Morb1 PDF

FOREWORD
The 2011 Manual of Regulations for Banks (MORB) is an updated compilation of

banking regulations and policy issuances of the Bangko Sentral ng Pilipinas (BSP).
Available in hard and soft copies, it is a convenient reference and guide for banks in
the conduct of their operations.
The updated MORB incorporates regulatory policies issued to align banking

practices on risk management, good corporate governance, capital adequacy, accounting
and reporting with international standards. It also includes rules implementing legislative
reform measures, the more significant of which are the General Banking Law of 2000,
the Anti-Money Laundering Act of 2001, the Special Purpose Vehicle Act of 2002 and the
Cooperative Code of the Philippines.
In providing banks and the banking public easy access to this information, the
updated MORB seeks to facilitate compliance with the BSP’s supervisory and regulatory
requirements that will contribute to the enhancement of the partnership between BSP
and the banking sector, and ultimately to the strengthening of the Philippine Banking
System and the economy.
AMANDO M. TETANGCO, JR.

Governor
PREFACE
(2011 Edition)
The 2011 Manual of Regulations for Banks (MORB) is the latest updated edition from
the initial issuance in 1996 . The updates consist of the significant policy developments and
changes in statutory laws. It shall serve as the principal source of banking regulations issued
by the Monetary Board and the Governor of the BSP and shall be cited as the authority for
enjoining compliance with the rules and regulations embodied therein.
To accomplish the work of proposing revision to the Old Manual, the Monetary
Board of the BSP, in its Resolution No. 1203 dated December 7, 1994, directed the creation
of a multi-departmental Ad Hoc Review Committee. The Committee was officially constituted
under Office Order No. 2 Series of 1995 and was reconstituted several times thereafter.
Under the aforesaid office order, the Committee is tasked to update the Manuals on a
continuing basis to (i) incorporate relevant issuances, (ii) propose revision/deletion of provisions
which have become obsolete, redundant, irrelevant or inconsistent with laws/regulations,
(iii) reformulate provisions as the need arises, and (iv) oversee printing of the Manuals/Updates
in coordination with the Corporate Affairs Office.
The present Committee, as reconstituted under Office Order No. 0152, Series of
2011 dated 01 February 2011, is composed of: Mr. Alberto A. Reyes, Director, Examination
Department (ED) II, Chairman; Atty. Magdalena D. Imperio, Deputy Director, Office of the
General Counsel and Legal Services (OGCLS), Vice Chairman; Ms. Ma. Belinda G. Caraan,
Deputy Director/Head, Financial Consumer Affairs Group (FCAG); Ms. Ma. Corazon T.
Alva, Deputy Director, Examination Department (ED) I; Atty. Lord Eileen S. Tagle, Legal
Officer III, OGCLS; Atty. Florabelle S. Madrid, Manager, CPCD I; Ms. Celedina P. Garbosa,
Manager, CPCD I; Atty. Asma A. Panda, Legal Officer IV, OGCLS; Ms. Concepcion A. Garcia,
Bank Officer IV, ED III; Atty. Ma. Corazon B. Bilgera-Cordero, Bank Officer II, Anti-Money
Laundering Specialists Group (AMLSG), members; and Mr. Nestor A. Espenilla, Jr., Deputy
Governor, Supervision and Examination Sector, Adviser.
The Committee Secretariat is headed by Ms. Ma. Cecilia U. Contreras, Supervision

and Examination Specialist I, ED II.
The Bangko Sentral ng Pilipinas

INSTRUCTIONS TO USERS
(2011 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
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
X105.5 Composition of capital accounts; compliance with
capital ratios
X105.6 Prescribed ratio of net due to and permanently
assigned capital
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 Limitations
X105.10 Change from one mode of entry to another
X105.11 Listing of shares with the Philippine Stock Exchange
X105.12 Applicability to Philippine corporations
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
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 )
X111.3 Memorandum of Understanding; Prompt Corrective
Action Program; Sanctions ( Deleted by Circular No.
696 dated 29 October 2010 )
x
E. RISK-BASED CAPITAL
SECTION X115 Basel II 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
SECTION X116 Basel I Risk-Based Capital

X116.1 Scope
X116.2 Qualifying capital
X116.3 Risk-weighted assets
X116.4 Definitions
X116.5 Required reports
X116.6 Sanctions
X116.7 Temporary relief
SECTION X117 Internal Capital Adequacy Assessment Process and Supervisory

Review Process
SECTION X118 Revised Risk-Based Capital Adequacy Framework for Stand

Alone Thrift Banks, Rural Banks and Cooperative Banks
F. CAPITAL INSTRUMENTS
SECTION X119 Unsecured Subordinated 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
xi
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)
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 Equity investment by holding corporations
SECTION X136 Dividends

X136.1 Definitions
X136.2 Requirements on the declaration of dividends
X136.3 Net amount available for dividends
X136.4 Reporting and verification
X136.5 Recording of dividends
xii
X136.6 Issuance of fractional shares
SECTION 1137 (Reserved)
SECTION 3137 Limitations/Amount Available on Dividends Declared by Rural

Banks and Cooperative Banks
3137.1 Dividends on government shares
H. DIRECTORS, OFFICERS AND EMPLOYEES
SECTION X141 Definition and Qualifications of Directors; Responsibilities and

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

X142.1 Definition of officers
X142.2 Qualifications of an officer
X142.3 Appointment of officers
SECTION X143 Disqualification 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
xiii
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
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 - X149.8 (Reserved)
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 fee
X151.6 Establishment of other banking offices
X151.7 Date of opening
X151.8 Requirements for opening a branch/other banking
office
X151.9 Relocation of branches/other banking offices
X151.10 Voluntary closure/sale/acquisition of branches/other
banking offices
X151.11 Relocation/transfer of branch licenses of closed banks
xiv
X151.12 Sanctions
X151.13 - X151.18 (Reserved)
X151.19 Tellering booths
SECTION X152 Relocation of Head Offices

X152.1 Sanctions
SECTION X153 Establishment of Additional Branches of Foreign Banks

X153.1 Application for authority to establish additional
branch
X153.2 Requirements for establishment of additional branch
X153.4 Requirements for opening a branch
X153.5 Choice of locations for establishment of 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
X154.5 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
xv
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)
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
L. MANAGEMENT CONTRACTS AND OUTSOURCING

OF BANKING FUNCTIONS
SECTION X161 Management Contracts
SECTION X162 Duties and Responsibilities of Banks and their Directors/Officers

in All Cases of Outsourcing of Banking Functions
X162.1 Prohibition against outsourcing certain banking
functions
X162.2 Outsourcing of information technology systems/
processes
X162.3 Outsourcing of other banking functions
X162.4 Service providers
X162.5 Review of subsisting outsourcing contracts
X162.6 - X162.10 (Reserved)
X162.11 Other banking services for subsidiaries, affiliates and
related companies
X162.12 Other banking services to other entities
X162.13 - X162.18 (Reserved)
X162.19 Penalties
M. BANK OFFICES AS OUTLET OF FINANCIAL PRODUCTS OF ALLIED

UNDERTAKINGS/INVESTMENT HOUSE
SECTION 1172 Financial Products of Allied Undertakings or Investment House

Units of Banks
xvi
1172.1 Statement of principles
1172.2 Prior Monetary Board approval
1172.3 Minimum documentary requirements
1172.4 Financial ratios and other related requirements
1172.5 Promotional materials; stationeries and other
paraphernalia
1172.6 Contracts/Information to be disclosed
1172.7 Training
1172.8 Other requirements
1172.9 - 1172.10 (Reserved)
1172.11 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 Market Risk Management
SECTION X175 Liquidity Risk Management
SECTION X176 Technology Risk Management
SECTION X180 Compliance System; Compliance Officer

X180.1 Compliance system
X180.2 Compliance officer
X180.3 Compliance risk
X180.4 Responsibilities of the board of directors and senior
management on compliance
X180.5 Status
X180.6 Independence
X180.7 Role and responsibilities of the compliance function
X180.8 Cross-border compliance issues
X180.9 Outsourcing of compliance risk assessment and
testing
SECTION X181 Bank Protection
xvii
X181.1 Objectives
X181.2 Designation of security officer
X181.3 Security program
X181.4 Minimum security measures
X181.5 Reports
X181.6 Bangko Sentral inspection
X181.7 Common security service provision
X181.8 Sanctions
SECTION X185 Internal Control System

X185.1 Proper accounting records
X185.2 Independent balancing
X185.3 Division of duties and responsibilities
X185.4 Joint custody
X185.5 Signing authorities
X185.6 Dual control
X185.7 Number control
X185.8 Rotation of duties
X185.9 Independence of the internal auditor
X185.10 Confirmation of accounts
X185.11 Other internal control standards
X185.12 Internal control procedures for dormant/inactive
accounts
SECTION X186 Internal Audit Function

X186.1 Independence of internal audit function
X186.2 Scope
X186.3 Qualification standards of the internal auditor
X186.4 Code of Ethics and Internal Auditing Standards
SECTION X189 Selection, Appointment, Reporting Requirements and Delisting

of External Auditors and/or Auditing Firm; Sanctions; Effectivity
SECTION X190 Audited Financial Statements of 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
xviii
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
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
X192.13 (Reserved)
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)
xix
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

X198.1 Definition of terms
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
X201.2 Requirements for accepting demand deposits
X201.3 Sanctions
SECTION X202 Temporary Overdrawings; Drawings Against Uncollected

Deposits
xx
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
SECTION 3205 Check Clearing Rules for Rural Banks Who Are Members of the
Philippine Clearing House Corporation
SECTIONS X206 Clearing Operations
SECTION X207 Check Clearing Operations During Public Sector Holidays
B. SAVINGS DEPOSITS
SECTION X213 Servicing Deposits Outside Bank Premises
SECTION X214 Withdrawals
SECTION X215 Rental Deposits of Lessees
SECTION X221 Peso Savings Deposit Accounts of Embassy Officials
C. NEGOTIABLE ORDER OF WITHDRAWAL ACCOUNTS
SECTION X223 Authority to Accept Negotiable Order of Withdrawal Accounts

X223.1 Prerequisites to accept negotiable order of withdrawal
accounts for thrift banks/rural banks/cooperative
banks
xxi
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 deposits
X233.10 (Reserved)
X233.11 Long-term non-negotiable tax-exempt certificates of
time deposit
E. DEPOSIT SUBSTITUTE OPERATIONS (QUASI-BANKING FUNCTIONS)
SECTION X234 Scope of Quasi-Banking 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
xxii
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
X239.3 Notice to Bangko Sentral ng Pilipinas
X239.5 Issuance of commercial papers
F. GOVERNMENT DEPOSITS
SECTION X240 Statement of Policy
xxiii
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 Regular reserves against deposit and deposit substitute
liabilities
X253.2 Liquidity reserves
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
xxiv
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
SECTION X265 Acceptance, Encashment or Negotiation of Checks Drawn in

Favor of Commissioner/Collector of Customs
xxv
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

X271.1 Nature of liquidity window
X271.2 Terms of credit
xxvi
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
xxvii
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
xxviii
PART THREE - LOANS, INVESTMENTS AND SPECIAL CREDITS
SECTION X301 Lending Policies

X301.1 (Reserved)
1301.1 Rules and regulations to govern the development and
implementation of banks’ internal credit risk rating
systems
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
X302.1 Provisions for losses; booking
X302.2 Sanctions
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 General guidelines
X304.2 Purpose of loans and other credit accommodations
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
xxix
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
X306.4 Restructured loans
X306.5 Write-off of loans as bad debts
X306.6 Writing-off microfinance loans as bad debts
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
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)
X309.4 Reporting requirement
B. SECURED LOANS
SECTION X311 Loans Secured by Real Estate Mortgages

X311.1 Loans secured by junior mortgage on real estate
X311.2 (Reserved)
1311.2 (Reserved)
2311.2 (Reserved)
xxx
3311.2 Eligible real estate collaterals on rural/cooperative
bank loans
X311.3 Insurance on real estate improvements
X311.4 (Reserved)
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
SECTION X313 Loans and Other Credit Accommodations Secured By Personal

Properties
SECTION X314 Increased Loan Values and Terms of Loans for Home-Building
SECTION X315 Loans Secured by Certificates of Time Deposit
C. UNSECURED LOANS
SECTION X319 Loans Against Personal Security

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 Finance charges
X320.7 Deferral charges
X320.8 Late payment/penalty fees
X320.9 Confidentiality of information
X320.10 Suspension, termination of effectivity and reactivation
xxxi
X320.11 Inspection of records covering credit card transactions
X320.12 Offsets
X320.13 Handling of complaints
X320.14 Unfair collection practices
X320.15 Sanctions
D. RESTRUCTURED LOANS
SECTION X322 Restructured Loans; General Policy

X322.1 Definition; when to consider performing/
non-performing
X322.2 Procedural requirements
X322.3 Restructured loans considered past due
X322.4 Classification
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
xxxii
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)
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
xxxiii
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)
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
xxxiv
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
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 (Reserved)
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
xxxv
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
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
xxxvi
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
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)
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
xxxvii
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
SECTION X396 Parcellary Plans on Crop Loans
SECTION 1397 Limits on Real Estate Loans of UBs/KBs
SECTION X398 Debt Service Limit on Local Government Borrowings
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
xxxviii
X404.3 Prerequisites for engaging in trust and other fiduciary
business
X404.4 Pre-operating requirements
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 Approval of the appointment/designation of trust
officer
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
xxxix
SECTION X409 Trust and Other Fiduciary Business
X409.1 Minimum documentary requirements
X409.2 Lending and investment disposition
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 to single person/entity
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,
single borrower's limit, director, officers, stockholders
and their related interests
SECTION X411 Investment Management Activities

X411.1 Minimum documentary requirements
X411.2 Minimum size of each investment management
account
xl
X411.3 Commingling of funds
X411.4 Lending and investment disposition
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 Prerequisites for engaging in investment management
activities
X414.2 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
xli
SECTION X417 Non-Investment Management Activities
SECTION X418 Unsound Practices
SECTION X419 Conduct of Investment Management Activities
SECTION X420 Required Surplus
C. GENERAL PROVISIONS
SECTION X421 Books and Records
SECTION X422 Custody of Assets
SECTION X423 Fees and Commissions
SECTION X424 Taxes
SECTION X425 Reports Required

X425.1 To trustor, beneficiary, principal
X425.2 To the Bangko Sentral
X425.3 Audited financial statements
X425.4 Post-bond flotation report
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
xlii
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
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
X441.14 Reportorial requirements
X441.15 - X441.28 (Reserved)
X441.29 Sanctions
D. GENERAL PROVISIONS ON SANCTIONS
PART FIVE - FOREIGN EXCHANGE TRANSACTIONS
PART ONE. CURRENT ACCOUNTS
Chapter I
NON-TRADE FOREIGN EXCHANGE RECEIPTS AND DISBURSEMENTS, CROSS-

BORDER TRANSFER OF LOCAL AND FOREIGN CURRENCIES, AND GOLD
TRANSACTIONS
SECTION 1 Disposition of Foreign Exchange Receipts
SECTION 2 Sale of Foreign Exchange to Residents by AABs and AAB-Forex

Corps for Non-Trade Current Account Transactions with Non-
Residents
SECTION 3 Sale of Foreign Exchange to Non-Resident Tourists/Balikbayans

by AABs and AAB-Forex Corps
xliii
SECTION 4 Cross-Border Transfer of Local and Foreign Currencies
SECTION 5 Buying and Selling of Gold by Residents
Chapter II
FOREIGN MERCHANDISE TRADE TRANSACTIONS
A. IMPORT TRADE TRANSACTIONS
SECTION 6 General Policy
SECTION 7 Classification of Imports
SECTION 8 Modes of Payment for Imports
SECTION 9 Letter of Credit (L/C)
SECTION 10 Documents Against Payment (D/P)
SECTION 11 Documents Against Acceptance (D/A) and Open Account (O/A)

Arrangements
SECTION 12 Direct Remittance (DR)
SECTION 13 Advance Payment
SECTION 14 Other Import Arrangements
B. EXPORT TRADE TRANSACTIONS
SECTION 16 Classification of Exports
SECTION 17 Export Declaration
SECTION 18 Modes and Currency of Payment
SECTION 19 Negotiation Procedures
SECTION 20 Disposition of Export Proceeds
SECTION 21 Gold and Constructive Exports
xliv
PART TWO. CAPITAL ACCOUNTS
Chapter I
LOANS AND GUARANTEES
SECTION 23 Loans Requiring Prior BSP Approval
SECTION 24 Loans Not Requiring Prior BSP Approval
SECTION 25 Projects/Costs Eligible for Foreign Financing
SECTION 26 Terms of Loans
SECTION 27 Drawdown/Availment on Loans
SECTION 28 Registration of Loans
SECTION 29 Servicing of Loans
SECTION 30 Approval/Registration and Servicing of Guarantees
SECTION 31 Approval/Registration and Servicing of Other Financing Schemes/

Arrangements
Chapter II
FOREIGN INVESTMENTS
SECTION 33 Categories of Inward Foreign Investments
SECTION 34 Inward Foreign Direct Investments
SECTION 35 Inward Foreign Portfolio Investments
SECTION 36 Registration with the BSP
SECTION 37 Registration with Custodian Banks
xlv
SECTION 38 Registration Procedures
SECTION 39 Import/Export of Stock Certificates of Philippine Firms
SECTION 40 Repatriation and Remittance Privileges
SECTION 41 Deposit of Divestment/Sales Proceeds
SECTION 42 Reinvestment
SECTION 43 Inward Foreign Investments Prior to 15 March 1973
SECTION 44 Investments by Philippine Residents
PART THREE. OBUs, REPRESENTATIVE OFFICES AND FCDUs
Chapter I
OFFSHORE BANKING UNITS OF FOREIGN BANKS
SECTION 45 Definition of Terms
SECTION 46 Approvals Required
SECTION 47 Criteria for Selection
SECTION 48 Pre-Operation Requirements
SECTION 49 Annual Fee
SECTION 50 Transactions with Non-Residents and/or with Other OBUs
SECTION 51 Transactions with Foreign Currency Deposit Units FCDUs)/

Expanded Foreign Currency Deposit Units (EFCDUs)
SECTION 52 Transactions with Residents which are not Banks
SECTION 53 Peso Deposits
SECTION 54 Financial Assistance to Officers/Employees
SECTION 55 Secrecy of Deposits
xlvi
SECTION 56 Exemption from Certain Laws
SECTION 57 Accounting and Reporting
SECTION 58 Supervision
SECTION 59 Taxes, Customs Duties
SECTION 60 Revocation/Suspension
Chapter II
REPRESENTATIVE OFFICES OF FOREIGN BANKS
SECTION 62 Criteria for Approval
SECTION 63 Authorized Activities of Representative Offices
SECTION 64 Fees
SECTION 65 Use of the term “Representative Office”
SECTION 66 Licensing
SECTION 67 Visitorial Power
SECTION 68 Reporting
SECTION 69 Revocation of License
Chapter III
FOREIGN CURRENCY DEPOSIT SYSTEM
SECTION 71 Qualification Requirements
SECTION 72 Authorized Transactions
SECTION 73 Foreign Currency Cover Requirements
xlvii
SECTION 74 Foreign Currency Deposits with the Bangko Sentral
SECTION 75 Currency Composition of the Cover
SECTION 76 Secrecy of Deposits
SECTION 77 Numbered Accounts
SECTION 78 Withdrawability and Transferability of Deposits
SECTION 79 Insurance Coverage
SECTION 80 Rates of Interest
SECTION 81 Eligibility as Collateral
SECTION 82 Taxes
SECTION 83 Exemption from Court Order or Process
SECTION 84 Accounting
SECTION 85 Supervision
SECTION 86 Prospective Effect of Regulations
SECTION 87 Sanctions
PART FOUR. FOREIGN EXCHANGE FORWARDS AND SWAPS

AND OPEN FOREIGN EXCHANGE POSITION OF BANKS
Chapter I
FOREIGN EXCHANGE FORWARDS AND SWAPS

INVOLVING THE PHILIPPINE PESO
SECTION 90 Documentation
SECTION 91 Tenor/Maturity and Settlement
xlviii
SECTION 92 Forward Contracts with Non-residents
SECTION 93 Cancellations, Roll-overs or Non-delivery of Deliverable

Foreign Exchange Forward and Swap Contracts
SECTION 94 Reporting Requirements
SECTION 95 Non-Bank BSP-Supervised Entities (NBBSEs)
Chapter II
OPEN FOREIGN EXCHANGE POSITION OF BANKS
SECTION 98 Allowable Open Foreign Exchange Position
SECTION 99 Computation of Foreign Exchange Position
SECTION 100 Sanctions
PART FIVE. GENERAL PROVISIONS
Chapter I
REPORTS AND POST VERIFICATION
SECTION 101 Reportorial Requirements
SECTION 102 Procedures for Reporting
SECTION 103 Fines and Penalties
SECTION 104 Post-Verification
Chapter II
FINAL PROVISIONS
SECTION 105 Compliance with Anti-Money Laundering Rules
xlix
SECTION 106 Penal Sanctions
SECTION 107 Repealing Clause
SECTION 108 Separability Clause
PART SIX - TREASURY AND MONEY MARKET OPERATIONS
A. OPEN MARKET OPERATIONS
SECTION X601 Open Market 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
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
l
2625.5 (Reserved)
3625.5 (Reserved)
X625.6 Cancellations, roll-overs or non-delivery of FX forward
contracts
X625.7 Non-deliverable forward contracts with non-residents
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
1635.4 Capital treatment of banks' exposures to structured
products
SECTION 1636 Expanded Foreign Currency Deposit Units Investments in Foreign

Currency Denominated Structured Products
li
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

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
lii
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
SECTION X705 Consumer Protection for Electronic Banking

X705.1 E-Banking oversight function
X705.2 E-Banking risk management and internal control
X705.3 Compliance with consumer awareness program
X705.4 Minimum disclosure requirements
X705.5 Complaint resolution
X705.6 Applicability
liii
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
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
liv
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
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
lv
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
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. BSP AUTHORITY AND ENFORCEMENT ACTIONS
SECTION X810 BSP Authority to Examine Deposits and Investments; Additional

Exeption to the Bank Secrecy Act; Annual Testing of Numbered
Accounts
SECTION X811 Sanctions and Penalties
lvi
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
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
lvii
SECTION X906 Disclosure of Remittance Charges and Other Relevant
Information
C. CREDIT RATING AGENCIES
SECTION X931 Recognition and Derecognition of Domestic Credit Rating

Agencies for Bank Supervisory Purposes
X931.2 Minimum eligibility criteria
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
lviii
D. 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
X950.5 Clean note policy
X950.6 Replacement and redemption of mutilated or unfit
legal tender Philippine currency notes and coins
X950.7 Treatment of Philippine currency notes and coins
called in for replacement
X950.8 Sanctions
SECTION X954 Service Fee for New/Fit Note Deposits with the Bangko Sentral
lix
POWER OF THE BANGKO SENTRAL TO EXAMINE BANKS
(2008 - X658) Examination by the Bangko g. Any other activities relevant to the
Sentral. Effective 14 August 2004 the term above.
“examination” shall, henceforth, refer to an Regular or periodic examination shall
investigation of an institution under the be done once a year, with an interval of
supervisory authority of the BSP to twelve (12) months from the last date
determine compliance with laws and thereof. Special examination may be
regulations. It shall include determination conducted earlier, or at a shorter interval,
that the institution is conducting its business when authorized by the Monetary Board by
on a safe and sound basis. Examination an affirmative vote of five (5) members.
requires full and comprehensive looking into In the full exercise of the supervisory
the operations and books of institutions, and powers of the BSP, examination by the BSP
shall include, but need not be limited to, of institutions shall be complemented by
the following: overseeing thereof. In this regard, the term
a. Determination of the bank’s “overseeing” shall refer to a limited
solvency and liquidity position; investigation of an institution, or any
b. Evaluation of asset quality as well investigation/s that is limited in scope,
as determination of sufficiency of conducted to inquire into a particular area/
valuation reserves on loans and other risk aspect of an institution’s operations, for the
assets; purpose of overseeing that laws and
c. Review of all aspects of bank regulations are complied with, inquiring
operations; into the solvency and liquidity of the
d. Assessment of risk management institution, enforcing prompt corrective
system, including the evaluation of the action, or such other matters requiring
effectiveness of the bank management’s immediate investigation: Provided, That -
oversight functions, policies, procedures, (i) specific authorizations be issued by the
internal control and audit; Deputy Governor, Supervision and
e. Appraisal of overall management of Examination Sector, and (ii) periodic
the bank; summary reports on overseeings made be
f. Review of compliance with submitted to the Monetary Board.
applicable laws, rules and regulations; and (Circular No. 442 dated 20 July 2004)
li
§ X101
10.12.31
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
10.12.31
all of the following: Bank of the Philippines (DBP), and other

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

§ X101
10.12.31
merchants, private and public employees; may perform any or all of the following
(b) accept savings and time deposits; services:
(c) act as correspondent of other FIs; (a) open savings accounts for
(d) rediscount paper with the LBP, DBP safekeeping or custody with no participation
or any other bank, including its branches in profit and losses except unless otherwise
and agencies. Said banks shall specify the authorized by the account holders to be
nature of paper deemed acceptable for invested;
rediscount, as well as the rediscount rate to (b) accept investment account
be charged by any of these banks; placements and invest the same for a term
(e) act as collection agent; with the IB’s funds in Islamically permissible
(f) offer other banking services as transactions on participation basis;
provided in Section 53 of R.A. No. 8791. (c) accept foreign currency deposits
With prior approval of the Monetary from banks, companies, organizations and
Board, an RB may perform any or all of the individuals, including foreign governments;
following services: (d) buy and sell foreign exchange;
(g) accept current or checking (e) act as correspondent of banks and
accounts: Provided, That such RB has net institutions to handle remittances or any
assets of at least P5.0 million; fund transfers;
(h) accept negotiable order of (f) accept drafts and issue letters of
withdrawal (NOW) accounts; credit or letters of guarantee, negotiate
(i) act as trustee over estates or notes and bills of exchange and other
properties of farmers and merchants; evidence of indebtedness under the
(j) act as official depository of universally accepted Islamic financial
municipal, city or provincial funds in the instruments;
municipality, city or province where it is (g) act as collection agent insofar as the
located; payment orders, bills of exchange or other
(k) sell domestic drafts; and commercial documents are exclusive of riba
(l) invest in allied undertakings. or interest prohibitions;
(5) Coop Banks. A Coop Bank shall (h) provide financing with or without
primarily provide financial, banking and collateral by way of leasing, sale and
credit services to cooperatives and their leaseback, or cost plus profit sales
members, although it may provide the same arrangement;
services to non-members or the general (i) handle storage operations for
public. goods or commodity financing secured by
In addition to the powers granted to warehouse receipts presented to the bank;
Coop Banks under existing laws, any Coop (j) issue shares for the account of
Bank may perform any or all of the banking institutions and companies assisted by the
services offered by other types of banks, bank in meeting subscription calls or
subject to prior approval of the BSP. augmenting their capital and/or fund
(6) IBs. In addition to the general requirements as may be allowed by law;
powers incident to corporations and those (k) undertake various investments in
provided in other laws, as well as in all transactions allowed by the Islamic
Circular No. 105 (Appendix 44), insofar as Shari’a in such a way that shall not permit
they are not inconsistent or incompatible the haram (forbidden), nor forbid the halal
with the provisions of R.A. No. 6848, an IB (permissible);

§§ X101 - 2101.1
10.12.31
(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. 682 dated 15 February 2010 and of import and export financing operations
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
§ 2101.1 Authority of thrift banks to with actual experience and/or specific
issue foreign letters of credit and pay/ training in import and export financing
accept/negotiate import/export drafts/bills operations who will handle the said
of exchange. With prior Monetary Board operations (prior to engaging in said
approval, TBs may be authorized to issue activities);

§§ 2101.1 - X102.1
10.12.31
i. No net weekly regular and liquidity accept/negotiate import/export drafts/bills

reserve deficiencies during the twelve (12) of exchange. An application for authority
week period immediately preceding the date to issue foreign LCs and pay/accept/
of application; negotiate import/export drafts/bills of
j. No deficiency in asset and liquid exchange shall be signed by the president
asset cover for FCDU liabilities for of the bank or officer of equivalent rank and
three (3) months immediately preceding the shall be accompanied by a certified true copy
date of application; of the resolution of the bank’s board of
k. No deficiency in liquidity floor directors authorizing the application.
requirement for government funds held (Circular No. 650 dated 09 March 2009)
during the twelve (12) week period
immediately preceding the date of B. ESTABLISHMENT AND
application; ORGANIZATION
l. No float items outstanding for more
than sixty (60) calendar days in the “Due Sec. X102 Basic Guidelines in Establishing
From/To Head Office/Branches/Offices” Banks. In establishing a new banking
and “Due from BSP” accounts exceeding organization and a Coop Bank, the basic
one percent (1%) of the total resources as guidelines shown in Appendices 37 and 38,
of end of month preceding the date of respectively, shall be observed.
application; (As amended by Circular No.682 dated 15 February 2010)
m. No unbooked valuation reserves;
n. Compliant with ceilings on loans, § X102.1 (2008 - X101.2) Prerequisites
other credit accommodations and for the grant of a universal banking authority
guarantees to directors, officers, a. Compliance with guidelines. A
stockholders, and their related interests domestic bank seeking authority to operate
(DOSRI) for the quarter immediately as a UB shall submit an application to the
preceding the date of application; appropriate department of the SES. The
o. Compliant with the single applicant shall comply with the guidelines
borrower’s loan limit (SBL); for the issuance of a UB authority and shall
p. Compliant with the limit on real submit all the documentary requirements
estate and improvements, including bank enumerated in Appendix 1.
equipment; b. Public offering of bank shares. A
q. No uncorrected findings of unsafe domestic bank applying for a UB
and unsound banking practices; authority shall, as a condition to the
r. Generally compliant with banking approval of its application, make a public
laws, rules and regulations, orders or offering of at least ten percent (10%) of
instructions of the Monetary Board and/or the required minimum capital and this
BSP Management; and condition must be complied with before
s. No past due obligations with the it can be granted the license for authority
BSP or with any FI. to operate as a UB.
(Circular No. 650 dated 09 March 2009 as amended by Circular
The term public offering shall mean the
No. 686 dated 20 April 2010)
offer to sell equity shares to the public.
Public shall refer to all prospective
§ 2101.2 Application for authority to stockholders, excluding the bank’s directors,
issue foreign letters of credit and pay/ shareholders owning twenty percent (20%)
Manual of Regulations for Banks Part I - Page 4a

§§ X102.1 - X102.2
08.12.31
or more of the bank’s subscribed capital Provided, That in the case of new UBs,
stock, together with those of their relatives the three (3) year period shall be reckoned
within the fourth degree of consanguinity from the date the license to operate as a
or affinity, and corporations controlled or UB was granted. In the case of existing
affiliated with them. UBs which have not listed their shares in
A bank whose shares of stock are the exchange, the three (3) year period
already listed in the Philippine Stock lapsed on 27 December 1998.
Exchange (PSE) at the time of filing of its The guidelines on public offering and
application for UB authority shall be listing of bank shares are enumerated in
deemed to have complied with the public Appendix 1.
offering requirement. Likewise, an
applicant bank may opt to have its shares § X102.2 (2008 - X102.1) Suspension
listed in the PSE directly instead of passing of the grant of new banking licenses or
through the process of public offering. In the establishment of new banks. Pending
either case, at least ten percent (10%) of completion of a study, there shall be an
the applicant bank’s capital stock should indefinite moratorium on the
be held by public stockholders before it establishment of new banks, except in
can be granted the license for authority to cities and municipalities where there are
operate as a UB. no existing banking offices.
c. Listing of bank shares in the stock The moratorium shall apply to all
exchange. Domestic banks granted a UB applications for establishment of new
license, existing or new, must list their banks, including pending ones received
shares in the PSE within three (3) years: prior to 16 August 1999.
(Next page is Part I - Page 5)
Part I - Page 4b Manual of Regulations for Banks

§§ X102.2 - X102.3
08.12.31
However, approved but not yet d. The moratorium under Section 8 of

opened banks shall be exempted from R. A. No. 8791 shall not be applicable to:
the moratorium. Requests for extension (1) acquisition or purchase by foreign
of the period within which to open banks of up to 100% of the voting stock
approved but not yet opened banks shall, of existing domestic KBs;
however, be evaluated on a case-to-case (2) the transfer of license of an existing
basis depending, among others, on the KB to another corporation, subject to prior
bank’s substantial compliance with the approval of the Monetary Board;
pre-operating requirements. (3) new KBs resulting out of mergers or
In the case of KBs, the following rules consolidations where at least one (1) of the
shall govern: banks involved in such merger or
a. No new KB shall be established consolidation is a KB; and
within three (3) years from 13 June 2000 (4) downgrading or refocusing of UBs
which is the date of effectivity of R.A. into KBs.
No. 8791 or until 12 June 2003.
The moratorium as mandated by said law § X102.3 (2008 - X102.2) Partial
covers only KBs classified and defined as lifting of general moratorium on the
such under Sections 3.2(b) and 29 of licensing of new thrift banks and rural
R. A. No. 8791 as well as in Item “b.2” of banks. The general moratorium on the
Sec. X101 without prejudice, however, to licensing of new TBs and RBs is partially
existing or future moratoriums on other lifted to allow the entry of microfinance-
types of bank as has been or may be oriented banks.
declared by the Monetary Board. For this purpose, a microfinance-
b. The moratorium under Section 8 oriented bank is a bank that provides
of R.A. No. 8791 shall cover all financial services and caters primarily to
applications for issuance of new the credit needs of the basic or
commercial banking licenses as well as disadvantaged sectors such as farmer-
upgrading or conversion of old banking peasants, artisanal fisherfolk, workers in
licenses into commercial banking licenses, the formal sector and migrant workers,
the organization and incorporation by workers in the informal sectors, indigenous
foreign banks of new commercial banking peoples and cultural communities,
subsidiaries and any and all other women, differently-abled persons, senior
transactions that may result in the issuance citizens, victims of calamities and disasters,
of new commercial banking licenses. youth and students, children, urban poor
c. All such pending applications as of and low income households for their
13 June 2000, including those which have microenterprises and small businesses so
already been decided but with any incident as to enable them to raise their income
thereto still unresolved or are on levels and improve their living standards.
reconsideration or appeal, shall not be Microfinance loans are granted on the basis
further acted upon by the BSP and shall be of the borrower’s cash flow and are
returned to the applicant banks without typically unsecured.
prejudice to the resubmission or re-filing The guidelines on the establishment
thereof upon expiration of the moratorium of a microfinance-oriented bank are as
at the option of the applicant banks. No follows:
such application shall be considered as a. Microfinance-oriented banks may
automatically re-submitted or re-filed be established on a very selective basis,
upon expiration of the moratorium. preferably in places not fully served by

§§ X102.3 - X102.4
08.12.31
existing RBs or in areas not fully serviced The Manual must be consistent with the
by microfinance-oriented banks, subject to core principles, characteristics and features
the following additional criteria (in addition of microfinance indicated in Sec. X361.
to standard licensing requirements): (6) At least fifty percent (50%) of the
(1) That the microfinance-oriented bank’s gross loan portfolio shall at all times
bank to be established shall either be a TB consist of microfinance loans as defined in
or an RB; Sec. X361.
(2) That the capital of the microfinance- b. The requirement that the president,
oriented banks to be established should chief operating officer or general manager
be owned by private persons, multilateral of a TB or RB must have at least two (2)
entities or a combination thereof; years experience in banking and/or
(3) That in the case of an RB to be finance may be substituted with
established as a microfinance bank, the microfinance experience in cases of
minimum paid-in capital shall be P5.0 officers of a microfinance organization
million or the applicable existing applying for authority to establish, or
capitalization requirement for a new RB, convert into a TB or RB: Provided, That the
whichever is higher. The capitalization concerned officer is a college graduate.
requirement under existing regulations c. Subject to the standard branching
shall apply to TBs; requirements, microfinance-oriented
(4) That the organizers must have the banks are also exempted from the general
capacity to engage in microfinancing, moratorium on the establishment of bank
which may be indicated by the following: branches, under Sec. X151. After one (1)
(a) At least twenty percent (20%) of the year of profitable operations, a
paid-in capital of the proposed bank must microfinance-oriented bank may apply for
be owned by persons or entities with track establishment of a branch but the Monetary
record in microfinancing. Board may require additional capital to be
(b) Majority of the members of the infused for every branch in addition to the
board of directors have experience in minimum capital of the TB/RB.
microfinancing with at least one (1) d. Existing microfinance organizations
member having actual banking applying for authority to establish, or convert
experience. into a TB or RB may also be allowed to
(c) The proposed bank must have as a convert their existing branches/offices into
minimum, an adequate loan tracking branches of the bank proposed to be
system that allows daily monitoring of loan established by simultaneously applying for
releases, collection and arrearages, and any authority for the purpose. However, the
restructuring and refinancing. standard requirements for the establishment
(5) In addition to the requirements for of branches, particularly the capitalization
the establishment of banks in Appendix 37, requirement, have to be complied with.
the application for authority to establish a Moreover, there must be a proof that the area
microfinance-oriented bank must be is not fully served by any existing RB.
accompanied by the following documents: (As amended by Circular No. 624 dated 13 October 2008)
(a) A vision and mission statement
with clear expression of the commitment § X102.4 (2008 - X101.6) Conditions
to reach low-income clients. for the grant of authority to convert into
(b) A written manual of operations, a lower category
which shall include the administrative and a. That the bank must have complied
credit program systems and procedures. with the end-2000 minimum capital

§ 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 correct the same within a period of six (6)
conversion,the bank shall phase-out all months from date of receipt of notice of
inherent powers and activities under approval of its application, otherwise, the
special authorities not normally associated same monetary and non-monetary penalties
to the lower bank category into which it mentioned in Item “b” above shall be
is converting: Provided, That a TB imposed;
(previously authorized by the Monetary d. That the bank shall submit the
Board to accept demand deposits) may be pertinent amended Articles of
allowed to retain such authority when Incorporation and By-Laws duly registered
converting into an RB but may clear with the SEC within six (6) months from
checks only through a correspondent bank date of receipt of notice of approval of its
and shall not be allowed to participate application;
directly in the Philippine Clearing House e. That the bank shall fully disclose its
Corporation (PCHC) and the BSP 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 BSP of a certificate of
From KB to TB 15,000/day 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
(b) Suspension of declaration of cash in Items “b” and “c” above shall be
dividends; reckoned from their respective prescribed
(c) Restriction on lending to affiliates; deadlines or within six (6) months from
(d) Denial of access to BSP 13 March 2000, if no such deadline is
rediscounting facilities; prescribed.

§§ X102.5 - X104.1
11.12.31
§ X102.5 (2008 - X102.3) Conversion c. The amount of capital, the

of microfinance-oriented thrift banks/ rural financing, organization, direction and
banks administration, as well as the integrity and
a. Microfinance-oriented TBs and RBs responsibility of the organizers and
are disallowed from converting to regular administrators reasonably assure the safety
TBs and RBs. of deposits and the public interest.
b. Microfinance-oriented branches of Likewise, the SEC shall not register the
regular TBs and RBs may convert into by-laws of any bank, or any amendment
regular branches, five (5) years after the start thereto, unless accompanied by a certificate
of the branch’s operations, subject to the of authority from the BSP.
submission of the following: (As amended by CL-2008-078 dated 15 December 2008)
(1) Certification signed by the
president or officer of equivalent rank that: Sec. X104 (2008 - X167) Business Name2
(a) At least seventy percent (70%) of a. UBs/KBs. Only a bank that is granted
deposits generated by the branch to be universal/commercial banking authority may
established shall be actually lent out to represent itself to the public as such in
microfinance borrowers; and connection with its business name.
(b) The microfinance loans of said b. TBs. TBs may be allowed to adopt
branch shall at all times be fifty percent and use any name: Provided, That the words
(50%) of its gross loan portfolio A Thrift Bank, A Savings Bank, A Private
are no longer feasible due to changes in Development Bank or A Stock Savings and
market condition in the locality where it is Loan Association, as the case may be, are
located. The certification shall be supported affixed after its business name.
by a market study citing, among others, c. RBs/Coop Banks. RBs/Coop Banks
changes in demographic, social, and may adopt a corporate name or use a
economic factors; and business name/style with the word Rural or
(2) Certified true copy of the resolution Coop, as the case may be. Said banks may
of the bank’s board of directors authorizing also adopt a name without such words:
the conversion of the microfinance-oriented Provided, That the identifying phrase, A
branch into a regular branch. Cooperative Bank or A Rural Bank, as the
(CL-2008-075 dated 28 November 2008) case may be, is affixed after its business
name: Provided, further, That where the
Sec. X103 Certificate of Authority to name of the bank is shown on letterheads,
Register1. The SEC shall not register the articles billboards and other advertising materials,
of incorporation of any bank, or any the size of the letters of such phrase shall
amendment thereto, unless accompanied by be at least one-half (½) the size of the
a certificate of authority issued by the business name.
Monetary Board, under its seal. The certificate (As amended by CL-2011-062 dated 19 August 2011,
shall not be issued unless the Monetary Board CL-2008-053 dated 21 August 2008 and 2008-007 dated 21
is satisfied from the evidence submitted that: January 2008)
a. All requirements of existing laws
and regulations to engage in the business § X104.1 (2008-X607) Bank
for which the applicant is proposed to be Advertisements. The following rules and
incorporated have been complied with; regulations shall govern bank
b. The public interest and economic advertisements.
conditions, both general and local, justify a. No bank shall publish, issue or
the authorization; and distribute in any form, any advertisement
1
See SEC Circular No. 3 dated 16 February 2006.
2
See SEC Circular Nos. 5 dated 17 July 2008 and 14 dated 24 October 2000, and DTI Administrative Order No. 1008
effective 10 October 2010
.
§§ X104.1 - X105.2
08.12.31
that shall degrade, deprecate or otherwise Sec. X105 (2008 - X121) Liberalized Entry
prejudice other banking and financial and Scope of Operations of Foreign
institutions. Banks. The following rules shall govern
b. No bank shall publish, issue or the liberalized entry and scope of
distribute in any form of advertisement (in operation of foreign banks.
newspapers, magazines, television, radio,
billboards, brochures, prospectuses, or any § X105.1 (2008 - X121.1) Modes of
other medium) or allow itself to be used/ entry of foreign banks. With prior approval
mentioned in any form of advertisement of the Monetary Board, foreign banks may
unless such advertisement is in pursuance operate in the Philippines through any
of its business or investment. one (1) of the following modes:
c. No bank shall place or cause to be a. B y a c q u i r i n g , p u r c h a s i n g o r
placed any advertisement tending to owning up to sixty percent (60%) of the
mislead a depositor into believing that he voting stock of an existing domestic
will get more in benefits than what the bank bank (including banks under
is legally authorized to give. No bank receivership or liquidation, provided
advertisement shall contain any false claim no final court liquidation order has
or exaggerated representation as to its been issued);
liquidity, solvency, resources, deposits and b. By investing in up to sixty percent
banking services. (60%) of the voting stock of a new banking
d. No bank advertisement shall subsidiary incorporated under the laws of
give the impression that the bank is the Philippines; or
engaged in a business other than c. By establishing branches with full
banking. banking authority.
e. Banks shall inform their Interested foreign banks shall file with
depositors and other clients by the Office of the Governor, BSP, their
advertisement or publication of the application for authority to operate in the
termination of benefits previously Philippines through any of the modes of
advertised or publicized. entry mentioned above. The application
f. Banks shall discontinue any must be submitted in the prescribed forms
advertisement whenever the same is shown in Appendix 2.
deemed unethical/unwarranted or violative
of the provisions of these regulations. The § X105.2 (2008 - X121.2) Qualification
client banks and/or their advertising requirements
agencies shall incorporate in their contract/ a. Investment in an existing domestic
agreement for time and space with media bank. A foreign bank seeking to acquire,
the condition that such contract/agreement purchase or own up to sixty percent (60%)
for time and space can be cancelled/ of the voting stock of an existing domestic
terminated immediately whenever the bank needs only to meet the selection
client bank is directed by the BSP to desist criteria under Subsec. X105.3.
or discontinue the particular advertisement b. Establishment of subsidiary or
in question. branch. Any foreign bank seeking to
g. Responsibility for compliance with establish a new banking subsidiary or
the above rules and regulations rests with to establish branches with full banking
the bank officers or directors who caused authority, in addition to satisfying the
the approval or placement of such criteria prescribed Subsec. X105.3,
advertisement. must be -

§§ X105.2 - X105.3
08.12.31
(1) Widely-owned and publicly-listed a. Geographic representation and

(listed in any stock exchange authorized complementation. Representation from
by the government of the country of the different parts of the world and/or the
origin), unless more than fifty percent international financial centers shall be
(50%) of the capital stock of said foreign ensured.
bank applicant is owned by the b. Strategic trade and investment
government of its country of origin. The relationships between the Philippines and
bank is considered as widely-owned if it the country of incorporation of the foreign
has at least fifty (50) stockholders without bank. Consideration shall be given to the
any stockholder owning more than countries of origin of applicant foreign
fifteen percent (15%) of its capital stock: banks -
Provided, That if the bank is owned/ (1) With substantial financial assistance
controlled by a holding company, this to, and loans and investments, past and
requirement shall apply to the holding present, in the Philippines; and
company; and (2) With which the Philippines has
(2) Among the top 150 banks in the significant volume of trade especially to
world or the top five (5) banks in its those with which the country has substantial
country of origin. net exports.
The determination of the top 150 c. Relationship between the applicant
banks in the world may be based on lists bank and the Philippines. Consideration
prepared and published by reputable shall be given to the capability of the foreign
organizations/publications. bank to promote trade with, and to bring
The determination of the top five (5) foreign investments into, the Philippines.
banks in the country of origin shall be Long standing financial and commercial
based on information supplied by the relationship with, and assistance extended
bank supervisory authorities in which to, the Philippines, shall likewise be taken
country of origin as to the ranking of into account.
banks based on net worth. However, the d. Demonstrated capacity, global
Monetary Board may also use total assets reputation for financial innovations and
as a criterion: Provided, That the same stability in a competitive environment of
shall be based on book accounts only and the applicant. Demonstrated capacity and
on the consolidated balance sheet of the stability may be indicated by the fact that
head office and all branches, excluding the applicant ranks among the top 150
subsidiaries and affiliates. in the world or top five (5) in its country
In addition to the foregoing of origin. Global reputation may be
requirements, the foreign bank applicant measured by international presence,
must be in compliance with capital e.g., number of branches with full
requirements as prescribed by the laws and banking authority outside of its country
regulations of its country of origin. of origin.
e. Reciprocity rights enjoyed by
§ X105.3 (2008 - X121.3) Guidelines Philippine banks in the applicant’s country.
for selection. The following factors shall Philippine banks shall enjoy reciprocity
be considered in selecting the foreign rights in the applicant's country.
bank which will be allowed to invest in f. Willingness to fully share
majority of the voting stock of an existing technology. The applicant bank shall
domestic bank or to establish a subsidiary submit an undertaking to this effect
or branch in the Philippines. together with its application.

§ X105.4
10.12.31
§ X105.4 (2008 - X121.4) Capital effectivity of R.A. No. 7721 shall comply
requirements with the required permanently assigned
a. For locally incorporated subsidiaries capital by inwardly remitting and
- The minimum capital required for locally converting into Philippine currency the
incorporated subsidiaries of foreign banks U.S. Dollar equivalent of P210.0 million
shall be the same as that prescribed by the computed at the same exchange rate of
Monetary Board for domestic banks of the P26.979 to US$1, within a period of one
same category. and one-half (1½) years from 05 June1994.
b. For foreign bank branches with full The said foreign bank may establish up
banking authority - A foreign bank to six (6) branches in addition to its branch
authorized to establish branches with full or branches existing as 05 June1994, the
banking authority in the Philippines shall first three (3) additional branches in
inwardly remit and convert into Philippine locations of its choice, and the next three
currency, as permanently assigned capital, (3) additional branches in locations
the U.S. Dollar equivalent of P210.0 designated by the Monetary Board:
million at the exchange rate prevailing on Provided, That upon establishing any
05 June 1994 (the date of effectivity of additional branch, the bank shall comply
R.A. No. 7721), i.e., P26.979 to US$1. The immediately with the permanently
foreign bank shall thereby be entitled to assigned capital mentioned in the next
establish three (3) branches in locations of preceding paragraph: Provided, further,
its choice. That the said permanently assigned
For purposes of this Subsection, the capital shall be the capital for the bank’s
same foreign bank may open three (3) first three (3) additional branches,
additional branches in locations designated including its existing branch or branches,
by the Monetary Board by inwardly and for each branch established in addition
remitting and converting into Philippine thereto, the U.S. Dollar equivalent of
currency, as additional permanently P35 million computed at the same
assigned capital the U.S. Dollar equivalent exchange rate of P26.979 to US$1,
of P35.0 million for every additional shall be inwardly remitted and
branch, computed at the same exchange converted into Philippine currency.
rate of P26.979 to US$1. The Monetary If the permanently assigned capital of
Board, in determining the location of the the existing branch/es of said foreign bank
next three (3) branches established that has been converted to Philippine
pursuant to the provisions of R.A. No. 7721, currency is sufficient to cover the above-
shall consider, among other things, mentioned amount of assigned capital
development requirements of a region and required for the additional branches, no
the contribution of a bank branch may additional assigned capital shall be
make to regional development, expansion required; otherwise, the foreign bank shall
of basic financial services and enhanced comply immediately with the capital
access to credit by small and medium-scale requirements under the above paragraphs.
enterprises: Provided, That the total (2) Foreign banks with existing
number of branches for each new foreign branches in the Philippines on 5 June1994
bank entrant shall not exceed six (6). shall have a period of one and one-half (1½)
c. For foreign banks with existing years from said date within which to comply
branches in the Philippines - with the ratio between the assigned capital
(1) A foreign bank with existing branch and the Net due to head office, branches,
or branches in the Philippines upon the subsidiaries and offices outside the

§§ X105.4 - X105.6
10.12.31
Philippines prescribed in Subsec. X105.6: X105.6. Should there be any Net due from
Provided, That upon establishing any head office, branches, subsidiaries and
additional branch pursuant to the other offices outside the Philippines, the
provisions of this Section, the bank shall same shall be deducted from the capital
comply immediately with the aforesaid accounts for purposes of determining
ratio. compliance with the required capital ratios.
d. Capital of Foreign Bank Branch c. Earnings not remitted to the head
Authorized to Operate as Expanded office shall constitute part of the Net due
Commercial Bank - The capital of a to of the local branch of a foreign bank:
Philippine branch of a foreign bank which Provided, That said bank may elect to
is authorized to operate as a UB may consider such earnings as part of the assigned
consist of its permanently assigned capital capital, in which case said earnings may
plus the Net due to account: Provided, That no longer be remittable to the head office.
at no time shall the aggregate of said d. The term Net due to shall be net
accounts fall below the amount required of: (1) unbooked valuation reserves and
for UB authority under Subsec. X111.1: other capital adjustments as may be
Provided, further, That the amount of the required by the BSP; (2) total outstanding
Net due to which may be added to unsecured credit accommodations, both
permanently assigned capital shall not direct and indirect, to DOSRI; and
exceed the equivalent of three (3) times (3) deferred income tax.
the amount of the permanently assigned e. Where a foreign bank has more
capital. than one (1) branch or banking office in
The Net due to as described in the the Philippines, all its branches and
preceding paragraph shall be net of the items banking offices shall be treated as a unit
enumerated in Subsec. X105.5d. for purpose of determining compliance
e. Applicable Exchange Rate - It is with the legal reserve requirement and
understood that the exchange rate of with capital requirement prescribed in
P26.979 to US$1 mentioned hereinabove laws/regulations.
is applicable only to the minimum capital
requirements provided in Items b and c of § X105.6 (2008 - X121.6) Prescribed
this Subsection. For other purposes, the ratio of net due to and permanently
exchange rate prevailing at the time of assigned capital. The amount of Net due
remittance shall be applicable. to which may be added to permanently
(As amended by Circular No. 696 dated 29 October 2010) assigned capital for purposes of
determining compliance with capital ratios
§ X105.5 (2008 - X121.5) Composition prescribed in laws/regulations shall not
of capital accounts; compliance with exceed the equivalent of four (4) times the
capital ratios amount of permanently assigned capital:
a. Foreign bank branches shall comply Provided, That for the purpose of a foreign
with the same capital ratios applicable to bank branch seeking to operate as a UB,
domestic banks of the same category. the ratio shall not exceed three (3) times
b. For Philippine branches of foreign as provided in Item "d" of Subsec. X105.4.
banks, the term capital shall include At least fifteen percent (15%) of the Net
permanently assigned capital which shall due to required to comply with the
be inwardly remitted and converted to prescribed capital ratio shall be inwardly
Philippine currency and Net due to up remitted and converted into Philippine
to an amount prescribed under Subsec. currency: Provided, That amounts invested

§§ X105.6 - X105.9
08.12.31
in productive enterprises or utilized by expanded commercial banking

Philippine companies for export authority subject to compliance with
activities, including foreign currency existing rules and regulations and the
denominated loans granted to Philippine guidelines enumerated in Appendix 3
exporters and loans for productive on the matter: Provided, That foreign
purposes such as the following: bank branches authorized to operate
agriculture, fisheries and forestry; under an expanded commercial
manufacturing; mining; public utilities; banking authority shall be exempted
construction; and home building, need from the requirement of publicly
not be subject to conversion into offering at least ten percent (10%) of
Philippine currency. its shares. The limitations include,
If there is non-compliance with the among other things, the single
prescribed fifteen percent (15%) of Net due borrower's limit, the capital-to-risk
to required to be inwardly remitted and assets ratio, and the capitalization and
converted to pesos, the bank shall other requirements under R.A. No. 337,
immediately inwardly remit and convert as amended, and other related laws.
to Philippine currency the amount of the
deficiency. § X105. 9 (2008 - X121.9) Limitations
Branches of foreign banks shall a. Limit on mode of entry for each
submit the reports prescribed in foreign bank - A foreign bank may avail
Appendix 6 to show compliance with itself of only one (1) mode of entry
the requirement that at least fifteen provided under Items "a" to "c" of
percent (15%) of its Net due to shall be Subsec. X105.1: Provided, That entry
inwardly remitted and converted into pursuant thereto shall not preclude
Philippine currency. investment in the equity of a domestic bank
pursuant to the provisions of R.A. No. 337,
§ X105.7 (2008 - X121.7) Head as amended. A foreign bank that comes
office guarantee. The head office of in via the establishment of branches under
foreign bank branches shall guarantee R.A. No. 7721 may still invest in the equity
prompt payment of all liabilities of its of a domestic bank subject to the provisions
Philippine branches, as well as the of R.A. No. 337, as amended.
observance of the constitutional rights of b. Limit on the number of foreign
the employees of such branches. banks which may be allowed to establish
branches. The Monetary Board may
§ X105.8 (2008 - X121.8) Scope of authorize up to six (6) new foreign banks
authority for locally incorporated to establish branches. However, upon
subsidiaries of foreign banks as well recommendation of the Monetary Board,
as branches with full banking the President of the Republic of the
authority. Subsidiaries and branches of Philippines may approve, as the national
foreign banks established under interest may require, four (4) additional
Subsec. X105.1 shall be allowed to new foreign banks to establish branches,
perform the same functions and enjoy subject to compliance with provisions of
the same privileges of, and be subject this Section.
to the same limitations imposed upon, c. Limit on the period for entry
a Philippine bank of the same through establishment of branches.
category. Privileges shall include the Foreign banks shall be allowed entry under
eligibility to operate under an Item “c” of Subsec. X105.1 by establishing

§§ X105.9 - X107
08.12.31
branches with full banking authority (ii) that the foreign bank qualifies
within five (5) years from 05 June 1994. under the provisions of Subsec.
The entry of foreign banks through the X105.2b; and
establishment of a new banking (iii) that the limit of ten (10) foreign
subsidiary and through investment in banks establishing branches as a mode
existing domestic banks shall not be of entry has not yet been reached.
subject to any time limitation. c. Foreign banks with existing
d. Control of the resources of the branches in the Philippines, as well as
banking system. The Monetary Board shall those that may be allowed to establish
adopt such measures as may be necessary branches under R.A. No. 7721, may
to ensure that at all times the control of incorporate under Philippine laws, in
seventy percent (70%) of the resources or which case said foreign banks may own
assets of the entire banking system is held up to sixty percent (60%) of the voting
by domestic banks more than fifty percent stock of the new bank.
(50%) of the subscribed capital of which is
owned by Filipinos. Said measures may § X105.11 (2008 - X121.11) Listing
include review of, among other things, the of shares with the Philippine Stock
existing policies on - Exchange. At least ten percent (10%) of
(i) the granting of authority to establish the capital of banks in which foreign banks
additional subsidiaries and branches; have invested under Subsec. X105.1a and
(ii) the granting of authority to b, shall be listed in the PSE within a
(aa) engage in expanded commercial reasonable period of time after the
banking and trust activities; (bb) open an investment is made as may be determined
FCDU; (cc) collect taxes and customs by the Monetary Board.
duties; and (dd) invest in the equity of
other entities; and § X105.12 (2008-X121.12)
(iii) access to rediscounting facilities. Applicability to Philippine corporations
a. Any right, privilege or incentive
§ X105.10 (2008 - X121.10) Change granted to foreign banks or their
from one mode of entry to another subsidiaries or affiliates under
a. As a general rule, a foreign bank R.A. No. 7721 shall be equally enjoyed
which has been authorized to operate in by, and extended under the same
the Philippines through any one (1) of the conditions to, domestic banks.
allowable modes of entry may change to b. Philippine corporations, whose
another mode by giving up the first mode shares of stocks are listed in the PSE, or
it availed of. which are of long standing for at least
b. A foreign bank which pursuant to ten (10) years, as determined by the
Items “a” and “b” of Subsec. X105.1, has Monetary Board, shall have the right to
established or acquired a banking acquire, purchase or own up to sixty
subsidiary may sell its stockholdings percent (60%) of the voting stock of
therein and may apply for authority to a domestic bank: Provided, That said
establish a branch subject to the corporations, as well as foreign banks
provisions of Subsec. X105.9c and to the may own up to sixty percent (60%)
following conditions: of the voting stock of only one (1)
(i) that the disposition/sale of its domestic bank.
stockholdings in the subsidiary is done
within five (5) years from 05 June 1994; Secs. X106 - X107 (Reserved)

§§ X108 - X108.3
09.12.31
C. MERGER AND CONSOLIDATION § X108.2 (2008 - X111.2) Rules on

exchange of shares. As a general rule, the
Sec. X108 (2008 - X111) Merger or ratio of exchange of shares between or
Consolidation to Meet Minimum Capital among the participants in a bank merger or
The merger or consolidation of banks and consolidation shall be based on mutual
other financial intermediary(ies) to meet agreement of the parties concerned.
minimum capital requirements shall be However, any appraisal increment reserve
allowed subject to the following regulations. (revaluation reserve) arising from the
For purposes of merger and revaluation of the fixed assets, as may be
consolidation, the following definitions agreed upon by the parties shall be limited
shall apply: to premises, improvement, and equipment
a. Merger - is the absorption of one which are necessary for its immediate
(1) or more corporations by another accommodation in the transaction of the
existing corporation, which retains its bank’s business. Such revaluation should
identity and takes over the rights, be based on fair valuation of the property
privileges, franchises, and properties, and which shall be subject to review and
assumes all the liabilities and obligations approval by the BSP.
of the absorbed corporation(s) in the same
manner as if it had itself incurred such § X108.3 (2008 - X112) Merger or
liabilities or obligations. The absorbing consolidation incentives. In pursuance of
corporation continues its existence while the policy to promote mergers and
the life or lives of the other corporation(s) consolidations among banks and other
is/are terminated. financial intermediaries as a means to
b. Consolidation - is the union of two develop larger and stronger FIs, constituent
(2) or more corporations into a single new entities may, subject to BSP approval, avail
corporation, called the consolidated themselves of any or all of the following
corporation, all the constituent corporations incentives:
thereby ceasing to exist as separate entities. a. Revaluation of premises,
The consolidated corporation shall improvements and equipment of the
thereupon and thereafter possess all the institutions: Provided, That such revaluation
rights, privileges, immunities, franchises and shall be based on fair valuation of the
properties, and assume all the liabilities and property conducted by a reputable appraisal
obligations of each of the constituent company which shall be subject to review
corporations in the same manner as if it had and approval by the BSP.
itself incurred such liabilities or obligations. The following rules shall govern the
revaluation of assets:
§ X108.1 (2008 - X111.1) Requirement (1) The revaluation of the premises,
of Bangko Sentral approval. Mergers and improvements and equipment shall be
consolidations including the terms and allowed only to all institutions participating
conditions thereof shall comply with the in a merger or consolidation if all of them
provisions of applicable law and are subject belong to the same category, or at least two
to approval by the BSP. (2) of them belong to the highest category
The guidelines and procedures in the among the merging or consolidating
application for merger/consolidation as institutions;
shown in Appendix 87 shall be observed (2) In case the merging or consolidating
by banks. institutions do not belong to the same
(As amended by M-2009-028 dated 12 August 2009) category or only one (1) of them falls under

§ X108.3
08.12.31
the highest category, all of them may be (1) The booking on staggered basis over
allowed to revalue their premises, a maximum period of five (5) years of
improvements and equipment: Provided, unbooked valuation reserves based upon
That the amount of appraisal increment examination by the BSP may be allowed to
resulting from such revaluation shall be all institutions participating in a merger or
limited to the amount of the total resources consolidation if all of them belong to the
of the institution belonging to the lower same category, or at least two (2) of them
category or categories. belong to the highest category among the
(3) The appraisal increment resulting merging or consolidating institutions.
from the revaluation shall form part of capital (2) In case the merging or
for purposes of determining the single consolidating institutions do not belong to
borrower’s limit and capital-to-risk assets the same category or only one (1) of them
ratio. The use of appraisal increment for falls under the highest category, all of them
cash dividend shall be governed by the may be allowed to book the required
provisions of the Corporation Code of the valuation reserves based upon examination
Philippines. by the BSP on a staggered basis over a
(4) The revaluation of premises, maximum of five (5) years: Provided, That
improvements, and equipment of the the aggregate amount of the required
institution as well as the recognition of valuation reserves shall be limited to the
goodwill as an incentive to mergers or amount of the total resources of the
consolidations as provided in Item "e" institution belonging to the lower category
hereof shall only be allowed if the following or categories.
conditions are met: c. Exemption from the forty percent
(i) The surviving or consolidated entity (40%) and sixty percent (60%) ownership
will meet the existing capital requirements limits prescribed in Subsec. X126.1 in the
after all adjustments are taken up in the new or surviving institution of any Filipino
books of accounts of the merging or individual or domestic non-bank
consolidating entities but before considering corporation: Provided, That this shall be
appraisal increments and goodwill, or there allowed only if the bank that is being
will be infusion of fresh capital to meet said merged is distressed as may be determined
existing capital requirements; and by the Monetary Board and such merger is
(ii) The merger or consolidation will for the purpose of rehabilitating the bank:
result in a more viable FI as a result of cost Provided, further, That whenever any of said
savings and improved competitive position. stockholders exceed the prescribed limits,
In case of purchase or acquisition of the his holdings shall not be increased, but may
majority or all of the outstanding shares of be reduced and once reduced, shall not
stocks of a bank, the same conditions must thereafter be increased beyond such limits.
be satisfied. In the case of purchase or acquisition
b. Unbooked valuation reserves based of majority or all of the outstanding shares
upon the BSP examination and other capital of a bank/QB by another bank/QB, the
adjustments resulting from the merger or revaluation of the assets and the booking
consolidation may be booked on staggered of the required valuation reserves based
basis over a maximum period of five (5) years. upon examination by the BSP over a
The following guidelines shall govern period of five (5) years shall be allowed
the staggered booking of valuation reserves: only if such purchase or acquisition is for

§ X108.3
08.12.31
staggered booking of valuation reserves BSP of RBs which are parties to the merger
shall be allowed in full only if both banks/ or consolidation: Provided, That loan
QBs belong to the same category. arrearages of RBs to the BSP are paid in full
Otherwise, only the bank/QB being or covered by a plan of payment payable on
acquired/rehabilitated shall be allowed to an equal monthly amortization schedule
recognize in full the appraisal increment over a period not exceeding ten (10) years;
resulting from revaluation of assets and to g. Relocation of branches/offices may be
book valuation reserves on a staggered basis, allowed within one (1) year from date of
while in the case of the acquiring bank/QB, merger or consolidation in cases where the
the appraisal increment resulting from merger or consolidation resulted in
revaluation of assets and the privilege of duplication of branches/offices in a service
staggered booking of valuation reserves area, or in such other cases/circumstances
shall each be limited to the amount of the as may be prescribed by the Monetary
total resources of the bank/QB being Board;
acquired/rehabilitated. h. Outstanding penalties in legal reserve
The exemption from the ownership deficiencies and interest on overdrafts with
limits prescribed in Subsec. X126.1 on the BSP as of the date of the merger or
existing stockholdings of any Filipino consolidation may be paid in installments
individual or domestic non-bank over a period of one (1) year;
corporation in a banking institution, as an i. Rediscount ceiling of 150% of
incentive to purchase or acquisition of adjusted capital accounts for a period of
majority or all of the outstanding shares of one (1) year, reckoned from the date of
stock of bank/QB shall be allowed only if merger or consolidation: Provided, That the
the bank being purchased or acquired is merged/consolidated bank meets the
distressed as may be determined by the required net worth-to-risk assets ratio and
Monetary Board and such merger is for the all of the other requirements for
purpose of rehabilitating the bank/QB. rediscounting;
d. If by reason of merger or j. UBs/KBs whose total outstanding
consolidation, the resulting bank is unable real estate loans exceed twenty percent
to comply fully with the prescribed net (20%) of total loan portfolio may be given
worth-to-risk assets ratio, the Monetary a period of one (1) year within which to
Board may, at its discretion, temporarily comply with the prescribed twenty
relieve the bank from full compliance with percent (20%) ratio reckoned from the
this requirement under such conditions as date of merger or consolidation;
it may prescribe; k. Restructuring/plan of payment of past
The recognition of goodwill as an due obligations of the proponents with the
incentive to mergers or consolidations shall BSP as of the date of merger/consolidation
only be allowed subject to the conditions over a period not exceeding ten (10) years;
in Item “a (4)”. l. In the case of RBs, grant of access to
e. Conversion or upgrading of the the rediscounting window of the BSP for a
existing head offices, branches and/or other period of two (2) years from the date of
offices of the merged or absorbed merger or consolidation even if its past
institutions into branches of the new or due ratio exceeds twenty five percent
surviving FIs; (25%) of loan portfolio but not exceeding
f. Condonation of liquidated damages thirty percent (30%): Provided, That the
and/or penalties on loan arrearages to the merged/consolidated bank meets all the

§§ X108.3 - X111
10.12.31
other requirements. During said period of The foregoing incentives may also be
two (2) years, its rediscounting limit per granted in cases of purchases or acquisitions
application may also be increased to an of majority or all of the outstanding shares
amount equivalent to the total of the of stock of a bank/QB.
rediscounting limit per application of each (As amended by Circular 494 dated 20 September 2005)
of the constituent banks before merger or
consolidation; 1108.3 (Reserved)
m. Subject to approval of the Monetary
Board concurrent officerships between a 2108.3 (Reserved)
merged or consolidated bank/FI and another
bank/FI may be allowed; 3108.3 Regulatory relief under the
Likewise, with prior approval of the strengthening program for RBs. The
Monetary Board, concurrent directorships Strengthening Program for RBs (SPRB) is a
may be allowed in cases where a bank joint undertaking of the BSP and the
acquires shares of stock of another bank for Philippine Deposit Insurance Corporation
the purpose of merging or consolidating the (PDIC) aimed at promoting mergers and
two (2) banks regardless of whether the consolidations as a means to further
banks belong to the same category or both strengthen the rural banking system through
have quasi-banking functions; the grant of financial assistance (FA) by the
n. Subject to other requirements on the PDIC and regulatory relief by the BSP to
establishment of branches, the merged/ eligible strategic third party investors (STPIs)
consolidated RBs may be allowed to which shall be RBs, desiring to enter into
establish a branch each in Cebu City and mergers and consolidations with eligible
Davao City if it has put up the minimum distressed RBs that may be considered under
capital requirement for these places; the SPRB.
o. Grant of automatic extension of The guidelines on the grant of regulatory
five (5) years for retirement of government relief under the SPRB including the
preferred shares to be reckoned from the documentary requirements in applying for
date of merger or consolidation; the regulatory relief are provided in
p. Training of officers and staff of the Appendix 94.
merging or consolidating RBs by the BSP; (Circular No. 693 dated 09 August 2010)
and
q. Any right or privilege granted a Secs. X109 - X110 (Reserved)
merging bank under a rehabilitation
program previously approved by the D. CAPITALIZATION
Monetary Board or under any special
authority granted by the Monetary Board Sec. X111 (2008 - X106) Minimum Required
shall continue to be in effect. Capital. The following provisions shall
The revaluation of assets and staggered govern the capital requirements for banks.
booking of valuation reserves shall be The term capital shall be synonymous
available for a period of two (2) years from to unimpaired capital and surplus,
19 February1999 while the rest of the combined capital accounts and net worth
incentives enumerated under this and shall refer to the total of the unimpaired
Subsection shall be available for a period of paid-in capital, surplus and undivided
three (3) years from 31 August 1998. profits, less:

§§ X111 - X111.1
11.12.31
a. Unbooked valuation reserves and (c) upon relocation of the head office of a
other capital adjustments as may be required TB/RB in an area of higher classification, and
by the BSP; (d) when majority of an RB’s total assets and/
b. Total outstanding unsecured credit or majority of its total deposit liabilities are
accommodations, both direct and indirect, regularly accounted for by branches located
to directors, officers, stockholders, and their in areas of higher classification as provided
related interests (DOSRI) granted by the in Subsec. X151.4 on the branching
bank proper; guidelines, shall be as follows:
c. Unsecured loans, other credit Required
accommodations and guarantees granted to Minimum
Bank Category Capitalization
subsidiaries and affiliates; a. UBs P4.95 billion
d. Deferred income tax; b. KBs P2.4 billion
e. Appraisal increment reserve c. TBs with Head
(revaluation reserve) as a result of Office in:
(1) Metro Manila P1.0 billion
appreciation or an increase in the book
(2) Cities of Cebu P500 million
value of bank assets; and Davao
f. Equity investment of a bank in ( 3) Other areas P250 million
another bank or enterprise, whether foreign d. RBs with Head
or domestic, if the other bank or enterprise Office in:
(1) MetroManila P100 million
has a reciprocal equity investment in the (2) Cities of Cebu P50 million
investing bank, in which case, the and Davao
investment of the bank or the reciprocal (3) All other cities P25 million
investment of the other bank or enterprises, (4) 1st to 4th class P10 million
municipalities
whichever is lower; and
(5) 5th to 6th P5 million
g. In the case of RBs/Coop Banks, the class municipalities
government counterpart equity, except e. Coop Banks P10 million
those arising from conversion of arrearages
under the BSP rehabilitation program. For the grant of the following special
With respect to Item “b” hereof, the banking authorities:
provision in Subsec. X326.1 shall apply a. Quasi-banking functions for TBs;
except that in the definition of b. Trust and other fiduciary business for
stockholders in said Subsection, the U/KBs and TBs;
qualification that his stockholdings, c. Limited trust for TBs and RBs/Coop
individually and/or together with his Banks;
related interest in the lending bank should d. Foreign currency deposit unit/
at least amount to two percent (2%) or more expanded foreign currency deposit unit
of the total subscribed capital stock of the (FCDU/EFCDU);
bank shall not apply for the purpose of this e. Issuance of foreign letters of credit
Item. (LCs) for TBs;
(As amended by Circular No. 560 dated 31 January 2007) f. Acceptance of demand deposit and
NOW accounts for TBs and RBs/Coop
§ X111.1 Minimum capitalization. The Banks; and
required minimum capitalization (a) upon g. Acting as third party securities
establishment of a new bank, (b) upon custodian/registry;
conversion of an existing bank from a lower the higher of (a) the required minimum
to a higher category bank and vice-versa, capital under this Subsection at the time of

§§ X111.1 - 1115.2
11.12.31
the application for the grant of special to Basel II recommendations is provided

banking authority or (b) the amount in Appendix 63b.
specified in the applicable Sections/ The risk-based capital ratio of a
Subsections for the grant of special bank, expressed as a percentage of
banking authorities shall be the required qualifying capital to risk weighted
minimum capital which shall be complied assets, shall not be less than ten percent
with on a continuing basis. (10%) for both solo basis (head office
Transitory Provision. Approved but plus branches) and consolidated basis
not yet operating RBs as well as pending (parent bank plus subsidiary financial
and complete applications for allied undertakings, but excluding
establishment of a new RB or conversion insurance companies).
of an existing bank from a higher category (The BSP’s implementation plans for
to an RB or for the grant of special banking the new international capital standards or
authorities, as of 21 November 2010 Basel 2 contained in the Basel Committee
shall not be covered by the new minimum on Banking Supervision document
capital requirement for RBs. “International Convergence of Capital
Approved but not yet operating TBs as Measurement and Capital Standards: A
well as pending and complete applications Revised Framework”, are shown in
for establishment of a new TB or conversion Appendix 63b)
of an existing bank from a higher or lower (Circular No. 538 dated 04 August 2006, as amended by Circular
category to a TB or grant of special banking Nos. 717 and 716 both dated 25 March 2011, 713 dated
14 February 2011, 709 dated 10 January 2011, M-2008-015
authorities or relocation of a TB head office dated 19 March 2008, Circular Nos. 605 dated 05 March 2008,
to areas of higher classification as of 25 588 dated 11 December 2007,M-2007-019 dated 21 June 2007,
March 2011 shall not be covered by the Circular No. 560 dated 31 January 2007 and M-2006-022 dated
new minimum capital requirements for 24 November 2006)
TBs.
(As amended by Circular No. 715 dated 04 March 2011 and § X115.1 Scope
696 dated 29 October 2010 and 682 dated 15 February 2010) The Basel II guidelines apply to all UBs
and KBs, as well as their subsidiary banks
§ X111.2 (2008 - X106.2) Capital and QBs.
build-up program
(Deleted by Circular No. 696 dated 29 October 2010)
§ X115.2 (Reserved)
§ X111.3 (2008 - X106.3)
§ 1115.2 (2008 - 1116.5) Market risk
Memorandum of Understanding; Prompt
capital requirement. UBs/KBs shall also
Corrective Action Program; Sanctions
(Deleted by Circular No. 696 dated 29 October 2010)
measure and apply capital charges for
market risk, in addition to the credit risk
Secs. X112 - X114 (Reserved) capital requirement in this Section, in
accordance with the Guidelines to
E. RISK-BASED CAPITAL Incorporate Market Risk in the Risk-Based
Capital Adequacy Framework in
Sec. X115 Basel II Risk-Based Capital Appendix 46.
The guidelines implementing the revised The capital treatment of market risk
risk-based capital adequacy framework for exposures arising from the holdings of
the Philippine banking system to conform Dollar-Linked Peso Notes (DLPNs) is

§§ 1115.2 - X116.3
11.12.31
indicated in Appendix 46a. QBs that are not subsidiaries of UBs and
The instructions for accomplishing the KBs shall continue to be subject to the
report on computation of the Adjusted risk-based capital adequacy framework, as
Risk-Based Capital Adequacy Ratio covering provided under Sec. X116, as well as
combined credit risk and market risk are Subsecs. X115.3 and X116.2 to X116.7.
shown in Appendices 46b (for UBs and KBs
with expanded derivatives authority), 46c § X116.2 (2008 - X116.1) Qualifying
(for UBs and KBs with expanded derivatives capital. The composition of qualifying capital
authority but without options transactions) is shown in Appendix 63a.
and 46d (for UBs and KBs without expanded (As amended by Circular Nos. 716 dated 25 March 2011,
709 dated 10 January 2011, 560 dated 31 January 2007,
derivatives authority).
528 dated 03 May 2006 and Memorandum to All Banks dated
(As amended by M-2011-062 dated 13 December 2011 and
23 March 2006)
Circular No. 740 dated 16 November 2011)
§ X116.3 (2008 - X116.2) Risk-weighted

§ 2115.2 (Reserved)
assets. The risk-weighted assets shall be
determined by assigning risk weights to
§ 3115.2 (Reserved)
amounts of on-balance sheet assets and to
credit equivalent amounts of off-balance
§ X115.3 (2008 - X116.8) Capital
sheet items (inclusive of derivatives
treatment of exposures/investments in
contracts): Provided, That the following shall
certain products. The guidelines on the
be deducted from the total risk-weighted
capital treatment of bank’s exposures/
assets: (1) general loan loss provision (in
investments in the following products are
excess of the amount permitted to be
in Part VI:
included in upper Tier 2 capital) and
a. Credit-linked notes in Sec. 1628
unbooked valuation reserves; and (2) other
and its Subsections.
capital adjustments affecting asset accounts
b. Structured products in Subsec.
based on the latest report of examination as
1635.4.
approved by the Monetary Board.
c. EFCDU investments in Subsec.
a. On-balance sheet assets. The
1636.4.
risk-weighted amount shall be the product
d. Investment in securities overlying
of the book value of asset multiplied by the
securitization structures in Subsec.
risk weight associated with that asset, as
1648.4.
follows:
(1) Zero percent (0%) risk weight -
Sec. X116 Basel I Risk-Based Capital. The
(a) Cash on hand;
risk-based capital ratio of a bank, expressed
(b) Claims on or portions of claims
as a percentage of qualifying capital to risk
guaranteed by or collateralized by securities
weighted assets, shall not be less than ten
issued by -
percent (10%) for both solo basis (head
i. Philippine National Government
office plus branches) and consolidated basis
and BSP; and
(parent bank plus subsidiary financial allied
ii. Central governments and central
undertakings, but excluding insurance
banks of foreign countries with the highest
companies).
credit quality as defined in Subsec.
The ratio shall be maintained daily.
X116.4;
(c) Claims on or portions of claims
§ X116.1 Scope. TBs, RBs as well as
guaranteed by or collateralized by securities

§ X116.3
11.12.31
issued by multilateral development banks with the highest credit quality as defined in
(MDBs); Subsec. X116.4;
(d) Loans to the extent covered by (e) Claims on or portion of claims
hold-out on, or assignment of, deposits/ guarateed by Philippine incorporated
deposit substitutes maintained with the private enterprises with the highest credit
lending bank; quality as defined in Subsec. X116.4;
(e) Loans or acceptances under letters (f) Claims on or portion of claims
of credit to the extent covered by margin guaranteed by foreign incorporated private
deposits; enterprises with the highest credit quality
(f) Portions of special time deposit as defined in Subsec. X116.4;
loans covered by Industrial Guarantee and (g) Loans to exporters to the extent
Loan Fund (IGLF) guarantee; guaranteed by Small Business Guarantee
(g) Real estate mortgage loans to the and Finance Corporation (SBGFC):
extent guaranteed by the Home Guaranty Provided, That loans to exporters to the
Corporation (HGC); extent guaranteed by the Guarantee Fund
(h) Housing microfinance loans as for Small and Medium Enterprises (GFSME)
provided under Subsec. X361.5 to the extent outstanding of the date of the effectivity of
guaranteed by duly recognized government the merger of the SBGFC and GFSME shall
guarantee programs; continue to have a zero percent (0%) risk
(i) Loans to the extent guaranteed by weight: Provided, further, That the zero
the Trade and Investment Development percent (0%) risk weight shall not apply to
Corporation of the Philippines loans renewed after the merger of the SBGFC
(TIDCORP); and the GFSME;
(j) Foreign currency notes and coins (h) Loans to small farmer and fisherfolk
on hand acceptable as international engaged in palay and/or food production
reserves; and projects/activities to the extent guaranteed
(k) Gold bullion held either in own by the Agricultural Guarantee Fund Pool
vaults, or in another’s vaults on an allocated (AGFP) created under Administrative
basis, to the extent it is offset by gold bullion Order No. 225-A dated 26 May 2008:
liabilities; Provided, That a separate fund is
(2) Twenty percent (20%) risk weight - maintained to guarantee the loans
(a) Checks and other cash items originated by banks: Provided, further,
(COCIs); That the maximum allowable leveraging
(b) Claims on or portions of claims ratio of the fund maintained to guarantee
guaranteed by or collateralized by securities bank loans shall be two (2), i.e., the
issued by non-central government public maximum amount of loans guaranteed by
sector entities of foreign countries with the the fund is twice the amount of money in
highest credit quality as defined in Subsec. the fund: Provided, furthermore, That the
X116.4; fund maintained to guarantee bank loans
(c) Claims on or portions of claims is invested in assets that are zero percent
guaranteed by Philippine incorporated (0%) risk-based capital adequacy
banks/QBs with the highest credit quality framework; and
as defined in Subsec. X116.4; (i) Foreign currency checks and other
(d) Claims on or portions of claims cash items denominated in currencies
guaranteed by foreign incorporated banks acceptable as international reserves;

§ X116.3
11.12.31
(j) Investments in GPNs; (iii) For the bank -

(3) Fifty percent (50%) risk weight - (aa) It must have adequate risk
(a) Loans for housing purpose, fully management process approved by the board
secured by first mortgage on residential of directors, including as a minimum, a
property that is or will be occupied or leased rigorous credit approval process and an
out by the borrower, which are not classified adequate loan tracking system that allows
as non-performing; timely monitoring of loan releases,
(b) Housing microfinance loans under collection and arrearages, and any
Subsec. X361.5 other than those guaranteed restructuring and refinancing; and
by the HGC. (bb) The bank must be financially sound
(c) Housing microfinance loans under and in compliance with major prudential
Subsec. X361.5 other than those guaranteed requirements, particularly the following:
by duly recognized government guarantee - CAMELS composite rating of at least
programs. “3” and management score of at least “3” in
(4) Seventy five percent (75%) risk its latest BSP examination; and
weight - Minimum applicable capital adequacy
(a) Defined small and medium ratio.
enterprise (SME) and microfinance loan (b) Non-performing loans (NPLs) for
portfolio that meets the following criteria: housing purpose, fully secured by first
(i) For individual claims that may form mortgage on residential property that is or
part of the SME and microfinance loan will be occupied or leased out by the
portfolio borrower: Provided, That risk weighting for
(aa) Claim must be on a small or such loans shall be increased to 100% in
medium business enterprise as defined 2007;
under existing BSP regulations; and (5) One hundred percent (100%) risk
(bb) Claims must be in the form of: weight –
- Direct loans; or All other assets including, among others,
- Unavailed portion of committed credit the following:
lines and other business facilities such as (a) Claims on central governments and
outstanding guarantees issued and unused central banks of foreign countries other than
letters of credit: Provided, That the credit those with the highest credit quality;
equivalent amounts thereof shall be (b)Claims on Philippine local
determined in accordance with Subsec. government units;
X116.3.b. (c) Claims on non-central government
(ii) For the SME and microfinance public sector entities of foreign countries
portfolio - other than those with the highest credit
(aa) It must be a highly diversified quality;
portfolio, i.e., it has at least 500 borrowers (d) Claims on government-owned or
that are distributed over a number of controlled commercial corporations;
industries; and (e) Claims on Philippine incorporated
(bb) The past due ratios of the defined banks/QBs other than those with the highest
SME and microfinance loan portfolio for credit quality;
each of the immediately preceding three (3) (f) Claims on foreign incorporated banks
years do not exceed five percent (5%). other than those with the highest credit

§ X116.3
11.12.31
quality; (vii) Equity investments in

(g) Claims on Philippine incorporated unconsolidated subsidiary banks and other
private enterprises and claims on foreign financial allied undertakings, but excluding
incorporated private enterprises other than insurance companies;
those with the highest credit quality; (viii) Investments in debt capital
(h) Loans to companies engaged in instruments of unconsolidated subsidiary
speculative residential building or property banks;
development; (ix) Equity investments in subsidiary
(i) Equity investments (except those insurance companies and non-financial
deducted from capital); allied undertakings;
(j) Bank premises, furniture, fixtures and (x) Reciprocal investments in equity of
equipment (net); other banks/enterprises;
(k)Appraisal increment - bank premises, (xi) Reciprocal investments in
furniture, fixtures and equipment (net); unsecured subordinated term debt
(l) Real and other properties owned or instruments of other banks/QBs in excess
acquired (net); of the lower of:
(m)Foreign currency notes and coins on (aa) an aggregate ceiling of five percent
hand not acceptable as international (5%) of total Tier 1 capital of the bank; or
reserves; (bb) ten percent (10%) of the total
(n) Gold bullion held in either own outstanding unsecured subordinated term
vaults, or in another’s vaults on an allocated debt issuance of the other bank/QB;
basis, that is not offset by gold bullion and
liabilities; (xii) Net due “from” head office,
(o)Foreign currency COCIs not branches, subsidiaries and other offices
denominated in foreign currencies outside the Philippines, if any (for foreign
acceptable as international reserves; except bank branches); and
those which are deducted from capital, as (p) Starting 2007, NPLs for housing
follows: purpose, fully secured by first mortgage on
(i) Unsecured credit accommodations, residential property that is or will be
both direct and indirect, to DOSRI; occupied or leased out by the borrower.
(ii) Unsecured loans, other credit (6) One hundred twenty five percent
accommodations and guarantees granted to (125%) risk weight -
subsidiaries and affiliates; All NPLs (except NPLs for housing
(iii) Deferred income tax; purpose, fully secured by first mortgage on
(iv) Goodwill; residential property that is or will be
(v) Sinking fund for redemption of occupied or leased out by the borrower) and
limited life redeemable preferred stock with all non-performing debt securities: Provided,
the replacement requirement upon That risk weighting for such exposures shall
redemption; be increased to 150% in 2007.
(vi) Sinking fund for redemption of NPLs, which are secured by eligible
limited life redeemable preferred stock collaterals or guaranteed by eligible
without the replacement requirement upon guarantors below, shall be assigned the risk
redemption (limited to the balance of weight of the collateral or guarantor, except
redeemable preferred stock after applying for NPLs granted to small farmer and
the cumulative discount factor); fisherfolk engaged in palay and/or food

§ X116.3
11.12.31
production projects/activities to the extent with the highest credit quality as defined in
guaranteed by the Agricultural Guaranteed Subsec. X116.4;
Fund Pool (AGFP), which shall be assigned (viii) Foreign incorporated banks with
a risk weight of twenty percent (20%), the highest credit quality as defined in
subject to the conditions in Item “(2)(h)” Subsec. X116.4;
above: Provided, That in cases of guarantees, (ix) SBGFC; and
the bank is able to pursue the guarantor of (x) Philippine incorporated private
any monies outstanding within the period enterprises with the highest credit quality
of time stipulated in the guarantee contract. as defined in Subsec. X116.4;
Otherwise, the loan in question shall be (xi) Foreign incorporated private
assigned the risk weight applicable for enterprises with the highest credit quality
NPLs. as defined in Subsec. X116.4; and
(a) List of eligible collaterals (xii) The AGFP created under
(i) Securities issued by the Philippine Administrative Order No. 225-A dated 26
national government and BSP, and central May 2008.
governments and central banks of foreign b. Off-balance sheet items. The risk
countries with the highest credit quality as weighted amount shall be calculated using
defined in Subsec. X116.4; a two (2)-step process.
(ii) Securities issued by multilateral First, the credit equivalent amount of an
development banks listed under Subsec. off-balance sheet item shall be determined
X116.4; by multiplying its notional principal amount
(iii) Cash in the form of hold out on or by the appropriate credit conversion factor,
assignment of deposits/deposit substitutes as follows:
maintained with the lending bank, and (1) One hundred percent (100%) credit
margin deposits for loans or acceptances conversion factor -
under letters of credit; and This shall apply to direct credit
(iv) Securities issued by non-central substitutes, e.g., general guarantees of
government public sector entities of foreign indebtedness (including standby letters of
countries with the highest quality as defined credit serving as financial guarantees for
in Subsec. X116.4. loans and securities) and acceptances
(b) List of eligible guarantors (including endorsements with the character
(i) Philippine national government and of acceptances), and shall include -
BSP, and central governments and central (a) Outstanding guarantees issued -
banks of foreign countries with the highest foreign loans;
credit quality as defined in Subsec. X116.4; (b) Outstanding guarantees issued -
(ii) Multilateral development banks other than foreign loans and shipside bonds/
listed under Subsec. X116.4; airway bills; and
(iii) IGLF; (c) Export letters of credit - confirmed.
(iv) HGC; This shall also apply to sale and repo
(v) TIDCORP; agreements and asset sales with recourse
(vi) Non-central government public where the credit risk remains with the bank
sector entities of foreign countries with the (to the extent not included in the balance
highest credit quality as defined in Subsec. sheet), as well as to forward asset purchases,
X116.4; forward forward deposits and partly-paid
(vii) Philippine incorporated banks/QBs shares and securities which represent

§ X116.3
11.12.31
commitments with certain drawdown: (4) Zero percent (0%) credit conversion
Provided, That these items shall be weighted factor –
according to the type of asset and not This shall apply to commitments with
according to the type of counterparty an original maturity of up to one (1) year, or
with whom the transaction has been which can be unconditionally cancelled at
entered into. any time, and shall include committed credit
(2) Fifty percent (50%) credit conversion line for commercial paper issues.
factor - This shall also apply to those not
This shall apply to certain transaction involving credit risk, and shall include -
related contingent items, e.g., performance (a) Inward bills for collection;
bonds, bid bonds, warranties and standby (b) Outward bills for collection;
letters of credit related to particular (c) Items held for safekeeping/
transactions, and shall include - custodianship;
(a) Standby letters of credit - domestic (d) Trust department accounts;
(net of margin deposit) established as a (e) Late deposits/payments received;
guarantee that a business transaction will (f) Items held as collaterals; and
be performed; and (g) Travelers’ checks; etc.
(b) Standby letters of credit - foreign (net Second, the credit equivalent amount
of margin deposit). shall be treated like any on-balance sheet
This shall also apply to - asset and shall be assigned the appropriate
(c) Note issuance facilities and revolving risk weight, i.e., according to the obligor,
underwriting facilities; and or if relevant, the qualified guarantor or the
(d) Other commitments, e.g., formal nature of collateral.
standby facilities and credit lines with an c. Derivatives contracts. The credit
original maturity of more than one (1) year. equivalent amount shall be the sum of the
This shall include underwritten accounts current credit exposure (or replacement
unsold. cost) and an estimate of the potential future
(3) Twenty percent (20%) credit credit exposure (or add-on): Provided, That
conversion factor - the following shall not be included in the
This shall apply to short-term, self computation:
liquidating trade-related contingencies, e.g., (1) Instruments which are traded on
documentary credits collateralized by the exchange where they are subject to daily
underlying shipments, and shall include - receipt and payment of cash variation
(a) Outstanding guarantees issued - margin; and
shipside bonds/airway bills; (2) Exchange rate contracts with original
(b) Domestic letters of credit outstanding maturity of fourteen (14) calendar days or
(net of margin deposit); less.
(c) Sight import letters of credit The current credit exposure shall be
outstanding (net of margin deposit); the positive mark-to-market value of the
(d) Usance import letters of credit contract (or zero if the mark-to-market
outstanding (net of margin deposit); value is zero or negative). The potential
(e) Deferred letters of credit (net of future credit exposure shall be the product
margin deposit); and of the notional principal amount of the
(f) Revolving letters of credit (net of contract multiplied by the appropriate
margin deposit) arising from movement of potential future credit conversion factor,
goods and/or services. as indicated below:

§§ X116.3 - X116.4
11.12.31
Residual Maturity Rate Contract Rate Contract jurisdictions.

One (1) year or less 0.0% 1.0 %
A guarantee must represent a direct
Over one (1) year to
five (5) years 0.5% 5.0 %
claim on the protection provider and must
Over five (5) years 1.5% 7.5 % be explicitly referenced to specific
exposures or a pool of exposures, so that
Provided, That for contracts with the extent of the cover is clearly defined
multiple exchanges of principal, the and incontrovertible. Other than the
factors are to be multiplied by the number non-payment by a protection purchaser of
of remaining payments in the contract: money due in respect of the credit
Provided, further, That for contracts that protection contract, the guarantee must be
are structured to settle outstanding irrevocable; there must be no clause in the
exposure following specified payment contract that would allow the protection
dates and where the terms are reset such provider unilaterally to cancel the credit
that the market value of the contract is zero cover or that would increase the effective
(0) on these specified dates, the residual cost of cover as a result of deteriorating credit
maturity would be set equal to the time quality in the hedged exposure. It must also
until the next reset date, and in the case of be unconditional; there should be no clause
interest rate contracts with remaining in the protection contract outside the direct
maturities of more than one (1) year that control of the bank that could prevent the
meet these criteria, the potential future protection provider from being obliged to
credit conversion factor is subject to a floor pay out in a timely manner in the event that
of five tenths percent (0.5%): Provided, the original counterparty fails to make the
furthermore, That no potential future credit payment(s) due.
exposure shall be calculated for single The extent to which a claim is
currency floating/floating interest rate guaranteed/collateralized shall be
swaps, i.e., the credit exposure on these determined by the amount of guarantee
contracts would be evaluated solely on the coverage/current market value of
basis of their mark-to-market value. securities pledged, in comparison with
The credit equivalent amount shall be the carrying amount of the on-balance
treated like any on-balance sheet asset, sheet asset or the notional principal
and shall be assigned the appropriate risk amount of the off-balance sheet
weight, i.e., according to the obligor, or exposure, except for derivatives
if relevant, the qualified guarantor or the contracts for which determination is
nature of collateral: Provided, That a fifty generally made in relation to credit
percent (50%) risk weight shall be applied equivalent amount.
in respect of obligors which would (As amended by M-2011-020 dated 30 March 2011 and Circular
Nos. 717 dated 25 March 2011, 713 dated 14 February 2011,
otherwise attract a 100% risk weight.
M-2008-015 dated 19 March 2008 and Circular No. 560 dated
d. Claims with eligible collateral/ 31 January 2007)
guarantees.
In order to obtain capital relief, all § X116.4 (2008 - X116.3) Definitions
documentation used in collateralized a. Amount due from the BSP. This refers
transactions and for documenting to all deposits of the reporting bank with
guarantees must be binding on all parties the BSP.
and legally enforceable in all relevant b. Appraisal increment reserve. This

§ X116.4
08.12.31
shall form part of capital only if authorized (16) Available for sale securities;
by the Monetary Board. (17) Investments in bonds and other
c. Bank premises, furniture, fixtures and debt instruments (IBODI); and
equipment net of depreciation. This refers (18) Others, e.g., accounts receivable
to the cost of land and improvements used and accrued interest receivable.
as bank premises, and furniture, fixtures and Accruals on a claim shall be classified
equipment owned by the bank. and risk weighted in the same way as the
d. Cash on hand. This refers to total cash claim. Bills purchased shall be classified as
held by the bank consisting of both notes claims on the drawee banks.
and coins in Philippine currency. g. Consolidated basis. This refers to
e. Central government of a foreign combined statement of condition of parent
country. This refers to the central government bank and subsidiary financial allied
which is regarded as such by a recognized undertakings, but excluding insurance
banking supervisory authority in that companies.
country. h. Debt capital instruments. This refers
f. Claims. This refer to loans or debt to unsecured subordinated term debt
obligations of the entity on whom the claim instruments qualifying as capital of banks.
is held, and shall include, but shall not be i. Equity investments. This refers to
limited to, the following accounts, inclusive investments in capital stock of companies,
of accumulated market gains/(losses) and firms or enterprises, made for purposes of
accumulated bond discount/(premium control, affiliation or other continuing
amortization), and net of specific allowance business advantage.
for probable losses: j. Exchange rate contracts. This
(1) Due from BSP; includes cross-currency interest rate swaps,
(2) Due from other banks; forward foreign exchange contracts,
(3) Interbank loans receivable; currency futures, currency options
(4) Loans and discounts; purchased and similar instruments.
(5) Agrarian reform and other k. Financial allied undertakings. This
agricultural credit loans - P.D. 717; refers to enterprises or firms with
(6) Development incentive loans; homogenous or similar activities/business/
(7) Bills purchased; functions with the financial intermediary
(8) Customers’ liability on bills/drafts and may include but not limited to leasing
under LCs/TRs; companies, banks, IHs, financing
(9) Customers’ liability for this bank’s companies, credit card companies, FIs
acceptances outstanding; catering to small and medium scale
(10) Restructured loans; industries (including venture capital
(11) Trading account securities - loans; corporations), companies engaged in stock
(12) Underwriting accounts - debt brokerage/securities dealership, companies
securities (for UBs); engaged in foreign exchange dealership/
(13) Underwriting accounts - equity brokerage, holding companies (for UBs),
securities (for UBs); and such other similar activities as the
(14) Trading account securities - Monetary Board may declare as appropriate
investments; from time to time, but excluding insurance
(15) Trading account securities - equity companies.
(for UBs); l. Claims on foreign country and

§ X116.4
08.12.31
foreign incorporated bank/private enterprise If a claim has only one (1) rating by any
and Philippine incorporated bank/quasi of the BSP recognized rating agencies, that
bank/private enterprise with the highest rating shall be used to determine the risk
credit quality. This refers to claims on a weight of the claim; in cases where there
country, bank or private enterprise given the are two (2) or more ratings which map into
highest credit ratings by any of the following different risk weights, the higher of the two
BSP-recognized credit rating agencies: (2) lowest risk weights should be used.
m. Forward asset purchases. This refers
(1) International rating agencies: to a commitment to purchase a loan,
Rating Agency Highest Rating security or other asset at a specified future
(1) Moody’s “Aa3” and above date, usually on prearranged terms.
(2) Standard and Poor’s “AA-” and above
n. Forward forward deposits. This
(3) FitchRatings “AA-” and above
(4) And such other as may be approved by refers to an agreement between two (2)
the Monetary Board parties whereby one (1) will pay and the
(2) Domestic rating agencies: other will receive an agreed rate of interest
Rating Agency Highest Rating on a deposit to be placed by one (1) party
(1) PhilRatings “PRS Aa” and above with the other at some predetermined date
(2) And such other rating agencies as may be in the future.
approved by the Monetary Board
o. Gold bullion held in another’s vault
on an allocated basis. This refers to gold
Provided, That for purposes of this
bullion held by others to the order of the
Subsection:
bank, and which is separately ascertainable.
(i) Any reference to credit rating shall
p. Goodwill. This refers to an
refer to issue-specific rating; the issuer rating
intangible asset that represents the excess
may be used only if the claim being
of the purchase price over the fair market
risk-weighted is a senior obligation of the
value of identifiable assets acquired less
issuer and is of the same denomination
liabilities assumed in acquisitions
applicable to the issuer rating (e.g., local
accounted for under the purchase method
currency issuer rating may be used for risk
of accounting.
weighting local currency denominated
q. Interest rate contracts. This includes
senior claims), or in cases of guarantees;
single-currency interest rate swaps, basis
(ii) For loans, risk weighting shall
swaps, forward rate agreements, interest rate
depend on either the rating of the borrower
futures, interest rate options purchased and
or the rating of the unsecured senior
similar instruments.
obligation of the borrower: Provided, That
r. Loans for housing purpose, fully
the loan is of the same denomination
secured by first mortgage on residential
applicable to the borrower rating or rating
property that is or will be occupied or leased
of the unsecured senior obligation;
out by the borrower. This shall not include
Domestic debt issuances may be rated
loans to companies engaged in speculative
by BSP-recognized domestic or
residential building or property
international credit rating agencies who
development.
may use a national rating scale acceptable
s. Loans or acceptances under letters
to the BSP, while international debt
of credit to the extent covered by margin
issuances should be rated by BSP-
deposits. This shall not include the
recognized international credit rating
unnegotiated letters of credit or the
agencies only; and
unutilized portion thereof, or other items

§ X116.4
08.12.31
booked under contingent accounts. This committed to underwrite.

shall also not include margin deposits x. Other commitments. This includes
against loans or acceptance accounts which undrawn portion of any binding
are fully liquidated. arrangements which obligate the bank to
t. Loans to the extent covered by hold- provide funds at some future date.
out on, or assignment of, deposits or deposit y. Other commitments with an
substitutes maintained in the lending bank. original maturity of up to one (1) year. This
A loan shall be considered as secured by a includes any revolving or undated
hold-out on, or assignment of deposit or open-ended commitments, e.g., overdrafts
deposit substitute only if such deposit or or unused credit lines, providing that they
deposit substitute account is covered by a can be unconditionally cancelled at any time
hold-out agreement or deed of assignment and subject to credit revision at least annually.
signed by the depositor or investor/placer z. Partly-paid shares and securities This
in favor of the bank. This shall not include arises where only a part of the issue price
loans transferred to/carried by the bank’s or nominal face value of a security
trust department secured by deposit hold- purchased has been subscribed and the
out/assignment. issuer may call for the outstanding balance
u. Multilateral development banks (or a further installment), either on a date
These refer to the World Bank Group predetermined at the time of issue, or at an
comprised of the International Bank for unspecified future date.
Reconstruction and Development (IBRD) aa. Perpetual preferred stock. This refers
and the International Finance Corporation to preferred stock that does not have a
(IFC), the Asian Development Bank (ADB), maturity date, that cannot be redeemed at
the African Development Bank (AfDB), the the option of the holder of the instrument,
European Bank for Reconstruction and and that has no provision that will require
Development (EBRD), the Inter-American future redemption of the issue. Consistent
Development Bank (IADB), the European with these provisions, any perpetual
Investment Bank (EIB); the Nordic preferred stock with a feature permitting
Investment Bank (NIB); the Caribbean redemption at the option of the issuer may
Development Bank (CDB), the Council of qualify as capital only if the redemption
Europe Development Bank (CEDB) and is subject to prior approval of the BSP.
such others as may be recognized by the bb. Philippine local government units
BSP. This refers to the Philippine government
v. Non-central government public units below the level of national
sector entity of a foreign country. This government, such as city, provincial, and
refers to entities which are regarded as municipal governments.
such by a recognized banking supervisory cc. Philippine national government.
authority in the country in which they are This shall refer to the Philippine national
incorporated. government and their agencies such as
w. Note issuance facilities and departments, bureaus, offices, and
revolving underwriting facilities. This instrumentalities, but excluding
refers to an arrangement whereby a government-owned and controlled
borrower may draw down funds up to a commercial corporations.
prescribed limit over an extended period dd. Private sector. This refers to
by repeated issues to the market of entities other than banks and governments.
promissory notes which the bank This shall also include commercial

§§ X116.4 - X116.5
08.12.31
companies owned by the public sector, loan, security or fixed asset to a third party
such as government-owned or controlled with a commitment to repurchase the
commercial corporations. asset after a certain time, or in the event
ee. Redeemable preferred stock. to a certain contingency.
This refers to preferred stock which may gg. Solo basis. This refers to combined
be redeemed at the specific dates or statement of condition of head office and
periods fixed for redemption, only upon branches.
prior approval of the BSP and, where hh.Subsidiary. This refers to a
the conditions of the issuance corporation or firm more than fifty percent
specifically state, only if the shares (50%) of the outstanding voting stock of
redeemed or replaced with at least an which is directly or indirectly owned,
equivalent amount of newly paid-in controlled or held with the power to vote
shares so that the total paid-in capital by a bank.
stock is maintained at the same level ii. Treasury shares. This refers to
immediately prior to redemption: shares of the parent bank held by a
Provided, That redemption shall not be subsidiary financial allied undertaking in
earlier than five (5) years after the date a consolidated statement of condition.
of issuance: Provided, further, That such jj. Private enterprises. This refers to
redemption may not be made where all commercial companies whether
the bank is insolvent or if such organized in the form of a corporation,
redemption will cause insolvency, partnership, or sole proprietorship.
impairment of capital or inability of the kk. Non-performing debt securities.
bank to meet its debts as they mature. This refers to debt securities as described
Banks which have issues of limited life below:
redeemable preferred shares compliant (i) For zero-coupon debt securities,
with Subsec. X126.5 and outstanding prior and debt securities with quarterly, semi-
to 01 July 2001 shall be allowed to redeem annual, or annual coupon payments, they
the same prior to the set redemption date, shall be considered non-performing when
without the need for replacement with at principal and or coupon payment is unpaid
least an equivalent amount of newly for thirty (30) days or more after due date.
paid-in shares within one (1) year from (ii) For debt securities with monthly
26 September 2003 (effectivity of Circular coupon payments, they shall be considered
No. 397) upon prior BSP approval: Provided, non-performing when three (3) or more
That: coupon payments are in arrears: Provided,
(i) The redeemable preferred however, That when the total amount of
shareholders will give consent; arrearages reaches twenty percent (20%) of
(ii) The bank meets the required the total outstanding balance of the debt
minimum risk-based CAR and minimum security, the total outstanding balance of the
capital level for the bank category after debt security shall be considered as
such redemption; and non-performing.
(iii) Such redemption will not cause
the inability of the bank to meet its § X116.5 (2008 - X116.4) Required
obligations as they mature. reports. Banks shall submit a report of their
ff. Sale and repurchase agreements risk-based capital adequacy ratio on a solo
and asset sales with recourse. This refers basis (head office plus branches) and on a
to arrangements whereby a bank sells a consolidated basis (parent bank plus

§ X116.5 - X118
11.12.31
subsidiary financial allied undertakings, but compliance with the required capital ratio
excluding insurance companies) quarterly for a maximum period of one (1) year.
to the appropriate department of the SES in
the prescribed forms within the deadlines, Sec. X117 Internal Capital Adequacy
i.e., fifteen (15) banking days and thirty (30) Assessment Process and Supervisory
banking days after the end of reference Review Process. The guidelines on banks’
quarter, respectively. Only banks with internal capital adequacy assessment
subsidiary financial allied undertakings process (ICAAP) and BSP’s supervisory
(excluding insurance companies) which review process (SRP) are shown in
under existing regulations are required to Appendices 90, 90a and 90b, respectively.
prepare consolidated statements of The ICAAP guidelines shall apply to all
condition on a line-by-line basis shall be UBs and KBs on a group-wide basis.
required to submit report on a consolidated All covered UBs and KBs are required
basis. The abovementioned reports shall be to submit the interim ICAAP document on
classified as Category A-2 reports. or before 30 April 2010 and the final ICAAP
document together with the corporate
§ X116.6 Sanctions. Whenever the secretary’s certificate attesting to the
capital accounts of a bank are deficient with approval by the bank’s board of directors
respect to the prescribed risk-based capital (BOD) on or before 31 January 2011.
adequacy ratio (which for UBs/KBs shall The guidelines shall take effect on
pertain to adjusted capital adequacy ratio 01 January 2011.
covering combined credit risk and market (Circular No. 639 dated 15 January 2009, as amended by Circular
risk), the Monetary Board, after considering Nos. 731 dated 28 July 2011, 677 dated 29 December 2009)
a report of the appropriate department of
the SES on the state of solvency of the Sec. X118 Revised Risk-Based Capital
institution concerned, shall limit or prohibit Adequacy Framework for Stand-Alone
the distribution of the net profits and shall Thrift Banks, Rural Banks and Cooperative
require that part or all of net profits be used Banks. The guidelines implementing the
to increase the capital accounts of the bank revised risk-based capital adequacy
until the minimum requirement has been framework for Stand- alone TBs, RBs, and
met. The Monetary Board may restrict or Coop Banks1 are in Appendix 63c.
prohibit the making of new investments of a. The risk-based capital adequacy ratio
any sort by the bank, with the exception of (CAR) of stand-alone TBs, RBs and Coop
purchases of readily marketable evidences Banks, expressed as a percentage of
of indebtedness issued by the Philippine qualifying capital to risk weighted assets,
National Government and BSP included in Item shall not be less than ten percent (10%) for
“a(1)(b)i” of Subsec. X116.3, until the minimum both solo basis (head office and branches)
required capital ratio has been restored. and consolidated basis (parent bank and
subsidiary financial allied undertakings).
§ X116.7 Temporary relief. In case of Stand-alone TBs, RBs and Coop Banks
a bank merger, or consolidation, or when a shall comply with the provisions of this
bank is under rehabilitation under a program Section starting 01 January 2012.
approved by the BSP, the Monetary Board b. Required reports. Banks shall submit
may temporarily relieve the surviving bank, a report of their risk-based capital ratio on a
consolidated bank, or constituent bank or solo basis (head office plus branches) and
corporations under rehabilitation from full on a consolidated basis (parent bank plus
1These refer to TBs, RBs and Coop Banks that are not subsidiaries of UBs and KBs.

§ X118
11.12.31
subsidiary financial allied undertakings disclosed under this Framework in either

[i.e., RBs and Venture Capital the Annual Report or the Published
Corporations (VCC) for TBs, and RBs for Balance Sheet shall be considered as a
Coop Banks] quarterly in the prescribed serious offense for purposes of
forms within the deadlines, i.e., fifteen determining the appropriate monetary
(15) banking days and thirty (30) banking penalty that will be imposed on the bank.
days after the end of the reference quarter, In addition, the President/or any officer
respectively. Only banks with subsidiary holding equivalent position and the BOD
financial allied undertakings (i.e., RBs and shall be subject to the following non-
VCCs for TBs, and RBs for Coop Banks) monetary sanctions:
which under the existing regulations are (1) First offense – warning on
required to prepare consolidated financial President/or any officer holding equivalent
statements on a line-by-line basis shall be position and the BOD
required to submit report on consolidated (2) Second offense – reprimand on
basis. The abovementioned reports shall President/or any officer holding equivalent
be classified as Category A-2 reports. position and the BOD
c. Sanctions (3) Third offense – 1 month
1. For non-reporting of CAR breaches suspension of President/or any officer
(a) It is the responsibility of the holding equivalent position without pay
President or any officer of the bank (4) Further offense – possible
holding equivalent position to cause the disqualification of the President/or any
immediate reporting of CAR breaches officer holding equivalent position and/or
both to its Board of Directors (BOD) and the BOD
to the BSP. It is likewise the responsibility 3. For non-compliance with the
of the President/or any officer holding minimum CAR
equivalent position to ensure the accuracy (a) In case a bank does not comply with
of CAR calculations and the integrity of the prescribed minimum CAR, the Monetary
the associated monitoring and reporting Board may limit or prohibit the distribution
system. Any willful violation of the above of net profits by such bank and may require
will be considered as a serious offense that part or all of net profits be used to
for purposes of determining the increase the capital accounts of the bank
appropriate monetary penalty that will be until the minimum requirements has been
imposed on the President/or any officer met. The Monetary Board may, furthermore,
holding equivalent position. In addition, restrict or prohibit the acquisition of major
the President/or any officer holding assets and the making of new investments
equivalent position shall be subject to the by the bank, with the exception of
non-monetary sanctions: purchases of readily marketable evidences
(1) First offense – warning of indebtedness of the Republic of the
(2) Second offense – reprimand Philippines and of the BSP included in
(3) Third offense – 1 month paragraph 2, Item “a.ii” of Part III, Appendix
suspension without pay 63c and any other evidences of indebtedness
(4) Further offense – disqualification or obligations the servicing and repayment
2. For non-compliance with required of which are fully guaranteed by the
disclosures Republic of the Philippines, until the
(a) Willful non-disclosure or erroneous minimum requirement capital ratio has
disclosure of any item required to the been restored.

§§ X118 - X119.1
11.12.31
(b) In case of a bank merger, or on the integrity, reliability and authenticity

consolidation, or when a bank is under of the UnSD in electronic form. An
rehabilitation program approved by the BSP, independent third party UnSD Registry shall
the Monetary Board may temporarily relieve maintain unissued UnSD certificates and
the surviving bank, consolidated bank, or the UnSD Registry Book, which must be
constituent bank or corporations under electronic if the UnSD is scripless in form.
rehabilitation from full compliance with the A UnSD that will be issued privately or on
required capital ratio under such conditions a negotiated basis shall be evidenced by
as it may prescribe. certificates.
(c) A bank may also be subject to Prompt All UnSD shall be registered in the
Corrective Action (PCA) framework when name of individuals or entities and pre-
either the total CAR, Tier 1 ratio or leverage numbered serially.
ratio falls below ten percent (10%), six b. Denomination. The UnSD must be
percent (6%), and five precent (5%), issued in minimum denominations of
respectively, or such other minimum levels P500,000 or its equivalent if denominated
that may be prescribed for the said ratios in a foreign currency.
under relevant regulations, and/or the c. Mandatory provisions. If the UnSD
combined capital accounts falls below the is not scripless in form, the following
minimum capital requirement prescribed provisions must appear in bolder prints on
under Subsec. X111.1, pursuant to the the face of every note, debenture or other
provisions of Sec. X193. certificate evidencing the same:
(Circular No. 688 dated 26 May 2010, as amended by Circular (1) This obligation is not a deposit and
Nos. 717 and 716 both dated 25 March 2011, 713 dated 14
February 2011 and 709 dated 10 January 2011)
is not insured by the Philippine Deposit
Insurance Corporation (PDIC);
F. CAPITAL INSTRUMENTS (2) This obligation is neither secured
nor covered by the guarantee of (name of
Sec. X119 Unsecured Subordinated Debt bank) or its subsidiaries and affiliates, or
The following are the guidelines for the other arrangement that legally or
issuance of unsecured subordinated debt economically enhances the priority of the
(UnSD) eligible as Hybrid Tier 1 (HT1) and claim of any holder of the UnSD as against
Tier 2 capital: depositors and other creditors (for LT2);
(As amended by Memorandum to All Banks dated depositors, other creditors and holders of
23 March 2006) LT2 capital instruments (for UT2); and
depositors, other creditors and holders of
§ X119.1 Minimum features of LT2 and UT2 capital instruments (for HT1);
unsecured subordinated debt (3) This obligation does not have a
a. Form. A UnSD that will be publicly priority claim, in respect of principal and
distributed may either be scripless in form coupon payments in the event of winding-
or evidenced by certificates such as: up of the (name of bank), which is higher
promissory note, debenture or other than or equal with that of depositors and
appropriate certificate of indebtedness. A other creditors (for LT2); depositors, other
UnSD in scripless form shall comply with creditors and holders of LT2 capital
the provisions of R.A. No. 8792, otherwise instruments (for UT2); and depositors, other
known as the “Electronic Commerce Act”, creditors, holders of LT2 and UT2 capital
particularly on the existence of an assurance instruments (for HT1); and

§§ X119.1 - X199.4
11.12.31
(4) The obligation is ineligible as qualified investors/buyers as hereinafter

collateral for a loan granted by (name of defined. The Issuing Bank must be rated
Bank), its subsidiaries and affiliates. by an independent credit rating agency
If the UnSD is scripless in form, the recognized by the BSP and a Public
foregoing provisions/information shall be Trustee shall be appointed for investor
furnished every buyer/investor in a protection.
separate written instrument receipt of a. Application for authority
which must be duly acknowledged by (1) The application shall be signed by
him. the president or officer of equivalent rank
d. Term. The UnSD qualifying under of the applicant bank;
HT1 capital shall be perpetual. The (2) The application for authority on
minimum maturity of a UnSD qualifying each UnSD issue/issue program shall be
under UT2 and LT2 capital shall be ten filed with the appropriate department of
(10) years and five (5) years, respectively. the SES: Provided, That the period of an
(As amended by Memorandum to All Banks dated 23 March issue program of two (2) or more tranches
2006) shall not exceed one (1) year from date of
approval; and
§ X119.2 Prior Bangko Sentral (3) The application shall be
approval. No UnSD shall be issued accompanied by:
without the prior approval of the BSP. (a) A certified true copy of the
resolution of the Issuing Bank’s board of
§ X119.3 Pre-qualification directors authorizing the issuance of the
requirements of issuing bank. A bank UnSD indicating, among others, the
applying for authority to issue a UnSD issue size, terms and conditions, offering
shall comply with the following period, purpose or intended use of
requirements: proceeds thereof, the names of the
a. It has complied with the minimum Underwriter/Arranger, UnSD Registry,
amount of capital required under Subsec. Selling Agent(s) and Market Maker(s),
X111.1 or its paid-in capital is at least and Public Trustee;
equal to the amount required therein. (b) A certification by the corporate
b. It has established a risk secretary that the issuance of the UnSD
management system appropriate to its has been approved by the stockholders
operations characterized by clear owning or representing at least two-thirds
delineation of responsibility for risk (2/3) of the outstanding capital stock of
management, adequate risk measurement the Issuing Bank if the UnSD has
systems, appropriately structured risk convertibility feature;
limits, effective internal controls and (c) A written confirmation from the
complete, timely and efficient risk president or officer of equivalent rank of
reporting system. the Issuing Bank stating that all the
c. It is a locally incorporated bank. conditions for UnSD under Item “a(2)(a)”,
Item “b(1)(h)” or Item “b(2)(c)”, of
§ X119.4 Public issuance of unsecured Appendix 63a are complied with and that
subordinated debt. Public issuance of such conditions shall be contained in the
UnSD is an issuance offered to the UnSD Certificates if the UnSD is not in
general public, which may or may not be scripless form, in the Information

§§ X119.4
11.12.31
Disclosure and Purchase Advice. UnSD issuance prepared by the

(d) A written undertaking from the Underwriter/Arranger;
president or officer of equivalent rank of (c) Promotional materials;
the Issuing Bank not to support, directly or (d) Specimen of the proposed
indirectly, by extending loans, issuing Purchase Advice and Registry
payment guarantees or otherwise, the Confirmation; and
buyer/holder of the UnSD of the Issuing Bank; (e) Copy of the agreements between
(e) A written confirmation from the the Issuing Bank and the Underwriter/
president or officer of equivalent rank of the Arranger/UnSD Registry/Selling Agent(s)/
Issuing Bank stating that the designated Market Maker(s), and Public Trustee.
Underwriter/Arranger, UnSD Registry, The BSP reserves the right to suspend
Selling Agent(s) and Market Maker(s) were the date of offering, within the fifteen (15)
provided with a complete list of banking day period from submission of
subsidiaries and affiliates of the Issuing the above-mentioned requirements.
Bank including their subsidiaries and (2) Within ten (10) banking days after
affiliates; issuance of the initial and subsequent
(f) A written undertaking from the tranches:
president or officer of equivalent rank (a) A written notice of the actual date
of the Issuing Bank to update the of issuance/offering of each initial and
above-mentioned list within three (3) subsequent tranches.
banking days from the date of change in c. Requirements for other parties
composition thereof; involved
(g) Specimen of the UnSD; and (1) Underwriter/Arranger
(h) A written external legal opinion (a) It is either a UB or an IH:
that all the conditions for UnSD under Item Provided, That if an offering is on a best
“a(2)(a)”, Item “b(1)(h)” or Item “b(2)(c)”, effort basis, the Arranger may also be a
of Appendix 63a, including the KB: Provided, further, That if an offering
subordination (for HT1, UT2 and LT2) and is denominated in foreign currency, the
loss absorption (for HT1 and UT2) Underwriter/Arranger may also be any
features, have been met. reputable international investment bank.
b. Additional requirements for the (b) It must be an independent third
issuance of UnSD party that has no subsidiary/affiliate or any
After a bank’s application to issue a other relationship with the Issuing Bank
UnSD has been approved, the applicant that would undermine the objective
shall submit the following additional conduct of due diligence.
requirements to the appropriate (c) If Underwriter, it must have
department of the SES: adequate risk management and must be
(1) At least fifteen (15) banking days well capitalized, which for a local
before the date of offering: Underwriter, shall be evidenced by
(a) A written confirmation from the compliance with the risk-based CAR
president or officer of equivalent rank of prescribed under Sec. X116 for the past
the Issuing Bank stating that the bank has sixty (60) days immediately preceding
been rated by an independent credit rating the date of application where
agency duly recognized by the applicable.
BSP; (2) UnSD Registry
(b) Information disclosure of the (a) It may be a UB, a KB, or such

§§ X119.4
11.12.31
other specialized entity that may be the UnSD is to be held on to maturity:

qualified by the Monetary Board. Provided, That this condition is properly
(b) It must be a third party that has no disclosed in the Purchase Advice, Registry
subsidiary/affiliate or any other Confirmation and Prospectus/Information
relationship with the Issuing Bank that Disclosure.
would undermine its independence. (5) Public Trustee
(c) It must not be an Underwriter or a (a) It must be a FI authorized by the BSP
Market Maker of the UnSD. to engage in trust and other fiduciary
(d) It must have adequate facilities and business.
the organization to do the following: (b) It must be a third party that has no
(i) Maintain certificates of unissued subsidiary/affiliate or any other relationship
UnSD and the Registry Book which must with the Issuing Bank that would undermine
be electronic if the UnSD is in scripless its independence.
form; (c) It must have adequate risk
(ii) Deliver transactions within the management system and must be well
agreed trading period; and capitalized as evidenced by compliance
(iii) Issue Registry Confirmations and with the risk-based CAR prescribed under
UnSD Certificates if they are not in scripless Sec. X116 for the past sixty (60) days
form to buyers/holders of UnSD. immediately preceding the date of
(e) It must have a CAMELS composite application where applicable. The sixty (60)-
rating of at least “3” in the last regular day compliance period with the risk-based
examination, where applicable. CAR shall be waived in evaluating a bank’s
(3) Selling Agent eligibility to act as Public Trustee for another
(a) It may be any FI with dealership or bank’s UnSD’s Tier 2 offering, if the former
brokering license and is under the bank has instituted remedial measure to its
supervision of the BSP. CAR deficiency by issuing Tier 2 capital.
(b) It must be a third party that has no (d) It may also be the UnSD Registry.
subsidiary/affiliate or any other relationship (e) A Public Trustee is mandatory if
with the Issuing Bank that would undermine UnSD shall be offered to the general public
its independence. and optional if offering will be limited to
(4) Market Maker qualified investors/buyers.
(a) It must be a FI with a dealership or d. Functions/Responsibilities of other
brokering license and is under the parties involved
supervision of the BSP. The respective parties shall have, among
(b) It must be a third party that has no others, the following functions/
subsidiary/affiliate or any other relationship responsibilities:
with the Issuing Bank that would undermine (1) Underwriter/Arranger
its independence. (a) Conducts due diligence on the
(c) It must have adequate risk Issuing Bank and determines the valuation/
management and must be well capitalized pricing of the primary issue;
as evidenced by compliance with the risk (b) Prepares the prospectus/information
based CAR prescribed under Sec. X116 for disclosure, including updates for
the past sixty (60) days immediately multi-tranche UnSD issues;
preceding the date of application where (c) Formulates the distribution/
applicable. allocation plan for the initial offering and
There is no need for a Market Maker if ensures proper and orderly distribution of

§§ X119.4
11.12.31
the primary offering of the UnSD; understands the features of the UnSD and
(d) Disseminates information to the risk involved therein; and
prospective investors of UnSD on the terms (c) Issues the Purchase Advice for the
and conditions of the issue (including primary offering of the UnSD to the buyer
information of non pre-termination at the and sends a copy thereof to the UnSD
initiative of the holder and the liquidity Registry.
mechanism in secondary trading) and the The sale or distribution of UnSD may
rights and obligations of the holder, issuer, also be performed by the issuer through its
Underwriter/Arranger, UnSD Registry, head office and branches subject to the
Selling Agent, Market Maker and Public following conditions:
Trustee; and (i) The in-house distribution shall not
(e) When selling to its clients, it must exceed fifty percent (50%) of the total issue;
perform the functions/responsibilities of the (ii) The sale/distribution must be done
Selling Agent under Item “d(3)” hereof. under the supervision of an officer of the
(2) UnSD Registry Issuing Bank who is capable of determining
(a) Keeps unissued UnSD certificates the suitability of the investor and ensuring
and maintains UnSD Registry book, which that he fully understands the risk in UnSD;
must be electronic if UnSD is scripless in (iii) All personnel assigned to distribute/
form; sell UnSD must be capable of determining
(b) Records initial issuance of the the suitability of the investor and ensuring
UnSD and subsequent transfer of that he fully understands the risk in UnSD;
ownership; and
(c) Issues UnSD Certificates for primary (iv) It must also perform the functions/
offerings if UnSD is not scripless in form; responsibilities of the Selling Agent.
(d) Issues Registry Confirmation to (4) Market Maker
buyers/holders; (a) Sets an independent pricing for the
(e) Functions as paying agent for secondary trading of UnSD;
periodic interest and principal payments; (b) Posts daily the bid and offer prices
(f) Monitors compliance with the for the UnSD on the screen of at least one
prohibitions on holdings of UnSD, as (1) of the information providers until the
prescribed under Subsec. X119.8 hereof; operation of a fixed income exchange for
and UnSD;
(g) Submits within ten (10) banking (c) Verifies identity of each investor to
days from end of reference month, an ascertain that Subsec. X119.8 is not violated
exception report on Subsec. X119.8 to the and applies appropriate standards to combat
appropriate department of the SES. This money laundering as required under existing
report shall be classified as a “Category B” BSP regulations;
report. (d) Determines the suitability of the
(3) Selling Agent buyer and ensures that he fully understands
(a) Verifies identity of each investor to the risk involved in a UnSD;
ascertain that Subsec. X119.8 is not violated (e) Issues the Purchase Advice for the
and applies appropriate standards to combat secondary trading of the UnSD to the buyer
money laundering as required under existing and sends a copy thereof to the UnSD
BSP regulations; Registry; and
(b) Determines the suitability of the (f) Ensures secondary market transfers
investor and ensures that he fully and registration in coordination with the

§§ X119.4
11.12.31
UnSD Registry. not insured by the PDIC.

(5) Public Trustee (2) This UnSD is neither secured nor
(a) Monitors compliance of the Issuing covered by a guarantee of the Issuer/
Bank with the terms and conditions of the Underwriter/Arranger or related party of
UnSD; the Issuer/Underwriter/Arranger or other
(b) Monitors compliance of the other arrangement that legally or economically
parties with their functions and enhances the priority of the claim of any
responsibilities prescribed under this holder of the UnSD as against depositors
Memorandum; and other creditors (for LT2); depositors,
(c) Reports regularly to UnSD holders other creditors and holders of LT2 capital
non-compliance of the Issuing Bank with instruments (for UT2); and depositors,
the terms and conditions of the UnSD and other creditors and holders of LT2 and
such other developments that adversely UT2 capital instruments (for HT1);
affect their interest and advise them of the (3) This UnSD does not have a
course of action they should take to protect priority claim, in respect of principal and
their interest; and coupon payments in the event of
(d) Act on behalf of the UnSD holders winding-up of the Issuing Bank, which is
in case of bankruptcy of the Issuing Bank. higher than or equal with that of
e. Change of Underwriter/Arranger, depositors and other creditors (for LT2);
UnSD Registry, Selling Agent(s), Market depositors, other creditors and holders of
Maker(s). After an application for LT2 capital instruments (for UT2); and
authority to issue a UnSD has been depositors, other creditors, holders of LT2
approved by the BSP, the Issuing Bank and UT2 capital instruments (for HT1);
cannot change its Underwriter/Arranger, (4) This UnSD is ineligible as
UnSD Registry, Selling Agent(s), Market collateral for a loan granted by the Issuing
Maker(s) and Public Trustee without prior Bank, its subsidiaries or affiliates;
BSP approval. (5) This UnSD cannot be terminated
f. Agreements Between Issuing Bank by the holder nor by the Issuing Bank (for
and other parties involved. The HT1). This UnSD cannot be terminated
agreements between the Issuing Bank and by the holder nor by the Issuing Bank
the UnSD Registry/Selling Agent(s)/Market before (maturity date) (for UT2 and LT2).
Maker(s)/Public Trustee shall comply with However, negotiations/transfers from
the provisions of Sec. X162 on bank one (1) holder to another do not constitute
service contracts. The Issuing Bank shall pre-termination;
be liable to investors for any damages (Item “g(5)” above shall apply if the
caused by actions of the UnSD Registry, Issuing Bank commits no pre-termination
Selling Agent(s) and Market Maker(s), of the UnSD. Otherwise, it shall read as
which are contrary to the agreements follows):
entered into. This UnSD cannot be terminated by
g. Purchase Advice and Registry the holder (for HT1). This UnSD cannot
Confirmation. The Purchase Advice and be terminated by the holder before
Registry Confirmation shall contain all the (maturity date) (for UT2 and LT2).
terms and conditions on the issuance of However, it may be pre-terminated at
UnSD and shall conspicuously state the the instance of the Issuing Bank upon:
following caveat: (a) Prior approval of the BSP subject
(1) This UnSD is not a deposit and is to the following conditions:

§§ X119.4
11.12.31
(i) The repayment is in connection (6) The holders/owners of this UnSD

with call option after a minimum of five cannot set off any amount they owe to
(5) years from issue date, or even within the Issuing Bank against this UnSD;
the first five (5) years from issue date (7) All negotiations/transfers of this
when: UnSD prior to maturity must be coursed
(aa)The UnSD was issued for the through a Market Maker until the
purpose of a merger with or acquisition operation of a fixed income exchange;
by the Issuing Bank and the merger or (8) The payment of principal may be
acquisition is aborted; accelerated on this UnSD only in the
(bb) There is a change in tax status of event of insolvency of the Issuing Bank;
the UnSD due to changes in the tax laws (9) The coupon rate, or the
and/or regulations; or formulation for calculating coupon
(cc)The UnSD does not qualify as HT1, payments shall be fixed at the time of
UT2 or LT2 capital, as the case may be, the issuance of the UnSD and may not
as determined by the BSP; and be linked to the credit standing of the
(ii) The debt is simultaneously Issuing Bank;
replaced with the issues of new capital (10) The payment of principal and
which is neither smaller in size nor of coupon due on this UnSD shall not be
lower quality than the original issue, made to the extent that such payment will
unless the Issuing Bank’s capital adequacy cause the Issuing Bank to become
ratio remains more than adequate after insolvent (for HT1 and UT2);
redemption; and (11) The holders of the UnSD shall be
(b) Prior notice to holders on record. treated as if they were holders of a
Negotiations/transfers from one (1) specified class of share capital in any
holder to another do not constitute proceedings commenced for the winding-
pre-termination. up of the Issuing Bank (for HT1 and UT2);
In case there is a feature allowing one- (Item “g(11)” above shall apply if such
time step-up in the coupon rate in is the manner by which the UnSD is to
conjunction with a call option, the step- be treated in loss situation. Otherwise, it
up shall be after a minimum of ten (10) shall read as follows):
years for HT1 and UT2 and five (5) years This UnSD shall be automatically
for LT2 after the issue date, and shall not converted into common shares or
result in an increase over the initial rate perpetual and non-cumulative preferred
that is more than: shares (for HT1) or into common shares
(i) 100 basis points less the swap or perpetual and non-cumulative
spread between the initial index basis and preferred shares or perpetual and
the stepped-up index basis; or cumulative preferred shares (for UT2)
(ii) Fifty percent (50%) of the initial upon occurrence of certain trigger events
credit spread less the swap spread as follows:
between the initial index basis and the (a) Breach of minimum capital ratio;
stepped-up index basis. (b) Commencement of proceedings
The swap spread shall be fixed at the for winding-up of the Issuing Bank; or
pricing date and reflect the differential in (c) Upon appointment of receiver for
pricing on that date between the initial the Issuing Bank.
reference security or rate and the stepped- The rate of conversion shall be fixed
up reference security or rate; at the time of the subscription of this

§§ X119.4
11.12.31
UnSD. the option to pre-terminate the UnSD;

(12) The amount and timing of (b) C o m p l i a n c e with Items
coupons on this UnSD shall be “a(2)(a)vii”, “b(1)(h)v” or “b(2)(c)iv” as
discretionary on the Issuing Bank where may be applicable, of Appendix 63a;
th e I s s u i n g B a n k h a s n o t p a i d o r (c) Prior notification of thirty (30)
declared a dividend on its common banking days or more to holders of
shares in the preceding financial year, record; and
or determines that no dividend is to be (d) Notwithstanding any agreement
paid on such shares in the current to the contrary, the Issuer shall shoulder
financial year; and the Issuing Bank the tax due, if any, on the interest
shall have full control and access to income already earned by the holders.
waived payments (for HT1). The (2) Within ten (10) banking days
coupon payment on this UnSD shall be after the completion of the pre-
deferred where the Issuing Bank has not termination transaction, the Issuing
paid or declared a dividend on its Bank must submit a written notice to the
common shares in the preceding appropriate department of the SES of the
financial year, or determines that no following:
dividend is to be paid on such shares (a) Actual pre-termination date; and
in the current financial year (for UT2); (b) New capital composition.
(13) The coupon on this UnSD shall be i. P r i m a r y o f f e r i n g / s e c o n d a r y
non-cumulative. In case there is a feature trading
allowing withheld cash coupon to be (1) The primary offering of a UnSD
payable in scrip or shares of stock, the shall be executed through an
shares of stock to be issued shall not be of Underwriter under a firm commitment
lower quality capital than the UnSD (for or through an Arranger on a best effort
HT1); and basis. Initial sale/distribution of UnSD
(14) The coupon to be paid on this shall be made by a Selling Agent, the
UnSD shall be paid only to the extent that Underwriter/Arranger or, to a limited
the Issuing Bank has profit distributable extent, the Issuing Bank itself.
determined in accordance with existing Subsequent negotiations in secondary
BSP regulations (for HT1). trading must be executed through
N.B.: The last five (5) items (i.e., authorized Market Maker(s) until the
10, 11, 12, 13 and 14) are applicable operation of a fixed income exchange.
only to UnSD qualifying under HT1 and The primary offering as well as the
UT2 capital, as the case may be. The secondary trading of a UnSD must be
foregoing information shall also be supported by Purchase Advice to be
shown in the Prospectus/Information issued by the Selling Agent or the
Disclosure. Market Maker, as the case may be, with
h. Pre-termination by the Issuer the original given to the buyer and a
(1) T h e I s s u i n g B a n k m a y p r e - second copy to the UnSD Registry.
terminate the UnSD subject to the Upon presentation by the buyer of the
following conditions: original copy of Purchase Advice, the
(a) The Information Disclosure, UnSD Registry shall:
Purchase Advice and Registry (a) record the primary issuance in
Confirmation shall include the the Registry Book and issue a Registry
information that the Issuing Bank has Confirmation and the corresponding

§§ X119.4 - X119.5
11.12.31
UnSD certificate to the buyer if it is not has been approved by the stockholders
scripless in form; and owning or representing at least two-
(b) register the transfer of ownership thirds (2/3) of the outstanding capital
in the UnSD Registry Book and issue a stock of the Issuing Bank if the UnSD
Registry Confirmation to the buyer, in the has convertibility feature;
case of secondary trading. (c) A written confirmation from the
(As amended by Circular Nos. 716 dated 25 March 2011, 709 president or officer of equivalent rank
dated 10 January 2011, Memorandum to All Banks dated 23 of the Issuing Bank stating that all the
March 2006) conditions for UnSD under Item
“a(2)(a)” excluding Item “(xiii)” on
§ X119.5 Private or negotiated underwriting provision or Item
issuance of unsecured subordinated “b(1)(h)” excluding Item “(xi)” on
debt underwriting provision or Item “b(2)(c)”
a. Private or negotiated issuance of excluding Item “(ix)” on underwriting
UnSD is the issuance of UnSD to provision of Appendix 63a are complied
qualified investors/buyers, whether with and that such conditions shall be
individuals or institutions as defined contained in the UnSD Certificates,
under Subsec. X119.7. There is no limit Prospectus/Information Disclosure and
on the number of qualified investors/ Debt Agreement/Contract.
buyers and on the sale or negotiation (d) A n u n d e r t a k i n g f r o m t h e
of the UnSD: Provided, That such sale president or officer of equivalent rank
or negotiation shall only be made to of the Issuing Bank that the UnSD shall
another qualified investor/buyer. be issued only to qualified investors/
b. Application for authority of the buyers;
Issuing Bank (e) A c e r t i f i c a t i o n f r o m t h e
(1) The application shall be signed president or officer of equivalent rank
by the president or officer of equivalent of the Issuing Bank that the investor/
rank of the Issuing Bank. buyer shall not be among those
(2) The application for authority on prohibited to hold UnSD under Subsec.
each negotiated UnSD issue shall be X119.8 and that the Issuing Bank has
filed with the appropriate department of applied appropriate standards to
the SES. combat money laundering as required
(3) T h e a p p l i c a t i o n s h a l l b e under existing BSP regulations;
accompanied by: (f) A written undertaking from the
(a) A c e r t i f i e d t r u e c o p y o f t h e president or officer of equivalent rank
resolution of the Issuing Bank’s board of the Issuing Bank not to support,
of directors authorizing the private/ directly nor indirectly, by extending
negotiated issuance of UnSD loans, issuing payment guarantees or
indicating, among others, the amount, otherwise, the buyer/holder of the
duration/maturity, interest rate, purpose UnSD of the Issuing Bank; and
or intended use of proceeds of the (g) Specimen of the proposed Debt
UnSD; Agreement/Contract containing the
(b) A Certification by the corporate terms and conditions of the UnSD
secretary that the issuance of the UnSD issuance.

§ X119.5
08.12.31
(h) A written external legal opinion (3) This UnSD does not have a priority
that all the conditions for UnSD under claim, in respect of principal and coupon
Item “a(2)(a)”, Item “b(1)(h)” or Item payments in the event of winding-up of the
“b(2)(c)”, of Appendix 63a including the Issuing Bank, which is higher than or equal
subordination (for HT1, UT2 and LT2) and with that of depositors and other creditors
loss absorption (for HT1 and UT2) (for LT2); depositors, other creditors and
features, have been met. holders of LT2 capital instruments (for
c. Additional Requirements for the UT2); and depositors, other creditors,
Private Issuance of UnSD. Within ten (10) holders of LT2 and UT2 capital instruments
banking days after issuance of the UnSD, (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 (5) This UnSD cannot be terminated
of full receipt of proceeds, accompanied by the holder nor by the Issuing Bank (for
by a certification from the president or HT1). This UnSD cannot be terminated by
officer of equivalent rank of the Issuing the holder nor by the Issuing Bank before
Bank stating that the pre-qualification (maturity date) (for UT2 and LT2).
requirements under Subsec. X119.3 have Item “d(5)” above shall apply if the
been complied with up to the time of full Issuing Bank commits no pre-termination
receipt of proceeds; of the UnSD. Otherwise, it shall read as
(2) A copy of each of the duly signed follows:
Debt Agreements/Contracts between the This UnSD cannot be terminated by the
Issuing Bank and the investor/buyer as holder (for HT1). This UnSD cannot be
specified in the application for authority to terminated by the holder before (maturity
issue negotiated UnSD; and date) (for UT2 and LT2).
(3) A copy of the income tax return of However, it may be pre-terminated at
the investor/buyer in case of a natural the instance of the Issuing Bank upon:
person. (a) Prior approval of the BSP subject
d. Debt agreement/contract to the following conditions:
The Debt Agreement/Contract shall (i) The repayment is in connection
contain all the terms and conditions on the with call option after a minimum of five
issuance of UnSD and shall conspicuously (5) years from issue date, or even within
state the following caveat: the first five (5) years from issue date when:
(1) This UnSD is not a deposit and is (aa) The UnSD was issued for the
not insured by the PDIC. purpose of a merger with or acquisition by
(2) This UnSD is neither secured nor the Issuing Bank and the merger or
covered by a guarantee of the Issuer or acquisition is aborted;
related party of the Issuer or other (bb) There is a change in tax status of
arrangement that legally or economically the UnSD due to changes in the tax laws
enhances the priority of the claim of any and/or regulations; or
holder of the UnSD as against depositors (cc) The UnSD does not qualify as HT1,
and other creditors (for LT2); depositors, UT2 or LT2 capital, as the case may be, as
other creditors and holders of LT2 capital determined by the BSP; and
instruments (for UT2); and depositors, other (ii) The debt is simultaneously
creditors and holders of LT2 and UT2 replaced with the issues of new capital
capital instruments (for HT1). which is neither smaller in size nor of

§ X119.5
08.12.31
lower quality than the original issue, unless proceedings commenced for the winding-
the Issuing Bank’s capital adequacy ratio up of the Issuing Bank (for HT1 and UT2);
remains more than adequate after (Item “d(11)” above shall apply if such
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
shall be after a minimum of ten (10) years perpetual and non-cumulative preferred
(for HT1 and UT2) and five (5) years (for shares (for HT1), or into common shares
LT2) after the issue date, and shall not result or perpetual and non-cumulative preferred
in an increase over the initial rate that is shares or perpetual and cumulative
more than: preferred shares (for UT2) upon occurrence
(i) 100 basis points less the swap of certain trigger events as follows:
spread between the initial index basis and (a) Breach of minimum capital ratio;
the stepped-up index basis; or (b) Commencement of proceedings
(ii) Fifty percent (50%) of the initial for winding up of the Issuing Bank; or
credit spread less the swap spread between (c) Upon appointment of receiver for
the initial index basis and the stepped-up the Issuing Bank.
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 coupons
reference security or rate and the stepped- on this UnSD shall be discretionary on the
up reference security or rate; Issuing Bank where the Issuing Bank has
(6) This UnSD may only be sold, not paid or declared a dividend on its
transferred or negotiated to another common shares in the preceding financial
qualified investor/buyer; year, or determines that no dividend is to
(7) The holders/owners of this UnSD be paid on such shares in the current
cannot set off any amount they owe to the financial year; and the Issuing Bank shall
Issuing Bank against this UnSD. have full control and access to waived
(8) The payment of principal may be payments (for HT1). The coupon payment
accelerated on this UnSD only in the event on this UnSD shall be deferred where the
of insolvency of the Issuing Bank. Issuing Bank has not paid or declared a
(9) The coupon rate, or the formulation dividend on its common shares in the
for calculating coupon payments shall be preceding financial year, or determines that
fixed at the time of the issuance of the no dividend is to be paid on such shares in
UnSD and may not be linked to the credit the current financial year (for UT2);
standing 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 (14) The coupon to be paid on this
specified class of share capital in any UnSD shall be paid only to the extent that

§§ X119.5 - X119.7
08.12.31
the Issuing Bank has profit distributable (5) Issues UnSD Certificates and
determined in accordance with existing Registry Confirmation to original investors/
BSP regulations (for HT1). buyers;
N.B.: The last five (5) items (i.e., 10, (6) Issues Registry Confirmation to
11, 12, 13 and 14) are applicable only to subsequent buyers/holders where
UnSD qualifying under HT1 and UT2 applicable;
capital, as the case may be. (7) Ensures compliance with Subsec.
e. Pre-termination by the Issuer X119.8 and applies appropriate standards
(1) The Issuing Bank may pre- to combat money laundering as required
terminate the negotiated UnSD subject to under existing BSP regulations; and
the following conditions: (8) Determines suitability of the
(a) The Debt Agreement/Contract shall investors/buyers (original or subsequent)
include the information that the Issuing and assures that he fully understands the
Bank has the option to pre-terminate the risk involved in a UnSD.
UnSD; (As amended by Memorandum to All Banks dated 23 March 2006)
(b) Compliance with Item “a(2)(a)vii”,
Item “b(1)(h)v” or Item “b(2)(c)iv”, as may § X119.6 Issuance abroad of unsecured
be applicable, of Appendix 63a; subordinated debt. The overseas issuance
(c) Prior notification of thirty (30) banking of UnSD shall also be subject to the
days or more to lender/investor; and provisions of Sec. X119 except for the
(d) Notwithstanding any agreement to following:
the contrary, the Issuer shall shoulder the a. Overseas issuance of UnSD may
tax due, if any, on the interest income be allowed to be governed by the laws and
already earned by the holders. applicable rules and regulations of the
(2) Within ten (10) banking days after country where the UnSD is to be issued
the completion of the pre-termination with respect to form, qualified investors/
transaction, the Issuing Bank must submit buyers and subsequent sale or negotiation;
a written notice to the appropriate b. The requirements under Subsecs.
department of the SES of the following: X119.1 c(1), X119.4 g(1), and X119.5 d(1)
(a) Actual pre-termination date; and and d(6) may be allowed to be dispensed
(b) New capital composition. with in cases of overseas issuance of
f. Functions/Responsibilities of the UnSD; and
Issuing Bank c. The subsequent sale/negotiation in
(1) Prepares the Prospectus/Information the Philippines of the UnSDs originally
Disclosure on the UnSD issues; issued overseas shall not be allowed unless
(2) Disseminates to prospective all the requirements for domestic issuance
investors/buyers information on the terms are complied with.
and conditions of the UnSD (including It is however understood that the
information on no pre-termination at the applicant/issuer shall also secure the
initiative of the holder, and where approval of the International Department
applicable, the liquidity mechanism in (ID) of the BSP for the overseas issuance
secondary trading) and the rights and of foreign currency denominated UnSD.
obligations of the holder and the issuer; (As amended by Memorandum to All Banks dated 23 March 2006)
(3) Keeps unissued UnSD certificates
and maintains UnSD Register; § X119.7 Qualified investors/buyers
(4) Records initial issuance of UnSD Qualified buyers of, or suitable investors
and subsequent transfer of ownership; in, a UnSD can be any of the following:

§§ X119.7 - X119.9
08.12.31
a. Banks; Department to purchase or invest in the

b. Investment house (IH); UnSD of the Issuing Bank; and
c. Insurance company; (2) That the authority/instruction of the
d. Pension or retirement fund of other fund owner and his understanding of the
entities which have no subsidiary/affiliate risk involved in purchasing or investing in
or any other relationship with the Issuing UnSD are fully documented.
Bank; For purposes of this Section, an affiliate
e. Investment company; refers to a related entity linked by means
f. Funds managed by another bank or of ownership of at least twenty percent
other entities duly authorized to engage (20%) to not more than fifty percent (50%)
in trust or other fiduciary business; of its outstanding voting stock.
g. Domestic corporate or institutional
investors with total assets of at least P100.0 § X119.9 Accounting treatment
million; Obligations arising from the issuance of
h. Foreign multilateral organizations UnSD (including the portion exceeding
such as, the ADB and IFC; the allowable ceiling for purposes of
i. High net-worth individual investor/ determining the qualifying capital as
buyer who is sophisticated enough to provided in Appendix 63a) shall be booked
understand and appreciate the significance under the following General Ledger
of and the risk involved in UnSD as may account titles:
be indicated by his/her educational a. “Other Equity Instruments -
background and/or employment/business Others” for HT1 capital which shall be
experience; and presented in the equity accounts section
j. Stockholder, director or officer of the Balance Sheet which shall be
with the rank of at least a vice-president of accounted for in accordance with the
the Issuing Bank. provisions of PAS 32; and
b. “Unsecured Subordinated Debt”
§ X119.8 Prohibitions on holdings of for UT2 and LT2 capital, which shall be
unsecured subordinated debt. The presented in the liability accounts section
following persons and entities are of the balance sheet.
prohibited from purchasing/holding UnSD However, only the proceeds actually
of the Issuing Bank: received from the UnSD issues, (i.e., net
a. Subsidiaries and affiliates of the of discounts, if any, and transaction costs)
Issuing Bank including their subsidiaries shall be considered as HT1, UT2 or LT2
and affiliates; and capital.
b. Common trust funds (CTFs) The proceeds actually received from
managed by the Trust Department of the the UnSD issues, (i.e., net of discounts, if
Issuing Bank, its subsidiaries and affiliates any, and transaction costs) eligible as UT2
or other related entities: Provided, That or LT2 capital shall be considered in the
other funds being managed by the Trust computation of loanable funds for purposes
Department of the Issuing Bank, its of determining compliance with the
subsidiaries and affiliates or other related mandatory allocation of funds for agri-agra
entities are allowed to purchase or invest credit required under P.D. No. 717, as
in UnSD of the Issuing Bank subject to the amended.
following conditions: A UnSD eligible as HT1, UT2 or LT2
(1) That the fund owners give prior capital shall be accounted for in accordance
authority/instruction to the Trust with PAS 32 and PAS 39.

§§ X119.9 - X120
08.12.31
A UnSD denominated in foreign c. On the UnSD registry

currency eligible as HT1, UT2 or LT2 may (1) Disqualification from being
be recorded in the regular banking unit appointed as UnSD Registry for three (3)
(RBU) or foreign currency deposit unit years; and
(FCDU/EFCDU) of the issuing bank: (2) Monetary penalty of P30,000 for
Provided, That if booked in the FCDU/ each violation.
EFCDU, the following conditions shall be d. On the selling agent/market maker
strictly observed: (1) D i s q u a l i f i c a t i o n f r o m b e i n g
a. The issuing bank shall indicate in appointed as selling agent or market
its application that the UnSD shall be maker for three (3) years; and
booked in its FCDU/EFCDU; (2) Monetary penalty of P30,000 for
b. The UnSD shall remain in the FCDU/ each violation.
EFCDU books until full settlement; and e. On the public trustee
c. The UnSD shall be issued only to (1) Disqualification from being
non-residents and offshore banking units appointed as public trustee for three (3)
(OBUs) in accordance with Section 72.2.e years; and
of CB Circular No. 1389, as amended. (2) Monetary penalty of P30,000 for
(As amended by Memorandum to All Banks dated each violation.
23 March 2006) f. On the certifying officer - A fine
of P5,000 per day from the time of
§§ X119.10 - X119.12 (Reserved) required disclosure up to the time
disclosure was made, or from the time
§ X119.13 Sanctions. Without misrepresentation was made up to the
prejudice to the other sanctions prescribed time the information was corrected, and
under Section 37 of R.A. No. 7653 and the a possible disqualification if warranted by
provisions of Section 16 of R.A. No. 8791, the gravity of the offense committed.
sanctions shall be imposed on the Issuing g. On the responsible officer - A fine
Bank, UnSD Registry and other parties of P30,000 for participating in or tolerating
involved in the transaction for failure to the non-disclosure or misrepresentation of
perform their respective functions/ information, and a possible disqualification
responsibilities and for non-disclosure or if warranted by the gravity of the offense
misrepresentation of information, as committed.
follows: (As amended by Circular No. 585 dated 15 October 2007)
a. On the issuing bank
(1) Suspension of its authority to issue Sec. X120 Interim Tier 1 Capital for Banks
remaining tranches, if any; Under Rehabilitation. The following are
(2) Disqualification from future the guidelines on the issuance of capital
issuance of UnSD; notes that will qualify as interim Tier 1
(3) Disqualification of all outstanding capital for banks under rehabilitation:
issues as eligible Tier 2 capital; and a. Banks under rehabilitation shall be
(4) Monetary penalty of P30,000 for allowed, upon prior BSP approval, to issue
each violation. capital notes that shall qualify as interim
b. On the underwriter/arranger Tier 1 capital: Provided, That the PDIC shall
(1) Disqualification from being be the holder of the said capital notes:
underwriter/arranger for three (3) years; and Provided, further, That any transter from
(2) Monetary penalty of P30,000 for PDIC of said capital notes shall require
each violation. prior BSP approval.

§ X120
08.12.31
b. The interim Tier 1 capital notes shall It must not contain any clause, which
have the following minimum features: requires acceleration of payment of
(1) It must be perpetual, unsecured principal, except in the event of
and subordinated; insolvency. The agreement governing its
(2) It must be issued and fully paid-up. issuance must not contain any provision
Only the net proceeds received from the that mandates or creates an incentive for
issuance shall be included as Tier 1 capital. the bank to repay the outstanding principal
The proceeds of the issuance must be of the interim Tier 1 capital notes, e.g., a
immediately available without limitation cross-default or negative pledge or a
to the bank; restrictive covenant, other than a call
(3) It must neither be secured nor option, which may be exercised by the
covered by a guarantee of the issuer or bank;
related party or other arrangement that (6) The PDIC, as holder of the interim
legally or economically enhances the Tier 1 capital notes, shall have the right to
priority of the claim of the PDIC as against convert, upon prior notice to the BSP, the
depositors, other creditors of the bank and interim Tier 1 capital notes into perpetual
holders of LT2 and UT2 capital instruments; and non-cumulative preferred shares
(4) The PDIC, as holder of the interim convertible into common shares which
capital notes must not have a priority claim, may be sold to new investors: Provided,
in respect of its principal and coupon That the rate of conversion shall be fixed
payments of the interim Tier 1 capital notes at the time of subscription of the interim
in the event of winding up of the bank, Tier 1 capital notes;
which is higher than or equal with that of (7) The coupons must be
depositors, other creditors of the bank and non-cumulative;
holders of LT2 (e.g. limited life redeemable (8) The bank must have full discretion
preferred stock) and UT2 (e.g. perpetual over the amount and timing of coupon
and cumulative preferred stock) capital payments and it must have full control and
instruments. The PDIC must waive its right access to waived payments;
to set-off any amount it owes the bank (9) Any coupon to be paid must be
against any subordinated amount owed to paid only to the extent that the bank has
it due to the interim Tier 1 capital notes; profits distributable determined in
(5) It must not be repayable without accordance with existing BSP
the prior approval of the BSP: Provided, That regulations. The coupon rate, or the
repayment may be allowed only in formulation for calculating coupon
connection with a call option after a payments must be fixed at the time of
minimum of five (5) years from issue date: issuance of the interim Tier 1 capital notes
Provided, however, That a call option may and must not be linked to the credit
be exercised within the first five (5) years standing of the bank;
from issue date upon entry of new (10) It must not have step-up provisions
investors: Provided, further, That such in the coupon rate in conjunction with the
repayment prior to maturity shall be call option;
approved by the BSP only if it is (11)All other transactions involving the
simultaneously replaced with issues of new capital notes shall require prior BSP
capital which is neither smaller in size nor approval.
of lower quality than the original issue, c. The bank must submit a written
unless the bank’s capital ratio remains opinion from its external auditor that the
more than adequate after redemption. features of the interim Tier 1 capital notes

§§ X120 - X126.1
11.12.31
shall be accounted for as equity instruments (including foreign individuals and non-
in accordance with PAS 32. bank corporations) in a domestic bank shall
(Circular No. 595 dated 11 January 2008) not exceed sixty percent (60%) of the
outstanding voting stock of the bank
Secs. X121- X125 (Reserved) established under R.A. No. 7721.
c. A Filipino individual and a domestic
G. STOCK, STOCKHOLDERS non-bank corporation may each own up to
AND DIVIDENDS forty percent (40%) of the voting stock of a
domestic bank. There shall be no ceiling on
Sec. X126 Shares of Stock of Banks. The the aggregate ownership by such individuals
following shall govern transactions affecting and non-bank corporations in a domestic bank.
shares of stock of banks and the limits on d. An individual and a corporation or
stockholdings in a single bank or in several corporations which are wholly-owned, or a
banks. majority of the voting stock of which is
For purposes of this Section, the term owned, by him may own only up to a
“corporations” shall include partnerships, combined forty-percent (40%) of the voting
cooperatives, associations and other stock of a domestic bank.
juridical persons/entities. e. The right of the qualified Philippine
(As amended by Circular No. 718 dated 26 April 2011) corporations, however, under Section 8 of
R.A. No, 7721, as implemented under
§ X126.1 Limits of stockholdings in a Subsec. X105.12 shall continue to be in
single bank. The stockholdings of an force and effect.
individual, corporation, family group, or f. Stockholdings of family groups or
same group of persons in any bank shall be related interests. Individuals related to each
subject to the limits prescribed in Sections other within the fourth degree of
11, 12, and 13 of R.A. No. 8791, R.A. No. consanguinity or affinity, whether legitimate,
7906, R.A. No. 7353, R.A. No. 7721 and illegitimate or common-law, shall be
other relevant laws. considered family groups or related interests
a. Foreign individuals and non-bank but may each own up to forty percent (40%)
corporations may own or control up to forty of the voting stock of a domestic bank:
percent (40%) of the voting stock of a Provided, That said relationship must be
domestic bank: Provided, That the aggregate fully disclosed in all transactions by such
foreign-owned voting stock owned by individuals or family groups or related
foreign individuals and non-bank interests.
corporations in a domestic bank shall not g. Two (2) or more corporations
exceed forty percent (40%) of the owned or controlled by the same family
outstanding voting stock of the bank. The group or same group of persons shall be
percentage of foreign-owned voting stock considered related interests but may each
in a bank shall be determined by the own up to forty percent (40%) of the voting
citizenship of the individual stockholders stock of a domestic bank: Provided, That said
in that bank. relationship must be fully disclosed in all
b. Qualified foreign banks may own transactions by such corporations or related
or control up to sixty percent (60%) of the groups of persons with the bank.
voting stock of a domestic bank: Provided, h. Ceiling on stockholdings in a Coop
That the aggregate foreign-owned voting Bank. The equity investment of any
stock owned by the qualified foreign banks cooperative in any Coop Bank shall not

§§ X126.1 - X126.2
11.12.31
exceed forty percent (40%) of the subscribed No. 7353, R.A. No. 7721 and other relevant
capital stock of such Coop Bank. laws are hereby declared unlawful and
i. Determination of foreign-owned void:
voting stock and citizenship of corporate (1) Any transaction involving voting
stockholders in a bank as well as the shares of stock of a bank, if such
relationship of stockholders of a bank. transaction, in itself, or in relation with other/
(1) The percentage of foreign-owned previous transaction/s shall result in the
voting stocks in a bank shall be determined ownership and control by an individual or
by the citizenship of all the stockholders in corporation of voting shares of stock in
that bank. excess of any of the following prescribed
(2) The citizenship of the corporation, ceilings:
which is a stockholder of a bank shall follow Under R.A. Nos. 8791,
7906 and 7353 Ceiling
the citizenship of the controlling (a) Voting shares of stock of a
stockholders of the corporation, irrespective Filipino individual or a
of the place of incorporation. For purposes Philippine non-bank 40%
corporation in a domestic
hereof, the term “controlling stockholders” bank
shall refer to stockholders holding more than (b) Voting shares of stock of
foreign individual or a
fifty percent (50%) of the voting stock of the foreign non-bank
corporate stockholders of the bank. corporation in a domestic:
(3) The relationship of individuals who i. UB/KB and TB 40%
ii. RB No foreign
are stockholders of a bank shall be stockholdings1
determined in accordance with the (c) Combined ownership of the
provisions of Articles 963 to 966 of the Civil voting shares of stock of
foreign individuals and/or
Code of the Philippines. foreign non-bank
(As amended by Circular No. 718 dated 26 April 2011 and corporations in a domestic:
Circular No. 682 dated 15 February 2010) i. UB/KB 40%
ii. TB 60%
iii. RB No foreign
§ X126.2 Transactions involving voting stockholdings1
shares of stocks.The following regulations (d) Combined ownership of the
voting shares of stock in a
shall govern all transactions involving voting domestic bank of an
shares of stocks of banks. individual and corporation/s
For purposes of this Subsection, which is/are wholly-owned 40%
or a majority of the voting
“transaction” shall refer to subscription/ shares of stock of which is
issuance, purchase/sale, transfer, conversion owned by such individual
of preferred shares or debt instruments into Under R.A. No. 7721
(a) Voting shares os stock of a
voting shares of stock, and such act, qualified foreign bank or
contract, agreement or arrangement qualified Philippine 60%
corporation in a domestic
whereby a person, whether natural or bank, i.e., UB/KB,TB and RB
juridical, acquires voting shares of stock (b) Combined ownership of the
from one person, whether natural or voting shares of stock of
qualified foreign banks
juridical, or is vested the right to vote or the (including foreign individuals 60%
control of the voting shares of stock of a bank. and non-bank corporations)
a. Unlawful and void transactions in a domestic bank, i.e.,
UB/KB, TB and RB
involving voting shares of stock of banks. The
following transactions, to the extent of the (2) Any act, contract, agreement or
excess over any of the prescribed ceilings arrangement, such as voting trust
under R.A. No. 8791, R.A. No. 7906, R.A. agreement or proxy, which vests in any
1
With the exception of shareholdings of Filipino controlled domestic banks.

§ X126.2
11.12.31
person, whether natural or juridical, the transaction until the required prior BSP
right to vote or the control of the voting approval is submitted as provided in
shares of stock of a bank, if such Subsec. X126.2.c.
arrangement in itself, or in relation with (3) In the case of additional subscription,
other/previous transaction/s, shall result in the bank shall not recognize the fund infused
the acquisition of the right to vote or the by the subscriber in its book as asset and
control of voting shares of stock of the bank, liability or equity unless prior Monetary
in excess of the prescribed ceilings. Board approval is obtained. Pending
b. Transactions requiring prior approval by the Monetary Board, the fund
Monetary Board approval infused by the subscriber shall be placed in
(1) Prior approval of the Monetary Board an escrow in another bank.
shall be required on transaction involving (4) Sanctions. Any willful delay in the
voting shares of stock of a bank, if such submission by the transferor and transferee
transaction, in itself or in relation with of the request for prior Monetary Board
other/previous transactions will: approval, together with the required
(a) result in ownership or control of supporting papers/documents, within sixty
more than twenty percent (20%) of voting (60) calendar days from date of transaction
shares of stock of a bank by any person or thirty (30) calendar days from receipt by
whether natural or juridical or which will corporate secretary of request for
enable such person to elect, or be elected registration of the transaction, whichever is
as, a director of such bank; or earlier, shall subject the transferor, the
(b) effect a change in the majority transferee, or both to the sanctions
ownership or control of the voting shares prescribed under Section 36 of R.A. No.
of stock of the bank from one (1) group of 7653, without prejudice to the appropriate
persons to another group: Provided, That legal actions for the rescission and
in no case shall such transaction be invalidation of the transaction.
approved unless the bank concerned shall Moreover, any director and/or officer of
immediately comply with the prescribed a bank found to be acting in the interest of
minimum capital requirement for new an unregistered stockholder shall be
banks, notwithstanding any approved subject to the applicable administrative
capital build-up program. sanctions under Section 37 of R.A. No.
(2) The request for prior Monetary 7653, without prejudice to the filing of
Board approval shall be submitted appropriate criminal charges as provided
jointly by the transferor-stockholder under Section 36 of R.A. No. 7653.
(or the bank in the case of additional Furthermore, any violation of the
subscription or conversion of preferred provisions of Subsec. X126.2.b(3) hereof
shares or debt instruments) and the shall subject the bank and/or its directors
transferee-stockholder thru the bank and/or officers to the applicable
to the appropriate department of the SES. administrative sanctions under Section 37
The request shall be accompanied of R.A. No. 7653, without prejudice to the
by, in the case of transferee-stockholder, filing of appropriate criminal charges as
the same papers/documents required of provided under Section 36 of R.A. No. 7653.
incorporators/stockholders of newly c. Duties of a corporate secretary. In all
established banks as provided in transactions, which may lawfully come to
Appendix 37. The corporate secretary shall the knowledge of the corporate secretary
hold in abeyance the registration of the involving voting shares of stock of a bank such

§ X126.2
11.12.31
as but not limited to subscription/issuance, (3) require the subscriber, purchaser,

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

§§ X126.2 - X126.3
11.12.31
may commence an action before the (2) A separate list containing the
appropriate body; names of stockholders who own voting
(4) promptly inform stockholders shares of stock in the bank and who are
(a) who have reached any of the ceilings related to each other within the fourth
prescribed by laws/BSP regulations of their degree of consanguinity or affinity,
ineligibility to own or control more than whether legitimate, illegitimate or
the applicable ceiling or (b) who would common-law (in the case of individuals)
own voting shares of stock requiring prior as well as corporations which are wholly-
Monetary Board approval; and owned or a majority of the stock of which
(5) disclose the ultimate beneficial is owned by any of such stockholders,
owners of bank shares held in the name including their subsidiaries; and
of Philippine Central Depository (PCD) (3) An affidavit under oath (sample
Nominee Corporation in the annual (or format shown in Appendix 4) from each of
quarterly whenever changes occur) report the stockholders attesting, among other
on Consolidated List of Stockholders and things, that he/she/it is the bona fide owner
Their Stockholdings (BSP 7-16-11), which of the voting shares of stock of the bank in
report shall be made under oath by the his/her/its own right, and not as an agent,
corporate secretary. Any willful delay in assignee, proxy, nominee or a dummy of
the submission of said report, a Category any other person, natural or juridical.
A-2 report, shall subject the bank to the (As amended by Circular No. 718 dated 26 April 2011)
corresponding fines for delayed reports
in accordance with the provisions of § X126.3 Other foreign equity
Subsec. X192.2 to be reckoned on the day investment in domestic banks. Except as
following the due date of submission until otherwise covered under Sec. X105 and
the correct report is submitted to the BSP. Subsec. X126.1, the following guidelines
Sanctions. The corporate secretary shall be observed on equity investments
found to have willfully falsely certified/ of foreigners in domestic banks:
submitted misleading statements and/or a. The prior authority of the Monetary
violated any of the provisions of Subsec. Board shall be obtained by foreign banks,
X126.2.c shall be subject to the including their subsidiaries and their
applicable administrative sanctions holding companies having majority
under Section 37 of R.A. No. 7653. The holdings in such foreign banks, whenever
imposition of the said administrative acquiring more than forty percent (40%)
actions is without prejudice to the filing of the voting stock of a domestic bank,
of appropriate criminal charges as including foreign-owned shares
provided under Section 35 of R.A. No. outstanding and foreign-held as of 27 April
7653 for the willful making of false or 1973 and which continued to be held by
misleading statement. the foreign stockholder up to the date of
d. Requirement for newly established the acquisition by the foreign banks.
banks. Entities which may hereinafter b. (Deleted by Cir. No. 256 dated 15
apply for a license to engage in banking August 2000)
business shall, before being allowed to c. The prior authority of the Monetary
operate, submit - Board is not required if the foreign investor
(1) An alphabetical list of stockholders is (1) an individual, (2) a non-financial
with the number and percentage of entity, or (3) a non-bank financial entity
voting shares of stock owned by them; which is not owned or controlled by a

§§ X126.3 - X126.5
11.12.31
bank, its subsidiary or holding company, acquired by the holders by virtue of such
and the investor is acquiring foreign- cumulative feature are not satisfied by
owned shares in existing domestic banks: the bank within a period of three (3) years
Provided, That said shares were from date of issue.
outstanding and foreign-held as of 27 d. Conversion of preferred shares of
April 1973 and which continued to be stock into voting/common shares of
foreign-held up to the date of acquisition stock, regardless of convertibility features
by the foreign investor. and notwithstanding any provision of
d. The maximum stockholdings existing BSP regulations to the contrary,
foreigners may own in domestic banks shall shall be:
continue to be governed by existing (1) effected only to the extent of the
provisions of law. prescribed ceilings under existing laws; and
e. Only foreign-owned shares directly (2) subject to prior Monetary Board
funded by inward remittance of foreign approval whenever said conversion will
exchange sold to the local banking system result to significant ownership of the
are qualified for registration with the BSP voting/common shares of stock of a bank
through its appropriate department for by any person, whether natural or
capital repatriation and remittance of juridical, or by one (1) group of persons,
profits/dividends privileges, in accordance as provided in Subsec. X126.2.b.
with existing BSP rules and regulations. The foregoing provision must be
specifically stated in the certificates of
§ X126.4 Convertibility of preferred preferred shares of stock.
stock to common stock. Out of the (As amended by Circular No. 718 dated 26 April 2011)
convertible preferred shares of stock which
KBs/TBs may henceforth be authorized to § X126.5 Issuance of redeemable
issue, at least fifty percent (50%) of each such shares: conditions; certification and
issue, shall be convertible into common report; sanctions
stock at the option of the holders thereof a. Conditions. Banks may issue
after five (5) years from date of issue: redeemable shares subject to the following
Provided, however, That : conditions:
a. The bank concerned may allow the (1) The applicant bank prior to the
conversion of such preferred stock into approval of the amendment of articles of
common stock even before the lapse of incorporation to issue redeemable
five (5) years from date of issue; preferred shares, has complied with the
b. At the time of the sale of the preferred requirements under Items “B1” to “B6”,
stock, both classes thereof (one with Appendix 5.
convertibility feature and the other without The articles of incorporation of an
convertibility feature) shall be offered to the applicant bank shall incorporate the
purchasers, with the purchasers having the conditions in Items “a (3)(a)”, “a(3)(b)”,
option to acquire either or both classes of “a(3)(c)” and “a(3)(d)” of this Subsection.
preferred stock; and (2) The applicant bank prior to the
c. Preferred shares of stock with a issuance of redeemable shares shall
cumulative feature issued by banks shall comply with, in addition to the conditions
automatically be convertible into common in Item “(1)” above, the requirements under
shares of stock at the option of the holders Items “B7”, “B8”, and “B12” to “B16”,
thereof whenever the right as may be Appendix 5.

§§ X126.5
08.12.31
(3) The applicant bank after the issuance (f) The conditions in Items “(3)(a)”,
of redeemable shares shall comply with the “(3)(b)”, “(3)(c)” and “(3)(d)” above shall
following: be incorporated in the certificates of stock.
(a) Redemption of shares shall be (g) Shares issued with the replacement
allowed at the specific dates or periods fixed requirement upon redemption shall be
for redemption only upon prior approval of eligible as Upper Tier 2 capital for
the BSP and, where the conditions of the purposes of computing qualifying capital
issuance specifically state, only if the shares as provided in Subsec. X116.2. Shares
redeemed are replaced with at least an issued without such condition shall be
equivalent amount of newly paid-in shares eligible as Lower Tier 2 capital.
so that the total paid-in capital stock is b. Certification and report. The bank
maintained at the same level immediately shall submit within fifteen (15) days after
prior to redemption: Provided, That the every issuance of at least twenty percent (20%)
redemption shall not be earlier than five (5) of the redeemable shares whether issued in
years after the date of issuance: Provided, series or at one (1) time, a certification signed
further, That such redemption may not be by its President/Chairman under oath, stating
made where the bank is insolvent or if such that the requirements under Items “a(1)” and
redemption will cause insolvency, “a(2)” above, including all other conditions
impairment of capital or inability of the bank that the BSP may impose, have been
to meet its debts as they mature; complied with.
(b) A sinking fund for the redemption of The applicant bank shall, not later than
preferred shares is to be created upon their ten (10) days from the end of reference
issuance. This is to be effected by the year, submit a yearly report of issuances
transfer of free surplus to a restricted surplus of preferred shares to the appropriate
account. The fund shall not be available for department of the SES indicating therein
dividends. The guidelines for the the name/s of the subscriber/s, the date
establishment and administration/ the shares were issued and the number/
management of sinking fund for the amount of shares issued.
redemption of redeemable private preferred c. Sanctions. Any violation of the
shares are shown in Appendix 47. foregoing provisions shall be subject to
(c) The issuing bank shall not treat in the following sanctions:
any way redeemable preferred shares as time (1) On the bank:
deposit, deposit substitute or other form of (a) For failure to comply with Items
borrowings; “a(3)(a)” to “a(3)(d)” above:
(d) No dividend shall be declared or paid i. Suspension of branching privilege;
on redeemable shares in the absence of ii. Prohibition against granting of new
sufficient undivided profits, free surplus and unsecured loans to DOSRI;
approval of the BSP; iii. Prohibition against declaration of
(e) The issuing bank shall execute within dividends;
ten (10) days after the first issuance a Deed iv. Denial of access to BSP rediscounting
of Undertaking (see Appendix 42), to be facilities;
signed by its directors and principal v. Revocation of authority to accept
officers, binding them to comply with the government deposits and to handle
requisites and conditions set forth in Items government funds as a result of agency
“(a)” to “(d)” above; and agreements with the BIR, SSS, etc.

§§ X126.5 - X126.10
08.12.31
(b) For failure to infuse capital in an up to the time the certification was found
amount at least equivalent to amount of to be false, shall be imposed against the
redeemed shares as required in Item certifying officer.
“a(3)(a)”: (As amended by Circular No. 585 dated 15 October 2007)
i. Sanctions in Item “(a)” above;
ii. No new loans and investments, § X126.6 Stock options/warrants. A
except in government securities; bank may grant options/warrants to
iii. P1,000 fine per day until the subscribe at par to its capital stock:
required infusion is made. Provided, That:
(c) If the certification submitted by the a. Provisions authorizing such options
bank required in these guidelines is found warrants shall be embodied in its articles
to be false, suspension of authority to of incorporation and in its by-laws; and
issue preferred shares for one (1) year. b. Such options/warrants may be
(d) For failure to submit report of granted for a maximum period of three (3)
issuance of redeemable preferred shares, years from the date such options/warrants
a fine of P1,200 for UBs/KBs; P600 for become effective.
TBs; and P180 for RBs/Coop Banks per
day of default until the report is submitted. §§ X126.7 - X126.9 (Reserved)
(2) On the directors and officers:
(a) For violation of any of the terms of § X126.10 Dealings with
the Deed of Undertaking, the following stockholders and their related
shall be imposed against the officers and interests. Dealings of a bank with any
directors of the bank who signed the deed: of its stockholders and their related
i. First offense - A fine of P500 per day interests shall be upon terms not less
for each violation from the time the favorable to the bank than those offered
violation was committed or up to the time to others. Towards this end, every
the violation is corrected; natural person acquiring shares
ii. Second and subsequent offenses - cumulatively amounting to at least two
A fine of P5,000 per day from the time percent (2%) of the total subscribed
the violation was committed up to the time capital of a domestic bank must disclose
the violation is corrected. all relevant information on all persons
(b) If the certification submitted by the related to him within the fourth degree of
bank as required in these guidelines is consanguinity or affinity, whether
found to be false, a fine of P5,000 per day legitimate, illegitimate or common law as
from the time the certification was made well as corporations, partnership or
(Next Page is Part I - Page 55)

§§ 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. ceilings. Stockholdings in a TB shall be
exempt from the ownership ceilings
Sec. X127 (Reserved) prescribed under Subsec. X126.1 until
16 March 2005.
Sec. 1127 Shares of Stock of Universal/
Commercial Banks. The following § 2127.2 Preferred shares. Private
guidelines shall also govern shares of stock development banks may also issue
in UBs and KBs. ordinary preferred shares of stock to private
persons, other than the preferred stock
§ 1127.1 Limits on stockholdings in representing government counterpart
several banks. Stockholders affiliated to capital contribution: Provided, That said
each other through a common interest preferred stock sold to private persons shall
herein termed a business group or any be governed by the pertinent BSP
corporation or association majority or all regulations for preferred stock issued to
of the equity of which is owned by a private investors.
business group may not control more Preferred shares of stock of private
than one (1) KB nor more than one (1) development banks held by DBP/LBP and
UB or both. sold thereafter to private persons may, at
Any natural person or a family group, the option of the purchasers, be retained
who, together, with any corporation with the same rights as when such shares

§§ 2127.2 - 3127.3
09.12.31
of stock were held by DBP/LBP, or DBP or any government-owned or

converted at not less than par to common controlled bank or FI, which shall be
shares or to ordinary preferred shares of non-voting and preferred as to assets upon
the class issued to private shareholders. liquidation; and (c) preferred stock with
such rights, voting powers, preferences and
§§ 2127.3 - 2127.5 (Reserved) restrictions, as may be approved by the
Monetary Board. Preferred and common
Sec. 3127 Shares of Stock of Rural Banks stocks shall have a minimum par value of
and Cooperative Banks. The following one peso (P1.00) per share: Provided, That
rules shall govern stockholdings in RBs and starting fifteen (15) days after 17 June 2009
Coop Banks: (date of publication), RBs which have a par
value per share higher than P1.00 and
§ 3127.1 Moratorium on ownership choose to lower the par value of their shares
ceiling. Individual stockholdings in RBs in of stock will be required to undertake the
excess of the forty percent (40%) ceiling necessary steps and secure attendant
as of 02 April 2002 and as provided in approvals from the BOD and stockholders
Section 11 of R.A. No. 8791 may be of the banks involved as well as from
retained: Provided, That such excess relevant regulatory agencies to ensure that
stockholdings were approved by the the reduction in par value shall not result
Monetary Board: Provided, further, That to a dilution in the percentage holdings of
such stockholdings shall not be further stockholders and that its effect shall not
increased, but may be reduced and once prejudice the rights of creditor. An RB may
reduced, shall not thereafter be increased not issue no-par value stock.
beyond the forty percent (40%) ceiling In the case of an acquisition plan of an
prescribed under said Section 11. RB already approved-in-principle by the
Any request for exemption from the Monetary Board where the shares of stock
prescribed ownership ceilings of individual/ of the target RB are at a par value per share
non-bank/corporate stockholdings shall be higher than P1.00, the acquiring bank may
submitted to the Monetary Board for request from the BSP the incentive to value
approval through the appropriate the shares of stock of the to-be-acquired RB
department of the SES and the exemption at the minimum par value of P1.00:
shall be reflected in the required report on Provided, That the acquiring bank will be
stock transactions. In cases where responsible for securing the necessary
unsubscribed shares of stock are sold to any approvals from its BOD and stockholders
person other than the existing stockholders, as well as from the BSP and the SEC
the bank’s corporate secretary shall execute pursuant to Section 14 of R.A. No. 8791
a certificate under oath that all the pertinent and Section 38 of the Corporation Code of
requirements of the Corporation Code on a the Philippines.
valid stock transfer/subscriptions have been (As amended by Circular No. 663 dated 10 September 2009)
complied with.
§ 3127.3 Limits on stockholdings in
§ 3127.2 Government-held shares several rural banks. Any individual
The articles of incorporation of RBs or the and/or his wholly or majority-owned
articles of cooperation of Coop Banks corporation or non-bank corporations may
shall provide for: (a) common stock with the own up to 100% of the voting stock in
power to vote; (b) preferred stock to three (3) RBs: Provided, That the individual
represent the counterpart capital of the LBP, and/or its subsidiary/ies, may thereafter

§§ 3127.3 - X136.1
08.12.31
own shares in any number of other RBs issued, duly signed by the president, the
only to such an extent as would not enable corporate secretary, and a majority of the
this group of investors to elect by virtue of board of directors. The bank shall submit
its shareholdings a director of each copies of such certificate and the amended
additional RB. articles of incorporation to the BSP for the
issuance of a certificate of authority for the
§ 3127.4 Convertibility of preferred purpose of registering the amended
stock to common stock. RBs may convert articles with the SEC.
their unissued preferred shares into
common stock. § 3127.5 Equity investment by holding
In the case of sale by the DBP, LBP or corporations. With the exception of
any government-owned or controlled bank shareholdings of non-bank corporations in the
or financial institution of preferred stock to equities in RBs as provided for under Section
private persons, such stock may be 11 of R.A. No. 8791, and of Filipino-
converted into common stock: Provided, controlled domestic banks, the capital stock
That pending amendment of the bank’s of any RB shall be fully owned and held
articles of incorporation, if necessary for directly or indirectly by citizens of the
the purpose of reflecting the conversion, Philippines or corporations, associations or
the transfer shall be recorded by the bank cooperatives qualified under Philippine laws
in its stock and transfer book and such to own and hold such capital stock.
shareholders shall thereafter enjoy all the The equity investment of any
rights and privileges appurtenant to the non-bank corporation in any RB shall not
converted stock. The certificates for the exceed forty percent (40%) of the voting
government preferred stocks so stock of such RB.
transferred shall be surrendered and A holding corporation for purposes of
cancelled and the corresponding common this Subsection shall refer to a corporation
stock certificates shall be issued. primarily organized to hold equities in RBs.
The corporate secretary of the bank
shall submit to the appropriate department Secs. X128 - X135 (Reserved)
of the SES and the SEC a report of every
transfer of preferred stock from the LBP, Sec. X136 Dividends. Pursuant to Section
DBP or any government-owned or 57 of R.A. No. 8791, no bank shall
controlled bank or financial institution to declare dividends greater than its
private shareholders within five (5) accumulated net profits then on hand,
banking days from the date of such deducting therefrom its losses and bad
transfer. debts. Neither shall the bank declare
When all the preferred shares of stocks dividends if, at the time of declaration,
held by the LBP, DBP or any government- it has not complied with the provisions
owned or controlled bank or financial of Subsec. X136.2.
institution have been sold to private
shareholders, the bank’s articles of § X136.1 Definitions. For purposes of
incorporation shall be amended to reflect this Section, the following definitions shall
the conversion, if any, of the preferred apply:
shares of stock into common stock. a. Bad debts - shall include any debt
For this purpose, a certificate that all on which interest is past due for a period
preferred shares have been sold and of six (6) months, unless it is well secured
transferred to private shareholders shall be and in process of collection.

§§ X136.1 - X136.2
08.12.31
A loan payable in installments with an automatically be classified as bad debts

automatic acceleration clause shall be unless judicial proceedings are instituted.
considered a bad debt within the The debt shall continue to be
contemplation of this Subsection where considered in process of collection during
installments or amortizations have the pendency of the judicial proceedings.
become past due for a period of six (6) When judgment against the debtor has
months, unless the loan is well secured and been obtained, the bank must be active in
in process of collection. For a loan payable enforcing the judgment for the debt to
in installment without an acceleration continue to be considered in process of
clause, only the installments or collection.
amortizations that have become past due
for a period of six (6) months and which § X136.2 Requirements on the
are not well secured and in the process of declaration of dividends. At the time of
collection shall be considered bad debts declaration, banks shall have complied
within the contemplation of this Section. with the following:
b. Well secured - A debt shall be a. Clearing account with the BSP is
considered well secured (or fully secured), not overdrawn;
if it is covered by collateral in the form of a b. Liquidity floor requirement for
duly constituted mortgage, pledge, or lien government funds;
on real or personal properties, including c. Minimum capitalization requirement
securities, having a loan value sufficient to and risk-based capital ratio;
discharge the debt in full, including accrued d. Prescribed EFCDU/FCDU cover
interest and other pertinent fees and consisting of:
expenses. (1) Thirty percent (30%) liquidity
c. In process of collection - A debt due cover; and
to a bank shall be considered in process of (2) 100% asset cover.
collection when it is the subject of e. Statutory and liquidity reserves
continuing extrajudicial or judicial requirement;
proceedings aimed towards its full f. No past due loans or
settlement or liquidation or otherwise to accommodations with the BSP or with any
place it in current status. institution;
The extrajudicial proceedings, such as g. No net losses from operations in any
the writing of collection or demand letters, one (1) of the two (2) fiscal years
must have been initiated by the bank and/ immediately preceding the date of
or its lawyers before the interest or dividend declaration;
installments or amortizations on the debt h. Has not committed any of the
have become past due and unpaid for a following major violations:
period of six (6) months. (1) Loans and other credit
The debt shall continue to be considered accommodations and guarantees granted
in process of collection for a period of six (6) in excess of the single borrower’s limit;
months counted from date of the first (2) Loans and other credit
collection or demand letter and if, within this accommodations granted/extended in
period, the debtor fails to make a payment excess of the ceilings on accommodations
of at least twenty percent (20%) of the to DOSRI;
outstanding balance of the principal on his (3) Unsafe and unsound banking
account, plus all interest which may have practice as defined under existing BSP
accrued thereon, the same shall regulations;

§§ X136.2 - X136.5
08.12.31
(4) Equity investments in excess of the e. Accrued interest as required to be

prescribed ceilings; excluded pursuant to Item “d” of Subsec.
(5) Investments in real estate, bank X305.4, net of booked valuation reserves
premises and equipment in excess of on accrued interest receivable or
prescribed ceilings; allowance for uncollectible interest on
(6) Major violations/exceptions cited loans; and
in the previous examination not duly acted f. Foreign exchange profit arising
upon or not yet corrected; from revaluation of foreign exchange
(7) Transactions or activities without denominated accounts.
prior approval or necessary license from For purposes of this Subsec., any
the BSP such as, but not limited to, balance of Paid-in Surplus account may
derivatives, trust and e-banking; be included in the amount available for
(8) Refusal to permit examination into stock dividends.
the affairs of the institution or any willful
making of a false or misleading statement § X136.4 Reporting and verification
to the Monetary Board or to the appropriate Declaration of dividends shall be reported
department of the SES; and by the bank concerned to the appropriate
(9) Failure to comply with the capital department of the SES in the prescribed
build-up program approved by the form within ten (10) business days after
Monetary Board. date of declaration.
On the other hand, banks which have Pending verification of abovementioned
committed any of the major violations report by the appropriate department of the
under Item “h” above may only be SES, the bank concerned shall not make
allowed to declare dividends by the any announcement or communication on
Monetary Board upon recommendation of the declaration of dividends nor shall any
the appropriate department of the SES that payment be made thereon.
the bank has corrected the major violation/ Banks, however, whose shares are
s that it has committed. listed with any domestic stock exchange
(As amended by Circular No. 571 dated 21 June 2007) may declare dividends and give immediate
notice of such declaration to the SEC and
§ X136.3 Net amount available for the stock exchanges, in compliance with
dividends. The net amount available for pertinent rules of SEC: Provided, That no
dividends shall be the amount of record date is fixed for such dividend
unrestricted or free earned surplus and pending verification of the report on such
undivided profits less: declaration by the appropriate department
a. Bad debts against which valuation of the SES.
reserves are not required by the BSP to be In any case, the declaration may be
set up; announced and the dividends paid, if after
b. Unbooked valuation reserves, and thirty (30) banking days from the date the
other unbooked capital adjustments report required herein shall have been
required by the BSP, whether or not received by the BSP, no advice against such
allowed to be set up on a staggered basis; declaration has been received by the bank
c. Deferred income tax; concerned.
d. Accumulated profits not yet received
but already recorded by a bank representing § X136.5 Recording of dividends. The
its share in profits of its subsidiaries under liability for dividends declared shall be
the equity method of accounting; taken up in the books upon receipt of

§§ X136.5 - 3137
08.12.31
BSP approval thereof, or if no such approval Sec. 2137 (Reserved)

is received, after thirty (30) banking/
business days from the date the required Sec. 3137 Limitations/Amount Available
report on dividend declaration was on Dividends Declared by Rural Banks
received by the appropriate department of and Cooperative Banks. The following
the SES , whichever comes earlier. A rules shall also govern the declaration of
memorandum entry may be made to dividends by RBs and Coop Banks.
record the dividend declaration on the date a. RBs. In addition to the
of approval by the board of directors and requirements prescribed in Sec. X136,
for full disclosure purposes, the dividends an RB may declare cash dividends only
declared may be disclosed in the financial if the amount of its reserve for retirement
statements by means of a footnote which of government preferred stock is at least
should include a statement to the effect that equal to the amount which should have
the dividend declaration is subject to been accumulated had the bank
review by the BSP. transferred annually to the reserve
Dividends of all kinds, whether on account from its undivided profits an
common or on preferred shares of stock, amount equal to at least an average of
should not be treated as interest expense, one-tenth (1/10) of the total amount of
considering that as a general policy, only preferred stock.
irredeemable stock may be issued by banks. In no case shall cash dividends be
declared whenever any of the following
§ X136.6 Issuance of fractional shares circumstances is present:
Whenever the declaration of stock (i) Arrearages in its obligations with
dividend results in the issuance of fractional the BSP amount to P1.0 million or more
shares, banks may observe the following unless covered by an approved plan of
guidelines: payment which is being fully complied
a. The amount corresponding to the with: Provided, however, That cash
fraction should be given in the form of cash dividends shall not exceed ten percent
dividend; and (10%) per annum; or
b. The certificate of stock issued (ii) Past due loans comprise twenty-five
should be in whole numbers, and the percent (25%) or more of the total loan
fractional shares shall be issued in the form portfolio at any time during the last six (6)
of scrip certificates. In no case shall the months prior to the dividend declaration.
certificate of stock be issued including such b. Coop Banks
fractional share. The scrip certificate is (1) Interest on share capital -
temporary in nature and should be (a) Interest on share capital shall be
redeemed in cash when the bank is in a declared only upon compliance with the
position to do so, or stockholders holding requirements prescribed under
such scrip certificates may negotiate with Item “a” above.
other stockholders for the purchase or sale (b) Government preferred shares shall
of such shares to convert them into full be entitled to interest as enumerated in
shares, subject to the limitations on Subsec. 3137.1: Provided, That no
stockholdings as provided by law. cumulative interest shall be allowed for any
kind or class of share issued by the Coop
Sec. X137 (Reserved) Bank.
Unless otherwise provided for in the
Sec. 1137 (Reserved) by-laws of the Coop Bank, the share capital

§§ 3137 - 3137.1
08.12.31
shall earn interest at the rate computed as non-member patrons only upon request and
follows: presentation of evidence of the amount of
its patronage. The amount so allocated shall
Rate of Interest = X (Net Surplus less be credited to such patron toward payment
Statutory Reserves) ÷ of the minimum capital contribution for
(Total Average Share Month)
where:
membership. When a sum equal to this
(i) “X“ shall be a percentage to be amount has accumulated at any time within
determined by the board of directors a period specified in the by-laws, such patron
allocated for interest on share capital; shall be deemed and become a member of
and
the Coop Bank if it so agrees or requests
(ii) “Statutory Reserves” shall refer to Article
87 of R.A. No. 6938. and complies with the provisions of the by
laws for admission to membership; and
No allocation of interest on share capital (iv) If within any period of time specified
shall be made without the approval of the in the by-laws, any subscriber who has not
general assembly which may increase or fully paid his subscribed share capital or any
decrease any or both. non-member patron which has accumulated
(2) Patronage refund - the sum necessary for membership but does
(a) The amount allocated for patronage not request nor agree to become a member
refund shall not be less than thirty percent or fails to comply with the provision of the
(30%) of the net surplus after deducting the by-laws for admission to membership, the
statutory reserves based on the principle of amount so accumulated or credited to their
equity; account together with any part of the general
(b) The rate of patronage refund shall fund for non-member patrons shall be
not be more than twice the rate of interest credited to the reserve fund or to the
on share capital; education and training fund of the Coop
(c) The sum allocated for patronage Bank.
refunds shall be made available at the same
rate to all cooperative patrons of the Coop § 3137.1 Dividends on government
Bank in proportion to their individual shares
patronage: Provided, That - a. Held prior to 09 June 1992. Whenever
(i) In the case of a cooperative member dividends of not less than fourteen percent
patron with paid-up share capital (14%) are declared on common stock,
contribution, its proportionate amount of government preferred stock shall be entitled
patronage refund shall be paid unless it to a cash dividend not to exceed two percent
agrees to credit the amount to its account (2%) of total outstanding preferred stock.
as additional share capital contribution; Should the dividends declared on common
(ii) In the case of a cooperative member stock be less than fourteen percent (14%),
patron with unpaid share capital the dividend on preferred stock shall be
contribution, its proportionate amount of proportionately reduced.
patronage refund shall be credited to its b. Held on or after 09 June 1992. Shares
share capital contribution; held by the LBP, DBP, or by any
(iii) In the case of a non-member patron, government-owned or-controlled bank or FI
its proportionate amount of patronage shall share in dividend distributions from
refund shall be set aside in a general fund the date of issuance in the amount of four
for such patrons and shall be allocated to percent (4%) on the first and second years;

§§ 3137.1 - X141.1
10.12.31
six percent (6%) on the third and fourth or consolidation, the number of directors
years; eight percent (8%) on the fifth and may be increased up to twenty-one (21).
sixth years; ten percent (10%) on the seventh An independent director shall mean a
and eighth years; and twelve percent (12%) person who -
on the ninth to the fifteenth years, which (1) Is not or has not been an officer or
shall be cumulative: Provided, That the RB employee of the bank, its subsidiaries or
and the government-owned or-controlled affiliates or related interests during the past
bank are not precluded from entering into three (3) years counted from the date of his
an agreement providing for rates of election;
dividends other than those prescribed by (2) Is not a director or officer of the
law. related companies of the institution’s
majority stockholder;
Secs. X138 - X140 (Reserved) (3) Is not a majority stockholder of the
institution, any of its related companies, or
H. DIRECTORS, OFFICERS AND of its majority shareholders;
EMPLOYEES (4) Is not a relative within the fourth
degree of consanguinity or affinity,
Sec. X141 Definition and Qualifications of legitimate or common-law of any director,
Directors; Responsibilities and Duties of officer or majority shareholder of the bank
Board of Directors. For purposes of this or any of its related companies;
Section, the following shall be the definition (5) Is not acting as a nominee or
and qualifications, responsibilities and representative of any director or substantial
duties of directors and board of directors, shareholder of the bank, any of its related
respectively. companies or any of its substantial
This Section shall also apply to Coop shareholders; and
Banks. (6) Is not retained as professional
(As amended by Circular No. 682 dated 15 February 2010) adviser, consultant, agent or counsel of the
institution, any of its related companies or
§ X141.1 Definition/limits any of its substantial shareholders, either in
a. Definition of directors. Directors shall his personal capacity or through his firm; is
include: independent of management and free from
(1) directors who are named as such in any business or other relationship, has not
the articles of incorporation; engaged and does not engage in any
(2) directors duly elected in subsequent transaction with the institution or with any
meetings of the stockholders; and of its related companies or with any of its
(3) those elected to fill vacancies in the substantial shareholders, whether by
board of directors. himself or with other persons or through a
b. Limits on the number of the members firm of which he is a partner or a company
of the board of directors. Pursuant to of which he is a director or substantial
Sections 15 and 17 of R.A. No. 8791, there shareholder, other than transactions which
shall be at least five (5), and a maximum of are conducted at arms length and could not
fifteen (15) members of the board of materially interfere with or influence the
directors of a bank at least two (2) of whom exercise of his judgment
shall be independent directors: Provided, An independent director of a bank can
That in case of a bank/QB/trust entity merger be elected as an independent director of its:

§ X141.1
08.12.31
(a) parent or holding company; (b) subsidiary operating policies of the enterprise under a
or affiliate; (c) substantial shareholder; or statute or an agreement; or
(d) other related companies, or vice-versa: iii. power to appoint or remove the
Provided, That he is not a substantial majority of the members of the board of
shareholder of the bank or any of the said directors or equivalent governing body; or
concerned entities. iv. power to cast the majority votes at
The foregoing terms and phrases used meetings of the board of directors or
in Items “(1) to (6)” of this Section shall have equivalent governing body; or
the following meaning: v. any other arrangement similar to any
(a) Parent is a corporation which has of the above.
control over another corporation directly or (f) Related company means another
indirectly through one (1) or more company which is: (a) its parent or holding
intermediaries. company; (b) its subsidiary or affiliate; or
(b) Subsidiary means a corporation (c) a corporation where a bank or its majority
more than fifty percent (50%) of the voting stockholder own such number of shares that
stock of which is owned or controlled will allow/enable him to elect at least one
directly or indirectly through one (1) or more (1) member of the board of directors or a
intermediaries by a bank. partnership where such majority
(c) Affiliate is a juridical person that stockholder is a partner.
directly or indirectly, through one (1) or (g) Substantial or major shareholder
more intermediaries, is controlled by, or is shall mean a person, whether natural or
under common control with the bank or its juridical, owning such number of shares
affiliates. that will allow him to elect at least one (1)
(d) Related interests as defined under member of the board of directors of a bank
Sections 12 and 13 of R.A. No. 8791 shall or who is directly or indirectly the registered
mean individuals related to each other or beneficial owner of more than ten
within the fourth degree of consanguinity percent (10%) of any class of its equity
or affinity, legitimate or common law, and security.
two (2) or more corporations owned or (h) Majority stockholder or majority
controlled by a single individual or by the shareholder means a person, whether
same family group or the same group of natural or juridical, owning more than fifty
persons. percent (50%) of the voting stock of a bank.
(e) Control exists when the parent Non-Filipino citizens may become
owns directly or indirectly through members of the board of directors of a bank
subsidiaries more than one-half of the voting to the extent of the foreign participation in
power of an enterprise unless, in exceptional the equity of said bank: Provided, That
circumstance, it can be clearly demonstrated pursuant to Section 23 of the Corporation
that such ownership does not constitute Code of the Philippines (BP Blg. 68), a
control. Control may also exist even when majority of the directors must be residents
ownership is one-half or less of the voting of the Philippines.
power of an enterprise when there is: The meetings of the board of directors
i. power over more than one-half of may be conducted through modern
the voting rights by virtue of an agreement technologies such as, but not limited to,
with other stockholders; or teleconferencing and video conferencing as
ii. power to govern the financial and long as the director who is taking part in

§§ X141.1 - X141.3
10.12.31
said meetings can actively participate in the integrity/probity, competence, education,

deliberations on matters taken up therein: diligence and experience/training.
Provided, That every member of the board In the case of Coop Bank, at least one
shall participate in at least fifty percent (50%) (1) member of its board of directors shall
and shall physically attend at least twenty- have a one (1) year experience in banking.
five percent (25%) of all board meetings The foregoing qualifications for directors
every year: Provided, further, That in the shall be in addition to those required or
case of a director who is unable to prescribed under R.A. No. 8791 and other
physically attend or participate in board existing applicable laws and regulations.
meetings via teleconferencing or video (As amended by Circular No. 682 dated 15 February 2010)
conferencing, the corporate secretary shall
execute a notarized certification attesting that § X141.3 Powers/responsibilities and
said director was given the agenda materials duties of directors
prior to the meeting and that his/her a. Powers of the board of directors.
comments/decisions thereon were The corporate powers of a bank shall be
submitted for deliberation/discussion and exercised, its business conducted and all
were taken up in the actual board meeting, its property shall be controlled and held by
and that the submission of said certification its board of directors. The powers of the
shall be considered compliance with the board of directors as conferred by law are
required fifty percent (50%) minimum original and cannot be revoked by the
attendance in board meetings. stockholders. The directors hold their office
charged with the duty to act for the bank in
§ X141.2 Qualifications of a director accordance with their best judgment.
A director shall have the following b. General responsibility of the board
minimum qualifications: of directors. The position of a bank
a. He shall be at least twenty-five (25) director is a position of trust. A director
years of age at the time of his election or assumes certain responsibilities to
appointment; different constituencies or stakeholders,
b. He shall be at least a college i.e., the bank itself, its stockholders, its
graduate or have at least five (5) years depositors and other creditors, its
experience in business; management and employees, and the
c. He must have attended a special public at large. These constituencies or
seminar on corporate governance for board stakeholders have the right to expect that
of directors conducted or accredited by the the institution is being run in a prudent
BSP: Provided, That incumbent directors as and sound manner.
well as those elected after 17 September The board of directors is primarily
2001 must attend said seminar on or before responsible for the corporate governance
30 June 2003 or within a period of six (6) of the bank. To ensure good governance
months from date of election for those of the bank, the board of directors should
elected after 30 June 2003, as the case may establish strategic objectives, policies and
be; and procedures that will guide and direct the
d. He must be fit and proper for the activities of the bank and the means to attain
position of a director of the bank. In the same as well as the mechanism for
determining whether a person is fit and monitoring management’s performance.
proper for the position of a director, the While the management of the day-to-day
following matters must be considered: affairs of the institution is the responsibility

§§ X141.3
08.12.31
of the management team, the board of establish adequate selection process for
directors is, however, responsible for all personnel. It is the primary
monitoring and overseeing management responsibility of the board of directors to
action. appoint competent management team at
c. Specific duties and responsibilities all times. The board of directors should
of the board of directors apply fit and proper standards on key
(1) To select and appoint officers who personnel. Integrity, technical expertise and
are qualified to administer the bank’s experience in the institution’s business,
affairs effectively and soundly and to either current or planned, should
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§ X141.3
08.12.31
be the key considerations in the (5) To prescribe a clear assignment of

selection process. And because mutual responsibilities and decision-making
trust and a close working relationship are authorities, incorporating a hierarchy of
important, the board’s choice should required approvals from individuals to the
share its general operating philosophy board of directors. The board should establish
and vision for the institution. The board in writing the limits of the discretionary
of directors shall establish an appropriate powers of each officer, committee,
compensation package for all personnel sub-committee and such other group for the
which shall be consistent with the purpose of lending, investing or committing
interest of all stakeholders. the bank to any financial undertaking or
(2) To establish objectives and draw exposure to risk at any time. The board
up a business strategy for achieving should have a schedule of matters and
them. Consistent with the institution’s authorities reserved to it for decision, such
objectives, business plans should be as: major capital expenditures, equity
established to direct its on-going investments and divestments.
activities. The board should ensure that (6) To effectively supervise the bank’s
performance against plan is regularly affairs. The board of directors should
reviewed, with corrective action taken establish a system of checks and balances
as needed. which applies in the first instance to the
(3) To conduct the affairs of the board itself. Among the members of the
institution with high degree of integrity. board, an effective system of checks and
Since reputation is a very valuable asset, balances must exist. The system should also
it is in the institution’s best interest that in provide a mechanism for effective check
dealings with the public, it observes a high and control by the board over the chief
standard of integrity. The board of directors executive officer and key managers and by
should prescribe corporate values, codes the latter over the line officers of the bank.
of conduct and other standards of (7) To monitor, assess and control the
appropriate behaviour for itself, the senior performance of management. The board
management and other employees. shall put in place an appropriate reporting
Among others, activities and transactions system so that it is provided with relevant
that could result or potentially result in and timely information to be able to
conflict of interest, personal gain at the effectively assess the performance of
expense of the institution, or unethical management. For this purpose, it may
conduct shall be strictly prohibited. It constitute a governance committee.
should provide policies that will prevent (8) To adopt and maintain adequate
the use of the facilities of the bank in risk management policy. The board of
furtherance of criminal and other illegal directors shall be responsible for the
activities. formulation and maintenance of written
(4) To establish and ensure policies and procedures relating to the
compliance with sound written policies. management of risks throughout the
The board should adopt written policies on institution. The risk management policy
all major business activities, i.e., shall include:
investments, loans, asset and liability (a) a comprehensive risk management
management, business planning and approach;
budgeting. A mechanism to ensure (b) a detailed structure of limits,
compliance with said policies shall also be guidelines and other parameters used to
provided. govern risk-taking;

§ X141.3
08.12.31
(c) a clear delineation of lines of institution’s internal controls, including

responsibilities for managing risk; financial, operational and compliance
(d) an adequate system for measuring controls, and risk management, is
risk; and conducted at least annually.
(e) effective internal controls and a The audit committee shall establish and
comprehensive risk-reporting process. maintain mechanisms by which officers
The board may constitute a committee and staff may, in confidence, raise concerns
for this purpose. about possible improprieties or
(9) To constitute the following malpractices in matters of financial
committees:1 reporting, internal control, auditing or other
(a) Audit committee. The audit issues to persons or entities that have the
committee shall be composed of members power to take corrective action. It shall
of the board of directors, at least two (2) of ensure that arrangements are in place for
whom shall be independent directors, the independent investigation, appropriate
including the chairman, preferably with follow-up action, and subsequent
accounting, auditing, or related financial resolution of complaints.
management expertise or experience. The (b) Corporate governance committee.
audit committee provides oversight of the The corporate governance committee
institution’s financial reporting and control shall assist the board of directors in
and internal and external audit functions. fulfilling its corporate governance
It shall be responsible for the setting up of responsibilities. It shall review and
the internal audit department and for the evaluate the qualifications of all persons
appointment of the internal auditor as well nominated to the board as well as those
as the independent external auditor who nominated to other positions requiring
shall both report directly to the audit appointment by the board of directors.
committee. It shall monitor and evaluate The committee shall be composed of at
the adequacy and effectiveness of the least three (3) members of the board of
internal control system. directors, two (2) of whom shall be
Upon setting up the audit committee, independent directors.
the board of directors shall draw up a The corporate governance committee
written charter or terms of reference which shall have a written charter that describes
clearly sets out the audit committee’s the duties and responsibilities of its
authority and duties, as well as the reporting members. This charter shall be approved
relationship with the board of directors. by the board of directors and reviewed
This charter shall be approved by the board and updated at least annually.
of directors and reviewed and updated The committee shall be responsible
periodically. for ensuring the board’s effectiveness and
The audit committee shall have explicit due observance of corporate governance
authority to investigate any matter within principles and guidelines. It shall oversee
its terms of reference, full access to and the periodic performance evaluation of
cooperation by management and full the board and its committees and
discretion to invite any director or executive management; and shall also
executive officer to attend its meetings, conduct an annual self-evaluation of its
and adequate resources to enable it to performance. The committee shall also
effectively discharge its functions. decide whether or not a director is able
The audit committee shall ensure that to and has been adequately carrying out
a review of the effectiveness of the his/her duties as director bearing in mind
1
Mandatory for all banks effective 01 January 2005 under Circular 456 dated 04 October 2004

§ X141.3
08.12.31
the director’s contribution and performance of directors and reviewed and refined
(e.g., competence, candor, attendance, periodically.
preparedness and participation). Internal The core responsibility of the risk
guidelines shall be adopted that address management committee are:
the competing time commitments that are (i) Identify and evaluate exposures.
faced when directors serve on multiple The committee shall assess the probability
boards. of each risk becoming reality and shall
The committee shall make estimate its possible effect and cost. Priority
recommendations to the board regarding areas of concern are those risks that are
the continuing education of directors, the most likely to occur and are costly when
assignment to board committees, they happen.
succession plan for the board members and (ii) Develop risk management
senior officers, and their remuneration strategies. The risk management
commensurate with corporate and committee shall develop a written plan
individual performance. defining the strategies for managing and
The corporate governance committee controlling the major risks. It shall identify
shall decide the manner by which the practical strategies to reduce the chance
board’s performance may be evaluated of harm and failure or minimize losses if
and propose an objective performance the risk becomes real.
criteria approved by the board. Such (iii) Implement the risk management
performance indicators shall address how plan. The risk management committee
the board has enhanced long term shall communicate the risk management
shareholders’ value. plan and loss control procedures to
(c) Risk management committee. affected parties. The committee shall
The risk management committee shall conduct regular discussions on the
be responsible for the development and institution’s current risk exposure based
oversight of the institution’s risk on regular management reports and
management program. The committee direct concerned units or offices on how
shall be composed of at least three (3) to reduce these risks.
members of the board of directors who (iv) Review and revise the plan as
shall possess a range of expertise as well needed. The committee shall evaluate the
as adequate knowledge of the risk management plan to ensure its
institution’s risk exposures to be able to continued relevancy, comprehensiveness,
develop appropriate strategies for and effectiveness. It shall revisit strategies,
preventing losses and minimizing the look for emerging or changing exposures,
impact of losses when they occur. It shall and stay abreast of developments that affect
oversee the system of limits to the likelihood of harm or loss. The
discretionary authority that the board committee shall report regularly to the
delegates to management, ensure that board of directors the entity’s over-all risk
the system remains effective, that the exposure, actions taken to reduce the risks,
limits are observed and that immediate and recommend further action or plans as
corrective actions are taken whenever necessary.
limits are breached. (d) (Deleted by Cir. 456 dated
The risk management committee shall 04 October 2004)
have a written charter that defines the (10)To meet regularly. To properly
duties and responsibilities of its members. discharge its function, the board of directors
The charter shall be approved by the board shall meet regularly. Independent views

§ X141.3
08.12.31
in board meetings shall be given full appropriate authority and provided with
consideration and all such meetings shall appropriate support and resources. It
be duly minuted. may also constitute a compliance
(11) To keep the individual members committee.
of the board and the shareholders d. Specific duties and responsibilities
informed. It is the duty of the board of a director
to present to all its members and to (1) To conduct fair business
the shareholders a balanced and transactions with the bank and to ensure
understandable assessment of the bank’s that personal interest does not bias board
performance and financial condition. It decisions. Directors should, whenever
should also provide appropriate possible, avoid situations that would give
information that flows internally and to the rise to a conflict of interest. If transactions
public. All members of the board shall with the institution cannot be avoided, it
have reasonable access to any information should be done in the regular course of
about the institution. business and upon terms not less favorable
(12) To ensure that the bank has to the institution than those offered to
beneficial influence on the economy. The others. The basic principle to be observed
board has a continuing responsibility to is that a director should not use his position
provide those services and facilities to make profit or to acquire benefit or
which will be supportive of the national advantage for himself and/or his related
economy. interests. He should avoid situations that
(13) To assess at least annually its would compromise his impartiality.
performance and effectiveness as a (2) To act honestly and in good faith,
body, as well as its various committees, with loyalty and in the best interest of the
the chief executive officer and the bank institution, its stockholders, regardless of
itself. The composition of the board shall the amount of their stockholdings, and
also be reviewed regularly with the end other stakeholders such as its depositors,
in view of having a balanced investors, borrowers, other clients and the
membership. Towards this end, a system general public. A director must always
and procedure for evaluation shall be act in good faith, with the care which an
adopted which may include, but not ordinarily prudent man would exercise
limited to, the setting of benchmark and under similar circumstances. While a
peer group analysis. director should always strive to promote
(14) To keep their authority within the the interest of all stockholders, he should
powers of the institution as prescribed in also give due regard to the rights and
the articles of incorporation, charter, by- interests of other stakeholders.
laws and in existing laws, rules and (3) To devote time and attention
regulations. To conduct and maintain the necessary to properly discharge their
affairs of the institution within the scope duties and responsibilities. Directors
of its authority as prescribed in its charter should devote sufficient time to familiarize
and in existing laws, rules and themselves with the institution’s
regulations, the board shall appoint a business. They must be constantly aware
compliance officer who shall be of the institution’s condition and be
responsible for coordinating, monitoring knowledgeable enough to contribute
and facilitating compliance with existing meaningfully to the board’s work. They
laws, rules and regulations. The must attend and actively participate in
compliance officer shall be vested with board and committee meetings, request

§§ X141.3 - X141.9
11.12.31
and review meeting materials, ask questions, Confirming Authority Position Level
and request explanations. If a person cannot a. Monetary Board Directors, senior vice
president and above
give sufficient time and attention to the of UBs and KBs, as
affairs of the institution, he should neither well as the directors,
accept his nomination nor run for election president, chief
as member of the board. executive officer,
chief operating
(4) To act judiciously. Before deciding officer, senior vice
on any matter brought before the BOD, president or equivalent
every director should thoroughly evaluate rank of TBs, IBs, RBs
the issues, ask questions and seek and Coop Banks
clarifications when necessary. with total assets of at
least P1.0 billion.
(5) To exercise independent judgment. b. A Committee to Directors, senior
A director should view each problem/ be composed of: vice president and
situation objectively. When a disagreement · The Deputy above or equivalent
with others occurs, he should carefully Governor - SES rank of TBs, IBs, RBs
evaluate the situation and state his position. · Managing and Coop Banks
Directors of SE I whose election
He should not be afraid to take a position and II appointment is not
even though it might be unpopular. · Directors of the subject to confirmation
Corollarily, he should support plans and department by the Monetary
ideas that he thinks will be beneficial to the of the SES Board.
institution. concerned
(6) To have a working knowledge of
the statutory and regulatory requirements The election/appointment of all
affecting the institution, including the incumbent directors and officers of all
content of its articles of incorporation and types of banks as of 17 September 2001
by-laws, the requirements of the BSP and not previously approved/confirmed by the
where applicable, the requirements of other Monetary Board shall be submitted to the
regulatory agencies. A director should also BSP through the appropriate department
keep himself informed of the industry of the SES for confirmation.
developments and business trends in The documentary requirements for the
order to safeguard the institution’s confirmation of the election/appointment
competitiveness. of the members of the board of directors/
(7) To observe confidentiality. senior vice presidents and above
Directors must observe the confidentiality or equivalent ranks are listed in
of non-public information acquired by Appendix 98.
reason of their position as directors. They (CL-2011-045 dated 01 July 2011)
may not disclose said information to any other
person without the authority of the board. § X141.5 Place of board of directors'
meeting. Banks shall include in their
§ X141.4 Confirmation of the election/ by-laws a provision that meetings of
appointments of directors and officers. The their board of directors shall be held only
election/appointment of directors and within the Philippines.
officers of banks shall be subject to
confirmation by the: §§ X141.6 - X141.8 (Reserved)

§§ X141.9 - X 142.2
10.12.31
§ X141.9 Reports required. Banks shall either through announcement, representation,

furnish all of their directors with a copy of publication or any kind of communication
the specific duties and responsibilities of the made by the bank: Provided, That a person
board of directors prescribed under Items holding the position of chairman or
“b” and “c” of Subsec. X141.3 within thirty (30) vice-chairman of the board or another position
banking days from 17 May 2001 in cases of in the board shall not be considered as an
incumbent directors and at the time of election officer unless the duties of his position in the
in cases of directors elected after such date. board include functions of management such
The directors concerned shall each be as those ordinarily performed by regular
required to acknowledge receipt of the officers: Provided, further, That members of a
copies of such specific duties and group or committee, including sub-groups or
responsibilities and shall certify that they sub-committees, whose duties include
fully understand the same. functions of management such as those
Copies of the acknowledgment and ordinarily performed by regular officers, and
certification herein required shall be are not purely recommendatory or advisory,
submitted in accordance with Appendix 6. shall likewise be considered as officers.
(As amended by Circular No. 562 dated 13 March 2007)
§ X141.10 Sanctions. Without prejudice
to the other sanctions prescribed under § X142.2 Qualifications of an officer
Section 37 of R.A. No. 7653 and to the An officer shall have the following minimum
provisions of Section 16 of R.A. No. 8791, qualifications:
any director of a bank who violates or fails a. He shall be at least twenty-one (21)
to observe and/or perform any of the above years of age; and
responsibilities and duties shall, for each b. He shall be at least a college graduate,
violation or offense, be penalized as follows: or have at least five (5) years experience in
banking or trust operations or related activities
For directors of Amount or in a field related to his position and
UBs/KBs P 30,000 responsibilities, or have undergone training
TBs/IBs 15,000 in banking or trust operations acceptable to
RBs/Coop Banks (national) 5,000 the appropriate department of the SES:
Coop Banks (local) 1,000 Provided, however, That trust officers shall
have at least five (5) years of actual experience
Sec. X142 Definition and Qualifications of in trust operations, or at least three (3) years of
Officers. For purposes of this Section, the actual experience in trust operations and
following shall be the definition and completed at least one (1) year training
qualification of officers. program in trust operations acceptable to the
This Section shall also apply to Coop Banks. BSP, or at least five (5) years of actual
(As amended by Circular No. 682 dated 15 February 2010) experience as officer of a bank or related
activities and completed at least one (1) year
§ X142.1 Definition of officers. Officers training program in trust operations acceptable
shall include the president, executive vice to the BSP; and
president, senior vice-president, vice president, c. He must be fit and proper for the
general manager, treasurer, secretary, trust position he is being proposed/appointed to.
officer and others mentioned as officers of the In determining whether a person is fit and
bank, or those whose duties as such are proper for a particular position, the following
defined in the by-laws, or are generally known matters must be considered: integrity/probity,
to be the officers of the bank (or any of its competence, education, diligence and
branches and offices other than the head office) experience/training.

§§X142.2 - X143.1
10.12.31
In the case of Coop Bank, the manager (1) Persons who have been convicted
must have actual banking experience by final judgment of a court for offenses
(at least manager or assistant manager). involving dishonesty or breach of trust such
The foregoing qualifications for officers as, but not limited to, estafa, embezzlement,
shall be in addition to those required or extortion, forgery, malversation, swindling,
prescribed under R.A. No. 8791 and other theft, robbery, falsification, bribery, violation
existing applicable laws and regulations. of B.P. Blg. 22, violation of Anti-Graft and
(As amended by Circular Nos. 682 dated 15 February 2010 and Corrupt Practices Act and prohibited acts
665 dated 04 September 2009) and transactions under Section 7 of R.A. No.
6713 (Code of Conduct and Ethical
§ X142.3 Appointment of officers Standards for Public Officials and
The appointment of officers of UBs/KBs/ Employees);
TBs with the rank of senior vice president (2) Persons who have been convicted
(SVP) and above, whether incumbent or by final judgment of a court sentencing them
proposed, shall not be subject to Monetary to serve a maximum term of imprisonment
Board approval but rather to Monetary of more than six (6) years;
Board confirmation. Appointment of officers (3) Persons who have been convicted
below the rank of SVP shall be subject by final judgment of the court for violation
neither to Monetary Board approval nor of banking laws, rules and regulations;
Monetary Board confirmation. (4) Persons who have been judicially
The appointment of abovementioned declared insolvent, spendthrift or
officers shall be deemed to have been incapacitated to contract;
confirmed by the BSP, if after sixty (60) (5) Directors, officers or employees of
banking days from receipt of the required closed banks who were found to be
reports, no advice against said appointment culpable for such institution’s closure as
has been received by the bank concerned. determined by the Monetary Board;
b. (As amended by Cir. 434 dated 04 (6) Directors and officers of banks found
October 2004) by the Monetary Board as administratively
liable for violation of banking laws, rules
Sec. X143 Disqualification of Directors and and regulations where a penalty of removal
Officers. The following regulations shall from office is imposed, and which finding
govern the disqualification of bank directors of the Monetary Board has become final and
and officers. executory; or
This Section shall also apply to Coop (7) Directors and officers of banks or any
Banks. person found by the Monetary Board to be
(As amended by Circular No. 682 dated 15 February 2010) unfit for the position of directors or officers
because they were found administratively
§ X143.1 Persons disqualified to liable by another government agency for
become directors. Without prejudice to violation of banking laws, rules and
specific provisions of law prescribing regulations or any offense/violation
disqualifications for directors, the following involving dishonesty or breach of trust, and
are disqualified from becoming directors: which finding of said government agency
a. Permanently disqualified has become final and executory.
Directors/Officers/employees b. Temporarily disqualified
permanently disqualified by the Monetary Directors/officers/employees
Board from holding a director position: disqualified by the Monetary Board from

§§ X143.1
10.12.31
holding a director position for a specific/ endorser or surety for loans from such FIs;
indefinite period of time. Included are: (ii) The spouse or child under the
(1) Persons who refuse to fully disclose parental authority of the director or officer;
the extent of their business interest or any (iii) Any person whose borrowings or
material information to the appropriate loan proceeds were credited to the account
department of the SES when required of, or used for the benefit of a director or
pursuant to a provision of law or of a officer;
circular, memorandum, rule or regulation (iv) A partnership of which a director
of the BSP. This disqualification shall be in or officer, or his/her spouse is the managing
effect as long as the refusal persists; partner or a general partner owning a
(2) Directors who have been absent or controlling interest in the partnership; and
who have not participated for whatever (v) A corporation, association or firm
reasons in more than fifty percent (50%) of wholly-owned or majority of the capital of
all meetings, both regular and special, of the which is owned by any or a group of
board of directors during their incumbency, persons mentioned in the foregoing Items
and directors who failed to physically attend “(i)”, “(ii)” and “(iv)”;
for whatever reasons in at least twenty-five This disqualification shall be in effect
percent (25%) of all board meetings in any as long as the delinquency persists.
year, except that when a notarized (4) Persons who have been convicted
certification executed by the corporate by a court for offenses involving dishonesty
secretary has been submitted attesting that or breach of trust such as, but not limited
said directors were given the agenda to, estafa, embezzlement, extortion, forgery,
materials prior to the meeting and that their malversation, swindling, theft, robbery,
comments/decisions thereon were falsification, bribery, violation of B.P. Blg.
submitted for deliberation/discussion and 22, violation of Anti-Graft and Corrupt
were taken up in the actual board meeting, Practices Act and prohibited acts and
said directors shall be considered present transactions under Section 7 of R.A. No.
in the board meeting. This disqualification 6713, violation of banking laws, rules and
applies only for purposes of the immediately regulations or those sentenced to serve a
succeeding election; maximum term of imprisonment of more
(3) Persons who are delinquent in the than six (6) years but whose conviction has
payment of their obligations as defined not yet become final and executory;
hereunder: (5) Directors and officers of closed
(a) Delinquency in the payment of banks pending their clearance by the
obligations means that an obligation of a Monetary Board;
person with a bank where he/she is a (6) Directors disqualified for failure to
director or officer, or at least two (2) observe/discharge their duties and
obligations with other banks/FIs, under responsibilities prescribed under existing
different credit lines or loan contracts, are regulations. This disqualification applies
past due pursuant to Sec. X306; until the lapse of the specific period of
(b) Obligations shall include all disqualification or upon approval by the
borrowings from a bank obtained by: Monetary Board on recommendation by the
(i) A director or officer for his own appropriate department of the SES of such
account or as the representative or agent of directors’ election/reelection;
others or where he/she acts as a guarantor, (7) Directors who failed to attend the

§§ X143.1 - X143.2
10.12.31
special seminar for board of directors any person found by the Monetary Board
required under Item “c” of Subsec. X141.2. to be unfit for the position of director or
This disqualification applies until the officer because they were found
director concerned had attended such administratively liable by another
seminar; government agency for violation of
(8) Persons dismissed/terminated from banking laws, rules and regulations or any
employment for cause. This disqualification offense/violation involving dishonesty or
shall be in effect until they have cleared breach of trust, and which finding of said
themselves of involvement in the alleged government agency is pending appeal
irregularity or upon clearance, on their before the appellate court, unless
request, from the Monetary Board after execution or enforcement thereof is
showing good and justifiable reasons, or restrained by the court; and
after the lapse of five (5) years from the time (13) Directors and officers of banks
they were officially advised by the found by the Monetary Board as
appropriate department of the SES of their administratively liable for violation of
disqualification; banking laws, rules and regulations where
(9) Those under preventive suspension; a penalty of suspension from office or fine
(10) Persons with derogatory records as is imposed, regardless whether the finding
certified by, or on the official files of, the of the Monetary Board is final and
judiciary, NBI, Philippine National Police executory or pending appeal before the
(PNP), quasi-judicial bodies, other appellate court, unless execution or
government agencies, international police, enforcement thereof is restrained by the
monetary authorities and similar agencies court. The disqualification shall be in
or authorities of foreign countries for effect during the period of suspension or
irregularities or violations of any law, rules so long as the fine is not fully paid.
and regulations that would adversely affect (As amended by Circular Nos.584 dated 28 September 2007
the integrity of the director/officer or the and 513 dated 10 February 2006)
ability to effectively discharge his duties.
This disqualification applies until they have § X143.2 Persons disqualified to
cleared themselves of the alleged become officers
irregularities/violations or after a lapse of a. The disqualifications for directors
five (5) years from the time the complaint, mentioned in Subsec. X143.1 shall likewise
which was the basis of the derogatory apply to officers, except those stated in Items
record, was initiated; “b(2)” and “b(7)”.
(11) Directors and officers of banks b. The spouses or relatives within the
found by the Monetary Board as second degree of consanguinity or affinity
administratively liable for violation of are prohibited from holding officership
banking laws, rules and regulations positions across the following functional
where a penalty of removal from office categories within a bank:
is imposed, and which finding of the 1. Decision making and senior
Monetary Board is pending appeal management function, e.g., chairman,
before the appellate court, unless president, chief executive officer (CEO),
execution or enforcement thereof is chief operating officer (COO), general
restrained by the court; manager, and chief financial officer (CFO)
(12) Directors and officers of banks or other than the treasurer or controller;

§§ X143.2 - X143.4
10.12.31
2. Treasury function, e.g., Treasurer disqualifications mentioned under

and Vice President – Treasury; Subsecs. X143.1 and X143.2 shall not be
3. Recordkeeping and financial confirmed by the confirming authority
reporting functions, e.g., controller and under Subsec. X141.4 and shall be
chief accountant; removed from office even if he/she
4. Safekeeping of assets, e.g., chief assumed the position to which he/she was
cashier; elected or appointed. A confirmed director/
5. Risk management function, e.g., officer or officer not requiring confirmation
chief risk officer; possessing any of the disqualifications,
6. Compliance function, e.g., enumerated in the abovementioned
compliance officer; and subsections shall be subject to the
7. Internal audit function, e.g., internal disqualification procedures provided under
auditor. Subsec. X143.4. A director/officer, prior to
The spouse or a relative within the assuming the position to which he/she was
second degree of consanguinity or affinity elected/appointed, must submit to the
of any person holding the position of appropriate department of the SES a
manager, cashier, or accountant of a branch verified statement that he/she has all the
or extension office of a bank or their aforesaid qualifications and none of the
respective equivalent positions is disqualifications. The submission of
disqualified from holding or being verified statement will apply to directors/
appointed to any of said positions in the officers elected/appointed after 14 March
same branch or extension office. 2006.
c. In the case of UBs, KBs, and TBs, (As amended by Circular No. 513 dated 10 February 2006)
any appointive or elective official, whether
full time or part time, except in cases where § X143.4 Disqualification procedures
such service is incident to financial a. The board of directors and
assistance provided by the government or management of every institution shall be
government-owned or -controlled responsible for determining the existence
corporations (GOCCs) or in cases allowed of the ground for disqualification of the
under existing law. institution’s director/officer or employee and
d. In the case of Coop Banks, any for reporting the same to the BSP. While
officer or employee of CDA or any elective the concerned institution may conduct its
public official, except a barangay official. own investigation and impose appropriate
e. Except as may otherwise be allowed sanction/s as are allowable, this shall be
under Commonwealth Act No. 108, without prejudice to the authority of the
otherwise known as “The Anti-Dummy Monetary Board to disqualify a director/
Law”, as amended, foreigners cannot be officer/employee from being elected/
officers or employees of banks. appointed as director/officer in any FI under
(As amended by Circular No. 699 dated 17 November 2010) the supervision of the BSP. Grounds for
disqualification made known to the
§ X143.3 Effect of non-possession of institution, shall be reported to the
qualifications or possession of appropriate department of the SES within
disqualifications. A director/officer elected seventy-two (72) hours from knowledge
or appointed who does not possess all the thereof.
qualifications mentioned under Subsecs. b. On the basis of knowledge and
X141.2 and X142.2 and/or has any of the evidence on the existence of any of the

§§ X143.4
08.12.31
grounds for disqualification mentioned in the SES shall proceed to evaluate the case.
Subsecs. X143.1 and X143.2, the director The director/officer concerned shall be
or officer concerned shall be notified in afforded the opportunity to defend/clear
writing either by personal service or himself/herself.
through registered mail with registry return d. If no reply has been received from
receipt card at his/her last known address the director/officer concerned upon the
by the appropriate department of the SES of expiration of the period prescribed under
the existence of the ground for his/her Item “b” above, said failure to reply shall be
disqualification and shall be allowed to deemed a waiver and the appropriate
submit within fifteen (15) calendar days from department of the SES shall proceed to
receipt of such notice an explanation on evaluate the case based on available records/
why he/she should not be disqualified and evidence.
included in the watchlisted file, together e. If the ground for disqualification is
with the evidence in support of his/her delinquency in the payment of obligation,
position. The head of said department may the concerned director or officer shall be
allow an extension on meritorious ground. given a period of thirty (30) calendar days
c. Upon receipt of the reply within which to settle said obligation or,
explanation of the director/officer restore it to its current status or, to explain
concerned, the appropriate department of why he/she should not be disqualified and
included in the watchlisted file, before the

§ X143.4
08.12.31
evaluation on his disqualification and disqualification would be appropriate and

watchlisting is elevated to the Monetary not for the purpose of passing judgment on
Board. the findings and decision of the entity
f. For directors/officers of closed concerned. The appropriate department of
banks, the concerned department of the SES may decide to recommend to the
the SES shall make appropriate Monetary Board a penalty lower than
recommendation to the Monetary Board disqualification (e.g., reprimand,
clearing said directors/officers when there suspension, etc.) if, in its judgment the act
is no pending case/complaint or evidence committed or omitted by the director/
against them. When there is evidence that officer concerned does not warrant
a director/officer has committed disqualification.
irregularity, the appropriate department of h. All other cases of disqualification,
the SES shall make recommendation to the whether permanent or temporary shall be
Monetary Board that his/her case be elevated to the Monetary Board for
referred to the Office of Special approval and shall be subject to the
Investigation (OSI) for further investigation procedures provided in Items “a”,”b”,”c”
and that he/she be included in the masterlist and “d” above.
of temporarily disqualified persons until the i. Upon approval by the Monetary
final resolution of his/her case. Directors/ Board, the concerned director/officer shall
officers with pending cases/complaints shall be informed by the appropriate department
also be included in said masterlist of of the SES in writing either by personal
temporarily disqualified persons upon service or through registered mail with
approval by the Monetary Board until the registry return receipt card, at his/her last
final resolution of their cases. If the director/ known address of his/her disqualification
officer is cleared from involvement in any from being elected/appointed as director/
irregularity, the appropriate department of officer in any FI under the supervision of
the SES shall recommend to the Monetary BSP and/or of his/her inclusion in the
Board his/her delisting. On the other hand, masterlist of watchlisted persons so
if the director/officer concerned is found to disqualified.
be responsible for the closure of the j. The board of directors of the
institution, the concerned department of concerned institution shall be immediately
the SES shall recommend to the Monetary informed of cases of disqualification
Board his/her delisting from the masterlist approved by the Monetary Board and shall
of temporarily disqualified persons and his/ be directed to act thereon not later than
her inclusion in the masterlist of the following board meeting. Within
permanently disqualified persons. seventy-two (72) hours thereafter, the
g. If the disqualification is based on corporate secretary shall report to the
dismissal from employment for cause, the Governor of the BSP through the
appropriate department of the SES shall, appropriate department of the SES the
as much as practicable, endeavor to action taken by the board on the director/
establish the specific acts or omissions officer involved.
constituting the offense or the ultimate facts k. Persons who are elected or
which resulted in the dismissal to be able appointed as director or officer in any of
to determine if the disqualification of the the BSP-supervised institutions for the first
director/officer concerned is warranted or time but are subject to any of the grounds
not. The evaluation of the case shall be for disqualification provided for under
made for the purpose of determining if Subsecs. X143.1 and X143.2, shall be

§§ X143.4 - X143.5
08.12.31
afforded the procedural due process not be accessed or queried upon by outside
prescribed above. parties including banks, QBs and trust
l. Whenever a director/officer is entities except with the authority of the
cleared in the process mentioned under person concerned and with the approval
Item “c” above or, when the ground for of the Deputy Governor, SES or the
disqualification ceases to exist, he/she Governor or the Monetary Board.
would be eligible to become director or BSP will disclose information on its
officer of any bank, QB, trust entity or any watchlist files only upon submission of a
institution under the supervision of the BSP duly accomplished and notarized
only upon prior approval by the Monetary authorization from the concerned person
Board. It shall be the responsibility of the and approval of such request by the
appropriate department of the SES to Deputy Governor, SES or the Governor
elevate to the Monetary Board the lifting or the Monetary Board. The prescribed
of the disqualification of the concerned authorization form to be submitted to the
director/officer and his/her delisting from concerned department of SES is in
the masterlist of watchlisted persons. Appendix 76.
(As amended by Circular No. 584 dated 28 September 2007) Banks can gain access to information
in the said watchlist for the sole purpose
§ X143.5 Watchlisting. To provide the of screening their applicants for hiring and/
BSP with a central information file to be or confirming their elected directors and
used as reference in passing upon and appointed officers. Banks must obtain the
reviewing the qualifications of persons said authorization on an individual basis.
elected or appointed as director or officer d. Delisting. All delistings shall be
of a bank, QB or trust entity, the SES shall approved by the Monetary Board upon
maintain a watchlist of persons disqualified recommendation of the operating
to be a director or officer of such entities departments of SES except in cases of
under its supervision under the following persons known to be dead where delisting
procedures: shall be automatic upon proof of death and
a. Watchlist categories. Watchlisting need not be elevated to the Monetary
shall be categorized as follows: Board. Delisting may be approved by the
(1) Disqualification File “A” Monetary Board in the following cases:
(Permanent) - Directors/officers/employees (1) Watchlist - Disqualification File “B”
permanently disqualified by the Monetary (Temporary) -
Board from holding a director/officer (a) After the lapse of the specific
position. period of disqualification;
(2) Disqualification File “B” (b) When the conviction by the court
(Temporary) - Directors/officers/employees for crimes involving dishonesty, breach of
temporarily disqualified by the Monetary trust and/or violation of banking law
Board from holding a director/officer becomes final and executory, in which
position. case the director/officer/employee is
b. Inclusion of directors/officers/ relisted to Watchlist - Disqualification File
employees in the watchlist. Directors/ “A” (Permanent); and
officers/employees disqualified under (c) Upon favorable decision or
Subsec. X143.4 shall be included in the clearance by the appropriate body, i.e.,
watchlist disqualification files “A” or “B”. court, NBI, BSP, bank, QB, trust entity or
c. Confidentiality. Watchlist files shall such other agency/body where the
be for internal use only of the BSP and may concerned individual had derogatory record.

§§ X143.5 - X144
08.12.31
Directors/officers/employees delisted In the case of the independent

from the Watchlist - Disqualification File directors, the bio-data shall be
“B” other than those upgraded to Watchlist accompanied by a certification under oath
- Disqualification File “A” shall be eligible from the director concerned that he/she is
for re-employment with any bank, QB or an independent director as defined under
trust entity. Subsec. X141.1 that all the information
(As amended by CL-2007-001 dated 04 January 2007 and thereby supplied are true and correct, and
CL-2006-046 dated 21 December 2006) that he/she:
(1) Is not or has not been an officer
Sec. X144 Bio-data of Directors and or employee of the bank, its subsidiaries
Officers or affiliates or related interests during the
a. Banks shall submit to the past three (3) years counted from the date
appropriate department of the SES a of his election;
bio-data of their directors and officers after (2) Is not a director or officer of the
their election or appointment, in a related companies of the institution’s
prescribed form and within the deadline majority stockholder;
indicated in Appendix 6. (3) Is not a majority stockholder of the
The bio-data shall be updated in any of institution, any of its related companies, or
the following instances: of its majority shareholders;
(1) Change in educational attainment, (4) Is not a relative within the fourth
experience or additional qualifications in degree of consanguinity or affinity,
banking that will enhance the director’s or legitimate or common-law of any director,
officer’s competence or will qualify him officer or majority shareholder of the bank
to his present position; or any of its related companies;
(2) Promotion; and (5) Is not acting as a nominee or
(3) Transfer to other banks. representative of any director or
The bio-data shall be submitted only substantial shareholder of the bank, any
once. For purposes of updating, only the of its related companies or any of its
pertinent sections and pages shall be substantial shareholders;
submitted to the BSP. (6) Is not retained as professional
b. Banks shall submit to the appropriate adviser, consultant, agent or counsel of the
department of the SES for evaluation, a list institution, any of its related companies or
of the incumbent members of the board of any of its substantial shareholders, either
directors and officers (chief executive officers in his personal capacity or through his firm;
down the line) after the annual election of is independent of management and free
the board of directors as provided in the from any business or other relationship, has
bank’s by-laws. Any change in the not engaged and does not engage in any
composition of the board of directors shall transaction with the institution or with any
also be reported to the BSP after the election of its related companies or with any of its
or appointment of a member. substantial shareholders, whether by
c. If after evaluation, the Monetary himself or with other persons or through a
Board shall find grounds for disqualification, firm of which he is a partner or a company
the director/officer so elected/appointed of which he is a director or substantial
may be removed from office even if he/ shareholder, other than transactions which
she has assumed the position to which he/ are conducted at arms length and could not
she was elected/appointed pursuant to materially interfere with or influence the
Section 9-A of R.A. No. 337, as amended. exercise of his judgment; and

§§ X144 - X145
11.12.31
(7) Complies with all the a. Interlocking directorships

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

§ X145
11.12.31
bank and one (1) or more of its subsidiary be allowed in the following cases:
bank/s, QB/s and NBFI/s, other than (1) Between a bank and not more than
investment house/s, shall be allowed. two (2) of its subsidiary bank/s, QB/s, and
c. Interlocking officerships NBFI/s, other than investment house/s; or
A concurrent officership in different FIs (2) Between a bank and not more than
may present more serious problems of two (2) of its subsidiary QB/s and NBFI/s;
self-dealing and conflict of interest. Multiple or
positions may result in poor governance or (3) Between two (2) banks, or
unfair competitive advantage. Considering between a bank and a QB or an NBFI, other
the full-time nature of officer positions, the than an investment house: Provided, That
difficulties of serving two (2) offices at the at least twenty percent (20%) of the equity
same time, and the need for effective and of each of the banks, QBs or NBFIs is
efficient management, the following rules owned by a holding company or a bank/
shall be observed: QB and the interlocking arrangement is
As a general rule, there shall be no necessary for the holding company or the
concurrent officerships, including bank/QB to provide technical expertise or
secondments, between banks or, between managerial assistance to its subsidiaries/
a bank and a QB or an NBFI. For this affiliates.
purpose, secondment shall refer to the Aforementioned concurrent officerships
transfer/detachment of a person from his may be allowed, subject to the following
regular organization for temporary conditions:
assignment elsewhere where the seconded (a) that the positions do not involve
employee remains the employee of the any functional conflict of interests;
home employer although his salaries and (b) that any officer holding the positions
other remuneration may be borne by the of president, chief executive officer, chief
host organization. operating officer or chief financial officer
In the case of non-governmental or their equivalent may not be concurrently
organizations (NGOs)/foundations that appointed to any of said positions or their
are engaged in retail microfinance equivalent;
operations, as defined under Subsec. (c) that the officer involved, or his
X326.1.e(9), bank officers are prohibited spouse or any of his relatives within the first
from holding officership position or other degree of consanguinity or affinity or by legal
positions that may cause them to be involved adoption, or a corporation, association or
in the daily microfinance operations of firm wholly- or majority-owned or
related NGOs/foundations. controlled by such officer or his relatives
Transitory provision. Bank officers, enumerated above, does not own in his/its
who concurrently hold officership position own capacity more than twenty percent
or other positions that caused them to be (20%) of the subscribed capital stock of the
involved in the daily microfinance entities in which the bank has equity
operations of related NGOs/foundations, investments; and
are given up to 30 September 2011 to (d) that where any of the positions
relinquish such officer position; otherwise, involved is held on full-time basis, adequate
they shall be disqualified from their justification shall be submitted to the
present positions in the bank. Monetary Board; or
However, subject to prior approval of (4) Concurrent officership positions in
the Monetary Board, concurrent the same capacity which do not involve
officerships, including secondments, may management functions, i.e., internal auditor

§§ X145 - X146
11.12.31
corporate secretary, assistant corporate reflected in the by-laws of the bank, subject
secretary and security officer, between a to the following guidelines:
bank and one or more of its subsidiary QB/s a. The base in any profit sharing
and NBFI/s, or between bank/s, QB/s and program shall be the net income for the year
NBFI/s, other than investment house/s: of the bank as shown in its Consolidated
Provided, That at least twenty percent (20%) Statement of Income and Expenses for the
of the equity of each of the banks, QBs and year, net of the following:
NBFIs is owned by a holding company or (1) All cumulative dividends accruing
by any of the banks/QBs within the group. to preferred stock to the extent not covered
For purposes of this Section, members of by earned surplus;
a group or committee, including sub-groups (2) Accrued interest receivable credited
or sub-committees, whose duties include to income but not yet collected, net of
functions of management such as those reserves already set up for uncollected
ordinarily performed by regular officers, shall interest on loans;
likewise be considered as officers. (3) Unbooked valuation reserves on
It shall be the responsibility of the loans or the amount required to update
Corporate Governance Committee to valuation reserves in accordance with the
conduct an annual performance evaluation schedule approved by the Monetary Board,
of the board of directors and senior as well as all amortizations due on deferred
management. When a director or officer has charges;
multiple positions, the Committee should (4) Provisions for current year’s taxes;
determine whether or not said director or (5) Income tax deferred for the year.
officer is able to and has been adequately Provided, however, That in case of reversal
carrying out his/her duties and, if necessary, of deferred income taxes which were
recommend changes to the board based deducted from net income in computing for
upon said performance/review. profit sharing of previous years, the deferred
The general principles and standards income tax reversed to expense shall be
that will govern the business relationships added back to net income to arrive at the
between banks and their related NGOs/ base for profit sharing for the year during
foundations engaged in retail microfinance which the reversal is made;
are found in Appendix 27. (6) Accumulated profits not yet
(As amended by Circular No. 725 dated 26 June 2011, M-2011- received but already recorded by a bank
033 dated 15 June 2011, Circular Nos. 646 dated 23 February
2009 and 592 dated 28 December 2007)
representing its share in profits of its
subsidiaries under the equity method of
§ X145.1 Representatives of accounting; and
government. The provisions of this Section b. The bank may provide in its by-laws
shall apply to persons appointed to such for other priorities in the computation of net
positions as representatives of the profits for purposes of profit sharing:
government or government-owned or Provided, That in no case shall profit sharing
controlled entities unless otherwise take precedence over any of the items in
provided under existing laws. the preceding paragraph; and
(As amended by Circular No. 592 dated 28 December 2007) c. Prior approval of the Monetary
Board shall be necessary before a bank
Sec. X146 Profit Sharing Programs. Profit which has received financial assistance from
sharing programs adopted in favor of the BSP may implement its profit sharing
directors, officers and employees shall be program. 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, on Real Estate/Chattel Transactions with

motor number and/or chassis number, as DOSRI and Employee(s) and/or the
may be applicable, for chattels); certified true copy of the resolution of the
(f) Appraised or market value or bank’s board of directors. A bank which has
prevailing rental rate; been found to have willfully made a false
(g) Reference or source of the amount or misleading statement in the Certification
reported under Item “(f)” above; on 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 BSP.
to comply with the provisions of this b. On the concerned director/officer
Section shall be subject to monetary 1. For willful non-compliance.
penalties under 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 subject to the monetary penalties applicable
serious offenses under Appendix 67, which to less serious offenses under Appendix 67,
shall be reckoned on a daily basis from the which shall be reckoned on a daily basis
day following the due date of submission from the day following the due date of the
until the required Certification on Real said certification until such time that an
Estate/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 BSP. BSP.
(b) For the willful making of a false/ The imposition of the above sanctions
misleading statement in the Certification is without prejudice to the filing of

§§ X148.9 - X149.9
11.12.31
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 – X149.8 (Reserved)

Unsafe/Unsound Manner. Whether a
particular activity may be considered as § X149.9 Sanctions. The Monetary
conducting business in an unsafe or Board may, at its discretion and based on
unsound manner, all relevant facts must be the seriousness and materiality of the acts
considered. An analysis of the impact or omissions, impose any or all of the
thereof on the bank’s operations and following sanctions provided under Section
financial conditions must be undertaken, 37 of R.A. No. 7653 and Section 56 of R.A.
including evaluation of capital position, No. 8791, whenever a bank conducts
asset condition, management, earnings business in an unsafe and unsound manner:
posture and liquidity position. a. Issue an order requiring the bank to
In determining whether a particular act cease and desist from conducting business
or omission, which is not otherwise in an unsafe and unsound manner and may
prohibited by any law, rule or regulation further order that immediate action be taken
affecting banks, may be deemed as to correct the conditions resulting from such
conducting business in an unsafe or unsafe or unsound practice;
unsound manner, the Monetary Board, upon b. Fines in amounts as may be
report of the head of the supervising or determined by the Monetary Board to be
examining department based on findings in appropriate, but in no case to exceed
an examination or a complaint, shall P30,000 a day on a per transaction basis
consider any of the following circumstances: taking into consideration the attendant
a. The act or omission has resulted or circumstances, such as the gravity of the
may result in material loss or damage, or act or omission and the size of the bank, to
abnormal risk or danger to the safety, be imposed on the bank, their directors and/
stability, liquidity or solvency of the or responsible officers;
institution; c. Suspension of interbank clearing
b. The act or omission has resulted or privileges/immediate exclusion from
may result in material loss or damage or clearing;
abnormal risk to the institution’s depositors, d. Suspension of rediscounting
creditors, investors, stockholders, or to the privileges or access to BSP credit facilities;
BSP, or to the public in general; e. Suspension of lending or foreign
c. The act or omission has caused any exchange operations or authority to accept
undue injury, or has given unwarranted new deposits or make new investments;
benefits, advantage or preference to the bank f. Suspension of responsible directors
or any party in the discharge by the director and/or officers;
or officer of his duties and responsibilities g. Revocation of quasi-banking license;
through manifest partiality, evident bad faith and/or
or gross inexcusable negligence; or h. Receivership and liquidation under
d. The act or omission involves entering Section 30 of R.A. No. 7653. All other
into any contract or transaction manifestly provisions of Sections 30 and 37 of R.A.
and grossly disadvantageous to the bank, No. 7653, whenever appropriate, shall also

§ X149.9 - X151
11.12.31
be applicable on the conduct of business in Extension office shall refer to any

an unsafe or unsound manner. permanent office or place of business in the
The imposition of the above sanctions Philippines other than the head office or a
is without prejudice to the filing of branch, where deposits are accepted and/
appropriate criminal charges against or withdrawals are serviced by tellers or
culpable persons as provided in Sections other authorized personnel. It does not
34, 35 and 36 of R.A. No. 7653. maintain a complete set of books of accounts
as its transactions are taken-up directly in
Sec. X150 Rules of Procedure on the books of the head office or a branch to
Administrative Cases Involving Directors which it is attached. It shall be treated as a
and Officers of Banks. The rules of branch for purposes of this Section and its
procedure on administrative cases involving Subsections.
directors and officers of banks are shown Other banking office (OBO) shall refer to
in Appendix 64. any permanent office or place of business
in the Philippines other than the head office,
I. BANKING OFFICES branch or extension office, which engages
in any or all of the following
Sec. X151 Establishment/Relocation/ non-transactional banking-related
Voluntary Closure/Sale of Branches. The activities:
BSP shall promote and maximize the a. Market loans, deposits and other
delivery of efficient and competitive banking bank products and services;
services especially to underserved markets b. Accept loan applications and conduct
and customers through innovative policies. preliminary credit evaluation as well as
Toward this end, the following are the rules perform credit administration support
and regulations that shall govern the services;
establishment, relocation, voluntary closure c. Host on-site automated teller
and sale of local branches of domestic machines (ATMs);
banks, including locally-incorporated d. Perform customer care services;
subsidiaries of foreign banks and the e. Perform customer identification
establishment of branches of foreign banks process, receive account opening
in the Philippines shall continue to be documents and facilitate account activation:
governed by the provisions of Secs. X105 Provided, That account opening approval
on liberalized entry and scope of operations and actual opening of deposit accounts shall
of foreign banks and Sec. X153 on be done only at the head office/branches
establishment of additional branches of extension offices; and
foreign banks. f. Such other non-transactional banking-
For purposes of this Section and its related activities as may be authorized by
Subsections, the following definitions shall the BSP.
apply: An OBO may also be recognized as
Branch shall refer to any permanent “microfinance-oriented”. A microfinance-
office or place of business in the Philippines oriented OBO (MF-OBO)/micro-banking
other than the head office where deposits office (MBO) shall refer to an OBO that
are accepted and/or withdrawals are primarily caters to the banking needs and
serviced by tellers or other authorized services of microfinance clients and
personnel. It maintains a complete set of overseas Filipinos (OFs) and their
books of accounts. beneficiaries. As contemplated under

§§ X151 - X151.2
11.12.31
Appendix 45, “microfinance clients” are client per day for credit to micro-deposit
micro-credit borrowers and/or micro- accounts;
depositors. subject to the following conditions:
In addition to the non-transactional (a) An MF-OBO/MBO shall only
banking-related activities and services perform the transactional activities it has
allowable for regular OBOs, MF-OBO/ specifically applied for and had been
MBOs may also engage in any or all of the authorized by the BSP to perform.
following limited transactional banking Subsequent enhancements are likewise
activities and services that enable and subject to prior BSP approval;
facilitate financial inclusion and broader (b) The bank shall ensure the timely
access to financial services: accounting and proper recording of all
(1) Accept micro-deposits including financial transactions of its OBOs and
initial deposit and service withdrawals observe adequate internal control
thereof; procedures to ensure the safety of funds
(2) Accept check deposits of and reliability of financial records and
microfinance clients for collection and reports emanating from all transactions;
credit to own deposit accounts; and
(3) Disburse/release proceeds of micro- (c) The bank president shall submit
loans and collect loan amortization within thirty (30) calendar days from the end
payments and related charges. The of a financial year a comprehensive
collection includes the microfinance statement under oath that all the bank’s
borrower’s embedded deposits that are part OBOs and their activities are duly
of the loan amortization payments; authorized by the BSP.
(4) Present, market, sell and service (As amended by M-2011-032 dated 06 June 2011, Circular Nos.
microinsurance products in accordance 694 dated 14 October 2010, 669 dated 22 October 2009 and
624 dated 13 October 2008)’
with existing regulations;
(5) Receive/pay-out funds in connection
§ X151.1 Prior Monetary Board
with authorized remittance transactions;
approval. No bank operating in the
(6) Act as a cash/money in and cash/
Philippines shall establish branches,
money out for electronic money (e-money)
extension offices or other banking offices
transactions;
or transact business outside the premises
(7) Collect premiums/pay out benefits
of its duly authorized principal office or
from/to members of social security
head office without the prior approval of
institutions such as the Government Service
the Monetary Board.
Insurance System (GSIS), Social Security
(As amended by Circular No. 624 dated 13 October 2008)
System (SSS), Philippine Health Insurance
Corporation (Philhealth), Employees’ § X151.2 Prerequisites for the grant
Compensation Commission (ECC), and of authority to establish a branch. With
other government authorized pension and prior approval of the Monetary Board,
benefit systems; banks may establish branches subject to
(8) Pay out benefits under government- the following pre-qualification
sponsored conditional cash transfer requirements:
schemes; a. The bank has complied with the
(9) Accept utilities payment; and minimum capital requirement under
(10)Purchase foreign currencies up to Subsec. X111.1, but not lower than P10
the maximum equivalent of USD300 per million, in the case of RBs.

§ X151.2
11.12.31
In the case of branches to be ceilings on loans

established in restricted areas pursuant to to DOSRI
(5) No deficiency in 3 months
Subsec. X151.4 Item “d”, the bank must liquidity floor on
have combined capital accounts of at least government deposits
P10 billion for a UB/KB and at least P3 (6) Compliant with as of date of
billion for a TB: Provided, That a UB/KB the single borrower’s application
with combined capital accounts of less loan limit and limit on
total investment in real
than P10 billion or a TB with combined estate and improvements
capital accounts of less than P3 billion including bank equipment
shall be allowed to execute an (7) No past due obligation as of date of
undertaking to build up capital for a with the BSP or with application
any FI
maximum period not later than 30 June
(8) No float items outstanding 3 months
2014. in the “Due From/To Head
b. The bank’s risk-based CAR at the Office/Branches/Offices”
time of filing the application is not lower and “Due from BSP”
than twelve percent (12%); accounts exceeding
one percent (1%) of the
c. The bank’s CAMELS composite total resources as of end
rating in the latest examination is at least of the month
“3”, with management component score (9) No uncorrected findings as of date of
not lower than “3”; of unsafe and unsound application
banking practices
d. The bank has established a risk
(10) Has adequate accounting as of date of
management system appropriate to its records, systems, application
operations, characterized by clear procedures and internal
delineation of responsibility for risk control
management, adequate risk measurement (11) Has generally complied as of date of
with banking laws, rules application
system, appropriately structured risk and regulations, orders
limits, effective internal control system or instructions of the
and complete, timely and efficient risk Monetary Board and/or
reporting system; BSP Management
(12) It has neither unpaid as of date of
e. The bank has no major supervisory
assessment due nor past application
concerns outstanding on safety and due obligation with the
soundness as indicated by the following PDIC.
during the period immediately preceding In the case of branches to be established
the date of application or as of the date of in restricted areas, neither the bank nor any
application: of its subsidiary banks is under Prompt
(1) No unbooked as of date of Corrective Action (PCA) or if under PCA, it
valuation reserves application
(2) No deficiency in 12 weeks
shall be compliant with PCA resolution
regular and liquidity guidelines.
reserve requirements f. For purposes of evaluating branch
on deposits and deposit applications and determining the number of
substitutes additional branches a bank may establish,
(3) No deficiency in 3 months
asset and liquid asset theoretical capital shall be assigned to each
cover for EFCDU/ branch to be established, including
FCDU liabilities approved but unopened branches as
(4) Compliant with 12 weeks follows:

§ X151.2
11.12.31
(In millions) (ii) 01 July 2013, and (iii) 01 July 2014,

Location of Date of UB/KB TB RB/
Branch Implementation COOP respectively;
Metro Up to 30 P50 P15 P5.0 (2)Applications received and
Manila June 2012 approved from 01 July 2012 to 30 June 2013
From 01 July P65 P18 P6.5
2012 to 30 shall be assessed the amount of theoretical
June 2013 capital effective 01 July 2012, subject to
2013 to 30
subsequent reassessments using the
June 2014 increased amount of theoretical capital
From 01 July P100 P25 P10 effective (i) 01 July 2013, and (ii) 01 July
2014
Cities of From 18 P25 P5.0 P2.5 2014, respectively;
Cebu and January (3) Applications received and approved
Davao 2006 from 01 July 2013 to 30 June 2014 shall be
1st to 3rd Up to 30 P25 P5.0 P2.5
class cities June 2012 assessed the amount of theoretical
From 01 July P25 P6.5 P2.5 capital effective 01 July 2013, subject to
2012 to 30
June 2013
subsequent reassessment using the
From 01 July P25 P8.0 P2.5 increased amount of theoretical capital
2013 to 30 effective 01 July 2014; and
June 2014
From 01 July P25 P10 P2.5 (4) Applications received and approved
2014 starting 01 July 2014 shall be assessed
4th to 6th Up to 30 P25 P5.0 P1.5 using the increased amount of theoretical
class cities June 2012
From 01 July P25 P6.5 P1.8 capital effective said date.
2012 to 30 The assigned theoretical capital for the
June 2013
From 01 July P25 P8.0 P2.1
proposed branch/es shall be deducted from
2013 to 30 the applicant bank’s existing qualifying
June 2014 capital as defined under Subsec. X116.2,
2014 solely for the purpose of determining whether
1st to 3rd From 18 P20 P5.0 P1.0 its qualifying capital can support the
class January 2006 establishment of the additional branch/es. The
municipal- Up to 30 P15 P2.5 P0.5
ities 4th to June 2012 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 CAR remains compliant with the minimum
class January
municipal- 2006 requirement.
ities If the applicant bank’s risk-based CAR
Provided, That: after deducting the assigned capital for the
(1) Applications received and approved proposed branch from the existing qualifying
up to 30 June 2012 shall be assessed the capital would be less than ten percent
amount of theoretical capital applicable on (10%), its application shall not be processed
14 July 2012, subject to subsequent unless it infused such amount as may be
reassessments using the increased amount necessary to maintain its risk-based CAR to
of theoretical capital effective (i) 01 July 2012, at least ten percent (10%);

§§ X151.2 - X151.4
11.12.31
g. The bank has been operating § X151.3 Application for authority to

profitably for the year immediately establish branches. An application for
preceding the date of application, or in the authority to establish a branch shall be
case of newly-established banks, the signed by the president of the bank or officer
submitted projection showed that of equivalent rank and shall be accompanied
profitability will be attained on the third year by the following information/documents:
of operations, at the latest; and a. Business plan detailing the primary
h. Additional requirements for the banking activities/products and services to
establishment of microfinance/BMBE- be offered; competition analysis to show
oriented branches of banks which are not that its application will not lead to over
microfinance/BMBE-oriented are as follows: banking in the target market; and financial
(1) The branch shall have a manual of projections for the first three (3) years of
operations on microfinancing duly approved operations showing sustained viability, as
by the bank’s board of directors; may be required by the appropriate
(2) The branch shall have an adequate department of the SES: Provided, That
loan tracking system that allows daily normally operating UBs, KBs, and TBs with
monitoring of loan releases, collections and total resources of P1 billion or more shall
arrearages, and any restructuring and be exempt from the foregoing requirements.
refinancing arrangements; A bank is not considered normally operating
(3) The proposed branch shall be if it is under PCA or is non-compliant with
managed by a person with adequate supervisory directives duly confirmed by the
experience or training in microfinancing Monetary Board. In the evaluation of the
activities; and business plan, due consideration shall be
(4) At least seventy percent (70%) of the given to banks that are able or are committed
deposits generated by the branch to be to invest or deploy branch resources in their
established shall be actually lent out to area of operations;
qualified microfinance/BMBE borrowers b. Certified true copy of the resolution
and the microfinance/BMBE loans of said of the bank’s board of directors authorizing
branch shall at all times be at least fifty the establishment of the branch and
percent (50%) of its gross loan portfolio. indicating its proposed site;
A microfinance-oriented branch is a c. Organizational set up of the
branch that provides financial services and proposed branch showing the proposed
caters primarily to the credit needs of basic staffing pattern; and
or disadvantaged sectors such as those d. Certification/Undertaking signed by
specified under the second paragraph of the president of the bank or officer of
Subsec. X102.3, so as to enable them to equivalent rank that the bank has complied
raise their income levels and improve their or will comply, as the case maybe, with the
living standards. Microfinance loans are prerequisites for the grant of authority to
granted on the basis of the borrower’s cash establish a branch under Subsec. X151.2.
flow and are typically unsecured. (As amended by Circular No. 624 dated 13 October 2008)
A BMBE-oriented branch of a bank is a
§ X151.4 Branching guidelines
branch that caters primarily to the credit
Branches may be established, subject to the
needs of BMBEs duly registered under R.A.
following guidelines:
No. 9178.
(As amended by Circular Nos. 728 dated 23 June 2011, 715
a. Only one (1) branch application
dated 04 March 2011, 682 dated 15 February 2010, 674 dated may be submitted at any time except for
10 December 2009 and 624 dated 13 October 2008) banks with at least P100.0 million

§ X151.4
11.12.31
combined capital accounts, as defined for branches in restricted areas starting 14

under Sec. X111, which may be allowed July 2011 and will remain open up to 11
a maximum of five (5) including approved October 2011 and establish the same until
but unopened branch applications, at any 30 June 2014. The branching restriction
time; shall be fully lifted starting 01 July 2014
For branch applications in restricted under Phase 2.
areas pursuant to Item “d” hereof, qualified Government-owned banks may
banks may apply to establish as many likewise apply for branches in the restricted
branches as their qualifying capital can areas subject to justification as to
support within Phase 1 period consistent consistency with mandates under their
with the theoretical capital requirement respective charters: Provided, however, That
computed in accordance with the RBs/Coop Banks shall not be allowed to
provisions of Subsec. X151.2 Item “f”. establish branches in Metro Manila:
b. Only applications submitted with Provided, further, That -
complete documentary requirements (1) Branches of microfinance-oriented
enumerated in Subsec. X151.3 shall be banks, microfinance-oriented branches of
accepted. Processing shall be on a first banks which are not microfinance-oriented
come, first-served basis; may be established anywhere, subject to
c. Industry/market notice of applica- compliance with, among other requirements,
tion for authority to establish a branch shall the minimum capital requirement under
be posted at the BSP website upon receipt Item “a” of Subsec. X151.2 and the
thereof; following conditions:
For branch applications in restricted (a) A microfinance-oriented TB or RB
areas, the BSP shall post on its website, may be allowed to establish a branches in
within a reasonable time from the ninety Metro Manila, including in the restricted
(90) calendar day period in Item “d” hereof, areas, if it has combined capital accounts
the list of applicant banks, the number of of at least P1.0 billion in case of a TB, or at
branch applications received from each least P100.0 million in case of an RB; and
applicant bank, and the final number of (b) A TB or RB Coop Bank may be
branch applications granted to each allowed to establish a microfinance-
applicant bank under Phase 1; oriented branches in Metro Manila,
d. As a general rule, banks shall be including in the restricted areas, if it has
allowed to establish branches anywhere in combined capital accounts of at least P1.0
the Philippines, except in the cities of billion in case of a TB, or at least P100.0
Makati, Mandaluyong, Manila, Parañaque, million in case of an RB Coop Bank.
Pasay, Pasig, Quezon and San Juan (2) Subject to the submission of the
(restricted areas). However, pursuant to the specific business purpose for establishing
policy of the BSP to promote a competitive the branch, among other justifications:
market environment conducive to a better (a) A TB with head office located
and improved quality of financial services outside the restricted areas or an RB with
delivery, the branching restriction in these head office located outside the restricted
eight (8) areas is lifted under a two areas but within Metro Manila with
(2)-phased liberalization approach. combined capital accounts of at least P1.5
Under Phase 1, private domestically billion may be allowed to establish one (1)
incorporated UBs/KBs and TBs that have branch anywhere within the restricted areas
less than 200 branches in the restricted if it has no existing branch in said areas;
areas as of 31 December 2010 may apply and

§ X151.4
11.12.31
(b) An RB with head office located Mindanao) where the head office is located,
outside Metro Manila with combined except in Metro Manila;
capital accounts of at least P1.5 billion may (9) An RB with combined capital
be allowed to establish one (1) branch accounts of at least P100.0 million capital
anywhere in Metro Manila, including in the accounts may establish branches anywhere
restricted areas, if it has no existing in the Philippines, except in Metro Manila
branch/es in Metro Manila. unless qualified under Items “d(1)” and
(3) A TB with head office outside Metro “d(2)” above; and
Manila with combined capital accounts of (10) In the case of Coop Banks:
at least P1.0 billion may establish branches a. The Coop Bank of the province may
in Metro Manila, except in the restricted set up branches/extension offices/other
areas. banking offices (OBOs) anywhere within
(4) A TB with head office outside Metro the province subject to compliance with the
Manila and Cities of Cebu and Davao with applicable branching rules and regulations
combined capital accounts of at least P500 as provided in Sec. X151;
million may establish branches in the Cities b. Coop Banks from other provinces
of Cebu and Davao. may set up branches/extension offices/
(5) Subject to the restrictions in Items OBOs in cities or municipalities where
“6”, “7”, “8” and “9” hereof, an RB with there are no other Coop Bank head office/
combined capital accounts of at least P10.0 branch/extension office;
million, may establish branches in cities/ c. The establishment of branches/
municipalities of higher classification and extension offices mentioned in Items “1” and
with corresponding higher capitalization “2” above shall be subject to the following
requirements, except in Metro Manila: minimum combined capital requirement:
Provided, That where the majority of the i. At least P10.0 million to establish
RB’s total assets and/or majority of its total branches/extension offices anywhere within
deposit liabilities are regularly accounted the province where its head office is located;
for by branches located in such cities/ ii. At least P50.0 million to establish
municipalities of higher classification, the branches/extension offices in any island
RB shall comply with the required minimum group (i.e., Luzon, Visayas, Mindanao)
capital under Subsec. X111.1 for that city/ where the head office is located, except in
municipality of the highest classification Metro Manila; and
within one (1) year from the BSP finding. iii. At least P100.0 million to establish
(6) An RB shall or a Coop Bank only branches/extension offices anywhere in the
be allowed to establish branches if its country except in Metro Manila unless the
combined capital accounts is at least P10.0 Coop Bank is qualified to establish a
million; branch/extension office in Metro Manila
(7) An RB with combined capital and/or restricted areas as provided in Items
accounts of at least P10.0 million but less “d.1” and “d.2” of Subsec. X151.4 on the
than P50.0 million may establish branches branching guidelines;
anywhere within two (2) - hour normal iv. Other relevant branching rules and
travel time by land/sea public transport from regulations which are not inconsistent with
the head office, except in Metro Manila; the above provisions shall continue to be
(8) An RB with combined capital governed by Sec. X151; and
accounts of at least P50.0 million but less v. For branches to be established in the
than P100.0 million may establish branches restricted areas, the maximum number of
in any island group (Luzon, Visayas or branches that may be established by

§§ X151.4 - X151.6
11.12.31
qualified banks under Phase 1 shall be For branch applications in the restricted
subject to final adjustment by the Monetary areas, the applicant bank shall upon
Board based on the total number of acceptance of branch application pay a
applications received. Should the total special licensing fee per branch depending
number of branch applications received by on the bank’s category, as follows:
the BSP under Item “d” above exceed the
total number determined by the Monetary Bank Category Licensing Fee Per Branch
Board to be optimal over the Phase 1
UB/KB P20 million
period, each qualifying applicant bank
shall be granted a pro-rata share based TB 15 million
on the total number of branches applied for. (As amended by Circular Nos. 728 dated 23 June 2011 and 624
e. The Monetary Board may decide to dated 13 October 2008 )
disapprove an otherwise qualified branch
application if in its determination such § X151.6 Establishment of other
branch application will lead to an banking offices. Other banking offices may
overbanking situation in the specific market. be established with prior Monetary Board
(As amended by CL-2011-052 27 July 2011, Circular No. 727 approval, and subject to compliance with
and 728 dated 23 June 2011, 696 dated 29 October 2010, 692 the following:
dated 23 July 2010, 682 dated 15 February 2010 and 624 dated
13 October 2008) a. Minimum capital requirement
under Subsec. X111.1 but not lower than
§ X151.5 Branch processing fee P10.0 million in the case of RBs and Coop
Branch processing fee shall be as follows: Banks;
b. Ten percent (10%) risk-based CAR;
Bank Branching Processing Fees c. CAMELS composite rating not lower
Category than “3”, with Management component
Metro Manila 3rd to 6th score not lower than “3” in the latest
Cities of Cebu Class Mu-
and Davao, nicipalities
examination of the bank; and
All Other d. Not under Prompt Corrective Action
Cities, 1 st to (PCA) or under conditions subject to PCA;
2nd Class e. No major supervisory concerns on
Municipalities safety and soundness such as those
a. UBs/KBs/ P200,000 P100,000 enumerated under Item “e” of Subsec.
Affiliated TBs
b. Non-affiliated P100,000 P50,000
X151.2 as of the date of application; and
TBs f. Additional requirement for the
c. RBs/Coop P25,000 P25,000 establishment of MF-OBOs/MBOs;
Bank 1) At least fifty percent (50%) of total
d. Microfinance P5,000 P5,000 transactions generated are with
-oriented
banks or microfinance clients;
microfinance 2) It shall have a maximum on-site cash
-oriented limit not exceeding P500,000 per day,
branches of commensurate to its level of banking
banks
activities;
Provided, That branches of TBs, RBs and 3) It shall have adequate physical
Coop Banks to be established within the facilities and security arrangements as well
region where the head office is located shall as information and transaction support
be free from assessment. systems appropriate to the level of banking

§§ X151.6 - X151.7
11.12.31
activities undertaken and services Provided, That all existing OBOs shall
offered; conform to the provisions of Sec. X151 and
4) It shall be managed by a responsible this Subsection or phase out non-conforming
officer with adequate experience or training activities by 04 May 2011: Provided,
in microfinancing activities; and further, That the president of a bank with
5) It shall have a manual of operations an existing OBO covered by this transitory
appropriate to its authorized activities that provision shall certify under oath to the BSP
is periodically reviewed and updated and within thirty (30) calendar days from the
duly approved by the bank’s board of end of the transition period that all existing
directors. OBOs conform to the provisions of Sec.
The application to establish other X151 and this Subsection.
banking offices shall be signed by the (As amended by M-2011-019 dated 29 March 2011, M-2010-040
president of the bank or officer of equivalent dated 04 November 2010, Circular Nos. 694 dated 14 October
2010, 682 dated 15 February 2010 and 624 dated 13 October
rank and submitted to the appropriate 2008)
department of the SES together with the
following documents: § X151.7 Date of opening. Approved
1. Certified true copy of the resolution branches/OBOs shall be opened within
of the bank’s board of directors authorizing one (1) year from the date of approval thereof
the establishment of the other banking and shall not be subject to any extension.
office and indicating its proposed site; Approved but not yet opened branches/
2. Purpose statement indicating the OBO may be relocated upon prior approval
bank’s objective or reason for establishing by the Deputy Governor, SES, subject to the
the other banking office; and presentation of justification and valid reason
3. Undertaking signed by the president for the relocation, and resubmission of the
of the bank or officer of equivalent rank that information/documents enumerated in
said other banking office shall not accept Subsec. X151.3 on application for authority
deposits and/or service withdrawals thru to establish branches: Provided, That the
tellers or other authorized personnel. In the opening of the relocated branch/OBO shall
case of LCDPs of microfinance-oriented be made within one (1) year from date of
banks and microfinance/BMBE-oriented Monetary Board approval of its
branches of banks, the undertaking shall establishment and shall not be subject to
state that the LCDP shall accept deposits any extension.
thru tellers or other authorized personnel As an incentive to merger/consolidation
solely from existing microfinance/BMBE of banks or purchase/acquisition of majority
borrowers. or all of the outstanding shares of stock of a
OBOs may be established only in areas distressed bank for the purpose of
where the bank is allowed to establish rehabilitating the same, opening or
branches as provided under Subsec. X151.4 relocation of approved but not yet opened
on branching guidelines. branches/OBO may be allowed within two
The processing guidelines on the (2) years from date of merger/consolidation
establishment of MF-OBOs/MBOs in or purchase/acquisition of majority or all of
Appendix 93. the outstanding shares of stock of a
Transitory provision. The bank is given distressed bank for the purpose of
up to 15 April 2011 to declare to the BSP rehabilitating the same.
the desired classification (regular or Approved branches in the restricted
MF-OBO/MBO) of its existing OBOs: areas shall be opened on or before

§§ X151.7 - X151.9
11.12.31
30 June 2014. Reasonable extensions may branch/other banking office not later than
be authorized by the Monetary Board on a five (5) banking days from such opening,
case-to-case basis provided there are together with a certification signed by the
meritorious grounds: Provided, That head of the branches department with the
approved branches of banks that have rank of a vice president, or its equivalent or
executed an undertaking to build up the by a higher ranking officer that the
required capital shall not be allowed to be requirements enumerated under Subsecs.
opened until the capital requirement is met: X151.2/X151.6 have been complied with
Provided, further, That approved branches as of the time of actual opening of the
of banks under PCA shall not be allowed to branch/other banking office.
be opened until the PCA status is lifted: A bank that fails to comply with any
Provided, finally, That the approved one (1) of the requirements in Subsecs.
branching shall be suspended should PCA X151.2/X151.6 on the prerequisites for the
be initiated on an applicant bank or any of grant of authority to establish a branch/
its subsidiary banks. establishment of OBOs as of the date of the
Failure to open a branch within the intended opening of the branch/OBO shall
period authorized by the Monetary Board refrain from opening the branch/OBO on
may result in forfeiture of the branch such date until it has complied with all of
licensing fee and the right to open such the requirements under Subsecs. X151.2/
branch. X151.6: Provided, That the provisions of
(As amended by Circular Nos. 728 dated 23 June 2011, 697 Subsec. X151.7 on the date of opening of
dated 29 October 2010 and 624 dated 13 October 2008) banks shall be observed.
(As amended by Circular Nos. 697 dated 29 October 2010 and
§ X151.8 Requirements for opening a 624 dated 13 October 2008)
branch/other banking office. After a bank’s
application to establish a branch/other § X151.9 Relocation of branches/other
banking office has been approved, it may banking offices. Relocation of existing/
open the same subject to its submission to operating branches/OBOs within the same
the appropriate department of the SES of the city or municipality where the branch/OBO
following: to be transferred is located shall be allowed
a. Within thirty (30) calendar days without prior BSP approval: Provided, That
prior to the intended date of opening, the branch/OBO shall be relocated and
personal information sheet (bio-data) of the reopened within six (6) months from date
proposed manager and other officers of the of temporary closure in accordance with the
branch/other banking office; and following procedures:
b. Within ten (10) banking days prior a. Notice of relocation or temporary
to the intended date of opening, a closure for the purpose of relocation of
certification signed by the head of the branches/OBOs signed by the president of
Branches Department with the rank of a vice the bank or officer of equivalent rank,
president, or its equivalent or by a higher together with a certified true copy of the
ranking officer that the installation of the resolution of the bank’s board of directors
required security devices under Item “b” of authorizing said temporary closure and
Subsec. X181.4 has been complied with. relocation; a certification signed by the
The bank shall likewise submit a written president of the bank or officer of equivalent
notice to the appropriate department of the rank that the bank has no pending or
SES of the actual date of opening of its unresolved supervisory issues; and an

§§ X151.9
10.12.31
undertaking that the bank shall comply with department with the rank of a vice president
the notification requirement under Item “b” or equivalent rank or by a higher ranking
below, shall be submitted by the bank to officer together with a certification that the
the appropriate department of the SES. The notification requirement in Item “b” above
notice shall include information as to the has been complied with and an undertaking
new relocation site, the timetable for said that the branch/OBO shall be relocated and
temporary closure and relocation, and the reopened within six (6) months from date
branch/OBO that will handle the of such closure shall be submitted to the
transactions of the branch/OBO to be appropriate department of the SES;
temporarily closed and relocated. d. Within five (5) banking days from the
b. If no reply is received by the bank date of relocation and opening of the
from the BSP within thirty (30) calendar days relocated branch/OBO, a notice of such
from date of receipt by the BSP of the said relocation and opening, together with a
notification, notice of temporary closure for certification signed by the head of the
the purpose of relocation shall be sent by branches department with the rank of vice
the bank to depositors and other creditors president or its equivalent rank or by a
by registered mail or proof of delivery (POD) higher ranking officer that the installation
service of the Philippine Postal Corporation of the required security devices under Item
(PhilPost) or other mail couriers, and posters “b” of Subsec. X181.4 on minimum security
shall be displayed in conspicuous places in measures has been complied with shall be
the premises of the branch/OBO to be submitted to the appropriate department of
closed for relocation at least three (3) the SES.
months prior to the temporary closure. Relocation of existing/operating
Information indicating the new relocation branches/OBOs (i) within the same city or
site, the duration of the temporary closure, municipality where the branch/OBO to be
and the address of the branch/OBO that will transferred is located involving temporary
handle the transactions of the branch/OBO closure for a period beyond six (6) months
to be closed/relocated shall be indicated in but not exceeding one (1) year; or (ii) outside
the said notice/posters: Provided, That said of the city or municipality where the branch/
notification period may be reduced to forty- OBO to be transferred is located involving
five (45) calendar days under any of the temporary closure for a period not exceeding
following circumstances: six (6) months may be allowed upon prior
(1) as an incentive to merger or approval of the Deputy Governor, SES in
consolidation of banks; accordance with the following procedures:
(2) as an incentive to purchase or a. Request for BSP approval of the
acquisition of majority or all of the temporary closure for the purpose of
outstanding shares of stock of a distressed relocation of branches/OBOs signed by the
bank for the purpose of rehabilitating the president of the bank or officer of equivalent
same; or rank, together with a certified true copy of
(3) the proposed relocation site is the resolution of the bank’s board of
within the same barangay of the branch/ directors authorizing said temporary closure
OBO to be relocated and relocation; a certification signed by the
c. Within five (5) banking days from date president of the bank or officer of equivalent
of temporary closure of the branch/OBO to rank that the bank has no pending or
be relocated, a notice of such closure, unresolved supervisory issues; and an
signed by the head of the branches undertaking that the bank shall comply with

§§ X151.9
10.12.31
the notification requirement under Item “b” has been complied with and an undertaking
below, shall be submitted by the bank to that the branch/OBO shall be reopened (i)
the appropriate department of the SES. The within one (1) year from date of closure in
request shall include information as to the cases of relocation within the same city or
new relocation site, the timetable for said municipality or (ii) six (6) months from date
temporary closure and relocation, and the of such closure in case of relocation outside
branch/OBO that will handle the of the city or municipality shall be submitted
transactions of the branch/OBO to be to the appropriate department of the SES;
temporarily closed and relocated. d. Within five (5) banking days from the
b. Upon receipt of the BSP approval, but date of relocation and opening of the
at least three (3) months prior to the relocated branch/OBO, a notice of such
temporary closure of the branch/OBO to be relocation and opening, together with a
relocated, notice of temporary closure for certification signed by the head of branches
the purpose of relocation, shall be sent to department with the rank of vice president
depositors and other creditors by registered or its equivalent rank or by a higher ranking
mail or POD service of the PhilPost or other officer that the installation of the required
mail couriers, and posters shall be displayed security devices under Item “b” of Subsec.
in conspicuous places in the premises of the X181.4 on minimum security measures has
branch/OBO to be closed for relocation. been complied with, shall be submitted to
Information indicating the new relocation the appropriate department of the SES.
site, the duration of the temporary closure, e. Branches/OBOs located in the
and the address of the branch/OBO that will restricted areas may be relocated anywhere;
handle the transactions of the branch/OBO and
to be closed/relocated shall be indicated in f. Branches/OBOs located in other areas
the said notice/posters: Provided, That said may be relocated only in areas where the
notification period may be reduced to bank is allowed to establish branches as
forty-five (45) calendar days under any of provided in and subject to the provisions of
the following circumstances: the branching guidelines under Subsec.
(1) as an incentive to merger or X151.4.
consolidation of banks; or Relocation of existing/operating
(2) as an incentive to purchase or branches/OBOs:
acquisition of majority or all of the i) within the same city or municipality
outstanding shares of stock of a distressed where the branch/OBO to be transferred is
bank for the purpose of rehabilitating the located involving temporary closure for a
same; or period beyond one (1) year but not
(3) the proposed relocation site is within exceeding two (2) years; or
the same barangay of the branch/OBO to ii) outside of the city or municipality
be relocated, where applicable. where the branch/OBO to be transferred is
c. Within five (5) banking days from located involving temporary closure for a
date of temporary closure of the branch/ period beyond six (6) months but not
OBO to be relocated, a notice of such exceeding two (2) years may be allowed
closure, signed by the head of the branches upon prior Monetary Board approval
department with the rank of a vice president subject to the presentation of justification
or equivalent rank or by a higher ranking and valid reason for the relocation, in
officer, together with a certification that the accordance with the procedures described
notification requirement in Item “b” above in Items “a”, “b”, “c”, “d”, “e” and “f”

§§ X151.9 - X151.10
11.12.31
above, except that the undertaking (2) Upon receipt of the notice of
required to be submitted under Item “c” for Monetary Board approval but at least three
the reopening of the branch/OBO shall be (3) months prior to the closure, notice of
for a period not exceeding two (2) years. closure shall be sent to depositors and other
Temporary closure of branches/OBOs creditors by registered mail or POD service
beyond two (2) years shall be deemed as of the PhilPost or other mail couriers and
permanent closure, and reopening thereof posters shall be displayed in conspicuous
shall be deemed as an establishment of a places in the premises of the branch/banking
new branch/OBO, subject to the provisions office to be closed: Provided that said
of Subsecs. X151.10 on voluntary closure notification period may be reduced to forty
and X151.2/X151.6 on the prerequisites for five (45) calendar days under any of the
the grant of authority to establish a branch/ following circumstances:
establishment of OBOs, respectively, except (a) As an incentive to merger or
as may be authorized by the Monetary consolidation of banks; or
Board. (b) As an incentive to the purchase or
As an incentive to merger/consolidation acquisition of majority or all of the
of banks or purchase/acquisition of majority outstanding shares of stock of a distressed
or all of the outstanding shares of stock of a bank for the purpose of rehabilitating the
distressed bank for the purpose of same; or
rehabilitating the same, relocation of existing (c) The proposed relocation site is
branches/OBOs may be allowed within two within the same barangay of the branch/
(2) years from date of merger/consolidation other banking office to be relocated; and
or purchase/acquisition except as may be (3) Within five (5) banking days from
authorized by the Monetary Board. date of closure, a notice of closure, together
(As amended by Circular Nos. 697 dated 29 October 2010 and with a certification signed by the president
624 dated 13 October 2008) of the bank or officer of equivalent rank, that
the notification requirement in Item “2”
§ X151.10 Voluntary closure/sale/ above has been complied with, shall be
acquisition of branches/other banking submitted to the appropriate department of
offices the SES.
a. Voluntary closure of branches/other Temporary closure of existing/operating
banking offices. Voluntary closure of branches/OBOs. Temporary closure of
branches/other banking offices may be existing/operating branches/OBOs for the
effected only with prior approval of the purpose of undertaking renovations/major
Monetary Board in accordance with the repairs of branch/office premises/facilities
following procedures: and for other valid reasons may be allowed
(1) Request for Monetary Board without prior BSP approval: Provided, That
approval of the closure of branches/other the branch/OBO shall be reopened within
banking offices signed by the president of a period of six (6) months from date of
the bank or officer of equivalent rank, temporary closure in accordance with the
together with a certified true copy of the following procedures:
resolution of the bank’s board of directors (1) Notice of temporary closure signed
authorizing the closure and stating the by the president of the bank or officer of
justification/reasons therefor, shall be equivalent rank together with a certified true
submitted to the appropriate department of copy of the resolution of the bank’s board
the SES; of directors authorizing said temporary
Manual of Regulations for Banks Part I - Page 94c

§ X151.10
11.12.31
closure and stating the justification/reasons signed by the head of the branches
therefore; and a certification signed by the department with the rank of vice president
president of the bank or officer of equivalent or its equivalent rank or by a higher ranking
rank that the bank has no pending or officer that the installation of the required
unresolved supervisory issues shall be security devices under Item “b” of Subsec.
submitted to the appropriate department of X181.4 on minimum security measures has
the SES. The request shall include been complied with shall be submitted to
information as to the timetable for said the appropriate department of the SES.
temporary closure and the branch/OBO that Temporary closure for a period beyond
will handle the transactions of the branch/ six (6) months but not exceeding one (1)
OBO to be temporarily closed; year may be allowed subject to the prior
(2) If no reply is received by the bank approval of the Deputy Governor, SES, in
from the BSP within thirty (30) calendar days accordance with the following procedures:
from the date of receipt by the BSP of the (1) Request for BSP approval of the
said notification, notice of temporary closure temporary closure of the branch/OBO
shall be sent to depositors and other signed by the president of the bank or officer
creditors, where applicable, by registered of equivalent rank together with a certified
mail or POD service of the PhilPost or other true copy of the resolution of the bank’s
mail couriers, and posters shall be displayed board of directors authorizing said
in conspicuous places in the premises of the temporary closure and stating the
branch/OBO to be closed at least three (3) justification/reasons therefore; and a
months prior to the temporary closure. certification signed by the president of the
Information as to the duration of said bank or officer of equivalent rank that the
temporary closure and the address of the bank has no pending or unresolved
branch/OBO that will handle the supervisory issues shall be submitted to the
transactions of the branch/OBO to be appropriate department of the SES. The
temporarily closed shall be indicated in the request shall include information as to the
said notice/posters; timetable for said temporary closure and the
(3) The transactions of the branch/OBO branch/OBO that will handle the
to be temporarily closed shall be handled transactions of the branch/OBO to be
by the nearest branch/OBO; temporarily closed;
(4) Within five (5) banking days after the (2) Upon receipt of the notice of BSP
date of temporary closure, a notice of such approval but at least three (3) months prior
closure, signed by the head of the branches to the intended date of temporary closure,
department with the rank of a vice president notice of temporary closure shall be sent to
or equivalent rank or by a higher ranking depositors and other creditors, where
officer together with a certification that the applicable, by registered mail or POD
notification requirement in Item “(2)” above service of the PhilPost or other mail
has been complied with and an undertaking couriers, and posters shall be displayed in
that the branch/OBO shall be reopened conspicuous places in the premises of the
within six (6) months from date of such branch/OBO to be closed. Information as
closure shall be submitted to the appropriate to the duration of said temporary closure
department of the SES; and and the address of the branch/OBO that will
(5) Within five (5) banking days from handle the transactions of the branch/OBO
date of re-opening, notice of such to be temporarily closed shall be indicated
re-opening together with a certification in the said notice/posters;
Part I - Page 94d Manual of Regulations for Banks

§ X151.10
11.12.31
(3) The transactions of the branch/OBO the grant of authority to establish a branch/
to be temporarily closed shall be handled establishment of OBOs, respectively, except
by the nearest branch/OBO; as may be authorized by the Monetary
(4) Within five (5) banking days after the Board.
date of temporary closure, a notice of such b. Sale/acquisition of branches/ OBOs.
closure, signed by the head of the branches Sale/acquisition of existing/operating
department with the rank of a vice president branches/ OBOs may be allowed with prior
or equivalent rank or by a higher ranking approval of the Monetary Board in
officer together with a certification that the accordance with the following procedures:
notification requirement in Item “(2)” above (1) In the case of sale of branches, the
has been complied with and an undertaking selling and acquiring banks shall secure the
that the branch/OBO shall be reopened prior written consent of the PDIC in the
within one (1) year from date of such transfer of assets and assumption of liabilities
closure shall be submitted to the appropriate as provided under Section 21 of the PDIC
department of the SES; and Charter (R.A. No. 3591), as amended by
(5) Within five (5) banking days from R.A. No. 9302;
date of re-opening, notice of such (2) Request for Monetary Board
re-opening, together with a certification approval to close the branches/other
signed by the head of the branches banking offices to be sold signed by the
department with the rank of vice president president of the bank or officer of equivalent
or its equivalent rank or by a higher ranking rank, together with a certified true copy of
officer that the installation of the required the resolution of the bank’s board of
security devices under Item “b” of directors authorizing the sale shall be
Subsec.X181.4 on minimum security submitted by the selling bank to the
measures has been complied with shall be appropriate department of the SES;
submitted to the appropriate department of (3) Upon receipt of the notice of
the SES. Monetary Board approval but at least three
Temporary closure for a period beyond (3) months prior to the closure, notice of
one (1) year but not exceeding two (2) years sale shall be sent to depositors and other
may be allowed upon prior Monetary Board creditors, where applicable, by registered
approval subject to the presentation of mail or POD service of the Philpost or other
justification and valid reason for the mail couriers, and posters shall be displayed
temporary closure, in accordance with the in conspicuous places in the premises of the
procedures described in Items “(1)”, “(2)”, branch/other banking office to be sold:
“(3)”, “(4)” and “(5)” above, except that the Provided, That said notification period may
undertaking required to be submitted under be reduced to forty-five (45) calendar days
Item “(4)” for the re-opening of the branch/ when there is no actual closure or disruption
OBO shall be for a period not exceeding of operations. Depositors shall likewise be
two (2) years. informed of their option to withdraw their
Temporary closure of branches/OBOs deposits or to maintain the same with the
beyond two (2) years shall be deemed as acquiring bank;
permanent closure, and re-opening thereof (4) Within five (5) banking days from
shall be deemed as an establishment of a the date of closure, a notice of such closure,
new branch/OBO, subject to the provisions together with a certification signed by the
of Subsecs. X151.10 on voluntary closure president of the bank or officer of
and X151.2/ X151.6 on the prerequisites for equivalent rank that the notification
Manual of Regulations for Banks Part I - Page 94e

§§ X151.10 - X151.12
11.12.31
requirement under Item “3” above has been OBO, a written notice of such opening
complied with, shall be submitted to the signed by the head of branches department
appropriate department of the SES; with the rank of vice president or its
(5) Request for Monetary Board equivalent rank or by a higher ranking officer
approval to acquire the branch/other banking shall be submitted by the acquiring bank to
office signed by the president of the bank or the appropriate department of the SES.
(As amended by Circular Nos. 727 dated 23 June 2011, 697
officer of equivalent rank, together with a
dated 29 October 2010 and 624 dated 13 October 2008)
certified true copy of the resolution of the
bank’s board of directors authorizing the § X151.11 Relocation/Transfer of
acquisition shall be submitted by the branch licenses of closed banks. Buyers of
acquiring bank to the appropriate closed banks shall be allowed to relocate/
department of the SES. The acquiring bank transfer acquired branches subject to the
shall likewise comply with the following: conditions stated under Items “d”, “e” and
(a) Minimum capital requirement “f” of the second paragraph of Subsec.
under Subsec. X111.1 but not lower than X151.9 on relocation of branches/
ten (P10) million in the case of of RBs and OBOs.
Coop Banks; (As amended by Circular Nos. 697 dated 29 October 2010 and
(b) Ten percent (10%) risk-based CAR; 624 dated 13 October 2008)
(c) CAMELS composite rating not lower
than “3” with Management component score § X151.12 Sanctions
not lower than “3” in the latest examination a. Any violation of the provisions of
of the bank; and Subsecs. X151.1 - X151.11 depending on
(d) Ceiling on total investments of a the materiality or seriousness of the
bank in real estate and improvements violation, may constitute a ground for
thereon, including bank equipment. considering the same as unsafe and unsound
A UB, KB or TB may purchase/acquire banking practice and may be a ground for
branches/OBOs anywhere, including in cancellation of the franchise and closure of
Metro Manila and in the restricted areas: any branch/OBO established herein without
Provided, That a TB may purchase/acquire prejudice to the imposition of the applicable
branches/OBOs in Metro Manila, including criminal and administrative sanctions
in the restricted areas, if it has combined prescribed under Sections 36 and 37,
capital accounts of at least P1.0 billion, and respectively, of R.A. No. 7653; and
purchase/acquire branches/OBOs in the b. If any part of any certification
Cities of Cebu and Davao, if it has combined submitted by the bank as required in this
capital accounts of at least P500.0 million: Section is found to be false, the following
(6) The acquiring bank shall pay a sanctions shall be imposed:
licensing fee per branch/OBO acquired, as 1. On the bank. Suspension for
follows: one (1) year of the privilege to establish and/
Location of Branch/Other Banking or open approved branches/other banking
Type of Office to be Acquired
Acquiring Within Outside offices, and/or relocate branches/other
Bank Metro Manila Metro Manila banking offices.
UBs and KBs P 1.0 million P 0.5 million 2. On the certifying officer. A fine of
TBs P 0.5 million P 0.25 million
P5,000 per day (P200 per day for RBs/Coop
and; Banks) from the time the certification was
(7) Within five (5) banking days from made up to the time the certification was
the date of opening of the acquired branch/ found to be false for each branch/other
Part I - Page 94f Manual of Regulations for Banks

§§ X151.12 - X152
10.12.31
banking office opened, relocated, closed or the proposed relocation/transfer of the head
sold without prejudice to the sanctions office, and stating the justification/reasons
under Section 35 of R.A. No. 7653. therefor;
(As amended by Circular Nos. 694 dated 14 October 2010 (2) A certified true copy of stockholders’
and 624 dated 13 October 2008) resolution authorizing the amendment of the
articles of incorporation of the bank;
§§ X151.13 - X151.18 (Reserved) (3) Description of the building and/or
place of relocation, manner of occupancy,
§ X151.19 (2008 - X155) Tellering i.e., whether lease or purchase, estimate of
booths. The following rules shall govern the total costs to be incurred in connection
the establishment of tellering booths in with the transfer, and the proposed timetable
BIR offices: for such relocation; and
a. As a general policy, the (4) Plan for the disposition of the original
establishment of tellering booths in BIR site.
offices are not authorized. However, in b. Upon receipt of the notice of
cases where tellering booths in offices are Monetary Board approval but at least three
needed as determined by the BIR, banks (3) months prior to the relocation, notice of
shall secure prior Monetary Board relocation shall be sent to depositors and
approval; other creditors by registered mail or POD
b. A bank’s application shall be service of the Philpost or other mail
accompanied by a letter from the BIR couriers, and poster shall be displayed in
Commissioner or Deputy Commissioner or conspicuous places in the premises of the
other officer specifically authorized by the head office to be relocated: Provided, That
Commissioner to sign such letter, stating said notification period may be reduced to
that the BIR has agreed to allow the forty-five (45) calendar days under any of
applicant bank to establish a tellering booth the following circumstances:
in the specified BIR office; (1) As an incentive to merger or
c. The applicant bank has complied consolidation of banks;
with the standard prequalification (2) As an incentive to the purchase or
requirements prescribed in Appendix 5; and acquisition of majority or all of the
d. Tax collections received shall be outstanding shares of stock of a distressed
subject to rules on government deposits. bank for the purpose of rehabilitating the
same; or
Sec. X152 Relocation of Head Offices (3) The proposed relocation site is
Relocation of a bank’s head office shall within the same municipality/city of the head
require prior approval of the Monetary office to be relocated.
Board in accordance with the following c. Within five (5) banking days from the
procedures: date of relocation, a notice of relocation,
a. Request for Monetary Board approval together with a certification signed by the
of the relocation of the bank’s head office president of the bank or officer of equivalent
signed by the president of the bank or officer rank that the notification requirement under
of equivalent rank shall be submitted to Item “b” above and the installation of the
the appropriate department of the SES required security devices under Item “b” of
together with the following documentary Subsec. X181.4 on minimum security
requirements: measures have been complied with, shall
(1) A certified true copy of the resolution be submitted to the appropriate department
of the bank’s board of directors authorizing of the SES.
Manual of Regulations for Banks Part I - Page 94g

§§ X152 - X153.3
10.12.31
A bank’s head office located in restricted references to the Philippine branches offices
areas may be relocated anywhere. A bank’s of such foreign bank shall be held to refer
head office located in other areas may be to such unit pursuant to Section 74 of the
relocated only in areas where the bank is R.A. No. 8791.
allowed to establish branches as
provided in Subsec.X151.4 on branching § X153.1 Application for authority to
guidelines. establish additional branch. An application
The executive offices of the bank shall for authority to establish additional branch
not be separated from the head office, i.e., or branches shall be signed by the Country
these shall be located where the bank’s head Manager or the highest ranking officer in
office is located. the Philippines of the applicant foreign bank,
Relocation of any other department/ and shall be accompanied by the following
unit of the bank not performing front-office information/documents:
operation, i.e., not dealing with the a. Certified true copy of the resolution
banking public, shall not require prior of the bank’s board of directors authorizing
Monetary Board approval: Provided the establishment of the additional branch/
however, That within five (5) banking days es and indicating its proposed site/s and/or
from date of relocation, a notice of authority of the bank’s Country Manager or
relocation signed by a vice president or highest ranking officer in the Philippines to
officer of equivalent rank or by a higher apply for authority to establish additional
ranking officer, together with a certified branch/es and represent the bank in
true copy of the resolution of the bank’s connection therewith;
board of directors authorizing the b. Banking facilities and services to be
relocation, shall be submitted to the offered;
appropriate department of the SES. c. Organizational set up of the proposed
(As amended by Circular Nos. 697 dated 29 October 2010 and branch showing the proposed staffing
624 dated 13 October 2008) pattern; and
d. Certification signed by the bank’s
§ X152.1 Sanctions. If any part of the Country Manager that the bank’s existing
certification submitted by the bank as branches in the Philippines reckoned as a
required in this Section is found to be false, single unit, have complied with all the
the sanctions under Subsec. X151.12 shall requirements enumerated under Subsec.
be imposed. X153.2.
Sec. X153 Establishment of Additional
Branches of Foreign Banks. The following § X153.2 Requirements for
guidelines shall govern the establishment of establishment of additional branch. In
additional branches of foreign banks in the addition to the standard pre-qualification
Philippines pursuant to R.A. No. 7721. requirement for the grant of banking
For purposes of this Section, the term authorities in Appendix 5, the applicant
bank shall refer to the existing branches of bank shall comply with requirements
the applicant bank in the Philippines prescribed in Subsecs. X105.4 b and c, and
reckoned as a single unit. X105.6.
In the case of a foreign bank which has
more than one (1) branch and/or other office § X153.3 Date of opening. The opening
in the Philippines, all such branches offices of approved branches shall be subject to
shall be treated as one (1) unit and all the provisions of Subsec. X151.6.
Part I - Page 94h Manual of Regulations for Banks

§§ X153.4 - X154
08.12.31
§ X153.4 Requirements for opening a banking operations: Provided, That the

branch. After a bank’s application to bank’s premises, vault and office equipment,
establish a branch has been approved, it after inspection by the representatives of the
may open the same subject to the following SES shall have been found to be substantially
conditions: in compliance with specifications on
a. Submission by the applicant bank of security standards and ready for use by the
a written notice at least thirty (30) days prior bank; and
to the intended date of opening, c. Issuance by the Governor of the
accompanied by the following: permit to open and operate the approved
(1) Proof or evidence of inward branch/es.
remittance needed to meet the requirements Banks shall submit a written notice to
prescribed in Subsecs. X105.4 b and c, and the appropriate department of the SES of the
X105.6; actual date of opening of their branches not
(2) List of principal and junior officers later than ten (10) banking days from such
of the proposed branch/es and their opening.
respective designations and salaries;
(3) Personal information sheet (biodata) § X153.5 Choice of locations for
for each of the officers to enable the BSP to establishment of branches
evaluate their qualifications as officers; and a. A foreign bank authorized to establish
(4) A certification signed by the bank’s branches in the Philippines pursuant to the
Philippine Country Manager that the provisions of R.A. No. 7721, may open its
requirements enumerated under Subsec. first three (3) branches in locations of its
X153.2 has been complied with up to the choice.
date of the aforementioned written notice. b. The same foreign bank may open its
A bank that fails to continuously comply next three (3) additional branches only in
with the requirements under Subsec. locations designated by the Monetary Board
X153.2 shall be given an extension of time to ensure balanced economic development
to open such branch after it has shown in all the regions.
compliance for another test period of the
same duration required of each requirement § X153.6 Sanctions. If a bank fails to
in Subsec. X153.2: Provided, That the submit any certification as required in this
provisions of Subsec. X153.3 shall be Section, or any part of the certification
observed if the branch cannot open within submitted by the bank as required in this
six (6) months from the date of approval Section is found to be false, the
thereof: Provided, further, That before such sanctions under Subsec. X151.12 shall be
branch opens for business, the bank shall imposed.
submit to the BSP the requirements under
Subsec. X153.4a with the certification to Sec. X154 Establishment of Offices Abroad
the effect that the bank has complied with The following rules shall govern the
requirements of Subsec. X153.2 up to the establishment by domestic banks of
date of the written notice within the period branches and other offices abroad.
prescribed therein; For purposes of this Section, the term
b. The foreign bank branch has offices shall include branches, agencies,
adequate staff, equipment, and other representative offices, remittance centers,
facilities to meet the needs of its commercial remittance desk offices and other offices.
Manual of Regulations for Banks Part I - Page 94i

§§ 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 BSP will be authorized representing initial capital outlay and other
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 BSP;
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
09.12.31
§ X154.4 Date of opening. The opening § X154.6 Sanctions. If any part of the
of any office abroad shall be subject to the certification submitted by the bank as
provisions of Subsec. X151.6. required in this Section is found to be false,
the sanctions under Subsec. X151.12 shall
§ X154.5 Requirements for opening be imposed.
an office abroad. After a bank’s
application to establish a branch has been §§ X154.7 - X154.8 (Reserved)
approved, it may open the same subject
to the following conditions: § X154.9 Establishment of a foreign
a. Submission by the applicant bank subsidiary by a bank subsidiary. The
of a written notice at least thirty (30) days establishment of a foreign subsidiary by a
prior to the intended date of opening, bank subsidiary are subject to the
accompanied by the following: guidelines in Subsec. X382.8.
(1) Proof or evidence of outward
remittance needed to meet the capital Sec. X155 (2008 - X502) Mobile Foreign
requirements prescribed by the host Exchange Booth; Off-site Automatic Multi-
country; Currency Money Changers. The operation
(2) List of principal and junior officers of mobile foreign currency booths and
of the proposed branch/es and their off-site automatic multi-currency money
respective designations and salaries; and changers (OAMMC) shall be governed by
(3) Personal information sheet this Section.
(Bio-data) for each of the officers to enable
the BSP to evaluate their qualifications as § X155.1 (2008 - X502.1) Mobile
officers; and foreign exchange booths. Without prior
b. A certification signed by the bank’s authority from the BSP, banks may operate
president or executive vice president that mobile foreign currency booths, subject to
the standard prequalification requirements the following guidelines:
enumerated in Appendix 5 have been a. The bank shall advise the BSP of the
complied with up to the date of the number of mobile foreign currency booths
aforementioned written notice. it will operate, the date it will start
A bank that fails to continuously operations, the areas of operation and the
comply with the requirements shall be given branch where the foreign exchange
an extension of time to open such office after acquisition will be turned over and booked;
it has shown compliance for another test b. The services of the mobile foreign
period of the same duration required of each currency booths shall be solely for changing
requirement: Provided, That the provisions foreign exchange currency into peso notes
of Subsec. X151.6 shall be observed if the and coins, and not pesos to other foreign
branch cannot open within six (6) months currency;
from the date of approval thereof: Provided, c. The mobile foreign currency
further, That before such branch opens for booths shall not accept deposit or perform
business, the bank shall submit to the BSP other banking functions other than
the requirements under Subsec. X154.5a purchase of foreign currencies;
together with a certification stating that the d. The internal control system of the
bank has complied with the standard proposed mobile foreign currency booths
prequalification requirements in Appendix shall be submitted to the appropriate
5 up to the date of the written notice within department of the SES, as well as other
the period prescribed therein. security measures adopted therein; and

§§ X155.1 - X156
09.12.31
e. The mobile foreign currency booths J. BANKING DAYS AND HOURS

shall be covered by insurance to protect
adequately the bank against losses of Sec. X156 Banking Days and Hours. Banks,
whatever nature arising from its operations. including their branches and offices, doing
business in the Philippines, shall observe
§ X155.2 (2008 - X502.2) Off-site for the conduct of their business a regular
automatic multi-currency money changers banking week of five (5) days, except
With prior approval of the BSP, banks which when such days are holidays. The regular
have shown general compliance with banking banking week should fall on Mondays to
laws, rules and regulations may install an Fridays unless otherwise authorized by the
OAMMC, subject to the following conditions: BSP in the interest of the banking public.
a. The OAMMC shall be installed only On these days, said institution shall
in centers of activities like shopping centers, transact business for at least six (6) hours
supermarkets, hotels and airports: Provided, each day.
That the site is within the area where the Subject to compliance with other
applicant bank has a regular branch to relevant laws, banks, including their
service the money changers; branches and offices, may opt to observe a
b. The applicant bank shall maintain banking week in excess of the five (5) days
adequate internal control and security after reporting to the BSP the additional days
measures, which shall include immediate during which such banks or their branches
rejection and detection of fake currencies or offices shall transact business for at least
by the machines; three (3) hours each day.
c. The transactions of the money Without the need for prior approval of
changers shall be booked in specific the BSP, and even in the absence of an
branches which must be identified at the approved local holiday, banks and/or their
time of application for the putting up of an branches or other offices are allowed to
OAMMC; and close on certain days in celebration of
d. The services of the OAMMC shall important historical and/or religious events
be solely for changing foreign exchange in the locality where these banks operate:
currency into peso notes and coins, and Provided, That said closure has the prior
not pesos to other foreign currencies. approval of the bankers’ association in the

§§ X156 - X156.1
08.12.31
locality and in the case of bank branches, at any international airport or major fish
their respective head offices: Provided, port are allowed to operate on flexible
further, That said closure will only be banking hours within a twenty-four (24)-
allowed in the municipality or city where hour period, subject to the condition that
the festivities are centered. the individual bank’s management will
Banks and/or their branches or other inform the BSP of the schedule of its banking
offices shall submit, either individually or hours which shall in no case be less than
through their head offices, to the six (6) hours a day.
appropriate department of the SES a prior Banks and/or their branch/es and/or
notice of their intended closure on account extension offices may opt to remain open
of a specific local festivity, together with a during any or all of their regular banking
copy of the resolution of the local bankers days that were covered by holidays for the
association approving said closure, at least purpose of servicing deposits and
two (2) working days before the intended withdrawals: Provided, That a bank opting
date of closure. to open its head office and/or branch/es
The required notice shall be supported and/or extension offices, shall submit to the
by a certification that: appropriate department of the SES at least
a. On the date of the temporary two (2) working days before the intended
closure, the bank and/or branch will date of opening of the bank’s head office
maintain a skeletal force to handle “out-of- and/or branches and/or extension offices,
town” clearing items in line with the a notice signed by its president or officer
provisions of Section X205; of equivalent rank, of its intention to open
b. The notice of the bank’s closure and during the holidays, together with a copy
the reason thereof shall be posted of the board resolution approving the
conspicuously in the bank’s premises; and same: Provided further, That the notice
c. For branches of banks, the closure shall specify which office (head office
has the prior approval of their respective and/or branch/es and/or extension offices)
head offices. will open on what dates and their schedule
(As amended by Circular Nos. 634 dated 05 December 2008 of banking hours.
and 624 dated 13 October 2008) Subject to submission of a notice
signed by the bank president or officer of
§ X156.1 Banking hours beyond the equivalent rank, authorized agent banks
minimum; banking services during of the BIR (BIR-AABs), and/or its branch/es
holidays. For purposes of servicing deposits and/or extension offices, are allowed to
and withdrawals, banks may, at their open for two (2) Saturdays prior to April
discretion, remain open beyond the 15 of every year, and daily from April 1 to
minimum six (6) hours and for as long as income tax payment deadline, to extend
they find it necessary, even before 8:00 banking hours from 3:00 PM to 5:00 PM to
AM or after 8:00 PM. Banks may, after receive internal revenue tax payments.
prior written notice to the approriate The notice, which shall specify which
department of the SES, also remain open office (head office and/or branch/es and/or
beyond the minimum six (6) hours for extension offices) will open or extend
banking services other than the servicing banking hours on what dates, shall be
of deposits and withdrawals but in no case submitted to the appropriate department
shall such banking hours start earlier than of the SES on or before the last banking
8:00 AM nor extend beyond 8:00 PM: day of March of every year.
Provided, however, That branches of banks (As amended by Circular No. 634 dated 5 December 2008)

§§ X156.2 - X160.2
08.12.31
§ X156.2 Report of, and changes in, K. BANKING PREMISES

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

§§ 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 - X162
10.12.31
to the monetary penalties applicable to educational institutions, airports, sports and

minor offenses under Appendix 67. recreation centers and complexes, shopping
b. For false/misleading statements centers or establishments, public parking
Directors/officers of the bank which places, workplaces, public utilities, shall be
have been found to have willfully falsely granted or issued unless the owner or
certified or willfully submitted misleading operator thereof shall install and incorporate
statements in the required Certification on in such building, establishment or public
Compliance with the Regulation on the utility, such architectural facilities or
Reclassification of ROPA to Bank Premises, structural features as shall reasonably
Furniture, Fixture and Equipment or in the enhance the mobility of disabled persons
certified true copy of the resolution of the such as sidewalks, ramps, railings and the
bank’s board of directors shall be subject like. If feasible, all such existing buildings,
to the monetary penalties applicable to institutions, establishments, or public
minor offenses under Appendix 67, which utilities may be renovated or altered to
shall be reckoned on a daily basis from the enable the disabled persons to have access
day following the due date of the said to them.
certification until such time that an amended
or corrected certification on compliance or L. MANAGEMENT CONTRACTS AND
certified true copy of the resolution of the OUTSOURCING OF BANKING
board of directors has been submitted to FUNCTIONS
the BSP.
The imposition of the above sanctions Sec. X161 (2008 - X168) Management
is without prejudice to the filing of Contracts
appropriate criminal charges against a. Management contracts of banks with
culpable persons as provided under Section management firms shall be limited to
35 of R.A. No. 7653 for the willful making consultancy and advisory services;
of a false/misleading statement. b. Only a natural person may be
(As amended by Circular No. 701 dated 13 December 2010) elected or appointed as an officer of a bank,
without prejudice to such person being a
§§ X160.4 - X160.9 (Reserved) nominee of a management corporation:
Provided, That the responsibility and/or
§ X160.10 (2008 - X606.10) Batas accountability of anyone elected or
Pambansa Blg. 344 - An Act to Enhance appointed to an officer position shall be
the Mobility of Disabled Persons by personal in nature and cannot be delegated
Requiring Certain Buildings, Institutions, to a corporation; and
Establishments and Public Utilities to c. Any bank that enters into contracts
Install Facilities and Other Devices. In contrary to this policy shall be denied the
order to promote the realization of the rights credit facilities of the BSP.
of disabled persons to participate fully in
the social life and the development of the Sec. X162 (2008 - X169) Duties and
societies in which they live and the Responsibilities of Banks and their
enjoyment of the opportunities available to Directors/Officers in All Cases of
other citizens, no license or permit for the Outsourcing of Banking Functions. When
construction, repair or renovation of public outsourcing of banking functions is allowed
and private buildings for public use, by law, banks shall:

§§ X162 - X162.2
08.12.31
a. Carry out the same in accordance § X162.1 (2008 - X169.1) Prohibition

with proper standards, ensuring the against outsourcing certain banking
integrity of the data, systems and controls functions. No bank or any director, officer,
of the banks and subject to the employee, or agent thereof shall outsource
supervisory, regulatory and administrative inherent banking functions.
authority of the BSP over the banks and For purposes of this Section,
their directors/officers; outsourcing of inherent banking functions
b. Be responsible for the shall refer to any contract between the
performance thereof in the same manner bank and a service provider for the latter
and to the same extent as it was before to supply, or any act whereby the latter
the outsourcing; supplies, the manpower to service the
c. Comply with all laws and deposit transactions of the former.
regulations governing the banking Banks cannot outsource management
activities/services performed by the functions except as may be authorized by
qualified service providers in its behalf the Monetary Board when circumstances
such as, but not limited to, keeping of justify.
records and preparation of reports, signing
authorities, internal control and clearing § X162.2 (2008 - X169.2) Outsourcing
regulations; and of information technology systems/
d. Manage, monitor and review on an processes. Subject to prior approval of the
ongoing basis the performance by the Monetary Board, banks may outsource all
qualified service providers of the outsourced information technology systems and
banking activities/services. processes except for certain functions

§ X162.2
08.12.31
affecting the ability of the bank to ensure the service provider and bank for any violation
fit of technology services deployed to meet of R.A. No. 1405 (the Bank Deposits
its strategic and business objectives and to Secrecy Law) actions that the bank may take
comply with all pertinent banking laws and against the service provider for breach of
regulations, such as, but not limited to: confidentiality or any form of disclosure of
strategic planning for the use of information confidential information, and the applicable
technology; determination of system penalties;
functionalities; change management inclusive (j) Segregation of the data of the bank
of quality assurance and testing; service level from that of the service provider and its
and contract management; and security policy other clients;
and administration. (k) Disaster recovery/business continuity
However, subject to prior approval of contingency plans and procedures;
the Monetary Board and submission of the (l) Adequate insurance for fidelity and
documentary requirements referred to in fire liability;
Item “a” hereof, consultants and/or service (m) Ownership/maintenance of the
providers may be engaged to provide computer hardware, software (program source
assistance/support to the bank personnel code), user and system documentation, master
assigned to perform these excepted and transaction data files;
functions. (n) Guarantee that the service provider
A bank intending to outsource will provide necessary levels of transition
information technology systems and assistance if the bank decides to convert to
processes shall submit the following other service providers or other
documents to BSP which shall treat the arrangements;
same as strictly confidential: (o) Access to the financial information
(1) Proposed contract between the bank of the service provider;
and the service provider which should, at a (p) Access of internal and external
minimum, include all the following: auditors to information regarding the
(a) Complete description of the work outsourced activities/services which they need
to be performed or services to be provided; to fulfill their respective responsibilities;
(b) Fee structure; (q) Access of BSP to the operations of
(c) Provisions regarding on-line the service provider in order to review the
communication availability, transmission same in relation to the outsourced activities/
line security, and transaction authentication; services;
(d) Responsibilities regarding hardware, (r) Provision which requires the service
software and infrastructure upgrades; provider to immediately take the necessary
(e) Provisions governing amendment corrective measures to satisfy the findings
and pretermination of contract; and recommendations of BSP examiners
(f) Mandatory notification by the and those of the internal and/or external
service provider of all systems changes that auditors of the bank and/or the service
will affect the bank; provider; and
(g) Details of all security procedures (s) Remedies for the bank in the event
and standards; of change of ownership, assignment,
(h) Responsibility, fines, penalties and attachment of assets, insolvency, or
accountability of the service provider for receivership of the service provider.
errors, omissions and frauds; (2) Minutes of meetings of the board
(i) Confidentiality clause covering all of directors of the bank concerned signed
data and information, solidary liability of by majority thereof, certified by the secretary

§ X162.2
08.12.31
and attested by the president documenting unsatisfactory results of which shall be valid
their discussions on the following: ground to rescind the contract with the
(a) The benefits and advantages of service provider.
outsourcing with respect to, among others, (3) Profile of the selected service
its role and contribution to the provider or the non-bank partner, in case of
accomplishment of the strategic and joint ventures and other similar
business plans of the bank as well as the arrangements, which should include:
economy, efficiency and quality of its (a) Most recent and complete financial
over-all operations; and operational information;
(b) The careful and diligent evaluation, (b) Track record;
prior to selecting the service provider with (c) List of clientele, particularly banks
which it is entering into an outsourcing and the services provided thereto by the
contract, by the bank of various service service provider; and
providers and their proposals, including (d) At the option of the service provider
their reputation, financial condition, cost or non-bank partner, other documents
for development, maintenance and demonstrative of its competence and
support, internal controls, recovery reputation in the field of information
processes, service level agreements, technology as applied to banking operations.
availability of competent, technically The following are considered as
qualified and experienced personnel, extension of the banks’ information
strategic or convenient location of support technology processes and are outsourcing
services and such similar other activities that need prior Monetary Board
considerations; approval under this Subsection:
(c) The creation, organization and (1) Connection of the bank’s ATM host
membership of a senior management and/or CASA systems to an ATM
oversight committee to handle and consortium or an Affiliate Switch Network
oversee the efficient implementation and (ASN). However, no prior Monetary Board
monitoring of the applications/operations approval shall be required for a bank
of the service provider to ensure that the connected or seeking to connect with
same is in accordance with the existing Bancnet and/or Megalink or with ASN of
information technology initiatives, policies either ATM consortium: Provided, That it
and guidelines of the bank; the list of the passed the BSP-approved accreditation
members of such committee, its process of either Bancnet or Megalink.
organizational chart, and a detailed (2) Sponsoring bank arrangement. A
description of the roles and responsibilities sponsoring bank arrangement is one
of its members must be included in the where a TB/RB or Coop Bank, which is not
minutes of the meeting or submitted as a member of any ATM network
attachments thereto; consortium, but wishes to provide ATM
(d) The creation, organization and services and terminals is “sponsored” by a
membership of a help desk to resolve all member-bank of any of the existing ATM
queries, problems and other concerns consortium.
arising from the applications/operations For purposes of these regulations, an
rendered by the service provider; and ATM network consortium is an entity that
(e) The systems and user acceptance operates and maintains an ATM switch
tests that will be conducted by the service network connecting member institutions
provider before full implementation of the while an ASN is an aggregator/service
outsourced systems/processes and the provider that connects its ATM switch

§§ X162.2 - X162.3
11.12.31
with BancNet and/or Megalink and (2) clearing and processing of checks
extends that connection to its subscribers not included in the Philippine Clearing
and/or members. ASN has to pass its House System;
accreditation requirements of BancNet (3) printing of bank deposit statements;
and Megalink which includes service level (4) credit card services;
standards, BSP access, and minimum (5) credit investigation and collection;
paid-up capital of P300 million. ASNs (6) processing of export, import and
already interconnected with BancNet other trading transactions;
and/or Megalink are required to comply (7) property appraisal;
with the minimum paid-up capital on (8) property management services;
staggered basis of: P100 million by (9) Internal audit, subject to the
31 December 2008; P200 million by following conditions:
31 December 2009; and P300 million by (a) the board of directors and senior
31 December 2010. management of the regulated entity remain
A bank that intends to outsource its responsible for maintaining an effective
internet and/or mobile banking services to system of internal control and for providing
BancNet and/or Megalink shall no longer active oversight of the outsourced internal
require prior MB approval: Provided, That audit activities/functions;
the applicant bank had passed the (b) the external service provider shall
BSP-approved accreditation process for be an independent external auditor included
membership in BancNet and/or Megalink, in the list of BSP-selected external auditors
which requires, among others, a “no or a parent company which owns or
objection” notice from the appropriate controls more than fifty percent (50%) of
department of the SES: Provided further, the subscribed capital stock of the
That banks which intend to provide outsourcing entity: Provided, That Item
electronic banking services via other “A2” of the general requirements under
arrangements or service providers will still Appendix 43 shall apply to the parent
have to comply with the existing company while Items “A2”, “A4”, “A5”, and
regulations on outsourcing in this “A6” shall apply to the independent external
Subsection and under Sec. X701 on auditor;
e-banking. (c) the contract/service agreement with
To ensure that it remains effective and the external service provider shall not be
adaptive to the changing environment, the entered into for a period longer than five (5)
accreditation process of BancNet and years;
Megalink for availment of the ATM (d) there shall be a contingency plan to
interconnection, internet and mobile mitigate any significant disruption,
banking services, shall be subject to discontinuity or gap in audit coverage,
periodic BSP review and examination. particularly for high-risk areas;
(As amended by M-2008-030 dated 12 September 2008) (e) the written engagement contract or
service agreement with the external service
§ X162.3 (2008 - X169.3) Outsourcing provider shall, as a minimum:
of other banking functions (i) define the rights, expectations and
a. Subject to prior approval of the responsibilities of both parties;
Monetary Board, banks may outsource the (ii) set the scope and frequency of,
following functions, services or activities: and the fees to be paid for, the work to be
(1) data imaging, storage, retrieval performed by the external service
and other related systems; provider;

§ X162.3
11.12.31
(iii) state that the outsourced internal (c) The bank shall certify that no inherent
audit services are subject to regulatory review banking functions involving deposit
and that BSP examiners shall be granted full transactions shall be outsourced to its parent/
and timely access to internal audit reports and subsidiary (service provider);
related working papers; (d) The bank shall submit a Service Level
(iv) state that the external service provider Agreement duly signed by the concerned
will not perform management functions, make parties and any amendments thereto, detailing
management decisions, or act or appear to the functions to be outsourced, the respective
act in a capacity equivalent to that of a member responsibilities of the bank and its parent/
of management or an employee of the subsidiary (service provider), and a
institution, and will comply with professional confidentiality clause; and
and regulatory independence guidelines; (e) Any breach in any of the above
(v) specify that the external service conditions shall subject the outsourcing of the
provider must maintain the audit reports and aforementioned banking functions to all the
related working papers/files for at least five requirements of this Section;
(5) years; (14) Back-up and data recovery
(vi) state that internal audit reports are operations;
the property of the institution, that the (15) Call center operations for credit card
institution will be provided with copies of and bank services: Provided, That such bank
related working papers/files it deems services do not involve inherent banking
necessary, and any information pertaining to functions;
the institution must be kept confidential; and (16) Loans processing, credit
(vii) establish a protocol for changing the administration and documentation services in
terms of the service contract and stipulations favor of subsidiaries, affiliates and other
for default and termination of the contract; companies related to it by at least five percent
(10) marketing loans, deposits and other (5%) common ownership;
bank products and services, provided it does (17) Loan documentation services
not involve the actual opening of deposit (such as mortgage registration);
accounts; (18) ATM servicing for offsite and onsite
(11) general bookkeeping and accounting ATMs which shall include the following:
services: Provided, That these activities do not (a) Cash replenishment;
include servicing bank deposits or other (b) First line maintenance;
inherent banking functions; (i) Troubleshooting
(12) offsite records storage services; (ii) Replenishment of supplies, e.g.,
(13) front/back office functions, i.e., trade paper and toner;
support services and downstream processing (iii) Assessment if second line
activities, by parent to a subsidiary or vice- maintenance is necessary;
versa, subject to the following conditions: (c) ATM online availability
(a) The bank intending to outsource the monitoring; and
aforementioned functions shall certify that the (d) Cash forecasting subject to the
front office functions to be done by its parent/ following conditions:
subsidiary (service provider) shall be limited (a) The bank shall-
to trade support services; (i) Ensure that the service provider is reg-
(b) The bank shall remain a parent/ istered with the Department of Labor and
subsidiary of its subsidiary/parent (service Employment (DOLE) pursuant to Section 11
provider) and such service provider shall service of DOLE Department Order No. 18-02,
only entities belonging to its business group; series of 2002, implementing Articles 106 to

§ X162.3
11.12.31
109 of the Labor Code of the Philippines, · ATM service area shall be equipped
as amended; with CCTV system that will record all
(ii) Ensure that the outsourcing of the occurrences in and around the machine.
aforementioned activities will not, in any Any amendment to the ATM service
manner, diminish the supervisory and agreement in the future shall be submitted
examination authority of the BSP over the to the BSP for its continuing evaluation prior
bank, nor will it impede the exercise thereof; to the effectivity of the amendment(s); and
(iii) Remain responsible for the (19) Such other activities as may be
performance of the outsourced activities in determined by the Monetary Board.
the same manner and to the same extent as The bank concerned must submit the
it was before the transfer of said activities. same documentary requirements listed in
Furthermore, the bank shall continue to Subsec. X162.2, except where they
comply with all the laws and regulations exclusively pertain to information
covering the activities performed by the technology operations.
service provider; b. Without need of prior Monetary
(iv) See to it that the service provider Board approval, banks may outsource the
shall strictly observe the confidentiality of following functions, services or activities:
the banking information that the latter may (1) printing of bank loan statements
have access to; and other non-deposit records, bank forms
(v) Manage, monitor and review on an and promotional materials;
ongoing basis, the performance by the (2) transfer agent services for debt and
service provider of the outsourced services equity securities;
and whenever applicable, the bank shall (3) messenger, courier and postal
amend its existing Business Continuity Plan services;
to include the risks brought about by the (4) security guard services;
outsourced activities; (5) vehicle service contracts;
(vi) Inform the BSP in advance should (6) janitorial services;
the service provider enter into any (7) public relations services,
sub-contracting arrangement with other procurement services, and temporary
entities; and staffing: Provided, That these activities do
(vii) See to it that the service provider not include servicing bank deposits or other
shall have no access on bank depositors’ inherent banking functions;
data pursuant to the provisions of R.A. No. (8) sorting and bagging of notes and coins;
1405 (An Act Prohibiting Disclosure of or (9) maintenance of computer
Inquiry into, Deposits with any Banking hardware, e.g., disk drives, printers,
Institution and Providing Penalty Therefor); monitors, UPS, network cabling systems;
and (10) payroll of bank employees;
(b) Adopt minimum security measures (11) telephone operator/receptionist
including but not limited, to the following: services;
(for Onsite ATMs only) (12) sale/disposal of acquired assets
· Servicing of ATMs shall be limited (ROPA);
during business hours; (13) human-resource related services
· Service providers will be given (such as personnel training and
limited access to the bank premises, when development, background investigation and
necessary, bank staff shall accompany salary benchmarking service);
service provider whenever the latter services (14) buildings, ground and other
the ATMs; and facilities maintenance;

§§ X162.3 - X162.11
11.12.31
(15) legal services from local legal bank and/or service provider to ensure the
counsel; secrecy of bank deposits and confidentiality
(16) compliance risk assessment and of all other data and information; and
testing; (4) Such other information as may be
(17) tax compliance services: Provided, necessary to show compliance with the
That the service provider is not also the pertinent provisions of this Section or be
external auditor of the bank; and required by the Monetary Board; and
(18) ATM card plastic embossing service, b. For outsourcing contracts not in
subject to the following conditions: accordance with this Subsection, the following
a. Only the ATM card number and the alternative courses of action are available to
name of the depositor are printed/indicated the bank concerned:
on the plastic card and stored in the magstripe; (1) preterminate said contracts;
and (2) renegotiate or remedy the same and
b. Account/transaction validation is done submit the amendments thereto or new
at the host level,i.e., the bank’s computer, as contracts to the BSP; or
the card number stored in the magstripe is (3) submit a program of compliance to
linked to the deposit account number residing the BSP.
at the same host computer;
(19) ATM incident management service: §§ X162.6 - X162.10 (Reserved)
Provided, That the messages transmitted by
the ATM machines to the service provider’s § X162.11 (2008 - X169.11) Other
monitoring system are purely ATM statuses banking services for subsidiaries, affiliates
and in no way shall client or transaction and related companies. A bank may be
information be sent; and authorized, upon prior Monetary Board
(20) Such other activities as may be approval, to render the following services in
determined by the Monetary Board. favor of subsidiaries, affiliates and companies
(As amended by Circular Nos. 739 dated 26 October 2011,723 related to it by at least five percent (5%)
dated 26 May 2011,642 dated 30 January 2009, 623 dated 09 common ownership:
October 2008, 621 dated 16 September 2008, 610 dated 26 May
2008, 596 dated 11 January 2008, 548 dated 25 September 2006 a. Credit card, bank and loans
and 543 dated 08 September 2006) reconciliation;
b. Credit card billing;
§ X162.4 (2008 - X169.4) Service c. Time deposit processing;
providers. When allowed by law, banks may d. Merchant settlement;
enter into outsourcing contracts only with e. Collections which may involve legal
service providers with demonstrable technical action;
and financial capability commensurate to the f. Credit application processing;
services to be rendered. g. Call center support;
h. Telemarketing of bank, credit card and
§ X162.5 (2008 - X169.5) Review of insurance (life and non-life) products;
subsisting outsourcing contracts. Within six i. Human resource-related service;
(6) months from 05 December 2000 - j. Finance/accounting functions;
a. Banks should submit a list of all their k. Documentation;
existing contracts with service providers, l. Cashiering;
detailing the: m. Reports preparation;
(1) Services/activities being outsourced; n. Procurement;
(2) Terms of the contracts; o. Records coordination;
(3) Measures, if any, undertaken by the p. Mailroom and general services;

§§ X162.11 - X172
08.12.31
q. Internal audit services; (1) The bank (or if the counterparty is

r. Credit administration services, such also a bank, both the bank providing the
as, limit administration, loan documentation, service and the outsourcing bank jointly)
loan administration, and credit reporting, shall inform the appropriate department of
compliance and control; the SES at least thirty (30) calendar days prior
s. Legal and compliance services; to undertaking the abovementioned services.
t. Production of credit cards and The bank may undertake said activities if no
preparation of statement of accounts; and objection has been received from said
u. Check writing services department within said thirty (30)-calendar
subject to the condition that, as service day period.
provider, the following shall be upheld by (2) The proposed contract or
the bank: Memorandum of Agreement (MOA)
(a) Confidentiality of bank deposits and indicating, among others, the particular type
investment in government bonds (R.A. No. of service to be rendered (and if the
1405); counterparty is also a bank, to be
(b) Prohibition against outsourcing of outsourced) by the bank/s shall be kept on
inherent banking functions; and file and be made available for inspection
(c) Prohibition on cross-selling except as during BSP examination;
allowed under applicable regulations. (3) As a service provider, the following
(As amended by Circular Nos. 606 dated 26 March 2008, 604 dated shall be upheld by the bank:
03 March 2008, 597 dated 11 January 2008, 586 dated 16 October (a) Confidentiality of bank deposits and
2007, 569 dated 21 May 2007, 567 dated 04 May 2007 and 556 investment in government bonds (R.A. No.
dated 12 January 2007) 1405);
(b) Prohibition against outsourcing of
§ X162.12 (2008 - X169.12) Other inherent banking functions; and
banking services to other entities. A bank may (c) Prohibition on cross-selling except as
render the following services to other entities allowed under applicable regulations.
(including non-related companies): (Circular No. 606 dated 26 March 2008)
a. Collections and payments;
b. Safekeeping of securities; §§ X162.13 - X162.18 (Reserved)
c. Act as correspondent of other FIs;
d. Payroll service; § X162.19 (2008 - X169.19) Penalties
e. Enter into a conduit clearing Violation of this Section shall be subject to
arrangement with indirect clearing participants; Sections 34, 35, 36 and 37 of R.A. No. 7653,
f. ATM cash loading service to the New Central Bank Act. If the offender is
depositors; a director or officer or a bank, the Monetary
g. Enter into an arrangement with other Board may also suspend or remove such
banks to enable such other banks to avail the director or officer.
service of an ATM network consortium, and
h. Subject to prior Monetary Board Sec. X163 - X171 (Reserved)
approval, such other services which are not
incompatible with banking business as may M. BANK OFFICES AS OUTLET OF
be determined by the Monetary Board: FINANCIAL PRODUCTS OF ALLIED
Provided, That the bank shall perform said UNDERTAKINGS/INVESTMENT HOUSE
services as depositary or as an agent, subject
to the following conditions: Sec. X172 (Reserved)

§§ 1172 - 1172.2
08.12.31
Sec. 1172 (2008 - 1631) Financial Products the power to vote by a bank. A domestic
of Allied Undertakings or Investment subsidiary or affiliate is any subsidiary or
House Units of Banks. The following affiliate domiciled in the Philippines and
guidelines shall govern the use of the head incorporated under the laws of the
office and/or any or all branches of UBs and Philippines, while a foreign subsidiary or
KBs as outlets for the presentation and sale affiliate is a subsidiary or affiliate
of financial products of their allied incorporated and organized under the laws
undertakings (subsidiaries and affiliates as of the foreign country.
defined hereafter) or of their investment
house (IH) units. In case of sale of insurance § 1172.1 (2008 - 1631.1) Statement of
products of insurance company affiliates, principles. The use of a bank’s head office
said affiliates must be accredited or pre- and/or any or all of its branches in the
cleared by the Insurance Commission (IC) presentation and sale of financial
to ensure that only stable and reputable products of allied undertakings or IH units
insurance companies can sell their products could give the banking public the
through banks. impression that these products are
a. Financial products covered by this covered by the deposit insurance system
Section are the following: or guaranteed by the parent bank. To
(1) Credit cards; enable the public to understand fully the
(2) Insurance products limited to: attendant risks involved in these
(a) Life insurance products; transactions, a clear and explicit
(i) Term insurance (including distinction between financial products
mortgage redemption insurance); offered by a bank and those of its allied
(ii) Whole life insurance; undertakings or IH units must be made
(iii) Endowment; in the presentation and sale of these
(iv) Health and accident policies; products, whether through written or
(v) Variable life insurance contracts; and verbal communications.
(vi) Life annuities.
(b) Non-life insurance; § 1172.2 (2008 - 1631.2) Prior Monetary
(i) Fire insurance; Board approval. The presentation and sale
(ii) Marine cargo policies; of financial products shall be made by the
(iii) Homeowners’ policies; bank in its head office and/or any or all of
(iv) Directors/officers liability insurance; its branches only upon prior approval of
and the Monetary Board.
(v) Motor vehicle insurance; The bank’s proposal on said
(3) Such other products as may be presentation and sale shall provide
authorized by the Monetary Board. information on the location of the office
b. For purposes of this Section, a where financial products will be
“subsidiary” means a corporation more sold. Where possible, the office shall not
than fifty percent (50%) of the voting stock be located in the main lobby of the bank’s
of which is directly or indirectly owned, head office and/or its branches and should
controlled or held with power to vote by a be clearly distinguishable by the public as
bank while an “affiliate” means a a separate entity from the parent bank. The
corporation at least five percent (5%) but proposal shall likewise cover particulars
not exceeding fifty percent (50%) of the on: (a) personnel who will be involved in
voting stock of which is directly or the marketing of the financial products; and
indirectly owned, controlled or held with (b) promotional matters including

§§ 1172.2 - 1172.4
08.12.31
safeguards that would ensure that the products of its allied undertakings or IH
public will be able to differentiate readily units must comply with the following
the bank products from the non-bank requirements to ensure that only
products. The public should also be able financially viable institutions complying
to distinguish personnel marketing with BSP rules and regulations are
non-bank products from regular bank allowed to undertake cross-selling
personnel. In case of sale of insurance activities:
products, the staff selling insurance policies a. The bank during the last ninety (90)
must be duly licensed by the IC. days immediately preceding the date of
application has complied with the
§ 1172.3 (2008 - 1631.3) Minimum following:
documentary requirements. The (1) Ceilings on credit accommodations
following documents shall be submitted to DOSRI;
as basis for the evaluation of a bank (2) Liquidity floor on government
intending to sell financial products of its deposits;
allied undertakings or its IH units: (3) Minimum capitalization as defined
a. Latest information on the allied under Sec. X111;
undertaking or IH unit: (4) Risk-based capital adequacy ratio
(1) Annual report; under Sec. X116 or as may be required by
(2) List of directors and senior officers; the Monetary Board in the future;
and (5) Single borrower’s limit;
(3) Income and expense statement for (6) Investment in bank premises and
the last three (3) years; other fixed assets;
b. Copy of the approval of the Board (7) Open foreign exchange position;
of Directors of both the parent bank and and
allied undertakings or IH units on the (8) Foreign exchange asset cover on
presentation and sale of financial FCDU/EFCDU foreign currency liabilities.
products; b. It does not have float items
c. Justification of the presentation and outstanding for more than sixty (60)
sale of financial products; calendar days in the “Due from/to Head
d. Detailed information on the Office/Branches/Offices” accounts and the
financial products to be offered, including “Due from Bangko Sentral” account
promotional materials which will be exceeding one percent (1%) of the total
used; resources as of end of preceding month;
e. Outline of the content of the c. It has no weekly reserve
training materials for bank’s staff and deficiency against deposit liabilities,
officers who will be involved in the deposit substitutes and CTFs during the last
handling of the sale of financial products; twelve (12) weeks immediately preceding
f. Sample contracts; and the date of application;
g. Such other information that may be d. It maintains adequate provisions for
required by the BSP. probable losses commensurate to the
quality of its asset portfolio but not lower
§ 1172.4 (2008 - 1631.4) Financial than the required valuation reserves as
ratios and other related requirements determined by the BSP; and
A bank intending to use its head office e. It has a CAMELS Composite Rating
and any/or all its branches as outlets for of at least “3” in the last regular examination
the presentation and sale of financial by the BSP.

§§ 1172.5 - 1172.11
08.12.31
§ 1172.5 (2008 - 1631.5) Promotional affiliate, as the case may be) of (name of
materials; stationeries and other parent bank). All transactions arising out
paraphernalia of or related to this contract shall be
a. The promotional materials used in binding only between these two (2)
the sale of these financial products, contracting parties. It is understood that
especially posters displayed in bank this transaction is neither insured by the
premises, shall contain the following: Philippine Deposit Insurance Corporation
(1) The logo of the allied undertaking (PDIC) nor guaranteed by the parent
or IH unit promoting the financial product bank.”
accompanied by the words “A subsidiary b. All other limitations that may
(or affiliate, as the case may be) of (name affect the interest of the client shall
of parent bank)"; and also be disclosed in the contract.
(2) The words “financial product/s of
(name of allied undertaking/investment § 1172.7 (2008 - 1631.7) Training. The
house unit) is/are not insured by the bank shall conduct training for the officers
Philippine Deposit Insurance Corporation and staff who will be involved in the
and is/are not guaranteed by the (name of handling of the sale of non-bank products
parent bank)” shall be printed in capital to ensure that they do not unwittingly
letters, black letters against light guarantee or give the impression that the
background/white letters against dark financial products being offered are those
background with the following print size: of the parent bank.
Size of Promotional § 1172.8 (2008 - 1631.8) Other

Material Print Size1 requirements
Legal/letter size 12 a. Record-keeping and accounting
15"X20" 24
for the financial products of the bank’s
19"X25" 36
allied undertaking or IH unit shall be
b. Stationeries and other paraphernalia separate from those of the parent bank.
used in the sale of aforementioned b. The bank, in coordination with
products shall bear the logo of the allied its allied undertaking/IH unit, shall
undertaking or IH unit promoting the formulate the guidelines and establish
financial product and the words “a clear procedures for evaluating client
subsidiary (or affiliate, as the case may be) suitability.
of (name of parent bank)” should appear
visibly under the logo. §§ 1172.9 - 1172.10 (Reserved)
§ 1172.6 (2008 - 1631.6) Contracts/ § 1172.11 (2008 - 1631.11) Sanctions

Information to be disclosed a. Violations of the provisions of this
a. The following paragraph shall be Section shall constitute grounds for the
printed at the end of the contract in the print imposition on the bank of the following:
size as the rest of the contract, or font size (1) Monetary fine - Any amount as may
12 whichever is bigger, in capital letters and be authorized by the Monetary Board not
in bold font: to exceed P30,000 a day for each violation
“This contract is between (name of from the time the violation was committed
client) and (name of allied undertaking or until it is corrected;
investment house unit), a subsidiary (or (2) Non-monetary penalties
1
For other measurements of promotional materials, use of print size closest to indicated size of promotional
material.

§§1172.11 - 2172
10.12.31
(a) Suspension of rediscounting Towards this end, all organic documents,

privileges or access to BSP credit informational and promotional materials
facilities; and used in the presentation and sale of these
(b) Other sanctions as the Monetary products shall prominently display both
Board may impose depending on the the name of the issuing insurance provider
gravity of the offense. and a clause stating that the insurance
product/s of (name of issuing insurance
Sec. 2172 Marketing, Sale and Servicing of provider) is/are not insured by the PDIC
Microinsurance Products by Thrift Banks and is/are not guaranteed by the (name of
In order to better serve microfinance clients bank)”. The bank shall also ensure
pursuant to the financial inclusion thrust of compliance with pertinent laws and rules
National Strategy and Regulatory on the sale of microinsurance products set
Framework for Microinsurance, a TB, by the Insurance Commission. As part of
including its authorized branch/es, extension product due diligence, the bank should
office/s and other banking offices (OBOs), check whether the microinsurance
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 handling mechanism to handle consumer
(IMC) No. 1-2010 dated 29 January 2010, protection issues.
provided that the microinsurance product A bank, prior to selling and/or
is duly approved by the Insurance marketing microinsurance products, shall
Commission. submit the following documents to the
The presentation, marketing and sale of BSP as bases for the latter’s evaluation:
microinsurance products by TB has been 1. Copy of the approval of the bank’s
determined to be a necessary and board of directors on the presentation, sale
complementary component of the primary and servicing (i.e. collect premiums and
business of TB considering the relationship of pay claims) of microinsurance products;
the latter with their microfinance clients. For 2. Copy of duly executed written
this purpose, the Monetary Board has defined agreement between the bank and the
that for TBs, microinsurance products as insurance provider on the presentation,
defined under IMC Nos. 9-2006 dated sale and servicing by the bank of the
25 October 2010 and 1-2010 dated financial products of the latter, including
29 January 2010 shall serve as a “financial the terms of compensation for the services;
product of an allied undertaking” under 3. Copy of the letter of approval from
Section 20 of the General Banking Law. the Insurance Commission covering each
A TB can also service (i.e., collect of the microinsurance product to be
premiums and pay claims) microinsurance marketed or sold by the bank;
products as collection and payment agents 4. Copy of the corresponding
pursuant to Section 53.3 of the General Certificate of Authority from the Insurance
Banking Law. Commission of the insurance provider/s
A TB which intends to avail of the option issuing the microinsurance products to be
to market or sell microinsurance products marketed or sold;
shall ensure that microinsurance products 5. Bank’s license from the Insurance
presented and marketed are clearly Commission as a microinsurance agent or
distinguishable from bank products. broker, as may be applicable.

§§ 2172 - X174
10.12.31
6. Certification from the bank 8. Such other information that may be

president that he/she ascertained and will required by the Bangko Sentral.
ensure continuing compliance with the (Circular No. 683 dated 23 February 2010)
following:
a. The product is authorized for cross Sec. 3172 Marketing, Sale and Servicing of
selling under existing BSP rules and Microinsurance Products by Rural and
regulations; Cooperative Banks. The marketing, sale and
b. The microinsurance product is servicing of microinsurance products by RBs
approved by the Insurance Commission and Coop Banks shall comply with the
and issued by an entity duly licensed and guidelines in Sec. 2172.
(Circular No. 683 dated 23 February 2010)
held in good standing by the Insurance
Commission;
N. RISK MANAGEMENT
c. The bank conducted product due
diligence to be suitable to its customers;
Sec. X173 Supervision by Risks. The
d. The organic, informational and
guidelines on supervision by risk to
promotional materials for the
provide guidance on how banks should
microinsurance products comply with BSP
identify, measure, monitor and control
requirements; and
risks are shown in Appendix 72.
e. The bank personnel concerned has
The guidelines set forth the
undertaken the necessary training and
expectations of the BSP with respect to the
passed the qualifying examination for the
management of risks and are intended to
presentation and sale of microinsurance
provide more consistency in how the risk-
products, in compliance with the
focused supervision function is applied to
requirements set forth by the Insurance
these risks. The BSP will review the risks to
Commission on marketing personnel for
ensure that a bank’s internal risk
insurance products.
management processes are integrated and
7. A letter of undertaking from the
comprehensive. All banks should follow the
bank president that he/she will ensure the
guidelines in their risk management efforts.
retention of the following :
(Circular No. 510 dated 19 January 2006)
a. Copies of the latest Certificate of
Authority from the Insurance Commission Sec. X174 Market Risk Management. The
covering all insurance companies whose guidelines on market risk management in
microinsurance products are being Appendix 73 set forth the expectations of
marketed or sold by the bank; the BSP with respect to the management
b. Copies of the letters of approval of market risk and are intended to provide
from the Insurance Commission covering more consistency in how the risk-focused
all the microinsurance products to be supervision function is applied to this risk.
marketed or sold; Banks are expected to have an integrated
c. Bank’s license from the Insurance approach to risk management to identify,
Commission as a microinsurance agent or measure, monitor and control risks.
broker or in lieu of a bank’s license as a Market risk should be reviewed together
microinsurance agent or broker, copies of with other risks to determine overall risk
the license from the Insurance Commission profile.
covering all its marketing personnel for The BSP is aware of the increasing
microinsurance products; and

§§ X174 - X176
08.12.31
diversity of financial products and that with other risks to determine overall risk
industry techniques for measuring and profile.
managing market risk are continuously The guidelines are intended for general
evolving. As such, the guidelines are application; specific application will depend
intended for general application; on the size and sophistication of a particular
specific application will depend to bank and the nature and complexity of its
some extent on the size, complexity and activities.
r a n g e o f a c t i v i t i e s undertaken by The guidelines on risk management for
individual banks. derivatives are shown in Appendix 25.
The guidelines on risk management for (Circular No. 545 dated 15 September 2006)
derivatives are shown in Appendix 25.
(Circular No. 544 dated 15 September 2006) Sec. X176 Technology Risk Management
The guidelines on technology risk
Sec. X175 Liquidity Risk Management management to ensure that banks have the
The guidelines on liquidity risk management knowledge and skills necessary to
in Appendix 74 set forth the expectations understand and effectively manage their
of the BSP with respect to the management technology-related risks are in
of liquidity risk and are intended to provide Appendix 75.
more consistency in how the risk-focused The guidelines contain two (2) main
supervision function is applied to this risk. parts. The first outlines the primary risk
Banks are expected to have an integrated related to the bank’s use of technology and
approach to risk management to identify, the second describes a risk management
measure, monitor and control risks. process on how banks should manage these
Liquidity risk should be reviewed together risks. Key points include the following:

§§ X176 - X180.1
08.12.31
a. The use of technology-related (1) The compliance program shall

products, services, delivery channels and enable the bank to identify the relevant
processes exposes a bank to various risks, Philippine laws and regulations, analyze
particularly Operational, Reputation, the corresponding risks of non-compliance,
Compliance and Strategic risk. and prioritize the compliance risks (e.g.,
b. Banks are expected to have an low, medium, high).
integrated approach to risk management (2) The program shall provide for
to identify, measure, monitor, and periodic compliance testing with
control risks. Technology-related risks applicable legal and regulatory
should be reviewed together with other requirements. Testing frequency shall be
bank risks to determine the bank’s commensurate with identified risk levels
overall risk profile. (e.g., annual testing for low-risk, quarterly
c. In using technology, bank testing for medium-risk, monthly testing
management should engage a rigorous for high-risk). It shall also provide for the
analytic process to identify and quantify reporting of compliance findings noted to
risks, to the extent possible, and to establish appropriate levels of management.
risk controls to manage risk exposures. (3) The program shall establish the
d. T e c h n o l o g y - r e l a t e d risk responsibilities and duties of the
management process involves three (3) essential compliance officer and other personnel
elements: (if any) involved in the compliance
(1) Planning function.
(2) Implementing (4) A copy of the compliance program
(3) Measuring and monitoring and the written approval of the board of
performance directors shall be submitted to the
These elements are critical to an appropriate department of the SES within
effective technology-related risk twenty (20) banking days from date of
management process of a well-managed approval.
bank, regardless of size. (5) The program shall be updated at
The guidelines on risk management least annually to incorporate changes in
and internal control are shown in Subsec. laws and regulations. Any changes in the
X705.2. program shall likewise be approved by the
(Circular No. 511 dated 03 February 2006) bank’s board of directors and submitted to
BSP within twenty (20) banking days from
Secs. X177 - X179 (Reserved) the date of approval.
b. A constructive working relationship
Sec. X180 (2008 - X170) Compliance with regulatory agencies.
System; Compliance Officer. Banks shall The bank, through its compliance
develop and implement a compliance officer, may consult the regulatory
system and appoint/designate a agencies for additional clarification
compliance officer to oversee its on specific provisions of laws and
implementation. regulations and/or discuss compliance
findings with the regulatory authorities.
§ X180.1 (2008 - X170.1) Compliance A dialogue may also be initiated with
system. The compliance system shall have the respect to borderline issues.
following basic elements. c. A clear and open communication
a. A written compliance program approved process within the bank to educate and address
by the board of directors: compliance matters.

§§ X180.1 - X180.4
11.12.31
Officers and staff shall be trained on the that the main function of the senior officer shall
regulatory requirements through regular be that of a compliance officer.
meetings, distribution of manuals and The internal auditor of a bank may also be
dissemination of regulatory issuance. designated as its compliance officer subject to
d. Continuous monitoring and the condition that his main function shall be that
assessment of the compliance program. of a compliance officer.
The program shall provide for the periodic Transitory Provision. Compliance officers
review of the compliance function to measure concurrently holding the position of Head of
its effectiveness. The review may be carried Internal Audit or Internal Auditor shall be given
out by the internal audit department of the one (1) year from 02 February 2008 within which
bank. to comply with this Subsection.
The compliance program may operate The documentary requirements for the
parallel to or as part of a bank’s internal control approval of the appointment of compliance
and auditing program. officers of banks are listed in Appendix 98a.
(Circular No. 598 dated 11 January 2008, CL-2011-045 dated 01
§ X180.2 (2008 - X170.2) Compliance July 2011)
officer
a. The principal function of the § X180.3 (2008 - X170.3) Compliance risk
compliance officer is to oversee and Compliance risk is the risk of legal or regulatory
coordinate the implementation of the sanctions, financial loss, or loss to reputation a
compliance system. His responsibility shall bank may suffer as a result of its failure to comply
include the identification, monitoring and with all applicable laws, regulations, codes of
controlling of compliance risk. conduct and standards of good practice.
b. The appointment/designation of a
compliance officer shall require prior approval § X180.4 (2008 - X170.4) Responsibilities of
of the Monetary Board. The bio-data of the the board of directors and senior management
proposed compliance officer shall be submitted on compliance. Aside from the duties and
to the appropriate department of the SES. responsibilities of the board of directors
c. The compliance officer shall have the mentioned under Subsec. X141.3, the board
skills and expertise to provide appropriate should oversee the implementation of the
guidance and direction to the bank on the compliance policy and ensure that compliance
development, implementation and issues are resolved expeditiously. Senior
maintenance of the compliance program. management should be responsible for
d. All UBs/KBs, as well as TBs and RBs/ establishing a compliance policy, ensuring
Coop Banks with total resources of P500 that it is observed, reporting to the board of
million and above, shall appoint an directors on its ongoing implementation and
independent full-time compliance officer, who assessing its effectiveness and appropriateness.
shall have the rank of at least a vice president Senior management should, at least once a
or its equivalent. year, report to the board of directors or a
e. For TBs and RBs/Coop Banks with total committee of the board on matters relevant to
resources of below P500 million, an the compliance policy and its implementation,
incumbent senior officer may be designated recommending any required changes to
concurrently as the bank’s compliance officer: the policy. The report should assist the
Provided, That such designation will not give board members in making an informed
rise to any conflict of interest situation and assessment as to whether the institution is

§§ X180.4 - X180.9
08.12.31
managing its compliance risk effectively. on any irregularities or breaches of laws,

However, any material breaches of laws, rules and standards discovered, without
rules and standards shall be reported fear of retaliation or disfavor from
promptly. management or other affected parties. The
compliance function should have access to
§ X180.5 (2008 - X170.5) Status. The all operational areas as well as any records
compliance function should have a formal or files necessary to enable it to carry out
status within the organization established its duties and responsibilities.
by a charter or other formal document
approved by the board of directors that § X180.7 (2008 - X170.7) Role and
defines the compliance function’s standing, responsibilities of the compliance
authority and independence, and function. The role and responsibilities of
addresses the following issues: the compliance function should be clearly
(1) measures to ensure the defined. If there is a division of duties and
independence of the compliance function responsibilities between different functions
from the business activities of the bank; such as legal, compliance, internal audit
(2) its role and responsibilities; or risk management, the allocation of
(3) its relationship with other duties and responsibilities to each function
functions or units within the organization; should be properly delineated. There
(4) its right to obtain access to should likewise be formal arrangements
information necessary to carry out its for cooperation between each function and
responsibilities; for the exchange of relevant information.
(5) its right to conduct investigations
of possible breaches of the compliance § X180.8 (2008 - X170.8) Cross-border
policy; compliance issues. The compliance
(6) its formal reporting relationships function for institutions that conduct
to senior management and the board of business in other jurisdictions should be
directors; and structured to ensure that local compliance
(7) its right of direct access to the concerns are satisfactorily addressed
board of directors or an appropriate within the framework of the compliance
committee of the board. policy for the organization as a whole. As
The compliance charter or other formal there are significant differences in
document defining the status of the legislative and regulatory frameworks
compliance function shall be communicated across countries or from jurisdiction to
throughout the organization. jurisdiction, compliance issues specific to
each jurisdiction should be coordinated
§ X180.6 (2008 - X170.6) Independence within the structure of the institution’s
The compliance function should be group-wide compliance policy. The
independent from the business activities organization and structure of the
of the institution. It should be able to carry compliance function and its responsibilities
out its responsibilities on its own initiative should be in accordance with local legal
in all units or departments where and regulatory requirements.
compliance risk exists and must be
provided with sufficient resources to carry § X180.9 (2008 - X170.9) Outsourcing
out its responsibilities effectively. It must of compliance risk assessment and testing
be free to report to senior management Banks should establish policies for
and the board or a committee of the board managing the risks associated with

§§ X180.9 - X181.2
08.12.31
outsourcing activities. Outsourcing of (e.g. robbery, hold-up, theft, etc.) and

services/activities can reduce the other destructive causes;
institution’s risk profile by transferring b. Prevent and discourage
activities to others with the necessary perpetration of crimes against bank; and
expertise to manage the risks associated c. Assist law enforcement agencies
with specialized business activities. in the identification, apprehension and
However, the use of third parties does not prosecution of the perpetrators of crimes
diminish the responsibility of the board of committed against banks.
directors and senior management to ensure (As amended by Circular No. 620 dated 03 September 2008)
that the outsourced activity is conducted
in a safe and sound manner and in § X181.2 (2008 - X171.2) Designation
compliance with applicable laws and of security officer. The board of directors
regulations. of each bank or the country head in the
Compliance risk assessment and case of a foreign bank branch, shall appoint
testing may be outsourced, subject to or designate a qualified security officer
appropriate oversight by the compliance who shall hold office under the direct
officer: Provided, That a copy of the authority and supervision of the president
outsourcing agreement stating the duties of the bank or the country head in the case
and responsibilities as well as rights and of a foreign bank branch. Subject to prior
obligations of the contracting parties, which BSP approval, banks with limited security
agreement shall be approved by the board risk exposure due to the nature of their
of directors of the institution concerned, operations such as single unit foreign bank
must be submitted to the appropriate branch operating in a highly secured
department of the SES at least thirty (30) environment or TBs or RBs/Coop Banks
days prior to its execution to enable review with total assets of less than P100 million
of its compliance with existing regulations may appoint one of their senior officers as
on outsourcing of banking functions. security officer in a concurrent capacity:
The service level agreement shall Provided, That if the senior officer so
ensure a clear allocation of responsibilities appointed does not possess the necessary
between the external service providers and qualifications, he shall be supported by a
the bank. Furthermore, the outsourcing competent consultant/adviser until such
bank should manage residual risks time that he acquires the necessary
associated with outsourcing arrangements, competency on security matters: Provided,
including default, operational failures, and further, That such appointment shall not
possible disruption of services. result to a conflict of interest situation.
The security officer must be: (a) at least
Sec. X181 (2008 - X171) Bank Protection thirty (30) years of age; (b) be a college
Each bank shall adopt an adequate security graduate; (c) have at least five (5) years of
program commensurate to its operations, supervisory experience in the field of law
taking into consideration its size, location, enforcement and/or security operations;
number of offices and business operations. and (d) possess all the qualifications and
(As amended by Circular No. 620 dated 03 September 2008) none of the disqualifications provided for
under Sections X142 and X143.
§ X181.1 (2008 - X171.1) Objectives The security officer shall be
These regulations are designed to: responsible for:
a. Promote maximum protection of a. The development and administration
life and property against crimes of a security program acceptable to BSP;

§§ X181.2 - X181.4
08.12.31
b. The conduct of continuing security iii. Standard operating procedures for

awareness program among all bank the safekeeping of all currencies,
employees to highlight that security is a negotiable securities and similar
common concern; valuables in vaults or safes;
c. Investigation of bank robberies/ iv. Provision for other security
hold-ups, recommending the filing of measures and procedures aimed at
appropriate charges in court as the giving added protection to the bank,
evidence may warrant and assisting in the e.g., procedures for the transport of funds
prosecution of the perpetrator(s) thereof; and other cash items, and defining
d. The establishment of an effective responsibility for their implementation;
working relationship with the BSP, PNP, v. Provision for the training and
and other law enforcement agencies in the periodic re-training of employees in their
prevention of bank crimes and other natural respective areas of responsibility under
and man-made hazards; and the security program, including the
e. The conduct of continuing research proper use of security devices and proper
and studies on new techniques, methods employee conduct during and after an
and equipment to enhance bank protection emergency situation;
measures. vi. Contingency measures for security
For purposes of the foregoing, a and rescue operations in emergency
security management team headed by the situations;
security officer may be constituted if vii. Provision for the posting of
warranted. adequate number of security personnel
(As amended by Circular No. 620 dated 03 September 2008) in all vital and/or critical areas in the bank’s
premises, and the minimum number of
§ X181.3 (2008 - X171.3) Security hours when each personnel shall be on
program. The security program of each duty; and
bank shall be in writing, duly approved by viii. Such other provisions/measures as
its board of directors or the country head the president of the bank or country head
in the case of a foreign bank branch. In in the case of a foreign bank branch may,
addition, the security program shall define in consultation with its security officer,
measures and procedures to detect and deem appropriate.
prevent the commission of bank crimes, (As amended by Circular No. 620 dated 03 September 2008)
as well as provide contingency plans in
case of calamities, terrorist attacks and § X181.4 (2008 - X171.4) Minimum
other emergency situations. The security security measures
program shall include the following: a. Guard system. All banking offices
i Installation of the prescribed
. shall be manned by an adequate number
minimum security devices; of security personnel to be determined by
ii. A schedule for the periodic the bank, taking into consideration its size,
inspection, testing and servicing of all location, costs and overall bank protection
security devices installed in each of the requirement: Provided, That cash centers
bank’s offices, designation of an officer or shall be manned by an adequate number
employee responsible for ensuring that of security guards as may be necessary
such devices are inspected, tested, during banking hours. For this purpose
serviced and kept in good working order, cash centers shall refer to branches which
and requiring record of such inspections, also handle the cash requirements of other
testing and servicing; branches of the same bank.

§ X181.4
08.12.31
b. Security devices. Within 120 (v) Other existing security measures

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

§§ X181.4 - X181.6
08.12.31
d. Security of the premises. For f. Armored Car Operation. To ensure

emergency purposes and where the protection of crew members and
applicable, each banking office shall be valuables, all armored vehicles shall be built
provided with a back door with a steel or with bullet-resistant materials capable of
grill door which shall be used as an withstanding the firepower of high-powered
alternative exit door for evacuation in case firearms, e.g., M16 and M14 rifles. Moreover,
of fire, flood, bomb threats, wind damage, armored vehicles shall be equipped with a
explosion, civil disturbance, earthquake, or vault or safe or a partition wall with a
other emergency. combination lock designed to prevent
Steel grills, where applicable, shall retrieval of the cargo while in transit. When
support exterior glass doors and windows in use the armored vehicles shall be provided
of all banking offices for protection against with at least two (2) armed guards and its
any forcible entry. Access to the back door operations must be supervised by at least two
shall be limited to authorized bank (2) officers of the bank.
personnel. Opening and closing thereof All canvass bags that contain cash and
before and after banking hours shall be other items of value shall be provided with
recorded in a registry. padlocks for security and control purposes.
Firearms and other deadly weapons Armored cars shall not be operated as
shall not be allowed inside bank premises mobile bank.
except when so authorized by the bank. (As amended by Circular No. 620 dated 03 September 2008)
A signage for this purpose shall be
conspicuously placed near the main § X181.5 (2008 - X171.5) Reports
entrance door of the bank. Specific Banks shall conduct a review and self-
guidelines as to when to allow firearms and assessment of their security program to
other deadly weapons inside bank ensure their compliance with prescribed
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
inspection report to BSP examiners during 30 January of the following year in
regular examination. accordance with the format shown in
The bank shall conduct fire, earthquake Appendix 10. The self-assessment together
and bomb threat drill at least once a year. with the updated security program shall
e. ATM. ATM sites shall be provided be considered Category A-2 reports.
with adequate security. Where there are (As amended by Circular No. 620 dated 03 September 2008)
no security personnel assigned to secure
the ATM, an anti-tampering device shall § X181.6 (2008 - X171.6) Bangko
be installed or the ATM and its immediate Sentral inspection. During regular
surroundings shall be regularly inspected examination, the BSP reserves the right
to promptly detect any attempt to rob or to perform a compliance assessment of
destroy the same. the adequacy of a bank’s security

§§ X181.6 - X185.2
08.12.31
arrangements. The BSP, with approval of c. All internal control audit reports or
the Governor, may also conduct at any their equivalent.
time a targeted inspection of the bank’s d. Information/data on the direct and/
implementation of its security program to or indirect equity holdings and/or
determine compliance with regulations. For connection with any firm, partnership or
this purpose, the BSP may avail of the corporation organized for profits, of all the
services of experts as resource persons. bank directors, officers and major
(As amended by Circular No. 620 dated 03 September 2008) stockholders as defined under Subsec.
X326.1 should be maintained.
§ X181.7 (2008 - X171.7) Common e. Information/data pertaining to the
security service provision. A bank, with electronic data processing (EDP)
prior BSP approval, may share the services department or EDP servicer of the bank
of a security officer or a security particularly on organization, input controls,
management team with its related FIs. processing controls, output controls, software
(As amended by Circular No. 620 dated 03 September 2008) controls, program and documentation
standards, logs on the operation of
§ X181.8 (2008 - X171.8) Sanctions mainframes and peripherals, hardware
Any violation of the provisions of this controls and such other EDP internal control
Section, as well as non-compliance with standards prescribed by the BSP in separate
the minimum standards set forth or any rules and regulations.
directive of the Monetary Board issued
pursuant hereof, shall be subject to the § X185.1 (2008 - X163.1) Proper
administrative sanctions provided under accounting records
Section 37 of R.A. No. 7653 and may, a. All banks shall maintain proper and
depending on the materiality or adequate accounting records.
seriousness of the violation, constitute a b. These records should be kept
ground for considering the same as an up-to-date and shall contain sufficient detail
unsafe and unsound banking practice. so that an audit trail is established.
(As amended by Circular No. 620 dated 03 September 2008) c. All tickets shall bear official
approval and should be initiated by the
Secs. X182 - X184 (Reserved) person originating and another person by
checking them.
Sec. X185 (2008 - X163) Internal Control
System. The following provisions are the § X185.2 (2008 - X163.2) Independent
minimum internal control standards for balancing
banks to help promote effective control a. Independent balancing shall mean
system. that records posted by a person or cash
For this purpose, the following records/ held by a teller or cashier shall be balanced
data shall be compiled and made available or counted by another person.
for the inspection of BSP examiners: b. The following minimum
a. Records showing compliance with independent balancing procedures shall
independent balancing procedures. These be adopted:
records should indicate the accounts and the (1) Monthly reconciliation of general
periodic balancing procedures performed. ledger balances against respective subsidiary
b. Statements of actual duties of and supporting records and documentation
persons assigned to handle cash and by someone other than the bookkeeper or
securities. the person handling the records;

§§ X185.2 - X185.4
08.12.31
(2) Irregular and unannounced count (4) Checks and other cash items
of teller’s cash and checks and other cash shall be maintained either by an
items at least twice a month and vault cash employee not handling cash or by the
including Automated Tellering Machine’s Rack/Distributing Department provided
(ATM) cash dispensers at least once a that adequate control as to custody and
month by the auditor/control officer or by disposition of funds are properly
an officer not connected with cash maintained;
department; (5) The receipt of statements from
(3) Monthly reconciliation of due from depository bank shall be assigned to an
banks, cash in bank accounts (domestic employee other than the one connected
and foreign) and due from/to head office/ with the preparation, recording and signing
branches by someone other than the of bank drafts;
person handling the records or posting the (6) Custodians of securities shall not
general ledger entries; be allowed to handle security transactions;
(4) Periodic verification of securities (7) Collateral appraisal shall be done
and collaterals by someone other than their by an employee/officer who does not
custodian; and approve loans;
(5) Periodic verification of the (8) Incoming checks and other cash
accuracy of the interest credits to deposit items shall be recorded chronologically
liabilities accounts. in a register by an employee other than
the bookkeeper before they are
§ X185.3 (2008 - X163.3) Division of forwarded for posting purposes;
duties and responsibilities (9) Credit reports shall be obtained by
a. The duties of all the officers and someone other than lending officers;
employees shall be segregated, clearly (10) Mailing of customers’ statements
defined, understood, documented and and delinquent notices shall be done by
manualized. No individual shall have an employee other than the one who
complete authority and responsibility for granted the loan or the one handling the
handling all phases of any transaction from records; and
beginning to end, without some check or (11) Dispatching and delivery of
balance from some other part of the current account statements shall be done
organization. by someone who is not involved in current
b. The physical handling of a account operations.
transaction shall be separated from its c. Extensive background checking of
recording and supervision as follows: persons intended to be assigned to handle
(1) A person handling cash shall not cash and securities shall be conducted.
be permitted to post the ledger records nor Frequent follow-up checking after their
should posting the general ledger be employment shall also be made.
performed by an employee who posts the
depositor’s subsidiary ledgers; § X185.4 (2008 - X163.4) Joint custody
(2) A lending officer shall never be a. Joint custody shall mean the
allowed to disburse proceeds of notes, processing of transactions in the presence
accept note payment nor post loan of and under the direct observation of a
ledgers; second person. Both persons shall be
(3) The functions of issuing, equally accountable for the physical
recording and signing of drafts/checks protection of the items and records
shall be separated; involved.

§§ X185.4 - X185.6
08.12.31
b. Physical protection shall be § X185.5 (2008 - X163.5) Signing

deemed established through the use of authorities. Signing authorities for the
two (2) locks or combinations on a file different levels of officers to sign for and in
chest or vault compartment. behalf of the banks shall be approved by
c. Two (2) or more persons shall be the board of directors and the extent of
assigned to each half of the control so each level of authority shall be clearly
that operating efficiency is not impaired defined. These signing authorities shall
if one (1) person is not immediately include but need not be limited to the
available. following:
d. Persons who are related to each a. Lending;
other within the third degree of b. Investment;
consanguinity or affinity shall not be made c. Approval of expense;
joint custodians. d. Various supervisory reports; and
e. The following shall be under joint e. Bank drafts, manager’s/cashier’s
custody: checks, bank money orders and certificates
(1) Cash in vault and in ATM cash of time deposit.
dispensers;
(2) All accountable forms; § X185.6 (2008 - X163.6) Dual control
(3) Collaterals; a. Dual control shall mean the work of
(4) Securities; one (1) person is to be verified by a second
(5) Documents of title and/or person to ensure that the transaction is
ownership of properties or fixed assets; properly authorized, recorded and settled.
(6) Dormant or inactive deposit b. The routine and completion of each
ledgers/EDP print-outs and corresponding transaction shall involve at least two (2) or
signature cards including on-line posting more individuals.
of dormant/inactive accounts; c. Except as herein provided, the
(7) Import documents; following accounts/transactions shall be
(8) Trust receipts; under dual control:
(9) Collection items; (1) Cashier's/manager's checks,
(10) Duplicate keys, safe deposit spare telegraphic transfers (TTs) and electronic
locks and keys, and keys to unrented safe fund transfer system (EFTS) - The
deposit boxes; signature of at least two (2) officers should
(11) Safekeeping items; be required in the issuance of cashier’s/
(12) Vault door and safe combinations; manager’s checks and payment orders
(13) Unissued specimen signature (incoming and outgoing) of TTs and EFTS.
books; The board of directors may, however,
(14) Correspondent’s and bank’s own prescribe a predetermined amount by
telegraphic and/or electronic fund which one (1) senior officer can sign
transfer system or cable test keys checks or payment orders, subject to
currently in use; appropriate control measures.
(15) Test key fixed numbers unissued; (2) Certificates of Time Deposit - The
(16) Unissued and captured ATM cards board of directors of a bank is given the
and similar devices; discretion to determine the number of
(17) Access locks and keys to on-line signatories for the issuance of certificates
EDP terminals and similar devices; and of time deposit (CTDs).
(18) Access locks and keys to EDP For this purpose, all banks shall submit
mainframes and peripherals. to the appropriate department of the SES

§§ X185.6 - X185.9
08.12.31
their respective internal control measures (1) Bank drafts;

for the issuance of CTDs, the minimum of (2) Manager’s and cashier’s checks;
which shall include the following activities: (3) Promissory notes;
(a) Joint custody of unissued CTD forms; (4) Savings deposit accounts;
(b) Accounting for all issued/ cancelled (5) Demand deposit accounts;
CTDs; (6) CTDs;
(c) Signature requirement for the (7) Letters of credit;
issuance of CTDs; (8) Collection items;
(d) Counterchecking of issued CTDs (9) Official and provisional receipts;
against the tellers’ proofsheets/validated (10) Certificates of stocks;
slips; and (11) Loan accounts;
(e) Recording of CTD transactions. (12) Expense vouchers;
Any change in the internal control (13) Payment orders (incoming and
measures shall be submitted to the outgoing ) of TTs and EFTS;
appropriate department of the SES not later (14) Transfer requests through EFTS
than thirty (30) days prior to the involving bank’s accounts abroad;
implementation. For newly established (15) EDP batch transmittal slips of
banks, the requirement shall be submitted documents; and
not later than a month from the start of (16) Due to/from head office/branches
banking operations. tickets.
(3) Bank Drafts - The signature of two
(2) authorized officers should be required § X185.8 (2008 - X163.8) Rotation of
in the issuance of bank draft. duties
(4) Borrowings - The signature of at a. The duties of personnel handling
least two (2) authorized officers should be cash, securities and bookkeeping records
required. shall be rotated.
(5) All transactions giving rise to Due b. Rotation assignment shall be
to or Due from accounts and all instruments irregular, unannounced and long
of remittances evidencing these enough to permit disclosure of any
transactions particularly those involving irregularities or manipulations.
substantial amounts should be approved by c. Tellers/cashiers shall be temporarily
two (2) authorized officers. relieved of their duties during the actual count
of their cash accountabilities by BSP examiners
§ X185.7 (2008 - X163.7) Number or by internal/external auditors.
control
a. Sequence number controls shall § X185.9 (2008- X163.9) Independence
be incorporated in the accounting of the internal auditor
system and should be used in registering a. The by-laws shall provide for the
notes, in issuing official checks and in other position of internal auditor together with
similar situations.Bank management shall the duties and responsibilities, scope and
designate a person who is detached objectives of internal auditing.
from the banking operations involved to b. The internal auditor shall report
monitor said sequence number directly to the board of directors or to an
controls. audit committee composed of directors who
b. The following are the forms, do not hold executive positions in the bank.
instruments and accounts that shall be c. The internal auditor shall not install
number-controlled: nor develop procedures, prepare records

§§ X185.9 - X185.11
08.12.31
or engage in other activities which he (9) Reports on closed accounts and

normally reviews or appraises. returned checks shall be prepared daily.
(10) All current account statements
§ X185.10 (2008 - X163.10) Confirmation shall be mailed or sent electronically via
of accounts. At least once a year, the electronic mail (e-mail), or such other
internal auditing staff shall confirm by electronic means direct to depositors:
direct verification with bank clients, the Provided, That banks using the electronic
following: means of sending the current account
a. Balances of loans and credit statements shall have prior BSP-approved
accommodations of borrowers; internet banking service and shall strictly
b. Deposit account balances observe the required retention of electronic
particularly new deposit accounts, inactive data messages or electronic documents
or dormant accounts and closed accounts; under Section 13 of R.A. No. 8792,
c. Outstanding balances of otherwise known as the “Electronic
borrowings and other liabilities; and Commerce Act”.
d. Outstanding balances of Undelivered statements shall be
receivables/payables. retained by an organizational unit not
responsible for demand deposit
§ X185.11 (2008 - X163.11) Other account processing.
internal control standards (11) An officer shall be designated to
a. Deposit accounts attend to customers who report differences
(1) Entries to dormant account ledgers on their statements.
shall be verified and approved by a (12) Checkbooks shall be issued only
designated officer. His initials shall be against requisition forms signed by an
placed next to the entry on the ledger authorized signatory to the account.
sheet. (13) Banks shall adopt a system to
(2) Dormant accounts shall be establish the identity of their depositors.
segregated from active account ledgers b. Miscellaneous
with a separate subsidiary control. (1) Loan applications and related
(3) Signature cards for dormant documents shall be verified to ensure their
accounts shall be removed from active authenticity particularly the name,
files. residence, employment and current
(4) All new current accounts shall be reputation of the borrower.
approved by a designated officer. (2) Tellers paying checks to strangers
(5) Signature cards and deposit shall obtain positive identification of the
ledger sheets shall be authenticated by person and the account on which the
some form of validation. Subsequent checks are drawn should be verified.
changes shall also be validated. (3) No employee shall be permitted
(6) Signature cards and deposit to process transaction affecting his own
ledger sheets shall be accessible only to account.
authorized persons. (4) Tellers and other employees
(7) Deposit tickets shall be occasionally having contact with customers shall be
examined at irregular intervals to determine prohibited from preparing deposit ticket,
that postings are made on the actual date withdrawal slip or other forms for the
deposits are received. customer.
(8) Checks shall be cancelled as soon (5) All banks shall have a sound
as they have been paid and posted. recruitment policy.

§§ X185.11 - X186.1
08.12.31
(6) In the case of TBs, all accountable (4) Signature cards for dormant
officers and employees shall be bonded. accounts shall also be segregated from
active files and held under joint custody.
§ X185.12 (2008 - X163.12) Internal (5) Entries to dormant account ledgers
control procedures for dormant/inactive shall be verified and approved by a
accounts designated officer. His initials shall be placed
a. Definition of dormant or inactive next to the entry on the ledger sheet.
accounts (6) All inquiries on dormant accounts
(1) Current or checking accounts shall be coursed to one officer who
showing no activity (deposit or should obtain sufficient identification
withdrawals) for a period of one (1) year. from the inquirer to assure that he is
(2) Savings account showing no entitled to the information.
activity (deposit or withdrawals) for a (7) A trial balance of dormant account
period of two (2) years. ledgers shall be taken periodically and
b. Procedures for classification. Banks balances with the general control account by
shall review and segregate dormant an employee other than the bookkeeper.
accounts as herein defined at least once in (8) Dormant or inactive accounts shall
every semester. be verified directly with depositors.
c. Internal control measures (9) All transactions affecting dormant
(1) As a matter of policy, banks shall accounts shall be subject to audit by the
exert all efforts to prevent checking and internal auditor.
savings accounts from becoming dormant. (10) A semestral report on deposit
When it becomes apparent that an account accounts transferred to dormant shall be
is inactive, a short letter should be sent to rendered to bank management.
the depositor encouraging him to use his
account. Sec. X186 (2008 - X164) Internal Audit
In case of checking accounts, the banks Function. Internal audit is an independent,
shall ensure that the monthly statement of objective assurance and consulting function
accounts reach the depositors. If the established to examine, evaluate and
depositors cannot be located, the following improve the effectiveness of risk
steps should be undertaken: management, internal control, and
(a) Check any significant changes or governance processes of an organization.
fluctuations in the depositors’ account
balances over a period of time with emphasis § X186.1 (2008 - X164.1) Independence
on accounts with decreasing balances; of internal audit function. The internal
(b) Verify apparent reactivation audit function must be independent of the
entries, represented either by deposit or activities audited and from day-to-day
withdrawal, that appears to have internal control process. It must be free to
prevented the account from being report audit results, findings, opinions,
classified as dormant; and appraisals and other information to the
(c) Investigate any obvious alteration appropriate level of management. It shall
of the ledger records. have authority to directly access and
(2) Segregated dormant accounts shall communicate with any officer or
be placed under joint custody of two (2) employee, to examine any activity or
responsible officers/employees. entity of the institution, as well as to access
(3) A separate ledger control for any records, files or data whenever
dormant accounts shall be maintained. relevant to the exercise of its assignment.

§§ X186.1 - X186.4
08.12.31
The Audit Committee or senior The internal auditor of a TB,QB, trust

management should take all necessary entity or national Coop Bank must be a CPA
measures to provide the appropriate with at least five (5) years experience in
resources and staffing that would enable the regular audit (internal or external) of a
internal audit to achieve its objectives. TB, QB, trust entity or national Coop Bank
as auditor-in-charge, senior auditor or audit
§ X186.2 (2008 - X164.2) Scope. The manager or, in lieu thereof, at least three
scope of internal audit shall include: (3) years experience in the regular audit
a. Examination and evaluation of the (internal or external) of a UB or KB as
adequacy and effectiveness of the internal auditor-in-charge, senior auditor or audit
control systems; manager.
b. Review of the application and The internal auditor of an RB, NSSLA
effectiveness of risk management procedures or local Coop Bank must be at least an
and risk assessment methodologies; accounting graduate with two (2) years
c. Review of the management and experience in external audit or in the
financial information systems, including regular audit of an RB, NSSLA or local Coop
the electronic information system and Bank or, in lieu thereof, at least one (1)
electronic banking services; year experience in the regular audit
d. Assessment of the accuracy and (internal or external) of a UB, KB, TB, QB,
reliability of the accounting system and of trust entity or national Coop Bank as
the resulting financial reports; auditor-in-charge, senior auditor or audit
e. Review of the systems and manager.
procedures of safeguarding assets; A qualified internal auditor of a UB or
f. Review of the system of assessing a KB shall be qualified to audit TBs, QBs,
capital in relation to the estimate of trust entities, national Coop Banks, RBs,
organizational risk; NSSLAs, local Coop Banks, subsidiaries
g. Transaction testing and assessment and affiliates engaged in allied activities,
of specific internal control procedures; and and other FIs under BSP supervision.
h. Review of the compliance system A qualified internal auditor of a TB or
and the implementation of established national Coop Bank shall likewise be
policies and procedures. qualified to audit QBs, trust entities, RBs,
NSSLAs, local Coop Banks, subsidiaries
§ X186.3 (2008 - X164.3) Qualification and affiliates engaged in allied activities,
standards of the internal auditor. The and other FIs under BSP supervision.
internal auditor of a UB or a KB must be a
Certified Public Accountant (CPA) and § X186.4 (2008 - X164.4) Code of Ethics
must have at least five (5) years experience and Internal Auditing Standards. The
in the regular audit (internal or external) internal auditor should conform with the
of a UB or KB as auditor-in-charge, senior Code of Professional Ethics for CPAs and
auditor or audit manager. He must possess ensure compliance with sound internal
the knowledge, skills, and other auditing standards, such as the Institute of
competencies to examine all areas in Internal Auditors’ International Standards
which the institution operates. Professional for the Professional Practice of Internal
competence as well as continuing training Auditing (e-mail: standards@theiia.org;
and education shall be required to face up Web: http://www.theiia.org.) and other
to the increasing complexity and diversity supplemental standards issued by
of the institution’s operations. regulatory authorities/government

§§ X186.4 - X190.1
09.12.31
agencies. The Standards address subject to BSP supervision are shown in

independence and objectivity, professional Appendix 43.
proficiency, scope of work, performance of b. Sanctions. The applicable sanctions/
audit work, management of internal audit, penalties prescribed under Sections 36 and
quality assurance reviews, communication 37 of R.A. No. 7653 to the extent applicable
and monitoring of results. shall be imposed on the covered institution,
its audit committee and the directors
Secs. X187 - X188 (Reserved) approving the hiring of external auditors/
auditing firm who/which are not in the BSP
Sec. X189 (2008 - X165) Selection, list of selected auditors for covered
Appointment, Reporting Requirements and institutions for hiring, and/or retaining the
Delisting of External Auditors and/or services of the external auditor/auditing firm
Auditing Firm; Sanctions; Effectivity in violation of any of the provisions of this
Pursuant to Section 58, R.A. No. 8791, Section and for non-compliance with the
and the existing provisions of the executed Monetary Board directive under Item “K”
Memorandum of Agreement (MOA) dated in Appendix 43. Erring external auditors/
12 August 2009, binding the BSP, SEC, auditing firms may also be reported by the
Professional Regulation Commission (PRC) BSP to the PRC for appropriate disciplinary
– Board of Accountancy (BOA) and the action.
Insurance Commission (IC) for a simplified (As amended by Circular Nos. 660 dated 25 August 2009 and
and synchronized accreditation 529 dated 11 May 2006)
requirements for external auditor and/or
auditing firm, following are the revised rules Sec. X190 (2008 - X166) Audited Financial
and regulations that shall govern the Statements of Banks. The following rules
selection and delisting by the BSP of covered shall govern the utilization and
institutions which under special laws are submission of AFS of banks.
subject to BSP supervision. For purposes of this Section, AFS shall
Statement of policy. It is the policy of include the balance sheets, income
the BSP to ensure effective audit and statements, statements of changes in equity,
supervision of banks, QBs, trust entities and/ statements of cash flows and notes to
or NSSLAs including their subsidiaries and financial statements which shall include
affiliates engaged in allied activities and other among other information, disclosure of the
FIs which under special laws are subject to volume of past due loans as well as
BSP supervision, and to ensure that reliance loan-loss provisions. On the other hand,
by BSP and the public on the opinion of financial audit report shall refer to the AFS
external auditors and auditing firms by and the opinion of the auditor. The AFS
prescribing the rules and regulations that of banks with subsidiaries shall be
shall govern the selection, appointment, presented side by side on a solo basis
reporting requirements and delisting for (parent) and on a consolidated basis
external auditors and auditing firms of said (parent and subsidiaries).
institutions, subject to the provisions of and (As amended by Circular No. 540 dated 09 August 2006)
implementing regulations issued pursuant to
the aforesaid MOA. § X190.1 (2008 - X166.1) Financial
a. Rules and regulations. The revised audit. Banks shall cause an annual financial
rules and regulations that shall govern the audit by an external auditor acceptable to
selection and delisting by the BSP of covered the BSP not later than thirty (30) calendar
institutions which under special laws are days after the close of the calendar year or

§ X190.1
08.12.31
the fiscal year adopted by the bank. Report financial audit report. If no material
of such audit shall be submitted to the board weakness or breach is noted to warrant the
of directors or country head, in the case of issuance of an LOC, a certification under
foreign bank branches, and the appropriate oath stating that no material weakness or
department of the SES not later than 120 breach in the internal control and risk
calendar days after the close of the calendar management systems was noted in the
year or the fiscal year adopted by the bank. course of the audit of the bank shall be
The report to the BSP shall be accompanied submitted in its stead, together with the
by the: (1) certification by the external financial audit report.
auditor on the: (a) dates of start and Material weakness shall be defined as
termination of audit; (b) date of submission a significant control deficiency, or
of the financial audit report and certification combination of deficiencies, that results
under oath stating that no material weakness in more than a remote likelihood that a
or breach in the internal control and risk material misstatement of the financial
management systems was noted in the statements will not be detected or
course of the audit of the bank to the board prevented by the entity’s internal control.
of directors or country head; and (c) the A material weakness does not mean that
absence of any direct or indirect financial a material misstatement has occurred or
interest and other circumstances that may will occur, but that it could occur. A
impair the independence of the external control deficiency exists when the design
auditor; (2) Reconciliation Statement or operation of a control does not allow
between the AFS and the balance sheet and management or employees, in the normal
income statement for bank proper (regular course of performing their assigned
and FCDU) and trust department submitted functions, to prevent or detect
to the BSP including copies of adjusting misstatements on a timely basis. A
entries on the reconciling items; and significant deficiency is a control
(3) other information that may be required deficiency, or combination of control
by the BSP. deficiencies, that adversely affects the
In addition, the external auditor shall be entity’s ability to initiate, authorize,
required by the bank to submit to the board record, process, or report financial data
of directors or country head, a LOC reliably in accordance with generally
indicating any material weakness or breach accepted accounting principles. The
in the institution’s internal control and risk phrase more than remote likelihood shall
management systems within thirty (30) mean that future events are likely to occur
calendar days after submission of the or are 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 systems, the Monetary Board may, upon
certification under oath submitted in lieu recommendation of the appropriate
of the LOC and shall submit, within thirty department of the SES, require the financial
(30) banking days after receipt of the audit to be conducted by an external
reports, a copy of its resolution to the auditor acceptable to the BSP, at the
appropriate department of the SES. The expense of the institution concerned:
resolution shall show, among other things, Provided, further, That when circumstances
the actions(s) taken on the reports and the such as, but not limited to loans from
names of the directors 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 external auditor may also be allowed.
thereof, a copy of its resolution together Banks and other FIs under the
with said LOC to the appropriate concurrent jurisdiction of the BSP and COA
department of the SES. The resolution shall shall, however, submit a copy of the
show the action(s) taken on the findings annual audit report (AAR) of the COA to
and recommendations and, the names of the appropriate department of the SES
the directors present and absent, among within thirty (30) banking days after receipt
other things. of the report by the board of directors. The
The country head of foreign banks with AAR shall be accompanied by the:
branches in the Philippines shall submit a (1) certification by the institution concerned
report on the action taken by management on the date of receipt of the AAR by the
(head office, regional, or country, as the board of directors; (2) reconciliation
case may be) on the financial audit report statement between the AFS in the AAR and
and the certification under oath submitted the balance sheet and income statement
in lieu of the LOC within thirty (30) of bank proper (regular and FCDU) and
banking days after receipt thereof. trust department submitted to the BSP,
The country head shall likewise submit including copies of adjusting entries on the
a report on the action taken by reconciling items; and (3) other information
management on the LOC within thirty (30) that may be required by the BSP.
banking days after receipt thereof. The board of directors of said
The LOC shall be accompanied by institutions, in a regular or special meeting,
the certification of the external auditor shall consider and act on the AAR, as well
of the date of its submission to the board as on the comments and observations and
of directors or country head, as the case shall submit, within thirty (30) banking
may be. days after receipt of the report, a copy of
Government-owned or-controlled its resolution to the appropriate department
banks, including their subsidiaries and of the SES. The resolution shall show the
affiliates, as well as other FIs under BSP action(s) taken on the report, including on
supervision which are under the the comments and observations and the
concurrent jurisdiction of the Commission names of the directors present and absent,
on Audit (COA) shall be exempt from the among other things.
aforementioned annual financial audit by The financial audit report required to
an acceptable external auditor: Provided, be submitted shall in all respect be PFRS/
That when warranted by supervisory PAS compliant: Provided, That banks shall

§§ X190.1 - X190.4
08.12.31
submit to the BSP adjusting entries (3) Inability of the auditor to confirm
reconciling the balances in the financial that the claims of creditors are still covered
statements for prudential reporting with by the bank’s assets.
that in the audited annual financial The disclosure of information by the
statements. external auditor to the BSP shall not be a
Banks as well as external auditors shall ground for civil, criminal or disciplinary
strictly observe the requirements in the proceedings against the former.
submission of the financial audit report and Bank management shall be present
reports required to be submitted under during discussions or at least be informed
Appendix 61. of the adverse findings in order to preserve
The reports and certifications of the concerns of the supervisory authority
institutions concerned, schedules and and external auditors regarding the
attachments required under this Subsec. confidentiality of information.
shall be considered Category B b. Sanction. The auditing firm(s) shall
reports, delayed submission of which shall be blacklisted by the Monetary Board for a
be subject to the penalties under Subsec. period as the Board may deem appropriate
X192.2b(1)b. for their failure to perform their duty of
(As amended by Circular Nos. 554 dated 22 December 2006 and reporting to the BSP any matter adversely
540 dated 09 August 2006) affecting the condition or soundness of the
bank. Banks shall not be allowed to engage
§ X190.2 (2008 - X166.2) Posting of the services of the blacklisted auditing firm.
audited financial statements. Local banks
shall post in conspicuous places in their § X190.4 (2008 - X166.4) Disclosure
head offices, all their branches and other requirement in the notes to the audited
banking offices, as well as in their financial statements. Banks shall require
respective websites, their latest financial their external auditors to include the
audit report. following additional information in the
The abovementioned documents shall notes to financial statements:
also be posted by foreign bank branches a. Basic quantitative indicators of
in all their banking offices in the financial performance such as return on
Philippines. average equity, return on average assets
(As amended by Circular No. 540 dated 9 August 2006) and net interest margin;
For purposes of computing the indicators,
§ X190.3 (2008 - X166.3) Disclosure the following formulas shall be used:
of external auditor’s adverse findings to
the Bangko Sentral; sanction (1) Return on Average Equity (%) =
Net Income (or Loss) after Income Tax x 100
a. Findings to be disclosed. Banks shall Average Total Capital Accounts
require their external auditors to report to
the BSP any matter adversely affecting the Where:
Average Total = Sum of Total Capital Accounts as of the 12
condition or soundness of the bank, such Capital month-ends in the calendar/fiscal year
as, but not limited to: Accounts adopted by the Bank
12
(1) Any serious irregularity, including (2) Return on Average Assets (%) =
those involving fraud or dishonesty, that Net Income (or Loss) after Income Tax x 100
Average Total Assets
may jeopardize the interest of depositors and
creditors; Where:
(2) Losses incurred which substantially Average = Sum of Total Assets as of the 12 month-ends in
Total the calendar/fiscal year adopted by the Bank
reduce the capital funds of the bank; and Assets 12

§§ X190.4 - X190.5
08.12.31
(3) Net Interest = Net Interest Income x 100 h. Aggregate amount of secured
Margin (%) Average Interest Earning Assets
liabilities and assets pledged as security; and
Where: i. Accounting policies which shall
Net = Total Interest Income – Total Interest Expense include, but shall not be limited to, general
Interest
Income accounting principles, changes in accounting
policies/practices, principles of consolidation,
Average = Sum of Total Interest Earning Assets as of the
Interest 12 month-ends in the calendar/fiscal year
policies and methods for determining when
Earning adopted by the Bank assets are impaired, recognizing income on
Assets 12 impaired assets and losses on non-
performing credits, income recognition,
b. Risk-based capital adequacy ratio valuation policies and accounting policies
under Section 34 of R.A. No. 8791/ on securitizations, foreign currency
Secs.X115 and X116; translations, loan fees, premiums and
c. Concentration of credit as to discounts, repurchase agreements, premises/
industry/economic sector where fixed assets, income taxes and derivatives.
concentration is said to exist when total loan
exposures to a particular industry/economic § X190.5 (2008 - X166.5) Disclosure
sector exceeds thirty percent (30%) of total requirements in the annual report. UBs,
loan portfolio; KBs, and TBs with at least P1.0 billion
d. Breakdown of total loans as to resources shall prepare an annual report
secured and unsecured and breakdown of which shall include, in addition to the
secured loans as to type of security; audited financial statements and other usual
e. Total outstanding loans to bank’s information contained therein, a discussion
DOSRI, percent of DOSRI loans to total loan and/or analysis of the following information:
portfolio, percent of unsecured DOSRI loans a. Financial performance;
to total DOSRI loans, percent of past due b. Financial position and changes
DOSRI loans to total DOSRI loans and therein;
percent of non-performing DOSRI loans to c. Overall risk management philosophy
total DOSRI loans; (i.e., a general statement of the risk management
f. Nature and amount of policy adopted by the bank's board of
contingencies and commitments arising directors which serves as the basis for the
from off-balance sheet items [include direct establishment of its risk management system),
credit substitutes (e.g., export LCs risk management system and structure;
confirmed, underwritten accounts unsold), d. Qualitative and quantitative
transaction-related contingencies (e.g., information on risk exposures (credit,
performance bonds, bid bonds, standby market, liquidity, operational, legal and
LCs), short-term self-liquidating trade-related other risks); and
contingencies arising from the movement e. Basic business management and
of goods (e.g., sight/ usance domestic LCs, corporate governance information such as
sight/usance import LCs), sale and the bank’s organizational structure, incentive
repurchase agreements not recognized in structure including its remuneration policies,
the balance sheet; interest and foreign nature and extent of transactions with
exchange rate related items; and other affiliates and related parties.
commitments; Additional disclosure requirements are
g. Provisions and allowances for found under Parts VIII and V of Appendices
losses and how these are determined; 63b and 63c, respectively.

§§ X190.6 - X191.3
11.12.31
§ X190.6 (2008 - X166.6) Posting and for BSP use, reconciliations of their ledger
submission of annual report. A copy of the accounts with the BSP prescribed Manual
latest annual report shall be posted by the of Accounts during regular or special bank
bank in a conspicuous place in its head examinations.
office, all its branches and other offices. Any bank which fails or refuses to adopt
The deadline for the submission of the the prescribed Manual of Accounts, or any
annual report to the appropriate department of the applicable accounts contained
of the SES is 180 calendar days after the therein, or adopts any general ledger
close of the calendar or fiscal year adopted account not specified in the said Manual of
by the bank. Accounts without prior written approval of
the Governor of the BSP, shall be penalized
Sec. X191 (2008 - X161) Records. Banks by revocation or suspension of its authority
shall have a true and accurate account, to engage in quasi-banking function.
record or statement of their daily
transactions, particularly those referring to § X191.2 (2008 - X162.16) Financial
their deposit liabilities. The making of any Reporting Package. In line with the
false entry or the willful omission of entries adoption of the Philippine Financial
relevant to any transaction, is a ground for Reporting Standards (PFRS) and Philippine
the imposition of administrative sanctions Accounting Standards (PAS) effective the
under Section 37 of R.A. No. 7653 and the annual financial reporting period
disqualification from office of any director beginning 01 January 2005, the Manual
or officer responsible therefor under of Accounts and the BSP reportorial
Section 9-A of R.A. No. 337, as amended. requirements consisting of the
This is without prejudice to their criminal Consolidated Statement of Condition
liability under Sections 35 and 36 of R.A. (CSOC), Consolidated Statement of
No. 7653 and/or the applicable provisions Income and Expense (CSIE) and their
of the Revised Penal Code. supporting schedules are amended
through the issuance of the new Financial
§ X191.1 (2008 - X161.1) Adoption of Reporting Package (FRP) for banks.
the Manual of Accounts. Banks shall strictly The general features as well as the
adopt the Manual of Accounts prescribed implementing guidelines of the FRP are
by the BSP for recording daily transactions provided in Appendix 77.
including reportorial and publication (Circular No. 512 dated 03 February 2006, as amended by
Circular No. 691 dated 23 June 2010, M-2010-016 dated 16
requirements. June 2010 and Circular No. 568 dated 08 May 2007)
Local branches of foreign banks may
continue using their parent bank’s general § X191.3 (2008 - X161.2) Philippine
ledger accounts: Provided, That published Financial Reporting Standards/
statements and reports submitted to the BSP Philippine Accounting Standards
follow the account definitions in the BSP- Statement of policy. It is the policy of
prescribed Manual of Accounts: Provided, the BSP to promote fairness, transparency
further, That the mathematical formulas for and accuracy in financial reporting. It is in
reconciling such published statements and this light that the BSP aims to adopt all PFRS
submitted reports with the general ledger and PAS issued by the ASC to the greatest
accounts of the bank are submitted to the extent possible.
appropriate department of the SES: Banks shall adopt the PFRS and PAS
Provided, finally, That said banks prepare which are in accordance with generally

§ X191.3
11.12.31
accepted accounting principles in recording recorded under “Unearned Income-Others”,

transactions and in the preparation of which shall be amortized over the term of the
financial statements and reports to BSP. loan using the effective interest method.
However, in cases where there are The provisions on government grants shall
differences between BSP regulations and be applied retroactively to all outstanding
PFRS/PAS as when more than one (1) option government grants received. FIs that adopted
are allowed or certain maximum or an accounting treatment other than the
minimum limits are prescribed by the PFRS/ foregoing shall consider the adjustment as a
PAS, the option or limit prescribed by BSP change in accounting policy, which shall be
regulations shall be adopted by banks. accounted for in accordance with PAS 8.
For purposes hereof, the PFRS/PAS shall Notwithstanding the exceptions in Items
refer to issuances of the ASC and approved “a”, “b” and “c”, the audited annual financial
by the Professional Regulation Commission statements required to be submitted to the BSP
(PRC). in accordance with the provision of Subsec.
Accounting treatment for prudential X190.1 shall in all respect be PFRS/PAS
reporting. For prudential reporting, banks compliant: Provided, That FIs shall submit to
shall adopt in all respect the PFRS and PAS the BSP adjusting entries reconciling the
except as follows: balances in the financial statements for
a. In preparing consolidated financial prudential reporting with that in the audited
statements, only investments in financial annual financial statements.
allied subsidiaries except insurance Guidelines on the adoption of PFRS 9.
subsidiaries shall be consolidated on a line- The guidelines governing the implementation/
by-line basis; while insurance and non- early adoption of the Philippine Financial
financial allied subsidiaries shall be Reporting Standards (PFRS 9) Financial
accounted for using the equity method. Instrument are shown in Appendix 97.
Financial/non-financial allied/non-allied Penalties and sanctions. The following
associates shall be accounted for using the penalties and sanctions shall be imposed
equity method in accordance with the on FIs and concerned officers found to
provisions of PAS 28 “Investments in violate the provisions of Appendix 97:
Associates”. (1) Fines to be imposed on FIs for each
b. For purposes of preparing separate violation, reckoned from the date the
financial statements, financial/non-financial violation was committed up to the date it
allied/non-allied subsidiaries/associates, was corrected:
including insurance subsidiaries/associates, (i) P20,000/day for UBs;
shall also be accounted for using the equity (ii) P10,000/day for KBs;
method; and (iii) P2,000/day for TBs; and
c. Banks shall be required to meet the (iv) P1,000/day for RBs/Coop Banks.
BSP recommended valuation reserves. (2) Sanctions to be imposed on
Government grants extended in the form concerned officers:
of loans bearing nil or low interest rates shall (i) First offense – reprimand the officers
be measured upon initial recognition at its responsible for the violation; and
fair value (i.e., the present value of the future (ii) Subsequent offenses - suspension of
cash flows of the financial instrument ninety (90) days without pay for officers
discounted using the market interest rate). responsible for the violation.
The difference between the fair value and (As amended by Circular Nos. 733 dated 05 August 2011 and
the net proceeds of the loan shall be 708 dated 10 January 2011 and 572 dated 22 June 2007)

§§ X191.4 - X192.1
11.12.31
§§ X191.4 - X191.9 (Reserved) b. Authorized signatories

(1) Category A-1 reports shall be signed
§ 1191.9 (Reserved) by the bank’s chief executive officer or, in
his absence, by the executive vice president,
§ 2191.9 (Reserved) and by the comptroller or, in his absence,
by the chief accountant, or officers holding
§ 3191.9 (2008 - 3161.9) Retention and equivalent positions.
disposal of records of rural/cooperative (2) Category A-2 reports shall be signed
banks. To guide RBs/Coop Banks in the by the president, executive vice president,
disposition of their records and documents vice president or by an officer holding
which no longer need to be retained and in equivalent position.
determining which of the records are of (3) Category A-3 and Category B reports
permanent value and therefore should be shall be signed by officers or their alternates,
preserved, RBs/Coop Banks shall follow the duly designated by the board of directors.
guidelines on retention and disposal of records The designated signatories of Categories
in Appendix 50. A-1, A-2, A-3 and B reports including their
(As amended by Circular No. 720 dated 06 May 2011) specimen signatures shall be contained in a
resolution approved by the board of
Sec. X192 (2008 - X162) Reports. Banks shall directors. A copy of the board resolution
submit to the appropriate department of the covering the initial designation and
SES all their statements and/or periodic reports subsequent change(s) in signatories as well
listed in Appendix 6 in such frequency and as specimen signatures of the signatories
deadlines indicated therein. In the preparation and alternates, shall be submitted to the
of said statements/reports, banks shall use and appropriate department of the SES in such
strictly follow the forms prescribed by the BSP. frequency and within the deadline indicated
In line with the policy direction of R.A. in Appendix 6.
No. 8792 (E-Commerce Act), the BSP is (4) Reports in computer media that are
strongly encouraging banks to submit their submitted by banks shall be subject to the
regular reports to the BSP in electronic form. same requirements regarding authorized
However, the BSP cannot presently signatories.
guarantee the security/confidentiality of data (5) Any report submitted to the BSP that
in the course of electronically transmitting is signed by an officer who is not listed or
reports to BSP. BSP recommends that sensitive included in any of the resolutions mentioned
or confidential information be provided by above, shall be considered as not having been
ordinary post or courier. The BSP will accept submitted at all.
no responsibility for electronic messages/ (6) All authorized agent banks shall
reports/information that may be hacked or submit to the Director, Branch Operations,
cracked, intercepted, copied or disclosed BSP, the updated specimen signatures of Senior
outside BSP’s information system. Bank Officers in their respective Head Offices
who are authorized to authenticate the
§ X192.1 (2008 - X162.1) Categories and signatures of their provincial branch officers
signatories of bank reports transacting business with the BSP Regional
a. Categories of reports. Reports required Offices/Branches.
to be submitted to the BSP by banks are The BSP Branch Operations shall be
grouped into Category A-1, Category A-2, advised of any changes in authorized branch
Category A-3 and Category B reports as signatories, as well as authenticating Head
indicated in Appendix 6. Office Senior Officers.

§§ X192.1 - X192.2
11.12.31
c. Deadline for submission of reports It shall also include the interview of the
(1) Regular reports. Unless otherwise directors and personnel of any bank
specified, the deadlines for submission of including its Electronic Data Processing
reports enumerated in Appendix 6, shall be (EDP) servicer. Books and records shall
reckoned on the basis of banking days. For include, but not limited to, data and
this purpose, banking days shall be information stored in magnetic tapes, discs,
understood to mean Monday through Friday diskettes printouts, logbooks and manuals
or banking days of the BSP. kept and maintained by the bank or by the
(2) Call Reports. The deadline of EDP servicer, that are necessary and
submission of call reports shall be specified incidental to the use of EDP systems by the
in the letter calling for the report. bank.
(4) Refusal to permit examination shall
§ X192.2 (2008 - X162.2) Sanctions mean any act or omission which impedes,
in case of willful delay in the submission delays or obstructs the duly authorized BSP
of reports/refusal to permit examination officer/examiner/employee from conducting
For willful delay in the submission of an examination, including the act of refusing
reports, specific sanctions shall be to accept or honor a letter of authority to
imposed in accordance with the following examine presented by any officer/examiner/
rules: employee of the BSP.
a. Definitions. For purposes of this b. Fines for willful delay in the
Subsection, the following definitions shall submission of reports.
apply. (1) Amount of fine. Any bank which
(1) Report shall refer to any report or shall incur willful delay in the submission
statement required to be submitted by a of required reports shall pay a fine in
bank to the BSP. accordance with the following schedule:
(2) Willful delay in the submission of (a) For Category A-1, A-2 and A-3
reports shall refer to the failure of any bank reports
to submit on time the report defined in Item (1) UBs/KBs - P1,200
“a(1)” above. Failure to submit a report on (2) TBs - 600
time due to fortuitous events, such as fire (3) RBs/Coop Banks - 180
and other natural calamities, and public per day of default until the report is filed
disorders including strike or lockout with the BSP: and
affecting a bank as defined in the Labor (b) For Category B reports
Code, or of a national emergency affecting (i) UBs/KBs - P 240
operations of banks, shall not be considered (ii) TBs - 120
as willful delay.1 (iii) RBs/Coop Banks - 60
(3) Examination shall include, but need per day of default until report is filed with
not be limited to, the verification, review, the BSP.
audit, investigation and inspection of the In the implementation of the foregoing
books and records, business affairs, rules, delay or default shall start to run on
administration and financial condition of any the day following the last day required for
bank including the reproduction of banking the submission of reports. However, should
records, as well as the taking possession of the last day of filing fall on a non-working
the books and records and keeping them day in the locality where the reporting bank
under BSP’s custody after giving proper is situated, delay or default shall start on the
receipts therefor. day following the next banking day. The due
1
See Appendix 89

§§ X192.2 - X192.4
11.12.31
date/deadline for submission of reports to (b) The fine shall be imposed starting on
BSP as prescribed under Sec. X192 governing the day following the receipt by the said
the frequency and deadlines indicated in department of the written report submitted
Appendix 6 shall be automatically moved by the BSP officer/examiner/employee
concerned regarding the continued refusal
to the next banking day whenever a half-
of the bank to permit the desired
day suspension of business operations in examination.
government offices is declared due to an d. Manner of payment or collection
emergency such as typhoon, floods, etc. of fines. Subsec. X902.1 shall be observed
Delayed schedules/attachments and in the collection of fines from banks for
amendments shall be considered late willful delay in the submission of reports
reporting subject to the above penalties. or for refusal to permit examination.
(2) Manner of filing. For the purpose of e. Other penalties. The imposition of
establishing delay or default, the submission the foregoing penalties shall be without
of reports shall be effected by filing them prejudice to imposition of the other
administrative sanctions and to the filing of a
with the appropriate department of the SES
criminal case as provided for in other
or with the BSP Regional Offices, or by provisions of law.
sending them by registered mail or by f. Appeal to the Monetary Board. An
special delivery through a private courier, aggrieved bank may appeal to the Monetary
unless otherwise specified in the circular or Board any fine imposed by the BSP.
memorandum of the BSP. (As amended by M-2011-056 dated 10 November 2011, M-2011-
In the first case, the date of 055 dated 17 October 2011, M-2011-043 dated 12 August 2011,
acknowledgment by the appropriate M-2011-007 dated 04 February 2011, M-2010-39 dated 03
department of the SES or the BSP Regional November 2010, M-2010-007 dated 23 April 2010, M-2009-040
Office appearing on the copies of such dated 30 October 2009, M-2009-038 dated 08 October 2009, M-
reports filed or submitted, and in the second 2009-037 dated 15 October 2009, M-2009-036 dated 07 October
case, the date of mailing postmarked on the 2009 and Circular 585 dated 15 October 2007)
envelope or the date of the registry receipt
or the date of special delivery receipt, shall § X192.3 (2008 - X162.3) Submission
be considered as the date of filing. of certain required information. Banks
c. Fines for refusal to permit examination. shall submit to the appropriate department
(1) Amount of fine - A bank which shall of the SES the information on bank’s profile
willfully refuse to permit examination shall required in Appendix 7. Any change in any
pay a fine of P3,000 daily from the day of of the required information submitted, after
refusal and for as long as such refusal lasts. the initial submission, shall be reported to
(2) Basis and effectivity of the the said department immediately.
imposition of fine. Banks shall likewise submit to the said
department any or all of the documents/
(a) The BSP officer/examiner/employee
information on bank’s organizational
shall report the refusal of the bank to permit
structure and operational policies
examination to the head of the appropriate
enumerated in Appendix 8. Any
department of the SES, who shall forthwith subsequent change/issuance should be
make a written demand upon the bank furnished the department within fifteen (15)
concerned for such examination. If the bank banking days from such change/issuance.
continues to refuse said examination
without any satisfactory explanation thereof, § X192.4 (2008 - X162.4) Report on
the BSP officer/examiner/employee crimes/losses. Banks shall report on the
concerned shall submit a report to that effect following matters to the appropriate
to the said department head. 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
08.12.31
§ X192.6 (2008-X162.6) Reconciliation § X192.8 (2008 - X162.8) Bangko

of head office and branch transactions Sentral offices, where reports are
Banks shall prepare reconciliation submitted. Submission of BSP periodic or
statements covering transactions between call reports shall be as follows:
the head office and all its branches within a. All banking offices shall submit
thirty (30) banking days after the end of the required reports in accordance with
each month. Appendix 6 to the BSP, Manila or to the
All items which are unresponded or nearest BSP Regional Offices: Provided,
outstanding in the reconciliation statement That the head office of a bank may submit
for more than (6) months as of to the SDC in electronic form the batched
reconciliation statement date shall be copy of all its banking units’ Quarterly
reported, with explanations/reasons for Statement of Condition and Statement of
their being outstanding, to the appropriate Income and Expenses by Banking Unit
department of the SES in such frequency in behalf of its branches and other
and within the deadline set in Appendix 6. offices;
The reconciliation statement shall be b. Where a particular report form calls
made available to any authorized bank for distribution of copies to other
examiner for inspection/examination departments of the BSP, the bank
without need of advance notice. concerned shall furnish said copies of the
A copy of the year-end reconciliation report direct to the respective departments
statement covering transactions between the of the BSP; and
bank’s head office and all its branches shall c. As an exception to Item “a” above,
be furnished the said department not later the duplicate copy of the bio-data for
than the end of January of the following year. directors/officers shall be submitted to the
SDC of the BSP.
§ X192.7 (2008 - X162.7) List of
stockholders and their stockholdings § X192.9 (2008 - X162.9) Publication/
a. Banks shall submit to the Posting of balance sheet
appropriate department of the SES a. UBs/KBs, TBs, RBs and Coop Banks
annually a complete list of stockholders with resources of P1.0 billion and above
and their stockholdings in the prescribed (1) Banks belonging to this category
form within the deadline indicated in shall accomplish the prescribed form and
Appendix 6. publish their quarterly Balance Sheet (BS)
b. Any change in the list shall also be as of the cut-off date indicated in the call
reported to the said department in such letter issued by the SES.
frequency and within the deadline The Consolidated Balance Sheet (CBS)
indicated in Appendix 6, indicating the of a bank and its subsidiaries and affiliates
name(s) and/or stockholdings involved shall be published side by side with the
which is/are to be cancelled or replaced, BS of its head office and its branches/other
and the new name(s) and/or offices.
stockholdings which shall be included (2) The CBS of the bank and its
for that quarter. In case no change subsidiaries and affiliates shall be
occurred during a particular quarter, the prepared in accordance with the rules of
report shall provide a notation, viz “no consolidation provided under the
change(s) since last report submitted for Financial Reporting Package (FRP), in
quarter ended, , 20 ”. which case, only financial allied

§ X192.9
08.12.31
subsidiaries, except subsidiary insurance the SES of the BSP, in a newspaper of

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

§§ X192.9 - X192.11
08.12.31
(j) Percent compliance with Magna d. Deferment of publication

Carta - 6% for Small Enterprise requirement.
(k) Percent compliance with Magna The abovementioned publication
Carta - 2% for Medium Enterprise requirement may be deferred by the
(l) CAR on Solo Basis under Appendix Monetary Board by at least five (5)
63b for UBs/KBs, TBs, and RBs that are affirmative votes upon application by the
subsidiaries of UBs/KBs. For stand-alone bank concerned during periods of national
TBs, RBs and Coop Banks, Sec. X116 shall and/or local emergency or of imminent
apply. panic which directly threaten monetary
(i) Total CAR and banking stability.
(ii) Tier 1 CAR The amended prescribed form for
(2) CBS (parent bank and financial the published BS shall be used starting
allied subsidiaries excluding subsidiary with the quarter-end September 2007
insurance companies) reports.
(a) List of financial allied subsidiaries (As amended by Circular No. 576 dated 08 August 2007)
(excluding subsidiary insurance
companies) § X192.10 (2008-X162.10) Consolidated
(b) List of subsidiary insurance financial statements of banks and their
companies subsidiaries engaged in financial allied
(c) CAR on consolidated basis undertakings. Banks shall submit after the
(i) Total CAR end of the calendar year or the end of the
(ii) Tier 1 CAR fiscal year adopted by the bank their
For purposes of additional information, consolidated financial statements and
all amounts and ratios shall be as of the supported by the individual annual
same call date. However, the basis for financial statements of their subsidiaries
computing the ROE shall be the latest engaged in financial allied undertakings.
quarter immediately preceding the call date For purposes of this Subsection, the
using the following formula: consolidated financial statements shall
Return on Average Equity (%) =
conform to the guidelines of PAS 27
Net Income (or Loss) after Income Tax x 100 “Consolidated and Separate Financial
Average Total Capital Accounts
Statements” except that for purposes of
consolidated financial statements, the
Where net income/(loss) after tax and
average total capital accounts shall be: provisions of Subsec. X191.3a shall
apply.
Net Income The consolidated financial statements
After Tax Average Total Capital
Quarter(loss) (NIAT) Accounts and the supporting individual financial
March Quarter end Sum of end-month capital statements of their subsidiaries shall be
NIAT accounts (December - submitted to the appropriate department
multiplied by 4. March) divided by 4.
June Semester end Sum of end-month capital of the SES within the deadline indicated in
NIAT accounts (December - Appendix 6.
multiplied by 2. June) divided by 7.
Sept. Nine (9) mos. Sum of end-month capital
NIAT accounts (December - § X192.11 (2008 - X162.11) Reports
multiplied by September) divided by10. of other banking offices. Extension offices
1.33333.
Dec. Year end Sum of end-month capital of banks which maintain separate books
NIAT accounts (December - of accounts shall be subject to all reporting
December) divided by 13. requirements of a regular branch.

§§ X192.11 - X192.12
08.12.31
An extension office whose record of requested to submit to the appropriate

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

§§ X192.13 - X192.16
11.12.31
§ X192.13 (Reserved) § 2192.13 (Reserved)
§ 1192.13 (2008 - §1162.13) Additional § 3192.13 (Reserved)

reports from UBs/KBs
a. Volume and weighted average § X192.14 (2008 - X162.14) Reports
interest rates of deposits and loans. Data of strikes and lockouts. Banks through
on the volume of transactions and weighted their president or chief executive officer
average interest rates of certificates of time shall immediately apprise the Deputy
deposits and secured/unsecured loans Governor of the SES of the BSP on the
granted, classified by maturity, and status of strikes/lockouts involving their
outstanding savings deposits classified by banks, if unsettled after seven (7) calendar
interest rates, shall be prepared daily (except days. The bank shall disclose the following
data on savings deposits which shall be pertinent information on the strike/
prepared weekly) and submitted weekly by lockout:
all head offices of UBs/KBs to the a. Cause of the strike/lockout and
Department of Economic Research of the bank management’s position on its
BSP not later than 4:00 PM on Thursday legality; and
after end of reference week. b. Bank operations affected.
b. Short-term prime rates. All UBs and
KBs shall submit in the prescribed form a § X192.15 (2008 - X162.15) Report on
report on the volume and interest rates on the Sworn Statement on Real Estate/
credit line availments under short-term Chattel Transactions.
prime rates in such frequency and within (Deleted by Circular No. 737 dated 19 September 2011)
the deadline indicated in Appendix 6.
c. (Deleted by Cir. No. 405 dated § X192.16 Notarized contracts/
28 August 2003). agreements between banks and
d. Foreign Exchange Position Report their related microfinance (MF)
Banks may be allowed to submit on a non-governmental organizations
weekly basis the notarized certification (NGO’s)/foundations. Business relationships
signed by the bank’s president/CEO/country between banks and their related MF NGO’s/
manager and the treasurer to cover the daily foundations shall be covered by notarized
hard copies of Schedule 13, FX Form I and contracts/agreements specifying the nature
CFXPR pertaining to each day of the week. of transactions and enumerating the terms
Delayed submission of the notarized and conditions thereof.
certification shall be subject to monetary Banks shall submit said notarized
penalty, as follows: contracts/agreements within fifteen (15)
Daily Penalty banking days from the date of meeting of
1st banking day of P6,000.00 (equivalent the board of directors approving said
delay P1,200.00 per day for contracts/agreements.
five (5) report dates covered Said notarized contracts/agreements
by the certification on the
shall be considered Category A-3 reports.
assumption that the five (5)
weekdays of the reference
Submission of said reports shall become
week are all banking days) effective starting with the reporting period
2nd banking day of P1,200.00/day ended 30 September 2011.
delay and onwards (Circular No. 725 dated 16 June 2011)

§§ X193 - X196.2
11.12.31
O. PROMPT CORRECTIVE ACTION Secs. X194 - X195 (Reserved)

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

following conditions:
Section X201 Authority to Accept or a. Submission of a certification signed
Create Demand Deposits. Banks may by the President/Chairman of the Board of
accept or create demand deposits subject the bank stating that the requirements
to withdrawal by check. enumerated under Subsec. X201.1 have
A UB/KB may accept or create demand been complied with up to the day before
deposits subject to withdrawal by check, the checking account services are actually
without prior authority from the BSP. 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 BSP. (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 clearing with
create demand deposits for thrift banks/ the PCHC/BSP and has complied with the
rural banks/cooperative banks. In addition minimum capital required for commercial
to the Standard Pre-qualification banks, thru which it shall participate in the
Requirements for the Grant of Banking check clearing system; and
Authorities enumerated in Appendix 5, a c. That it has complied with all other
TB/RB/Coop Bank applying for authority to conditions that the BSP may impose.
accept or create demand deposits shall also The applicant bank shall submit a written
comply with the following requirements: notice to the appropriate supervising and
a. The applicant TB/RB/Coop Bank examining department of the BSP of the
must have complied with the minimum actual date when the demand deposit
capital required under Subsec. X111.1. service is offered to the public not later than
The terms capital and net assets shall ten (10) banking days from such offering of
have the same meaning as in Sec. X111. the service.
b. It has neither unpaid assessment due
nor past due obligations with the PDIC; and § X201.3 Sanctions. If any part of the
c. The applicant bank must have been certification submitted by the bank as
examined by the BSP within one (1) year required in these guidelines is found to be
prior to the date of submission of complete false, the following sanctions shall be
documentary requirements with the Central imposed, without prejudice to the sanctions
Applications and Licensing Group (CALG). under Section 35 of R.A. No. 7653.
(As amended by Circular Nos. 696 dated 29 October 2010, a. On the bank
674 dated 10 December 2009 and 667 dated 01 October 2009) Suspension of its authority to accept or
create demand deposits for one (1) year.
§ X201.2 Requirements for accepting b. On the certifying officer
demand deposits. After a TB’s/RB’s/Coop A fine of P5,000 per day from the time
Bank’s application to accept demand the certification was made up to the time
deposits has been approved, it may actually the certification was found to be false.
Manual of Regulations for Banks Part II - Page 1

§§ X202 - X203
10.12.31
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:
of funds shall be returned not later than 7:30
1. The drawee bank shall affix to the
a.m. on the clearing day immediately
check a return stamp, indicating therein the
following the original date of presentation
date when the check is returned and the
of the COCI to PCHC or RCC.1
reason for the refusal to pay the same to the
______________________
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
holder thereof. insufficient funds or credit, closed account

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

§§ X203 - X204
10.12.31
through the clearing system shall be affected by the COCI later returned due to
returned by the drawee bank to the holder 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 BSP and relevant PCHC Clearing
drawee bank to the negotiating bank not later House Rules and Regulations. 2
than the afternoon regular clearing. (3) COCI not Coursed Through the
(1) For Local Exchanges Clearing System
There shall be two (2) separate clearing A COCI dishonored due to technical
windows for COCIs returned due to reasons which was not coursed through the
technical reasons in the Integrated GM LX clearing system shall be returned by the
and RLX. drawee bank to the holder or the negotiating
The settlement of interbank transactions bank, as the case may be, not later than the
vis-àvis covering reserve requirement/ banking day following the date the COCI is
deficiency of banks’ DDA is shown in presented for payment with the drawee
Appendix 39. bank.
(a) AM Returned COCI Clearing – The The negotiating bank shall, in turn,
AM returned COCI clearing window for return a COCI dishonored due to technical
COCIs dishonored due to technical reasons reasons to the holder not later than the
in the Integrated GM LX and in the RLX shall banking day following its receipt of the
be conducted from 2:00 AM to 7:30 AM dishonored COCI from the drawee bank.
on the clearing day immediately following (As amended by Circular Nos. 705 dated 29 December 2010
the original date of presentation of the COCI and 681 dated 08 February 2010)
to PCHC or RCC. 1
Returned COCI in the AM clearing Sec. X204 Current Accounts of Bank
window shall be given value on the same Officers and Employees. As a general rule,
date as the date of original presentation of officers and employees of banks, their
the COCI to PCHC or RCC. The amount of spouses and relatives within the second
debits and credits on the date of original degree of consanguinity and affinity,
presentation shall be reversed to the extent including partnerships, associations or
of the amount of credits and debits arising corporations in which such officers and
from the returned COCI. The process employees, their spouses and relatives
restores the balances of the demand deposits within the second degree of consanguinity
of banks with the BSP to their position prior and affinity, individually or as a group, own
to the settlement of the clearing results or control at least a majority of the capital
1
2
Ibid

§§ X204 - X205
10.12.31
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
shall be monitored by a designated officer arrangements with UBs/KBs. Other banks
who shall be responsible for ensuring that may indirectly participate through
accounts of officers and staff are properly maintenance of DDAs with UBs/KBs as
maintained. Any irregularity in the account settlement account for demand deposit or
activity shall be promptly investigated and NOW accounts of TBs/RBs.
reported to the appropriate management b. Banks authorized to participate
level; directly in the clearing in PCHC shall be
1

§§ X205
10.12.31
subject to the following measures to manage (3) Provided the overdraft does not
the settlement risks: exceed the ceiling as defined in Item “2”
(1) Settlement of both inward and hereof, the bank may avail of the clean/
outward items shall be value dated on the collateralized OCL. The availments against
day the checks are originally presented to the approved clean/collateralized OCL shall
PCHC or RCC, net of AM returns. For this bear interest at a rate equivalent to one-tenth
purpose, the value date or settlement date of one percent (1/10 of 1%) per day or the
referred to herein shall be defined uniformly ninety-one (91)-day T-Bill rate of the last
as the date of original presentation of the auction immediately preceding the
COCI to PCHC for the Integrated GM LX availment, plus three percentage (3%)
and to the RCC for the RLX. For the points, whichever is higher.
Integrated GM Outward to Region, (4) The availment shall be for a
Integrated GM Inward from Region and maximum period of five (5) consecutive
Region to Region clearing, the value date or clearing days or five (5) clearing days within
settlement date shall be on the day the any thirty (30)-day rolling calendar period,
COCIs are received and processed at after which the OCL shall be suspended.
PCHC. (5) Should the overdraft exceed the
(2) A ceiling shall be set on the amount ceiling, as defined in Item “2” hereof, no
of overdraft a bank may incur due to failure availment of the clean/collateralized OCL
to cover clearing losses through interbank shall be allowed.
borrowings and/or repurchase agreements (i) In the case of end-of-day overdraft,
with the BSP. The ceiling is defined as the the Payments and Settlements Office (PSO)
sum of clean Overdraft Credit Line (OCL) shall advise the PCHC of the amount
equivalent to fifteen percent (15%) of available for settlement of the drawee bank’s
rediscounting line with the BSP, and the net clearing loss, beyond which amount
collateralized OCL that will be extended by inward clearing items will be unwound in
BSP. A bank not meeting the following accordance with the PCHC Clearing House
criteria: Rules and Regulations.
(i) CAMELS composite rating of at (ii) In the case of final overdraft, i.e.,
least “3”; after AM returns, where unwinding is no
(ii) CAR of at least ten percent (10%); longer possible, the bank shall be excluded
or from next clearing. The PSO shall advise
(iii) No chronic reserve deficiencies for the PCHC of such exclusion upon prior
the immediately preceding one (1) year, Monetary Board approval.
or other measures as may be defined by the (6) The collateralized OCL may be
BSP for this purpose, should apply for converted into an emergency loan provided
collateralized OCL in an amount equivalent the bank complies with the guidelines
to at least five percent (5%) of their demand governing the grant of emergency loans
deposit liabilities as of end of month, two under Subsec. X272.2 or may be subject to
(2) months prior to the date of application foreclosure of collateral.
with the DLC; otherwise, its outward The guidelines implementing Item “b”
clearing items shall be subject to second day of this Section are in Appendix 31.
value dating. c. In indirect participation through
Other banks may also apply for conduit arrangement, where the clearing
collateralized OCL in any amount. results of participating TBs/RBs are

§§ X205 - 2205
10.12.31
consolidated with those of the conduit UBs/ KB to the conduit TB.

KBs, caps shall be set on the net clearing Parties to existing conduit arrangements
losses to be passed on to the conduit UB/ shall have thirty (30) days from 08 April
KB by the TB/RB. 1998 to comply with the above requirement.
The cap is defined as the combined c. For TBs authorized to participate in
value of the following amounts: the PCHC and BSP check clearing
(1) the TB/RB’s DDA with the BSP; and operations, ceilings for clearing losses not
(2) the value of clean/collateralized covered by interbank borrowings shall be
overdraft credit line that may be extended established and unwinding of the clearing
by the conduit UB/KB to the TB/RB. transactions shall be authorized when the
The conduit arrangement should include ceilings are breached.
provisions setting aforementioned cap on (1) The proposed ceiling is defined as
the net clearing losses. the collateralized overnight clearing line that
(As amended by Circular Nos. 705 dated 29 December 2010 will be extended by BSP. Every TB
and 681 dated 08 February 2010) authorized to participate directly in the
clearing operations of PCHC should apply
Secs. 1205 (Reserved) for this line with the appropriate department
of the SES. The availments against the
Sec. 2205 Check Clearing Rules for Thrift approved loan line shall bear interest at the
Banks Authorized to Accept Demand ninety-one (91)-day Treasury Bill rate of the
Deposits. The following are the check last auction immediately preceding the
clearing rules for TBs authorized to accept availments.
demand deposits: (2) Procedures for unwinding shall
a. TBs authorized to accept demand apply to all inward items, other than
deposits may participate in the clearing Returned Items and to local exchanges only.
process conducted by the PCHC in the (3) The aggregate value of all inward
integrated Metro Manila clearing area and items of all clearing centers, including On
by the BSP in regional clearing centers Manila clearing demands presented to
through either of the following modes: PCHC, shall be ranked from highest to
(i) maintenance of NOW accounts with KBs; lowest. The unsettled net clearing losses
(ii) conduit arrangements with KBs; and shall be eliminated by unwinding the
(iii) direct participation in clearing inward items starting from the clearing
operations, at the option of the TB centers, including PCHC, with highest
concerned. aggregate value.
b. In conduit arrangements, caps shall (4) In case the aggregate value of the
be set on the net clearing losses to be passed inward items for a given clearing center,
on to the conduit KB by the conduit TB. except PCHC, exceeds the unsettled net
To address the settlement risks, the pro- clearing losses, the total inward items for
forma conduit arrangement should include that clearing center shall be the subject of
provisions setting aforementioned cap on unwinding.
the net clearing losses. The cap is defined (5) In the case of checks cleared
as the combined value of the following through PCHC, the inward clearing items
amounts: shall be unwound to the extent of the
(1) the TB’s reserve deposit with BSP; unsettled net clearing loss. The selection of
and the specific demand items to be covered by
(2) the value of collateralized overdraft unwinding shall be based on PCHC rules.
line that may be extended by the conduit (6) Checks which are the subject of the
Manual of Regulations for Banks Part II - Page 6a

§§ 2205 - X213
10.12.31
unwound clearing transactions shall be e. Any overdraft incurred under

returned to the presenting banks not later Section 102 of R.A. No. 7653 may be
than 9:00 A.M. of the following clearing converted into an emergency loan or
day. advance provided it complies with the
d. TBs authorized to participate guidelines governing the grant of emergency
directly in the clearing in PCHC and BSP loans under Subsec. X272.2.
regional clearing centers shall be subject to (As amended by Circular Nos. 681 dated 08 February 2010 and
the following measures to manage the 516 dated 06 March 2006)
settlement risks:
(1) Settlement of Outward items shall Sec. 3205 Check Clearing Rules for Rural
be value dated on the day the checks are Banks Who Are Members of the Philippine
cleared, net of returns. For this purpose, the Clearing House Corporation. The
value date or settlement date referred to provisions of Items “c” and “d” of Sec. 2205
herein shall be defined uniformly as the next and the implementing operating guidelines
clearing day when dishonored checks are in Appendix 31 shall also apply to RBs
returned within the reglementary period, which are members of the PCHC.
(As amended by Circular Nos. 681 dated 08 February 2010 and
reckoned after the date of presentation for 516 dated 06 March 2006)
local clearing in the integrated Manila
Clearing area for PCHC and in all BSP Sec. X206 (2008 - X603) Clearing
regional clearing centers. For inter-regional Operations. Banks shall observe the clearing
clearing items, outward Manila clearing procedures in accordance with the PCHC
items and to Manila clearing items, the value Clearing House Rules and Regulations for
or settlement date shall be defined in clearing the clearing of checks.1
circulars to be issued by BSP. (As amended by Circular Nos. 705 dated 29 December 2010
(2) A ceiling shall be set on the amount and 681 dated 08 February 2010)
of overdraft a TB authorized to accept
demand deposits may incur due to failure Sec. X207 Check Clearing Operations
to cover clearing losses through interbank During Public Sector Holidays. The
borrowings. The ceiling is defined as the guidelines on check clearing operations
collateralized overnight clearing line that will during public sector holidays are shown in
be extended by BSP DLC. The availments Appendix 84.
against the approved loan line shall bear (M-2008-025 dated 13 August 2008)
interest at the ninety-one (91)- day Treasury
Bill (T-Bill) rate of the last auction Secs. X208 - X212 (Reserved)
immediately preceding the availments.
(3) Should the overdraft exceed the B. SAVINGS DEPOSITS
ceiling, the BSP Accounting Department is
authorized to instruct the PCHC and the BSP Sec. X213 Servicing Deposits Outside Bank
regional clearing centers to unwind the Premises. Banks may be authorized by the
clearing transactions following the BSP to solicit and accept deposits outside
procedures defined in Item “c” of this their bank premises, subject to the following
Section. conditions:
The operating guidelines implementing a. Minimum capital requirement is
Items “c” and “d” of this Section are in met;
Appendix 31. b. No major supervisory concerns
1
Part II - Page 6b Manual of Regulations for Banks

§§ X213
08.12.31
affecting safety and soundness; initially bonded for at least P1,000 subject
c. The area of operations shall be to the increase thereof to approximate their
within one (1)-hour normal travel time by daily collections;
land/sea from any head office or branch, (2) Deposit solicitors shall be provided
except in remote areas where more than with proper identification cards with
one (1)- hour normal travel time may be photograph and signature of each respective
allowed; and solicitor, certified to by the appropriate
d. Applicant bank shall institute officer of the bank. Said identification cards
maintain the following minimum shall be worn by each solicitor at all times
safeguards: at the upper breast of his outer garment
(1) All deposit solicitors shall be when soliciting deposits; and
(Next Page is Part II - Page 7)
Manual of Regulations for Banks Part II - Page 6c

§§ 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
to the depositor, the second copy to be necessary withdrawal slips, except for
used for posting reference, and the third banks authorized by the BSP to adopt the
copy to be retained in the booklet; no passbook withdrawal system: Provided,
(5) All collections shall be turned over to That banks which are already adopting the
the cashier at the end of each day accompanied no passbook withdrawal system shall be
by a Collection Summary Report to be given six (6) months from effectivity of this
accomplished in duplicate which shall contain Manual to seek approval from the BSP.
the following minimum information: The provisions of Sec. X202b shall also
(a) Date of the report apply to withdrawals from savings deposits.
(b) Names and addresses of the
depositors Sec. X215 Rental Deposits of Lessees
(c) Deposit slip numbers The following guidelines shall govern the
(d) Amounts of deposit opening and handling by banks of deposits
(e) Savings account and passbook made by lessees under Section 5(b) of
numbers Batas Pambansa Blg. 25, otherwise known
(f) Name and signature of solicitor as the Rent Control Law:
rendering the report a. The deposit made by the lessee
(6) Depositors shall always be shall only be accepted by the bank under a
required to accomplish a Signature Card special savings account in the name of the
when opening an account, which card lessor;
shall be used always as reference in b. The bank shall require the lessee
checking the genuineness/authenticity of to submit a copy of the written notice sent
signatures affixed on withdrawal slips or to the lessor for the deposit made, stating
authorizations for withdrawal; among other things, the date and amount
(7) Deposits/withdrawals shall be of the deposit and the name and address
recorded by the bookkeeper or any ledger of the lessor;
clerk, except any bank solicitor, in the c. The bank, at its option, may require
depositor’s ledger cards and passbooks on the lessee to submit any supporting document,
the same day that such deposits/ such as the lease contract or official receipts
withdrawals are accepted. Passbooks shall of previous rentals paid, which will show the
be returned to the depositors not later than specimen signature of the lessor, or other
the following business day; papers to identify the lessor;
(8) At the end of each month, d. The bank shall segregate from its
depositors shall be advised in writing of regular savings deposit accounts and
the balances of their deposits with the bank, maintain a separate subsidiary control
the advise slips of which shall never be ledger for deposits made under Section 5(b)
handcarried by the solicitors themselves; of Batas Pambansa Blg. 25;

§§ X215 - X223.2
10.12.31
e. Any withdrawal against these § X223.1 Prerequisites to accept

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

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

§§ X233.5 - X233.9
09.12.31
All outstanding NCTDs shall be valid c. Pre-qualification requirements

and negotiable up to their maturity dates and (1) Issuing bank
shall not be subject to renewal. A bank applying for authority to issue
an LTNCTD shall comply with the
§ X233.6 Sanctions. If any part of the following requirements:
certification submitted by the bank as (a) It has complied with the following
required in these guidelines is found to be capital adequacy requirements:
false, the following sanctions shall be (i) Minimum capitalization as defined
imposed, without prejudice to the sanctions under Sec. X111; and
under Section 35 of R.A. No. 7653. (ii) Risk-based capital adequacy ratio
a. On the bank under Sec. X115 within the sixty (60) days
Suspension of its authority to issue immediately preceding the date of application;
NCTDs for one (1) year. (b) It has not incurred net weekly
b. On the certifying officer reserve deficiencies within eight (8) weeks
A fine of P5,000 per day from the time immediately preceding the date of
the certification was made up to the time application;
the certification was found to be false. (c) It has generally complied with
banking laws, rules and regulations, orders
§§ X233.7 - X233.8 (Reserved) or instructions of the Monetary Board and/
or BSP Management in the last two (2)
§ X233.9 Long-term negotiable preceding examinations prior to the date of
certificates of time deposit. The following application, more particularly:
guidelines shall govern the issuance of long- (i) The ceilings on credit
term negotiable certificates of time deposit accommodations to DOSRI;
(LTNCTD) with a minimum maturity of five (ii) Liquidity floor requirements for
(5) years: government deposits;
a. Prior BSP approval. No LTNCTD (iii) Single borrower’s loan limit; and
shall be issued without the prior approval (iv) Investment in bank premises and
of the BSP. other fixed assets;
b. Application for authority of the (d) It maintains adequate provisions for
issuing bank. An application for authority probable losses commensurate to the quality
on each issue/issue program of LTNCTD of its asset portfolio but not lower than the
shall be filed with the appropriate required valuation reserves as determined
department of the SES: Provided, That the by the BSP;
issue period of an issue program of two (2) (e) It does not have float items
or more tranches shall not exceed one (1) outstanding for more than sixty (60) calendar
year from approval. days in the “Due From/To Head Office/
The application shall be signed by the Branches/Offices” accounts and the “Due
president/country manager (branch of a From Bangko Sentral“ account exceeding
foreign bank) of the bank. It shall be one percent (1%) of the total resources as
accompanied by a certified true copy of the of date of application;
resolution of the bank’s board of directors (f) It has no past due obligations with
authorizing the issuance of LTNCTD the BSP or with any government FI;
indicating, among others, the issue size, (g) It has established a risk management
offering period, purpose or intended use of system appropriate to its operations
proceeds thereof, registry bank, underwriter/ characterized by clear delineation of
arranger, selling agent(s) and market maker(s). responsibility for risk management, adequate

§ X233.9
09.12.31
risk measurement systems, appropriately (4) Selling agent

structured risk limits, effective internal It may be any FI, with dealership or
controls and complete, timely and efficient brokering license, under the regulatory
risk reporting system; supervision of the BSP.
(h) It has a CAMELS Composite (5) Market maker
Rating of at least “3” in the last regular (a) It must not be the issuing bank;
examination; and (b) It must be a third party which is not
(i) It has neither unpaid assessment due related to the issuing bank in any manner that
nor past due obligations with the PDIC. would undermine its independence;
(2) Registry bank (c) It must be a FI, with dealership or
(a) It may be a UB, a KB, or such other brokering license, under the regulatory
specialized entity that may be qualified by supervision of the BSP; and
the Monetary Board; (d) It must be well-capitalized and
(b) In the case of a UB or a KB: must have adequate risk management as
(i) It must be a third party: evidenced by compliance with Items
(aa) with no subsidiary/affiliate “c(1)(a), (d), (g) and (h)” as may be
relationship with the issuing bank; and applicable.
(bb) which is not related to the issuing d. Additional requirements for the
bank in any manner that would undermine issuance of LTNCTD. After a bank’s
its independence. application to issue an LTNCTD has been
(ii) It must have adequate facilities and approved, it may issue the same, subject to
the organization to do the following: the submission of the following additional
(aa) Maintain the Electronic Registry requirements:
Book (ERB); (1) At least fifteen (15) days before the
(bb) Deliver transactions within the date of offering:
agreed trading period; and (a) Written waiver of the secrecy of
(cc) Issue registry confirmations to deposits on said LTNCTD by the issuing
holders of LTNCTDs. bank, its subsidiaries, affiliates and wholly
(iii) It must have a CAMELS Composite or majority-owned or -controlled entities of
Rating of at least “3” in the last regular such subsidiaries and affiliates;
examination. (b) Information disclosure and the
(3) Underwriter/Arranger terms and conditions of the LTNCTD
(a) I t i s e i t h e r a U B o r a n I H : issuance;
Provided, That if an offering is on a best- (c) Promotional materials; and
efforts basis, such arranger may also be a (d) Specimen of the proposed registry
KB; confirmation and purchase advice from
(b) It must be a third party, such that: each selling agent/market maker which will
(i) it has no subsidiary/affiliate evidence sale of the LTNCTD.
relationship with the issuing bank; and (2) Within ten (10) days after issuance
(ii) it is not related in any manner that of the initial and subsequent tranches:
would undermine the objective conduct of Written notice to the appropriate
due diligence. department of the SES of the actual date of
(c) Underwriters must be well- initial/tranche offering accompanied by a
capitalized and must have adequate risk certification by the president/country
management as evidenced by compliance manager that the pre-qualification
with Items “c(1)(a), (d), (g) and (h)” as may requirements under Item “c(1)” have been
be applicable. complied with up to the time of offering.

§ X233.9
09.12.31
e. Functions/responsibilities of the (4) Market maker

parties involved. The respective parties shall (a) Sets independent pricing for the
have, among others, the following functions/ secondary trading of LTNCTDs;
responsibilities: (b) Posts daily the bid and offer prices
(1) Registry bank for the LTNCTDs on the screen of at least
(a) Generates and maintains the one (1) of the information providers until
ERB; the operation of a fixed income exchange
(b) Records any transfer of ownership; for LTNCTDs;
(c) Issues and sends registry (c) Verifies identity of each investor
confirmation to holders; and applies other standards to combat
(d) Functions as paying agent for money laundering as required under
periodic interest and principal payments; Sec. X801;
and (d) Issues the purchase advice for the
(e) Monitors compliance with the secondary sale of the LTNCTDs; and
prohibition on holdings of LTNCTD, as (e) Ensures secondary market transfers
prescribed under Item “h” hereof. and registration in coordination with the
(2) Underwriter/Arranger registry bank.
(a) Conducts due diligence on the f. Change of Underwriter/Arranger,
issuing bank and determines the valuation/ registry bank, selling agent(s)/market
pricing of the primary issue; maker(s). After an application for authority
(b) Prepares the prospectus/information to issue LTNCTDs has been approved by
disclosure/updates for multi-tranche issues; the BSP, the issuing bank cannot change its
(c) Formulates the distribution/ underwriter/arranger, registry bank, selling
allocation plan for the initial offering and agent(s) and market maker(s) without the
ensures proper and orderly distribution of prior approval of the BSP.
the primary sale/issue of the LTNCTDs; g. Waiver of the secrecy of deposits for
(d) Disseminates information to market makers. A market maker who holds
prospective depositors/investors of an LTNCTD for its own account must issue
LTNCTDs on the terms and conditions a waiver of the secrecy of deposits in favor
of the issue (including information of of the BSP for examination purposes. Any
non-pretermination by the depositor information obtained from an examination
prior to original maturity and the of said LTNCTD shall be held strictly
liquidity mechanism in secondary confidential.
trades) and the rights and obligations h. Prohibition on holdings of
of the holder, issuer, market maker/ LTNCTDs. The issuing bank including its
selling agent, underwriter/ arranger and related companies (subsidiaries and affiliates
registry bank; and and wholly or majority-owned or -controlled
(e) When selling to its clients, it must entities of such subsidiaries and affiliates)
perform the functions/responsibilities of the cannot be a holder of the LTNCTDs of the
selling agent under Items “e(3)(a) and (b)”. issuing bank.
(3) Selling agent The issuing bank shall provide the
(a) Verifies identity of each investor registry bank with an updated list of all
and applies other standards to combat related companies. This report shall be a
money laundering as required under “Category B” report.
Sec. X801; and For purposes of this Subsection, an
(b) Issues the purchase advice for the affiliate is an entity, at least twenty percent
primary offering of the LTNCTDs. (20%) but not exceeding fifty percent (50%)

§ X233.9
09.12.31
of the outstanding voting stock of which is, The caveat shall apply if the issuing bank
owned by the issuing bank. commits no pretermination. Otherwise, it
i. Agreements between issuing bank shall read as follows:
and registry bank/selling agent(s)/market “This LTNCTD cannot be terminated by
maker(s). The agreements between the the holder before (maturity date). However, it
issuing bank and the registry bank/market may be preterminated at the instance of the
makers/selling agents shall comply with the Issuing Bank upon prior notice to the holder
provisions of Sec. X162 on bank service on record. Negotiations/transfers from one (1)
contracts. The issuing bank shall be liable holder to another do not constitute
for any damages to investors/depositors pretermination”; and
caused by actions of said registry bank, (b) “All negotiations/transfers of this
selling agent(s)/market maker(s) contrary to LTNCTD prior to maturity must be coursed
the agreements entered into. through a Market Maker”.
j. Minimum features (2) The selling agent/market maker shall
(1) Form; denomination - An LTNCTD issue a Purchase Advice to evidence initial
shall be in scripless form with a third party purchase/secondary trading of LTNCTD
registry bank maintaining the ERB. To have with the original copy given to the holder.
legal effect, it shall comply with the (3) The registry bank shall issue a
provisions of R.A. No. 8792 (Electronic Registry Confirmation to evidence
Commerce Act) particularly on the existence ownership of the LTNCTD, with the original
of an assurance on the integrity, reliability copy given to the holder.
and authenticity of the LTNCTD in electronic l. Issue size and aggregate ceiling.
form. LTNCTDs shall be registered in the An issuing bank can issue LTNCTDs up
name of individuals or corporations, to 300% of its total capital accounts as
negotiable and prenumbered serially. The defined under Subsec. X111/X105.5:
minimum denomination shall be at the Provided, That each issue/issue program
discretion of the issuing bank. size does not exceed P5.0 billion pesos.
(2) Currency - Denomination shall be This ceiling shall be subject to a regular
in Philippine pesos. review by the BSP.
(3) Term - The minimum maturity of the m. Deposit insurance coverage. The
LTNCTDs shall be five (5) years. LTNCTDs shall be insured with the PDIC,
(4) Primary Offering/Secondary Trading subject to applicable rules and regulations,
- The initial offering shall be executed among others, on maximum insurance
through an underwriter or an arranger. coverage.
Subsequent negotiations in secondary n. Pretermination by the issuer.
trading must be executed through LTNCTDs may be preterminated by the
authorized market maker(s). issuing bank, subject to the following
k. Purchase Advice and Registry conditions:
Confirmation (1) The Information Disclosure,
(1) The Purchase Advice and Registry Purchase Advice and Registry Confirmation
Confirmation shall conspicuously contain shall include the information that the
the following caveat: LTNCTD may be preterminated by the
(a) “This LTNCTD cannot be terminated issuing bank;
by the holder nor the Issuing Bank before (2) Thirty (30)-day prior notification
(maturity date). However, negotiations/ must be given to the appropriate department
transfers from one (1) holder to another do of the SES together with the justification for
not constitute pretermination.” the pretermination;

§§ X233.9 - X233.11
09.12.31
(3) Thirty (30)-day prior notification to one (1) year and a monetary penalty of
holders of record; P30,000 for each violation.
(4) Notwithstanding any agreement to (4) On the certifying officer - A fine of
the contrary, the issuer shall shoulder the P5,000 per day from the time of required
tax due on the interest income already disclosure up to the time disclosure was
earned by the holders; and made; or from the time misrepresentation
(5) The issuing bank’s reserve positions was made up to the time the information
shall be recomputed retroactively based on was corrected.
the applicable reserve rate(s) for regular time (5) On the responsible officer - A fine
deposits during the affected periods. of P30,000 for participating or confirming
If the recomputed amounts result in a in the non-disclosure or misrepresentation
reserve deficiency, the issuing bank shall of information.
be fined with the corresponding monetary (As amended by Circular Nos. 674 dated 10 December 2009 and
penalties. The preceding monetary penalty, 585 dated 15 October 2007)
however, shall not be imposed if
pretermination by the issuer is due to a § X233.10 (Reserved)
change in law or regulation that will
increase the cost of maintaining the § X233.11 Long-term non-negotiable
LTNCTDs. tax-exempt certificates of time deposit. The
o. Non-pretermination by the holder. issuance of long-term non-negotiable tax-
Presentation of the LTNCTD to the issuing exempt certificates of time deposit shall be
bank for payment before the maturity date governed by the following rules:
is not allowed. However, negotiation or a. Minimum features
transfer from one (1) holder to another shall (1) Form; denomination - The
not constitute pretermination of the certificate shall contain words denoting its
LTNCTD. non-negotiability and shall be issued by
p. Sanctions. Without prejudice to the banks only in the name of individuals with
other sanctions prescribed under Section 37 denominations in increments of
of R.A. No. 7653 and the provisions of P1,000.00.
Section 16 of R.A. No. 8791, the following (2) Term - The minimum maturity of the
sanctions will be imposed on any issuing certificate shall be five (5) years.
bank, registry bank and other parties for (3) Manner of issuance - The certificate
failure to perform their respective functions/ shall be issued only upon receipt of funds
responsibilities and for non-disclosure or equivalent to their face value.
misrepresentation of information: (4) Manner of printing - The certificate
(1) On the issuing bank - Suspension shall be printed on security paper.
of its authority to issue LTNCTDs, (5) P r e - t e r m i n a t i o n - I n c a s e o f
disqualification from future issuance of pre-termination, the deposit shall be
LTNCTDs and a monetary penalty of subject to income tax as provided under
P30,000 for each violation. Section 24(B)(1) of the Tax Reform Act
(2) On the registry bank - of 1997 which states that “xxx a final
Disqualification to be a registry bank for one tax shall be imposed on the entire
(1)-year and a monetary penalty of P30,000 income and shall be deducted and
for each violation. withheld by the depository bank from
(3) On all authorized selling agents/ the proceeds of the long-term deposit
market makers - Disqualification to be or investment certificate based on the
appointed as selling agent/market maker for remaining maturity thereof:

§§ X233.11 - X234.3
08.12.31
(a) Four (4) years to less than a. Borrowing shall refer to all forms of
five (5) years 5% obtaining or raising funds through any of
(b) Three (3) years to less than the methods and for any of the purposes
four (4) years 12% provided in Subsec. X234.1 whether the
(c) Less than three (3) years 20% borrower’s liability thereby is treated as real
xxx” or contingent.
b. Insurance coverage. The deposits b. For the borrower’s own account
shall be insured with the PDIC, subject to shall refer to the assumption of liability in
applicable rules and regulations, among one’s own capacity and not in
others, on maximum insurance coverage. representation, or as an agent or trustee, of
c. Reserves against long-term non- another.
negotiable certificates of time deposit. The c. Purchasing of receivables or other
rate and form of required reserves on regular obligations shall refer to the acquisition of
time deposit shall also apply to the required claims collectible in money, including
reserves on long-term non-negotiable tax- interbank borrowings or borrowings
exempt certificates of time deposit. between FIs, or of acquisition of securities,
of any amount and maturity, from domestic
E. DEPOSIT SUBSTITUTE OPERATIONS or foreign sources.
(QUASI-BANKING FUNCTIONS) d. Relending shall refer to the
extension of loans by an institution with
Sec. X234 Scope of Quasi-Banking antecedent borrowing transactions.
Functions. The following rules and Relending shall be presumed, in the
regulations shall govern the quasi-banking absence of express stipulations, when
operations of banks. the institution is regularly engaged in
lending.
§ X234.1 Elements of quasi-banking e. Regularly engaged in lending shall
The essential elements of quasi-banking are: refer to the practice of extending loans,
a. Borrowing funds for the borrower’s advances, discounts or rediscounts as a
own account; matter of business, as distinguished from
b. Twenty (20) or more lenders at any isolated lending transactions.
one (1) time;
c. Methods of borrowing are issuance, § X234.3 Transactions not considered
endorsement, or acceptance of debt quasi-banking. The following shall not
instruments of any kind, other than deposits, constitute quasi-banking:
such as acceptances, promissory notes, a. Borrowing by commercial,
participations, certificates of assignments or industrial and other non-financial
similar instruments with recourse, trust companies through any of the means
certificates, repurchase agreements, and listed in Subsec. X234.1 hereof, for the
such other instruments as the Monetary limited purpose of financing their own
Board may determine; and needs or the needs of their agents or
d. The purpose of which is (1) dealers; and
relending, or (2) purchasing receivables or b. The mere buying and selling without
other obligations. recourse of instruments mentioned in
Subsec. X234.1: Provided, That:
§ X234.2 Definition of terms and (1) The institution buying and selling
phrases. The following terms and phrases without recourse shall indicate in
shall be understood as follows: conspicuous print on its instrument the

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

§§ X235.3 - X235.5
11.12.31
Borrowings of banks from the loans and custodian in a registry for said securities, if
discounts window of other banks or immobilized or dematerialized while the
non-bank financial intermediaries shall be overlying principal borrowing instrument
exempted from the documentation shall be physically delivered to the lender/
requirements prescribed in this Subsection: purchaser. The custodian shall hold the
Provided, That the exemption from the securities in the name of the borrower/
documentation requirements prescribed in seller, but shall keep said securities
this Subsection shall not be construed or segregated from the regular securities
interpreted as exempting said borrowings account of the borrower/seller if the
from other regulations standardizing deposit borrower/seller has an existing securities
substitute instruments and from other account with the custodian: Provided, That
BSP regulations on deposit substitutes. a bank/other entity authorized by the BSP
Deposit substitute instruments shall to perform custodianship function may not
conform to the language prescribed by the be allowed to be custodian of securities
BSP. Any substantial deviation there from issued or owned by said bank/entity, its
or any additional stipulation therein shall subsidiaries or affiliates, or of securities in
be referred to the BSP for prior approval. bearer form.
The size and appearance of these The delivery shall be effected upon
instruments, shall not be similar to the size payment and shall be evidenced by a
and appearance of checks. Rubber securities delivery receipt duly signed
stamping, typewriting or handwriting some by authorized officers of the custodian
provisions shall not be considered and delivered to both the lender/
compliance with said regulations. (Shown purchaser and seller/borrower.
in Appendix 12 are the samples of Sanctions. Violation of any provision
standardized instruments as evidence of of Item “a” shall be subject to the following
deposit substitute liabilities.) sanctions/penalties:
(1) Monetary penalties
§ X235.4 Interbank loan transactions First offense - Fine of P10,000 a day for
Except for interbank borrowings which are each violation reckoned from the date the
settled through the banks’ respective DDAs violation was committed up to the date it
with the BSP via PhilPaSS, all interbank was corrected.
borrowings shall be evidenced by deposit Subsequent offenses - Fine of P20,000
substitute instruments containing the minimum a day for each violation reckoned from the
features prescribed in Subsec. X235.3. date the violation was committed up to the
(As amended by Circular No. 703 dated 23 December 2010) date it was corrected.
(2) Other sanctions
§ X235.5 Delivery of securities First offense - Reprimand for the
a. Securities, warehouse receipts, directors/officers responsible for the violation.
quedans and other documents of title Subsequent offense -
which are the subject of quasi-banking (a) Suspension for ninety (90) days
functions, such as repurchase agreements, without pay of directors/officers responsible
shall be physically delivered, if certificated, for the violation;
to a BSP accredited custodian that is (b) Suspension or revocation of the
mutually acceptable to the lender/ accreditation to perform custodianship
purchaser and borrower/seller, or by means function;
of book-entry transfer to the appropriate (c) Suspension or revocation of the
securities account of the BSP-accredited authority to engage in quasi-banking

§§ X235.5- X235.11
11.12.31
function; and/or (3) Suspension for 120 days without pay

(d) Suspension or revocation of the of the directors/officers responsible for the
authority to engage in trust and other violation.
fiduciary business. (As amended by Circular No. 714 dated 10 March 2011,
b. The guidelines to implement the M-2007-002 dated 23 January 2007, M-2006-009 dated 06 July
delivery by the seller of securities to the 2006, M-2006-002 dated 05 June 2006 and Circular No. 524
buyer or to his designated third party dated 31 March 2006)
custodian are shown in Appendix 68.
The disposition of compliance issues of § X235.6 Other rules and regulations
Appendix 68 is shown in Appendix 68a. governing the issuance and treatment of
The guidelines on the delivery of deposit substitute instruments
government securities to the investor’s a. If there is any stipulation that
principal securities account with the payment of the deposit substitute shall be
Registry of Scripless Securities (RoSS) are in chargeable against a particular deposit
Appendix 68b. account, it shall further provide that the
Sanctions. Without prejudice to the liability of the maker or issuer of the
penal and administrative sanctions provided instrument shall not be limited to the
for under Sections 36 and 37, respectively outstanding balance of said account.
of R.A. No. 7653 (The New Central Bank b. Any agreement allowing the issuer
Act), violation of any provision of the or maker to substitute the underlying
guidelines in Appendix 68 shall be subject securities shall further provide that the
to the following sanctions/penalties actual substitution shall be with the prior
depending on the gravity of the offense: written consent of the payee.
(a) First offense - c. Automatic renewal upon maturity of
(1) Fine of up to P10,000 a day for the the instrument may be effected only under
institution for each violation reckoned from terms and conditions previously stipulated
the date the violation was committed up to by the parties.
the date it was corrected; and d. Stipulations between the maker or
(2) Reprimand for the directors/officers issuer and the payee which are embodied
responsible for the violation. in separate instruments shall be specifically
(b) Second offense - referred to in the deposit substitute
(1) Fine of up to P20,000 a day for instruments and made an integral part
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 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
08.12.31
§ X235.12 Repurchase agreements and non-negotiable securities or

covering government securities, instruments that are not documented in
commercial papers and other negotiable accordance with existing BSP regulations
and non-negotiable securities or and that the bank has strictly complied
instruments. The following regulations shall with the pertinent rules of the SEC and
govern repurchase agreements covering the BSP on the proper sale of securities to
government securities, commercial papers the public and performed the necessary
and other negotiable and non-negotiable representations and disclosures on the
securities or instruments of banks as well securities particularly the following:
as sale on a without recourse basis of said (a) Informed the clients that such
securities by banks. securities are not deposits and as such, do
a. Proper recording and documentation not benefit from any insurance otherwise
of repurchase agreements. applicable to deposits such as, but not
Banks shall have a true and accurate limited to, R.A. No. 3591, as amended,
account, record or statement of their daily otherwise known as the 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 BSP 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 non- interest and principal; and
negotiable securities or instruments; (ix) other pertinent terms and
(2) Submit a notarized certification at conditions of the security and if possible, a
the end of every semester that the bank did copy of the prospectus or information sheet
not enter into any repurchase agreement of the security.
covering government securities, (c) Informed the client that pursuant to
commercial papers and other negotiable Subsecs. X235.5 and X238.1:

§§ X235.12- X236
10.12.31
(i) Securities sold under repurchase as Appendix 65.

agreements shall be physically delivered, e. Sanctions. The Monetary Board
if certificated, to a BSP-accredited may, at its evaluation and discretion,
custodian that is mutually acceptable to the impose any or all of the following sanctions
client and the bank, or by means of book- to a bank or the director/s or officer/s found
entry transfer to the appropriate securities to be responsible for repurchase agreements
account of the BSP-accredited custodian in covering government securities, commercial
a registry for said securities, if immobilized papers and other negotiable and non-
or dematerialized; and negotiable securities or instruments that are
(ii) Securities sold on a without not documented in accordance with existing
recourse basis are required to be delivered BSP regulations:
physically to the purchaser, or to his (1) Fine of up to P30,000 a day to the
designated custodian duly accredited by concerned entity for each violation from
the BSP, if certificated, or by means of the date the violation was committed up
book-entry transfer to the appropriate to the date it was corrected;
securities account of the purchaser or his (2) Suspension of interbank clearing
designated custodian in a registry for said privileges/immediate exclusion from
securities if immobilized or dematerialized. clearing;
(d) Clearly stated to the client that: (3) Suspension of access to BSP
(i) The bank does not guarantee the rediscounting facilities;
payment of the security sold on a “without (4) Suspension of lending or foreign
recourse basis” and in the event of default exchange operations or authority to accept
by the issuer, the sole credit risk shall be new deposits or make new investments;
borne by the client; and (5) Revocation of quasi-banking
(ii) The bank is not performing any license;
advisory or fiduciary function. (6) Revocation of authority to perform
(3) Report to the appropriate department trust operations; and
of the SES any undocumented repurchase (7) Suspension for one hundred twenty
agreement within seventy-two (72) hours from (120) days without pay of the directors/
knowledge of such transactions. officers responsible for the violation.
c. Treatment as Deposit Substitutes.
All sales of government securities, Sec. X236 Minimum Trading Lot and
commercial papers and other negotiable Minimum Term of Deposit Substitute
and non-negotiable securities or a. The minimum size of any single
instruments that are not documented in deposit substitute transaction shall be
accordance with existing BSP regulations P50,000.
shall be deemed to be deposit substitutes No bank performing quasi-banking
subject to regular reserves. functions shall issue deposit substitute
d. Certification. The submission instruments in the name of two (2) or more
deadline for the required certification from persons or accounts except those falling
the CEO/officer of equivalent rank of the under the following relationships in which
bank shall initially be 01 February 2005 cases, commingling may be allowed:
using the format attached as Annex A of (a) husband and wife; (b) persons related to
Appendix 65. Thereafter, the required each other within the second degree of
succeeding certification shall be submitted consanguinity; and (c) “in trust for” (ITF)
within five (5) banking days from end of arrangements.
reference semester using the format attached (As amended by Circular No. 703 dated 23 December 2010)

§§ X237 - X237.3
08.12.31
Sec. X237 Money Market Placements of conditions:

Rural Banks. Banks shall not accept money a. That total money market placements
market placements from any RB unless the of an RB as stated in the certification,
latter presents a certification under oath including the placement being accepted by
stating: (a) that it has no overdue special time the entity concerned, shall not exceed the
deposits; (b) that it has no past due RB’s combined capital accounts or net
obligations with the BSP or other worth less current obligations with the BSP
government financial institutions; (c) the or other government financial entities;
amount of its current obligations, if any, b. The maturity of the money market
with said government financial institutions; placement shall not exceed sixty (60)
and (d) the amount of its total outstanding days; and
money market placements. However, in no c. That placements shall be
case shall such banks sell receivables to RBs evidenced in all cases by promissory
without recourse. notes of accepting entities/repurchase
agreements and/or certificates of
§ X237.1 Definition of terms. As used participation/assignment with recourse
in this Section, the following terms shall and that underlying instruments shall be
have the following meanings: certificates of indebtedness issued by the
a. Money market placements shall BSP or other government securities the
include investments in debt instruments, servicing and repayment of which are
including purchase of receivables with guaranteed by the Republic of the
recourse to the lending institution, except Philippines.
purchase of government securities on an
outright basis. § X237.3 Sanctions. Violations of the
b. Government securities shall include provisions of this Section shall be subject
evidences of indebtedness of the Republic to the following sanctions/penalties:
of the Philippines, the BSP and other a. Monetary penalties
evidences of indebtedness or obligations of First offense - Fines of P3,000 a day,
government entities the servicing and reckoned from the date placement started
repayment of which are fully guaranteed by up to the date when said placement was
the Republic of the 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 Subsequent offenses - Fines of P5,000 a
rules by the director or officer concerned day, reckoned from the date placement
for four (4) or more times within a twelve started up to the date placement was
(12)-month period from the date the first withdrawn, for each violation shall be
offense was committed. assessed on the bank.
b. Other sanctions
§ X237.2 Conditions required on First offense - Reprimand for the
accepted placements not covered by directors/officers who approved the
prohibition. Placements accepted which are acceptance/placement with a warning that
otherwise not covered by the above subsequent violations will be subject to
prohibition must comply with the following more severe sanctions.

§§ X237.3 - X238.1
11.12.31
Subsequent offenses - § X238.1 Delivery of securities

(1) Suspension for ninety (90) days a. Securities sold on a without
without pay for directors/officers who recourse basis allowed under Sec. X238
approved the placement. shall be delivered physically to the
(2) Suspension or revocation of the purchaser, or to his designated custodian
authority to engage in quasi-banking duly accredited by the BSP, if certificated,
functions. or by means of book-entry transfer to the
appropriate securities account of the
Sec. X238 Without Recourse Transactions purchaser or his designated custodian in a
No bank shall sell, discount, assign, or registry for said securities, if immobilized
negotiate, in whole or in part, such as thru or dematerialized, while the confirmation
syndications, participations and other of sale or document of conveyance by the
similar arrangements, any notes, seller shall be physically delivered to the
receivables, loans, debt instruments and purchaser. The custodian shall hold the
any type of financial asset or claim, except securities in the name of the buyer:
government securities, or be a party in any Provided, That a bank/other entity
capacity in any of the above transactions, authorized by the BSP to perform
on a without recourse basis unless such custodianship function may not be allowed
receivables, notes, loans, debt instruments to be custodian of securities issued or sold
and financial assets or claims are registered on a without recourse basis by said bank/
with the SEC. This prohibition includes entity, its subsidiaries or affiliates, or of
transactions between a bank and its trust securities in bearer form.
department. The delivery shall be effected upon
Unregistered commercial papers may payment and shall be evidenced by a
be sold, discounted, assigned, or negotiated securities delivery receipt duly signed by
by banks to the following: the authorized officer of the custodian and
a. other banks; delivered to the purchaser.
b. QBs; Sanctions. Violation of any provisions
c. IHs; of Item “a” shall be subject to the
d. insurance companies; following sanctions/penalties:
e. finance companies; (1) Monetary penalties
f. investment companies; First offense - Fine of P10,000 a day for
g. pension or retirement plan each violation reckoned from the date the
maintained by the government of the violation was committed up to the date it
Philippines or any political subdivision was corrected.
thereof or managed by a bank or other Subsequent offenses - Fine of P20,000
persons authorized by the Bangko Sentral a day for each violation reckoned from the
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
i. such other person as the SEC may directors/officers responsible for the
by rule determine as qualified buyers, on violation.
the basis of such factors as financial Subsequent offense -
sophistication, net worth, knowledge, and (a) Suspension for ninety (90) days
experience in financial and business matters, without pay of directors/officers responsible
or amount of assets under management. for the violation;

§§ X238.1 - X238.3
11.12.31
(b) Suspension or revocation of the custodianship by banks/other entities under

accreditation to perform custodianship BSP supervision, which are not in
function; accordance with said regulation, must
(c) Suspension or revocation of the therefore, be delivered to a BSP-accredited
authority to engage in quasi-banking third party custodian. However, banks and
function; and/or other FIs under BSP supervision may
(d) Suspension or revocation of the maintain custody of existing securities of
authority to engage in trust and other their clients who are unable or unwilling to
fiduciary business. take delivery pursuant to the provisions of
b. The guidelines to implement the Subsec. X235.5 but who declined to deliver
delivery by the seller of securities to the their existing securities to a BSP accredited
buyer or to his designated third party third party custodian subject to the
custodian are shown in Appendix 68. following conditions:
Sanctions. Violation of any provision of (1) the custody arrangements with
the guidelines in Appendix 68 shall be clients have been in existence prior to
subject to the sanctions/penalties under 05 November 2004 (effectivity of
Item “b” of Subsec. X235.5. Circular 457 dated 14 October 2004);
(As amended by Circular No. 714 dated 10 March 2011, (2) the dealing bank/NBFI under BSP
M-2007-002 dated 23 January 2007,M-2006-009 dated 06 July supervision had been informed in writing
2006 and M-2006-002 dated 05 June 2006, Circular No. 524 by the client that he is not willing to have
dated 31 March 2006) his existing securities delivered to a third
party custodian;
§ X238.2 Sanctions. Unless specific (3) any BSP regulated institution shall
sanctions are prescribed under these rules, not enter into securities transactions with
any violation of the provisions of this a client who has outstanding securities not
Section shall be subject to any or all of the delivered to a BSP-accredited third party
following sanctions: custodian; and
a. Suspension of quasi-banking (4) it shall be the responsibility of any
authority for a period of six (6) months; and BSP regulated institution to satisfy itself that
b. Monetary penalty of P500 per day the person purchasing securities from it has
per transaction for each officer of the bank no outstanding securities holdings which
involved in any capacity in any transaction were not delivered to a BSP-accredited third
violative of these regulations. party custodian.
Sanctions. Without prejudice to the
§ X238.3 Securities custodianship penal and administrative sanctions
operations provided for under Sections 36 and 37,
a. Securities sold on a without recourse respectively, of the R.A. No. 7653,
basis shall be delivered to the purchaser, or violation of any provision of this Subsection
to his designated custodian duly accredited shall be subject to the following sanctions/
by the BSP: Provided, That a bank/other penalties:
entity authorized by the BSP to perform (1) First offense -
custodianship function may not be (a) Fine of up to P10,000 a day for the
allowed to be custodian of securities institution for each violation reckoned from
issued or sold on a without recourse basis the date the violation was committed up
by said bank/entity, its subsidiaries or to the date it was corrected; and
affiliates, or of securities in bearer form. (b) Reprimand for the directors/officers
Existing securities being held under responsible for the violation.

§§ X238.3 - X239.4
08.12.31
(2) Second offense - § X239.2 Compliance with Securities

(a) Fine of up to P20,000 a day for the and Exchange Commission rules on
institution for each violation reckoned from registration of bond issues. All banks with
the date the violation was committed up quasi-banking authority issuing or intending
to the date it was corrected; and to issue bonds shall comply with the New
(b) Suspension for ninety (90) days Rules on Registration of Long-Term
without pay of directors/officers responsible Commercial Papers promulgated by the
for the violation. SEC (Appendix 13).
(3) Subsequent offenses -
(a) Fine of up to P30,000 a day for the § X239.3 Notice to Bangko Sentral ng
institution for each violation from the date Pilipinas. Within three (3) days from
the violation was committed up to the date approval by SEC of its bond issue, the bank
it was corrected; concerned shall notify the appropriate
(b) Suspension or revocation of the department of the SES of the approval
authority to act as securities custodian attaching thereto the documents required
and/or registry; and by the SEC for the issuance and registration
(c) Suspension for 120 days without of the bond issue.
pay of the directors/officers responsible for
the violation. § X239.4 Minimum features. Bonds
b. Sec. X441 shall also govern the issued by banks shall have the following
securities custodianship and securities minimum features:
registries of banks. a. Form; issue price; denomination -
(As amended by M-2006-009 dated 06 July 2006, The trust indenture and the name of the
M-2006-002 dated 05 June 2006 and Circular No. 524 indenture trustee shall be indicated on the
dated 31 March 2006) face of the bond certificate.
The SEC-assigned bond registration
Sec. X239 Issuance of Bonds. The following number and expiry date, if any, shall
guidelines shall govern the issuance of bonds likewise be indicated, stamped on the face
by banks with quasi-banking authority. of each bond certificate issued.
Bonds may be issued at face value, at a
§ X239.1 Definition of terms. For discount or at a premium. Minimum
purposes of this Section, unless the context denomination shall be P20,000.
clearly indicates otherwise, the following b. Term - The minimum term of the
shall have the meaning as indicated: bonds shall be four (4) years. No optional
a. Government securities shall refer redemption before the fourth year shall be
to evidences of indebtedness of the allowed.
Republic of the Philippines or its c. Interest; manner; form of payment -
instrumentalities, or of the BSP, and must The bonds shall not be subject to interest
be freely negotiable and regularly rate ceilings prescribed by the Monetary
serviced. Board or Act No. 2655, as amended.
b. Net book value shall refer to the d. Trust indenture; collaterals; sinking
acquisition cost of property or accounts plus fund - A trust indenture shall be executed
additions and improvements thereon less between the issuer and a qualified trust
valuation reserves, if any. corporation as trustee, which shall neither
c. Current market value shall refer to be an affiliate nor a subsidiary of the issuer.
the value of the property as established by The following shall be deemed as
a duly licensed and independent appraiser. eligible collateral and shall be maintained

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

to 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
of 100% government-owned or controlled
(2) Readily marketable - Aggregate
corporations shall be deposited with the
private securities current
listed in the big board market value
BSP, with only minimum working
of stock exchanges of 150% balances to be held by government-owned
(3) Real estate - Net book banks and such other banks incorporated
value of 100% in the Philippines as the Monetary Board
(4) Unmatured - Net book may designate: Provided, That such banks
receivables acquired value of 150% may be authorized by the Monetary Board
with recourse to 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 trustee. Substitution of collaterals controlled corporations shall refer
shall be allowed: Provided, That in no case to government-owned or-controlled
shall the collateral fall below the herein corporations which are created by special
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
e. Bond registry - The bonds shall be Code (BP Blg. 68) and private corporations
fully registered as to principal and which are taken over by government-
interest. The issuer, its trustee, agent or
owned or-controlled corporations.
underwriter must maintain a bond
registry duly approved by the SEC for b. Minimum working balances
recording initial and subsequent transfers shall represent the minimum amounts
the names of transferees, date of transfer, necessary to enable the government
purchase price and serial numbers of instrumentality/political subdivision
bonds transferred. making the deposit to transact business
efficiently and effectively as determined
§ X239.5 Issuance of commercial by the Department of Finance.
papers. The issuance of other forms of
commercial papers by banks with § X240.1 Prior Monetary Board
quasi-banking authority shall be subject to approval. No private bank shall, without
the new rules on registration of short-term prior approval of the Monetary Board,
and long-term commercial papers accept, as depository, any fund or money
appended hereto as Appendices 13 and 14. from the Government, its political

§§ X240.1 - X240.3
10.12.31
subdivisions and instrumentalities, and c. Where there is no government

government-owned or -controlled bank or BSP office in the province and the
corporations; nor shall a private bank nearest government bank or BSP office is
borrow any fund or money therefrom, inaccessible by ordinary transportation, or
through the issuance or sale of its transporting/withdrawing the government
acceptances, notes or other evidences of deposits to and from the said office is
indebtedness. impractical or risky, the province, as well
as cities and municipalities located therein,
§ X240.2 Banks which may accept may seek approval of the Monetary Board
government funds to consider all their funds eligible for
a. Banks, the majority of the capital deposits with a qualified private depository
of which is owned by the Government, bank within the province, city or
may act as depository of funds of the municipality, as the case may be.
Government, its political subdivisions and d. Banks acting as official depository
instrumentalities, and government-owned of government funds may accept demand,
or-controlled corporations. savings or time deposits.
b. Private banks incorporated in the e. The authority of a bank to accept
Philippines may act as depository of government deposits does not obligate the
government funds only with the prior Government, its subdivisions and
approval of the BSP. Local government instrumentalities and government-owned
units may maintain depository accounts or-controlled corporations to deposit with
preferably in government banks and, in that bank. Thus, even if a TB or RB is
exceptional cases and with the prior authorized by the Monetary Board to accept
approval of the Monetary Board, in the government deposits, a municipality is not
name of their respective government units, obligated to deposit with that TB or RB.
in private banks located in or nearest to Similarly, a bank which is authorized to
their respective areas of jurisdiction but the accept deposits of the Government or a
depository bank(s) must also seek the prior government corporation because of
approval of the BSP: Provided, That a TB/ outstanding loans granted by the bank
RB/Coop Bank may only act as official cannot demand as a matter of right that the
depository of government funds pursuant Government or government corporation
to R.A. Nos. 7906, 7353 and 6938, as make deposits unless there is a stipulation
follows: in the loan agreement.
(1) a TB may only act as official
depository of national agencies, and of § X240.3 Prerequisites for the grant
municipal, city or provincial funds in the of authority to accept deposits from the
municipality, city or province where the Government and government entities. In
TB is located; addition to the Standard Pre-qualification
(2) an RB may only act as official Requirements for the Grant of Banking
depository of municipal, city or provincial Authorities enumerated in Appendix 5,
funds in the municipality, city or province private banks applying for authority to
where the RB is located; and accept deposits from the Government, its
(3) a Coop Bank may accept deposits subdivisions and instrumentalities
of all government departments, agencies and government-owned or-controlled
and units of the national and local corporations and government banks applying
governments including government- for authority to accept government deposits
owned or-controlled corporations. in excess of minimum working balances

§§ X240.3 - X240.5
10.12.31
shall also comply with the following b. A copy of the resolution of the board
conditions: of directors of the government-owned or-
a. The applicant bank must have controlled corporations authorizing the
complied with the minimum capital required deposit of funds of said corporations; or
under Subsec. X111.1; c. In case of the National Government,
b. It has neither unpaid assessment due its unincorporated branches, agencies and
nor past due obligations with the PDIC; and instrumentalities, a written authority to
c. The bank’s CAMELS composite deposit government funds signed by the
rating in its latest examination is not lower duly authorized official of the department,
than three (3) with Management component agency, office or unit making the deposit.
score of not lower than three (3). The resolution or authority should state
(As amended by Circular Nos. 696 dated 29 October 2010, the name and location of the depository
674 dated 10 December 2009 and 526 dated 10 April 2006) bank, type and terms of the deposit, and
that the amount to be deposited represents
§ X240.4 Application for authority. An working balances.
application for authority to accept
government deposits shall be signed by the § X240.5 Limits on funds of the
president of the bank and shall be filed with Government and government entities
the appropriate department of the SES. The that may be deposited with banks
application shall be accompanied by a a. Funds of the Government, its
certification by the bank president or subdivisions and instrumentalities and
executive vice-president that the bank has government-owned or-controlled corporation,
complied with all the requirements deposited with banks authorized to receive
enumerated under Subsec. X240.3. deposits shall be limited to the minimum
Banks authorized to accept government working balance of the depositor.
funds as depository shall continuously With prior Monetary Board approval,
comply with the conditions enumerated government or private banks may be
under Subsec. X240.3 even after the authorized to accept amounts in excess of
authority to accept government deposits minimum working balances if the
has been granted and during the period Government or government entity making
while the banks actually hold government the deposit has outstanding loan obligations
deposits, otherwise, any violation may be to the depository bank but such amounts
a basis for the imposition of sanctions shall not exceed the amount of its
against the bank, its directors and officers, outstanding loan obligations to the
or revocation of the authority to accept depository bank. The amount of non-
government deposits. transferable and non-negotiable
Deposits maintained by the Government, government securities with market or
its subdivisions and instrumentalities below market interest rate at the time of
and government-owned or-controlled issue, issued by the National Government
corporations shall be supported by the to the depository bank shall be considered
following documents whenever applicable: as “outstanding loans” of the National
a. A copy of the resolution of the Government to said bank within the
barangay, municipal or city council meaning of Section 113 of R.A. No. 7653.
(Sangguniang Bayan/Panglunsod) or the b. The aggregate amount of
provincial board (Sangguniang Panlalawigan) government funds which a private bank
authorizing the deposit of municipal, city or can hold at any given time shall not exceed
provincial funds; 200% of the 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 BSP, upon certification withdrawal or in advance: Provided,
by the appropriate department of the SES however, That interest or yield paid in
that the bank has had no deficiency in its advance shall not exceed the interest for one
liquidity floor and no excess holdings of (1) year.
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-approved to savings deposits.
internet banking facility are allowed to b. A deposit substitute instrument not
accept payment of fees/other charges of withdrawn or renewed on its maturity date
similar nature for the account of the shall from said date become payable on
departments, bureaus, offices and agencies demand and shall earn an interest or yield
of the government as well as all GOCCs: from maturity to actual withdrawal or
Provided, That the funds so accepted/ renewal at a rate applicable to a deposit
collected shall be treated as deposit substitute with a maturity of fifteen (15)
liabilities subject to existing regulations on days.
government deposits and shall not exceed Banks performing quasi-banking
the minimum working balance of the said functions shall continue to consider matured
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, i.e.,
Sec. X241 (Reserved) whether credited in advance or otherwise;
d. Basis of interest payment, i.e.,
G. INTEREST whether based on average daily balance
compounded quarterly or otherwise;
Sec. X242 Interest on Deposits/Deposit e. Effective rate of interest expressed as
Substitutes. Demand, savings, NOW a simple annual rate, on the basis of the
accounts, time deposits and deposit information above given and indicating the
substitutes shall not be subject to interest formula used to arrive at the effective rate
ceilings. of interest; and

§§ X243 - X253.2
11.12.31
f. Illustration of basis of computing evidenced by repo agreements covering

interest on a hypothetical deposit account. government securities up to the amount
Copies of the abovementioned equivalent to the adjusted Tier 1 capital of
information shall be made available to the bank shall be subject to the statutory
each and every depositor by attaching reserve of four percent (4%): Provided,
these copies to savings deposit further, That such rate shall apply only to
passbooks and time deposit certificates. repo agreements, the documentation of
Posters disclosing the above information which conforms with, and were delivered
and aggregate deposit rates shall also be to a BSP accredited third party custodian
displayed conspicuously within the bank as required under existing BSP regulations.
premises. (As amended by Circular Nos.732 dated 03 August 2011,
726 dated 27 June 2011 and 632 dated 19 November 2008)
Secs. X244 - X252 (Reserved)
§ X253.2 Liquidity reserves. On top
H. RESERVES AGAINST DEPOSIT of the regular reserve requirements,
AND DEPOSIT SUBSTITUTE liquidity reserves against peso demand,
LIABILITIES “NOW”, savings, time deposit and deposit
substitute liabilities shall be maintained, as
Sec. X253 Accounts Subject to Reserves; follows:
Amounts Required. The following rules and Liquidity
regulations shall govern the reserves against Category of Banks Reserves
deposit and deposit substitute liabilities. a. UBs/KBs 11%
b. TBs 2%
§ X253.1 Regular reserves against c. RBs/Coop Banks 0%
deposit and deposit substitute liabilities
The rates of regular reserves against The liquidity reserves for DS evidenced
deposit and deposit substitute liabilities in by repo agreements and LTNCTDs shall
local currency of banks shall be as follows: be 0%.
The required liquidity reserves shall be
RBs/ maintained in the Reserve Deposit Account
UBs/KBs TBs Coop Banks (RDA) with the BSP, or may be in the form
a. Demand of the following: Provided, That it complies
Deposits 10% 6% 6%
b. NOW Accounts 10% 6% 6%
with the guidelines shown in Appendix 71.
c. Savings a. Short-term market-yielding
Deposits 10% 6% 3% government securities purchased directly
d. Time Deposits, 10% 6% 3% from the BSP-Treasury Department;
Long-term NCTDs 4% 4% 4%
b. NDC Agri-Agra ERAP Bonds which
e. Deposit
Substitutes(DS)1 10% 6% NA are not being used as alternative
f. DS evidenced by compliance with P.D. No. 717. Such bonds
repo agreement1 4% 4% NA shall not in any way be encumbered or be
g. IBCL 0% 0% 0% subject to any transaction without prior
(Sec. X343)
h. Bonds 5% 5% NA
approval of the BSP; and
i. Mortgage/CHM cert. NA 5% NA c. Poverty Eradication and Alleviation
Certificates (PEACe) bonds only to the
Provided, That deposit substitutes extent of the original gross issue proceeds
1
The new reserve requirement ratios shall take effect on the reserve week beginning on 05 August 2011.

§§ X253.2 - X254
11.12.31
determined at the time of the auction, plus (2) The amount, maturity date and rate
capitalized interest on the underlying zero- of interest must be definite and stated in
coupon Treasury Notes as and when the the certificate itself.
corresponding interest is earned over the Other government securities being
life of the bonds. used for reserve purposes shall continue
Any deficiency in the liquidity reserves to be eligible as such: Provided, That
shall continue to be in the forms or modes whenever said securities shall have
prescribed under existing regulations for matured, they shall be replaced by
the composition of required reserves. securities carrying the above features.
(As amended by Circular Nos. 732 dated 03 August 2011, 726 The securities held as reserves under
dated 27 June 2011, 632 dated 19 November 2008, 551 dated Item “b” and last paragraph of Sec. X253
17 November 2006 and 539 dated 09 August 2006)
shall be valued at cost of acquisition and
the bank may freely alter its composition:
Sec. X254 Composition of Reserves. The
Provided, That any substitution or
composition of the required reserves shall
acquisition satisfies the eligibility
be as follows:
requirements prescribed above: Provided,
a. Deposits with the BSP. At least
further, That the bank notifies the BSP of
twenty-five percent (25%) shall be in the
any such change in the prescribed forms not
form of deposits with the BSP.
later than the reporting day following the
b. Government securities and cash in
change. Securities counted as reserves may
vault. The remaining portion of the required
not be hypothecated or encumbered in any
reserves may be held by all banks in the
way or earmarked for any other purpose
form of cash in vault and/or government
without automatically losing their eligibility
securities or evidences of indebtedness of
as reserves.
the Republic of the Philippines.
Only the buying/lending bank in an
To support the implementation of the
agreement covering eligible government
provisions of Subsecs. X343.3 and X601.3,
securities may use such securities as reserves
the cash-in-vault (CIV) component of
against deposits/deposit substitutes.
available reserves shall be based on the
Conversely, the selling/borrowing bank in
actual CIV balance outstanding one (1)
a resale agreement covering eligible
banking day lag, for purposes of computing
government securities may not use such
the reserve position of the current day.
securities as reserves against deposits/
For purposes of this Section, government
deposit substitutes.
securities which may form part of the
The list of reserve-eligible and
reserves against deposits/ deposit substitute
non-eligible securities may be found in
liabilities of banks shall refer to bonds or
Appendix 15.
other evidences of indebtedness
representing direct obligations of the The reserve eligibility of government
Government of the Republic of the securities under the reverse repo
Philippines: Provided, That such securities operations of the BSP shall be suspended
shall have the following minimum features/ during the term of the reverse repo
conditions: agreement.
(1) The securities must bear an interest The phrase non-reserve eligible shall
rate of not more than four percent (4%) per be stamped on the face of the custodian
annum, must be non-negotiable and shall receipt being issued by the BSP to buyer
carry BSP support; and FIs.

§§ X254.1 - X256
08.12.31
§ X254.1 Allowable drawings against government securities eligible for reserves,

reserves. Deposit with the BSP to comply transactions concerning reserve-eligible
with reserve requirements are not regular securities shall be entered in the respective
current accounts. The use, therefore, of BSP securities account of each bank with the BSP
checks for drawings against reserve deposits and shall be evidenced by securities account
shall be limited to (a) settlement of debit or credit advices to be promptly
obligations with the BSP, and (b) furnished the institution/s concerned. No
withdrawals to meet cash requirements. certificate shall be issued for any purpose.
Transactions with third parties other than
§ X254.2 Exclusion of uncleared the BSP shall not be recognized.
checks and other cash items. COCIs which
have not been cleared yet through the Sec. X255 Exemptions from Reserve
Clearing Office should not be debited to the Requirements. The following shall be
account Due from the BSP and should not exempt from reserve requirements:
be considered as available reserves against a. All collections credited to the special
deposit/deposit substitute liabilities. Such account “Due to BSP - Internal Revenue
items shall be debited to the COCIs account. Account (Other Cities and Municipalities)”;
Only after the COCIs have been cleared b. STDs from the Agrarian Reform Fund
through the Clearing Office can the bank Commission and special savings deposits
debit the Due from the BSP account for said from farmer-borrowers; and
items. c. Unclaimed balances of deposit
liabilities already reported to the Treasurer
§ X254.3 Interest income on reserve of the Philippines in accordance with the
deposits. Deposits maintained by banks with Unclaimed Balances Act (Act No. 3936, as
the BSP up to forty percent (40%) of the amended) and transferred/reclassified from
reserve requirement (excluding the liquidity the deposit liability/other credit accounts to
reserve mentioned in Subsec. X253.2 the liability account “Due to the Treasurer
against the combined deposit and deposit of the Philippines”.
substitute liabilities of banks allowed to be Local banks may deduct from the
maintained in the form of short-term market amount of their gross demand deposits, the
yielding government securities purchased total of their Due from Local Banks -
directly from the BSP Treasury Department) Demand and Due from PNB - Clearing in
shall be paid interest at four percent (4%) an amount not exceeding the total of their
per annum based on the average daily Demand Deposits-Banks and Due to Local
balance of said deposits to be credited Banks. As used herein, the term gross
quarterly. demand deposits shall mean the sum of all
The computation of quarterly interest individual deposits, including deposits
payments credited to the DDAs of banks’ made by other local banks, the Philippine
legal reserve deposits with BSP are shown Government, its political subdivisions and
in Appendix 54. instrumentalities, and GOCCs.
Effective 01 July 2003, published interest
rates that will be applied on BSP’s Regular Sec. X256 Computation of Reserve
DDAs of banks shall be inclusive of the ten Position. The reserve position of any bank
percent (10%) Value Added Tax (VAT). and the penalty on reserve deficiency shall
be computed based on a seven (7)-day
§ X254.4 Book entry method for week, starting Friday and ending Thursday,
reserve securities. In the implementation of including Saturdays, Sundays, public
the book entry system for transactions in special/legal holidays, non-banking

§§ X256 - X257
11.12.31
days or declared half-day holidays and submitted by banks in compliance with the
days when there is no clearing: Provided, provisions of Sec. X115 or X116, as
That with reference to public special/legal applicable.
holidays, non-banking days, unexpected b. Any material differences that may be
declared non-banking days, declared half- noted by the SDC between the daily and
day holidays and days when there is no the quarterly report shall be considered as
clearing, the reserve position as calculated erroneous reporting and shall be subject to
at the close of the business day immediately the penalties under existing regulations. The
preceding such public special/legal SDC shall also make a re-run of its
holidays, non-banking days and unexpected computation of the bank’s reserve position
declared non-banking days and declared and in the event that the reserve position
half-day holidays and days when there is resulted to a reserve deficiency/ies, the
no clearing, shall apply thereon. For this corresponding penalties on reserve
purpose, the principal office in the deficiencies shall also apply.
Philippines and all other banking offices c. The lagged system in the
located therein shall be treated as a single measurement of a bank’s reserve
unit. requirement, as provided in Subsec.
The guidelines on the computation of a X256.1, shall also be adopted in the
banks’ reserve position during public sector calculation of the two percent (2%) statutory
holidays are shown in Appendix 84. reserve requirements for repo agreements
(As amended by M-2008-025 dated 13 August 2008) 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) shall capital shall be treated as regular deposit
be computed based on the corresponding substitutes and shall be subject to the regular
levels of deposit and deposit substitute statutory and liquidity reserve requirements
liabilities of the prior week. under existing regulations.
§§ 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 BSP one-tenth of one percent
evidenced by repurchase agreements (1/10 of 1%) per day on the amount of the
covering government securities deficiency or the prevailing ninety-one (91)
a. The SDC shall determine the day T-Bill rate plus three (3) percentage
maximum allowable amount of repo points, whichever is higher: Provided,
agreements covering government securities however, That a bank shall be permitted to
that will qualify for the reduced statutory offset any reserve deficiency occurring one
reserve requirements of two percent (2%). (1) or more days of the week covered by the
It shall be based on the amount reported by report against excess reserves which it may
banks in their weekly Consolidated Daily hold on other days of the same week, and
Report of Condition. The adjusted Tier 1 shall be required to pay the penalty only on
capital reported daily should approximate the average daily net deficiency during the
the quarterly adjusted Tier 1 capital as week.1
1
See Appendix 89

§§ X257 - X260
11.12.31
In case of abuse, a bank shall higher. In case a bank fails to cover its
automatically lose the privilege of offsetting overdrawings, it shall be excluded from
reserve deficiency in the aforesaid manner until clearing on such day and it shall also be denied
such time that it maintains its daily reserve the credit facilities of the BSP. Such exclusion
position at the required minimum for at least from clearing shall continue for as long as it
two (2) consecutive weeks. has not maintained credit balances with the
As used in this Section, “abuse” in the BSP for at least five (5) consecutive banking
privilege of offsetting reserve deficiencies days. If its clearing account is overdrawn for
against excess reserves shall mean having five (5) consecutive banking days, it shall be
reserve deficiencies occurring four (4) or more prohibited from (a) making new loans or
times during any given week for two (2) investments, except investment in government
consecutive weeks, whether or not resulting securities with BSP support; (b) declaring cash
in net weekly deficiencies. dividends until it has maintained credit
(As amended by M-2011-056 dated 10 November 2011, M-2011-055 balances in its BSP clearing account for at least
dated 17 October 2011, M-2011-043 dated 12 August 2011, M-2011 fifteen (15) consecutive banking days; and
-007 dated 04 February 2011, M-2010-039 dated 03 November
2010, M-2010-007 dated 23 April 2010, M-2009-040 dated 30 (c) establishing branches. The denial from
October 2009, M-2009-037 dated 15 October 2009, M-2009-38 availment of credit facilities of the BSP shall
dated 08 October 2009, and M-2009-036 dated 07 October 2009) continue for as long as the bank maintained
credit balances with the BSP for at least fifteen
§ X257.1 Chronic reserve deficiency; (15) consecutive banking days.
penalties. In cases where the bank has chronic For purposes of computing the total
reserve deficiency in deposit/ deposit substitute available reserves against deposit/deposit
liabilities, the bank shall be denied the credit substitute liabilities, the total amount of
facilities of the BSP; and the Monetary Board overdrawing in the clearing account with the
may: BSP shall be deducted from available reserves
(a) limit or prohibit the making of new after the required reserves against deposit/
loans or investments by the bank; and deposit substitute liabilities shall have been
(b) prohibit the declaration of cash satisfied.
dividends. The board of directors of said bank
shall be notified of such chronic reserve § X257.3 Payment of penalties on
deficiency and the penalties therefor, and be reserve deficiencies. Penalties if unpaid
required to immediately correct the reserve within fifteen (15) days from receipt of the
position of the bank. assessment, shall be charged against the
As used in this Subsection, “chronic demand deposits of banks with the BSP:
reserve deficiency” shall mean having net Provided, That where the bank’s credit
reserve deficiencies for two (2) consecutive balance is insufficient and it fails to settle
weeks. the assessment, the Monetary Board may
limit or prohibit the making of new loans
§ X257.2 Failure to cover overdrawings or investments by the bank.
with the Bangko Sentral. Any bank which
incurs an overdrawing in its deposit account Sec. X258 Report on Compliance. Every
with the BSP shall fully cover said overdraft bank shall make a weekly report to the BSP
not later than the next clearing day including of its daily required and available reserves
interest thereon equivalent to one-tenth of on deposit/deposit substitute liabilities in the
one percent (1/10 of 1%) per day or the prescribed forms.
prevailing ninety-one (91) day T-Bill plus
three (3) percentage points, whichever is Secs. X259 - X260 (Reserved)
1
See Appendix 89

§§ 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 - X263.1
11.12.31
indicating the name of the letter carrier, his alternative modes of communication on the
signature and date signed. Said POD and depositor’s last known address at least sixty
Delivery/Monitoring Report may be system (60) days prior to implementation shall be
generated by the bank so as not to rely on considered sufficient notice: Provided,
the manual inscription of the required further, That failure of the depositor to
information by the PhilPost and/or other manifest or register his objection to the new
mail courier personnel. service charges and maintenance fees or any
Regardless of the forms adopted by the change in their terms and conditions in
PhilPost and/or other mail couriers, the writing within thirty (30) days from receipt
proper implementation of the POD service of written notice of amendment shall be
requires as a minimum, that the following deemed to constitute acceptance of such
information be stated clearly: changes, for purposes of this Subsection.
(1) name and address of the addressee/ Banks shall likewise post said
depositor; information on their respective websites,
(2) actual date of delivery/receipt; Automated Time Machine on-screen
(3) name and address of sender/bank; 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 Time 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 respective Sec. X264 Unclaimed Balances. All
deposit accounts that meet the required unclaimed balances, which include credits
monthly ADB, within three (3) months from or deposits of money, bullion, securities or
03 June 2011. Depositors whose accounts other evidences of indebtedness of any kind,
were erroneously charged with these fees and interest thereon already reported to the
since 23 June 2005 but whose deposit Treasurer of the Philippines in accordance
accounts have since been closed shall likewise with the Unclaimed Balances Act (Act No.
be given appropriate notices sent to their last 3936, as amended) shall be transferred/
known mailing address. Notices on the proper reclassified from the deposit liability/other
interpretation of the regulations on the credit accounts to the liability account, “Due
imposition of service charges and maintenance to the Treasurer of the Philippines,” until they
fees on deposit accounts shall likewise be are deposited with or turned over to the
posted in conspicuous places within the Treasurer of the Philippines upon order of the
premises of all banks. court that the same have been escheated in
(As amended by M-2011-030 dated 03 June 2011) 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 other 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 - 267
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 BSP authority: more than fifteen percent (15%);
Provided, That a notarized certification (4) It has no past due obligations with
(using the format shown in Appendix 82) the BSP or with any government FI;
stating that the bank complies with all the (5) It should have continuous profitable
conditions set forth in Sec. X266, jointly operations; and
signed by the bank’s executive vice president (6) It must show adherence to law, and
or officer of equivalent rank and by the BSP rules and regulations.
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 (CPCD I, CPCD II, ISD I and ISD II) the following justifications on the need for
at least five (5) banking days before bank’s the RB/Coop Bank and its branches to
intended starting date of its deposit pick- undertake such service which should
up/cash delivery services beyond regular contain, among other things, the following:
banking hours and days to clients. (1) the names of clients/companies to
e. If any of the above conditions is not be serviced, estimated daily average deposit
met, the BSP may suspend the deposit pick and distance/proximity of client from
up/cash delivery operations of the bank applicant bank;
without prejudice to the imposition of (2) the names and number of banks,
sanctions under Section 37 of R.A. No. 7653. branches, if any, in the area where depositor
(As amended by Circular No. 614 dated 14 July 2008) is situated;
(3) the arrangement in writing between
§ X266.1 Operation of armored cars the bank and the client desiring to avail of
Except for Item “b(2)” of this Section, banks the service, which arrangement shall define
shall use armored cars to afford security in and specify the respective responsibilities
collection and/or delivering cash or of the parties; and
securities and other valuables from or to (4) such other information pertinent to
their clients, branch or extension offices or the application.
the BSP, provided such armored 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
Sec. 2266 (Reserved) conditions:

§§ X267 - X268.2
11.12.31
(1) Banks shall submit a report to the rediscounting line which is based on their
appropriate department of the SES on ATMs total credit score under the Credit
which they establish; Information System (CRIS). The scoring
(2) The off-site ATMs shall be installed system under the CRIS shall consider the
only in centers of activity like shopping following factors:
centers, supermarkets, hospitals, university a. Management and risk management
campuses: Provided, That adequate internal system;
control and security measures shall be (1) Management; and
adopted and submitted to the BSP; and (2) Risk management system;
(3) Only banks which have shown b. Financial indicators;
general compliance with laws, rules and (1) Capital adequacy;
regulations shall be allowed to open off-site (2) Asset quality;
ATMs. (3) Profitability; and
b. Mobile ATMs. Banks may also (4) Liquidity;
establish mobile ATMs, subject to the c. Credit experience;
following conditions: (1) Compliance with the terms and
(1) The mobile ATMs should be conditions of the loan and other BSP
allowed to visit only centers of activity as regulations; and
mentioned in Item “a(2)” above; (2) Credit experience with other FIs.
(2) The bank shall secure insurance The CRIS guidelines shall be reviewed
coverage or adopt a self-insurance scheme on a regular basis by a Credit Committee
to protect itself against losses of whatever created under MB Resolution No. 832 dated
nature in its mobile ATM operations; and 02 July 2008, to maximize its effectiveness
(3) The bank shall notify the appropriate in managing the credit risk of the BSP.
department of the SES of the actual date a (Circular No. 515 dated 06 March 2006 as amended by Circular
mobile ATM becomes operational and when No. 630 dated 11 November 2008)
no longer in operation.
§ X268.2 Application procedure Banks
(As amended by Circular No. 735 dated 16 August 2011)
applying for a rediscounting line shall submit
J. BORROWINGS FROM THE their application in the prescribed form (RL
BANGKO SENTRAL Form No. 1) to the DLC, BSP- Manila or the
appropriate Regional Loans and Credit
Sec. X268 Rediscounting Line. The following Division (RLCD), BSP Regional Offices in
guidelines shall govern the operations of the Cebu, Davao and La Union, together with
BSP’s rediscounting line by banking the following documents:
institutions. a. Board resolution duly signed by the
Coop Banks shall be given the same board of directors of the applicant bank,
privileges and incentives granted to RBs, authorizing the bank to apply for a
TBs, UBs and KBs to rediscount notes with rediscounting line with the BSP and
the BSP, the Land Bank of the Philippines, designating the officer/s of the bank to sign
and other government banks. and endorse documents pertaining thereto,
(Circular No. 515 dated 06 March 2006 as amended by Circular together with their specimen signature/s;
No. 682 dated 15 February 2010) b. Articles of incorporation (for new
applicants only) and amendments, if any;
§ X268.1 Credit Information System c. Organizational chart (for new
The rediscounting availments of all eligible applicants only);
banks shall be drawn against their d. List of board of directors and principal

§§ X268.2 - X268.3
10.12.31
officers (top three (3) executive officers) and indirect loans to DOSRI to the aggregate past
their education/training and work due loans should not be more than five
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. 684 dated 15 March 2010, 648 dated 02 March 2009 and microfinance;
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 the line shall be more than five percent (5%);
subject to the bank’s full compliance with d. The ratio of total collections
the following requirements: (excluding prepayments) during the
a. Minimum capital prescribed under preceding twelve (12)-month period to
Subsecs. X111.1 and X111.2 based on the total collectibles (past due microfinance
latest available report of the SDC; loans beginning, plus matured loans/
b. CAR as required under Sec. X115 principal amortizations due for the
or X116, as applicable based on the latest period) should not be less than ninety-
available report of the SDC except those five percent (95%); and
with capital build-up program approved by e. Officers and staff responsible for
the Monetary Board; microcredit operations shall have
c. R e q u i r e d r e s e r v e s a g a i n s t completed: (1) a training course on
deposit liabilities/deposit substitutes for microfinance; and (2) at least one (1)
two (2) consecutive weeks based on the year experience in microlending
latest available report of the SDC; activities.
d. NPL ratio lower or equal to the The approval, disapproval,
industry average adjusted upward by extension, amendment, cancellation,
two percent (2%) based on the latest suspension and restoration of the
available report of the SDC, or the rediscounting line shall be delegated to
allowable NPL ratio approved by the a Credit Committee composed of the
Monetary Board; Assistant Governor/Managing Director
e. Positive DDA balance with the (MD) of the Monetary Operations Sub-
BSP as of date of application; Sector, MD of the Regional Monetary
f. N o p a s t d u e o b l i g a t i o n s o r Affairs Sub-Sector, and the Director of
collateral deficiencies on account of the DLC.
matured notes/unremitted collections/ Banks with approved rediscounting
missing collaterals or ineligible papers line shall, thereafter, submit the
with the BSP as of date of application; following:
g. A CAMELS composite rating of a. Rediscounting line agreement (RL
“3” or higher based on the latest general Form No. 3); and
e x a m i n a t i o n o f t h e a p propriate b. For new applicant RBs/Coop Banks
department of the SES; and with designated custodian bank, a tripartite
h. The ratio of past due direct and depository agreement (RLF Form No. 2) by

§§ X269.3 - X269.1
10.12.31
and among the applicant bank, designated Constitutional Commissions, the

depository bank (duly concurred by its Head Ombudsman, or to any firm or entity in
Office) and the DLC or RLCD. which they have controlling interest, during
(Circular No. 515 dated 06 March 2006 as amended by Circular their tenure.”
Nos. 684 dated 15 March 2010, 648 dated 02 March 2009 and a. Definition
630 dated 11 November 2008) (1) The terms “loan”, “guaranty” or
“other form of financial accommodation”
§ X268.4 Amount of line. The amount as used in these regulations shall refer to
of rediscounting line shall be based on the transactions which involve the grant,
total credit score obtained by the applicant renewal or extension to a bank by the BSP
bank computed under the CRIS guidelines of any loan, advance, discount, rediscount
which ranges from fifty percent (50%) to or credit in 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 BSP shall submit,
period, the rediscounting line of the bank together with the application, a certification
concerned will be reviewed immediately under oath of the President of the bank that
and acted upon accordingly. the bank and/or any of its stockholders do
(Circular No. 515 dated 06 March 2006 as amended by Circular not fall within the prohibition under Section
No. 630 dated 11 November 2008) 16, Article XI of the Constitution.
§ X268.6 - X268.9 (Reserved) Sec. X269 Rediscounting Availments

Banks shall enroll in the Electronic
§ X268.10 Constitutional prohibition Rediscounting System (eRS) by executing
The following regulations shall govern the and submitting to the DLC or the RLCD a
implementation of Section 16, Article XI of Notarized Electronic Rediscounting System
the Constitution, which reads as follows: Participation Agreement before availing of
“Sec. 16. No loan, guaranty, or other the rediscounting facility of the BSP.
form of financial accommodation for any (Circular No. 515 dated 06 March 2006 as amended by Circular
business purpose may be granted, directly No. 630 dated 11 November 2008)
or indirectly, by any government-owned or
controlled corporation or financial § X269.1 Eligibility requirements at the
institution to the President, the Vice- time of availment. Banks availing of the BSP
President, the Members of the Cabinet, the rediscounting facility must have at the time
Congress, the Supreme Court, and the of availment :

§§ X269.1 - X269.2
11.12.31
a. A positive DDA balance; Type of Collateral Collateral Value

(1) Duly notarized Shall equal or
b. No past due obligations; and
assignment of export exceed the
c. No collateral deficiencies on or domestic letters of outstanding balance
account of matured notes, unremitted credit confirmed of the credit
purchase order sales instrument
collections, missing collaterals or ineligible contract, quedans
papers. (2) Trust Receipts Shall equal or
(Circular No. 515 dated 06 March 2006 as amended by Circular exceed the
outstanding balance
No. 630 dated 11 November 2008) of the credit
instrument
§ X269.2 Eligible papers and collaterals (3) Duly registered 70% of the
mortgage on real appraised value
The BSP shall accept credit instruments property shall equal or
covering all economic activities except the exceed the
following: outstanding
balance of the PN
a. Interbank loans;
(4) Credit guarantees/ Shall equal or
b. Extended/Restructured loans; sureties issued by exceed the
c. Past due loans; the lGLF, the Small outstanding
d. Unsecured loans; Business Corporation balance of the PN
(SBC) and the national
e. Personal consumption loans; government
f. Loans to NBFIs; and (5) Credit guarantees/ Shall equal or
sureties issued by exceed 80% of
g. Loans funded from other the Credit Surety the outstanding
borrowings, e.g. government FIs or Fund (CSF) jointly balance of the PN
multi-lateral agencies. established by
cooperatives and
Credit instruments offered as collateral local government
shall be subject to the eligibility units
requirements provided under Section 82
of R.A. No. 7653. The outstanding National Food
a. Commercial credits - Bills, Authority papers that a bank can rediscount
acceptances, promissory notes (PNs) and shall not exceed the rediscounting bank’s
other credit instruments with maturities of SBL [twenty five percent (25%) of its net
not more than 180 days from the date of worth] or P3.0 billion, which ever is lower.
their rediscount, discount or acquisition by b. Production credits - Bills,
the BSP and resulting from transactions acceptances, PNs and other credit
related to: instruments having maturities of not more
(1) the importation, exportation, than 360 days from the date of their
purchase or sale of readily saleable goods rediscount, discount or acquisition by the
and products, or their transportation within BSP and resulting from transactions related
the Philippines; or to the production or processing of
(2) the storing of non-perishable goods agricultural, animal, mineral, industrial and
and products which are duly insured and other products.
deposited, under conditions assuring their Credit instruments acquired under
preservation, in authorized bonded production credits shall be secured by a duly
warehouses or in other places approved by registered mortgage on real property seventy
the Monetary Board. percent (70%) of the appraised value of
Credit instruments acquired under which equals or exceeds the outstanding
commercial credits shall be secured either balance of the PN.
by: c. Other credits - Special credit

§§ X269.2 - X269.3
11.12.31
instruments not otherwise rediscountable a. Microfinance loans; or

under the immediately preceding Items “a” b. Loans secured by a duly registered
and “b” such as, but not limited to, mortgage on real property of the bank,
microfinance, housing, services, agricultural seventy percent (70%) of the appraised value
loans with long gestation period and other of which equals or exceeds the outstanding
eligible economic activities with maturity of balance of the unsecured PN and other
not more than ten (10) years from date of collaterals acceptable to the BSP, e.g.,
their rediscount, discount or acquisition of government securities.
the BSP. For real estate properties covered by
Credit instruments acquired under other Section 7 of RA No. 26 offered as
credits shall be secured by: collateral, the following conditions must be
met:
Type of Collateral Collateral Value 1. The two (2)-year period from date of
(1) Duly registered 70% of the
mortgage on real appraised value entry of the notation has already expired;
property shall equal or 2. The bank has already filed the
exceed the petition with the court for the cancellation
outstanding balance
of the PN thereof; and
(2) Duly notarized Shall equal or 3. The bank shall submit prior to the
assignment of exceed the
receivables from outstanding
release of the loan a surety bond issued by
service contract balance of the PN an insurance/surety company which is
(3) Credit guarantees/ Shall equal or acceptable to the BSP and is not affiliated
sureties issued by the exceed the
IGLF the SBC and the outstanding with the bank or its subsidiaries, or their
national government balance of the PN stockholder, directors or officers, equivalent
(4) Credit guarantees Shall equal or to the loan value of the property plus interest
sureties issued by the exceed 80% of
CSF jointly established the outstanding and other charges that may fall due, to answer
by cooperatives and balance of the PN for the payment of the obligations in the
LGUs
(5) Other collaterals Current market
event that the petition for cancellation is
acceptable to the BSP value shall equal denied or the notation is not cancelled on
e.g., government or exceed the or before the maturity of the loan.
securities outstanding balance
(Circular No. 515 dated 06 March 2006 as amended by M-2011-
of the PN
036 dated 05 July 2011, M-2011-017 dated 18 March 2011,
Circular Nos. 648 dated 02 March 2009 and 630 dated 11
For housing loans, the lien or mortgage November 2008)
shall cover the property being financed.
An Original Certificate of Title issued § X269.3 Loan availment procedures
by virtue of Free Patent, covering Banks availing of the rediscounting facility
agricultural lands, may be accepted as shall submit their loan applications
underlying collateral for loans offered for electronically to the BSP using their eRS
rediscounting with the BSP after the expiry registered computers.
of the prescription period of five years from Upon receipt of the confirmation of
date of the approval of the order to issue loan approval:
the patent. The five (5)-year restriction is not a. Banks shall execute the PNs with
applicable for residential lands acquired Trust Receipt Agreement and Deed of
under free patent as provided under Section Assignment (PNTRADA) in favor of the BSP
9 of R.A No. 10023. (RL Form No. 7 for peso and RL Form No.
Unsecured loans may be accepted for 8 for dollar and yen), signed by the
rediscounting provided they are: authorized officer/s of the bank.

§§ X269.3 - X269.7
11.12.31
b. Banks authorized to hold-in trust the c. Other Credits maximum term of ten
rediscounted credit instruments and (10) years but shall not
underlying collaterals shall segregate and go beyond the maturity
date of the credit
keep the same together with the PNTRADA
instrument
at a secured place within their premises
under the custody of the accountable officer.
No. 630 dated 11 November 2008)
c. Banks with custodianship
agreements shall deposit with their
§ X269.6 Rediscount/lending rates and
respective depositary/custodian bank the
liquidated damages. The rediscount rates for
rediscounted credit instruments, underlying
peso, dollar and yen loans shall be as
collaterals and the PNTRADA not later than
follows:
the next banking day from date of loan grant,
a. Peso Based on the applicable BSP
receipt of which shall be acknowledged by Rediscount overnight reverse repurchase
the depositary bank in the List of (RRP) rate
Rediscounted Loans. b. Dollar/ Based on their respective London
(Circular No. 515 dated 06 March 2006 as amended by Circular Yen Inter-Bank Offered Rate (LIBOR)
Rediscounts for the last working day of the
No. 630 dated 11 November 2008)
immediately preceding month
§ X269.4 Loan value. The loan value of The lending rates of banks on their
all eligible papers shall be eighty percent rediscounted papers shall not be subject to
(80%) of the outstanding balance of the any ceiling but the spreads of the banks on
borrower’s credit instrument but not higher these papers shall be closely monitored by
than seventy percent (70%) of the appraised the BSP to ensure that these are consistent
value of the underlying collateral. with the prevailing market rates.
Past due BSP loans and unpaid matured
Nos. 684 dated 15 March 2010, 648 dated 02 March 2009 and
notes shall be levied liquidated damages
630 dated 11 November 2008)
equivalent to five percent (5%) per
annum.1
§ X269.5 Maturities. The maturities of (Circular No. 515 dated 06 March 2006 as amended by M-
BSP rediscounts are as follows: 2011-056 dated 10 November 2011, M-2011-055 dated 17
Type of Credit Maturity Date October 2011, M-2011-043 dated 12 August 2011, M-2011-
a. Commercial Credits 007 dated 04 February 2011, M-2010-039 dated 03 November
2010, M-2010-007 dated 23 April 2010, Circular No. 679
(1) Export Packing 180 days from date
dated 01 February 2010, M-2009-040 dated 30 October 2009,
(2) Trading of rediscount but
M-2009-037 dated 15 October 2009, M-2009-38 dated 08
(3) Transport shall not go beyond October 2009, and M-2009-036 dated 07 October 2009,
(4) Quedan the maturity date of Circular Nos.648 dated 02 March 2009 and 630 dated 11
the credit instrument November 2008)
(5) Export Bills (EBs)
At sight fifteen (15) days § X269.7 Release of proceeds. The
from purchase date proceeds of the rediscounting availment
Usance EB term of draft but not to shall be released as follows:
exceed sixty (60) days a. Peso rediscounts - automatically
from shipment date credited to the borrowing bank’s DDA or
b. Production 360 days from date of its depository bank’s DDA with the BSP on
Credits rediscount but shall the same day for loan application submitted
not go beyond the to the BSP before 4:30 pm during banking
maturity date of the PN days.
1
See Appendix 89

§§ X269.7 - X269.8
11.12.31
b. Dollar/Yen rediscounts - released (2) Dollar/Yen rediscounts

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

§§ X269.8 - X269.9
11.12.31
(iii) In the case of negotiated EBs, the 2009, M-2009-37 dated 15 October 2009, M-2009-38 dated 08
receipt by the borrowing bank of payment October 2009, and M-2009-036 dated 07 October 2009, Circular
Nos. 648 dated 02 March 2009 and Circular No. 630 dated 11
from its correspondent bank either through Novermber 2008)
actual remittance or credit advice; or
through book entries made by the § X269.9 Prohibited transactions
borrowing bank charging its correspondent The following shall not be allowed without
bank before receipt of advice shall constitute prior approval of the BSP:
receipt of collection. a. Substitution of rediscounted credit
(2) The bank shall ensure that adequate instruments and underlying collateral real
records are maintained in its Head Office properties on outstanding loans with the
on the collections made by the branches. BSP;
c. Arrearages. The BSP shall b. Renewal of rediscounted credit
undertake all necessary collection measures instruments without remitting payment
allowed by law, such as foreclosure while the loan released against the
proceedings against banks with past due rediscounted credit instrument is still
loans. outstanding with the BSP; and
(Circular No. 515 dated 06 March 2006 as amended by c. Acceptance of properties as
M-2011-056 dated 10 November 2011, M-2011-055 dated 17
October 2011, M-2011-043 dated 12 August 2011, M-2011-007
payment (dacion en pago).
dated 04 February 2011, M-2010-39 dated 03 November 2010, (Circular No. 515 dated 06 March 2006 as amended by Circular
M-2010-007 dated 23 April 2010, M-2009-040 dated 30 October No. 630 dated 11 November 2008)
(Next Page is Part II - Page - 51)
Manual of Regulations for Banks Part II - Page 50a

§§ X269.10 - X269.11
08.12.31
§ X269.10 Monitoring and credit The following definition of terms shall

examination of borrowing banks. The apply:
DLC and the RLCD shall conduct an (1) Offense shall refer to a violation
off-site analysis of the BSP’s credit that connotes infraction of the terms and
exposure to borrowing banks and a risk- conditions of the loans granted by the BSP
based on-site examination that will focus and of the applicable laws, rules and
primarily on determining whether there regulations, BSP credit policies and non-
is a “high”, “moderate” or “low” compliance with the BSP/Monetary Board
probability of default on the settlement directives.
of the banks’ rediscounting obligations (2) Serious offense – This refers to
with the BSP. acts or omissions constituting violation
(Circular No. 515 dated 06 March 2006 as amended by Circular of the terms and conditions of the loans
No. 630 dated 11 November 2008) granted to the bank and of the applicable
laws, rules and regulations that constitute
§ X269.11 Penalties/sanctions. The unsafe and unsound banking practices;
following penalties and sanctions shall be and the misrepresentation of facts and
imposed on the erring bank and/or the warranties committed by the bank/
bank’s authorized/certifying officers. individual(s) that influenced the approval
and amount of the rediscounting loan/line
a. For serious offense granted, such as:
Aggregate Amount/ (a) Rediscounting of ineligible papers,
Penalty Range Minimum Maximum fictitious borrowers/loans/titles or
P50K or less P83 P250
Above P50K
submission of spurious documents;
to 100K 250 750 (b) Absence of or failure to execute
Above P100K vital loan documents;
to P500K 1,000 3,000 (c) Failure or delay in the deposit of
Above P500K
rediscounted loan documents with the
to 1M 2,500 7,500
Above P1M 5,000 15,000 custodian bank, except those caused by
fortuitous events; and
b. For less serious offense (d) Failure to remit to the BSP
P50K or less P63 P188 collections on principal of the rediscounted
Above P50K loans within the prescribed period of five
to 100K 188 563
Above P100K
(5) banking days from date of actual receipt
to P500K 750 2,250 of collections except collections from
Above P500K microfinance loans.
to 1M 1,875 5,625 (3) Less serious offense – This refers
Above P1M 3,750 11,250
to acts or omissions constituting violation
c. Minor offense of the terms and conditions of the loans
P50K or less P42 P125 granted to the bank and of the applicable
Above P50K laws, rules and regulations that constitute
to 100K 125 375 unsafe and unsound banking practices but
Above P100K not falling under the serious offense
to P500K 500 1,500
Above P500K
category; however, the deficiencies noted
to 1M 1,250 3,750 should be addressed immediately to
Above P1M 2,500 7,500 mitigate the credit risk of the BSP.

§§ X269.11 - X269.12
08.12.31
(4) Minor offense – This includes acts the deficiencies/violations noted or

or omissions which are procedural in undertakes to correct the deficiencies
nature, not intentional, may not result in within fifteen (15) days from receipt of
any loss or damage to or any significant notice.
increase in the risk of the creditor BSP and (c) The bank has voluntary disclosed
can be resolved immediately during the the offense/violation committed before it
normal course of business. For purposes is discovered by the BSP or has remitted to
of classifying the nature of the offense, this the BSP the total amount due plus accrued
includes all other acts or omissions which interest.
cannot be classified under serious or less (7) Maximum penalty – refers to the
serious offenses. range of penalties to be imposed if the
(5) Aggregate amount - shall refer to aggravating circumstances outweigh the
the aggregate amount of the following mitigating factor(s), to wit:
under the current examination: (a) The act or omission carries with it
(a) Under serious offense: the intention to commit or cover up a
Total loan value of the following: violation or to defraud the BSP.
(i) Rediscounted ineligible papers (b) Commission or omission of a
with serious offense, fictitious loans or specific offense corrected in the past but
spurious loan documents as determined by found repeated in another transaction in
the BSP or OSI; subsequent examination.
(ii) Undeposited vital loan documents (c). Additional interest charges on
and underlying collaterals as of unpaid penalty.
examination date; and An additional interest of twelve percent
(iii) Collections on principal of (12%) per annum shall be assessed on non-
rediscounted loans which were not payment of the penalties, from date of
remitted to the BSP within the prescribed demand until full settlement thereof.
period of five (5) banking days from date The foregoing monetary penalties shall
of receipt of collections. be without prejudice to the cancellation of
(b) Under less serious offense: the bank’s rediscounting line with the BSP
Total loan value of rediscounted and/or administrative and criminal
ineligible papers with less serious offense sanctions that may be charged against its
as determined by the BSP. culpable officers.
(c) Under minor offense: (Circular No. 515 dated 06 March 2006 as amended by Circular
Total loan value of rediscounted No. 630 dated 11 November 2008)
ineligible papers with minor offense as
determined by the BSP. § X269.12 Interlocking directorship/
(6) Minimum penalty – refers to the officership. Banks owned or managed by
range of penalties to be imposed if the the same owners, stockholders, directors,
mitigating factor(s) outweigh the officers or family/business group may also
aggravating circumstances, to wit: be suspended from availment of the
(a) The act or omission is not rediscounting facility by the Credit
intentional or the bank acted in “good faith” Committee once the rediscounting line of
when the error, deficiency, violation or the any of the banks belonging to the same
absence/lack of the required action were group is suspended, until such time that the
committed. suspension of the erring bank is lifted.
(b) The bank is willing to take (Circular No. 515 dated 06 March 2006 as amended by Circular
immediate action or has started to rectify No. 630 dated 11 November 2008)

§§ 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)
(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 - 1301.1
09.12.31
PART THREE
LOANS, INVESTMENTS AND SPECIAL CREDITS
Section X301 Lending Policies. It shall be c. Minimum operational requirements

the responsibility of the board of directors (1) A bank’s internal credit risk
of a bank to formulate written policies on rating system must be duly approved by
the extension of credit and risk the board of directors (or equivalent
diversification and to set the guidelines for management committee in the case of
evaluation of risk assets. Well-defined Philippine branches of foreign banks).
lending policies and sound lending The board should exercise appropriate
practices are essential if a bank is to perform oversight over the system in a consistent
its lending function effectively and manner.
minimize the risk inherent in any extension (2) A bank’s internal credit risk rating
of credit. The responsibility should be system must be operationally integrated into
approached in a way that will provide its internal credit risk management process.
assurance to the public, the stockholders Its output should accordingly be an integral
and supervisory authorities that timely and part of the process of evaluation and review
adequate action will be taken to maintain of prospective and existing exposures,
the quality of the loan portfolio and other respectively. Credit underwriting criteria
risk assets. should become progressively more
conservative as credit rating declines. All
§ X301.1 (Reserved) credit decisions must be supported by a
written assessment. In the context of
§ 1301.1 Rules and regulations to govern ongoing review, provisioning standards
the development and implementation of must be rationally tied to the internal credit
banks’ internal credit risk rating systems rating system.
a. Statement of policy. It is the policy (3) Banks must have an independent
of the BSP to ensure that banks’ credit risk credit risk control function that is
management processes are sound and responsible for the design, implementation
effective. Towards this end, the following and performance of their credit risk rating
rules and regulations that shall govern the systems. The credit risk control function
use of banks’ internal credit risk rating must be independent from the business
systems are hereby prescribed. functions responsible for originating
b. Scope. UBs and KBs must have in exposures.
place a formal internal credit risk rating (4) Internal ratings must be an essential
system for the underwriting and ongoing part of annual or more frequent reporting
administration, initially, of corporate credit of banks’ changing portfolio quality over
exposures. The internal credit risk rating time to the board of directors (or equivalent
system must be appropriate to a bank’s management committee in the case of
nature, complexity and scale of activities. Philippine branches of foreign banks).
Initially and until such time that the Reporting must include portfolio
Monetary Board prescribes otherwise, breakdown by credit grade, major portfolio
corporate credit exposure shall be defined segments breakdown by credit grade, and
as exposures to companies with assets of analysis of realized default rates against
more than P15.0 million. expectations.
Manual of Regulations for Banks Part III - Page 1

§ 1301.1
09.12.31
(5) Internal and external audit must also result in a meaningful distribution of
review at least annually the bank’s internal exposures across grades with no excessive
rating system and its operations, including the concentrations on a single rating grade.
operations of the credit risk control function. (5) The ratings output of banks’
d. Minimum technical standards internal credit risk rating systems must
(1) Banks must fully document their contain both a borrower and a facility
internal credit risk rating systems. The dimension. The borrower dimension should
documentation must address topics such as focus on factors that affect the inherent
coverage, rating criteria, responsibilities of credit quality of each borrower. The facility
parties involved in the ratings process, dimension, on the other hand, should focus
definition of what constitutes a rating on security/collateral arrangements and
exception, parties that have authority to other similar risk influencing factors of each
approve exceptions, frequency of rating transaction.
reviews, and management oversight of the (6) In rating corporate borrowers with
rating process. A bank must document the total assets of more than P15.0 million, only
rationale for its choice of rating criteria and financial statements audited by external
must be able to provide analyses auditors that are accredited/selected by
demonstrating that the rating criteria and the SEC, the BSP or the Insurance
procedures are likely to result in ratings that Commission (IC) shall be used starting
meaningfully differentiate risk. with the annual financial statements
(2) The rating criteria should reflect an ending 31 December 2006.1
established blend of qualitative and e. Definition of default and loss. In
quantitative factors. Transparent ranges need connection with the data collection
to be set for the quantitative standards based exercise prescribed under this Subsection,
on experience. The quantitative criteria must banks shall be guided by the following
include leverage and cash flow standards. standard definitions of default and loss:
(3) Banks must maintain rating (1) Definition of default
histories on individual accounts, which A default is considered to have
shall include the ratings of the account, occurred in the following cases:
the dates the ratings were assigned, the (a) If a credit obligation is considered
methodology and key data used to derive non-performing under existing rules and
the ratings and the analyst who gave the regulations;
ratings. The identity of borrowers and (b) If a borrower/obligor has sought or
facilities that default, and the timing and has been placed in bankruptcy, has been
circumstances of such defaults, must be found insolvent, or has ceased operations
retained. Banks must also retain data on in the case of businesses;
the realized default rates associated with (c) If the bank sells a credit obligation at
rating grades and ratings migration in a material credit-related loss, i.e., excluding
order to eventually track the predictive gains and losses due to interest rate
power of the risk rating system. movements. Banks’ board-approved internal
(4) A bank’s internal credit risk rating policies that govern the use of their internal
system must have a minimum of 6 rating rating systems must specifically define when
grades for unclassified accounts and 4 rating a material credit-related loss occurs; and
grades for classified accounts, which must (d) If a credit obligation of a borrower/
be assigned in a consistent manner over obligor is considered to be in default, all
time. Moreover, the rating system must credit obligations of the borrower/obligor
1
The Monetary Board approved the one (1) year suspension of the requirement on the use of AFS audited by accredited
external auditors for banks’ internal credit rating system starting fifteen (15) days after 18 May 2009 (publication date).
Part III - Page 2 Manual of Regulations for Banks

§§ 1301.1 - X301.6
09.12.31
with the same bank shall also be considered not properly managed may cause significant
to be in default. losses that could threaten its financial
(2) Definition of loss strength and undermine public confidence
Loss, for purposes of accumulating data in the bank.
on loss in the event of default, refers to (2) Credit risk concentrations may arise
economic loss. It must therefore include from excessive exposures to individual
discount effects, as well as direct and indirect counterparties, groups of related counterparties
costs associated with collecting on the credit and groups of counterparties with similar
obligation. Banks’ board-approved internal characteristics (e.g., counterparties in specific
policies that govern the use of their internal geographical locations, economic or industry
rating systems must include specific policies sectors).
and procedures that should be followed in (3) Diversification of risk is essential in
the determination of economic loss. banking. Many past bank failures have been
f. Timetable for implementation due to credit risk concentrations of some
(1) Banks must submit an kind. It is essential for banks to prevent
implementation plan to the appropriate undue credit risk concentrations from
department of the SES no later than 31 July excessive exposures to particular
2004. A monetary penalty of P10,000 per counterparties, industries, economic sectors,
day shall be imposed for delay until such regions or countries.
plan is submitted. (4) While concentration of credit risks
(2) A fully documented internal credit risk are inherent in banking and cannot be
rating system, duly approved by the board of totally eliminated, they can be limited and
directors, must be submitted to the BSP not reduced by adopting proper risk control and
later than 31 December 2004. Upon diversification strategies. Safeguarding
submission of the system, all prospective and against credit risk concentrations should
existing corporate accounts must immediately form an important component of a bank’s
be evaluated and monitored according to such risk management system.
system. A monetary penalty of P10,000 per (5) The board of directors of a bank
day shall be imposed for delay until this shall be responsible for establishing and
requirement is complied with. monitoring compliance with policies
(As amended by Circular Nos. 655 dated 12 May 2009, 585 dated governing large exposures and credit risk
15 October 2007 and 531 dated 17 May 2006) concentrations of the bank. The board
should review these policies regularly (at
§ 2301.1 (Reserved) least annually) to ensure that they remain
adequate and appropriate for the bank.
§ 3301.1 (Reserved) Subsequent changes to the established
policies must be approved by the board.
§§ X301.2 - X301.5 (Reserved) (6) The policy on large exposures and
credit risk concentrations shall, at a
§ X301.6 Large exposures and credit minimum, cover the following:
risk concentrations. The following (a) Exposure limits that are reasonable
guidelines shall govern managing large in relation to capital and resources for -
exposures and credit risk concentrations in (i) Various types of borrowers/
line with the objective of strengthening risk counterparties (e.g., government, banks
management in the banking system. and other FIs, corporate and individual
a. General principles borrowers);
(1) A bank can be exposed to various (ii) A group of related borrowers/
forms of credit risk concentration which if counterparties;

§ X301.6
08.12.31
(iii) Individual industry sectors; twenty-five percent (25%) as a matter of

(iv) Individual countries; and sound practice.
(v) Various types of investments. b. Monitoring of large exposures/
(b) The circumstances in which the credit risk concentrations
above limits can be exceeded and the party (1) Banks should have a central
authorized to approve such excesses, e.g., liability record (preferably based on
the bank’s board of directors or credit automated system) for each loan exposure.
committee with delegated authority from the Banks should be able to monitor such
board; exposures against prescribed and internal
(c) The delegation of credit authority limits on a daily basis.
within the bank for approving large (2) Every bank should have adequate
exposures; management information and reporting
(d) The procedures for identifying, systems that enable management to
reviewing, managing and reporting large identify credit risk concentrations within
exposures of the bank; the asset portfolio of the bank or of the
(e) The definition of exposure. Banks group (including subsidiaries and overseas
should take into account the nature of their branches) on a timely basis. If a
business and the complexity of their concentration does exist, banks should
products. In any case, a bank’s exposures reduce it in accordance with their
to a counterparty should include its on and prescribed policies. Large exposures shall
off-balance sheet exposures and indirect be subject to more intensive monitoring.
exposures; and (3) Banks should ensure that their
(f) The criteria to be used for internal or external auditors conduct at least
identifying a group of related persons. an annual review of the quality of large
(7) The board and senior management exposures and controls to safeguard against
of a bank should ensure that: credit risk concentrations. Their review
(a) Adequate systems and controls are should ascertain whether:
in place to identify, measure, monitor and (a) The bank’s relevant policies, limits
report large exposures and credit risk and procedures are complied with; and
concentrations of the bank in a timely (b) The existing policies and controls
manner; and remain adequate and appropriate for the
(b) Large exposures of the bank are bank’s business.
kept under regular review. “Large (4) Management should take prompt
exposures” shall refer to exposures to a corrective action to address concerns and
counterparty or a group of related exceptions raised.
counterparties equal or greater than five (5) There should also be an
percent (5%) of bank’s qualifying capital as independent compliance function to
defined under Sec. X116. ensure that all relevant internal and
(8) A bank should, where appropriate, prescribed requirements and limits are
conduct stress testing and scenario analysis complied with. Breaches of prescribed
of its large exposures to assess the impact requirements and deviations from
of changes in market conditions or key risk established policies and limits should be
factors (e.g. economic cycles, interest rate, reported to senior management in a timely
liquidity conditions or other market manner.
movements) on its profile and earnings. c. Unsafe and unsound practice
(9) It is expected that banks would Non-observance of the principles and
generally observe a lower internal single the requirements of Items “a” and “b” above
borrower’s limit than the prescribed limit of may be a ground for a finding of unsafe

§§ X301.6 - X302.2
11.12.31
and unsound practice under Section 56 of The system of identifying and

the General Banking Law of 2000 monitoring problem loans and other risk
(Appendix 48) and may be subject to assets and setting up of allowances for
appropriate sanction as may be determined probable losses shall include, but is not
by the Monetary Board. limited to, the guidelines mentioned in
d. Notification requirements Appendix 18.
A bank must inform BSP immediately (As amended by M-2011-059 dated 22 November 2011, M-2011-
when it has concerns that its large 056 dated 10 November 2011, M-2011-055 dated 17 October
2011, M-2011-043 dated 12 August 2011, M-2011-007 dated
exposures or credit risk concentrations have 04 February 2011, Circular Nos. 622 dated 16 September 2008,
the potential to impact materially upon its 603 dated 03 March 2008 and 520 dated 20 March 2006)
capital adequacy, along with proposed
measures to address these concerns. § X302.1 Provisions for losses;
e. Reporting booking. The board of directors of banks are
Bank’s records on monitoring of large responsible for ensuring that their institutions
exposures shall be made available to the have controls in place to determine the
BSP examiners for verification at any given allowance for probable losses on loans, other
time. When warranted, the BSP may impose credit accommodations, advances and other
additional reporting requirements on bank assets consistent with the institutions’ stated
in relation to its large exposures and credit policies and procedures, generally accepted
risk concentrations. accounting principles (GAAP), the BSP rules
f. Sanction and regulations and the safe and sound
Any failure or delay in complying with banking practices. The board of directors, in
the requirements under Items “d” and “e” fulfilling this responsibility, shall require
of this Subsection shall be subject to management to develop and maintain an
penalty applicable to those involving major appropriate, systematic and uniformly applied
reports. process consistent and in compliance with
existing BSP rules and regulations to determine
Sec. X302 Loan Portfolio and Other Risk the amount of reserves for bad debts or
Assets Review System. To ensure that timely doubtful accounts or other contingencies.
and adequate management action is taken The specific allowance for probable
to maintain the quality of the loan portfolio losses for classified loans and other risk
and other risk assets and that adequate loss assets and the general loan loss provision
reserves are set up and maintained at a level as required in Appendix 18 shall be set up
sufficient to absorb the loss inherent in the immediately.
loan portfolio and other risk assets, each
bank shall establish a system of identifying § X302.2 Sanctions. Non-compliance
and monitoring existing or potential with the requirement to book valuation re-
problem loans and other risk assets and of serves required under the preceding Subsec-
evaluating credit policies vis-à-vis prevailing tion shall be a ground for the imposition of
circumstances and emerging portfolio any or all of the following sanctions:
trends. Management must also recognize a. Denial of the request for authority to
that loss reserve is a stabilizing factor and establish new banking offices regardless of
that failure to account appropriately for type or category;
losses or make adequate provisions for b. Denial of access to BSP credit
estimated future losses may result in facilities except as may be allowed under
misrepresentation of the bank’s Section 84 of R. A. No. 7653; and
financial condition. c. Fine of P10,000 a day for UBs and

§§ X302.2 - X303
11.12.31
KBs, P5,000 for TBs and P500 for RBs/Coop title covering readily marketable, non-
Banks, counted as follows: perishable goods which must be fully
(1) from the date the bank has been covered by insurance;
informed that the recommendation of the 2. By an additional twenty-five percent
appropriate department of the SES has been (25%) of the net worth of such bank:
confirmed by the Monetary Board up to the Provided, That the additional loans, credit
date that said recommended valuation accommodations and guarantees are for the
reserves had been actually booked, in the purpose of undertaking infrastructure and/
case of allowance for probable losses for or development projects under the Public-
loans and other risk assets classified as Private Partnership (PPP) Program of the
substandard unsecured, doubtful and loss government duly certified by the Secretary
as required by the BSP; and of Socio-Economic Planning: Provided,
(2) from the dates prescribed under this further, That the total exposures of the bank
Section up to the date of the actual booking to any borrower pertaining to such
in cases of the two percent (2%) general infrastructure and/or development projects
provision for probable losses, the twenty- under the PPP Program shall not exceed
five percent (25%) allowance for probable twenty-five percent (25%) of the net worth
losses on secured loans classified as of such bank: Provided, furthermore, That
substandard, and the five percent (5%) the additional twenty-five percent (25%)
allowance for probable losses on loans shall only be allowed for a period of
especially mentioned. three (3) years from 28 December 2010:
Provided, finally, That the credit risk
A. LOANS IN GENERAL concentration arising from total exposures
to all borrowers pertaining to such
Sec. X303 Credit Exposure Limits to a infrastructure and/or development projects
Single Borrower under the PPP Program shall be considered
a. Consistent with national interest, the by the bank in its internal assessment of
total amount of loans, credit capital adequacy relative to its overall risk
accommodations and guarantees that may profile and operating environment. Said
be extended by a bank to any person, loans, credit accommodations and
partnership, association, corporation or guarantees based on the contracted amount
other entity shall at no time exceed twenty as of the end of the three (3)-year period
five percent (25%) of the net worth of such shall not be increased but may be reduced
bank. The basis for determining compliance and once reduced, said exposures shall not
with the single borrower’s limit (SBL) is the be increased thereafter; and
total credit commitment of the bank to or 3. By an additional fifteen percent (15%)
on behalf of the borrower. of the net worth of such bank: Provided,
b. The total amount of loans, credit That the additional loans, credit
accommodations and guarantees prescribed accommodations and guarantees are granted
in the first paragraph may be increased for to finance oil importation of oil companies
each of the following circumstances: which are not subsidiaries or affiliates of
1. By an additional ten percent (10%) of the lending bank engaged in energy and
the net worth of such bank: Provided, That power generation: Provided, further, That
the additional liabilities are adequately the oil companies qualify under the credit
secured by trust receipts, shipping underwriting standards of the lending bank
documents, warehouse receipts or other and the lending bank shall comply with
similar documents transferring or securing Subsec. X301.6 on the guidelines in

§ X303
11.12.31
managing large exposures and credit risk be combined under certain circumstances,
concentration: Provided, furthermore, That including but not limited to any of the
the credit risk concentration arising from following situations: (1) the parent
total exposures to all oil companies shall corporation, partnership, association, entity
be considered by the bank in its internal or individual guarantees the repayment of
assessment of capital adequacy relative to the liabilities; (2) the liabilities were incurred
its overall risk profile and operating for the accommodation of the parent
environment and shall be incorporated in corporation or another subsidiary or of the
the Internal Capital Adequacy Assessment partnership or association or entity or such
Process (ICAAP) document required to be individual; or (3) the subsidiaries though
submitted under Sec. X117: Provided, separate entities operate merely as
finally, That the additional fifteen percent departments or divisions of a single entity.
(15%) shall only be allowed for a non- e. For purposes of this Section, loans,
extendable period of two (2) years from 03 other credit accommodations and
March 2011. Said additional loans, credit guarantees shall exclude: (1) loans and other
accommodations and guarantees credit accommodations secured by
outstanding as of the end of the two obligations of the BSP or of the Philippine
(2)-year period and in excess of twenty five Government; (2) loans and other credit
percent (25%) of the lending bank’s net accommodations fully guaranteed by the
worth shall not be increased but shall be government as to the payment of principal
reduced and once reduced, said exposures and interest; (3) loans and other credit
shall not be increased thereafter. accommodations secured by U.S. Treasury
c. The above prescribed ceilings shall Notes and other securities issued by central
include: (1) the direct liability of the maker governments and central banks of foreign
or acceptor of paper discounted with or sold countries with the highest credit quality
to such bank and the liability of a general given by any two (2) internationally accepted
endorser, drawer or guarantor who obtains rating agencies; (4) loans and other credit
a loan or other credit accommodation from accommodations to the extent covered by
or discounts paper with or sells papers to the hold-out on or assignment of, deposits
such bank; (2) in the case of an individual maintained in the lending bank and held in
who owns or controls a majority interest in the Philippines; (5) loans, credit
a corporation, partnership, association or accommodations and acceptances under
any other entity, the liabilities of said entities letters of credit to the extent covered by
to such bank; (3) in the case of a margin deposits; and (6) other loans or
corporation, all liabilities to such bank of credit accommodations which the Monetary
all subsidiaries in which such corporation Board may from time to time specify as non-
owns or controls a majority interest; and risk items.
(4) in the case of a partnership, association f. The wholesale lending activities of
or other entity, the liabilities of the members government banks to participating financial
thereof to such bank. institutions (PFIs) for relending to end-user
d. Even if a parent corporation, borrowers shall at no time exceed a separate
partnership, association, entity or an limit of thirty-five percent (35%) of net
individual who owns or controls a majority worth, subject to the following guidelines:
interest in such entities has no liability to (1) it shall apply only to loans granted to
the bank, the liabilities of subsidiary PFIs on a wholesale basis for on-lending to
corporations or members of the partnership, end-user borrowers; (2) it shall apply only
association, entity or such individual shall to loan programs funded by multilateral,

§§ X303 -X303.1
11.12.31
international or local development agencies, owned or controlled financial institution in

organizations or institutions especially the area.
designed for wholesale lending activities of h. Loans, credit accommodations and
government banks; (3) the end-user borrowers guarantees to any person, partnership,
of the PFIs shall be subject to the twenty-five association, corporation or other entity or
percent (25%) SBL, not the increased ceiling group of companies in excess of the
of thirty-five percent (35%); and (4) applicable SBL arising from acquisition,
government banks shall observe appropriate merger or consolidation of borrower-
criteria for accrediting PFIs and for the grant/ corporations, which loans, credit
renewal of credit lines to accredited PFIs. accommodations and guarantees were granted
g. Loans and other credit prior to and are outstanding as of date of
accommodations and usual guarantees by a acquisition, merger or consolidation of
bank to any non-bank entity, whether locally borrower-corporations shall not be increased,
or abroad, shall be subject to the limits as but shall be reduced and once reduced, shall
herein prescribed. not be increased beyond the applicable SBL.
Loans and other credit accommodations (As amended by Circular Nos. 734 dated 16 August 2011, 712
as well as deposits and usual guarantees by a dated 9 February 2011 and 700 dated 06 December 2010)
bank to any other bank, whether locally or § X303.1 Definition of terms. For
abroad, shall be subject to the limits as herein purposes of this Section, the following
prescribed or P100.0 million, whichever is definitions shall apply:
higher: Provided, That the lending bank shall a. Total credit commitment shall include
exercise proper due diligence in selecting a outstanding loans and other credit
depository bank and shall formulate accommodations, deferred letters of credit less
appropriate policies to address the margin deposits, and guarantees. Except as
corresponding risks involved in the specifically provided, total credit commitment
transactions. shall be reckoned on credit risk-weighted basis
Deposits of RBs/Coop Banks with consistent with existing regulations.
government-owned or controlled financial b. Loans shall refer to all the accounts
institutions like the LBP and the DBP shall not under the loan portfolio of a bank as
be covered by the SBL imposed under R.A. enumerated in the Manual of Accounts for
No. 8791. Banks.
In municipalities and cities where there c. Other credit accommodations shall
are no government banks, the deposits of RBs/ refer to credit and specific market risk
Coop Banks in private banks in said areas shall exposures of banks arising from
not be subject to the SBL imposed under R.A. accommodations other than loans such as
No. 8791. Deposits in private banks located receivables (sales contract receivables,
in municipalities/cities where there are accounts receivables and other receivables),
government banks shall be subject to the limits and debt securities booked as investments.
as prescribed in the second paragraph above. d. Bank guarantee. A bank guarantee is
The outstanding balance of the demand an irrevocable commitment of a bank binding
deposit account in a private depository bank itself to pay a sum of money in the event of
being used by the TBs/RBs/Coop Banks with non-performance of a contract by a third party.
authority to accept/create demand or current The guarantee is a commitment separate and
deposits, to fund checks cleared through the distinct from the principal debt or contract.
said private depository bank shall also be e. Net worth shall mean the total of the
exempt from the SBL imposed under R.A. unimpaired paid-in capital including paid-in
No. 8791 even if there is a government- surplus, retained earnings and undivided

§ X303.1
09.12.31
profit, net of unbooked valuation reserves and articles of commerce, agriculture or industry
other adjustments as may be required by the of such uses as to make them the subject of
BSP. constant dealings in ready markets with such
f. Qualifying capital shall mean capital frequent quotations as to make their prices
under Sec. X116. easily and definitely ascertainable, or which
g. The term “control of majority interest” lend themselves easily to disposal by sale at
shall be synonymous to “controlling interest” any time to pay the obligations secured by the
and exists when the parent owns directly or said goods.
indirectly through subsidiaries more than one k. Bill of exchange drawn in good faith
half of the voting power of an enterprise against actually existing values shall mean one
unless, in exceptional circumstance, it can be (1) which is drawn by a seller on the purchaser
clearly demonstrated that such ownership for the purchase price of commodities sold. A
does not constitute control. Control of majority bill of exchange, whether drawn against goods
interest may also exist even when the parent for exports or against goods to be sold locally,
owns one-half or less of the voting power of which is discounted or purchased by a bank
an enterprise when there is: is a bill drawn against existing values only
(1) Power over more than one-half of the when it is accompanied by shipping
voting rights by virtue of an agreement with documents, warehouse receipts or other
other investors; or papers, securing title to the goods sold.
(2) Power to govern the financial and However, bills of exchange drawn in good
operating policies of the enterprise under a faith against actually existing values as defined
statute or an agreement; or in this paragraph, which are past due or the
(3) Power to appoint or remove the maturities of which have been extended, shall
majority members of the board of directors or be considered as additional loans authorized
equivalent governing body; or under the second paragraph of this section and
(4) Power to cast the majority votes at shall be subject to the ten percent (10%)
meetings of the board of directors or equivalent limitation provided therein.
governing body; or l. Commercial or business paper
(5) Any other arrangement similar to any actually owned by the person negotiating the
of the above. same shall mean a paper arising from an actual
h. Subsidiary shall refer to a corporation business transaction. A trade acceptance or
or firm more than fifty percent (50%) of the promissory note actually owned by the person
outstanding voting stock of which is directly negotiating the same is a commercial or a
or indirectly owned, controlled or held with business paper. However, if a bill is drawn
power to vote by its parent corporation. against an agent or fictitious drawee, or if a
i. Credit risk transfer shall refer to any promissory note is executed by an agent or
arrangement that allows the bank to transfer fictitious drawee, neither is a commercial nor
the credit risk associated with its loan or other a business paper. Commercial or business
credit accommodation to a third party. papers actually owned and discounted by the
j. Readily marketable goods shall mean person negotiating the same, which are
(Next page is Part III- Page 9)
Manual of Regulations for Banks Part III - Page 8a

§§ X303.1 - X303.4
08.12.31
past due or the maturity of which have been extent of 100% of the net worth of the bank
extended, shall be considered as money concerned shall be excluded in
borrowed and shall be subject to the determining the SBL prescribed herein,
limitation of twenty-five percent (25%) subject to the following conditions:
provided in the first paragraph of this (1) The importation shall be made in
Section: Provided, That commercial or pursuance of a national policy duly
business papers purchased by banks from enunciated by the National Government;
SMEs which became past due or the (2) The importation shall have been
maturities of which have been extended, approved by the National Economic
shall be considered additional loan by the Development Authority (NEDA);
bank to the purchaser of goods or services (3) The letter of credit shall specify that
from the SME and shall be entitled to an importation shall be made with certification
increased SBL equivalent to ten percent from the National Food Authority (NFA),
(10%) of the net worth of the concerned or the consular establishment of the
bank if the purchasers are companies with Philippine government at the source of any
credit ratings of at least “AA-” or equivalent such establishment of the Philippine
from a BSP-recognized rating agency. government at the source of any such
shipment to the effect that the commodity
§ X303.2 Rediscounted papers being imported is either rice or corn; and
included in loan limit. The liabilities to the (4) The related bills of lading shall
bank of borrowers whose papers were specify in addition to the name of the
rediscounted by banks with the BSP shall importer concerned, that the NFA shall be
not be deemed as having been the consignee of the shipment;
extinguished by the rediscount, but shall c. The portion of loans and other credit
be considered as still existing and shall be accommodations covered by the guarantee
included in determining the SBL until such of IGLF;
papers are paid by the borrowers. d. The total liabilities of a commercial
paper issuer for commercial paper held by
§ X303.3 Credit risk transfer. Subject a UB as a firm underwriter shall not be
to prior approval of the BSP, loans and other counted in determining compliance with
credit accommodations covered by a legally the SBL within a period of 180 days from
effective credit risk transfer arrangement the acquisition of the commercial paper by
such as guarantee, letter of indemnity, the UB: Provided, That in no case shall such
standby letter of credit or credit derivative, liabilities exceed five percent (5%) of the
may be excluded from the total credit net worth of the UB beyond the normal
commitment of the bank to a borrower in applicable SBL;
reckoning compliance with the SBL. e. The portion of loans and other
credit accommodations covered by
§ X303.4 Exclusions from loan limit guarantees of international/regional
a. The discount of bills of exchange institutions/multi-lateral FIs where the
drawn in good faith against actually existing Philippine Government is a member/
values, and the discount of commercial or shareholder, such as the IFC and the ADB;
business paper which are actually owned f. Loans and other credit
by the person, company, corporation or accommodations or portion thereof,
association negotiating the same; specifically provided for with valuation
b. Credit accommodations to finance reserve: Provided, That the bank has no
the importation of rice and corn to the unbooked valuation reserves;

§§ X303.4 - X303.8
08.12.31
g. Loans and other credit (3) Other penalties as the Monetary

accommodations as a result of an Board may impose depending on the
underwriting or sub-underwriting gravity of the offense.
agreement of debt securities outstanding Transitory provision. Outstanding
for a period not exceeding thirty (30) credit commitments of a bank as of 02 May
calendar days; 2004 which are within the ceiling
h. Loans granted to foreign embassies. prescribed under the regulations existing
These loans are considered as loans to their prior to said date but will exceed the
respective central governments and as such limitations prescribed in this Section shall
shall be considered non-risk; and not be subject to penalty for a period of
i. Foreign securities lending under one (1) year or until said credit
Sec. X531 and other domestic securities commitments become past due or are
lending programs duly recognized by the extended, renewed or restructured
BSP containing safeguards consistent with whichever comes later. Said credit
best international practices, to protect commitments shall, however, be reported
securities lenders’ risk exposures. to the BSP within fifteen (15) banking days
(As amended by Circular Nos. 578 dated 17 August 2007 and from 02 May 2004.
550 dated 17 November 2006)
§§ X303.6 – X303.7 (Reserved)
§ X303.5 Sanctions. Violations of the
provisions of this Section shall be subject § X303.8 Limit for wholesale lending
to the following: activities of government banks. There
a. Monetary penalties - Fines of one- shall be a separate SBL of thirty-five percent
tenth of one percent (1/10 of 1%) of the (35%) of unimpaired capital and surplus for
excess over the ceiling but not to exceed the wholesale lending activities of
P30,000.00 a day for each SBL violation government banks to PFIs for relending to
shall be assessed on the bank to be end-user borrowers, subject to the
reckoned from the date the excess started following guidelines:
up to the date when such excess was a. Government banks’ SBL of thirty-
eliminated: Provided, That a maximum fine five percent (35%) of unimpaired capital
of P500.00 a day for each violation shall be and surplus shall apply only to loans
imposed against banks with total resources granted to PFIs on a wholesale basis for
of less than P50.0 million at the time of on-lending to end-user borrowers;
granting of loan/credit accommodation. b. The thirty-five percent (35%) SBL
b. Other sanctions shall apply only to loan programs funded by
First Offense – Reprimand for the multilateral, international or local
directors/officers who approved the credit developmental agencies, organizations or
availment which resulted in the excess with institutions specially designed for wholesale
a warning that subsequent violations will lending activities of government banks;
be subject to more severe sanctions. c. The end-user borrowers of the PFIs
Subsequent offenses – shall be subject to the twenty-five percent
(1) Fine of P1,000.00 for directors/ (25%) SBL, not to the increased ceiling of
officers who approved the credit availment thirty-five percent (35%); and
which resulted in the excess. d. Government banks shall observe
(2) Suspension of the bank’s branching the minimum criteria for accrediting PFIs
privileges and access to BSP rediscounting and for the grant/renewal of credit lines to
facilities until the excess is eliminated. accredited PFIs as set forth in Appendix 41.

§§ X304 - X304.1
10.12.31
Sec. X304 Grant of Loans and Other Credit and financial statements shall also be
Accommodations. The following regulations checked and considered in the evaluation
shall be observed in the grant of loans and of the financial capacity and
other credit accommodations. creditworthiness of credit applicants. The
waiver of confidentiality of client
§ X304.1 General guidelines. Consistent information and/or an authority of the bank
with safe and sound banking practices, a to conduct random verification with the BIR
bank shall grant loans or other credit need not be submitted annually since once
accommodations only in amounts and for submitted these documents remain valid
the periods of time essential for the unless revoked.
effective completion of the operation to be Should the document(s) submitted
financed. prove to be spurious or incorrect in any
Before granting loans or other credit material detail, the bank may terminate any
accommodations, a bank must ascertain loan or other credit accommodation
that the borrower, co-maker, endorser, granted on the basis of said document(s)
surety and/or guarantor, if applicable, and shall have the right to demand
is/are financially capable of fulfilling immediate repayment or liquidation of the
his/their commitments to the bank. For obligation. Moreover, the bank may seek
this purpose, a bank shall obtain adequate redress from the court for any harm done
information on his/their credit standing by the borrower’s submission of spurious
and financial capacities. documents.
In addition to the usual information The required submission of additional
sheet about the borrower, a bank shall documents shall cover loans, other credit
require from the credit applicant the accommodations, and credit lines granted,
following: restructured, renewed or extended after
a. A copy of the latest ITR of the 02 November 2006 including any
borrower and his co-maker, if applicable, availment and/or re-availment against
duly stamped as received by the BIR; existing credit lines, except:
b. Except as otherwise provided by (1) Microfinance loans as defined under
law and in other regulations, if the Subsec. X361.1 (a);
borrower is engaged in business, a copy (2) Loans to registered Barangay
of the borrower’s latest financial Micro-Business Enterprises (BMBEs);
statements as submitted for taxation (3) Interbank loans;
purposes to the BIR; and (4) Loans secured by hold-outs on or
c. A waiver of confidentiality of client assignment of deposits or other assets
information and/or an authority of the bank considered non-risk by the Monetary
to conduct random verification with the Board;
BIR in order to establish authenticity of the (5) Loans to individuals who are not
ITR and accompanying financial statements required to file ITRs under BIR regulations,
submitted by the client. as follows:
The documents under Items “a” and (a) Individuals whose gross
”b” above shall be required to be submitted compensation income does not exceed
annually for as long as the loan and/or their total personal and additional
credit accommodation is outstanding. The exemptions, or whose compensation
consistency of the data/figures in said ITRs income derived from one (1) employer

§§ X304.1 - X304.2
10.12.31
does not exceed P60,000 and the income extended.

tax on which has been correctly withheld; For purposes of this Subsection, the
(b) Those whose income has been following definitions shall apply:
subjected to final withholding tax; 1. Micro and small enterprises shall be
(c) Senior citizens not required to file a defined as any business activity or enterprise
return pursuant to R.A. No. 7432, as engaged in industry, agribusiness and/or
amended by R.A. No. 9257, in relation to services whether single proprietorship,
the provisions of the National Internal cooperative, partnership or corporation
Revenue Code (NIRC) or the Tax Reform whose total assets, inclusive of those arising
Act of 1997; and from loans but exclusive of the land on
(d) An individual who is exempt from which the particular business entity’s office,
income tax pursuant to the provisions of plant and equipment are situated, must have
the NIRC and other laws, general or a value of up to P3.0 million and P15.0
special; and million, respectively, or as may be defined
(6) Loans to borrowers, whose only by the SMED Council or other competent
source of income is compensation and the government agency.
corresponding taxes on which has been 2. Consumer loans is defined to include
withheld at source: Provided, That the housing loans, loans for purchase of car,
borrowers submitted, in lieu of the ITR, a household appliance(s), furniture and fixtures,
copy of their Employer’s Certificate of loans for payment of educational and hospital
Compensation Payment/Tax Withheld (BIR bills, salary loans and loans for personal
Form 2316) or their payslips for at least consumption, including credit card loans.
three (3) months immediately preceding (As amended by Circular Nos. 694 dated 14 October 2010,
the date of loan application. 622 dated 16 September 2008, 607 dated 30 April 2008 and
Loans to micro and small enterprises 549 dated 09 October 2006)
which are not specifically exempted from
the additional documentary requirements § X304.2 Purpose of loans and other
specified under the third paragraph of this credit accommodations. Before granting
Subsection shall be exempted from said a loan or other credit accommodation,
additional documentary requirement up to banks shall ascertain the purpose of the loan
31 December 2011. or other credit accommodation which shall
Consumer loans, with original amounts be clearly stated in the application and in
not exceeding P2.0 million, are exempted the contract between the bank and
from updating requirements or the required borrower. The proceeds of a loan or other
annual submission of the same credit accommodation shall be utilized only
requirements forwarded during the initial for the purpose(s) stated in the application
submission under this Subsection but not and contract; otherwise, the bank may
in their restructuring, renewal, or extensions terminate the loan or other credit
or availment/re-availment against existing accommodation and demand immediate
credit lines: Provided, That these loans are repayment of the obligation.
supported by ITRs or by BIR Form 2316 or Notwithstanding the preceding sentence,
payslips for at least three (3) months the proceeds of a loan or other credit
immediately preceding the date of loan accommodation may be utilized by the
application, and financial statements borrower for a purpose(s) other than that
submitted for taxation purposes to the BIR, originally stated in the application and
as may be applicable, at the time the loans contract: Provided, That such other
were granted, restructured, renewed, or purpose(s) is/are among those for which the

§§ X304.2 - X304.10
10.12.31
lending bank may grant loans and other credit risk such as requiring the submission of
credit accommodations under existing laws a Comfort Letter from the visa holder’s
and regulations: Provided, further, That such employer, limiting the term of the loan to the
utilization shall be with prior written period of the visa’s validity, submission of SIRV
approval of duly authorized officer(s)/ identification card, as well as subjecting the
committee/board of directors of the lending visa holder to the usual credit processes/
bank and such written approval shall form requirements; and
part of the contract between the bank and b. Embassy officials [foreign diplomats
the borrower. and career consular officials and employees
who are physically residing in the
§ X304.3 Prohibited use of loan Philippines for a term of one (1) year or
proceeds. Banks are prohibited from more]: Provided, That such loans shall be
requiring their borrowers to acquire shares limited to consumer loans, including credit
of stock of the lending bank out of the loan cards, auto loans, appliance loans and others
or other credit accommodation proceeds that may henceforth be allowed by the
from the same bank. Monetary Board: Provided, further, That the
lending bank institutes measures to mitigate
§ X304.4 Signatories. Banks shall credit risk such as requiring the submission
require that loans and other credit of a Comfort Letter from the Embassy
accommodations be made under the employing said officials.
signature of the principal borrower and, in (M-2007-021 dated 15 August 2007)
the case of unsecured loans and other credit
accommodations to an individual § X304.10 Minimum required
borrower, at least one (1) co-maker, except disclosure. Banks shall provide a table of
that a co-maker is not required when the the applicable fees, penalties and interest
principal borrower has the financial rates on loan transactions, including the
capacity and a good track record of paying period covered by and the manner of and
his obligations. reason for the imposition of such penalties,
(As amended by Circular No. 622 dated 16 September 2008) fees and interests; fees and applicable
conversion reference rates for third currency
§ X304.5 - X304.8 (Reserved) transactions, in plain sight and language, on
materials for marketing loans, such as
§ X304.9 Policies on loans to non- brochures, flyers, primers and advertising
immigrants and embassy officials. Banks are materials, on loan application forms, and
allowed to extend peso loans to the on billing statements: Provided, That these
following: disclosures are in addition to the full
a. Non-immigrants holding visas issued disclosure 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 such printed in plain language and in bold black
loans shall be limited to peso consumer loans letters against a light or white background,
including credit cards, auto loans and and using the minimum Arial 12 theme font
appliance loans, but excluding real estate or and size, or its equivalent in readability, and
housing loans: Provided, further, That the on the first page, if the applicable document
lending bank institutes measures to mitigate has more than one (1) page.

§§ X304.10 - X304.12
10.12.31
Transitory provision: Banks shall be are the only reasonable or convenient

given a period of 120 days from 6 January opportunities for contact.
2011 to fully implement the required Banks shall inform their borrowers in
disclosure requirements. writing of the endorsement of the collection
(Circular No. 702 dated 15 December 2010) of their account to a collection agency/
agent, or the endorsement of their account
§ X304.11 Unfair collection practices from one collection agency/agent to another,
Banks, collection agencies, counsels and at least seven (7) days prior to the actual
other agents may resort to all reasonable and endorsement. The notification shall include
legally permissible means to collect amounts the full name of the collection agency and
due them under the loan agreement: its contact details: Provided, That the
Provided, That in the exercise of their rights required notification in writing shall be
and performance of duties, they must included in the terms and conditions of the
observe good faith and reasonable conduct loan agreement. Banks shall adopt policies
and refrain from engaging in unscrupulous and procedures to ensure that personnel
or untoward acts. Without limiting the handling the collection of accounts, whether
general application of the foregoing, the these are in-house collectors, or third-party
following conduct is a violation of this collection agents, shall disclose his/her full
Subsection: name/true identity to the borrower.
a. the use or threat of violence or other (As amended by Circular No. 702 dated 15 December 2010)
criminal means to harm the physical person,
reputation, or property of any person; § X304.12 Confidentiality of
b. the use of obscenities, insults, or Information. Banks shall keep strictly
profane language which amount to a confidential the data on the borrower or
criminal act or offense under applicable consumer, except under the following
laws; circumstances:
c. disclosure of the names of borrowers a. disclosure of information is with the
who allegedly refuse to pay debts, except consent of the borrower or consumer;
as allowed under Subsec. X304.12; b. release, submission or exchange of
d. threat to take any action that cannot customer information with other financial
legally be taken; institutions, credit information bureaus,
e. communicating or threat to lenders, their subsidiaries and affiliates;
communicate to any person credit c. upon orders of court of competent
information which is known to be false, jurisdiction or any government office or
including failure to communicate that a debt agency authorized by law, or under such
is being disputed; conditions as may be prescribed by the
f. any false representation or deceptive Monetary Board;
means to collect or attempt to collect any d. disclosure to collection agencies,
debt or to obtain information concerning a counsels and other agents of the bank to
borrower; and enforce its rights against the borrower;
g. making contact at unreasonable/ e. disclosure to third party service
inconvenient times or hours which shall be providers solely for the purpose of assisting
defined as contact before 6:00 A.M. or after or rendering services to the bank in the
10:00 P.M., unless the account is past due administration of its lending business; and
for more than sixty (60) days or the borrower f. disclosure to third parties such as
has given express permission or said times insurance companies, solely for the purpose

§§ X304.12 - X305.3
10.12.31
of insuring the bank from borrower default goods or credits may stipulate that the rate
or other credit loss, and the borrower from of interest agreed upon may be increased in
fraud or unauthorized charges. the event that the applicable maximum rate
(Circular No. 702 dated 15 December 2010) of interest is increased by the Monetary
Board: Provided, That such stipulation shall
§§ X304.13 - X304.14 (Reserved) be valid only if there is also a stipulation in
the agreement that the rate of interest agreed
§ X304.15 Sanctions.Violations of the upon shall be reduced in the event that the
provisions of Subsecs. X304.10 to X304.12 applicable maximum rate of interest is
shall be subject to any or all of the reduced by law or by the Monetary Board:
following sanctions depending upon their Provided, further, That the adjustment in the
severity: rate of interest agreed upon shall take effect
a. First offense. Reprimand for the on or after the effectivity of the increase or
directors/officers responsible for the decrease in the maximum rate of interest.
violation;
b. Second offense. Disqualification of § X305.3 Floating rates of interest. The
the bank concerned from the credit rate of interest on a floating rate loan during
facilities of the BSP except as may be each interest period shall be stated on the
allowed under Section 84 of R. A. No. 7653; basis of Manila Reference Rates (MRRs),
c. Subsequent offense/s: T-Bill Rates or other market based reference
i. Prohibition on the bank concerned rates plus a margin as may be agreed upon
from the extension of additional credit by the parties.
accommodation against personal security; The MRRs for various interest periods
and shall be determined and announced by the
ii. Penalties and sanctions provided BSP every week and shall be based on the
under Sections 36 and 37 of R. A. No. 7653. weighted average of the interest rates paid
(Circular No. 702 dated 15 December 2010) during the immediately preceding week by
the ten (10) KBs with the highest
Sec. X305 Interest and Other Charges. The combined levels of outstanding deposit
rate of interest, including commissions, substitutes and time deposits, on promissory
premiums, fees and other charges, on any notes issued and time deposits received by
loan, or forbearance of any money, goods such banks, of P100,000 and over per
or credits regardless of maturity and transaction account, with maturities
whether secured or unsecured shall not be corresponding to the interest periods for
subject to any regulatory ceiling. which such MRRs are being determined.
Such rates and the composition of the
§ X305.1 Rate of interest in the sample KBs shall be reviewed and
absence of stipulation. The rate of interest determined at the beginning of every
for the loan or forbearance of any money, calendar semester on the basis of the banks’
goods or credits and the rate allowed in combined levels of outstanding deposit
judgments, in the absence of expressed substitutes and time deposits as of 31 May
contract as to such rate of interest, shall be or 30 November, as the case may be.
twelve percent (12%) per annum. 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
pertaining to a loan or forbearance of money, obtained in accordance with the provisions

§§ X305.3 - X305.5
11.12.31
of the rules existing as of 01 January 1989: (1) In current status; and

Provided, however, That the parties to such (2) Fully secured by real estate with loan
existing floating rate loan agreements are value of up to sixty percent (60%) of the
not precluded from amending or modifying appraised value of the real estate security
their loan agreements by adopting a floating and the insured improvements thereon, and
rate of interest determined on the basis of such other first class collaterals as may be
the TBR or other market based reference deemed appropriate by the Monetary Board.
rates. c.Interest on non-performing loan
Where the loan agreement provides for accounts shall be taken up as income only
a floating interest rate, the interest period, when actual payments thereon are
which shall be such period of time for received.
which the rate of interest is fixed, shall be d. Accrued interest earned but not yet
such period as may be agreed upon by the collected/received shall not be considered
parties. as profits and/or earnings eligible for
For the purpose of computing the MRRs, dividend declaration and/or profit sharing.
banks shall accomplish the report forms, e. A contra account to be designated
RS Form 2D and Form 2E (BSP 5-17-34A). Allowance for Uncollected Interest on
Loans shall be set up in accordance with
§ X305.4 Accrual of interest earned on Appendix 18 if accrued interest receivable
loans. Banks are allowed to accrue interest on loans and loan installments is still
earned on loans, subject to the following uncollected after three (3) months from the
guidelines and/or procedures. date such loans and loan installments have
a. No accrual of interest income is become non-performing.
allowed if a loan has become non- f. The amount representing Allowance
performing as defined under Sec. X309. for Uncollected Interest on Loans may be
Likewise, interest income shall not be chargeable against the excess of outstanding
accrued for unmatured loans/receivables valuation reserves for loans and other risk
with indications that collectibility thereof assets as appearing in the bank’s books, over
has become doubtful. These indications those recommended by the appropriate
shall include declaration of bankruptcy, department of the SES. The balance thereof,
insolvency, cessation of operations, or such if any, shall be chargeable against
other conditions of financial difficulties or operations.
inability to meet financial obligations as g. For all purposes, the Allowance for
they mature. Separate appropriate records Uncollected Interest on Loans shall be
shall be maintained for these non-accruing considered a valuation reserve/allowance
unmatured loans. against the Accrued Interest Receivable
Interest income on past due loans arising account.
from discount amortization (and not from
the contractual interest of the accounts) § X305.5 Method of computing interest
shall be accrued as provided in PAS 39. Banks may only charge interest based on
b. Interest earned on extended or the outstanding balance of a loan at the
renewed loans may be accrued: Provided, beginning of an interest period.
That there is no previously accrued but For a loan where principal is payable
uncollected interest thereon. in installments, interest per installment
Interest income on restructured loans period shall be calculated based on the
(principal plus capitalized interest thereon) outstanding balance of the loan at the
may be accrued: Provided, That these are: beginning of each installment period.

§§ X305.5 - X306.1
11.12.31
Towards this end, all loan-related against a credit line - If not paid on the
documents shall show repayment schedules respective maturity dates of the promissory
in a manner consistent with this provision. notes;
Marketing materials and presentations shall c. Customers’ liability on drafts under
likewise be consistent with this provision. letters of credit/trust receipts:
To enhance loan transaction (1) Sight Bills - If dishonored upon
transparency, Effective Interest Rate (EIR) presentment for payment or not paid within
calculation models illustrative of common thirty (30) days from date of original entry,
loan features are presented in Appendix 91 whichever comes earlier;
for guidance. It is understood, however, that (2) Usance Bills - If dishonored upon
an EIR calculation model, founded on presentment for acceptance or not paid on
established principles of discounted cash due date, whichever comes earlier; and
flow analysis, for a loan should be based (3) Trust receipts - If not paid on due date.
on the actual features thereof. A bank shall d. Bills and other negotiable
be solely responsible for the propriety and instruments purchased - If dishonored upon
accuracy of its EIR calculation model. presentment for acceptance/payment or not
However, for purposes of determining paid on maturity date, whichever comes
compliance with this Section, the BSP’s earlier: Provided, however, That an out-of-
determination of the reasonableness and town check and a foreign check shall be
accuracy of an EIR calculation model considered as past due if outstanding for
prevails. thirty (30) days and forty-five (45) days,
(Circular No. 730 dated 20 July 2011 and M-2011-040 dated respectively, unless earlier dishonored;
28 July 2011)
e. Loans/receivables payable in
installments - The total outstanding balance
Sec. X306 Past Due Accounts. Past due
thereof shall be considered past due in
accounts of a bank shall, as a general rule,
accordance with the following schedule:
refer to all accounts in its loan portfolio, all
receivable components of trading account
Minimum No.
securities and other receivables, as defined
of Installments
in the Manual of Accounts for Banks, which
Mode of Payment In Arrears
are not paid at maturity.1
Monthly 3
(M-2011-056 dated 10 November 2011, M-2011-055 dated 17
October 2011, M-2011-043 dated 12 August 2011, M-2011-007 Quarterly 1
dated 04 February 2011, M-2010-039 dated 03 November 2010, Semestral 1
M-2010-007 dated 23 April 2010, M-2009-040 dated 30 October Annual 1
2009, M-2009- 037 dated 15 October 2009, M-2009-038 dated
08 October 2009 and M-2009-036 dated 07 October 2009)
Provided, however, That when the total
§ X306.1 Accounts considered past due amount of arrearages reaches twenty percent
The following shall be considered as past (20%) of the total outstanding balance of the
due: loan/receivable, the total outstanding
a. Loans or receivables payable on balance of the loan/receivable shall be
demand - If not paid on the date indicated considered as past due, regardless of the
on the demand letter, or within three (3) number of installments in arrears: Provided,
months from date of grant, whichever further, That for modes of payment other
comes earlier; than those listed above (e.g., daily, weekly
b. Bills discounted and time loans, or semi-monthly), the entire outstanding
whether or not representing availments balance of the loan/receivable shall be
1
See Appendix 89

§§ X306.1 - X306.5
09.12.31
considered as past due when the total from the time the obligor defaults, shall be
amount of arrearages reaches ten percent considered past due.
(10%) of the total loan/receivable balance; (Circular No. 409 dated 14 October 2009, as amended by Circular
For this purpose, the term “installments” No. 607 dated 30 April 2008)
shall refer to principal and/or interest
amortizations that are due on several dates § X306.2 Demand loans. Banks shall,
as indicated/specified in the loan in case of non-payment of a demand loan,
documents. make a written demand within three (3)
f. Credit card receivables - If the months following the grant of such loan.
minimum amount due or minimum The demand shall indicate a period of
payment required is not paid within two (2) payment which shall not be later than three
cycle dates, the total amount due stated in (3) months from date of said demand.
the monthly billing statement: Provided,
however, That the total outstanding balance § X306.3 Renewals/extensions. No loan
which includes amortization/s of any fixed shall be renewed or its maturity date
monthly installment plan or deferred extended unless the corresponding accrued
payment scheme shall be considered and interest receivable shall have been paid.
reported past due when the number of
monthly installments in arrears is three (3) § X306.4 Restructured loans
or more: Provided, further, That the bank Restructured loans whose terms of payment
shall have the right to demand the obligation have not been complied with and which
in full in case of default in any installment have become past due shall be governed
thereon if the contract between the bank and by the provisions of Sec. X322.
the cardholder contains an “acceleration
clause”; and § X306.5 Write-off of loans as bad debts
g. (Deleted by Circular No. 202 dated a. Approval by board of directors
27 May 1999) Banks, upon approval by their board of
h. Microfinance loans - Past Due/ directors may write-off loans, other credit
Portfolio-at-Risk (PAR) is the outstanding accommodations, advances, and other
principal amount of all loans that have at assets, regardless of amount, against
least one (1) installment past due for one (1) allowance for probable losses (valuation
or more days. The amount includes the reserves) or current operations as soon as
unpaid principal balance but excludes they are satisfied that such loans, other credit
accrued interest. Under PAR, loans are accommodations, advances and other assets
considered past due if a payment has fallen are worthless as follows:
due and remained unpaid. Loan payments (1) In the case of secured loans, banks
are applied first to any interest due, then to may write-off loans, other credit
any installment of principal that is due but accommodations and other assets in an
unpaid, beginning with the earliest amount corresponding to the booked
installment. The number of days of lateness valuation reserves: Provided, That the
delinquency is based on the due date of the balance of the secured loans, other credit
earliest loan installment that has not been accommodations, advances and other assets
fully paid. shall remain in the books.
For the purpose of determining (2) In the case of unsecured loans,
delinquency in the payment of obligations other credit accommodations, advances and
as defined in Subsec. X143.1e, any due and other assets, banks shall write-off said loans,
unpaid loan installment or portion thereof, other credit accommodations, advances and

§§ X306.5 - X307
08.12.31
other assets in full amount outstanding. income tax purposes shall be recognized and
However, write-off of loans, other reversed in bank’s books.
credit accommodations, advances and other d. Verification of write-offs. Write-offs
assets considered transactions with DOSRI of loans shall be subject to verification during
shall be with prior approval of the Monetary examination.
Board.
b. Definitions. For purposes of this § X306.6 Writing-off microfinance
Section, the following terms are hereby loans as bad debts. Microfinance loans,
defined as follows: regardless of amount that have become past
(1) Loans. The term loans shall refer due in accordance with Subsec. X306.1h
to all the accounts under the loan portfolio may be written-off, in conformity with the
of a bank as enumerated in the Manual of provisions of Subsec. X306.5: Provided, That
Accounts for Banks. the notice of write-off and attachments
(2) Other credit accommodations. The required under Item “c” of Subsec. X306.5
term other credit accommodations shall are filed within thirty (30) days after every
refer to exposures of banks other than loans write-off of loans.
such as sales contract receivables, accounts
receivables, accrued interest receivables, § X306.7 Updating of information
lease receivables, and rental receivables. provided to credit information bureaus
(3) Advances. The term advances shall Banks which have provided adverse
refer to any advance by means of an information, such as the past due or
incidental or temporary overdraft, cash litigation status of loan accounts, to credit
“vale”, any advance by means of DAUD and information bureaus, or any organization
any advances of unearned salary or performing similar functions, shall submit
unearned compensation. monthly reports to these bureaus or
(4) Other assets. The term other assets organizations on the full payment or
shall refer to investments, placements, settlement of the previously reported
ROPAs and all other asset accounts that will accounts within five (5) banking days from
not fall under loans and other credit the end of the month when such full
accommodations. payment was received. For this purpose, it
(5) Bad debts. The term bad debts shall shall be the responsibility of the reporting
refer to the definition under Subsec. X136.1. banks to ensure that their disclosure of any
c. Reporting requirements. Notice of information about their borrowers/clients is
write-off of loans, other credit with the consent of borrowers/clients
accommodations, advances, and other concerned.
assets shall be submitted in the prescribed (Circular No. 589 dated 18 December 2007)
form to the appropriate department of SES
concerned within thirty (30) days after every Sec. X307 “Truth in Lending Act”
write-off with (i) a sworn statement signed Disclosure Requirement. Banks are
by the President of the bank or officer of required to strictly adhere to the provisions
equivalent rank that write-off did not include of R.A. No. 3765, otherwise known as the
transactions with DOSRI and (ii) a copy of “Truth in Lending Act”, and shall make the
board resolution approving the write-off. true and effective cost of borrowing an
The income tax expense deferred integral part of every loan contract.
corresponding to the amount of loan, other The following regulations shall apply to
credit accommodation, advances and other all banks engaged in the following types of
asset written-off considered deductible for credit transactions:

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

§§ X307.1 - X309
11.12.31
comparable to the concept of simple annual examination by the appropriate

rate. department of the SES.
For loans with contractual interest rates
stated on monthly basis, the effective § X307.4 Posters. Banks shall post in
interest rate may be expressed as a monthly conspicuous places in their principal place
rate. of business and branches, the information
In accordance with the Philippine as contained in the revised format of
Accounting Standards (PAS) definition, disclosure statement in Appendix 19. The
EIR is the rate that exactly discounts posters shall include an explicit notification
estimated future cash flows through the that the disclosure statement is a required
life of the loan to the net amount of the attachment to the loan contract and the
loan proceeds. For consistency, customer has a right to demand a copy of
methodology and standards for such disclosure.
discounted cash flow models shall be (As amended by Circular No. 730 dated 20 July 2011)
prescribed to be used for the purpose.
(As amended by Circular No. 730 dated 20 July 2011) Sec. X308 Amortization on Loans and
Other Credit Accommodations. The
§ X307.2 Information to be disclosed amortization schedule of bank loans and
As a general rule, loan terms shall be other credit accommodations shall be
disclosed to all types of borrower. For small adapted to the nature of the operations to
business/retail/consumer credit, the be financed.
following are the minimum information to In case of loans and other credit
be disclosed (sample form in Appendix 19): accommodations with maturities of more
a.The total amount to be financed; than five (5) years, provisions must be
b.The finance charges expressed in made for periodic amortization payments,
terms of pesos and centavos; but such payments must be made at least
c. The net proceeds of the loan; and annually: Provided, however, That when
d.The percentage that the finance the borrowed funds are to be used for
charge bears to the total amount to be purposes which do not initially produce
financed expressed as a simple annual rate revenues adequate for regular
or an EIR as described in Item “h” of Subsec. amortization payments, the bank may
X307.1. EIR may also be quoted as a permit the initial amortization payment to
monthly rate in parallel with the quotation be deferred until such time as said
of the contractual rate. revenues are sufficient for such purpose,
Banks are required to furnish each but in no case shall the initial amortization
borrower a copy of the disclosure statement, date be later than five (5) years from the
prior to the consummation of the date on which the loan or other credit
transaction. accommodation is granted: Provided,
(As amended by Circular No. 730 dated 20 July 2011) further, That in the case of agriculture and
fisheries projects with long gestation
§ X307.3 Inspection of contracts periods, the initial amortization payment
covering credit transactions. Banks shall may be deferred for a longer period based
keep in their offices or places of business on the economic life of the project as
copies of contracts which involve the provided under Section 24 of R.A. No.
extension of credit by the bank and the 8435 and implemented under Sec. X349.
payment of finance charges therefor. Such
copies shall be available for inspection or Sec. X309 Non-Performing Loans

§§ X309.1
08.12.31
§ X309.1 Accounts considered non- that they become past due in accordance
performing; definitions with Sec. X306, i.e., the entire outstanding
a. Non-performing loans shall, as a balance of the loan/receivable shall be
general rule, refer to loan accounts whose considered as past due when the total
principal and/or interest is unpaid for thirty amount of arrearages reaches ten percent
(30) days or more after due date or after they (10%) of the total loan/receivable balance.
have become past due in accordance with d. Restructured loans shall be
existing rules and regulations. This shall considered non-performing in accordance
apply to loans payable in lump sum and with Subsec. X322.1.
loans payable in quarterly, semi-annual or e. All items in litigation as defined in
annual installments, in which case, the total the Manual of Accounts for Banks shall be
outstanding balance thereof shall be considered non-performing.
considered non-performing. f. In the case of microfinance loans, past
b. In the case of loans payable in due/portfolio-at-risk (PAR) accounts as
monthly installments, the total outstanding defined in Subsec. X361.1(b) shall be
balance thereof shall be considered non- considered NPL.
performing when three (3) or more Only the following accounts are
installments are in arrears. qualified to be excluded from the non-
c. In the case of loans payable in daily, performing classification:
weekly or semi-monthly installments, the (1) Loans previously classified as
total outstanding balance thereof shall be “Loss” by the BSP fully covered by
considered non-performing at the same time allowance for probable losses; and
(Next Page is Part II - Page 21)
Part III - Page 20b Manual of Regulations for Banks

§§ X309.1 - X311.1
08.12.31
(2) Outstanding credit card receivables Banks which are not qualified under
classified as “Loss” in the latest BSP Subsec. X309.1 to exclude loans classified
examination plus credit card receivables as “Loss” by the BSP from the non-
classified as “Loss” by the bank but not to performing classification may opt not to fill
exceed the total amount classified as “Loss” up Item “7a” of the Additional Information
in the latest BSP examination: Provided, That of the monthly CSOC.
information on the outstanding credit card
receivables classified as “Loss” as of the Sec. X310 (Reserved)
reporting month shall be reported in a
separate item in the Additional Information B. SECURED LOANS
of the CSOC. Only banks with no unbooked
valuation reserves and capital adjustments, Sec. X311 Loans Secured by Real Estate
even if approved for booking on a staggered Mortgages. Loans against real estate security
basis, are qualified to exclude loans shall not exceed seventy percent (70%) of
classified as “Loss” by the BSP from the non- the appraised value of the respective real
performing classification: Provided, That estate security plus seventy percent (70%)
interest on said loans shall not be accrued of the appraised value of insured
and that such loans shall also be deducted improvements, and such loans shall not be
from total loan portfolio for purposes of made unless title to the real estate is in the
computation. mortgagor.
(As amended by Circular No. 607 dated 30 April 2008) In the case of UBs/KBs, the loan values
of real estate given as security for any loan
§ X309.2 - X309.3 (Reserved) granted shall be reduced from seventy
percent (70%) to not more than sixty percent
§ X309.4 Reporting requirement. Banks (60%) of the appraised value of the real
shall report the following data, at the end estate security and the insured improvements,
of each month, as additional information except the following which shall be allowed
(under Item 7) of the monthly CSOC: a maximum value of seventy percent (70%) of
“7. Total Non-Performing Loans the appraised value:
a. Non-performing regular loans xxx a. Any loan not exceeding P3.5 million
b. Non-performing restructured to finance the acquisition or improvement
loans xxx of residential units; and
b. Housing loans extended or
“7a. Loans classified as “Loss” in guaranteed under the government’s National
the latest examination by the BSP Shelter Program (NSP) such as the Expanded
which are fully covered by Housing Loans Program (EHLP) of the Home
Allowance for Probable Losses, Development Mutual Fund (HDMF or Pag-
net of write-offs and recoveries xxx IBIG Fund) and the mortgage and guaranty and
credit insurance program of the Home
“7b. Outstanding credit card Insurance and Guaranty Corporation (HIGC).
receivables classifed as “Loss”
in the latest BSP examination, § X311.1 Loans secured by junior
net of write-offs, recoveries mortgage on real estate. Banks may also
and collections xxx grant loans on the security of junior
mortgages on real estate: Provided, That for
“7c. Credit card receivables such loans to be considered as adequately
classified as “Loss” by the secured under Sections 37 and 38 of
bank as of this month xxx R.A. No. 8791, the sum total of the loans to

§§ X311.1 - 2311.4
08.12.31
be granted and the outstanding balance the issuance of titles but already approved,
of the loan granted on the senior mortgage the provisions of any law or regulations to
shall not, at any time, exceed the loan the contrary notwithstanding: Provided, That
value of subject real estate security based when the corresponding titles are issued,
on the appraisal of the real estate by the the same shall be delivered to the Register
junior mortgagee. of Deeds of the province where such lands
A certified latest statement of account are situated for the annotation of the
showing the outstanding balance of the loan encumbrance: Provided, further, That in the
including interest and arrearages, from the case of lands pending homestead or free
senior mortgagee shall be presented to the patent titles, copies or notices for the
bank. presentation of the final proof shall also be
In case several loans are granted on the furnished the creditor RB/Coop Bank and,
security of the same property, the total if the borrower applicants fail to present the
amount of the loans shall not, at any time, final proof within thirty (30) days from date
exceed the total loan value of the said of notice, the creditor RB/Coop Bank may
property. do so for them at their expense: Provided,
furthermore, That the applicant for
§ X311.2 (Reserved) homestead or free patent has already made
improvements on the land and the loan
§ 1311.2 (Reserved) applied for is to be used for further
development of the same or for other
§ 2311.2 (Reserved) productive economic activities: Provided,
finally, That the appraisal and verification
§ 3311.2 E l i g i b l e r e a l e s t a t e of the status of a land is a full responsibility
collaterals on rural/cooperative bank of the RB/Coop Bank and any loan granted
loans. Loans may be granted by RBs/Coop on any land which shall be found later to
Banks on the security of lands without be within the forest zones shall be for the
Torrens Title where the owner of private sole account of the RB/Coop Bank.
property can show five (5) years or more of
peaceful, continuous and uninterrupted § X311.3 Insurance on real estate
possession in the concept of an owner; or improvements. The required insurance on
of portions of friar land estates or other lands improvements used as collateral for loan
administered by the Bureau of Lands that should be such as shall be sufficient to
are covered by sales contracts and the secure seventy percent (70%) of the
purchasers have paid at least five (5) years appraised value of such improvements or if
installment thereon, without the necessity inadequately insured, the loan value shall
of prior approval and consent by the correspond to the extent of insurance taken
Director of Lands, or of portions of other on such improvements.
estates under the administration of the
Department of Agrarian Reform (DAR) or § X311.4 (Reserved)
other governmental agency which are
likewise covered by sales contracts and the § 1311.4 (Reserved)
purchasers have paid at least five (5) years
installments thereon, without the necessity § 2311.4 Foreclosure by thrift banks
of prior approval and consent of the DAR The foreclosure of mortgages covering loans
or corresponding governmental agency; or granted by TBs and executions of judgment
of homesteads or free patent lands pending thereon involving real properties

§§ 2311.4 - 3311.4
10.12.31
levied upon by a sheriff shall be exempt from barangay public market, if any, where the
the publications in newspapers now land mortgaged is situated during the period
required by law where the total amount of of sixty (60) days immediately preceding the
loan, excluding interests due and unpaid, public auction of execution of judgment.
does not exceed P100,000 or such amount Proof of publication as required herein shall
as the Monetary Board may prescribe as be accomplished by an affidavit of the sheriff
may be warranted by prevailing economic or officer conducting the foreclosure sale or
conditions and by the nature of service of execution of judgment and shall be attached
customers served by each category of the with the records of the case: Provided, That
TB. It shall be sufficient publication in such when a homestead or free patent is
cases if the notices of foreclosure and foreclosed, the homesteader or free patent
execution of judgment are posted in the holder, as well as his heirs shall have the
conspicuous area of the TB’s premises, right to redeem the same within one (1) year
municipal building, municipal public from the date of foreclosure in the case of
market, the barangay hall, and the barangay land not covered by a Torrens Title or one
public market, if there be any, where the (1) year from the date of the registration of
land mortgaged is situated within a period the foreclosure in the case of land covered
of sixty (60) days immediately preceding the by a Torrens Title.
public auction of execution of judgment. In the case of Coop Banks the
Proof of publication as required herein shall foreclosure of mortgages and execution of
be accomplished by an affidavit of the sheriff judgment thereon involving real properties
or officer conducting the foreclosure sale levied upon by a sheriff shall be exempt
or execution of judgment and shall be from the publications in newspaper now
attached with the records of the case. required by law where the total amount
A TB shall be allowed to foreclose lands of loan, excluding interests due and
mortgaged to it: Provided, That said lands unpaid, does not exceed P250,000 or
shall be covered under R.A. No. 6657. such amount as the BSP may prescribe as
may be warranted by prevailing economic
§ 3311.4 Foreclosure by rural/ conditions and by the nature and character
cooperative banks. The foreclosure of of the Coop Banks. It shall be sufficient
mortgages covering loans granted by RBs publication in such cases if the notices of
and executions of judgment thereon foreclosure and execution of judgment are
involving real properties levied upon by a posted in conspicuous areas in the bank’s
sheriff shall be exempt from the publications premises, municipal hall, the municipal
in newspapers now required by law where public market, the barangay hall and the
the total amount of loan, excluding interests barangay public market, if any, where the
due and unpaid, does not exceed P100,000 property mortgaged is situated during the
or such amount as the Monetary Board may period of sixty (60) days immediately
prescribe as may be warranted by preceding the public auction or execution
prevailing economic conditions. It shall be of judgment. Proof of publication as required
sufficient publication in such cases if the herein shall be accomplished by an affidavit
notices of foreclosure and execution of of the sheriff or officer conducting the
judgment are posted in the conspicuous area foreclosure sale or execution of judgment
of the municipal building, the municipal and shall be attached to the records of the
public market, the barangay hall, and the case.

§§ 3311.4 - X313
10.12.31
An RB/Coop Bank shall be allowed to the title-holder of the unencumbered

to foreclose lands mortgaged to it: chattels and intangible properties or his
Provided, That said lands shall be assignees: Provided, That in the case of
covered under R.A. No. 6657. intangible properties, appraisal thereof shall
(As amended by Circular No. 682 dated 15 February 2010) be conducted by an independent appraiser
acceptable to the BSP.
§ X311.5 Redemption of foreclosed real
estate mortgage. In the event of foreclosure, Sec. X313 Loans and Other Credit
whether judicially or extrajudicially, of any Accommodations Secured By Personal
mortgage on real estate, the mortgagor or Properties. Loans and other credit
debtor shall have the right within one (1) accommodations may be secured by
year after the sale of the real estate, to unencumbered personal property which
redeem the property by paying the amount may consist of:
due under the mortgage deed, with interest a. Bonds and securities issued by the
thereon at the rate specified in the mortgage, Government. Such bonds and securities
and all costs and expenses incurred by the may be given loan values equivalent to
bank or institution from the sale and custody their face value or cash value, as the case
of said property less the income derived may be;
therefrom. However, the purchaser at the b. Readily marketable bonds and other
auction sale concerned shall have the right high-grade debt securities and “blue chip”
to enter upon and take possession of such stocks, except those issued by the lending
property immediately after the date of the entity or by its parent company, which owns
confirmation of the auction sale and more than fifty percent (50%) of its
administer the same in accordance with the outstanding shares of stocks: Provided, That
law. (1) the issuer corporation must be a listed
Juridical persons whose property is corporation with a net worth of at least P1.0
being sold pursuant to an extra-judicial billion and with annual net earnings during
foreclosure, shall have the right to redeem the immediately preceding five (5) years; and
the property in accordance with this (2) the loan value shall be equivalent to
provision until, but not after, the fifty percent (50%) of their market value.
registrationof the certificate of foreclosure c. Expected harvest from the project to
sale with the applicable Register of Deeds be financed or growing crops, up to forty
which in no case shall be more than percent (40%) of the calculated market value
three (3) months after foreclosure, whichever of the crop for which the loan or other credit
is earlier. accommodation is sought, based on
previous production records or, in the
Sec. X312 Loans and Other Credit absence thereof, on production in the
Accommodations Secured By Chattels and locality of similar plantations;
Intangible Properties. Loans and other d. Quedans or warehouse receipts
credit accommodations on the security of issued by bonded warehouses covering
chattels and intangible properties, such as, stock deposited in said warehouses up
but not limited to, patents, trademarks, trade to eighty percent (80%) of the
names, and copyrights shall not exceed calculated market value of the crop for
seventy-five percent (75%) of the appraised which the loan or other credit
value of the security, and such loans and accommodation is sought; and
other credit accommodations may be made

§§ X313 - X319.1
08.12.31
e. Any other personal property, up to c. If the term of the CTDs subject to

fifty percent (50%) of the fair market value. hold-out or assignment is shorter than the
If the property is newly purchased and the term of the loan, there shall be an agreement
purchase price thereof appears in a bill of in writing that renewal of the time deposit
sale, then the above percentage shall be upon maturity shall be made at least co-
based on the price of the said bill of sale. terminus with the term of the loan;
d. There shall be no pre-termination of
Sec. X314 Increased Loan Values and the time deposit without the consent of the
Terms of Loans for Home-Building. Loans lending bank and unless an acceptable
for home-building and subdivision substitute collateral for the loan has been
development for low and middle-income made;
families against real estate security and e. The lending bank shall keep a
housing loans defined as loans granted for complete record of all pertinent loan
the purpose of constructing, improving or documents, such as, but not limited to, the
acquiring a residential property which is original copy of the CTDs subject to
rented or is occupied or intended to be assignment or hold-out agreement; deed of
occupied by the borrower may be granted assignment or hold-out agreement; and written
up to eighty percent (80%) of the waiver of the depositor required in Item “f”
appraised value of the real estate security: below, which shall be made available for
Provided, that: inspection and/or examination by the
a. Such loans shall not be made unless appropriate department of the SES; and
the title to the real estate security is in the f. The loan documents shall include
name of the borrower or mortgagor; and a waiver on the part of the depositor of
b. In case of subdivision/housing his rights under existing law to the
project, the same or its plan has been confidentiality of his deposits.
approved by the proper authorities;
Provided, further, That the loans may Secs. X316 - X318 (Reserved)
be increased to ninety percent (90%) of the
appraised value of the real estate security if C. UNSECURED LOANS
such loans are fully guaranteed by the
appropriate government agency, in addition Sec. X319 Loans Against Personal
to the foregoing conditions. Security.The grant, renewal, restructuring
or extension of unsecured loans shall, in
Sec. X315 Loans Secured by Certificates addition to the requirements of Sec. X304,
of Time Deposit. The following rules shall be made under the signature of the
govern the grant of loans secured by holdout principal borrower and at least one (1) co-
on and/or assignment of CTDs issued by maker, except that a co-maker is not
the lending bank, as well as its branches or required when the principal borrower has
subsidiaries abroad: the financial capacity and a good track
a. The original copy of the CTDs record of paying his obligations.
subject to hold-out or assignment shall be (As amended by Circular No. 622 dated 16 September
surrendered to the lending bank; 2008)
b. The depository bank, other than the
lending bank, shall be furnished a copy of § X319.1 General guidelines
the Deed of Assignment or hold-out (Deleted by Circular No. 622 dated
agreement on the deposit used as collateral; 16 September 2008)

§§ X319.2 - X320.1
08.12.31
§ X319.2 Proof of financial capacity of balance multiplied by the required

borrower payment percentage or a fixed amount
(Deleted by Circular No. 622 dated whichever is higher; (2) any amount which
16 September 2008) is part of any fixed monthly installment that
is charged to the card; (3) any amount in
§ X319.3 Signatories excess of the credit line; and (4) all past due
(Deleted by Circular No. 622 dated amounts, if any.
16 September 2008) d. Default or delinquency. Shall mean
non-payment of, or payment of any amount
Sec. X320 Credit Card Operations; General less than, the “Minimum Amount Due” or
Policy. The BSP shall foster the development “Minimum Payment Required” within
of consumer credit through innovative two (2) cycle dates, in which case, the “Total
products such as credit cards under Amount Due” for the particular billing
conditions of fair and sound consumer credit period as reflected in the monthly statement
practices. The BSP likewise encourages of account may be considered in default or
competition and transparency to ensure more delinquent.
efficient delivery of services and fair dealings e. Acceleration clause. Shall mean
with customers. any provision in the contract between the
Towards this end, the following rules bank and the cardholder that gives the
and regulations shall govern the credit card bank the right to demand the obligation
operations of banks and subsidiary/affiliate in full in case of default or non-payment
credit card companies, aligned with global of any amount due or for whatever valid
best practices. reason.
f. Subsidiary refers to a corporation or
§ X320.1 Definition of terms firm more than fifty percent (50%) of the
a. Credit card. Means any card, plate, outstanding voting stock of which is directly
coupon book or other credit device or indirectly owned, controlled or held with
existing for the purpose of obtaining the power to vote by a bank or other FI.
money, property, labor or services on g. Affiliate refers to an entity linked
credit. directly or indirectly to a bank or other FI
b. Credit card receivables. Represents through any one or a combination of any of
the total outstanding balance of credit the following:
cardholders arising from purchases of goods (1) Ownership, control or power to
and services, cash advances, annual vote, whether by permanent or temporary
membership/renewal fees as well as interest, proxy or voting trust, or other similar
penalties, insurance fees, processing/service contracts, by a bank or other financial
fees and other charges. institution of at least ten percent (10%) or
c. Minimum amount due or more of the outstanding voting stock of the
minimum payment required. Means the entity, or vice-versa;
minimum amount that the credit (2) Interlocking directorship or
cardholder needs to pay on or before the officership, except in cases involving
payment due date for a particular billing independent directors as defined under
period/cycle as defined under the terms existing regulations;
and conditions or reminders stated in the (3) Common stockholders owning at
statement of account/billing statement least ten percent (10%) of the outstanding
which may include: (1) total outstanding voting stock of each FI and the entity; or

§§ X320.1 - X320.4
10.12.31
(4) Management contract or any p. Dealings with marketing agents/

arrangement granting power to the bank or collection agents.
other FI to direct or cause the direction of (As amended by Circular No. 702 dated 15 December 2010)
management and policies of the entity, or
vice-versa. § X320.3 Minimum requirements
Banks and their subsidiary or affiliate
§ X320.2 Risk management system credit card companies shall not issue pre-
To safeguard their interests, banks and approved credit cards.
subsidiary/affiliate credit card companies Before issuing credit cards, banks and/
are required to establish an appropriate or their subsidiary/affiliate credit card
system for managing risk exposures from companies must exercise,in accordance
credit card operations which shall be with the provisions of Subsec. X304.1,
documented in a complete and concise proper diligence by ascertaining that
manner. The risk management system applicants possess good credit standing and
shall cover the organizational set-up, are financially capable of fulfilling their credit
records and reports, accounting, policies commitments.
and procedures and internal control. The net take home pay of applicants
Written policies, procedures and who are employed, the net monthly receipts
internal control guidelines shall be of those engaged in trade or business, or
established on the following aspects of credit the net worth or cash flow inferred from
card operations: deposits of those who are neither employed
a. Requirements for application; nor engaged in trade or business or the
b. Solicitation and application credit behavior exhibited by the applicant
processing; from his other existing credit cards, or other
c. Determination and approval of lifestyle indicators such as, but not limited
credit limits; to, club memberships, ownership and
d. Issuance, distribution and activation location of residence and motor vehicle
of cards; ownership shall be determined and used as
e. Supplementary or extension cards; basis for setting credit limits. The gross
f. Cash advances; monthly income may also be used provided
g. Billing and payments; reasonable deductions are estimated for
h. Deferred payment program or income taxes, premium contributions, loan
special installment plans; amortizations and other deductions.
i. Collection of past due accounts; All credit card applications, specifically
j. Handling of accounts for write-off; those solicited by third party representatives/
k. Suspension, cancellation and agents, shall undergo a strict credit risk
withdrawal or termination of card; assessment process and the information
l. Renewal of cards, upgrade or stated thereon validated and verified by
downgrade of credit limit authorized personnel of the banks and their
m. Lost or stolen cards and their subsidiary or affiliate credit card companies,
replacement; other than those handling marketing.
n. Accounts of DOSRI and employees; (As amended by Circular No. 702 dated 15 December 2010)
o. Disposition of errors and/or
questions about the billing statement/ § X320.4 Information to be disclosed
statement of account and other customers’ Banks or their subsidiary/affiliate credit card
complaints; and companies shall disclose to each person to

§§ X320.4
10.12.31
whom the credit card privilege is extended fees, credit investigation fees and attorney’s
in the agreement, contract or any equivalent fees; and
document governing the issuance or use of k. for transactions made in foreign
the credit card or any amendment thereto currencies and/or outside the Philippines,
or in such other statement furnished the for dual currency accounts (peso and dollar
cardholder from time to time, prior to the billings), as well as payments made by credit
imposition of the charges and to the extent cardholders in any currency other than the
applicable, the following information: billing currency: the application of
a. non-finance charges, individually payments; the manner of conversion from
itemized, which are paid or to be paid by the transaction currency and payment
the cardholder in connection with the currency to Philippine pesos or billing
transaction but which are not incident to the currency; definition or general description
extension of credit; of verifiable blended exchange/conversion
b. the percentage that the interest bears rates (e.g., MASTERCARD and/or VISA
to the total amount to be financed expressed International rates on the day the item was
as a simple monthly or annual rate, as the processed/posted to the billing statement,
case may be, on the outstanding balance of plus mark-up, if any) including conversion
the obligation; commission; and/or other currency
c. the effective interest rate per annum; conversion charges and costs arising from
d. for installment loans, the number of the purchase by the card company of foreign
installments, amount and due dates or currency to settle the customer’s transactions
periods of payment schedules to repay the shall also be disclosed.
indebtedness; Banks and their subsidiary or affiliate
e. the default, late payment/penalty credit card companies shall also provide the
fees or similar delinquency-related charges following information to their cardholders:
payable in the event of late payments; 1. A table of the applicable fees,
f. the conditions under which interest penalties and interest rates on credit card
may be imposed, including the time period, transactions, including the period covered
within which any credit extended may be by and the manner of and reason for the
repaid without interest; imposition of such penalties, fees and
g. the method of determining the interests; fees and applicable conversion
balance upon which interest and/or reference rates for third currency
delinquency charges may be imposed; transactions, in plain sight and language,
h. the method of determining the on materials for marketing credit cards, such
amount of interest and/or delinquency as brochures, flyers, primers and advertising
charges, including any minimum or fixed materials, on credit card application forms,
amount imposed as interest and/or and on credit card billing statements:
delinquency charge; Provided, That these disclosures are in
i. where one (1) or more periodic rates addition to the full disclosure of the fees,
may be used to compute interest, each such charges and interest rates in the terms and
rate, the range of balances to which it is conditions of the credit card agreement
applicable, and the corresponding simple found elsewhere on the application form
annual rate; and billing statement; and
j. other fees, such as membership/ 2. A reminder to the cardholder in the
renewal fees, processing fees, collection monthly billing statement, or its equivalent

§§ X320.4 - X320.9
10.12.31
document, that payment of only the penalty fees shall be based on the unpaid
minimum amount due or any amount less minimum amount due or a prescribed
than the total amount due for the billing minimum fixed amount: Provided, further,
cycle/period, would mean the imposition That said late payment or penalty fees may
of interest and/or other charges: be based on the total outstanding balance
Provided, That such table of fees, penalties of the credit card obligation, including
and interest rates and reminder shall be amounts payable under installment terms
printed in plain language and in bold black or deferred payment schemes, if the
letters against a light or white background, contract between the issuer and the
and using the minimum Arial 12 theme font cardholder contains an “acceleration
and size, or its equivalent in readability, and clause” and the total outstanding balance
on the first page, if applicable document has of the credit card is classified and reported
more than one page. as past due.
Transitory provisions. Banks and their
subsidiary or affiliate credit card companies § X320.9 Confidentiality of
shall be given a period of 120 days from information. Banks and subsidiary/affiliate
06 January 2011 to fully implement the credit card companies shall keep strictly
required disclosure requirements. confidential the data on the cardholder or
(As amended by Circular No. 702 dated 15 December 2010) consumer, except under the following
circumstances:
§ X320.5 Interest accrual on past due a. disclosure of information is with the
loans. Interest income on past due loans consent of the cardholder or consumer;
arising from discount amortization (and not b. release, submission or exchange of
from the contractual interest of the accounts) customer information with other financial
shall be accrued as provided in PAS 39. institutions, credit information bureaus,
credit card issuers, their subsidiaries and
§ X320.6 Finance charges. The amount affiliates;
of finance charges in connection with any c. upon orders of court of competent
credit card transaction shall refer to interest jurisdiction or any government office or
charged to the cardholder. agency authorized by law, or under such
conditions as may be prescribed by the
§ X320.7 Deferral charges. The bank Monetary Board;
and the cardholder may, prior to the d. disclosure to collection agencies,
consummation of the transaction, agree in counsels and other agents of the bank or
writing to a deferral of all or part of one (1) card company to enforce its rights against
or more unpaid installments and the bank the cardholder;
may collect a deferral charge which shall e. disclosure to third party service
not exceed the rate previously disclosed providers solely for the purpose of assisting
pursuant to the provisions on disclosure. or rendering services to the bank or card
company in the administration of its credit
§ X320.8 Late payment/penalty fees. No card business; and
late payment or penalty fee shall be f. disclosure to third parties such as
collected from cardholders unless the insurance companies, solely for the purpose
collection thereof is fully disclosed in the of insuring the bank from cardholder default
contract between the issuer and the or other credit loss, and the cardholder from
cardholder: Provided, That late payment or fraud or unauthorized charges.

§§ X320.10 - X320.14
10.12.31
§ X320.10 Suspension, termination of statement of account and inform the bank/

effectivity and reactivation. Banks or their subsidiary credit card companies in
subsidiary/affiliate credit card companies writing of any billing error or discrepancy.
shall formulate criteria or parameters for Within ten (10) calendar days from receipt
suspension, revocation and reactivation of of such written notice, the bank/
the right to use the card and shall include in subsidiary credit card company shall send
their contract with cardholders a provision a written acknowledgment to the
authorizing the issuer to suspend or cardholder unless the action required is
terminate its effectivity, if circumstances taken within such ten (10)-day period.
warrant. Not later than two (2) billing cycles
or two (2) months which in no case shall
§ X320.11 Inspection of records exceed ninety (90) days after receipt of the
covering credit card transactions. Banks notice and prior to taking any action to
or their subsidiary/affiliate credit card collect the contested amount, or any part
companies shall make available for thereof, banks/subsidiary credit card
inspection or examination by the companies shall make appropriate
appropriate department of the SES corrections in their records and/or send a
complete and accurate files on card written explanation or clarification to the
applicant/cardholder to support the cardholder after conducting an
consideration for approval of the investigation. Nothing in this
application and determination of the Subsection shall be construed to
credit limit which shall be in prohibit any action by the bank/
accordance with the verified debt subsidiary credit card company to
repayment ability and/or net worth of collect any amount which has not been
the card applicant/cardholder. indicated by the cardholder to contain
a billing error or apply against the credit
§ X320.12 Offsets. For purposes of limit of the cardholder the amount
transparency and adequate disclosure, the indicated to be in error.
credit card issuer shall inform/notify the
credit cardholder in the agreement, § X320.14 Unfair collection practices
contract or any equivalent document Banks, subsidiary/affiliate credit card
governing the issuance or use of the credit companies, collection agencies,
card that, pursuant to the provisions of counsels and other agents may resort
Articles 1278 to 1290 of the New Civil to all reasonable and legally
Code of the Philippines, as amended, the permissible means to collect amounts
use of his credit card will subject his due them under the credit card
deposit/s with the bank to offset against agreement: Provided, That in the
any amount/s due and payable on his exercise of their rights and performance
credit card which have not been paid in of duties, they must observe good faith
accordance with the terms of the and reasonable conduct and refrain
agreement/contract. from engaging in unscrupulous or
untoward acts. Without limiting the
§ X320.13 Handling of complaints general application of the foregoing,
Banks or subsidiary/affiliate credit card the following conduct is a violation of
companies shall give cardholders at least this Subsection:
twenty (20) calendar days from statement a. the use or threat of violence or
date to examine charges posted in his/her other criminal means to harm the

§§ X320.14 - X321
10.12.31
physical person, reputation, or property procedures to ensure that personnel

of any person; handling the collection of accounts,
b. the use of obscenities, insults, or whether these are in-house collectors, or
profane language which amount to a third-party collection agents, shall
criminal act or offense under applicable disclose his/her full name/true identity to
laws; the cardholder.
c. disclosure of the names of credit (As amended by Circular No. 702 dated 15 December 2010)
cardholders who allegedly refuse to pay
debts, except as allowed under Subsec. § X320.15 Sanctions.Violations of the
X320.9; provisions of Subsecs. X320.1, X320.5 to
d. threat to take any action that X320.13 shall be subject to any or all of the
cannot legally be taken; following sanctions depending upon their
e. c o m m u n i c a t i n g o r t h r e a t t o severity:
communicate to any person credit a. Disqualification of the bank
information which is known to be false, concerned from the credit facilities of the
including failure to communicate that BSP except as may be allowed under Section
a debt is being disputed; 84 of R.A. No. 7653;
f. any false representation or b. Prohibition of the bank concerned
deceptive means to collect or attempt to from the extension of additional credit
collect any debt or to obtain information accommodation against personal security;
concerning a cardholder; and and
g. making contact at unreasonable/ c. Penalties and sanctions provided
inconvenient times or hours which shall be under Sections 36 and 37 of R.A. No. 7653.
defined as contact before 6:00 A.M. or after Violations of the provisions of Subsecs.
10:00 P.M., unless the account is past due X320.2 to X320.4 and X320.14 shall be
for more than sixty (60) days or the subject to any or all of the following
cardholder has given express permission or sanctions depending upon their severity:
said times are the only reasonable or a. First offense.Reprimand for the
convenient opportunities for contact. directors/officers responsible for the
Banks and their subsidiary/affiliate violation;
credit card companies shall inform their b. Second offense. Disqualification of
cardholder in writing of the endorsement the bank concerned from the credit
of the collection of their account to a facilities of the BSP except as may be
collection agency/agent, or the allowed under Section 84 of R. A. No.
endorsement of their account from one (1) 7653;
collection agency/agent to another, at least c. Subsequent offense/s:
seven (7) days prior to the actual i.Prohibition on the bank concerned
endorsement. The notification shall from the extension of additional credit
include the full name of the collection accommodation against personal security;
agency and its contact details: Provided, and
That the required notification in writing ii.Penalties and sanctions provided
shall be included in the terms and under Sections 36 and 37 of R. A. No. 7653.
conditions of the credit card agreement. (As amended by Circular No. 702 dated 15 December 2010)
Banks and their subsidiary/affiliate credit
card companies shall adopt policies and Sec. X321 (Reserved)

§§X322 - X322.1
08.12.31
D. RESTRUCTURED LOANS modified in accordance with a

restructuring agreement setting forth a new
Sec. X322 Restructured Loans; General plan of payment or a schedule of payment
Policy. Banks shall have full discretion in on a periodic basis. The modification may
the restructuring of loans in order to include, but is not limited to, change in
provide flexibility in arranging the maturity, interest rate, collateral or
repayment of such loans without increase in the face amount of the debt
impairing or endangering the lending resulting from the capitalization of accrued
bank’s financial interest, except in special interest/accumulated charges. Items in
cases approved by the Monetary Board litigation and loans subject of judicially
such as loans funded by foreign currency approved compromise, as well as those
obligations. However, the restructuring of covered by petitions for suspension or for
loans granted to DOSRI should be upon new plans of payment approved by the
terms not less favorable to the bank than court or the SEC, shall not be classified as
those offered to others. While agreements restructured loans.
on loan restructuring should be A loan which is restructured shall be
considered as management tools to considered non-performing except when as
maintain or improve the soundness of the of restructuring date -
bank’s lending operations, these should (1) with updated principal and interest
be drawn mainly to assist borrowers payments; and
towards the settlement of their (2) fully secured by real estate with
obligations, taking into account their loan value of up to sixty percent (60%) of
capacity to pay. the appraised value of the real estate
security and the insured improvements
§ X322.1 Definition; when to thereon, and such other first class
consider performing/non-performing collaterals as may be deemed appropriate
Restructured loans are loans the principal by the Monetary Board: Provided, That a
terms and conditions of which have been restructured loan, with or without
(Next Page is Part III - Page 31 )

§§ X322.1 - X322.2
08.12.31
capitalized interest, must be yielding a rate specifically on restructuring of loans:

of interest equal to or greater than the Provided, further, That said guidelines shall
bank’s average cost of funds at the date of be submitted to the appropriate
restructuring, otherwise, it shall be department of the SES within thirty (30)
considered non-performing. days following the date of approval thereof.
The restoration to a performing loan However, loans previously approved by
shall only be effective after a satisfactory the executive committee as well as those
track record of payments of the required granted to DOSRI shall be subject to
amortizations of principal and/or interest approval by the board as provided under
has been established. existing rules and regulations. Loans
For this purpose, a satisfactory track restructured other than those approved by
record of payments of principal and/or the board shall be reported to it for
interest shall mean three (3) consecutive confirmation.
payments of the required amortizations of b. A second restructuring of a loan
principal and/or interest have been made. shall be allowed only if there are
However, in the case of a restructured loan reasonable justifications: Provided, That it
with capitalized interest but not fully shall be considered a non-performing loan
secured by real estate with loan value of and classified, at least, “Substandard”. The
up to sixty percent (60%) of the appraised restoration to a performing loan status
value of the real estate security and the and/or upgrading of loan classification, e.g.,
insured improvements thereon or other from “Substandard” to “Loans Especially
first class collaterals, six (6) consecutive Mentioned”, if circumstances warrant an
payments of the required amortizations of upgrading in accordance with the criteria
principal and/or interest must have been under Appendix 18, shall only be allowed
made. after a satisfactory track record of at least
A restructured loan which has been six (6) consecutive payments of the
restored to a performing loan status shall required amortization of principal and/or
be immediately considered non-performing interest has been established.
in case of default of any principal or interest c. In the restructuring process, the
payment. bank shall encourage the borrower to
improve the quality of the loan either by
§ X322.2 Procedural requirements strengthening financial capacity or
a. A loan may be restructured, subject providing additional collateral.
to the approval of the bank’s board of The real estate security and/or other first
directors in a resolution which shall class collaterals offered shall be appraised
embody, among other things: at the time of restructuring to ensure that
(1) the basis of or justification for the current market values are being used. Real
approval; estate security shall be appraised by an
(2) determination of the borrower’s independent appraisal company
capacity to pay, such as viability of the acceptable to the BSP and shall be
business; and reappraised every year thereafter.
(3) the nature and extent of protection (1) For UBs/KBs – a loan benchmark
of the bank’s exposure. is set at P5.0 million, such that loans beyond
The authority to approve the this amount will require an independent
restructuring of loans may be delegated appraisal company: Provided, That the
by the bank’s board of directors to a appraisal company contracted to do the
committee or officer(s): Provided, That appraisal is not a subsidiary or an affiliate
there are board prescribed guidelines of the UB/KB.

§§ X322.2 - X322.4
08.12.31
(2) For TBs – a loan benchmark is set with annual net earnings during the
at P1.0 million such that loans beyond this immediately preceding five (5) years; and
amount will require an independent (e) Such other collaterals that the
appraisal company: Provided, That the Monetary Board may declare as first class
appraisal company contracted to do the collaterals from time to time.
appraisal is not a subsidiary or an affiliate It is understood that the loan value to
of the TB. be assigned the collateral shall be as
A TB may be allowed to use a UB/KB prescribed under existing regulations.
or another TB acceptable to the BSP to do
the appraisal for it: Provided, That the TB § X322.3 Restructured loans
requesting the appraisal is not a subsidiary considered past due. Restructured loans
or affiliate of the UB/KB/other TB contracted shall be considered past due in case of
to do the appraisal. default of any principal or interest and shall
(3) For RBs/Coop Banks – the be subject to classification in accordance
benchmark is set at P500 thousand such that with Sec. X322.4.
loans beyond this amount will require an
independent appraisal company: Provided, § X322.4 Classification. The classification
That the appraisal company contracted to of a loan prior to restructuring, e.g., “Loans
do the appraisal is not a subsidiary or an Especially Mentioned”, “Substandard” or
affiliate of the RB/Coop Bank. “Doubtful” shall be retained: Provided, That
An RB/Coop Bank may be allowed to a loan that is not classified but which is
use a UB/KB or a TB acceptable to the BSP non-performing prior to restructuring shall
to do the appraisal for it: Provided, That the be classified, at least, “Loans Especially
RB requesting the appraisal is not a Mentioned”: Provided, further, That
subsidiary or affiliate of the UB/KB/TB restructured loans with capitalized interest
contracted to do the appraisal. shall be classified, at least, “Substandard”
The term “first class collaterals” refers and the required valuation reserves shall
to assets and securities which have be set up accordingly: Provided, finally,
relatively stable and clearly definable value That a more adverse classification may be
and/or greater liquidity and are free from given, i.e., “Substandard”, “Doubtful” or
lien/encumbrance, such as: “Loss”, if the circumstances warrant it as
(a) Real estate; provided under Appendix 18.
(b) Evidences of indebtedness of the The upgrading of loan classification,
Republic of the Philippines and of the BSP, e.g., from “Substandard” to “Loans
and other evidences of indebtedness or Especially Mentioned”, if circumstances
obligations the servicing and repayment of warrant an upgrading in accordance with
which are fully guaranteed by the Republic the criteria under Appendix 18, shall only
of the Philippines; be effective after a satisfactory track record
(c) Hold-out on and/or assignment of of payments of the required amortizations
deposits/deposit substitutes maintained in of principal and/or interest has been
the lending institutions; established.
(d) “Blue chip” shares of stocks, except For this purpose, a satisfactory track
those issued by the lending entity or by its record of payments of principal and/or
parent company which owns more than interest shall mean three (3) consecutive
fifty percent (50%) of its outstanding shares payments of the required amortizations of
of stocks. For this purpose, the issuer principal and/or interest have been made.
corporation must be a listed corporation However, in the case of a restructured loan
with a net worth of at least P1.0 billion and with capitalized interest but not fully

§§ X322.4 - X326.1
11.12.31
secured by real estate with loan value of up aforementioned relatives own more than fifty
to sixty percent (60%) of the appraised value percent (50%) of the total subscribed capital
of the real estate security and the insured stock of such corporation, association or
improvements thereon or other first class firm, amount to one percent (1%) or more
collaterals, six (6) consecutive payments of of the total subscribed capital stock of the
the required amortizations of principal and/ bank.
or interest must have been made. d. Substantial stockholder shall mean
a person, or group of persons whether
Secs. X323 - X325 (Reserved) natural or juridical, owning such number
of shares that will allow such person or
E. LOANS AND OTHER CREDIT group to elect at least one (1) member of
ACCOMMODATIONS TO DIRECTORS, the board of directors of a bank or who is
OFFICERS, STOCKHOLDERS AND directly or indirectly the registered or
THEIR RELATED INTERESTS beneficial owner of more than ten percent
(10%) of any class of its equity security.
Sec. X326 General Policy. Dealings of a e. Related interest shall refer to any of
bank with any of its DOSRI should be in the following:
the regular course of business and upon (1) Spouse or relative within the first
terms not less favorable to the bank than degree of consanguinity or affinity, or relative
those offered to others. by legal adoption, of a director, officer or
stockholder of the bank;
§ X326.1 Definitions. For purposes of (2) Partnership of which a director,
these regulations, the following definitions officer, or stockholder of a bank or his spouse
shall apply: or relative within the first degree of
a. Directors shall refer to bank consanguinity or affinity, or relative by legal
directors as defined in Subsec. X141.1. adoption, is a general partner;
b. Officers shall refer to bank officers (3) Co-owner with the director, officer,
as defined in Subsec. X142.1. stockholder or his spouse or relative within
c. Stockholder shall refer to any the first degree of consanguinity or affinity,
stockholder of record in the books of the or relative by legal adoption, of the property
bank, acting personally, or through an or interest or right mortgaged, pledged or
attorney-in-fact; or any other person duly assigned to secure the loans or other credit
authorized by him or through a trustee accommodations, except when the
designated pursuant to a proxy or voting mortgage, pledge or assignment covers only
trust or other similar contracts, whose said co-owner’s undivided interest;
stockholdings in the lending bank, individual (4) Corporation, association, or firm of
and/or collectively with the stockholdings which a director or officer of the bank, or
of: (i) his spouse and/or relative within the his spouse is also a director or officer of such
first degree by consanguinity or affinity or corporation, association or firm, except
legal adoption; (ii) a partnership in which (a) where the securities of such corporation,
the stockholder and/or the spouse and/or association or firm are listed and traded in
any of the aforementioned relatives is a the big board or commercial and industrial
general partner; and (iii) corporation, board of domestic stock exchanges and less
association or firm of which the stockholder than fifty percent (50%) of the voting stock
and/or his spouse and/or the thereof is owned by any one (1) person or

§ X326.1
11.12.31
by persons related to each other within the or any similar arrangement with the parent
first degree of consanguinity or affinity; or of the lending bank; and
(b) where the director, officer or stockholder (9)Non-governmental organizations
of the bank sits as a representative of the (NGOs)/foundations that are engaged in
bank in the board of directors of such retail microfinance operations which are
corporation: Provided, That the bank incorporated by any of the stockholders
representative shall not have any equity and/or directors and/or officers of related
interest in the borrower corporation except banks.
for the minimum shares required by law, The general principles and standards
rules and regulations, or by the by-laws of that will govern the business relationships
the corporation, or (c) where the corporation between banks and their related NGOs/
is at least ninety-nine percent (99%) owned foundations engaged in retail microfinance
by a non-stock corporation as defined in are found in Appendix 27.
Section 87 of the Corporation Code of the f. Subsidiary shall refer to a
Philippines: Provided, That the purpose of corporation or firm more than fifty percent
the loan is to finance hospitals and other (50%) of the outstanding voting stock of
medical services: Provided, further, That the which is directly or indirectly owned,
loan is fully secured: Provided, furthermore, controlled or held with power to vote by its
That in the case of Items “(a)”, “(b)” and “(c)” parent corporation.
above, the borrowing corporation is not g. Unencumbered deposits shall refer
among those mentioned in Items “e(5)”, to savings, time and demand deposits,
“e(6)”, “e(7)” and “e(8)” of this Section; which are not subject to an assignment or
(5) Corporation, association or firm of hold-out agreement or any other
which any or a group of directors, officers, encumbrance.
stockholders of the lending bank and/or h. Book value of the paid-in capital
their spouses or relatives within the first contribution shall mean the proportional
degree of consanguinity or affinity, or relative amount of the bank’s total capital accounts
by legal adoption, hold or own at least (net of such unbooked valuation reserves
twenty percent (20%) of the subscribed and other capital adjustments as may be
capital of such corporation, or of the equity required by the BSP) as the corresponding
of such association or firm; paid-in capital contribution of each of the
(6) Corporation, association or firm bank’s directors, officers, stockholders and
wholly or majority-owned or controlled by their related interests bear to the total
any related entity or a group of related paid-in capital of the bank: Provided, That
entities mentioned in Items “e(2)”, “e(4)” and as a basis for determining the individual
“e(5)” of this Section; ceiling referred to in Sec. X330, the
(7) Corporation, association or firm corresponding book value of the shares
which owns or controls directly or indirectly of stock of said directors, officers,
whether singly or as part of a group of stockholders and their related interests
related interest at least twenty percent (20%) which are the subject of pledge,
of the subscribed capital of a substantial assignment or any other encumbrance
stockholder of the lending bank or which shall be deducted therefrom.
controls majority interest of the bank i. Net worth shall mean the total of
pursuant to Subsec. X303.1; the unimpaired paid-in capital including
(8) Corporation, association or firm paid-in surplus, retained earnings and
which has an existing management contract undivided profit, net of valuation reserves

§§ X326.1 - X327
11.12.31
and other adjustments as may be required title to the property is retained by the bank;
by the BSP. and
j. Total loan portfolio shall refer to (8) Customer’s liability-import bills
the sum of all loan accounts outstanding, under trust receipts outstanding for not more
gross of valuation reserves, as reflected than thirty (30) days from date of booking:
in the bank’s consolidated statement of Provided, That the booking under trust
condition, excluding outstanding loans receipts shall have been made not later than
financed by special/specific funds from the thirty-first day from the date of original
the government FIs. entry referred to in Item “(6)” above.
k. Secured loan, borrowing or other l. Unsecured loan, borrowing or other
credit accommodation shall refer to any credit accommodation shall refer to any
loan, or credit accommodation or portion loan, or other credit accommodation or
thereof referred to in Sec. X327 which is portion thereof referred in Sec. X327 which
secured by: is not secured in accordance with Item “k”
(1) Real estate mortgage, chattel above.
mortgage on tangible assets, and pledge of (As amended by Circular Nos. 725 dated 16 June 2011,
jewelry, precious stones and other valuable M-2011-33 dated 15 June 2011, Circular No. 695 dated 22
articles; October 2010 and 560 dated 31 January 2007)
(2) Assignment of intangible assets such
as patents, trademarks, trade names and Sec. X327 Transactions Covered. The terms
copyrights; loans, other credit accommodations and
(3) Unconditional payment guarantees guarantees as used herein shall refer to
such as standby letters of credit and letter transactions of the bank which involve the
of indemnity issued by banks/multilateral grant of any loan, advance or other credit
FIs; accommodation in any form whatsoever,
(4) Assignment of, or hold-out on, whether renewal, extension or increase, and
deposits or deposit substitutes maintained shall include:
in the lending bank; a. Any advance by means of an
(5) Cash margin deposits; or incidental or temporary overdraft, cash item,
assignment or pledge of government “vale”, etc.;
securities or readily marketable bonds and b. Any advance of unearned salary or
other high-grade debt securities and other unearned compensation for periods
“blue-chip” stocks, except those issued by in excess of thirty (30) days;
the lending entity, or by its parent c. Any advance by means of DAUDs;
company which owns more than fifty d. Outstanding availments under an
percent (50%) of its outstanding shares of established credit line;
stocks, subject to the additional provision e. Drawings against an existing letter
that the issuer corporation has a net worth of credit;
of at least P1.0 billion and with annual f. The acquisition of any note, draft,
net earnings during the immediately bill of exchange or other evidence of
preceding five (5) years; indebtedness upon which the bank’s
(6) Customer’s liability under import DOSRIs may be liable as makers, drawers,
bills outstanding for not more than thirty acceptors, endorsers, guarantors or sureties;
(30) days from date of original entry; g. Indirect lending such as loans or
(7) Sales contract receivables arising other credit accommodations granted by
from sale of real property on credit where another financial intermediary to said

§§ X327 - X328.1
08.12.31
DOSRIs from funds of the bank invested in a 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
availments under a credit line or additional or assignment of a deposit in a currency
drawings against a letter of credit; eligible as part of the international
i. The sale of assets, such as shares of reserves and held in a bank in the
stock, on credit; and Philippines to secure other credit
j. Any other transactions as a result accommodations granted to another
of which the bank’s DOSRIs become person or entity: Provided, That the
foreign bank stockholder shall
obligated or may become obligated to
automatically be subject to the ceilings
the lending bank, by any means as herein provided in the event that its
whatsoever to pay money or its contingent liability as guarantor becomes
equivalent. a real liability; and
e. Interbank call loan transactions.
Sec. X328 Transactions Not Covered. The
terms loans, other credit accommodations § X328.1 Applicability to credit card
and guarantees as used herein shall not refer operations. The credit card operations of
to the following: banks shall not be subject to these
a. Advances against accrued regulations where the credit cardholders
compensation, or for the purpose of are bank’s DOSRI: Provided, That (a) the
providing payment of authorized travel, privilege of becoming a credit cardholder
legitimate expenses or other transactions for is open to all qualified persons on the
the account of the bank or for utilization of basis of selective criteria which are
maternity and other leave credits; applied by the bank to all applicants
b. The increase in the amount of thereof; and (b) the bank’s DOSRIs
outstanding credit accommodations as a reimburse/pay the bank for the billed
result of additional charges or advances amount in full on or before the payment
made by the bank to protect its interest such due date in the billing or statement of
as taxes, insurance, etc.; account, as set by the bank for all other
c. The discount of bills of exchange qualified credit card holders on
drawn in good faith against actually availments made for the same period on
existing values, and the discount of their credit cards. However, the
commercial or business paper actually transaction shall be subject to applicable
owned by the person negotiating the same, DOSRI regulations if the bank’s DOSRIs:
including, but not limited to, the a. fail to reimburse/pay the bank
acquisition by a domestic bank of export within the period mentioned herein; or
bills from any of its DOSRI which are b. on the outset, opt for deferred
drawn in accordance with the terms and payment scheme, and the availment is
conditions of the covering letters of credit: booked by the bank.
Provided, That the transaction shall For purposes of this Section,
automatically be subject to the ceilings as stockholders and related interests refer to
herein provided once the DOSRI who is 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
11.12.31
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 BSP b. Loans, other credit accommodations
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
11.12.31
c. Loans, other credit accommodations a. Credit accommodations or portions

and guarantees extended by a Coop Bank thereof to the extent secured by assets
to its cooperative shareholders. considered as non-risk by the Monetary
The general principles and standards that Board;
will govern the business relationships between b. Credit accommodations to a
banks and their related NGOs/foundations corporate stockholder which meets all the
engaged in retail microfinance are found in following conditions:
Appendix 27. (1) The corporation is a non-financial
(As amended by Circular No. 725 dated 16 June 2011 and M-2011- institution;
033 dated 15 June 2011) (2) Its shares are listed and traded in
the domestic stock exchanges; and
Sec. X331 Aggregate Ceiling; Ceiling on (3) No person or group of persons
Unsecured Loans, Other Credit related within the first degree of
Accommodations and Guarantees consanguinity or affinity holds/owns more
Except with the prior approval of the than twenty percent (20%) of the subscribed
Monetary Board, the total outstanding loans, capital of the corporation.
other credit accommodations and c. Credit accommodations to
guarantees to DOSRI shall not exceed fifteen government-owned or controlled
percent (15%) of the total loan portfolio of corporations, in cases where a director,
the bank or 100% of net worth whichever officer or stockholder of the lending bank is
is lower: Provided, That in no case shall the a representative of the government in the
total unsecured loans, other credit borrowing corporation and does not hold
accommodations and guarantees to said any proprietary interest in such corporation:
DOSRI exceed thirty percent (30%) of the Provided, That other rules on loans to
aggregate ceiling or the outstanding loans, DOSRI, such as procedural and reportorial
other credit accommodations and requirements under Sections X334 and
guarantees, whichever is lower. For the X335 are followed.
purpose of determining compliance with the d. Exclusions from individual ceiling
ceiling on unsecured loans, other credit mentioned under Items “(b)” and “(c)” of
accommodations and guarantees, banks Subsec. X330.1.
shall be allowed to average their ceiling on
unsecured loans, other credit Sec. X333 Applicability to Branches and
accommodations and guarantees every Subsidiaries of Foreign Banks. The
week. individual and aggregate ceilings as well as
In evaluating requests for extension of ceilings on unsecured credit
loans in excess of the aggregate ceiling, the accommodations prescribed herein shall
BSP shall consider the credit standing of the also apply to branches and subsidiaries of
borrower, viability of the projects financed foreign banks in the Philippines.
by such other credit accommodations in
relation to national objectives, collateral or Sec. X334 Procedural Requirements. The
security and other pertinent considerations. following provisions shall apply if the
bank’s DOSRI are parties to, or act as
Sec. X332 Exclusions from Aggregate representatives or agents of others in, any
Ceiling. The following loans, other credit of the transactions enumerated under Sec.
accommodations and guarantees shall be X327:
excluded in determining compliance with a. Approval of the board, when to
the aggregate ceiling: obtain. Except with prior written approval

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

§§ X336 - X338.1
11.12.31
provisions of this Section may be declared or in the maximum amount permitted by

vacant and the director or officer shall be law, whichever is lower, shall be required
subject to the penal provisions of the New by the lending bank to waive the secrecy
Central Bank Act; of his deposits of whatever nature in all
c. Application of (1) the borrowing banks in the Philippines. Any information
director’s or officer’s share in the bank’s obtained from an examination of his
profit sharing program; and (2) the share of deposits shall be held strictly confidential
the director voting for the approval of the and may be used by the examiners only
loan or other credit accommodation, against in connection with their supervisory and
the excess of such loan or other credit examination responsibility or by the BSP
accommodation over any of the herein in an appropriate legal action it has initiated
prescribed ceilings; and involving the deposit 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
ceilings per day but not to exceed P30,000 financial assistance to their officers and
a day on the following: employees, as part of their fringe benefits
(1) The lending bank; program, to meet the housing,
(2) The director, officer or stockholder transportation, household and personal
whose borrowing exceeds his individual needs of their officers and employees.
ceiling; and Financing plans and amendments thereto,
(3) Each of the directors voting for shall be with prior approval of the BSP.1
the approval of the loan or other credit (M-2011-056 dated 10 November 2011, M-2011-055 dated 17
accommodation in excess of any of the October 2011, M-2011-043 dated 12 August 2011, M-2011-007
ceilings prescribed in Secs. X330 and dated 04 February 2011, M-2010-039 dated 03 November 2010,
X331. M-2010-007 dated 23 April 2010, M-2009-040 dated 30 October
The penalty for exceeding the individual 2009, M-2009-037 dated 15 October 2009, M-2009-038 dated
ceiling, aggregate ceiling and ceiling on 08 October 2009 and M-2009-036 dated 07 October 2009)
unsecured loans shall be computed on the
average amount of loans in excess of said § X338.1 Mechanics. The mechanics of
ceilings during the same week. such financing plan shall have the following
minimum features:
Sec. X337 Waiver of Secrecy of Deposit a. Participation shall be limited to
Any director, officer or stockholder who, fulltime and permanent officers and
together with his related interest, contracts employees of the bank;
a loan or any form of financial b. Financial assistance shall only be for
accommodation from: the following purposes:
a. his bank; or (1) The acquisition of a residential
b. from a bank house and lot, or the construction,
(1) which is a subsidiary of a bank renovation or repair of a residential house
holding company of which both his bank on a lot owned and to be occupied by the
and the lending bank are subsidiaries; or officer or employee;
(2) in which a controlling proportion of (2) The acquisition of vehicles,
the shares is owned by the same interest household equipment and appliances for the
that owns a controlling proportion of the personal use of the officer or employee or
shares of his bank, in excess of five percent his immediate family; or
(5%) of the capital and surplus of the bank, (3) To meet expenses for the medical,
1
See Appendix 89

§§ 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.
Manual of Regulations for Banks Part III - Page 52c

§§ 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
Part III - Page 52d Manual of Regulations for Banks

§§ X341.15 - X342.1
11.12.31
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
c. Disposition of penalties collected in the Manual of Accounts Section of the
Ninety percent (90%) of the total FRP under Subsec. X191.2 (gross of
penalties collected on non-compliance/ allowance for credit losses) excluding the
under-compliance with the mandatory following:
agri-agra credit under Item no. “a(1)(a)” (1) Interbank loans receivable, other
above shall be remitted by the BSP to than (a) wholesale lending of a bank to
the Agricultural Guarantee Fund Pool conduit banks/QBs for on-lending to
(AGFP) and the PCIC, in accordance with MSMEs, and (b) rediscounting facility
the following percentage allocation: granted to another bank for loans to
MSMEs;
Recipient Percent Allocation (2) Wholesale lending of a bank to
AGFP 50% conduit non-bank FIs without quasi-
PCIC 50% banking authority, other than those for on-
lending to MSMEs;
The percentage allocation may be (3) Loans granted under special
amended by the Secretary of DA in financing programs, other than those for
consultation with the Agricultural Credit MSMEs;
Policy Council (ACPC), PCIC and the (4) Loans granted to MSMEs, other than
Secretary of DAR, according to the needs to BMBEs, to the extent funded by
of the agri-agra sector. wholesale lending of, or rediscounted
The remaining, ten percent (10%) of with, another bank;
the total penalties collected on non- (5) Agrarian reform credits/other
compliance/under-compliance with the agricultural loans granted under P.D. No.
mandatory agri-agra credit under Item no. 717, other than those eligible for
“(1)a” shall be retained by the BSP to cover compliance with the mandatory allocation
its administrative expenses. of credit for MSMEs, as well as
(As amended by Circular No. 736 dated 20 July 2011 and 585 development loans incentives under R.A.
dated 15 October 2007) No. 7721 granted by banks other than
branches of foreign banks; and
Sec. X342 Mandatory Allocation of Credit (6) Loans and receivables arising from
Resources to Micro, Small and Medium repo agreements, certificates of
Enterprises. The following rules shall assignment/participation with recourse and
govern the mandatory allocation of credit securities lending and borrowing
resources to Micro, Small and Medium transactions.
Manual of Regulations for Banks Part III - Page 52e

§§ X342.1
08.12.31
c. MSMEs shall refer to any business (1) whose total assets, inclusive of
activity within the major sectors of the those arising from loans but exclusive of the
economy, namely: industry, trade, services, land on which the particular business
including the practice of one’s profession, entity’s office, plant and equipment are
the operation of tourism-related situated, must have a value falling under the
establishments, and agri-business, which for following categories:
this purpose refers to any business activity Micro : not more than P 3,000,000
involving the manufacturing, processing, Small : more than P 3,000,000 to P 15,000,000
and/or production of agricultural produce, Medium : more than P 15,000,000 to P 100,000,000
whether single proprietorship, cooperative,
partnership or corporation: and
(Next Page is Part III- Page 53)
Part III - Page 52f Manual of Regulations for Banks

§§ X342.1 - X342.3
08.12.31
(2) duly registered with the appropriate a. For MSEs

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

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

and 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 and FIs; or enforcement and other proceedings, solely
(4) Purchase/discount on a “with or upon default of a borrower, and for a period
without recourse” basis of ME not exceeding five (5) years from actual
receivables; or possession: Provided, That in no event shall
(5) Wholesale lending or rediscounting title to the property be transferred to such
facility granted to PFIs for on-lending to lending institution. If the lending institution
MEs; or is the winning bidder, it may, during said
(6) Wholesale lending or rediscounting five (5) year period, transfer its rights to a
facility granted to PFIs for on-lending to qualified Philippine national, without
export, import, and domestic medium scale prejudice to a borrower’s rights under
traders; or applicable laws.
(7) Commercial letters of credit (As amended by Circular No. 625 dated 14 October 2008)
outstanding, net of margin deposits, issued
for the account of MEs. § X342.6 Submission of reports. Banks
c. Alternative compliance for either shall submit reports on compliance with
or both MSEs or/and MEs the mandatory credit allocation on a
(1) Paid subscription/purchase of quarterly basis within fifteen (15) banking
liability instruments as may be offered by days from the end of reference quarter to
the SB Corporation; or SDC of the BSP. Said report shall be
(2) Paid subscription of preferred considered Category A-3 report. It shall
shares of stock of the SB Corporation; or become effective starting with the
(3) Loans from whatever sources reporting period ending 31 December 2008.
granted to BMBEs as provided under Banks shall maintain appropriate records/
Subsec. X365.5. details of the reported loans to MSMEs and
(As amended by Circular Nos. 625 dated 14 October 2008 and shall make these available to BSP.
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 compliance
Corporation, and the granting of loans to with the prescribed portions of loan
MSMEs, other than to BMBEs, to the extent 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 under-
(As amended by Circular No. 625 dated 14 October 2008) compliance 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
585 dated 15 October 2007)
§ 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 - X348.1
08.12.31
issuance by the Monetary Board of the § X347.2 Ceiling. The total guarantees
certification, and subject to their loan and or similar arrangements, the nature of which
investment policies, extend to an RB a loan requires the guarantor to assume the
or loans from time to time, repayable in ten liabilities/obligations of third parties in case
(10) years, with concessional rates of interest, of their inability to pay, that may be issued
against security/ies which the stockholder or by a bank and outstanding at any given time,
stockholders of the RB may offer. shall not exceed one hundred percent (100%)
of the bank’s qualifying capital.
Secs. X345 - X346 (Reserved) Transitory provision. This Subsection
is also covered by the last paragraph of
Sec. X347 Standby Letters of Credit. The Subsec. X303.5.
following shall govern the issuance of
standby letters of credit. § X347.3 Reports. Banks shall submit
a monthly report of domestic standby letter
§ X347.1 Domestic standby letters of of credit opened and outstanding in the
credit. Domestic standby letters of credit prescribed form within fifteen (15) banking
may be issued or used in transactions other days after end of reference month to the
than those involving movement of goods appropriate department of the SES. The
under the following guidelines: report shall contain the following
a. The bank’s obligation to pay shall minimum information:
be either unconditional (as against (1) Date the letter of credit was
presentation of a clean draft) or conditional opened;
only upon the presentation of documents (2) Amount, purpose and accountee
and not upon actual existence or non- thereof;
existence of facts, i.e., the bank must not (3) Beneficiary;
be called upon to determine disputed (4) Security and value of security;
questions of facts or law; (5) Expiry date of the letter of credit; and
b. The bank’s obligation shall be (6) Certification as to the correctness of
limited to a fixed maximum amount; the report by an authorized officer of the bank.
c. The bank’s obligation shall have an
expressed expiration date; Sec. X348 Committed Credit Line for
d. The standby letters of credit Commercial Paper Issues. The following
accommodation shall not violate any law or guidelines shall govern committed credit
existing BSP directives, rules and regulations, line agreements as a prerequisite for
such as the SBL and DOSRI ceilings; corporations proposing to issue
e. The party who opened the standby commercial paper, pursuant to the New
letters of credit or the ultimate borrower Rules on the Registration of Short-Term
shall not have any past due obligation with Commercial Papers (Appendix 14).
the issuing bank for the ninety (90)-day
period preceding the date of issuance of § X348.1 Who may grant line facility
the letter of credit; and A bank with a net worth of at least P1.0
f. The party who opened the letter of billion as defined in Sec. X111, may
credit (borrower or principal obligor) must provide a committed credit line facility to
have an unqualified obligation to a commercial paper issuer.
reimburse the bank on the same condition The bank shall exercise proper caution
as the bank has paid. in ascertaining that the party, in whose
(As amended by Circular No. 536 dated 18 July 2006) favor the credit line shall be granted, is

§§ X348.1 - X348.5
08.12.31
capable of fulfilling his commitments to the the date of payment of obligation arising
bank under the credit line agreement. from outstanding commercial paper;
A bank or a group of banks may enter e. That the request to avail of the
into a committed credit line agreement with credit line agreement shall be addressed
any corporation proposing to issue to the bank or to the lead bank acting for a
commercial paper. Where a group of banks group of banks, which request shall be
is involved, a lead bank shall be designated duly signed by a member of the board of
from among themselves. directors and a senior ranking officer of the
commercial paper issuer duly authorized
§ X348.2 Ceilings. The aggregate for the purpose through an appropriate
commitments under committed credit line board resolution, which resolution shall
agreements entered into by each bank also provide for the designation of the
pursuant to this Section shall not exceed alternate signatories who shall likewise be
an amount equivalent to thirty percent a member of the board of directors and a
(30%) of its net worth, reckoned as of the senior financial officer of the corporation;
date of execution of the latest agreement: f. That the extent of the commitment
Provided, That in no case shall a bank of each participant in a group of banks
extend commitments to a single issuer for under a credit line agreement shall be
more than twenty-five percent (25%) of its stipulated in the agreement; and
net worth exclusive of other exposures to g. That the commitment of the bank
the said issuer. under the credit line agreement shall be a
net risk to the bank and the practice of
§ X348.3 Terms; conditions; requiring the commercial paper issuer to
restrictions. The committed credit line maintain a compensating deposit with the
agreement shall incorporate the following bank shall be prohibited.
terms, conditions and restrictions:
a. That the credit line agreement is § X348.4 Reports to the Bangko
executed pursuant to the provisions of this Sentral. The bank or the lead bank, as the
Section; case may be, shall report to the BSP:
b. That the bank or banks are a. All commitments entered into with
committed to make available to the issuer commercial paper issuers within ten (10)
funds equivalent to at least twenty percent banking days after the issuer shall have
(20%) of the aggregate of the commercial been authorized by the SEC; and
paper issued and outstanding at any time; b. Any availment under the committed
c. That the commitment of the bank credit line agreement within three (3)
or banks shall be firm and irrevocable and banking days from date of drawdown.
effective for as long as the issues under a
particular permit are outstanding, subject § X348.5 Loan limit. The liabilities of
to renewal by the bank; a commercial paper issuer to a bank arising
d. That availments pursuant to the from the availment by the issuer of the
credit line agreement shall be for the credit line agreement shall not be counted
exclusive purpose of meeting obligations in determining compliance by the bank
arising from commercial paper issues in with the SBL: Provided, That in no case
accordance with the provisions of the Rules shall they exceed five percent (5%) of the
on Registration of Commercial Papers, net worth of the bank beyond the normal
which availments shall be honored not applicable SBL for a period of 180 days
earlier than three (3) banking days prior to from each availment of the credit line.

§§ X349 - X361.1
11.12.31
Sec. X349 Agriculture and Fisheries be the grace period and not the original
Projects with Long Gestation Periods maturity of the loan.
Pursuant to Section 24 of R.A. No. 8435
(Agriculture and Fisheries Modernization § X349.5 Non-performing loans. The
Act of 1997), agriculture and fisheries rule on non-performing loans under Sec.
projects with long gestation periods shall X309 shall apply except that the reckoning
be entitled to longer grace periods in date shall be the grace period and not the
repaying the loan based on the economic original maturity of the loan.
life of the project. For purposes of this
Section, the following definitions and Secs. X350 - X360 (Reserved)
guidelines shall govern the grant of loans
for long-gestating agriculture and fisheries Sec. X361 Microfinance Loans. Pursuant to
projects. Sections 40, 43 and 44 of R.A. No. 8791
the following rules, regulations and
§ X349.1 Definition of terms standards shall govern microfinancing
a. Gestation period shall refer to the operations of banks.
span of time from the commencement of In the implementation of this Section,
the project to the time that it is banks should be guided by the Notes on
economically productive and producing Microfinance in Appendix 45.
revenues; and (As amended by Circular Nos. 744 dated 28 December 2011,
b. Grace period under this Section 694 dated 14 October 2010 and 607 dated 30 April 2008)
shall refer to the period that the initial
§ X361.1 Definition
amortization payment on the loan is
a. Microfinance loans are small loans
deferred. All payments, however, must be
granted to the basic sectors, as defined in
made on or before the maturity of the loan.
the Social Reform and Poverty Alleviation
Act of 1997 (R.A. No. 8425), and other loans
§ X349.2 Grace period. Banks are
granted to the poor and low-income
allowed to extend loans/guarantees with a
households for their microenterprises and
grace period of up to seven (7) years to
small businesses so as to enable them to
viable long-gestating agriculture and
raise their income levels and improve their
fisheries projects.
living standards. These loans also include
Suggested gestation and grace periods
the Housing Microfinance Product offered
for some of the long-gestating projects are
by banks accredited by the Housing and
in Appendix 36.
Urban Development Coordinating Council
(HUDCC) and the Micro-Agri Loan Product
§ X349.3 Responsibility of lending
of the Rural Bankers Association of the
banks. Lending banks shall institute the
Philippines-Microenterprise Access to
necessary safeguards and precautions to
Banking Services. Sub-accounts shall be
ascertain the viability of the projects financed
provided for lending to Housing
and the capability of the borrower in
Microfinance Product, Micro-Agri and
fulfilling his commitments.
Barangay Micro Business Enterprises.
b. Past Due/Portfolio-at-Risk (PAR) is
§ X349.4 Past due loans. The rule on the outstanding principal amount of all loans
past due accounts under Sec.X306 shall that have at least one (1) installment past
apply except that the reckoning date shall due for one (1) or more days. The amount

§§ X361.1 - X361.4
10.12.31
includes the unpaid principal balance but microenterprise under R.A. No. 8425.
excludes accrued interest. Under PAR, loans b. The schedule of loan amortization
are considered past due if a payment has shall take into consideration the projected
fallen due and remained unpaid. Loan cash flow of the borrowers which is
payments are applied first to any interest adopted into the terms and conditions
due, then to any installment of principal that formulated. Hence, microfinance loans may
is due but unpaid, beginning with the earliest be amortized on a daily, weekly, bi-monthly
installment. The number of days of lateness or monthly basis, depending on the cash
is based on the due date of the earliest loan flow conditions of the borrowers.
installment that has not been fully paid. c. Interest on such microfinancing
c. Restructured loans are loans that loans shall be reasonable and just as may
have been renegotiated or modified to either be determined by management to be
lengthen or postpone the original scheduled consistent with its credit policies.
installment payments or substantially alter The interest rate shall not be lower than the
the original terms of the loans. Any increase prevailing market rates to enable the lending
in the face amount of the debt resulting from institution to recover the financial and
accrued interest and accumulated charges operational costs incidental to this type of
which have been capitalized or made part microfinance lending.
of the principal of restructured loans shall d. Interest accrued and/or booked shall
be recorded in the unearned income/ be reversed and no accrual of interest shall
deferred credit account “Capitalized Interest be allowed after the microfinance loan has
and Other Charges - Restructured Loans”. become past due as defined in Subsec.
Upon receipt of payment, the realized X306.1.h.
portion shall be amortized/credited to
income. § X361.3 Credit information exemption
d. Refinanced loans are loans that have In cases of microfinancing loans which meet
been disbursed to enable repayment of prior the criteria in Subsec X361.2, a bank may
loans that would not have been paid in not require from its credit applicants, a
accordance with the original installment statement of assets and liabilities, and of
schedule. Loans granted within a week or their income and expenditures and such
less from the date an original loan with more information as may be prescribed by law
than thirty percent (30%) of the original or by rules and regulations of the Monetary
principal still outstanding had been paid in Board to enable the bank to properly
advance shall be considered as refinanced evaluate the credit application which
loans. Refinanced loans shall be classified includes the corresponding financial
and reported as restructured loans. statements submitted for taxation purposes
(Circular No. 272 dated 30 January 2001, as amended by Circular to the BIR, as prescribed under Section 40
Nos. 694 dated 14 October 2010, 607 dated 30 April 2008, and
of R.A. No. 8791.
409 dated 14 October 2003)
§ X361.2 Loan limit; amortization; § X361.4 Exemptions from rules on

interest unsecured loans. In view of the unique
a. The maximum principal amount of characteristics of microfinance loans, i.e.,
microfinance loans shall not exceed small unsecured and based on cash flow of
P150,000. This is equivalent to the borrowers, these loans may be exempted
maximum capitalization of a from rules and regulations which may be

§§ X361.4 - X361.5
11.12.31
issued by the Monetary Board with respect seen as a way to improve the living
to unsecured loans under Section 41 of the conditions of the enterprising poor and the
General Banking Law of 2000: Provided, low-income households which will
That the bank has: contribute to better health, productivity and
a. well-defined standards, credit quality of life.
policies and procedures for microfinance Housing as a shelter is a necessity. As a
loans which are in conformity with sector, it spurs economic activity and creates
microfinance international best practices; employment through the multiplier effects
b. specific measures to be undertaken generated in the downstream industries by
to ensure collection such as close the procurement of construction materials.
supervision of borrowers’ projects and It is therefore important to support this
operations; and sector.
c. Loan Portfolio and Other Risk Assets The following rules and regulations shall
Review System required under Sec. X302 govern the approval of banks’ housing
which would serve as: microfinance products:
(1) An adequate loan tracking system (1) Minimum criteria to determine
that allows daily monitoring of the status of banks’ capacity to offer housing
loan releases, collection and arrearages, any microfinance - The BSP will review the
restructuring or refinancing; and application based on the following basic
(2) A regular monitoring of past due principles:
loans and portfolio at risk. (a) To ensure that the banks have the
capacity and technical capability to offer
§ X361.5 Housing microfinance loan housing microfinance
The BSP adopts a holistic approach in (b) To ensure that the provision of
addressing social and economic objectives housing microfinance uphold adequate and
through microfinance. Microfinance has appropriate risk management system and
been confined to mean financing for procedures as well as the microfinance best
microenterprises or small livelihood methodologies and technologies.
activities. It has been proven, however, that Based on the above principles, the BSP
clients of microfinance also need a wide may approve the banks’ housing
range of financial services including housing microfinance product upon satisfaction of
finance. Further, it is typical that some the following requirements:
microfinance clients also use their access (a) The bank must have a track record
to credit for their homes. of at least two (2) years in implementing
Housing microfinance involves the sustainable microfinance programs,
application of microfinance principles and including acceptable portfolio-at-risk (PAR)
methodologies to the provision of housing levels as evaluated against prevailing BSP
finance and consists mainly of loans to standards.
existing clients of microfinance institutions (b) The bank must have an appropriate
and other poor and low-income households. housing microfinance product manual
With adequate and appropriate risk where the product will be included in the
management measures, the product will bank’s microfinance manual as one of the
enable institutions to appropriately service types of services or products offered to
the housing needs of those who are unable prospective clients. Loan/account officers
to access traditional housing finance. The must be trained about the housing
provision of housing microfinance is also microfinance product and that the details

§ X361.5
11.12.31
of the program can be communicated clearly Subject Particulars

to the clients. Payment ·Frequent amortization
(c) Appropriate verification of the ·With savings component
following: ·Loan payments should not
(i) latest CAMELS rating of at least “3“ exceed a reasonable percentage of
and a management score of at least “3”; clients income as determined by
(ii) CAR of not lower than 12%; cash flow analysis and capacity to
(iii) no major supervisory concerns pay as well determined through a
as to warrant initiation of Prompt clear credit process
Corrective Action (PCA) under existing Terms ·Up to fifteen (15) years for
regulations; house construction and house
(iv) no arrearages in microfinance and/or lot acquisition subject to
borrowings, banks’ credit policies
d) Appropriate certification of the ·Up to 5 years for home
banks’ commitment to implement the improvement/repairs
housing microfinance product following the The product must share the
guidelines set forth in the submitted manual. characteristics of the microfinance loan as
(2) Basic product characteristics. The describe under this Section and Appendix
housing microfinance product shall have the 45 except for the following:
following basic characteristics: (a) The maximum loan amount may be
Subject Particulars P300,000.
Purpose ·House construction (b) The loans have longer terms with a
·House and/or lot acquisition maximum of five (5) years for home
·Lot acquisition should be for improvement/repairs and fifteen (15) years
housing/business for house construction and house/lot
Home improvement/repairs acquisition.
Eligibility ·Existing microfinance clients (c) For house construction and house/
·New clients who will normally lot acquisition loans, secure tenure
be eligible for microfinance instruments will be used as collateral. (See
loans based on banks’ policies Appendix 81)
-Borrowers who have qualified (3) Appropriate risk management. Due
for the Credit Surety Fund credit to a risk profile that may be different from
enhancement program provided the typical microfinance loan, the following
they qualify with the banks policies risk management elements must be
Loan Amount ·Up to P300,000 for house highlighted and embedded in the product:
construction and/or lot acquisition (a) Opening of a savings account shall
(must show tenure security) be required for clients with no existing
·Up to P150,000 for home savings account;
improvement/repairs (b) Secure tenure instruments as
-incremental loan amounts to collateral/collateral substitutes for loans over
support incremental building P150,000;
Loan Value ·Up to ninety percent (90%) of (c) Adequate loan monitoring,
the appraised value in case of REM collection, control, provisioning which is
·Acceptable valuation in cases of also to be included in the banks’ housing
usufruct, leases, etc. microfinance manual;
·Capacity to pay based on household (d) Additional risk cover may be availed
cash flow analysis from government guarantee program;

§§ X361.5 - X361.7
11.12.31
(e) A lien or mortgage covering the control ledger for the housing microfinance
house and/or lot financed by the loan shall product
be executed by the borrower in favor of the (2) The housing microfinance loans
lending bank; and shall not exceed thirty percent (30%) of the
(f) Mortgage redemption insurance shall total loan portfolio
be required to cover against death or (3) Recording of PAR and the
permanent disability. provisioning requirements shall be strictly
(4) Application procedure in accordance with applicable BSP
(a) The bank shall apply for specific regulations.
product approval of its housing (Circular No. 736 dated 20 July 2011, M-2008-015 dated 19
microfinance lending program with the BSP. March 2008, as amended by Circular No. 678 dated 06 January
(b) The bank may submit a housing 2010)
microfinance lending program as a
participant in a broader housing § X361.6 (Reserved)
microfinance lending program based on a
common business model and organized by § X361.7 Micro-agri loans
a group of banks or industry association. Statement of policy. The BSP adopts a
c. Regulatory treatment. holistic approach in addressing social and
The following are the incentives for economic objectives through microfinance.
housing microfinance loans in addition to Microfinance utilizes an innovative
existing incentives available for technology and methodology that has
microfinance: proven successful in providing the
(1) Housing microfinance loans shall appropriate financing for microentrepreneurs
be eligible as alternative compliance to the who were previously underserved by the
mandatory credit allocation to agrarian formal financial system. Through the years,
reform and other agricultural credit. These it has been evident that the microfinance
are also eligible for rediscounting with the technology and methodology can be
BSP subject to existing rules and regulations appropriately utilized to deliver other types
governing rediscounting. of financial services in a sound, prudent and
(2) The loans shall have an assigned sustainable manner, including credit for
risk-weight of fifty percent (50%) when not small farming activities.
guaranteed and zero percent (0%) when a. Minimum criteria to determine banks’
guaranteed by the HGC. capacity to offer micro-agri loans. The BSP
(3) For housing microfinance loans will review the application based on the
secured by REM, a ninety percent (90%) following basic principles:
loan valuation may be allowed for loans 1. To ensure that the banks have the
with a government guarantee component. capacity and technical capability to offer
(e) Secure tenure instruments such as micro-agri loans
freehold, usufruct, leasehold and right to 2. To ensure that the provision of
occupy and/or build shall be recognized as micro-agri loans uphold adequate and
collateral/collateral substitute subject to appropriate risk management systems and
approved loan valuations (Appendix 81). procedures as well as the microfinance
Banks that will offer housing best methodologies and technologies.
microfinance shall also comply with the Based on the above principles, the BSP
following: may consider the banks’ micro-agri loans
(1) The bank must maintain a sub- as microfinance loans upon satisfaction of

§§ X361.7 - 2361.8
11.12.31
the following requirements: c. Appropriate risk management. Micro-

1. The bank must have a track record agri loans shall be subject to the same risk
of at least two (2) years in implementing management mechanisms required for
sustainable microfinance programs, microfinance loans including, but not
including acceptable portfolio-at-risk (PAR) limited to the following:
levels as evaluated against prevailing BSP 1. Clients’ ability to repay based on cash
standards. flow analysis and affordability especially the
2. The bank must have an appropriate new clients. The prospective client must have
micro-agri loan product manual to be other sources of income sufficient for the
included in the bank’s microfinance manual periodic payment of the loan while the loan
as one (1) of the types of services or project is not yet generating income, evaluated
products offered to prospective clients. through household cash flow analysis;
Loan/account officers must be trained about 2. Adequate loan monitoring,
the micro-agri loan product and that the collection, control, provisioning consistent
details of the program can be with existing BSP regulations;
communicated clearly to the clients. 3. The loan product is included in the
b. Basic product characteristics. The banks’ microfinance manual as one (1) of
micro-agri loan product shall have the the types of services or products offered to
criteria/characteristics of a microfinance prospective clients; and
loan as provided in existing regulations in 4. The micro-agri loans must have a sub-
addition to the following product control ledger.
characteristics: d. Regulatory treatment. The approved
Subject Particulars micro-agri loan product will be considered
Purpose/Term · Short term purposes only (up to as a microfinance loan and have the same
12 months) whether it is for farm regulatory treatment as provided by existing
activities, agri-business, agri-related microfinance regulations.
fixed assets, among others (Circular No. 680 dated 03 February 2010)
Eligibility - Multiple income generation
activities (farm and off-farm) § X361.8 (Reserved)
- Farm activities at least 2 years
in operation § 1361.8 (Reserved)
· Existing borrowers with good
track record based on banks’ § 2361.8 Marketing, sale and servicing
policies of microinsurance products by thrift
Loan Amount · Up to P150,000 banks. In order to better serve microfinance
- Loan to start small and increase clients pursuant to the financial inclusion
incrementally based on banks’ thrust of National Strategy and Regulatory
policies Framework for Microinsurance, a TB,
Loan Value · Capacity to pay based on including its authorized branch/es,
household cash flow analysis extension office/s and other banking offices
Payment · Frequent amortization (OBOs), can present, market and sell
(weekly, semi-monthly, monthly) microinsurance products as defined under
- Lump sum payment may be the Insurance Commission’s Memorandum
considered an option of up to 40% Circular (IMC) No. 1-20101, provided that
of loan amount the microinsurance product is duly approved
Security · Like microfinance loans, collateral by the Insurance Commission.
substitutes may be required The presentation, marketing and sale of
microinsurance products by TBs has been
1
Dated 29 January 2010

§§ 2361.8
11.12.31
determined to be a necessary and A bank, prior to selling and/or marketing

complementary component of the primary microinsurance products, shall submit the
business of TBs considering the relationship following documents to the BSP as bases
of the latter with their microfinance for the latter’s evaluation:
clients. For this purpose, the Monetary 1. Copy of the approval of the bank’s
Board has defined that for TBs, board of directors on the presentation, sale
microinsurance products as defined under and servicing (i.e. collect premiums and
IMC No. 9-20061 and 1-20102 shall serve pay claims) of microinsurance products;
as a “financial product of an allied 2. Copy of duly executed written
undertaking” under Section 20 of the agreement between the bank and the
General Banking Law. insurance provider on the presentation,
A TB can also service (i.e., collect sale and servicing by the bank of the
premiums and pay claims) microinsurance financial products of the latter, including
products as collection and payment agents the terms of compensation for the services;
pursuant to Section 53.3 of the General 3. Copy of the letter of approval from
Banking Law. the Insurance Commission covering each
A TB which intends to avail of the of the microinsurance product to be
option to market or sell microinsurance marketed or sold by the bank;
products shall ensure that microinsurance 4. Copy of the corresponding Certificate
products presented and marketed are clearly of Authority from the Insurance
distinguishable from bank products. Commission of the insurance provider/s
Towards this end, all organic documents, issuing the microinsurance products to be
informational and promotional materials marketed or sold;
used in the presentation and sale of these 5. Bank’s license from the Insurance
products shall prominently display both the Commission as a microinsurance agent or
name of the issuing insurance provider and broker, as may be applicable3.
a clause stating that the insurance product/ 6. Certification from the bank president
s of (name of issuing insurance provider) that he/she ascertained and will ensure
is/are not insured by the PDIC and is/are continuing compliance with the following:
not guaranteed by the (name of bank). The a. The product is authorized for cross selling
bank shall also ensure compliance with under existing BSP rules and regulations;
pertinent laws and rules on the sale of b. The microinsurance product is approved
microinsurance products set by the by the Insurance Commission and issued by an
Insurance Commission. As part of product entity duly licensed and held in good standing
due diligence, the bank should check by the Insurance Commission;
whether the microinsurance product- c. The bank conducted product due
issuing insurance provider has a diligence to be suitable to its customers;
functioning customer care and claims- d. The organic, informational and
handling mechanism to handle consumer promotional materials for the
protection issues. microinsurance products comply with BSP
requirements; and
1
Dated 25 October 2006
2
Dated 29 January 2010
3
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)

§§ 2361.8 - X365.2
11.12.31
e. The bank personnel concerned has Section 84 of R.A. No. 7653;

undertaken the necessary training and passed b. Prohibition of the bank concerned
the qualifying examination for the presentation from the extension of additional
and sale of microinsurance products, in microfinance loans; and
compliance with the requirements set forth by c. Penalties and sanctions provided under
the Insurance Commission on marketing Sections 36 and 37 of R.A. No. 7653.
personnel for insurance products.
7. A letter of undertaking from the bank Secs. X362 - X364 (Reserved)
president that he/she will ensure the
retention of the following: Sec. X365 Loans to Barangay Micro
a. Copies of the latest Certificate of Business Enterprises. The following are the
Authority from the Insurance Commission rules and regulations to implement Section
covering all insurance companies whose 9 and the second paragraph of Section 13
microinsurance products are being marketed of R.A. No. 9178, otherwise known as the
or sold by the bank; “Barangay Micro Business Enterprises
b. Copies of the letters of approval from the (BMBEs) Act of 2002”.
Insurance Commission covering all the
microinsurance products to be marketed or sold; § X365.1 Credit delivery. The LBP,
c. Bank’s license from the Insurance the DBP, the SBGFC, and the Peoples Credit
Commission as a microinsurance agent or and Finance Corporation (PCFC) shall set up
broker or in lieu of a bank’s license as a a special credit window that will service the
microinsurance agent or broker, copies of financing needs of duly registered BMBEs
the license from the Insurance Commission consistent with BSP policies, rules and
covering all its marketing personnel for regulations. Said special credit window shall
microinsurance products; and service the credit needs of BMBEs either
8. Such other information that may be through retail or wholesale lending, or both,
required by the Bangko Sentral. as the concerned FIs may deem consistent
(Circular No. 683 dated 23 February 2010, M-2011-015 dated with their corporate policies and objectives.
18 March 2011) The GSIS and the SSS shall likewise set up
special credit window that will serve the
§ 3361.8 Marketing, sale and servicing
financing needs of their respective members
of microinsurance products by rural and
who may wish to establish a BMBE.
cooperative banks
Said FIs are encouraged to wholesale
An RB/Coop banks including its
funds to accredited private FIs including
authorized branch/es, extension office/s and
community based organizations such as
OBOs shall comply with Subsec. 2361.8 for
cooperatives, NGOs and people’s
the presentation, marketing and sale of
organizations engaged in granting credit, for
micro insurance products.
(Circular No. 683 dated 23 February 2010) relending to BMBEs.
Private banking and other FIs are
§ X361.9 (Reserved) encouraged to lend to BMBEs.
§ X361.10 Sanctions. Violations of the § X365.2 Interest on loans to Barangay

provisions of this Section shall be subject Micro Business Enterprises. Interest on
to any or all of the following sanctions: BMBE loans shall be just and reasonable as
a. Disqualification of the bank may be determined by management of the
concerned from the credit facilities of the concerned entity to be consistent with its
BSP except as may be allowed under credit policies.

§§ X365.3 - X365.8
11.12.31
§ X365.3 Amortization of loans to of the government-owned banks and the

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

§§ X365.8 - X376.5
09.12.31
implementation of the provisions of e. It has exceeded the individual and

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

§§ X376.5 - X377
09.12.31
or contingency plan in case the investee’s supervision.

operations fail or do not prosper. d. Examination and inspection.
c. Prior BSP approval; information/ Whenever deemed necessary, BSP shall
documents required. Subject to prior have the authority to examine investee
approval of the BSP, banks may invest in companies or to verify information
allied or non-allied undertakings, provided by other supervisory authorities
including corporate affiliations or such as the SEC.
structures. A bank intending to make such The BSP shall have the authority to
investment shall submit the following seek corrective action, to issue orders to
information/documents to the appropriate terminate activities with or divest an
department of the SES for evaluation: interest in an investee company, if it
(1) Name of the company; believes that such action is necessary to
(2) Type of business activities; prevent or redress unsafe or unsound
(3) Board of directors’ approval on practice by such company that poses a
such investments; material risk to the financial safety,
(4) Certification from the bank’s board soundness or stability of a bank.
of directors that the criteria enumerated (As amended by Circular No. 671 dated 27 November 2009)
in Item “b” are complied with;
(5) Management contract; Sec. X377 Financial Allied Undertakings
(6) Financial information and other With prior BSP approval, banks may
information about financial strengths, e.g., invest in equities of the following financial
projected balance sheet and income allied undertakings, subject to the limits
statements for the first three (3) years; prescribed under Sec. X378:
(7) Members of the board and senior a. Leasing companies including
management; leasing of stalls and spaces in a
(8) Interest to be held by the bank and commercial establishment: Provided,
the manner in which such interest will That bank investment in/acquisition of
be held; and shares of such leasing company shall be
(9) Conformity of the investee limited/applicable only in cases of
company for BSP to examine its books. conversion of outstanding loan
The BSP may impose conditions on obligations into equity;
any approval, including conditions to b. Banks;
address financial, managerial, safety and c. IHs;
soundness, compliance, or other d. Financing companies;
concerns. Further, the BSP may e. Credit card companies;
disapprove a proposed investment if it f. FIs catering to small and medium
finds that the proposal would constitute scale industries including venture capital
an unsafe and unsound practice, or would corporation (VCC), subject to the provisions
violate any law, regulation, Monetary of Sec. X379 and its subsections;
Board directive, or any condition imposed g. Companies engaged in stock
by, or written agreement with, the BSP. brokerage/securities dealership; and
The BSP may prescribe other h. Companies engaged in foreign
guidelines/regulations as it may consider exchange dealership/brokerage.
necessary to ensure that banks’ major In addition, UBs may invest in the
investments do not expose the banks to following as financial allied undertakings:
undue risks or hinder effective (1) Insurance companies; and
Manual of Regulations for Banks Part III - Page 66c

§§ X377 - X379
11.12.31
(2) Holding company: Provided, That To promote competitive conditions, the

the investments of such holding company Monetary Board may further limit the equity
are confined to the equities of allied investments in QBs of UBs and KBs to forty
undertakings and/or non-allied percent (40%).
undertakings of UBs allowed under BSP A publicly-listed UB or KB may own
regulations. up to 100% of the voting stock of only one
The Monetary Board may declare (1) other UB or KB. Otherwise, it shall be
such other activities as financial allied limited to a minority holding.
undertakings of banks. The existing investment of a bank in
The determination of whether the another bank under R.A. No. 7721 shall be
corporation is engaged in a financial governed by Sec. X105 insofar as it is
allied undertaking shall be based on its consistent with R.A. No. 8791.
primary purpose as stated in its articles The guidelines in determining
of incorporation and the volume of its compliance with ceilings on equity
principal business. investments in financial allied undertakings
are shown in Appendix 79.
(As amended by Circular Nos. 710 dated 19 January 2011, 671
Sec. X378 Limits on Investment in the dated 27 November 2009, 581 dated 14 September 2007 and
Equities of Financial Allied 530 dated 19 May 2006)
Undertakings. The equity investment of
a bank in a single financial allied Sec. X379 Investments in Venture Capital
undertaking shall be within the Corporations. The following rules and
following ratios in relation to the total regulations shall implement Presidential
subscribed capital stock and to the total Decree No. 1688 entitled “Authorizing
voting stock of the allied undertaking: Banks to Invest in the Equity of Venture
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
(Next Page is Part III- Page 67)
Part III - Page 66d Manual of Regulations for Banks

§§ 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 days after the date of payment. reserves and other capital adjustments, if
For purposes of this Subsection, re- any; and
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 BSP; (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 including the capital expenditures; and
duly authorized personnel/examiners of (3) Proposed organizational structures,
the BSP 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 BSP;
§ 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
BSP 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 - X385
09.12.31
by the BSP and the cost of such banking days from 20 December 2009:
examination shall be charged against the Provided, That said confirmation shall be
grandparent bank; and subject, among others, to the condition
i. Any additional funding or advances that such shares of stock shall be disposed
of the parent bank in the Philippines to its of within a reasonable period not to
subsidiaries abroad or the subsidiary will exceed five (5) years from the date of
require prior BSP approval. acquisition thereof.
(As amended by Circular Nos. 671 dated 27 November 2009
Sec. X383 Other Limitations and and 581 dated 14 September 2007)
Restrictions. The following limitations and
restrictions shall also apply regarding equity Sec. X384 (Reserved)
investments of banks.
a. In any single enterprise. The equity Sec. X385 Sanctions. The following
investments of UBs and KBs in any single sanctions shall be imposed for equity
enterprise shall not exceed at any time investments made without prior Monetary
twenty-five percent (25%) of the net worth Board approval:
of the investing banks as defined in Sec. a. First offense - If the investment
X111 and Subsec. X105.5. is not allowable under existing
b. A g g r e g a t e l i m i t s . T h e t o t a l regulations, divestment of the
amount of investments in equities in all investment and reprimand on officer/
enterprises shall not exceed the director who recommended/approved
following ratios in relation to the net the investment.
worth of the investing bank: b. Subsequent offense -
UB KB TB RB Coop Bank On the Bank. If the investment is not
allowable under existing regulations,
LIMIT: 50% 35% 25% 25% 25% divestment of the investment.
On the director/officer. Fine of P20,000
c. Exclusion of underwriting for each investment to be imposed on the
exposure from ceiling. The exposure of a members of the board and the executive
bank with UB authority arising from the officers who recommended/approved the
firm underwriting of equity securities of investment per investment and to be
enterprises shall not be counted in shouldered personally by the officer/
determining compliance with the ceilings director: Provided, That if the subsequent
prescribed in this Section and Subsec. offense is an investment in a non-allied
1381.2 for a period of two (2) years from enterprise, the fine shall be P40,000.
the acquisition of such equity securities.
d. The guidelines in determining I. (RESERVED)
compliance with the other limitations and
restrictions on equity investments of Secs. X386 - X387 (Reserved)
banks are shown in Appendix 79.
Banks with acquired shares of stock J . OTHER OPERATIONS
in excess of limits provided in this Section
which have not been previously confirmed Sec. X388 Purchase of Receivables and
by the Monetary Board shall seek Other Obligations. The following
confirmation of the Monetary Board of regulations shall govern the purchase of
such acquisition not later than ninety (90) receivables and other obligations.

§§ X388.1 - X388.3
08.12.31
§ X388.1 Yield on purchase of recourse basis shall be subject to the SBL

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

§§ X388.3 - X388.5
11.12.31
b. Ascertain that the registration number obligations the servicing and repayment of
and expiry date indicated in the commercial which are guaranteed by the Republic of the
paper are the same as those in the certificate Philippines.
of registration submitted. b. The classification, accounting
Any violation or failure to comply with procedures, valuation and sales and
the provisions of this Subsection shall subject transfers of investments in all debt securities
the erring bank to suspension or revocation and marketable equity securities shall be in
of its authority to engage in quasi-banking accordance with the guidelines in
functions. Appendices 33 and 33a.
Penalties and sanctions. The following
§ X388.4 Reverse repurchase penalties and sanctions shall be imposed on
agreements with Bangko Sentral. Reverse FIs and concerned officers found to violate
repo agreements with the BSP shall be the provisions of Item “b”:
governed by Subsec. X601.2. (1) Fines to be imposed on FIs for each
violation, reckoned from the date the
§ X388.5 Investment in debt and readily violation was committed up to the date it
marketable equity securities. The following was corrected:
rules and regulations shall govern investment (i) P20,000/day for UBs;
in debt securities and marketable equity (ii) P10,000/day for KBs;
securities. (iii) P2,000/day for TBs; and
a. Banks may invest in the following: (iv) P1,000/day for RBs/Coop Banks.
(1) Readily marketable bonds and other (2) Sanctions to be imposed on
debt securities which are of such use or concerned officers:
demand as to make them the subject of (i) First offense - reprimand the officers
constant dealings in securities markets, with responsible for the violation; and
such frequent quotations of price as to make (ii) Subsequent offenses - suspension of
the price easily and definitely ascertainable, ninety (90) days without pay for officers
and the security easy to realize upon sale at responsible for the violation.
any time: Provided, That the bonds and other Regular banking unit (RBU) of UBs/KBs
debt securities have complied with the new and TBs are prohibited from purchasing
rules on registration of commercial papers: Philippine debt papers representing debt
Provided, further, That in the case of RBs/ papers of Philippine public sector and
Coop Banks, the bonds and other securities private sector obligors which were
have been approved by the BSP. restructured during the period of moratorium
TBs may invest in evidences of in the payment of external debt. They may,
indebtedness which are registered with the however, invest in, or purchase, other
SEC but are not readily marketable securities: foreign currency denominated debt
Provided, That these evidences of instruments, subject to applicable rules and
indebtedness shall be acquired with recourse regulations, particularly on risk
against a bank or a QB. management: Provided, That the RBU of
It shall be the responsibility of the TBs may invest only in readily marketable
investing bank to undertake the necessary foreign currency denominated debt
investigation to satisfy itself with regard to instrument as defined under Sec. 72 of
the particular security. Part V.
(2) Evidences of indebtedness of the (As amended by Circular Nos. 738 dated 11 October 2011, 707
Republic of the Philippines or the BSP, and dated 07 January 2011, 670 dated 18 November 2009, 628
any other evidences of indebtedness or dated 31 October 2008, 626 dated 23 October 2008 and 585

§§ X388.5 - X393.3
11.12.31
dated 15 October 2007, M-2007-006 dated 28 February 2007; head offices and branches.
Circular Nos. 558 dated 22 January 2007, 546 dated17 November (As amended by Circular No. 613 dated 18 June 2008)
2006 and 509 dated 01 February 2006)
§ X393.1 Statement of policy. It is
Sec. X389 (Reserved) the policy of the BSP to promote healthy
competition within the banking system as
Sec. 1389 Guidelines on the Investment of well as provide enhanced banking statistics
Universal Banks and Commercial Banks in necessary for informed decision-making.
Credit-Linked Notes, Structured Products (As amended by Circular No. 613 dated 18 June 2008)
and Securities Overlying Securitization
Structures. In line with the policy of § X393.2 Regional loans-to-deposits
encouraging banks to diversify their ratio. An individual bank’s regional LDR is
investment portfolios and to foster the a measure of the extent of its lending activity
development of a market for new financial vis-à-vis deposits generated in a region. On
products, the BSP has issued guidelines on an aggregate basis, the regional LDR for the
the investment of UBs and KBs in (1) CLNs banking system is an indicator of the level
and similar products (Sec. 1628), (2) foreign of bank deposits which have been
currency denominated structured products transformed into investments in a region.
(Secs. 1635 and 1636) and (3) securities The latter may be used by banks as a
overlying securitization structures (Sec. benchmark in assessing their regional
1648). lending and deposit operations as against
No prior BSP approval is required to enter that of the industry and their peer group.
into authorized transactions. However, it (As amended by Circular No. 613 dated 18 June 2008)
shall be the responsibility of UBs/KBs to
fully comply with appropriate risk § X393.3 Computation of the
management standards including, as a regional loans-to-deposits ratio. The
minimum, those prescribed under relevant individual bank’s regional LDR shall be
Sections. The regulatory requirements computed by dividing a bank’s aggregate
enumerated in Appendix 66 shall be fully loans by its aggregate deposit liabilities on a
complied with by UBs/KBs investing in per region basis as of the same reporting cut-off
products allowed under Secs./Subsec. 1628, date. A bank, in computing its regional LDR,
1635 and X115.3. shall be guided by the following:
The guidelines on the accounting for a. Loans shall be reported by a bank in the
investments in CLNs and other SPs, in region where the loan proceeds were
addition to those prescribed under PAS 39, utilized or channeled to, i.e., location of the
is provided in Appendix 66a. end-users.
(As amended by Circular No. 708 dated 01 January 2011 and b. Deposits, on the other hand, shall be
M-2008-010 dated 07 March 2008) reported by a bank in the region wherein
these were generated.
Sec. 2389 - 3389 (Reserved) For purposes of this Section, loans
shall refer to the amortized cost of a bank’s
Secs. X390 - X392 (Reserved) total loan portfolio, excluding “Loans to BSP”,
“Interbank Loans Receivable” and loans
K. MISCELLANEOUS PROVISIONS granted by a bank’s FCDU/EFCDU.
Deposits, on the other hand, shall refer to a
Sec. X393 Loans-to-Deposits Ratio. The bank’s total deposit liabilities, excluding
following policies and guidelines shall FCDU/EFCDU deposits.
govern the loans-to-deposits ratio (LDR) of (As amended by Circular No. 613 dated 18 June 2008)

§ X394 - X394.2
08.12.31
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 BSP.
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
premises of their head office and each of (e.g., receivables from third party or equity
their branches and other banking offices a interest in an entity) based on their fair
list of acquired assets together with the values, which allocated carrying amounts
corresponding lowest price at which the shall become 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
a. ROPA in settlement of loans be accounted for using the cost model
through foreclosure or dation in payment under 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”.
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.

§§ X394.2 - X394.3
08.12.31
f. Claims arising from deficiency cost subject to depreciation and

judgments rendered in connection with the impairment testing, which shall be
foreclosure of mortgaged properties shall reckoned from the time of acquisition.
be lodged under the real account (As amended by Circular Nos. 555 dated 12 January 2007 and
“Deficiency Judgment Receivable”; while 520 dated 20 March 2006)
probable claims against the borrower
arising from the foreclosure of mortgaged § X394.3 Sales contract receivable
properties shall be lodged under the a. Sales Contract Receivable (SCR)
contingent account “Deficiency Claims shall be recorded based on the present
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 BSP. An in-house of sale in accordance with the provisions
appraisal of all ROPAs shall be made at of PAS 18 “Revenue”: Provided,
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 The provisions of this Subsection shall
value. be applied retroactively to all outstanding
h. Non-cash payment for interest. FIs ROPAs and SCRs: Provided: That for
that accept non-cash payments for interest properties acquired before 01 January
on their borrowers’ loans shall book the 2005, the carrying amount of the acquired
acquired assets as ROPA. The amount to properties when initially booked under
be booked as ROPA shall be the booked ROPA shall be the cost subject to
accrued interest less allowance for credit depreciation and impairment testing,
losses (computed based on PAS 39 which shall be reckoned from the time of
provisioning requirements): Provided, That acquisition.
if the carrying amount of ROPA exceeds b. SCRs which meet all the
P5.0 million, the appraisal of the foreclosed/ requirements/conditions enumerated
purchased asset shall be conducted by an below are hereby considered performing
independent appraiser acceptable to the assets and therefore, not subject to
BSP. The carrying amount of ROPA shall classification:
be allocated in accordance with Item “b” (1) That there has been a
and shall be subsequently accounted for downpayment of at least twenty percent
in accordance with Item “c” of this (20%) of the agreed selling price or in the
Subsection. absence thereof, the installment payments
The provisions of this Subsection shall on the principal had already amounted to
be applied retroactively to all outstanding at least twenty percent (20%) of the agreed
ROPAs and sales contract receivables: selling 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;

§§ X394.3 - X394.15
08.12.31
(3) That any grace period in the §§ X394.11 - X394.14 (Reserved)

payment 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 BSP to encourage banks to dispose
automatically classified “Substandard” and of their ROPAs in settlement of loans and
considered non-performing in case of other advances either through foreclosure
non-payment of any amortization due: or dacion en pago as well as other
Provided, further, That an SCR which has properties acquired as a consequence of a
been classified “Substandard” and considered merger/consolidation which are no longer
non-performing due to non-payment of any necessary for their banking operations.
amortization due may only be upgraded Towards this end, banks are hereby
restored to unclassified and/or performing 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-2008-014 dated 17 March 2008, M-2008-005 venture under the following forms:
dated 04 February 2008, M-2007-013 dated 11 May 2007 and (1) A jointly-controlled operation/
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

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

§§ X395 - 1397
11.12.31
under Priority II of said schedule to fifty employees for the same purpose which are
percent (50%) of their outstanding loans at covered by bank’s fringe benefit plan and
any time. which plan was approved by the Monetary
Board; and
Sec. X396 Parcellary Plans on Crop Loans (2) l a n d developers/construction
Banks shall require the submission of companies and other borrowers for the
parcellary plans a requisite for granting crop acquisition and development of land
loans to sugarcane planters. and/or construction of buildings and
structures, including housing units for
Sec. X397 (Reserved) sale/lease and/or for use in retail/wholesale,
manufacturing or other income-generating
Sec. 1397 Limits on Real Estate Loans of purposes, including loans for the land
UBs/KBs. Total real estate loans of UB/KBs, development and construction of residential
excluding: properties.
a. L o a n s e x t e n d e d t o i n d i v i d u a l It shall not include loans for
households for purposes of financing the construction of highways, streets, bridges,
acquisition, construction, and/or tunnels, railways, and other infrastructure
improvement of housing units and for public use.
acquisition of any associated land that is or Purchase by banks of receivables under
will be occupied by the borrower, Contract to Sell (CTS) executed between the
regardless of amount; real estate developers and home buyers on
b. Loans extended to land developers/ a with recourse basis shall be considered
construction companies for the purpose of loans to real estate developers and shall be
development and/or construction of classified as commercial real estate loans.
socialized and low-cost residential Trust departments of UBs/KBs shall be
properties as defined under existing exempted from the prescribed limit on real
guidelines of the HUDCC for the estate loans.
implementation of government housing Under existing HUDCC guidelines,
programs, which are intended for sale to socialized and low-cost housing loans are
individual households; defined as follows:
c. Loans to the extent guaranteed by the Housing Loan Ceiling
HGC; and Package
d. Loans to the extent collateralized by
non-risk assets under existing regulations Low-cost
shall not exceed twenty percent (20%) of Level 1-A P400,000 and below
the total loan portfolio, net of interbank (Socialized)
loans. Level 1-B Above P400,000
For this purpose, real estate loans shall to P500,000
refer to loans granted to: Level 2 Above P500,000
(1) i n d i v i d u a l h o u s e h o l d s f o r t h e to P1,250,000
acquisition, construction and/or
improvement of housing units and Level 3 Above P1,250,000 to
acquisition of any associated land that is or P3,000,000
will be occupied by the borrower, including (As amended by M-2011-035 dated 23 June 2011, Circular
loans granted to bank officers and No. 600 dated 04 February 2008)

§§ 2397 - X399
08.12.31
Sec. 2397 (Reserved) L. GENERAL PROVISION

ON SANCTIONS
Sec. 3397 (Reserved)
Sec. X399 General Provision on
Sec. X398 Debt Service Limit on Local Sanctions. Any violation of the provisions
Government Borrowings. To ensure the of this Part shall be subject to Sections 36
effective implementation of the debt and 37 of R.A. No. 7653.
service limit on local government The guidelines for the imposition of
borrowings as stipulated in Section 324 (b) monetary penalty for violations/offenses
of the Local Government Code of 1991, with sanctions falling under Section 37 of
all banks shall require each borrowing LGU R. A. No. 7653 on banks, their directors
to present a certificate of its debt service and/or officers are shown in Appendix 67.
and borrowing capacity, duly certified by
the Bureau of Local Government Finance –
Department of Finance (BLGF-DOF).

§§ X401 - X402
11.12.31
PART FOUR
TRUST, OTHER FIDUCIARY BUSINESS AND INVESTMENT

MANAGEMENT ACTIVITIES
Section X401 Statement of Principles government entities: Provided, however, That

The cardinal principle common to all trust government-owned banks may receive or hold
and other fiduciary relationships is fidelity. as trustee, agent, administrator, financial
Policies predicated upon this principle are manager, or other similar capacity, the
directed towards confidentiality, scrupulous following:
care, safety and prudent management of a. Funds of local government units
property including reasonable probability (LGUs) which are expected to be available for
of income with proper accounting and investment purposes for a relatively long period
appropriate reporting thereon. Practices are of time: Provided, further, That the amounts
designed in accordance with the basic held in trust or otherwise managed/ advised
standards for trust, other fiduciary and for and in behalf of the LGUs shall be invested
investment management accounts in only in government securities, specifically,
Appendix 83 to promote efficiency in evidences of indebtedness of the National
administration and operation; to adhere and Government, the BSP and other evidences of
conform to the terms of the instrument or indebtedness or obligations of government
contract; and to maintain absolute entities, the servicing and repayment of which
separation of property free from any are fully guaranteed by the National
intrusion of conflict of interest. Government; and
A bank authorized to engage in trust b. Funds of government and government
and fiduciary business is under no entities which are authorized by special laws
obligation, either legal or moral, to accept to be placed in trust.
any such business being offered nor has it (As amended by Circular Nos. 721 dated 13 May 2011 and 618
the right to accept if the same is contrary to dated 20 August 2008)
law, rules, regulations, public order and
public policy. It shall advertise its services Sec. X402 Scope of Regulations. These
in a dignified manner and enter such regulations shall govern the grant of authority
business only when demand for such to and the management, administration and
service is evident, when specially conduct of trust, other fiduciary business and
equipped to render such service and upon investment management activities (as these
full appreciation of the responsibilities terms are defined in Sec. X403) of banks.
involved. It shall be ready and willing to The regulations are divided into three (3)
give full disclosure of the services being Sub-Parts where:
offered and shall conduct its dealing with A. Trust and Other Fiduciary Business
transparency. Harmonious relationship shall apply to banks authorized to engage in
shall likewise be pursued with other trust and other fiduciary business including
professions to achieve the common goal investment management activities;
of mutual service to the public and B. Investment Management Activities
protection of its interest. shall apply to banks without trust authority but
Banks may not receive or hold as with authority to engage in investment
trustee, agent, administrator, financial management activities; and
manager, or other similar capacity, any C. General Provisions shall apply to
fund or money from the Government and both.
Manual of Regulations for Banks Part IV - Page 1

§ X403
08.12.31
Sec. X403 Definitions. For purposes of d. Trust is a relationship or an

regulating the operations of trust and other arrangement whereby a person called a
fiduciary business and investment trustee is appointed by a person called a
management activities, unless the context trustor to administer, hold and manage
clearly connotes otherwise, the following funds and/or property of the trust or for the
shall have the meaning indicated. benefit of a beneficiary.
a. Trust business shall refer to any e. Trust agreement is an instrument
activity resulting from a trustor-trustee in writing covering the terms and conditions
relationship (trusteeship) involving the of the trust.
appointment of a trustee by a trustor for the f. Trustee is any person who holds legal
administration, holding, management title to the funds and/or property of a trust.
of funds and/or properties of the trustor by g. Trustor is any person who creates
the trustee for the use, benefit or advantage a trust.
of the trustor or of others called h. Beneficiary is any person for
beneficiaries. whose benefit a trust is created.
b. Other fiduciary business shall refer i. Fiduciary shall refer to any person
to any activity of a trust-licensed bank or entity engaged in any of the other
resulting from a contract or agreement fiduciary business as herein defined where
whereby the bank binds itself to render no trustor-trustee relation exists.
services or to act in a representative j. Agency shall refer to a contract
capacity such as in an agency, guardianship, whereby a person binds himself to render
administratorship of wills, properties and some service or to do something in
estates, executorship, receivership, and representation or on behalf of another, with
other similar services which do not create the consent or authority of the latter.
or result in a trusteeship. It shall exclude k. Principal shall refer to the person
collecting or paying agency arrangements who grants authority to another person
and similar fiduciary services which are called an agent, under a contract to enter
inherent in the use of the facilities of the into transactions in his behalf.
other operating departments of said bank. l. Agent shall refer to a person who
Investment management activities, which acts in representation or on behalf of
are considered as among other fiduciary another with the latter’s authority.
business, shall be separately defined in the m. Trust department shall refer to then
succeeding item to highlight its being a major department, office, unit, group, division or
source of fiduciary business. any aggrupation which carries out the trust
c. Investment management activity and other fiduciary business of a bank.
shall refer to any activity resulting from a n. Trust officer shall refer to the
contract or agreement primarily for designated head or officer-in-charge of the
financial return whereby the bank (the trust department.
investment manager) binds itself to handle o. Trust account shall refer to an
or manage investible funds or any account where transactions arising from a
investment portfolio in a representative trusteeship are kept and recorded.
capacity as financial or managing agent, p. Common trust fund (CTF) shall
adviser, consultant or administrator of refer to a fund maintained by a bank
financial or investment management, authorized to perform trust functions under
advisory, consultancy or any similar a written and formally established plan,
arrangement which does not create or exclusively for the collective investment
result in a trusteeship. and reinvestment of certain money
Part IV - Page 2 Manual of Regulations for Banks

§§ X403 - X404.2
09.12.31
representing participation in the plan or turnover of any trust and other fiduciary
received by it in its capacity as the trustee. and/or investment management account
q. Fiduciary account shall refer to an (IMA) to duly incorporated and licensed
account where transactions arising from any entities of the choice of the trustor,
of the other fiduciary businesses are kept beneficiary or client, as the case may be.
and recorded. No bank shall advertise or represent
r. Investment Manager shall refer to itself as being engaged in trust and other
any person or entity engaged in investment fiduciary business or in investment
management activities as herein defined. management activities or represent itself as
s. Investment Management Department trustee or investment manager or use words
shall refer to the department, unit, group, of similar import; and/or use in connection
division or any aggrupation which carries with its business title the words trust, trust
out the investment management activities corporation, trust company, trust plan or
of a bank that does not have an authority to words of similar import, without having
engage in trust and other fiduciary business. obtained the required authority to do so.
t. Investment Management Officer
shall refer to the designated head or officer- § X404.1 Application for authority to
in-charge of the investment management perform trust and other fiduciary business
department of a bank which does not have Banks desiring to perform trust and other
the authority to engage in trust and other fiduciary business shall file an application
fiduciary business. with the appropriate supervising and
u. Investment management account examining department. The application shall
shall refer to an account where transactions be signed by the bank’s president or officer
arising from investment management of equivalent rank and shall be accompanied
activities are kept and recorded. 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 conditions/prerequisites for the grant of
may engage in trust and other fiduciary authority to perform trust and other fiduciary
business under Chapter VII of R.A. No. 337, business.
as 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 required under Sec. X105 or such amount
action as it may deem proper such as, but as may be required by the Monetary Board
may not be limited to, requiring the transfer in the future.

§§ X404.2 - X404.3
09.12.31
TBs. P650.0 million or such amounts as e. The bank is well capitalized whose
may be required by the Monetary Board in risk-based capital adequacy ratio is not
the future. lower than twelve percent (12%) at the time
Banks authorized to perform and are of filing the application;
actually performing trust and other f. It has not incurred net weekly
fiduciary business prior to 20 August 2002 reserve deficiencies during the eight (8)-
whose capital accounts are lower than the week period immediately preceding the date
above-prescribed minimum capital of application;
accounts shall, before declaring any g. It has generally complied with
dividend, carry to surplus at least fifty banking laws, rules and regulations, orders
percent (50%) of their net income from all or instructions of the Monetary Board and/or
operations since the last preceding BSP Management in the last two (2)
dividend until such time that their capital preceding examinations prior to the date of
accounts meet the above requirement. application, particularly on the following:
(1) election of at least two (2)
§ X404.3 Prerequisites for engaging in independent directors;
trust and other fiduciary business. Before (2) attendance by every member of the
it may engage in trust and other fiduciary board of directors in a special seminar for
business, a bank shall comply with the board of directors conducted or accredited
following requirements: by the BSP;
a. The applicant has been duly licensed (3) the ceilings on credit
or incorporated as a bank or created as such accommodations to DOSRI;
by special law or charter; (4) liquidity floor requirements for
b. The articles of incorporation or government deposits;
governing charter of the institution shall (5) single borrower’s limit; and
include among its powers or purposes, (6) investment in bank premises and
acting as trustee or administering any trust other fixed assets;
or holding property in trust or on deposit h. It maintains adequate provisions for
for the use, or in behalf of others; probable losses commensurate to the quality
c. The by-laws of the institution shall of its asset portfolio but not lower than the
include among other things, provisions on required valuation reserves as determined
the following; by the BSP;
(1) The organization plan or structure i. It does not have float items
of the department, office or unit which shall outstanding for more than sixty (60) calendar
conduct the trust and other fiduciary days in the “Due From/To Head Office/
business of the institution; Branches/Other Offices” accounts and the
(2) The creation of a trust committee, the “Due from Bangko Sentral” account
appointment of a trust officer and subordinate exceeding one percent (1%) of the total
officers of the trust department; and resources as of date of application;
(3) A clear definition of the duties and j. It has no past due obligations with
responsibilities as well as the line and staff the BSP or with any government financial
functional relationships of the various units, institution;
officers and staff within the organization; k. It has established a risk management
d. The bank’s operation during the system appropriate to its operations
preceding calendar year and for the period characterized by clear delineation of
immediately preceding the date of responsibility for risk management, adequate
application has been profitable; risk measurement systems, appropriately

§§ X404.3 - 2404
09.12.31
structured risk limits, effective internal to engage in limited trust business shall be
controls and complete, timely and efficient granted to qualified TBs which meet the
risk reporting system; minimum capital required for the grant of
l. It has a CAMELS composite rating such authority, among others.
of at least “3” in the last regular examination b. Scope of limited trust business
with management rating of not lower than Limited trust business shall be confined to:
“3”; and (1) court trusts or trusts under orders of
m. It has neither unpaid assessment court of competent jurisdiction, such as
due nor past due obligations with the PDIC. acting as:
Compliance with the foregoing as well (a) executor or administrator of a will;
as with other requirements under existing and
regulations shall be maintained up to the (b) guardian of the estate of a minor or
time the trust license is granted. A bank that incompetent; and
fails in this respect shall be required to show (2) administration of properties.
compliance for another test period of the c. Application for authority to engage
same duration. in limited trust business. A TB desiring to
(As amended by Circular No. 674 dated 10 December 2009) engage in a limited trust business shall file
an application with the Centralized
§ X404.4 Pre-operating requirements Application and Licensing Group (CALG)
A bank authorized to engage in trust and of the SES. The application shall be signed
other fiduciary business shall, before by the bank president or officer of equivalent
engaging in actual operations, submit to the rank and shall be accompanied by the
BSP the following: following documents:
a. Government securities acceptable to (1) Certified true copy of the resolution
the BSP amounting to P500,000 as minimum of the bank’s board of directors authorizing
basic security deposit for the faithful the application; and
performance of trust and other fiduciary duties (2) Certification signed by the bank
required under Subsec. X405.1; president or officer of equivalent rank that the
b. Organization chart of the trust bank has complied with all the conditions/
department which shall carry out the trust and pre-requisites for the grant of authority to
other fiduciary business of the bank; and engage in a limited trust business.
c. Names and positions of individuals d. Required capital. A TB applying for
designated as chairman and members of the authority to engage in limited trust business
trust committee, trust officer and other must have minimum capital accounts under
subordinate officers of the trust department existing regulations or P100.0 million,
with their respective bio-data and statement whichever is higher, or such amounts as may
of duties and responsibilities. be required by the Monetary Board in the
future.
Sec. 1404 (Reserved) e. Pre-requisites for the grant of
authority to engage in limited trust business.
Sec. 2404 Grant of Authority to Engage in A TB applying for authority to engage in
Limited Trust Business to Thrift Banks limited trust business must comply with the
a. Statement of policy. It is hereby following requirements:
declared the policy of the BSP to promote (1) The bank’s operation during the
healthy competition in order to improve the preceding calendar year and for the period
delivery of banking services especially in immediately preceding the date of
the countryside. Towards this end, authority application has been profitable;

§ 2404
09.12.31
(2) The bank is well capitalized whose controls and complete, timely and efficient
risk-based CAR is not lower than twelve risk reporting system;
percent (12%) at the time of filing the (9) It has a CAMELS composite rating of
application; at least “3” in the last regular examination with
(3) It has not incurred net weekly Management rating not lower than “3”; and
reserve deficiencies within eight (8) weeks (10) It has neither unpaid assessment
immediately preceding the date of due nor past due obligations with the PDIC;
application; f. Requirements for engaging in
(4) It has generally complied with limited trust business. A TB authorized to
banking laws, rules and regulations, orders engage in limited trust business shall comply
or instructions of the Monetary Board with the following requirements:
and/or BSP Management in the last two (2) (1) The articles of incorporation of the
preceding examinations prior to the date of bank shall include among its powers or
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
board of directors in a special seminar for include among others, provisions on the
board of directors conducted or accredited following:
by the BSP; (a) The organization plan or structure
(c) the ceilings on credit of the department, office or unit which shall
accommodations to DOSRI; conduct the trust and other fiduciary
(d) liquidity floor requirements for business of the bank;
government deposits; (b) The creation of a trust committee,
(e) SBL; and to be composed of at least three (3)
(f) investment in bank premises and members who are all members of the board
other fixed assets; of directors and who are not operating
(5) It maintains adequate provisions for officers of the bank, and at least two (2) of
probable losses commensurate to the quality whom are independent directors: Provided,
of its asset portfolio but not lower than the That if the bank decides to have a trust
required valuation reserves as determined committee composed of at least five (5)
by the BSP; members, the provisions of Subsec. X406.2
(6) It does not have float items shall apply;
outstanding for more than sixty (60) (c) The appointment of a trust officer
calendar days in the “Due From/To Head and subordinate officers of the trust
Office/Branches/Offices” accounts and the department, office or unit: Provided, That
“Due From Bangko Sentral” account the trust officer shall have the following:
exceeding one percent (1%) of the total (i) At least two (2) years of actual
resources as of date of application; experience in trust operations; or
(7) It has no past due obligations with (ii) At least one (1) year of actual
the BSP or with any government FI; experience in trust operations and
(8) It has established a risk management completion of a training program in trust
system appropriate to its operations operations acceptable to the BSP; or
characterized by clear delineation of (iii) At least two (2) years of actual
responsibility for risk management, adequate experience as officer of a bank and
risk measurement systems, appropriately completion of a training program in trust
structured risk limits, effective internal operations acceptable to the BSP; and

§§ 2404 - 3404
09.12.31
(d) A clear definition of the duties and (b) guardian of the estate of a minor or
responsibilities as well as the line and staff incompetent; and
functional relationships of the various units, (2) administration of properties.
officers and staff within the organization. c. Application for authority to engage
g. Administration of properties held in in limited trust business. An RB desiring to
trust. The properties held in trust or other engage in a limited trust business shall file
fiduciary capacity shall be administered in an application with the CALG of the SES.
accordance with the terms of the instrument The application shall be signed by the bank
creating the trust and/or order of the court. president or officer of equivalent rank and
Unless otherwise directed in writing by the shall be accompanied by the following
court, investments of fiduciary funds shall documents:
be limited to: (1) Certified true copy of the resolution
(1) Bank deposits; and of the bank’s board of directors authorizing
(2) Evidences of indebtedness of the the application; and
Republic of the Philippines or of the BSP, (2) Certification signed by the bank
and any other evidences of indebtedness or president or officer of equivalent rank that the
obligations the servicing and repayment of bank has complied with all the conditions/
which are fully guaranteed by the Republic pre-requisites for the grant of authority to
of the Philippines; engage in a limited trust business.
h. Applicability of the rules and d. Required capital. An RB applying for
regulations on trust, other fiduciary business authority to engage in limited trust business
and investment management activities. The must have minimum capital accounts of
provision of this Part which are not P100.0 million, or such amounts as may be
inconsistent with the provisions of this required by the Monetary Board in the future.
Section shall apply to TBs authorized to e. Pre-requisites for the grant of
engage in limited trust business. authority to engage in limited trust business
(Circular No. 583 dated 24 September 2007, as amended by An RB applying for authority to engage in
Circular No. 674 dated 10 December 2009) limited trust business must comply with the
following requirements:
Sec. 3404 Grant of Authority to Engage in (1) The bank’s operation during the
Limited Trust Business to Rural Banks preceding calendar year and for the period
a. Statement of policy. It is hereby immediately preceding the date of
declared the policy of the BSP to promote application has been profitable;
healthy competition in order to improve the (2) The bank is well capitalized whose
delivery of banking services especially in risk-based CAR is not lower than twelve
the countryside. Towards this end, authority percent (12%) at the time of filing the
to engage in limited trust business shall be application;
granted to qualified RBs which meet the (3) It has not incurred net weekly
minimum capital required for the grant of reserve deficiencies within eight (8) weeks
such authority, among others. immediately preceding the date of
b. Scope of limited trust business application;
Limited trust business shall be confined to: (4) It has generally complied with
(1) court trusts or trusts under orders banking laws, rules and regulations, orders
of court of competent jurisdiction, such as or instructions of the Monetary Board
acting as: and/or BSP Management in the last two (2)
(a) executor or administrator of a will; preceding examinations prior to the date of
and application, more particularly:

§ 3404
09.12.31
(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
board of directors in a special seminar for include among others, provisions on the
board of directors conducted or accredited following:
by the BSP; (a) The organization plan or structure
(c) the ceilings on credit of the department, office or unit which shall
accommodations to DOSRI; conduct the trust and other fiduciary
(d) liquidity floor requirements for business of the bank;
government deposits; (b) The creation of a trust committee,
(e) SBL; and to be composed of at least three (3) members
(f) investment in bank premises and who are all members of the board of
other fixed assets; directors and who are not operating officers
(5) It maintains adequate provisions of the bank, and at least two (2) of whom
for probable losses commensurate to the are independent directors: Provided, That if
quality of its asset portfolio but not lower the bank decides to have a trust committee
than the required valuation reserves as composed of at least five (5) members, the
determined by the BSP; provisions of Subsec. X406.2 shall apply;
(6) It does not have float items (c) The appointment of a trust officer
outstanding for more than sixty (60) calendar and subordinate officers of the trust
days in the “Due From/To Head Office/ department, office or unit: Provided, That
Branches/Offices” accounts and the “Due the trust officer shall have the following:
From Bangko Sentral” account exceeding (i) At least two (2) years of actual
one percent (1%) of the total resources as experience in trust operations; or
of date of application; (ii) At least one (1) year of actual
(7) It has no past due obligations with experience in trust operations and
the BSP or with any government FI; completion of a training program in trust
(8) It has established a risk operations acceptable to the BSP; or
management system appropriate to its (iii) At least two (2) years of actual
operations characterized by clear experience as officer of a bank and
delineation of responsibility for risk completion of a training program in trust
management, adequate risk measurement operations acceptable to the BSP; and
systems, appropriately structured risk limits, (d) A clear definition of the duties and
effective internal controls and complete, responsibilities as well as the line and staff
timely and efficient risk reporting system; functional relationships of the various units,
(9) It has a CAMELS composite rating of officers and staff within the organization.
at least “3” in the last regular examination with g. Administration of properties held in
Management rating not lower than “3”; and trust. The properties held in trust or other
(10) It has neither unpaid assessment fiduciary capacity shall be administered in
due nor past due obligations with the PDIC. accordance with the terms of the instrument
f. Requirements for engaging in creating the trust and/or order of the court.
limited trust business. An RB authorized to Unless otherwise directed in writing by the
engage in limited trust business shall comply court, investments of fiduciary funds shall
with the following requirements: be limited to:
(1) The articles of incorporation of the (1) Bank deposits; and
bank shall include among its powers or (2) Evidences of indebtedness of the
purposes, acting as trustee or administering Republic of the Philippines or of the BSP,

§§ 3404 - X405.2
09.12.31
and any other evidences of indebtedness or by the Monetary Board: Provided, That such
obligations the servicing and repayment of securities shall be free, unencumbered, and
which are fully guaranteed by the Republic not utilized for any other purpose: Provided,
of the Philippines; further, That such securities shall have
h. Applicability of the rules and remaining maturity of not more than three
regulations on trust, other fiduciary business (3) years from the date of deposit with the
and investment management activities. The BSP; and
provision of this Part which are not b. NDC Agri-Agra ERAP Bonds which
inconsistent with the provision of this are not being used as alternative compliance
Section shall apply to RBs authorized to with P.D. No. 717. The requirement that
engage in limited trust business. the securities used shall have a remaining
(Circular No. 583 dated 24 September 2007, as amended by maturity of not more than three (3) years
Circular No. 674 dated 10 December 2009) shall not apply.
c. Five (5)- and Ten (10)-year SPTBs to
Sec. X405 Security for the Faithful finance the CARP-related expenditures,
Performance of Trust and Other Fiduciary provided such bonds shall not be
Business hypothecated in any way or earmarked for
any other purpose and they meet the three
§ X405.1 Basic security deposit. A bank (3)-year remaining maturity requirement to
authorized to engage in trust and other ensure that such bonds are liquid.
fiduciary business shall deposit with the BSP d. Securities backed by the unreleased
eligible government securities as security for IRAs of LGUs (issued by a Special Purpose
the faithful performance of its trust and other Trust administered by the DBP under the
fiduciary duties equivalent to at least one IRA Monetization Program of the Union of
percent (1%) of the book value of the total Local Authorities of the Philippines) the
volume of trust, other fiduciary and release of which IRA on scheduled date of
investment management assets: Provided, payment has been certified by the DBM as
That at no time shall such deposit be less not being subject to any conditionalities:
than P500,000. Provided, That such securities shall be
Scripless securities under the Registry eligible only to the extent of the present value
of Scripless Securities (RoSS) System of the of the bond computed using the original
Bureau of Treasury (BTr) may be used as yield to maturity (as of auction/issue date):
basic security deposit for trust and other Provided, further, That for reserve for trust
fiduciary duties using the Guidelines and other fiduciary duties, the remaining
enumerated in Appendix 34 of this Manual. maturities of the securities shall not exceed
three (3) years; and
§ X405.2 Eligible securities. Government e. Zero Coupon Bond Issue by the
securities which shall be deposited in HGC of up to P7.0 billion five (5)-year
compliance with the above basic security regular series and up to P3.0 billion seven
deposit shall consist of: (7)-year special series to finance its guaranty
a. Evidences of indebtedness of the servicing of socialized and low-cost housing
Republic of the Philippines and of the BSP projects: Provided, That they meet the three
and any other evidences of indebtedness or (3)-year remaining maturity requirement to
obligations the servicing and repayment of ensure that such bonds are liquid: Provided,
which are fully guaranteed by the Republic further, That such bonds shall qualify as
of the Philippines; and such other kinds of eligible reserve for trust and other fiduciary
securities which may be declared eligible duties only to the extent of the present value

§§ X405.2 - X405.4
08.12.31
of the bond computed using the original security deposit for the faithful performance
yield to maturity (as of auction/issue date). of trust, investment management and other
f. Tobacco Excise Tax Receivable fiduciary duties:
Monetization Program Investment a. On the bank:
Certificates (TEXTR Certificates) backed by i. Monetary penalty/ies:
receivables representing the unreleased Offense Third and
portion of the obligation of the National Trust First Second subsequent
Government to its LGUs for their share of Asset Size offense(s)
the Tobacco Excise Taxes under R.A. No. TBs/RBs with
7171 amounting to P1.85 billion and Limited Trust P300.00 P400.00 P500.00
covering the years 2001 and 2002: Provided, Authority
That such securities shall be eligible only to Up to
the extent of the present value of the P500 P600.00 P700.00 P800.00
securities computed using the original yield
UBs/KBs/TBs with Full Trust Authority and with Trust Assets of
million
to maturity as of auction/issue date. Above
g. Securities received, pursuant to the
Penalty per Calendar Day
P500
Domestic Debt Exchange Offer of the Republic million P1,000.00 P1,250.00 P1,500.00
of the Philippines, in exchange for securities but not
that are eligible reserves for trust duties. exceeding
(As amended by Circular No. 509 dated 01 February 2006) P1 billion
Above
§ X405.3 Valuation of securities and P1 billion
basis of computation of the basic security but not P2,000.00 P3,000.00 P4,000.00
deposit requirement. For purposes of exceeding
determining compliance with the basic P10 billion
security deposit under this Section, the Above
amount of securities so deposited shall be P10 billion
based on their book value, that is, cost as but not P5,000.00 P6,000.00 P7,000.00
increased or decreased by the corresponding exceeding
discount or premium amortization. P50 billion
The base amount for the basic security Above
deposit shall be the average of the P50 billion P8,000.00 P9,000.00 P10,000.00
month-end balances of total trust, investment
management and other fiduciary assets of ii. Non-monetary penalty beginning
the immediately preceding calendar quarter. with the third offense (all banks) -
Prohibition against the acceptance of new
§ X405.4 Compliance period; sanctions trust and other fiduciary accounts, and from
The trustee or fiduciary shall have thirty (30) renewing expiring trust and other fiduciary
calendar days after the end of every calendar contracts up to the time the violation is
quarter within which to deposit with the BSP corrected.
the securities required under this Section. b. On the trust officer and/or other
The following sanctions shall be officer(s) responsible for the deficiency/
imposed for any deficiency in the basic non-compliance:

§§ X405.4 - X405.5
08.12.31
(1) First offense - warning that (2) such other managed peso funds
subsequent violations shall be dealt with which partake the nature of collective
more severely; investment of a peso-denominated CTF as
(2) Second offense - written reprimand may be indicated by the presence of the
with a stern warning that subsequent following features:
violations shall be subject to suspension; (a) The funds are composed of
(3) Third offense - thirty (30) calendar contributions from two (2) or more
day-suspension without pay; and investors;
(4) Subsequent offense(s) - sixty (60) (b) The funds are managed/
calendar day-suspension without pay. administered as a vehicle for collective
For purposes of determining the investment and reinvestment;
frequency of the violation, the bank’s (c) The trustee/administrator/agent has
compliance profile for the immediately the exclusive management and control over
preceding three (3) years or twelve (12) the funds and the sole right at any time to
quarters will be reviewed: Provided, That sell, convert, invest, exchange, transfer or
for purposes of determining appropriate otherwise change or dispose of the assets
penalty on the trust officer and/or other comprising the funds; and
responsible officer(s), any offense (d) Investments/contributions to, or
committed outside the preceding three (3) withdrawals from, the funds are being
year or twelve (12) quarter- period shall allowed at anytime or as of a fixed date in
be considered as the first offense: Provided, the future, and/or the income, net of all
further, That in the case of trust officer, all expenses incurred in the management of
offenses committed by him in the past as the fund plus the fee of the trustee/
trust officer of other institution(s) shall also administrator/agent, are being distributed
be considered: Provided, finally, That if the among the participants of the funds, without
offense cannot be attributed to any other the need to liquidate all assets of the funds.
officer of the bank, the trust officer shall The required reserves against
be automatically held responsible since the peso-denominated CTFs and such other
ultimate responsibility for ensuring managed peso funds which partake the
compliance with the regulation rests upon nature of collective investment of
him, as evidence may warrant. peso-denominated CTFs shall be as follows:
(As amended by Circular Nos. 617 dated 30 July 2008 and UBs/KBs - 10%1
585 dated 15 October 2007) TBs - 5%2
RBs - 4%
§ X405.5 Reserves against peso- In addition to the regular reserve
denominated common trust funds and requirement, the liquidity reserves against
trust and other fiduciary accounts - peso-denominated CTFs and such other
others peso funds which partake the nature of
a. Reserves against peso- collective investment of peso-denominated
denominated CTFs. In addition to the basic CTFs shall be as follows:
security deposit, a bank authorized to UBs/KBs - 11%1
engage in trust and other fiduciary business TBs - 4%2
shall maintain reserves on: The liquidity reserve shall be
(1) peso-denominated CTF; and maintained in the Reserve Deposit
1
Under Circular 491 dated 12 July 2005, regular reserve and liquidity reserve rates shall be 10% and 11%, respectively,
effective the reserve week starting 15 July 2005.
2
Under MAB dated 29 December 2004, regular reserve and liquidity reserve rates shall be 6% and 2%, respectively,
effective the reserve week starting 07 January 2005.

§§ X405.5 - X405.6
08.12.31
Account (RDA) with the BSP, or may be in The liquidity reserve, which is in
the form of the following: Provided, That it addition to the regular reserve, shall be as
complies with the guidelines shown in follows:
Appendix 71. UBs/KBs - 11%1
(i) Short-term market-yielding TBs - 4%
government securities purchased directly RBs - 0%
from the BSP-Treasury Department (TD); The liquidity reserve shall be
(ii) NDC Agri-Agra ERAP Bonds which maintained in the RDA with the BSP, or
are not being used as alternative may be in the form of the following:
compliance with P.D. No. 717. The Provided, That it complies with the
requirement that the securities used shall guidelines shown in Appendix 71.
have a term of not more than one (1) year (1) Short-term market-yielding
shall not apply; and government securities purchased directly
(iii) PEACe bonds only to the extent of from the BSP-TD: Provided, That the
the original gross issue proceeds reserves on TOFA-Others shall be
determined at the time of the auction, plus provided out of such funds;
capitalized interest on the underlying (2) NDC Agri-Agra ERAP Bonds which
zero-coupon Treasury Notes as and when are not being used as alternative
the corresponding interest is earned over compliance with P.D. No. 717. The
the life of the bonds; requirement that the securities used shall
Any deficiency in the liquidity reserves have a term of not more than one (1) year
shall continue to be in the forms or modes shall not apply; and
prescribed under existing regulations for (3) PEACe bonds only to the extent of
the composition of required reserves. the original gross issue proceeds
The reserves on peso-denominated determined at the time of the auction, plus
CTFs and such other managed peso funds capitalized interest on the underlying
shall be provided out of such funds. zero-coupon Treasury Notes as and when
b. Reserves against TOFA - Others. the corresponding interest is earned over
In addition to the basic security deposit, the life of the bonds.
banks shall maintain reserves on TOFA- Any deficiency in the liquidity reserves
Others, except accounts held under shall continue to be in the forms or modes
(1) Administratorship; (2) Bond Issues/Other prescribed under existing regulations for
Obligations Under Deed of Trust or the composition of required reserves.
Mortgage; (3) Custodianship and The reserves on TOFA-Others shall be
Safekeeping; (4) Depository and provided by the institution out of said funds.
Reorganization; (5) Employee Benefit (As amended by Circular Nos. 551 dated 17 November 2006 and
Plans Under Trust; (6) Escrow; (7) Personal 539 dated 09 August 2006)
Trust (testamentary or living trust);
(8) Executorship; (9) Guardianship; § X405.6 Composition of reserves
(10) Life Insurance Trust; and (11) Pre- a. The provisions of Sec. X254 shall
need Plans (institutional/individual). govern the composition of reserves against
The required reserves against TOFA peso-denominated CTFs and such other
Others shall be as follows: managed peso funds, as well as
UBs/KBs - 6% TOFA-Others, of banks authorized to
TBs - 5% engage in trust and other fiduciary
RBs - 4% business.
1
Under Circular 491 dated 12 July 2005, regular reserve and liquidity reserve rates shall be 6% and 11%, respectively,
effective the reserve week starting 15 July 2005.

§§ X405.6 - X405.9
08.12.31
For purposes of this Subsection, a reserves on the value per books of its
special deposit account shall be maintained peso-denominated CTFs and such other
by banks with the BSP exclusively for trust managed peso funds, as well as on
reserves. Deposits maintained by banks TOFA-Others, based on the seven-day
authorized to engage in trust and other week, starting Friday and ending Thursday
fiduciary business with the BSP up to forty including Saturdays, Sundays, holidays,
percent (40%) of the required reserves non-banking days or days when there is
against peso-denominated CTFs (less the no clearing: Provided, That with reference
percentage allowed to be maintained in the to holidays, non-banking days and days
form of short-term market-yielding where there is no clearing, the reserve
government securities), as well as the position at the close of banking day
required reserves on TOFA-Others (less immediately preceding such holidays, non-
the percentage allowed to be maintained banking days or days where there is no
in the form of short-term market-yielding clearing, shall apply. For the purpose of
government securities), shall be paid computing reserve position, the principal
interest at four and one-half percent (4½%) office in the Philippines and all branches
(for UBs/KBs and TBs) and four percent and agencies located therein shall be
(4%) (for RBs) per annum effective treated as a single unit.
09 October 1998 based on the average The required reserves in the current
daily balance of said deposits to be credited period (reference reserve week) shall be
quarterly. computed based on the corresponding
Effective 01 July 2003, published levels of peso-denominated CTFs and such
interest rates that will be applied on BSP’s other managed peso funds, as well as on
SDAs of banks shall be inclusive of the ten TOFA-Others of the prior week.
percent (10%) VAT. For purposes of computing the required
b. The required reserves which may and available statutory and liquidity
be in the form of short-term market- reserves for peso-denominated CTFs and
yielding government securities shall be such other managed peso funds, as well as
purchased directly from the BSP Treasury TOFA-Others, the term value per books
Department at one-half percent (½%) shall refer to the total volume of CTFs, other
below the prevailing market rate for an managed peso funds, as well as
equivalent term and volume and subject TOFA-Others less booked “Allowance for
to BSP’s firm commitment to buy back at Probable Losses”.
any time at prevailing market rates. Such (As amended by Circular No. 535 dated 04 July 2006)
reserves in the form of government
securities shall be in addition to other forms § X405.8 Reserve deficiencies;
of eligible reserves such as cash in vault or sanctions. The provisions of Sec. X257 shall
on deposit with BSP. govern the computation of reserve
All purchases of said government deficiencies for peso-denominated CTFs
securities shall be under the RoSS system and such other managed peso funds, as
of the BTr. Transactions covering said well as TOFA-Others, of banks authorized
securities shall be recorded in accordance to engage in trust and other fiduciary
with the guidelines in Appendix 34. business, including the sanctions provided
in said Section.
§ X405.7 Computation of reserve
position. A bank authorized to engage in § X405.9 Report of compliance. Every
trust and other fiduciary business shall bank shall submit a report to the BSP of its
calculate daily the required and available daily required and available reserves on

§§ X405.9 - X406.2
08.12.31
peso-denominated CTFs and such other business shall be considered part of the
managed peso funds, as well as TOFA- bank’s real liabilities.
Others, in such frequency and within the The bank proper and the trust
deadline stated in Appendix 6. department may share the following
activities: (1) electronic data processing;
Sec. X406 Organization and Management (2) credit investigation; (3) collateral
appraisal; and (4) messengerial, janitorial
§ X406.1 Organization. A bank and security services.
authorized to engage in trust and other b. The trust department, trust officer
fiduciary business shall, pursuant to Subsec. and other subordinate officers of the trust
X404.1, include in its by-laws, provisions department shall only be directly
on the organization plan or structure of the responsible to the bank’s trust committee
department, office or unit which shall which shall, in turn, be only directly
conduct such business. The by-laws shall responsible to the bank’s board of directors.
also include provisions on the creation of a No director, officer or employee taking
trust committee, the appointment of a trust part in the management of trust and other
officer and other subordinate officers and a fiduciary accounts shall perform duties in
clear definition of their duties and other departments or the audit committee
responsibilities as well as their line and staff of the bank and vice versa. However,
functional relationships within the branch managers duly authorized by the
organization which shall be in accordance board of directors may, for or on behalf of
with the following guidelines. the trust officer, sign predrawn trust
a. Trust and other fiduciary business of instruments such as CTFs.
a bank shall be carried out through a trust c. The organization structure and
department which shall be organizationally, definition of duties and responsibilities of
operationally, administratively and the trust committee, officers and employees
functionally separate and distinct from the of the trust department shall reflect
other departments and/or businesses of the adherence to the minimum internal control
institution. standards prescribed by the BSP.
A bank which is also engaged in d. Provisions shall be made by the
investment management activities, shall bank to have legal assistance readily
conduct the same only through its trust available in the review of proposed and/or
department and the responsibilities of the existing trust and fiduciary agreements and
board of directors, trust committee and trust documents and in the handling of legal and
officer shall be construed to include the tax matters related thereto.
proper administration and management of
investment management activities. § X406.2 Composition of trust
No bank shall undertake any of the trust committee. The trust committee shall be
and other fiduciary business and, whenever composed of at least five (5) members
applicable, investment management including the president, the trust officer and
activities outside the direct control, directors who are appointed by the board
authority and management of the trust of directors on a regular rotation basis and
department or through any department or who are not officers of the bank proper.
office which is involved in the other No member of the audit committee, if the
businesses of the bank, such as the bank has any, shall be concurrently
Treasury, Funds Management or any designated as a member of the trust
similar department, otherwise, any such committee: Provided, That in the case of a

§§ X406.2 - X406.4
09.12.31
trust committee composed of more than in trust operations and completed at least
five (5) members, the appointment therein one (1) year training program in trust
of an operating officer may be allowed only operations acceptable to the BSP, or at
if the required balance in the membership least five (5) years of actual experience as
of at least three (3) members of the board officer of a bank or related activities and
for every operating officer shall be completed at least one (1) year training
maintained: Provided, further, That the program in trust operations acceptable to
Philippine branch of a foreign bank may the BSP.
appoint its resident manager or chief (As amended by Circular No. 665 dated 04 September 2009)
executive officer in lieu of the president
while the positions allotted for members § X406.4 Responsibilities of
of the board may be filled up by the area administration
manager and/or officers/representatives a. Board of Directors. The board of
from the Head Office who are not involved directors is responsible for the proper
in audit-related activities. administration and management of trust and
For purposes of this Subsection, the other fiduciary business. Funds and
term officer shall include the president, properties held in trust or in any fiduciary
executive vice-president, general manager, capacity shall be administered with the skill,
corporate secretary, treasurer and others care, prudence and diligence necessary
mentioned as officers of the bank, or those under the circumstances then prevailing that
whose duties as such are defined in the a prudent man, acting in like capacity and
by-laws, or are generally known to be familiar with such matters, would exercise
officers of the bank (or any of its branches in the conduct of an enterprise of like
and offices other than the Head Office) character and with similar aims.
either through announcement, The responsibilities of the board of
representation, publication or any kind of directors shall include, but need not be
communication made by the bank. limited to, the following:
The board of directors shall duly note (1) It shall determine and formulate
in the minutes the committee members and general policies and guidelines on the:
designate the chairman who shall be one (a) acceptance, termination, or closure of
of the directors referred to above. trust and other fiduciary accounts;
(b) proper administration and management
§ X406.3 Qualifications of committee of each trust and other fiduciary account;
members, officers and staff. The bank’s and (c) investment, reinvestment and
trust department shall be staffed by persons disposition of funds or property held in its
of competence, integrity and honesty. capacity as trustee or fiduciary;
Directors, committee members and (2) It shall direct and review the
officers charged with the administration of actions of the trust committee and all
trust and other fiduciary activities shall, in officers and employees designated to
addition to meeting the qualification manage the trust and other fiduciary
standards prescribed for directors and accounts, especially accounts without
officers of banks, possess the necessary specific agreements on investments or
technical expertise in such business: discretionary accounts;
Provided, That trust officers who shall be (3) It shall approve or confirm the
appointed shall have at least five (5) years acceptance, termination or closure of all
of actual experience in trust operations, or trust and other fiduciary accounts and shall
at least three (3) years of actual experience record such in its minutes;

§§ X406.4 - X406.8
08.12.31
(4) Upon the acceptance of an account, (2) The initial review of assets placed
it shall immediately review all non-cash under the trustee’s or fiduciary’s custody;
assets received for management. Likewise, (3) The investment, reinvestment and
it shall make a review of the trust and/or disposition of funds or property;
fiduciary assets at least once every twelve (4) The review and approval of
(12) months to determine the advisability transactions between trust and/or
of retaining or disposing of such assets; fiduciary accounts; and
(5) It shall be responsible for taking (5) The review of trust and other
appropriate action on the examination fiduciary accounts at least once every twelve
reports of supervisory agencies, internal (12) months to determine the advisability
and/or external auditors on the bank’s of retaining or disposing of the trust or
trust and other fiduciary business and fiduciary assets, and/or whether the account
recording such actions thereon in the is being managed in accordance with the
minutes; instrument creating the trust or other
(6) It shall designate the members of the fiduciary relationship.
trust committee, the trust officer and For this purpose, the trust committee
subordinate officers of the trust department shall meet whenever necessary and keep
and shall be responsible for requiring minutes of its actions and make periodic
reports from said committee and officers reports thereon to the board.
and recording its actions thereon in the c. Trust Officer. The trust officer
minutes; and designated by the board of directors as
(7) It shall establish an appropriate head of the Trust Department shall act
staffing pattern and adopt operating and represent the bank in all trust and
budgets that shall enable the trust other fiduciary matters within the sphere
department to effectively carry out its of his authority as may be provided in
functions. It shall likewise be responsible the by-laws or as may be delegated by
for providing the officers and staff of the the board. His responsibilities shall
bank with appropriate training programs include, but need not be limited to the
in the administration and operation of all following:
phases of trust and other fiduciary (1) The administration of trust and
business. other fiduciary accounts;
The board of directors may, by action (2) The implementation of policies
duly entered in the minutes, delegate its and instructions of the board of directors
authority for the acceptance, termination, and the trust committee;
closure or management of trust and other (3) The submission of reports on
fiduciary accounts to the trust committee matters which require the attention of the
or to the trust officer, subject to certain trust committee and the board of
guidelines approved by the board. directors;
b. Trust Committee. The trust (4) The maintenance of adequate
committee duly constituted and authorized books, records and files for each trust or
by the board of directors shall act within other fiduciary account; and
the sphere of authority which may be (5) The maintenance of necessary
provided in the by-laws and/or as may be controls and measures to protect assets
delegated by the board, such as, but not under his custody and held in trust or
limited to, the following: other fiduciary capacity.
(1) The acceptance and closing of trust
and other fiduciary accounts; § X406.5 - X406.8 (Reserved)

§§ X406.9 - X407
11.12.31
§ X406.9 Outsourcing services in trust that does not conform to these shall not be
departments. Trust departments of banks considered as trust, other fiduciary and/or
performing trust and other fiduciary investment management relationship.
business and investment management The following shall not constitute a trust,
activities are covered by the requirement other fiduciary and/or investment
of prior BSP approval for outsourcing management relationship:
services under Subsec. X162.3. a. When there is a preponderance of
(M-2007-009 dated 22 March 2007) purpose or of intent that the arrangement
creates or establishes a relationship other
§ X406.10 Approval of the than a trust, fiduciary and/or investment
appointment/designation of trust officers management;
Regardless of rank, the appointment/ b. When the agreement or contract is
designation of trust officers shall require itself used as a certificate of indebtedness
prior approval of the Monetary Board. The in exchange for money placement from
bio-data of the proposed trust officers shall clients and/or as the medium for confirming
be submitted to the appropriate department placements and investment thereof;
of the SES. c. When the agreement or contract of
The appointment/designation of all an account is accepted under the
incumbent trust officers not previously signature(s) of those other than the trust
approved/confirmed by the Monetary Board officer or subordinate officer of the trust
shall be submitted, within six (6) months department or those authorized by the board
from 24 September 2009, to the BSP, of directors to represent the trust officer;
through the appropriate department of the d. Where there is a fixed rate or
SES, for approval. guaranty of interest, income or return in
The documentary requirements on the favor of its client or beneficiary: Provided,
approval of the appointment of trust officers however, That where funds are placed in
of banks are listed in Appendix 98a. fixed income-generating investments, a
(Circular No. 665 dated 04 September 2009, CL-045 dated 01 quotation of income expectation or like
July 2011) terms, shall neither be considered as
arrangements with a fixed rate nor a
Sec. X407 Non-Trust, Non-Fiduciary and/ guaranty of interest, income or return when
or Non-Investment Management Activities the agreement or indenture categorically
The basic characteristic of trust, other states in bold letters that the quoted income
fiduciary and investment management expectation or like terms is neither assured
relationship is the absolute non-existence nor guaranteed by the trustee or fiduciary
of a debtor-creditor relationship, thus, there and it does not, therefore, entitle the client
is no obligation on the part of the trustee, to a fixed interest or return on his
fiduciary or investment manager to investments: Provided, further, That any of
guarantee returns on the funds or properties the following practices or practices similar
regardless of the results of the investment. and/or tantamount thereto shall be
The trustee, fiduciary or investment manager construed as fixing or guaranteeing the rate
is entitled to fees/commissions which shall of interest, income or return:
be stipulated and fixed in the contract or (1) Issuance of certificates, side
indenture and the trustor or principal is agreements, letters of undertaking or other
entitled to all the funds or properties and similar documents providing for fixed
earnings less fees/commissions, losses and rates or guaranteeing interest, income or
other charges. Any agreement/arrangement return;

§§ X407 - X408
09.12.31
(2) Paying trust earnings based on or examining department based on

indicated or expected yield regardless of the findings in an examination or a complaint,
actual investment results; shall consider any of the following
(3) Increasing or reducing fees in order circumstances:
to meet a quoted or expected yield; a. The act or omission has resulted
(4) Entering into any arrangement, or may result in material loss or damage,
scheme or practice which results in the or abnormal risk or danger to the
payment of fixed rates or yield on trust safety, stability, liquidity or solvency
investments or in the payment of the of the bank;
indicated or expected yield regardless of the b. The act or omission has resulted or
actual investment results; and may result in material loss or damage or
e. Where the risk or responsibility is abnormal risk to the bank’s depositors,
exclusively with the trustee, fiduciary or creditors, investors, stockholders or to the
investment manager in case of loss in the BSP or to the public in general;
investment of trust, fiduciary or investment c. The act or omission has caused any
management funds, when such loss is not undue injury, or has given unwarranted
due to the failure of the trustee or fiduciary benefits, advantage or preference to the
to exercise the skill, care, prudence and bank or any party in the discharge by the
diligence required by law. director or officer of his duties and
Trust, other fiduciary and investment responsibilities through manifest partiality,
management activities involving any of the evident bad faith or gross inexcusable
foregoing which are accepted, renewed or negligence; or
extended after 16 October 1990 shall be d. The act or omission involves
reported as deposit substitutes and shall be entering into any contract or transaction
subject to the reserve requirement for manifestly and grossly disadvantageous to
deposit substitutes from the time of the bank, whether or not the director or
inception, without prejudice to the officer profited or will profit thereby.
imposition of the applicable sanctions The list of activities which may be
provided for in Sections 36 and 37 of considered unsafe and unsound is shown
R.A. No. 7653. in Appendix 48.
In line with the statement of principles
Sec. X408 Unsafe and Unsound Practices governing trust and other fiduciary business
Whether a particular activity may be under Sec. X401, the trustee, fiduciary or
considered as conducting business in an investment manager shall desist from the
unsafe or unsound manner all relevant facts following unsound practices:
must be considered. An analysis of the a. Entering in an arrangement
impact thereof on the bank’s operations and whereby the client is at the same time
financial conditions must be undertaken, the borrower of his own fund placement,
including evaluation of capital position, or whereby the trustor or principal is a
asset condition, management, earnings borrower of other trust, fiduciary or
posture and liquidity position. investment management funds
In determining whether a particular act or belonging to the same family or business
omission, which is not otherwise prohibited group of such trustor or principal;
by any law, rule or regulation affecting banks, b. Granting loans or accommodations
may be deemed as conducting business in an to any trust committee member, officer
unsafe or unsound manner, the Monetary Board, and employee of the trust department
upon report of the head of the supervising except where such loans are obtained by

§§ X408 - X408.9
09.12.31
said persons as members of an employee § X408.9 Sanctions. The Monetary

benefit fund of the trustee’s own institution; Board may, at its discretion and based on
c. Borrowing from, or selling trust, the seriousness and materiality of the acts
other fiduciary and/or investment or omissions, impose any or all of the
management assets to, the bank proper to following sanctions provided under Section
cover portfolio losses and/or to guarantee 37 of R.A. No. 7653 and Section 56 of
the return of principal or income; R.A. No. 8791, whenever a bank conducts
d. Granting new loans to any business in an unsafe and unsound manner:
borrower who has a past due and/or a. Issue an order requiring the bank to
classified loan account with the bank proper cease and desist from conducting business
or the trust department; and in an unsafe and unsound manner and may
e. Requiring clients to sign further order that immediate action be taken
documents in blank. to correct the conditions resulting from such
(As amended by Circular No. 640 dated 16 January 2009) unsafe or unsound practice;
b. Fines in amounts as may be
§§ X408.1 - X408.8 (Reserved) determined by the Monetary Board to be
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Manual of Regulations for Banks Part IV - Page 18a

§§ X408.9 - X409.2
08.12.31
appropriate, but in no case to exceed or institutions, the voluntary written

P30,000 a day on a per transaction basis agreement or indenture entered into by the
taking into consideration the attendant parties, accompanied by a copy of the board
circumstances, such as the gravity of the resolution or other evidence authorizing
act or omission and the size of the bank, the establishment of, and designating the
to be imposed on the bank, their directors signatories to, the trust or other fiduciary
and/or responsible officers; account.
c. Suspension of interbank clearing c. In the case of accounts created by
privileges/immediate exclusion from individuals, the voluntary written
clearing; agreement or indenture entered into by the
d. Suspension of rediscounting parties.
privileges or access to BSP credit facilities; The voluntary written agreement or
e. Suspension of lending or foreign indenture shall include the following
exchange operations or authority to accept minimum provisions:
new deposits or make new investments; (1) Title or nature of contractual
f. Suspension of responsible directors agreement in noticeable print;
and/or officers; (2) Legal capacities, in noticeable
g. Revocation of quasi-banking print, of parties sought to be covered;
license; and/or (3) Purposes and objectives;
h. Receivership and liquidation under (4) Funds and/or properties subject of
Section 30 of R.A. No. 7653. the arrangement;
All other provisions of Sections 30 and (5) Distribution of the funds and/or
37 of R.A. No. 7653, whenever appropriate, properties;
shall also be applicable on the conduct of (6) Duties and powers of trustee or
business in an unsafe or unsound manner. fiduciary;
The imposition of the above sanctions (7) Liabilities of the trustee or fiduciary;
is without prejudice to the filing of (8) Reports to the client;
appropriate criminal charges against (9) Termination of contractual
culpable persons as provided in Sections arrangement and, in appropriate cases,
34, 35 and 36 of R.A. No. 7653. provision for successor-trustee or fiduciary;
(10) The amount or rate of the
Sec. X409 Trust and Other Fiduciary compensation of trustee or fiduciary;
Business. The conduct of trust and other (11) A statement in noticeable print to
fiduciary business shall be subject to the the effect that trust and other fiduciary
following regulations. business are not covered by the PDIC and
that losses, if any, shall be for the account
§ X409.1 Minimum documentary of the client; and
requirements. Each trust or fiduciary (12) Disclosure requirements for
account shall be covered by a written transactions requiring prior authority and/
document establishing such account, as or specific written investment directive
follows: from the client, court of competent
a. In the case of accounts created by jurisdiction or other competent authority.
an order of the court or other competent
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

§§ X409.2 - X409.3
08.12.31
of the instrument creating the trust or other unless prior to its execution, such
fiduciary relationship. transaction has been fully disclosed and
When a trustee or fiduciary is granted specifically authorized in writing by the
discretionary powers in the investment client, beneficiary, other party-in-interest,
disposition of trust or other fiduciary funds and court of competent jurisdiction or other
unless otherwise specifically enumerated in the competent authority:
agreement or indenture and directed in writing a. Lend, sell, transfer or assign money
by the client, court of competent jurisdiction or or property to any of the departments,
other competent authority, loans and directors, officers, stockholders or
investments of the fund shall be limited to: employees of the trustee or fiduciary, or
a. Evidences of indebtedness of the relatives within the first degree of
Republic of the Philippines and of the BSP, consanguinity or affinity, or the related
and any other evidences of indebtedness interest of such directors, officers and
or obligations the servicing and repayment stockholders; or to any corporation where
of which are fully guaranteed by the the trustee or fiduciary owns at least fifty
Republic of the Philippines or loans against percent (50%) of the subscribed capital or
such government securities; voting stock in its own right and not as
b. Loans fully guaranteed by the trustee nor in a representative capacity;
Republic of the Philippines as to the b. Purchase or acquire property or
payment of principal and interest; debt instruments from any of the
c. Loans fully secured by a hold-out departments, directors, officers,
on, assignment or pledge of deposits stockholders, or employees of the trustee
maintained either with the bank proper or or fiduciary, or relatives within the first
other banks, or of deposit substitutes of the degree of consanguinity or affinity, or the
bank, or of mortgage and chattel mortgage related interest of such directors, officers
bonds issued by the trustee or fiduciary; and stockholders; or from any
d. Loans fully secured by real estate corporation where the trustee or
or chattels in accordance with Section 78 fiduciary owns at least fifty percent (50%)
of R.A. No. 337, as amended, and subject of the subscribed capital or voting stock
to the requirements of Sections 75, 76, and in its own right and not as trustee nor in
77 of R.A. No. 337, as amended; and a representative capacity;
e. Investment in the BSP special deposit c. Invest in equities of, or in
account (SDA) facility made in accordance securities underwritten by, the trustee or
with the guidelines in Appendix 78. fiduciary or a corporation in which the
The specific directives required under trustee or fiduciary owns at least fifty
this Subsection shall consist of the percent (50%) of the subscribed capital
following information: or voting stock in its own right and not
(1) The transaction to be entered into; as trustee nor in a representative
(2) The borrower’s name; capacity; and
(3) Amount involved; and d. Sell, transfer, assign, or lend
(4) Collateral security(ies), if any. money or property from one trust or
(As amended by M-2007-038 dated 29 November 2007 and fiduciary account to another trust or
M-2007-011 dated 08 May 2007) fiduciary account except where the
investment is in any of those enumerated
§ X409.3 Transactions requiring in Items “a” to “d” of Subsec. X409.2.
prior authority. A trustee or fiduciary DOSRIs covered by this Subsection
shall not undertake any of the following shall be those considered as such under
transactions for the account of a client, existing regulations on loans to DOSRI in

§§ 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 –
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
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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 - X410.5
08.12.31
The rules and regulations on Common deemed to have any ownership or interest
Trust Funds (CTFs) are in Appendix 60. in any particular account or investment in
the UIT Fund but shall have only its
§ X410.1 Definitions proportionate beneficial interest in the fund
a. Unit Investment Trust Funds. Unit as a whole.
Investment Trust Funds are open-ended
pooled trust funds denominated in pesos § X410.4 Relationship of trustee with
or any acceptable currency, which are Unit Investment Trust Fund. A trustee
operated and administered by a trust entity administering a UIT Fund shall not have
and made available by participation. The any other relationship with such fund other
term Unit Investment Trust Funds is than its capacity as trustee of the UIT Fund:
synonymous to CTFs. As an open-ended Provided, however, That a trustee which
fund, participation or redemption is simultaneously administers other trust,
allowed as often as stated in its plan rules. fiduciary or investment management funds
UIT Funds shall not include long term may invest such funds in the trustee’s UIT
funds designed for the primary purpose of Fund, if allowed under a policy approved
availing the tax incentives/exemption by the board of directors.
under Section 24(B)(1) of R.A. No. 8424
(The Tax Reform Act of 1997). § X410.5 Operating and accounting
b. Trust entity. Any bank, IH or a stock methodology. A UIT Fund shall be
corporation duly authorized by the operated and accounted for in accordance
Monetary Board to engage in trust, with the following:
investment management and fiduciary a. The total assets and accountabilities
business. of each fund shall be accounted for as a
c. Board of directors. For this purpose, single account referred to as pooled-fund
the term shall include a trust entity’s duly accounting method.
constituted board of directors or its b. Contributions to each fund by clients
functional oversight equivalent which shall shall always be through participation in units
include the country head in the case of of the fund and each unit shall have uniform
foreign banks. rights or privileges, as any other unit.
c. All such participations shall be
§ X410.2 Establishment of a Unit pooled and invested as one (1) account
Investment Trust Fund. Any trust entity (referred to as collective investments).
authorized to perform trust functions may d. The beneficial interest of each
establish, administer and maintain one (1) participation unit shall be determined under
or more UIT Funds subject to applicable a unitized net asset value per unit (NAVPu)
provisions under this Section. valuation methodology defined in the
written plan of the UIT Fund, and no
§ X410.3 Administration of a Unit participation shall be admitted to, or
Investment Trust Fund. The trustee shall redeemed from, the fund except on the
have exclusive management and control basis of such valuation. To arrive at a fund’s
of each UIT Fund under its administration, NAVPu, the fund’s total Net Assets is
and the sole right at any time to sell, divided by the total outstanding units. Total
convert, reinvest, exchange, transfer or Net Assets is a summation of the market
otherwise change or dispose of the assets value of each investment less fees, taxes,
comprising the fund: Provided, That no and other qualified expenses, as defined
participant in a UIT Fund shall have or be under the plan rules.

§ X410.6
08.12.31
§ X410.6 Plan rules. Each UIT Fund suitability assessment to profile the risk-
shall be established, administered and return orientation and suitability of the
maintained in accordance with a written client to the specific type of fund. If the
trust agreement drawn by the trustee, frequency of admission or redemption is
referred to as the “Plan” which shall be other than daily; that is, any business day,
approved by the board of directors of the the same should be explicitly stated in the
trustee and a copy of which shall be Plan rules: Provided, That the admission
submitted to the BSP for processing and and redemption prices shall be based on
approval prior to its implementation. Each the end of day NAVPu of the fund
new UIT Fund Plan filed for approval shall computed after the cut-off time for fund
be charged a processing fee of participation and redemption for that
P10,000.00. reference day, in accordance with existing
The Plan shall contain the following BSP regulations on mark to market
minimum elements: valuation of investment securities.
a. Title of the Plan. This shall g. Aside from the regular audit
correspond to the product/brand name by requirement applicable to all trust
which the UIT Fund is proposed to be accounts, an external audit of each UIT
known and made available to its clients. Fund shall be conducted annually by an
The Plan rules shall state the classification independent auditor acceptable to the BSP
of the UIT Fund (e. g., money market fund, and the results thereof made available to
bond fund, balanced fund and equity fund). participants. The external audit shall be
b. Manner by which the fund is to be conducted by the same external auditor
operated. A statement of the fund’s engaged for the audit of the trust entity.
investment objectives and policies h. Basis upon which the fund may be
including limitations, if any. terminated. The Plan rules shall state the
c. Risk disclosure. The Plan rules shall rights of participants in case of termination
state both the general risks and risks of the fund. Termination of the fund shall
specific to the type of fund. be duly approved by the trustee’s board of
d. Investment powers of the trustee directors and a copy of the resolution
with respect to the fund, including the submitted to the appropriate department
character and kind of investments, which of the BSP.
may be purchased, by the fund. There must i. Liability clause of the trustee.
be an unequivocal statement of the full There must be a clear and prominent
discretionary powers of the trustee as far statement adjacent to where a client is
as the fund’s investments are concerned. required to sign the participating trust
These powers shall be limited only by the agreement that (1) the UIT Fund is a trust
duly stated investment objective and product and not a deposit account or an
policies of the fund. obligation of, or guaranteed, or insured
e. The unitized NAVPu valuation by the trust entity or its affiliates or
methodology as prescribed under Subsec. subsidiaries; (2) the UIT Fund is not
X410.5.d shall be employed. insured or governed by the PDIC; (3) due
f. Terms and conditions governing to the nature of the investment, yields
the admission or redemption of units of and potential yields cannot be
participation in the fund. The Plan rules guaranteed; (4) any loss/income arising
shall state that the trustee, prior to from market fluctuations and price
admission of a client’s initial participation volatility of the securities held by the UIT
in the UIT Fund, shall conduct a client Fund, even if invested in government

§§ X410.6 - X410.7
08.12.31
securities, is for the account of the client/ fund shall be immediately notified of
participant; (5) as such, the units of such amendments and shall be allowed
participation of the investor in the UIT to withdraw their participations within a
Fund, when redeemed, may be worth reasonable time but in no case less than
more or be worth less than his/her initial thirty (30) calendar days after the
investment/contributions; (6) historical amendments are approved, if they are
performance, when presented, is purely not in conformity with the amendments
for reference purposes and is not a made thereto: Provided further, That
guarantee of similar future result; and amendments to the Plan shall be submitted
(7) the trustee is not liable for losses unless to the BSP within ten (10) business days
upon willful default, bad faith or gross from approval of the amendments by the
negligence. board of directors. For purposes of
j. Amount of fees/commission and imposing monetary penalties provided
other charges to be deducted from the fund. under Subsec. X192.2 for delayed
The amount of fees that shall be charged submission of reports, the amendments to
to a fund shall cover the fund’s fair and the Plan shall be considered as “Category
equitable share of the routine A-3” report. The amendments shall be
administrative expenses of the trustee such deemed approved after thirty (30) business
as salaries and wages, stationery and days from date of completion of
supplies, credit investigation, collateral requirements.
appraisal, security, messengerial and A copy of the Plan shall be available at
janitorial services, EDP expenses, BSP the principal office of the trustee during
supervision fees and internal audit fees. regular office hours, for inspection by any
However, the trustee may charge a UIT person having an interest in the fund or by
Fund for special expenses in case such his authorized representative. Upon
expenses are (1) necessary to preserve or request, a copy of the Plan shall be
enhance the value of the fund, (2) payable furnished such interested person.
to a third party covered by a separate (As amended by Circular No. 593 dated 08 January 2008)
contract, and (3) disclosed to participants.
The trustee shall secure prior BSP approval § X410.7 Minimum disclosure
for outsourcing services provided under requirements
existing regulations. No other fees shall a. Disclosure of UIT Fund investments.
be charged to the fund. A list of prospective and outstanding
Marketing or other promotional related investment outlets shall be made available
expenses shall be for the account of the by the trustee for the review of all UIT
trustee and shall be presumed covered by Fund clients. Such disclosure shall be
the trust fee. substantially in the form as shown in
k. Such other matters as may be Appendix 62. The list of investment outlets
necessary or proper to define clearly the shall be updated quarterly.
rights of participants in the UIT Fund. The b. Distribution of investment units.
provisions of the Plan shall govern The trustee may issue such conditions or
participation in the fund including the rights rules, as may affect the distribution of
and benefits of persons having interest in such investment units subject to the minimum
participation, as beneficiaries or otherwise. conditions enumerated hereunder.
The Plan may be amended by a resolution (1) Marketing materials. All printed
of the board of directors of the trustee: marketing materials related to the sale of
Provided, however, That participants in the a UIT Fund shall clearly state:

§§ X410.7
08.12.31
(a) The designated name and losses unless upon willful default, bad faith
classification of the fund and the fund’s or gross negligence.
trustee. (d) A balanced assessment of the
(b) Minimum information regarding: possible gains and losses of the UIT Fund
(i) The general investment policy and and that the participation does not carry
applicable risk profile. There shall be a any guaranteed rate of return, and is not
clear description/explanation of the general insured by the PDIC.
risks attendant with investing in a UIT Fund, (e) An advisory that the investor must
including risk specific to a type of fund. read the complete details of the fund in
Technical terms should likewise be the Plan Rules, make his/her own risk
defined in laymen’s terms1. assessment, and when necessary, he/she
(ii) Particulars or administrative and must seek independent/professional
marketing details like pricing and cut-off opinion, before making an investment.
time. (2) Evidence of participation. Every
(iii) All charges made/to be made UIT Fund participant shall be given -
against the fund, including trust fees, other (a) A participating trust agreement.
related charges. Such agreement shall clearly indicate that
(iv) The availability of the Plan Rules (1) the UIT Fund is a trust product and not
governing the fund, upon the client’s request. a deposit account or an obligation of, or
(v) Client and Product Suitability guaranteed, or insured by the trust entity
Standards. Prior to admission, the trustee or its affiliates or subsidiaries; (2) the UIT
shall perform a client profiling process for Fund is not insured or governed by the
all UIT Fund participants under the general PDIC; (3) due to the nature of the
principles on client suitability assessment investment, yields and potential yields
to guide the client in choosing investment cannot be guaranteed; (4) any loss/income
outlets that are best suited to his objectives, arising from market fluctuations and price
risk tolerance, preferences and experience. volatility of the securities held by the UIT
The profiling process shall, at the minimum, Fund, even if invested in government
require the trustee to obtain client securities, is for the account of the client/
information through the Client Suitability participant; (5) as such, the units of
Assessment (CSA) form, classify the client participation of the investor in the UIT Fund,
according to his financial sophistication and when redeemed, may be worth more or
communicate the CSA results to the be worth less than his/her initial investment/
subject client. The general principles on contributions; (6) historical performance,
CSA shall also require the trustee to adopt when presented, is purely for reference
a notice mechanism whereby clients are purposes and is not a guarantee of similar
advised and/or reminded of the explicit future result; and (7) the trustee is not liable
requirement to notify the trustee or its UIT for losses unless upon willful default, bad
Fund marketing personnel of any change in faith or gross negligence.
their characteristics, preferences or In addition to the agreement, every UIT
circumstances to enable the trustee to update Fund participant shall be provided with -
client’s profile at least every three (3) years. (1) CSA form to be accomplished
(c) The participation is not a “deposit during the profiling process required under
account” but a trust product; and that any the general principles on CSA. This is
loss/income is for the account of the designed to ensure that based on relevant
participant; that the trustee is not liable for information about the client, his investment
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 - X410.8
08.12.31
profile is matched against the investment NAVPu of such fund in one (1) or more
parameters of the UIT Fund. At the newspaper of national circulation:
minimum, client information shall include Provided, That a pooled weekly publication
personal or institutional data, investment of such NAVPu shall be considered as
objective, investment horizon, investment substantial compliance with this
experience, and risk tolerance; and requirement. The said publication, at the
(2) Risk disclosure statement, which minimum, shall clearly state the name of
in reference to Subsec. X410.6c, shall the fund, its general classification, the fund’s
describe the attendant general and specific NAVPu and the moving return on
risks that may arise from investing in the investment (ROI) of the fund on a year-to-
UIT Fund. Such statement shall be date (YTD) and year-on-year (YOY) basis.
substantially similar to the form in Annex A NAVPu shall be computed daily and
of Appendix 62a. shall be made available to participants and
Both documents shall be signed by the prospective participants upon request.
client/participant and the UIT marketing d. Marketing personnel. To ensure
personnel who assessed and explained to the competence and integrity of all duly
the concerned client his/her ability to bear designated UIT marketing personnel, all
the risks and potential losses. personnel involved in the sales of these
(b) A confirmation of participation and funds shall be required to undergo
redemption made to/from the fund that standardized training program in
shall contain the following information: accordance with the guidelines of this
(i) NAVPu of the fund on day of Subsection. This training program may be
purchase/redemption; conducted by their respective trust entities
(ii) Number of units purchased/ in accordance with the minimum training
redeemed; and program guidelines provided by the Trust
(iii) Absolute peso or foreign currency Officers Association of the Philippines
value. (TOAP). Such training program shall
No indicative rates of return shall be however be regularly validated by TOAP.
provided in the trust participating (As amended by Circular No. 593 dated 08 January 2008)
agreement. Marketing materials may
present relevant historical performance § X410.8 Exposure limit to single person/
purely for reference and with clear entity. The combined exposure of the UIT
indication that past results do not guarantee Fund to any entity and its related parties
similar future results. shall not exceed fifteen percent (15%) of
(3) A participating trust agreement or the market value of the UIT Fund:
confirmation of contribution/redemption Provided, That, a UIT Fund invested,
need not be manually signed by the trustee partially or substantially, in exchange
or his authorized representative if the traded equity securities shall be subject
same is in the form of an electronic to the fifteen percent (15%) exposure limit
document that conforms with the to a single entity/issuer: Provided, further,
implementing rules and regulations of That, in the case of an exchange traded
R.A. No. 8792, otherwise known as the equity security which is included in an
E-Commerce Act. index and tracked by the UIT Fund, the
c. Regular publication/computation/ exposure of the UIT Fund to a single entity
availability of the fund’s NAVPu. Trust shall be the actual benchmark weighting
entities managing a UIT Fund shall cause of the issuer or fifteen percent (15%),
at least the weekly publication of the whichever is higher.

§§ X410.8 - X410.11
10.12.31
This limitation shall not apply to prices represent actual and regularly
non-risk assets as defined by the BSP. occurring market transactions on an arm’s
In case the limit is breached due to the length basis.
marking-to-market of certain investment/s or The UIT Fund may avail itself of
any extraordinary circumstances, e.g., financial derivatives instruments solely for
abnormal redemptions which are beyond the purpose of hedging risk exposures of
the control of the trustee, the trustee shall the existing investments of the Fund,
be given thirty (30) days from the time the provided these are accounted for in
limit is breached to correct the same. accordance with existing BSP hedging
(As amended by Circular No. 577 dated 17 August 2007) guidelines as well as the trust entity’s risk
management and hedging policies duly
§ X410.9 Allowable investments approved by the Trust Committee and
and valuation. UIT Fund investments shall disclosed to participants.
be limited to bank deposits and the The use of hedging instruments shall
following financial instruments: also be disclosed in the “Plan” as provided
(a) Securities issued by or guaranteed in Item “c” of Subsec. X410.6 and
by the Philippine government, or the BSP; specified in the quarterly “list of
(b) Tradable securities issued by the investment outlets” as provided in Item
government of a foreign country, any “a” of Subsec. X410.7.
political subdivision of a foreign country (As amended by M-2010-033 dated 04 October 2010,
or any supranational entity; Circular Nos. 676 dated 29 December 2009 and 675 dated 22
(c) Exchange-listed securities; December 2009)
(d) Marketable instruments that are
traded in an organized exchange; § X410.10 Other related guidelines
(e) Loans traded in an organized on valuation of allowable investments
market; a. In pricing debt securities,
(f) Loans arising from repo agreements interpolated yields shall be used for
which are transacted through an exchange securities with odd or off-the-run tenors
recognized by the SEC, subject to the using the straight-line basis and generally
condition that the repo contracts may be accepted market convention.
pre-terminated lawfully by the trust entity b. In case outstanding UIT Fund
administering the UITF and acting as lender, investments may deteriorate in quality,
with due notice to its counterparty and the i.e., no longer tradable as defined under
market operator; and Subsec. X410.9, the trustee shall
(g) Such other tradable investments immediately provision to reflect fair value
outlets/categories as the BSP may allow. in accordance with generally accepted
Provided, That the investment of the peso accounting principles or as may be
UIT Fund in tradable foreign currency- prescribed by the BSP. If no fair value is
denominated financial instruments shall be available, the instrument shall be assumed
subject to Items “e” and “f” of Subsec. to be of no market value.
X409.6.
Provided further, That a financial § X410.11 Unit investment trust fund
instrument is regarded as tradable if administration support
quoted two-way prices are readily and a. Backroom operations. Administrative
regularly available from an exchange, rules on backroom under Sec. X421 shall
dealer, broker, industry group, pricing be applicable to UIT Fund. Adequate
service or regulatory agency, and those systems to support the daily marking-to-

§ X410.11
08.12.31
market of the fund’s financial instruments shall be done and all differences resolved
shall be in place at all times. In this respect, within the day.
a daily reconcilement of the fund’s resultant b. Custody of securities. Investments in
marked-to-market value with the unrealized securities of a UIT Fund shall be held for
market losses and gains (respective contra safekeeping by BSP accredited third party
asset balance) versus the book value of the custodians which shall perform independent
fund for investments in financial instruments marking-to-market of such securities.
(Next Page is Part IV - Page 33)
Manual of Regulations for Banks Part IV - Page 32a

§§ X410.12 - X411.1
08.12.31
§ X410.12 Counterparties § X411.1 Minimum documentary

a. Dealings with related interests/bank requirements. An investment management
proper/holding company/subsidiaries/ account shall be covered by a written
affiliates and related companies. A trustee document establishing such account, as
of a UIT Fund shall be transparent at all follows:
times and maintain an audit trail for all a. In the case of accounts created by
transactions with related parties or corporations, business firms, organizations
entities. The trustee shall observe the or institutions, the voluntary written
principle of best execution and no agreement or indenture entered into by the
purchase/sale shall be made with related parties, accompanied by a copy of the board
counterparties without considering at resolution or other evidence authorizing the
least two (2) competitive quotes from establishment of and designating the
other sources. signatories to, the investment management
b. Accreditation of counterparties. account.
The Fund shall only invest with approved b. In the case of accounts created by
counterparties qualified in accordance with individuals, the voluntary written
the policy duly approved by the Trust agreement or indenture entered into by the
Committee. Counterparties shall be parties.
subject to appropriate limits in accordance The voluntary written agreement or
with sound risk management principles. contract shall include the following
minimum provisions:
§ X410.13 Foreign currency- (1) Pre-numbered contractual
denominated unit investment trust funds agreement form;
UIT Fund denominated in any acceptable (2) Title or nature of contractual
foreign currency provided under existing agreement in noticeable print;
BSP rules and regulations may be (3) Legal capacities, in noticeable print,
established. Such fund may only be of parties sought to be covered;
invested in allowable investments (4) Purposes and objectives;
denominated in pesos or any acceptable (5) The initial amount of funds and/or
foreign currency as expressly allowed value of securities subject of the
under the fund’s plan rules and properly arrangement delivered to the investment
disclosed to fund participants. manager;
(6) Statement in underlined noticeable
§ X410.14 Exemptions from statutory print that:
and liquidity reserves, single borrower’s (a) The agreement is an agency and not
limit, director, officers, stockholders and a trust agreement. As such, the client shall
their related interests. The provisions on at all times retain legal title to funds and
reserves, single borrower’s limit and properties subject of the arrangement;
DOSRI ceilings under Subsec. X405.5, and (b) The arrangement does not guaranty
Secs. X303, X330 and X331, respectively, a yield, return or income by the investment
applicable to trust funds in general shall manager. As such, past performance of the
not be made applicable to UIT Funds. account is not a guaranty of future
performance and the income of investments
Sec. X411 Investment Management can fall as well as rise depending on
Activities. The conduct of investment prevailing market conditions; and
management activities shall be subject to (c) The investment management
the following regulations. agreement is not covered by the PDIC and

§§ X411.1 - X411.5
08.12.31
that losses, if any, shall be for the account of the instrument creating the investment
of the client; management relationship.
(7) Duties and powers of the When an investment manager is
investment manager; granted discretionary powers in the
(8) Liabilities of the investment investment disposition of investment
manager; management funds and unless otherwise
(9) Reports to the client; specifically enumerated in the agreement
(10) The amount or rate of the or indenture and directed in writing by the
compensation of the investment manager; client, loans and investments of the fund
(11) Terms and conditions governing shall be limited to:
withdrawals from the account; a. Evidences of indebtedness of the
(12) Termination of contractual Republic of the Philippines and of the BSP,
arrangement; and and any other evidences of indebtedness
(13) Disclosure requirements for or obligations the servicing and repayment
transactions requiring prior authority and/ of which are fully guaranteed by the
or specific written investment directives Republic of the Philippines or loans against
from the client. such government securities;
A sample investment management b. Loans fully guaranteed by the
agreement which conforms to the foregoing Republic of the Philippines as to the
requirements is shown as Appendix 24. payment of principal and interest;
c. Loans fully secured by a hold-out on,
§ X411.2 Minimum size of each assignment or pledge of deposits maintained
investment management account. No either with the bank proper or other banks,
investment management account shall be or of deposit substitutes of the bank, or
accepted or maintained for an amount less mortgage and chattel mortgage bonds
than P1.0 million. An investment issued by the investment manager; and
management account reduced to less than d. Loans fully secured by real estate
P1.0 million due to investment losses shall or chattels in accordance with Sections 37
be exempt from this requirement. and 38 of R.A. No. 8791, and subject to
the requirements of Sections 39 and 40 of
§ X411.3 Commingling of funds. Two R.A. No. 8791.
(2) or more individual investment The specific directives required under
management accounts shall not be this Subsection shall consist of the
commingled except for the purpose of following information:
investing in government securities or in (1) The transaction to be entered into;
duly registered commercial papers: (2) Borrower’s name;
Provided, That the participation of each of (3) Amount involved; and
the aforementioned accounts in the (4) Collateral security(ies), if any.
commingled account shall not be less than
P1.0 million: Provided, further, That such § X411.5 Transactions requiring prior
commingling has been duly disclosed and authority. An investment manager shall
specifically agreed in writing by the clients. not undertake any of the following
transactions for the account of a client,
§ X411.4 Lending and investment unless prior to its execution, such
disposition. Assets received in investment transaction has been fully disclosed and
management capacity shall be specifically authorized in writing by the
administered in accordance with the terms client:

§§ 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
09.12.31
or IMAs shall deposit with the BSP and no part of such surplus shall at any time
additional eligible government securities be paid out in dividends but losses accruing
under Subsec. X405.2 as security for the in the course of its business may be charged
faithful performance of trust duties or against surplus.
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 § X414.1 Prerequisites for engaging in
fiduciary business shall, before the investment management activities. A bank
declaration of dividends, carry to surplus at before it may engage in investment
least ten percent (10%) of its net profits management activities shall comply with the
realized out of its trust, investment following requirements:
management and other fiduciary business a. The bank has been duly licensed by
since the last preceding dividend declaration the BSP or created by special law or charter.
until the surplus shall amount to twenty b. The articles of incorporation or
percent (20%) of its authorized capital stock charter of the bank shall include among its

§§ X414.1 - X415.3
08.12.31
powers or purposes the authority to engage a. Government securities acceptable to

in investment management activities. the BSP amounting to P500,000 as minimum
c. The by-laws of the bank shall basic security deposit for the faithful
include, among other things: performance of investment management duties
(1) The organization plan or structure required under Subsec. X415.1;
of the department, office or unit which shall b. Organization chart of the investment
conduct the investment management management department which shall carry
activities of the institution; out the investment management activities of
(2) The creation of an investment the bank; and
management committee, the appointment c. Names and positions of individuals
of an investment management officer and designated as chairman and members of the
subordinate officers of the investment investment management committee,
management department; and investment management officer and other
(3) A clear definition of the duties and subordinate officers of the investment
responsibilities as well as the line and staff management department.
functional relationships of the various units,
officers and staff within the organization. Sec. X415 Security for the Faithful
d. The applicant shall also meet the Performance of Investment Management
following additional requirements: Activities
(1) It has continuously complied with
its net worth-to-risk assets ratio, liquidity § X415.1 Basic security deposit. A bank
floor, and ceilings on DOSRI loans for the authorized to engage in investment
last sixty (60) days immediately preceding management activities shall deposit with the
the date of application; BSP eligible government securities as
(2) It has not incurred net weekly security for the faithful performance of its
reserve deficiency against deposit liabilities investment management activities equivalent
and deposit substitutes during the last eight to at least one percent (1%) of the book value
(8) weeks immediately preceding the date of the total investment management assets:
of application; and Provided, That at no time shall such deposit
(3) It has shown substantial be less than P500,000.
compliance with other pertinent laws, rules Scripless securities under the RoSS
and regulations, policies and instructions system of the BTr may be used as basic
of the BSP; and has not been cited for security deposit for the faithful performance
serious violations or exceptions affecting its of investment management activities using
solvency, liquidity and profitability. the guidelines enumerated in Appendix 33.
Compliance with the foregoing as well
as with other requirements under existing § X415.2 Eligible securities. Securities
regulations, shall be maintained up to the enumerated in Subsec. X405.2 shall be
time the trust license is granted. A bank that eligible as security deposit for faithful
fails in this respect shall be required to show performance of investment management
compliance for another test period of the activities.
same duration.
§ X415.3 Valuation of securities and
§ X414.2 Pre-operating requirements basis of computation of the basic security
A bank authorized to engage in investment deposit requirement. For purposes of
management activities shall, before engaging determining compliance with the basic
in actual operations, submit to the BSP the security deposit under this Section, the
following: 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 time the violation is corrected.
investment management funds of the b. On the Head of the Investment
immediately 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 BSP securities required under this (2) Second offense - written reprimand
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
committed outside the preceding three (3)
UBs/KBs/TBs with Full Trust Authority and with Trust Assets of
million
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
09.12.31
where the CTFs, individual trust funds and agreement but shall not in any case be longer
investment management funds will be than once every quarter; and
invested. Likewise, the banks shall ensure d. The reports shall be made available
that the correct amount of final tax on the to clients not later than twenty (20) calendar
interest income on the interest-bearing days from the end of the reference date/
instruments is withheld/deducted from the period in Item “c” above.
proceeds from the CTF participation, trust
or IMA and remitted to the BIR in the event § X425.2 To the Bangko Sentral. A bank
said tax becomes due such as when funds acting as trustee, fiduciary or investment
are withdrawn before the required five (5)- manager shall submit periodic reports
year holding period or when corporations prescribed by the appropriate department
happen to invest in the tax-exempt trust of the SES on the bank’s trust and other
instruments created within the purview of fiduciary business and investment
R.A. No. 8424. management activities within the deadlines
indicated in Appendix 6.
Sec. X425 Reports Required
§ X425.3 Audited financial statements
§ X425.1 To trustor, beneficiary, The trust/investment management
principal. A bank acting as trustee, fiduciary department shall adopt the provisions of the
or investment manager shall render reports Philippine Financial Reporting Standards
on the trust, other fiduciary or IMAs to the (PFRS)/Philippine Accounting Standards
trustor, beneficiary, principal or other party (PAS) in all respect, for purposes of preparing
in interest or the court concerned or any the AFS of its trust and other fiduciary and
party duly designated by the court order, as investment management activities. The
the case may be, under the following following guidelines shall likewise be
guidelines: observed in the preparation of the AFS:
a. The reports shall be in such forms as (a) The provisions of PFRS/ PAS shall
to apprise the party concerned of the be adopted effective the annual financial
significant developments in the administration statements beginning 01 January 2008;
of the account and shall consist of: (b) A complete set of financial
(1) A balance sheet; statements shall comprise of the following:
(2) An income statement; (1) Balance sheet as of the end of the
(3) A schedule of earning assets of the period;
account; and (2) Income statement for the period;
(4) An investment activity report. (3) Statement of changes in
b. Items (3) and (4) above shall include accountabilities, which shall show a
at least the following: reconciliation of the net carrying amount at
(1) Name of issuer or borrower; the beginning and end of the period of the
(2) Type of instrument; following accounts:
(3) Collateral, if any; (i) principal;
(4) Amount invested; (ii) accumulated income; and
(5) Earning rate or yield; (iii) net unrealized gains/(losses) on
(6) Amount of earnings; available for sale financial assets, separately
(7) Transaction date; and disclosing the changes in each of the
(8) Maturity date; foregoing accounts;
c. The reports shall be prepared in (4) Notes, which shall comprise of a
such frequency as required under the summary of significant accounting policies

§§ X425.3 - X426.1
09.12.31
and other disclosure requirements provided (e) The following transitory rules and
under PFRS/PAS: Provided, That for regulations shall govern the accounting
purposes of complying with the disclosure treatment of specific items for purposes of
of the nature and extent of risks arising preparing the AFS for the financial reporting
from financial instruments as required under period beginning 01 January 2008:
PFRS 7, disclosure statements may be made (1) The provisions of PFRS/PAS shall only
based on the general categories of be applied to accounts outstanding as of end-
contractual relationships (i.e., UITF-trust, December 2008;
institutional-trust, and individual-trust; other (2) Reclassification of previously
fiduciary; institutional-agency, and recognized financial instruments shall no
individual-agency; and special purpose trust) longer be allowed except as allowed under
of the trust/investment management existing regulations;
department of a bank with its clients; and (3) The fair value of ROPA and
(5) Balance sheet as at the beginning Investment Properties as of the date of
of the earliest comparative period when a transition to PFRS/PAS may be used as the
trust/investment management department deemed cost of said properties as of that date:
applies an accounting policy retrospectively Provided, That said ROPA and Investment
or when it makes a retrospective restatement Properties shall be subsequently accounted
of items in the financial statements, or when for in accordance with the provisions of the
it reclassifies items in the financial 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
shall be presented for each of the general The LGU or its representative or its trustee
categories of contractual relationships (i.e., bank, as the case may be, shall submit to
UITF-trust, institutional-trust, and individual- the BSP the post-bond flotation report
trust; other fiduciary; institutional-agency, required in the Revised Guidelines on the
and individual-agency; and special purpose Flotation of Bonds by LGUs (Without
trust) of the trust/investment management National Government Guarantee)
department of a bank with its clients; (Appendix 57) that will indicate the actual
(d) Comparative information for amount of the issue as well as the final terms
periods before 01 January 2008 need not and conditions of the issue within the
be presented in the AFS for the financial deadline indicated in Appendix 6; and such
reporting period beginning 01 January 2008: other reports as may be required by the BSP.
Provided, That disclosure statements on the (As amended by Circular No. 653 dated 05 May 2009)
end-2007 balances of total assets of the
general categories of contractual Sec. X426 Audits
relationships of the trust/investment
management department of a bank with § X426.1 Internal audit. The bank’s
its clients prepared based on the Generally internal auditor shall include among his
Accepted Accounting Principles (GAAP) functions, the conduct of periodic audits of
previously applied, shall be presented in the trust department or investment
the notes to financial statements: management department at least once every
Provided, further, That comparative twelve (12) months. The board of directors,
periods shall be presented in the AFS for in a resolution entered in its minutes, may
the financial reporting period beginning also require the internal auditor to adopt a
01 January 2009 and thereafter. suitable continuous audit system to

§§ X426.1 - X428
09.12.31
supplement and/or to replace the periodic fiduciary; institu tional-agency, and

audit. In any case, the audit shall ascertain individual-agency; and special purpose trust)
whether the institution’s trust and other of the trust/investment management
fiduciary business and investment department of a bank with its clients
management activities have been following the format in Appendix 87.
administered in accordance with laws, BSP (As amended by Circular No. 653 dated 05 May 2009)
rules and regulations, and sound trust or
fiduciary principles. § 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 BSP. In case the surviving
activities, which shall cover at the minimum institution does not have previous
a review of the trust investment management authority but desires to engage in trust and
operations, practices and policies, including other fiduciary business and in investment
audit and internal control system, shall be management activities, it shall secure the
subject to auditing standards to the extent prior approval of the Monetary Board to
necessary to express an opinion on the engage in such business as part of its
financial statements. 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
supplemental audit report to be submitted resulting entity is an entirely new one, it shall
to the bank’s board of directors and to the secure from the Monetary Board an authority
BSP within the prescribed period containing, to engage in trust and other fiduciary
among other things, the complete set of business or in investment management
financial statements of the trust/ investment activities before it may engage in such
management department of a bank prepared business.
in accordance with the provisions of Subsec.
X425.3 together with the other information Sec. X428 Receivership. Whenever a
required by the BSP to be submitted under receiver is appointed by the Monetary Board
Subsec. X190.1: Provided, That a for a bank which is authorized to engage in
reconciliation statement of the balance sheet trust and other fiduciary business or in
in the AFS and the FRPTI shall be prepared investment management activities, the
for each of the general categories of receiver shall, pursuant to the instructions
contractual relationships (i.e., UITF-trust, of the Monetary Board, proceed to close the
institutional-trust, and individual trust; other trust, other fiduciary and IMAs promptly

§§ X428 - X441.4
11.12.31
and/or transfer all other accounts to guidelines in Appendix 68 shall be subject

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

§§ X441.4 - X441.5
11.12.31
and examining department of the BSP. The operations) and other related documents
application shall be signed by the highest embodying the risk management system
ranking officer of the bank and shall be must be submitted to the appropriate
accompanied by a certified true copy of the supervising and examining department at
resolution of the bank’s board of directors the time of application for authority and
authorizing the bank to engage in securities within thirty (30) days from updates;
custodianship and/or registry and, in the case f. It must have adequate technological
of a branch of a foreign bank, approval by capabilities and the necessary technical
its highest ranking regional officer with proof expertise to ensure the protection, safety and
of delegated authority from the bank’s board integrity of client assets, such as:
of directors. (1) It can maintain an electronic registry
dedicated to recording of accountabilities to
§ X441.5 Pre-qualification requirements its clients; and
for a securities custodian/registry (2) It has an updated and comprehensive
a. The securities custodian must be a computer security system covering system,
bank that is authorized to engage in network and telecommunication facilities that
investment management or trust business. will:
The securities registry must be a bank. (a) limit access only to authorized users;
b. It must have complied with the (b) preserve data integrity; and
minimum capital accounts required under (c) provide for audit trail of transactions.
existing regulations, as follows: g. It has complied, during the period
(1) Domestic banks. The minimum immediately preceding the date of
capital required under Subsec. X111.1 or the application, with the following:
minimum capital required for TBs operating (1) ceilings on credit accommodation to
in Metro Manila, whichever is higher. DOSRI; and
(2) Branches of foreign banks. The (2) single borrower’s limit.
minimum capital required under Subsec. h. It has no reserve deficiencies during
X105.4. the eight (8) weeks immediately preceding
c. Its risk-based capital adequacy ratio the date of application;
is not lower than twelve percent (12%) at i. It has set up the prescribed
the time of filing the application; allowances for probable losses, both general
d. It must have a CAMELS composite and specific, as of date of application;
rating of at least “4” (as rounded off) in the j. It has not been found engaging in
last regular examination; unsafe and unsound practices during the last
e. It must have in place a comprehensive six (6) months preceding the date of
risk management system approved by its application;
board of directors (or equivalent k. It has generally complied with laws,
management committee in the case of rules and regulations, orders or instructions
foreign bank branches) appropriate to its of the Monetary Board and/or BSP
operations characterized by a clear Management;
delineation of responsibility for risk l. It has submitted additional
management, adequate risk measurement documents/information which may be
systems, appropriately structured risk limits, requested by the appropriate supervision
effective internal control and complete, and examination department, such as, but
timely and efficient risk reporting systems. not limited to:
In this connection, a manual of operations (1) Standard custody/registry agreement
(which includes custody and/or registry and other standard documents;

§§ X441.5 - X441.8
11.12.31
(2) Organizational structure of the of securities held under custodianship:

custody/registry business; Provided, That the custodian shall
(3) Transaction flow; and immediately make known to the securities
(4) For those already in the custody or owner all collections received and payments
registry business, a historical background for made with respect to the securities under
the past three (3) years; custody.
m. It shall be conducted in a separate j. In addition to the above basic
unit headed by a qualified person with at functions, it may perform the value-added
least two (2) years experience in custody/ service of securities lending as agent:
registry operations; Provided, That it complies with the
n. It can interface with the clearing and pre-qualification requirements under Item
settlement system of any recognized “o” of Subsec. X441.5: Provided, further,
exchange in the country capable of That the securities lending service shall be
achieving a real time gross settlement of covered by a Securities Lending
trades; and Authorization Agreement (SLAA) which
o. A securities custodian which shall be attached to the custody contract.
provides the value-added service of A securities custodian which renders the
securities lending involving securities that value-added service of securities lending
are sold, offered for sale or distributed within involving securities that are sold, offered and
the Philippines must be a duly-licensed distributed within the Philippines shall
lending agent registered with the SEC. comply with all other pertinent rules
(As amended by Circular No. 714 dated 10 March 2011) and regulations of the SEC on securities
lending and borrowing operations.
§ X441.6 Functions and responsibilities (As amended by Circular No. 714 dated 10 March 2011)
of a securities custodian. A securities
custodian shall have the following basic § X441.7 Functions and responsibilities
functions and responsibilities: of a securities registry
a. Safekeeps the securities of the client; a. Maintains an electronic registry
b. Holds title to the securities in a book;
nominee capacity; b. Delivers confirmation of transactions
c. Executes purchase, sale and other and other documents within agreed trading
instructions; periods;
d. Performs at least a monthly c. Issues registry confirmations for
reconciliation to ensure that all positions are transfers of ownership as it occurs;
properly recorded and accounted for; d. Prepares regular statement of
e. Confirms tax withheld; securities balances at such frequency as may
f. Represents clients in corporate be required by the owner on record but not
actions in accordance with the direction less frequent than every quarter; and
provided by the securities owner; e. Follows appropriate legal
g. Conducts mark-to-market valuation documentation to govern its relationship
and statement rendition; with the Issuer.
h. Does earmarking of encumbrances
or liens such as, but not limited to, Deeds § X441.8 Protection of securities of the
of Assignment and court orders; and customer. A custodian must incorporate the
i. Acts as a collecting and paying agent following procedures in the discharge
in respect of dividends, interest earnings or of its functions in order to protect
proceeds from the sale/redemption/maturity the securities of the customer:

§§ X441.8 - X441.9
11.12.31
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
bank may be allowed to administer event 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 e. Periodic reporting. The custodian
that fully protect customer securities. It is shall prepare at least quarterly (or as frequent
essential that custodians segregate as the owner of securities will require)
customer securities from one another and securities statements delivered to the
from its proprietary holdings to protect the registered owner’s address on record. Said
same from the claims of its general statement shall present detailed information
creditors. such as, but not limited to, inventory of
Securities held under custodianship shall securities, outstanding balances, and market
be recorded in the books of the custodian values.
at the face value of said securities in the (As amended by Circular No.714 dated 10 March 2011)
off-balance sheet account “Securities Held
Under Custodianship by Bank Proper”, if § X441.9 Independence of the
booked in the Bank Proper, or the other registry and custodian. A BSP-accredited
fiduciary sub-account “Custodianship”, if securities registry must be a third party with
booked in the Trust Department. no subsidiary/affiliate relationship with the
Securities held under custodianship issuer of securities while a BSP-accredited
where the custodian performs the custodian must be a third party with no
value-added service of securities subsidiary/affiliate relationship with the
lending as agent shall be booked in the Trust issuer or seller of securities. A bank
Department. accredited by BSP as securities custodian
1
Existing BSP-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 this Subsection.

§§ X441.9 - X441.13
11.12.31
may, however, continue holding securities § X441.11 Confidentiality. A BSP-

it sold under the following cases: accredited securities custodian/registry shall
a. where the purchaser is a related not disclose to any unauthorized person any
entity acting in its own behalf and not as information relative to the securities under
agent or representative of another; its custodianship/registry. The Management
b. where the purchaser is a non-resident shall likewise ensure the confidentiality of
with existing global custody agreement client accounts of the custody or registry
governed by foreign laws and conventions unit from other units within the same
wherein the bank is designated as custodian organization.
or sub-custodian; and
c. upon approval by the BSP, where the § X441.12 Compliance with anti-money
purchaser is an insurance company whose laundering laws/regulations. For purposes
custody arrangement is either governed by of compliance with the requirements of R.A.
a global custody agreement where the bank No. 9160, otherwise known as the
is designated as custodian or sub-custodian “Anti-Money Laundering Act of 2001,” as
or by a direct custody agreement with amended, particularly the provisions regarding
features at par with the standards set under customer identification, record keeping and
this Subsection drawn or prepared by the reporting of suspicious transactions, a
parent company owning more than fifty BSP-accredited custodian may rely on
percent (50%) of the capital stock of the referral by the seller issuer of securities:
purchaser and executed by the purchaser Provided, That it maintains a record of such
itself and its custodian. referral together with the minimum
Purchases by non-residents and identification, information/documents
insurance companies that are exempted required under the law and its implement-
from the independence requirement of this ing rules and regulations.
Section shall, however, be subject to all A BSP-accredited custodian must
other provisions of this Subsection maintain accounts only in the true and full
name of the owners of the security.
§ X441.10 Registry of scripless However, said securities owners may be
securities of the Bureau of the Treasury identified by number or code in reports and
The Registry of Scripless Securities (RoSS), correspondences to keep his identity
operated by the Bureau of the Treasury, confidential.
which is acting as a registry for government Securities subject of pledge and/or deed
securities is deemed to be automatically of assignment as of 14 October 2004 (date
accredited for purposes of this Section and of Circular 457), may be held by a lending
is likewise exempted from the bank up to the original maturity of the loan
independence requirement under Subsec. or full payment thereof, whichever comes
X441.9. However, securities registered earlier.
under the RoSS shall only be considered
delivered if said securities were transferred § X441.13 Basic security deposit
by means of book entry to the appropriate Securities held under custodianship whether
securities account of the purchaser or his booked in the Trust Department
designated custodian. Book entry transfer or carried in the regular books of the bank
to a sub-account for clients under shall be subject to a security deposit for
the primary account of the seller shall not faithful performance of duties at the rate of
constitute delivery for purposes of this 1/25 of one percent (1%) of the total face
Section and of Subsecs. X235.5 and X238.1. value or P500,000 whichever is higher.

§§ X441.13 - X499
11.12.31
However, securities held under the date the violation was committed up to
custodianship where the custodian also the date it was corrected; and
performs securities lending as agent shall (2) Suspension for ninety (90) days
be subject to a higher basic security deposit without pay of directors/officer responsible
of one percent (1%) of the total face value. for the violation.
Compliance shall be in the form of c. Subsequent offenses –
government securities deposited with the (1) Fine of up to P30,000 a day for the
BSP eligible pursuant to existing regulations institution for each violation from the date
governing security for the faithful the violation was committed up to the date
performance of trust and other fiduciary it was corrected;
business. (2) Suspension or revocation of the
(As amended by Circular No.714 dated 10 March 2011) authority to act as securities custodian and/
or registry; and
§ X441.14 Reportorial requirements (3) Suspension for one hundred twenty
An accredited securities custodian shall (120) days without pay of the directors/
comply with reportorial requirements that officers responsible for the violation.
may be prescribed by the BSP, which shall
include as a minimum, the face and market Secs. X442 – X498 (Reserved)
value of securities held under custodianship.
D. GENERAL PROVISION ON
§§ X441.15 – X441.28 (Reserved) SANCTIONS
§ X441.29 Sanctions. Without prejudice Sec. X499 Sanctions. Any violation of the
to the penal and administrative sanctions provisions of this Part shall be subject to
provided for under Sections 36 and 37, Sections 36 and 37 of R.A. No. 7653
respectively, of the R.A. No. 7653, without prejudice to the imposition of
violation of any provision of this Section other sanctions as the Monetary Board
shall be subject to the following sanctions/ may consider warranted under the
penalties: circumstances that may include the
a. First offense – suspension or revocation of a bank’s
(1) Fine of up to P10,000 a day for the authority to engage in trust and other
institution for each violation reckoned from fiduciary business or in investment
the date the violation was committed up to management activities, and such other
the date it was corrected; and sanctions as may be provided by law.
(2) Reprimand for the directors/officers The guidelines for the imposition of
responsible for the violation. monetary penalty for violations/offenses
b. Second offense - with sanctions falling under Section 37 of
(1) Fine of up to P20,000 a day for the R.A. No. 7653 on banks, their directors and
institution for each violation reckoned from or officers are shown in Appendix 67.

Sections 1 - 2
10.12.31
PART FIVE
MANUAL OF REGULATIONS ON
FOREIGN EXCHANGE TRANSACTIONS
PART ONE. CURRENT ACCOUNTS for Non-Trade Current Account

Transactions with Non-Residents. AABs
Chapter I and AAB-forex corps may sell foreign
exchange to residents to cover payments
NON-TRADE FOREIGN EXCHANGE to non-resident beneficiaries for non-trade
RECEIPTS AND DISBURSEMENTS, current account purposes (e.g.,
CROSS-BORDER TRANSFER OF LOCAL educational expenses, medical expenses,
AND FOREIGN CURRENCIES, AND travel expenses and salaries of foreign
GOLD TRANSACTIONS expatriates) other than those relating to
foreign/foreign currency loans and
Section 1. Disposition of Foreign Exchange investments, without need for prior BSP
Receipts. Foreign exchange receipts, approval, subject to the the submission/
acquisitions or earnings of residents from presentation of the following to the foreign
non-trade sources may be used freely for exchange selling institution:
any purpose. Such proceeds may, at the option 1. For sales not exceeding USD60,000
of said residents, be sold for pesos, retained or its equivalent in other foreign currency
or deposited in foreign currency accounts, - Duly accomplished application to
whether in the Philippines or abroad. purchase foreign exchange using the
Resident shall refer to: prescribed format (Annex A);
a. an individual citizen of the 2. For sales exceeding USD60,000 or
Philippines residing therein; or its equivalent in other foreign currency
b. an individual who is not a citizen - Duly accomplished application to
of the Philippines but is permanently purchase foreign exchange using the
residing1 therein; or prescribed format (Annex A) and
c. a corporation or other juridical supported by documents prescribed under
person organized under the laws of the Item "A" of Appendix 1.
Philippines; or The authority to purchase foreign
d. a branch, subsidiary, affiliate, exchange for non-trade current account
extension office or any other unit of purposes does not include purchases of
corporations or juridical persons which are foreign exchange for direct credit to or
organized under the laws of any country and deposit in the purchasers’ foreign currency
operating in the Philippines, except OBUs. deposit unit account.
Non-resident shall refer to an All foreign exchange purchases for non-
individual, a corporation or other juridical trade current account transactions shall be
person not included in the definition of directly remitted to the intended non-
resident. resident beneficiary’s account (whether
offshore or onshore). Exceptions to this rule
Section 2. Sale of Foreign Exchange to include travel funds, medical expenses
Residents by AABs and AAB-Forex Corps abroad not yet incurred, and sales proceeds
1
Residents include any individual, citizen or otherwise, who has resided in the Philippines for a year or longer, as defined
in Section 83 of the International Monetary Fund (IMF) Balance of Payments Textbook, 1996.
Manual of Regulations for Banks Part V- Page 1

Sections 2 - 6
11.12.31
of emigrant’s domestic assets if emigrant is denominated bearer monetary instruments”

still in the country. shall refer to the following foreign
(As amended by Circular No. 698 dated 05 November 2010) exchange-denominated instruments in
bearer form whereby title thereto passes to
Section 3. Sale of Foreign Exchange to Non- another by endorsement, assignment or
Resident Tourists/Balikbayans by AABs and delivery: travelers’ checks, other checks,
AAB-Forex Corps. AABs and AAB-forex drafts, notes, money orders, bonds, deposit
corps may sell foreign exchange to non- certificates, securities, commercial papers,
resident tourists or balikbayans to the extent trust certificates, custodial receipts, deposit
of the amount shown to have been sold by substitute instruments, trading orders,
them for pesos to said entities. Departing transaction tickets and confirmation of sale/
non-resident tourists or balikbayans may investment.
reconvert at airports or other ports of exit
unspent pesos to a maximum of USD5,000 Section 5. Buying and Selling of Gold by
or its equivalent in other foreign currency Residents
calculated at prevailing exchange rates, 1. Except as provided in this Manual,
without showing proof/s of previous sale of gold and gold-bearing metals may be
foreign exchange for pesos. bought and sold without specific approval
(As amended by Circular No. 698 dated 05 November 2010) of the BSP.
2. Gold from small-scale mining,
Section 4. Cross-Border Transfer of Local including panned-gold, shall be sold to the
and Foreign Currencies BSP pursuant to Republic Act No. 7076
1. Local Currency. No person may (People’s Small-Scale Mining Act of 1991)
import or export nor bring with him into or dated 27 June 1991. All other forms or types
take out of the country, or electronically of gold may, at the option of the owner or
transfer, legal tender Philippine notes and producer thereof and with the consent of
coins, checks, money order and other bills the BSP, be sold and delivered to the BSP.
of exchange drawn in pesos against banks The BSP may sell gold grains/pellets/
operating in the Philippines in an amount bars and sheets to local jewelry
exceeding PHP10,000.00 without manufacturers and other industrial users
authorization by the BSP. upon application, or to banks exclusively
The term “electronic transfer” as used for re-sale to jewelry manufacturers/
herein shall mean a system where the industrial users, at the BSP’s gold-selling
authority to debit or credit an account (bank, price plus a service fee to cover costs
business or individual) is provided by wire, including cost of conversion and packaging.
with or without a source document being
mailed to evidence the authority. Chapter II
2. Foreign Currency. Any person, who
brings into or takes out of the Philippines FOREIGN MERCHANDISE TRADE
foreign currency, as well as other foreign TRANSACTIONS
currency-denominated bearer monetary
instruments, in excess of USD10,000 or its A. IMPORT TRADE TRANSACTIONS
equivalent, is required to declare the same
in writing and to furnish information on the Section 6. General Policy. As a general
source and purpose of the transport of such rule, all kinds of merchandise imports are
currency or monetary instrument. allowed. However, the importation of
As used herein, “other foreign currency- certain commodities are regulated or
Part V- Page 2 Manual of Regulations for Banks

Sections 6 - 11
11.12.31
prohibited for reasons of public health and foreign exchange for trade transactions
safety, national security, international under Appendix 4:
commitments, and development/ 1. Letter of Credit (L/C);
rationalization of local industry. 2. Documents Against Payment (D/P);
Foreign exchange purchased from 3. Documents Against Acceptance (D/A);
AABs/AAB-forex corps to service 4. Open Account (O/A);
importations shall be directly remitted to the 5. Direct Remittance (DR); and
non-resident beneficiary on the date of 6. Advance Payment.
purchase. However, foreign exchange
purchases may be credited to FCDU deposit Section 9. Letter of Credit (L/C)
accounts of the importer pending remittance 1. All L/Cs must be opened on or before
to the non-resident beneficiary: Provided, the date of shipment and only one (1) L/C
That the importer shall execute a waiver of should be opened for each import
the requirements of R.A. No. 6426 (Foreign transaction. For purposes of opening an L/C,
Currency Deposit Act) dated 04 April 1974, importers shall submit to the AAB the
as amended, on the secrecy of foreign documents listed in Appendix 5.
currency deposits upon purchase of foreign Amendments of L/Cs need not be referred
exchange to enable the BSP to validate the to the BSP for prior approval. L/Cs shall
authenticity of the credits and eventual be negotiated in accordance with the terms
remittance of the funds. and conditions set forth in the L/C and shall
(As amended by Circular No. 742 dated 21 November 2011) be governed by the Uniform Customs and
Practices on Documentary Credits.
Section 7. Classification of Imports 2. Deferred L/Cs shall be governed by
Imports are classified as follows: the pertinent provisions of Part Two,
1. Freely Importable Commodities. Chapter 1 hereof (Loans and Guarantees).
These are commodities the importation of For this purpose, deferred L/Cs refer to those
which is neither regulated nor prohibited with payment terms of more than one year
as defined under (2) and (3) hereunder. The reckoned from initial shipment date.
importation may be effected without the (As amended by Circular No. 742 dated 21 November 2011)
prior approval of or clearance from any
government agency. Section 10. Documents Against Payment (D/P)
2. Regulated Commodities. These are 1. Under the D/P arrangement, AABs
commodities, listed in Appendix 2, the shall advise the importer of the receipt of
importation of which requires clearances/ the complete original shipping documents
permits from appropriate government and effect the release of said documents to
agencies including the BSP. the importer upon receipt of payment.
3. Prohibited Commodities. These are 2. AABs shall remit payment to the
commodities, listed in Appendices 3 and supplier through the correspondent bank
3.1, the importation of which is not allowed abroad.
under existing laws.
Section 11. Documents Against Acceptance
Section 8. Modes of Payment for Imports (D/A) and Open Account (O/A)
AABs and AAB-forex corps may sell foreign Arrangements. Under a D/A arrangement, the
exchange to service payments for imports original shipping documents are released
under any of the following arrangements to the importer by the AAB concerned at
subject to the provisions of Sections 9 to 13 the instance of the seller’s bank upon the
and the guidelines covering the sale of importer’s acceptance of the seller’s bill of

Sections 11 - 16
11.12.31
exchange obligating the importer to pay for Section 14. Other Import Arrangements
the shipment at some future date. Under an The following import arrangements are also
O/A arrangement, the said documents are allowed without prior BSP approval:
released by the seller directly to the importer 1. Self-Funded/”No Dollar” Imports.
without coursing the documents through the These are imports funded by importer’s own
banks, upon the importer’s promise to pay foreign currency deposit accounts or those
at some future date. As used herein, an sent by suppliers abroad for which no
import transaction to be considered under payment in foreign exchange will be made
D/A or O/A must be payable at least 30 days whether immediate or potential.
after bill of lading (B/L) or airway bill (AWB) 2. Importations on Consignment Basis.
shipment date. These are importations by export producers
The guidelines for reporting, payments of raw materials and accessories/supplies
and extensions of imports under D/A or O/A from foreign suppliers/buyers abroad for the
arrangements are shown in Appendix 6. manufacture or processing of products
destined for export to said foreign suppliers/
Section 12. Direct Remittance (DR). AABs buyers. These shall also include machinery/
and AAB-forex corps may service within equipment and spare parts consigned to the
twenty nine (29) calendar days after B/L or local manufacturer/processor for eventual
AWB shipment date applications for direct re-export to the consignor: Provided, That
remittance of import payments upon the equipment involved shall be used only
presentation of the complete original in connection with the processing of
shipping documents, in accordance with products for export.
existing rules, and if applicable, import
clearance, for regulated items issued by B. EXPORT TRADE TRANSACTIONS
concerned government agencies. If the 29th
day falls on a non-banking day, the following Section 15. General Policy. It is the policy
banking day shall apply and the importation of the BSP to encourage commodity exports
will still be considered DR. which generate foreign exchange earnings
for the country. Accordingly, commodity
Section 13. Advance Payment. AABs and exports are allowed without restriction
AAB-forex corps may sell foreign exchange except for certain commodities which are
to importers without prior BSP approval, for regulated or prohibited for reasons of
advance payment for importations subject national interest or by provision of law.
to the guidelines under Appendix 7 hereof,
including documents prescribed thereunder. Section 16. Classification of Exports
The foreign exchange selling/remitting AAB 1. Freely Exportable Commodities.
shall report these transactions to the BSP- These are commodities the exportation of
International Operations Department (IOD) which is neither regulated nor prohibited.
using the prescribed forms (Annexes B and They may be effected without prior approval
C). All applications to purchase foreign of or clearance from any government
exchange in excess of USD1.0 million or agency.
its equivalent in other foreign currency to 2. Regulated Commodities. These are
service advance payment for importation commodities the exportation of which
shall be filed directly with the BSP-IOD for requires clearances/permits from
prior approval. appropriate products with the appropriate
(As amended by Circular Nos. 742 dated 21 November 2011 government agencies/offices is shown in
and Circular No. 698 dated 05 November 2010) Appendix 8.

Sections 16 - 20
09.12.31
3. Prohibited Exports. These are 1) U.S. dollar

commodities the exportation or sale of 2) Japanese yen
which is prohibited/penalized by law 3) Pound sterling
(Appendix 9). 4) Euro
5) Hong Kong dollar
Section 17. Export Declaration 6) Swiss franc
All export shipments shall be covered 7) Canadian dollar
by an Export Declaration using the 8) Singapore dollar
prescribed form. AABs or OBUs shall 9) Australian dollar
require submission, for record purposes, of 10) Saudi riyal
a copy of the duly accomplished Export 11) Bahrain dinar
Declaration form if the export negotiation 12) Brunei dollar
or payment of the pertinent export shipment 13) Indonesian rupiah
is coursed through them. 14) Thai baht
15) United Arab Emirates dirham
Section 18. Modes and Currency of 16) Chinese renminbi or yuan
Payment 17) Korean won
1. Authorized Modes. Payments for 18) Such other currencies that may be
exports may be made under any of the declared acceptable by the BSP
following modes without prior BSP b. Payments may, however, be made
approval: in Philippine pesos for the following:
a. Letter of Credit (L/C); 1) Exports to ASEAN countries:
b. Documents Against Payment (D/P)/ Provided, That the BSP shall not be asked
Cash Against Documents (CAD); to intervene in the clearing of any balances
c. Documents Against Acceptance (D/A); from this payments scheme; and
d. Open Account (O/A); 2) Gold sales to the BSP which are
e. Intercompany Open Account Offset considered as constructive exports.
(Interco O/A) Arrangement (can be availed
of only by firms with parent/affiliate Section 19. Negotiation Procedures
relationship abroad); and The exporter shall negotiate his bill of
f. Consignment. exchange/account with the AAB or OBU
2. Other Authorized Modes. Payments together with the bill of lading (B/L)/airway
for exports may also be made through export bill (AWB), signed commercial invoice and
advances without prior approval of the BSP. other documents as required.
Export advances shall refer to all payments/ In case of availments of export
remittances received before shipment, advances, the AAB through which the
including prepayments and Red Clause availment was made must also be the same
advances. bank to negotiate the export documents.
Bank draft/telegraphic transfer, buyer’s
checks, traveler’s checks or acceptable Section 20. Disposition of Export
foreign currency notes may be used in Proceeds. Foreign exchange receipts,
prepayment/export advance, but for buyer’s acquisitions or earnings of residents from
checks, the same shall be cleared before exports may be used freely for any
shipment. purpose. Such proceeds may, at the option
3. Acceptable Currencies of the exporter, be sold for pesos, retained,
a. Payments for exports may be made or deposited in foreign currency accounts,
in the following currencies: whether in the Philippines or abroad.

Sections 21 - 22
11.12.31
Section 21. Gold and Constructive Exports Foreign Currency Deposit Units (EFCDUs)
1. Gold. All exports of gold in any of banks shall be referred to the BSP for prior
form may be allowed except for gold from approval, unless otherwise indicated herein.
small-scale mining, including panned gold, Other private sector loans from these
which is required to be sold to the BSP creditors and other financing schemes/
pursuant to Republic Act No. 7076. arrangements shall require prior approval
2. Constructive Exports. The following and/or registration by the BSP if these will
sales of residents paid for in foreign currency ultimately involve foreign exchange
shall be considered as constructive exports: purchased from AABs or AAB-forex corps.
a. Gold sales to the BSP even if paid 1. The required BSP approval shall be
for in Philippine currency; obtained as follows:
b. Sales of residents paid for in foreign a. For public sector loans – Applications
currency to the following entities: for loan approval shall be filed with the BSP
1) Bonded manufacturing warehouses using the prescribed form (Annex D.1)
of export producers/manufacturers; together with all the required supporting
2) Export processing zones; documents/information,before
3) Board of Investments (BOI)- commencement of actual negotiations, or
registered export traders operating bonded before issuing a mandate of commitment to
trading warehouses supplying raw materials foreign funders/arrangers; and
used in the manufacture of export products; b. For private sector loans – Applications
4) Diplomatic missions in the for loan approval shall be filed with the BSP
Philippines; using the prescribed form (Annex D.2)
5) Duty Free Philippines, Inc. (DFP); and together with all the required supporting
6) Foreign buyers of goods/products to documents/information, at least thirty (30)
be delivered directly to local consumers at banking days before the target signing date
the instruction of the former and paid for in of the loan documents and/or initial
foreign currency. drawdown date, whichever is earlier.
An Export Declaration for each sale 2. Resident companies/entities
shall be accomplished: Provided, That the intending to obtain medium- and long-term
exporter shall submit a delivery receipt signed foreign loans or issue bonds/notes/debt
by the buyer in lieu of the B/L or AWB. securities offshore shall submit to the BSP-
IOD their annual foreign borrowings plan
PART TWO. CAPITAL ACCOUNTS as follows:
a. Public sector entities, including the
Chapter I National Government – every end-
September for borrowings for the following
LOANS AND GUARANTEES year, regardless of amount; and
b. Private sector entities, with planned
Section 22. The BSP shall regulate foreign/ aggregate annual borrowing of at lease
foreign currency loans to ensure that USD10 million, or its equivalent - every
principal and interest owed to creditors can end-September for borrowings for the
be serviced in an orderly manner and with following year.
due regard to the economy’s overall debt The timetable and any changes on the
servicing capacity. All public and publicly- submitted foreign borrowings plan shall be
guaranteed private sector obligations from communicated to the BSP-IOD within two
foreign creditors, OBUs and Foreign (2) weeks upon availability of information
Currency Deposit Units (FCDUs)/Expanded for monitoring and programming purposes.

Sections 22 - 24
11.12.31
3. Private sector loans that are submitted c. to be granted by FCDUs/EFCDUs

to the BSP for approval or registration that and specifically or directly funded from, or
were not included under a foreign collateralized by offshore loans or deposits.
borrowings plan as required in Item 2 of 3. Loans with maturities exceeding one
this Section shall be assessed an additional (1) year to be obtained by private non-bank
fee equivalent to ten percent (10%) of the financial institutions intended for relending
applicable processing fee for BSP approval/ to public or private sector enterprises.
registration, as indicated under Appendix 4. Other loans irrespective of maturity
20. and currency if to be serviced using foreign
4. For statistical purposes, all foreign exchange purchased by the borrower/
loans obtained by private sector entities, creditor/guarantor from AABs or AAB-forex
whether or not these are BSP-approved/ corps and not covered by Section 24.
registered, shall be regularly reported to the Applications submitted to the BSP with
BSP-IOD, using the prescribed forms signed loan documents and/or loan proceeds
(Annexes E.1 and E.2) within the required already drawn shall no longer be eligible
deadline until the obligations are fully for BSP approval and registration.
extinguished. (As amended by Circular No. 742 dated 21 November 2011)
5. AABs shall not extend peso financing
to non-residents unless explicitly allowed Section 24. Loans Not Requiring Prior BSP
under existing BSP rules. Approval. The following loans may be
(As amended by Circular No. 742 dated 21 November 2011) granted without prior approval of the BSP:
1. a. Loans of resident private sector
Section 23. Loans Requiring Prior BSP borrowers from FCDUs/EFCDUs/offshore
Approval. Prior BSP approval shall be sources, irrespective of maturity, that will
required for the following loans: be serviced using foreign exchange
1. Loans of the following public sector purchased from entities that are not AABs
entities irrespective of maturity, creditor and or AAB-forex corps.
the source of foreign exchange for servicing b. Loans of non-residents from
thereof, except short-term FCDU/EFCDU FCDUs/ EFCDUs, irrespective of maturity:
loans covered by Section 24.4: Provided, That the loan shall be serviced
a. National Government, its agencies using foreign exchange purchased from
and instrumentalities; entities that are not AABs or AAB-forex corps.
b. Government-owned/controlled 2. Short-term loans of financial
corporations (GOCCs); institutions, both public and private for
c. Government financial institutions normal interbank transactions, e.g.,
(GFIs), except short-term normal interbank interbank call loans.
borrowings; Short-term loans of the private sector in
d. Local government units (LGUs); and the form of export advances from buyers
e. Other public sector entities. abroad.
2. Loans of the private sector irrespective 4. Short-term loans of the following
of maturity, creditor and the source of private and public sector borrowers from
foreign exchange for servicing thereof if: FCDUs/EFCDUs:
a. guaranteed by government a. Commodity and service exporters:
corporations and/or government financial Provided, That these loans are used to
institutions; finance export-related import costs of goods
b. covered by foreign exchange and services as well as peso cost
guarantees issued by AABs; and requirements.

Section 24
11.12.31
Service exporters shall refer to not be refinanced by a medium- /long-term

Philippine residents engaged or proposing foreign currency loan;
to engage in rendering technical, c. Proceeds of loans intended to pay
professional or other services which are for foreign exchange requirements may be
paid for in foreign exchange. paid directly to the supplier/creditor, while
Indirect exporters may likewise borrow amounts intended to fund pre-export peso
to fund export-related costs, which may costs shall be inwardly remitted and sold
include both foreign exchange as well as for pesos to AABs;
peso costs. Indirect exporters shall refer to d. Drawdown and registration
cottage/small and medium industries requirements under Sections 27 and 28
(producers/manufacturers) that have supply hereof shall be complied with;
arrangements with direct exporters who are e. Any assignment of the loan by the
holders of an export letter of credit or a creditor concerned shall be reported to the
confirmed purchase order/sales contract BSP within five (5) days from date of
from a foreign buyer. assignment;
b. Producers/manufacturers, including f. Creditor banks shall submit the
oil companies and public utility concerns: following reports to the BSP:
Provided, That the loans are used to finance i. Their lending program for private
import costs of goods and services necessary sector borrowers for the next six (6) months
in the production of goods by the borrower indicating their proposed credit limit
concerned. Producers/manufacturers shall together with a list of prospective borrowers/
refer to persons or entities that undertake beneficiaries; and
the processing/conversion of raw materials ii. Monthly report on loans granted
into marketable form through physical, to residents using Schedule 4A (Part I)
mechanical, chemical, or other means or by & 4B (Part II) - Consolidated Report
special treatment or a series of actions that on Loans Granted by OBUs to Residents
result in a change in the nature or state of - to the “Statement of Assets and
the products. Liabilities” of OBUs, and similar reports
Public utility firms shall refer to business by foreign banks with branches in the
organizations that regularly supply the public Philippines.
with commodities or services such as g. The borrowers shall submit monthly
electricity, gas, water, transportation, reports on transactions and status of their
telegraph/telephone services and the like. short-term loans within three (3) banking
5. Short-term loans of private days after end of reference month using the
exporters/importers from OBUs and foreign prescribed form (Annex F).
banks with branches in the Philippines: 6. Short-term loans of private
Provided, That: exporters/importers from other offshore
a. The loans are not covered by a sources/creditors: Provided, That all
guarantee from a government financial provisions of Section 24.5 are complied
institution/corporation; with, except Item (f), and that the loans shall
b. The loans shall be exclusively used be granted against BSP-approved short-term
to finance specific trade transactions, i.e., relending programs of foreign creditors.
to liquidate/pay for import obligations and/ Creditors shall submit to the BSP for
or in the case of export financing approval their short-term relending program
transactions, to fund the borrower’s for Philippine borrowers indicating their
pre-export financing requirements and shall proposed credit limit together with a list of

Sections 24 - 26
11.12.31
prospective borrowers/beneficiaries. These Medium-Term Public Investment Program

relending programs shall be valid for one (MTPIP);
(1) year. e. Development of industrial estates
7. Private sector loans not guaranteed and economic zones;
by foreign governments/official export credit f. Socialized/Low-cost housing
agencies covering importation of freely projects;
importable commodities under deferred g. Acquisition of non-performing
L/Cs or D/A-O/A arrangements with a term assets/loans (NPAs/NPLs) of banks and
of more than one (1) year. other GFIs;
8. Private sector intercompany loans h. Acquisition of government assets
granted by foreign companies to their local approved for privatization;
branches/subsidiaries, irrespective of i. Other projects that may be
amount and maturity: Provided, That these declared priority under the country’s
are used to finance eligible projects/costs socio-economic development plan by the
cited under Section 25. For purposes of National Economic and Development
this Item, intercompany loans shall Authority or by Congress;
include those granted by foreign branches j. Refinancing of existing loans used
and wholly-owned subsidiaries of a for eligible projects/costs which are eligible
foreign parent company as well as other for servicing using foreign exchange sourced
subsidiaries of the parent company but from AABs or AAB-forex corps.; and
shall exclude those loans that are intended k. Microfinance activities.
to refinance existing obligations: 2. Short-term loans shall finance
Provided, That, in the case of other exclusively foreign exchange requirements
subsidiaries, the loan/s shall be fully of eligible projects, except as may be
guaranteed by the parent company. specifically allowed under this Manual.
9. Loans of resident private sector Medium- and long-term loans may finance
borrowers from FCDUs/EFCDUs/offshore foreign exchange costs as well as peso costs
sources that are not publicly-guaranteed (excluding working capital) of eligible
to finance infrastructure projects included projects.
in the Government’s list of Public Private (As amended by Circular No. 742 dated 21 November 2011)
Partnership (PPP) projects. The exemption
of these loans from prior BSP approval Section 26. Terms of Loans
shall be valid up to three (3) years 1. Loans shall have terms reflective of
reckoned from 10 December 2011. those prevailing in the international capital
(As amended by Circular No. 742 dated 21 November 2011) markets.
2. Terms of loans to be obtained by
Section 25. Projects/Costs Eligible for the National Government and other public
Foreign Financing sector entities shall be in accordance with
1. Loans submitted for prior BSP the provisions of pertinent laws/
approval shall finance the following types regulations governing public sector
of projects/activities: borrowings.
a. Export-oriented projects; 3. The Monetary Board may require
b. Projects registered with the BOI; longer grace/maturity periods for medium
c. Priority investment areas under the and long-term loans involving large amounts
current Investment Priorities Plan (IPP); to reduce the impact thereof on debt
d. Activities listed in the current servicing.

Sections 27 - 29
11.12.31
Section 27. Drawdown/Availment on by the Monetary Board are deemed

Loans. Loans intended to be serviced using registered.
foreign exchange purchased from AABs or 2. Loans shall be registered by the BSP
AAB-forex corps shall comply with the upon the borrower’s compliance with the
following procedures/conditions for terms and conditions imposed under the BSP
drawdown: approval of the loan and/or pertinent
1. Loan proceeds shall be used solely provisions of this Manual, including
for the purpose/s as approved by the BSP or submission of required documents and
considered eligible for foreign financing information.
under the rules herein. 3. Loans granted under Sections 24.4
2. Loan proceeds intended to fund and 24.5 that are duly reported to the BSP
local costs (i.e., those payable to residents) using the prescribed forms (IOS Form 4 and
shall be inwardly remitted and sold for pesos Schedule 4A (Part I) & 4B (Part II)-
to AABs. Consolidated Report on Loans Granted by
3. Amounts intended to finance OBUs to Residents, respectively) are
foreign exchange costs (i.e., those payable deemed registered.
to non-residents) need not be inwardly 4. Loans requiring prior BSP approval
remitted but may either be paid directly to which have been signed and/or drawn/
the non-resident supplier/beneficiary availed of prior to securing the requisite
concerned or deposited in a foreign approval shall not be eligible for registration
exchange account pending utilization of the and subsequent servicing using foreign
funds unless covered by Section 27.4. exchange purchased from AABs or AAB-
4. Pending utilization, foreign forex corps.
exchange proceeds of loans and bond/note (As amended by Circular No. 742 dated 21 November 2011)
issues of the public sector shall be deposited
with the BSP pursuant to Section 113 of Section 29. Servicing of Loans1
Republic Act No. 7653 (The New Central 1. All foreign exchange purchases from
Bank Act) dated 14 June 1993. AABs or AAB-forex corps for servicing of
foreign/foreign currency loans shall be
Section 28. Registration of Loans directly remitted to the creditor/beneficiary
1. Loans shall be registered with the concerned on the day of purchase, unless
BSP to be eligible for servicing using foreign otherwise explicitly allowed by BSP.
exchange purchased from AABs or AAB- 2. Payments for principal, interest, fees
forex corps. Applications for registration of and related charges on loans duly registered
private sector loans shall be filed by the with the BSP may be remitted through AABs
borrower with the BSP within ten (10) as these fall due without prior BSP approval
banking days from drawdown date for provided such interest, fees and charges are
short-term loans and three (3) months from indicated in the BSP registration document,
utilization of loan proceeds for medium and and upon presentation of documents
long-term loans using the prescribed forms prescribed under Item B of Appendix 1
(Annex D.2). Private sector loans that do not hereof.
require prior BSP approval but are submitted 3. Payments for the following shall,
to the BSP for registration shall be charged however, be subject to prior BSP approval:
a processing fee indicated in Appendix 20. a. Prepayment of public sector/
Public sector loans extended final approval publicly guaranteed private sector loans;
1
Guidelines on the three (3) months temporary window for the purchase of FX to service unregistered
private sector foreign loans issued under Cir. 741 dated 17 November 2011

Sections 29 - 30
10.12.31
b. All loans that are past due for more full amount to the creditor at the target
than thirty (30) calendar days reckoned as prepayment date.
follows: e. The foreign exchange selling institution
(1) For short-term loans, from the 360th shall see to it that documents evidencing
day after availment; and payment of applicable documentary stamp
(2) For MLT loans, from original tax, if any, are presented/available.
maturity date. f. The foreign exchange sold shall be
c. Other loan-related fees/charges not duly reported by the foreign exchange-selling
authorized by the BSP; and AAB under FX Form 1 (Consolidated Report
d. Loans covered by official on Foreign Exchange Assets & Liabilities)-
rescheduling with Paris Club creditors. Schedule 4 following the deadline for
4. AABs and AAB-forex corps may sell submission of FX Form 1.
foreign exchange for prepayments (i.e., 5. Applications to purchase foreign
payments before original due dates) of MLT exchange for servicing of loan-related
private sector loans (including bonds and payments shall be submitted to any AAB or
notes) that are not publicly-guaranteed and AAB-forex corp. using the prescribed form
are covered by a BSP registration document (Annex A) and supported by documents
(BSRD) without prior BSP approval, subject prescribed under Item B, Appendix 1 hereof.
to the following conditions: 6. AABs and AAB-forex corps shall not
a. The borrower shall submit to the BSP- sell foreign exchange to residents for
IOD a notice of their intention to prepay at payment of foreign exchange obligations to
least one (1) month prior to the target residents other than AABs.
prepayment date indicating the following: 7. All loan payments made, irrespective
name of creditor, BSP registration number of the source of the foreign exchange used,
for the loan, date of prepayment, amount to shall be reported by the borrower concerned
be prepaid in original currency, and to BSP-IOD using the prescribed form
remittance instructions (e.g., account number (Annex E.2).
and recipient bank for the prepayment). After (As amended by Circular Nos. 741 dated 17 November 2011 and
payment, the borrower shall submit to the 698 dated 05 November 2010)
BSP-IOD, proof/s of the payment made,
together with copy of the duly stamped BSRD Section 30. Approval/Registration and
and its Form 2 report (Annex E.2) Servicing of Guarantees
b. The foreign exchange selling AAB/ 1. The following guarantees shall
AAB-forex corp shall require the require prior BSP approval:
presentation by the borrower of documents a. Guarantees for account of the
prescribed under Item B, Appendix 1 hereof. public sector as well as those to be issued
c. The foreign exchange purchases shall by government-owned and controlled
not exceed USD 50.0 million per day, corporations in favor of non-residents; and
provided that the total foreign exchange b. Guarantees issued by foreign banks
purchases shall not at any case exceed the and financial institutions to secure
amount to be prepaid. The daily limit shall obligations of residents partaking the nature
be subject to periodic review to take into of a foreign loan which require prior BSP
consideration prevailing conditions; revised approval pursuant to Section 23.
limits shall be duly disseminated by the BSP. 2. The following guarantees, including
d. Advance foreign exchange purchases risk take-over and similar arrangements, for
shall be deposited in the borrower’s FCDU/ account of the private sector shall not
offshore account pending remittance of the require prior BSP approval and registration

Sections 30 - 31
11.12.31
but shall be reported to the BSP by AABs as issuer/ 5. Any payments relative to BSP
beneficiary using the prescribed form (Annex G registered guarantees may be remitted by AABs
if issuer or Annex H if beneficiary) to be eligible as they fall due without prior BSP approval. Any
for servicing using foreign exchange purchased foreign liability arising from a call on the
from AABs or AAB-forex corps in the event of guarantee shall require prior BSP approval, if
default by the principal obligor: to be serviced using foreign exchange
a. Guarantees to be issued by local banks purchased from AABs or AAB-forex corps.
and other financial institutions, including
government financial institutions, in favor of Section 31. Approval/Registration and Servicing
non-residents such as: of Other Financing Schemes/Arrangements
1) Payment guarantees (e.g., bid bonds, 1. Financing schemes which would
performance bonds, advance payment bonds); involve option to purchase arrangement or
and transfer of ownership after a certain period of
2) Guarantees to secure foreign time as in the case of Build-Operate-Transfer
obligations of residents which do not partake (BOT), Build and Transfer (BT) arrangements
the nature of a foreign loan. shall be registered with the BSP to be eligible
b. Guarantees to be issued by foreign for servicing using foreign exchange purchased
banks and financial institutions as well as other from AABs or AAB-forex corps. Applications
foreign entities to secure peso loans/FCDU for registration shall be filed by the
loans authorized under Section 24.4. Proceeds implementing agency/proponent with the BSP
of guarantees where the beneficiary is a within one month from contract signing.
resident shall be inwardly-remitted and sold Implementing agencies/proponents of
to AABs for pesos. projects under BOT/similar financing
As a prerequisite to the issuance of arrangements shall submit to the BSP the
guarantees under Item a, the following following reports:
documents shall be submitted to the guarantor: a. Yearly Projected Funding
a. Registration papers of domestic Requirements for BOT/Other Similar
accountee with the Securities and Exchange Financing Schemes (Annex I), on or before
Commission (SEC) (for corporation/ September 30 of the year preceding the
partnership) or with the Bureau of Domestic reference period; and
Trade (BDT) of the Department of Trade and b. Monthly Report on payment under
Industry (DTI) (for single proprietorship); and BOT/Other Similar Financing Schemes
b. Contract and/or other documents which (Annex J) within ten (10) working days from
serve as basis for the issuance of the guarantee. end of reference month.
3. Other guarantees or similar 2. Offshore issuances of peso-
arrangements which may give rise to actual denominated instruments1 involving:
foreign obligations shall require prior BSP a. inward remittance of foreign
approval to be eligible for servicing using exchange to the Philippines and sale thereof
foreign exchange purchased from AABs or for pesos to AABs; or
AAB-forex corps. b. a resident enterprise or any of its
4. Fees and charges on guarantees shall offshore offices, branches, subsidiaries and
be reflective of prevailing market terms: affiliates, which will participate in such
Provided, That guarantees issued by parent transactions as an issuer, guarantor or
companies to their affiliates shall not be beneficiary, and where proceeds shall be lent
charged any fee. to or invested in resident companies.
1
Under Circular Letter No. CL-2011-14, dated 03 March 2011, this provision covers all offshore issuances by
residents of peso-denominated bonds/notes and similar instruments, whether to be settled in pesos or foreign
currency and thus, require BSP approval (regardless of the source of foreign exchange for servicing of the
obligation) prior to launching/signing of agreements/receipt of proceeds.

Sections 31 - 35
11.12.31
The approval of said instruments shall funding for the cash investments must be
be subject to the following conditions: inwardly remitted but need not be converted
a. the transaction shall not involve to pesos.
import or export of Philippine currency Assets eligible for registration as
whether physically or electronically; and investment in kind shall include:
b. compliance with pertinent rules and (1) machinery and equipment; (2) raw
regulations of the BSP (including reportorial materials, supplies, spare parts and other
requirements) and other regulatory/ items including intangible assets necessary
government agencies/entities including for the operations of the investee firm. The
approval by the Department of Finance value of these investments in kind shall be
(DOF) in the case of supranational issuers. assessed and appraised by the BSP before
3. Non-residents’ issuance of notes/ their registration.
bonds or similar instruments in the domestic Expenses incurred by foreign firms
market, shall require BSP approval before pursuant to government-approved service
execution thereof. contracts/other contracts for oil, gas, and
geothermal energy exploration/
Chapter II developments may be capitalized and
registered as foreign investment with the BSP.
FOREIGN INVESTMENTS (As amended by Circular No. 742 dated 21 November 2011)
Section 32. General Policy. The BSP Section 35. Inward Foreign Portfolio
supports the country’s policy to encourage Investments. Inward foreign portfolio
inward foreign investments. Said investments shall include the following:
investments need not be registered with the 1. Investments in government securities
BSP unless the foreign exchange needed to which refer to investments in peso-
service the repatriation of capital and the denominated certificates of indebtedness,
remittance of dividends, profits and earnings issued by public sector entities.
which accrue thereon shall be purchased 2. Investments in listed securities
from AABs or AAB-forex corps. which refer to investments in securities
listed in the PSE.
Section 33. Categories of Inward Foreign 3. Investments in money market
Investments. For purposes of registration, instruments which refer to all peso-
foreign investments may be in the form of: denominated debt instruments, such as but
(1) foreign direct investments in Philippine not limited to bonds, bills payables,
firms or enterprises; (2) investments in peso- promissory notes, and non-participating
denominated government securities; (3) preferred shares, issued onshore by private
investments in securities listed in the resident firms, not included in Section 23.
Philippine Stock Exchange (PSE);(4) 4. Investments in bank deposits:
investments in peso-denominated money Provided, That only peso time deposits with
market instruments; and (5) investments in an AAB with a maturity of at least ninety
peso time deposits with AABs with a (90) days shall be eligible for registration
minimum maturity of ninety (90) days. with the BSP.
For registration purposes, the foreign
Section 34. Inward Foreign Direct exchange funding for the portfolio
Investments. Inward foreign direct investments must be inwardly remitted and
investments may be in cash or in kind. For converted to pesos.
registration purposes, foreign exchange (As amended by Circular No. 742 dated 21 November 2011)

Sections 36 - 40
11.12.31
Section 36. Registration with the BSP. The Section 39. Import/Export of Stock
following inward foreign investments shall Certificates of Philippine Firms. No prior
be registered with the BSP: BSP authority shall be required for the
1. Inward foreign direct investments import/export of stock certificates of
under Section 34; and Philippine firms issued to foreign investors,
2. Investments in peso-denominated including investments prior to 15 March
money market instruments under Item 3 of 1973 under Section 43.
Section 35.
All applications for registration of Section 40. Repatriation and Remittance
foreign direct investments under Section 34 Privileges
shall be filed with the BSP within five (5) 1. Inward foreign investments duly
years from the date of inward remittance/ registered with the BSP or with a custodian
actual transfer of assets to the Philippines.1 bank duly designated by the foreign investor,
A Bangko Sentral Registration Document shall be entitled to full and immediate
(BSRD) shall be issued by the BSP repatriation of capital and remittance of
evidencing registration of such investments. dividends, profits and earnings using foreign
(As amended by Circular No. 743 dated 15 December 2011) exchange to be purchased from AABs and
AAB-forex corps.
Section 37. Registration with Custodian 2. Foreign exchange may be purchased
Banks. Inward foreign investments in peso- from AABs and AAB-forex corps for outward
denominated government securities, PSE- remittance in an amount equivalent to the
listed securities, and peso time deposits peso sales/divestments proceeds (including
under Items 1, 2 and 4, respectively, of dividends, profits or earnings thereon) of
Section 35 shall be registered with an BSP-registered foreign investments in
investor’s designated custodian bank on accordance with the procedures outline in
behalf of the BSP. Appendix 11 and supported by the
A custodian bank may be any AAB or documents prescribed under Items C.1 and
an OBU appointed by the foreign investor C.2 of Appendix 1 hereof.
to register his investments and to hold 3. Registering banks for foreign
shares and other investment instruments for investments may sell for outward remittance
and on his behalf and to represent him in the equivalent foreign exchange of excess
all the necessary actions in connection with pesos funded with inward remittance of
his investments in the Philippines. foreign exchange but not to exceed the
The BSRD to be issued by a custodian amount of foreign exchange brought in less
bank on behalf of the BSP shall be in the the amount actually used for BSP-registered
prescribed pre-numbered form purchased investments made in the country, subject
by the custodian bank from the BSP. BSRDs to the following conditions:
issued directly by custodian banks for a. the investor shall comply with the
registered investments in peso time deposits prescribed documents under Item C. 3 of
shall be (a) annotated with roll-overs of the Appendix 1 hereof;
investment; or (b) cancelled if such deposits b. such excess pesos should not
are preterminated before ninety (90) days. have been utilized to fund any
investment; and
Section 38. Registration Procedures. The c. the remittance of the equivalent
procedures for registration of foreign foreign exchange shall be reported to the
investments including the supporting BSP-IOD by the remitting AAB within two
documents are outlined in Appendix 10. (2) banking days from the date of outward
1
Qualified foreign investment, whose date of inward remittance of funds or actual transfer of assets
to the Philippines are beyond the 5-year period, are allowed to register until 14 December 2012.

Sections 40 - 44
11.12.31
remittance, with copies of the prescribed Section 44. Investments by Philippine

supporting documents. Residents
The foreign exchange purchases may be 1. Outward Investments.
made by the resident agent on behalf of the a. Residents may undertake outward
non-resident investor for direct remittance investments only if:
to the non-resident beneficiary on the day i. the investments are funded by
of purchase. withdrawals from the resident investor’s
(As amended by Circular No. 698 dated 05 November 2010) FCDU account/s; or
ii. the funds to be invested are not
Section 41. Deposit of Divestment/Sales among those required to be sold to AABs
Proceeds. Pending reinvestment or for pesos under existing BSP rules; or
repatriation, divestment/sales proceeds of iii. the funds to be invested are
duly registered foreign investments, purchased from AABs or AAB-forex corps
including dividends, profits, and earnings but in amounts not exceeding USD60
may be deposited temporarily with any million or its equivalent in other foreign
AAB. The eventual repatriation thereof currency per investor per year, or per fund
including interest earned net of taxes, shall per year for qualified investors (QIs).
be remittable in full through any AAB Application to purchase foreign
without prior BSP approval in accordance exchange for outward investments(Annex A)
with the procedures outlined in shall be supported by documents prescribed
Appendix 11. under Item "C.4" of Appendix 1 hereof.
b. Outward investments by residents
Section 42. Reinvestment. Foreign investors (excluding AABs) funded with foreign
may reinvest divestment/sales proceeds or exchange purchased from AABs or AAB-
remittable dividends/profits or earnings of forex corps in excess of the USD60 million
duly registered investments. The per investor per year shall require prior
reinvestments shall be registered with the approval by the BSP: Provided, That the
BSP or the investors’ designated custodian purchase of foreign exchange for outward
banks, as applicable, if the foreign exchange investments by managed or trusteed
needed to service the repatriation of capital accounts (other than pooled funds) shall be
and the remittance of dividends, profits and considered as part of the foreign exchange
earnings which accrue thereon shall be purchases by the principal or trustor of such
purchased from AABs and AAB-forex corps. accounts for determining compliance with
the limits. Outward investments of banks
Section 43. Inward Foreign Investments shall be subject to existing prudential
Prior to 15 March 1973. Repatriation of regulations of the BSP.
divestment proceeds and remittance of c. QIs may apply with the BSP for a
dividends, profits and earnings from foreign higher annual outward investment limit.
investments certified by stock transfer agents For purposes of this section, QIs shall
to have been made prior to 15 March 1973 be limited to the following: insurance
may be serviced using foreign exchange and pre-need companies; collective/
purchased from AABs and AAB-forex corps, pooled funds, whether in a corporate or
without prior BSP approval. In the absence contractual structure, such as mutual
of said certification, such investments may funds, unit investment trust funds and
be registered with the BSP subject to variable insurance; public or private
submission of documentary requirements pension or retirement or provident
under Appendix 12. funds and such other entities and funds

Sections 44 - 45
11.12.31
as the BSP may determine as QIs on the PART THREE. OFFSHORE BANKING
basis o f s u c h f a c t o r s a s f i n a n c i a l UNITS, REPRESENTATIVE OFFICES
sophistication, size and regularity of AND FOREIGN CURRENCY
financial transactions, net worth and DEPOSIT UNITS
size of assets being managed. The
application of collective/pooled funds Chapter I
and pension, retirement and provident
funds for a higher annual outward OFFSHORE BANKING UNITS OF
investment limit may be effected FOREIGN BANKS
through its governing board or through
its trustee. Section 45. Definition of Terms. As used
2. Investments in bonds/notes in this Chapter, the following terms shall
issued by residents offshore. Residents have the meaning indicated unless the
may purchase foreign exchange from context clearly indicates otherwise:
AABs or AAB-forex corps without prior 1. “Offshore Banking” shall refer to the
BSP approval for investments in the conduct of banking transactions in foreign
following: (a) foreign currency- currencies involving the receipt of funds
denominated bonds/notes of the principally from external sources and, as
Republic of the Philippines or other allowed in this Manual, from internal
Philippine resident entities; and sources and utilization of such funds, as
(b) peso-denominated bonds/notes of provided herein.
the Republic of the Philippines or other 2. “Offshore Banking Unit” or “OBU”
Philippine resident entities requiring shall refer to a branch a foreign banking
settlement in foreign currency: corporation which is duly authorized by the
Provided, That such purchases shall be BSP to transact offshore banking business
consolidated with foreign exchange in the Philippines.
purchases for outward investments 3. “Net office funds” shall refer to the
under Item 1.b hereof for purposed of net credit balance of the “Due to Head Office
determining compliance with the (HO)/Branches/” after deducting the “Due
allowed limit, and supported by from HO/Branches”, as shown in the
documents prescribed under Item “C.5” following computation:
of Appendix 1 hereof.
3. Foreign exchange received by Due to HO/Branches
residents as dividends/earnings or Remittances/Advances/Deposits
to OBU by HO/Branches xxxxxxx
divestment proceeds from outward Unremitted earnings of OBU xxxxxxx
investments and investments in bonds/
notes issued by residents offshore that Total USD x x x x x x x
were funded with foreign exchange Less: Due from HO/Branches

purchased from AABs or AAB-forex
Remittances/Advances/Deposits of
corps, need not be inwardly remitted OBU with its HO/Branches xxxxxxx
and sold for pesos.
(As amended by Circular Nos. 742 dated 21 November Net Office Funds USD x x x x x x x
2011 and 698 dated 05 November 2010)

Sections 45 - 47
09.12.31
4. “Deposits” shall refer to funds in acceptable to and exchangeable at the BSP and
foreign currencies which are accepted and which form part of the international reserves
held by an OBU in the regular course of of the country.
business, with the obligation to return an
equivalent amount to the owner thereof, with Section 46. Approvals Required. A
or without interest. foreign bank may operate an OBU in the
5. “Resident” shall refer to – Philippines, upon issuance of a Certificate of
a) an individual citizen of the Philippines Authority to operate by the Monetary Board
residing therein1; or and registration with the SEC.
b) an individual who is not a citizen of
the Philippines but is permanently residing1 Section 47. Criteria for Selection. The
therein; or following factors shall serve as basis for the
c) a corporation or other juridical person issuance of certificate of authority to operate
organized under the laws of the Philippines; an OBU: (1) liquidity and solvency positions;
or (2) net worth and resources; (3) managerial
d) a branch,subsidiary,affiliate, extension and international banking expertise of applicant
office or any other unit of corporations or bank; (4) contribution to the Philippine
juridical persons which are organized under economy; and (5) other relevant factors, such
the laws of any country and operating in the as participation in the equity of local UBs/KBs
Philippines, except OBUs. and appropriate geographic representations.
6. “Non-resident” shall refer to an
individual, a corporation or other juridical Section 48. Pre-Operation Requirements
person not included in the definition of Upon advice from the BSP, a qualified bank
resident. shall submit a sworn undertaking of its head
7. “Foreign Currency Deposit Unit” or office through any of its duly authorized
“FCDU” shall refer to that unit of a local bank officers, supported by an appropriate
or of a local branch of a foreign bank resolution of its board of directors, to the effect
authorized by the BSP to engage in foreign that it shall:
currency-denominated transactions, pursuant 1. provide, on demand, the necessary
to the provisions of Republic Act No. 6426 currencies to cover liquidity needs that may
(Foreign Currency Deposit Act) dated 4 April arise or other shortfall that its OBU may incur;
1974, as amended. 2. manage the operations of its OBU
8. “Local bank” shall refer to a rural bank soundly and with prudence;
(RB)/cooperative bank (Coop Bank), thrift bank 3. continually train a specific number of
(TB), commercial bank (KB) or universal bank Filipinos in international banking and foreign
(UB) organized under the laws of the Republic exchange trading with a view to reducing the
of the Philippines. number of expatriates;
9. “Local branch of a foreign bank” shall 4. provide and maintain in its OBU at
refer to a branch of a foreign bank doing all times net office funds in the minimum
business in the Philippines, pursuant to the amount of USD1 million;
provisions of Republic Act No. 7653 and 5. start operations of its OBU within 180
Republic Act No. 8791 (The General Banking days from receipt of its certificate of authority
Law of 2000) dated 23 May 2000. to operate such unit;
10. “Acceptable foreign exchange” 6. comply with all applicable local laws
comprise those foreign currencies which are relating to labor and employment; and
(Next Page is Part V - Page 17)
1
Residents include any individual, citizen or otherwise, who has resided in the Philippines for a year or longer,
as defined in Section 83 of the IMF Balance of Payments Textbook, 1996.
Manual of Regulations for Banks Part V- Page 16a

Sections 48 - 52
09.12.31
7. submit, before start of operations, OBUs and resident banks authorized to

other documents as may be required by the accept foreign currency deposits under the
BSP such as certification or similar provisions of Republic Act No. 6426, as
documents showing that it is duly amended.
authorized by the proper government entity Interbank short-term transactions of not
of its country to engage in offshore banking exceeding 360 days such as credit lines of
business in the Philippines. Philippine banks with correspondent banks,
interbank call loans and interbank loans for
Section 49. Annual Fee. Upon issuance of general liquidity purposes shall not require
a certificate of authority to operate an OBU prior BSP approval.
in the Philippines, and yearly thereafter, the
authorized bank shall pay the BSP a fee of Section 52. Transactions with Residents
not less than USD20,000.00. which are not Banks. An OBU may engage
in the following transactions with residents
Section 50. Transactions with Non- which are not banks:
Residents and/or with Other OBUs. An 1. Deal in foreign currency financial
OBU may freely engage in all normal instruments;
banking transactions with non-residents 2. Extend foreign currency loans and
and/or with other OBUs, involving any advances, subject to existing regulations on
currency other than the Philippine peso. foreign borrowings;
3. Service importations through L/C,
Section 51. Transactions with Foreign D/A, O/A and D/P of resident-borrowers:
Currency Deposit Units (FCDUs)/ Provided, That such importations shall be
Expanded Foreign Currency Deposit Units funded by a BSP-authorized OBU foreign
(EFCDUs). Subject to BSP regulations, an currency loan to the resident-borrower
OBU may engage in the following involved; and Provided, further, That D/A-
transactions with FCDUs/EFCDUs of local O/A imports coursed through and serviced
banks in any currency other than the by OBUs shall be subject to the reporting
Philippine peso: requirements under Appendix 6;
1. Accept time, savings and demand 4. Negotiate inward (export) L/Cs and
deposits or issue negotiable certificates of handle other export transactions (including
time deposit; D/P, D/A and O/A) coursed through their
2. Borrow with maturities not worldwide network of branches and
exceeding 360 days; correspondents: Provided, That OBUs share
3. Deposit; in the total export L/C negotiation business
4. Extend loans and advances; shall be limited to ½ of the growth
5. Deal in foreign currency financial (incremental) element in the country’s total
instruments; annual export. This limit shall be observed
6. Discount bills, acceptances, and yearly until this equals ten percent (10%) of
negotiable certificates of deposits; total exports. Exports not covered by L/Cs,
7. Engage in foreign exchange trading; i.e., done through D/A-O/A arrangements
8. Engage in foreign currency, foreign shall be considered subject to this overall
currency swap; and limit;
9. Engage in such other transactions as 5. Provide full foreign exchange
authorized under this Section between service for all foreign currency non-trade
Manual of Regulations for Banks Part V - Page 17

Sections 52 - 56
09.12.31
and trade remittances resulting from or inward remittances of Filipino overseas

related to their own negotiation of export workers or of Filipino or multinational
L/Cs; companies, coursed through the OBUs’
6. Render financial, advisory and correspondent banks abroad;
related services; and 3. To pay the designated beneficiaries
7. Refinance trust receipts without in the Philippines the peso equivalent of
prior BSP approval arising from import foreign exchange inward remittances other
transactions of Philippine residents in U.S. than those related to (a) trade; or (b) inward
dollars or in other acceptable foreign foreign investments that are intended to be
currencies. The refinancing shall be serviced using foreign exchange purchased
evidenced by banker’s acceptances. from AABs or AAB-forex corps; and
However, OBUs may hold peso- 4. To pay the peso equivalent of
denominated assets arising from foreign exchange sold by beneficiaries of
restructuring or other repayment scheme of export L/Cs negotiated with the OBUs.
outstanding loans, subject to the terms and The peso deposit accounts shall be
conditions of the approval of such funded exclusively by inward remittances
restructuring/other repayment scheme and of foreign exchange eligible to form part of
to the following clarifications and the Philippine international reserves.
conditions: OBUs may also sell inward remittances
a. That term ‘assets’ as used in this of foreign exchange for pesos to the BSP
Section shall refer to bonds or other through the Treasury Department, for credit
certificates of indebtedness, shares of stocks to the demand deposit account of the
and other properties; designated AABs for the account of the
b. That bonds or other certificates of OBU.
indebtedness issued by a third party as well
as shares of stocks and other properties Section 54. Financial Assistance to
acquired as a result of restructuring/other Officers/Employees. OBUs may extend
payment scheme shall be accounted for in financial assistance (real estate, car, personal
accordance with Philippine Accounting loans, etc.) in local or foreign currency to
Standards (PAS) 39; and their Filipino officers and employees as part
c. That shares of stock and other of their fringe benefit program.
properties acquired as a result of They may likewise grant foreign
restructuring/other repayment scheme shall currency loans to their expatriate officers
be sold/disposed of within a period of five without need of BSP approval.
(5) years from date of acquisition.
Section 55. Secrecy of Deposits. The
Section 53. Peso Deposits. OBUs may open provisions of Republic Act No. 6426, as
and maintain peso deposit accounts with amended, shall apply to deposits in OBUs;
AABs exclusively for the following Provided, That numbered deposit accounts
purposes: shall not be used.
1. To meet administrative and other
operating expenses, such as salaries, rentals Section 56. Exemption from Certain Laws.
and the like; The provisions of Republic Act No. 2655
2. To pay the peso equivalent of (Usury Law) dated 01 May 1915, as
foreign exchange sold by beneficiaries of amended1, and Republic Act No. 3591
1
Suspended by CBP Circular No. 905-82 dated 10 December 1982, effective 01 January 1983.
Part V - Page 18 Manual of Regulations for Banks

Sections 56 - 64
09.12.31
(An Act Establishing the Philippine Deposit 2. “Representative Office” shall refer
Insurance Corporation) dated 22 June 1963, to a liaison office of a foreign bank which
as amended, shall not apply to transactions deals directly with the public by promoting
and/or deposits in OBUs in the Philippines. and giving information about the services
offered by the foreign bank. It does not
Section 57. Accounting and Reporting include the regional or area headquarters
OBUs shall maintain an accounting of a foreign bank registered and licensed
system in accordance with guidelines under existing laws.
prescribed by the BSP. Periodically or as
required, existing reports shall continue Section 62. Criteria for Approval. The
to be submitted in the prescribed forms Monetary Board may authorize qualified
to the BSP. foreign banks to open representative offices
in the Philippines if, in its judgment, the
Section 58. Supervision. The operations and public interest and economic conditions,
activities of OBUs shall be conducted under both general and local, justify the
the supervision of the BSP. establishment of such office. The following
factors, among others, shall serve as basis
Section 59. Taxes, Customs Duties for issuance of authority to open a
Transactions of OBUs in the Philippines representative office in the Philippines:
shall be subject to such taxes as are (1) liquidity and solvency positions; (2) net
prescribed in Presidential Decree No. 1034 worth and resources; (3) financial and credit
(Authorizing the Establishment of an standing in the international banking
Offshore Banking System in the Philippines) community; (4) exposure in the Philippines;
dated 30 September 1976, as implemented and (5) other relevant factors, such as
by regulations of the BIR. Philippine commercial and financial
relationships with the country where
Section 60. Revocation/Suspension. The applicant bank is based.
Monetary Board, upon recommendation of
the Governor, may revoke or suspend the Section 63. Authorized Activities of
authority of an OBU to operate in the Representative Offices. Authorized
Philippines for violation of Presidential representative offices may promote and
Decree No. 1034 or relevant provisions of provide information about the services/
this Manual. products offered by the foreign banks but
may not transact banking business, such as
Chapter II acceptance of deposits, issuance of letters
of credit and foreign exchange trading.
REPRESENTATIVE OFFICES OF Transactions generated through the
FOREIGN BANKS promotional efforts of the representative
office may be booked only by the foreign
Section 61. Definition of Terms. As used bank abroad.
in this Chapter, the following terms shall
have the meaning indicated unless the Section 64. Fees. Foreign banks intending
context clearly indicates otherwise: to establish a representative office shall,
1. “Foreign Bank” shall refer to a bank upon issuance by the BSP of a Certificate of
or banking corporation formed, organized Authority, pay the BSP a license fee of
and existing under any foreign law. USD2,000.00.

Sections 65 - 70
09.12.31
Section 65. Use of the term Chapter III

“Representative Office”. Foreign banks
authorized to operate representative offices FOREIGN CURRENCY DEPOSIT
shall, in their representation with the public, SYSTEM
carry with their name the additional term
“Representative Office” to properly guide the Section 70. Definition of Terms. As used
public on the nature and extent of their in this Chapter, the following terms shall
activities. have the meaning indicated unless the
context clearly indicates otherwise:
Section 66. Licensing. The licensing and 1. “Foreign Currency Deposit Unit”
operations of representative offices including (FCDU) and “Expanded Foreign Currency
the implementation of these regulations and Deposit Unit” (EFCDU) shall refer to a
such other rules and regulations that may unit of a local bank or of a local branch
be issued from time to time shall be the of a foreign bank authorized by the BSP
responsibility of the BSP-Supervision and to engage in foreign currency-
Examination Sector (SES). denominated transactions, pursuant to the
provisions of Republic Act No. 6426, as
Section 67. Visitorial Power. The BSP may, amended.
from time to time, look into the affairs of 2. “Local bank” shall refer to an RB/
the representative offices to determine the Coop Bank, TB, KB or UB organized under
extent of their compliance with these the laws of the Republic of the Philippines.
regulations and/or other related BSP 3. “Local branch of a foreign bank”
issuances. shall refer to a branch of a foreign bank doing
business in the Philippines, pursuant to the
Section 68. Reporting. Representative provisions of Republic Act No. 7721 (An
offices shall submit to the BSP annual reports Act Liberalizing the Entry and Scope of
of their Head Office and, periodically as may Operations of Foreign Banks in the
be required, reports on the transactions of Philippines and for Other Purposes) dated
their Head Office in the Philippines in such 18 May 1994, Republic Act No. 7653, and
form as may be prescribed for the purpose. Republic Act No. 8791.
4. “Short-term” loans and securities
Section 69. Revocation of License. The shall refer to those with maturities of one
Monetary Board may revoke the license of (1) year or less.
a representative office if it finds after due 5. “Medium-term” loans and securities
investigation that: (1) the representative shall refer to those with maturities of more
office or its officers have violated the than one (1) year but not more than five (5)
provisions of this Manual and any other years.
applicable rules and regulations of the BSP; 6. “Long-term” loans and securities
or (2) its Head Office is found to be in shall refer to those with maturities of more
imminent danger of insolvency or that its than five (5) years.
continuance in business will involve The definition of such other terms used
probable loss to those transacting business in this Chapter shall be consistent with the
with it, pursuant to Section 37 of Republic definition of terms used under the Chapters
Act No. 7653, and Section 78 of Republic on OBUs and Representative Offices of
Act No. 8791. Foreign Banks.

Sections 71
09.12.31
Section 71. Qualification Requirements g. The bank does not have float items
UBs/KBs may be authorized to operate an outstanding for more than 60 calendar days
FCDU or EFCDU: Provided, That they meet the in the “Due From/To Head Office/Branches/
minimum capital requirements as prescribed Offices” accounts and the “Due from Bangko
under Section X106 and Subsections X106.1 Sentral” account exceeding one percent (1%)
and X106.2 of the Manual of Regulations of the total resources as of end of preceding
for Banks (MORB) for local banks and month;
Subsections X121.4 and X121.5 of the h. The bank has no past due obligation
MORB for branches of foreign banks. with the BSP or with any financial institution
In addition, the following standard pre- as of date of application;
qualification requirements as prescribed i. The bank’s facilities pertinent to the
under Appendix 5 of the MORB shall be authority applied for are adequate;
complied with: j. The officers who will be in-charge
a. The bank has complied, during the of the operation relating to the authority
period indicated immediately preceding the applied for have actual experience of at least
date of application, with the following: two (2) years in another bank as in-charge
1) Risk-based capital adequacy ratio (or at least as assistant-in-charge) of the same
for the last 60 days; operation;
2) Ceilings on credit accommodation k. The bank personnel who will handle
to directors, officers, stockholders and the operation relating to the authority
related interests (DOSRI); and applied for, have attended appropriate
3) Liquidity floor on government seminars, workshops or on-the-job training
deposits. or have experience of at least six (6) months;
b. The bank has not incurred net and
weekly reserve deficiencies for the last eight l. The bank has complied with the
(8) weeks; mandatory allocation of credit resources to
c. The bank has generally complied micro, small and medium enterprises for
with banking laws, rules and regulations, two (2) quarters immediately preceding the
orders or instructions of the Monetary Board date of application.
and/or BSP Management; 2. TBs with net worth or combined
d. The bank’s past due loans do not capital accounts of at least PHP325 million
exceed twenty percent (20%) of its total loan for those with head offices located within
portfolio as of the date of application; Metro Manila and PHP52 million for those
e. The bank has corrected as of date with head offices located outside Metro
of application the major violations noted Manila may, subject to prior Monetary
in its latest examination particularly Board approval, operate an FCDU. A TB
relating to - desiring to operate an FCDU shall file an
1) single borrower’s limit; and application with the BSP-SES. The
2) total investment in real estate and application shall be signed by the bank
improvements thereon, including bank president or officer of equivalent rank and
equipment, which shall not exceed fifty shall be accompanied by the following
percent (50%) of net worth; documents:
f. The bank’s accounting records, a. Certified true copy of the resolution
systems, procedures and internal control of the bank’s board of directors authorizing
systems are satisfactorily maintained; the application; and

Section 71
09.12.31
b. A certification signed by the (6) investment in bank premises and

president or the officer of equivalent rank other fixed assets.
that the bank has complied with all f. The bank maintains adequate
conditions/prerequisites for the grant of provisions for probable losses
authority to operate an FCDU. commensurate to the quality of its asset
A TB applying for authority to operate portfolio but not lower than the required
FCDU must comply with the following valuation reserves as determined by the BSP;
requirements: g. The bank has no float items
a. The bank’s operation during the outstanding for more than 60 calendar days
preceding calendar year and for the period in the “Due From/To Head Office/Branches/
immediately preceding the date of Offices” accounts and the “Due From
application has been profitable; Bangko Sentral” account exceeding one
b. The bank is well capitalized with percent (1%) of the total resources as of date
risk-based capital adequacy ratio not lower of application;
than twelve percent (12%) at the time of h. The bank has no past due
filing the application; obligations with the BSP or with any
c. The officer who will be in charge of government financial institution;
FCDU operations shall either have at least i. The bank has established a risk
one (1) year of actual experience in another management system appropriate to its
bank as in-charge or assistant in-charge of operations characterized by clear
the same operations, or have attended a delineation of responsibility for risk
specialized training course on FCDU management, adequate risk measurement
transactions or operations conducted by the systems, appropriately structured risk limits,
BSP or an institution duly accredited by the effective internal controls and complete,
BSP; timely and efficient risk reporting system;
d. The bank has not incurred net j. The bank has a CAMELS Composite
weekly reserve deficiencies within eight (8) Rating of at least “3” in the last regular
weeks immediately preceding the date of examination with Management rating of not
application; lower than “3”; and
e. The bank has generally complied k. The bank is a member of the
with banking laws, rules and regulations, Philippine Deposit Insurance Corporation
orders or instructions of the Monetary Board (PDIC) in good standing.
and/or the BSP Management in the last two 3. An RB/Coop Bank desiring to
(2) preceding examinations prior to the date operate an FCDU shall file an application
of application, more particularly on: with the BSP-SES. The application shall be
(1) election of at least two (2) signed by the bank president or officer of
independent directors; equivalent rank and shall be accompanied
(2) attendance by every member of the by the following documents:
board of directors in a special seminar for a. Certified true copy of the resolution
board of directors conducted or accredited of the bank’s board of directors authorizing
by the BSP; the application; and
(3) the ceilings on credit b. Certification signed by the president
accommodations to DOSRI; or the officer of equivalent rank that the bank
(4) liquidity floor requirements for has complied with all the conditions/
government deposits; prerequisites for the grant of authority to
(5) single borrower’s loan limit; and operate an FCDU.

Sections 71 - 72
09.12.31
An RB/Coop Bank applying for assistant in-charge of the same operations

authority to operate an FCDU must comply for at least one (1) year, or (b) who has
with the following requirements: attended a specialized training course on
a. Minimum capital under Subsection FCDU transactions or operations conducted
X151.2 of the MORB or PHP20 million, by the Bangko Sentral ng Pilipinas Institute
whichever is higher; or an institution or bank duly accredited by
b. Risk-based capital adequacy ratio at the BSP; and
the time of filing the application of at least b. establish a risk management system
twelve percent (12%); appropriate to its operations, characterized
c. CAMELS composite rating in the by clear delineation of responsibility for risk
latest examination of at least “3”, with management, adequate risk measurement
Management component score not lower system, appropriately structured risk limits,
than “3”; and effective internal control system and
d. No outstanding major supervisory complete, timely and efficient risk reporting
concerns on safety and soundness from last system.
examination, such as, but not limited to:
1) Unbooked valuation reserves Section 72. Authorized Transactions
2) Inadequate regular and liquidity 12 weeks
1. TBs and RBs/Coop Banks which are
reserves on deposits including
government deposits and deposit granted a certificate of authority to operate
substitutes an FCDU are authorized to engage in the
3) DOSRI loans in excess of ceilings 3 months following transactions in any acceptable
4) Poor asset quality foreign currency:
5) Violation of single borrower’s
loan limit and investment limits.
a. Accept deposits and trust accounts
6) Past due obligation with the BSP (for banks authorized to engage in trust
or with any financial institution operations) from residents and non-
7) Unsafe and unsound banking 6 months residents;
practices
b. Deposit, regardless of maturity,
8) Inadequate accounting
records, systems, procedures with foreign banks abroad, OBUs and other
and internal controls FCDUs/EFCDUs;
9) Corporate governance c. Invest in readily marketable foreign
10)Compliance with banking currency denominated debt instruments. For
laws, rules and regulations,
orders or instructions of the
this purpose, ‘readily marketable’ debt
Monetary Board and/or BSP instruments shall refer to debt instruments
Management that are quoted in an active market and the
11)Membership with the PDIC quoted prices are readily and regularly
available from an exchange, dealer,
In addition to requirements under broker, industry group, pricing service or
existing regulations, an RB/Coop Bank regulatory agency, and those prices
authorized to operate an FCDU shall: represent actual and regularly occurring
a. have the capacity to operate an market transactions on an arm’s length
FCDU. An RB/Coop Bank may, however, basis;
upgrade its capacity by appointing as Officer d. Grant short-term foreign currency
who will be in-charge of the FCDU loans as may be allowed by BSP
operations an individual (a) with actual regulations: Provided, That FCDUs of
experience in another bank as in-charge or RBs/Coop Banks shall not grant loans to

Section 72
09.12.31
producers/manufacturers, including oil iii. The debt instrument must have the
companies and public utility concerns; same maturity and interest rate.
e. Borrow, subject to existing rules on (2) The lending activity shall have prior
foreign/foreign currency borrowings, (i) from approval of the bank’s board of directors
EFCDUs, foreign banks abroad and OBUs, and shall be governed by adequate written
regardless of maturity; and (ii) from other policies and procedures duly approved by
FCDUs, on short-term maturity; the said board;
f. Engage in foreign currency-foreign (3) The securities lending shall be done
currency swaps with the BSP, OBUs and through reputable internationally
other FCDUs/EFCDUs; recognized and experienced third-party
g. Engage in securities lending lending agent/intermediary which must be
activities as lender subject to the following a regulated entity in its country of operation;
conditions: (4) The securities lending transaction
(1) The securities to be lent shall be shall be subject to a written legal agreement
limited to securities lodged under the account between the lending bank and the lending
Held for Trading (HFT) Financial Assets and agent which must clearly specify the:
Available for Sale (AFS) Financial Assets. (a) relationship as well as the
The use of Held to Maturity (HTM) respective duties and responsibilities of each
Financial Assets holdings shall also be counterparty;
allowed in securities lending subject to the (b) obligation of the borrower to
following conditions: redeliver a like quantity of the same issue
(a) The lending bank had the positive or series as the loaned securities;
intention and ability to maintain or recover (c) guidelines for selecting investments
control of the same or substantially similar for cash collateral, which shall include a
securities as those lent; provision that cash collateral will not be
(b) The counterparty’s failure to reinvested in liabilities of the lender, its
redeliver the securities lent at maturity or at subsidiaries or affiliates; and
the date agreed upon could not have been (d) lending fee or compensation;
reasonably anticipated by the lender at the (5) The loaned securities must be fully
time of the transaction; and secured by debt securities of countries or
(c) In case of failure or default of the entities with highest credit quality, cash in
counterparty to redeliver the securities lent, currencies acceptable as part of
the same shall be immediately replaced by international reserves, letters of credit and
identical or substantially similar securities. certificates of deposits issued by banks with
For this purpose, a replacement security may highest credit quality. For this purpose, a
only be considered substantially similar to foreign country and a bank with highest
the securities lent or sold if all of the credit quality refer to a foreign country and
following circumstances are present: a bank given the highest credit rating by any
i. The security must have the same two (2) of the following internationally
primary obligor and must have the same accepted rating agencies:
guarantor under the same terms and
Rating Agencies Highest Rating
conditions, if guaranteed;
ii. The security must be identical in Moody’s “Aa3”
form and type so as to give the same risks Standard and Poor’s “AA”
Fitch IBCA “AA”
and rights to the holder; and Others as may be approved by the Monetary Board

Section 72
09.12.31
Collateral value shall initially be at least these shall not be eligible for the thirty
102% of the current market value of the percent (30%) liquid asset cover.
loaned securities and maintained at 100% h. Engage in repurchase agreements
of the value of the loaned securities plus involving foreign currency denominated
accrued interest thereon during the course government securities subject to the
of the loan; following conditions:
(6) The lender shall do daily mark-to- (1) Such repurchase agreements shall
market on the loaned securities and on the be limited to:
securities where cash collateral is invested/ a. HFT and AFS securities held under
reinvested; the FCDU/EFCDU books;
(7) The lender shall require from the b. HTM securities holdings, subject to
lending agent/intermediary timely and the following conditions:
comprehensive reports on the lending i. The selling bank had the positive
activity; intention and ability to maintain or recover
(8) For proper identification and control of the same or substantially similar
monitoring, the outstanding book balance securities as those sold;
on the loaned securities shall be reclassified ii. The counterparty’s failure to
to the sub-account Government Securities redeliver the securities sold at maturity or
(GS)/Debt Securities (DS) Lent under at the date agreed upon could not have been
Securities Lending and Borrowing reasonably anticipated by the seller at the
Transactions under the HFT/AFS/HTM time of the transaction;
Financial Asset accounts; iii. In case of failure or default of the
(9) The bank has in place a risk counterparty to redeliver the securities
management system commensurate to the sold, the same shall be immediately
nature, volume and complexity of its replaced by identical or substantially
operations and characterized by clear similar securities. For this purpose, a
delineation of responsibility for risk replacement security may only be
management, adequate risk measurement considered substantially similar to the
systems, appropriately structured risk securities sold if all of the following
limits, effective internal controls and circumstances are present:
complete, timely and efficient risk a. The security must have the same
reporting system: Provided, That this primary obligor and must have the same
requirement shall be automatically guarantor under the same terms and
considered complied with by banks with conditions, if guaranteed;
derivatives license; b. The security must be identical in
(10)The bank’s CAMELS composite form and type so as to give the same risks
rating in the last BSP regular examination is and rights to the holder; and
at least “3”, with a minimum score of “3” c. The debt instrument must have the
on management; and same maturity and interest rate.
(11)The foreign currency denominated (2) For proper identification and
debt securities lent or used as collateral monitoring, the outstanding book
by the borrowing bank in securities balance of the government securities
lending and borrowing transactions shall sold under repurchase agreements are
be considered as eligible asset cover for to be reclassified to the sub-account GS
the 100% cover requirement. However, Sold under Repurchase Agreement

Section 72
09.12.31
under the HFT/AFS/HTM Financial Asset (2) That the maximum term of the resale
accounts; agreements shall be one (1) year; and
(3) The borrowings shall only be from (3) That such government securities
FCDUs/EFCDUs, non-resident financial purchased under resale agreements shall be
institutions and OBUs; classified as Loans and Receivables Arising
(4) The maximum term of the from Repurchase Agreements/Certificates of
repurchase agreements shall be one (1) year; Assignment/Participation with Recourse and
(5) The borrowings shall be booked Securities Lending and Borrowing
under “Bills Payable” and included in the Transactions.
computation of the total FCDU/EFCDU j. Issue Hybrid Tier 1 (HT1) capital
liabilities subject to the mandatory 100 instruments subject to the requirements
percent asset cover and thirty percent (30%) under existing regulations;
liquidity cover; k. Engage in USD-denominated
(6) The foreign currency-denominated repurchase agreements (R/P) with the BSP
debt securities sold or used as additional as provided under Subsection X601.1 of the
collateral in repurchase agreement shall be MORB, subject to the guidelines under
considered as eligible asset cover for the Appendix 13.
100% cover requirement. However, these Sanctions. Without prejudice to the
shall not be eligible for the thirty percent criminal and administrative sanctions
(30%) liquid asset cover; provided for under Sections 36 and 37,
(7) Banks shall, at all times, comply respectively, of Republic Act No. 7653,
with the 100% FCDU/EFCDU asset cover violation of any provision of Items “1.g.1“
and thirty percent (30%) liquid asset cover; and “1.h.1.b” of this Section pertaining to
and HTM financial assets, shall be considered
(8) Banks shall monitor and assess the a violation of the “tainting” provision under
risks inherent in these repurchase Subsection X388.5(b) of the MORB in
transactions. relation to Section 3.a of Appendix 33 of
The provisions/requirements under the MORB. In such a case, the entire HTM
Item g which are not inconsistent with the portfolio shall be reclassified to the AFS
foregoing shall be strictly observed by the category and the financial institution shall
bank concerned. be prohibited from using the HTM account
i. Purchase foreign currency during the year the violation was committed
denominated government securities under and for the succeeding two (2) full financial
resale agreements from other banks’ FCDU/ years. Failure to reclassify the HTM portfolio
EFCDU, non-resident financial institutions to AFS shall subject the bank and concerned
and OBUs, subject to the following officers to the penalties and sanctions
conditions: provided under Subsection X388.5(c) of the
(1) That the government securities MORB.
purchased shall be limited to those issued Moreover, the Monetary Board may at
by central governments and/or central banks its discretion, impose any or all of the
of foreign countries with the highest credit following sanctions to a bank and/or its
quality given by any two internationally director/s or officer/s found to be responsible
accepted rating agencies (i.e., currently the for violation of Item “k” of this Subsection:
equivalent of Standard and Poor’s AA- or a. Termination of eligibility and
Moody’s Aa3 or better); pre-termination of any outstanding balance

Section 72
09.12.31
through repayment and/or sale of the h. On request/instructions of its foreign

collateral; correspondent bank, it may:
b. Fine of up to PHP30,000 per (1) issue letters of credit for a non-
transaction per day of violation reckoned resident importer in favor of a non-resident
from the time the violation was committed exporter;
up to the date it is corrected; (2) pay, accept, or negotiate drafts/bills
c. Suspension of interbank clearing of exchange drawn under the letter of credit;
privileges/immediate exclusion from and
clearing; (3) make payment to the order of the
d. Suspension of access to the BSP non-resident exporter.
rediscounting facilities; Provided, That the foreign correspondent
e. Suspension of lending or foreign bank shall deposit sufficient foreign
exchange operations or authority to accept exchange with the EFCDU issuing the letter
new deposits or make new investments; of credit to cover all drawings.
f. Revocation of authority to perform i. Engage in direct purchase of export
trust operations; bills of resident exporters subject to the
g. Revocation of quasi-banking following conditions:
license; (1) Export transactions covered by
h. Suspension for 120 days without usance or sight letters of credit, shall be
pay of the officers and/or directors allowed to be purchased by EFCDUs; and
responsible for the violation; and (2) Export bills negotiated/purchased by
i. Other sanctions as may be provided the bank’s Regular Banking Unit (RBU) and
by law. outstanding in its books shall not be allowed
2. UBs/KBs, which are authorized to to be purchased by its EFCDUs.
operate under the expanded foreign j. Engage in securities lending
currency deposit system may engage in the activities as lender subject to the conditions
following transactions in any acceptable as enumerated in Item "1.g" of this Section;
foreign currency: k. Engage in repurchase agreements
a. Accept deposits and trust accounts involving foreign currency denominated
(for banks authorized to engage in trust government securities subject to the
operations) from residents and non- conditions as enumerated in Item "1.h" of
residents; this Section, except Item "1.h(4)";
b. Deposit with foreign banks abroad, l. In v e s t i n f o r e i g n c u r r e n c y
OBUs and other FCDUs/EFCDUs; denominated structured products issued
c. Invest in foreign currency- by banks and special purpose vehicles
denominated debt instruments; (SPVs) of high credit quality subject to
d. Grant foreign currency loans as may the provisions in Section 1636 of the
be allowed by the BSP; MORB;
e. Borrow from other FCDUs/EFCDUs m. Purchase foreign currency
and from non-residents and OBUs, subject denominated government securities under
to existing rules on foreign borrowings; resale agreements from other banks’ FCDU/
f. Engage in foreign currency-foreign EFCDU, non-resident financial institutions
currency swap; and OBUs, subject to the following
g. Engage in foreign exchange trading, conditions:
and with prior BSP approval, engage in (1) That the government securities
financial futures and options trading; purchased shall be limited to those issued

Section 72
09.12.30
by central governments and/or central banks director/s or officer/s found to be responsible

of foreign countries with the highest credit for violation of Item “o” of this Subsection:
quality given by any two internationally a. Termination of eligibility and
accepted rating agencies (i.e., currently the pre-termination of any outstanding balance
equivalent of Standard and Poor’s AA- or through repayment and/or sale of the
Moody’s Aa3 or better); and collateral;
(2) That such government securities b. Fine of up to PHP30,000 per
purchased under resale agreements shall be transaction per day of violation reckoned
classified as Loans and Receivables Arising from the time the violation was committed
from Repurchase Agreements, Certificates up to the date it is corrected;
of Assignment/Participation with Recourse, c. Suspension of interbank clearing
and Securities Lending and Borrowing privileges/immediate exclusion from
Transactions. clearing;
n. Issue Hybrid Tier 1 (HT1) capital d. Suspension of access to the BSP
instruments subject to the requirements rediscounting facilities;
under existing regulations; e. Suspension of lending or foreign
o. Engage in USD-denominated exchange operations or authority to accept
repurchase agreements (R/P) with the BSP new deposits or make new investments;
as provided under Subsection X601.1 of the f. Revocation of authority to perform
MORB, subject to the guidelines under trust operations;
Appendix 13. g. Revocation of quasi-banking
Sanctions. Without prejudice to the license;
criminal and administrative sanctions h. Suspension for 120 days without
provided for under Sections 36 and 37, pay of the officers and/or directors
respectively, of Republic Act No. 7653, responsible for the violation; and
violation of any provision of Items “2.j”, and i. Other sanctions as may be provided
“2.k” of this Section pertaining to HTM by law.
financial assets, shall be considered a 3. Excess FCDU/EFCDU funds of
violation of the “tainting” provision under UBs/KBs may be lent to the regular banking
Subsec. X388.5(b) of the MORB in relation unit (RBU) to fund the latter’s on-balance
to Section 3.a of Appendix 33 of the MORB. sheet foreign exchange trade transactions,
In such a case, the entire HTM portfolio subject to the following conditions:
shall be reclassified to the AFS category and a. FCDU/EFCDU may lend funds to
the financial institution shall be prohibited the RBU only after it has fully complied with
from using the HTM account during the year the prescribed 100% asset cover/thirty
the violation was committed and for the percent (30%) liquid asset cover on FCDU/
succeeding two (2) full financial years. EFCDU liabilities;
Failure to reclassify the HTM portfolio to b. FCDU/EFCDU lending to the RBU
AFS shall subject the bank and concerned shall be -
officers to the penalties and sanctions (1) Capped at the lower of total
provided under Subsec. X388.5(c) of the outstanding balance on the RBU’s on-
MORB. balance sheet foreign currency trade assets1
Moreover, the Monetary Board may at or thirty percent (30%) of the level of FCDU/
its discretion, impose any or all of the EFCDU deposit liabilities, computed at the
following sanctions to a bank and/or its average daily balance (using 2-month rolling
1
i.e., Customers' Liability on Import Bills-Foreign, Customers' Liability under Trust Receipts-Foreign, Customers' Liablity for
this Bank's Acceptances Outstanding-Foreign, Export Bills Purchased and Foreign Bills Purchased-Documentary, excluding
past due accounts and Items in Litigation.

Sections 72 - 73
09.12.31
data) as of end of the second week prior to reference month, a certification under oath
the reference week. Total outstanding (Appendix 14), signed by the Bank’s
balance of FCDU/EFCDU lending to the President or Country Manager, in case of
RBU shall, at all times, be within the local branch/subsidiary of foreign banks,
prescribed cap. Any breach thereon shall Compliance Officer and Head of Treasury,
be subject to the imposition of a monetary to the effect that, at any day of the
penalty of PHP30,000 per calendar day, reference month, the outstanding balance
commencing on the day the cap was on funds borrowed from FCDU/EFCDU
breached until the same is corrected; did not exceed the prescribed cap (i.e.,
(2) Charged interest at prevailing lower of total outstanding balance on
market rates, computed monthly at the RBU’s on-balance sheet foreign currency
average daily balance of the receivable from trade assets or thirty percent (30%) of the
the RBU; and level of FCDU/EFCDU deposit liabilities)
(3) On short-term maturity, or for a and were utilized by the RBU solely for
period of one (1) year or less. Balances shall foreign currency trade transactions.
be settled, within a year from availment, by The foregoing rule shall be subject to
way of actual transfer of foreign currency quarterly review by the BSP.
assets from the RBU books to the FCDU/
EFCDU books. Section 73. Foreign Currency Cover
c. The lending transaction shall be Requirements. Depository banks under the
booked as “Loans to RBU by FCDU/ foreign currency deposit and expanded
EFCDU” in the FCDU/EFCDU books and foreign currency deposit systems shall
“Loans by RBU from FCDU/EFCDU” in the maintain at all times a 100% cover for their
RBU books; foreign currency liabilities, except for
d. The “Loans to RBU by FCDU/ USD-denominated repurchase agreements
EFCDU” account balance (net of (R/P) with the BSP. Provided, That
transactions outstanding for more than one violation of the terms and conditions of
(1) year) shall qualify as eligible asset cover, the USD- denominated R/P facility shall
but not as liquid asset cover, for FCDU/ subject the borrowings of the bank to the
EFCDU liabilities; FCDU/EFCDU asset and liquid asset cover
e. Banks shall establish and maintain requirements. For purposes of complying
systems to– with this requirement, the principal offices
(1) monitor the foreign currency funds in the Philippines of the authorized banks
flow of RBU and the average daily balances and all their branches located therein shall
of foreign currency trade assets, with be considered as a single unit. The foreign
minimum database covering a two (2)- currency cover shall consist of the net
month rolling period; and carrying amount of the following:
(2) account for the utilization of funds 1. For banks authorized to operate an
borrowed from FCDU/EFCDU. FCDU:
The systems as well as periodic a. Foreign currency cash on hand;
reports generated therefrom shall be made b. Foreign currency checks and other
available to the BSP examiners for cash items;
verification. c. Due from BSP – Foreign Currency;
f. Banks shall submit to the d. Due from other banks (other
appropriate BSP supervising department, FCDUs/EFCDUs, OBUs, and non-resident
within five (5) banking days from end of banks);

Section 73
09.12.31
e. Derivatives with Positive Fair Value loans to resident private sector borrowers
Held for Trading and/or Hedging to be serviced using foreign exchange
(Derivatives with Negative Fair Value Held purchased from entities that are not AABs
for Trading and/or Hedging shall require or AAB-forex corps under Section 24.1.a:
corresponding asset/liquid asset cover); Provided, That all applicable banking rules
f. Investments in readily marketable and regulations are complied with including
foreign currency-denominated debt single borrower’s limit as provided in
instruments, booked under the following Section X303 of the MORB;
control accounts: (i) Held for Trading (HFT); h. Loans and receivables arising from
(ii) Designated at Fair Value through Profit repurchase agreements, certificates of
or Loss (DFVPL); (iii) Available for Sale assignment/participation with recourse, and
(AFS); and (iv) Held to Maturity (HTM). securities lending and borrowing
Foreign currency-denominated debt transactions, maturing within one (1) year;
securities sold/lent in repurchase agreement/ i. Foreign currency accrued interest
securities lending and borrowing income from financial assets;
transactions shall be considered as eligible j. Accounts receivable arising from
asset cover for the 100% asset cover sale of financial assets under the trade date
requirement. The same treatment shall accounting pending actual settlement/
likewise apply to foreign currency delivery of the underlying securities
denominated debt securities used as (Accounts payable arising from the purchase
additional collateral in repurchase of financial assets under the trade date
agreements or as collateral by borrowing accounting pending actual settlement/
bank in securities lending and borrowing receipt of the underlying securities shall
transactions. require corresponding asset/liquid asset
g. Foreign currency loans and cover);
receivables maturing within one (1) year k. Loans to RBU (net of transactions
authorized by the BSP, booked under the outstanding for more than one (1) year):
following: Provided, That the conditions under Item 3
i. Loans to BSP of Section 72 are complied with;
ii. Interbank loans receivable l. Receivable from the RBU book
iii. Loans and receivables – others arising from the exercise of warrants paired
Loans and receivables authorized by the with ROP Global Bond Holdings in the
BSP shall refer to those granted pursuant to FCDU/EFCDU book: Provided, That it shall
this Manual and shall include the following: be settled by the RBU book to the FCDU/
(a) those with specific approval by the BSP EFCDU book within six (6) months from the
under Section 23 (Loans Requiring Prior BSP date of receipt of the Exchange Securities;
Approval); (b) those short term loans to and
resident private and public sector borrowers m. Such other assets as may be
which under existing regulations require no determined by the Monetary Board as
prior BSP approval but allowed to be eligible asset cover.
serviced using foreign exchange purchased 2. For banks authorized to operate an
from AABs or AAB-forex corps (i.e., loans EFCDU – The foregoing accounts,
to commodity and service exporters, regardless of maturity, and in the case of
indirect exporters, producers/manufacturers, investment in foreign currency denominated
including oil companies and public utility debt instruments (including debt
concerns) under Section 24.4 (Loans Not instruments booked under Unquoted Debt
Requiring Prior BSP Approval); and (c) those Securities Classified as Loans and

Section 73
09.12.31
investments in structured products), a. Foreign currency cash on hand;

regardless of maturity and marketability, b. Foreign currency checks and other
shall all be considered as eligible asset cash items;
cover. Loans to resident private and public c. Due from BSP – Foreign Currency
sector borrowers which under Section 24.4 with remaining maturity of one (1) year or
require no prior BSP approval and allowed less regardless of funding: Provided, That
to be serviced using foreign exchange such deposit/placement is not encumbered
purchased from AABs or AAB-forex corps or is not being utilized for any other
(i.e., loans to commodity and service purposes;
exporters, indirect exporters, producers/ d. Due from other banks (other
manufacturers, including oil companies and FCDUs/EFCDUs, OBUs and non-resident
public utility concerns) shall however have banks);
short term maturity. e. Investments in readily marketable
In addition, the following shall also be foreign currency denominated debt
considered as eligible asset cover: instruments, booked under the following
a. Loans and Receivables granted by control accounts: (i) HFT; (ii) DFVPL;
EFCDU pursuant to Section 24, i.e., those (iii) AFS; and (iv) HTM; except for the
loans of non-residents from EFCDUs, to be following: (a) those which are sold/lent in
serviced using foreign exchange purchased repurchase agreement/securities lending and
from entities that are not AABs or AAB-forex borrowing transactions and those used as
corps under Section 24.1.b: Provided, That additional collateral in repurchase
all applicable banking rules and regulations agreements or as collateral by borrowing
are complied with including single bank in securities lending and borrowing
borrower’s limit as provided in Section X303 transactions; and (b) those investments in
of the MORB; structured products;
b. Outstanding Export Bills Purchased f. Loans and receivables authorized by
in the EFCDU books, booked under the the BSP booked under the following:
following control accounts: i. Loans to BSP maturing within one
i. Interbank loans receivable - if (1) year;
without recourse ii. Interbank loans receivable maturing
ii. Loans and receivables – others - if within one (1) year;
with recourse iii. Loans and receivables – others that
For this purpose, net carrying amount is any of the following:
shall refer to the gross amount of financial (1) Outstanding export bills purchased
asset, plus or minus, as the case may be, in the EFCDU books.
the following: (i) unamortized premium/ (2) Short-term EFCDU loans to
(discount) determined using the effective exporters in the form of export packing
interest method; (ii) any accumulated market credits, whether rediscounted or not under
gains/(losses) in the case of AFS financial BSP’s Export Dollar Facility, up to the extent
assets; and (iii) any allowance for credit guaranteed by Trade and Investment
losses determined based on existing Development Corporation of the Philippines
regulations. (TIDCORP) or Small Business Guarantee
3. Further, at least thirty percent (30%) and Finance Corporation (SBGFC): Provided,
of the cover requirement for foreign That these credits are not overdue.
currency liabilities in the FCDU/EFCDU g. Loans and receivables arising from
shall be in the form of liquid assets as repurchase agreements, certificates of
follows: assignment/participation with recourse and

Sections 73 - 75
09.12.31
securities lending and borrowing c. In the case of foreign banks,

transactions, maturing within one (1) year; remittance of profits to their Head Office
and abroad.
h. Accounts receivable arising from Issuance by a bank of false/erroneous
sale of financial assets under the trade date certification that it has fully complied with
accounting pending actual settlement/ the FCDU/EFCDU cover requirements any
delivery of the underlying securities days of the reference month shall be subject
pertaining to readily marketable foreign to a maximum monetary penalty of
currency denominated debt instruments. PHP30,000 per day (reckoned from the date
The 100% asset cover and thirty percent the deficiency started until it is corrected)
(30%) to be held in the form of liquid assets without prejudice to the imposition on the
enumerated above, shall be unencumbered, erring bank and/or the concerned bank
except as otherwise provided in second officers, of the penal sanctions provided
paragraph of Item f of Section 73.1. under Sections 35 and 36 of Republic Act
The amended report (Appendix 15) on No. 7653.
compliance with FCDU/EFCDU cover The Due from Other Banks – Non-
requirements shall form part of the Financial Resident (DFOB-Non-Resident) account
Reporting Package (FRP) issued under representing cover for foreign currency
Subsec. X162.16 of the MORB. The bank liabilities of FCDU/EFCDU shall be kept
shall continue to submit to the BSP- separate and distinct from the DFOB – Non
Supervisory Data Center (SDC) a Resident account for the regular banking
certification (Appendix 15.1) under oath and unit (RBU).
signed by the bank’s President or Country
Manager, in the case of local branch of Section 74. Foreign Currency Deposits
foreign banks, Compliance Officer and with the Bangko Sentral. Foreign currency
Head of Treasury, to the effect that the bank deposit with the BSP equivalent to at least
has fully complied with the FCDU/EFCDU fifteen percent (15%) as a form of foreign
cover requirements on all banking days of currency cover referred to in Section 4 of
the reference quarter. Republic Act No. 6426, as amended, shall
Sanctions: Non-compliance with the be optional on FCDUs/EFCDUs of UBs/
prescribed 100% FCDU/EFCDU asset KBs and FCDUs of TBs and RBs/Coop
cover and/or thirty percent (30%) liquid Banks. The BSP may pay interest on the
asset cover requirements shall be subject to foreign currency deposit and if requested,
the imposition of a monetary penalty of one- shall exchange the foreign currency notes
tenth of one percent (1/10 of 1%) of the and coins into foreign currency instruments
deficiency, converted to its peso equivalent drawn on its depository banks.
at the exchange rate prevailing on the date
the deficiency was incurred but not to Section 75. Currency Composition of the
exceed PHP30,000 per deficiency, per Cover. FCDUs of TBs and RBs/Coop Banks
calendar day. Compliance for at least six (6) shall maintain the foreign currency cover
months of the FCDU/EFCDU cover in the same currency as that of the
requirement is a pre-condition for the corresponding foreign currency deposit
following: liability.
a. Declaration of cash dividends; FCDUs/EFCDUs of UBs/KBs shall
b. Bank’s application for branching; maintain not less than seventy percent
and (70%) of the foreign currency cover in the

Sections 75 - 84
09.12.31
same currency as that of the liability and amended. Depositors are entitled to receive
thirty percent (30%) or less, at the option of payment in the same currency in which the
the FCDU/EFCDU, may be denominated in insured deposits are denominated.
other acceptable foreign currencies.
Section 80. Rates of Interest. Foreign
Section 76. Secrecy of Deposits. Pursuant currency deposits shall not be subject to
to Republic Act No. 6426, as amended, all interest rate ceilings.
foreign currency deposits are declared as
and considered of an absolutely Section 81. Eligibility as Collateral. Deposits
confidential nature and, except upon the under the foreign currency deposit system
written permission of the depositor, or are eligible as collateral for peso loans or
pursuant to a lawful order issued by a for foreign currency loans to residents and
competent court, in no instance shall such non-residents.
foreign currency deposits be examined,
inquired or looked into by any person, Section 82. Taxes. Pursuant to the National
government official, bureau or office Internal Revenue Code of 1997, as amended
whether judicial, administrative or and its Implementing Rules and Regulations,
legislative, or any other entity whether any income of non-residents (whether
public or private. individuals or corporations) from
transactions with depository banks covered
Section 77. Numbered Accounts. Pursuant under this Chapter shall be exempt from
to Section 9 of Republic Act No. 9160 (The income tax. Interest income derived by
Anti-Money Laundering Act of 2001) dated residents (whether individuals or
29 September 2001, as amended, and its corporations) from depository banks covered
Revised Implementing Rules and under this Chapter shall be subject to a final
Regulations, foreign currency non-checking income tax at the rate of seven and one-half
numbered accounts shall be allowed: percent (7.5%) of such interest income. The
Provided, that the true identity of the transactions of FCDUs/EFCDUs shall,
customers of all foreign currency non- however, be subject to such taxes as
checking numbered accounts are provided under the National Internal
satisfactorily established based on official Revenue Code, as amended and its
and other reliable documents and records Implementing Rules and Regulations.
and the information and documents required
are obtained and recorded by the bank. Section 83. Exemption from Court Order
or Process. Subject to the provisions of
Section 78. Withdrawability and Republic Act No. 9160, as amended,
Transferability of Deposits. There shall be foreign currency deposits shall be exempt
no restrictions on the withdrawal by the from attachment, garnishment, or any other
depositor of his deposit or on the transfer order or process of any court, legislative
of the same abroad except those arising from body, government agency or any
the contract between the depositor and the administrative body whatsoever.
bank.
Section 84. Accounting. The foreign
Section 79. Insurance Coverage. Foreign currency deposits and their corresponding
currency deposits shall be insured under the cover shall be considered as funds separate
provisions of Republic Act No. 3591, as and distinct from the regular assets and

Sections 84 - 87
09.12.31
liabilities of the AABs. AABs shall maintain the bank’s compliance with the provisions
a separate accounting for transactions of law and these regulations.
covered by these rules that will enable
preparation of the Balance Sheet and Income Section 86. Prospective Effect of
Statement covering said funds. Regulations. In the event a new enactment
For purposes of preparing the FCDU/ or regulation is issued decreasing the rights
EFCDU financial statements, the bank shall hereunder granted, such new enactment or
use the US dollar (USD) as its functional regulation shall not apply to foreign
currency. However, for purposes of currency deposits already made or existing
consolidating the FCDU/EFCDU financial at the time of issuance of such new
statements with the RBU financial enactment or regulation, but such new
statements, these shall be translated into the enactment or regulation shall apply only to
presentation currency, i.e. Philippine Peso foreign currency deposits made after its
(PHP). issuance.
The transfer of net realized/unrealized
losses recognized in profit or loss and equity Section 87. Sanctions
and Undivided Profits/(Losses) from FCDU/ 1. Any willful violation of Republic
EFCDU to the Regular Banking Unit (RBU) Act No. 6426, as amended, or any
shall be subject to the guidelines and regulation duly promulgated by the
conditions under Appendix 16. Monetary Board pursuant thereto shall
The policy guidelines on the conversion subject the offender upon conviction to
and transfer of foreign currency- an imprisonment of not less than one (1)
denominated loans, and Real and Other year nor more than five (5) years or a fine
Properties Acquired (ROPA) in the books of not less than Five Thousand Pesos
of the FCDU/EFCDU to peso loans and (PHP5,000.00) nor more than Twenty-
ROPA in the books of the RBU shall be Five Thousand Pesos (PHP25,000.00), or
subject to the conditions provided under both such fine and imprisonment at the
Appendix 17. discretion of the court.
Banks which are authorized to operate The BSP may revoke or suspend the
under this Chapter shall submit to the BSP- authority of a bank to accept new foreign
SES a separate audited financial statement currency deposits for violation of Republic
(Category B report) of the FCDU/EFCDU for Act No. 6426, as amended, or these
the past year within ninety (90) calendar regulations, or if such bank ceases to possess
days after the start of the audit which audit the minimum qualifications required.
shall start not later than thirty (30) calendar 2. Delayed submission of report by
days after the close of the calendar/fiscal year a bank and/or submission of erroneous/
adopted by the bank in accordance with the incomplete report shall be subject to the
provisions of Section X166 of the MORB. monetary penalties under Section 103.
3. Any violation of the provisions of
Section 85. Supervision. The Governor and this Chapter shall be subject to Section 37
the head of the appropriate department of of Republic Act No. 7653. The guidelines
the BSP personally, or by deputies, are for the imposition of monetary penalty for
authorized to verify the books of account violations/offenses with sanctions falling
and transactions of each AAB, to verify the under Section 37 of Republic Act No. 7653
eligible cover, as well as review all other on banks, their directors and/or officers are
requirements under these regulations and shown in Appendix 67 of the MORB.

Sections 88 - 89
09.12.31
PART FOUR. FOREIGN EXCHANGE transactions involving the Philippine peso

FORWARDS AND SWAPS AND OPEN between authorized dealer banks and their
FOREIGN EXCHANGE POSITION OF customers.
BANKS
Section 89. Definition of Terms
Chapter I “Customers” shall refer to: (a) resident
banks (other than KBs and UBs), and non-
FOREIGN EXCHANGE FORWARDS bank BSP supervised entities (NBBSEs) not
AND SWAPS INVOLVING THE authorized to engage in foreign exchange
PHILIPPINE PESO forwards and swaps as dealers; (b) resident
non-bank entities; and (c) non-residents,
Section 88. General Policy. It is the policy both banks and non-banks.
of the BSP to support the deepening of the “Foreign exchange obligation” shall
Philippine financial markets. In line with refer to an actual commitment to repatriate
this policy, customers may, through foreign or pay to a non-resident or any AAB a
exchange forwards, hedge their market risks specific amount of foreign currency on a
arising from foreign exchange obligations pre-agreed date.
and/or exposures: Provided, That forward “Foreign exchange exposure” shall refer
sale of foreign exchange (deliverable and to foreign exchange risk arising from an
non-deliverable) may only be used when existing commitment which will lead to an
the underlying transaction is eligible for actual payment of foreign exchange to, or
servicing using foreign exchange purchased receipt of foreign exchange assets from, non-
from AABs or AAB-forex corps. Customers residents or any AAB based on verifiable
may, likewise, cover their funding documents on deal date. Foreign exchange
requirements through foreign exchange risks arising from BSP-registered foreign
swaps. investments without specific repatriation
AABs may only engage in foreign dates are considered foreign exchange
exchange forwards and swap transactions exposures.
with customers if the latter is hedging market “Foreign exchange swap” shall refer to
risk or covering funding requirements. There a transaction involving the actual exchange
shall be no double/multiple hedging such of two currencies (principal amount only)
that at any given point in time, the total on a specific date at a rate agreed on deal
notional amount of the foreign exchange date (the first leg), and a reverse exchange
derivatives transaction/s shall not exceed the of the same two currencies at a date further
amount of the underlying foreign exchange in the future (the second leg) at a rate
obligation/exposure. (different from the rate applied to the first
The customer shall no longer be allowed leg) agreed on deal date.
to buy foreign exchange from AABs or AAB- “Foreign exchange forward” shall refer
forex corps for foreign exchange obligations/ to a contract to purchase/sell a specified
exposures that are fully covered by amount of currency against another at a
deliverable foreign exchange forwards and specified exchange rate for delivery at a
foreign exchange swaps. specified future date three or more business
The following guidelines, as well as days after deal date.
minimum documentary requirements, shall “Non-Deliverable Forward (NDF)” shall
cover foreign exchange forward and swap refer to a foreign exchange forward contract

Sections 89 - 92
09.12.31
where only the net difference between the pretermination of the contract due to
contracted forward rate and the market rate prepayment of the underlying obligation or
at maturity (i.e., the fixing rate) shall be exposure: Provided, That for foreign
settled on the forward date. currency loans, prior BSP approval has been
obtained for the prepayment and a copy of
Section 90. Documentation. Minimum such approval is presented to the AAB
documentary requirements for foreign counterparty.
exchange forward and swap transactions b. Foreign Exchange Swaps
listed in Appendix 18 shall be presented on No restriction on tenor.
or before deal date to AABs unless c. Settlement of NDFs
indicated. All NDF contracts with residents shall
Foreign exchange selling AABs shall be settled in pesos.
stamp the supporting documents upon d. Remittance of foreign exchange
presentation by customers as follows: proceeds of deliverable forward and swap
a. For hedging transactions: “FX contracts
HEDGED/DELIVERABLE” or “FX HEDGED/ Foreign exchange proceeds of
NON-DELIVERABLE”; deliverable forward and swap contracts shall
b. For funding transactions: “FX be delivered by the AAB counterparty
SOLD”, directly to the beneficiaries concerned
except for foreign investments where said
indicating the contract date and amount FX proceeds are reconverted to Philippine
involved, and signed by the AAB’s pesos and re-invested in eligible peso
authorized officer. Copies of all duly marked instruments such as those listed in Item
supporting documents shall be retained by A.2.2 of Appendix 18. For this purpose,
AABs and made available to the BSP for beneficiaries shall refer to the FCDU/
verification. The retained copies shall also EFCDU of a bank or a non-resident entity
be marked “DOCUMENTS PRESENTED AS (e.g., creditor, supplier, investor) to whom
REQUIRED” and signed by the AAB’s the customer is committed to pay/remit
authorized officer. foreign exchange.
Section 91. Tenor/Maturity and Settlement Section 92. Forward Contracts with Non-
a. Forward Sale of Foreign Exchange residents
(whether deliverable or non-deliverable) All forward contracts to sell foreign
The tenor/maturity of such contracts exchange to non-residents (including OBUs)
shall not be longer than: with no full delivery of principal, including
(i) the maturity of the underlying cancellations, roll-overs/renewals shall be
foreign exchange obligation; or submitted to the BSP for prior clearance.
(ii) the approximate due date or However, every roll-over of short-term (ST)
settlement of the foreign exchange exposure. deliverable forward contracts with non-
For deliverable foreign exchange forward residents need not be prior approved:
contracts, the tenor/maturity shall be Provided, That:
co-terminus with the maturity of the 1. The underlying transaction for each
underlying obligation or the approximate ST deliverable foreign exchange forward
due date or settlement of the foreign contract is a foreign investment in long-term
exchange exposure. This shall not preclude (LT) Philippine government securities for

Sections 92 - 95
09.12.31
which a Bangko Sentral Registration the counterparty signature on pertinent

Document (BSRD) has been issued; documents; and
2. The roll-over is effected during the d. Mark-to-Market Test – the booking
tenor of the underlying LT Philippine or recording in the books of accounts of the
government securities; profit or loss on contracts and cash flows/
3. The actual delivery/settlement of the settlement to counterparties must be fully
forward contract coincides with the date supported by appropriate documents such
of the intended capital repatriation of the as authenticated copy of debit/credit tickets,
BSP-registered investments; schedules showing among others, mark-to-
4. The value of the forward contract market valuation computation, etc.
does not exceed the foreign currency
equivalent of the maturity value/net Section 94. Reporting Requirements
proceeds of the BSP-registered investments Banks duly authorized to engage in
computed at the agreed forward exchange derivatives transactions shall continue to be
rate; and covered by the BSP’s existing reporting
5. The repatriation of capital and requirements on financial derivatives.
remittance of income for the BSP- Cancellations, roll-overs or non-delivery of
registered investment complies with deliverable foreign exchange forward
documentary requirements under existing contracts and under the forward leg of swap
BSP rules. contracts shall be reported electronically in
excel format to the BSP not later than five
Section 93. Cancellations, Roll-overs or (5) banking days after reference month using
Non-delivery of Deliverable Foreign the prescribed format in Annex L.
Exchange Forward and Swap Contracts Swap contracts with counterparties
All cancellations, roll-overs or non- involving purchase of foreign exchange by
delivery of all foreign exchange banks at the initial leg shall likewise be
deliverable forward contracts and the reported electronically in excel format to the
forward leg of swap contracts shall be BSP not later than five (5) banking days after
subject to the following guidelines to reference month using the prescribed format
determine the validity thereof: in Annex M .
a. Eligibility Test - Contracts must be The reports shall be transmitted to the
supported by documents listed in International Operations Department at
Appendix 18; iod@bsp.gov.ph, copy furnished the
b. Frequency Test - the Supervisory Data Center (SDC) at the
reasonableness of the cancellation, roll-over following addresses: sdcfxkbdom@
or non-delivery shall be based on the results bsp.gov.ph (for Domestic Banks) and
of the evaluation of the justification/ sdcfxkbfor@bsp.gov.ph (for Foreign Banks).
explanation submitted by banks as
evidenced by appropriate documents; Section 95. Non-Bank BSP-Supervised
c. Counterparty Test – the Entities (NBBSEs)
cancellation or roll-over of contracts must NBBSEs that may subsequently be
be duly acknowledged by the counterparty authorized to engage in foreign exchange
to the contract as shown in documents forwards and swaps as dealers shall
submitted by banks, e.g., there should be likewise be covered by the provisions of
conforme of counterparty as evidenced by this Chapter.

Sections 96 - 99
09.12.31
Chapter II (e) appraisal increment reserves

(revaluation surplus) arising from an
OPEN FOREIGN EXCHANGE appreciation or an increase in the book
POSITION OF BANKS value of bank assets.
“Permanently assigned capital” shall
Section 96. General Policy. It is the policy refer to the minimum capital required for
of the BSP to promote the growth and branches of foreign banks in the
development of the foreign exchange market. Philippines to be inwardly remitted and
It is also recognized that banks are the main converted into pesos.
players in this market, primarily in their role “Unimpaired capital of foreign banks”,
as “market-makers” 1. Thus, in order to for purposes of this Chapter, shall be
ensure that banks are able to provide ample defined as “permanently assigned capital”
liquidity in the market but, at the same time, plus the “Net Due To Head Office”
conduct their business in a sound manner, account: Provided, That the amount of Net
and guard against speculative activity, limits Due To Head Office that may be added
on their net open foreign exchange position to the permanently assigned capital of
are instituted. foreign banks that are UBs shall not
exceed the equivalent of six (6) times the
Section 97. Definition of Terms permanently assigned capital. Provided
“Open Foreign Exchange Position” shall further; That the amount of Net Due To
refer to the extent that banks’ foreign Head Office that may be added to the
exchange assets do not match their foreign permanently assigned capital of foreign
exchange liabilities. An open position may banks that are KBs shall not exceed the
either be “positive”, “long”, or “overbought” equivalent of eight (8) times the
(i.e., foreign exchange assets exceed foreign permanently assigned capital.
exchange liabilities) or “negative”, “short”,
or “oversold” (i.e., foreign exchange Section 98. Allowable Open Foreign
liabilities exceed foreign exchange assets). Exchange Position. Banks’ allowable open
“Unimpaired capital” shall refer to a foreign exchange position (either
bank’s total capital net of (a) such overbought or oversold) shall be the lower
unbooked valuation reserves and other of 20 percent (20%) of their unimpaired
capital adjustments as may be required by capital or USD50 million.
the BSP; (b) total outstanding unsecured Any excess of the allowable limit shall
credit accommodations, both direct and be settled on a daily basis.
indirect, to directors, officers, Penalties on excess overbought and
stockholders, and their related interests oversold positions of banks when PDS
(DOSRI); (c) deferred income tax; (d) trading is suspended shall be waived.
equity investment of a bank in another
bank or enterprise whether foreign or Section 99. Computation of Foreign
domestic, if the other bank or enterprise Exchange Position. Banks’ open foreign
has a reciprocal equity investment in the exchange position shall be computed daily
investing bank, in which case, the based on their FX Form 1. The guidelines
investment of the bank or the reciprocal on the computation of foreign exchange
investment of the other bank or position of banks and reporting
enterprises, whichever is lower; and requirements are outlined in Appendix 19.
1
There are two facets to this role. First, banks must be able to quote rates to their customers at which they stand ready to buy
and sell currencies. Second, banks themselves may take open positions in currencies.

Sections 100 - 101
09.12.31
Section 100. Sanctions. The following Non-Monetary Sanctions

sanctions shall be imposed on banks "chronic" violation suspension of bank's
found in violation of the net open foreign rediscounting privileges,
exchange position limits: cash dividend declaration
a. A bank is considered immediately and branching privileges
in violation of the open foreign exchange until the violation is
corrected but in case shall
position limit on the day it exceeds such
such suspension be less
limit. Such bank shall be subject to the
than 30 calendar days
following monetary penalties: "abusive" violation suspension of bank's
rediscounting privileges,
Per Calendar Month Daily Penalty
cash dividend declaration
1st calendar day of violation PHP10,000.00 and branching privileges
2nd calendar day of violation PHP20,000.00 until the violation is
3rd calendar day of violation, PHP30,000.00 corrected but in no case
and onwards, or if the excess
shall such suspension be
open foreign exchange position
of the bank is thirty percent (30%) less than 60 calendardays.
or more of the allowable limit in
any calendar day, regardless of
whether a bank is in first, second,
c. The Monetary Board may impose
third or more days of violation other non-monetary sanctions on a bank
for violations determined by BSP as
b. In addition, the following non- “chronic” or “abusive” on a case-to-case
monetary sanctions shall be imposed on basis, pursuant to Section 37 of Republic
the bank committing violations Act No. 7653.
considered as:
1 ) “chronic”, that is, when the PART FIVE. GENERAL PROVISIONS
violation continues beyond three (3)
banking days within a calendar month, Chapter I
but the excess position is less than thirty
percent (30%) of the allowable limit; and REPORTS AND POST VERFICATION
2) “abusive”, that is, when the
violation continues beyond three (3) Section 101. Reportorial Requirements.
banking days within a calendar month and The following reports are required to be
the excess position is thirty percent (30%) submitted to the BSP by AABs, OBUs, and
or more of the allowable limit. AAB-forex corps when applicable:
Title of Report Submission Submission Process

Frequency/Deadline
Category A. Consolidated Report on Foreign Exchange Assets and Liabilities
For UBs/KBs
A-3 FX Form 1, Main Report Weekly, within five (5) email to DES at
banking days after end of der.itrs@bsp. gov. ph
reference week
A-3 FX Form 1, Schedule 1 Weekly, within five (5) email to DES at
banking days after end of der.itrs@bsp.gov.ph
reference week
A-3 FX Form 1, Schedules 2 to 7, Weekly, within five (5) email to DES at
9 to 12 banking days after end of der.itrs@bsp.gov.ph
reference date (hard copy of Schedule
10 & 11 to ID)

Section 101
09.12.31

Frequency/Deadline
Sworn Certification – FX Form 1 Weekly, within three (3) Hard copy to DES
Main Report and Schedules banking days after
2 to 7, 9 to 12 (Annex T) submission deadline for the
covered reports/schedules
A-3 FX Form 1, Schedules 8 &13 Daily, within two (2) email to SDC at
banking days after end of fed@bsp.gov.ph or sedi-
reference date fxvmd@bsp.gov.ph
Sworn Certification – FX Form 1 Weekly, within three (3) Hard copy to SDC
Schedules 8 &13 (Annex U) banking days after end of
reference week
A-3 FX Form 1, Schedule 14 Monthly, within 15 banking email to SDC at
days after end of reference fed@bsp.gov.ph or sedi-
month fxvmd@bsp.gov.ph
A-3 Consolidated Foreign Exchange Daily, within three (3) Hard copy to SDC
Position Report banking days from
reference date
For TBs:
B FX Form 1A, Main Report and Monthly, within ten (10) e-mail to DES at
Schedules 2 to 9 banking days after end of der.itrs@bsp.gov.ph
reference month
B. Foreign Trade Transactions
A-3 Report on Export Proceeds Weekly, within five (5) e-mail to DES at
FX Form 1, Schedule 9 banking days after end of der.itrs@bsp.gov.ph
reference week
A-3 Report on Import Letters of Credit -do- e-mail to DES
(L/Cs) Opened and DA-OA Import der.itrs@bsp.gov.ph
Availments and Extensions, FX (hard copy to ID)
Form 1, Schedule 10
A-3 Report on Import Payments -do- e-mail to DES
FX Form 1, Schedule 11 der.itrs@bsp.gov.ph
(hard copy to ID)
Monthly Report on Sale/Remittance Monthly, within the first five Hard copy to ID
of Foreign Exchange (FX) for (5) banking days of the
Advance Payment of Importations month succeeding the date
up to USD100,000.00 (Annex B) of foreign exchange sale
Monthly Report on Purchase of Monthly, within the first five Hard copy to ID
Foreign Exchange (FX) from (5) banking days of the
Refund of Advance Payment of month succeeding the
Importations up to USD100,000.00 receipt of the refund
(Annex C)
C. Foreign Currency Loans and Related Transactions
A-2 Report on Bank Liabilities to Non- Monthly, within fifteen (15) email to ID at
Residents (including hard copy of banking days after end of id-form5@bsp.gov.ph
Certification for correctness and reference month
consistency with FRP), ID-Form 5
B Consolidated Report on Loans Monthly, within fifteen (15) Hard copy and
Granted by FCDUs, IOS Form 4 banking days after end of diskette to ID
reference month

Section 101
09.12.31

Frequency/Deadline
B Report on Guarantees Issued by Quarterly, within fifteen (15) Hard copy to ID
Local Banks and Financial banking days from end of
Institutions in Favor of Non- reference quarter
Residents, R-1 (Annex G)
B Report on Foreign Guarantees Quarterly, within fifteen (15) Hard copy to ID
Securing Loans of Residents from banking days from end of
Local Banks and Financial reference quarter
Institutions, R-4 (Annex H)
B Report on Cancellations, Monthly, within five (5) email to ID at
Roll-overs and Non-delivery of banking days after end of iod@bsp.gov.ph
Deliverable Foreign Exchange reference month
Forward Purchase and Sale
Contracts and Forward Leg of Swap
Contracts (Annex L)
B Report on Foreign Exchange -do- -do-
Swaps with Customers where the
First Leg is a Purchase of Foreign
Exchange Against Pesos (Annex M)
D. FCDUs/EFCDUs
Report on Inventory of Philippine Weekly, within three (3) Original to SDC
Debt Papers banking days after end of
reference week
Sworn Certification on Monthly, within five (5) Hardcopy to SDC
FCDU/EFCDU Lending to RBU banking days from end of
(Appendix 14) reference month
B Audited Financial Statement of Annually, within ninety (90) Hardcopy to
FCDU/EFCDU calendar days after the start appropriate SES
of audit which audit shall department
start not later than thirty
(30) calendar days after the
close of the calendar/fiscal
year adopted by the bank
A-2 Report on Compliance with Quarterly, within fifteen (15) Generated by SDC
FCDU/EFCDU Cover Requirements banking days after end of using FRP data
(Appendix 15) reference quarter submitted by bank
Sworn Certification of Compliance Quarterly, within fifteen (15) Hardcopy to SDC
with FCDU/EFCDU Cover banking days from end of
Requirements (Appendix 15.1) reference quarter
E. Offshore Banking Units
Statement of Assets and Liabilities Monthly, within fifteen (15) hard copy to SDC
banking days after end of
reference month
Schedule 1 – Maturity Profile of -do-
Sources and Uses of Funds
Schedule 2 Page 1 – Currency -do-
Classification of Funds (In US
Dollars)
Schedule 2 Page 2 – Currency -do-
Classification of Funds (In Original
Currencies)

Section 101
09.12.31

Frequency/Deadline
Schedule 3 – Country Classification Monthly, within fifteen (15)
of Interbank Funds/Non-Bank banking day after end of
Funds reference month
Schedule 4A – Report on Loans -do-
Granted by OBUs: Part I – Credit
Information (In Original Currencies)
Schedule 4B– Report on Loans -do-
Granted by OBUs: Part II – Credit
Status
Schedule 4C – Loans and -do-
Discounts – Residents: By
Borrower/By Economic Activity/By
Status
Schedule 5 – Investments in Bonds -do-
and Other Debt Instruments (In
Original Currencies and USD
Equivalent)
Schedule 5A – Investments in -do-
Bonds and Other Debt Instruments
Issued by Residents
Schedule 6 – Indebtedness Among -do-
Banks Operating in the Philippines
Schedule 7 – Report on OBU -do-
Liabilities to Non-Residents (In
Original Currencies and USD
Equivalent)
Schedule 8 – Report on Spot and -do-
Forward Foreign Exchange
Transactions of OBUs
Schedule 9 – Report of Foreign -do-
Exchange Flows
Schedule 9A – Foreign Exchange -do-
Actually Sold to Authorized Agent
Banks (AABs)
Schedule 9B – Details of -do-
Investment Receipts/Disbursements
Statement of Earnings and Semi-annual, within fifteen
Expenses, BSP 6.40.02 (15) banking days after end
of reference semester
Financial Assistance and Training Annually, within ten (10)
Granted by OBUs to its Filipino banking days after end of
Staff reference year
Updated List and Bio-Data of Annually, within ten (10)
Expatriates banking days after end of
reference year
F. Representative Offices of Foreign Banks
FX Cash Receipts and Cash Monthly, within ten (10) hard copy to SDC
Disbursements banking days after end of
reference month

Sections 101 - 103
09.12.31

Frequency/Deadline
Annual Report of Head Office Within five (5) months after hard copy to SDC
end of fiscal/calendar year
G. Custodian Banks/Remitting AABs
A-2 Statement of Remittance Report Daily, within two (2) hard copy to ID
(for Registered Foreign Direct banking days from date of
Investments), together with actual remittance
supporting documents under Items
C.1(b) and C.2 of Appendix 1 and
Appendix 11)
A-2 Consolidated Daily Foreign Portfolio Daily, within two (2) e-mail to ID at
Investment Registration and banking days from iod-pid@bsp.gov.ph
Outward Remittance Report, transaction date and hard copy to ID
together with supporting documents
under Items C.1(a) and C.2 of
Appendix 1 and Appendix 10 and 11
H. AAB-forex corps
Report on Foreign Exchange Weekly, within five (5) e-mail to DES
Transactions banking days after end of
reference week
Section 102. Procedures for Reporting. C. For Reports of Representative

Reports shall be filed with the BSP Main Offices of Foreign Banks and Reports of
Office or with the BSP Regional Offices UBs/KBs, TBs, and RBs/Coop Banks Not
or by sending them by mail or special Classified as Category A or B Reports:
delivery, unless otherwise specified. a. PHP100 per calendar day for the
The date of acknowledgment of receipt first five (5) successive calendar days of
on the copy of the report (if mailed) delay
shall be considered as the date of b. PHP150 per calendar day for the
submission. next five (5) successive calendar days of
delay
Section 103. Fines and Penalties c. PHP200 per calendar day after the
1. The following schedule of fines first ten (10) successive calendar days of
for delayed submission of reports and/ delay until the particular report has been
or incomplete/erroneous reporting shall filed.
apply: D. For Reports of OBUs
A. For Category A-1, A-2, and A-3 PHP500 per calendar day except for
reports: the following reports where the above
a. UBs/KBs : PHP 1,200 per calendar fines and penalties for representative
day offices of foreign banks shall apply:
b. TBs : PHP 600 per calendar day
a. Statement of Earnings and
c. RBs/Coop Banks : PHP 180 per calendar day
Expenses;
b. Financial Assistance and Training
B. For Category B reports:
Granted by OBUs to its Filipino Staff;
a. UBs/KBs : PHP 240 per calendar day
and
b. TBs : PHP 120 per calendar day
c. RBs/Coop Banks : PHP 60 per calendar day
c. Updated List and Bio-Data of
Expatriates.

Sections 103 - 106
09.12.31
E. For Reports of AAB-Forex corps Chapter II

PHP 1,000 per calendar day of delay
until complied FINAL PROVISIONS
F. Chronic delayed reporting including
submission of amended reports required for Section 105. Compliance with Anti-Money
FX Form 1 shall be subject to an additional Laundering Rules
monetary penalty of PHP 2,000.00 per All transactions under this Manual shall
banking day until the respective report and comply with existing regulations on anti-
schedules are correctly submitted. money laundering pursuant to the
Submission of delayed reports, including provisions of Republic Act No. 9160, as
amended reports, shall be considered amended.
chronic based on the following:
Section 106. Penal Sanctions. Any person
Name of Report/ Frequency of No. of times
Schedule Submission delay violating the provisions of this Manual
Schedules 8 & 13 Daily More than seven shall suffer the penalties prescribed under
(7) times delayed Section 36 of Republic Act No. 7653.
per month
Main Report, Weekly At least two (2) Administrative sanctions may also be
Schedules 2 - 7 times delayed per imposed upon institutions within BSP’s
and 9 - 12 month or five (5)
banking days of
administrative authority found violating
continuous delay this Manual, including their directors and
from submission officers responsible for such violation.
deadline
Schedule 14 and Monthly More than two These penalties may be any or all of
Reconciliation (2) times delayed the following as circumstances warrant:
Statement per semester or 1. Monetary sanction - The amount
ten (10) banking
days of continuous of PHP30,000.00 penalty imposed per day
delay from the per violation committed shall be based on
submission
deadline
a per transaction basis;
2. Non-monetary sanction - This shall
2. Manner of payment or collection of be based on the gravity of the offense or
fines: violation:
a. Fines shall be collected through a. Reprimand of bank officers who
debit to the AAB’s current account deposit approved the transaction;
maintained with the BSP by the Financial b. Suspension of bank officers who
Accounting Department upon receipt of approved the transaction;
notice from the department/s concerned; or c. Suspension of directors (for local
b. In case payment of fines is effected banks) and Country Manger (for foreign banks);
through check or cash, the same shall be d. Permanent disqualification of bank
remitted to the Cash Department of the BSP officers/directors;
through the department/s concerned. e. Reduction or suspension of
overbought/oversold limits;
Section 104. Post-Verification. Post- f. Suspension of opening of L/Cs
verification of foreign exchange transactions and over-the-counter sale of foreign
covered by this Manual and reported under exchange for a period of up to six (6)
Section 101 hereof shall be undertaken by months;
the BSP to verify compliance with the g. S u s p e n s i o n o f d e r i v a t i v e s
provisions of this Manual and for monitoring activities for a period of up to six (6)
purposes. months; and

Sections 106 - 108/Glossary
11.12.31
h. Suspension of FCDU/EFCDU entity, or vice-versa;

authority for a period of up to six (6) months. b. Interlocking directorship or
officership, except in cases involving
Section 107. Repealing Clause. All existing independent directors as defined under
BSP rules and regulations on current existing regulations;
accounts, capital accounts, OBUs, c. Common stockholders owning ten
representative offices of foreign banks, percent (10%) to fifty percent (50%) of the
FCDUs/EFCDUs, foreign exchange outstanding voting stock of each financial
forwards and swaps involving the Philippine intermediary and the entity;
peso, and open foreign exchange position d. Management contract or any
of banks, as well as all other existing BSP arrangement granting power to the bank to
rules and regulations or parts thereof which direct or cause the direction of management
are inconsistent with or contrary to the and policies of the entity, or vice-versa; and
provisions of this Manual are hereby e. Permanent proxy or voting trusts in
repealed or modified accordingly: Provided, favor of the bank or quasi-bank constituting
That regulations, violations of which are the ten percent (10%) to fifty percent (50%) of
subject of pending actions or investigations, the outstanding voting stock of the entity,
shall not be considered repealed insofar as or vice-versa.
such pending actions or investigations are Authorized Agent Banks (AABs) shall
concerned, it being understood that as to refer to all categories of banks [except
such pending actions or investigations, the Offshore Banking Units (OBUs)] duly
regulations existing at the time the cause of licensed by the BSP. It is understood that each
action accrued shall govern. category of bank should function within the
operational parameters defined by existing
Section 108. Separability Clause. Nothing laws/regulations for the specific bank category
herein is intended nor shall be construed, to which they respectively belong.
to repeal or amend any law or statute. AAB-forex corps, whether or not named
Should any provision of this Manual be as such, shall refer to AAB subsidiary/affiliate
declared unconstitutional or invalid, the forex corporations whose business include
remaining provisions or parts thereof shall buying and selling of foreign exchange.
remain in full force and effect, and continue Balikbayan is a Filipino that has
to be valid and binding. established permanent residence abroad.
Cash Against Document (CAD) is an
Glossary of Terms arrangement whereby the buyer pays the
exporter upon the former’s receipt of the
FOR PURPOSES OF THIS MANUAL, the shipping documents sent to him by the
following definitions are adopted: exporter either directly or through the banks.
Advance Payment is an arrangement Consignment is an arrangement
between the seller and buyer where the whereby payment is contingent upon the
buyer pays, either partial or full, the sale to third parties abroad of the exported
seller prior to the shipment of the commodities by consignee.
goods. Direct Remittance (DR) is a supplier-
Affiliate refers to an entity linked buyer arrangement where payment is made
directly or indirectly to a bank by means of: within 29 calendar days from bill of lading/
a. Ownership, control or power to airway bill date.
vote, of ten percent (10%) to fifty percent Documents Against Acceptance (D/A)
(50%) of the outstanding voting stock of the is an arrangement under documentary

Glossary
11.12.31
collection in which an exporter instructs the Forex Corporations, whether or not

presenting bank to hand over shipping and title named as such, refer to entities whose business
documents to the importer only if the importer include buying and selling of foreign
accepts and signs the accompanying bill of exchange.
exchange or draft. Intercompany Open Account Offset
Documents Against Payment (D/P) is an Arrangement (Interco O/A) is an arrangement
arrangement under documentary collection in whereby the exporter offsets its payables to
which an exporter instructs the presenting against its receivables from, its parent/affiliate
bank to hand over shipping and title company abroad.
documents to the importer only if the importer Legal Tender refers to money recognized
fully pays the accompanying bill of exchange by law as acceptable payment for debts owed
or draft. to creditors.
Electronic transfer is a system where the Letter of Credit (L/C), which gives the
authority to debit or credit an account (bank, seller assurance that he will receive the
business or individual) is provided by wire, payment for the goods, is binding document
with or without a source document being that a buyer can request from his bank in order
mailed to evidence the authority. to guarantee that the payment for goods will
Financial Institutions shall refer to be transferred to the seller. In order for the
business organizations that offer a broad base payment to occur, the seller has to present
of financial services or specialize in specific the bank with the necessary shipping
financial functions, products, or services, e.g. documents confirming the delivery of goods
banks, investment houses, pension funds, within a given time frame.
pawnshops, credit unions, investment Low-Cost Housing refers to housing
companies, insurance companies, securities packages with loan ceilings ranging from
brokers and dealers, stock exchanges, mutual above PHP400,000 up to PHP3 million or in
funds, trust corporations, leasing companies, such other amounts which HUDCC may
financing companies, credit card companies, prescribe in the future.
companies engaged in foreign exchange Medium- and Long-Term Loans are credits
dealership/brokerage and others that deal in with maturities exceeding one (1) year.
money. Non-bank BSP-supervised entities
Foreign Bank shall refer to a bank or (NBBSEs) refer to non-bank entities that fall
banking corporation formed, organized and under the supervisory authority of the BSP
existing under any foreign law. under Republic Act No. 7653 (The New
Foreign Currency Deposit Unit (FCDU)/ Central Bank Act), Republic Act No. 8791
Expanded Foreign Currency Deposit Unit (The General Banking Law of 2000) and other
(EFCDU) shall refer to a unit of a local bank or special laws. These include quasi-banks,
of a local branch of a foreign bank authorized subsidiaries and affiliates of AABs/quasi-
by the BSP to engage in foreign currency- banks, non-banks with trust or investment
denominated transactions, pursuant to the management activities license, non-stock
provisions of Republic Act No. 6426, as savings and loan associations, and
amended. pawnshops.
Foreign Currency Loans are loans Non-resident refers to an individual, a
denominated in currencies other than the corporation or other juridical person not
Philippine peso, regardless of the creditor. included in the definition of resident.
Foreign Loans are loans owed to (See “Resident”)
non-residents, regardless of currency Non-trade current account
denomination. transactions refer to all non-trade

Glossary
11.12.31
transactions (also referred to as invisibles) advances in order to assure that revenues from
excluding those related to foreign/foreign the shipment are used to repay the advances
currency loans and foreign investments. made.
Non-trade transactions refer to all other Representative Office shall refer to a
foreign exchange transactions not included in liaison office of a foreign bank which deals
the definition of trade transactions. These shall directly with the public by promoting and
include foreign loans and foreign investments. giving information about the foreign bank’s
(See “Trade Transactions”) services offered. It does not include the
Offshore Banking refers to the conduct regional or area headquarters of a foreign bank
of banking transactions in foreign currencies registered and licensed under existing laws.
involving the receipt of funds principally from Resident shall refer to –
external sources and, as allowed in this a) an individual citizen of the Philippines
Manual, from internal sources and utilization residing therein; or
of such funds, as provided herein. b) an individual who is not a citizen of
Offshore Banking Unit (OBU) refers to a the Philippines but is permanently residing1
branch, subsidiary, or affiliate of a foreign therein; or
banking corporation which is duly authorized c) a corporation or other juridical person
by the BSP to transact offshore banking organized under the laws of the Philippines;
business in the Philippines. For purposes of or
this Manual, OBUs are classified as non- d) a branch, subsidiary, affiliate,
residents. extension office or any other unit of
Open Account (O/A) is an arrangement corporations or juridical persons which are
whereby the shipping documents are sent and organized under the laws of any country and
released by the exporter directly to the buyer, operating in the Philippines, except OBUs.
without coursing the documents through the Short-term loans are credits with maturity
banks, upon the buyer’s promise to pay at not exceeding one (1) year.
some future date after shipment. Socialized housing refers to housing
Red Clause is a clause (originally typed in packages with loan ceilings of not more than
red) added to a letter of credit authorizing the PHP400,000, or in such other amounts which
advising/negotiating bank to make an advance the HUDCC may prescribe in the future.
payment to the beneficiary (exporter) before Small-scale mining refers to mining
the actual shipment to the buyer. The advance activities which rely heavily on manual labor
may be up to 100% of the export contract using simple implement and methods and do
value and may be used by the exporter to buy not use explosives or heavy mining equipment
the inputs for manufacturing or shipment. Red Subsidiary (of a bank) refers to a
clause credits are used primarily when the corporation or firm more than fifty percent
buyer (importer) has an agent in the exporting (50%) of the outstanding voting stock of which
country. To finance its purchases, the importer is directly or indirectly owned, controlled or
may arrange for the opening of a red clause held with power to vote by a bank.
letter of credit. Negotiations of red clause Trade transactions refer to merchandise
credits are limited to the bank making the export and/or import transactions.
For an updated version of the FX Manual, please visit http://www.bsp.gov.ph/regulations/

reg_MORB.asp then click on the Manual of Regulations on Foreign Exchange Transactions.
1
Residents include any individual, citizen or otherwise, who has resided in the Philippines for a year or longer,
as defined in Section 83 of IMF Balance of Payments Textbook 1996.

§§ 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:
of obligations of the National Government Provided, further, That payments due shall
and other freely negotiable securities in the be deducted from the Regular Demand
BSP portfolio valued at 100%. Deposit Account (RDDA) of concerned
d. Delivery. No delivery of the banks. The BSP shall issue the certificate of
collateral shall be made, but a custody final withholding tax reflecting the amount
receipt shall be issued instead. of the FWT paid; and
e. Reservation. Prepayment may be (3) Concerned banks shall issue the
made by the BSP at its option anytime before corresponding debit authority to the BSP to
maturity. cover the twenty percent (20%) FWT on
Effective 01 July 2003, published their overnight reverse repo agreements with
interest rates that will be applied on BSP’s the BSP as mentioned in Item “2” above.
reverse repo agreements with banks shall (As amended by Circular Nos. 647 dated 03 March 2009 and
be inclusive of Value Added Tax (VAT). 619 dated 22 August 2008)
Reverse repo agreements entered into
by the BSP with any AAB are included in § X601.3 Settlement procedures on the
the definition of the term “deposit purchase and sale of government securities
substitutes” under Sec. 22 (y) Chapter 1 of under repurchase agreements with the
the National Internal Revenue Code of 1997. Bangko Sentral. Purchase and sale of
The BSP shall withhold twenty percent government securities under repo
(20%) Final Withholding Tax (FWT) on its agreements (GS/repo agreements) between
overnight reverse repo agreements starting and among banks and QBs and BSP in
01 January 2008, under the following connection with the latter’s open market
guidelines: operations shall be settled in accordance
(1) All overnight reverse repo with the provisions of the agreement for the
agreements with the BSP shall be subject PhilPaSS executed on 12 December 2002
to the twenty percent (20%) FWT in the between the BSP and BAP/CTB/RBAP and
same manner as term reverse repo any subsequent amendments thereto.
agreements, which tax is deducted on each (As superseded by the agreement between the BSP and BAP/
maturity date and remitted to the BIR; CTB/RBAP dated 12 December 2002)
(2) With respect to the overnight RRPs
from 01 January 2008 to 22 August 20081, §§ X601.4 - X601.5 (Reserved)
the concerned banks shall reimburse the BSP
the amount equivalent to forty percent (40%) § X601.6 Bangko Sentral trading
of the twenty percent (20%) FWT due windows and services during public sector
thereon. However, banks which choose to holidays. The guidelines on BSP’s trading
pay the whole twenty percent (20%) FWT windows and services during public sector
shall remit the amount equivalent to the sixty holidays are shown in Appendix 84.
percent (60%) balance thereof to the BIR, (M-2008-025 dated 13 August 2008)
through the BSP as withholding agent. In
both cases, payment of the FWT to the BSP Secs. X602 - X610 (Reserved)
shall be made on or before 03 April 2009,
either in full or in three (3) installments: B. FINANCIAL INSTRUMENTS
Provided, That a bank which intends to
pay in installments shall remit the first Sec. X611 (2008 - X602) Derivatives. A
payment on or before 06 March 2009, the bank may engage in authorized derivatives
second on or before 20 March 2009 and activities: Provided, That the bank:
1
Interest income payments from 01 January 2008 to 26 August 2008.

§ X611
08.12.31
a. Understands, measures, monitors c. It is settled at a future date.

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. An 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

§ X611
08.12.31
categorized as market counterparty, to the derivatives contract are the client and
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
(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 those hedging its own risks: Provided, That it
of others. A dealer can also act as broker observes all the requirements for hedging
and/or end-user of derivatives instruments. transactions under PAS.
(As amended by Circular No. 594 dated 08 January 2008) (b) A UB or KB may trade with
counterparties in order to take positions for
§ X611.1 (2008 - X602.1) Generally its own account in “organized market” -
authorized derivatives activities. A bank traded financial instruments enumerated
may engage in the following derivatives under Item "1" above. It can also take long
activities without need of prior BSP positions in naked FX options with a tenor
approval: Provided, That it observes the of three (3) years or less.
provisions of Appendix 25 and meets the (c) RBU and EFCDU of UBs and KBs,
following conditions: including its trust departments, may invest,
a. UBs and KBs may transact in the for their own account, in the following SPs:
following derivatives in the capacities (i) Principal-protected foreign
specified: currency-denominated SPs, the revenue
(1) As a dealer. A UB or KB may streams of which are linked to interest rate
originate and distribute the following indices, interest rate instruments, listed
“organized market”-traded financial equity shares or indices, FX rates, credit
derivatives: rating or index, or gold: Provided, That the
(a) FX forwards, FX swaps, currency maximum contractual maturity shall be
swaps and analogous financial futures with five (5) years;
a tenor of three (3) years or less; and (ii) Plain vanilla single-name CLNs
(b) Interest rate swaps, forward rate where the reference asset is an obligation
agreements and analogous financial futures issued or guaranteed by the Republic of
with a tenor of ten (10) years or less: the Philippines.
Provided, That the issuance of sub- Provided, That the bank or trust entity
participation in any derivatives held as an shall comply with the following conditions:
end-user shall be deemed as undertaking (aa) Total carrying value of all
the role of a dealer: Provided, further, That investments in SPs shall not exceed 100%
the dealer UB or KB observes the of the bank’s qualifying Tier 1 capital or
provisions of Appendix 26 and other fifty percent (50%) of a trust entity’s trust
pertinent securities laws, rules and assets; and
regulations. (bb) For investments in SPs under the
For purposes of this Subsection, an EFCDU, total carrying value of SPs as
organized market refers to an exchange defined herein shall also not exceed
or a BSP-recognized over-the-counter twenty percent (20%) of the total FCDU
market governed by transparent and assets: Provided, That SPs which are not
binding market conventions on price booked in an investment account
transparency, trade reporting, market (e.g., booked as inter-bank loans), for this
surveillance and orderly conduct/ purpose, shall be considered as part of the
operations of the market. EFCDU 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
08.12.31
entity (i.e., issuer or a third party) rated at derivatives transactions under Subsec.
least “A” or its equivalent by an X611.1(a)(2). Any trust entity may also
international rating agency acceptable to apply for Type 3 authority in order to
the BSP or fully collateralized by an asset transact as end-user on behalf of its trustor/
with equivalent credit quality. principal/s with derivatives instrument
(3) As a broker. A UB or KB may outside those enumerated under Subsec.
facilitate derivatives transactions between X611.1(a)(2).
dealers and market and/or institutional (As amended by Circular Nos. 605 dated 05 March 2008 and
counterparties and/or sophisticated 594 dated 08 January 2008)
individual end-users: Provided, That the
UB/KB, acting as broker, ensures that its § X611.2(2008 - X602.2) Activities
client fully understands its limited requiring additional derivatives
responsibility as a broker: Provided further, authority. A bank shall apply for prior BSP
That the bank adheres to procedures for approval of additional derivatives authority
evaluating client suitability, including risk to engage in all other financial derivatives
disclosures, as prescribed in Appendix 26: activities not expressly allowed in Subsec.
Provided finally, That the bank complies X611.1. A bank may apply for two (2) or
with other pertinent securities laws, rules more additional authorities. A bank
and regulations. applying for additional derivatives
b. TBs, RBs and Coop Banks may authority/ies must have and maintain a risk
enter in derivatives transactions as end-user management system commensurate to the
with BSP - authorized dealers and brokers additional authority/ies being applied for,
solely for hedging purposes: Provided, That in accordance with the provisions of
they observe all the requirements for Appendix 25 and meet other conditions
hedging transactions under PAS1. A TB, RB specified under this Subsection.
or Coop Bank may apply for a Type 3 a. Classification of additional
authority to enter into derivatives derivatives authority
transactions as end-user for purposes other (1) Type 1 - Expanded dealer authority
than hedging: Provided, That the applicant A UB or KB may apply for a Type 1
bank agrees to be covered by all authority. A bank with Type 1 authority
regulations prescribing capital for market may transact in any financial derivatives
risk, notwithstanding any provision to the as a dealer: Provided, That a bank with
contrary; and Type 1 authority shall comply with the
c. A trust department of a UB or KB sales and marketing guidelines prescribed
may transact, as an institutional in Appendix 26. A bank with Type 1
counterparty, with financial derivatives authority may likewise transact in any
instruments enumerated under Subsec. financial derivatives as a broker and an
X611.1(a)(2) on behalf of its trustor/ end-user.
principal/s as may be authorized by such The BSP expects banks applying for
trustor/ principal/s: Provided, That the trust Type 1 authority to institutionalize a
department observes the relevant (a) comprehensive and integrated risk
provisions of Appendices 25 and 26. Trust management system; and (b) sales and
entities other than that within a UB or KB marketing practices that are deemed
may apply for a Type 3 authority to enter appropriate and adequate for the different
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
08.12.31
in. It must be rated at least CAMELS (or A bank with additional Type 1, 2 or 4
ROCA for branches of foreign banks) of authorities shall be responsible for
“4” or better over-all, notwithstanding any complying with pertinent securities laws,
provision to the contrary. rules and regulations.
(2) Type 2 - Limited dealer authority For purposes of this Subsection, the
A UB or KB may apply for a Type 2 types of derivatives are classified as follows:
authority. A bank with Type 2 authority forwards, swaps and options. Underlying
may operate as a dealer in specific types reference pertains to the following: interest,
of derivatives products with specific FX, equity, credit and commodity.
underlying reference, as applied for by the b. Qualification requirements. A
bank, outside those financial derivatives bank applying for additional authority to
instruments under Subsec. X611.1(a)(1): engage in expanded derivatives activities
Provided, That a bank with Type 2 shall:
authority shall comply with the sales and (1) Demonstrate adequate competence
marketing guidelines prescribed in in its general operations as evidenced by:
Appendix 26. The Type 2 authority also (a) CAMELS (or ROCA for branches of
carries authority to transact as broker and foreign banks) composite rating of at least
end-user of the said specific derivatives “3” with a similar rating for Management;
instruments. (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 underlying corporate governance and risk
reference, as applied for by the bank, outside management.
of those instruments under Subsec. (2) Hold capital commensurate to the
X611.1(a)(2). However, as regards a TB, RB risks assumed or to be assumed from the
or Coop Bank and trust entity other than that derivatives activities. The BSP expects a
within a UB or KB, a Type 3 authority will bank applying for or holding additional
enable said bank/entity to transact as end- derivatives authority to have adequate
user of a derivative instrument as may be capital to accommodate existing and
applied for by the bank/entity. future risks from additional and generally
(4) Type 4 - Special broker authority authorized derivatives activities as well
A bank, other than a UB or KB, may as risks arising from the bank’s other
apply for a Type 4 authority. A bank with business activities. For this purpose, the
Type 4 authority may facilitate a derivatives BSP may require capital higher than the
transaction between a UB or KB, as dealer, minimum required under prudential
and market and institutional counterparties regulations.
and sophisticated individual end-users: (3) Have and maintain a risk
Provided, That the bank, acting as broker, management system that conforms to the
ensures that its client fully understands its principles and complies with the minimum
limited responsibility as a broker and standards prescribed in Appendix 25.
observes the provisions of Appendix 26. c. Applicability to trust entities. Trust
A UB or KB may likewise apply for a entities may apply for Type 3 authority:
Type 4 authority to enable itself to broker Provided, That they comply with the
a derivatives transaction for or with other requirements prescribed and observe the
end-users. provisions of Appendix 26.

§§ X611.2 - X611.3
08.12.31
d. Application procedures. The Authority Amount

applicant shall submit to the Capital Type 1 P 200,000
Markets Specialist Group, SES of the BSP Type 2 100,000 (UBs and KBs)
a written application for additional Type 3 50,000
derivatives authority/ies accompanied by: 25,000 (other applicants)
(1) A copy of the board resolution (or Type 4 25,000 (all banks)
equivalent management review body in
the case of branches of foreign banks or (5) The BSP will not accept
trust committee, in case of trust entities) applications lacking any of the above-
approving the application for a specific type stated requirements. The BSP, however,
of derivatives authority; may require additional documents to aid
(2) A notarized certification signed its evaluation of the application. By virtue
jointly by the president, treasurer and of the application, the applicant
compliance officer of the applicant-bank (or automatically authorizes the BSP to
two (2) authorized signatories of equivalent conduct an on-site evaluation of the
rank of the trust committee in case of trust applicant’s risk management capabilities,
entities), stating that the bank complies with if this is deemed necessary.
all the requirements for the authority being (6) Type 1 authority shall be subject
applied for specified in Subsec. X611.2; and to approval by the Governor, upon
(3) A list of the types of derivatives and recommendation of the Deputy Governor,
underlying reference the bank intends to SES. All other applications for additional
engage in, including the following authority/ies shall be subject to approval by
information for each derivatives class or type: the Deputy Governor, SES.
(a) Target customers for such (7) A bank whose application for
derivatives; additional derivatives authority/ies or an
(b) The capacity in which the bank upgrade thereof (e.g., from Type 2 to
intends to engage in such derivatives; Type 1 authority) has been denied cannot
(c) Description of each type of submit a new application for additional
derivatives and underlying reference with derivatives authorities until after six (6)
which it will deal; months from receipt of denial. The same
(d) Analysis of the risks involved in rule applies for a bank whose authorities
transacting in each type of derivatives; have been limited or downgraded.
(e) Procedures/methodologies that the (8) A bank that holds an additional
bank will implement to measure, monitor derivatives authority may apply for
(including risk management reports) and additional derivatives authorities
control the risks inherent in the types of (e.g., currently holding Type 3 authority
derivatives; who wish to apply for Type 4 authority)
(f) Relevant accounting guidelines, or an upgrade thereof only after the lapse
including pro-forma accounting entries; of six (6) months from the grant of the
(g) Analysis of any actual or potential previous additional derivatives authority.
legal/regulatory restrictions; and (As amended by Circular No. 594 dated 08 January 2008)
(h) Process flow chart, from deal
initiation to risk reporting, indicating the § X611.3 (2008 - X602.3) Intra-group
departments and personnel involved in transactions. All derivatives transactions
identified processes. between a bank and any of its subsidiaries
(4) Payment of a non-refundable and affiliates shall comply with minimum
processing fee amounting to: 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

issued by a reference entity/ies. The FX commitment to a non-resident or any
repayment of the principal to the note AAB where the amount, payment tenor and
holder is contingent upon the occurrence party 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. bank is the purchaser or the writer,
For 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 - 1625.5
08.12.31
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 BSP approval has
Provisions under Sec. 1648 shall continue been obtained for the prepayment and a
to apply for securities overlying copy of such approval is presented to the
securitization structures. 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 BSP for verification. The retained § X625.5 (Reserved)
copies shall also be marked “Documents
Presented as Required” and signed by the § 1625.5 (2008 - 1602) Forward
bank’s authorized officer. contracts with non-residents. All forward
(As amended by Circular No. 591 dated 27 December 2007) contracts to sell foreign exchange to
non-residents (including OBUs) with no
§ X625.4 (2008 - X602.17) Tenor/ full delivery of principal, including
maturity and settlement cancellations, roll-overs/renewals shall be
a. Forward sale of FX (whether submitted for prior clearance to the BSP.
deliverable or non-deliverable). The tenor/ However, every roll-over of short-term (ST)
maturity of such contracts shall not be longer deliverable forward contracts with

§§ 1625.5 - X625.9
08.12.31
non-residents need not be prior-approved, c. Counterparty test - the cancellation

provided: or roll-over of contracts must be duly
a. The underlying transaction for each acknowledged by the counterparty to the
ST deliverable FX forward contract is a contract as shown in documents submitted
foreign investment in long-term (LT) by banks, e.g., there should be conforme
Philippine government securities for of counterparty as evidenced by the
which a Bangko Sentral Registration counterparty signature on pertinent
Document (BSRD) has been issued; documents.
b. The roll-over is effected during the d. Mark-to-Market test - the booking or
tenor of the underlying LT Philippine recording in the books of accounts of the
government securities; profit or loss on contracts and cash flows/
c. The actual delivery/settlement of settlement to counterparties must be fully
the forward contract coincides with the date supported by appropriate documents such
of the intended capital repatriation of the as authenticated copy of debit/credit
BSP-registered investments; tickets, schedules showing among others,
d. The value of the forward contract mark-to-market valuation computation, etc.
does not exceed the foreign currency (As amended by Circular No. 591 dated 27 December 2007)
equivalent of the maturity value/net
proceeds of the BSP-registered investments § X625.7 (2008 - X602.19) Non-
computed at the agreed forward exchange deliverable forward contracts with
rate; and non-residents. NDF contracts to sell FX to
e. The repatriation of capital and non-residents shall be covered by the
remittance of income for the BSP-registered provisions of Subsection 1625.5.
investment complies with documentary
requirements under existing BSP rules. § X625.8 (2008 - X602.20) Compliance
(As amended by Circular No. 591 dated 27 December 2007) with anti-money laundering rules. All
transactions under Sec. X625 and Subsecs.
§ 2625.5 (Reserved) X625.1 to X625.9 shall comply with
existing regulations on anti-money
§ 3625.5 (Reserved) laundering under Sec. X801.
§ X625.6 (2008 - X602.18) Cancellations,
roll overs or non-delivery of FX forward § X625.9 (2008 - X602.21) Reporting
contracts. All cancellations, roll-overs or requirements. Banks duly authorized to
non-delivery of all FX deliverable forward engage in derivatives transactions shall
contracts and the forward leg of swap continue to be covered by the BSP’s
contracts shall be subject to the following existing reporting requirements on financial
guidelines to determine the validity thereof: derivatives. Cancellations, roll-overs or
a. Eligibility test - Contracts must be non-delivery of deliverable FX forward
supported by documents listed in contracts and under the forward leg of swap
Appendix 58 hereof. contracts shall be reported electronically in
b. Frequency test - the reasonableness Excel format to the BSP not later than five
of the cancellation, roll-over or non-delivery (5) banking days after reference month as
shall be based on the results of the evaluation indicated in Appendix 6.
of the justification/explanation submitted by Swap contracts with counterparties
banks as evidenced by appropriate involving purchase of FX by banks at the
documents. initial leg shall likewise be reported

§§ X625.9 - X625.14
08.12.31
electronically in Excel format to the BSP not (1) “chronic”, i.e., when the violation
later than five (5) banking days after reference continues beyond three (3) banking days
month as indicated in Appendix 6. within a calendar month, but the excess
The reports shall be transmitted to the position is less than thirty percent (30%) of
International Department at iod@bsp.gov.ph, the allowable limit; and
copy furnished the SDC at the following (2) “abusive”, i.e., when the violation
addresses: sdcfxkbdom@bsp.gov.ph (for continues beyond three (3) business days
domestic banks) and sdcfxkbfor@bsp.gov.ph within a calendar month and excess
(for foreign banks). position is thirty percent (30%) or more of
(As amended by Circular No. 591 dated 27 December 2007) the allowable limit.
§§ X625.10 - X625.13 (Reserved) “Chronic” Suspension of the bank’s

violation rediscounting privileges,
§ X625.14 (2008 - X602.26) Sanctions cash dividend declaration
Violations of Sec. X625 and Subsecs. X625.1 and branching privileges
until the violation is
to X625.9 shall be subject to the penalty corrected but in no case
provisions under R.A. No. 7653 (The New shall such suspension be
Central Bank Act) and other existing less than thirty (30)
banking laws and regulations. calendar days.
Failure to comply with Subsec. X625.6 “Abusive” Suspension of the bank’s
shall result in the exclusion of the forward violation rediscounting privileges,
contracts in the computation of the bank’s cash dividend declaration
consolidated daily position starting from and branching privileges
until the violation is
day one, i.e., when the individual
corrected but in no case
contracts were entered into. Violations shall such suspension be
of the prescribed FX position limits shall less than sixty (60)
be subject to the following sanctions calendar days.
provided under Circular Letter dated
13 March 1998: c. The Monetary Board may impose
a. Monetary Penalties other non-monetary sanctions on a bank
Per Calendar Month Daily Penalty for violations determined by BSP as
1st banking day P10,000 “chronic” or “abusive” on a case-to-case
2 banking day
nd
20,000 basis, pursuant to Sec. 37 of R.A. No. 7653.
3rd banking day of violation, 30,000 d. Banks shall be duly advised by the
and onwards, or if the excess BSP of their violations and the
FX position of the bank is corresponding sanctions imposed for such
thirty percent (30%) or violations.
more of the allowable e. A monetary penalty imposed on a
limits in any banking day, bank shall be paid to the BSP Cash
regardless of whether a bank Department, within three (3) banking days
is in the first, second, third or from the bank’s receipt of advice of said
more days of violation 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
08.12.31
Counterparties that habitually cancel as defined above on the principle that such
deliverable forwards without proper banks have already demonstrated a more
justification may be subject of a BSP watchlist. sophisticated ability to manage risks.
(As amended by Circular No. 591 dated 27 December 2007) Subject to the provisions in Sec. 1648, they
may also invest in SPV-issued CLNs that
Secs. X626 - X628 (Reserved) co-exist with other CLNs of different
seniority of claims against the reference
Sec. 1628 (2008 - 1633) Credit-linked asset pool. As an exception to the
Notes and Similar Credit Derivative general rule, a UB/KB without expanded
Products. The following are the guidelines derivatives authority may invest in single
for the capital treatment of investments in name CLNs where the reference asset
credit-linked notes and similar credit is a direct ROP obligation or an obligation
derivative products such as credit-linked fully guaranteed by the ROP.
deposits and credit linked loans.
§ 1628. 3 (2008 - 1633) Capital treatment
§ 1628.1(2008 - 1633) Definitions of investments in CLNs
(1) A credit-linked note (CLN) pertains (1) Banking book. Positions in CLNs in
to a pre-funded credit derivative the banking book shall be reported in the
instrument under which the note holder computation of the risk-based capital
effectively accepts the transfer of credit risk adequacy ratio covering credit risks under
pertaining to a reference asset or basket of Sec. X116.
assets issued by a reference entity/ies. The Through holding a CLN, a bank
repayment of the principal to the note acquires credit exposure on two (2) fronts
holder is contingent upon the occurrence - to the reference entity of the note and
of a defined credit event. In consideration, also to the note issuer. The on-balance
the note holder receives an economic sheet exposure arising from the CLN
return reflecting the underlying credit risk should be weighted by the higher of the
of the reference asset/s. risk weight of the reference entity or the
All references to CLNs in this Section risk weight of the note issuer. The amount
shall be taken to generically include of exposure is the book value of the note.
similar instruments, such as Credit-Linked If the CLN principal is fully collateralized
Deposits (CLDs) and Credit-Linked Loans by securities that are acceptable as credit
(CLLs). risk mitigant under Sec. X116 and provided
(2) An SPV, for purposes of this such collateral is constituted in a legally
Section, refers to an entity specifically effective manner as to give priority to the
established to issue CLNs of a single, note holders’ interest in the event of
homogeneous risk class that are fully bankruptcy of the note issuer, the risk
collateralized as to principal by high-grade weight of the note issuer is substituted with
securities purchased out of the proceeds the risk weight associated with the relevant
of the note issuance. Collateral shall be security.
limited to securities with an assignable risk When the CLN is referenced to a
weight of not more than twenty percent basket of reference entities and the contract
(20%) under existing regulations. terminates and pays out on the first entity
to default in the basket, capital should be
§ 1628.2 (2008 - 1633) Qualified banks held to consider the cumulative risk of all
In general, only banks with expanded the reference entities in the basket. This
derivatives authority may invest in CLNs means that the risk weights of all the

§ 1628.3
08.12.31
reference entities are added up and the sum A CLN which is referenced to entities
compared with the risk weight of the note in the basket proportionately should be
issuer. If the sum of the risk weights of all risk-weighted according to each
the reference entities in the basket is higher reference entity’s share of protection
than the risk weight of the note issuer, then under the contract. Thus, if there are two
this sum is adopted. The resultant risk- (2) reference entities in a P100.0 million
weighted exposure to the basket is, contract, one (1) with a 100% risk weight
however, capped at ten (10) times the book and a twenty percent (20%) share and
value of the note. Accordingly, the the other with a twenty percent (20%)
maximum capital charge is 100% of the risk weight and an eighty percent (80%)
book value of the note. The multiplier ten share, the risk weighted exposure is
(10) is the reciprocal of the BSP-required P36.0 million, i.e., P100.0 million x 20%
minimum capital adequacy ratio of ten x 100% + P100.0 million x 80% x 20%.
percent (10%). The corresponding capital charge is
If, on the other hand, the risk weight of P3.6 million (P36.0 million x 10%).
the note issuer is still higher than the sum (2) Trading book. Positions in CLNs
of the risk weights of all the reference taken up in the trading book should be
entities in the basket, then the risk weight reported in the computation of the adjusted
of the note issuer is adopted. risk-based capital adequacy ratio covering
When the contract terminates and pays combined credit risk and market risk under
out on the nth (other than the first) entity to Appendix 46.
default in the basket, the treatment above (a) Standardized approach
shall apply except that in aggregating the The following describes the positions
risk weights of reference entities, the risk to be reported for investments in CLNs for
weight/s of n–1 entity/ies is/are excluded purposes of calculating specific risk and
from the computation. The bank may general market risk charges under the
choose which entity/ies to exclude. standardized approach.
If a CLN that pays out on the nth entity A CLN investment is treated as a
to default is rated such that it meets the position in the note itself, with an
criteria of a security with the “highest credit embedded credit default product. The CLN
quality” as defined under Appendix 46, only is subject to the specific risk associated
the highest risk weight in the basket of with the issuer or the collateral when the
reference entities is compared with the risk issuer is an SPV. In addition, it is subject to
weight of the note issuer. general market risk that is a function of the
If the CLN is issued by an SPV, the bank maturity and coupon or interest rate of the
is exposed to both the reference entity and note. The embedded credit default product
the collateral held by the SPV. Thus, the creates a notional position in the specific
risk weight/s of the reference entity/ies risk of the reference obligation (with no
should be compared with the risk weight additional general market risk position
of the riskiest eligible collateral for created).
purposes of computing the risk-weighted Specific risk
exposure of the note and the corresponding A CLN investment should be reported
capital charge. as a long position on the reference
Subject to prior BSP clearance, a bank obligation and a long position on the note
may disapply the additive rule when a very itself.
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
11.12.31
reported shall depend on the structure of use of internal models are set out in Annex
the contract. When the contract terminates A of Appendix 46.
and pays out on the first obligation to While some banks may not be able to
default in the basket, the note should be run full internal models to calculate market
reported as long positions in each of the risk capital charges, they may, with the
reference obligations in the basket, with necessary expertise and systems, use
the total capital charge for the product preprocessing techniques to calculate
capped at the book value of the note. capital charge for CLNs. Banks wishing to
When the contract terminates and pays adopt these techniques should seek BSP’s
out on the nth (other than the first) entity to prior consent. The preprocessing models
default in the basket, the treatment above are subject to verification by the BSP.
shall apply except that in aggregating the
risk weights of the reference obligations, § 1628.4 (2008 - 1633) Risk management
the 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 BSP clearance, a bank particular, investing banks should be aware
may disapply the additive rule when a of the potential legal risk arising from an
very strong correlation among the unenforceable contract. They should
reference obligations in the basket can be consult their legal advisors about these and
demonstrated. related legal issues before engaging in
The additive treatment may also be such transactions. In addition, all
disapplied when an nth-to-default CLN is investments in CLNs must be duly
rated such that it meets the criteria of a approved by a bank’s board of directors and
security with the “highest credit quality” subjected to appropriate risk management
as defined under Appendix 46. Positions procedures.
in the reference obligations can be
reported as a single long position in a debt § 1628.5 (2008 - 1633) Transitional
security with the “highest credit quality”. arrangements. Banks which have
A long position on the note should also be outstanding investments in CLNs, but
reported whether or not the CLN meets which have not been authorized under this
the criteria of a security with the “highest Section to invest in such, shall be given a
credit quality”. period of ninety (90) calendar days from
When the CLN is referenced to 25 February 2004 (effectivity of Circular
multiple obligations under a proportionate No. 417) to divest themselves of such
structure, positions in the reference investments.
obligations should be reported according
to their respective proportions in the § 1628.6 (2008 - 1633) Bangko Sentral
contract. approval not required. No prior BSP
General market risk approval is required to invest in CLNs and
A CLN investment creates a long similar products. However, it shall be the
position in the note itself. responsibility of UBs/KBs to fully comply
(b) Internal models approach with appropriate risk management
Banks may seek the BSP’s approval standards including, as a minimum, those
to include CLNs in their recognized prescribed under this Section. The
models for calculating capital charges. regulatory requirements enumerated in
The detailed requirements relating to the Appendix 66 shall be fully complied with

§§ 1628.6 - 1635.4
11.12.31
by UBs/KBs investing in products allowed risks inherent in these products.

under this Section.
Investment in credit-linked notes (CLNs) § 1635.2 Definition. A structured product
and similar structured products with refers to a financial instrument where the
embedded credit derivatives, as defined return is a function of one (1) or more
under Section 1628.1, including those that underlying indices, such as interest rates,
were reclassified from HFT to Available for equities and exchange rates. There may also
Sale (AFS)/Held to Maturity (HTM)/ be embedded derivatives such as swaps,
Unquoted Debt Securities Classified as forwards, options, caps, and floors that
Loans (UDSCL) or from AFS to HTM/UDSCL reshape the risk-return pattern. For purposes
in accordance with the reclassification rules of this Subsection, structured products do not
under Circular No. 626 dated 23 October include asset-backed securities, credit-linked
2008 and Circular No. 628 dated 31 notes and other similar instruments.
October 2008, shall be classified and
measured at FVPL upon initial application § 1635.3 Qualified banks. As a general
of PRFS 9. rule, only UBs and KBs with expanded
The accounting treatment for derivatives license may obtain exposures in
investments in CLNs and other structured structured products. Banks without
products under BSP Memorandum expanded derivatives license may only invest
M-2008-10 dated 07 March 2008 and the in structured products duly approved by the
guidelines on reclassification of CLNs and BSP.
other similar instruments that are linked to
the ROP under Memorandum M-2009-12 § 1635.4 Capital treatment of banks’
dated 16 April 2009 shall no longer apply exposures to structured products
to financial assets that are accounted for in a. Banking book
accordance with FPRS 9. (1) Risk weights. Capital charge for
(As amended by Circular Nos. 733 dated 05 August 2011 and structured products held in the banking
708 dated 10 January 2011) 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:
Secs. X629 - X635 (Reserved)
(a) Moody’s;
(b) Standard & Poor’s;
Sec. 1635 Banks’ Exposures to Structured (c) Fitch Ratings; and
Products. The following rules and regulations (d) Such other international rating
shall govern the capital treatment of banks’ agencies as may be approved by the
exposures to structured products. Monetary Board.
In cases where there are two (2) or more
§ 1635.1 Statement of policy. The BSP types of collateral, capital charge shall
aims to foster the development of a market depend on the lowest rated collateral.
for new financial products in the country, The mapping of ratings to the
while at the same time ensure that banks corresponding risk weights shall be as
hold sufficient capital commensurate to the 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
(Next page is Part VI - Page 19)
Manual of Regulations for Banks Part VI - Page 18a

§§ 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) Requirements

system outsourced to a third party service for banks with pending applications. The
provider taking into consideration the same procedure and requirements stated
existence of adequate security controls in the foregoing shall apply to all banks
and the observance of confidentiality [as with pending applications with the BSP,
required in R.A. No. 1405 (Bank Secrecy except on the submission of the
Law)] of customer information; documents enumerated in Subsec.
c. Adoption of measures to properly X701.4. Banks which have already
educate customers on safeguarding of submitted all the required information/
user ID, PIN and/or password, use of documents need not comply with this
bank’s products/services, actual fees/bank requirement.
charges 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 BSP
between the bank and its customers; approval shall be required.
e. Customer’s acknowledgement in
writing that they have understood the § X701.8 (2008 - X621.8) Transitory
terms and conditions and the provision. Banks with existing electronic
corresponding risks that entail in availing banking services but do not qualify as a
electronic banking service; result of the pre-screening process
f. The bank’s oversight process shall mentioned in Subsec. X701.2, shall be given
ensure that business expansion shall not three (3) months from 21 December 2000,
put undue strains on its systems and risk within which to show proof of improved
management capability; overall financial condition and/or
g. The establishment of procedures substantial compliance with BSP’s
for the regular review of the bank’s prudential requirements, otherwise, their
security arrangements to ensure that such electronic banking activities will be
arrangements remain appropriate having temporarily suspended until such time that
regard to the continuing developments in the same have been complied with.
security technology;
h. Strict adherence to BSP regulations §§ X701.9 - X701.11 (Reserved)
on fund transfers in cases where clients
use the electronic banking services to § X701.12 (2008 - X621.12) Sanctions
transfer funds; For failure to seek BSP approval before
i. The electronic banking service 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 BSP shall be notified in writing monetary penalties and/or suspension of
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 - X705.1
08.12.31
Monetary penalties Amount an effective management oversight over

a. For responsible officer/s a one time e-banking services.
and/or director/s - for penalty of The BOD is expected to take an
failure to seek prior BSP P200,000 explicit, informed and documented
approval and/or for strategic decision as to whether and how
non-submission delayed the bank is to provide e-banking services
submission of required to their customers. Effective management
information/documents oversight encompasses the review and
approval of the key aspects of the bank’s
b. On the bank - for failure P30,000 per security control program and process, such
to seek prior BSP approval day starting as the development and maintenance of
and/or for non-submission/ from the day security control policies and infrastructure
delayed submission of the offense that properly safeguard e-banking systems
required information/ was committed and data from both internal and external
documents up to the time threats. It also includes a comprehensive
the same was process for managing risks associated with
corrected. increased complexity of and increasing
reliance on outsourcing relationships and
§ X701.13 (2008 - X621.13) Outsourcing third-party dependencies to perform
of internet and mobile banking services critical e-banking functions.
Outsourcing of internet and mobile It is also incumbent upon the BOD and
banking services shall be governed by the banks’ senior management to take steps
provisions of Subsec. X162.2. to ensure that their banks have updated
(M-2008-030 dated 12 September 2008) and modified where necessary, their
existing risk management policies and
Secs. X702 – X704 (Reserved) processes to cover their current or planned
e-banking services. The integration of
Sec. X705 (2008 - X624 and App. 70) e-banking applications with legacy
Consumer Protection for Electronic Banking systems implies an integrated risk
These guidelines shall govern the management approach for all banking
implementation of e-banking activities of a activities.
bank for purposes of compliance with the (b) Bank’s compliance officer should
requirements to safeguard customer ensure that proper controls are incorporated
information; prevention of money laundering into the system so that all relevant
and terrorist financing; reduction of fraud and compliance issues are fully addressed.
theft of sensitive customer information; and Management and system designers
promotion of legal enforceability of banks’ should consult with the compliance
electronic agreements and transactions. officer during the development and
(Circular No. 542 dated 01 September 2006, as amended by implementation stages of e-banking
CL-2007-048 dated 24 September 2007) products and services. This level of
involvement will help decrease bank’s
§ X705.1 (2008 - App. 70) E-Banking compliance risk and may prevent the
oversight function need to delay deployment or redesign
(a) Bank’s board of directors (BOD) and programs that do not meet regulatory
a senior management committee are requirements.
responsible for developing the bank’s (Circular No. 542 dated 01 September 2006, as amended by
e-banking business strategy and establishing CL-2007-048 dated 24 September 2007)

§ X705.2
08.12.31
§ X705.2 (2008 - App. 70) E-Banking consumers from fraud, robbery and other
risk management and internal control e-banking crimes.
(a) Information Security Program Banks should also take into account
Banks should establish and maintain other relevant industry security standards
comprehensive information security and sound practices as appropriate, and
program and ensure that it is properly keep up with the most current information
implemented and strictly enforced. They security issues (e.g., security weaknesses
should also encourage the development of of the wireless environment), by sourcing
a security culture within the organization. relevant information from well-known
The information security program should security resources and organizations.
include, at a minimum, the following: (c) Authentication
(1) Identification and assessment of To authenticate the identity of
risks associated with e-banking products e-banking customers, banks should employ
and services; techniques appropriate to the risks
(2) Identification of risk mitigation associated with their products and services.
actions, including appropriate authentication The implementation of appropriate
technology and internal controls; authentication methodologies should start
(3) Information disclosure and with a risk assessment process. The risk
customer privacy policy; and should be evaluated based on the type of
(4) Evaluation of consumer awareness customer; the customer transactional
efforts. capabilities (e.g., bill payment, fund
Banks should adjust or update, as transfer, inquiry); the sensitivity of customer
appropriate, their information security information and transaction being
program in light of any relevant changes communicated to both the bank and the
in technology, the sensitivity of its customer; the ease of using the
customer information and internal or communication method; and the volume
external threats to information such as of transactions.
increasing incidence of identity theft1. Because the standards for implementing
(b) Information security measures a commercially reasonable system may
Banks should ensure that their change over time as technology and other
information security measures and internal procedures develop, banks and technology
control related to e-banking are installed, service providers should continuously
regularly updated, monitored and is review, evaluate and identify authentication
appropriate with the risks associated with technology and ensure appropriate changes
their products and services. are implemented for each transaction type
Appendices 70a and 70b provide for and level of access based on the current and
the minimum security measures that banks changing risk factors. Account fraud and
should employ in their ATM facilities and identity theft are frequently the result of single-
internet/mobile banking activities, factor (e.g., ID/password) authentication
respectively, to protect depositors and exploitation. Where risk assessments
1
There are several schemes perpetrated by these identity thieves, e.g., credit card fraud, account takeover fraud, new
account fraud and check fraud.
Credit card fraud is where a fraudster causes the credit card of another person to be charged for a purchase. Account
takeover fraud occurs when a fraudster obtains an individual’s personal information, and changes the official mailing
address with that individual’s FI. Once accomplished, the fraudster has established a window of opportunity in which
transactions are conducted without the victim’s knowledge. New account fraud involves the criminal using a false identity,
made-up or stolen; to open a new account, typically to obtain a credit card or loan. Check fraud may either be done through
(i) alterations to the check, (ii) forgeries of the maker’s signature on either the face of the check or the payee’s endorsement
at the back of the check, or (iii) counterfeit checks created by a dishonest third party

§§ X705.2 - X705.4
08.12.31
indicate that the use of single-factor Adequate reporting mechanisms are

authentication is inadequate, banks should needed to promptly inform security
implement multi-factor authentication administrators when users are no longer
(e.g., ATM card and PIN), layered security, authorized to access a particular system and
or other controls reasonably calculated to to permit the timely removal or suspension
mitigate those risks. of user account access.
Banks’ authentication process should be Whenever critical systems or processes
consistent with and support the bank’s overall are outsourced to third parties,
security and risk management programs. An management should ensure that the
effective authentication process should have appropriate logging and monitoring
customer acceptance, reliable performance, procedures are in place and that suspected
scalability to accommodate growth, and unauthorized activities are communicated
interoperability with existing systems and to the bank in a timely manner.
future plans as well as appropriate policies, An independent party (e.g., internal or
procedures, and controls. external auditor) should also review activity
(d) Account origination and customer reports documenting the security
verification administrators’ actions to provide the
With the growth in e-banking and necessary checks and balances for
e-commerce, banks should use reliable managing system security.
methods of originating new customer (Circular No. 542 dated 01 September 2006, as amended by
accounts. Potentially significant risks may CL-2007-048 dated 24 September 2007)
arise when a bank accepts new customers
through the internet or other electronic § X705.3 (2008 - App. 70) Compliance
channels. Thus, in an e-banking with consumer awareness program
environment, banks need to ensure that in Consumer awareness is a key defense
originating new accounts, the KYC (“know against fraud and identity theft and security
your customer”) requirement which breach. Appendix 70c provides for the
involves a “face-to-face” process is strictly minimum Consumer Awareness Program
adhered to. that banks should convey to their
(e) Monitoring and reporting of customers.
e-banking transactions To be effective, banks should
Monitoring systems can determine if implement and continuously evaluate their
unauthorized access to computer systems consumer awareness program. Methods to
and customer accounts has occurred. A evaluate a program’s effectiveness include
sound monitoring system should include tracking the number of customers who
audit features that can assist in the detection report fraudulent attempts to obtain their
of fraud, money laundering, compromised authentication credentials (e.g., ID/
passwords, or other unauthorized activities. password), the number of clicks on
The activation and maintenance of audit information security links on websites, the
logs can help banks to identify number of inquiries.
unauthorized activities, detect intrusions, (Circular No. 542 dated 01 September 2006, as amended by
reconstruct events, and promote employee CL-2007-048 dated 24 September 2007)
and user accountability. This control
process also facilitates banks in the § X705.4 (2008 - App. 70) Minimum
submission of suspicious activities reports disclosure requirements
as required by the AMLC and other (a) Banks are required to provide their
regulatory bodies. customers with a level of comfort regarding

§§ X705.4 - X780.1
09.12.31
information disclosures or transparencies, should also establish procedures to resolve

protection of customer data and business disputes arising from the use of the
availability that they can expect when using e-banking products and services.
traditional banking services. (Circular No. 542 dated 01 September 2006, as amended by
To minimize operational, legal and CL-2007-048 dated 24 September 2007)
reputational risks associated with e-banking
activities, banks should make adequate § X705.6 (2008 - App. 70) Applicability
disclosure of information and take These regulations are intended for all
appropriate measures to ensure adherence e-banking services and products offered
to customer privacy and protection by the banks to their customers. Although
requirements. Appendix 70d provides for these are focused on the risks and risk
the minimum disclosure requirement of the management techniques associated with
banks. an electronic delivery channel to protect
Likewise, to meet customers’ customers and the general public, it should
expectations, banks should have effective be understood, however, that not all of
capacity, business continuity and the consumer protection issues that
contingency planning. They should have the have arisen in connection with new
ability to deliver e-banking services to all technologies are specifically addressed in
end-users and be able to maintain such this Section. Additional issuances may be
availability in all circumstances (e.g., 24/7 issued in the future to address other
availability). Effective incident response aspects of consumer protection as the
mechanisms and communication strategies financial service environment through
are also critical to minimize risks arising e-banking evolves.
from unexpected events, including internal (Circular No. 542 dated 01 September 2006, as amended by
and external attacks. CL-2007-048 dated 24 September 2007)
(b) Banks should apply to e-banking
financial transactions and disclosures the Secs. X706 - X779 (Reserved)
record retention provisions required in
paper-based transactions. Sec. X780 Issuance and Operations of
A written policy or procedure needs to Electronic Money. The following guidelines
define vital records relating to e-banking shall govern the issuance of electronic
financial transactions and disclosures and money (e-money) and the operations of
the corresponding retention period of these electronic money issuers.
records. (Circular No. 649 dated 09 March 2009)
(Circular No. 542 dated 01 September 2006, as amended by
CL-2007-048 dated 24 September 2007) § X780.1 Declaration of policy. It is
the policy of the BSP to foster the
§ X705.5 (2008 - App. 70) Complaint development of efficient and convenient
resolution. Banks may receive customer retail payment and fund transfer mechanisms
complaint either through an electronic in the Philippines. The availability and
medium or otherwise, concerning an acceptance of e-money as a retail payment
unauthorized transaction, loss, or theft in medium will be promoted by providing the
its e-banking account. Therefore, banks necessary safeguards and controls to
should ensure that controls are in place to mitigate the risks associated in an e-money
review these notifications and that an business.
investigation is initiated as required. Banks (Circular No. 649 dated 09 March 2009)

§§ X780.2 - X780.4
09.12.31
§ X780.2 Definitions approved by the BSP. In case an EMI issues

E-money shall mean monetary value as several e-money instruments to a person
represented by a claim on its issuer, that is - (e-money holder), the total amount loaded
a. electronically stored in an in all the e-money instruments shall be
instrument or device; consolidated in determining compliance
b. issued against receipt of funds of an with the aggregate monthly load limit;
amount not lesser in value than the b. EMIs shall put in place a system to
monetary value issued; maintain accurate and complete record of
c. accepted as a means of payment e-money instruments issued, the identity of
by persons or entities other than the e-money holders, and the individual and
issuer; consolidated balances thereof. The system
d. withdrawable in cash or cash must have the capability to monitor the
equivalent; and movement of e-money transactions and link
e. issued in accordance with this e-money instruments issued to common
Section. e-money holders. The susceptibility of a
Electronic money issuer (EMI) shall be system to intentional or unintentional
classified as follows: misreporting of transactions and balances
a. Banks (hereinafter called EMI-Bank); shall be sufficient ground for imposition by
b. NBFI supervised by the BSP the BSP of sanctions, as may be applicable.
(hereinafter called EMI-NBFI); and c. E-money may only be redeemed at
c. Non-bank institutions registered face value. It shall not earn interest nor
with the BSP as a monetary transfer agent rewards and other similar incentives
under Sec. 4511N of the MORNBFI convertible to cash, nor be purchased at a
(hereinafter called EMI-Others). discount. E-money is not considered a
For purposes of this Section: deposit, hence, it is not insured with the
a. Electronic instruments or devices PDIC.
shall mean cash cards, e-wallets accessible d. EMIs shall ensure that e-money
via mobile phones or other access device, instruments clearly identify the issuer who
stored value cards, and other similar is ultimately responsible to the e-money
products. holders. This shall be communicated to the
b. E-money issued by banks shall not client who shall acknowledge the same in
be considered as deposits. writing.
(Circular No. 649 dated 09 March 2009) e. It is the responsibility of EMIs to
ensure that their distributors/e-money agents
§ X780.3 Prior Bangko Sentral approval comply with all applicable requirements of
Banks planning to be an EMI-Bank shall the Anti-Money Laundering Law, rules and
apply in accordance with Sec. X701 relating regulations.
to the guidelines on electronic banking f. EMIs shall provide an acceptable
services and with Sec. X162 on outsourcing redress mechanism to address the
of banking functions, when applicable. complaints of its customers.
(Circular No. 649 dated 09 March 2009) g. EMIs shall disclose in writing and
its customers shall signify agreement to the
§ X780.4 Common provisions. The information embodied in Item “c” above
following provisions are applicable to all EMIs: upon their participation in the e-money
a. E-money instrument issued shall be system. In addition, it shall provide clear
subject to aggregate monthly load limit of guidance in English and Filipino on
P100,000 unless a higher amount has been consumers’ right of redemption, including

§§ 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
11.12.31
address, nature of work or business, and customer who was referred to a covered
source of funds as if the account was institution, the latter may rely on the
opened by them separately. Where the representation of the third party that it has
covered institution is required to report a already conducted face-to-face contact:
CT or the circumstances warrant the filing Provided, That the pertinent requirements
of an ST, it shall obtain such other in Subsec. X806.2.e.1 are also met.
information on every trustor, principal, (Circular No. 706 dated 05 January 2011)
beneficial owner, or person on whose
behalf the account is being opened in order § X806.2 Customer identification
that a complete and accurate report may Covered institutions shall establish and
be filed with the AMLC. record the true identity of its customers
In case a covered institution entertains based on valid identification document/s
doubts that the trustee, nominee, agent or specified in Subsec. X806.2.c.
intermediary is being used as a dummy in
circumvention of existing laws, it shall § X806.2.a New individual customers
apply enhanced due diligence in accordance Covered institutions shall develop a
with Subsec. X806.1.b. systematic procedure for establishing the
true and full identity of new individual
customers and shall open and maintain the
§ X806.1.e.2 Outsourcing account only in the true and full name of
arrangement. Subject to existing rules on the account owner or owners.
outsourcing of specified banking activities, Unless otherwise stated in this Part,
a covered institution, without prior average due diligence requires that the
Monetary Board approval, may outsource covered institution obtain, at the time of
to a counterparty the conduct of the account opening, all the following
requisite face-to-face contact: Provided, That minimum information and confirming these
such arrangement is formally documented information with the valid identification
and: Provided, further, That the conditions documents stated in Subsec. X806.2.c from
under Subsec. X806.2.d are met. individual customers and authorized
If the counterparty is an entity other than signatory/ies of corporate and juridical entities:
a covered institution as herein defined, (1) Name;
covered institutions shall ensure that the (2) Present address;
employees or representatives of the (3) Date and place of birth;
counterparty conducting the face-to-face (4) Nature of work, name of employer
contact undergo equivalent training or nature of self-employment/business;
program as that of its frontliners undertaking (5) Contact details;
a similar activity. Covered institutions shall (6) Specimen signature;
likewise monitor and review annually the (7) Source of funds;
performance of the counterparty to assist it (8) Permanent address;
in determining whether or not to continue (9) Nationality;
with the arrangement. (10) Tax identification number, SSS
(Circular No. 706 dated 05 January 2011) number or GSIS number, if any; and
(11) Name, present address, date and
§ X806.1.e.3 Third party reliance place of birth, nature of work and source of
Where a third party as defined under funds of beneficial owner or beneficiary,
Subsec. X806.2.e.1 has already conducted whenever applicable.
the requisite face-to-face contact on its own (Circular No. 706 dated 05 January 2011)

§§ X806.2.b - X806.2.c
11.12.31
§ X806.2.b New corporate and (9) For entities registered outside the
juridical entities. Covered institutions shall Philippines, similar documents and/or
develop a systematic procedure for information shall be obtained, duly
identifying corporate, partnership and sole authenticated by the Philippine Consulate
proprietorship entities as well as the where said entities are registered.
stockholders/partners/owners, directors, (Circular No. 706 dated 05 January 2011)
officers and authorized signatory of these
entities. It shall open and maintain accounts § X806.2.c Valid identification
only in the true and full name of the entity documents. The following guidelines govern
and shall have primary responsibility to the acceptance of valid ID cards for all types
ensure that the entity has not been, or is not of financial transaction by a customer and
in the process of being, dissolved, the authorized signatory/ies of a corporate
struck-off, wound-up, terminated, or or juridical entity, including financial
otherwise placed under receivership or transactions involving Overseas Filipino
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
BSP for money changers/foreign exchange shall be required to present the original and
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’ (a) Government of the Republic of the
Secretary authorizing the signatory to sign Philippines;
on behalf 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 registered with or supervised or regulated
outstanding capital stock and primary either by the BSP, SEC or IC.
officers such as 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;
(7) Source of funds and nature of business; 2. Driver’s license;
(8) Name, present address, date and 3. PRC ID;
place of birth, nature of work and source of 4. NBI clearance;
funds of beneficial owner or beneficiary, if 5. Police clearance;
applicable; and 6. Postal ID;

§§ X806.2.c - X806.2.d
11.12.31
7. Voter’s ID; (6) Whenever it deems necessary, a

8. Tax Identification Number; covered institution may accept other IDs
9. Barangay certification; not enumerated above: Provided, That it
10. GSIS e-Card; shall not be the sole means of
11. SSS card; identification.
12. Senior Citizen card; (7) In case the identification documents
13. OWWA ID; mentioned above or other identification
14. OFW ID; documents acceptable to the covered
15. Seaman’s book; institution do not bear any photo of the
16. Alien Certificate of Registration/ customer or authorized signatory, or the
Immigrant Certificate of Registration; photo bearing ID or a copy thereof does not
17. Government office and GOCC ID clearly show the face of the customer or
(e.g., AFP, HDMF IDs); authorized signatory, a covered institution
18. Certification from the NCWDP; may utilize its own technology to take the
19. DSWD certification; photo of the customer or authorized
20. IBP ID; and signatory.
21. Company IDs issued by private (Circular No. 706 dated 05 January 2011)
entities or institutions registered with or
supervised or regulated either by the BSP, § X806.2.d Outsourcing of the
SEC or IC. gathering of minimum information and/or
(2) Students who are beneficiaries of documents. Except for deposit taking, which
remittances/fund transfers and who are not is an inherent banking function that cannot
yet of voting age, may be allowed to present be outsourced and subject to existing rules
the original and submit a clear copy of one on outsourcing of specified banking
(1) valid photo-bearing school ID duly signed activities, a covered institution may, without
by the principal or head of the school. prior Monetary Board approval, outsource
(3) Where the customer or authorized to a counterparty, which may or may not
signatory is a non-Philippine resident, be a covered institution as herein defined,
similar IDs duly issued by the foreign the gathering of the minimum information
government where the customer is a and/or documents required to be obtained
resident or a citizen may be presented. by this Part: Provided, That the ultimate
(4) A covered institution shall require responsibility for knowing the customer and
their customers or authorized signatory to for keeping the identification documents
submit a clear copy of one (1) valid ID on a shall lie with the covered institution and
one (1)-time basis only at the compliance with the following conditions:
commencement of business relationship. For covered institution counterparty:
They shall require their clients to submit an (1) There is a written service level
updated photo and other relevant agreement approved by the board of
information on the basis of risk and directors of both covered institutions;
materiality. (2) The counterparty has a reliable and
(5) A covered institution may classify acceptable customer identification system
identification documents based on its and training program in place; and
reliability and ability to validate the (3) In line with requirement no.1, all
information indicated in the identification identification information and/or documents
document with that provided by the shall be turned over within a period not
customer. exceeding ninety (90) calendar days to the

§§ X806.2.d - X806.2.e.1.a
11.12.31
covered institution, which shall carefully In case it entertains doubts as to whether

review the documents and conduct the the trustee, nominee, agent or intermediary
necessary risk assessment of the is being used as a dummy in circumvention
customer. of existing laws, it shall apply enhanced due
For non-covered institution diligence in accordance with Subsec.
counterparty: X806.1.b.
(1) All conditions required for covered (Circular No. 706 dated 05 January 2011)
institutions counterparty;
(2) The covered institution outsourcing § X806.2.e.1 Where the customer
the activity shall likewise ensure that the transacts through a trustee, nominee, agent
employees or representatives of the or intermediary which is a third party as
counterparty establishing the true and full herein defined (Third Party Reliance). A
identity of the customer undergo covered institution may rely on the customer
equivalent training program as that of the identification process undertaken by a third
covered institution’s own employees party. For purposes of this Subsection, the
undertaking a similar activity; and “third party” shall refer to a:
(3) Annual monitoring and review by (a) covered institution as herein
the covered institution of the performance specifically defined and as generally defined
of the counterparty to assist it in by AMLA, as amended, and its RIRR; or
determining whether or not to continue (b) an FI operating outside the
with the arrangement. Philippines that is covered by equivalent
(Circular No. 706 dated 05 January 2011) customer identification requirements. A
BSP-accredited custodian may likewise rely
§ X806.2.e Trustee, nominee, agent or in accordance with this Part on the face-to-
intermediary account. Where any face contact and gathering of minimum
transaction is conducted by a trustee, information to establish the existence and
nominee, agent or intermediary, either as full identity of the customer conducted by
an individual or through a fiduciary the seller or issuer of securities or by the
relationship, a corporate vehicle or global custodian provided the latter has an
partnership, on behalf of a trustor, equivalent customer identification
principal, beneficial owner or person on requirements.
whose behalf a transaction is being (Circular No. 706 dated 05 January 2011)
conducted, covered institutions shall
establish and record the true and full identity § X806.2.e.1.a Third party is a covered
and existence of both the (1) trustee, institution specifically defined by this Part
nominee, agent or intermediary and the and as generally defined by AMLA, as
(2) trustor, principal, beneficial owner or amended and its RIRR. A covered
person on whose behalf the transaction is institution may rely on the identification
being conducted. The covered institution process conducted by a third party:
shall determine the true nature of the parties’ Provided, That the covered institution shall
capacities and duties by obtaining a copy obtain from the third party a written sworn
of the written document evidencing their certification containing the following:
relationship and apply the same standards (1) The third party has conducted the
for assessing the risk profile and determining requisite customer identification
the standard of due diligence to be applied requirements in accordance with this Part
to both. and its own MLPP including the face-to-face

§§ X806.2.e.1.a - X806.2.h
11.12.31
contact requirement to establish the the elements of reputational risk especially

existence of the ultimate customer and has if the customer identification process is not
in its custody all the minimum information diligently followed. Covered institutions
and/or documents required to be obtained therefore shall endeavor to establish and
from the customer; and record the true and full identity of these
(2) The relying covered institution shall customers and establish a policy on what
have the ability to obtain identification standard of due diligence will apply to them.
documents from the third party upon request They shall also require approval by a senior
without delay. officer other than the private banking/wealth
(Circular No. 706 dated 05 January 2011) management/similar activity relationship
officer or the like for acceptance of
§ X806.2.e.1.b Third party is an FI customers of private banking, wealth
operating outside the Philippines that is management and similar activities.
other than covered institutions referred to (Circular No. 706 dated 05 January 2011)
in Subsec. X806.2.e.1.a but conducts
business operations and activities similar § X806.2.g Politically exposed person
to them. All the contents required in the A covered institution shall endeavor to
sworn certification mentioned in Subsec. establish and record the true and full
X806.2.e.1.a shall apply with the additional identity of PEPs as well as their immediate
requirement that the laws of the country family members and the entities related to
where the third party is operating has equal them and establish a policy on what
or more stringent customer identification standard of due diligence will apply to them
process requirement and that it has not been taking into consideration their position and
cited in violation thereof. It shall, in the risks attendant thereto.
addition to performing normal due diligence (Circular No. 706 dated 05 January 2011)
measures, do the following:
(1) Gather sufficient information about § X806.2.h Correspondent banking
the third party and the group to which it Because of the risk associated with dealing
belongs to understand fully the nature of its with correspondent accounts where it may
business and to determine from publicly unknowingly facilitate the transmission, or
available information the reputation of the holding and management of proceeds of
institution and the quality of supervision, unlawful activities or funds intended to
including whether it has been subject to finance terrorist activities, covered
money laundering or terrorist financing institutions shall adopt policies and
investigation or regulatory action; procedures for correspondent banking
(2) Document the respective activities and designate an officer
responsibilities of each institution; and responsible in ensuring compliance with
(3) Obtain approval from senior these policies and procedures. A covered
management at inception of relationship institution may rely on the customer
before relying on the third party. identification process undertaken by the
(Circular No. 706 dated 05 January 2011) respondent bank. In such case, it shall
apply the rules on third party reliance
§ X806.2.f Private banking/wealth under Subsec. X806.2.e.1, treating the
management operations. These services, respondent bank as the third party as
which by their nature involve high measure defined therein. In addition, the
of client confidentiality, are more open to correspondent bank shall:

§§ X806.2.h - X806.2.i
11.12.31
(1) Gather sufficient information about identity and existence of said beneficiary.
the respondent institution to understand fully Should the originator and beneficiary be the
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,
customers having direct access accounts of or any information or document provided
the correspondent and that it is able to is false or falsified, or result of the validation
provide relevant customer identification data process is unsatisfactory, the beneficiary
upon request by the correspondent bank. institution shall refuse to effect the fund/
Correspondent banking customers wire transfer or the pay-out of funds without
presenting greater risk, including shell prejudice to the reporting of a suspicious
companies, shall be subject to enhanced transaction to the AMLC when
due diligence. circumstances warrant.
(Circular No. 706 dated 05 January 2011) (4) Whenever possible, manually
initiated fund transfer (MIFT) instructions
§ X806.2.i Fund/Wire transfer should not be the primary delivery method.
Because of the risk associated with dealing Every effort shall be made to provide client
with fund/wire transfers, where a covered with an electronic banking solution.
institution may unknowingly transmit However, where MIFT is utilized, the
proceeds of unlawful activities or funds existing rules on validation procedures as
intended to finance terrorist activities, it prescribed by Circular No. 436 dated
shall establish policies and procedures 18 June 2004 shall apply.
designed to prevent it from being utilized (5)1 Cross border and domestic fund/
for that purpose which shall include, but wire transfers and related message
not limited to, the following: amounting to P50,000 or more or its
(1) The beneficiary institution shall not equivalent shall include accurate and
accept instructions to pay-out fund transfers meaningful originator information. The
to non-customer beneficiary, unless it has following are the originator information
conducted the necessary customer due that shall remain with the transfer or related
diligence to establish the true and full message through the payment chain:
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.i - X806.2.j.2
11.12.31
(a) Name of the originator; § X806.2.j.1 Buyers of cashier’s,

(b) Address or in its absence the manager’s or certified checks other than
national identity number or date and place an existing customer. Where an
of birth of the originator; and individual or an entity other than an
(c) Account number of the originator or existing customer applies for the issuance
in its absence, a unique reference number of cashier’s, manager’s or certified checks,
must be included. the covered institution shall, in addition to
(6) Should any wire transfer amounting the information required in Subsec.
to P50,000 or more or its equivalent be X806.2.j, obtain all the identification
unaccompanied by the required originator documents and minimum information
information, the beneficiary institution shall required by this Part to establish the true
exert all efforts to establish the true and full and full identity and existence of the
identity and existence of the originator by applicant. In no case shall reduced due
requiring additional information from the diligence be applied to the applicant and,
originating institution or intermediary where circumstances warrant, enhanced
institution. It shall likewise apply enhanced due diligence should be applied.
due diligence to establish the true and full (Circular No. 706 dated 05 January 2011)
identity and existence of the beneficiary.
Where additional information cannot be § X806.2.j.2 Buyers of cashier’s,
obtained, or any information or document manager’s or certified checks in blank or
provided is false or falsified, or result of the payable to cash, bearer or numbered
validation process is unsatisfactory, the account. A covered institution may issue
beneficiary institution shall refuse to effect cashier’s, manager’s or certified checks or
the fund/wire transfer or the pay-out of funds other similar instruments in blank or payable
without prejudice to the reporting of a to cash, bearer or numbered account subject
suspicious transaction to the AMLC when to the following conditions:
circumstances warrant. (1) The amount of each check shall not
(Circular No. 706 dated 05 January 2011) exceed P10,000;
(2) The buyer of the check is properly
§ X806.2.j Buyers of cashier’s, identified in accordance with its customer
manager’s or certified checks. A covered acceptance and identification policies and
institution may sell cashier’s, manager’s or as required under Subsec. X806.2.j and
certified checks only to its existing Subsec. X806.2.j.1 of this Part;
customers and shall maintain a register of (3) A register of said checks indicating
said checks indicating the following all the information required under Subsec.
information: X806.2.j shall be maintained;
(1) True and full name of the buyer or (4) A covered institution which issues
the applicant if buying on behalf of an as well as those which accepts as deposits,
entity; said cashier’s, manager’s or certified checks
(2) Account number; or other similar instruments issued in blank
(3) Date of issuance and the number of or payable to cash, bearer or numbered
the check; account shall take such measure(s) as may
(4) Name of the payee; be necessary to ensure that said instruments
(5) Amount; and are not being used/resorted to by the buyer
(6) Purpose of such transaction. or depositor in furtherance of a money
(Circular No. 706 dated 05 January 2011) laundering activity;

§§ X806.2.j.2 - X806.2.m
11.12.31
(5) The deposit of said instruments shall Foreign exchange dealers, money
be subject to the same requirements of changers and remittance agents customers
scrutiny applicable to cash deposits; and presenting greater risk, such as shell
(6) Transactions involving said companies shall be subject to enhanced
instruments should be accordingly reported due diligence.
to the AMLC if there is reasonable ground (Circular No. 706 dated 05 January 2011)
to suspect that said transactions are being
used to launder funds of illegitimate origin. § X806.2.m High risk customer
(Circular No. 706 dated 05 January 2011) A customer from a country that is
recognized as having inadequate
§ X806.2.k Second-endorsed checks. A
internationally accepted anti-money
covered institution shall enforce stricter
laundering standards, or does not
guidelines in the acceptance of second
sufficiently apply regulatory supervision
-endorsed checks including the application
or the Financial Action Task Force (FATF)
of enhanced due diligence to ensure that
recommendations, or presents greater risk
they are not being used as instruments for
for crime, corruption or terrorist financing
money laundering or other illegal activities.
is considered a high risk customer.
For this purpose, a covered institution
Information relative to these are publicly
shall limit the acceptance of
available such as in the websites of FATF,
second-endorsed checks from properly
FATF Style Regional Bodies (FSRB) like the
identified customers and only after
Asia Pacific Group on Money Laundering
establishing that the nature of the business
and the Egmont Group, national
of said customer justifies, or at least makes
authorities like the OFAC of the U.S.
practical, the deposit of second-endorsed
Department of the Treasury, or other
checks. In case of isolated transactions
reliable third parties such as regulators or
involving deposits of second-endorsed
exchanges, which shall be a component
checks by customers who are not engaged
of a covered institution’s customer
in trade or business, the true and full
identification process.
identity of the first endorser shall be
When dealing with high risk
established and the record of the
customers, a covered institution should
identification shall also be kept for five (5) years.
(Circular No. 706 dated 05 January 2011) take extreme caution and vigilance. In no
case shall reduced diligence be applied
§ X806.2.l Foreign exchange dealers/ to high risk customers. On the other hand,
money changers/remittance agents in case the covered institution determines,
A covered institution shall require their based on its standards, that dealing with
customers, who are foreign exchange the high risk customer calls for, or this
dealers, money changers and remittance Part requires, the application of enhanced
agents, to submit a copy of the certificate of due diligence, it shall apply the minimum
registration issued to them by the BSP as requirements for enhanced due diligence
part of their customer identification in accordance with Subsec. X806.1.b. In
document. The certificate of registration shall all instances of acceptance of a high risk
be for each head office, branch agent, customer, approval of the covered
sub-agent, extension office or business institution’s senior officer shall be
outlet of foreign exchange dealers, money necessary.
changers and remittance agents. (Circular No. 706 dated 05 January 2011)

§§ 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
operate or be established in the existing customers on the basis of
Philippines. A covered institution shall materiality and risk.
refuse to enter into, or continue, With respect to monitoring of
correspondent banking relationship with transactions, in order that a covered
them. It shall likewise guard against institution may be able to control and
establishing relations with foreign FIs that reduce risk associated with money
permit their accounts to be used by shell laundering and terrorist financing, it is
banks. necessary that it has a system that will
(Circular No. 706 dated 05 January 2011) enable it to understand the normal and
reasonable account activity of customers
§ X806.2.o Numbered accounts
and detect unusual or suspicious patterns
No peso and foreign currency
of account activity. Thus, a risk and
non-checking numbered accounts shall be
materiality based on-going monitoring of
allowed without establishing the true and
customer’s accounts and transactions should
full identity and existence of customers
be part of a covered institution’s customer
and applying enhanced due diligence in
due diligence.
accordance with Subsec. X806.1.b.
Peso and foreign currency
non-checking numbered accounts existing
§ X806.3.a Enhanced due diligence
prior to 17 October 2001 shall continue
Covered institutions shall apply enhanced
to exist but the covered institution shall
due diligence on its customer in
establish the true and full identity and
accordance with Subsec. X806.1.b if it
existence of the beneficial owners of such
acquires information in the course of its
accounts and applying enhanced due
customer account or transaction
diligence in accordance with Subsec.
monitoring that:
X806.1.b.
(Circular No. 706 dated 05 January 2011) (1) Raises doubt as to the accuracy of
any information or document provided or
§ X806.2.p Prohibited accounts the ownership of the entity;
A covered institution shall maintain (2) Justifies re-classification of the
accounts only in the true and full name of customer from low or normal risk to
the account owner. The provisions high-risk pursuant to this Part or by its own
of existing law to the contrary criteria; or
notwithstanding, anonymous accounts, (3) Any of the circumstances for the
accounts under fictitious names, filing of a suspicious transaction exists such
numbered checking accounts, and all as but not limited to the following:
other similar accounts shall be absolutely (a) Transacting without any underlying
prohibited. legal or trade obligation, purpose or
(Circular No. 706 dated 05 January 2011) 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 considered as “non-cash, no/low risk
financial capacity of the customer or covered transactions” the reporting of
deviates from 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 BSP;
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 c. Internal operating expenses of
activity as herein defined. banks;
Where additional information cannot be d. Transactions involving transfer of
obtained, or any information or funds from one deposit account to another
document provided is false or falsified, or deposit account of the same person within
result of the validation process is the same bank;
unsatisfactory, the covered institution shall e. Roll-overs of placements of time
immediately close the account and refrain deposit; and
from further conducting business f. Loan/Interest principal payment
relationship with the customer without debited against borrower’s deposit account
prejudice to the reporting of a suspicious maintained with the lending bank.
transaction to the AMLC when In addition, pursuant to AMLC
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
Transaction Reporting 1 . Covered the 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
transaction, the covered institution shall be however required to file STRs when the
required to report the same as a suspicious transactions that pass through them are
transaction. deemed suspicious.
(Circular No. 706 dated 05 January 2011, as amended by The BSP may consider other
CL -078 dated 11 October 2011)
transactions as “no/low risk covered
transactions” and propose to the AMLC that
§ X807.1 Deferred reporting of certain they be likewise subject to deferred
covered transactions. Pursuant to AMLC reporting by covered institutions.
Resolution No. 58 dated 25 June 2005 as (Circular No. 706 dated 05 January 2011, as amended by
amended by AMLC Resolution No. 24 dated 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 BSP regular or special procedures.
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 BSP examination.
(Circular No. 706 dated 05 January 2011) (Circular No. 706 dated 05 January 2011)

§§ X810 - X899
11.12.31
F. BSP Authority and Enforcement the integrity of the national banking and
Actions financial system, violation of these Rules
shall constitute a major violation subject
Sec. X810 BSP Authority to Examine to the following enforcement actions
Deposits and Investments; Additional against the board of directors, senior man-
Exception to the Bank Secrecy Act; Annual agement and line officers, not necessarily
Testing of Numbered Accounts. To ensure according to priority:
compliance with the AMLA, as amended, a. Written reprimand;
its RIRR, and this Part, the BSP may inquire b. Suspension or removal from the
into or examine any deposit or investment office they are currently holding; and/or
with any banking institution or NBFI and c. Disqualification from holding any
their subsidiaries and affiliates when the position in any covered institution.
examination is made in the course of a In addition to the non-monetary
periodic or special examination, in sanctions stated above, the BSP may also
accordance with the Rules of Examination impose monetary penalties computed in
of the BSP. accordance with existing regulations and
The BSP may likewise conduct annual in coordination with the AMLC.
testing solely limited to the determination of Enforcement actions shall be imposed
the existence and true identity of the owners on the basis of the overall assessment of
of numbered and similar accounts. the covered institution’s AML risk
In the course of the periodic and special management system. Whenever a covered
examination for purposes of complying with institution’s AML compliance system is
the provisions of the AMLA, as amended, found to be grossly inadequate, this may
its RIRR, and this Part, the covered be considered as unsafe and unsound
institutions, their officers and employees, and banking practice that may warrant
the BSP, shall not be deemed to have violated initiation of prompt corrective action.
the provisions of R. A. No. 1405, as (Circular No. 706 dated 05 January 2011)
amended, R.A. No. 6426, as amended, R.A.
No. 8791 and other similar laws, and Sec. X812 (Reserved)
Subsec.X807.6 when disclosing information
Sec. X813 Separability Clause. If any
to BSP relative to covered and suspicious
provisions, sections of this Part, or its
transaction reports filed with the AMLC.
application to any person or circumstance
is held invalid, the other provisions or
sections of this Part, and the application of
Sec. X811 Sanctions and Penalties. In line
such provision or section to other persons
with the objective of ensuring that covered
or circumstance shall not be affected thereby.
institutions maintain high anti-money (Circular No. 706 dated 05 January 2011)
laundering standards in order to protect its
safety and soundness as well as protecting Secs. X814 - X899 (Reserved)

§§ X901 - X902.1
11.12.31
PART NINE
OTHER BANKING REGULATIONS
A. BANKING FEES/CHARGES deposits with the BSP by the BSP

Comptrollership Department upon receipt
Section X901 (2008 - X608) Assessment of the notice of the assessment from the
Fees on Banks. Banks shall contribute to the appropriate department of the SES.
BSP an annual fee to help defray the cost of Where the deposit account is
maintaining the appropriate department of insufficient to cover the assessment fee, the
the SES in accordance with the following BSP Comptrollership Department shall bill
guidelines. the bank for the full amount of the annual
(As amended by M-2011-029 dated 26 May 2011) fee or for the balance thereof not covered
by its deposit account, as the case may be.
§ X901.1 (2008 - X608.1) Annual fees Within thirty (30) calendar days from
on banks. For purposes of computing the receipt of the bill, the bank shall make the
annual fees chargeable against banks, the corresponding remittance to the BSP
term “Total Assessable Assets” shall be the Accounting Department. Failure to pay the
amount referred to as the total assets under bill within the prescribed period shall
Section 28 of R.A. No. 7653 (end-of-month subject the institution to administrative
total assets per balance sheet, after sanctions.
deducting cash on hand and amounts due The guidelines in the collection of the
from banks, including the BSP and banks annual supervisory fees for the year 2011
abroad), plus trust department accounts. are provided in Appendix 88.
Average Assessable Assets (AAAs) shall be (As amended by M-2011-029 dated 26 May 2011, Circular No.
the summation of the end-of-month total 714 dated 10 March 2011, M-2010-013 dated 31 May 2010,
assessable assets divided by the number of Circular No. 687 dated 21 May 2010, M-2009-046 dated 17
November 2009, M-2009-004 dated 12 February 2009 and
months in operation during the particular
Circular No. 643 dated 10 February 2009)
assessment period.
The rates of annual fees for banks beginning
Sec. X902 (2008 - X609) Collection of Fines and
assessable year 2010 shall be as follows:
Other Charges from Banks. The following
regulations shall govern the payment of fines
a. UBs/KBs - 1/32 of 1%
and other charges by banks.
b. TBs - 1/32 of 1%
c. RBs/Coop Banks - 1/45 of 1%
§ X902.1 (2008 - X609.1) Guidelines on
the imposition of monetary penalties. The
multiplied by their AAAs of the preceding year:
following are the guidelines on the
Provided, That the applicable rates for future
imposition of monetary penalties on banks,
assessable years shall be subject to review.
their directors and/or officers:
Securities held under custodianship shall
a. Definition of terms. For purposes of
be exempt from annual fees.
the imposition of monetary penalties, the
Annual fees to be collected from banks
following definitions are adopted:
shall be debited from their respective
(1) Continuing offenses/violations are
Manual of Regulations for Banks Part IX - Page 1

§§ X902.1
09.12.31
acts, omissions or transactions entered into, c. Additional charge for late payment
in violation of laws, BSP rules and of monetary penalty. Late payment of
regulations, Monetary Board directives, and monetary penalty shall be subject to an
orders of the Governor which persist from additional charge of six percent (6%) per
the time the particular acts were committed annum to be reckoned from the banking day
or omitted or the transactions were entered immediately following the said penalty
into until the same were corrected/rectified becomes due and payable up to the day of
by subsequent acts or transactions. They actual payment. The penalty shall become
shall be penalized on a per calendar day due and payable fifteen (15) calendar days
basis from the time the acts were committed/ from receipt of the Statement of Account
omitted or the transactions were effected up from the BSP. For banks which maintain
to the time they were corrected/rectified. DDA with the BSP, penalties which remain
(2) Transactional offenses/violations are unpaid after the lapse of the fifteen-day
acts, omissions or transactions entered into period shall be automatically debited
in violation of laws, BSP rules and against their corresponding DDA on the
regulations, Monetary Board directives, and following banking day without additional
orders of the Governor which cannot be charge. If the balance of the concerned
corrected/rectified by subsequent acts or bank’s DDA is insufficient to cover the
transactions. They shall be meted with one- amount of the penalty, said penalty shall
time monetary penalty on a per transaction already be subject to an additional charge
basis. of six percent (6%) per annum to be
(3) Continuing penalty refers to the reckoned from the banking day immediately
monetary penalty imposed on continuing following the end of said fifteen (15)-day
offenses/violations on a per calendar day period up to the day of actual payment.
basis reckoned from the time the offense/ d. Appeal or request for
violation occurred or was committed until reconsideration. A one (1)-time appeal or
the same was corrected/rectified. request for reconsideration on the monetary
(4) Transactional penalty refers to a penalty approved by the Governor/
one-time penalty imposed on a transactional Monetary Board to be imposed on the bank,
offense/violation. its directors and/or officers shall be allowed:
b. Basis for the computation of the Provided, That the same is filed with the
period or duration of penalty. The appropriate department of the SES within
computation of the period or duration of all fifteen (15) calendar days from receipt of
penalties shall be based on calendar days. the Statement of Account/billing letter. The
For this purpose the terms “per banking appropriate department of the SES shall
day”, “per business day”, “per day” and/or evaluate the appeal or request for
“a day” as used in this Manual, and other reconsideration of the bank/individual and
BSP rules and regulations shall mean “per make recommendations thereon within
calendar day” and/or “calendar day” as the thirty (30) calendar days from receipt
case may be. 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 that it is duty-exempt and citing the specific
LC. The deposit which shall be effected basis/authority of such exemption,
through an electronic Import Entry supported by a copy of the applicable
Declaration (IED) lodged thru a Value certification/ approval/letter of authority
Added Service Provider (VASP), shall not of the government agency concerned.
be withdrawable and shall be utilized only d. Transmittal of the ADPI to the
by crediting the same to the import duties AABs. The ADPI shall be transmitted by
due on the importation. the BOC to the PCHC Payment Gateway
b. Amount of advance deposit. The which shall have responsibility for
import duties due shall be computed by the forwarding the same to the AAB
Electronic to Mobile (e2m) system based on concerned.
the applicant's declared descriptions, e. Collection by debit from designated
ASEAN Harmonized Tariff Nomenclature bank account. The collection of the advance
(AHTN), quantities and values in the IED. deposit as well as of the final duties, taxes
The LC applicant must ensure that the and other charges payable on the
particulars of the LC application and the importation shall be by debit from the
supporting pro-forma invoice correspond to applicant’s bank account designated in the
those declared in the IED and any ADPI or in the Final Payment Instruction
undervaluation, misclassification and (FPI) and credited to the BOC’s account.
misdeclaration in the IED shall subject the f. Validation of advance deposits.
LC applicant to the penalties prescribed Payment of advance deposits shall be
under Section 2503 of the Tariff and validated by official receipts, such as
Customs Code, as amended. The amount electronic Advance Payment Confirmations
payable to the AAB, which shall be the full (APC) prepared and transmitted by the AAB
advance duty payable on the importation using the payment subsystem of the e2m
taking into account exemptions obtained, system via the PCHC Payment Gateway.
shall be notified to the AAB thru an g. Other payment arrangements. The
electronic Advance Deposit Payment requirement of a deposit as stated in Item
Instruction (ADPI). “a” hereof shall likewise apply even if the
The net amount payable must be paid importation is effected under other types of
within the IED validity period which is payment arrangements or on a deferred
reckoned as seven (7) calendar days from payment basis. The deposit should be made
date the payment instruction is generated upon presentation of the import documents
by the e2m system. Beyond the validity to the AAB.
period, the IED status will be indicated as h. Confirmation of advance duties
expired. For expired lEDs, AABs shall not collected. The e2m system shall provide
accept payment. Importers will have to file the importer’s VASP the APC. The VASP
a new IED. shall in turn notify the importer by e-mail
c. Duty exempt imports. If the of its receipt of the APC and provide the
importer/applicant declares in the IED that importer a printed copy thereof upon
the importation is exempt from duties, such request.
claim shall be taken at face value in the i. Collection of final duties and tax
determination by the Bureau of Customs payable. The final duties and tax payable
(BOC) of the amount of advance deposit. as computed by the e2m system shall be
However, AABs shall, as a requirement for notified to the AAB concerned thru an
the opening of the LC, require from the electronic FPI. After collecting the amount
applicant a sworn statement to the effect in the FPI, the AAP shall transmit to BOC

§§ X903.10 - X906
11.12.31
via the PCHC Payment Gateway a Final custody of the banks these funds shall not
Payment Confirmation (FPC). earn interest.
j. Statement of duties and taxes The banks shall not collect from the SSS
availment (SDTA). Upon receipt of the FPC any service charge for such agency.
from the AAB, the BOC shall provide the The funds collected by banks shall be
importer electronically an SDTA which shall handled by the bank proper and not the trust
be his proof of having settled all duties, department: Provided, however, That such
taxes, and other charges on the importation. deposits shall be subject to the reserve
k. Phased implementation. The e2m requirements and the liquidity floor
system shall be rolled out nationwide in requirements on government deposits.
phases. Importations to be cleared thru (As amended by Circular No. 722 dated 17 May 2011)
Customs Collection Districts already
operating the e2m system shall be paid thru Sec. X905 (2008 - X605.3) Collection
payment system prescribed under this Agents of PhilHealth. Banks are authorized
Section. However, importations to be to act as collecting agents of the Philippine
cleared thru non-e2m customs ports shall Health Insurance Corporation (PhilHealth)
follow the old payment system during the under which agency:
migration period under Subsec. X903.11. a. PhilHealth members may pay their
Violations. Any violation of the premium contributions to PhilHealth through
provisions of this Subsection shall be the said banks and the funds thus collected
penalized under the pertinent provisions of shall be remitted to PhilHealth in accordance
the Tariff and Customs Code of the with PhilHealth’s agreed remittance schedule
Philippines, as amended, and/or under which in no case shall exceed thirty (30) days
Section 37 of Republic Act No. 7653. from receipt thereof;
(As amended by Circular No.638 dated 09 January 2009) b. During the period that such premium
contributions are in the custody of banks, such
Sec. X904 Collection Agents of the Social funds shall not earn interest; and
Security System. Banks duly accredited by c. The banks shall not collect from
the SSS are authorized to act as collection PhilHealth any service charge for such agency.
agents under which agency, members of the The funds collected by the banks shall
SSS may pay their contributions for social be handled by the operating departments
security and employees compensation to the (cash departments) of the banks concerned
SSS through the said banks. Such banks are and not their trust operations: Provided,
also authorized to receive from SSS members however, That such funds shall be subject
amortization payments for loans granted by to the reserve requirement on deposits and
the SSS and such other payments due to SSS. to the liquidity floor on government
The funds thus collected shall be deposits.
remitted to the SSS within the period
prescribed by the SSS, i.e., collections by Sec. X906 (2008 - X660) Disclosure of
the bank from the first (1st) day to the fifteenth Remittance Charges and Other Relevant
(15th) day of the month shall be remitted to Information. It is the policy of the BSP to
the SSS not later than the last day of the promote the efficient delivery of
month while collections from the sixteenth competitively-priced remittance services by
(16th) day to the last day of the month shall banks and other remittance service
be remitted to the SSS not later than the providers by promoting competition and the
fifteenth (15th) day of the following month. use of innovative payment systems,
During the period that such funds are in the strengthening the financial infrastructure,

§§ X906 - X931.2
08.12.31
enhancing access to formal remittance C. CREDIT RATING AGENCIES

channels in the source and destination
countries, deepening the financial literacy Sec. X931 (2008 - X654) Recognition and
of consumers, and improving transparency Derecognition of Domestic Credit Rating
in remittance transactions, consistent with Agencies for Bank Supervisory Purposes
sound banking practices. The following regulations shall govern the
Towards this end, banks providing recognition and derecognition of domestic
overseas remittance services shall disclose credit rating agencies (CRAs) for bank
to the remittance sender and to the recipient/ supervisory purposes.
beneficiary, the following minimum items
of information regarding remittance § X931.1 (2008 - X654.1) Statement of
transactions, as defined herein: policy. The introduction in the financial
a. Transfer/remittance fee - charge for market of new and innovative products
processing/sending the remittance from create increasing demand for and reliance
the country of origin to the country of on CRAs by the industry players and
destination and/or charge for receiving the regulators as well. As a matter of policy,
remittance at the country of destination; the BSP wants to ensure that the reliance
b. Exchange rate - rate of conversion on credit ratings is not misplaced. The
from foreign currency to local currency, e.g., following rules and regulations that shall
peso-dollar rate; govern the recognition/derecognition of
c. Exchange rate differential/spread - domestic CRAs for bank supervisory
foreign exchange mark-up or the difference purposes.
between the prevailing BSP reference/
guiding rate and the exchange/ conversion § X931.2 (2008 - X654.2) Minimum
rate; eligibility criteria. Only ratings issued by
d. O t h e r c u r r e n c y c o n v e r s i o n CRAs recognized by the BSP shall be
charges - commissions or service fees, considered for BSP bank supervisory
if any; purposes. The BSP, through the Monetary
e. Other related charges - e.g., Board, may officially recognize a credit
surcharges, postage, text message or rating agency upon satisfaction of the
telegram; following requirements:
f. Amount/currency paid out in the a. Organizational structure
recipient country - exact amount of money (1) A domestic CRA must be a duly
the recipient should receive in local currency registered company under the SEC; and
or foreign currency; and (2) A domestic CRA must have at
g. Delivery time to recipients/ least five (5) years track record in the
beneficiaries - delivery period of remittance issuance of reliable and credible ratings.
to beneficiary stated in number of days, In the case of new entrants, a probationary
hours or minutes. status may be granted: Provided, That the
Banks shall likewise post said CRA employs professional analytical staff
information in their respective websites and with experience in the credit rating
display them prominently in conspicuous business.
places within their premises and/or b. Resources
remittance/service centers. (1) Human Resources
(Circular No. 534 dated 26 June 2006) (a) The size and quality of the CRA’s
professional analytical staff must have the
Secs. X907 - X930 (Reserved) capability to thoroughly and competently
Manual of Regulations for Banks Part IX - Page 8a

§ X931.2
08.12.31
evaluate the assessed/rated entity’s in the rating business, majority of whom

creditworthiness; must have at least five (5) years experience
(b) The size of the CRA’s professional in credit rating business;
analytical staff must be sufficient to allow (d) The directors of the CRA must possess
substantial on-going contact with senior a high degree of competency equipped with
management and operational levels of the appropriate education and relevant
assessed/rated entities as a routine experience in the rating business;
component of the surveillance process; (e) The directors, officers, members of
(c) The CRA shall establish a Rating the rating committee and professional
Committee composed of adequately analytical staff of the CRA have not at any
qualified and knowledgeable individuals time been convicted of any offense
(Next page is Part IX - Page 9)
Part IX - Page 8b 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
10.12.31
2. The MIRA must have rules and branches as outlets and/or selling such
regulations that prevent insider trading and financial products without prior BSP
other conflict of interest situations. approval.
(Circular No. 685 dated 07 April 2010)
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 BSP if their parent
1. Any willful misrepresentation and/ bank and/or branches abroad of their parent
or falsification of information/documents bank offer or market products in the
required under this Section. Philippines, either through electronic means
2. Failure to maintain compliance with (website) or through its local desks (within
the requirements under this Section. 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. D. PHILIPPINE & FOREIGN
(Circular No. 685 dated 07 April 2010)
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
Manual of Regulations for Banks Part IX - Page 12c

§§ X950 - X950.1
09.12.31
mutilated or unfit for circulation, and the and genuine.

treatment and disposition of Philippine c. Counterfeit Coin - An imitation or
currency notes and coins called in for forged design of a genuine legal and
replacement. authorized coin intended to deceive or pass
The guidelines and procedures for the genuine coin, regardless of its
governing currency deposits and intrinsic value.
withdrawals of banks for credit to and debit d. Unauthorized Reproduction of
from their DDAs with the BSP is provided Legal Tender Philippine Note - A
in Appendix 80. reproduction of a facsimile or any
(As amended by M-2009-021 dated 16 June 2009) illustration or object bearing the likeness or
similitude of legal tender Philippine
§ X950.1 (2008 - X610.1) Definition of currency note or any part thereof, without
terms. For purposes of this Section, the prior authority from the Governor of BSP
following terms are defined: or his duly authorized representative.
a. Legal Tender Philippine Currency - e. Unauthorized Reproduction of
Notes and coins issued and circulating Legal Tender Philippine Coin - A
under the provisions of R.A No. 265 reproduction of a facsimile or any object in
and/ or R.A. No. 7653, which when offered metal form bearing the likeness or similitude
for the payment of public or private debt of legal tender Philippine currency coin or
must be accepted. any part thereof, without prior authority
b. Counterfeit Note - An imitation of a from the Governor of BSP or his duly
legal and genuine note intended to deceive authorized representative.
or to be taken for that which is original, legal
(Next Page is Part IX - Page 13)
Part IX - Page 12d Manual of Regulations for Banks

§§ X950.2 - X950.3
08.12.31
§ X950.2 (2008 - X610.2) Treatment seizure enclosing therewith a copy of the

and disposition of counterfeit Philippine receipt and inventory taken on the seized
and foreign currency notes and coins. Any items. All seized notes or coins which are
person or entity, public or private, who not or no longer needed as evidence in
receives or takes hold of a note or coin any investigation/legal proceedings shall
which is counterfeit or whose genuineness be immediately turned over to the Cash
is questionable, whether Philippine or Department, BSP, for proper disposition.
foreign currency, shall issue a temporary The Cash Department, BSP, after
receipt to its owner/holder and must examining all notes and coins submitted
indicate therein his name, address and to it for examination and/or determination
community tax certificate number or the as to its genuineness, shall:
passport number, in case of a foreigner, (a) Issue a corresponding certification
the date of receipt, the denomination, serial for the currency examined, if needed;
number of the note or the coin series as (b) Stamp the word “COUNTERFEIT”
the case may be. The owner/holder shall on both the face and the back of each note
be required to countersign the receipt and found to be counterfeit; and
in case of refusal, the reasons thereof shall (c) Return to the owner/holder, and/or
be stated in the receipt. sender the Philippine or foreign currency
Any person or entity, public or private, notes or coins found to be genuine in
who receives, takes hold or has in his accordance with existing accounting and
possession a note or a coin which is auditing regulations.
counterfeit or whose genuineness is All notes and coins, whether Philippine
questionable, whether Philippine or or foreign, determined by the BSP to be
foreign currency, shall forward the same counterfeit currency, shall not be returned
within five (5) working days from date of to the owner/holder, but shall be retained
receipt/ possession thereof, together with and later disposed of in accordance with
a copy of the temporary receipt required such guidelines as may be adopted by the
herein for examination to: BSP, except those which will be used as
evidence in an investigation or legal
The Cash Department proceedings, in which case, the same shall
Bangko Sentral ng Pilipinas be retained and preserved by the BSP for
A. Mabini St., Manila evidentiary purposes.
The BSP shall extend assistance as may
In cases where personal delivery to the be requested of it in the investigation,
Cash Department, BSP, Manila, is not apprehension and/or prosecution of
feasible, delivery of the afore-stated notes person/s responsible for counterfeiting of
or coins may be made through any of the notes and coins, both Philippine or foreign.
following agencies:
(1) The BSP Regional Offices/Units; or § X950.3 (2008 - X610.3) Reproduction
(2) Any banking institution. and/or use of facsimiles of legal tender
Any law enforcement agency which Philippine currency notes. No person or
conducted any seizure of notes and coins, entity, public or private, shall design,
whether Philippine or foreign, which are engrave, print, make or execute in any other
counterfeits or suspected to be counterfeit manner, or utter, issue, distribute, circulate
currency, shall within five (5) working days or use any handbill, advertisement, placard,
from date of seizure, advise in writing the circular, card, or any other object whatsoever
Cash Department, BSP, Manila of said bearing the facsimile, likeness or similitude

§§ X950.3 - X950.5
08.12.31
of any legal tender Philippine currency educational, historical and other purposes
note, or any part thereof, whether in black which will maintain, promote or enhance
and white or any color or combination of the integrity and dignity of said coins.
colors, without prior authority therefor
having been secured from the Governor, § X950.5 (2008 - X610.5) Clean note
BSP or his duly authorized representative. policy. When making cash deposits with
The reproduction and/or use of the Cash Department or any of the Regional
facsimiles or any illustration bearing the Offices/Units of the BSP, banks and their
likeness or similitude of legal tender branches shall observe the following
Philippine currency notes may be guidelines and procedures.
authorized by the Governor, BSP or his a. Banks shall classify their cash
duly authorized representative, for printed deposits into: (1) clean or fit notes and (2)
illustrations in articles, books, journals, dirty or unfit notes, in accordance with the
newspapers, or other similar materials and Currency Guide for Bank Tellers, Money
strictly for numismatic, educational, Counters and Cash Custodians prepared
historical, newsworthy or other purposes by Cash Department, BSP. The notes thus
which will maintain, promote or enhance classified shall be further sorted by series
the integrity and dignity of said note: and by denomination.
Provided, however, That any such b. Banks shall provide securely
facsimile or illustration shall be of a size sealed bags or containers separately for
less than three-fifths (3/5) or more than one the clean or fit notes and for the dirty or
and one-half (1-1/2) times in size of the unfit notes accompanied by a deposit slip
currency note being illustrated and that for each type/category. The deposit slip
there will be no deviation from the purpose for unfit currency notes shall be clearly
for which the notes will be used. labelled as unfit.
c. To facilitate handling of deposits,
§ X950.4 (2008 - X610.4) Reproduction bank deposits shall be packed in sealed
and/or use of facsimiles of legal tender bags or containers in standard quantity of
Philippine currency coins. No person or twenty (20) full bundle per denomination
entity, public or private, shall design, (each bundle containing 1,000 notes in
engrave, make or execute in any other ten (10) equal straps, each strap containing
manner, or use, issue, or distribute any 100 notes).
object whatsoever bearing the likeness or d. Provincial branches of banks may
similitude as to design, color or the make direct deposits of currency notes duly
inscription thereon of any legal tender identified and sorted, with the nearest BSP
Philippine currency coin or any part Regional Office/Unit. In areas where there
thereof, in metal form, irrespective of size are no BSP Regional Office/Unit, provincial
and metallic composition, without prior branches of banks shall arrange with their
authority from the Governor, BSP or his respective head offices the shipment of
duly authorized representative. their unfit or dirty notes for deposit with
The reproduction and/or use of the BSP Cash Department in Manila. Cost
facsimiles or of any object bearing the of shipment and other related expenses to
likeness or similitude of legal tender be incurred shall be solely for the account
Philippine currency coins referred to in the of the bank concerned.
foregoing section may be authorized by For purposes of this Subsection, the
the Governor, BSP or his duly authorized Cash Department and the regional offices/
representative, strictly for numismatic, units of BSP may refuse acceptance of cash

§§ X950.5 - X950.6
08.12.31
deposits that do not conform with these c. Unfit currency coin. A currency coin
guidelines and procedures. shall be considered unfit for circulation
when:
§ X950.6 (2008 - X610.6) Replacement (1) It is bent or twisted out of shape or
and redemption of mutilated or unfit legal defaced, but its genuineness and/or
tender Philippine currency notes and denomination can still be readily and clearly
coins. The replacement and redemption of determined/identified; or
legal tender Philippine currency notes and (2) It has been considerably reduced in
coins considered mutilated or unfit for weight by natural abrasion/wear and tear.
circulation shall be governed by the d. Mutilated currency coin. A currency
following rules. coin shall be considered mutilated when:
a. Unfit currency note. A currency (1) It shows signs of filing, clipping or
note shall be considered unfit for circulation perforation; or
when: (2) It shows signs of having been
(1) It contains heavy creases which burned or has been so defaced, that its
break the fiber of the paper and indicate that genuineness and/or denomination cannot be
disintegration has begun: Provided, readily and clearly identified.
however, that mere creasing or wrinkling e. Currency notes and coins
which has not broken nor weakened the considered unfit for circulation shall not be
note does not render the note unfit for re-circulated, but may be presented for
circulation; or exchange to or deposited with any bank.
(2) It is badly soiled/contaminated and/ f. Currency notes and coins
or with writings even if it has proper life or considered mutilated shall not be
sizing; or recirculated nor deposited/exchanged, but
(3) It presents a limp or raglike may be presented or forwarded for
appearance. determination of their redemption exchange
b. Mutilated currency note. A currency value to:
note shall be considered mutilated when: (1) The Cash Department
(1) Torn parts of banknote are joined Bangko Sentral ng Pilipinas
together with adhesive tape in a manner A. Mabini St., Manila; or
which tries to preserve as nearly as possible (2) The nearest BSP Regional Office/
the original design and size of the note; or Unit.
(2) The original size of the note has g. The BSP shall replace or redeem
been reduced/lost through wear and tear or notes and coins considered unfit for
has been otherwise torn, damaged, defaced circulation or mutilated except when such
or perforated through action of insects, notes and coins fall under any of the
chemicals or other causes; or following classifications:
(3) It is scorched or burned to such an (1) Notes and coins the identification
extent that although recognizable as such, of which is impossible;
it has become frail and brittle as to render (2) Coins which show signs of filing,
further handling thereof impossible without clipping or perforations; or
disintegration or breaking; or (3) Notes which have lost more than
(4) It is split edgewise; or two-fifths (2/5) of their surface or all of the
(5) It has lost all the signatures signatures inscribed thereon.
inscribed thereon. Notes and coins falling under any of the

§§ X950.6 - X954
10.12.31
classifications mentioned under Item “g” note deposit of banks with the Cash
above shall be withdrawn from circulation Department (CD), Currency Management
and demonetized without compensation to Sub-Sector (CMSS) and the Regional Offices
the owner/bearer. and Branches, Regional Monetary Affairs
Sub- Sector (RMASS):
§ X950.7 (2008 - X610.7) Treatment of a. A service fee of P100 for every 1,000
Philippine currency notes and coins called pieces of new/fit note deposits of banks
in for replacement. Any person or entity, shall be charged effective 04 January 2010
public or private, who receives, takes, holds and 01 October 2010, respectively.
or has in his possession Philippine currency b. Banks shall issue a letter of authority
notes and coins called in for replacement in favor of the BSP, through the CMSS and
shall forward the same during the RMASS to debit their respective DDA
redemption period to: maintained with the BSP, for the service fee
a. Any authorized agent banks of the on their new/fit note deposits;
BSP when the notes are still considered legal c. New/Fit notes
tender, within one (1) year from the date of (1) New notes shall be deemed to
call; or include notes in original BSP wrappers/
b. The BSP Cash Department or BSP bundles and notes in uncirculated condition
Regional Offices/Cash Units, within the in individual bank wrappers.
redemption period as may be determined (2) Fit notes shall be deemed to include:
by the Monetary Board. (a) Clean notes such that the prints are
The BSP Cash Department or the BSP clear and the genuineness is obvious;
Regional Cash Units shall exchange the (b) Notes without writing and/or heavy
notes/coins called in for replacement if creases; and
presented to the BSP within the redemption (c) Notes that can maintain their upright
period as determined by the Monetary Board position when at the mid portion of one (1)
and subsequently dispose the same in of the shorter borders.
accordance with BSP procedures for d. Banks shall continue to prepare
disposal. separate deposit slip/s for new,fit and unfit
notes which will serve as basis for the
§ X950.8 (2008 - X610.8) Sanctions imposition of applicable service fees for fit
Any violation of the provisions of Subsecs. and new notes.
X950.3 and X950.4, shall subject the e. The applicable service fee shall be
offender to imprisonment of not less than debited against the DDA of the bank
five (5) years, but not more than ten (10) concerned with the BSP on the day of
years. In case the Revised Penal Code deposit based on the deposit slip/s;
provides for a greater penalty, then that f. Banks in Metro Manila shall deposit
penalty shall be imposed. new/fit notes in separate sealed transparent
containers of twenty (20) bundles per
Secs. X951 - X953 (Reserved) denomination. The CD may refuse to accept
mixed deposits of new, fit and unfit notes.
Sec. X954 Service Fee for New/Fit Note g. The BSP Regional Offices and
Deposits with the Bangko Sentral. The Branches may, however, accept deposit of
following are the guidelines on the bundled new and fit notes packed in sealed
imposition of service fee on new and fit containers in uniform quantity of twenty (20)

§§ X954 - X999
10.12.31
complete bundles of one (1) or various any violation of the provisions of this Part
denominations. shall be subject to Sections 36 and 37 of
(M-2009-044 dated 09 November 2009, as amended by M-2010- R.A. No. 7653.
030 dated 22 September 2010) The guidelines for the imposition of
monetary penalty for violations/offenses
Secs. X955 - X998 (Reserved) with sanctions falling under Section 37 of
R. A. No. 7653 on banks, their directors
Sec. X999 (2008 - X199) General Provision and/or officers are shown in Appendix 67.
on Sanctions. Except as otherwise provided,

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FOREWORD

The 2011 Manual of Regulations for Banks (MORB) is an updated compilation of

The updated MORB incorporates regulatory policies issued to align banking

AMANDO M. TETANGCO, JR.

The Committee Secretariat is headed by Ms. Ma. Cecilia U. Contreras, Supervision

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

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 - X110 (Reserved)

SECTION X111 Minimum Required Capital

SECTIONS X112 - X114 (Reserved)

SECTION X115 Basel II Risk-Based Capital

SECTION X116 Basel I Risk-Based Capital

SECTION X117 Internal Capital Adequacy Assessment Process and Supervisory

SECTION X118 Revised Risk-Based Capital Adequacy Framework for Stand

SECTION X119 Unsecured Subordinated Debt

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 2127 Shares of Stock of Thrift Banks

SECTION 3127 Shares of Stock of Rural Banks and Cooperative Banks

SECTIONS X128 - X135 (Reserved)

SECTION X136 Dividends

SECTION X137 (Reserved)

SECTION 1137 (Reserved)

SECTION 2137 (Reserved)

SECTION 3137 Limitations/Amount Available on Dividends Declared by Rural

SECTIONS X138 - X140 (Reserved)

H. DIRECTORS, OFFICERS AND EMPLOYEES

SECTION X141 Definition and Qualifications of Directors; Responsibilities and

SECTION X142 Definition and Qualifications of Officers

SECTION X143 Disqualification of Directors and Officers

SECTION X144 Bio-data of Directors and Officers

SECTION X146 Profit Sharing Programs

SECTION X147 Compensation and Other Benefits of Directors and Officers

SECTION 1147 (Reserved)

SECTION 2147 (Reserved)

SECTION 3147 Bonding/Training of Directors, Officers and Employees

SECTION X149 Conducting Business in an Unsafe/Unsound Manner

SECTION X150 Rules of Procedure on Administrative Cases Involving Directors

SECTION X151 Establishment/Relocation/Voluntary Closure/Sale of Branches

SECTION X152 Relocation of Head Offices

SECTION X153 Establishment of Additional Branches of Foreign Banks