Board of Directors
- atleast (5) max. (15) 5-15 members
- (2) must be independent directors- other than an officer or
employee of the bank, its subsidiaries, or affiliates or related
interest
- Non-Filipino residents can be a member of BOD only to the
extent of his/her foreign participation in the equity
-meeting can be conducted through modern tech. but not
limited to videoconferencing/teleconferencing
- Directors of merged or consolidated banks shall not
exceed 21
- Election: President, Treasurer (director or not),
Secretary (resident citizen).
- Not allowed position: President/Secretary,
President/Treasurer
- A foreigner may be a member of the Board of
directors of a rural bank at the time of their
assumption of office
Fit and Proper Rule
• Powers of MB against directors:
a. Review qualifications and DQs of directors
b. After due notice, may disqualify, suspend or
remove director
c. Fit and proper rule shall be determined by -
integrity, experience, education, training,
competence of the director
• Disqualifications of directors:
a. Convicted of final judgment involving dishonesty or
breach of trust
b. Persons convicted of final judgment with a
maximum imprisonment term of more than 6 years
c. Convicts of banking laws
d. Persons judicially declared insolvent
e. Culpable of bank’s closure (guilty)
f. Administratively liable for violation of banking laws
with penalty of removal from office
g. Found unfit for position
• There can be also temporary disqualifications and
shall exist until DQ is gone
• Under CC (Corporation Code) disqualification is only
with (1) imprisonment more than 6 years or (2)
violation of code committed within 5 years
Compensation and Other Benefits of Directors and
Office
- Monetary board may regulate the payment by the
bank to its directors and officers of compensation,
allowance, fees, bonuses, stock options, profit sharing
and fringe benefits only in exceptional cases, not
limited to the following:
• bank is under comptrollership or
conservatorship
• bank is found by the Monetary Board to be
conducting business in an unsafe or unsound
manner
• bank is found by the Monetary Board to be in
an unsatisfactory financial condition
Banking Days and Hours
- all banks including their branches and offices
shall transact business on all working days for
at least six (6) hours a day
- may open for business on Saturdays, Sundays
or holidays for at least three (3) hours a day
*must report to BSP
• For purposes of deposits and
withdrawals, bank can extend beyond or
early of 8AM and 8PM
• If it is for other purposes, they can
exceed 6 hours minimum but not extend
beyond or early of 8AM and 8PM
• Banks in airports or major fish ports can
open 24hours
• Changes in banking days and hours can
be made once every 30 days except during
emergencies
Strikes and Lockouts
- any strike or lockout involving banks, if
unsettled after seven (7) calendar days shall
be reported by the Bangko Sentral to the
Secretary of Labor who may assume
jurisdiction over the dispute or decide it or
certify the same to the National Labor
Relations Commission for compulsory
arbitration.
- However, the President of the Philippines
may at any time intervene and assume
jurisdiction over such labor dispute in order
to settle or terminate the same.
- Banks, through their president, shall
inform BSP of the cause of the strike and
the operations affected

Loans and Other Credit Accommodations Against Real
Estate
- shall not exceed seventy-five percent (75%) of the
appraised value of the respective real estate
security, plus sixty percent (60%) of the appraised
value of the insured improvements, and such loans
may be made to the owner of the real estate or to
his assignees.
Loans and credit accommodations on security of
chattels and intangible properties
- Shall also not exceed 75% of the appraised
value of the security
Acquisition of real estate by way of satisfaction of
claims
• Notwithstanding the limitations, bank may still
acquire the following property:
1. Mortgage to it in good faith for security
2. Conveyed for satisfaction of debt
3. Purchase under judgement or mortgage
• Any real property held in such circumstance must be
disposed within 5 years
• After said period, those properties shall now be
included in the 50% limitation
Prohibition to act as an insurer
- A bank shall not directly engage in insurance
business as the insurer
- Insurance act shall include making insurance
contract, surety contract, doing business of
reinsurance
- Fact that no profit is derived shall not be
deemed conclusive to show that there is no
insurance business
Legal tender power
• All notes and coins issued by BSP shall be fully guaranteed
by the Government and shall be legal tender in Philippines
for all debts, public or private
• Checks representing demand deposits do not have legal
tender and acceptance is at the option of the creditor
• Check cleared and credited to account of creditor shall be
equivalent to delivery
• BSP Circ. 537 of 2006 – maximum amount of coins to be
considered as legal tender o 1,5,10 peso coins – 1k o
1,5,10,25 centavos – 100
Replacement of currency unfit for circulation
• BSP shall withdraw from circulation and demonetize all
notes and coins unfit for circulation and shall replace them
• BSP shall not replace notes under mutilated condition and
without compensation to bearer
• Mutilated condition: (1) identification is impossible, (2)
signs of filing, clipping, or perforation (3) notes lost more
than 2/5 of surface or all signatures
Retirement of old notes and coins
• BSP may call for replacement of notes (more than 5 yrs
old) and coins (more than 10 yrs old)
• Notes and coins called in for replacement shall remain
legal tender for 1 year from date of call
• After period, such shall cease to be to be legal tender but
can be exchanged at par and without charge in BSP during
following year
• After said period, notes and coins not exchanged shall
cease to be a liability of BSP and shall be demonetize
International Reserves
• International reserves – must be maintained adequately
to meet foreseeable net demands for foreign currencies
• Adequacy of international reserves – MB shall be guided
by prospective receipts and payments of foreign exchange
• MB shall give special attention to volume and maturity of
the following:
o Liability of BSP in foreign currency
o Foreign exchange assets and liabilities of other banks
and all other persons
Composition of International Reserves
• International reserve shall include but not limited to:
• Gold
• Assets in foreign currencies
• Assets in foreign currencies include
(1) documents of international transfer of funds,
(2) demand and time deposits of banks abroad and
(3) foreign government securities and notes
• MB shall hold the FOREX resource of BSP in freely
convertible currencies
• MB shall issue regulations that FOREX assets must meet
• BSP shall be free to convert any asset in international
reserves into other assets
Purchase and sales of FOREX
• BSP may buy and sell foreign notes, coins and documents.
They can also engage in future exchange operations
• BSP shall engaged with FOREX transactions with the
following:(BIG-FO)
1. Banking institutions operating in the Philippines
2. International financial institutions
3. Government (inc. subdivisions and instrumentalities)
4. Foreign governments
5. Other entities authorized by MB
•In order to maintain convertibility of peso, BSP may buy
those offered and sell any quantity demanded provided
that FOREX is freely convertible into gold or US dollars
• This requirement shall not apply to demand for foreign
notes and coins
• BSP shall effect its exchange transactions at the rates
determined by Sec. 74
Exchange Rates (Sec. 73)
•MB shall determine exchange rate policy of the country
• MB shall determine rates at which BSP shall buy and sell
spot exchange and establish deviation limits for effective
exchange rates
• BSP shall not collect any additional commissions other
than actual telegraphic costs
• MB shall similarly determine rates for other types of
FOREX transactions including sales of foreign notes and
coins
• The margins between effective exchange rates and rates
established may not exceed the corresponding margins for
spot exchange transactions more than additional costs
involved in each type of transactions
DOSRI ACCOUNTS (Directors, Officers, Stockholders,
Related interest)
a) The borrower is dosri
b) Contracts a loan or any form of financial
accommodation
c) The loan or financial accommodation is from
(1) his bank (2) bank that is subsidiary of a
bank holding company of which both his bank
and lending bank are subsidiaries (3) a bank in
which a controlling proportion of the shares is
owned by the same interest that owns a
controlling proportion of the shares of his
bank
d) The loan or financial accommodation of
DOSRI is in excess of 5% of the capital and
surplus of the lending bank or in the
maximum amount permitted by law,
whichever is lower
• Directors include those named in incorporations,
elected or filled
• Officers shall include any person who performs
function of management
• Stockholder – stockholder of record in the books of
the bank
• Related interest includes spouse or relative within
1st degree or by legal adoption. This includes
partnership, co-ownership of DOSRIs
• Corporations where the above mentioned owns 20%
of subscribed capital, then the prohibition shall apply
• Can also be less than 50% if the DOS sits as
representative of the bank in the board of such
corporation
Restriction on Bank Exposure to (DOSRI)
• No DOSRI can directly or indirectly borrow from
such bank or become a guarantor, indorser or surety
for loan
• Exception is when there is a written approval of the
majority of all directors of the bank excluding the
DOSRI concerned
• Such approval is not required for loans if it is under
a fringe benefit plan approved by BSP
b. Dealings of a bank with any of dosri shall be upon
terms not less favorable to the bank than those offered
to others (arms length rule)
c. loans extended to dosri shall be limited to an
amount equivalent to their respective unencumbered
deposits and book value of their paid in capital
contribution in the bank
 Except:
- Loans, credit accomodations and
guarantees secured by assets considered
as non risk by MB
- L, CA, Advances to officers in the form
of fringe benefits
- Cooperative banks with regard to their
cooperative shareholders
d. the resolution approving the loan shall be entered in the
records of the bank and transmitted to bsp
e. waiver of secrecy of deposits of whatever nature in all
banks in the ph by the borrower. No waiver is required if
the related interests are the borrower
f. information obtained from examination is strictly
confidential

PROHIBITION TO ACQUIRE OWN SHARE

- The Bangko Sentral shall not acquire shares of
any kind or accept them as collateral, and shall
not participate in the ownership or management
of any enterprise, either directly or indirectly.
- The Bangko Sentral shall not engage in
development banking or financing: Provided,
however, That outstanding loans obtained or
extended for development financing shall not be
affected by the prohibition of this section.
 V. Placement under conservatorship- attempts to
save the bank from bankruptcy & total liquidation
• Grounds for appointment of conservator
a) Whenever the MB finds the bank in a state of:
1. Continuing inability or
2. Unwillingness to maintain a condition of
liquidity deemed adequate to protect
depositors and creditors
b) MB may appoint conservator with following
powers:
1. Take charge of assets, liabilities and
management thereof
2. Reorganize management
3. Collect monies and debs due
4. Exercise all powers necessary to restore
viability
• Conservator shall report to MB and shall have the
power to overrule or revoke actions of previous
management
• Rehabilitation proceedings provide for equitable
distribution of insolvent debtor’s remaining assets to
its creditors and give debtor a fresh start by relieving
them of the weight of their debts
• Qualification of conservator
-competent and knowledgeable in bank
operations and management
-Period of conservatorship shall not exceed 1
year
• Power of conservator cannot impair obligations of
• Remuneration
- Conservator shall receive remuneration to
be fixed by MB in an amount not to
exceed 2/3 the salary of president of bank
in 1 year, payable in 12 equal instalments
- If within one year the conservatorship is
terminated on ground that institution can
operate on its own, conservator shall
receive balance
- But if it is terminated on some other
ground, conservator shall not be entitled to
remaining balance
- MB can appoint conservator connected to
BSP in which case he shall not receive
remuneration from BSP
• Expenses of conservatorship
- It shall be borne by bank concerned
• Terminations of conservatorship
- MB shall terminate the conservatorship is
it is satisfied that bank can continue
operations
- Conservatorship can also be terminated on
basis of report of conservator or its own
findings would involve loss
- In such as case, there shall be receivership
or liquidation
• Final and executory
- Action of MB shall be final except on
petition for certiorari in case of grave
abuse of discretion
- It shall be filed within 10 days from receipt
of notice of board of directors of
conservatorship, receivership or
liquidation
Exclusive power to appoint conservator shall lie in
MB
Designation of conservator is not precondition to
designation of receiver
contracts
- Conservator power to revoke contracts cannot
post-facto affect perfected transaction as it
would infringe non-impairment clause
- Conservator is given power to revoke contracts
only those that are defect (void, voidable,
unenforceable, rescissible)
- Conservator merely takes place of board of
directors
- Conservator cannot simply repudiate valid
obligations of the bank and must bring them to
court actions
- In FPIB vs. CA the court ruled that the
conservator cannot revoke a previously valid
contract entered by the bank even though the
object of the contract has a higher price
- In conservatorship, the banking functions
continue unlike in receivership and liquidation
Cessation of banking business
• Voluntary liquidation
- In voluntary liquidation, bank sends to MB
notice of liquidation
- No voluntary dissolution shall be undertaken by
a bank without prior approval of MB. Request of
voluntary dissolution shall be accompanied by
liquidation plan
• Receivership
- Equivalent to an injunction to restrain the
bank in any way. Appointing a receiver to
suspend the authority of the bank over its
property
- The MB can summarily and without need of prior
hearing forbid the institution from doing business
and designate PDIC as receiver
- Grounds for receivership and liquidation:
1. Unable to pay liabilities that are due. This
shall not include inability to pay cause by
extraordinarily demands by financial panic
2. Insufficient realizable assets
3. Cannot continue business without involving
probable loss to depositors or creditors
4. Wilfully violated cease and desist order
involving transactions of fraud
5. In case a bank notifies BSP or public
announces bank holiday where it suspends
payment of its deposit liabilities continuously for
more than 30 days
GBL:
1. Notification to the bsp or public
announcement of a bank holiday
2. Suspension of payment of deposit liabilities
continuously for more than 30 days
3. Persistence in conducting business in an
unsafe/unsound manner
- For quasi-banks any persons recognize in competence
in banking may be designated as receiver
2. Procedure
• Receiver shall immediately:
1. Take charge of all assets and liabilities
2. Administer the same for benefit of creditors
3. Exercise general power of receiver under ROC
4. Shall not pay or any act that involves transfer of
asset of bank
• Receiver may deposit or place funds of bank in
non-speculative investments
• Receiver shall determine within 90 days from
takeover, whether institution may be
rehabilitated or otherwise (liquidation)
• Determination of resumption of business is
subject to approval of MB
• In Teal Motor vs. CFI, receiver was defined as a
indifferent person appoint by the court to
preserve the funds of the in litigation pendent lite
• He is not an agent or representative of any
party
LIQUIDATION
- It is the insolvency of the bank or its
continuance would involve probable loss
to its depositors and creditors
- Determination of the MB that the bank
cannot be rehabilitated
Procedure:
1. Receiver shall file ex parte, with a proper
RTC, a petition for assistance for
liquidation of the institution pursuant to
liquidation plan adopted by PDIC to all
closed banks. If quasi-bank, the liquidation
plan shall be adopted by Monetary board
2. He shall convert the assets of the
institution to money for the purpose of
paying the debts of the institution
3. Payment shall be in accordance with the
rules in concurrence & preference of
credits
(regular courts have no jurisdiction over
claimants against insolvent bank)
Effects of Receiver/Liquidation
1. Suspension of operation
2. Assets under receivership/liquidation shall
be deemed in custodia legis in the hands of
receiver and shall be exempt from
garnishment, levy, attachment or execution
3. Bank is not liable to pay interest on
deposits during suspension of operation
4. Corporation retains its legal personality
5. Deposits do not become preferred credits