the complaints procedure. This
media or other appropriate means. log must contain the following:
f. Remuneration structure (1) Details of each complaint;
(1) Design remuneration structure for (2) The date the complaint was received;
staff of BSFI and authorized agents in a (3) A summary of the BSFI’s response;

§§ X1002.4 - X1002.5
14.12.31
(4) Details of any other relevant relationship with clients. Dedicated and
correspondence or records; adequate resources should be provided for
(5) The action taken to resolve each the financial education initiatives.
complaint; and b. Develop financial education and
(6) The date the complaint was resolved. awareness programs, either on their own
d. Ensure that information on how to or in partnership or collaboration with
make a complaint is clearly visible in the industry associations, which contribute to
bank’s premises and on their websites. the improvement of their clients’ knowledge
e. Undertake an analysis of the patterns and understanding of their rights and
of complaints from customers on a regular responsibilities, basic information and risks
basis including investigating whether of financial products and services, and
complaints indicate an isolated issue or a ability to make informed financial decisions
more widespread issue for consumers. This and participate in economic activities.
analysis of consumer complaints must be Financial education programs should be
escalated to the BSFI’s compliance/risk designed to meet the needs and financial
management function and senior literacy level of target audiences, as well as
management. those that will reflect how target audience
f. Provide for adequate resources to prefers to receive financial information.
handle financial consumer complaints These may include:
efficiently and effectively. Staff handling (1) Delivering public awareness
complaints should have appropriate campaigns and information resources that
experience, knowledge, and expertise. would teach consumers on certain aspects
Depending on the BSFI’s size and of their financial lives particularly, budgeting,
complexity of operation, a senior staff financial planning, saving, investing,
member should be appointed to be in borrowing, retirement planning, and self-
charge of the complaint handling process. protection against fraud.
(Circular No. 857 dated 21 November 2014) (2) Developing financial education
tools or information materials that are
§ X1002.5 Financial education and updated and readily understood and
awareness. Financial education initiatives transparent such as customized advice
give consumers the knowledge, skills, and and guidance (face to face training);
confidence to understand and evaluate the printed brochures, flyers, posters, training
information they receive and empower them videos (e.g., about money management,
to make informed financial decisions. debt management, saving), and
Because BSFIs deal directly with financial newsletters; websites, and interactive
consumers, they have the reach, expertise, calculators that deliver key messages and
and established relationships necessary to “call to action” concerning better money
deliver financial education. Financial management (e.g., protect your money,
education should be integral to the good know your product, read and understand
governance of the BSFIs. the T&C, check your statements, pay credit
The BSFI demonstrates this principle card bills on time, safeguard your Personal
through various means and in particular: Identification Number, understand fees
a. Have a clear and defined financial and charges) and consumer responsibility
education and awareness program as part to ask the right questions.
of a wider financial consumer protection (3) Distributing to customers, at the point
and education strategy and corporate of sale, a pamphlet on questions, which
governance. It is an integral component of customers need to ask before accepting a
the BSFI’s ongoing interaction and financial product or service.

§§ X1002.5 - X1003
14.12.31
c. Clearly distinguish between financial (4) Bangko Sentral consumer assistance

education from commercial advice. Any mechanism
financial advice for business purposes c. The following enforcement action
should be transparent. Disclose clearly any may be taken depending on:
commercial nature where it is also being (1) Rating-based enforcement actions
promoted as a financial education initiative. for on-site periodic assessment. To
It should train staff on financial education implement the foregoing enforcement
and develop codes of conduct for the actions, the following rules shall apply:
provision of general advice about (a) A Consumer Protection Rating (CPR)
investments and borrowings, not linked to of 4 will require no enforcement action.
the supply of a specific product. (b) A CPR of 3 will require issuance of
d. Provide via the internet or through a written reminder on consumer protection
printed publications unbiased and inde- areas that may lead to weaknesses in the
pendent information to consumers BSFI’s Consumer Protection Framework.
through comparative information about (c) A CPR of 2 will require a written
the price and other key features, benefits Action Plan in response to the written
and risks, and associated fees and charges reminder issued by the Bangko Sentral. The
of products and services. written Action Plan shall be duly approved
e. Regularly track, monitor, and assess by the board. It shall aim to correct the
campaigns and programs and use the results identified weaknesses in the BSFI’s
of the evaluation for continuous Consumer Protection Framework or the
improvement. noted violations of the Bangko Sentral
Regulations on Consumer Protection.
Financial Consumer Protection Department
C. ENFORCEMENT ACTIONS
(FCPD) shall assess the viability of the plan
and shall monitor the bank’s performance.
Sec. X1003 Enforcement Actions (d) A CPR of 1 shall also be considered
a. Enforcement is the implementation of as poor/grossly inadequate Financial
corrective measures and imposition of Consumer Protection Framework. For this
sanctions to BSFIs to: reason, a written action plan fully
(1) Ensure compliance with the Bangko executable within ninety (90) days shall be
Sentral regulations on consumer protection prepared. The action plan shall be duly
and consumer protection laws and approved by the board aimed at instituting
regulations; immediate and strong measures to restore
(2) Inform the management of the BSFIs the BSFI to acceptable consumer protection
of the consequences of their decisions and operating condition, where it does not pose
actions; any risk of financial loss or harm to the
(3) Instill discipline to the BSFIs; and financial consumers.
(4) Serve as deterrent to the commission In the event of non-submission of the
of violations. written Action Plan within the deadline or
b. The bases for enforcement actions are failure to implement its action plan, FCPD
the results of the: shall recommend appropriate enforcement
(1) On-site consumer protection actions on the BSFI and its responsible officers
framework assessment; including monetary penalties to be computed
(2) Off-site surveillance; on a daily basis until improvements are
(3) Market monitoring; and satisfactorily implemented.

§ X1003
14.12.31
Composite Rating
Numerical 4 3 2 1
Rating
Adjectival Strong Acceptable Marginal Poor
Rating
Supervisory No cause for Minimal More than Immediate and
Approach supervisory supervisory normal close supervisory
concern concern supervisory attention and
concern monitoring
Enforcement None Written Written Action Written action plan
Action reminder plan
suspension of
introduction of
new products and
services or
suspension of
existing
products/services
that poses a
consumer
protection concern
or suspension of
further
distribution or
issuance of
consumer products
and services
Table No. 2. Enforcement Actions for Consumer Protection Ratings
d. Enforcement actions for violations of consumer protection regulations.

Depending on the seriousness and impact of the breaches of Bangko Sentral Regulations on
consumer protection and specific consumer protection rules and regulations, the following
administrative sanctions shall be imposed:
Administrative sanctions Whenever applicable, the following administrative sanctions

shall be imposed:
(a) Fines in amount as may be determined by the
Monetary Board to be appropriate;
(b) Stopping/suspendingoperations/products or restricting
approval of new operations/products;
(c) Requiring the withdrawal/modification of advertising/
marketing materials; and
(d) Requiring submission of additional reports for monitoring.
Table No. 3. Administrative Sanctions for Violations of Consumer
Protection Regulations.
(Circular No. 857 dated 21 November 2014)

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PREFACE

Manual of Regulations for Banks

rules and regulations embodied therein.

07 December 1994, directed the creation of a multi-departmental Ad Hoc Review Committee

1. Incorporate relevant issuances;

2. Propose revisions/amendments/deletions of provisions which have

become obsolete, redundant, irrelevant or inconsistent with laws/

rules and regulations;

3. Reformulate provisions as the need arises; and

4. Oversee the publication and printing of the MORB in coordination

with the Economic and Financial Learning Center and Corporate

21 June 2013 is composed of:

Adviser - Nestor A. Espenilla Jr.

Chairman - Judith E. Sungsai

Vice Chairman - Atty. Ma. Loretta S. Esquivias-Conlu

Ma. Belinda G. Caraan Betty Christine C. Bunyi

Ma. Corazon T. Alva Andrea A. Vitangcol

Atty. Florabelle S. Madrid Atty. Asma A. Panda

Lucila F. Ocampo Celedina P. Garbosa

Atty. Lord Eileen S. Tagle Amelia B. Damian

Concepcion A. Garcia Atty. Ma. Corazon Bilgera-Cordero

II, OSPD, and two (2) other personnel.

The Bangko Sentral ng Pilipinas

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”

Part One on “Organization, Management and Administration”

Manual of Regulations for Banks (Common provision)

Main Section - “Investment in Non-Allied Undertakings”

Part Three - “Loans, Investments and Special Credits”

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

POWER OF THE BANGKO SENTRAL TO EXAMINE BANKS

Examination by the Bangko Sentral

SECTION X001- X008 (Reserved)

SECTION X009 Supervising Enforcement Policy

PART ONE - ORGANIZATION, MANAGEMENT AND ADMINISTRATION

A. CLASSIFICATIONS AND POWERS OF BANKS

SECTION X101 Classifications, Powers and Scope of Authorities of Banks

B. ESTABLISHMENT AND ORGANIZATION

SECTION X102 Basic Guidelines in Establishing Banks

SECTION X103 Certificate of Authority to Register

SECTION X104 Business Name

SECTIONS X106 - X107 (Reserved)

C. MERGER AND CONSOLIDATION

SECTION X108 Merger or Consolidation to Meet Minimum Capital

SECTIONS X109 Consolidation Program for Rural Banks (CPRB)

SECTIONS X110 (Reserved)

SECTION X111 Minimum Required Capital

SECTIONS X112 - X114 (Reserved)

SECTION X115 Basel III Risk-Based Capital

SECTION X117 Internal Capital Adequacy Assessment Process and Supervisory

SECTION X119 Unsecured Subordinated Debt

SECTION X120 Interim Tier 1 Capital for Banks Under Rehabilitation

SECTIONS X121 - X125 (Reserved)

G. STOCK, STOCKHOLDERS AND DIVIDENDS

SECTION X126 Shares of Stock of Banks

SECTION X127 (Reserved)

SECTION 1127 Shares of Stock of Universal/Commercial Banks

SECTION 3127 Shares of Stock of Rural Banks and Cooperative Banks

SECTION X128 Deposits for Stock Subscription

SECTIONS X129 - X135 (Reserved)

SECTION X136 Dividends

SECTION X137 (Reserved)