Professional Documents
Culture Documents
2016MORNBFI2
2016MORNBFI2
The MORNBFI serves two fundamental objectives: one, a convenient reference for
operators and regulators regarding the implementation of domestic laws and their pertinent
rules and regulations governing said financial intermediaries; and two, a useful guide for all
individuals, organizations, and agencies with interest in the country’s non-bank financial
institutions.
(MORNBFI) is the latest edition from the initial issuance in 1996. The updates consist of the
banking legislative reforms and its implementing rules and regulations and amendments to
existing policies. It shall serve as the principal source of banking regulations issued by the
Monetary Board and the Governor of the Bangko Sentral and shall be cited as the authority
for enjoining compliance with the rules and regulations embodied therein.
The Monetary Board of the Bangko Sentral, in its Resolution No. 1203 dated
with representatives from the Supervision and Examination Sector (SES) and Office of the
General Counsel and Legal Services (OGCLS). The Committee was officially constituted
under Office Order No. 2 series of 1995 and was reconstituted several times thereafter, the
latest of which was Office Order No. 0458 dated 21 June 2013. Under the aforesaid Office
Order, the Committee is tasked to update the Manuals on a continuing basis to:
Affairs Office.
The present Committee, as reconstituted under Office Order No. 2257 dated
Members:
and Examination (SE) Specialist II, OSPD, and is assisted by two (2) other personnel.
The Manual of Regulations for Non-Bank Financial Institutions (the “Manual”) contains
the rules and regulations which govern non-bank financial institutions (NBFIs) subject to
the supervision of the Bangko Sentral ng Pilipinas (BSP) under existing laws, i.e. : Quasi-
banks (Q Regulations), NSSLAs (S Regulations), Pawnshops (P Regulations), other NBFIs,
trust entities, subsidiaries and affiliates of banks and quasi-banks (N Regulations) and Trust
Corporations (T Regulations).
The Manual is divided into five (5) books Q, S, P, N or T. Each book is divided into
parts. Each part is divided into sections containing four (4) digits and the letter Q, S, P, N or
T, as applicable, i.e., 4143Q. The first digit “4” means that the regulation is applicable to
NBFIs; the second digit “1” refers to the Part number, and the third and fourth digits “4” and
“3” refer to the section number.
Sections may contain subsections represented by number/s after the decimal point,
i.e., 4143Q.1.
4 1 4 3 Q . 1
The runners in the upper-right or left hand corners of each page show the sections/
subsections of the regulations 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 NON-BANK FINANCIAL INSTITUTIONS
S REGULATIONS
(Regulations Governing Non-Stock Savings and Loan Associations)
TABLE OF CONTENTS
A. SCOPE OF AUTHORITY
B. CAPITALIZATION
C. (RESERVED)
SECTION 4119S Reserve for Office Premises, Furniture, Fixtures and Equipment
ix
SECTION 4120S (Reserved)
E. (RESERVED)
x
SECTION 4146S Agents and Representatives
J. REPORTS
xi
4163S.5 Monitoring activites and correcting
deficiencies
K. INTERNAL CONTROL
L. MISCELLANEOUS PROVISIONS
xii
SECTIONS 4184S Rules Governing Prejudicial Acts, Practices or Omissions
4184S.1 Acts, practices or omissions considered prejudicial
to the interest of members
4184S.2 Enforcement actions
A. DEMAND DEPOSITS
xiii
B. SAVINGS DEPOSITS
C. (RESERVED)
D. TIME DEPOSITS
E. - F. (RESERVED)
G. INTEREST ON DEPOSITS
xiv
H. (RESERVED)
J. (RESERVED)
K. OTHER BORROWINGS
A. LOANS IN GENERAL
xv
SECTION 4305S Interest and Other Charges
4305S.1 - 4305S.2 (Reserved)
4305S.3 Interest in the absence of stipulation
4305S.4 Escalation clause; when allowable
4305S.5 Interest accrual on past due loans
4305S.6 Method of computing interest
B. SECURED LOANS
xvi
C. - D. (RESERVED)
F. - I. (RESERVED)
J. OTHER OPERATIONS
SECTION 4392S Loan Portfolio and Other Risk Assets Review System
xvii
K. MISCELLANEOUS PROVISIONS
C. ENFORCEMENT ACTIONS
A. OTHER OPERATIONS
xviii
4601S.1 Guidelines on the imposition of monetary
penalties; payment of penalties or fines
B. SUNDRY PROVISIONS
xix
SECTION 4657S Non-Stock Savings and Loan Associations Premises and
Other Fixed Assets
4657S.1 Accounting for non-stock savings and loans
associations premises; other fixed assets
4657S.2 (Reserved)
4657S.3 Reclassification of real and other properties
acquired as non-stock savings and loans
association premises
4657S.4 - 4657S.8 (Reserved)
4657S.9 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
4657S.10 Republic Act No. 9994 - An Act Granting
Additional Benefits and Privileges to Senior
Citizens, Further Amending Republic Act No.
7432 of 1992 As Amended by Republic Act
No. 9257 of 2003.
xx
List of Appendices
16.06.30
LIST OF APPENDICES
S-2 List of Reports Required from Non-Stock Savings and Loan Associations
Annex S-2-a - Reporting Guidelines on Crimes/Losses
xxi
List of Appendices
16.06.30
LIST OF APPENDICES
S-9 Guidelines in Classifying Loans and Other Risk Assets and Setting up
Allowance for Probable Losses
xxii
§§ 4101S - 4101S.2
08.12.31
PART ONE
1
See SEC Circular No. 3 dated 16 February 2006.
broad-based, the total amount that a pertinent provisions of its by-laws and
member and/or his immediate family may written policies to comply with the
contribute as fixed/ non-withdrawable foregoing requirements: Provided, That
contributions shall be subject to a ceiling amounts held in excess of the prescribed
which shall be determined by the board ceiling under Item “b.(1)” hereof as of
of trustees and duly confirmed by the 22 March 2013 shall be allowed to
NSSLA’s general assembly. The prescribed continue as such but once reduced shall not
ceiling shall be applied uniformly to all thereafter be increased beyond the
members: Provided, That in cases where prescribed ceiling.
the NSSLA is unable to comply with the (As amended by Circular No. 789 dated 28 February 2013)
capital adequacy ratio requirement as
provided under Sec. 4116S, any deviation §§ 4106S.2 - 4106S.6 (Reserved)
from the uniform application of or setting-
up of aforesaid ceiling may be allowed. § 4106S.7 Revaluation surplus. In cases
b. Withdrawable capital refers to the of both retiring and new members, a
amount of capital contributions which may revaluation surplus shall be added to their
be withdrawn by a member pursuant to the contributions by imputing their respective
terms and conditions prescribed under the proportionate shares in the withdrawable
NSSLA’s by-laws, or as approved by the share reserve and the reserve for furniture,
board of trustees and duly confirmed by fixtures, and furnishings.
(As amended by Circular No. 789 dated 28 February 2013)
the NSSLA’s general assembly.
(1) Ceiling. At no time shall the total
Secs. 4107S - 4110S (Reserved)
withdrawable capital contributions of a
member and that of his immediate family,
C. (RESERVED)
as defined in Subsec. 4101S.1.b(3), exceed
ten times (10X) their fixed/non-withdrawable
Secs. 4111S - 4115S (Reserved)
capital contributions.
(2) Restrictions on withdrawability.
D. CAPITAL-TO-RISK ASSETS RATIO
Notwithstanding the capital contributions’
withdrawability, the NSSLA shall establish Sec. 4116S Capital-to-Risk Assets Ratio
and prescribe the conditions and/or Capital-to-risk assets ratio (CAR) is an
circumstances when the NSSLA may limit important tool to measure solvency and
the withdrawal of the members’ effectively manage the risk-taking activities
withdrawable capital contributions, such as, of an NSSLA, determine its capacity to
when the NSSLA is under liquidity stress absorb unexpected losses, and adequately
or is unable to meet the capital adequacy provide protection to members and
ratio requirement under Sec. 4116S. creditors.
c. Limit on total capital contributions. The CAR, expressed as a percentage of
NSSLAs shall prescribe a maximum amount total capital accounts to total risk assets shall
on the total amount of fixed and not be less than ten percent (10%).
withdrawable capital contributions that a For purposes of computing CAR, the
family group [i.e., member and his aggregate amount of withdrawable capital
immediate family as defined under Subsec. contributions that shall be allowed to form
4101S.1.b(3)] may hold in an NSSLA. part of an NSSLA’s total capital accounts
Transitory provisions. An NSSLA shall shall be capped at ten times (10X) the
have one (1) year period reckoned from aggregate amount of fixed/non-withdrawable
22 March 2013 within which to amend the capital contributions.
The total risk asset is defined as total Transitory provisions. An NSSLA which
assets minus the following assets: failed to meet the minimum CAR as
a. Cash on hand; prescribed above shall have until 30 June
b. Evidences of indebtedness of the 2013 within which to comply.
Republic of the Philippines and any other (As amended by Circular Nos. 789 dated 28 February 2013 and
573 dated 22 June 2007)
evidences of indebtedness/obligations, the
servicing and repayment of which are fully Sec. 4117S Withdrawable Share Reserve
guaranteed by the Republic of the NSSLAs shall create a withdrawable share
Philippines; reserve which shall consist of two percent
c. Loans to the extent covered by hold- (2%) of the total capital contributions of the
out on, or assignment of, deposits members.
maintained in the lending NSSLA; An amount corresponding to the
d. Office premises, depreciated; withdrawable share reserve shall be set up
e. Furniture, fixtures and equipment, by the NSSLA, such amount invested in
depreciated; bonds or evidences of indebtedness of the
f. Real estate mortgage loans guaranteed Republic of the Philippines or of its
by the Home Guarantee Corporation to the subdivisions, agencies or instrumentalities,
extent covered by the guarantee; and the servicing and repayment of which are
g. Other non-risk items as the Monetary fully guaranteed by the Republic of the
Board may, from time to time, authorize to Philippines, and evidences of indebtedness
be deducted from total assets. of the Bangko Sentral.
The Monetary Board shall prescribe the For a uniform interpretation of the
manner of determining the total assets of provisions of this Section, the following shall
such NSSLA for the purpose of this Section, serve as guidelines:
but contingent accounts shall not be a. The withdrawable share reserve shall
included among total assets. be set up from the undivided profits of the
Whenever the capital accounts of an NSSLA and shall be funded in the form of
NSSLA are deficient with respect to the cash deposited as a separate account and/
preceding paragraph, the Monetary Board, or an investment allowed under this Section;
after considering the report of the b. Should there be an increase in the
appropriate department of the SES on the capital contribution, the reserve shall be
state of solvency of the NSSLA concerned, correspondingly adjusted at the end of each
shall limit or prohibit the distribution of net month from undivided profits, if any; and
income and shall require that part or all of c. The reserve shall be adjusted first
net income be used to increase the capital before the NSSLA shall declare and
accounts of the NSSLA until the minimum distribute to its members any portion of its
requirement has been met. The Monetary net income at any time of the year.
Board may, after considering the aforesaid (As amended by Circular No. 573 dated 22 June 2007)
report of the appropriate department of the
SES, and if the amount of the deficiency Sec. 4118S Surplus Reserve for Ledger
justifies it, restrict or prohibit the making of Discrepancies. Whenever an NSSLA has a
new investments of any sort by the NSSLA discrepancy between its general ledger
with the exception of the purchases of accounts and their respective subsidiary
evidence of indebtedness included under ledgers, the board of trustees of the NSSLA
Item “b” of this Section until the minimum shall set up from the undivided profits of
required capital ratio has been restored. the NSSLA, if any, a surplus reserve, in an
amount equivalent to the amount of the income to members out of its adjusted
discrepancy, and this reserve shall not be Undivided Profits and the balance of its
available for distribution to members or for Surplus Free account as of the calendar year-
any other purpose unless and until the end or fiscal year-end immediately preceding
discrepancy is accounted for. The board of the date of net income distribution:
trustees shall also direct the employee Provided, That in addition to the
responsible for the discrepancy to account requirements as provided in this Section, in
for said discrepancy: Provided, That the no case shall the NSSLA distribute any of
failure of the employee to do so shall its net income and/or surplus to its members
constitute as ground for his dismissal if the if its CAR and capital contributions are
discrepancy is of serious or recurring nature. below the level required under Secs. 4106S
(As amended by Circular Nos. 661 dated 01 September 2009 and 4116S , respectively.
and 573 dated 22 June 2007)
b. Basis for participation in profits
Sec. 4119S Reserve for Office Premises, Member-contributors of an NSSLA may
Furniture, Fixtures and Equipment. NSSLAs participate in the profits of the NSSLA on
shall set aside five percent (5%) of their the basis of the balances of their capital
yearly net income until it amount to at least contributions as determined by the board
five percent (5%) of the total assets as a of trustees: Provided, That an NSSLA shall
reserve for a building fund to cover the cost distribute net income to members only once
of construction or acquisition of office in a calendar or fiscal year adopted by such
premises, and of the purchase of office NSSLA.
furniture, fixtures and equipment.
c. Level of withdrawable share reserve
An NSSLA which, as determined by its
No NSSLA shall distribute any of its net
board of trustees, has adequate office
income to its members if the withdrawable
premises, furniture, fixtures and equipment
share reserve required under Sec. 4117S is
necessary for the conduct of its business
less than, or by such distribution would be
need not set up the reserve: Provided, That
reduced below, the amount specified in said
this fact should be certified by its board of
Section. The reserve shall be adjusted first
trustees in a resolution to be submitted to
before the NSSLA shall distribute its net
the appropriate department of the SES for
income for the year.
verification and approval: Provided,
d. Discrepancies between the general
however, That in case reserves had been
ledger and subsidiary ledger accounts. The
set up, the NSSLA so exempted may revert
surplus reserves set up as required under
the reserves to free surplus.
Sec. 4118S shall not be reverted to Surplus
(As amended by Circular No. 573 dated 22 June 2007)
Free available for distribution to members
Sec. 4120S (Reserved) unless and until the discrepancy between
the general ledger accounts and their
E. (RESERVED) respective subsidiary ledgers for which the
surplus reserve has been set up ceases to
Secs. 4121S - 4125S (Reserved) exist.
e. Other unbooked capital adjustments
F. NET INCOME DISTRIBUTION required by Bangko Sentral, whether or not
allowed to be set up on a staggered basis
Sec. 4126S Limitations on Distribution of The unbooked loss reserves and other
Net Income unbooked capital adjustments required by
a. Amount available for income the Bangko Sentral based on the latest
distribution. An NSSLA may distribute net approved Report of Examination of the
NSSLA, whether or not allowed to be set the SES whichever comes earlier. A
up on a staggered basis, shall be deducted memorandum entry may be made to trustees
from the amount of net income available for and for full disclosure purposes, the amount
of income for distribution may be disclosed
distribution to members.
in the financial statements by means of a
f. Interest and other income earned but
footnote which should include a statement
not yet collected/received, net of allowance to the effect that the distribution is subject
for credit losses. Accrued interest and other to review by the Bangko Sentral.
income not yet received but already (As amended by Circular No. 573 dated 22 June 2007)
recorded by an NSSLA from financial assets,
net of allowance for credit losses, shall be Secs. 4127S - 4140S (Reserved)
deducted from the amount of net income
available for distribution to members. G. TRUSTEES, OFFICERS, EMPLOYEES
(As amended by Circular Nos. 789 dated 28 February 2013 and AND AGENTS
573 dated 22 June 2007)
Strengthening Corporate Governance. It
§ 4126S.1 Reporting and verification is the thrust of the Bangko Sentral to
Declaration of income for distribution to continuously strengthen corporate governance
members shall be reported by an NSSLA in its supervised financial institutions
concerned to the appropriate department of cognizant that this is central in sustaining
the SES in the prescribed form (Revised BSP the resiliency and stability of the financial
Form No. 7-26-25H) within ten (10) business system. In this light, the Bangko Sentral is
days after date of declaration. aligning its existing regulations with
Pending verification of abovementioned international best practices that promote
report by the appropriate department of the good corporate governance such as the
SES, the NSSLA concerned shall not make “Principles for Enhancing Corporate
any announcement or communication on Governance” issued by the Basel Committee
the intended distribution of net income or on Banking Supervision.
shall any actual distribution be made (Circular No. 749 dated 27 February 2012)
thereon.
In any case, the declaration may be
Sec. 4141S Definition; Qualifications;
announced and the income distributed, if
Responsibilities and Duties of Trustees
after twenty (20) business days from the date
For purposes of this Section, the following
of the report required herein shall have been
shall be the definition, qualifications,
received by the Bangko Sentral, no advice
responsibilities and duties of trustees.
against such distribution has been received
by the NSSLA concerned.
(As amended by Circular Nos. 661 dated 01 September 2009
§ 4141S.1 Definition of trustees
and 573 dated 22 June 2007) Trustees shall include: (a) those who are
named as such in the articles of
§ 4126S.2 Recording of net income for incorporation; (b) those duly elected in
distribution. The liability for members’ share subsequent meetings of the NSSLA’s
in the net income distribution shall be taken members; and (c) those elected to fill
up in the books upon receipt of Bangko vacancies in the board of trustees.
Sentral approval thereof, or if no such
approval is received, after twenty (20) § 4141S.2 Qualifications of trustees
business days from the date the required No person shall be eligible as trustee of an
Report on Distributable Net Income was NSSLA unless he is a member of good
received by the appropriate department of standing of such NSSLA.
operations, and initiatives thereto shall be its trust operations. The risk management
implemented with clearly defined policy shall include:
responsibilities and accountabilities. These (a) a comprehensive risk management
shall take into account the NSSLA’s long- approach;
term financial interests, its level of risk (b) a detailed structure of limits,
tolerance and its ability to manage risks guidelines and other parameters used to
effectively. The board shall establish a govern risk-taking;
system for measuring performance against (c) a clear delineation of lines of
plans through regular monitoring and responsibilities for managing risk;
reviews, with corrective action taken as (d) an adequate system for measuring
needed. risk; and
(e) effective internal controls and a
The board shall likewise ensure that the
comprehensive risk-reporting process. The
NSSLA has beneficial influence on the
board of trustees shall ensure that a robust
economy by continuously providing services
internal reporting system is in place that shall
and facilities which will be supportive of enable each employee to contribute to the
the national economy. appreciation of the NSSLA’s overall risk
(2) To approve and oversee the exposures.
implementation of policies governing major The board of trustees shall ensure that
areas of NSSLA operations. The board shall the risk management function is given
approve policies on all major business adequate resources to enable it to effectively
activities, e.g., investments, loans, asset and perform its functions. The risk management
liability management, trust, business function shall be afforded with adequate
planning and budgeting. The board shall personnel, access to information technology
accordingly define the NSSLA’s level of risk systems and systems development
resources, and support and access to
tolerance in respect of said activities. A
internal information.
mechanism to ensure compliance with said
(4) To oversee selection and
policies shall also be provided.
performance of senior management. It is the
The board shall set out matters and
primary responsibility of the board of
authorities reserved to it for decision, which
trustees to appoint competent management
include, among others, major capital
team at all times, monitor and assess the
expenditures, equity investments and
performance of the management team based
divestments. The board shall also establish
on established performance standards that
the limits of the discretionary powers of each
are consistent with the NSSLA’s strategic
officer, committee, sub-committee and such objectives, and conduct regular review of
other groups for purposes of lending, NSSLA’s policies with the management
investing or any other financial undertaking team.
that exposes the NSSLA to significant risks. (a) The board of trustees shall apply fit
(3) To approve and oversee the and proper standards on key personnel.
implementation of risk management Integrity, technical expertise and experience
policies. The board of trustees shall be in the institution’s business, either current
responsible for defining the NSSLA’s level or planned, shall be the key considerations
of risk tolerance and for the approval and in the selection process. And because
oversight of the implementation of policies mutual trust and a close working
and procedures relating to the management relationship are important, the members of
of risks throughout the institution, including senior management shall uphold the general
operating philosophy, vision and core values of good governance from the top and in
of the institution. The board of trustees shall setting corporate values, codes of conduct
replace members of senior management, and other standards of appropriate behavior
when necessary, and have in place an for itself, the senior management and other
appropriate plan of succession. employees. The board of trustees shall:
(b) The board of trustees shall regularly (a) Articulate clear policies on the
monitor the actions of senior management handling of any transaction with directors,
and ensure that these are consistent with officers, stockholders, and their related
the policies that it has approved. It shall put interests (DOSRI) and other related parties
in place formal performance standards to ensuring that there is effective compliance
be able to effectively assess the performance with existing laws, rules and regulations at
of senior management. The performance all times and no stakeholder is unduly
standards shall be consistent with the disadvantaged. In this regard, the board of
NSSLA’s strategic objectives and business trustees shall define “related party
plans, taking into account the NSSLA’s long- transaction”, which is expected to cover a
term financial interests. wider definition than DOSRI under existing
(c) The board of trustees shall regularly regulations and a broader spectrum of
meet with senior management to engage in transactions (i.e., not limited to credit
discussions, question and critically review exposures), such that relevant transactions
the reports and information provided by the that could pose material risk or potential
latter. The board of trustees shall set the abuse to the NSSLA and its stakeholders are
frequency of meeting with senior captured.
management taking into account the size, (b) Require the NSSLA’s members to
complexity of operations and risk profile of confirm by majority vote, in the annual
the NSSLA. members’ meeting, the NSSLA’s significant
(d) The board of trustees shall regularly transactions with its DOSRI and other
review policies, internal controls and self related parties.
assessment functions (e.g., internal audit, (c) Articulate acceptable and
risk management and compliance) with unacceptable activities, transactions and
senior management to determine areas for behaviors that could result or potentially
improvement as well as to promptly identify result in conflict of interest, personal gain
and address significant risks and issues. The at the expense of the institution, or unethical
board of trustees shall set the frequency of conduct.
review taking into account the size, (d) Articulate policies that will prevent
complexity of operations and risk profile of the use of the facilities of the NSSLA in
the NSSLA. furtherance of criminal and other improper
The board of trustees shall ensure that or illegal activities, such as but not limited
senior management’s expertise and to financial misreporting, money
knowledge shall remain relevant given the laundering, fraud, bribery or corruption.
NSSLA’s strategic objectives, complexity of (e) Explicitly discourage the taking of
operations and risk profile. excessive risks as defined by internal policies
(5) To consistently conduct the affairs and establish an employees’ compensation
of the institution with a high degree of scheme effectively aligned with prudent risk
integrity. Since reputation is a very valuable taking. The compensation scheme shall be
asset, it is in the institution’s best interest adjusted for all types of risk and sensitive to
that in dealings with the public, it observes the time horizon of risk. Further, the grant
a high standard of integrity. The board of of compensation in forms other than cash
trustees shall lead in establishing the tone shall be consistent with the overall risk
alignment of the NSSLA. The board of (a) The board of trustees shall ensure
trustees shall regularly monitor and review that the NSSLA’s organizational structure
the compensation scheme to ensure that it facilitates effective decision-making and
operates and achieves the objectives as good governance. This includes clear
intended. definition and delineation of the lines of
(f) Ensure that employee pension funds responsibility and accountability, especially
are fully funded or the corresponding liability between the roles of the Chairman of the
appropriately recognized in the books of the board of trustees and Chief Executive
NSSLA at all times. Further, the board of Officer/President.
trustees shall ensure that all transactions (b) The board of trustees shall maintain,
involving the pension fund are conducted and periodically update, organizational
at arm’s length terms. rules, by-laws, or other similar documents
(g) Allow employees to communicate, setting out its organization, rights,
with protection from reprisal, legitimate responsibilities and key activities.
concerns about illegal, unethical or (c) The board of trustees shall restructure
questionable practices directly to the board itself in a way, including in terms of size,
of trustees or to any independent unit. frequency of meetings and the use of
Policies shall likewise be set on how such committees, so as to promote efficiency,
concerns shall be investigated and critical discussion of issues and thorough
addressed, for example, by an internal review of matters. It shall meet regularly to
control function, an objective external party, properly discharge its functions. It shall also
senior management and/or the board itself. ensure that independent views in board
(h) Articulate policies in communicating meetings shall be given full consideration
corporate values, codes of conduct and other and all such meetings shall be duly minuted.
standards in the NSSLA as well as the means (d) The board shall conduct and
to confidentially report concerns or maintain the affairs of the institution within
violations to an appropriate body. the scope of its authority as prescribed in
its charter and in existing laws, rules and
(6) To define appropriate governance
regulations. It shall ensure effective
policies and practices for the NSSLA and
compliance with the latter, which include
for its own work and to establish means to
prudential reporting obligations. Serious
ensure that such are followed and
weaknesses in adhering to these duties and
periodically reviewed 1 for ongoing
responsibilities may be considered as unsafe
improvement. The board of trustees,
and unsound NSSLA practice. The board
through policies and its own practices, shall
shall appoint a compliance officer who shall
establish and actively promote,
be responsible for coordinating, monitoring
communicate and recognize sound
and facilitating compliance with existing
governance principles and practices to
laws, rules and regulations. The compliance
reflect a culture of strong governance in the
officer shall be vested with appropriate
NSSLA as seen by both internal and external authority and provided with appropriate
stakeholders. support and resources.
1
NSSLAs shall submit the following to the appropriate department of the SES within 90 calendar days from
17 March 2012:
(1) A Secretary’s Certificate attesting the approval of the board of trustees to changes in the policies.
(2) Acknowledgement receipt of copies of specific duties and responsibilities of the board of trustees and
of a trustee, and certification that they fully understand the same.
(e) The board of trustees shall establish review and update periodically, or the
a system of checks and balances which respective charters of each committee or
applies in the first instance to the board other documents that set out its mandate,
itself. Among the members of the board, an scope and working procedures.
effective system of checks and balances (b) The board of trustees shall appoint
must exist. The system shall also provide a members of the committees taking into
mechanism for effective check and control account the optimal mix of skills and
by the board over the chief executive officer experience to allow the members to fully
and key managers and by the latter over the understand, be critical and objectively
line officers of the NSSLA. Checks and evaluate the issues. In order to promote
balances in the board shall be enhanced by objectivity, the board of trustees, shall
appointing a chairperson who is a non- appoint independent trustees and non-
executive, whenever possible. executive members of the board to the
(f) The board of trustees shall assess at greatest extent possible while ensuring that
least annually its performance and such mix will not impair the collective skills,
effectiveness as a body, as well as its various experience, and effectiveness of the
committees, the chief executive officer, the committees.
individual trustee, and the NSSLA itself, (c) The board of trustees shall ensure that
which may be facilitated by the corporate each committee shall maintain appropriate
governance committee or external records (e.g., minutes of meetings or
facilitators. The composition of the board summary of matters reviewed and decisions
shall also be reviewed regularly with the taken) of their deliberations and decisions.
end in view of having a balanced Such records shall document the
membership. Toward this end, a system and committee’s fulfillment of its responsibilities
procedure for evaluation shall be adopted and facilitate the assessment of the effective
which shall include, but not limited to, the dispense of its functions.
setting of benchmark and peer group (d) The board of trustees shall constitute,
analysis. at a minimum, the audit committee. The
(g) The board shall ensure that individual audit committee shall be composed of
members of the board and the members are members with accounting, auditing, or
accurately and timely informed. It shall related financial management expertise or
provide all its trustees and to the members experience commensurate with the size,
a comprehensive and understandable complexity of operations and risk profile of
assessment of the NSSLA’s performance, the NSSLA. To the greatest extent possible,
financial condition and risk exposures. All the audit committee shall be composed of a
trustees shall have reasonable access to any sufficient number of non-executive board
information about the institution at all times. members. Further, the chief executive
It shall also provide appropriate information officer, chief financial officer and/or
that flows internally and to the public. treasurer shall not be appointed as members
(7) To constitute committees to increase of the audit committee.
efficiency and allow deeper focus in specific The audit committee provides oversight
areas. The board of trustees shall create over the institution’s financial reporting
committees, the number and nature of policies, practices and control and internal
which would depend on the size of the and external audit functions. It shall be
NSSLA and the board, the complexity of responsible for the setting up of the internal
operations, long-term strategies and risk audit department and for the appointment
tolerance level of the institution. of the internal auditor as well as the
(a) The board of trustees shall approve, independent external auditor who shall both
(3) To act honestly and in good faith, Corollarily, he should support plans and
with loyalty and in the best interest of the ideas that he thinks will be beneficial to the
NSSLA , its members, regardless of the institution.
amount of their capital contributions, and (8) To have a working knowledge of the
other stakeholders such as its depositors, statutory and regulatory requirements
investors, borrowers, other clients and the affecting the NSSLA institution, including the
general public. A trustee must always act content of its articles of incorporation and
in good faith, with the care which an by-laws, the requirements of the Bangko
ordinarily prudent man would exercise Sentral and where applicable, the
under similar circumstances. While a trustee requirements of other regulatory agencies.
should always strive to promote the interest A trustee should also keep himself informed
of all members, he should also give due of the industry developments and business
regard to the rights and interests of other trends in order to safeguard the institution’s
stakeholders. competitiveness.
(4) To devote time and attention (9) To observe confidentiality. Trustees
necessary to properly discharge their duties must observe the confidentiality of non-
and responsibilities. Trustees should devote public information acquired by reason of
sufficient time to familiarize themselves with their position as trustees. They may not
the institution’s business. They must be disclose said information to any other person
constantly aware of the institution’s without the authority of the board.
condition and be knowledgeable enough to (As amended by Circular Nos.757 dated 08 May 2012 and 749
contribute meaningfully to the board’s work. dated 27 February 2012)
They must attend and actively participate
in board and committee meetings, request Sec. 4142S Definition and Qualifications
and review meeting materials, ask questions, of Officers. Officers shall include the
and request explanations. If a person cannot President, Vice-President, General Manager,
give sufficient time and attention to the Corporate Secretary, Treasurer and others
affairs of the institution, he should neither mentioned as officers of the NSSLA, or
accept his nomination nor run for election whose duties as such are defined in the by-
as member of the board. laws.
(5) To act judiciously. Before deciding The minimum qualifications for trustees
on any matter brought before the board of prescribed in Sec. 4141S are also applicable
trustees, every trustee should thoroughly to officers.
evaluate the issues, ask questions and seek
clarifications when necessary. § 4142S.1 Definition of officers
(6) To contribute significantly to the Officers shall include the president,
decision-making process of the board. executive vice president, senior vice
Trustees should actively participate and president, vice president, general manager,
exercise objective independent judgment on secretary, treasurer, and others mentioned
corporate affairs requiring the decision or as officers of the NSSLA, or those whose
approval of such board. duties as such are defined in the by-laws,
(7) To exercise independent judgment. or are generally known to be the officers of
A trustee should view each problem/ the NSSLA (or any of its branches and offices
situation objectively. When a disagreement other than the head office) either through
with others occurs, he should carefully announcement, representation, publication
evaluate the situation and state his position. or any kind of communication made by the
He should not be afraid to take a position NSSLA. A person holding the position of
even though it might be unpopular. chairman, vice-chairman or any other
position of the board who also performs of trustees. They shall establish a NSSLA-
functions of management such as those wide management system characterized by
ordinarily performed by regular officers shall strategically aligned and mutually
also be considered an officer. reinforcing performance standards across
the organization.
§ 4142S.2 Qualifications of officers (c) To ensure that duties are effectively
An officer shall have the following delegated to the staff and to establish a
minimum qualifications: management structure that promotes
a. He shall be at least twenty-one (21) accountability and transparency. NSSLA
years of age; officers shall establish measurable
b. He shall be at least a college graduate standards, initiatives and specific
or have at least five (5) years experience in responsibilities and accountabilities for
NSSLA or banking operations or related each NSSLA personnel. NSSLA officers shall
activities or in a field related to his position oversee the performance of these delegated
and responsibilities, or have undergone duties and responsibilities and shall
training in NSSLA or banking operations ultimately be responsible to the board of
acceptable to the appropriate department of trustees for the performance of the NSSLA.
the SES; (d) To promote and strengthen checks
c. He must be fit and proper for the and balances systems in the NSSLA. NSSLA
position of an officer of the NSSLA. In officers shall promote sound internal
determining whether a person is fit and controls and avoid activities that shall
proper for the position of an officer, the compromise the effective dispensing of their
following matters must be considered: functions. Further, they shall ensure that
integrity/probity, competence, education, they give due recognition to the importance
diligence, and experience/training. The of the internal audit, compliance and
foregoing qualifications for officers shall be external audit functions.
(Circular Nos.757 dated 08 May 2012 and 749 dated 27 February
in addition to those already required or 2012)
prescribed by R.A. No. 8367, as amended,
and other existing applicable laws and Sec. 4143S Disqualification of Trustees and
regulations. Officers. The following regulations shall
govern the disqualification of NSSLAs’
§ 4142S.3 Duties and responsibilities trustees and officers.
of officers
(a) To set the tone of good governance § 4143S.1 Persons disqualified to
from the top. NSSLA officers shall promote become trustees. Without prejudice to
the good governance practices within the specific provisions of law prescribing
NSSLA by ensuring that policies on disqualifications for trustees, the following
governance as approved by the board of are disqualified from becoming trustees:
trustees are consistently adopted across the a. Permanently disqualified. Trustees/
NSSLA. officers/employees permanently disqualified
(b) To oversee the day-to-day by the Monetary Board from holding a
management of the NSSLA. NSSLA officers director/trustee position:
shall ensure that NSSLA‘s activities and (1) Persons who have been convicted
operations are consistent with the NSSLA’s by final judgment of a court for offenses
strategic objectives, risk strategy, corporate involving dishonesty or breach of trust such
values and policies as approved by the board as but not limited to, estafa, embezzlement,
mentioned in the foregoing Items “(i)”, “(ii)” showing good and justifiable reasons, or
and “(iv)”; after the lapse of five (5) years from the time
This disqualification shall be in effect they were officially advised by the
as long as the delinquency persists. appropriate department of the SES of their
(4) Persons who have been convicted disqualification;
by a court for offenses involving dishonesty (9) Those under preventive suspension;
or breach of trust such as, but not limited (10) Persons with derogatory records as
to, estafa, embezzlement, extortion, forgery, certified by, or on the official files of, the
malversation, swindling, theft, robbery, judiciary, NBI, PNP, quasi-judicial bodies,
falsification, bribery, violation of B.P. Blg. other government agencies, international
22, violation of Anti-Graft and Corrupt police, monetary authorities and similar
Practices Act and prohibited acts and agencies or authorities of foreign countries
transactions under Section 7 of R.A. No. for irregularities or violations of any law,
6713 (Code of Conduct and Ethical rules and regulations that would adversely
Standards for Public Officials and affect the integrity of the trustee/officer or
Employees), violation of banking laws, rules the ability to effectively discharge his duties.
and regulations or those sentenced to serve This disqualification applies until they have
a maximum term of imprisonment of more cleared themselves of the alleged
than six (6) years but whose conviction has irregularities/violations or after a lapse of five
not yet become final and executory; (5) years from the time the complaint, which
(5) Trustees and officers of closed was the basis of the derogatory record, was
banks QBs/trust entities/NSSLAs and other initiated;
FIs under BSP supervision/regulation (11) Trustees and officers of banks, QBs
pending their clearance by the Monetary and trust entities found by the Monetary
Board; Board as administratively liable for violation
(6) Trustees disqualified for failure to of banking laws, rules and regulations
observe/discharge their duties and where a penalty of removal from office is
responsibilities prescribed under existing imposed, and which finding of the Monetary
regulations. This disqualification applies Board is pending appeal before the appellate
until the lapse of the specific period of court, unless execution or enforcement
disqualification or upon approval by the thereof is restrained by the court;
Monetary Board on recommendation by the (12) Trustees and officers of banks, QBs
appropriate department of the SES of such and trust entities or any person found by
trustees’ election/re-election; the Monetary Board to be unfit for the
(7) Trustees who failed to attend the position of trustees or officers because they
special seminar on corporate governance were found administratively liable by
for board of trustees required by BSP. This another government agency for violation of
disqualification applies until the trustee banking laws, rules and regulations or any
concerned had attended such seminar; offense violation involving dishonesty or
(8) Persons dismissed/terminated from breach of trust, and which finding of said
employment for cause. This disqualification government agency is pending appeal before
shall be in effect until they have cleared the appellate court, unless execution or
themselves of involvement in the alleged enforcement thereof is restrained by the
irregularity or upon clearance, on their court; and
request, from the Monetary Board after (13) Trustees and officers of banks, QBs
and trust entities found by the Monetary The spouse or relative within the second
Board as administratively liable for violation degree of consanguinity or affinity of any
of banking laws, rules and regulations person holding the position of manager,
where a penalty of suspension from office cashier, or accountant of a branch or
or fine is imposed, regardless whether the extension office of an NSSLA or their
finding of the Monetary Board is final and respective equivalent positions is
executory or pending appeal before the disqualified from holding or being
appellate court, unless execution or appointed to any of said positions in the
enforcement thereof is restrained by the same branch or extension office.
court. The disqualification shall be in effect c. Except as may otherwise be allowed
during the period of suspension or so long under C.A. No. 108, otherwise known as
as the fine is not fully paid. “The Anti-Dummy Law,” as amended,
(As amended by Circular Nos. 584 dated 28 September 2007 foreigners cannot be officers or employees
and 513 dated 10 February 2006) of NSSLAs; and
d. Any appointive or elective public
§ 4143S.2 Persons disqualified to official, whether full time or part time,
become officers except in cases where such service is
a. The disqualifications for trustees incident to financial assistance provided by
mentioned in Subsec. 4143S.1 shall likewise the government or GOCCs or in cases
apply to officers, except those stated in Items allowed under existing law.
“b(2)” and “b(7)”. (As amended by Circular No. 699 dated 17 November 2010)
b. The spouses or relatives within the
second degree of consanguinity or affinity § 4143S.3 Disqualification procedures
are prohibited from holding officership a. The board of trustees and
positions across the following functional management of every NSSLAs shall be
categories within an NSSLA: responsible for determining the existence
1. Decision making and senior of the ground for disqualification of the
management function, e.g., chairman, NSSLA’s trustee/officer or employee and for
president, chief executive officer (CEO), reporting the same to the BSP. While the
chief operating officer (COO), general concerned NSSLA may conduct its own
manager, and chief financial officer (CFO) investigation and impose appropriate
other than the treasurer or controller; sanction/s as are allowable, this shall be
2. Treasury function, e.g., Treasurer and without prejudice to the authority of the
Vice President – Treasury; Monetary Board to disqualify a trustee/
3. Recordkeeping and financial officer/employee from being elected
reporting functions, e.g., controller and chief appointed as trustee/officer in any FI under
accountant; the supervision of the BSP. Grounds for
4. Safekeeping of assets, e.g., chief disqualification made known to the NSSLA
cashier; shall be reported to the appropriate
5. Risk management function, e.g., chief department of the SES within seventy-two
risk officer; (72) hours from knowledge thereof.
6. Compliance function, e.g., b. On the basis of knowledge and
compliance officer; and evidence on the existence of any of the
7. Internal audit function, e.g., internal grounds for disqualification mentioned in
auditor. Subsecs. 4143S.1 and 4143S.2, the trustee
or officer concerned shall be notified in position. The head of said department may
writing either by personal service or allow an extension on meritorious ground.
through registered mail with registry return c. Upon receipt of the reply/
receipt card at his/her last known address explanation of the trustee/officer
by the appropriate department of the SES of concerned, the appropriate department of
the existence of the ground for his/her the SES shall proceed to evaluate the case.
disqualification and shall be allowed to The trustee/officer concerned shall be
submit within fifteen (15) calendar days from afforded the opportunity to defend/clear
receipt of such notice an explanation on himself/herself.
why he/she should not be disqualified and d. If no reply has been received from
included in the watchlisted file, together the trustee/officer concerned upon the
with the evidence in support of his/her
expiration of the period prescribed under concerned department of the SES shall
Item “b” above, said failure to reply shall recommend to the Monetary Board his/her
be deemed a waiver and the appropriate delisting from the masterlist of temporarily
department of the SES shall proceed to disqualified persons and his/her inclusion
evaluate the case based on available in the masterlist of permanently disqualified
records/evidence. persons.
e. If the ground for disqualification is g. If the disqualification is based on
delinquency in the payment of obligation, dismissal from employment for cause, the
the concerned trustee or officer shall be appropriate department of the SES shall, as
given a period of thirty (30) calendar days much as practicable, endeavor to establish
within which to settle said obligation or, the specific acts or omissions constituting
restore it to its current status or, to explain the offense or the ultimate facts which
why he/she should not be disqualified and resulted in the dismissal to be able to
included in the watchlisted file, before the determine if the disqualification of the
evaluation on his disqualification and trustee/officer concerned is warranted or not.
watchlisting is elevated to the Monetary The evaluation of the case shall be made
Board. for the purpose of determining if
f. For trustees/officers of closed QBs, disqualification would be appropriate and
trust entities, NSSLAs or other FIs under not for the purpose of passing judgment on
Bangko Sentral supervision, the concerned the findings and decision of the entity
department of the SES shall make concerned. The appropriate department of
appropriate recommendation to the the SES may decide to recommend to the
Monetary Board clearing said trustees/ Monetary Board a penalty lower than
officers when there is no pending case/ disqualification (e.g., reprimand,
complaint or evidence against them. When suspension, etc.) if, in its judgment the act
there is evidence that a trustees/officer has committed or omitted by the trustee/officer
committed irregularity, the appropriate concerned does not warrant
department of the SES shall make disqualification.
recommendation to the Monetary Board h. All other cases of disqualification,
that his/her case be referred to the OSI for whether permanent or temporary shall be
further investigation and that he/she be elevated to the Monetary Board for approval
included in the masterlist of temporarily and shall be subject to the procedures
disqualified persons until the final provided in paragraphs “a”, “b”, “c” and “d”
resolution of his/her case. Trustees/officers above.
with pending cases/complaints shall also be i. Upon approval by the Monetary
included in said masterlist of temporarily Board, the concerned trustee/officer shall be
disqualified persons upon approval by the informed by the appropriate department of the
Monetary Board until the final resolution of SES in writing either by personal service or
their cases. If the trustee/officer is cleared through registered mail with registry return
from involvement in any irregularity, the receipt card, at his/her last known address of
appropriate department of the SES shall his/her disqualification from being elected/
recommend to the Monetary Board his/her appointed as trustee/officer in any FI under the
delisting. On the other hand, if the trustee supervision of Bangko Sentral and/or of his/
officer concerned is found to be responsible her inclusion in the masterlist of watchlisted
for the closure of the institution, the persons so disqualified.
bonuses are based on the profits and not permitted under R.A. No. 8367, and any
on the volume or number of loans made trustee, officer or employee, who on behalf
or on the interest or fees collected thereon. of any such NSSLA, knowingly makes or
To protect the funds of depositors and purchases any such loan or investment or
creditors, the Monetary Board may who knowingly consents thereto shall be
regulate/restrict the payment by the personally liable to the NSSLA for the full
NSSLA of compensation, allowances, amount of any such loan or investment.
fees, bonuses, and fringe benefits to its
trustees and officers in exceptional cases Sec. 4145S Bonding of Officers and
and when the circumstances warrant, Employees. All officers and employees of
such as, but not limited to the following: an NSSLA who, in the regular discharge
a. When the NSSLA is found by the of their duties have access to money or
Monetary Board to be conducting negotiable securities shall, before entering
business in an unsafe or unsound manner; upon such duties, furnish to the
b. When the NSSLA is found by the employing NSSLA a good and sufficient
Monetary Board to be in an unsatisfactory bond and providing for indemnity to the
financial condition such as, but not NSSLA against the loss of money or
limited to, the following cases: securities, by reason of their dishonesty.
(1) Its capital is impaired; and The bond of the cashier, assistant cashier,
(2) It has suffered continuous losses treasurer, and other employees having
from operations for the past three (3) years. money accountability shall not be less than
In the presence of any one (1) or more their average daily accountability. The
of the circumstances mentioned above, bond must be issued by a reputable
the Monetary Board may impose the bonding company duly licensed by the
following restrictions in the compensation Insurance Commission and approved by
and other benefits of trustees and officers: the Bangko Sentral. Capital contribution
(a) Except for the financial assistance or a cash bond deposited with the NSSLA
to meet expenses for the medical, or with a bank, may also be allowed.
maternity, education and other emergency
needs of the trustees or officers or their Sec. 4146S Agents and Representatives.
immediate family, other forms of financial No person shall act as an agent or sales
assistance may be suspended. representative of an NSSLA or operate an
(b) When the total compensation agency without obtaining a license from the
package including salaries, allowances, fees Monetary Board. No license is required for
and bonuses of trustees and officers are a collector of an NSSLA but no person shall
significantly excessive as compared with hold himself out or act as collector unless
industry averages, the Monetary Board may he is authorized as a collector in writing by
order their reduction to reasonable levels. such NSSLA.
trustees/officers with rank of SVP and above Sec. 4148S Full-Time Manager for NSSLAs.
(or equivalent ranks) within a particular NSSLAs with total assets of at least P5.0
NSSLA, the duly notarized authorization million shall maintain a full-time manager
form per Appendix Q-45, within twenty (20) to take charge of the operations of the
business days from the date of election/re- NSSLA. The manager shall possess all the
election of the trustees/meeting of the board qualifications and shall not have any
of trustees in which the officers are disqualification under Subsecs. 4142S.2 and
appointed/promoted in accordance with 4143S.2, respectively.
Appendix S-2.
The bio-data shall be updated and Secs. 4149S - 4150S (Reserved)
submitted in case of change of name due to
change in civil status, within twenty (20) H. BRANCHES AND OTHER OFFICES
business days from the date the change
occurred. Sec. 4151S Establishment of Branches/
For other officers below the rank of Extension Offices. Prior Bangko Sentral
SVP, the NSSLA shall not be required to authority shall be obtained before operating
submit their bio-data to the Bangko Sentral. a branch or other offices.
b. The NSSLA shall, however, keep a
complete record of the bio-data of all its § 4151S.1 Application. The application
trustees and officers and shall maintain a shall be prescribed by the appropriate
system of updating said records which department of the SES and accompanied
shall be made available during on-site by the following minimum requirements:
examination or when required by the a. Sketch of the location of the
Bangko Sentral for submission for offsite proposed office which shall be within the
verification. compound of the mother firm’s branch
c. The NSSLA shall also submit to the office;
appropriate department of the SES a duly b. Itemized statement of estimated
notarized list of the incumbent members
receipts and expenses of the NSSLA in
of the board of trustees and officers
connection with such branch or extension
(President or equivalent rank, down the
office;
line, format attached as Appendix Q-57b),
c. Description or enumeration of service
within twenty (20) business days from the
facilities that will cater to the deposit and
election of the board of trustees as
credit needs of members of the NSSLA;
provided in the NSSLA’s by-laws, in
d. Financial statements for the year
accordance with Appendix S-2.
(As amended by Circular Nos. 887 dated 07 October 2015 and
immediately preceding the date of
758 dated 11 May 2012) application;
e. Certification as to the actual number for business during business hours and days
of members that will be serviced by the except when extraordinary instances caused
branch/extension office; and by unforeseen, unavoidable event directly
f. Undertaking that the branch/extension affect the NSSLA’s ability to open for
office will service only members of the business. NSSLAs shall post conspicuously
NSSLA. at all times in their place of business their
schedule of regular business hours and days.
§ 4151S.2 Conditions precluding
acceptance/processing of application. The Secs. 4157S - 4160S (Reserved)
application shall not be accepted/processed
in any of the following cases: J. REPORTS
a. The NSSLA’s operation during the
year immediately preceding the date of filing Sec. 4161S Records. NSSLAs shall have a
of application was unprofitable; true and accurate account, record or
b. Total capital accounts of the NSSLA statement of their daily transactions. The
are less than P100 million as of the date of making of any false entry or the willful
filing of the application; omission of entries relevant to any
c. Total number of members to be transaction is a ground for the Monetary
served in the proposed branch/extension Board for the imposition of administrative
office is less than 500; or sanctions under Section 37 of R.A. No.
d. Non-compliance by the NSSLA with 7653, without prejudice to the criminal
any of the pertinent provisions of banking liability of the director or officer responsible
laws, rules, regulations and policies of the therefore under Sections 35 and 36 of
Bangko Sentral. R.A. No. 7653 and/or the applicable
provisions of the Revised Penal Code.
§ 4151S.3 Internal control system. The Records shall be up to-date and shall contain
NSSLA shall submit to the appropriate sufficient detail so that an audit trail is
department of the SES a system of internal established.
safeguards and control measures to be
adopted for compliance by the staff of the § 4161S.1 Uniform System of
proposed branch/extension office. Accounts. NSSLAs are required to pattern
their charts of accounts and recording
§ 4151S.4 Permit to operate. Actual systems after the Uniform System of
operation shall commence only after a Accounts prescribed for NSSLAs including
permit to operate has been issued by the reportorial and publication requirements.
Bangko Sentral. The voucher system of accounting or the
ticket system, or such other accounting
Secs. 4152S - 4155S (Reserved) system acceptable to the Bangko Sentral as
well as the prescribed chart of accounts
I. BUSINESS DAYS AND HOURS shall be adopted for use by NSSLAs.
transparency and accuracy in financial value of the future cash flows of the
reporting. It is in this light that the Bangko financial instrument discounted using the
Sentral aims to adopt all PFRS and PAS market interest rate). The difference
issued by the Financial Reporting Standards between the fair value and the net
Council (FRSC) to the greatest extent proceeds of the loan shall be recorded
possible. under “Unearned Income- Others”, which
NSSLAs shall adopt the PFRS and PAS shall be amortized over the term of the
which are in accordance with GAAP in loan using the effective interest method.
recording transactions and in the The provisions on government grants
preparation of financial statements and shall be applied retroactively to all
reports to Bangko Sentral. However, in outstanding government grants received.
cases where there are differences between NSSLAs that adopted an accounting
Bangko Sentral regulations and PFRS/PAS as treatment other than the foregoing shall
when more than one (1) option are allowed consider the adjustment as a change in
or certain maximum or minimum limits are accounting policy, which shall be
prescribed by the PFRS/PAS, the option or accounted for in accordance with PAS 8.
limit prescribed by Bangko Sentral Notwithstanding the exceptions in
regulations shall be adopted by all NSSLA/ Items “a” and “b”, the audited financial
FIs. statements required to be submitted to the
For purposes hereof, the PFRS/PAS shall Bangko Sentral in accordance with the
refer to issuances of the FRSC and approved provisions of Appendix S-2 shall in all
by the PRC. respect be PFRS/ PAS compliant: Provided,
Accounting treatment for prudential That FIs shall submit to the Bangko Sentral
reporting. For prudential reporting, FIs shall adjusting entries reconciling the balances
adopt in all respect the PFRS and PAS except in the financial statements for prudential
as follows: reporting with that in the audited financial
a. In preparing consolidated financial statements.
statements, only investments in financial For purposes of preparing solo/separate
allied subsidiaries except insurance financial statements, financial allied, non-
subsidiaries shall be consolidated on a line- financial allied and non-allied subsidiaries/
by-line basis; while insurance and non- associates/joint ventures, including
financial allied subsidiaries shall be insurance subsidiaries/associates, shall be
accounted for using the equity method. accounted for using the equity method, in
Financial/non-financial allied/non-allied accordance with PAS 27, as amended.
associates shall be accounted for using the Non-stock savings and loan
equity method in accordance with the associations, shall adopt the full provisions
provisions of PAS 28 “Investments in of PFRS 9 Financial Instruments only
Associates”; and upon its mandatory effectivity date of
b. FIs shall be required to meet the 01 January 2018. Prior to said mandatory
Bangko Sentral recommended valuation effectivity date, financial instruments of
reserves. non-stock savings and loan associations
Government grants extended in the shall continue to be accounted for in
form of loans bearing nil or low interest accordance with the provisions of PAS 39.
rates shall be measured upon initial (As amended by Circular Nos. 915 dated 05 July 2016 and 912
recognition at its fair value (i.e., the present dated 27 May 2016 and 572 dated 22 June 2007)
Sec. 4162S Reports. NSSLAs shall submit to the Bangko Sentral are hereby grouped
to the appropriate department of the SES the into Categories A-1, A-2, A-3 and Category B,
reports in prescribed form listed in as enumerated in Appendix S-3.
Appendix S-2. Category A-1 reports shall be signed by
the NSSLA’s chief executive officer (who
§ 4162S.1 Categories and signatories may be the president or chairman of the
of reports. For purposes of designating the board, or designated in the by-laws), or in
signatories of reports, certain weekly, his absence, by the executive vice president
monthly, quarterly, semi-annual, and annual or the officer duly authorized under a
statements/reports required to be submitted resolution approved by the board of
trustees and by the chief finance officer the BSP Regional Offices or by sending
(i.e., controller or chief accountant, who them registered mail or special delivery,
shall likewise be duly authorized by the unless otherwise specified in the circular
NSSLA’s board of trustees in a format or memorandum of the Monetary Board or
prescribed in Appendix S-3a. the BSP.
Category A-2 reports of the head office
of the NSSLA shall be signed by the § 4162S.3 Sanctions and procedures for
NSSLA’s president or senior vice- filing and payment of fines. Failure to submit
president/equivalent position. Offices/units the above reports on or before the specified
(such as branch) reports in this category dates shall subject the person responsible
shall be signed by their respective or entity concerned to the penalties provided
managers/officers-in-charge. Likewise, the by law.
signing authority in this category shall be For willful delay in the submission of
contained in a resolution approved by the reports, the following rules shall apply:
board of trustees in the format prescribed a. Definition of Terms. The following
in Appendix S-3b. definitions shall apply:
Category A-3 and B reports are those (1) Report shall refer to all written
required to be submitted to the BSP and are reports/statements required of an NSSLA
not included in Categories A-1 and A-2. They to be submitted to the BSP periodically or
shall be signed by officers or their alternates, within a specified period.
who shall be duly designated by the board of (2) Willful delay in the submission of
trustees. A copy of the board resolution with reports shall refer to the failure of any
format as prescribed in Appendix S-3c, NSSLA to submit on time the report defined
covering the initial designation and subsequent in Item “(1)” above. Failure to submit a
changes in signatories and alternates, shall be report on time due to fortuitous events, such
submitted to the appropriate department of as fire and other natural calamities and
the SES within three (3) days from the date of public disorders, shall not be considered as
resolution. willful delay.
If a report is submitted to the BSP under (3) Examination shall include, but need not
the signature of an officer who is not listed be limited to, the verification, review, audit,
or included in any of the resolutions investigation and inspection of the books and
mentioned above, the appropriate records, business affairs, administration and
department of the SES shall refuse to financial condition of any NSSLA including the
acknowledge the report as valid or consider reproduction of the records as well as the
the report as not having been submitted at taking possession of the books and records and
all. If such a report is not resubmitted by the keeping them under BSP custody after giving
NSSLA under the signature of a duly proper receipts therefore. It shall also include
authorized signing officer, administrative the interview of the directors and personnel
sanctions/penalties shall be imposed on the of any NSSLA.
erring NSSLA for the late reporting or failure (4) Refusal to permit examination shall
to submit the required report, as the case mean any act or omission which impedes,
may be. delays or obstructs the duly authorized BSP
officer/examiner/employee from conducting
§ 4162S.2 Manner of filing. The an examination, including the act of refusing
submission of the reports shall be effected to honor a letter of authority to examine
by filing them personally with the presented by any officer/examiner/
appropriate department of the SES or with employee of the BSP.
Sec. 4163S Internal Control Framework. Further, the board of trustees shall, on a
Internal control is a process designed and periodic basis:
effected by the board of trustees, senior (1) conduct discussions with
management, and all levels of personnel to management on the effectiveness of the
provide reasonable assurance on the internal control system;
achievement of objectives through efficient (2) review of evaluations made by the
and effective operations; reliable, complete audit committee on the assessment of
and timely financial and management effectiveness of internal control made by
information; and compliance with management, internal auditors and external
applicable laws, regulations, supervisory auditors;
requirements, and the organization’s (3) ensure that management has
policies and procedures. promptly followed up on recommendations
NSSLAs shall have in place adequate and concerns expressed by auditors and
and effective internal control framework for supervisory authorities on internal control
the conduct of their business taking into weaknesses; and
account their size, risk profile and complexity (4) review and approve the remuneration
of operations. The internal control framework of the head and personnel of the internal audit
shall embody management oversight and function. Said remuneration shall be in
control culture; risk recognition and accordance with the NSSLA’s remuneration
assessment; control activities; information policies and practices and shall be structured
and communication; and monitoring in such a way that these do not create
activities and correcting deficiencies. conflicts of interest or compromise
(Circular No. 871 dated 05 March 2015) independence and objectivity.
b. The audit committee shall be
§ 4163S.1 Management oversight and responsible for overseeing senior
control culture. Consistent with the management in establishing and maintaining
principles provided under Subsecs. 4141S.3 an adequate, effective and efficient internal
and 4142S.3, the board of directors and control framework. It shall ensure that
senior management shall be responsible for systems and processes are designed to
promoting high ethical and integrity provide assurance in areas including
standards; establishing the appropriate reporting, monitoring compliance with
culture that emphasizes, demonstrates and laws, regulations and internal policies,
promotes the importance of internal control; efficiency and effectiveness of operations
and designing and implementing processes and safeguarding of assets.
for the prevention and detection of fraud. The audit committee shall oversee the
a. The board of trustees shall be ultimately internal audit function and shall be
responsible for ensuring that senior responsible for:
management establishes and maintain an (1) monitoring and reviewing the
adequate, effective and efficient internal effectiveness of the internal audit function;
control framework commensurate with the (2) approving the internal audit plan,
size, risk profile and complexity of operations scope and budget;
of the NSSLA. The board of trustees shall also (3) reviewing the internal audit reports
ensure that the internal audit function has an and the corresponding recommendations to
appropriate stature and authority within the address the weaknesses noted, discussing
NSSLA and is provided with adequate the same with the head of the internal audit
resources to enable it to effectively carry-out function and reporting significant matters to
its assignments with objectivity. the board of directors;
(4) ensuring that the internal audit skills necessary to accomplish the internal
function maintains an open communication audit activities.
with senior management, the audit c. Senior management shall be
committee, external auditors, and the responsible for maintaining, monitoring
supervisory authority; and evaluating the adequacy and
(5) reviewing discoveries of fraud and effectiveness of the internal control system
violations of laws and regulations as raised on an ongoing basis, and for reporting on
by the internal audit function; the effectiveness of internal controls on a
(6) reporting to the board of directors periodic basis. Management shall develop
the annual performance appraisal of the a process that identifies, measures,
head of the internal audit function; monitors and controls risks that are
(7) recommending for approval of the inherent to the operations of the NSSLA;
board of directors the annual remuneration maintain an organizational structure that
of the head of the internal audit function and clearly assigns responsibility, authority
key internal auditors; and reporting relationships; ensure that
(8) appointing, reappointing or removing delegated responsibilities are effectively
the head of the internal audit function and carried out; implement internal control
key internal auditors; and policies and ensure that activities are
(9) selecting and overseeing the conducted by qualified personnel with the
performance of the internal audit service necessary experience and competence.
providers. Management shall ensure that NSSLA
In particular, the audit committee shall personnel undertake continuing professional
be responsible for: development and that there is an appropriate
(1) ensuring the independence of the balance in the skills and resources of the front
internal audit service provider; office, back office, and control functions.
(2) reporting to the board of directors Moreover, Management shall promptly inform
on the status of accomplishments of the the internal audit function of the significant
outsourced internal audit activities, changes in the NSSLA’s risk management
including significant findings noted during systems, policies and processes.
the conduct of the internal audit; d. All personnel need to understand their
(3) ensuring that the internal audit roles and responsibilities in the internal
service provider comply with sound internal control process. They should be fully
auditing standards such as the Institute of accountable in carrying out their
Internal Auditors’ International Standards for responsibilities effectively and they should
the Professional Practice of Internal Auditing communicate to the appropriate level of
and other supplemental standards issued by management any problem in operations,
regulatory authorities/ government agencies, action or behavior that is inconsistent with
as well as with relevant code of ethics; documented internal control processes and
(4) ensuring that the audit plan is aligned code of ethics.
with the overall plan strategy and budget of (Circular No. 871 dated 05 March 2015)
the NSSLA and is based on robust risk
assessment; and § 4163S.2 Risk recognition and
(5) ensuring that the internal audit assessment. An effective internal control
service provider has adequate human system shall identify, evaluate and
resources with sufficient qualifications and continually assess all material risks that
could affect the achievement of the NSSLA’s systems in place such as, among others,
performance, information and compliance having clearly defined organizational
objectives. The potential for fraud shall be structure and reporting lines, and
considered in assessing the risks to the arrangements for delegating authority;
achievement of said objectives. Further, the adequate accounting policies, records and
risk assessment shall cover all risks facing processes; robust physical and environmental
the NSSLA, which include, among others, controls for tangible assets and access controls
credit; country and transfer; market; interest to information assets; and appropriate
rate; liquidity; operational; compliance; segregation of conflicting functions.
legal; and reputational risks. a. Clear arrangements for delegating
Effective risk assessment identifies and authority. The functions and scope of
considers both internal (e.g., complexity of authority and responsibility of each
the organization’s structure, nature of the personnel should be adequately defined,
NSSLA’s activities and personnel profile) documented and clearly communicated.
and external (e.g., economic conditions, The extent to which authorities may be
technological developments and changes in delegated and the corresponding
the industry) factors that could affect the accountabilities of the personnel involved
internal control framework. The risk shall be approved by the appropriate level
assessment shall be conducted at the level of management or the board of directors.
of individual business units and across all b. Adequate accounting policies,
NSSLA activities/groups/units and subsidiaries, records and processes. NSSLAs shall
in the case of a parent FI. Internal controls maintain adequate financial policies,
shall be revised to address any new or records and processes. These records shall
previously uncontrolled or unidentified risks. be kept up-to-date and contain sufficient
(Circular No. 871 dated 05 March 2015)
detail to establish an audit trail. Further,
NSSLAs shall conduct independent
§ 4163S.3 Control activities. Control
balancing and reconciliation of records and
activities shall form part of the daily activities
reports to ensure the integrity of the reported
of the NSSLA and all levels of personnel in
the NSSLA. Control activities are designed data and balances. NSSLAs shall also put in
and implemented to address the risks place a reliable information system that
identified in the risk assessment process. covers all of its significant activities which
These involve the establishment of control shall allow the board of directors and
policies and procedures, and verification management access to data and information
that these are being complied with. relevant to decision making such as, among
NSSLAs shall have in place control others, financial, operations, risk
activities defined at every business level, management, compliance and market
which shall include a system that provides information. Moreover, these systems shall
for top and functional level reviews; be secured, monitored independently and
checking compliance with exposure limits supported by adequate contingency
and follow-up on noncompliance; a system arrangements.
of approvals and authorizations, which c. Robust physical and environmental
shall include the approval process for new controls to tangible assets and access
products and services; and a system of controls to information assets. NSSLAs shall
verification and reconciliation. adopt policies and practices to safeguard
Control activities complement existing their tangible and information assets. These
policies, procedures and other control shall include, but shall not be limited to:
(1) identifying officers with authorities areas that may pose potential conflict of
to sign for and on behalf of the NSSLA. interest. Moreover, periodic reviews of
Signing authorities shall be approved by the responsibilities and functions shall be
board of trustees and the extent of authority conducted to ensure that personnel are not in
at each level shall be clearly defined; a position to conceal inappropriate actions.
(2) implementing joint custody on Examples of internal control measures
certain assets. Joint custody shall mean the are in Appendix Q-66.
processing of transactions in the presence, (Circular No. 871 dated 05 March 2015)
and under the direct observation of a second
§ 4163S.4 Information and
person. Both persons shall be equally
communication. An effective internal
accountable for the physical protection of
control system requires that there are
the items and records involved: Provided,
adequate and comprehensive internal
That persons who are related to each other
financial, operational and compliance data,
within the third degree of consanguinity or
as well as external information about events
affinity shall not be made joint custodians;
and conditions that are relevant to decision
(3) adopting dual control wherein the
making. Information shall be reliable, timely,
work of one (1) person is to be verified by a
accessible, and provided in a consistent
second person to ensure that the transaction
format. NSSLAs shall have in place a reliable
is properly authorized, recorded and settled;
management information system that covers
(4) incorporating sequence number
significant activities of the NSSLA and has
control in the accounting system which shall
the capability to generate relevant and
also be used in promissory notes, checks
quality information to support the
and other similar instruments. Management
functioning of internal control.
shall also put in place appropriate controls NSSLAs shall also establish effective
to monitor the usage, safekeeping and channels of communication to ensure that
recording of accountable forms; all personnel fully understand and adhere
(5) restricting access to information to policies and procedures and control
assets by classifying information as to degree measures relevant to their duties and
of sensitivity and criticality and identifying responsibilities and that relevant
information owners or personnel with information is reaching the appropriate
authorities to access particular personnel. Management shall also ensure
classifications based on job responsibilities that all personnel are cognizant of their duty
and the necessity to fulfill one’s duties; and to promptly report any deficiency to
(6) implementing authentication and appropriate levels of management or to the
access controls prior to granting access to board of trustees, where required. These shall
information such as, among others, enable them to quickly respond to changing
implementing password rules. This shall conditions and avoid unnecessary costs.
be supplemented by appropriate monitoring (Circular No. 871 dated 05 March 2015)
mechanisms that will allow audit of use of
information assets. § 4163S.5 Monitoring activities and
d. Segregation of conflicting functions. correcting deficiencies. The overall
NSSLAs shall ensure that areas of potential effectiveness of the internal controls shall
conflicts of interest shall be identified, be monitored on an ongoing basis.
minimized and subjected to independent Monitoring functions and activities shall be
monitoring. Further, appropriate segregation adequately defined by management,
of functions shall be observed in identified integrated in the operating environment and
should produce regular reports for review. b. Internal audit function in group
In this regard, all levels of review shall be structures. In case each BSFI belonging to
adequately documented and results thereof group structures has its own internal audit
reported on a timely basis to the appropriate function, said internal audit function shall
level of management. be accountable to the financial institution’s
Evaluations of the effectiveness of the own board of directors and shall likewise
internal control system and the report to the head of the internal audit
corresponding monitoring activities may be function of the parent bank within a
done by personnel from the same reasonable period and frequency prescribed
operational area in the form of self- by the board of directors of the parent NSSLA.
assessment or from other areas such as On the other hand, in case the parent
internal audit: Provided, That, self- NSSLA’s internal audit function shall cover
assessment done by business units shall be the internal audit activities in the subsidiary
subject to independent validation. or affiliate BSFI, the board of directors of
Evaluations done shall be adequately the parent NSSLA shall ensure that the scope
documented and internal control of internal audit activities is adequate
deficiencies and weaknesses identified shall considering the size, risk profile and
be reported on a timely basis to the complexity of operations of the subsidiary
appropriate level of management or the or affiliate concerned.
board of trustees, where necessary, and The establishment of internal audit
addressed promptly. function centrally by the parent bank in
(Circular No. 871 dated 05 March 2015) group structures shall not fall under the
outsourcing framework as provided under
Sec. 4164S Internal Audit Function. Internal Sec. X162. In this respect, the head of the
audit is an independent, objective assurance internal audit function of the parent bank
and consulting function established to shall define the internal audit strategies,
examine, evaluate and improve the methodology, scope and quality assurance
effectiveness of internal control, risk measures for the entire group: Provided, That
management and governance systems and this shall be done in consultation and
processes of an organization, which helps coordination with the respective board of
management and the board of trustees in directors and of the subsidiary or affiliate
protecting the NSSLA and its reputation. The BSFI: Provided, further, That the board of
internal audit function shall both assess and directors of the subsidiary or affiliate BSFI,
complement operational management, risk shall remain ultimately responsible for the
management, compliance and other control performance of the internal audit activities.
functions. In this respect, internal audit shall c. Outsourcing of internal audit
be conducted in frequencies commensurate activities. NSSLAs may outsource, in
with the assessed levels of risk in specific accordance with existing Bangko Sentral
NSSLA areas. regulations on outsourcing, internal audit
a. Permanency of the internal audit activities covering all areas of its operations:
function. Each NSSLA shall have a Provided, That the board of trustees of the
permanent internal audit function. In the NSSLA shall remain ultimately responsible
case of group structures involving a parent for the conduct of effective internal audit:
NSSLA and subsidiary or affiliate BSFI, the Provided, further, That The internal audit
internal audit function shall either be activity shall not be outsourced to the
established in each of the BSFI or centrally NSSLA’s own external auditor/audit firm nor
by the parent NSSLA. to internal audit service provider that was
previously engaged by the NSSLA in the proficiency on the conduct of internal audit
same area intended to be covered by the and must have at least two (2) years
internal audit activity that will be outsourced, experience in the regular audit (internal or
without a one-year “cooling off” period. external) of a UB, KB, TB, RB, Coop Bank,
(As amended by Circular No. 871 dated 05 March 2015) QB or NSSLA.
A qualified head of the internal audit
§ 4164S.1 (2014 - Status) Qualifications function of a UB or a KB shall be qualified
of the head of the internal audit function. to audit TBs, RB, Coop Banks, QBs, trust
The head of the internal audit function must entities, NSSLAs, subsidiaries and affiliates
have an unassailable integrity, relevant engaged in allied activities, and other
education/experience/training, and has an financial institutions under Bangko Sentral
understanding of the risk exposures of the supervision. A qualified internal auditor of
NSSLA, as well as competence to audit all a complex TB, RB, and Coop Bank; QB and;
areas of its operations. He must also possess trust entity shall likewise be qualified to
the following qualifications: audit non-complex TB, RB and Coop Bank
a. The head of the internal audit function and NSSLA.
of a UB or a KB must be a Certified Public The head of the internal audit function
Accountant (CPA) or a Certified Internal shall be appointed/reappointed or replaced
Auditor (CIA) and must have at least five (5) with prior approval of the audit committee.
years experience in the regular audit In cases, when the head of the internal audit
(internal or external) of a UB or KB as function will be replaced, the NSSLA shall
auditor-in-charge, senior auditor or audit report the same and the corresponding
manager. He must possess the knowledge, reason for replacement, to the appropriate
skills, and other competencies to examine supervising department of the Bangko
all areas in which the institution operates. Sentral within five (5) days from the time it
Professional competence as well as has been approved by the board of directors.
continuing training and education shall be (As amended by Circular No. 871 dated 05 March 2015)
required to face up to the increasing
complexity and diversity of the institution’s § 4164S.2 (2014 - Scope) Duties and
operations. responsibilities of the head of the internal
b. The head of the internal audit function audit function or the chief audit executive.
of a complex TB, RB and Coop Bank; QB a. To demonstrate appropriate
and; trust entity must be a graduate of any leadership and have the necessary skills to
accounting, business, finance or economics fulfill his responsibilities for maintaining the
course with technical proficiency on the unit’s independence and objectivity;
conduct of internal audit and must have at b. To be accountable to the board of
least five (5) years experience in the regular trustees or audit committee on all matters
audit (internal or external) of a TB, national related to the performance of its mandate
Coop Bank, QB or trust entity or, at least as provided in the internal audit charter. The
three (3) years experience in the regular audit head of the internal audit function shall
(internal or external) of a UB or KB. submit a report to the audit committee or
c. The head of the internal audit function board of trustees on the status of
of a simple or non-complex TB, RB and accomplishments of the internal audit unit,
Coop Bank; and NSSLA must be a graduate including findings noted during the conduct
of any accounting, business, finance or of the internal audit as well as status of
economics course with technical compliance of concerned departments/units.
c. To ensure that the internal audit responsibilities. They should respect the
function complies with sound internal confidentiality of information acquired in the
auditing standards such as the Institute of course of the performance of their duties and
Internal Auditors’ International Standards for should not use it for personal gain or
the Professional Practice of Internal Auditing malicious actions. Moreover, internal audit
and other supplemental standards issued by personnel shall avoid conflicts of interest.
regulatory authorities/ government agencies, Internally-recruited internal auditors shall
as well as with relevant code of ethics; not engage in auditing activities for which
d. To develop an audit plan based on they have had previous responsibility before
robust risk assessment, including inputs a one-year “cooling off” period has elapsed.
from the board of trustees, audit The internal audit personnel shall adhere at
committee and senior management and all times to the NSSLA’s Code of Ethics as
ensure that such plan is comprehensive well as to an established code of ethics for
and adequately covers regulatory matters. internal auditors such as that of the Institute
The head of the internal audit function of Internal Auditors.
shall also ensure that the audit plan, (Circular No. 871 dated 05 March 2015)
including any revisions thereto, shall be
approved by the audit committee; and § 4164S.4 (2014 - Code of Ethics and
e. To ensure that the internal audit Internal Auditing Standards) Independence
function has adequate human resources and objectivity of the internal audit
with sufficient qualifications and skills function. The internal audit function must
necessary to accomplish its mandate. In be independent of the activities audited and
this regard, the head of the internal audit from day-to-day internal control process. It
function shall periodically assess and must be free to report audit results, findings,
monitor the skill-set of the internal audit opinions, appraisals and other information
function and ensure that there is an adequate through clear reporting line to the board of
development program for the internal audit trustees or audit committee. It shall have
staff that shall enable them to meet the growing authority to directly access and
technical complexity of NSSLA operations. communicate with any officer or employee,
(Circular No. 871 dated 05 March 2015) to examine any activity or entity of the
NSSLA, as well as to access any records,
§ 4164S.3 (2014 - Qualification files or data whenever relevant to the
standards of the internal auditor) exercise of its assignment.
Professional competence and ethics of the If independence or objectivity of internal
internal audit function. The internal audit audit function is impaired, in fact or
function shall be comprised of professional appearance, the details of the impairment
and competent individuals who collectively must be disclosed to the audit committee.
have the knowledge and experience Impairment to organizational independence
necessary in the conduct of an effective and individual objectivity may include, but
internal audit on all areas of NSSLA’s is not limited to, personal conflict of interest,
operations. The skill set of the internal audit scope limitations, restrictions on access to
staff shall be complemented with records, personnel, and properties, and
appropriate audit methodologies and tools resource limitations, such as funding.
as well as sufficient knowledge of auditing The internal audit function shall inform
techniques in the conduct of audit activities. senior management of the results of its
All internal audit personnel shall act with audits and assessment. Senior management
integrity in carrying-out their duties and may consult the internal auditor on matters
provisions; liquidity level; regulatory and course of the audit of the NSSLA to the board
internal reporting. of directors; and (c) the absence of any direct
(Circular No. 871 dated 05 March 2015) or indirect financial interest and other
circumstances that may impair the
Secs. 4165S - 4170S (Reserved) independence of the external auditor;
(2) reconciliation statement between the AFS
K. INTERNAL CONTROL and the balance sheet and income statement
for NSSLA submitted to the Bangko Sentral
Sec. 4171S External Auditor. NSSLAs except including copies of adjusting entries on the
those with total resources of P10.0 million reconciling items; and (3) other information
or less, shall engage the services of an that may be required by the Bangko Sentral.
independent Certified Public Accountant to In addition, the external auditor shall be
audit their books of accounts at least once a required by the NSSLA to submit to the board
year, or as often as necessary. of directors, a LOC indicating any material
weakness or breach in the institution’s
Sec. 4172S Financial Audit. NSSLAs shall internal control and risk management
cause an annual financial audit by an systems within thirty (30) calendar days after
external auditor acceptable to the Bangko submission of the financial audit report. If
Sentral not later than thirty (30) calendar no material weakness or breach is noted to
days after the close of the calendar year or warrant the issuance of an LOC, a
the fiscal year adopted by the NSSLA. Report Certification under oath stating that no
of such audit shall be submitted to the board material weakness or breach in the internal
of directors and the appropriate department control and risk management systems was
of the SES not later than 120 calendar days noted in the course of the audit of the NSSLA
after the close of the calendar year or the shall be submitted in its stead, together with
fiscal year adopted by the NSSLA. The report the financial audit report.
to the Bangko Sentral shall be accompanied Material weakness shall be defined as a
by the: (1) certification by the external significant control deficiency, or
auditor on the: (a) dates of start and combination of deficiencies, that results in
termination of audit; (b) date of submission more than a remote likelihood that a material
of the financial audit report and certification misstatement of the financial statements will
under oath stating that no material weakness not be detected or prevented by the entity’s
or breach in the internal control and risk internal control. A material weakness does
management systems was noted in the not mean that a material misstatement has
occurred or will occur, but that it could be exempt from the aforementioned
occur. A control deficiency exists when annual financial audit by an acceptable
the design or operation of a control does external auditor: Provided, That when
not allow management or employees, in warranted by supervisory concern such
the normal course of performing their as material weakness/breach in internal
assigned functions, to prevent or detect control and/or risk management systems,
misstatements on a timely basis. A the Monetary Board may, upon
significant deficiency is a control recommendation of the appropriate
deficiency, or combination of control department of the SES, require the
deficiencies, that adversely affects the financial audit to be conducted by an
entity’s ability to initiate, authorize, external auditor acceptable to the Bangko
record, process, or report financial data Sentral, at the expense of the institution
reliably in accordance with GAAP. The concerned: Provided, further, That when
term more than remote likelihood shall circumstances such as, but not limited to,
mean that future events are likely to occur loans from multilateral financial institutions,
or are reasonably possible to occur. privatization, or public listing warrant, the
The board of directors, in a regular or financial audit of the concerned institution
special meeting, shall consider and act on by an acceptable external auditor may also
the financial audit report and the be allowed.
certification under oath submitted in lieu NSSLAs under the concurrent
of the LOC and shall submit, within thirty jurisdiction of the Bangko Sentral and COA
(30) banking days after receipt of the shall, however, submit a copy of the AAR
reports, a copy of its resolution to the of the COA to the appropriate department
appropriate department of the SES. The of the SES within forty (40) calendar days
resolution shall show, among other after receipt of the AAR by the board of
things, the actions(s) taken on the reports directors. The AAR shall be accompanied
and the names of the directors present and by the: (1) certification by the institution
absent. concerned on the date of receipt of the AAR
The board shall likewise consider and by the board of directors; (2) reconciliation
act on the LOC and shall submit, within statement between the AFS in the AAR and
thirty (30) banking days after receipt the balance sheet and income statement of
thereof, a copy of its resolution together the NSSLA submitted to the Bangko Sentral,
with said LOC to the appropriate including copies of adjusting entries on the
department of the SES. The resolution reconciling items; and (3) other information
shall show the action(s) taken on the that may be required by the Bangko Sentral.
findings and recommendations and, the The board of directors of said
names of the directors present and absent, institutions, in a regular or special
among other things. meeting, shall consider and act on the
The LOC shall be accompanied by the AAR, as well as on the comments and
certification of the external auditor of the observations and shall submit, within
date of its submission to the board of thirty (30) banking days after receipt of
directors. the report, a copy of its resolution to the
NSSLAs under Bangko Sentral appropriate department of the SES. The
supervision which are under the resolution shall show the action(s) taken
concurrent jurisdiction of the COA shall on the report, including the comments and
S Regulations
Part I - Page 24
§§ 4174S - 4180S
12.12.31
functions. This independence shall be govern the selection and delisting by the
displayed in practice at all times as such, Bangko Sentral of covered institutions which
the CRO shall report directly to the board under special laws are subject to Bangko
of trustees or to the risk oversight committee Sentral supervision.
without any impediment. Statement of policy. It is the policy of
The CRO shall have sufficient stature, the Bangko Sentral to ensure effective audit
authority and seniority within the NSSLA. and supervision of banks, QBs, trust entities
This will be assessed based on the ability and/or NSSLAs including their subsidiaries
of the CRO to influence decisions that affect and affiliates engaged in allied activities and
the NSSLA’s exposure to risk. The CRO shall other FIs which under special laws are
have the ability, without compromising his subject to Bangko Sentral supervision, and
independence, to engage in discussion with to ensure the reliance by Bangko Sentral and
the board of trustees, chief executive officer the public on the opinion of external auditors
and other senior management on key risk and auditing firms by prescribing the rules
issues and to access such information as he and regulations that shall govern the
deems necessary to form his or her selection, appointment, reporting
judgment. The CRO shall meet with the requirements and delisting for external
board of directors/risk oversight committee auditors and auditing firms of said
on a regular basis and such meetings shall institutions, subject to the binding provisions
be duly minuted and adequately of and implementing regulations pursuant
documented. to the aforesaid MOA.
CROs shall be appointed and replaced a. Rules and regulations. The revised
with prior approval of the board of trustees. rules and regulations that shall govern the
In cases, when the CRO will be replaced, selection and delisting by the Bangko Sentral
the NSSLA shall report the same to the of covered institutions which under special
appropriate department of the SES within laws are subject to Bangko Sentral
five (5) days from the time it has been supervision are shown in Appendix S-8.
approved by the board of trustees. Sanctions. The applicable sanctions/
(Circular Nos.757 dated 08 May 2012 and 749 dated 27 February penalties prescribed under Sections 36 and
2012) 37 of R.A. 7653 to the extent applicable
shall be imposed on the covered institutions,
Secs. 4175S - 4179S (Reserved) its audit committee and the directors
approving the hiring of external auditor/
Sec. 4180S Selection, Appointment, auditing firm who/which are not in the
Reporting Requirements and Delisting Bangko Sentral list of selected auditors for
of External Auditors and/or Auditing covered institutions or for hiring, and/or
Firm; Sanction. Pursuant to Section 58, retaining the services of the external auditor/
R.A. No. 8791, and the existing provisions auditing firm in violation of any of the
of the executed Memorandum of Agreement provisions of this Section and for non-
(MOA) dated 12 August 2009, binding the compliance with the Monetary Board
Bangko Sentral, SEC, PRC - BOA and the IC directive under Item “K” in Appendix S-8.
for a simplified and synchronized Erring external auditors/auditing firm may
accreditation requirements for external also be reported by the Bangko Sentral to
auditor and/or auditing firm, following are the PRC for appropriate disciplinary action.
(As amended by Circular Nos. 660 dated 25 August 2009 and
the revised rules and regulations that shall
529 dated 11 May 2006)
1
See SEC Circular Nos. 5 dated 17 July 2008 and 14 dated 24 October 2000
process, may also order the revocation of Secs. 4185S - 4189S (Reserved)
an NSSLA’s license to operate as such if the
prejudicial acts, practices or omissions are Sec. 4190S Guidelines on Outsourcing.
found to be persistent and grossly The rules on outsourcing of banking
disadvantageous to the interest of the functions as shown in Appendix Q-37
majority of its members. shall be adopted insofar as they are
Moreover, the above is without applicable to NSSLAs.
prejudice to the filing of appropriate criminal (As amended by Circular Nos. 764 dated 03 August 2012, 642
charges against culpable persons as dated 30 January 2009, 610 dated 26 May 2008, 596 dated 11
January 2008, 548 dated 25 September 2006 and 543 dated 08
provided for under Section 23(c) of September 2006)
R.A. No. 8367.
(Circular No. 933 dated 16 December 2016) Sec. 4191S (Reserved)
Sec. 4192S Prompt Corrective Action managing market risk are continuously
Framework. The framework for the evolving. As such, the guidelines are
enforcement of PCA on banks which is in intended for general application; specific
Appendix Q-40 shall govern the PCA taken application will depend to some extent on
on NSSLAs to the extent applicable, or by the size, complexity and range of activities
analogy. undertaken by NSSLAs.
(Circular No. 523 dated 31 March 2006, as amended by Circular (Circular No. 544 dated 15 September 2006)
No. 664 dated 15 September 2009)
Sec. 4195S Liquidity Risk Management
Sec. 4193S Supervision by Risks. The The guidelines on liquidity risk management
guidelines on supervision by risk in for QBs as shown in Appendix Q-44 shall
Appendix Q-42 which provide guidance on govern the liquidity risk management of
how QBs should identify, measure, monitor NSSLAs to the extent applicable.
and control risks shall govern the The guidelines set forth the expectations
supervision by risks of NSSLAs to the extent of the Bangko Sentral with respect to the
applicable. management of liquidity risk and are
The guidelines set forth the expectation intended to provide more consistency in
of the Bangko Sentral with respect to the how the risk-focused supervision function
management of risks and are intended to is applied to this risk. NSSLAs are expected
provide more consistency in how the risk- to have an integrated approach to risk
focused supervision function is applied to management to identify, measure, monitor
these risks. The Bangko Sentral will review and control risks. Liquidity risk should be
the risks to ensure that an NSSLA’s internal reviewed together with other risks to
risk management processes are integrated determine overall risk profile.
and comprehensive. All NSSLAs should These guidelines are intended for
follow the guidance in risk management general application; specific application will
efforts.
depend on the size and sophistication of a
(Circular No. 510 dated 03 February 2006)
particular NSSLA and the nature and
complexity of its activities.
Sec. 4194S Market Risk Management (Circular No. 545 dated 15 September 2006)
The guidelines on market risk management
for QBs as shown in Appendix Q-43 shall Sec. 4196S Information Technology Risk
govern the market risk management of Management (ITRM). The enhanced
NSSLAs to the extent applicable. guidelines on ITRM keep abreast with the
The guidelines set forth the expectations aggressive and widespread adoption of
of the Bangko Sentral with respect to the technology in the financial service industry
management of market risk and are intended and consequently strengthen existing
to provide more consistency in how the risk- Bangko Sentral framework for IT risk
focused supervision is applied to this risk. supervision. ITRM should be considered a
NSSLAs are expected to have an integrated component and integrated with the
approach to risk management to identify, institutions’ risk management program. The
measure, monitor and control risks. Market guidelines likewise provide practical plans
risk should be reviewed together with other
to address risks associated with emerging
risks to determine overall risk profile.
trends in technology and growing concerns
The Bangko Sentral is aware of the
on cyber security.
increasing diversity of financial products and
that industry techniques for measuring and (Circular No. 808 dated 22 August 2013)
achievement of desired results. The ITSC, the IT budget and maintain responsibility
at a minimum, should have as members a for performance management, IT acquisition
non-executive Board director who oversees oversight, professional development and
the institution’s IT function, the head of IT training. The IT Head should be a member
group/department, and the highest rank of executive management with direct
officer who oversees the business user involvement in key decisions for the BSI and
groups. The head of control groups should usually reports directly to the President or
participate in ITSC meetings in advisory Chief Executive Officer.
capacity only. A clear description of roles and
A charter should be ratified by the Board responsibilities for individual IT functions
to clearly define the roles and should be documented and approved by the
responsibilities of the ITSC. Formal minutes Board. Proper segregation of duties within
of meeting should be maintained to and among the various IT functions should
document its discussions and decisions. The be implemented to reduce the possibility
ITSC should regularly provide adequate for an individual to compromise a critical
information to the Board regarding IT process. A mechanism should be in place
performance, status of major IT projects or to ensure that personnel are performing only
other significant issues to enable the Board the functions relevant to their respective jobs
to make well-informed decisions about the and positions. In the event that an institution
BSIs’ IT operations. finds it difficult to segregate certain IT control
BSIs should develop an IT strategic plan responsibilities, it should put in place
that is aligned with the institution’s business adequate compensating controls (e.g. peer
strategy. This should be undertaken to reviews) to mitigate the associated risks.
manage and direct all IT resources in line b. IT policies, procedures and
with the business strategy and priorities. IT standards. IT controls, policies, and
strategic plan should focus on long term procedures are the foundation of IT
goals covering three (3)- to five (5)- year governance structure. It helps articulate the
horizon and should be sufficiently rules and procedures for making IT
supplemented by tactical IT plans which decisions, and helps to set, attain, and
specify concise objectives, action plans and monitor IT objectives.
tasks that are understood and accepted by BSIs should adopt and enforce IT-related
both business and IT. The IT strategic plan policies and procedures that are well-
should be formally documented, endorsed defined and frequently communicated to
by the Board and communicated to all establish and delineate duties and
stakeholders. It should be reviewed and responsibilities of personnel for better
updated regularly for new risks or coordination, effective and consistent
opportunities to maximize the value of IT to performance of tasks, and quicker training
the institution. of new employees. Management should
BSIs should also create an organization ensure that policies, procedures, and
of IT functions that will effectively deliver systems are current and well-documented.
IT services to business units. For “Complex” The ITSC should review IT policies,
BSIs, a full-time IT Head or equivalent rank procedures, and standards at least on an
should be designated to take the lead in key annual basis. Any updates and changes
IT initiatives and oversee the effectiveness should be clearly documented and properly
of the IT organization. In addition to approved. IT policies and procedures
managing the delivery of day-to-day IT should include at least the following areas:
services, the IT Head should also oversee • IT Governance/Management;
institution. Therefore, the IT systems should responsibility for the outsourced activity.
be reliable, secure and available when Moreover, the risks associated with the
needed which translates to high levels of outsourced activity may be realized in a
service and dependency on IT to operate. different manner than if the functions were
One of the primary responsibilities of inside the institution resulting in the need
IT operations management is to ensure the for controls designed to monitor such risks.
institution’s current and planned BSI management should implement an
infrastructure is sufficient to accomplish its effective outsourcing oversight program that
strategic plans. BSI management should provides the framework for management to
ensure that IT operates in a safe, sound, and understand, monitor, measure, and control
efficient manner throughout the institution. the risks associated with outsourcing. BSIs
Given that most IT systems are outsourcing IT services should have a
interconnected and interdependent, failure comprehensive outsourcing risk
to adequately supervise any part of the IT management process which provides
environment can heighten potential risks for guidance on the following areas: 1) risk
all elements of IT operations and the assessment; 2) selection of service
performance of the critical business lines of providers; 3) contract review; and
the BSIs. Such scenario necessitates the 4) monitoring of service providers. Detailed
coordination of IT controls throughout the guidelines/standards on IT Outsourcing/
institution’s operating environment. Vendor Management and on the adoption
(Detailed guidelines/standards on IT of outsourced cloud computing model are
Operations are shown in Appendix Q-59d) shown in Appendix Q-59e.
d. IT outsourcing/vendor management e. Electronic products and services. The
program. IT outsourcing refers to any evolution in technology revolutionized the
contractual agreement between a BSI and a way banking and financial products and
service provider or vendor for the latter to services are delivered. Physical barriers
create, maintain, or reengineer the were brought down enabling clients to
institution’s IT architecture, systems and access their accounts, make transactions or
related processes on a continuing basis. A gather information on financial products and
BSI may outsource IT systems and processes services anywhere they are, at any time of
except those functions expressly prohibited the day and at their own convenience. As
by existing regulations. The decision to development in technology continues to
outsource should fit into the institution’s accelerate, innovative electronic products
overall strategic plan and corporate and services are foreseen to bring more
objectives and said arrangement should accessibility and efficiency. However, BSIs
comply with the provisions of existing may be confronted with challenges relating
Bangko Sentral rules and regulations on to capacity, availability and reliability of the
outsourcing. Although the technology electronic services. Likewise, fraudulent
needed to support business objectives is activities via electronic channels are also
often a critical factor in deciding to rising in number.
outsource, managing such relationships BSIs should protect customers from
should be viewed as an enterprise-wide fraudulent schemes done electronically.
corporate management issue, rather than a Otherwise, consumer confidence to use
mere IT issue. electronic channels as safe and reliable
While IT outsourcing transfers method of making transactions will be
operational responsibility to the service eroded. To mitigate the impact of cyber
provider, the BSIs retain ultimate fraud, BSIs should adopt aggressive security
PART TWO
1
Effective 25 April 2017.
PART THREE
e. Loan agreements. For each loan Sec. 4305S Interest and Other Charges. The
granted by an NSSLA, a promissory note following rules shall govern the rates of
must be executed by the member-borrower interest and other charges on loans granted
in favor of the NSSLA expressing such by NSSLAs.
particulars as the amount of the loan, date
granted, due date, interest rate and other §§ 4305S.1 - 4305S.2 (Reserved)
similar information.
f. Inscription of lien. In case of § 4305S.3 Interest in the absence of
mortgage loans, no release against an stipulation. The rate of interest for the loan
approved loan shall be made before the or forbearance of any money, goods or
inscription of the mortgage. credit and the rate allowed in judgments, in
the absence of express contract as to such
rate of interest, shall be six percent (6%) per
Sec. 4303S Loan Proceeds. NSSLAs shall
annum.
in no case require member-borrowers to
(As amended by Circular No. 799 dated 21 June 2013)
deposit a portion of the loan proceeds,
whether in the form of savings or time
§ 4305S.4 Escalation clause; when
deposits. Where, subsequent to the release allowable. Parties to an agreement
of the loan proceeds, member-borrowers pertaining to a loan or forbearance of
open deposit accounts or make additional money, goods or credits may stipulate
deposits to their existing accounts, no part that the rate of interest agreed upon may
of such new deposits shall be covered by a be increased in the event that the
stipulation prohibiting or limiting applicable maximum rate of interest is
withdrawal while new portion of their loans increased by the Monetary Board:
are outstanding: Provided, however, That Provided, That such stipulations are
this prohibition shall not apply in cases of valid only if there is also a stipulation
loans secured by a hold-out on deposits to in the agreement that the rate of interest
the extent of the unencumbered amount of agreed upon shall be reduced in the
the deposit existing at the time of the filing event that the applicable maximum rate
of the above-mentioned loan application. of interest is reduced by law or by the
Monetary Board: Provided, further, That
Sec. 4304S Loan Repayment. The the adjustment in the rate of interest
treasurer, cashier or paymaster of the firm agreed upon shall take effect on or after
employing a member-borrower shall be the effectivity of the increase or decrease
required, pursuant to R.A. No. 8367, to in the maximum rate of interest.
make deductions from the salary, wage,
income or retirement pension of the § 4305S.5 Interest accrual on past
member-borrower in accordance with the due loans. NSSLAs shall not accrue
terms of his loan, and all other deductions interest income on loans which are
authorized by the member-borrower, to already past due or on loan installments
remit such deductions to the NSSLA which are in arrears, regardless of
concerned and to collect such reasonable whether the loans are secured or
fee for his services as may be authorized unsecured. Interest on past due loans or
by rules promulgated by the Monetary loan installments in arrears shall be taken
Board. up as income only when actual payments
thereon are received.
Interest income on past due loan arising b. For loans or receivables payable on
from discount amortization (and not from installment, the outstanding balance of the
the contractual interest of the account) shall loan if a payment has fallen due and
be accrued as provided in PAS 39. remained unpaid;
(As amended by Circular No. 494 dated 20 September 2005) c. In case of restructured loans as
defined in Sec. 4308S, the total outstanding
§ 4305S.6 Method of computing balance of the loan if a payment has fallen
interest. NSSLAs shall only charge interest due and remained unpaid; and
based on the outstanding balance of a loan d. All items in litigation as defined in
at the beginning of an interest period. the Manual of Accounts.
For a loan where the principal is payable Past due accounts as defined herein are
in installments, interest per installment considered non-performing loans (NPL).
period shall be calculated based on the (As amended by Circular No. 789 dated 28 February 2013)
outstanding balance of the loan at the
beginning of each installment period. § 4306S.2 Extension/renewal of loans
Towards this end, all loan-related (Transferrred to Section 4309S pursuant to Circular No. 789
documents shall show repayment schedules dated 28 February 2013)
in a manner consistent with this provision.
Marketing materials and presentations shall §4306S.3 Write-off of loans as bad
likewise be consistent with this provision. debts. To maximize the protection of
(Circular No. 754 dated 17 April 2012) members of NSSLAs against misfeasance
and malfeasance of the trustees and officers
Sec. 4306S Past Due Accounts. Past due thereof, the Monetary Board adopted the
accounts of an NSSLA shall, as a general following regulations on writing-off of
rule, refer to all accounts which are not paid loans by NSSLAs.
at maturity. a. The term loan shall include all types
of credit accommodations granted to, and
§ 4306S.1 Accounts considered past advances made by the NSSLA for the
due. The following shall be considered as account of the borrowers/debtors,
past due: including the interest thereon recorded in
a. For loan or receivable payable on the books.
demand not paid upon written demand as b. Writing-off of loans by an NSSLA
required herein or within one (1) year from shall be made not more than twice a year
date of grant or renewal, whichever comes by its board of trustees; and
earlier. c. Notice/application for write-off of
NSSLAs shall, in case of non-payment loans shall be submitted, in the prescribed
of a demand loan, make a written demand form to the appropriate department of the
within six (6) months following the grant SES at least thirty (30) days prior to the
of such loan. The demand shall indicate a intended date of write-off: Provided, That
period of payment which shall not be later no such loans with an aggregate outstanding
than six (6) months from date of said amount of P15,000 or more, as certified in
said notice/application, shall be written-off
demand.
without the prior approval of:
(1) The Monetary Board, in case of subsequent to the making of such sale
loans to trustees and officers of the or contract;
NSSLA, direct or indirect; or (3) Any option, demand, lien, pledge,
(2) The head of the appropriate or other claim against, or for delivery of,
department of the SES, subject to property or money;
confirmation by the Monetary Board, in case (4) Any purchase, or other acquisition
of loans other than those mentioned in Item of, or any credit upon the security of any
“(1)” above. obligation or claim arising out of any of
the foregoing; and
§ 4306S.4 Updating of information (5) Any transaction or series of
provided to credit information bureaus transactions having a similar purpose or
NSSLAs which have provided adverse effect.
information, such as the past due or b. Tra n s a c t i o n s n o t c o v e r e d
litigation status of loan accounts, to credit Considering that the specific purpose of
information bureaus, or any organization the law is the full disclosure of the true
performing similar functions, shall submit cost of credit, the following categories
monthly reports to these bureaus or of credit transactions are outside the
organizations on the full payment or scope of the above regulations:
settlement of the previously reported (1) Credit transactions which do not
accounts within five (5) business days from involve the payment of any finance charge
the end of the month when such full by the debtor; and
payment was received. For this purpose, it (2) Credit transactions in which the
shall be the responsibility of the reporting debtor is the one specifying a definite and
NSSLAs to ensure that their disclosure of any fixed set of credit terms such as bank
information about their borrowers/clients is deposits, insurance contracts, sale of
with the consent of borrowers concerned. bonds, etc.
(Circular No. 589 dated 18 December 2007)
§ 4307S.1 Definition of terms
Sec. 4307S “Truth in Lending Act” a. Creditor (who shall furnish the
Disclosure Requirements. NSSLAs are information) means any person engaged in
required to strictly adhere to the the business of extending credit (including
provisions of R. A. No. 3765, otherwise any person who as a regular business
known as the “Truth in Lending Act,” practice makes loans or sells or rents
and shall make the true and effective property or services on a time, credit, or
cost of borrowing an integral part of
installment basis, either as principal or as
every loan contract.
agent), who requires as an incident to the
a. Transactions covered
extension of credit, the payment of a finance
(1) Any loan, mortgage, deed of trust,
charge.
advance and discount;
The term creditor shall include, but shall
(2) Any conditional sales contract,
not be limited to, banks and banking
any contract to sell, or sale or contract
institutions, insurance and bonding
of sale of property or services, either for
companies, savings and loan associations,
present or future delivery, under which,
credit unions, financing companies,
part or all of the price is payable
installment houses, real estate dealers,
lending investors, pawnshops, and any other g. Amount to be financed consists of the
person or entity engaged in the business of cash price plus non-finance charges less the
extending credit who requires as an incident amount of the down payment and value of
to the extension of credit, the payment of a the trade-in.
finance charge. h. Finance charge includes interest, fees,
b. Person means any individual, service charges, discounts, and such other
corporation, partnership, NSSLA, or other charges incident to the extension of credit.
organized group of persons, or the legal i. Simple annual rate is the uniform
successor or representative of the foregoing, percentage which represents the ratio
and includes the Philippine Government or between the finance charge and the amount
any agency thereof, or any other to be financed under the assumption that
government, or any of its political the loan is payable in one (1) year with single
subdivisions, or any agency of the foregoing. payment upon maturity and there are no up-
c. Cash price or delivered price (in case front deductions to principal.
of trade transactions) is the amount of For loans with terms different from the
money which would constitute full payment above assumptions, the effective annual
upon delivery of the property (except money) interest rate shall be calculated and
or service purchased at the creditor’s place disclosed to the borrower as the relevant
of business. In the case of financial true cost of the loan comparable to the
transactions, cash price represents the concept of simple annual rate.
amount of money received by the debtor For loans with contractual interest rates
upon consummation of the credit stated on monthly basis, the effective interest
transaction, net of finance charges collected rate may be expressed as a monthly rate.
at the time the credit is extended (if any). In accordance with the Philippine
d. Down payment represents the Accounting Standards (PAS) definition,
amount paid by the debtor at the time of the effective interest rate is the rate that exactly
transaction in partial payment for the discounts estimated future cash flows
through the life of the loan to the net amount
property or service purchased.
of loan proceeds. For consistency,
e. Trade-in represents the value of an
methodology and standards for discounted
asset, agreed upon by the creditor and
cash flow models shall be prescribed to be
debtor, given at the time of the transaction
used for the purpose.
in partial payment for the property or service
(As amended by Circular No. 754 dated April 2012)
purchased.
f. Non-finance charges correspond to § 4307S.2 Information to be disclosed
the amounts advanced by the creditor for The following are the minimum information
items normally associated with the ownership required to be disclosed to NSSLA
of the property or of the availment of the service borrowers (sample form in Appendix S-4):
purchased which are not incident to the a. The total amount to be financed;
extension of credit. For example, in the case b. The finance charges expressed in
of the purchase of an automobile on credit, terms of pesos and centavos;
the creditor may advance the insurance c. The net proceeds of the loan; and
premium as well as the registration fee for d. The percentage that the finance
the account of the debtor. charge bears to the total amount to be
financed expressed as a simple annual rate a. First offense. Reprimand on the erring
or an effective annual interest rate as officer/s;
described in Item “h” of Subsec. 4307S.1. b. Second offense. Reprimand on the
Effective annual interest rate may also be entire board of trustees; and
quoted as a monthly rate in parallel with c. Subsequent offense/s:
the quotation of the contractual rate. i. Suspension of the erring officer/s and/
NSSLAs are required to furnish each or entire board of trustees; and
borrower a copy of the disclosure statement, ii. Restriction on lending activities.
prior to the consummation of the transaction. This is without prejudice to other
(As amended by Circular No. 754 dated 17 April 2012 and penalties and sanctions provided under
M-2012-018 dated 19 April 2012) Sections 36 and 37 of R.A. No. 7653.
(As amended by Circular No. 754 dated 17 April 2012)
§ 4307S.3 Inspection of contracts
covering credit transactions. NSSLAs shall Sec. 4308S Restructured Loans; General
keep in their office or place of business Policy. Restructured loans are loans the
copies of contracts covering all credit principal terms and conditions of which
transactions entered into by them which have been modified for it not to become a
involve the extension of credit to another problem account, or if already past due, to
and the payment of finance charges therefor. allow for a better settlement plan to fully
Such copies shall be available for inspection pay-off the loan. Restructured loans are
or examination by the appropriate supported by a restructuring agreement
department of the SES. setting forth a new plan of payment or a
schedule of payment on a periodic basis.
§ 4307S.4 (2008 – 4309S.4) Posters The modification may include, but is not
NSSLAs shall post in conspicuous places limited to, change in maturity, installment
in their principal place of business and amortization, interest rate, collateral or
branches, the information as contained in increase in the face amount of the debt
the revised format of disclosure statement resulting from the capitalization of accrued
(Appendix S-4). The posters shall include interest/accumulated charges.
an explicit notification that the disclosure Items in litigation and loans subject of
statement is a required attachment to the judicially-approved compromise, as well
loan contract and the customer has a right as those covered by petitions for
to demand a copy of such disclosure. suspensions or for new plans of payment
(As amended by Circular No. 754 dated17 April 2012) approved by the court or the SEC, shall not
be classified as restructured loans.
§4307S.5 Sanctions and penal NSSLAs shall have the flexibility to
provisions. Non-compliance with any of the determine the basis for and terms of the loan
provisions of this Section shall be restructuring, considering, among other
regarded at least as a less serious offense, things, the paying capacity of the
depending on the severity of non- borrowers: Provided, That these shall at all
disclosure, number of loans and amount times be consistent with sound credit risk
involved in the violation. In addition to management standards.
sanctions under R.A. No. 3765, the Loan restructuring shall be subject to the
following sanctions may be imposed: approval of the board of trustees whose
implement the required disclosure for more than sixty (60) days or the borrower
requirements. has given express permission or said times
(Circular No. 702 dated 15 December 2010) are the only reasonable or convenient
opportunities for contact.
Sec. 4311S Unfair Collection Practices. NSSLAs shall inform their borrower in
NSSLAs, collection agencies, counsels and writing of the endorsement of the collection
other agents may resort to all reasonable and of their account to a collection agency/agent,
legally permissible means to collect or the endorsement of their account from
amounts due them under the loan one collection agency/agent to another, at
agreement: Provided, That in the exercise least seven (7) days prior to the actual
of their rights and performance of duties, endorsement. The notification shall include
they must observe good faith and reasonable the full name of the collection agency and
conduct and refrain from engaging in its contact details: Provided, That the
unscrupulous or untoward acts. Without required notification in writing shall be
limiting the general application of the included in the terms and conditions of the
foregoing, the following conduct is a loan agreement. NSSLAs shall adopt policies
violation of this Section: and procedures to ensure that personnel
a. the use or threat of violence or other handling the collection of accounts, whether
criminal means to harm the physical person, these are in-house collectors, or third-party
reputation, or property of any person; collection agents, shall disclose his/her full
b. the use of obscenities, insults, or name/true identity to the borrower.
profane language which amount to a criminal (Circular No. 702 dated 15 December 2010)
act or offense under applicable laws;
c. disclosure of the names of borrowers Sec. 4312S Confidentiality of Information.
who allegedly refuse to pay debts, except NSSLAs shall keep strictly confidential the
as allowed under Subsec. 4312S; data on the borrower or consumer, except
d. threat to take any action that cannot under the following circumstances:
legally be taken; a. disclosure of information is with the
e. communicating or threat to consent of the borrower or consumer;
communicate to any person credit b. release, submission or exchange of
information which is known to be false, customer information with other financial
application form and billing statement: institutions, credit information bureaus,
Provided further, That such table of fees, lenders, their subsidiaries and affiliates;
penalties and interest rates shall be printed c. upon orders of court of competent
including failure to communicate that a debt jurisdiction or any government office or
is being disputed; agency authorized by law, or under such
f. any false representation or deceptive conditions as may be prescribed by the
means to collect or attempt to collect any Monetary Board;
debt or to obtain information concerning d. disclosure to collection agencies,
borrower; and counsels and other agents of the NSSLA to
g. making contact at unreasonable/ enforce its rights against the borrower;
inconvenient times or hours which shall be e. disclosure to third party service
defined as contact before 6:00 A.M. or after providers solely for the purpose of
10:00 P.M., unless the account is past due assisting or rendering services to the
NSSLA in the administration of its lending materials, merchandise and other personal
business; and properties;
f. disclosure to third parties such as d. Assignment of quedans which gives the
insurance companies, solely for the purpose right of disposal of readily marketable
of insuring the NSSLA from borrower default products;
or other credit loss, and the borrower from e. Time and/or savings deposits and/ or
fraud or unauthorized charges. capital contribution;
(Circular No. 702 dated 15 December 2010) f. Pledge of bonds, stock and other
securities of GOCCs and other bonds, stocks
Sec. 4313S Sanctions. Violations of the or securities which are non-speculative in
provisions of Secs. 4310S to 4312S shall be nature;
subject to any or all of the following g. Land transfer certificates issued by the
sanctions depending upon their severity: government to tenant farmers, under the
a. First offense. Reprimand for the agrarian reform program to the extent of sixty
directors/officers responsible for the percent (60%) of the value of the farm
violation; holdings: Provided, That a certification shall
b. Second offense. Disqualification of the be first secured from the office of the Registry
NSSLA concerned from the credit facilities of of Deeds to the effect that the Land Transfer
the Bangko Sentral except as may be allowed Certificate being presented is valid; and
under Section 84 of R. A. No. 7653; h. Other securities as may be approved
c. Subsequent offense/s: by the Monetary Board.
i. Prohibition on the NSSLA concerned
Secs. 4322S - 4335S (Reserved)
from the extension of additional credit
accommodation against personal security;
C. - D. (RESERVED)
and
ii. Penalties and sanctions provided Sec. 4336S (Reserved)
under Sections 36 and 37 of R. A. No. 7653.
(Circular No. 702 dated 15 December 2010) Sec. 4337S Policies on Salary-Based
General-Purpose Consumption Loans 1.
Secs. 4314S – 4320S (Reserved) Statement of policy. The Bangko Sentral
recognizes the helpful role of salary-based,
B. SECURED LOANS consumer lending schemes in allowing an
individual borrower to manage his/her cash
Sec. 4321S Kinds of Security. Loans by an flows provided these are granted under
NSSLA may be secured by any or all of the sound credit standards and fair consumer
following: practices. The Bangko Sentral likewise
a. Mortgages on registered real estate; encourages competition and transparency
b. Chattel mortgages on harvested or to promote efficient and innovative delivery
stored crops of non-perishable character; of financial services and fair dealing with
c. Chattel mortgages on livestock, tools, customers.
(Circular No. 837 dated 18 June 2014, as amended by Circular
equipment or machinery, supplies or Nos. 903 dated 29 February 2016 and 886 dated 08 September
2015)
1
This Section shall apply to all salary-based general purpose consumption loans as defined herein including
those outstanding prior to 26 September 2015.
Fls shall be given six (6) months from 08 September 2015 to adopt/amend their policies, procedures and credit
risk strategy on salary-based general-purpose consumption loans to comply with the provisions contained
herein.
Sec. 4357S Direct/Indirect Borrowings; total assets; any investment in excess of ten
Ceilings. No NSSLA shall directly or percent (10%) shall require the prior approval
indirectly make any loan to any trustee or of the Bangko Sentral: Provided, That NSSLAs
officer of such NSSLA, either for himself or may invest available funds in excess of ten
as agent or as partner of another, except percent (10%) of total assets in sound non-
with the written approval of the majority of speculative enterprise, particularly in readily
the trustees of the NSSLA, excluding the marketable and high grade commercial papers,
trustee concerned: Provided, That the bonds and securities issued by the
aggregate loans to such trustees and officers Government of the Philippines or any of its
shall not exceed twenty percent (20%) of political subsidiaries, instrumentalities or
the total capital contributions of the NSSLA. corporations including GOCCs, subject to the
following conditions:
Sec. 4358S Records; Reports. In all cases (1) The credit needs of the members
of accommodations granted to trustees and shall be served/satisfied first;
officers under Sec. 4357S, the written
(2) The investment in any one (1)
approval of the majority of the trustees of
corporation (excluding the Government of
the NSSLA, excluding the trustee concerned,
the Philippines, any of its political
shall be entered upon the records of the
subdivisions, instrumentalities, or
NSSLA and a copy of such entry shall be
corporations including GOCCs), shall not
transmitted forthwith to the appropriate
exceed twenty-five percent (25%) of the
department of the SES within twenty (20)
NSSLA's combined capital accounts; and
business days from the date of approval.
(3) The additional investment may be
Secs. 4359S - 4369S (Reserved) up to another ten percent (10%) of the
NSSLA’s total assets;
Sec. 4370S Sanctions. The office of any b. In real property, in an aggregate amount
trustee or officer of an NSSLA who violates not exceeding at any one time five percent (5%)
the provisions of these rules on of the total assets of such NSSLA; and
accommodations granted to trustee and c. In furniture, fixtures, furnishings and
officers shall immediately become vacant and equipment, and leasehold improvements for
said trustees or officer shall be punished by its offices, in amount not exceeding at any
imprisonment of not more than one (1) year one time ten percent (10%), of its total
nor more than ten (10) years and by a fine of capital contribution.
not less than P5,000 nor more than P50,000
pursuant to Section 15 of R.A. No. 8367. §§ 4391S.1 - 4391S.2 (Reserved)
PART FOUR
enable adequate oversight. The quality and BSFI’s business operations; 3) address
timeliness of the information provided to the compliance with consumer protection laws,
Board and Senior Management regarding rules, and regulations; and 4) reviewed
the BSFI’s CPRMS are especially important periodically and kept-to-date as it serve as
for assessing the program’s effectiveness. reference for employees in their day-to-day
The Board and Senior Management must activities.
also ensure that sufficient resources have d. Internal audit function
been devoted to the program. The ability to Independent of the compliance function, the
achieve the consumer protection objectives BSFI’s Audit Function should review its
depends, in large part, on the authority and consumer protection practices, adherence
independence of the individuals directly to internal policies and procedures, and
responsible for implementing the CPRMS compliance with existing laws, rules and
and for performing audit/review activities, regulations. The BSFI’s internal audit of the
and the support provided by the Board and different business units/functions should
Senior Management. The Board and Senior include the consumer protection audit
Management must also make certain that program. A well-designed and implemented
CPRMS weaknesses are addressed and consumer protection audit program ensures
corrective actions are taken in a timely that the Board or its designated Committee
manner. shall be able to make an assessment on the
b. Compliance program. A Consumer effectiveness of implementation as well as
Protection Compliance Program is an essential adequacy of approved policies and
component of the CPRMS. The BSFIs should standards in meeting the established
establish a formal, written Consumer consumer protection objectives.
Protection Compliance Program that is part of e. Training. Continuing education of
the over-all Compliance System and should personnel about consumer protection laws,
be in accordance with the Revised Compliance rules and regulations as well as related bank
Framework for Banks under Sec. 4180Q. policies and procedures is essential to
A well planned, implemented, and maintained maintaining a sound consumer protection
Consumer Protection Compliance Program compliance program. BSFIs should ensure
should prevent or reduce regulatory violations that all relevant personnel, specifically those
and protect consumers from non-compliance whose roles and responsibilities have
and associated harms or loss. customer interface, receive specific and
c. Policies and procedures. An comprehensive training that reinforces and
helps implement written policies and
effective CPRMS should have consumer
procedures on consumer protection. The
protection policies and procedures in place,
BSFI should institute a consumer protection
approved by the Board. A comprehensive
training program that is appropriate to its
and fully implemented policies help to
organization structure and the activities it
communicate the board’s and senior
engages. The training program should be
management’s commitment to compliance
able to address changes in consumer
as well as expectations. Overall, policies
protection laws, rules and regulations and
and procedures should a) be consistent with
to policies and procedures and should be
Consumer Protection policies approved by
provided in a timely manner.
the Board; b) ensure that consumer (Circular No. 857 dated 21 November 2014, as amended by
protection practices are embedded in the Circular No. 890 dated 02 November 2015)
be informed of this right whenever a notice marketed and the communication channels
of change is made. employed for marketing financial services.
(13) Provides customers with a proof of (4) Ensures that all advertising and
the transaction immediately after the promotional materials disclose the fact that
transaction has been completed. The it is a regulated entity and that the name and
customer should be given a hard copy of contact details of the regulator are indicated.
each of the documents signed by the clients c. Conflict of interest
(including, but not limited to, the contract) (1) Discloses properly to the consumer
with all terms and conditions. The BSFI prior to the execution of the transaction that
ensures that documents signed by the the BSFI or its staff has an interest in a direct/
customer are completely filled and that there cross transaction with a consumer.
are no blank terms. (2) Discloses the limited availability of
(14) Regularly provides customers with products to consumers when the BSFI only
clear and accurate information regarding recommends products which are issued by
their accounts (e.g., Statement of accounts their related companies, particularly when
that includes, among others, covering commissions or rebates are the primary
period, opening balance/value of basis for recommending the particular
product to consumers.
transactions, all kinds of interest, fees and
(3) Discloses the basis on which the
charges, closing balance, inquiries for
BSFI is remunerated at the pre-contractual
outstanding balances, proof of payments for
stage.
loans).
(4) Ensures that adequate systems and
(15) Informs customers of their rights
controls are in place to promptly identify
and responsibilities including their right to
issues and matters that may be detrimental
complain and the manner of its submission. to a customer’s interest (e.g., cases in which
b. Advertising and promotional advice may have been given merely to meet
materials sales targets, or may be driven by financial
(1) Ensures that advertising and or other incentives).
marketing materials do not make false, (Circular No. 857 dated 21 November 2014, as amended by
misleading, or deceptive statements that Circular No. 890 dated November 2015)
may materially and/or adversely affect the
decision of the customer to avail of a service §4402S.2 Protection of client
information. Financial consumers have the
or acquire a product.
right to expect that their financial
(2) Ensures that advertising and
transactions, as well as relevant personal
promotional materials are easily readable
information disclosed in the course of a
and understandable by the general public.
transaction, are kept confidential. Towards
It should disclose clear, accurate, updated, this end, BSFIs must ensure that they have
and relevant information about the product well-articulated information security
or service. It should be balanced/ guidelines, well-defined protocols, a
proportional (reflecting both advantages and secured database, and periodically
risks of the product or service); visible/ re-validated procedures in handling the
audible; key information is prominent and personal information of their financial
not obscured; print is of sufficient size and consumers. This should be an end-to-end
clearly legible. process that should cover, among others,
(3) Ensures that promotional materials the array of information that will be
are targeted according to the specific groups pre-identified and collected, the purpose of
of consumers to whom products are gathering each information, how these will be
sourced from the client, the IT-security (d) Select service providers that can
infrastructure of the BSFI, and the protocols maintain appropriate safeguards.
for disclosure, both within the BSFI and (e) Evaluate and adjust the program in
especially to third parties. light of relevant circumstances, including
The BSFI demonstrates the ability to changes in the firm’s business or operations,
protect client information if it is able to: or the results of security testing and
a. Confidentiality and security of client monitoring.
information (4) Have appropriate policies and
(1) Have a written privacy policy to practices for employee management and
safeguard its customers’ personal training to assess and address the risks to
information. This policy should govern the customer information. These include:
gathering, processing, use, distribution, (a) Checking references and doing
storage, and eventual disposal of client background checks before hiring employees
information. The BSFI should ensure that who will have access to customer
privacy policies and sanctions for violations information.
are implemented and strictly enforced. (b) Asking new employees to sign an
(2) Ensure that privacy policies are agreement to follow BSFI confidentiality and
regularly communicated throughout the security standards for handling customer
organization. Opportunities include information.
employees’ initial training sessions, regular (c) Limiting access to customer
organization-wide training programs, information to employees who have a
employee handbooks, posters and posted business reason to see it.
signs, company intranet and internet (d) Controlling access to sensitive
websites, and brochures available to information by requiring employees to use
clients. “strong” passwords that must be changed
(3) Have appropriate systems in place on a regular basis.
to protect the confidentiality and security of (e) Using automatic time-out or log-off
the personal data of its customers against controls to lock employee computers after
any threat or hazard to the security or a period of inactivity.
integrity of the information and against (f) Training employees to take basic
unauthorized access. This includes a steps to maintain the security,
written information security plan that confidentiality, and integrity of customer
describes its program to protect customer information. These may include locking
personal information. The plan must be rooms and file cabinets where records are
appropriate to its size and complexity, nature kept; ensuring that employee passwords are
and scope of its activities, and the sensitivity not posted in work areas; encrypting
of customer information it handles. As part sensitive customer information when
of its plan, the BSFI must: transmitted electronically via public
(a) Designate employee accountable to networks; referring calls or other requests
coordinate its Information Security Program. for customer information to designated
(b) Identify and assess the risks to individuals who have been trained in how
customer information in each relevant area BSFI safeguards personal data; and reporting
of the BSFI operation, and evaluate the suspicious attempts to obtain customer
effectiveness of the current safeguards for information to designated personnel.
controlling these risks. (g) Regularly reminding all employees
(c) Design and implement a safeguards of company policy to keep customer
program, and regularly monitor and test it. information secured and confidential.
1
The effectivity of the cooling-off provisions shall be deferred to 16 January 2016.
banking days] immediately following the view of the risk mismatch. In such
signing of any agreement or contract, instances, there should be a written disclosure
particularly for financial products or services of consequences which is accepted by the
with a long-term savings component or client.
those subject to high pressure sales contract. (4) Ensure that the customer’s suitability
Cooling-off shall be applicable to a and affordability are assessed against
customer who is a natural person and to specific risks of the investment products:
financial instruments whose remaining term (a) Financial Needs Analysis (FNA) and
is equal to or beyond one (1) year. Client Suitability - to assess the customer’s
(2) Permit the customer to cancel the risk profile and suitability of the product.
agreement without penalty to the customer (b) Customer’s Declaration Form - to
of any kind on his or her written notice to confirm his acceptance and understanding
the BSFI during the cooling-off period. The of the highlighted features of the product.
BSFI may however collect or recover (c) FNA, Client Suitability and
reasonable amount of processing fees. It is Declaration Form should be duly completed
further recognized that there may be a need to make sure that the product sold is
for some qualification to an automatic right suitable and affordable for the customer.
of cooling off. For example, the right shall
e. Institutional culture of fair and
not apply where there has been a
responsible treatment of clients
drawdown of a credit facility and a BSFI
shall be able to recover any loss arising from (1) There should be a Code of Conduct
an early withdrawal of a fixed rate term (Code) applicable to all staff, spelling out
deposit which loss arises because of a the organizational values and standards of
difference in interest rates. This would be professional conduct that uphold
in addition to any reasonable administrative protection of customers. This Code should
fees associated with closure of the term be reviewed and approved by the Board.
deposit. The staff signs a document by which they
d. Objectivity acknowledge that they will abide by the
(1) Deal fairly, honestly, and in good Code and not engage in the behaviors
faith with customers and avoid making prohibited as provided for in the Code.
statements that are untrue or omitting To ensure adherence to the Code, the BSFI
information which are necessary to prevent is required to implement measures to
the statement from being false or misleading. determine whether the principles of
(2) Present a balanced view when selling consumer protection are observed, the
a product or service. While the BSFI highlights clients’ concerns are appropriately
the advantages of a product/service, the addressed and problems are resolved in a
customer’s attention should also be drawn to timely manner. These may include among
its disadvantages and downside risks. others, the regular conduct of customer
(3) Ensure that recommendations made satisfaction survey.
to customer are clearly justified and (2) Ensure that recruitment and training
explained to the customer and are properly policies are aligned around fair and
documented. If the requested products are responsible treatment of clients.
of higher risk rating than a customer’s risk (3) Ensure that staff, specifically those who
tolerance assessment results, the BSFI should interact directly with customers, receive
draw to the customer’s attention that the adequate training suitable for the complexity
product may not be suitable for him in of the products or services they sell.
(4) Ensure that collection practices are (1) Design remuneration structure for
covered during the initial training of all staff staff of BSFI and authorized agents in a
involved in collections (loan officers, manner that encourages responsible
collections staff, and branch managers). In business conduct, fair treatment and
particular, collection staff should receive avoidance/mitigation of conflicts of interest.
training in acceptable debt collection (2) Disclose to the customers the
practices and loan recovery procedures. remuneration structure where appropriate,
(5) Strictly comply with Bangko Sentral’s such as when potential conflicts of interest
existing regulation on what constitutes cannot be managed or avoided.
unfair debt collection practices. The BSFI’s (3) Ensure adequate procedures and
Code of Conduct should clearly spell out the controls so that sales staff are not
specific standards of professional conduct that remunerated based solely on sales
performance but that other factors, including
are expected of all staff involved in collection
customer’s satisfaction (in terms of number
(including outsourced staff).
of customer complaints served/settled) and
(6) Institute policy that guarantees that
compliance with regulatory requirements,
clients receive a fair price for any foreclosed best practices guidelines, and Code of
assets and has procedures to ensure that Conduct in which certain principles are
collateral seizing is respectful of clients’ related to best interest of customers,
rights. satisfactory audit/compliance review results
(7) Ensure that Managers and Supervisors and complaint investigation results, are
review ethical behavior, professional taken into account.
conduct, and quality of interaction with (Circular No. 857 dated 21 November 2014, as amended by
customers as part of staff performance Circular Nos. 930 dated 18 November 2016, 898 dated 14
evaluations. January 2016 and 890 dated 02 November 2015)
(8) Have a system or internal processes
in place to detect and respond to customer § 4402S.4 Effective Recourse.
mistreatment as well as serious infractions. Financial consumers should be provided
In case of violation of Code of Conduct (e.g., with accessible, affordable, independent,
harassment), sanctions shall be enforced. fair, accountable, timely, and efficient means
for resolving complaints with their financial
(9) Inform staff of penalties for non-
transactions. BSFIs should have in place
compliance with Code of Conduct.
mechanisms for complaint handling and
(10) Perform appropriate due diligence
redress.
before selecting the authorized agents/
The BSFI demonstrates the ability to
outsourced parties (such as taking into provide effective recourse if it is able to:
account the agents’ integrity, a. Establish an effective Consumer
professionalism, financial soundness, Assistance Management System (CAMS).
operational capability and capacity, and Appendix S-10 provides for the minimum
compatibility with the FI’s corporate culture) requirements of an effective CAMS.
and implement controls to monitor the b. Develop internal policies and
agents’ performance on a continuous basis. practices, including time for processing,
The BSFI retains ultimate accountability for complaint response, and customer access.
outsourced activities. c. Maintain an up-to-date log and
(11) Disseminate the main aspect of the records of all complaints from customers
Code of Conduct to clients through printed subject to the complaints procedure. This
media or other appropriate means. log must contain the following:
f. Remuneration Structure (1) Details of each complaint;
(2) The date the complaint was received; and education strategy and corporate
(3) A summary of the BSFI’s response; governance. It is an integral component of
(4) Details of any other relevant the BSFI’s ongoing interaction and
correspondence or records; relationship with clients. Dedicated and
(5) The action taken to resolve each adequate resources should be provided for
complaint; and the financial education initiatives.
(6) The date the complaint was resolved. b. Develop financial education and
d. Ensure that information on how to awareness programs, either on their own
make a complaint is clearly visible in the or in partnership or collaboration with
BSFI’s premises and on their websites. industry associations, which contribute to
e. Undertake an analysis of the patterns the improvement of their clients’ knowledge
of complaints from customers on a regular and understanding of their rights and
basis including investigating whether responsibilities, basic information and risks
complaints indicate an isolated issue or a of financial products and services, and
more widespread issue for consumers. This ability to make informed financial decisions
analysis of consumer complaints must be and participate in economic activities.
escalated to the BSFI’s compliance/risk Financial education programs should be
management function and senior designed to meet the needs and financial
management.
literacy level of target audiences, as well as
f. Provide for adequate resources to
those that will reflect how target audience
handle financial consumer complaints
prefers to receive financial information.
efficiently and effectively. Staff handling
These may include:
complaints should have appropriate
experience, knowledge, and expertise. (1) Delivering public awareness
Depending on the BSFI’s size and campaigns and information resources that
complexity of operation, a Senior staff would teach consumers on certain aspects
member should be appointed to be in of their financial lives particularly, budgeting,
charge of the complaint handling process. financial planning, saving, investing,
(Circular No. 857 dated 21 November 2014, as amended by borrowing, retirement planning, and self-
Circular No. 890 dated 02 November 2015) protection against fraud.
(2) Developing financial education tools
§4402S.5 Financial education and or information materials that are updated
awareness. Financial education initiatives and readily understood and transparent such
give consumers the knowledge, skills, and as customized advice and guidance (face to
confidence to understand and evaluate the face training); printed brochures, flyers,
information they receive and empower them posters, training videos (e.g., about money
to make informed financial decisions. management, debt management, saving),
Because BSFIs deal directly with financial and newsletters; websites, and interactive
consumers, they have the reach, expertise,
calculators that deliver key messages and
and established relationships necessary to
“call to action” concerning better money
deliver financial education. Financial
management (e.g., protect your money,
education should be integral to the good
governance of the BSFIs. know your product, read and understand
The BSFI demonstrates this principle the T&C, check your statements, pay credit
through various means and in particular: card bills on time, safeguard your Personal
a. Have a clear and defined financial Identification Number, understand fees and
education and awareness program as part charges) and consumer responsibility to ask
of a wider financial consumer protection the right questions.
Composite Rating
Numerical 4 3 2 1
Rating
Adjectival Strong Acceptable Marginal Poor
Rating
Supervisory No cause for Minimal More than Immediate and
Approach supervisory supervisory normal close supervisory
concern concern supervisory attention and
concern monitoring
Enforcement None Written Written action Written action plan
Action reminder plan
Suspension of
introduction of
new products and
services or
suspension of
existing
products/services
that poses a
consumer
protection concern
or suspension of
further
distribution or
Issuance of
consumer products
and services
Table No. 1. Enforcement Actions for Consumer Protection Ratings
PART FIVE
PART SIX
MISCELLANEOUS
development of the societies in which they in the transaction counters of all NSSLA
live and the enjoyment of the opportunities branches and/or offices.
available to other citizens, no license or (Circular No. 805 dated 08 August 2013)
permit for the construction, repair or
renovation of public and private buildings Secs. 4658S - 4659S (Reserved)
for public use, educational institutions,
airports, sports and recreation centers and Sec. 4660S Disclosure of Remittance
complexes, shopping centers or Charges and Other Relevant Information
establishments, public parking places, It is the policy of the Bangko Sentral to
workplaces, public utilities, shall be granted promote the efficient delivery of
or issued unless the owner or operator competitively-priced remittance services by
thereof shall install and incorporate in such banks and other remittance service providers
building, establishment or public utility, by promoting competition and the use of
such architectural facilities or structural innovative payment systems, strengthening
features as shall reasonably enhance the the financial infrastructure, enhancing
mobility of disabled persons such as access to formal remittance channels in the
sidewalks, ramps, railings, and the like. If source and destination countries, deepening
feasible, all such existing buildings, the financial literacy of consumers, and
institutions, establishments, or public improving transparency in remittance
utilities may be renovated or altered to transactions, consistent with sound
enable the disabled persons to have access practices.
to them. Towards this end, NBFIs under Bangko
Sentral supervision, including FXDs/MCs
§ 4657S.10. Republic Act No. 9994 – and RAs, providing overseas remittance
An Act Granting Additional Benefits and services shall disclose to the remittance
Privileges to Senior Citizens, Further sender and to the recipient/beneficiary, the
Amending Republic Act No. 7432 of 1992, following minimum items of information
as Amended by Republic Act No. 9257 of regarding remittance transactions, as
2003. To be able to give full support to the defined herein:
improvement of the total well-being of the a. Transfer/remittance fee - charge for
elderly and their full participation in society, processing/sending the remittance from the
and to motivate and encourage them to country of origin to the country of
contribute to nation building, senior citizens destination and/or charge for receiving the
shall be provided with express lanes in all remittance at the country of destination;
branches and offices of NSSLAs. If the b. Exchange rate - rate of conversion
provision of express lanes is logistically from foreign currency to local currency, e.g.,
impossible in any particular branch or office peso-dollar rate;
of any NSSLA, said branch or office shall c. Exchange rate differential/spread -
ensure that senior citizens are accorded foreign exchange mark-up or the difference
priority service. The provision of express between the prevailing Bangko Sentral
lanes and/or priority service shall be made reference/guiding rate and the exchange/
known to the general public through a conversion rate;
clearly written notice prominently displayed d. Other currency conversion charges -
1. The Teller. He should not be depository bank will accept them and
allowed to accumulate more than a specific solely for deposit to its account. Thus, even
maximum amount to be determined by the in the remote possibility that someone
association but in no case to exceed presents a COCI stolen from the association
P10,000 in cash at any given time while in to one of its depository banks, it will not be
the performance of his duties. The accepted for encashment.
procedures in this regard are as follows: 2. The COCIs Clerk. In view of the
a. Cash. All cash in excess of the fact that all COCIs received by the tellers
maximum amount determined by the are stamped “non-negotiable” as detailed
association shall be turned over to the above, the COCIs clerk who records and
cashier. When deposits received by a teller processes these checks carries no
will increase his cash in excess of the accountabilities whatsoever. From the
maximum limit, the teller shall moment that a check is received up to the
immediately make a cash turn-over of, at moment that it is deposited to the account
least, the excess. Thus, although his of the association with one of its depository
transactions during the day may total more banks, that check is just a piece of paper to
than the maximum limit, the amount of be processed and recorded. It will only
money directly in his custody at any given reassume its negotiability upon its receipt
time will never exceed the limit. by the association’s depository bank. In
b. Checks and Other Cash Items cases, however, where checks are
(COCIs). All COCIs received by a teller received by mail, the COCIs clerk shall be
should be stamped as “non-negotiable.” charged with the duty of stamping the
The stamping should be made diagonally checks as “non-negotiable.”
on the face of the check. Thus, all checks 3. As an added precautionary
that are received by the tellers lose their measure, the manager/accountant/loan
further negotiability. There should, officer should check from time to time
however, be an agreement with the whether all COCIs received are stamped
association’s depository banks whereby “non-negotiable.” In the event that a COCI
they will accept for deposit only to the is not so stamped and it results in financial
account of the association the COCI loss on the part of the association, the
previously stamped by the tellers as “non- employee charged with the duty to stamp
negotiable.” Therefore, only the association and who failed to do so, shall be held
and nobody else can further negotiate these personally responsible, together with the
checks, and only the association’s manager/accountant/loan officer, for the loss.
A-2 BSP 7-26-02H 4162S Consolidated Statement of Condition Quarterly on or before the end of Original to SDC
(As the immediately following
amended month
by M-029
dated
09.24.07,
Cir. No.
837 dated
06.18.14,
Cir. No.
880 dated
05.22.15,
Cir. No.
883 dated
07.10.15
and M-028
dated
07.31.15,
Cir. No.
886 dated
09.08.15,
M-29 dated
09.14.15,
M-30 dated
09.14.15,
M-31 dated
09.14.15,
M-32 dated
09.14.15
and M-33
dated
09.14.15)
Page 1 of 5
APP. S-2
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
A-2 Unnumbered 4691S Report on Suspicious Transactions As 10th business day from Original and duplicate -
(Rev. May transaction date of transaction/ Anti-Money Laundering
2002, as occurs knowledge Council (AMLC)
amended
by Cir.
No. 612
dated
06.03.08)
A-3 BSP 7-26-03H 4162S Consolidated Statement of Income and Quarterly on or before the end of Original to SDC
(As Expenses the immediately following
amended month
by M-029
dated
09.24.07
and Cir.
No. 883
dated
07.10.15)
A-3 BSP 7-26-18.1H 4358S Copy of entry in NSSLA records of As 20th business day from Original - ISD I
written approval of majority of directors approved date of approval
on credit accommodation to directors
and officers with accompanying
Certification on Loans Granted to
Directors/Officers
A-3 Unnumbered 4162S Report on Borrowings of BSP Personnel Quarterly 15th banking days after Original to SDC
(CL-050 end of reference quarter
dated
10.04.07
and
CL-059
dated
11.28.07)
Page 2 of 5
APP. S-2
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
B 4172S Audited/Unaudited Financial Statements Annually 120th/60th day after Original - ISD I
required in Sec. 4181S accompanied by end of fiscal year as
annual report1 (to members, if any) required in Sec. 4181S
B SES II Form 15 4147S Biographical Data of Trustees/Officers Upon every 20th business day from date of Hard copy to appropriate
(NP08-TB) (As with rank of senior vice president and election/ election/re-election of the department of the SES
amended above with ID picture re-election or trustees/meeting of the board of
by Cir. No. appointment/ trustees in which the officers
758 dated promotion or if are appointed/promoted
05.11.12, change in name
M-024 or residential
dated address occurs
07.31.08
and Cir. - If submitted in CD form - Notarized 20th business day from the date
No. 887 first page of each of the trustees'/officers' the change of name or
dated Biographical Data saved in CD and residential address occurred
10.07.15) control proof list
1
Required of NSSLAs with total resources of P 10 million or more
Page 3 of 5
APP. S-2
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
B 4147S Duly accomplished and notarized Upon election/ 20th business day from date of Hard copy to appropriate
(Circular authorization form for querying the re-election or election/re-election of the department of the SES
Nos. 758 Bangko Sentral watchlist files appointment/ trustees/meeting of the board of
dated promotion as first trustees in which the officers
05.11.12 time trustee/ are appointed/promoted
and 887 officer within an
dated NSSLA
10.07.15)
B Unnumbered 4147S List of Members of the Board of Trustees Annually 20th business day from the Hard copy to appropriate
(Circular and Officers election of the board of trustees department of the SES
Nos. 758
dated
05.11.12
and 887
dated
10.07.15 )
B BSP 7-26-20H 4162S Report on Crimes/Losses As crime/ See Annex S-2-a for guidelines -do-
incident on reporting crimes and losses
occurs
4306S.3 Notice/Application for Write-Off of As Write-off 30th day prior to the intended -do-
Loans occurs date of write-off
B 4162S Board Resolution on NSSLA's As authorized 3rd day from date of resolution Electronic mail or diskette
signatories to reports submitted to form to SDC or if hard copy
Bangko Sentral original to appropriate
department of the SES,
duplicate to SDC
Page 4 of 5
APP. S-2
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
B General Information Sheet Annually 30th day from date of annual Drop Box-SEC Central
stockholders’ meeting Receiving Section
Original-SEC
Duplicate –BSP
B Form I M-031 Report on Electronic Money Quarterly 15 banking days after e-mail -
Schedule 1 dated Transactions end of reference quarter sdcothers-emoney@
09.11.09 bsp.gov.ph
and Cir. Quarterly Statement of E-Money Hardcopy- SDC
No. 649 Transactions - Volume and Amount of E-
dated Money Transactions Quarterly
03.09.09 Statement of Liquidity Cover
Schedules
1 - E-Money Balances
Unnumbered 4196S.8 IT Risk Profile Report Annually 25 calendar days after end of e-mail at sdcnbfi-
(Cir. No. reference year itprofile@bsp.gov.ph
808 dated
08.22.13)
Page 5 of 5
APP. S-2
08.12.31
Annex S-2-a
1. NSSLAs shall report on the a crime, when the amount involved per
following matters through the incident is P20,000 or more.
appropriate supervising and examining 2. The following guidelines shall be
department: observed in the preparation and
a. Crimes whether consummated, submission of the report.
frustrated or attempted against property/ a. The report shall be prepared in
facilities (such as robbery, theft, two (2) copies and shall be submitted
swindling or estafa, forgery and other within five (5) business days from
deceits) and other crimes involving loss/ knowledge of the crime or incident, the
destruction of property of the NSSLA original to the appropriate supervising
when the amount involved in each crime department and the duplicate to the BSP
is P20,000 or more. Security Coordinator, thru the Director,
Crimes involving NSSLA personnel, Security Investigation and Transport
regardless of whether or not such crimes Department.
involve the loss/destruction of property b. Where a thorough investigation
of the NSSLA, even if the amount and evaluation of facts is necessary to
involved is less than those above complete the report, an initial report
specified, shall likewise be reported to submitted within the five (5)-business day
the BSP. deadline may be accepted: Provided,
b. Incidents involving material loss, That a complete report is submitted not
destruction or damage to the institution’s later than fifteen (15) business days from
property/facilities, other than arising from termination of investigation.
Category A-2 reports of head offices Copies of the board resolutions on the
shall be signed by the president, executive report signatory designations shall be
vice-presidents, vice-presidents or officers submitted to the appropriate supervising
holding equivalent positions. Such reports and examining department of the BSP
of other offices/units (such as branches) within three (3) business days from the date
shall be signed by their respective of resolution.
Annex S-3-a
Whereas, it is required under Subsec. 4162S.1 that Category A-1 reports be signed by the
Chief Executive Officer, or in his absence, by the Executive Vice-President, and by the
Comptroller, or in his absence, by the Chief Accountant, or by officers holding equivalent positions.
Whereas, it is also required that aforesaid officers of the institution be authorized under
a resolution duly approved by the institution's Board of Directors;
Whereas, we, the members of the Board of Directors of (Name of Institution) ,
are conscious that, in designating the officials who would sign said Category A-1 reports,
we are actually empowering and authorizing said officers to represent and act for or in behalf
of the Board of Directors in particular and (Name of Institution) in general;
Whereas, this Board has full faith and confidence in the institution's Chief Executive
Officer, Executive Vice-President, Comptroller and Chief Accountant, as the case may be,
and, therefore, assumes responsibility for all the acts which may be performed by aforesaid
officers under their delegated authority;
Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby
resolved that:
1. Mr.____________ President _________________
Specimen Signature
or
Executive
2. Mr.____________ Vice-President _________________
Specimen Signature
and
3. Mr.____________ Comptroller _________________
Specimen Signature
or
Chief
4. Mr.____________ Accountant _________________
Specimen Signature
are hereby authorized to sign Category A-1 reports of (Name of Institution) .
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
______________________
CORPORATE SECRETARY
Annex S-3-b
Whereas, it is required under Subsec. 4162S.1 that Category A-2 reports of head offices
be signed by the President, Executive Vice-Presidents, Vice-Presidents or officers holding
equivalent positions, and that such reports of other offices be signed by the respective
managers/officers-in-charge;
Whereas, it is also required that aforesaid officers of the institution be authorized under
a resolution duly approved by the institution's Board of Directors;
Whereas, we, the members of the Board of Directors of (Name of Institution) , are
conscious that, in designating the officials who would sign said Category A-2 reports, we are
actually empowering and authorizing said officers to represent and act for or in behalf of the
Board of Directors in particular and (Name of Institution) in general;
Whereas, this Board has full faith and confidence in the institution's President (and/or
the Executive Vice-President, etc., as the case may be) and, therefore, assumes responsibility
for all the acts which may be performed by aforesaid officers under their delegated authority;
Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby
resolved that:
Name of Officer Specimen Signature Position Title Report No.
_____________ ________________ __________ _________
are hereby authorized to sign the Category A-2 reports of (Name of Institution) .
_________________________
CHAIRMAN OF THE BOARD
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY
Annex S-3-c
Whereas, it is required under Subsec. 4162S.1 that Categories A-3 and B reports be
signed by officers or their alternates;
Whereas, it is also required that aforesaid officers of the institution be authorized under
a resolution duly approved by the institution's Board of Directors;
Whereas, we the members of the Board of Directors of (Name of Institution) , are
conscious that, in designating the officials who would sign said Categories A-3 and B reports,
we are actually empowering and authorizing said officers to represent and act for or in
behalf of the Board of Directors in particular and (Name of Institution) in general;
Whereas, this Board has full faith and confidence in the institution's authorized signatories
and, therefore, assumes responsibility for all the acts which may be performed by aforesaid
officers under their delegated authority;
Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby
resolved that:
1. Authorized
(Alternate)
2. Authorized
(Alternate)
etc.
are hereby authorized to sign the Category A-2 reports of (Name of Institution) .
_________________________
CHAIRMAN OF THE BOARD
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY
NAME OF BORROWER
ADDRESS
4. SCHEDULE OF PAYMENTS
a. Single payment due on (date) P XXX
b. Installment Payments (Please see attached amortization schedule)
6. CONDITIONAL CHARGES THAT MAY BE IMPOSED (if applicable). Please specify manner of
imposition:
a. Late Charge P
b. Prepayment (penalty/refund)
c. Others (Specify)
CERTIFIED CORRECT:
_______________________________ _______________________________
(Signature of Creditor/Authorized Position
Representative Over Printed Name)
_______________________________ _________________________
(Signature of Borrower over Date
Printed Name)
Notes:
¹ Itemize all charges including advance deductions
- Small business/Retail/Consumer Loans includes microfinance, auto (motor), salary, personal, medical,
educational and other loans of similar nature
- This document contains the minimum information required to be disclosed to the borrower and may be
enhanced to improve client information
AMORTIZATION SCHEDULE
(Sample Only)
Legends:
A - Number of installment periods based on loan term
B - Gross amount of loan
C - Installment payment on the principal
D - Installment payment on the interest
E - Total amortization payment for the installment period
F - Outstanding principal balance of the loan
(As amended byCircular No. 754 dated 17 April 2012 and M-2012-018 dated 19 April 2012)
Section 1. This Act shall be known as the (7) the percentage that the finance
“Truth in Lending Act.” charge bears to the total amount to be
financed expressed as a simple annual rate
Sec. 2. Declaration of Policy. It is hereby on the outstanding unpaid balance of the
declared to be the policy of the State to protect obligation.
its citizens from a lack of awareness of the
xxx xxx xxx
true cost of credit to the user by assuring a
full disclosure of such cost with a view of
Sec. 6. (a) Any creditor who in connection
preventing the uninformed use of credit to
with any credit transaction fails to disclose to
the detriment of the national economy.
any person any information in violation of
xxx xxx xxx this Act or any regulation issued thereunder
shall be liable to such person in the amount
Sec. 3. As used in this Act, the term - of P100 or in an amount equal to twice the
finance charge required by such creditor in
xxx xxx xxx
connection with such transaction, whichever
(3) “Finance charge” includes interest, fees, is the greater, except that such liability shall
service charges, discounts, and such other not exceed P2,000 on any credit transaction.
charges incident to the extension of credit
xxx xxx xxx
as the Board may by regulation prescribe.
(c) Any person who willfully violates
xxx xxx xxx
any provision of this Act or any regulation
issued thereunder shall be fined by not less
Sec. 4. Any creditor shall furnish to each
than P1,000 nor more than P5,000 or
person to whom credit is extended, prior
imprisonment for not less than 6 months
to the consummation of the transaction a
nor more than one year or both.
clear statement in writing setting forth, to
xxx xxx xxx
the extent applicable and in accordance
with rules and regulations prescribed by (d) Any final judgment hereafter
the Board, the following information: rendered in any criminal proceeding under
(1) the cash price or delivered price this Act to the effect that a defendant has
of the property or service to be acquired; willfully violated this Act shall be prima
(2) the amounts, if any, to be credited facie evidence against such defendant in
as down payment and/or trade-in; an action or proceeding brought by any
(3) the difference between the other party against such defendant under
amounts set forth under clauses (1) and (2); this Act as to all matters respecting which
(4) the charges, individually itemized, said judgment would be an estoppel as
which are paid or to be paid by such person between the parties thereto.
in connection with the transaction but which
are not incident to the extension of credit; Sec. 7. This Act shall become effective
(5) the total amount to be financed; upon approval.
(6) the finance charge expressed in
terms of pesos and centavos; and Approved, 22 June 1963.
Annex S-6-a
CERTIFICATION OF COMPLIANCE
WITH ANTI-MONEY LAUNDERING REGULATIONS
Annex S-6-b
selection of the external auditors and/or will recommend deletion from the list even
auditing firm to be engaged by banks for prior to the three (3)-year renewal period, if
regular audit or non-audit services. based on assessment, the external auditors’
5. Pursuant to paragraph (5) of the report did not comply with BSP
MOA, SEC, BSP and IC shall mutually requirements.
recognize the accreditation granted by any
of them for external auditors and firms of E. QUALIFICATION REQUIREMENT
Group C or D companies under SEC, The following qualification requirements
Category B and C under BSP, and insurance are required to be met by the individual
brokers under IC. Once accredited/selected external auditor and the auditing firm at the
by any one (1) of them, the above-mentioned time of application and on continuing basis,
special requirements shall no longer be subject to BSP’s provisions on the delisting
prescribed by the other regulators. and suspension of accreditation:
For corporations which are required to 1. Individual external auditor
submit financial statements to different a. General requirements
regulators and are not covered by the mutual (1) The individual applicant must be
recognition policy of this MOA, the primarily accredited by the BOA. The
following guidance shall be observed: individual external auditor or partner
a. The external auditors of UBs which in-charge of the auditing firm must have at
are listed in the Exchange, should be least five (5) years of audit experience.
selected/accredited by both the BSP and (2) Auditor’s independence.
SEC, respectively; and In addition to the basic screening
b. For insurance companies and banks procedures of BOA on evaluating auditor’s
that are not listed in the Exchange, their independence, the following are required
external auditors must each be selected/ for BSP purposes to be submitted in the form
accredited by BSP or IC, respectively. For of notarized certification that:
purposes of submission to the SEC, the (a) No external auditor may be engaged
financial statements shall be at least audited by any of the covered institutions under Item
by an external auditor registered/accredited "B" hereof if he or any member of his
with BOA. immediate family had or has committed to
This mutual recognition policy shall acquire any direct or indirect financial
however be subject to the BSP restriction interest in the concerned covered institution,
that for banks and its subsidiary and affiliate or if his independence is considered
bank, QBs, trust entities, NSSLAs, their impaired under the circumstances specified
subsidiaries and affiliates engaged in allied in the Code of Professional Ethics for CPAs.
activities and other FIs which under special In case of a partnership, this limitation shall
laws are subject to BSP consolidated apply to the partners, associates and the
supervision, the individual and consolidated auditor-in-charge of the engagement and
financial statements thereof shall be audited members of their immediate family;
by only one (1) external auditor/auditing (b) The external auditor does not have/
firm. shall not have outstanding loans or any
6. The selection of external auditors credit accommodations or arranged for the
and/or auditing firm shall be valid for a extension of credit or to renew an extension
period of three (3) years. The SES shall make of credit (except credit card obligations
an annual assessment of the performance which are normally available to other credit
of external auditors and/or auditing firm and card holders and fully secured auto loans
and housing loans which are not past due) a. The auditing firm must be primarily
with the covered institutions under Item "B" accredited by the BOA and the name of the
at the time of signing the engagement and firm’s applicant partner’s should appear in
during the engagement. In the case of the attachment to the certificate of
partnership, this prohibition shall apply to accreditation issued by BOA. Additional
the partners and the auditor-in-charge of the partners of the firm shall be furnished by
engagement; and BOA to the concerned regulatory agencies
(c) It shall be unlawful for an external (e.g. BSP, SEC and IC) as addendum to the
auditor to provide any audit service to a firm’s accreditation by BOA.
covered institution if the covered b. Applicant firms to act as the external
institution’s CEO, CFO, Chief Accounting auditor of entities under Category A in Item
Officer (CAO), or comptroller was "B" must have established adequate quality
previously employed by the external auditor assurance procedures, such consultation
and participated in any capacity in the audit policies and stringent quality control, to
of the covered institution during the one- ensure full compliance with the accounting
year preceding the date of the initiation of and regulatory requirements.
the audit; c. At the time of application, the
(3) Individual applications as external applicant firm must have at least one (1)
auditor of entities under Category A above signing practitioner or partner who is already
must have established adequate quality selected/accredited, or who is already
assurance procedures, such consultation qualified and is applying for selection by
policies and stringent quality control, to BSP.
ensure full compliance with the accounting d. A registered accounting/auditing
and regulatory requirements. firm may engage in any non-auditing
b. Specific requirements service for an audit client only if such
(1) At the time of application, service is approved in advance by the
regardless of the covered institution, the client’s audit committee. Exemptions from
external auditor shall have at least five (5) the prohibitions may be granted by the
years experience in external audits; Monetary Board on a case-by-case basis
(2) The audit experience above refers to the extent that such exemption is
to experience required as an associate, necessary or appropriate in the public
partner, lead partner, concurring partner or interest. Such exemptions are subject to
auditor-in-charge; and review by the BSP.
(3) At the time of application, the e. At the time of application, the
applicant must have the following track applicant firm must have the following
record: track record:
(a) For Category A, he/she must have (1) For Category A, the applicant firm
at least five (5) corporate clients with total must have had at least twenty (20)
assets of at least P50.0 million each. corporate clients with total assets of at least
(b) For Category B, he/she must have P50.0 million each;
had at least three (3) corporate clients with (2) For Category B, the applicant firm
total assets of at least P25.0 million each. must have had at least five (5) corporate
(c) For Category C, he/she must have clients with total assets of at least P20.0
had at least three (3) corporate clients with million each;
total assets of at least P5.0 million each; (3) For Category C, the applicant firm
2. Auditing firms must have had at least five (5) corporate
clients with total assets of at least P5.0 management systems and corporate
million each. governance framework of the covered
entities.
F. APPLICATION FOR AND/OR e. Copy of the latest AFS of the
RENEWAL OF THE SELECTION OF applicant’s two (2) largest clients in terms
INDIVIDUAL EXTERNAL AUDITOR of total assets.
1. The initial application for BSP 2. Subject to BSP’s provision on early
selection shall be signed by the external deletion from the list of selected external
auditor and shall be submitted to the auditor, the selection may be renewed
appropriate department of the SES together within two (2) months before the expiration
with the following documents/information: of the three (3)-year effectivity of the
a. Copy of effective and valid BOA selection upon submission of the written
Certificate of Accreditation with the application for renewal to the appropriate
attached list of qualified partner/s of the firm; department of the SES together with the
b. A notarized undertaking of the following documents/information:
external auditor that he is in compliance (a) copy of updated BOA Certificate of
with the qualification requirements under Accreditation with the attached list of
Item "E" and that the external auditor shall qualified partner/s of the firm;
keep an audit or review working papers for (b) notarized certification of the external
at least seven (7) years in sufficient detail to auditor that he still possess all qualification
support the conclusion in the audit report required under Item "F.1.b" of this Appendix;
and making them available to the BSP’s (c) list of corporate clients audited
authorized representative/s when required during the three (3)-year period of being
to do so; selected as external auditor by BSP. Such
c. Copy of Audit Work Program which list shall likewise indicate the findings noted
shall include assessment of the audited by the BSP and other regulatory agencies
institution’s compliance with BSP rules and on said AFS including the action thereon
regulations, such as, but not limited to the by the external auditor; and
following: (d) written proof that the auditor has
(1) capital adequacy ratio, as currently attended or participated in trainings for at
prescribed by the BSP; least thirty (30) hours in addition to the
(2) AMLA framework; BOA’s prescribed training hours. Such
(3) risk management system, training shall be in subjects like international
particularly liquidity and market risks; and financial reporting standards, international
(4) loans and other risk assets review standards of auditing, corporate
and classification, as currently prescribed governance, taxation, code of ethics,
by the BSP rules and regulations. regulatory requirements of SEC, IC and BSP
d. If the applicant will have clients or other government agencies, and other
falling under Category A, copy of the Quality topics relevant to his practice, conducted
Assurance Manual which, aside from the by any professional organization or
basic elements as required under the BOA association duly recognized/accredited by
basic quality assurance policies and the BSP, SEC or by the BOA/PRC through a
procedures, specialized quality assurance CPE Council which they may set up.
procedures should be provided consisting The application for initial or renewal
of, among other, review asset quality, accreditation of an external auditor shall be
adequacy of risk-based capital, risk accomplished by a fee of P2,000.00.
should however been made aware of such partnership is dissolved. The accreditation
investigation; of such firm/partnership shall however be
g. Gross negligence in the conduct of reinstated by the BSP upon showing that the
audits which would result, among others, said dissolution was solely for the purpose
in non-compliance with generally accepted of admitting new partner/s have complied
auditing standards in the Philippines or with the requirements of this regulation and
issuance of an unqualified opinion which thereafter shall be reorganized and re-
is not supported with full compliance by registered;
the auditee with generally accepted e. There is a showing that the
accounting principles in the Philippines accreditation of the following number or
(GAAP). Such negligence shall be percentage of external auditors, whichever
determined by the BSP after proper is lesser, have been suspended or delisted
investigation during which the external for whatever reason, by the BSP:
auditor shall be given due notice and (1) at least ten (10) signing partners and
hearing; currently employed selected/accredited
h. Conduct of any of the non-audit external auditors, taken together; or
services enumerated under Item "E.1" for (2) such number of external auditors
his statutory audit clients, if he has not constituting fifty percent (50%) or more of
undertaken the safeguards to reduce the the total number of the firm’s signing partners
threat to his independence; and and currently selected/accredited auditors,
i. Failure to comply with the taken together.
Philippine Auditing Standards and f. The firm or any one (1) of its
Philippine Auditing Practice Statements. auditors has been involved in a major
2. An auditing firms; accreditation accounting/auditing scam or scandal. The
shall be suspended or delisted, after due suspension or delisting of the said firm
notice and hearing, for the following shall depend on the gravity of the offense
grounds: or the impact of said scam or scandal on
a. Failure to submit the report under the investing public or the securities
Item "H" or the required reports under Sec. market, as may be determined by the BSP;
X190.1. g. The firm has failed reasonably to
b. Continuous conduct of audit supervise an associated person and
despite loss of independence of the firm as employed auditor, relating to the
provided under this regulation and under following:
the Code of Professional Ethics; (1) auditing or quality control
c. Any willful misrepresentation in the standards, or otherwise, with a view to
following information/ documents; preventing violations of this regulations;
(1) Application and renewal for (2) provisions under SRC relating to
accreditation; preparation and issuance of audit reports
(2) Report required under Item "H"; and the obligations and liabilities of
and accountants with respect thereto;
(3) Notarized certification of the (3) the rules of the BSP under this
managing partner of the firm. Appendix; or
d. Dissolution of the auditing firm/ (4) professional standards.
partnership, as evidenced by an Affidavit h. Refusal for no valid reason, upon
of Dissolution submitted to the BOA, or order of the BSP, to submit requested
upon findings by the BSP that the firm/ documents in connection with an ongoing
investigation. The firm should however be under this section shall be supported by a
made aware of such investigation. clear statement setting forth the following:
3. Pursuant to paragraph 8 of the (1) Each act or practice in which the
aforesaid MOA, the SEC, BSP and IC shall selected/accredited external auditor or
inform BOA of any violation by an auditing firm, or associated entry, if
accredited/selected external auditor which applicable, has engaged or omitted to
may affect his/her accreditation status as a engage, or that forms a basis for all or part
public practitioner. The imposition of of such suspension/delisting;
sanction by BOA on an erring practitioner (2) The specific provision/s of this
shall be without prejudice to the appropriate regulation, the related SEC rules or
penalty that the SEC, IC or BSP may assess professional standards which the Monetary
or impose on such external auditor pursuant Board determined as has been violated; and
to their respective rules and regulations. In (3) The imposed suspension or
case of revocation of accreditation of a delisting, including a justification for either
public practitioner by BOA, the sanction and the period and other
accreditation by SEC, BSP and IC shall requirements specially required within
likewise be automatically revoked/ which the delisted auditing firm or external
derecognized. auditor may apply for re-accreditation.
The SEC, BSP and IC shall inform each d. The suspension/delisting, including
other of any violation committed by an the sanctions/penalties provided in Sec.
external auditor who is accredited/selected X189 shall only apply to:
by any one (1) or all of them. Each agency (1) Intentional or knowing conduct,
shall undertake to respond on any referral including reckless conduct, that results in
or endorsement by another agency within violation or applicable statutory, regulatory
ten (10) working days from receipt thereof. or professional standards; or
4. Procedure and Effects of Delisting/ (2) Repeated instances of negligent
Suspension. conduct, each resulting in a violation of the
a. An external auditor/auditing firm applicable statutory, regulatory or
shall only be delisted upon prior notice professional standards.
to him/it and after giving him/it the e. No associate person or employed
opportunity to be heard and defend auditor of a selected/accredited auditing
himself/itself by presenting witnesses/ firm shall be deemed to have failed
evidence in his favor. Delisted external reasonably to supervise any other person
auditor and/or auditing firm may re-apply for purpose of Item "I.2.g" above, if:
for BSP selection after the period (1) There have been established in and
prescribed by the Monetary Board. for that firm procedures, and a system for
b. BSP shall keep a record of its applying such procedures, that comply with
proceeding/investigation. Said applicable rules of BSP and that would
proceedings/investigation shall not be reasonably be expected to prevent and
public, unless otherwise ordered by the detect any such violation by such associated
Monetary Board for good cause shown, person; and
with the consent of the parties to such (2) Such person or auditor has
proceedings. reasonably discharged the duties and
c. A determination of the Monetary obligations incumbent upon that person by
Board to impose a suspension or delisting reason of such procedures and system, and
NSSLAs are responsible for the regular 1. Loans especially mentioned. These
review and assessment of the quality of their loans have potential weaknesses which, if
loan portfolio and other risk assets. It is the left uncorrected, may affect the repayment
duty of the board and senior management of the loan. Their characteristics include:
of NSSLAs to ensure that the good quality a. Loans extended to member-
of these assets is maintained, and that borrowers whose paying capacity was not
adequate loss reserves are set-up at all times. appropriately determined;
To achieve these objectives, NSSLAs shall b. Accounts with defects and
adopt and fully document policies and deficiencies in documentation which may
procedures for an effective internal asset render the collection of the loan difficult, e.g.,
review system and monitoring processes loans with unsigned promissory notes; and
which should, at a minimum, comply with c. Accounts which are 1-10 days past
the standards prescribed herein. These due based on the established and approved
policies and procedures should be clearly collection cycle indicated in the product
communicated to all relevant parties in the manual of an NSSLA.
organization to ensure implementation 2. Substandard. These loans have well-
thereof. Adequate measures should be defined weakness or weaknesses that
adopted to see to it that asset review policies jeopardize their repayment/liquidation,
and procedures remain relevant and including adverse trends or developments
appropriate with due consideration of the that affect willingness or capacity to pay.
design and characteristics of their portfolio, Basic characteristics include the following:
and that enough safeguards to ensure that a. For secured loans:
changes where appropriate are adopted. (1) There is an imminent possibility of
Failure to conduct this regular assessment foreclosure or acquisition of the collateral
and set-up adequate loss reserves shall be because failure of all collection efforts.
considered unsafe and unsound practice. b. For unsecured loans:
(1) Loans under litigation; and
I. Classification of loans. Loans shall be (2) Loans classified as “Loans Especially
qualitatively assessed and grouped as Mentioned” in the last examination the
unclassified or classified. weaknesses of which remained uncorrected
A. Unclassified loans. These are loans in the current examination.
that do not have a greater-than-normal credit In addition, loans which are 11-30 days
risk and do not possess the characteristics past due based on the established and
of classified loans as defined. The borrower approved collection cycle indicated in the
has the apparent ability to satisfy his product manual of an NSSLA.
obligations in full and therefore no loss in 3. Doubtful. These are loans whose
ultimate collection is anticipated. characteristics make collection or
B. Classified loans. Their classification liquidation highly improbable and from
and characteristics are detailed as follows: which substantial loss is probable, such as:
a. Past due loans secured by real estate amortization of principal and/or interest has
mortgage, the title to which is subject to been established and if such loan meets the
adverse claim or with defect in ownership criteria of the lower loan classification.
rendering settlement of the loan through
foreclosure doubtful; II. Classification of Other Risk Assets
b. Past due loans secured by collaterals A. Real and Other Properties Acquired
which have declined in value materially (ROPA), Sales Contract Receivable (SCR)
without the borrower offering additional and Investments shall be subject to
collateral for the loans; and impairment provisions under the Philippine
c. Loans which are 31-90 days past due Accounting Standards (PAS) which were
based on the established and approved adopted by the Bangko Sentral. ROPA
collection cycle indicated in the product exceeding P5.0 million book value shall be
manual of an NSSLA. appraised by external appraisers acceptable
4. Loss. These are loans considered to the Bangko Sentral. An in-house appraisal
uncollectible. Their basic characteristics of all ROPAs shall be made every other year:
include the following: Provided, That immediate re-appraisal shall
a. The member-borrower’s be conducted on ROPAs which materially
whereabouts is unknown, or he has decline in value.
absconded, is dead or his earning power is
While ROPA and SCR are subject to
permanently impaired and his co-makers or
impairment provisions, their classifications
guarantors are insolvent or that their
status shall be “Substandard”. ROPAs are
guaranty is not financially supported:
not sound assets because their nature as
Provided, That the NSSLA may take into
non-liquid and non-productive. As such their
account the outstanding balance of deposits
immediate disposal is highly recommended.
and/or capital contributions of the member-
On the other hand, SCRs come from
borrower and/or the present realizable value
conversion of ROPA, hence, they shall
of security offered;
b. Where the collaterals securing the initially carry the classification of their
loans are without recoverable values and predecessor. SCRs which meet all the
the member-borrower and his co-makers are requirements/conditions enumerated below
insolvent; and are considered performing assets and not
c. Loans which are past due for ninety- subject to classification:
one (91) days and beyond based on the 1. That there has been a down
established and approved collection cycle payment or installment payments on the
indicated in the product manual of an principal of at least twenty percent (20%)
NSSLA. of the agreed selling price.
C. Restructured loans. Upon execution 2. That payment of the principal must
of the restructuring agreement, the be in equal installments or in diminishing
classification of a loan prior to restructuring, amounts and with maximum intervals of
either “loans especially mentioned”, or one (1) year.
“substandard” or “doubtful” shall be 3. That any grace period in the
retained. The upgrading of the loan’s payment of principal shall not be more than
classification shall only be effective after a one (1) year; and
satisfactory track record of three (3) 4. That there is no installment payment
consecutive payments of the required in arrear either on principal or interest:
1
all periods are reckoned from receipt of complaint.
the: (aa) reason thereof; (bb) need for (2) Consumer feedback may be
extended timeframe; and (cc) date on which obtained through a feedback form/
the complainant may expect the outcome customer satisfaction survey available for
of the BSFI assessment and/or investigation; walk-in complainants, in the website, or
Provided, however, that the additional through a voice logger system.
period shall not exceed forty-five (45) days. (3) Customer feedbacks shall be
This will afford the complainants recorded and analyzed to improve the
opportunity to seek other means to resolve system and to enhance personnel
their complaints. capabilities in handling complaints.
(iii) Result of assessment, investigation,
and BSFI’s final response shall be J. Complaints Recording/Data Management
communicated to the complainant in (1) A BSFI and its branches/other
writing in simple and clear language. The offices shall maintain copies of the
BSFI shall likewise inform the complainant of complaints/requests received, including
the possible remedies available to the party, supporting and other relevant documents
including resort to Bangko Sentral consumer thereto, within a period of two (2) years
assistance mechanism and the courts. from date of resolution.
(2) Inquiries Microfilms/digital copies of original
A BFSI must respond to inquiries received, documents may be maintained by a BSFI
at the latest, by the next business day. in accordance with its management
information systems for record keeping.
G. Confidentiality (2) A BSFI and its branches/other
A BSFI shall not disclose to a third party offices shall maintain complaints/requests
information acquired from the consumer in register which contains the following
all stages of the complaint, except as may information:
be required by the conduct of the BSFI’s (a) Name of the complainant;
investigation. (b) Subject/nature of the complaint;
The subject/nature of complain may
H. Conflict of interest be indicated by classification, such as
A BSFI shall ensure that complaints are those related to credit cards, deposits,
investigated by a consumer assistance administrative, foreign exchange,
officer who is neither directly nor indirectly remittances, investments, others;
involved in the matter which is the subject (c) Name of the personnel directly
of the complaint. handling/in-charge of the complaint and
officer supervising the resolution of the
I. Consumer Feedback complaint;
(1) Subject to the willingness of the (d) Date of receipt of complaint by the
consumer, BSFIs shall ask for feedback BSFI;
on the following matters: (e) Actions taken on the complaint or
(a) Overall satisfaction (whether request;
satisfied, somewhat satisfied, or (f) Resolution provided;
dissatisfied); (g) Date of resolution 1; and
(b) Processes needing improvement; (h) Other information such as, log and
(c) Personnel needing improvement; details of phone calls made or received.
and (3) The Consumer assistance group/head
(d) Any suggestions for improvement. consumer assistance officer shall maintain:
1
The complaint register must reveal the reason in case the date of resolution falls outside the regulatory
deadline.
P REGULATIONS
(Regulations Governing Pawnshops)
TABLE OF CONTENTS
A. SCOPE OF AUTHORITY
iii
SECTION 4104P Transfer of Ownership
iv
D. MANAGEMENT
v
E. COMMENCEMENT OF OPERATIONS AND PAWNSHOP OFFICES
G. REGISTERED/BUSINESS NAME
vi
I. OUTSOURCING
SECTION 4162P Reports (Deleted by Circular No. 938 dated 23 December 2016)
4162P.1 Categories of and signatories to reports (Deleted
by Circular No. 938 dated 23 December 2016)
4162P.2 Manner of filing by (Deleted by Circular No. 938
dated 23 December 2016)
4162P.3 Definition relevant to reports to Bangko Sentral
(Deleted by Circular No. 938 dated 23
December 2016)
SECTION 4165P General Information Sheet (Deleted by Circular No. 711 dated
28 January 2011)
vii
SECTIONS 4166P Grant of Loans
4166P.1 General guidelines
J. INTERNAL CONTROL
K. RISK MANAGEMENT
viii
SECTION 4181P Registered/Business Name
4181P.1 Changed of registered/business name (Deleted by
Circular No. 938 dated 23 December 2016)
4181P.2 Use of registered business name in signage, pawn
tickets and other forms (Deleted by Circular
No. 938 dated 23 December 2016)
4181P.3 Sanctions (Deleted by Circular No. 711 dated
28 January 2011)
ix
4187P.3 Insurance
x
PART TWO - BORROWING OPERATIONS
xi
PART THREE - PAWNING OPERATIONS
A. LOANS IN GENERAL
SECTION 4306P Interest Accrual on Past Due Loans (Deleted by Circular No.
938 dated 23 December 2016)
B. LOAN COLLATERAL/SECURITY
xii
SECTION 4322P Redemption of Pawns
4322P.1 Sanctions (Deleted by Circular No. 711 dated
28 January 2011)
C. PUBLIC AUCTION
xiii
4402P.1 Interest rates
4402P.2 Ninety (90)- day grace period
4402P.3 Insurance
4402P.4 Effective Recourse (Deleted by Circular No. 938
dated 23 December 2016)
4402P.5 Financial Education and Awareness (Deleted by
Circular No. 938 dated 23 December 2016)
C. ENFORCEMENT ACTIONS
A. (RESERVED)
xiv
4642P.6 Sanctions (Deleted by Circular No. 938 dated
23 December 2016)
4642P.7 Transitory provisions (Deleted by Circular No.
938 dated 23 December 2016)
4642P.8 - 4642P.10 (Reserved)
4642P.11 Outsourcing of services by Electronic Money
Issuers (EMIs) to Electronic Money Network
Service Providers (EMNSP) (Deleted by Circular
No. 938 dated 23 December 2016)
B. SUNDRY PROVISIONS
SECTION 4657P 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 (Deleted by Circular No. 938
dated 23 December 2016)
xv
SECTION 4692P Revocation of Authority to Operate
xvi
List of Appendices
16.12.31
LIST OF APPENDICES
xi
List of Appendices
16.12.31
xii
§§ 4101P - 4101P.7
16.12.31
PART ONE
a corporation by any person whether natural shall comply with the minimum
or juridical, or which will enable such capitalization and borrowing limits
person to elect, or be elected as, a director prescribed under Secs. 4111P and 4281P.
of such pawnshop; or Any pawnshop that does not meet
(b) effect a change in the majority these requirements shall submit an
ownership or control of the interests in a acceptable plan of compliance, for a
pawnshop organized as a partnership or the period not to exceed one (1) year from date
voting shares of stock of the pawnshop of submission, to the Bangko Sentral along
organized as a corporation from one (1) with the application for an Authority to
group of persons to another group. Operate under Sec. 4103P within six (6)
(Circular No. 656 dated 02 June 2009, as amended by Circular months from the effectivity of these
No. 938 dated 23 December 2016) regulations. Any delay in the submission of
such plan shall be subject to appropriate
Sec. 4105P (Reserved) sanctions.
(Circular No. 656 dated 02 June 2009, as amended by Circular
Sec. 4106P Capital of Pawnshops. Nos. 938 dated 23 December 2016 and 711 dated 28 January
(As amended by Circular No. 938 dated 23 December 2016) 2011)
the pawnshop office's premises. The shall also be surrendered to the Bangko
Bangko Sentral reserves the right to collect Sentral.
a reasonable amount to cover the cost of (Circular No. 656 dated 02 June 2009, as amended by Circular
production/issuance of the metal plate. No. 938 dated 23 December 2016)
(As amended by Circular No. 938 dated 23 December 2016)
Sec. 4155P (2016 - 4158P) Surrender of
F. TRANSFER/RELOCATION AND Pawnshop Operator License Due to
COLUNTARY CLOSURE OF BUSINESS Closure of Business. The surrender of
pawnshop operator license may be effected
Sec. 4153P (2016 - 4156P) Transfer/ only after the operator has complied with
Relocation of Business. Consistent with the the requirements under Section 16 of P.D.
requirements stated in Section 16 of P.D. No. 114 and the requirement in Appendix P-3.
No. 114, no pawnshop shall transfer or (As amended by Circular No.938 dated 23 December 2016)
relocate its place of business within three (3)
G. REGISTERED/BUSINESS NAME
months following the maturity of any loan
or pledge, or before any pawn shall have
Sec. 4156P (2016 - Transfer/Relocation of
been sold or disposed of as provided under
Business) Registered/Business Name. No
P.D. No. 114 and these regulations. The
person or entity shall advertise, use signage
requirement for the publication of notice
or hold itself out as being engaged in the
mandated under the same section of P.D.
business of a pawnshop or use in its
No 114 shall be strictly observed for such
business name the words “pawnshop”,
transfer/relocation of the pawnshop’s place
“pawnbrokerage”, or words of similar
of business.
import, or transact in any manner the
A notice of transfer shall be submitted
b u s i n e s s of a pawnshop unless so
to the appropriate department of the SES
authorized to operate as such by the Bangko
within five (5) working days after the
Sentral.
effectivity of such transfer. The metal plate
For purposes of this Section, the Bangko
issued for the transferred/relocated
Sentral shall provide for the guidelines that
pawnshop office shall also be surrendered
shall govern the application for change of
to the Bangko Sentral for the issuance of a
registered/ business name and the use of
new metal plate. The Bangko Sentral
registered/business name in signage, pawn
reserves the right to collect a reasonable
tickets and other forms.
amount to cover the cost of production/
(Circular No. 656 dated 02 June 2009, as amended by Circular
issuance of said metal plate. No. 938 dated 23 December 2016)
(Circular No. 656 dated 02 June 2009, as amended by Circular
No. 938 dated 23 December 2016)
H. BUSINESS DAYS AND HOURS
Sec. 4154P (2016 - 4157P) Voluntary Sec. 4157P (2016 - Voluntary Closure of a
Closure of a Pawnshop Office. Voluntary
Pawnshop Office) Business Days and
closure of a pawnshop office may be
Hours. Pawnshops shall be open for
effected only after compliance with the
business at least five (5) days a week and
requirements under Section 16 of P.D.
for at least six (6) hours a day.
No. 114.
The business hours and business days
A notice of closure of pawnshop office
shall be posted conspicuously at all times
shall be submitted to the appropriate
within the premises of the pawnshop.
department of the SES within five (5) working (Circular No. 656 dated 02 June 2009, as amended by Circular
days after the effectivity of such closure. The Nos. 938 dated 23 December 2016 and 711 dated 28 January
metal plate issued to such pawnshop office 2011)
by the Bangko Sentral, the external auditors/ § 4193P.3 Complexity of IT risk profile.
audit firm to be contracted shall be from (Deleted by Circular No. 938 dated 23 December 2016)
the Bangko Sentral list of selected
auditors for supervised and/or regulated § 4193P.4 IT rating system.
institutions. (Deleted by Circular No. 938 dated 23 December 2016)
(Circular No. 656 dated 02 June 2009, as amended by Circular
Nos. 938 dated 23 December 2016 and 711 dated 28 January § 4193P.5 Definition of terms.
2011) (Deleted by Circular No. 938 dated 23 December 2016)
PART TWO
BORROWING OPERATIONS
Section 4201P Supervisory Powers of the Sec. 4221P Capital Build-up Program.
Bangko Sentral. (As amended by Circular No. 938 dated 23 December 2016)
(As amended by Circular No. 938 dated 23 December 2016)
Secs. 4222P - 4280P (Reserved)
§ 4201P.1 Refusal to permit
examination. Sec. 4281P (2016 - 4112P) Maximum
(As amended by Circular No. 938 dated 23 December 2016) Borrowings. The maximum borrowings of a
pawnshop business, expressed as a percentage
Sec. 4202P Revocation of Authority to of total borrowings to pledge loans, shall
Operate. not exceed fifty percent (50%): Provided,
(As amended by Circular No. 938 dated 23 December 2016) That borrowings shall not be from more
than nineteen (19) creditors.
Secs. 4203P - 4205P (Reserved) Borrowings for purposes of acquiring
fixed assets used for business operations
Sec. 4206P Filing/Licensing Fees. shall not be included in the
(Asamended by Circular No. 938 dated 23 December 2016) abovementioned limit.
(As amended by Circular No. 938 dated 23 December 2016)
Sec. 4207P Annual Supervision Fees.
(As amended by Circular No. 938 dated 23 December 2016)
Secs. 4282P - 4284P (Reserved)
Secs. 4208P - 4210P (Reserved) Sec. 4285P Securities and Exchange
Commission Registration of Borrowing.
Section 4211P Philippine and Foreign (Deleted by Circular No. 938 dated 23 December 2016)
Currency Notes and Coins.
(As amended by Circular No. 938 dated 23 December 2016)
Sec. 4286P Borrowings Constituting Quasi-
Secs. 4212P - 4215P (Reserved) Banking Functions.
(Deleted by Circular No. 938 dated 23 December 2016)
PART THREE
PAWNING OPERATIONS
by a notary public of the city or province where § 4325P.1 Auction of pawned items
the pawnshop has its place of business. covered by a single pawn ticket.
The Auction Sheet/Book containing (Deleted by Circular No. 938 dated 23 December 2016)
entries of auctioned pawned articles duly
signed by the auctioneer or notary public Secs. 4326P - 4398P (Reserved)
under oath shall be maintained by the pawnshop.
(Circular No. 656 dated 02 June 2009, as amended by Circular
Sec. 4399P General Provisions on Sanctions.
(Deleted by Circular No. 938 dated 23 December 2016)
No. 938 dated 23 December 2016)
PART FOUR
PART FIVE
PART SIX
MISCELLANEOUS
PART SEVEN
Section 4700P (2016 - 4216P) General Bangko Sentral shall be without prejudice
Provision on Sanctions. Any violation of the to the imposition of penalties under Section
provisions of theese regulations shall be 18 of P.D. No. 114 and other applicable
subject to the administrative penalties under laws against the pawnshop, its proprietor,
Section 37 of R.A. No. 7653, as implemented partners, directors, stockholders, president,
by Sec. 4009Q or the Bangko Sentral officers and/or employees.
Supervisory Enforcement Policy, in relation (As amended by Circular No. 938 dated 23 December 2017)
to Section 17 of P.D. No. 114. Any
administrative sanctions imposed by the Secs. 4701P - 4799P (Reserved)
The application for an Authority to voting and non-voting shares held by them;
Operate a new pawnshop business shall be f. Duly notarized authorization form,
accompanied by the following documents: per Appendix Q-45, for querying the Bangko
a. Sworn undertaking, in case of sole Sentral watchlist file from the proprietor/
proprietorshop, or sworn agreement, in case partners/directors, president and proposed
of partnership/corporation, to organize and manager or officer-in-charge;
operate a pawnshop business compliant g. A Certificate of Registration (COR) of
with existing laws, rules and regulations; business name from the DTI, in case of a
b. Personal data sheet (using BSP- sole proprietoship;
prescribed form for pawnshops) with h. Articles of Partnership/Incorporation
passport size picture duly accomplished by and by-laws duly registered with the SEC,
the proprietor or partners or incorporators, in the case of a partnership or a corporation
directors, officers, individual stockholders which Articles shall indicate that the primary
owning ten percent (10%) or more of the purpose of the partnership/corporation is to
voting stock, and the beneficial owners of engage in the business of a pawnshop or a
the pawnshop; pawnbroker;
Beneficial owner refers to natural i. Copy of the city/municipal license/
person(s) who ultimately owns or controls business license/mayor's permit for the
the pawnshop. It also includes those persons
current period;
who exercise ultimate effective control over
j. Certified true copy/ies of the
a legal person or arrangement.
certificate/s evidencing attendance, or a
c. Sworn certification that the applicant
sworn undertaking to attend, of proprietor/
has the financial capacity to organize and
partners/incorporators/directors/president/
operate a pawnshop business.
manager/officer-in-charge in a briefing on
d. NBI clearance for the proprietor/
partners/incorporators/directors/principal pawnshop regulations and a seminar on
officers; AMLA, as amended, in accordance with
e. For corporate subscribers: Subsection 4103P.2; and
(1) Copy of the latest articles of k. Notarized special power of attorney
incorporation and by-laws; authorizing a person/entity to apply for an
(2) List of general information sheet (GIS) authority to operate a pawnshop business
filed with the Securities and Exchange in behalf of the proprietor/partnership/
Commission (SEC); corporation. In the case of a corporate
(3) List of major stockholders, including applicant, a certified true copy of the board
the corporation's ultimate beneficial resolution authorizing the person or entity
owners, indicating the citizenship and the shall likewise be submitted.
number, amount and percentage of the (As amended by Circular No. 938 dated 23 December 2016)
Annex P-2-a
Annex P-3-a
Annex P-3-b
Annex P-3-c
Annex P-5-a
CERTIFICATION OF COMPLIANCE
WITH ANTI-MONEY LAUNDERING REGULATIONS
Annex P-5-b
“Know-Your-Pawner” Policy
(Appendix to Subsection 4301P.3)
N REGULATIONS
(Regulations Governing Other Non-Bank Financial Institutions)
TABLE OF CONTENTS
iii
SECTION 4144N Securities Custodianship and Securities Registry Operations
4144N.1 Statement of policy
4144N.2 Applicability of this regulation
4144N.3 Prior Bangko Sentral approval
4144N.4 Application for authority
4144N.5 Pre-qualification requirements for a securities
custodian/registry
4144N.6 Functions and responsibilities of a securities
custodian
4144N.7 Functions and responsibilities of a securities
registry
4144N.8 Protection of securities of the customer
4144N.9 Independence of the registry and securities
custodian
4144N.10 Registry of Scripless Securities of the Bureau of
the Treasury
4144N.11 Confidentiality
4144N.12 Compliance with anti-money laundering laws/
regulations
4144N.13 Basic security deposit
4144N.14 Reportorial requirements
4144N.15 - 4144N.28 (Reserved)
4144N.29 Sanctions
SECTION 4157N 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
SECTION 4158N Republic Act No. 9994 - An Act Granting Additional Benefits
and Privileges to Senior Citizens, Further Amending Republic
Act No. 7432 of 1992 as Amended by Republic Act
No. 9257 of 2003
iv
SECTION 4162N Reports
4162N.1 Categories and signatories of reports
4162N.2 Manner of filing
4162N.3 Sanctions in case of willful delay in the
submission of reports
v
SECTION 4191N (Reserved)
vi
4197N.15 Credit Review Process
4197N.16 Credit Classification and Provisioning
4197N.17 Credit workout and remedial management of
problem credits
4197N.18 Writing off problem credits
4197N.19 Enforcement Actions
vii
SECTION 4302N Classification of Credit Card Receivables (Deleted by Circular
No. 855 dated 29 October 2014)
viii
SECTIONS 4401N - 4459N (Reserved)
ix
4642N.2 Definitions
4642N.3 Prior Bangko Sentral approval
4642N.4 Common provisions
4642N.5 Quasi-bank license requirement
4642N.6 Sanctions
4642N.7 Transitory provisions
4642N.8 - 4642N.10 (Reserved)
4642N.11 Outsourcing of services by Electronic Money
Issuers (EMIs) to Electronic Money Network
Service Providers (EMNSP)
x
B. CONSUMER PROTECTION STANDARDS OF CONDUCT FOR BSFIS
C. ENFORCEMENT ACTION
xi
List of Appendices
16.06.30
LIST OF APPENDICES
xiv
List of Appendices
16.06.30
LIST OF APPENDICES
N-9 The Guidelines for the Imposition of Monetary Penalty for Violations/
Offenses with Sanctions Falling under Section 37 of R.A. No. 7653 on
Trust Corporations, Directors and/or Officers
xv
§§ 4101N - 4103N.1
09.12.31
N Regulations
(Regulations Governing Other Non-Bank Financial Institutions)
Secs. 4105N - 4109N (Reserved) allow him or his related interests to elect at
least one (1) member of the board of directors
§§ 4109N.1 - 4109N.15 (Reserved) of such NBFI or is directly or indirectly the
registered or beneficial owner of more than
§ 4109N.16 Qualification and ten percent (10%) of any class of its equity
accreditation of non-bank financial security.
institutions acting as trustee on any e. Investment and management of the
mortgage or bond issuance by any funds. A domestic NBFI designated as
municipality, GOCC, or any body politic. trustee of a mortgage or bond issuance may
a. Applicability. NBFIs duly accredited hold and manage, in accordance with the
by the Bangko Sentral may act as trustee on provisions of the trust indenture or
any mortgage or bond issued by any agreement, the proceeds of the mortgage or
municipality, GOCC, or any body politic. bond issuance and such assets and funds of
b. Application for accreditation. An the issuing municipality, GOCC, or body
NBFI desiring to act as trustee on any politic as may be required to be delivered
mortgage or bond issued by any to the trustee under the trust indenture/
municipality, GOCC, or any body politic agreement, subject to the following
shall file an application for accreditation conditions/restrictions:
with the appropriate department of the SES. (1) Pending the utilization of such funds
The application shall be signed by the pursuant to the provisions of the trust
president or officer of equivalent rank of the indenture/agreement, the same shall only be
NBFI and shall be accompanied by the (i) deposited in any bank authorized to
following documents: accept deposits from the Government or
(1) certified true copy of the resolution government entities: Provided, That the
of the institution’s board of directors depository bank is not a subsidiary or affiliate
authorizing the application; and of the trustee NBFI, or (ii) invested in peso-
(2) a certification signed by the president denominated treasury bills acquired/
or officer of equivalent rank that the purchased from any securities dealer/entity,
institution has complied with all the other than the trustee or any of its unit/
qualification requirements for accreditation. department, its subsidiary or affiliate.
c. Qualification requirements. An NBFI (2) Investments of funds constituting or
applying for accreditation to act as trustee forming part of the sinking fund created as
on any mortgage or bond issued by any the primary source for the payment of the
municipality, GOCC, or any body politic principal and interests due the mortgage or
must comply with the requirements in bonds shall also be limited to deposits in
Appendix N-6. any bank authorized to accept deposits from
d. Independence of the trustee. An NBFI the Government or government entities and
is prohibited from acting as trustee of a investments in government securities that
mortgage or bond issuance if any elective are consistent with such purpose which
or appointive official of the LGU, GOCC, must be acquired/purchased from any
or body politic which issued said mortgage securities dealer/entity, other than the trustee
or bond and/or his related interests own or any of its unit/department, its subsidiary
such number of shares of the NBFI that will or affiliate.
bank/s, QB/s, and NBFI/s, other than (4) 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. NBFIs, other than investment house/s;
A concurrent officership in different FIs (5) Between a bank and not more than
may present more serious problems of self- two (2) of its subsidiary QB/s, and NBFI/s.
dealing and conflict of interest. Multiple Aforementioned concurrent officerships
positions may result in poor governance may be allowed, subject to the following
or unfair competitive advantage. conditions:
Considering the full-time nature of officer (a) that the positions do not involve any
positions, the difficulties of serving functional conflict of interests;
two (2) offices at the same time, and the (b) that any officer holding the positions
need for effective and efficient management, of president, chief executive officer, chief
the following rules shall be observed: operating officer or chief financial officer
As a general rule, there shall be no may not be concurrently appointed to any
concurrent officerships, including of said positions or their equivalent;
secondments, between QBs or between a (c) that the officer involved, or his spouse
QB and a bank or between a QB and an or any of his relatives within the first degree
NBFI. For this purpose, secondment shall of consanguinity or affinity or by legal
refer to the transfer/detachment of a person adoption, or a corporation, association or
from his regular organization for temporary firm wholly- or majority-owned or
assignment elsewhere where the seconded controlled by such officer or his relatives
employee remains the employee of the enumerated above, does not own in his/its
home employer although his salaries and own capacity more than twenty
other remuneration may be borne by the percent (20%) of the subscribed capital
host organization. stock of the entities in which the QB has
However, subject to prior approval of equity investments; and
the Monetary Board, concurrent (d) that where any of the positions
officerships, including secondments, may be involved is held on full-time basis, adequate
allowed in the following cases: justification shall be submitted to the
(1) Between a QB, other than an Monetary Board; or
investment house, and not more than two (6) Concurrent officership positions in
(2) of its subsidiary bank/s, QB/s, and the same capacity which do not involve
NBFI/s, other than investment house/s; management functions, i.e., internal
(2) Between two (2) QBs, or between auditors, corporate secretary, assistant
a QB, other than an investment house, and corporate secretary and security officer,
a bank, or between a QB and an NBFI: between a QB and one (1) or more of its
Provided, That at least twenty percent (20%) subsidiary QB/s and NBFI/s, or between a
of the equity of each of the banks, QBs or bank and one (1) or more of its subsidiary
NBFIs is owned by a holding company or a QB/s and NBFI/s, or between QB/s and/or
QB/bank and the interlocking arrangement NBFI/s or between bank/s, QB/s and
is necessary for the holding company or the NBFI/s, other than investment house/s:
QB/bank to provide technical expertise or Provided, That in the last two instances, at
managerial assistance to its subsidiaries/ least twenty percent (20%) of the equity of
affiliates; each of the banks, QBs and NBFIs is owned
(3) Between a QB and not more than by a holding company or by any of the
two (2) of its subsidiary QB/s, and banks/QBs within the group.
NBFI/s;
(2) Directors who have been absent or “(i)”, “(ii)” and “(iv)”;
who have not participated for whatever This disqualification shall be in effect
reasons in more than fifty percent (50%) of as long as the delinquency persists.
all meetings, both regular and special, of (4) Persons convicted for offenses
the board of directors during their involving dishonesty, breach of trust or
incumbency, or any twelve (12)-month violation of banking laws but whose
period during said incumbency. This conviction has not yet become final and
disqualification applies for purposes of the executory;
succeeding election; (5) Directors, trustees and officers of
(3) Persons who are delinquent in the closed institutions under the supervisory
payment of their obligations as defined and regulatory powers of the Bangko Sentral
hereunder: pending their clearance by the Monetary
(a) Delinquency in the payment of Board;
obligations means that an obligation of a (6) Directors and trustees disqualified
person with the institution where he/she is for failure to observe/discharge their duties
a director or officer, or at least two (2) and responsibilities prescribed under
obligations with other FIs, under different existing regulations. This disqualification
credit lines or loan contracts, are past due applies until the lapse of the specific period
pursuant to Secs. X306, 4306Q, 4306S and of disqualification or upon approval by the
4303P; Monetary Board on recommendation by the
(b) Obligations shall include all appropriate department of the SES of such
borrowings from any FI obtained by: directors’ election/re-election;
(i) A director, trustee or officer for his (7) Persons dismissed from employment
own account or as the representative or for cause. This disqualification shall be in
agent of others or where he/she acts as a effect until they have cleared themselves of
guarantor, endorser or surety for loans from involvement in the alleged irregularity or
such FIs; upon clearance, on their request, from the
(ii) The spouse or child under the Monetary Board after showing good and
parental authority of the director, trustee or justifiable reasons, or after the lapse of
officer; five (5) years from the time they were officially
(iii) Any person whose borrowings or advised by the appropriate department of the
loan proceeds were credited to the account SES of their disqualification;
of, or used for the benefit of a director, (8) Those under preventive suspension;
trustee or officer; and
(iv) A partnership of which a director, (9) Persons with derogatory records
trustee or officer, or his/her spouse is the with the NBI, court, police, Interpol and
managing partner or a general partner monetary authority (central bank) of other
owning a controlling interest in the countries (for foreign directors and officers)
partnership; and involving violation of any law, rule or
(v) A corporation, association or firm regulation of the Government or any of its
wholly-owned or majority of the capital of instrumentalities adversely affecting the
which is owned by any or a group of integrity and/or ability to discharge the
persons mentioned in the foregoing Items duties of a director/trustee/officer. This
included in the watchlisted file, before the made for the purpose of determining if
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 the SES may decide to recommend to the
shall make appropriate recommendation to Monetary Board a penalty lower than
the Monetary Board clearing said directors/ disqualification (e.g., reprimand,
officers when there is no pending case/ suspension, etc.) if, in its judgment the act
complaint or evidence against them. When committed or omitted by the director
there is evidence that a director/officer has officer concerned does not warrant
committed irregularity, the appropriate disqualification.
department of the SES shall make h. All other cases of disqualification,
recommendation to the Monetary Board that whether permanent or temporary shall be
his/her case be referred to the OSI for further elevated to the Monetary Board for approval
investigation and that he/she be included in and shall be subject to the procedures
the masterlist of temporarily disqualified provided in paragraphs “a”, “b”, “c” and “d”
persons until the final resolution of his/her above.
case. Directors/ officers with pending cases/ i. Upon approval by the Monetary
complaints shall also be included in said Board, the concerned director/officer shall
masterlist of temporarily disqualified persons be informed by the appropriate department
upon approval by the Monetary Board until of the SES in writing either by personal
the final resolution of their cases. If the service or through registered mail with
director/officer is cleared from involvement registry return receipt card, at his/her last
in any irregularity, the appropriate known address of his/her disqualification
department of the SES shall recommend to from being elected/appointed as director
the Monetary Board his/her delisting. On the officer in any FI under the supervision of
other hand, if the director/officer concerned BSP and/or of his/her inclusion in the
is found to be responsible for the closure of masterlist of watchlisted persons so
the institution, the concerned department disqualified.
of the SES shall recommend to the Monetary j. The board of directors of the
Board his/her delisting from the masterlist concerned institution shall be immediately
of temporarily disqualified persons and his/ informed of cases of disqualification
her inclusion in the masterlist of approved by the Monetary Board and shall
permanently disqualified persons. be directed to act thereon not later than
g. If the disqualification is based on the following board meeting. Within
dismissal from employment for cause, the seventy-two (72) hours thereafter, the
appropriate department of the SES shall, as corporate secretary shall report to the
much as practicable, endeavor to establish Governor of the BSP through the
the specific acts or omissions constituting appropriate department of the SES the
the offense or the ultimate facts which action taken by the board on the director/
resulted in the dismissal to be able to officer involved.
determine if the disqualification of the k. Persons who are elected or
director/officer concerned is warranted or appointed as director or officer in any of
not. The evaluation of the case shall be the BSP-supervised institutions for the first
time but are subject to any of the grounds permanently disqualified by the Monetary
for disqualification provided for under Board from holding a director/trustee/officer
Subsecs. 4143N.1 and 4143N.2, shall be position.
afforded the procedural due process (2) Disqualification File “B” (Temporary)
prescribed above. – Directors/trustees/officers/employees
l. Whenever a director/officer is cleared temporarily disqualified by the Monetary
in the process mentioned under Item “c” Board from holding a director/trustee/officer
above or, when the ground for position.
disqualification ceases to exist, he/she b. Inclusion of directors/trustees/
would be eligible to become director or officers/employees in the watchlist. Upon
officer of any bank, QB, trust entity or any recommendation by the appropriate
institution under the supervision of the department of the SES, the inclusion of
Bangko Sentral only upon prior approval by directors/trustees/officers/employees in
the Monetary Board. It shall be the watchlist disqualification files “A” and “B”
responsibility of the appropriate department on the basis of decisions, actions or reports
of the SES to elevate to the Monetary Board of the courts, institutions under the
the lifting of the disqualification of the supervisory and regulatory powers of the
concerned director/officer and his/her Bangko Sentral, NBI or any other
delisting from the masterlist of watchlisted administrative agencies shall first be
persons. approved by the Monetary Board.
(As amended by Circular No. 584 dated 28 September 2007) c. Notification of directors/trustees/
officers/employees. Upon approval by the
§ 4143N.4 Effect of possession of Monetary Board, the concerned director/
disqualifications. Directors/officers elected trustee/officer/employee shall be informed
or appointed possessing any of the through registered mail, with registry return
disqualifications as enumerated herein, receipt card, at his last known address of
shall vacate their respective positions his inclusion in the masterlist of watchlisted
immediately. persons disqualified to be a director/trustee/
officer in any institution under the
§ 4143N.5 (Reserved) supervisory and regulatory powers of the
Bangko Sentral.
§ 4143N.6 Watchlisting. To provide the d. Confidentiality. Watchlist files shall
Bangko Sentral with a central information be for internal use only of the Bangko Sentral
file to be used as reference in passing upon and may not be accessed or queried upon
and reviewing the qualifications of persons by outside parties including QBs, NBFIs with
elected or appointed as trustee or officer of trust authority, trust corporations and such
an institution under the supervisory and institutions under the supervisory and
regulatory powers of the Bangko Sentral, the regulatory powers of the Bangko Sentral,
SES shall maintain a watchlist of disqualified except with the authority of the person
directors/trustees/officers under the concerned (without prejudice to the
following procedures: authority of the Governor and the Monetary
a. Watchlist categories. Watchlisting Board to authorize release of the information)
shall be categorized as follows: and with the approval of the concerned SES
(1) Disqualification File “A” (Permanent) Department Head or SES Subsector Head
–Directors/trustees/officers/employees or the Deputy Governor, SES or the Governor,
Sec. 4157N Batas Pambansa Blg. 344 –An provision of express lanes is logistically
Act To Enhance The Mobility Of Disabled impossible in any particular branch or office
Persons By Requiring Certain Buildings, of any NBFI, said branch or office shall
Institutions, Establishments And Public ensure that senior citizens are accorded
Utilities To Install Facilities And Other priority service. The provision of express
Devices. In order to promote the realization lanes and/or priority service shall be made
of the rights of disabled persons to known to the general public through a
participate fully in the social life and the clearly written notice prominently displayed
development of the societies in which they in the transaction counters of all NBFI
live and the enjoyment of the opportunities branches and/or offices.
available to other citizens, no license or (Circular No. 805 dated 08 August 2013)
permit for the construction, repair or
renovation of public and private buildings Secs. 4159N - 4160N (Reserved)
for public use, educational institutions,
airports, sports and recreation centers and Sec. 4161N Philippine Financial Reporting
complexes, shopping centers or Standards/Philippine Accounting Standards.
establishments, public parking places, Statement of policy. It is the policy of
workplaces, public utilities, shall be granted the Bangko Sentral to promote fairness,
or issued unless the owner or operator transparency and accuracy in financial
thereof shall install and incorporate in such reporting. It is in this light that the Bangko
building, establishment or public utility, Sentral aims to adopt all PFRS and PAS
such architectural facilities or structural issued by the Financial Reporting Standards
features as shall reasonably enhance the Council (FRSC) to the greatest extent
mobility of disabled persons such as possible.
sidewalks, ramps, railings and the like. If Other NBFIs not performing quasi-
feasible, all such existing buildings, banking functions shall adopt the PFRS and
institutions, establishments, or public PAS which are in accordance with generally
utilities may be renovated or altered to accepted accounting principles in recording
enable the disabled persons to have access transactions and in the preparation of
to them. financial statements and reports to Bangko
Sentral. However, in cases where there are
Sec. 4158N Republic Act No. 9994 – An differences between Bangko Sentral
Act Granting Additional Benefits and regulations and PFRS/PAS as when more
Privileges to Senior Citizens, Further than one (1) option are allowed or certain
Amending Republic Act No. 7432 of 1992, maximum or minimum limits are prescribed
as Amended by Republic Act No. 9257 of by the PFRS/PAS, the option or limit
2003. To be able to give full support to the prescribed by Bangko Sentral regulations
improvement of the total well-being of the shall be adopted by the NBFIs.
elderly and their full participation in society, For purposes hereof, the PFRS/PAS shall
and to motivate and encourage them to refer to issuances of the FRSC and approved
contribute to nation building, senior citizens by the PRC.
shall be provided with express lanes in all Accounting treatment for prudential
branches and offices of NBFIs. If the reporting. For prudential reporting, FIs shall
adopt in all respect the PFRS and PAS except PAS compliant: Provided, That FIs shall
as follows: submit to the Bangko Sentral adjusting
a. In preparing consolidated financial entries reconciling the balances in the
statements, only investments in financial financial statements for prudential reporting
allied subsidiaries except insurance with that in the audited financial statements.
subsidiaries shall be consolidated on a line For purposes of preparing solo/
by-line basis; while insurance and non- separate financial statements, financial
financial allied subsidiaries shall be allied, non-financial allied and non-allied
accounted for using the equity method. subsidiaries/associates/joint ventures,
Financial/non-financial allied/non-allied including insurance subsidiaries/
associates shall be accounted for using the associates, shall be accounted for using
equity method in accordance with the the equity method, in accordance with
provisions of PAS 28 “Investments in PAS 27, as amended.
Associates”; and NBFIs, shall adopt the full provisions
b. FIs shall be required to meet the of PFRS 9 Financial Instruments only upon
Bangko Sentral recommended valuation its mandatory effectivity date of 01 January
reserves. 2018. Prior to said mandatory effectivity
Government grants extended in the date, financial instruments of NBFIs shall
form of loans bearing nil or low interest continue to be accounted for in
rates shall be measured upon initial accordance with the provisions of PAS 39.
recognition at its fair value (i.e., the present (As amended by Circular Nos. 915 dated 05 July 2016, 912
dated 27 May 2016, 572 dated 22 June 2007 and 494 dated 20
value of the future cash flows of the
September 2004)
financial instrument discounted using the
market interest rate). The difference Sec. 4162N Reports. NBFIs without quasi-
between the fair value and the net banking functions but are subsidiaries/
proceeds of the loan shall be recorded affiliates of banks and QBs and investment
under “Unearned Income-Others”, which houses without quasi-banking functions but
shall be amortized over the term of the with trust operations shall submit to the
loan using the effective interest method. appropriate department of the SES the
The provisions on government grants reports listed in Appendix N-1 in the forms
shall be applied retroactively to all as may be prescribed by the Deputy
outstanding government grants received. FIs Governor, SES.
that adopted an accounting treatment other Any change in, or amendment to, the
than the foregoing shall consider the articles of incorporation, by-laws or material
adjustment as a change in accounting policy, documents required to be submitted to the
which shall be accounted for in accordance Bangko Sentral shall be reported by
with PAS 8. submitting copies of the amended articles
Notwithstanding the exceptions in Items of incorporation, by-laws, or material
“a” and “b”, the audited financial statements documents to the appropriate department
required to be submitted to the Bangko of the SES within fifteen (15) days following
Sentral in accordance with the provisions such change.
of Sec. 4172N shall in all respect be PFRS/ (As amended by Circular No. 880 dated 22 May 2015)
(1) conduct discussions with (4) ensuring that the internal audit
management on the effectiveness of the function maintains an open communication
internal control system; with senior management, the audit
(2) review of evaluations made by the committee, external auditors, and the
audit committee on the assessment of supervisory authority;
effectiveness of internal control made by (5) reviewing discoveries of fraud and
management, internal auditors and external violations of laws and regulations as raised
auditors; by the internal audit function;
(3) ensure that management has (6) reporting to the board of directors
promptly followed up on recommendations the annual performance appraisal of the
and concerns expressed by auditors and head of the internal audit function;
supervisory authorities on internal control (7) recommending for approval of the
weaknesses; and board of directors the annual remuneration
(4) review and approve the of the head of the internal audit function
remuneration of the head and personnel of and key internal auditors;
the internal audit function. Said (8) appointing, reappointing or removing
remuneration shall be in accordance with the head of the internal audit function and
the FI’s remuneration policies and practices key internal auditors; and
and shall be structured in such a way that (9) selecting and overseeing the
these do not create conflicts of interest or performance of the internal audit service
compromise independence and objectivity. providers.
b. The audit committee shall be In particular, the audit committee shall
responsible for overseeing senior be responsible for:
management in establishing and (1) ensuring the independence of the
maintaining an adequate, effective and internal audit service provider;
efficient internal control framework. It shall (2) reporting to the board of directors
ensure that systems and processes are on the status of accomplishments of the
designed to provide assurance in areas outsourced internal audit activities,
including reporting, monitoring compliance including significant findings noted during
with laws, regulations and internal policies, the conduct of the internal audit;
efficiency and effectiveness of operations (3) ensuring that the internal audit
and safeguarding of assets. service provider comply with sound internal
The audit committee shall oversee the auditing standards such as the Institute of
internal audit function and shall be Internal Auditors’ International Standards for
responsible for: the Professional Practice of Internal Auditing
(1) monitoring and reviewing the and other supplemental standards issued by
effectiveness of the internal audit function; regulatory authorities/ government agencies,
(2) approving the internal audit plan, as well as with relevant code of ethics;
scope and budget; (4) ensuring that the audit plan is
(3) reviewing the internal audit reports aligned with the overall plan strategy and
and the corresponding recommendations to budget of the FI and is based on robust risk
address the weaknesses noted, discussing assessment; and
the same with the head of the internal audit (5) ensuring that the internal audit
function and reporting significant matters to service provider has adequate human
the board of directors; resources with sufficient qualifications and
skills necessary to accomplish the internal considered in assessing the risks to the
audit activities. achievement of said objectives. Further, the
c. Senior management shall be risk assessment shall cover all risks facing
responsible for maintaining, monitoring and the FI, which include, among others, credit;
evaluating the adequacy and effectiveness country and transfer; market; interest rate;
of the internal control system on an ongoing liquidity; operational; compliance; legal;
basis, and for reporting on the effectiveness and reputational risks.
of internal controls on a periodic basis. Effective risk assessment identifies and
Management shall develop a process that considers both internal (e.g., complexity of
identifies, measures, monitors and controls the organization’s structure, nature of the
risks that are inherent to the operations of FI’s activities and personnel profile) and
the FI; maintain an organizational structure external (e.g., economic conditions,
that clearly assigns responsibility, authority technological developments and changes in
and reporting relationships; ensure that the industry) factors that could affect the
delegated responsibilities are effectively internal control framework. The risk
carried out; implement internal control assessment shall be conducted at the level
policies and ensure that activities are of individual business units and across all
conducted by qualified personnel with the FI activities/groups/units and subsidiaries,
necessary experience and competence. in the case of a parent FI. Internal controls
Management shall ensure that FI personnel shall be revised to address any new or
undertake continuing professional previously uncontrolled or unidentified risks.
development and that there is an appropriate (Circular No. 871 dated 05 March 2015)
balance in the skills and resources of the front
office, back office, and control functions. § 4163N.3 Control activities. Control
Moreover, Management shall promptly activities shall form part of the daily activities
inform the internal audit function of the of the FI and all levels of personnel in the
significant changes in the FI’s risk management FI. Control activities are designed and
systems, policies and processes. implemented to address the risks identified
d. All personnel need to understand in the risk assessment process. These
their roles and responsibilities in the internal involve the establishment of control policies
control process. They should be fully and procedures, and verification that these
accountable in carrying out their are being complied with.
responsibilities effectively and they should FIs shall have in place control activities
communicate to the appropriate level of defined at every business level, which shall
management any problem in operations, include a system that provides for top and
action or behavior that is inconsistent with functional level reviews; checking
documented internal control processes and compliance with exposure limits and
code of ethics. follow-up on noncompliance; a system of
(Circular No. 871 dated 05 March 2015) approvals and authorizations, which shall
include the approval process for new
§ 4163N.2 Risk recognition and products and services; and a system of
assessment. An effective internal control verification and reconciliation.
system shall identify, evaluate and Control activities complement existing
continually assess all material risks that policies, procedures and other control
could affect the achievement of the FI’s systems in place such as, among others,
performance, information and compliance having clearly defined organizational
objectives. The potential for fraud shall be structure and reporting lines, and
function shall either be established in each further, That the internal audit activity shall
of the BSFI or centrally by the parent bank. not be outsourced to the FI’s own external
b. Internal audit function in group auditor/audit firm nor to internal audit
structures. In case each Bangko Sentral- service provider that was previously
supervised financial institution belonging to engaged by the FI in the same area intended
group structures has its own internal audit to be covered by the internal audit activity
function, said internal audit function shall that will be outsourced, without a one-year
be accountable to the financial institution’s “cooling off” period.
own board of directors and shall likewise (As amended by Circular No. 871 dated 05 March 2015)
report to the head of the internal audit
function of the parent bank within a § 4164N.1 (2014 - Status)
reasonable period and frequency prescribed Qualifications of the head of the internal
by the board of directors of the parent bank. audit function. The head of the internal audit
On the other hand, in case the parent function must have an unassailable integrity,
bank’s internal audit function shall cover the relevant education/experience/training, and
internal audit activities in the subsidiary or has an understanding of the risk exposures
affiliate BSFI institution, the board of of the FI, as well as competence to audit all
directors of the parent bank shall ensure that areas of its operations. He must also possess
the scope of internal audit activities is the following qualifications:
adequate considering the size, risk profile a. The head of the internal audit function
and complexity of operations of the of a UB or a KB must be a Certified Public
subsidiary or affiliate concerned. Accountant (CPA) or a Certified Internal
The establishment of internal audit Auditor (CIA) and must have at least five (5)
function centrally by the parent bank in years experience in the regular audit
group structures shall not fall under the (internal or external) of a UB or KB as
outsourcing framework as provided under auditor-in-charge, senior auditor or audit
Sec. X162. In this respect, the head of the manager. He must possess the knowledge,
internal audit function of the parent bank skills, and other competencies to examine
shall define the internal audit strategies, all areas in which the institution operates.
methodology, scope and quality assurance Professional competence as well as
measures for the entire group: Provided, That continuing training and education shall be
this shall be done in consultation and required to face up to the increasing
coordination with the respective board of complexity and diversity of the institution’s
directors and of the subsidiary or affiliate operations.
BSFI: Provided, further, That the board of b. The head of the internal audit
directors of the subsidiary or affiliate BSFI function of a complex TB, RB and Coop
shall remain ultimately responsible for the Bank; QB and trust entity must be a
performance of the internal audit activities. graduate of any accounting, business,
c. Outsourcing of internal audit finance or economics course with
activities. FIs may outsource, in accordance technical proficiency on the conduct of
with the Bangko Sentral regulations on internal audit and must have at least five
outsourcing, internal audit activities (5) years experience in the regular audit
covering all areas of its operations: Provided, (internal or external) of a TB, national
That the board of directors of the FI shall Coop Bank, QB or trust entity or, at least
remain ultimately responsible for the three (3) years experience in the regular
conduct of effective internal audit: Provided, audit (internal or external) of a UB or KB.
c. The head of the internal audit function accomplishments of the internal audit unit,
of a simple or non-complex TB, RB and including findings noted during the conduct
Coop Bank; and NSSLA must be a graduate of the internal audit as well as status of
of any accounting, business, finance or compliance of concerned departments/units;
economics course with technical c. To ensure that the internal audit
proficiency on the conduct of internal audit function complies with sound internal
and must have at least two (2) years auditing standards such as the Institute of
experience in the regular audit (internal or Internal Auditors’ International Standards for
external) of a UB, KB, TB, RB, Coop Bank, the Professional Practice of Internal Auditing
QB or NSSLA. and other supplemental standards issued by
A qualified head of the internal audit regulatory authorities/ government agencies,
function of a UB or a KB shall be qualified as well as with relevant code of ethics;
to audit TBs, RB, Coop Banks, QBs, trust d. To develop an audit plan based on
entities, NSSLAs, subsidiaries and affiliates robust risk assessment, including inputs
engaged in allied activities, and other from the board of directors, audit committee
financial institutions under Bangko Sentral and senior management and ensure that
supervision. A qualified internal auditor of such plan is comprehensive and adequately
a complex TB, RB, and Coop Bank; QB and covers regulatory matters. The head of the
trust entity shall likewise be qualified to internal audit function shall also ensure that
audit non-complex TB, RB and Coop Bank the audit plan, including any revisions
and NSSLA. thereto, shall be approved by the audit
The head of the internal audit function committee; and
shall be appointed/reappointed or replaced e. To ensure that the internal audit
with prior approval of the audit committee. function has adequate human resources
In cases, when the head of the internal audit with sufficient qualifications and skills
function will be replaced, the FI shall report necessary to accomplish its mandate. In this
the same and the corresponding reason for regard, the head of the internal audit
replacement, to the appropriate supervising function shall periodically assess and
department of the Bangko Sentral within five monitor the skill-set of the internal audit
(5) days from the time it has been approved function and ensure that there is an adequate
by the board of directors. development program for the internal audit
(As amended by Circular No. 871 dated 05 March 2015) staff that shall enable them to meet the
growing technical complexity of FI’s
§ 4164N.2 (2014 - Scope) Duties and operations.
responsibilities of the head of the internal (Circular No. 871 dated 05 March 2015)
audit function or the chief audit executive.
a. To demonstrate appropriate § 4164N.3 (2014 - Qualification
leadership and have the necessary skills to standards of the internal auditor)
fulfill his responsibilities for maintaining the Professional competence and ethics of the
unit’s independence and objectivity; internal audit function. The internal audit
b. To be accountable to the board of function shall be comprised of
directors or audit committee on all matters professional and competent individuals
related to the performance of its mandate who collectively have the knowledge and
as provided in the internal audit charter. The experience necessary in the conduct of an
head of the internal audit function shall effective internal audit on all areas of FI’s
submit a report to the audit committee or operations. The skill set of the internal
board of directors on the status of audit staff shall be complemented
circumstances that may impair the future events are likely to occur or are
independence of the external auditor; reasonably possible to occur.
(2) reconciliation statement between the The board of directors, in a regular or
AFS and the balance sheet and income special meeting, shall consider and act on
statement for FI and trust department the financial audit report and the certification
submitted to the Bangko Sentral including under oath submitted in lieu of the LOC and
copies of adjusting entries on the reconciling shall submit, within thirty (30) banking days
items; and (3) other information that may after receipt of the reports, a copy of its
be required by the Bangko Sentral. resolution to the appropriate department of
In addition, the external auditor shall be the SES. The resolution shall show, among
required by the FI to submit to the board of other things, the actions(s) taken on the
directors, a LOC indicating any material reports and the names of the directors
weakness or breach in the institution’s present and absent.
internal control and risk management The board shall likewise consider and
systems within thirty (30) calendar days act on the LOC and shall submit, within
after submission of the financial audit thirty (30) banking days after receipt thereof,
report. If no material weakness or breach a copy of its resolution together with said
is noted to warrant the issuance of an LOC to the appropriate department of SES.
LOC, a Certification under oath stating The resolution shall show the action(s) taken
that no material weakness or breach in on the findings and recommendations and,
the internal control and risk management the names of the directors present and
systems was noted in the course of the absent, among other things.
audit of the FI shall be submitted in its The LOC shall be accompanied by the
stead, together with the financial audit certification of the external auditor of the date
report. of its submission to the board of directors.
Material weakness shall be defined as Government-owned or -controlled FIs,
a significant control deficiency, or including their subsidiaries under Bangko
combination of deficiencies, that results in Sentral supervision which are under the
more than a remote likelihood that a material concurrent jurisdiction of the COA shall
misstatement of the financial statements will be exempt from the aforementioned
not be detected or prevented by the entity’s annual financial audit by an acceptable
internal control. A material weakness does external auditor: Provided, That when
not mean that a material misstatement has warranted by supervisory concern such as
occurred or will occur, but that it could material weakness/breach in internal
occur. A control deficiency exists when the control and/or risk management systems,
design or operation of a control does not the Monetary Board may, upon
allow management or employees, in the recommendation of the appropriate
normal course of performing their assigned department of the SES, require the
functions, to prevent or detect misstatements financial audit to be conducted by an
on a timely basis. A significant deficiency external auditor acceptable to the Bangko
is a control deficiency, or combination of Sentral, at the expense of the institution
control deficiencies, that adversely affects concerned: Provided, further, That when
the entity’s ability to initiate, authorize, circumstances such as, but not limited to,
record, process, or report financial data loans from multilateral FIs, privatization, or
reliably in accordance with generally public listing warrant, the financial audit of
accepted accounting principles. The term the concerned institution by an acceptable
more than remote likelihood shall mean that external auditor may also be allowed.
Sec. 4194N Market Risk Management The Bangko Sentral is aware of the
The guidelines on market risk management increasing diversity of financial
for QBs as shown in Appendix Q-43 shall products and that industry techniques
govern the market risk management of FIs for measuring and managing market risk
to the extent applicable. are continuously evolving. As such, the
The guidelines set forth the expectations guidelines are intended for general
of the Bangko Sentral with respect to the application; specific application will
management of market risk and are intended depend to some extent on the size,
to provide more consistency in how the risk- complexity and range of activities
focused supervision is applied to this risk. undertaken by individual FIs.
FIs are expected to have an integrated (Circular No. 544 dated 15 September 2006)
approach to risk management to identify,
measure, monitor and control risks. Market Sec. 4195N Liquidity Risk Management. The
risk should be reviewed together with other guidelines on liquidity risk management for
risks to determine overall risk profile. QBs as shown in Appendix Q-44 shall govern
the liquidity risk management of FIs to the business and operations of BSIs, such
extent applicable. technology usage and dependence, if not
The guidelines set forth the expectations properly managed, may heighten technology
of the Bangko Sentral with respect to the risks. The Bangko Sentral expects BSIs to
management of liquidity risk and are have the knowledge and skills necessary to
intended to provide more consistency in understand and effectively manage
how the risk-focused supervision function technology risks. These institutions are
is applied to this risk. FIs are expected to required to have an integrated approach to
have an integrated approach to risk risk management to identify, measure,
management to identify, measure, monitor monitor and control risks.
and control risks. Liquidity risk should be (Circular No. 808 dated 22 August 2013)
reviewed together with other risks to
determine overall risk profile. § 4196N.2 Purpose and scope. The
These guidelines are intended for enhanced guidelines aim to provide
general application; specific application will guidance in managing risks associated with
depend on the size and sophistication of a use of technology. The guidelines outlined
particular FI and the nature and complexity are based on international standards and
of its activities. recognized principles of international
(Circular No. 545 dated 15 September 2006)
practice for ITRM and shall serve as Bangko
Sec. 4196N Information Technology Risk Sentral’s baseline requirement for all BSIs.
Management (ITRM). The enhanced The guidelines shall apply to BSIs which
guidelines on ITRM keep abreast with the include banks, non-banks with quasi-
aggressive and widespread adoption of banking function (NBQB), non-bank
technology in the financial service industry electronic money issuers and other non-bank
and consequently strengthen existing institutions which under existing Bangko
Bangko Sentral framework for IT risk Sentral rules and regulations and special
supervision. ITRM should be considered a laws are subject to Bangko Sentral
component and integrated with the supervision and/or regulation. Moreover,
institutions’ risk management program. The subject guidelines shall also apply to BSIs
guidelines likewise provide practical plans with offshore data processing as may be
to address risks associated with emerging appropriate to their situation. The
trends in technology and growing concerns
framework covers different facets of ITRM,
on cyber security.
some of which are supplemented with
(Circular No 808 dated 22 August 2013)
detailed guidelines in Appendices Q-59a,
Q-59b, Q-59c, Q-59d, Q-59e and Q-59f.
§ 4196N.1 Declaration of policy. A
The Bangko Sentral shall keep the
growing number of Bangko Sentral
Appendices updated and, in the future, issue
supervised institutions (BSIs) employ the
advances in technology as leverage to offer additional regulations on new and emerging
innovative products, deliver fast and efficient products, services, delivery channels, and
service at affordable prices, and venture to other significant applications of technology.
new markets. Moreover, technology drives Subject guidelines, including the
the efficiency of operations and financial Appendices Q-59a, Q-59b, Q-59c, Q-59d,
accounting of these institutions, and Q-59e and Q-59f, are not “one-size-fits-all”
improves their decision-making process. As and implementation of these need to be risk-
technology becomes an integral part of the based and commensurate with size,
nature and types of products and services on Bangko Sentral’s IT rating system. A
and complexity of IT operations of the composite rating is assigned based on a “1”
individual BSIs. BSIs shall exercise sound to “4” numerical scale, as follows:
judgment in determining applicable
provisions relevant to their risk profile. 4 BSIs with this rating exhibit strong
(Circular No. 808 dated 22 August 2013) performance in every respect.
Noted weaknesses in IT are
§ 4196N.3 Complexity of IT risk profile minor in nature and can be easily
The Bangko Sentral shall risk profile all BSIs corrected during the normal
and classify them as either “Complex” or course of business.
“Simple”. The assessment of complexity of
IT risk profile is based largely on the degree 3 BSIs with this rating exhibit
of adoption of technology and considers satisfactory performance but may
size, nature and types of products and demonstrate modest weaknesses
services and complexity of IT operations in operating performance,
among the risk factors. In assessing IT monitoring, management
operations, the nature of IT organization, processes or system development.
degree of automation of core processes and
applications and extent and reach of online 2 BSIs with this rating exhibit less
branch network are likewise considered. than satisfactory performance and
A BSI with “Complex” IT risk profile is require considerable degree of
highly dependent on technology. IT supervision due to a combination
components are integral to the core business of weaknesses that may range
activities that major weaknesses on IT from moderate to severe.
systems, maintenance and support, if not
properly addressed, may cause operational 1 BSIs with this rating exhibit
inefficiencies, business disruptions and/or deficient IT environment that may
financial losses. On the other hand, a BSI impair the future viability of the
with “Simple” IT risk profile relies or entity, thereby requiring
depends less on technology in the immediate remedial action.
(Circular No. 808 dated 22 August 2013)
operations of its business, thus, is not
affected or lowly impacted by IT-related
§ 4196N.5 Definition of terms. In these
risks.
guidelines, terms are used with the
Non-bank institutions which under
following meanings:
existing Bangko Sentral rules and regulations
and special laws are subject to Bangko Terminology Definitions
Sentral supervision/regulation shall be
Board of The governing body
notified in writing of their classification
Directors elected by the
immediately after 14 September 2013.
(Board) stockholders that
(Circular No. 808 dated 22 August 2013)
exercises the corporate
powers of a locally
§ 4196N.4 IT rating system. The
incorporated BSI. In
Bangko Sentral, in the course of its on-site
case of a BSI
examination activities, shall evaluate BSIs’
incorporated or
ITRM system and measure the results based
established outside the
management unit or to a group of persons risk, it should rank the risks and prioritize
from different units collectively performing its response. The probability of occurrence
the tasks defined for this function. and the magnitude of impact provide the
The function should have a formal foundation for reducing risk exposures or
technology risk acknowledgement and establishing mitigating controls for safe,
acceptance process by the owner of risk to sound, and efficient IT operations
help facilitate the process of reviewing, appropriate to the complexity of the
evaluating and approving any major organization. Periodic risk assessment
incidents of non-compliance with IT control process should be done at the enterprise-
policies. The process can be supported by wide level and an effective monitoring
the following: program for the risk mitigation activities
• a description of risk being should be manifested through mitigation or
considered for acknowledgement by owner corrective action plans, assignment of
of risk and an assessment of the risk that is responsibilities and accountability and
being accepted; management reporting.
• identification of mitigating controls; 3. IT controls implementation. Controls
• formulation of a remedial plan to comprise of policies, procedures, practices
reduce risk; and and organizational structures designed to
• approval of risk acknowledgement provide reasonable assurance that business
from the owner of the risk and senior objectives will be achieved and undesired
management. events will be mitigated. Management
ITRM processes should be integrated should establish an adequate and effective
into the enterprise-wide risk management system of internal controls based on the
processes to allow BSIs to make well- degree of exposure and the potential risk of
informed decisions involving business plans loss arising from the use of IT. Controls for
and strategies, risk responses, risk tolerance IT environment generally should address the
levels and capital management, among overall integrity of the environment and
others. should include clear and measurable
2. Risk identification and assessment. performance goals, the allocation of specific
BSIs should maintain a risk assessment responsibilities for key project
process that drives response selection and implementation, and independent
controls implementation. An effective IT mechanisms that will both measure risks
assessment process begins with the and minimize excessive risk-taking. BSI
identification of the current and prospective Management should implement satisfactory
IT risk exposures arising from the control practices that address the following
institution’s IT environment and related as part of its overall IT risk mitigation
processes. The assessments should identify strategy: 1) Information security; 2) Project
all information assets, any foreseeable management/development and acquisition
internal and external threats to these assets, and change management; 3) IT operations;
the likelihood of the threats, and the 4) IT outsourcing/Vendor management; and
adequacy of existing controls to mitigate the 5) Electronic banking, Electronic payments,
identified risks. Management should Electronic money and other Electronic
continually compare its risk exposure to the products and services.
value of its business activities to determine a. Information security. Information is
acceptable risk levels. a vital asset that must be managed to support
Once management understands the BSI management in making decisions. BSIs
institution’s IT environment and analyzes the should have a comprehensive information
outsource should fit into the institution’s accelerate, innovative electronic products
overall strategic plan and corporate and services are foreseen to bring more
objectives and said arrangement should accessibility and efficiency. However, BSIs
comply with the provisions of existing may be confronted with challenges relating
Bangko Sentral rules and regulations on to capacity, availability and reliability of the
outsourcing. Although the technology electronic services. Likewise, fraudulent
needed to support business objectives is activities via electronic channels are also
often a critical factor in deciding to rising in number.
outsource, managing such relationships BSIs should protect customers from
should be viewed as an enterprise-wide fraudulent schemes done electronically.
corporate management issue, rather than a Otherwise, consumer confidence to use
mere IT issue. electronic channels as safe and reliable
While IT outsourcing transfers method of making transactions will be
operational responsibility to the service eroded. To mitigate the impact of cyber
provider, the BSIs retain ultimate fraud, BSIs should adopt aggressive security
responsibility for the outsourced activity. posture such as the following:
Moreover, the risks associated with the i. The entire ATM system shall be
outsourced activity may be realized in a upgraded/converted to allow adoption of
different manner than if the functions were end-to-end Triple DES (3DES) encryption
inside the institution resulting in the need standards by 01 January 2015. The 3DES
for controls designed to monitor such risks. encryption standards shall cover the whole
BSI management should implement an ATM network which consists of the host
effective outsourcing oversight program that processors, switches, host security module
provides the framework for management to (HSM), automated teller machines (ATMs),
understand, monitor, measure, and control point-of-sale (POS) terminals and all
the risks associated with outsourcing. BSIs communication links connected to the
outsourcing IT services should have a network;
comprehensive outsourcing risk ii. ATMs to be installed after
management process which provides 14 September 2013 should be 3DES
guidance on the following areas: 1) risk compliant; and
assessment; 2) selection of service iii. ATMs, POS terminals and payment
providers; 3) contract review; and cards are also vulnerable to skimming
4) monitoring of service providers. Detailed attacks due to the lack of deployment of
guidelines/standards on IT Outsourcing/ globally recognized EMV enabled
Vendor Management and on the adoption technology by BSIs. Magnetic stripe only
of outsourced cloud computing model are ATMs, POS Terminals and cards are largely
shown in Appendix Q-59e. defenseless against modern fraud
e. Electronic products and services. The techniques. Therefore, all concerned BSIs
evolution in technology revolutionized the should shift from magnetic stripe technology
way banking and financial products and to EMV chip-enabled cards, POS Terminals
services are delivered. Physical barriers and ATMs. The entire payment card
were brought down enabling clients to network should be migrated to EMV by
access their accounts, make transactions or 01 January 2017. This requirement shall
gather information on financial products and cover both issuing and acquiring programs
services anywhere they are, at any time of of concerned BSIs. A written and Board-
the day and at their own convenience. As approved EMV migration plan should be
development in technology continues to submitted to Bangko Sentral within six (6)
months from 22 August 2013. Likewise, the areas and provide assurance that IT
detailed guidelines covering subject EMV functions are meeting the objectives. Areas
requirement shall be issued separately. to consider include system and network
Detailed guidelines/standards on availability, data center availability, system
Electronic Products and Services are shown reruns, out of balance conditions, response
in Appendix Q-59f. time, error rates, data entry volumes, special
4. Risk measurement and monitoring. requests, and problem reports.
BSI Management should monitor IT risks Management should properly define
and the effectiveness of established controls services and service level agreements (SLA)
through periodic measurement of IT that must be monitored and measured in
activities based on internally established terms understandable to the business units.
standards and industry benchmarks to assess SLA with business units and IT department
the effectiveness and efficiency of existing should be established to provide a baseline
operations. Timely, accurate, and complete to measure IT performance.
risk monitoring and assessment reports c. Quality assurance/quality control. BSI
should be submitted to management to should establish quality assurance (QA) and
provide assurance that established controls quality control (QC) procedures for all
are functioning effectively, resources are significant activities, both internal and
operating properly and used efficiently and external, to ensure that IT is delivering value
IT operations are performing within to business in a cost effective manner and
established parameters. Any deviation noted promotes continuous improvement through
in the process should be evaluated and ongoing monitoring. QA activities ensure
management should initiate remedial action that product conforms to specification and
to address underlying causes. The scope and is fit for use while QC procedures identify
frequency of these performance weaknesses in work products and to avoid
measurement activities will depend on the the resource drain and expense of redoing
complexity of the BSI’s IT risk profile and a task. The personnel performing QA and
should cover, among others, the following: QC reviews should be independent of the
a. Performance vis-à-vis approved IT product/process being reviewed and use
strategic plan. As part of both planning and quantifiable indicators to ensure objective
monitoring mechanisms, BSI management assessment of the effectiveness of IT
should periodically assess its uses of IT as activities in delivering IT capabilities and
part of overall business planning. Such an services.
enterprise-wide and ongoing approach d. Policy compliance. BSIs should
helps to ensure that all major IT projects develop, implement, and monitor
are consistent with the BSI’s overall strategic processes to measure IT compliance with
goals. Periodic monitoring of IT their established policies and standards as
performance against established plans shall well as regulatory requirements. In addition
confirm whether IT strategic plans remain to the traditional reliance on internal and
in alignment with the business strategy and third party audit functions, BSIs should
the IT performance supports the planned perform self-assessments on a periodic
strategy. basis to gauge performance which often
b. Performance benchmarks/service lead to early identification of emerging or
levels. BSIs should establish performance changing risks requiring policy changes and
benchmarks or standards for IT functions updates.
and monitor them on a regular basis. Such e. External assessment program.
monitoring can identify potential problem Complex BSIs may also seek regular
assurance that IT assets are appropriately § 4196N.9 Sanctions and penalties. BSIs
secured and that their IT security risk should make available IT policies and
management framework is effective. This procedures on the foregoing and other
may be executed through a formal external related documents during the on-site
assessment program that facilitates a examination as well as provide a copy
systematic assessment of the IT security risk thereof when written request was made to
and control environment over time. determine their compliance with this Section.
(Circular No. 808 dated 22 August 2013) Any violation of the provisions of this
Section, its appendices and annexes, shall
§ 4196N.8 Reports. To enable the Bangko be subject to the monetary and non-
Sentral to regularly monitor IT risk profile and monetary sanctions provided under
electronic products, services, delivery Section 37 of R.A. No. 7653. Enforcement
channels, processes and other relevant actions shall be imposed on the basis of
information regarding the use of technology, the overall assessment of BSIs’ ITRMS.
BSIs are required to submit the following: Whenever a BSI’s ITRMS is rated “1”
1. Annual IT Profile, electronically to the pursuant to Subsection 4196N.4, the
Bangko Sentral Supervisory Data Center following additional sanctions may be
(SDC) within twenty five (25) days from the imposed:
end of reference year (Guidelines to be 1. Suspension/revocation of authority to
observed in the preparation and submission provide electronic products and services; and
of this report was issued under Bangko 2. Prohibition against offering/
Sentral Memorandum to All Banks No. provision of new electronic products and
M-2012-011 dated 17 February 2012); services.
2. Report on breach in information (Circular No. 808 dated 22 August 2013)
security, especially incidents involving the
use of electronic channels, pursuant to the Sec. 4197N Credit Risk Management;
provisions of Items “a” or “b” of Appendix Statement of Policy1. It is the policy of the
Q-60 following the guidelines provided in Bangko Sentral to ensure that FIs under its
Item “d” thereof. Depending on the nature supervision have adequate and effective
and seriousness of the incident, Bangko credit risk management systems
Sentral may require the BSI to provide commensurate to their credit risk-taking
further information or updates on the activities. Towards this end, the following
reported incident until the matter is finally guidelines on credit risk management set
resolved; and forth the expectations of the Bangko Sentral
3. Notification letter to the Core with respect to the comprehensive
Information Technology Specialist Group management of credit risk. The guidelines
(CITSG) of the Bangko Sentral of disruption of IT further articulate sound principles and
services/operations that resulted to the activation practices that shall be embedded in the
of disaster recovery and business continuity credit risk management framework of FIs
plan immediately upon activation of the plan. and shall cover the following areas:
(Circular No. 808 dated 22 August 2013) a) establishing an appropriate credit risk
1
FIs shall be given six (6) months from 19 November 2014 to: (1) perform a gap analysis of their current
practices vis-à-vis this Section and (2) propose an action plan duly approved by the board of directors to
achieve full compliance within a reasonable period of time but in no case longer than two (2) years from
19 November 2014.
All action plans shall be subject to acceptance by the Bangko Sentral through the Deputy Governor,
Supervision and Examination Sector. All requests for regulatory relief shall be subject to prior Monetary
Board approval.
Any FI that fails to comply with the obligations prescribed during this transition period shall be subject to
the imposition of appropriate monetary and/or non-monetary sanctions.
N Regulations Manual of Regulations for Non-Bank Financial Institutions
Page 28l
§§ 4197N - 4197N.2
14.12.31
environment; b) operating under a sound The principles set forth in the credit risk
credit granting process; and c) maintaining management guidelines shall be used in
appropriate credit administration, determining the adequacy and effectiveness
measurement, monitoring and control of an FI’s credit risk management process
processes over credit risk. While FIs may and adequacy of capital relative to exposure.
employ different approaches in the The Bangko Sentral shall consider the
management of their credit risk, the Bangko following factors:
Sentral expects that all these areas are a. The FI’s business strategies,
effectively addressed. operating environment, and the
For purposes of these guidelines, FIs competencies of its officers and personnel;
refer to UBs, KBs, TBs, RB and Coop Banks and
and their respective credit-granting financial b. The major sources of credit risk
subsidiaries (if any) as well as stand-alone exposure and the complexity and level of
QBs. risk posed by the assets, liabilities, and off-
(Circular No. 855 dated 29 October 2014) balance sheet activities.
(Circular No. 855 dated 29 October 2014)
§ 4197N.1 Evaluation of credit risk
management system. The Bangko Sentral A. ESTABLISHING AN
shall evaluate the FI’s credit risk APPROPRIATE CREDIT RISK
management system not only at the level of ENVIRONMENT
individual legal entities but also across the
subsidiaries within the consolidated
§ 4197N.2 Role of the board and senior
banking organization. It will not restrict the
management
scope of the credit risk-taking activities of
a. Board of directors. The board of
an FI, so long as the FI is authorized to
directors shall be responsible for the
engage in such activities and:
approval and regular review of credit risk
• Understands, measures, monitors and
strategy and credit policy, as well as the
controls the risk assumed;
oversight of the implementation of a
• Adopts risk management practices
comprehensive and effective credit risk
whose sophistication and effectiveness are
management system appropriate for the size,
commensurate to the risk being taken; and
complexity and scope of operations of an
• Maintains capital commensurate with
FI. The board shall ensure that the system
the risk exposure assumed.
provides for adequate policies, procedures
If the Bangko Sentral determines that an
and processes to identify, measure, monitor
FI’s risk exposures are excessive relative to
and control all credit risks inherent in an
the FI’s capital, or that the risk assumed is
FIs’ products and activities, both at the
not well-managed, the Bangko Sentral will
individual and portfolio levels on a
direct the FI to reduce its exposure to an
consistent and continuing basis; and that an
appropriate level and/or to strengthen its
independent assessment of the system is
risk management systems. In evaluating the
periodically performed, the results of which
above parameters, the Bangko Sentral
shall be reported to it or to a board-level
expects FIs to have sufficient knowledge,
committee for appropriate action.
skills and appropriate system and
b. Senior management. Senior
technology necessary to understand and
management shall be responsible for
effectively manage their credit risk
ensuring that the credit risk-taking activities
exposures.
risk management system of the FI. The scope acceptable level of diversification and
of internal audit shall include the evaluation concentration; and consider the risk/reward
of the independence and overall trade-off by factoring in, to the greatest
effectiveness of the credit review function. extent possible, price and non-price (e.g.
i. Regardless of the organizational collateral, restrictive covenants, etc.) terms
structure that an FI adopts, the board shall as well as likely downside scenarios and
ensure that the aforementioned key their possible impact on the obligors.
functions are considered and independence The FI shall likewise define acceptable
and control oversight functions are effective and unacceptable types of credits, clients,
to avoid or address any potential conflict of activities, transactions and behaviors that
interest. could result or potentially result in conflict
j. Personnel or staff involved in all of interest, personal gain at the expense of
phases of the credit risk management the FI, or unethical conduct.
process shall be qualified, competent and b. The credit risk strategy shall consider
have the necessary training and experience the cyclical aspects of the economy and the
to exercise prudent judgment in assessing, varying effects of the economic cycle on the
managing and/or controlling credit risk, and credit portfolio of the FI.
a solid understanding of an FI’s strategic (Circular No. 855 dated 29 October 2014)
direction, policies, procedures, risk
tolerance and limits. Their qualification § 4197N.5 Credit policies, processes
standards, roles and responsibilities shall and procedures. FIs shall have in place a
be clearly defined in the credit operating sound, comprehensive and clearly defined
policies and procedures manual of the FI. credit policies, processes and procedures
The board and senior management shall consistent with prudent standards, practices,
ensure that adequate resources and and relevant regulatory requirements
appropriate level of staffing are allocated to adequate for the size, complexity and scope
execute all kinds of credit activities. of an FI’s operations. The board-approved
(Circular No. 855 dated 29 October 2014) policies, processes and procedures shall
cover all phases of the credit risk
§ 4197N.4 Credit risk strategy. The management system.
credit risk strategy must reflect the FI’s a. FIs shall establish appropriate
profitability and portfolio growth targets, processes and procedures to implement the
and must be consistent with the credit risk credit policy and strategy. These processes
tolerance and overall corporate strategy and and procedures, as well as the credit policy,
business goals of the FI. shall be documented in sufficient detail,
a. In formulating the credit risk effectively communicated throughout the
strategy, the FI shall articulate the desired organization to provide guidance to staff,
market segments and types of credit and periodically reviewed and updated to
exposures (e.g., commercial credits, retail take into account new activities and
credits, real estate, investments, trading products, as well as new lending
products, credit commitments and/or approaches. Subsequent major changes
guarantees); specific characteristics of must be approved by the board.
clients, economic sector, geographical b. The credit policy shall likewise
location; the portfolio mix that reflects the provide for the maintenance of an audit trail
documenting that the credit risk § 4197N.7 Credit granting and loan
management process was properly observed evaluation/analysis process and
and identifying the unit, individual(s) and/ underwriting standards. Consistent with
or committee(s) providing input into the safe and sound banking practice, an FI shall
process. grant credits only in amounts and for the
c. The credit culture, which reflects the periods of time essential for the effective
FI’s credit values, beliefs and behaviors, completion of the activity to be financed and
shall likewise be articulated in the credit after ascertaining that the obligor1 is capable
policy and communicated to credit officers of fulfilling his commitments to the FI.
and staff at all levels through the strategic Towards this end, an FI shall establish well-
plan. The credit practices shall be assessed defined credit-granting criteria and
periodically to ensure that the officers and underwriting standards, which shall include
staff conform to the desired standard and a clear indication of the FI’s target market
value. and a thorough understanding of the obligor
(Circular No. 855 dated 29 October 2014) or counterparty, as well as the purpose and
structure of the credit and its source of
repayment.
B. OPERATING UNDER A SOUND a. FIs shall conduct comprehensive
CREDIT GRANTING PROCESS assessments of the creditworthiness of their
obligors, and shall not put undue reliance
§ 4197N.6 Credit approval process on external credit assessments. Credit shall
The approval process for new credits as well be granted on the basis of the primary source
as the amendment, renewal and refinancing of loan repayment or cash flow, integrity
of existing credit exposures shall be aligned and reputation of the obligor or counterparty
with the credit risk management structure as well as their legal capacity to assume the
and clearly articulated in an FI’s written liability.
credit policy. The process shall include b. Depending on the type of credit
the different levels of appropriate exposure and the nature of the credit
approving authority and the relationship, the factors to be considered
corresponding approving authority limits, and documented in approving credits shall
which shall be commensurate with the risks include, but are not limited to, the following:
of the credit exposures, as well as expertise (1) The purpose of the credit which
of the approving individuals involved. It shall shall be clearly stated in the credit
also include an escalation process where application and in the contract between the
approval for restructuring of credits, policy FI and the obligor;
exceptions or excesses in internal limits (2) The current risk profile (including
is escalated to units/officer with higher the nature and aggregate amounts of risks,
authorities. Further, there shall be proper risk rating or credit score, pricing
coordination of relevant units and information) of the borrower, collateral,
individuals and sufficient controls to other credit enhancements and its sensitivity
ensure acceptable credit quality at to economic and market developments;
origination. (3) The sources of repayment,
(Circular No. 855 dated 29 October 2014) repayment history and current capacity to
1
Obligor refers to an individual or entity that owes another person or entity a certain debt or duty. For
purposes of these guidelines, obligor can also be used interchangeably with borrower or debtor.
repay based on financial analysis from also analyze issuer risk. For treasury and
historical financial trends and indicators capital market activities, the structure of
such as equity, profitability, turnover, products and transactions shall be analyzed
leverage, and debt servicing ability via cash to determine the source and volatility of
flow projections, under various scenarios; credit exposure.
(4) For commercial credits, the f. When granting consumer credits, an
borrower’s business expertise, its credit FI shall conduct its credit assessment in a
relationships including its shareholders and holistic and prudent manner, taking into
company directors, as applicable, and the account all relevant factors that could
status of the borrower’s economic sector influence the prospect for the loan to be
and its track record vis-à-vis industry peers; repaid according to its terms and conditions.
(5) The proposed terms and conditions This shall include an appropriate
of the credit (i.e., type of financing, tenor, consideration of the potential obligor’s other
repayment structure, acceptable collateral) debt obligations and repayment history and
including covenants designed to limit an assessment of whether the loan can be
changes in the future risk profile of the expected to be repaid from the potential
obligor; obligor’s own resources without causing
(6) Use of credit reports; and undue hardship and over-indebtedness.
(7) Where applicable, the adequacy, Adequate checkings, including with relevant
valuation and enforceability of collateral or credit bureaus, shall be made to verify the
guarantees. obligor’s credit applications and repayment
c. In performing the financial analysis, records.
FIs shall use, to the extent available, credible g. FIs shall factor into their credit-
audited financial statements and other granting decisions the likelihood of
relevant documents and sources. FIs may providing allowance for identified and
opt to use financial information/data from expected losses and holding adequate
other sources provided that the process for capital to absorb unexpected losses for
arriving at such disposition and an credits with apparent weaknesses.
evaluation of how much reliance or value h. FIs may utilize physical collateral
was attached into the financial information (like real estate), financial guarantees and
used is clearly articulated and documented. other instruments to help mitigate risk in
d. When participating in loan credit exposures. However, these shall not
syndications, an FI shall not place undue substitute for a comprehensive assessment
reliance on the credit analysis done by the of the obligor or fully compensate for
lead underwriter and shall perform its own insufficient information.
analysis and review of syndicate terms. It i. FIs shall establish adequate policies
shall analyze the risk and return on in determining the acceptability of various
syndicated loans in the same manner as forms of credit mitigants and appropriate
directly sourced loans and ensure that the collateral value limits; procedures for
loan is consistent with its credit risk regularly assessing the value of physical
strategy. collaterals and availability of financial
e. When an FI purchases securities guarantees; and a process to ensure that
issued by an obligor that is different from these are, and continue to be, enforceable,
the counterparty (e.g. asset swaps), it shall realizable and marketable. Finally, FIs need
to consider that the realizable value of the adequate policies, procedures and controls
physical collateral or the quality of financial before being introduced or undertaken.
guarantees and other credit mitigants may (Circular No. 855 dated 29 October 2014)
be impaired by the same factors that have
led to the diminished recoverability of the § 4197N.8 Renewal or extension of
credit. maturity date of credits. FIs shall adopt and
In the case of guarantees, the level of adhere to the following explicit standards
coverage being provided in relation to the that control the use of renewals and
credit quality, financial and legal capacity extensions of maturity date of credits:
of the guarantor shall be evaluated. a. Credits and other
For credit exposures secured by accommodations shall only be renewed or
deposits, FIs shall likewise require obligors its maturity date extended:
(1) Upon re-establishment of the
to provide a written waiver of his rights
creditworthiness of the obligor using the
under existing laws to the confidentiality of
same credit-granting criteria for the
his deposits, and make this available for
evaluation and approval of new loans; and
inspection and/or examination by the
(2) When the corresponding accrued
appropriate department of the SES.
interest receivable has been paid.
j. Netting arrangements also mitigate
b. A policy on clean-up of principal,
risks, especially in interbank and off-balance
either partial or full, shall be established and
sheet transactions. In order to actually
appropriate controls put in place to prevent
reduce risk, such agreements need to be
continuous renewal or extension over a long
sound and legally enforceable in all relevant
period of time without reduction in
jurisdictions.
principal; otherwise, such credits and other
k. For more complex credit risk accommodations shall be subject to
exposures, (e.g., asset securitization, credit classification and allowance for credit
derivatives, credit-linked notes, credit losses.
granted internationally, etc.), a more c. Specific and reasonable standards
sophisticated tool shall be used for shall be provided for renewals or extensions
identifying, measuring, monitoring and of certain types of credit exposures that take
controlling credit, country and transfer risks. into consideration the following factors:
Each complex credit risk product or activity, (1) Borrower’s normal operating, trade
especially those that are new to banking, or production cycle, in the case of credit
shall be subject to a thorough analysis in exposures for working capital, trade
addition to the regular assessment that is financing, production, and/or other similar
done with traditional credit-granting purposes to ensure a realistic repayment
activities. schedule;
l. For new products and activities, the (2) Transaction history such as frequency
credit risk shall be appropriately identified of renewal or extension, rate of utilization
and managed through a formal risk of facilities granted, and business
assessment program. FIs shall ensure that requirements;
they fully understand the risk involved in (3) Status of collateral and other
new products and activities and put in place guarantees in the case of secured credit
exposures, including requiring the FI to re- government, banks and other FIs, corporate
appraise the property especially when there and individual borrowers, including
is a material change in market conditions exchanges, electronic communication
or in the physical aspects of the property networks or ECNs and clearing houses);
that threatens the collateral protection; and · A group of connected borrowers/
(4) Age of the account, utilization rate, counterparties (includes aggregating
average balance carried, delinquency status, exposures to groups of accounts exhibiting
payment history, and account profitability financial or economic interdependence,
(if available) in the case of retail credits. including corporate or non-corporate,
(Circular No. 855 dated 29 October 2014) where they are under common ownership
or control or with strong connecting links,
§ 4197N.9 Credit limits, large e.g. common management, familial ties);
exposures, and credit risk concentrations · Individual industry sectors;
An FI is exposed to various forms of credit · Geographic regions or countries;
risk concentration which if not properly · Loan structure, collateral, and tenor;
managed, monitored and controlled may and
cause significant losses that could threaten · Various types of investments,
its financial strength and undermine public including other credit instruments in the
confidence in the FI. Concentration risk can trading books and off-balance sheet
arise from excessive exposures to individual transactions.
obligors, groups of connected counterparties c. Defining limit structure on each of
and groups of counterparties with similar the foregoing categories. Limits shall
characteristics (e.g., counterparties in specific meaningfully aggregate credit exposures,
geographical locations, economic or industry both in the banking, trading book and on
sectors) or entities in a foreign country or a and off the balance sheet and shall be
group of countries with strongly interrelated reasonable in relation to the FI’s level of risk
economies. tolerance, historical loss experience, capital
While concentration of credit risks is and resources. Such limits can be based in
inherent in banking and cannot be totally part on the internal risk rating assigned to
eliminated, this can be mitigated by adopting the obligor or counterparty.
policies and processes that would limit and d. Procedures shall ensure that limits
control credit exposures and employing are not exceeded and are clearly
portfolio diversification strategies. Policies communicated, periodically reviewed and
and procedures may include, but are not modified, as appropriate. Should exceptions
limited to the following: to policy be allowed, the circumstances
a. Policies and procedures for under which limits may be exceeded and
identifying, reviewing, managing and the party authorized to approve such
reporting large exposures and concentration excesses shall be clearly articulated in the
risks of the FI. credit policy.
b. Segmenting its portfolio into the (Circular No. 855 dated 29 October 2014)
following diverse categories or such other
segmentations consistent with the FI’s credit § 4197N.10 Credits granted to related
strategy. parties. Consistent with sound corporate
· Various types of borrowers/ governance practices, the board and senior
counterparties or loan category (e.g., management shall articulate and implement
FIs shall have sophisticated rating (4) The board shall receive sufficient
systems involving sufficiently granular information to oversee management’s
rating grades. Simple FIs may adopt simpler implementation of the process. Migration
systems. In all cases, however, FIs shall analysis/transition matrix of ratings shall be
demonstrate the influence of the internal risk regularly reported to show the actual
rating system in the following important performance of the rating system over time;
functions: i) credit approval and (5) The risk rating system shall
underwriting; ii) loan pricing; encompass an adequate number of ratings.
iii) relationship management and credit FIs shall ensure that “pass” credits are
administration; iv) allowance for credit sufficiently differentiated and more precisely
losses and capital adequacy; and v) portfolio defined. There shall be a proper process to
management and board reporting. map the internal rating system to regulatory
Internal risk rating systems shall classification. The FI shall readjust the
generally observe the following standards: mapping after every review of its internal
(1) It must be operationally integrated risk rating methodology. For FIs whose
into the FI’s internal credit risk management internal rating systems have several pass
process. Its output shall accordingly be an grades, special mention loans may pertain
integral part of the process of evaluation and to several risk ratings while substandard,
review of prospective and existing doubtful and loss generally correspond to
exposures. Credit underwriting criteria shall the lowest three risk ratings;
become progressively more stringent as (6) Risk ratings must be reasonable,
credit rating declines; timely and dynamic. Ratings shall be
(2) It must be fully documented and reviewed at least annually and shall be
shall address topics such as coverage, rating modified whenever the borrower’s
criteria, responsibilities of parties involved in creditworthiness changes;
the ratings process, definition of what (7) The rating criteria shall reflect an
constitutes a rating exception, parties that have established blend of qualitative (e.g., the
authority to approve exceptions, frequency of quality of management, willingness to
rating reviews, and management oversight of repay, etc.) and quantitative (e.g., cash flow,
the rating process. In addition, FIs must profitability, and leverage) factors. The
document the rationale for its choice of rating criteria for assigning each rating shall be
criteria and must be able to provide analyses clearly defined;
demonstrating that the rating criteria and (8) The rating policy shall indicate a
procedures are likely to result in ratings that time horizon for the risk rating. Generally,
meaningfully differentiate risk; the time horizon used for probability of
(3) All credit exposures shall be rated default estimation is one year. However,
for risk. Where individual credit risk ratings FIs may use a different time horizon to cover
are not assigned, e.g., small-denomination one business cycle;
performing loans, FIs shall assign the (9) Ratings shall reflect the risks posed
portfolio of such exposures a composite by both the borrower’s expected
credit risk rating that adequately defines its performance and the transaction’s structure.
risk, i.e., repayment capacity and/or loss The ratings output of internal credit risk
potential; rating systems must contain both a borrower
1
This refers to economic loss, thus shall include discount effects, as well as direct and indirect costs associated
with collecting on the credit obligation. The FIs’ board-approved internal policies that govern the use of their
internal rating systems must include specific policies and procedures that shall be followed in the determination
of economic loss.
FIs shall establish comprehensive assess the FI’s ability to withstand such
policies and procedures on effective changes;
validation of the rating system (e.g. review (b) The inputs are reliable and relate
of model design/developmental evidence, directly to the subject portfolios;
backtesting, benchmarking and assessment (c) The process includes frequency of
of the discriminatory power of the ratings) test and procedures for convening periodic
and rating process (e.g. review of data meetings to identify the principal risk factors
quality, internal reporting, problem handling affecting the portfolio, setting loss limits and
and how the rating system is used by the the authority for setting these limits, and
credit officers). This shall be adequately monitoring stress loss limits;
documented and results reported to (d) Assumptions are well documented
appropriate levels of the FI. The process shall and conservative;
likewise be subject to periodic review by (e) Models (if any) are subject to a
qualified, independent individuals. comprehensive validation process;
Moreover, FIs shall periodically conduct (f) Exceptions to limits and stress testing
back-testing in evaluating the quality of their results are reported to the senior
credit risk assessment models and establish management and board of directors for
internal tolerance limits for differences appropriate remedial actions; and
between expected and actual outcomes and (g) Results are discussed and actions
processes for updating limits as conditions and resolutions made arising from the
warrant. The policy shall also include discussion.
remedial actions to be taken when risk (2) The linkages between different
tolerances are exceeded. categories of risk that are likely to emerge
e. Stress testing. When appropriate, in times of crisis shall be fully identified. In
an FI shall conduct stress testing and case of adverse circumstances, there may
scenario analysis of its credit portfolio be a substantial correlation of various risks,
including off-balance sheet exposures, both especially credit, liquidity, and market risk.
at an individual and group levels to assess f. FIs shall develop a contingency plan
the impact of market dislocations and for scenarios and outcomes that involve
changes in economic conditions or key risk credit risk in excess of the FI’s established
factors on its profile and earnings. risk tolerances. This plan may include
(1) Whether stress tests are performed increasing monitoring, limiting portfolio
manually, or through automated modeling growth, and hedging or exit strategies for
techniques, FIs shall ensure that: both significant individual transactions and
(a) Policies and processes – key portfolio segments.
(i) Are adequate and clearly (Circular No. 855 dated 29 October 2014)
documented, rational, easily understood and
approved by the board and senior § 4197N.13 Credit risk management
management; and information and reporting systems. FIs
(ii) Includes methodology for shall render accurate, reliable and timely
constructing appropriate and plausible information and reports. Thus, adequate
single and multi-factor stress tests, and management information and reporting
possible events, scenarios, or future changes systems shall be in place to identify and
in economic conditions that could have measure credit risk inherent in all on- and
adverse impact on credit exposures, and off-balance sheet activities and ensure the
overall effectiveness of the risk management adequacy of scope and reliability and
process. The information generated from accuracy of the information generated.
such systems shall enable the board and all Internal audit shall also periodically assess
levels of management to fulfill their the controls over MIS.
respective oversight roles, including (Circular No. 855 dated 29 October 2014)
determining the level of capital commensurate
to the credit risk exposure of the FI. § 4197N.14 Credit monitoring. FIs shall
a. At a minimum, an effective develop and implement comprehensive
management information system (MIS) shall processes, procedures and information
enable FIs to: systems to effectively monitor the condition
(1) Provide adequate information on the and quality of individual credits and group
quality and composition of the credit of credits across the FIs’ various portfolios.
portfolio (including off-balance sheet These shall include criteria that identify and
accounts); report problem credits to reasonably assure
(2) Determine accurately the level of that they are appropriately monitored as
credit risk exposures of an FI through its well as administered and provided for.
various activities (e.g. renewal and a. The system shall be able to, among
extension of loans, collection process, status others, provide measures to ensure that the
of delinquent accounts, write-offs, board and management are kept informed
provisioning, among others); of the current financial condition of the
(3) Timely identify and monitor credit borrower and the various credit portfolios;
risk concentrations, exposures approaching loan covenants are consistently adhered to;
risk limits, exceptions to credit risk limits cash flow projections meet repayment
and overrides to ensure that policy and requirements; prudential and internal limits
underwriting deviations as well as breaches are not exceeded; portfolios are stress-
and other potential problems are promptly tested; and potential problem credits and
reported to the board and management for other transactions are identified.
appropriate corrective action; Exceptions, breaches and potential
(4) Aggregate credit exposures to problems noted shall be promptly reported
individual borrowers and counterparties as to management for corrective action,
well as to a group of accounts under possible classification and/or provisioning
common ownership or control; and more frequent monitoring.
(5) Permit additional analysis of the b. Personnel or unit assigned to
credit portfolio, including stress testing; and monitor, on an ongoing basis, credit quality
(6) Maintain a database for research and and underlying physical collateral and
use of analytical techniques, report financial guarantees shall ensure that
exposures, track quality and account relevant information is communicated to
performances, and maintain limits. those personnel or unit assigned to provide
b. The credit policy shall clearly define internal credit risk ratings.
the types of information and reports to be c. FIs shall perform post-validation of
generated, frequency of reporting, deadline the actual use of funds to determine that
of submission, and the users/recipients of credits were drawn down for their intended
and personnel responsible for the purposes. Should funds be diverted for
preparation of such information and reports. purposes other than what has been applied
c. FIs shall provide sufficient controls for and approved, the FI shall immediately
to ensure integrity of the MIS. Reports shall re-evaluate its approval or if necessary
be periodically reviewed to ensure terminate the credit accommodation and
1
Other credit accommodations include other credits such as accounts receivables, sales contract receivables,
accrued interest receivables and advances
against the regulatory classification criteria repayments. Loans and other credit
provided below. However, FIs are accommodations affected by these
encouraged and not precluded from using characteristics may retain the EM
additional criteria appropriate to their classification in the next examination should
internal credit risk rating system provided the same adverse conditions persist,
they are consistent with the regulatory provided that the loans remain current; or
classification as follows: (iv) Intermittent delays or inadequate
(a) Pass. These are loans and other repayment of principal, interest or periodic
credit accommodations that do not have a amortizations of loans and other credit
greater-than-normal credit risk. The accommodations granted by the FI or by
borrower has the apparent ability and other FIs, where such information is
willingness to satisfy his obligations in full available.
and therefore no loss in ultimate collection (c) Substandard. These are loans and
is anticipated. other credit accommodations that have
(b) Especially mentioned (EM). These well-defined weakness/(es), that may
are loans and other credit accommodations jeopardize repayment/liquidation in full,
that have potential weaknesses that deserve either in respect of the business, cash flow
management’s close attention. If left or financial position, which may include
uncorrected, these weaknesses may affect adverse trends or developments that affect
the repayment of the loan. Some degree of willingness or repayment ability of the
structural weakness may be found in borrower. Basic characteristics include any
virtually any aspect of the loan arrangement of the following:
or type of loan, and the presence of one (or (i) Weak financial condition and results
more) need not be indicative of an overall of operation that leads to the borrower’s
credit weakness deserving criticism. inability to generate sufficient cash flow for
Instead, the FI must evaluate the relative debt servicing, except for start-up firms which
importance of such factors in the context of shall be evaluated on a case-to-case basis;
the borrower’s overall financial strength, the (ii) Past due secured loans and other
condition of the borrower’s industry or credit accommodations where properties
market, and the borrower’s total offered as collateral have been found with
relationship with the FI. Basic defects as to ownership or with other
characteristics include, but are not limited adverse information;
to, any of the following: (iii) Breach of any key financial
(i) Deficiencies in underwriting, covenants/agreements that will adversely
documentation, structure and/or credit affect the capacity to pay of the borrower; or
administration that can compromise an FI’s (iv) Classified “Especially Mentioned” as
ability to control credit relationship if of the last credit review without adequate
economic or other events adversely affect corrective action.
the borrower; (d) Doubtful. These are loans and
(ii) Continuous renewal/ extension other credit accommodations that exhibit
without reduction in principal, except when more severe weaknesses than those
the capacity to pay of the borrower has been classified as “Substandard”, whose
clearly re-established; characteristics on the basis of currently
(iii) Adverse economic or market known facts, conditions and values make
conditions, that in the future may affect the collection or liquidation highly improbable,
borrower’s ability to meet scheduled however, the exact amount remains
(d) In the case of restructured loans, the the remaining portfolio into groups of loans
classification shall only be upgraded after with similar credit risk characteristics for
establishing a satisfactory track record of at collective assessment.
least six (6) consecutive payments of the (i) Individually assessed loans. FIs shall
required amortization of principal and establish a materiality threshold for
interest, or until the borrower has significant credit exposures that will warrant
sufficiently exhibited that the loan will be an individual assessment, which threshold
fully repaid (continued collection in shall be regularly reviewed.
accordance with the terms of the loans is The loan loss estimates shall reflect
expected) and the loan meets the criteria of consideration of the facts and
lower loan classification. circumstances that affect the repayment
b. Loan loss estimation methodology, of each individual loan as of the evaluation
provisioning and allowance for credit losses date. The following factors are relevant
(1) All FIs shall develop and document in estimating loan losses for individually
a sound loan loss methodology that can assessed loans:
reasonably estimate provisions for loans and (aa) Significant financial difficulty of the
other credit accommodations and risk assets borrower;
in a timely manner, using their experience (bb) Probable bankruptcy or other
and research and this guidance to ensure financial reorganization of the borrower;
that the specific and collective allowance (cc) Breach of contract, such as a default
for credit losses1 (ACL) are adequate and or delinquency in interest or principal
approximates the expected losses in their payments; or
credit portfolio. (dd) Concession granted by the FI, for
An FI’s loan loss methodology shall economic or legal reasons relating to the
consider the following: borrower’s financial difficulty, which would
(a) Written policies and procedures for not otherwise be considered.
the credit risk systems and controls inherent The methodology shall include
in the methodology, including roles and procedures describing the determination
responsibilities of the FI’s board of directors and measurement of the amount of any
and senior management; impairment, the impairment measurement
(b) A detailed analysis of the entire loan techniques available and steps performed
portfolio, including off-balance sheet to determine which technique is most
facilities, performed on a regular basis; appropriate in a given situation.
(c) A realistic view of its lending (ii) Collectively assessed loans. FIs may
activities and adequately consider use different methods to group loans for the
uncertainty and risks inherent in those purpose of assessing credit risk and
activities in preparing accounting valuation. More sophisticated credit risk
information. Loan accounting policies and assessment models or methodologies for
practices shall be selected and applied in a estimating expected future cash flows,
consistent way that reasonably assures that including credit risk grading processes, may
loan and loan loss provision information is combine several of the following
reliable and verifiable; characteristics: loan type, product type,
(d) Identification of loans to be market segment, estimated default
evaluated individually and segmentation of probabilities or credit risk grading and
1
ACL represents the aggregate amount of individual and collectively assessed probable credit losses.
1
The historical net charge-off rate is generally based on the annualized historical gross loan charge-offs, less
recoveries, recorded by the FI.
2
There may be instances when no adjustments are needed to the data in the recognition and measurement
of loan losses because the data are consistent with current conditions.
• Changes related to new market (3) FIs shall set up general loan loss
segments and products; provision equivalent to one percent (1%) of
• Quality of the FI’s loan review system the outstanding balance of individually and
and the degree of oversight by senior collectively assessed loans for which no
management and board of directors; specific provisions are made and/or for
• The existence and effect of any which the estimated loan losses are less than
concentrations of credit, and changes in the one percent (<1%), less loans which are
level of such concentrations; and considered non-risk under existing laws,
• Credit risk profile of the loan portfolio rules and regulations.
as a whole as well as the effect of external (4) FIs shall ensure the adequacy of the
factors such as competition and legal and individual and collective ACL for the entire
regulatory requirements on the level of loan portfolio. They shall have a policy for
estimated credit losses in the FI’s current the regular review of the ACL, which shall
portfolio. be conducted at least semi-annually after
Experienced credit judgment shall also considering results of the credit review, level
be used to determine an acceptable period of classified loans, delinquency reports,
that will yield reliable historical loss rates historical losses and market conditions.
as loss rate periods shall not be restricted to Failure to make adequate provisions for
a fixed time period to determine the average estimated future losses results in material
historical loss experience for any group of misrepresentation of an FI’s financial
loans with similar credit risk characteristics. condition.
An FI shall maintain sufficient historical loss (Circular No. 855 dated 29 October 2014)
data over a full credit cycle to provide robust
§ 4197N.17 Credit workout and
and meaningful statistical loan loss estimates
remedial management of problem credits
for establishing the level of collective
FIs shall develop and maintain a disciplined
impairment losses for each group of loans
and vigorous process for the early
with similar credit risk characteristics.
identification and intervention for potential
When applying experienced credit
or existing problem credits. The process
judgment, an FI shall provide a sound
shall ensure that timely and adequate
rationale for excluding any historical loss
management action is taken to maintain the
data that is deemed not representative of the
quality of the credit portfolio, prevent further
performance of the portfolio.
deterioration, and minimize the likelihood
(2) FIs with credit operations that may
of future losses.
not economically justify a more
a. Problem credits refer to credits that
sophisticated loan loss estimation
display signs of potential problems and/or
methodology or whose practices fell short
well-defined weaknesses such as those not
of expected standards shall, at a minimum,
performing according to the terms of the
be subject to the regulatory guidelines in
contract, or with credit quality impairment,
setting up allowance for credit losses
or deficiencies relating to their approval
prescribed in Appendix N-11, provided that
and/or conduct that are not in keeping with
the FIs notify the appropriate department of
sound and prudent credit policies. These
SES of this preference. Nevertheless, such
shall include past due loans, non-performing
FIs shall still use experienced credit
loans and restructured loans.
judgment, subject to the criteria prescribed
b. FIs shall adopt appropriate and cost
in this Subsection, in determining the ACL.
effective workout, restructuring or remedial
1
BSFIs shall comply with the foregoing standards on operational risk management within a period of two (2)
years from 05 February 2016. In this regard, a BSFI should be able to show its plan of actions with specific
timelines, as well as the status of initiatives being undertaken to fully comply with the provisions of Sec. 4198N
as well as Subsec. 4198N.1 to 4198N.11.
2
Embodied in the relevant documents issued by the Basel Committee on Banking Supervision.
processes and procedures, and provides sensitive information. The board should
feedback on the operational risk likewise institute tools, methodologies, and
management process. In this regard, the practices in order to ensure compliance and
board shall establish a feedback and adherence to the standards by all employees
reporting system that will allow employees including the senior officers and the board
to raise their concerns without fear of itself. In this regard, employees should be
negative consequences; and required to acknowledge in writing that they
(g) Ensure that the operational risk have read, understood, and will observe the
management framework is subject to code of conduct;
effective and comprehensive independent (6) Ensure that business and risk
review, on a periodic basis, by operationally management activities, including the
independent, appropriately trained, and operational risk management function, are
competent staff to ensure that it remains carried out by adequate and qualified staff
commensurate with the BSFI’s risk profile with the necessary experience, technical
and continues to be adequate and effective capabilities, and competence. Moreover, the
in managing operational risk. The review board shall ensure that employees and
should take into account the changes in officers in all areas of operations have a high
business and operating environment, degree of integrity.
material changes in systems, business
For this purpose, the board shall approve
activity or volume of transactions, quality
appropriate hiring and selection policies and
of control environment, effectiveness of risk
processes, adopt a continuing professional
management or mitigation strategies, loss
development program, and institutionalize
experience, and the frequency, volume or
a framework for continuing assessment of
nature of breaches in limits or any policy.
fitness and propriety of employees. These
(3) Provide adequate oversight on all
policies, processes and programs should
outsourcing activities and ensure effective
management of risks arising from these reinforce the conduct and values being
activities. In this regard, the board of promoted in the organization.
directors shall approve a framework Further, the board shall oversee the
governing outsourcing activities, which design and implementation of remuneration
includes a system to evaluate the risk and policies. It shall ensure that the
materiality of all existing and prospective remuneration policies do not encourage
outsourcing engagements and the policies excessive risk-taking or provide incentives
that apply to such arrangements; to people to perform contrary to the desired
(4) Ensure observance of expectations risk management values. It shall also ensure
and requirements prescribed under relevant that remuneration policies are appropriate
laws, rules and regulations, industry-set and aligned with the BSFI’s long-term
standards, and policies on internal control, strategic direction and risk appetite, as well
internal audit, and disclosure; as with relevant legal or regulatory
(5) Promote a culture of high standards requirements;
of ethical behavior. The board shall adopt a (7) Ensure that all units in the
code of conduct of ethical behaviors with organization have adequate resources,
corresponding disciplinary actions for non- including personnel complement, and are
compliance, which should cover, among supported by appropriate technological
others, guidance and protocols on conflicts systems. The use of technological systems
of interest situations, safeguarding of must be commensurate to the activities
confidential information, and use of being undertaken; and
risk exposures and processes, these units (a) Results of internal/external audit and
should play a major role in the identification supervisory issues raised in the Bangko
and assessment of operational risk. Sentral Report of Examination (ROE) –
(1) BSFIs shall consider the following Internal audit surfaces issues on effectiveness
loss event-type categories as part of their risk of internal control, risk management, and
identification and assessment processes: governance systems and processes of an
(a) Internal fraud, e.g., intentional organization, while external audit focuses
misreporting of positions, employee theft, on control weaknesses and susceptibility of
and insider trading on an employee’s own the BSFI to material misstatements in the
account; financial statements. On the other hand, the
(b) External fraud, e.g., robbery, forgery, Bangko Sentral ROE highlights deficiencies
check kiting, and damage from computer in the risk management systems and
hacking; governance processes as well as issues on
(c) Employment practices and compliance with relevant laws, rules and
workplace safety, e.g., workers regulations, which could have adverse
compensation claims, violation of health and effects on the safety and soundness of the
safety rules, organized labor activities, BSFI;
discrimination claims, and general liability; (b) Internal loss data collection and
(d) Clients, products and business analysis – Internal operational loss data
practices, e.g., fiduciary breaches, misuse provides meaningful information for
of confidential customer information, assessing BSFI’s exposure to operational risk
improper trading activities on the BSFI’s and the effectiveness of internal controls.
account, money laundering, and sale of Analysis of loss events can provide insights
unauthorized products; into the causes of large losses and
(e) Damage to physical assets, e.g., information on whether control failures are
terrorism, vandalism, earthquakes, fires and isolated or pervasive. BSFIs may consider
floods; mapping internal loss data to the following
(f) Business disruption and system business lines:
failures, e.g., hardware and software (i) Corporate finance;
failures, telecommunication problems, and (ii) Trading and sales;
utility outages; and (iii) Retail banking;
(g) Execution, delivery, and process (iv) Commercial banking;
management, e.g., data entry errors, (v) Payment and settlement;
collateral management failures, incomplete (vi) Agency services;
legal documentation, unapproved access (vii) Asset management; and
given to client accounts, non-client (viii) Retail brokerage.
counterparty misperformance, and vendor Loss events linked to credit and market
disputes. risk may also relate to operational issues and
(2) BSFIs shall adopt tools and should be segmented in order to obtain a
mechanisms that are appropriate to their more comprehensive view of the BSFI’s
size, complexity of operations and risk operational risk exposure;
profile to properly identify and assess (c) Risk Self Assessments (RSA)/Risk
operational risk. The tools that may be used Control Self Assessments (RCSA) – RSA is a
for identifying and assessing operational risk tool to assess processes underlying BSFI’s
may include, but not limited to: operations against a library of potential
threats and vulnerabilities including their the potential outcome. Scenario analysis is
potential impact. A similar approach, RCSA, an effective tool when considering potential
typically evaluates inherent risk (the risk sources of significant operational risk and
before controls are considered), the the need for additional risk management
effectiveness of the control environment, and controls or mitigation solutions. Given the
residual risk (the risk exposure after controls subjectivity of the scenario process, a robust
are considered). Scorecards on RCSAs may governance framework is essential to ensure
be developed by allocating weights to the integrity and consistency of the process;
residual risks to provide a means of (g) Model measurement – Larger BSFIs
translating the RCSA output into metrics that may deem it useful to quantify their
will give a relative ranking of the control operational risk exposures by using the
environment; output of the risk assessment tools as inputs
(d) Business process mappings – These into a model that estimates operational risk
help identify key steps in business processes, exposure. The results of the model can be
activities, and organizational functions as used in an economic capital process and
well as the key risk points in the BSFI’s can be allocated to business lines to link
overall business process. Process maps can risk and return; and
reveal individual risks, risk (h) Comparative analysis – Comparative
interdependencies, and areas of control or analysis consists of comparing the results
risk management weakness. They can also of the various assessment tools to provide a
help prioritize subsequent management more comprehensive view of the BSFI’s
action; operational risk profile.
(e) Risk and performance indicators – Comparison of external loss data, if
Risk and performance indicators, such as available, such as industry experiences, vis-
Key Risk Indicators (KRIs) and Key à-vis BSFI’s internal loss data can also be
Performance Indicators (KPIs), provide an made to explore possible weaknesses in the
insight into a BSFI’s emerging risk exposure. financial institution’s control environment
KRIs are used to monitor the main drivers and enable it to consider previously
of exposure associated with key risks that unidentified risk exposures.
contribute to early detection of heightened In choosing among these tools, each
risk, ongoing monitoring of their BSFI must carefully consider what is
movements, and preemptive reactions as proportionate to its size, risk profile, and
necessary. KPIs, on the other hand, provide complexity of operations. Data/information
insight into the status of operational gathered from these tools should enable
processes, which may in turn provide BSFIs to make a thorough causal analysis,
insights into operational weaknesses, identify control gaps, and consequently
failures, and potential loss. Risk and adopt appropriate corrective actions.
performance indicators are often used with BSFIs are expected to adopt at the
escalation triggers to warn when risk levels minimum, the (i) results of internal/external
approach or exceed acceptable ranges and audit and supervisory issues raised in the
prompt mitigation plans; Bangko Sentral ROE; and (ii) internal loss
(f) Scenario analysis – This refers to the data collection and analysis.
process of obtaining expert opinion of (3) BSFIs shall develop databases to
business line and risk managers to identify accumulate at least a five (5)-year history of
potential operational risk events and assess operational risk losses which can be fed
back into the operational risk management (4) BSFIs shall determine based on the
process. Apart from capturing events that results of the risk assessment process
resulted to actual loss, BSFIs shall also gather whether the risks are within the scope of its
potential loss or near-misses1. Said database operational risk management strategy and
of loss events provides basis for analysis policies. It shall identify the risk exposures
which can help direct corrective action to that are unacceptable or are outside its risk
improve the control environment, as well appetite and/or risk management capacity,
as determine risk mitigating actions. BSFIs and design and prioritize appropriate risk
should assess the depth of its data collection mitigation and corrective actions with clear
which is vital in understanding the risk accountabilities, roles and responsibilities
environment. The loss event database shall for implementation within reasonable
at a minimum disclose the following: timelines.
(a) Short description of the event; (5) BSFIs shall continually assess
(b) Loss event type category; its operational risk exposures in order to
(c) Department/Unit/Branch sustaining gain broader recognition and understanding
the loss; of their effects. It shall consider the
(d) Business line classification; following factors in the assessment:
(e) Date of occurrence; (a) Expected and unexpected changes to
(f) Date of discovery; the BSFI’s operating environment;
g) Date of booking of actual losses; (b) Actual operational loss events that
(h) Actual loss amount or potential loss could have resulted in substantial losses/
amount, if a near-miss event; damage but were avoided (e.g., near misses)
(i) Amount recovered and date of or recovered;
recovery; (c) Reported external operational losses
(j) Causes of the event (e.g., control and incidents which have damaged investor
weaknesses identified) confidence and caused serious reputational
(k) Consequence of the loss event (e.g., harm;
market loss, fees paid to a counterparty, a (d) Areas of concern or unusual volumes
lawsuit or damage to the BSFI’s reputation); or high number of exceptions; and
and (e) Results of internal assessment of risks
(l) Action(s) taken. and controls.
BSFIs shall define appropriate thresholds (6) BSFIs shall ensure that their risk
for internal loss data collection and must management and control infrastructure keep
be able to justify the same. Thresholds pace with the growth of or changes in their
should be reasonable and should not business activities, i.e., when they engage
omit any operational loss event data that in any new activity; introduce a new
is material for operational risk exposure product; enter new or unfamiliar markets;
and for effective risk management. BSFIs implement new business processes or
shall ensure that the choice of threshold technology systems; establish subsidiaries/
should not adversely impact the credibility branches that are geographically remote
and accuracy of operational risk from the head office; and/or embark on an
measurement. aggressive growth strategy by acquiring
1
Potential loss is an initial estimate of the loss that the bank may have sustained at the time of discovery of the
event. Near miss is an adverse operational risk event which was not prevented by internal controls but did not
result in an actual adverse impact (financial or reputational) due to chance, recovery or other external factors.
problem BSFIs to rapidly increase branch (2) Management shall ensure that
network during a short period of time. BSFIs regular reports on operational risk are
should have relevant policies and received on a timely basis and in a form
procedures that address the process for and format that will aid in the monitoring
review and approval of new products, and control of their business areas. The
activities, processes and systems. The review board should receive sufficient high-level
and approval process shall consider the information to enable it to understand the
following: BSFI’s overall operational risk profile and
(a) Inherent risks in the new product, focus on the material and strategic
service, or activity; implications for the business.
(b) Changes to the BSFI’s operational risk (3) Management reports should contain
profile, appetite and tolerance, including the relevant internal financial, operational, and
impact on existing products or activities; compliance data, as well as external market
(c) Necessary controls, risk management information about events and conditions
processes, and risk mitigation strategies; that are relevant to decision making. They
(d) Any residual risk; and should aim to provide information such as:
(e) Procedures and metrics to measure, (a) The critical operational risks facing,
monitor, and manage the risk of the new or potentially facing, the BSFI (e.g., as
product or activity. shown in KRIs and their trend data, changes
b. Risk monitoring and reporting. BSFIs in risk and control self-assessments,
shall implement a process to regularly comments in audit/compliance review
monitor their operational risk profiles and reports, etc.);
material exposures to losses on a continuing (b) Major risk events/loss experience,
basis. The process shall take into account issues identified and intended remedial
both qualitative and quantitative assessment actions;
of exposure to all types of operational risk, (c) The status and/or effectiveness of
assess the quality and appropriateness of actions taken; and
corrective or mitigating actions, and ensure (d) Exception reporting (covering among
that adequate controls and systems are in others authorized and unauthorized
place to identify and address problems deviations from the BSFI’s operational risk
before they become major concerns. policy and likely or actual breaches in pre-
(1) Risk monitoring should be an integral defined thresholds for operational
part of a BSFI’s activities, the frequency of exposures and losses).
which should reflect the risks involved in (4) Reports should be analyzed with a
these activities as well as the frequency and view to improving existing management
nature of changes in the operating performance as well as developing new risk
environment. The results of the monitoring management policies, procedures and
activities, findings of compliance, internal practices. Moreover, to ensure the
audit and risk management functions, usefulness and reliability of the reports
management letters issued by external received, management should regularly
auditors, and reports generated by verify the timeliness, accuracy, and
supervisory authorities, as appropriate, relevance of reporting systems and internal
should be included in regular reports to the controls in general.
board and the senior management to ensure (5) Management should keep track of
that timely and appropriate measures are the information provided in the reports,
undertaken to address the issues/findings. particularly the loss data, to establish a
Bangko Sentral in this respect may be services. BSFIs are expected to identify
considered by the Bangko Sentral as and understand the distinct operational risk
conducting business in an unsafe or arising from the products and services they
unsound manner, subject to applicable offer or innovative delivery channels they
provision of laws and regulations. use. They should also be cognizant of
(Circular No. 900 dated 18 January 2016) potential transformation or transfer or
risk exposures. In this regard, BSFIs shall
§ 4198N.8 Management of legal risk
adopt an operational risk management
exposures. BSFIs shall adopt a system for
framework appropriate to the nature
identifying and assessing legal risks related
and scale of their operations. Said
to business line functions as well as framework shall consider the principles
products and services offered. This shall embodied in this Section designed to
include a process for assessing the BSFI’s suit the BSFI’s business model and ensure
rights and obligations in contractual sustained delivery of financial services to
relationships and in ensuring that the unserved and underserved sector.
all agreements/contracts entered into by (Circular No. 900 dated 18 January 2016)
the BSFI conform with legal and
regulatory requirements and that no § 4198N.10 Notification/Reporting to
party is unduly disadvantaged. This shall also Bangko Sentral. BSFIs shall notify the
include the assessment of trends of appropriate department of the Supervision
customer complaints to determine potential and Examination Sector, Bangko Sentral,
legal risk exposures. within ten (10) calendar days from the date
There should be a system in place to of discovery, of any operational risk event1
manage outstanding legal cases involving the that may result in any of the following:
BSFI or any of its directors and officers, with a. Significant operational losses or
respect to suits filed in line with the exposures;
performance of their duties. Said system b. Activation of business continuity
should cover a periodic review of the status plan; or
of cases, an assessment of potential outcome c. Any material change in business and
including probable liability or receivable, operating environment.
and regular reporting of the same to the Upon receipt of notification, the Bangko
appropriate level of management and the Sentral may require, if warranted, the
board. reporting BSFI to submit a report detailing
(Circular No. 900 dated 18 January 2016) the causes and impact of such events and
an acceptable action plan to address the
§ 4198N.9 Management of operational issue and any other weakness identified.
risk arising from financial inclusion (Circular No. 900 dated 18 January 2016)
initiatives. BSFIs that provide financial
services to the unserved and underserved § 4198N.11 Supervisory Enforcement
sector generally handle small and Actions. Consistent with Sec. 4009Q, the
voluminous transactions, which have Bangko Sentral may deploy enforcement
inherently high operational risk. actions to promote adherence with the
Incremental operational risk also comes from requirements set forth in this Section
the higher number of personnel or from and bring about timely corrective actions.
the use of technology-based platform to The Bangko Sentral may issue directives to
effectively and efficiently deliver financial improve the operational risk management
1
As enumerated under Section 4198N.4.a.(1).
credit card companies shall also provide minimum Arial 12 theme font and size, or
the following information to their its equivalent in readability, and on the first
cardholders: page, if applicable document has more than
1. A table of the applicable fees, one page.
penalties and interest rates on credit card Transitory provisions. NBFIs and their
transactions, including the period covered subsidiary or affiliate credit card
by and the manner of and reason for the companies shall be given a period of 120
imposition of such penalties, fees and days from the 06 January 2011 to fully
interests; fees and applicable conversion implement the required disclosure
reference rates for third currency requirements.
transactions, in plain sight and language, (As amended by Circular Nos. 754 dated 17 April 2012 and
on materials for marketing credit cards, 702 dated 15 December 2010)
such as brochures, flyers, primers and
advertising materials, on credit card § 4301N.5 Interest accrual on past
application forms, and on credit card due loans. Interest income on past due
billing statements: Provided, That these loans arising from discount amortization
disclosures are in addition to the full (and not from the contractual interest of
disclosure of the fees, charges and interest the accounts) shall be accrued as provided
rates in the terms and conditions of the in PAS 39.
credit card agreement found elsewhere on
the application form and billing statement; § 4301N.6 Method of computing
and interest. Subsidiary/affiliate credit card
2. A reminder to the cardholder in the companies of banks/QBs shall only charge
monthly billing statement, or its equivalent interest based on the outstanding balance
document, that payment of only the of a loan at the beginning of an interest
minimum amount due or any amount less period.
than the total amount due for the billing For a loan where the principal is payable
cycle/period, would mean the imposition in installments, interest per installment
of interest and/or other charges: Provided, period shall be calculated based on the
That such table of fees, penalties and interest outstanding balance of the loan at the
rates and reminder shall be printed in plain beginning of each installment period.
language and in bold black letters against a Towards this end, all loan-related
light or white background, and using the documents shall show repayment schedules
§ 4301N.12 (2011 - 4301N.11) Not later than two (2) billing cycles or
Inspection of records covering credit card two (2) months which in no case shall
transactions. Subsidiary/affiliate credit card exceed ninety (90) days after receipt of the
companies of banks/QBs shall make notice and prior to taking any action to
available for inspection or examination by collect the contested amount, or any part
the appropriate department of the SES thereof, banks/subsidiary credit card
complete and accurate files on card companies shall make appropriate
applicant/ cardholder to support the corrections in their records and/or send a
consideration for approval of the application written explanation or clarification to the
and determination of the credit limit which cardholder after conducting an investigation.
shall be in accordance with the verified debt Nothing in this Subsection shall be
repayment ability and/or net worth of the construed to prohibit any action by the
card applicant/cardholder. bank/subsidiary credit card company to
(As amended by Circular No. 754 dated 17 April 2012) collect any amount which has not been
indicated by the cardholder to contain a
§ 4301N.13 (2011 - 4301N.12) Offsets billing error or apply against the credit limit
For purposes of transparency and adequate of the cardholder the amount indicated to
disclosure, the credit card issuer shall be in error.
inform/notify the credit cardholder in the (As amended by Circular No. 754 dated 17 April 2012)
agreement, contract or any equivalent
document governing the issuance or use of § 4301N.15 (2011 - 4301N.14) Unfair
the credit card that, pursuant to the collection practices. Subsidiary/affiliate
provisions of Articles 1278 to 1290 of the credit card companies of banks/QBs,
New Civil Code of the Philippines, as collection agencies, counsels and other
amended, the use of his credit card will agents may resort to all reasonable and
subject his deposit/s with the bank to offset legally permissible means to collect
against any amount/s due and payable on amounts due them under the credit card
his credit card which have not been paid in agreement: Provided, That in the exercise
accordance with the terms of the agreement/ of their rights and performance of duties,
contract. they must observe good faith and
(As amended by Circular No. 754 dated 17 April 2012) reasonable conduct and refrain from
engaging in unscrupulous or untoward acts.
§ 4301N.14 (2011 - 4301N.13) Without limiting the general application of
Handling of complaints. Subsidiary/affiliate the foregoing, the following conduct is a
credit card companies of banks/QBs shall violation of this Subsection:
give cardholders at least twenty (20) a. the use or threat of violence or other
calendar days from statement date to criminal means to harm the physical person,
examine charges posted in his/her statement reputation, or property of any person;
of account and inform the credit card b. the use of obscenities, insults, or
company in writing of any billing error or profane language which amount to a
discrepancy. Within ten (10) calendar days criminal act or offense under applicable
from receipt of such written notice, the laws;
credit card company shall send a written c. disclosure of the names of credit
acknowledgement to the cardholder unless cardholders who allegedly refuse to pay
the action required is taken within such ten debts, except as allowed under Subsec.
(10)-day period. 4301N.9;
d. threat to take any action that cannot sanctions depending upon their severity:
legally be taken; a. Disqualification of the NBFI
e. communicating or threat to concerned from the credit facilities of the
communicate to any person credit Bangko Sentral except as may be allowed
information which is known to be false, under Section 84 of R.A. No. 7653;
including failure to communicate that a debt b. Prohibition on the NBFI concerned
is being disputed; from the extension of additional credit
f. any false representation or deceptive accommodation against personal security;
means to collect or attempt to collect any and
debt or to obtain information concerning a
c. Penalties and sanctions provided
cardholder; and
under Sections 36 and 37 of R.A. No. 7653.
g. making contact at unreasonable/
Non-compliance with the provisions of
inconvenient times or hours which shall be
defined as contact before 6:00 A.M. or after Subsecs. 4301N.2 to 4301N.4, 4301N.6
10:00 P.M., unless the account is past due and 4301N.15 shall be regarded at least as
for more than sixty (60) days or the a less serious offense, depending on the
cardholder has given express permission or severity of non-disclosure, number of loans
said times are the only reasonable or and amount involved in the violation. In
convenient opportunities for contact. addition to sanctions under R.A. No. 3765,
NBFIs and their subsidiary/affiliate the following sanctions may be imposed:
credit card companies shall inform their a. First offense. Reprimand on the
cardholder in writing of the endorsement erring officer/s;
of the collection of their account to a b. Second offense. Reprimand on the
collection agency/agent, or the endorsement entire board of directors; and
of their account from one collection agency/ c. Subsequent offense/s:
agent to another, at least seven (7) days prior i. Suspension of the erring officer/s
to the actual endorsement. The notification and/or entire board of directors; and
shall include the full name of the collection ii. Restriction on lending activities.
agency and its contact details: Provided, This is without prejudice to other
That the required notification in writing shall penalties and sanctions provided under
be included in the terms and conditions of Sections 36 and 37 of R.A. No. 7653.
the credit card agreement. NBFIs and their
(As amended by Circular Nos. 754 dated 17 April 2012 and 702
subsidiary/affiliate credit card companies
dated 15 December 2010)
shall adopt policies and procedures to
ensure that personnel handling the
§ 4301N.17 Submission of credit card
collection of accounts, whether these are
in-house collectors, or third-party collection business activity report. For purposes of
agents, shall disclose his/her full name/true transparency and availability of data on
identity to the cardholder. credit card operations and in the light of
(As amended by Circular No. 754 dated 17 April 2012 and 702 ensuring consumer protection, as well as
dated 15 December 2010) managing risks involved in credit
transactions, NBFIs including their
§ 4301N.16 (2011 - 4301N.15) subsidiaries and affiliates, shall submit a
Sanctions and penal provisions. Violations monthly quantitative report to Bangko
of the provisions of Subsecs. 4301N.1, Sentral covering the following data on credit
4301N.5, and 4301N.7 to 4301N.14 shall card issuers/acquirers, cardholders, credit
be subject to any or all of the following card complaints, and usage location:
Sec. 4312N Grant of Loans and Other (c) Senior citizens not required to file a
Credit Accommodations. In addition to the return pursuant to R.A. No. 7432, as
principles and standards provided under amended by R.A. No. 9257, in relation to
Section 4197N, the following regulations the provisions of the NIRC or the Tax
shall be observed in the grant of loans and Reform Act of 1997; and
other credit accommodations. (d) An individual who is exempt from
(As amended by Circular No. 855 dated 29 October 2014) income tax pursuant to the provisions of
the NIRC and other laws, general or
§ 4312N.1 Additional requirements. FIs special;
shall require submission and maintain on (6) Loans to borrowers, whose only
file updated ITRs of the borrower, and his source of income is compensation and the
co-maker, if applicable, duly stamped as corresponding taxes on which has been
received by the BIR together with supporting withheld at source: Provided, That the
financial statements, as applicable. FIs shall borrowers submitted, in lieu of the ITR, a
likewise require borrowers to execute a waiver copy of their Employer’s Certificate of
of confidentiality of client information and/or Compensation Payment/Tax Withheld (BIR
an authority of the FI to conduct random Form 2316) or their payslips for at least
verification with the BIR in order to establish three (3) months immediately preceding the
authenticity of these documents. date of loan application;
Should the document(s) submitted (7) Loans and other credit
prove to be spurious or incorrect in material accommodations not exceeding P3.0
detail, the FI may terminate any loan or other million; or
credit accommodation granted on the basis (8) Loans to start up enterprise
of said document(s) and shall have the right borrowers during the first three (3) years of
to demand immediate repayment or their operations or banking relationship.
liquidation of the obligation. (As amended by Circular Nos. 855 dated 29 October 2014, 746
The required submission of such dated 03 February 2012, 622 dated 16 September 2008 and
549 dated 09 October 2006)
documents shall not cover the following
credit exposures:
(1) Microfinance loans as defined under § 4312N.2 Purpose of loans and other
credit accommodations.
Subsec. X361.1(a) of the MORB;
(Deleted by Circular No. 855 dated 29 October 2014)
(2) Loans to registered BMBEs;
(3) Interbank loans; § 4312N.3 Prohibited use of loan
(4) Loans secured by hold-outs on or proceeds. NBFIs are prohibited from
assignment of deposits or other assets requiring their borrowers to acquire shares
considered non-risk by the Monetary Board; of stock of the lending NBFI out of the loan
(5) Loans to individuals who are not or other credit accommodation proceeds
required to file ITRs under BIR regulations, from the same NBFI.
as follows: (Circular No. 622 dated 16 September 2008)
(a) Individuals whose gross compensation
income does not exceed their total personal and § 4312N.4 Signatories. NBFIs shall
additional exemptions, or whose compensation require that loans and other credit
income derived from one (1) employer does accommodations be made under the
not exceed P60,000 and the income tax on signature of the principal borrower and, in
which has been correctly withheld; the case of unsecured loans and other credit
(b) Those whose income has been accommodations to an individual borrower,
subjected to final withholding tax; at least one (1) co-maker, except that a
co-maker is not required when the principal penalties and interest rates shall be printed
borrower has the financial capacity and a in plain language and in bold black letters
good track record of paying his obligations. against a light or white background, and
(As amended by Circular No. 622 dated 16 September 2008) using the minimum Arial 12 theme font and
size, or its equivalent in readability, and on
§ 4312N.5 Sanctions the first page, if the applicable document
(Renumbered as 4312N.15 by Circular No. 702 dated 15 has more than one (1) page.
December 2010)
Transitory provision: NBFIs shall be
given a period of 120 days from 06 January
§ 4312N.6 Accrual of interest earned
2011 to fully implement the required
on loans. Accrual of interest earned on
disclosure requirements.
loans shall only be allowed if the loans and
(Circular No. 702 dated 15 December 2010)
other credit accommodations are current
and performing (i.e., no condition of § 4312N.11 Unfair collection
financial difficulties or inability to meet practices. NBFIs, collection agencies,
financial obligations as they mature). counsels and other agents may resort to all
However, interest income on past due loans reasonable and legally permissible means
arising from discount amortization (not from to collect amounts due them under the loan
the contractual interest of the accounts) shall agreement: Provided, That in the exercise
be accrued in accordance with PAS 39. of their rights and performance of duties,
Accrued interest receivable shall be they must observe good faith and reasonable
classified in accordance with their respective conduct and refrain from engaging in
loan accounts and provided with Allowance unscrupulous or untoward acts. Without
for Uncollected Interest on Loans. limiting the general application of the
(Circular No. 855 dated 29 October 2014) foregoing, the following conduct is a
violation of this Subsection:
§§ 4312N.7 - 4312N.9 (Reserved) a. the use or threat of violence or other
criminal means to harm the physical person,
§ 4312N.10 Minimum required reputation, or property of any person;
disclosure. NBFIs shall provide a table of b. the use of obscenities, insults, or
the applicable fees, penalties and interest profane language which amount to a
rates on loan transactions, including the criminal act or offense under applicable
period covered by and the manner of and laws;
reason for the imposition of such penalties, c. disclosure of the names of borrowers
fees and interest, fees and applicable who allegedly refuse to pay debts, except
conversion reference rates for third currency as allowed under Subsec. 4312N.12;
transactions, in plain sight and language, on d. threat to take any action that cannot
materials for marketing loans such as legally be taken;
brochures, flyers, primers and advertising e. communicating or threat to
materials, on loan application forms, and communicate to any person credit
on billing statements: Provided, That these information which is known to be false,
disclosures are in addition to the full including failure to communicate that a debt
disclosure of the fees, charges and interest is being disputed;
rates in the terms and conditions of the loan f. any false representation or deceptive
agreement found elsewhere on the means to collect or attempt to collect any
application form and billing statement: debt or to obtain information concerning a
Provided, further, That such table of fees, borrower; and
1
The following provisions in Subsecs. 4350N.1 to 4350N.3 covering the agricultural value chain financing
framework shall be implemented in consonance with Sec. 4197N.
management practices, the Bangko Sentral role that the borrower takes in the value
hereby recognizes agricultural value chain chain and the risks to be addressed by the
financing programs that have the following BSFI:
features: (1) Cash disbursements - the most
a. Agricultural value chain policy and common practice which may be completed
procedures. The BSFIs shall put in place in one transaction or in installments;
adequate policies and procedures which (2) Loan proceeds transfer to suppliers -
cover the identification of value chains, under this scheme the BSFI prefers to deal
comprehensive value chain analysis, and the with the supplier directly to control loan
design of appropriate financial products and utilization and, therefore, prefer to transfer
services, among others; the loan proceeds straight to the supplier
b. Types of credit products. BSFIs can upon full acceptance of the buyer (borrower).
design and/or offer appropriate financial In case the supplier is a related party, the
products either to a specific actor/player or BSFI shall ensure that the term and
to various actors/players of the value chain conditions of the loan are not less favorable
model simultaneously. In addition to the to the borrower than those offered by other
traditional loans and discounts that BSFIs lenders; and
are currently offering, the following products (3) Anchor firm (institutional buyer)
and financial services may also be made triggered loan release - loan release to the
available to agricultural value chain actors/ borrower will be endorsed by the anchor
players: firm to ensure the adoption of the technology
(1) Trade-receivables finance - a BSFI protocol required by the buyer (anchor firm).
advances working capital to agribusiness This would optimize productivity by the
(supplier, processor, marketing and export) farmer-borrower and the technology adopted
companies against accounts receivable or conforms with the requirements of the buyer;
confirmed orders to producers. Receivables thus, reduce rejects on the deliveries of the
financing takes into account the strength of produce.
the buyer’s purchases and repayment d. Disaster contingency mechanism. In
history; light of the vulnerability of the agriculture
(2) Factoring - a financial transaction and fisheries sectors which could result to a
whereby a business sell its accounts significant credit losses to financial
receivable or contracts of sales of goods at institutions, if not managed well, the BSFI
a discount to an appropriate BSFI, called a may put in place a disaster contingency
factor, who pays the business minus a factor mechanism that anticipates such events and
discount and collects the receivables when provides response mechanisms to mitigate
due; and the impact of such inherent risks. The disaster
(3) Warehouse receipts - farmers and contingency mechanism can provide timely
other value chain enterprises receive a relief to a borrower to facilitate recovery. This
receipt from a certified warehouse that can mechanism shall be adequately documented
be used as collateral to access a loan from with clear policies and guidelines.
an appropriate BSFI against the security of Provided such built-in contingency
goods in an independently controlled mechanism is prudently designed, its
warehouse. activation shall not automatically trigger
c. Loan disbursement. Loan releases may adverse loan classification and past due loan
take the following forms depending on the recognition so as to manage credit losses to
the BSFI and minimize burden on the client. b. Increase in SBL for an additional
Any new financing granted under such twenty-five percent (25%) for loans, other
schemes will also not be adversely credit accommodations and guarantees
classified. However, such credit should be granted to entities, which act as value chain
closely monitored and appropriate aggregators of the lending banks’ clients,
corrective measure should be taken once it and/or economically-linked entities that are
becomes clear that recoverability is also actors/players in the value chain;
impaired. Provided, That the additional twenty-five
e. Other features. The following activities percent (25%) will apply only to non-
may also be allowed: director/s, officer/s, stockholder/s, and
(1) Director/s, officer/s and/or related interest/s (DOSRI)/related party
stockholder/s of BSFIs engaged in agricultural transaction (RPT) loans: Provided, further,
value chain financing may own and/or That such increase in the SBL for an
control: (i) private entities that would act as additional twenty-five percent (25%) shall
aggregators to facilitate the formation of only be a period of three (3) years starting
value chains, and (ii) economically-linked 02 April 20161, subject to review after said
entities that are also actors/players in the period.
value chain: Provided, That all transactions (Circular No. 908 dated 14 March 2016)
with such entities shall be in the ordinary
course of business and not undertaken on Secs. 4351N- 4390N (Reserved)
more favorable economic terms to such
related parties than similar transactions with Sec. 4391N Investments in Debt and
non-related parties under similar Marketable Equity Securities. The
circumstances. These transactions shall classification, accounting procedures,
comply and adhere to existing regulations valuation, sales and transfers of investments
pertaining to DOSRI loans and/or related- in debt securities and marketable equity
party transactions; and securities shall be in accordance with the
(2) The BSFI, if necessary, may initiate guidelines in Appendices Q-20 and Q-20- a.
the formulation of formal agreement(s) with Penalties and sanctions. The following
qualified value chain actors/players to penalties and sanctions shall be imposed
protect the interests of all parties involved. on FIs and concerned officers found to
(Circular No. 908 dated 14 March 2016)
violate the provisions of these regulations:
a. Fines of P2,000/day to be imposed
§ 4350N.3 Regulatory incentives. To
on NBFIs for each violation, reckoned from
encourage BSFIs to engage in agricultural
the date the violation was committed up to
value chain financing, the following
the date it was corrected; and
incentives shall apply; provided, Subsec.
b. Sanctions to be imposed on
4350N.2 is complied with:
concerned officers:
a. Loans granted to agricultural value
(1) First offense – reprimand the
chain actor(s)/player(s), who are qualified
officers responsible for the violation; and
borrowers under Subsec. X341.2, MORB,
(2) Subsequent offenses – suspension
shall be considered as either direct or
of ninety (90) days without pay for officers
allowable alternative compliance to the
responsible for the violation.
mandatory agriculture and agrarian reform (Circular No. 476 dated 16 February 2005 as amended by
credit allocation; and Circular Nos. 628 dated 31 October 2008, 626 dated 23 October
2008 and 585 dated 15 October 2007)
1
Effectivity date of Circular No. 908 dated 14 March 2016.
Secs. 4392N - 4400N (Reserved) regulations shall govern the registration and
operations of foreign exchange dealers
Secs. 4401N - 4459N (Reserved) (FXDs)/money changers (MCs) and/or
remittance agents:
Sec. 4460N Personal Equity and Retirement
Account (PERA) Market Participants and § 4511N.1 Registration. Qualified
PERA Investment Products. The guidelines persons or non-bank institutions wishing
on the qualification/accreditation of PERA to act as FXDs/MCs and/or remittance
Market Participants and PERA Investment agents are required to register with the
Products which are being issued pursuant Bangko Sentral before they can operate as
to R.A. No. 9505, also known as the PERA such.
Act of 2008 (PERA Act), and its For this purpose, the term money
implementing Rules and Regulations (the changers, interchangeably referred to as
PERA Rules) are provided in Sec. 4960Q. foreign exchange dealers, shall refer to
(Circular No. 860 dated 28 November 2014, as amended by those regularly engaged in the business of
Circular No. 890 dated 02 November 2015)
buying and/or selling foreign currencies.
Secs. 4461N - 4500N (Reserved) Remittance agents, on the other hand,
shall refer to persons or entities that offer to
Secs. 4501N - 4510N (Reserved) remit, transfer or transmit money on behalf
of any person to another person and/or
Sec. 4511N Foreign Exchange Dealers/ entity. These include money or cash
Money Changers and/or Remittance Agents couriers, money transmission agents,
Operations. The following rules and remittance companies and the like.
fifteen (15) day period shall be automatically provisions under Subsecs. 4625Q to
debited against their corresponding DDA on 4625Q.9, and 4625Q.14.
the following business day without (Circular No. 591 dated 27 December 2007)
additional charge. If the balance of the
concerned NBFI’s DDA is insufficient to Secs. 4604N - 4640N (Reserved)
cover the amount of the penalty, said penalty
shall already be subject to an additional Sec. 4641N Electronic Services. The
charge of six percent (6%) per annum to be guidelines concerning electronic activities
reckoned from the business day immediately as may be applicable, are found in Sec.
following the end of said fifteen (15)-day 4701Q and its Subsections.
period up to the day of actual payment. (Circular No. 649 dated 09 March 2009)
d. Appeal or request for reconsideration
A one (1)-time appeal or request for Sec. 4642N Issuance and Operations of
reconsideration on the monetary penalty Electronic Money. The following guidelines
approved by the Governor/Monetary Board shall govern the issuance of electronic
to be imposed on the NBFI, its directors and/ money (e-money) and the operations of
or officers shall be allowed: Provided, That electronic money issuers (EMIs).
the same is filed with the appropriate (Circular No. 649 dated 09 March 2009)
department of the SES within fifteen (15)
calendar days from receipt of the Statement of § 4642N.1 Declaration of policy. It is
Account billing letter. The appropriate the policy of the BSP to foster the
department of the SES shall evaluate the appeal development of efficient and convenient
or request for reconsideration of the NBFI retail payment and fund transfer
individual and make recommendations mechanisms in the Philippines. The
thereon within thirty (30) calendar days from availability and acceptance of e-money as
receipt thereof. The appeal or request for a retail payment medium will be promoted
reconsideration on the monetary penalty by providing the necessary safeguards and
approved by the Governor/Monetary Board controls to mitigate the risks associated in
shall be elevated to the Monetary Board for an e-money business.
resolution/decision. The running of the penalty (Circular No. 649 dated 09 March 2009)
period in case of continuing penalty and/or
the period for computing additional charge § 4642N.2 Definitions
shall be interrupted from the time the appeal E-money shall mean monetary value as
or request for reconsideration was received represented by a claim on its issuer, that is -
by the appropriate department of the SES up a. electronically stored in an
to the time that the notice of the Monetary instrument or device;
Board decision was received by the NBFI/ b. issued against receipt of funds of an
individual concerned. amount not lesser in value than the
(Circular No. 585 dated 15 October 2007, as amended by monetary value issued;
Circular No .662 dated 09 September 2009) c. accepted as a means of payment by
persons or entities other than the issuer;
Sec. 4602N (Reserved) d. withdrawable in cash or cash
equivalent; and
Sec. 4603N Non-Bank BSP Supervised e. issued in accordance with this
Entities. NBBSEs that may subsequently be Section.
authorized to engage in FX forwards and Electronic money issuer shall be
swaps as dealers shall be covered by the classified as follows:
a. Banks (hereinafter called EMI- the entity should have sufficient liquid assets
Bank); equal to the amount of outstanding e-money
b. NBFI supervised by the BSP issued. The liquid assets should remain
(hereinafter called EMI-NBFI); and unencumbered and may take any of the
c. Non-bank institutions registered following forms:
with the BSP as a money transfer agent (1) bank deposits separately maintained
under Section 4511N of the MORNBFI for liquidity purposes;
(hereinafter called EMI-Others). (2) government securities set aside for
For purposes of this Section: the purpose; and
a. Electronic instruments or devices (3) such other liquid assets as the BSP
shall mean cash cards e-wallets accessible may allow.
via mobile phones or other access device, Records pertaining to the above liquid
stored value cards, and other similar assets shall be made available for inspection
products. by BSP at any time and the confidentiality
b. E-money issued by NBFIs shall not of bank deposits and government securities
be considered as deposits. shall be waived.
(Circular No. 649 dated 09 March 2009) e. The BSP shall be allowed access to
review the e-money systems and databases
§ 4642N.3 Prior Bangko Sentral of the entity. Whenever the circumstances
approval. NBFIs planning to be an EMI- warrant, such access shall extend to the
NBFI shall comply with the requirements agents, partners, service providers or
of Sec. 4641N and Sec. 4190N, when outsourced entities of the EMI-Others in
applicable. view of their participation in the e-money
NBFIs planning to be an EMI-Others business; and
shall register with the BSP as a money f. EMI-Others shall submit to the
transfer agent in accordance with the SDC, its AFS within thirty (30) days from
provisions of Sec. 4511N. To qualify for date of report of its external auditors.
registration, they have to comply with the In case the NBFI is already registered
following requirements: with the BSP as a money transfer agent, it is
a. They must be a stock corporation required to meet the additional requirements
with a minimum paid-up capital of P100 mentioned above to qualify as EMI-Others.
million; (Circular No. 649 dated 09 March 2009)
b. They shall engage only in the
business of e-money and other activities § 4642N.4 Common provisions. The
related or incidental to the business of following provisions are applicable to all EMIs:
e-money, such as money transfer/remittance. a. E-money instrument issued shall be
An existing entity engaged in activities not subject to aggregate monthly load limit of
related to the business of e-money but P100,000 unless a higher amount has been
wishing to act as EMI-Others must do so approved by BSP. In case an EMI issues
through a separate entity duly incorporated several e-money instruments to a person
exclusively for such purpose; (e-money holder), the total amount loaded
c. They shall not engage in the in all the e-money instruments shall be
extension of credit, unless they comply with consolidated in determining compliance
the provisions of Subsec. 4633N.5; with the aggregate monthly load limit;
d. To further protect the e-money b. EMIs shall put in place a system to
holders and ensure that e-money maintain accurate and complete record of
redemptions are adequately met at all times, e-money instruments issued, the identity of
e-money holders, and the individual and (1) Sound and prudent management,
consolidated balances thereof. The system administrative and accounting procedures
must have the capability to monitor the and adequate internal control
movement of e-money transactions and link mechanisms;
e-money instruments issued to common (2) Properly-designed computer
e-money holders. The susceptibility of a systems which are thoroughly tested prior
system to intentional or unintentional to implementation;
misreporting of transaction and balances (3) Appropriate security policies and
shall be sufficient ground for imposition by measures intended to safeguard the
the Bangko Sentral of sanctions, as may be integrity, authenticity and confidentiality
applicable. of data and operating processes;
c. E-money may only be redeemed at (4) Adequate business continuity and
face value. It shall not earn interest nor disaster recovery plan; and
rewards and other similar incentives (5) Effective audit function to provide
convertible to cash, nor be purchased at a periodic review of the security control
discount. E-money is not considered a deposit environment and critical systems.
hence it is not insured with the PDIC. i. EMIs shall provide the SDC quarterly
d. EMIs shall not ensure that e-money statements containing, among others,
instruments clearly identify the issuer who information on investments, volume of
is ultimately responsible to the e-money transactions, total outstanding e-money
holders. This shall be communicated to the balances, and liquid assets in such forms as
client who shall acknowledge the same in may be prescribed later on.
writing. j. EMIs shall notify Bangko Sentral in
e. It is the responsibility of EMIs to writing of any change or enhancement in
ensure that their distributors/e-money agents the e-money facility thirty (30) days prior
comply with all applicable requirements of to implementation. If said change or
the Anti-Money Laundering laws, rules and enhancement requires prior Bangko
regulations. Sentral approval, the same shall be
f. EMIs shall provide an acceptable evaluated accordingly. Any change or
redress mechanism to address the enhancement that shall expand the scope
complaints of its customers. or change the nature of the e-money
g. EMIs shall disclose in writing and its instrument shall be subject to prior
customers shall signify agreement to the approval of the Deputy Governor, SES.
information embodied in Item “c” above These changes or enhancements may
upon their participation in the e-money include the following:
system. In addition, it shall provide clear (1) Additional capabilities of the
guidance in English and Filipino on e-money instrument/s, like access to new
consumers’ right of redemption, including channels (e.g. inclusion of internet channel
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 place: (Circular No. 649 dated 09 March 2009)
circulation, and the treatment and disposition b. Exchange rate - rate of conversion
of Philippine currency notes and coins called from foreign currency to local currency,
in for replacement are provided in Section e.g., peso-dollar rate;
4950Q. c. Exchange rate differential/spread -
(Circular No. 829 dated 13 March 2014, M-2009-021 dated foreign exchange mark-up or the difference
16 June 2009, as amended by Circular No. 890 dated
between the prevailing Bangko Sentral
02 November 2015)
reference/guiding rate and the exchange
conversion rate;
Secs. 4651N - 4652N (Reserved) d. Other currency conversion charges -
commissions or service fees, if any;
Sec. 4653N Accounting for Financial e. Other related charges - e.g.,surcharges,
Institution Premises; Other Fixed Assets. postage, text message or telegram;
FI premises, furniture, fixture and equipment f. Amount/currency paid out in the
shall be accounted for using the cost model recipient country - exact amount of money
under PAS 16 “Property, Plant and the recipient should receive in local currency
Equipment.” or foreign currency; and
(Circular No. 494 dated 20 September 2004)
g. Delivery time to recipients/
Secs. 4654N - 4659N (Reserved) beneficiaries - delivery period of remittance
to beneficiary stated in number of days,
Sec. 4660N Disclosure of Remittance hours or minutes.
Charges and Other Relevant Information. Non-bank remittance service providers
It is the policy of the Bangko Sental to shall likewise post said information in their
promote the efficient delivery of respective websites and display them
competitively-priced remittance services by prominently in conspicuous places within their
banks and other remittance service providers premises and/or remittance/service centers.
by promoting competition and the use of (Circular No. 534 dated 26 June 2006)
innovative payment systems, strengthening
Secs. 4661N - 4694N (Reserved)
the financial infrastructure, enhancing access
to formal remittance channels in the source Sec. 4695N Valid Identification Cards for
and destination countries, deepening the Financial Transactions. The provisions of Part
financial literacy of consumers, and improving
8 of the Q Regulations on valid identification
transparency in remittance transactions,
documents shall apply to all types of financial
consistent with sound practices.
ransactions by NBFIs, including financial
Towards this end, NBFIs under Bangko
transactions involving OFWs.
Sentral supervision, including FXDs/MCs (Circular No. 564 dated 03 April 2007, as amended by Circular
and RAs, providing overseas remittance Nos. 792 dated 03 May 2013, 706 dated 05 January 2011, 657
services shall disclose to the remittance dated 16 June 2009 and 608 dated 20 May 2008)
sender and to the recipient/beneficiary, the
following minimum items of information Secs. 4696N - 4698N (Reserved)
regarding remittance transactions, as
defined herein: Sec. 4699N General Provision on Sanctions.
a. Transfer/remittance fee - charge for Any violation of the preceding provisions
processing/sending the remittance from the shall be subject to Section 36 of R.A. No.
country of origin to the country of 7653.
destination and/or charge for receiving the
remittance at the country of destination; Secs. 4700N (Reserved)
and for performing audit/review activities, include the consumer protection audit
and the support provided by the Board and program. A well-designed and implemented
Senior Management. The Board and Senior consumer protection audit program ensures
Management must also make certain that that the Board or its designated Committee
CPRMS weaknesses are addressed and shall be able to make an assessment on the
corrective actions are taken in a timely effectiveness of implementation as well as
manner. adequacy of approved policies and
standards in meeting the established
b. Compliance program. A Consumer
consumer protection objectives.
Protection Compliance Program is an essential
e. Training. Continuing education of
component of the CPRMS. The BSFIs should
personnel about consumer protection laws,
establish a formal, written Consumer rules and regulations as well as related bank
Protection Compliance Program that is part of policies and procedures is essential to
the over-all Compliance System and should maintaining a sound consumer protection
be in accordance with the Revised Compliance compliance program. BSFIs should ensure
Framework for Banks under Sec. 4180Q. that all relevant personnel, specifically those
A well planned, implemented, and maintained whose roles and responsibilities have
Consumer Protection Compliance Program customer interface, receive specific and
should prevent or reduce regulatory violations comprehensive training that reinforces and
and protect consumers from non-compliance helps implement written policies and
and associated harms or loss. procedures on consumer protection. The
c. Policies and procedures. An BSFI should institute a consumer protection
effective CPRMS should have consumer training program that is appropriate to its
protection policies and procedures in place, organization structure and the activities it
approved by the Board. A comprehensive engages. The training program should be
and fully implemented policies help to able to address changes in consumer
communicate the board’s and senior protection laws, rules and regulations and
management’s commitment to compliance to policies and procedures and should be
as well as expectations. Overall, policies provided in a timely manner.
and procedures should a) be consistent with (Circular No. 857 dated 21 November 2014, as amended by
Consumer Protection policies approved by Circular No. 890 dsted 02 November 2015)
the Board; b) ensure that consumer
protection practices are embedded in the B. CONSUMER PROTECTION
STANDARDS OF CONDUCT FOR BSFIS
BSFI’s business operations; 3) address
compliance with consumer protection laws,
Sec. 4702N Consumer Protection
rules, and regulations; and 4) reviewed
Standards. The following Consumer
periodically and kept-to-date as it serve as Protection Standards reflect the core
reference for employees in their day-to-day principles, which BSFIs are expected to
activities. observe at all times in their dealings with
d. Internal audit function financial consumers. These should be
Independent of the compliance function, the embedded into the corporate culture of the
BSFI’s Audit Function should review its BSFI, enhancing further its defined
consumer protection practices, adherence governance framework while addressing
to internal policies and procedures, and conflicts that are inimical to the interests of
compliance with existing laws, rules and the financial consumer.
regulations. The BSFI’s internal audit of the (Circular No. 857 dated 21 November 2014, as amended by
different business units/functions should Circular No. 890 dated 02 November 2015)
executing the transaction. The staff of the The PHS should be clear, concise, and
BSFI should be available to answer the easily understandable by individual
questions and clarifications from the customers. It should contain information
financial customer. that empowers the customer to appreciate
(6) Ensures that staff assigned to deal the key features of the product and its risks.
directly with customers, or who prepare It is prepared in a format that facilitates
advertisement materials (or other material comparison with other products. The PHS
of the BSFI for external distribution) or who should be available at no cost to the public
markets any product or service should be and made available to consumers upon
fully knowledgeable about these products request. Before signing any contract, the
and services, including statutory and BSFI should ensure that the customer has
regulatory requirements, and are able to freely signed a statement to the effect that
explain the nuances to the consumer. the customer has duly received, read, and
(7) Uses a variety of communication understood the PHS.
channels to disclose clear and accurate (12) Notifies the customer in writing of
information. Such communication channels any change in:
should be available to the public without (a) Interest rate to be paid or charged
need for special access requirements, which on any account of the customer as soon as
possible; and
may entail additional expense.
(b) A non-interest charge on any account
Communication channels should be
of the customer within a number of days as
sufficiently responsive to address the literacy
provided under existing regulations prior to
limitations of the financial consumer. Said
the effective date of the change.
channels may be written and/or verbal as
If the revised terms are not acceptable
may be warranted.
to the customer, he or she should have the
(8) Discloses pricing information in
right to exit the contract without penalty,
public domains (e.g., websites). provided such right is exercised within a
(9) Updates customers with relevant reasonable period. The customer should
information, free of charge in a clear, be informed of this right whenever a notice
understandable, comprehensive, and of change is made.
transparent manner, for the duration of the (13) Provides customers with a proof of
contract. Such information covers the the transaction immediately after the
characteristics and the risks of the transaction has been completed. The
products sold by the BSFI and their customer should be given a hard copy of
authorized agents. each of the documents signed by the clients
(10) Imparts targeted information to the (including, but not limited to, the contract)
specific groups of clients to whom specific with all terms and conditions. The BSFI
products are being marketed, with a ensures that documents signed by the
particular consideration for vulnerable customer are completely filled and that there
customers. Communication channels are no blank terms.
employed for such targeted marketing (14) Regularly provides customers with
initiatives may be accordingly calibrated. clear and accurate information regarding
(11) Offers enhanced disclosure for their accounts (e.g., Statement of accounts
more complex products, highlighting the that includes, among others, covering
costs and risks involved for the customer. period, opening balance/value of
For structured investment products, a transactions, all kinds of interest, fees and
Product Highlight Sheet (PHS) is required. charges, closing balance, inquiries for
outstanding balances, proof of payments for (3) Discloses the basis on which the
loans). BSFI is remunerated at the pre-contractual
(15) Informs customers of their rights stage.
and responsibilities including their right to (4) Ensures that adequate systems and
complain and the manner of its submission. controls are in place to promptly identify
b. Advertising and promotional issues and matters that may be detrimental
materials to a customer’s interest (e.g., cases in which
(1) Ensures that advertising and advice may have been given merely to meet
marketing materials do not make false, sales targets, or may be driven by financial
or other incentives).
misleading, or deceptive statements that
(Circular No. 857 dated 21 November 2014, as amended by
may materially and/or adversely affect the Circular No. 890 dated 02 November 2015)
decision of the customer to avail of a service
or acquire a product. §4702N.2 Protection of client
(2) Ensures that advertising and information. Financial consumers have the
promotional materials are easily readable right to expect that their financial
and understandable by the general public. transactions, as well as relevant personal
It should disclose clear, accurate, updated, information disclosed in the course of a
and relevant information about the product transaction, are kept confidential. Towards
or service. It should be balanced/ this end, BSFIs must ensure that they have
well-articulated information security
proportional (reflecting both advantages and
guidelines, well-defined protocols, a
risks of the product or service); visible/
secured database, and periodically
audible; key information is prominent and re-validated procedures in handling the
not obscured; print is of sufficient size and personal information of their financial
clearly legible. consumers. This should be an end-to-end
(3) Ensures that promotional materials process that should cover, among others,
are targeted according to the specific groups the array of information that will be
of consumers to whom products are pre-identified and collected, the purpose of
marketed and the communication channels gathering each information, how these will be
employed for marketing financial services. sourced from the client, the IT-security
(4) Ensures that all advertising and infrastructure of the BSFI, and the protocols
promotional materials disclose the fact that for disclosure, both within the BSFI and
it is a regulated entity and that the name and especially to third parties.
contact details of the regulator are indicated. The BSFI demonstrates the ability to
protect client information if it is able to:
c. Conflict of interest
a. Confidentiality and security of client
(1) Discloses properly to the consumer information
prior to the execution of the transaction that (1) Have a written privacy policy to
the BSFI or its staff has an interest in a direct/ safeguard its customers’ personal
cross transaction with a consumer. information. This policy should govern the
(2) Discloses the limited availability of gathering, processing, use, distribution,
products to consumers when the BSFI only storage, and eventual disposal of client
recommends products which are issued by information. The BSFI should ensure that
their related companies, particularly when privacy policies and sanctions for violations
commissions or rebates are the primary are implemented and strictly enforced.
basis for recommending the particular (2) Ensure that privacy policies are
product to consumers. regularly communicated throughout the
(a) Knowing where sensitive customer are treated fairly, honestly, professionally
information is stored and storing it securely. and are not sold inappropriate and harmful
Make sure only authorized employees have financial products and services. BSFIs
access. should ensure they have the necessary
(b) Taking steps to ensure the secure resources and procedures in place, internal
transmission of customer information. monitoring, and control mechanisms, for
(c) Disposing customer information in safeguarding the best interest of their
a secure way. customers. These include general rules,
(d) Maintaining up-to-date and such as those addressing ethical staff
appropriate programs and controls to behavior, acceptable selling practices as well
prevent unauthorized access. as regulating products and practices where
(e) Using appropriate oversight or audit customers are more likely to be offered
procedures to detect the improper services that are inappropriate for their
disclosure or theft of customer information. circumstances.
(f) Having a security breach response The BSFI demonstrates the principle of
plan in the event the BSFI experiences a data fair treatment towards financial consumers
breach. if it is able to:
b. Sharing of customer information a. Affordability and suitability of product
(1) Inform its customers in writing and or service
explain clearly to customers as to how it (1) When making a recommendation to
will use and share the customer’s personal a consumer:
information. (a) Gather, file, and record sufficient
(2) Obtain the customers’ written information from the customer to enable the
consent, unless in situations allowed as an BSFI to offer an appropriate product or
exception by law or BSP-issued regulations service to the customer. The information
on confidentiality of customer’s gathered should be commensurate to the
information, before sharing customers’ nature and complexity of the product or
personal information with third parties such service either being proposed to or sought
as credit bureau, collection agencies, by the customer and should enable the BSFI
marketing and promotional partners, and to provide an appropriate level of
other relevant external parties. professional service. As a minimum,
(3) Provide access to customers to the information includes the customers’
information shared and should allow financial knowledge and experience,
customers to challenge the accuracy and financial capabilities, investment objectives,
completeness of the information and have time horizons, needs, priorities, risk
these amended as appropriate. affordability, and risk profile.
(4) Appropriate penalties should be (b) Offer products or services that are
imposed by the BSFI to erring employees in line with the needs/risk profile of the
for exposing or revealing client data to third consumer. The BSFI should provide for and
parties without prior written consent from allow the customer to choose from a range
client. of available products and services that can
(Circular No. 857 dated 21 November 2014, as amended by
Circular No. 890 dated 02 November 2015) meet his needs and requirements. Sufficient
and right information on the product or service
§ 4702N.3 Fair treatment. Fair should enable the customer to select the most
treatment ensures that financial consumers suitable and affordable product or service.
(2) Inform or warn the customers that decisions including appropriate criteria to
if they do not provide sufficient information limit the amount of credit.
regarding their financial knowledge and (4) Monitor enforcement of policies
experience, the BSFI is not in a position to to prevent over-indebtedness. The Board
accurately determine whether the product and Senior Management of the BSFIs
or service is appropriate to them, given the should be aware of and concerned about
limited information available. This the risks of over-indebtedness of its
information or warning may be provided in customers.
a standardized format. (5) Draw the customer’s attention to
(3) Ensure that the customer certifies in the consequences of signing a contract that
writing the accuracy of the personal may affect his financial position and his
information provided. collateral in case of default in payment of a
(4) Ensure to offer market-based pricing. loan/obligation.
(5) Design products that are appropriate (6) Prepare and submit appropriate
to the varying needs and interests of different reports (e.g., loan quality, write-offs,
types of consumers, particularly the more restructured loans) to management.
vulnerable consumers. Adequate product (7) Ensure that corrective measures are
approval should be in place. Processes in place for poor long-term quality of loan
should be proper to ensure that products and portfolio linked to over-indebtedness.
services are fit for the targeted consumer. (8) Have specific procedures to actively
(6) Do not engage in abusive or work out solutions (i.e., through workout
deceptive acts or practices. plan) for restructured loans/refinancing/
(7) Seek customer feedback for product writing-off on exceptional basis for clients
design and delivery and use this feedback in default who have the “willingness” but
to enhance product development and without the capacity to repay, prior to
improve existing products. Likewise, seizing the assets.
investigate reasons for client drop out. c. Cooling-off period1
(8) Do not use high pressure/aggressive (1) As may be appropriate, provide the
sales techniques and do not force clients to customer with a “cooling-off” period of a
sign contracts. reasonable number of days [at least two (2)
(9) Have a system in place for approval banking days] immediately following the
when selling high-risk instruments to signing of any agreement or contract,
consumers. particularly for financial products or services
b. Prevention of over-indebtedness with a long-term savings component or
(1) Have appropriate policies for good those subject to high pressure sales contract.
repayment capacity analysis. The loan Cooling-off shall be applicable to a
approval does not rely solely on guarantees customer who is a natural person and to
(co-signers or collateral) as a substitute for financial instruments whose remaining term
good capacity analysis. is equal to or beyond one (1) year.
(2) Properly assess the creditworthiness (2) Permit the customer to cancel the
and conduct appropriate client repayment agreement without penalty to the
capacity analysis when offering a new credit customer of any kind on his or her written
product or service significantly increasing notice to the BSFI during the cooling-off
the amount of debt assumed by the customer. period. The BSFI may however collect or
(3) Ensure to have an appropriate recover reasonable amount of processing
system in place for credit analysis and fees. It is further recognized that there may
1
The effectivity of the cooling-off provisions shall be deferred to 16 January 2016.
be a need for some qualification to an to make sure that the product sold is
automatic right of cooling off. For example, suitable and affordable for the customer.
the right shall not apply where there has e. Institutional culture of fair and
been a drawdown of a credit facility and a responsible treatment of clients
BSFI shall be able to recover any loss arising (1) There should be a Code of Conduct
from an early withdrawal of a fixed rate term (Code) applicable to all staff, spelling out
deposit which loss arises because of a the organizational values and standards of
difference in interest rates. This would be in professional conduct that uphold protection
addition to any reasonable administrative fees of customers. This Code should be reviewed
associated with closure of the term deposit. and approved by the Board. The staff signs
d. Objectivity a document by which they acknowledge that
(1) Deal fairly, honestly, and in good they will abide by the Code and not engage
faith with customers and avoid making in the behaviors prohibited as provided for
in the Code. To ensure adherence to the
statements that are untrue or omitting
Code, the BSFI is required to implement
information which are necessary to prevent
measures to determine whether the
the statement from being false or misleading.
principles of consumer protection are
(2) Present a balanced view when selling observed, the clients’ concerns are
a product or service. While the BSFI highlights appropriately addressed and problems are
the advantages of a product/service, the resolved in a timely manner. These may
customer’s attention should also be drawn to include among others, the regular conduct
its disadvantages and downside risks. of customer satisfaction survey.
(3) Ensure that recommendations made (2) Ensure that recruitment and training
to customer are clearly justified and policies are aligned around fair and
explained to the customer and are properly responsible treatment of clients.
documented. If the requested products are (3) Ensure that staff, specifically those who
of higher risk rating than a customer’s risk interact directly with customers, receive
tolerance assessment results, the BSFI should adequate training suitable for the complexity
draw to the customer’s attention that the of the products or services they sell.
product may not be suitable for him in view (4) Ensure that collection practices are
of the risk mismatch. In such instances, covered during the initial training of all staff
there should be a written disclosure of involved in collections (loan officers,
consequences which is accepted by the collections staff, and branch managers). In
client. particular, collection staff should receive
(4) Ensure that the customer’s suitability training in acceptable debt collection
and affordability are assessed against practices and loan recovery procedures.
(5) Strictly comply with Bangko
specific risks of the investment products:
Senrtral’s existing regulation on what
(a) Financial Needs Analysis (FNA) and
constitutes unfair debt collection practices.
Client Suitability - to assess the customer’s
The BSFI’s Code of Conduct should clearly
risk profile and suitability of the product. spell out the specific standards of
(b) Customer’s Declaration Form - to professional conduct that are expected of
confirm his acceptance and understanding all staff involved in collection (including
of the highlighted features of the product. outsourced staff).
(c) FNA, Client Suitability and (6) Institute policy that guarantees that
Declaration Form should be duly completed clients receive a fair price for any foreclosed
assets and has procedures to ensure that related to best interest of customers,
collateral seizing is respectful of clients’ rights. satisfactory audit/compliance review results
(7) Ensure that Managers and Supervisors and complaint investigation results, are
review ethical behavior, professional taken into account.
conduct, and quality of interaction with (Circular No. 857 dated 21 November 2014, as amended by
Circular Nos. 930 dated 18 November 2016, 898 dated 14
customers as part of staff performance
January 2016 and 890 dated 02 November 2015)
evaluations.
(8) Have a system or internal processes
§ 4702N.4 Effective recourse.
in place to detect and respond to customer
Financial consumers should be provided
mistreatment as well as serious infractions. with accessible, affordable, independent,
In case of violation of Code of Conduct (e.g., fair, accountable, timely, and efficient means
harassment), sanctions shall be enforced. for resolving complaints with their financial
(9) Inform staff of penalties for non- transactions. BSFIs should have in place
compliance with Code of Conduct. mechanisms for complaint handling and
(10) Perform appropriate due diligence redress.
before selecting the authorized agents/ The BSFI demonstrates the ability to
outsourced parties (such as taking into provide effective recourse if it is able to:
account the agents’ integrity, a. Establish an effective Consumer
professionalism, financial soundness, Assistance Management System (CAMS).
operational capability and capacity, and Appendix N-12 provides for the minimum
compatibility with the FI’s corporate culture) requirements of an effective CAMS.
and implement controls to monitor the b. Develop internal policies and
agents’ performance on a continuous basis. practices, including time for processing,
The BSFI retains ultimate accountability for complaint response, and customer access.
outsourced activities. c. Maintain an up-to-date log and
(11) Disseminate the main aspect of the records of all complaints from customers
Code of Conduct to clients through printed subject to the complaints procedure. This
media or other appropriate means. log must contain the following:
f. Remuneration Structure (1) Details of each complaint;
(1) Design remuneration structure for (2) The date the complaint was received;
staff of BSFI and authorized agents in a (3) A summary of the BSFI’s response;
manner that encourages responsible (4) Details of any other relevant
business conduct, fair treatment and correspondence or records;
(5) The action taken to resolve each
avoidance/mitigation of conflicts of interest.
complaint; and
(2) Disclose to the customers the
(6) The date the complaint was resolved.
remuneration structure where appropriate,
d. Ensure that information on how to
such as when potential conflicts of interest
make a complaint is clearly visible in the
cannot be managed or avoided.
BSFI’s premises and on their websites.
(3) Ensure adequate procedures and
e. Undertake an analysis of the patterns
controls so that sales staff are not of complaints from customers on a regular
remunerated based solely on sales basis including investigating whether
performance but that other factors, including complaints indicate an isolated issue or a
customer’s satisfaction (in terms of number more widespread issue for consumers. This
of customer complaints served/settled) and analysis of consumer complaints must be
compliance with regulatory requirements, escalated to the BSFI’s compliance/risk
best practices guidelines, and Code of management function and senior
Conduct in which certain principles are management.
investments and borrowings, not linked to the foregoing enforcement actions, the
the supply of a specific product. following rules shall apply:
d. Provide via the internet or through (a) A Consumer Protection Rating (CPR)
printed publications unbiased and of 4 will require no enforcement action.
independent information to consumers (b) A CPR of 3 will require issuance
through comparative information about the of a written reminder on consumer
price and other key features, benefits and protection areas that may lead to
risks, and associated fees and charges of weaknesses in the BSFI’s Consumer
products and services. Protection Framework.
e. Regularly track, monitor, and assess (c) A CPR of 2 will require a written
campaigns and programs and use the results Action Plan in response to the written
of the evaluation for continuous improvement. reminder issued by the BSP. The written
(Circular No. 857 dated 21 November 2014, as amended by Action Plan shall be duly approved by the
Circular No. 890 dated 02 November 2015)
Board. It shall aim to correct the identified
C. ENFORCEMENT ACTIONS weaknesses in the BSFI’s Consumer
Protection Framework or the noted
Sec. 4703N Enforcement Actions. violations of the BSP Regulations on
a. Enforcement is the implementation Consumer Protection. FCPD shall assess the
of corrective measures and imposition of viability of the plan and shall monitor the
sanctions to BSFIs to: BSFI’s performance.
(1) Ensure compliance with the BSP (d) A CPR of 1 shall also be considered
regulations on consumer protection and as poor/grossly inadequate Financial
consumer protection laws and regulations; Consumer Protection Framework. For this
(2) Inform the management of the BSFIs reason, a written action plan fully
of the consequences of their decisions and executable within ninety (90) days shall be
actions; prepared. The action plan shall be duly
(3) Instill discipline to the BSFIs; and approved by the Board aimed at instituting
(4) Serve as deterrent to the commission immediate and strong measures to restore
of violations. the BSFI to acceptable consumer protection
b. The bases for enforcement actions are operating condition, where it does not pose
the results of the: any risk of financial loss or harm to the
(1) On-site consumer protection financial consumers.
framework assessment; In the event of non-submission of the
(2) Off-site surveillance; written Action Plan within the deadline or
(3) Market monitoring; and failure to implement its action plan, FCPD
(4) Bangko Sentral Consumer Assistance shall recommend appropriate enforcement
Mechanism actions on the BSFI and its responsible
c. The following enforcement action officers including monetary penalties to be
may be taken depending on: computed on a daily basis until
(1) Rating-based enforcement actions for improvements are satisfactorily
on-site periodic assessment. To implement implemented.
Composite Rating
Numerical 4 3 2 1
Rating
Adjectival Strong Acceptable Marginal Poor
Rating
Supervisory No cause for Minimal More than Immediate and
Approach supervisory supervisory normal close supervisory
concern concern supervisory attention and
concern monitoring
Enforcement None Written Written action Written action plan
Action reminder plan
Suspension of
introduction of
new products and
services or
suspension of
existing
products/services
that poses a
consumer
protection concern
or suspension of
further
distribution or
Issuance of
consumer products
and services
Table No. 1. Enforcement Actions for Consumer Protection Ratings
TRUST CORPORATION
(Stand-Alone Trust)
A-1 4162N Reports Relative to the Initial Adoption of One-time 15 business days after end of -do-
(Cir. No. PFRS 9 calendar/fiscal year from the
708 dated date of initial application of PFRS
01.10.11) 9
A-2 BSP-7-26-02-A 4162N Consolidated Statement of Condition -do- 15 business days after end of Email to SDC @
(M-008 (CSOC) reference month sdcnbfi@bsp.gov.ph
dated
02.14.08 and
Cir. No. 880
dated 05.22.15,
Cir. 883 dated
07.10.15, M-28
dated 07.31.15,
M-29 dated
09.14.15, M-30
dated 09.14.15,
M-31 dated
09.14.15, M-32
dated 09.14.15
and M-33 dated
09.14.15)
Page 1 of 6
APP. N-1
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
A-2 BSP-7-26-02 4162N Schedule of Loans/Receivables, Trading -do- -do- Original – Appropriate
Schedule 1 (Cir. No. 883 Account Securities (TAS) - Loans and department of the SES
(IHs only) dated 07.10.15) Underwritten Debt Securities Duplicate to SDC or
e-mail
A-2 BSP-7-26-02 4162N Schedule of Loans/Receivables and Trading Monthly 15th business days from end of Original – Appropriate
Schedule 1 Account Securities - Loans reference month department of the SES
Duplicate - SDC or
e-mail
A-2 BSP-7-26-02 4162N Schedule of Trading Account Securities - -do- -do- -do-
Schedule 2 Investments, Available for Sale Securities
(FCs only) and Investment in Bonds and Other Debt
Instruments (IBODI)
A-2 BSP-7-26-02 4162N Interest Rates and Maturities Matching -do- -do- -do-
Schedule 3
A-2 BSP-7-26-02 4162N Remaining Maturities of Selected Accounts -do- -do- Original - Appropriate
Schedule 4 department of the SES
Duplicate - SDC or
e-mail
Page 2 of 6
APP. N-1
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
A-2 BSP-7-26-02 4162N Schedule of Bills Payables and Bonds -do- -do- Original – Appropriate
Schedule 5 department of the SES
Duplicate – SDC or
e-mail
A-2 BSP-7-26-02 4162N Data on Firm's Businesses -do- -do- Original – Appropriate
Schedule 6 department of the SES
(FCs only) Duplicate – SDC or
e-mail
A-2 BSP-7-26-03 4162N Statement of Income and Expenses -do- -do- -do-
A-2 BSP-7-26-24 4162N Credit and Equity Exposures to Quarterly 15th business day from end of Electronic submission/
(Rev. Aug. Individuals/Companies/Groups Aggregating reference quarter diskette - SDC
2003 per P 1.0 Million and above
CL dated Fax to SDC
08.06.03)
A-2 Unnumbered 4101N Report on required and available reserves Weekly 3rd business day following Original - Appropriate
(no prescribed on Peso-denominated Common Trust reference week department of the SES
form) Funds (CTFs), such other managed peso Duplicate - SDC or
(Entities with funds and TOFA-Others cc:mail/electronic
Trust/Fund transmission
Management
Only)
A-2 Unnumbered 4101N Report on Suspicious Transactions As 10th business day from date of Original and duplicate -
(Rev. May transaction transaction/knowledge Anti-Money Laundering
2002 as occurs Council (AMLC)
amended
by Cir. No.
612 dated -do-
06.03.08) Report on Covered Transactions As 10th business day from date of
transaction transaction/knowledge
occurs
Page 3 of 6
APP. N-1
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
A-2 Unnumbered 4162N Financial Reporting Package for Trust Quarterly 20th business day after SDC
Institutions end of reference quarter sdcnbfi-
Schedules frpti@bsp.gov.ph
- D to D2 Wealth/Assets/Fund
Management–UITF
-E Fiduciary Accounts
- E2, E2a, E2b – report by the PERA Quarterly 20 banking days after -do-
Administrator on Personal Equity and the end of reference quarter
Retirement Account
Page 4 of 6
APP. N-1
16.03.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
A-3 Unnumbered 4162N Report on Borrowings of Bangko Sentral Quarterly 15th business day after Original to SDC
(CL-2007-050 dated Personnel end of reference quarter
10.04.07 and CL-2007-
059 dated 11.28.07)
A-3 Unnumbered 4301N.16 Credit Card Business Activity Report Quarterly 15th banking day of sdc-ccbar@bsp.gov.ph
(Cir. No. 812 dated reference quarter
09.23.13, M-060 dated
12.10.13 and M-002
dated 03.10.16)
B SES II Form 15 4145N Biographical data of Directors/Officers with ID Upon every 20th business day from Hard copy to appropriate
(NP08-TB) (Cir. Nos. 758 dated picture election/re- date of election of the department of the SES
05.11.12, election or directors/meeting of the
M-2008-024 dated appointmnet/ board of directors in
07.31.08 and 887 promotion or if which the officers are
dated 10.07.15) - If submitted in CD form - Notarized first page of change in appointed/promoted
each of the directors'/officers' Biographical Data name or
saved in CD and control prooflist residential
address occurs
- If sent by electronic mail - Notarized first page of 20th business day from
Biographical or Notarized list of names of date the change of name
Directors/Officers whose Biographical data were or residential address
submitted thru electronic mail to be faxed to SDC occurred
B 4145N Duly accomplished and notarized authorizarion Upon election 20th business day from Hard copy to appropriate
(Cir. Nos. 758 dated form for querying the Bangko Sentral watchlist or date of election of the department of the SES
05.11.12 and 887 files appointment/ directors/meeting of the
dated 10.07.15) promotion as board of directors in
first time which the officers are
director/officer appointed/promoted
within an FI
Page 5 of 6
APP. N-1
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
B Unnumbered 4145N List of Members of the Board of Directors Annually 20th business day from annual Appropriate department
(Circular No. and Officers election of the board of directors of the SES
758 dated
05.11.12 and
Cir. No. 887
dated 10.07.15)
B Unnumbered 4162N Board Resolution on NBFIs signatories of As 3rd business day from date of
reports submitted to Bangko Sentral authorized resolution
B General Information Sheet Annually 30th business day from Drop Box - SEC Central
annual stockholders' Receiving Section
meeting Duplicate – Bangko
Sentral
B Forms I and II M -031 dated Report on Electronic Money Transactions Quarterly 15th business day after end of e-mail -sdcothers-
Schedules 1 to 09.11.09 and reference quarter emoney@
3 Cir. No. 649 Quarterly Statement of E-Money Balances bsp-gov.ph
dated 03.09.09 and Activity - Volume and Amount of hard copy -SDC
E-Money Transactions
Quarterly Statement of Liquidity Cover
Schedules
1 - E-Money Balances
2 - Bank Deposits
3 - Government Securities and Others
Unnumbered 4196N.8 IT Risk Profile Report Annually 25 calendar days after end of e-mail at sdcnbfi-
(Cir. No. 808 reference year itprofile@bsp.gov.ph
dated 08.22.13)
Page 6 of 6
APP. N-2
08.12.31
Annex N-2-a
Whereas, it is required under Subsec. 4162N.1 that Category A-2 reports of head offices
be signed by the president, executive vice-presidents, vice-presidents or officers holding
equivalent positions, and that such reports of other offices be signed by the respective
managers/officers-in-charge;
Whereas, it is also required that aforesaid officers of the institution be authorized under
a resolution duly approved by the institution’s Board of Directors;
Whereas, we, the members of the Board of Directors of (Name of Institution) , are
conscious that, in designating the officials who would sign said Category A-2 reports, we are
actually empowering and authorizing said officers to represent and act for or in behalf of the
Board of Directors in particular and (Name of Institution) in general;
Whereas, this Board has full faith and confidence in the institution’s President (and/or
the Executive Vice-President, etc., as the case may be) and, therefore, assumes responsibility
for all the acts which may be performed by aforesaid officers under their delegated authority;
Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby
resolved that:
Name of Specimen Position Report
Officer Signature Title No.
Done in the City of ___________, Philippines, this _____ day of __________, 20__ .
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY
Annex N-2-b
1. Authorized
(Alternate)
2. Authorized
(Alternate)
etc.
Done in the City of __________, Philippines, this ____ day of ____________, 20__ .
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY
Annex N-3-a
Annex N-3-b
Control may also exist even when 17. Auditor-in-charge – refers to the
ownership is one half or less of the voting team leader of the audit engagement.
power of an enterprise when there is:
a. Power over more than one half of D. GENERAL CONSIDERATION AND
the voting rights by virtue of an agreement LIMITATIONS OF THE SELECTION
with other stockholders; PROCEDURES
b. Power to govern the financial and 1. Subject to mutual recognition
operating policies of the enterprise under a provision of the MOA and as implemented
statute or an agreement; in this regulation, only external auditors and
c. Power to appoint or remove the auditing firms included in the list of BSP
majority of the members of the board of selected external auditors and auditing firms
directors or equivalent governing body; or shall be engaged by all the covered
d. Power to cast the majority votes at institutions detailed in Item "B". The external
meetings of the board of directors or auditor and/or auditing firm to be hired shall
equivalent governing body. also be in-charge of the audit of the entity’s
11. External auditor - means a single subsidiaries and affiliates engaged in allied
practitioner or a signing partner in an activities: Provided, That the external auditor
auditing firm. and/or auditing firm shall be changed or the
12. Auditing firm – includes a lead and concurring partner shall be rotated
proprietorship, partnership limited liability every five (5) years or earlier: Provided
company, limited liability partnership, further, That the rotation of the lead and
corporation (if any), or other legal entity, concurring partner shall have an interval of
including any associated person of any of at least two (2) years.
these entities, that is engaged in the practice 2. Category A covered entities which
of public accounting or preparing or issuing have engaged their respective external
audit reports. auditors and/or auditing firm for a
13. Associate – any director, officer, consecutive period of five (5) years or more
manager or any person occupying a as of 18 September 2009 shall have a one
similar status or performing similar (1)-year period from said date within which
functions in the audit firm including to either change their external auditors
employees performing supervisory role in and/or auditing firm or to rotate the lead
the auditing process. and/or concurring partner.
14. Partner - all partners including 3. The selection of the external auditors
those not performing audit engagements. and/or auditing firm does not exonerate the
15. Lead partner – also referred to as covered institution or said auditors from
engagement partner/partner-in-charge/ their responsibilities. Financial statements
managing partner who is responsible for filed with the BSP are still primarily the
signing the audit report on the responsibility of the management of the
consolidated financial statements of the reporting institution and accordingly, the
audit client, and where relevant, the fairness of the representations made
individual audit report of any entity whose therein is an implicit and integral part of
financial statements form part of the the institution’s responsibility. The
consolidated financial statements. independent certified public accountant’s
16. Concurring partner - the partner responsibility for the financial statements
who is responsible for reviewing the audit required to be filed with the BSP is
report. confined to the expression of his opinion,
credit accommodations or arranged for the (c) For Category C, he/she must have
extension of credit or to renew an extension had at least three (3) corporate clients with
of credit (except credit card obligations total assets of at least P5.0 million each;
which are normally available to other credit 2. Auditing firms
card holders and fully secured auto loans a. The auditing firm must be primarily
and housing loans which are not past due) accredited by the BOA and the name of the
with the covered institutions under Item "B" firm’s applicant partner’s should appear in
at the time of signing the engagement and the attachment to the certificate of
during the engagement. In the case of accreditation issued by BOA. Additional
partnership, this prohibition shall apply to partners of the firm shall be furnished by
the partners and the auditor-in-charge of the BOA to the concerned regulatory agencies
engagement; and (e.g. BSP, SEC and IC) as addendum to the
(c) It shall be unlawful for an external firm’s accreditation by BOA.
auditor to provide any audit service to a b. Applicant firms to act as the external
covered institution if the covered auditor of entities under Category A in Item
institution’s CEO, CFO, Chief Accounting "B" must have established adequate quality
Officer (CAO), or comptroller was previously assurance procedures, such consultation
employed by the external auditor and policies and stringent quality control, to
participated in any capacity in the audit of the ensure full compliance with the accounting
covered institution during the one-year and regulatory requirements.
preceding the date of the initiation of the audit; c. At the time of application, the
(3) Individual applications as external applicant firm must have at least one (1)
auditor of entities under Category A above signing practitioner or partner who is
must have established adequate quality already selected/accredited, or who is
assurance procedures, such consultation already qualified and is applying for
policies and stringent quality control, to selection by BSP.
ensure full compliance with the accounting d. A registered accounting/auditing
and regulatory requirements. firm may engage in any non-auditing
b. Specific requirements service for an audit client only if such
(1) At the time of application, service is approved in advance by the
regardless of the covered institution, the client’s audit committee. Exemptions from
external auditor shall have at least five (5) the prohibitions may be granted by the
years experience in external audits; Monetary Board on a case-by-case basis
(2) The audit experience above refers to the extent that such exemption is
to experience required as an associate, necessary or appropriate in the public
partner, lead partner, concurring partner or interest. Such exemptions are subject to
auditor-in-charge; and review by the BSP.
(3) At the time of application, the e. At the time of application, the
applicant must have the following track applicant firm must have the following
record: track record:
(a) For Category A, he/she must have (1) For Category A, the applicant firm
at least five (5) corporate clients with total must have had at least twenty (20)
assets of at least P50.0 million each. corporate clients with total assets of at
(b) For Category B, he/she must have least P50.0 million each;
had at least three (3) corporate clients with (2) For Category B, the applicant firm
total assets of at least P25.0 million each. must have had at least five (5) corporate
clients with total assets of at least P20.0 basic quality assurance policies and
million each; procedures, specialized quality assurance
(3) For Category C, the applicant firm procedures should be provided consisting
must have had at least five (5) corporate of, among other, review asset quality,
clients with total assets of at least P5.0 adequacy of risk-based capital, risk
million each. management systems and corporate
governance framework of the covered
F. APPLICATION FOR AND/OR entities.
RENEWAL OF THE SELECTION OF e. Copy of the latest AFS of the
INDIVIDUAL EXTERNAL AUDITOR applicant’s two (2) largest clients in terms
1. The initial application for BSP of total assets.
selection shall be signed by the external 2. Subject to BSP’s provision on early
auditor and shall be submitted to the deletion from the list of selected external
appropriate department of the SES together auditor, the selection may be renewed
with the following documents/information: within two (2) months before the expiration
a. Copy of effective and valid BOA of the three (3)-year effectivity of the
Certificate of Accreditation with the selection upon submission of the written
attached list of qualified partner/s of the firm; application for renewal to the appropriate
b. A notarized undertaking of the department of the SES together with the
external auditor that he is in compliance following documents/information:
with the qualification requirements under (a) copy of updated BOA Certificate of
Item "E" and that the external auditor shall Accreditation with the attached list of
keep an audit or review working papers for qualified partner/s of the firm;
at least seven (7) years in sufficient detail to (b) notarized certification of the external
support the conclusion in the audit report auditor that he still possess all qualification
and making them available to the BSP’s required under Item "F.1.b" of this Appendix;
authorized representative/s when required (c) list of corporate clients audited
to do so; during the three (3)-year period of being
c. Copy of Audit Work Program which selected as external auditor by BSP. Such
shall include assessment of the audited list shall likewise indicate the findings noted
institution’s compliance with BSP rules and by the BSP and other regulatory agencies
regulations, such as, but not limited to the on said AFS including the action thereon
following: by the external auditor; and
(1) capital adequacy ratio, as currently (d) written proof that the auditor has
prescribed by the BSP; attended or participated in trainings for at
(2) AMLA framework; least thirty (30) hours in addition to the
(3) risk management system, BOA’s prescribed training hours. Such
particularly liquidity and market risks; and training shall be in subjects like international
(4) loans and other risk assets review financial reporting standards, international
and classification, as currently prescribed standards of auditing, corporate
by the BSP rules and regulations. governance, taxation, code of ethics,
d. If the applicant will have clients regulatory requirements of SEC, IC and BSP
falling under Category A, copy of the Quality or other government agencies, and other
Assurance Manual which, aside from the topics relevant to his practice, conducted
basic elements as required under the BOA by any professional organization or
(SRC); and the rules and regulations of (3) Notarized certification of the
concerned regulatory authorities; managing partner of the firm.
f. Refusal for no valid reason, upon d. Dissolution of the auditing firm/
lawful order of the BSP, to submit the partnership, as evidenced by an Affidavit of
requested documents in connection with Dissolution submitted to the BOA, or upon
an ongoing investigation. The external findings by the BSP that the firm/partnership
auditor should however been made aware is dissolved. The accreditation of such firm/
of such investigation; partnership shall however be reinstated by
g. Gross negligence in the conduct of the BSP upon showing that the said
audits which would result, among others, dissolution was solely for the purpose of
in non-compliance with generally accepted admitting new partner/s have complied with
auditing standards in the Philippines or the requirements of this regulation and
issuance of an unqualified opinion which thereafter shall be reorganized and re-
is not supported with full compliance by registered;
the auditee with generally accepted e. There is a showing that the
accounting principles in the Philippines accreditation of the following number or
(GAAP). Such negligence shall be percentage of external auditors, whichever
determined by the BSP after proper is lesser, have been suspended or delisted
investigation during which the external for whatever reason, by the BSP:
auditor shall be given due notice and (1) at least ten (10) signing partners and
hearing; currently employed selected/accredited
h. Conduct of any of the non-audit external auditors, taken together; or
services enumerated under Item "E.1" for (2) such number of external auditors
his statutory audit clients, if he has not constituting fifty percent (50%) or more of
undertaken the safeguards to reduce the the total number of the firm’s signing partners
threat to his independence; and and currently selected/accredited auditors,
i. Failure to comply with the taken together.
Philippine Auditing Standards and f. The firm or any one (1) of its
Philippine Auditing Practice Statements. auditors has been involved in a major
2. An auditing firms; accreditation accounting/auditing scam or scandal. The
shall be suspended or delisted, after due suspension or delisting of the said firm
notice and hearing, for the following shall depend on the gravity of the offense
grounds: or the impact of said scam or scandal on
a. Failure to submit the report under the investing public or the securities
Item "H" or the required reports under Sec. market, as may be determined by the BSP;
X190.1. g. The firm has failed reasonably to
b. Continuous conduct of audit supervise an associated person and
despite loss of independence of the firm as employed auditor, relating to the
provided under this regulation and under following:
the Code of Professional Ethics; (1) auditing or quality control
c. Any willful misrepresentation in the standards, or otherwise, with a view to
following information/ documents; preventing violations of this regulations;
(1) Application and renewal for (2) provisions under SRC relating to
accreditation; preparation and issuance of audit reports
(2) Report required under Item "H"; and the obligations and liabilities of
and accountants with respect thereto;
(3) the rules of the BSP under this for good cause shown, with the consent of
Appendix; or the parties to such proceedings.
(4) professional standards. c. A determination of the Monetary
h. Refusal for no valid reason, upon Board to impose a suspension or delisting
order of the BSP, to submit requested under this section shall be supported by a
documents in connection with an ongoing clear statement setting forth the following:
investigation. The firm should however be (1) Each act or practice in which the
made aware of such investigation. selected/accredited external auditor or
3. Pursuant to paragraph 8 of the auditing firm, or associated entry, if
aforesaid MOA, the SEC, BSP and IC shall applicable, has engaged or omitted to
inform BOA of any violation by an engage, or that forms a basis for all or part
accredited/selected external auditor which of such suspension/delisting;
may affect his/her accreditation status as a (2) The specific provision/s of this
public practitioner. The imposition of regulation, the related SEC rules or
sanction by BOA on an erring practitioner professional standards which the Monetary
shall be without prejudice to the appropriate Board determined as has been violated; and
penalty that the SEC, IC or BSP may assess (3) The imposed suspension or
or impose on such external auditor pursuant delisting, including a justification for either
to their respective rules and regulations. In sanction and the period and other
case of revocation of accreditation of a requirements specially required within
public practitioner by BOA, the which the delisted auditing firm or external
accreditation by SEC, BSP and IC shall auditor may apply for re-accreditation.
likewise be automatically revoked/ d. The suspension/delisting, including
derecognized. the sanctions/penalties provided in Sec.
The SEC, BSP and IC shall inform each X189 shall only apply to:
other of any violation committed by an (1) Intentional or knowing conduct,
external auditor who is accredited/selected including reckless conduct, that results in
by any one (1) or all of them. Each agency violation or applicable statutory, regulatory
shall undertake to respond on any referral or professional standards; or
or endorsement by another agency within (2) Repeated instances of negligent
ten (10) working days from receipt thereof. conduct, each resulting in a violation of the
4. Procedure and Effects of Delisting/ applicable statutory, regulatory or
Suspension. professional standards.
a. An external auditor/auditing firm e. No associate person or employed
shall only be delisted upon prior notice to auditor of a selected/accredited auditing
him/it and after giving him/it the opportunity firm shall be deemed to have failed
to be heard and defend himself/itself by reasonably to supervise any other person
presenting witnesses/ evidence in his favor. for purpose of Item "I.2.g" above, if:
Delisted external auditor and/or auditing (1) There have been established in and
firm may re-apply for BSP selection after the for that firm procedures, and a system for
period prescribed by the Monetary Board. applying such procedures, that comply with
b. BSP shall keep a record of its applicable rules of BSP and that would
proceeding/investigation. Said proceedings/ reasonably be expected to prevent and
investigation shall not be public, unless detect any such violation by such associated
otherwise ordered by the Monetary Board person; and
QUALIFICATION REQUIREMENTS
FOR A BANK/NON-BANK FINANCIAL INSTITUTION APPLYING FOR
ACCREDITATION TO ACT AS TRUSTEE ON ANY MORTGAGE OR BOND
ISSUED BY ANY MUNICIPALITY, GOVERNMENT-OWNED OR
CONTROLLED CORPORATION, OR ANY BODY POLITIC
(Appendix to Subsec. 4109N.16)
FORMAT CERTIFICATION
[Appendix to Subsec. 4211N.2]
Name of Applicant
Address
Date
Gentlemen:
• Incorporation papers duly authenticated by the Securities and Exchange Commission (for
corporation or partnership);
• Copy of the Certificate of Registration with the Department of Trade and Industry (for
single proprietorship);
• Copy of business license/permit from the city or municipality having territorial jurisdiction
over the place of establishment and operation;
• List of stockholders/partners/proprietor/directors/principal officers as the case maybe;
• Notarized Deed of Undertaking to strictly comply with the requirements of all relevant
laws, rules and regulations, signed by the owner, partner, president or officer of equivalent
rank.
Designation
B. Deed of Undertaking
Name of Applicant
Address
DEED OF UNDERTAKING
I, (name and designation), of legal age and under oath, declare the following:
1. That I have been duly authorized by (name of institution) and its Board of Directors/
Partners/Owners to bind (name of institution) to strictly comply with all the requirements,
rules and regulations of the Bangko Sentral ng Pilipinas regarding the registration and operations
of foreign exchange dealers/money changers/remittance agents as well as the provisions of
the Anti-Money Laundering Act of 2001 (R.A. No. 9160, as amended by R.A. No. 9194) and
its implementing rules and regulations.
2. That I certify that (name of institution) undertakes to strictly comply with all the
requirements, rules and regulations of the Bangko Sentral ng Pilipinas regarding the licensing
and operations of foreign exchange dealers/money changers/remittance agents as well as
with all the provisions of the Anti-Money Laundering Act of 2001 (R.A. No. 9160) and its
implementing rules and regulations.
3. That I certify that (name of institution), through and with full knowledge and agreement
of its Board of Directors/Partners/Owners, understands and accepts that in case of violations
of any of the aforementioned laws, rules and regulations, (name of institution) and its Board
of Directors/Partners/Owners/Stockholders/Officers/employees responsible for such
violation/s shall be subject to the administrative sanctions prescribed under Section 36 of
R.A. No. 7653, otherwise known as the “New Central Bank Act” and other applicable
laws, rules and regulations.
_________________________
Designation
Subscribed and sworn to before me this _____ of __________, 20____, affiant exhibiting
to me his/her Community Tax Certificate No. ___________________ issued at
_______________ on _______.
NOTARY PUBLIC
___________________________________________________________
Name of Foreign Exchange Dealer/Money Changer/Remittance Agent
________________________________
Address
1. Date :_________________________
3. Signature :_________________________
7. Nationality :_________________________
A. Sale of foreign exchange for non-trade current account purposes exceeding USD10,000
7. Foreign nationals' income taxes due to a. ACR-I Card and DOLE Alien Employment
foreign governments Permit; and
b. Photocopy of income tax return covering
the income tax payment sought to be
remitted.
19. Net Peso revenues of foreign airlines/ a. Statement of Net Peso Revenues (Peso
shipping companies revenues less expenses) certified by
authorized officer of airline/shipping
company; and
b. Photocopy of contract/agreement.
21. Net peso revenues of embassies/ Statement of net peso revenues (Peso
consulates of foreign countries revenues less expenses) certified by the
Embassy's/Consulate's authorized officer.
Attachment 2
COMPUTATION SHEET
Repatriation of Capital
Name of Investor:
Record Date:
Payment Date:
Amount of Dividends/Share
or Rate of Profits:
REPATRIATION OF CAPITAL
Prepared by:
Date
1/
To be supplied by FX Selling Bank
(Superseded by Circular No. 884 dated 22 July 2015 ; incorporated in Appendix T-2)
FIs with credit operations that may not the loans and advances are determined to
economically justify a more sophisticated be insufficient, weak or without recoverable
loan loss estimation methodology or where values, such loans and advances shall be
practices fell short of expected standards treated as if these are unsecured.
shall, at a minimum, be subject to the 2. Loans and other credit
following guidelines: accommodations that exhibit the
characteristics for classified accounts
I. Individually Assessed Loans and described under Subsec. 4197N.16 shall be
Other Credit Accommodations1 provided with ACL as follows:
Classification ACL
1. Loans and other credit Especially Mentioned (EM) 5%
accommodations with unpaid principal Substandard - Secured 10%
and/or interest shall be classified and Substandard - Unsecured 25%
Doubtful 50%
provided with allowance for credit losses
Loss 100%
(ACL) based on the number of days of missed
payments as follows: 3. Unsecured loans and other credit
For unsecured loans and other credit accommodations classified as
accommodations: “Substandard” in the last two (2) internal
No. of Days
credit reviews which have been
Unpaid/with Classification ACL
Missed Payment continuously renewed/extended without
31 - 90 days Substandard 10% reduction in principal and is not in process
91 - 120 days Substandard 25% of collection, shall be downgraded to
121 - 180 days Doubtful 50% “Doubtful” classification and provided with
181 days Loss 100% a fifty percent (50%) ACL.
and over 4. Loans and other credit
accommodations under litigation which
For secured loans and other credit have been classified as “Pass” prior to the
accommodations: litigation process shall be classified as
No. of Days “Substandard” and provided with twenty five
Unpaid/with Classification ACL percent (25%) ACL.
Missed Payment
5. Loans and other credit
31 - 180 days* Substandard 10%
accommodations that were previously
181 - 365 days Substandard 25%
Over 1 year Doubtful 50% classified as “Pass” but were subsequently
- 5 years restructured shall have a minimum
Over 5 years Loss 100% classification of EM and provided with a five
* When there is imminent possibility of percent (5%) ACL, except for loans which
foreclosure and expectation of loss, ACL shall be are considered non-risk under existing laws,
increased to twenty five percent (25%) rules and regulations.
6. Classified loans and other credit
Provided, That where the quality of physical accommodations that were subsequently
collaterals or financial guarantees securing restructured shall retain their classification
1
Other credit accommodations include other credits such as accounts receivables, sales contract receivables,
accrued interest receivables and advances
and provisioning until the borrower has For secured loans and other credit
sufficiently exhibited that the loan will be accommodations2:
fully repaid.
ACL (%)
No. of Days Other Secured
II. Collectively Assessed Loans1 and Unpaid/with Classification types of by real
Other Credit Accommodations Missed Payment collateral estate
31 – 90 Substandard 10 10
1. Current “Pass” loans and other 91 – 120 Substandard 25 15
credit accommodations should be 121 – 360 days Doubtful 50 25
provided with a reasonable level of 361 days Loss
collective allowance, using historical loss – 5 years 100 50
Over 5 years Loss 100
experience adjusted for current
conditions. Provided, That where the quality of physical
2. Loans and other credit collaterals or financial guarantees securing
accommodations with unpaid principal and/ the loans and advances are determined to
or interest shall be classified and provided be insufficient, weak or without recoverable
with ACL based on the number of days of values, such loans and advances shall be
missed payments as follows: treated as if these are unsecured.
For unsecured loans and other credit (As amended by Circular No. 855 dated 29 October 2014,
accommodations: M-2014-039 dated 01 October 2014, M-2014-031 dated
No. of Days 08 August 2014, M-2014-006 dated 12 February 2014, M-2013-
Unpaid/with Classification ACL 050 dated 15 November 2013, M-2013-046 dated 30
Missed Payment* October,2013, M-2013-045 dated 23 October 2013, M-2013-
040 dated 03 September 2013, M-2013-001 dated 14
1 - 30 days EM 2%
January,2013, M-2012-060 dated 27 December 2012, M-2012-
31 - 60 days/ Substandard 25% 051 dated 09 November 2012, M-2012-044 dated 24 August
1st restructuring 2012, M-2012-042 dated 17 August 2012, M-2012-001 dated 03
61 - 90 days Doubtful 50% January 2012, M-2011-059 dated 22 November 2011, M-2011-
91 days and over/ Loss 100% 056 dated 21 October 2011, M-2011-055 dated 17 October
2nd restructuring 2011, M-2011 043 dated 12 August 2011, M-2011-007 dated 04
* PAR for microfinance loans February 2011, M-2010-039 dated 03 October 2010, M-2010-
007 dated 23 April 2010, M-2009-040 dated 30 October 2009,
M-2009-038 dated 08 October 2009, M-2009-037 dated 15
October 2009, M 2009-036 dated 06 October 2009, Circular
Nos. 622 dated 16 September 2008, 603 dated 03 March 2008,
520 dated 20 March 2006)
1
This includes microfinance loans, micro enterprises and small business loans and consumer loans such as
salary loans, credit card receivables, auto loans, housing loans and other consumption loans, and other loan
types which fall below the FI’s materiality threshold for individual assessment.
2
As defined under Sec. 4311N
1
all periods are reckoned from receipt of complaint.
the: (aa) reason thereof; (bb) need for (2) Consumer feedback may be
extended timeframe; and (cc) date on which obtained through a feedback form/
the complainant may expect the outcome customer satisfaction survey available for
of the BSFI assessment and/or investigation; walk-in complainants, in the website, or
Provided, however, that the additional through a voice logger system.
period shall not exceed forty-five (45) days. (3) Customer feedbacks shall be
This will afford the complainants recorded and analyzed to improve the
opportunity to seek other means to resolve system and to enhance personnel
their complaints. capabilities in handling complaints.
(iii) Result of assessment, investigation,
and BSFI’s final response shall be J. Complaints Recording/Data Management
communicated to the complainant in (1) A BSFI and its branches/other
writing in simple and clear language. The offices shall maintain copies of the
BSFI shall likewise inform the complainant of complaints/requests received, including
the possible remedies available to the party, supporting and other relevant documents
including resort to Bangko Sentral consumer thereto, within a period of two (2) years
assistance mechanism and the courts. from date of resolution.
(2) Inquiries Microfilms/digital copies of original
A BFSI must respond to inquiries received, documents may be maintained by a BSFI
at the latest, by the next business day. in accordance with its management
information systems for record keeping.
G. Confidentiality (2) A BSFI and its branches/other
A BSFI shall not disclose to a third party offices shall maintain complaints/requests
information acquired from the consumer in register which contains the following
all stages of the complaint, except as may information:
be required by the conduct of the BSFI’s (a) Name of the complainant;
investigation. (b) Subject/nature of the complaint;
The subject/nature of complain may
H. Conflict of interest be indicated by classification, such as
A BSFI shall ensure that complaints are those related to credit cards, deposits,
investigated by a consumer assistance administrative, foreign exchange,
officer who is neither directly nor indirectly remittances, investments, others;
involved in the matter which is the subject (c) Name of the personnel directly
of the complaint. handling/in-charge of the complaint and
officer supervising the resolution of the
I. Consumer Feedback complaint;
(1) Subject to the willingness of the (d) Date of receipt of complaint by the
consumer, BSFIs shall ask for feedback BSFI;
on the following matters: (e) Actions taken on the complaint or
(a) Overall satisfaction (whether request;
satisfied, somewhat satisfied, or (f) Resolution provided;
dissatisfied); (g) Date of resolution 1; and
(b) Processes needing improvement; (h) Other information such as, log and
(c) Personnel needing improvement; details of phone calls made or received.
and (3) The Consumer assistance group/head
(d) Any suggestions for improvement. consumer assistance officer shall maintain:
1
The complaint register must reveal the reason in case the date of resolution falls outside the regulatory
deadline.
The agriculture value chain business models are characterized by the main driver of the
value chain, and its rationale or objectives. The following are the typical organizational models
for smallholder production:
Model Driver of organization Rationale
Producer-driven - small-scale producers, especially - access to new markets;
(Association) when formed into groups such as - obtain higher market price;
associations or cooperatives; - stabilize and secure market
- large scale farmers position
Reference:
Miller, C. and Jones, L. 'Agricultural Value Chain Finance, Tools and Lessons'. Published by FAO and
Practical Action Publishing, 2010.
(Circular No. 908 dated 14 March 2016)
T REGULATIONS
(Regulations Governing Trust Corporations)
TABLE OF CONTENTS
A. SCOPE OF AUTHORITY
iii
C. MERGER AND CONSOLIDATION
D. CAPITALIZATION
SECTION 4112T Security for the Faithful Performance of Trust and Other
Fiduciary Business and Investment Management Activities
4112T.1 Basic Security Deposit
4112T.2 Eligible Securities
4112T.3 Valuation of securities and basis of
computation of the basic security deposit
requirement
4112T.4 Compliance period
4112T.5 Sanctions
F. (RESERVED)
iv
SECTIONS 4137T - 4140T (Reserved)
J. BRANCHES/MARKETING OFFICES
v
4151T.8 Requirements for opening branch(es)/marketing
office(s)
4151T.9 Relocation/closure of branch(es)/marketing
office(s)
4151T.10 Sanctions
K. MARKETING
vi
P. RISK MANAGEMENT GUIDELINES
vii
SECTION 4191T Records
SECTION 4302T Loan Portfolio and Other Risk Assets Review System
viii
SECTION 4327T (Reserved)
ix
PART FIVE - EIGHT - (RESERVED)
A. SUNDRY PROVISIONS
x
List of Appendices
15.10.31
LIST OF APPENDICES
T-2 The Guidelines for the lmposition of Monetary Penalty for Violations/
Offenses with Sanctions Falling under Section 37 of R.A. No. 7653 on
Trust Corporations, Directors and/or Officers.
Annex T-2-a - Aggravating and Mitigating Factors to be Considered
in the lmposition of Penalty
xi
§ 4001T - 4008T
16.03.31
1
Section 4 of R.A. No. 8791 (General Banking Law of 2000) defines the scope of Bangko Sentral’s
supervisory powers, which may be grouped into three categories: (i) issuance of rules; (ii) examination
and investigation; and (iii) enforcement of Prompt Corrective Action (PCA)
1
Prevalence pertains to the pervasiveness of the supervisory issues, concerns and problems in relation to their
impact on the FI’s solvency, asset quality, operating performance and liquidity, among others.
PART ONE
or agreement primarily for financial return q. Unit Investment Trust Fund (UITF)
whereby the institution (the investment shall refer to an open-ended pooled trust
manager) binds itself to handle or manage fund denominated in pesos or any
investible funds or any investment portfolio acceptable currency, which are operated
in a representative capacity as financial or and administered by a trust entity and made
managing agent, adviser, consultant or available by participation. The term Unit
administrator of financial or investment Investment Trust Funds is synonymous to
management, advisory, consultancy or any common trust funds. As an open-ended
similar arrangement which does not create fund, participation or redemption is allowed
or result in a trusteeship.
as often as stated in its plan rules.
f. Investment management account shall
r. Assets under management (AUM)
refer to an account where transactions arising
shall represent all funds, properties and
from investment management activities are
kept and recorded. securities, denominated in peso and other
g. Trust is a relationship or an foreign currency, which the TC, acting as
arrangement whereby a person called a trustee, fiduciary and agent, shall manage,
trustee is appointed by a person called a administer, hold, and/or take custody, for
trustor to administer, hold and manage funds the use and/or benefit of persons other than
and/or property of the trust or for the benefit the TC. In the performance of its trust, other
of a beneficiary. fiduciary business and investment
h. Trust agreement is an instrument in management activities (IMA), the assets under
writing covering the terms and conditions management of the TC shall be kept separate
of the trust. and distinct from the proprietary assets of
i. Trustee is any person who holds legal the TC as well as from the general or other
title to the funds and/or property of a trust. business owned and operated by its parent
j. Trustor is any person who creates a trust. company, subsidiaries and related interest
k. Beneficiary is any person for whose including all other funds, properties, and
benefit a trust is created. assets owned by such TC.
l. Fiduciary shall refer to any person or s. Proprietary assets shall refer to all
entity engaged in any of the other fiduciary assets, excluding assets under management,
business as herein defined where no trustor- owned by the TC for the purpose of engaging
trustee relation exists.
in the business of trust, other fiduciary and
m. Agency shall refer to a contract
investment management activities and
whereby a person binds himself to render
maintaining the minimum capital requirement.
some service or to do something in
(Circular No. 884 dated 22 July 2015)
representation or on behalf of another, with
the consent or authority of the latter.
n. Principal shall refer to the person who § 4102T.2 Powers and scope of
grants authority to another person called an authority. A TC, with prior approval of
agent, under a contract to enter into the Monetary Board, shall engage in trust
transactions in his behalf. and other fiduciary business under Chapter
o. Agent shall refer to a person who acts IX of R.A. No. 8791 (The General Banking
in representation or on behalf of another Law of 2000).
person with the latter's authority. A TC may accept peso and foreign
p. President shall refer to the chief currency denominated accounts: Provided,
executive officer of the TC or to any other That in the case of foreign currency
position of equivalent rank or position. denominated accounts, all relevant laws,
rules and regulations issued by local reputation in the business community. The
regulatory agencies on such are complied with. subscribers must have adequate and
(Circular No. 884 dated 22 July 2015) legitimate financial capacity to pay for their
proposed subscriptions in the TC.
§ 4102T.3 Limitations. Except for In addition, the incorporators/
escrow services, property administratorship, subscribers must not have been convicted
safekeeping, collection and payment of any crime involving moral turpitude, and
services, and other similar legitimate unless otherwise allowed under the
activities, a TC shall not accept and provisions of existing laws, are not officers
administer funds or property of any bank or employees of a government agency,
and/or quasi-bank, and/or act as trustee, instrumentality, department or office
fiduciary, financial consultant, investment charged with the supervision of, or the
adviser, or portfolio manager of such funds granting of credit to trust entities.
or property. It shall not, in any manner, A TC shall ensure that it upholds
allow itself to be a party to any transaction consumer protection practices that adhere
by which a bank or quasi-bank circumvent to the highest level of service standards, and
laws, rules and regulations. Moreover, a TC observes fair and responsible dealings in the
cannot engage in quasi-banking functions, conduct of its trust business. In this regard,
particularly the borrowing of funds from the a TC shall adopt a board-approved consumer
public for the purpose of relending the said protection framework that is appropriate to
funds. The TC, however, retains the right to its corporate structure, operations and risk profile.
borrow as is inherent to any duly registered (Circular No. 884 dated 22 July 2015)
corporate entity: Provided, however, That
borrowing of a TC from its managed or § 4103T.1 Basic guidelines in
trusteed accounts shall be prohibited. establishing TCs. No person or entity shall
(Circular No. 884 dated 22 July 2015) be allowed to operate as a TC without prior
authority from the Bangko Sentral.
B. ESTABLISHMENT AND a. Organizational requirements.
ORGANIZATION (1) Articles of incorporation and
by-laws. The articles of incorporation and
Sec. 4103T Establishment and by-laws of any TC, or any amendment
Organization. A TC shall administer the thereto, shall not be registered with the
funds or property under its custody with the Securities and Exchange Commission (SEC)
diligence that a prudent man would exercise unless accompanied by a certificate of authority
in the conduct of an enterprise of a like to register issued by the Monetary Board.
character with similar aims. (2) Application for authority to establish
The TC must have suitable shareholders, the TC. The incorporators/directors of the
adequate financial strength, a legal structure proposed TC shall file and submit to the
in line with its operations, and a Monetary Board through the appropriate
management that is fit and proper to operate supervising and examining department of
the corporation. Where the proposed the Bangko Sentral an application for
owner or parent organization is a foreign- authority to establish a TC to primarily
regulated financial institution, the prior engage in trust, other fiduciary business and
consent of its home country supervisor investment management activities, which
should be obtained. shall be duly signed by all incorporators/
The incorporators/subscriber must be directors, together with the following
persons of integrity and of good credit documents:
1
Control exists when the parent owns directly or indirectly through subsidiaries more than one-half (1/2) of the
voting power of an enterprise unless, in exceptional circumstance, it can be clearly demonstrated that such
ownership does not constitute control. Control may also exist even when ownership is one-half (1/2) or less of
the voting power of an enterprise when there is: (i) power over more than one-half (1/2) of the voting rights by
virtue of an agreement with other stockholders; or (ii) power to govern the financial and operating policies of
the enterprise under a statute or an agreement; or (iii) power to appoint or remove the majority of the members
of the board of directors or equivalent governing body; or (iv) power to cast the majority votes at meetings of
the board of directors or equivalent governing body; or (v) any other arrangement similar to any of the above.
(f) Detailed plan of operation and (iv) Clearance from the NBI of each of
economic justification for establishing a TC. the incorporator, subscriber, proposed
The plan should describe and analyze the director and officer or similar document
industry and the market area from which from the home country in the case of non-
the TC expects to draw majority of its trust Filipino citizens. However, the applicant
business and establish a strategy for its may instead submit a certification that the
ongoing operation. It should also describe incorporator, subscriber, proposed director
how the TC will be organized and controlled and officer concerned has already undergone
internally. Further, the plan should cover prior approval/confirmation by the Bangko
the marketing and distribution arrangements Sentral as director and/or officer of a Bangko
to be adopted by the TC which shall comply Sentral-supervised entity;
with Sections 4152T and 4153T; (v) Copy of the board resolution
(g) Projected financial statements for the authorizing the trust department to spin-off
first five (5) years together with assumptions. into a TC and designating the person who
These should be consistent with its proposed will represent the corporation in connection
plan of operation and would show sufficient therewith;
capital to support its strategy and operations; (vi) In addition to the detailed plan of
(h) Detailed plan on how the operation and economic justification for
subscribers would put up the required establishing a TC required under
capitalization for the proposed TC; and Item “(2)(f)”, the plan shall include specific
(i) Such other information that the actions and timelines for the smooth
Bangko Sentral may require. transition of its operations including
In case of banks and NBFIs that decide timelines for ample notification to clients;
to spin-off their trust department to a TC, (vii) Detailed plan on how the bank/
in addition to the articles of incorporation, NBFI would put up the required
by-laws and the application for capitalization for the proposed TC;
establishment of the proposed TC, the (viii) For trust departments of foreign
documentary requirements are as follows: banks/foreign bank branches, it shall also
(i) Updated biographical data of each submit a certification from its home
incorporator, subscriber, proposed director country’s supervisory authority that it has
and officer; no objection to the spin-off of the trust
(ii) Certificate of net worth as of a date department of said bank/foreign branches
not earlier than ninety (90) days prior to the into a TC and that adequate information shall
filing of the application of each of the likewise be provided to the Bangko Sentral
subscriber. Such certificate shall indicate a to the extent allowed under existing laws; and
minimum net worth that will demonstrate (ix) Such other information that the
the certifying person’s financial capacity to Bangko Sentral may require.
invest in the TC. A waiver of rights under Application for establishment of a TC
R. A. No. 1405, as amended, shall also be shall be subject to the following fees:
submitted for purposes of verification of the (aa) Filing fee - A filing fee of P25,000.00
declared net worth; shall be charged upon filing of the
(iii) Certified photocopies of ITRs for the application and is non-refundable;
last two (2) calendar years of each (bb) Processing fee - A processing fee of
incorporator, subscriber, proposed director P100,000.00 shall be charged for accepted
and officer or similar document from the applications regardless whether the
home country in the case of non-Filipino application is approved or denied. Processing
citizens; fee shall be inclusive of the filing fee; and
(e) Risk Management Manual, Manual (i) Certification by the president that no
on Consumer Protection Framework and person who is the spouse or relative within
Operations Manual embodying the policies, the second degree of consanguinity or
systems, and operating procedures of each affinity of any person holding the position
department/unit in the organization, of chairman, president, chief executive
together with the certification of the officer, chief operating officer, executive vice-
president of the TC that the manuals were president, senior vice president or any
prepared and aligned with existing Bangko position of equivalent rank, general manager
Sentral rules and regulations on risk treasurer, chief cashier, or chief accountant
management, consumer protection and will be appointed to any of said positions
trust, other fiduciary and investment in the TC; and
(j) Other documents/papers which may
management activities, and that the
policies, systems and operating procedures be required.
(Circular No. 884 dated 22 July 2015, as amended by Circular No.
in the manuals shall be implemented. A 903 dated 29 February 2016)
TC is expected to have in place, a risk
management system that is appropriate to
§ 4103T.2 Commencement of trust,
the nature and complexity of the TC’s
other fiduciary business and investment
fiduciary activities and to ensure that the
management activities. The authority to
policies, systems and operating procedures
establish a TC shall be automatically
in the manuals shall be implemented;
(f) Excerpts of the minutes of the revoked if the TC is not organized and
organizational/director’s meetings opened for business within one (1) year from
confirming all organizational and pre- date of approval by the Monetary Board of
opening transactions relative to activities their application for authority to operate a
undertaken by the TC to operate the trust, TC. A final extension may be granted upon
other fiduciary business and investment presentation of justifiable reason for
management activities (e.g., appointment of failure to open the TC within the
officers, and approval of authorized prescribed period, and proof that the TC
can be opened within the extension
signatories);
period.
(g) Alphabetical list of all stockholders
In the case of spun-off trust departments
with the number and percentage of voting
of banks/NBFIs, it is understood that upon
stocks owned/held;
receipt of the certificate of authority to
(h) List of natural persons/stockholders
operate a TC, the trust license of the trust
certified by the corporate secretary, owning
department shall be automatically
voting stocks in the TC and are related to other
revoked.
identified stockholders within the first degree
The TC shall submit a written notice
of consanguinity or affinity, indicating the to the appropriate supervising and
combined percentage of voting stocks held by examining department of the Bangko
these persons in the particular TC, as well as Sentral of the actual date of
juridical persons, including corporations that commencement of trust, other fiduciary
are wholly-owned or a majority of the stock and investment management operations
of which is owned by any of such persons, not later than ten (10) days from such
including their wholly- or majority-owned operation.
subsidiaries; (Circular No. 884 dated 22 July 2015)
Sec. 4104T Unauthorized Conduct of Trust TC, the authority to engage in trust, other
and Other Fiduciary Business. If an entity fiduciary business and investment
is found to be engaged in unauthorized management activities shall continue to be
trust and other fiduciary business and/or in effect if the surviving institution has such
investment management activities, authority and the same has not been
whether as its primary, secondary or withdrawn or revoked by the Bangko
incidental business, the Monetary Board Sentral. In case the surviving institution does
may proceed against such entity and/or its not have previous authority, it shall secure
board of directors, and/or principal the prior approval of the Monetary Board
officers and/or majority stockholders in to engage in trust business as part of its
accordance with law. application for merger to enable it to
The Monetary Board may take such incorporate such among its powers or
action as it may deem proper such as, but purpose clause in its articles of
may not be limited to, requiring the incorporation, articles of merger, by-laws
transfer or turnover of any trust and other and such other pertinent documents. In the
fiduciary and/or investment management consolidation of TCs where the resulting
accounts to duly incorporated and entity is an entirely new one, it shall secure
licensed entities of choice by the trustor, from the Monetary Board an authority to
beneficiary or client, as the case may be. engage in trust, other fiduciary business and
No entity shall advertise or represent investment management activities before it
itself as being engaged in trust and other may engage in such business.
fiduciary business or in investment Mergers and consolidations including
management activities or represent itself the terms and conditions thereof shall
as trustee or investment manager or use comply with the provisions of applicable
words of similar import and/or use in law and are subject to approval by the
connection with its business title, the Bangko Sentral.
words trust, trust corporation, trust The guidelines and procedures in the
company, trust plan or words of similar application for merger/consolidation as
import, without having obtained the shown in Appendix Q -50 of the MORNBFI
required authority to do so. shall be observed by TCs.
TCs may be allowed to adopt any Rules on exchange of shares. As a
name that is not offensive or confusing to general rule, the ratio of exchange of
the public: Provided, That the words trust, shares between or among the participants
trust corporation, trust company or words in a financial institution (FI) merger or
of similar import, is affixed in its business consolidation shall be based on mutual
name. agreement of the parties concerned.
(Circular No. 884 dated 22 July 2015) However, any appraisal increment
reserve (revaluation reserve) arising from
Secs. 4105T - 4107T (Reserved) the revaluation of the fixed assets, as may
be agreed upon by the parties shall be
C. MERGER AND CONSOLIDATION limited to premises, improvement, and
equipment which are necessary for its
Sec. 4108T Authority Resulting from immediate accommodation in the
Merger or Consolidation. In the merger of transaction of the FI’s business. Such
financial institutions (FI), one of which is a revaluation should be based on fair
valuation of the property which shall be The assets under management, for this
subject to review and approval by the purpose, shall be computed based on the
Bangko Sentral. average of the quarter-end balances of
(Circular No. 884 dated 22 July 2015) AUM for the calendar year.
For purposes of this Section, combined
Secs. 4109T - 4110T (Reserved) capital accounts shall mean the total capital
stock, retained earnings, and profit and loss
D. CAPITALIZATION summary, net of (a) valuation reserves on
the allowable proprietary assets;
Sec. 4111T Minimum Required Capital. (b) appraisal surplus or appreciation credit
A TC shall have an unimpaired combined as a result of appreciation or an increase in
capital accounts of P300 million or 0.10% book value of the assets of the TC, if
of the total book value of its AUM, applicable; and (c) such other capital
whichever is higher: Provided, That the adjustments as may be required by the
minimum paid-in capital shall be at least Bangko Sentral.
P300 million. (Circular No. 884 dated 22 July 2015)
(Circular No. 884 dated 22 July 2015)
§ 4111T.2 Sanctions. Whenever the
§ 4111T.1 Capital build-up program. paid-in or the combined capital accounts
Upon incorporation/establishment, a TC of the TC are deficient with respect to the
may have an initial minimum paid-in preceding paragraphs, the TC may be
capital of P100 million and shall be subject to the sanctions/penalties provided
allowed to build-up capital over a period under existing laws and Bangko Sentral
of 5 years: Provided, That the minimum rules and regulations. Moreover, the
paid-in capital after 5 years shall be at least Monetary Board, after considering the
P300 million: Provided, further, That the report of the appropriate supervisory and
minimum capital during the capital build- examining department of the Bangko
up phase shall be determined as follows: Sentral, shall require the TC to institute
necessary corrective action(s) to address
Calendar Year Capital Requirement its capital deficiency. Until the TC
Year 0- Upon complies with the minimum capital
incorporation/ P100 million requirement, the Monetary Board may
At inception restrict the ability of the TC, to declare
End of Year 1 P140 million or 0.10% dividends and/or expand its business.
of AUM whichever is
The Monetary Board may revoke the
higher
End of Year 2 P180 million or 0.10%
license of the TC which fails to comply
of AUM whichever is with the minimum capital requirement
higher within the remedial period.
End of Year 3 P220 million or 0.10% (Circular No. 884 dated 22 July 2015)
of AUM whichever is
higher E. BASIC SECURITY DEPOSIT
End of Year 4 P260 million or 0.10%
of AUM whichever is Sec. 4112T Security for the Faithful
higher Performance of Trust and Other Fiduciary
End of Year 5 P330 million or 0.10% Business and Investment Management
and onwards of AUM whichever is Activities.
higher (Circular No. 884 dated 22 July 2015)
§ 4112T.1 Basic security deposit. TCs The security for the faithful performance
duly authorized by the Monetary Board, of Personal Equity and Retirement Account
shall deposit with the Bangko Sentral (PERA) Administrator shall be separately
eligible government securities as security calculated as prescribed under Section 4960Q
for the faithful performance of trust and and Appendix Q-21a of the MORNBFI.
other fiduciary duties and investment (Circular No. 884 dated 22 July 2015)
management activities equivalent to
0.05% of the total book value of the § 4112T.2 Eligible securities.
AUM: Provided, That at no time shall the Government securities which shall be
basic security deposit be less than deposited in compliance with the above
P500,000.00. Provided, further, That after basic security deposit shall consist of
the first year of operation, the basic evidences of indebtedness of the Republic
security deposit shall be based on the trust of the Philippines and of the Bangko Sentral
rating of the most recent report of and any other evidences of indebtedness or
examination of the TC, as shown in the obligations the servicing and repayment of
table below: which are fully guaranteed by the Republic
of the Philippines; and such other kinds of
Trust Rating Required Basic Security securities which may be declared eligible
Deposit by the Monetary Board: Provided, That such
4 P500,000 or 0.03% of the securities shall be free, unencumbered, and
total book value of the not utilized for any other purpose: Provided,
AUM, whichever is higher. further, That such securities shall have
3 P500,000 or 0.05% of the remaining maturities of not more than three
total book value of the
(3) years from the date of deposit with the
AUM, whichever is higher.
2 P500,000 or 0.10% of the
Bangko Sentral.
total book value of the (Circular No. 884 dated 22 July 2015)
AUM, whichever is higher.
1 P500,000 or 0.20% of the § 4112T.3 Valuation of securities and
total book value of the basis of computation of the basic security
AUM, whichever is higher. deposit requirement. For the valuation of
securities and basis of computation of the
The basic security deposit shall be in basic security deposit requirement, the
the form of securities acceptable to the provisions of Subsection 4405Q.3 of the
Bangko Sentral, earmarked in favor of the MORNBFI shall apply.
Bangko Sentral: Provided, That the TC shall (Circular No. 884 dated 22 July 2015)
not withdraw, transfer or replace such
earmarked securities without prior written § 4112T.4 Compliance period. The TC
approval of the Bangko Sentral. shall have thirty (30) calendar days after the
Scripless securities under the Registry of end of every calendar quarter within which
Scripless Securities (RoSS) System of the to deposit with the Bangko Sentral
Bureau of the Treasury (BTr) may be used as additional securities required due to
basic security deposit for trust and other increase in the average AUM. In cases of
fiduciary duties using the guidelines changes in the trust rating, the reckoning
enumerated in Appendix Q-21 of the period of the thirty (30) days shall be the
MORNBFI. quarter-end from receipt of the Report of
1
Beneficial owner refers to natural person(s) who ultimately owns or controls a customer and/or the
person on whose behalf a transaction is being conducted. It also incorporates those persons who
exercise ultimate effective control over a legal person or arrangement.
Manual of Regulations for Non-Bank Financial Institutions T Regulations
Part I - Page 13
§§ 4126T.1 - 4141T.2
16.03.31
b. At least three (3) years of professional Officers of the TC with position of senior
experience in relevant field such as banking, vice president and up, shall at least possess
finance, economics, law and risk the requirement in Item “(b)” above.
management; The foregoing qualifications for officers
c. Completion of at least ninety (90) shall be in addition to those required or
training hours on trust, other fiduciary prescribed under R. A. No. 8791, the
business, or investment management activities Corporation Code of the Philippines (Batas
acceptable to the Bangko Sentral; or Pambansa Blg. 68) and other existing
d. Completion of a relevant global or applicable laws and regulations.
local professional certification program. (Circular No. 884 dated 22 July 2015)
(Circular No. 884 dated 22 July 2015)
§ 4142T.1 - 4142T.2 (Reserved)
§ 4141T.3 Powers/responsibilities and
duties of board of directors. In addition to § 4142T.3 Duties and responsibilities
the provisions prescribed under Subsection of officers. The president shall have general
4141Q.3 of the MORNBFI, the board of supervision and direction of the business
directors shall conduct regular meetings at least affairs of the TC; he/she shall be responsible
once every quarter, or more frequently as in the management of the day-to-day
necessary, depending on the size and activities of the TC. In this regard, the
complexity of the fiduciary business. president shall provide supervision and
(Circular No. 884 dated 22 July 2015) direction in the following areas:
a. Adherence to the basic standards in
§ 4141T.4 – 4141T.9 (Reserved) the administration of trust, other fiduciary
and investment management accounts
Sec. 4142T Definition; Qualifications; and pursuant to Appendix Q-48 of the MORNBFI;
Duties and Responsibilities of Officers. The b. Development and implementation of
definition, qualifications and duties of officers relevant policies and procedures on
provided under Section 4142Q of the fiduciary activities;
MORNBFI, shall be adopted for TC, unless c.Observance of sound risk
otherwise provided herein. management practices and maintenance
Moreover, in line with the fit and of necessary controls to protect assets
proper criterion of the abovementioned under custody and held in trust or other
Section, the president who shall be fiduciary capacity;
appointed shall also possess the following d. Implementation of investment and
qualifications: other fiduciary activities in accordance
a. At least five (5) years of actual with agreements with clients and
management experience in trust, other parameters set by the board of directors;
fiduciary and investment management e. Regular reportorial requirements to the
operations; or board of directors on business performance
b. At least five (5) years of actual and other matters requiring its attention;
experience as officer of a bank, NBFI or f. Maintenance of adequate books,
related field: Provided, That said officer records and files for each trust or other
passed the training program in trust, other fiduciary account and provision of timely
fiduciary and investment management and regular disclosures to clients on the
operations acceptable to the Bangko Sentral. status of their accounts; and
(4) Business and/or economic true copy of the resolution of the TC’s board
justification (including data) for the of directors authorizing said relocation/
establishment of the branch; and closure and stating the justifications/reasons
(5) Certification/Undertaking signed by thereof, shall be submitted by the TC to the
the president that the TC has complied or appropriate department of the SES;
will comply, as the case maybe, with the 2. Upon receipt of “no objection
prerequisites for the grant of authority to notice” from the Bangko Sentral but at least
establish a branch under Subsection 4151T.3. forty-five (45) calendar days prior to the
b. For marketing office(s), the notice closure, notice of relocation/closure shall
shall be supported with Items “(2), (3)” and be sent by the TC to the trustors’ and other
“(5)” of the above documentary creditors’ last known addresses by
requirements. registered mail service of the Philippine
(Circular No. 884 dated 22 July 2015) Postal Corporation (Philpost) or delivery
service of other mail couriers or electronic
§ 4151T.6 Filing/processing fee. A non- mail, and posters shall also be displayed in
refundable filing fee of P2,000.00 shall be conspicuous places in the premises of the
paid for each branch application. Moreover, branch to be closed. Proofs of receipt of
a processing fee of P25,000.00 shall be paid notice by the trustors and other creditors
for each branch application processed, shall be kept on file and made available upon
regardless of the final decision of the Bangko request of the Bangko Sentral; and
Sentral. 3. Within five (5) banking days from the
(Circular No. 884 dated 22 July 2015)
date of relocation/closure of the branch/
marketing office, a notice of such relocation/
§ 4151T.7 Date of opening. Approved closure signed by the compliance officer
branch(es) shall be opened within six (6)
with the rank of a vice president or equivalent
months from the date of approval thereof
rank, or by a higher ranking officer, together
and shall not be subject to any extension.
with a certification that the notification
(Circular No. 884 dated 22 July 2015)
requirement in Item “2” above has been
complied with, shall be submitted to the
§ 4151T.8 Requirement for opening
appropriate department of the SES.
branch(es)/marketing office(s). Not later
(Circular No. 884 dated 22 July 2015)
than five (5) banking days from date of
opening, the TC shall notify the appropriate
department of the SES of the actual date of § 4151T.10 Sanctions. Any violation of
opening of its branch/marketing office. the provisions of Subsections 4151T.1 to
(Circular No. 884 dated 22 July 2015) 4151T.9 depending on the materiality or
seriousness of the violation, may constitute
§ 4151T.9 Relocation/closure of a ground for considering the same as unsafe
branch(es)/marketing office(s). Relocation/ and unsound practice and may be a ground
closure of branch(es)/marketing office/s may for cancellation of the franchise and closure
be effected only with prior notification to of said branch/marketing office established
the Bangko Sentral in accordance with the herein without prejudice to the imposition
following procedures: of applicable criminal and administrative
1. Notice of the relocation/closure of the sanctions prescribed under Sections 36 and
branch/marketing office signed by the 37, respectively of R.A. No. 7653; and if any
president of the TC, together with a certified part of any certification submitted by the TC
Reclassification of real and other properties Sec. X162 and Appendix Q-37, of the
acquired to QB premises, furniture, fixture and MORNBFI, in so far as applicable, shall apply.
equipment; Sanction) shall be adopted for the (Circular No. 884 dated 22 July 2015)
premises and other fixed assets of the trust
corporations. Secs. 4163T - 4172T (Reserved)
(Circular No. 884 dated 22 July 2015)
P. RISK MANAGEMENT
O. MANAGEMENT CONTRACTS AND GUIDELINES
OUTSOURCING OF OTHER
FUNCTIONS Sec. 4173T Risk Management Guidelines.
Risk management guidelines for trust
Sec. 4161T Management Contracts. Subject and other fiduciary business and
to existing laws and regulations, all investment management activities shall be
agreements whereby the affairs or governed by the applicable regulations under
operations of a trust corporation will be Secs. 4174Q, 4175Q, 4176Q and 4177Q,
carried out by another corporation, person MORNBFI, and by Appendix Q-48a of the
or group of persons, shall be subject to prior MORNBFI-Risk Management Guidelines for
Bangko Sentral approval. Trust and Other Fiduciary Business and
The agreements referred to in the Investment Management Activities.
preceding paragraph shall not be entered (Circular No. 884 dated 22 July 2015)
into for a period longer than five (5) years.
(Circular No. 884 dated 22 July 2015) Secs. 4174T –4177T (Reserved)
Sec. 4162T Duties and Responsibilities of Sec. 4178T Credit Risk Management. The
TCs and their Directors/Officers in All guidelines on sound credit risk management
Cases of Outsourcing of Other Functions. practices as provided under Sec. 4178Q
Only trust corporations with trust composite and the following Subsections of the
rating of at least “2” and a Management MORNBFI shall apply in so far as applicable
rating of not lower than “3” shall be allowed to trust corporations:
to outsource designated activities without 4178Q.1 Evaluation of credit risk
prior Bangko Sentral approval. Otherwise,
management system
the trust corporation must secure approval
4178Q.2 Role of the Board and Senior
from the appropriate supervising department
Management
of the Bangko Sentral whose evaluation shall
be based on the trust corporation's ability 4178Q.3 Credit risk management
to manage risk attendant to outsourcing. The structure
trust corporation shall likewise ensure that 4178Q.4 Credit risk strategy
outsourcing of activities will not 4178Q.5 Credit policies, processes and
compromise confidentiality or access to procedures
(client) sensitive information. Moreover, no (Circular No. 884 dated 22 July 2015)
trust corporation shall outsource inherent
trust functions such as but not limited to Sec. 4179T Operational Risk Management;
managing of risk exposures and strategic Policy Statement1. It is the thrust of the
decision-making activities. The rules on Bangko Sentral to promote the adoption of
outsourcing of services as shown under effective risk management systems to sustain
1
Trust Corporations shall comply with the foregoing standards on operational risk management within a period
of two (2) years from 05 February 2016. In this regard, a trust corporation should be able to show its plan of
actions with specific timelines, as well as the status of initiatives being undertaken to fully comply with the
provisions of Sec. 4179T as well as Subsec. 4179T.1 to 4179T.11.
the safe and sound operations of its trust (1) Ensure that it is aware of and
corporations. Cognizant that operational risk understands the nature and complexity of
is inherent in all activities, products and the major operational risks in the trust
services, and is closely tied in with other corporation's business and operating
types of risks (e.g., credit, liquidity and environment, including risks arising from
market risks), the Bangko Sentral is issuing transactions or relationships with third
these guidelines to clearly set out its parties, vendors, suppliers including
expectations and define the minimum outsourced service providers, and clients of
prudential requirements on operational risk services provided. This should include
management. These guidelines align existing understanding of both the financial and non-
regulations to the extent possible, with financial impact of operational risk to
international standards1 and best practices. which the trust corporation is exposed to;
Bangko Sentral expects trust corporations to (2) Approve the operational risk
adopt an operational risk management management framework which shall form
framework, as part of the enterprise-wide risk part of the trust corporation’s enterprise-
management system, that is suited to their wide risk management system and shall
size, complexity of operations, and risk cover all business lines and functions of the
profile. trust corporation, including outsourced
(Circular No. 900 dated 18 January 2016) services and services provided to external
parties. The operational risk management
§ 4179T.1 Definition of operational framework should include an enterprise-
risk. Operational risk refers to the risk of wide definition of operational risk, which
loss resulting from inadequate or failed should be consistent with the definition
internal processes, people and systems; or under Subsec. 4179T.1, governance, and
from external events. This definition reporting structures including the roles and
includes legal risk, but excludes strategic and responsibilities of all personnel, feedback
reputational risk. Operational risk is inherent mechanism, as well as standards and tools
in all activities, products and services, and for operational risk management. In this
cuts across multiple activities and business respect, the board shall:
lines within the financial institution and (a) Define the operational risk
across the different entities in a banking management strategy and ensure that it is
group or conglomerate where the financial aligned with the trust corporation’s overall
institution belongs.
business objectives. Relative to this, the
(Circular No. 900 dated 18 January 2016)
board should set and provide clear guidance
§ 4179T.2 Duties and responsibilities. on the trust corporation’s operational risk
a. Board of directors. Consistent appetite (i.e., the level of operational risk
with the principles embodied under the trust corporation is willing to take and able
Subsec. 4141T.3, the duties and to manage in pursuit of its business
responsibilities of the board of directors in objectives as well as the type of risks that
relation to the effective management of risk are not acceptable to the board and
include the establishment of a management), which should consider all
comprehensive and effective operational material risk exposures as well as the trust
risk management framework as part of the corporation’s financial condition and
enterprise-wide risk management system. strategic direction;
In this regard, the board of directors shall: (b) Approve appropriate thresholds or
1
Embodied in the relevant documents issued by the Basel Committee on Banking Supervision.
limits to ensure that the level of operational reporting system that will allow employees
risk is maintained within tolerance and at to raise their concerns without fear of
prudent levels and supported by adequate negative consequences; and
capital. Relative to this, the board shall (g) Ensure that the operational risk
approve policy on resolving limit breaches management framework is subject to
which should cover escalation procedures effective and comprehensive independent
for approving or investigating breaches, review, on a periodic basis, by operationally
approving authorities, and requirements in independent, appropriately trained, and
reporting to the appropriate level of competent staff to ensure that it remains
management or the board; commensurate with the trust corporation’s
(c) Ensure that operational risk is risk profile and continues to be adequate and
appropriately considered in the capital effective in managing operational risk. The
adequacy assessment process; review should take into account the changes
(d) Ensure that it receives adequate in business and operating environment,
information on material developments in the material changes in systems, business activity
operational risk profile of the trust or volume of transactions, quality of control
corporation, including pertinent information environment, effectiveness of risk
on the current and emerging operational risk management or mitigation strategies, loss
exposures and vulnerabilities as well as experience, and the frequency, volume or
information on the effectiveness of the nature of breaches in limits or any policy.
operational risk management framework. (3) Provide adequate oversight on all
The board must challenge the quality and outsourcing activities and ensure effective
comprehensiveness of the operational risk management of risks arising from these
information it receives. It should also be activities. In this regard, the board of
satisfied with the reliability of the said directors shall approve a framework
information and the monitoring system for governing outsourcing activities, which
operational risk; includes a system to evaluate the risk and
(e) Ensure that business objectives, risk materiality of all existing and prospective
appetite, the operational risk management outsourcing engagements and the policies
framework, and the respective roles and that apply to such arrangements;
responsibilities of personnel and officers at (4) Ensure observance of expectations
all levels in terms of implementing the and requirements prescribed under relevant
operational risk management framework, laws, rules, and regulations, industry-set
are properly disseminated, clearly standards, and policies on internal control,
communicated/discussed, and understood internal audit, and disclosure;
by personnel concerned; (5) Promote a culture of high standards
(f) Provide senior management with of ethical behavior. The board shall adopt a
clear guidance and direction regarding the code of conduct of ethical behaviors with
principles underlying the operational risk corresponding disciplinary actions for non-
management framework. The board shall compliance, which should cover, among
ensure that senior management others, guidance and protocols on conflicts
appropriately implements policies, of interest situations, safeguarding of
processes and procedures, and provides confidential information, and use of sensitive
feedback on the operational risk information. The board should likewise
management process. In this regard, the institute tools, methodologies, and practices
board shall establish a feedback and in order to ensure compliance and adherence
to the standards by all employees including The board should create and promote an
the senior officers and the board itself. In organizational culture that places high
this regard, employees should be required priority on business continuity.This shall
to acknowledge in writing that they have include providing sufficient financial and
read, understood, and will observe the code human resources associated with the trust
of conduct; corporation’s business continuity initiatives.
(6) Ensure that business and risk b. Senior management. Senior
management activities, including the management shall be responsible for the
operational risk management function, are implementation and consistent adherence
carried out by adequate and qualified staff by all personnel to the operational risk
with the necessary experience, technical management framework approved by the
capabilities, and competence. Moreover, the board of directors. In this respect, senior
board shall ensure that employees and management shall:
officers in all areas of operations have a high (1) Translate the approved operational
degree of integrity. risk management framework into specific
For this purpose, the board shall approve policies and processes covering all
appropriate hiring and selection policies and businesses and functions of the trust
processes, adopt a continuing professional corporation, including outsourced services
development program, and institutionalize and services provided to external parties.
a framework for continuing assessment of Said policies should be clearly documented,
fitness and propriety of employees. These approved by the board of directors and
policies, processes and programs should communicated to personnel at all levels.
reinforce the conduct and values being Policies should include, among others:
promoted in the organization. (a) Definition of operational risk and
Further, the board shall oversee the operational risk loss. This should be
design and implementation of remuneration supported by common operational risk
policies. It shall ensure that the remuneration taxonomy that includes the operational risk
policies do not encourage excessive risk- event type and causes of losses to facilitate
taking or provide incentives to people to the consistent identification of operational
perform contrary to the desired risk risks across the trust corporation as well as
management values. It shall also ensure that the management of operational risk in an
remuneration policies are appropriate and integrated manner;
aligned with the trust corporation’s long- (b) Appropriate governance and
term strategic direction and risk appetite, as oversight structures, reporting lines, and
well as with relevant legal or regulatory accountabilities for managing operational
requirements; risks;
(7) Ensure that all units in the (c) Clear description of risk limits and
organization have adequate resources, thresholds that correspond to the BSFI’s
including personnel complement, and are approved operational risk appetite and
supported by appropriate technological tolerance;
systems. The use of technological systems (d) Risk mitigation strategies and tools
must be commensurate to the activities being for maintaining risks within the thresholds
undertaken; and and limits set;
(8) Oversee implementation of a sound (e) Approach to operational risk
business continuity management framework. identification, assessment, monitoring and
reporting that utilizes appropriate as well as the compliance and internal audit
operational risk management tools. This units have authority independent from the
should include an outline of the reporting units they review and are knowledgeable
framework and types of data/information to about the different areas of operations; and
be included in the risk management reports; (6) Establish policies, standards and
and processes for an effective business continuity
(f) Requirement for the conduct of management.
independent review of the framework as well c. Business units. Business line
as its implementation, on a periodic basis, management and personnel, as the first line
and whenever there are material changes in of defense, are responsible on a day-to-day
the trust corporation’s operational risk basis for identifying, managing and reporting
profile. operational risks inherent in the products,
(2) Communicate individual roles and activities, processes and systems for which
responsibilities of personnel. It is important they are accountable. In this regard, business
that personnel at all levels understand their line management shall ensure that:
respective roles in the operational risk (1) Internal controls and practices within
management process. In this regard, senior their business lines are consistent with the
management should clearly assign authority, enterprise-wide policies and procedures to
responsibility, and reporting relationships to support the management of operational risk;
encourage and maintain accountability, and (2) Business line specific policies,
ensure that the necessary resources are processes, and procedures are adequate and
available to manage operational risk effectively implemented, and personnel are
effectively; adequate and competent to manage
(3) Establish systems to report, track, operational risk for all material products,
escalate, and resolve issues; and set the activities, and processes;
frequency of operational risk management (3) Operational risk management
framework within each business line reflects
reporting considering the level and type of
the scope of that business line and its
risks involved as well as the pace and nature
inherent operational complexity and
of the operating environment of the trust
operational risk profile;
corporation;
(4) Risk mitigation strategies and
(4) Assess the appropriateness of the
processes as approved by the board and
operational risk management process in light senior management are established and
of the changing business environment and executed;
nature of risks arising from business activities (5) Internal controls, and operational risk
or functions; mitigation strategies and processes are
(5) Ensure that sufficient number of periodically reviewed within the business
personnel, technical support, and other units to effectively manage operational risks
resources are devoted for operational risk within approved risk tolerance, and
management such that the trust consistent with enterprise-wide policies and
corporation’s activities are conducted by procedures established. There must be clear
qualified personnel with the necessary expectations and processes established to
experience and technical capabilities. It shall ensure prompt escalation and actions to
also ensure that personnel responsible for address any gap or issue identified; and
monitoring and enforcing compliance with (6) Operational risk-related information
the trust corporation’s operational risk policy (e.g., loss events, incidents, et. al.) are
c. Internal audit. Internal audit shall Since the business lines are expected to have
conduct an independent assessment of the the best knowledge of their risk exposures
operational risk management framework, and processes, these units should play a
including the implementation of operational major role in the identification and
risk management policies and procedures. assessment of operational risk.
The board of directors, either directly or (1) Trust corporations shall consider the
indirectly through the board-level Audit following loss event-type categories as part
Committee shall ensure that the scope and of their risk identification and assessment
frequency of audit is appropriate to the risk processes:
exposures. Any operational risk issue (a) Internal fraud, e.g., intentional
identified and reported in the audit process misreporting of positions, employee theft,
should be addressed by senior management and insider trading on an employee’s own
in a timely and effective manner, or raised account;
to the attention of the board as appropriate. (b) External fraud, e.g., robbery, forgery,
(Circular No. 900 dated 18 January 2016) check kiting, and damage from computer
hacking;
§ 4179T.4 Operational risk (c) Employment practices and
management framework. Trust workplace safety, e.g., workers
corporations shall have in place an compensation claims, violation of health and
appropriate operational risk management safety rules, organized labor activities,
framework, as part of the enterprise-wide discrimination claims, and general liability;
risk management system, that is effective and
(d) Clients, products and business
efficient in identifying, assessing,
practices, e.g., fiduciary breaches, misuse of
monitoring and controlling/mitigating
confidential customer information, improper
operational risk. They shall ensure that their
trading activities on the trust corporation’s
operational risk management framework is
account, money laundering, and sale of
commensurate with the complexity of their
unauthorized products;
operations, range of products and services,
(e) Damage to physical assets, e.g.,
organizational structure, and risk profile.
a. Risk identification and assessment. terrorism, vandalism, earthquakes, fires and
Risk identification and assessment are floods;
fundamental elements of an effective (f) Business disruption and system
operational risk management system. failures, e.g., hardware and software failures,
Effective risk identification shall consider telecommunication problems, and utility
both internal factors (such as trust outages; and
corporation structure, nature of activities, (g) Execution, delivery, and process
the quality of human resources, management, e.g., data entry errors,
organizational changes and employee collateral management failures, incomplete
turnover, among others) and external factors legal documentation, unapproved access
(such as changes in the broader environment given to client accounts, non-client
and the industry, advances in technology, counterparty misperformance, and vendor
and developments in political, legal, and disputes.
economic factors, among others). Risk (2) Trust corporations shall adopt tools
identification and assessment allow the trust and mechanisms that are appropriate to their
corporation to better understand its risk size, complexity of operations and risk
profile and allocate risk management profile to properly identify and assess
resources and strategies more effectively. operational risk. The tools that may be used
for identifying and assessing operational risk tool to assess processes underlying trust
may include, but not limited to: corporation’s operations against a library of
(a) Results of internal/external audit and potential threats and vulnerabilities
supervisory issues raised in the Bangko including their potential impact. A similar
Sentral Report of Examination (ROE) – approach, RCSA, typically evaluates
Internal audit surfaces issues on effectiveness inherent risk (the risk before controls are
of internal control, risk management, and considered), the effectiveness of the control
governance systems and processes of an environment, and residual risk (the risk
organization, while external audit focuses exposure after controls are considered).
on control weaknesses and susceptibility of Scorecards on RCSAs may be developed by
the trust corporation to material allocating weights to residual risks to
misstatements in the financial statements. provide a means of translating the RCSA
On the other hand, the Bangko Sentral ROE output into metrics that will give a relative
highlights deficiencies in the risk ranking of the control environment;
management systems and governance (d) Business process mappings – These
processes as well as issues on compliance help identify the key steps in business
with relevant laws, rules and regulations, processes, activities, and organizational
which could have adverse effects on the functions as well as the key risk points in
safety and soundness of the trust corporation; the trust corporation’s overall business
(b) Internal loss data collection and process. Process maps can reveal individual
analysis – Internal operational loss data risks, risk interdependencies, and areas of
provides meaningful information for control or risk management weakness. They
assessing trust corporation’s exposure to can also help prioritize subsequent
operational risk and the effectiveness of management action;
internal controls. Analysis of loss events can (e) Risk and performance indicators –
provide insights into the causes of large Risk and performance indicators, such as
losses and information on whether control Key Risk Indicators (KRIs) and Key
failures are isolated or pervasive. Trust Performance Indicators (KPIs), provide an
corporations may consider mapping internal insight into a trust corporation's emerging
loss data to the following business lines: risk exposure. KRIs are used to monitor the
(i) Corporate finance; main drivers of exposure associated with
(ii) Trading and sales; key risks that contribute to early detection
(iii) Retail banking; of heightened risk, ongoing monitoring of
(iv) Commercial banking; their movements, and preemptive reactions
(v) Payment and settlement; as necessary. KPIs, on the other hand,
(vi) Agency services; provide insight into the status of operational
(vii) Asset management; and processes, which may in turn provide
(viii) Retail brokerage. insights into operational weaknesses,
Loss events linked to credit and market failures, and potential loss. Risk and
risk may also relate to operational issues and performance indicators are often used with
should be segmented in order to obtain a escalation triggers to warn when risk levels
more comprehensive view of the trust approach or exceed acceptable ranges and
corporation’s operational risk exposure; prompt mitigation plans;
(c) Risk Self Assessments (RSA)/Risk (f) Scenario analysis – This refers to the
Control Self Assessments (RCSA) – RSA is a process of obtaining expert opinion of
business line and risk managers to identify internal/external audit and supervisory
potential operational risk events and assess issues raised in the Bangko Sentral ROE and
the potential outcome. Scenario analysis is (ii) internal loss data collection and analysis.
an effective tool when considering potential (3) Trust corporations shall develop
sources of significant operational risk and databases to accumulate at least a five(5)-
the need for additional risk management year history of operational risk losses which
controls or mitigation solutions. Given the can be fed back into the operational risk
subjectivity of the scenario process, a robust management process. Apart from capturing
governance framework is essential to ensure events that resulted to actual loss, trust
the integrity and consistency of the process; corporations shall also gather potential loss
(g) Model measurement – Larger trust or near-misses1. Said database of loss events
corporations may deem it useful to quantify provides basis for analysis which can help
their operational risk exposures by using the direct corrective action to improve the
output of the risk assessment tools as inputs control environment, as well as determine
into a model that estimates operational risk risk mitigating actions. Trust corporations
exposure. The results of the model can be should assess the depth of its data collection
used in an economic capital process and which is vital in understanding the risk
can be allocated to business lines to link environment. The loss event database shall
risk and return; and at a minimum disclose the following:
(h) Comparative analysis – Comparative (a) Short description of the event;
analysis consists of comparing the results (b) Loss event type category;
of the various assessment tools to provide a (c) Department/Unit/Branch sustaining
more comprehensive view of the trust the loss;
corporation’s operational risk profile. (d) Business line classification;
(e) Date of occurrence;
Comparison of external loss data, if
(f) Date of discovery;
available, such as industry experiences, vis-
g) Date of booking of actual losses;
à-vis trust corporation’s internal loss data
(h) Actual loss amount or potential loss
can also be made to explore possible
amount, if a near-miss event;
weaknesses in the financial institution’s
(i) Amount recovered and date of
control environment and enable it to
recovery;
consider previously unidentified risk
(j) Causes of the event (e.g., control
exposures. weaknesses identified);
In choosing among these tools, each (k) Consequence of the loss event (e.g.,
trust corporation must carefully consider market loss, fees paid to a counterparty, a
what is proportionate to its size, risk profile, lawsuit or damage to the trust corporation’s
and complexity of operations. Data/ reputation); and
information gathered from these tools (l) Action(s) taken.
should enable trust corporations to make a Trust corporations shall define
thorough causal analysis, identify control appropriate thresholds for internal loss data
gaps, and consequently adopt appropriate collection and must be able to justify the
corrective actions. same. Thresholds should be reasonable and
Trust corporations, are expected to should not omit any operational loss event
adopt at the minimum, the (i) results of data that is material for operational risk
1
Potential loss is an initial estimate of the loss that the bank may have sustained at the time of discovery of the
event. Near-miss is an adverse operational risk event which was not prevented by internal controls but did not
result in an actual adverse impact (financial or reputational) due to chance, recovery or other external factors.
exposure and for effective risk management. business processes or technology systems;
Trust corporations shall ensure that the establish subsidiaries/branches that are
choice of threshold should not adversely geographically remote from the head office;
impact the credibility and accuracy of and/or embark on an aggressive growth
operational risk measurement. strategy by acquiring problem trust
(4) Trust corporations shall determine corporations to rapidly increase branch
based on the results of the risk assessment network during a short period of time. Trust
process whether the risks are within the corporations should have relevant policies
scope of its operational risk management and procedures that address the process for
strategy and policies. It shall identify the risk review and approval of new products,
exposures that are unacceptable or are activities, processes and systems. The
outside its risk appetite and/or risk review and approval process shall consider
management capacity, and design and the following:
prioritize appropriate risk mitigation and (a) Inherent risks in the new product,
corrective actions with clear service, or activity;
accountabilities, roles and responsibilities (b) Changes to the trust corporation's
for implementation within reasonable operational risk profile, appetite and
timelines. tolerance, including the impact on existing
(5) Trust corporations shall continually products or activities;
assess its operational risk exposures in order (c) Necessary controls, risk management
to gain broader recognition and processes, and risk mitigation strategies;
understanding of their effects. It shall (d) Any residual risk; and
consider the following factors in the (e) Procedures and metrics to measure,
assessment: monitor, and manage the risk of the new
(a) Expected and unexpected changes to product or activity.
the trust corporation’s operating b. Risk monitoring and reporting. Trust
environment; corporations shall implement a process to
(b) Actual operational loss events that regularly monitor their operational risk
could have resulted in substantial losses/ profiles and material exposures to losses on
damage but were avoided (e.g., near misses) a continuing basis. The process shall take
or recovered; into account both qualitative and
(c) Reported external operational losses quantitative assessment of exposure to all
and incidents which have damaged investor types of operational risk, assess the quality
confidence and caused serious reputational and appropriateness of corrective or
harm; mitigating actions, and ensure that adequate
(d) Areas of concern or unusual volumes controls and systems are in place to identify
or high number of exceptions; and and address problems before they become
(e) Results of internal assessment of risks major concerns.
and controls. (1) Risk monitoring should be an integral
(6) Trust corporations shall ensure that part of a trust corporation’s activities, the
their risk management and control frequency of which should reflect the risks
infrastructure keep pace with the growth of involved in these activities as well as the
or changes in their business activities, i.e., frequency and nature of changes in the
when they engage in any new activity; operating environment. The results of the
introduce a new product; enter new or monitoring activities, findings of
unfamiliar markets; implement new compliance, internal audit and risk
efficiently deliver financial services. Trust requirements set forth in this Section and
corporations are expected to identify and bring about timely corrective actions. The
understand the distinct operational risk Bangko Sentral may issue directives to
arising from the products and services they improve the operational risk management
offer or innovative delivery channels they system, or impose sanctions to limit the
use. They should also be cognizant of level of or suspend any business activity that
potential transformation or transfer or risk has adverse effects on the safety or
exposures. In this regard, trust corporations soundness of the trust corporation, among
shall adopt an operational risk management others. Sanctions may likewise be imposed
framework appropriate to the nature and on a trust corporation and/or its directors,
scale of their operations. Said framework officers and/or employees.
shall consider the principles embodied in (Circular No. 900 dated 18 January 2016, as amended by Circular
this Section designed to suit the trust No. 930 dated 18 November 2016)
corporation's business model and ensure
sustained delivery of financial services to the Sec. 4180T Compliance System. The
unserved and underserved sector. applicable provisions under Sec. 4180Q
(Circular No. 900 dated 18 January 2016) and its Subsections shall be adopted by the
trust corporations.
§ 4179T.10 Notification/Reporting to (Circular No. 884 dated 22 July 2015)
Bangko Sentral. Trust corporations shall
notify the appropriate department of the Secs. 4181T - 4184T (Reserved)
Supervision and Examination Sector,
Bangko Sentral, within ten (10) calendar Sec. 4185T Internal Control System. The
days from the date of discovery, of any applicable provisions under Sec. 4185Q
operational risk event1 that may result in any and its Subsections shall be adopted by the
of the following: trust corporations.
a. Significant operational losses or (Circular No. 884 dated 22 July 2015)
exposures;
b. Activation of business continuity Sec. 4186T Internal Audit Function. Internal
plan; or audit is an independent, objective assurance
c. Any material change in business and and consulting function established to
operating environment. examine, evaluate and improve the
Upon receipt of notification, the Bangko effectiveness of risk management, internal
Sentral may require, if warranted, the control, and governance processes of an
reporting trust corporation to submit a report organization.
detailing the causes and impact of such The board of directors, in a resolution
events and an acceptable action plan to entered in its minutes, may adopt a suitable
address the issue and any other weakness continuous audit system to supplement and/
identified. or replace the performance of an annual
(Circular No. 900 dated 18 January 2016) audit. The audit may be conducted in
intervals commensurate with the assessed
§ 4179T.11 Supervisory Enforcement levels of risk in trust and investment
Actions. Consistent with Sec. 4009T, the management operations: Provided, That
Bangko Sentral may deploy enforcement such intervals shall be supported and
actions to promote adherence with the reassessed regularly to ensure
1
As enumerated under Sec. 4179T.4.a.(1).
appropriateness given the current risk and extent necessary to express an opinion on
volume of the trust and investment the financial statements. Report of such audit
management operations. In any case, the shall be submitted to the board of directors
audit shall ascertain whether the institution’s and the appropriate department of the SES
trust and other fiduciary business and not later than one hundred twenty (120)
investment management activities have calendar days after the close of the calendar
been administered in accordance with laws, year or the fiscal year adopted by the trust
Bangko Sentral rules and regulations, and corporation and shall contain, among other
sound trust or fiduciary principles. The things, the complete set of financial
report of the audit, together with the actions statements and other information required
thereon, shall be noted in the minutes of by Bangko Sentral to be submitted under
the trust corporation’s board of directors. Sec. 4190Q of the MORNBFI: Provided, That
Other applicable provisions of Sec. 4186Q a reconciliation of the balance sheet in the
and its Subsecstions shall likewise be Audited Financial Statement (AFS) and the
adopted by the trust corporation. Financial Reporting Package for Trust
(Circular No. 884 dated 22 July 2015) Institutions (FRPTI) shall also be prepared for
each of the general categories of contractual
Secs. 4187T - 4188T (Reserved) relationships (i.e., UITF trust, institutional-trust,
and individual trust; other fiduciary;
Sec. 4189T Selection, Appointment, institutional-agency, and individual-agency;
Reporting Requirements and Delisting of and special purpose trust) of the trust/
External Auditors and/or Auditing Firm; investment management department of an
Sanction. The provisions under Sec. 4189Q institution with its clients following the format
of the MORNBFI shall be adopted in so far in Appendix Q-33 of the MORNBFI.
as applicable to the trust corporations. The report of the audit, together with the
(Circular No. 884 dated 22 July 2015) actions thereon, shall be noted in the
minutes of the board of directors of the
Sec. 4190T Audited Financial Statements trust corporations. Other provisions of
of trust corporations; Financial Audit. The Sec. 4190Q of the MORNBFI in so far as
trust corporation’s operation shall be subject applicable shall likewise be adopted by the
to financial audit by an external auditor trust corporations.
acceptable to the Bangko Sentral not later (Circular No. 884 dated 22 July 2015)
than thirty (30) calendar days after the close
of the calendar or the fiscal year adopted § 4190T.1 Audited financial statements
by the trust corporation. Such audit, which of TCs. The trust corporations shall submit
shall cover among others, the trust two (2) sets of AFS: AFS of the trust
corporation’s operation, practices and corporations proper and AFS covering trust
policies, audit and internal control system, operations. The provisions of Sec. 4190Q
shall be subject to auditing standards to the and its Subsections, and Subsec.
4425Q.3 of the MORNBFI shall be adopted and records of its proprietary accounts and
in so far as applicable to the TC. shall strictly follow and implement the FRPTI
(Circular No. 884 dated 22 July 2015) prescribed by the Bangko Sentral.
The making of any false entry or the
§§ 4190T.2 - 4190T.3 (Reserved) willful omission of entries relevant to any
transaction is a ground for the imposition
§ 4190T.4 Disclosure requirements in of administrative sanctions under Section 37
the notes to the audited financial of R.A. No. 7653, without prejudice to the
statements. TCs shall require their external criminal liability of the director or officer
auditors to include the following additional responsible therefor under Sections 35 and
information in the notes to financial 36 of R.A. No. 7653 and/or the applicable
statements: provisions of the Revised Penal Code.
a. Basic quantitative indicators of Records shall be up-to-date and shall
financial performance such as return on contain sufficient detail so that an audit
average equity, return on average assets trail is established. Other provisions of
(computed pursuant to Subsection Sections 4191Q and 4421Q of the
4190Q.4, MORNBFI) and percentage of MORNBFI shall be adopted in so far as
total trust fees to total AUM; applicable to the TC.
b. Total outstanding investment, loans (Circular No. 884 dated 22 July 2015)
and other credit exposures to TC’s DOSRI
and related parties with breakdown and Sec. 4192T Reports/Manner of Filing. The
name of DOSRI/related parties; applicable provisions of Section 4192Q of
c. Nature and amount of the MORNBFI shall be adopted by the TC,
contingencies and commitments arising except that, instead of Appendix Q-3, the
from off-balance sheet items, if any; applicable reports for TCs are those
d. Provisions and allowances for enumerated under Appendix T-3.
losses and how these are determined; The TC, if a subsidiary/affiliate of a bank,
e. Aggregate amount of secured is required to submit a quarterly report to
liabilities and assets pledged as security; and the appropriate supervising department of
f. Accounting policies which shall the Bangko Sentral on its financial
include, but shall not be limited to, general transactions with the bank within twenty
accounting principles, changes in (20) calendar days after the end of the
accounting policies/practices, principles of reference quarter.
consolidation, policies and methods for (Circular No. 884 dated 22 July 2015)
determining when assets are impaired,
recognizing income on impaired assets and Q. PROMPT CORRECTIVE ACTION
losses on non-performing credits, income FRAMEWORK
recognition, valuation policies and
accounting policies. Sec. 4193T Prompt Corrective Action
(Circular No. 884 dated 22 July 2015) Framework. The framework for the
enforcement of prompt corrective action
Sec. 4191T Records. TCs shall have a true (PCA) on banks which is in Appendix 69
and accurate account, record or statement of of the MORB, shall govern the PCA taken
their daily transactions. The TC shall also keep on TCs to the extent applicable, or by
books and records on trust, other fiduciary analogy.
and IMAs separate and distinct from the books (Circular No. 884 dated 22 July 2015)
PART TWO
PART THREE
1
As defined under Subsec. 4141Q.3.c.5.a of the MORNBFI
PART FOUR
for such service is evident, when specially agreement form; and except Subsections
equipped to render such service and upon 4411Q.7 Ceilings on Loans; 4411Q.10
full appreciation of the responsibilities Tax-Exempt Individual IMA)
involved. It shall be ready and willing to give e. Section 4413Q Required Retained
full disclosure of the services being offered Earnings Appropriation
and shall conduct its dealing with f. Section 4422Q Custody of Assets
transparency. Harmonious relationship shall g. Section 4423Q Fees and
likewise be pursued with other professions to Commissions
achieve the common goal of mutual service h. Section 4424Q Taxes
to the public and protection of its interest. i. Section 4425Q.1 Reports Required
The TC shall formulate and adhere to a to Trustor, Beneficiary, Principal;
Code of Ethics and Professional Standards j. Section 4499Q Sanctions (For this
(Code and Standards), duly approved by the purpose the guidelines for the imposition
board of directors, that defines the ethical of monetary penalty as shown under
principles and professional conduct of Appendix T-2 shall be used by TCs)
(Circular No. 884 dated 22 July 2015, as amended by Circular
fiduciary functions with the clients’ best
No. 903 dated 29 February 2016)
interest in mind. It shall be the responsibility
of the board of directors of the TC to ensure
Secs. 4403T - 4409T (Reserved)
strict conformance with the Code and
Standards by all its directors, officers and
§§ 4409T.1 - 4409T.16 (Reserved)
personnel. To this end, the board of directors
shall incorporate compliance procedures in
§ 4409T.17 Trust fund of pre-need
its Code and Standards.
(Circular No. 884 dated 22 July 2015)
companies. The rules and regulations on the
acceptance, management and administration
Sec. 4402T Applicable Regulations on Trust of trust funds of pre-need companies by TCs
and Other Fiduciary Activities. In addition shall be governed by Chapter VIII of the Pre-
to the provisions in the “T” regulation of the need Code of the Philippines (Republic Act
MORNBFI, trust operations and other No. 9829).
fiduciary activities, including investment (Circular No. 884 dated 22 July 2015)
management shall be subject to the
following regulations provided under Part Secs. 4410T - 4411T (Reserved)
Four of the MORNBFI, in so far as applicable
to the TC: Sec. 4412T Foreign Currency Denominated
a. Section 4407Q Non-Trust, Non- Trust, Other Fiduciary and Investment
Fiduciary and/or Non-Investment Management Account. A TC may accept
Management Activities foreign currency-denominated (FCD) trust,
b. Section 4409Q Trust and Other other fiduciary and IMA accounts in any
Fiduciary Business (except Subsections acceptable foreign currency.
4409Q.4 Ceiling on Loans; 4409Q.8 For purposes of this Section, “acceptable
Tax-exempt Individual Trust Accounts) foreign exchange” comprise those foreign
c. Section 4410Q Unit Investment currencies which are acceptable to and
Trust Funds exchangeable at the Bangko Sentral and
d. Section 4411Q Investment which form part of the international reserves
Management Activities (except on the of the country.
required pre-numbered contractual (Circular No. 884 dated 22 July 2015)
particular examination, the TC has one (1) custodianship accounts to the level
examination cycle from date of receipt immediately prior to the downgrade until
of the report of examination, which shall such time the rating is restored to “3”;
or (2) revocation of the custodianship
serve as notice of downgrade, within which
authority.
to correct/address the cause of the (Circular No. 884 dated 22 July 2015)
downgrade, otherwise sanction will be
imposed which include, but is not limited §§ 4441T.16 - 4441T.29 (Reserved)
to: (1) suspension of custodianship
authority and limiting the TC’s Secs. 4442T - 4499T (Reserved)
PART FIVE
PART SIX
PART SEVEN
PART EIGHT
PART NINE
MISCELLANEOUS
activities and such other sanctions as may be The guidelines for the imposition of
provided by law. If the offender is a director monetary penalty shown in Appendix T-2
or officer of the TC, the Monetary Board may shall govern the imposition of monetary
also suspend or remove such director or penalty for violations/offenses with
officer. If the violation is committed by a administrative sanctions falling under
corporation, such corporation may be Section 37 of R.A. No. 7653 on TCs, their
dissolved by quo warranto proceedings directors and/or officers.
instituted by the solicitor general. (Circular No. 884 dated 22 July 2015)
Q Regulations
Q-3-c Reporting Guidelines on Crimes/ Sec. 4192T Reports/Manner of Filing
(Annex) Losses
Q-4 Guidelines on Prescribed Reports Sec. 4192T Reports/Manner of Filing
Signatories and Signatory Authorization
Q-5 Minimum Internal Control Standards Sec. 4185T Internal Control System (same
for Quasi-banks standards is required for TCs)
Q-10 Guidelines in Identifying and Monitoring Sec. 4302T Loan Portfolio and Other Risk
Problem Loans and Other Risk Assets Assets Review System (as amended by
and Setting-Up of Allowance for Circular No. 855 dated 29 October 2014)
Probable Losses
Q-11 Format of Disclosure Statement of Sec. 4304T Applicable Regulations on Credit
Loan/Credit Transaction and Investment Operations
Q-12 Abstract of "Truth in Lending Act"
(Republic Act No. 3765) Sec. 4307Q Truth in Lending Act Disclosure
Requirement, and its Subsections
Q-14 Sample Investment Management Sec. 4402T Applicable Regulations on Trust
Agreement and Other Fiduciary Activities
The schedule of penalty, categorized based on: (1) the nature of offenses such as minor, less
serious, and/or serious, and (2) the size of the assets under management of the trust corporation,
shall be as follows:
Assets Under Up to P200 Above Above Above P1 Above P10 Above P50
Management million P200 P500 Billion but Billion but Billion
Size million but million but not not
Penalty not not exceeding exceeding
Range exceeding exceeding P10 Billion P50 Billion
P500 P1
million Billion
Minimum P 500 P 1, 000 P 3, 000 P 10, 000 P 18, 000 P 25, 000
Medium 750 1, 500 5, 000 12, 500 20, 000 27, 500
Maximum 1, 000 2, 000 7, 000 15, 000 22, 000 30, 000
Assets Under Up to P200 Above Above Above P1 Above P10 Above P50
Management million P200 P500 Billion but Billion but Billion
Size million but million but not not
Penalty not not exceeding exceeding
Range exceeding exceeding P10 Billion P50 Billion
P500 P1
million Billion
Minimum P 300 P 600 P 1, 000 P 3, 000 P 7, 000 P 15, 000
Medium 350 700 1, 250 4, 000 8, 500 17, 500
Maximum 400 800 1, 500 5, 000 10, 000 20, 000
Assets Under Up to P200 Above Above Above P1 Above P10 Above P50
Management million P200 P500 Billion but Billion but Billion
Size million but million but not not
Penalty not not exceeding exceeding
Range exceeding exceeding P10 Billion P50 Billion
P500 P1
million Billion
Minimum P 150 P 300 P 600 P 1, 000 P 3, 000 P 6, 000
Medium 200 400 700 1, 500 4, 000 8, 000
Maximum 250 500 800 2, 000 5, 000 10, 000
For purposes of this Regulation, the (d) The act or omission involves entering
following definition of terms shall mean: into any contract or transaction manifestly
1. Serious Offense - This refers to unsafe and grossly disadvantageous to the trust
or unsound practice. An unsafe or unsound corporation, whether or not the director or
practice is one in which there has been some officer profited or will profit thereby.
conduct, whether act or omission, which is Certain acts or omissions as falling
contrary to accepted standards of prudent under this classification maybe determined
fiduciary activities, and trust business/ based on the guidelines provided under
operation, and may result to the exposure Appendix Q-24 of the MORNBFI.
of the trust corporation and its shareholders 2. Less Serious Offense - These include
to abnormal risk or loss. major acts or omissions defined as trust
In determining the acts or omissions corporation/individual’s failure to comply
included under the unsafe or unsound with the requirements of banking laws, rules
practice, an analysis of the impact thereof and regulations, provisions of Manual of
on the trust corporations’ operations and Regulations(MOR)/Circulars/Memorandum
financial condition must be undertaken, as well as Monetary Board directives/
including evaluation of capital position, instructions having material1 impact on trust
asset condition, management, earnings corporation’s solvency, liquidity or
posture and liquidity position. The following profitability and/or those violations
circumstances shall be considered: classified as major offenses under the Report
(a) The act or omission has resulted or of Examination, except those classified
may result in material loss or damage, or under unsafe or unsound practice.
abnormal risk or danger to the safety, 3. Minor Offense - These include acts
stability, liquidity or solvency of the or omissions which are procedural in
institution; nature, can be corrected immediately and
(b) The act or omission has resulted do not have material impact on the
or may result in material loss or damage solvency, liquidity and profitability of the
or abnormal risk to the institution’s trust corporation. All other acts or omissions
creditors, investors, trust/other fiduciary/ that cannot be classified under the major
investment management clients, offenses/violations will be classified under
stockholders, or to the Bangko Sentral or this category.
to the public in general; 4. Minimum refers to the range of
(c) The act or omission has caused any penalties to be imposed if the mitigating
undue injury, or has given unwarranted factor(s) outweigh the aggravating
benefits, advantage or preference to the circumstances.
trust corporation or any party in the 5. Medium refers to the penalty to be
discharge by the director or officer of his imposed in the absence of any mitigating
duties and responsibilities through and aggravating circumstances or if the
manifest partiality, evident bad faith or mitigating factor(s) offset the aggravating
gross inexcusable negligence; or factor(s).
1
SFAS/IAS defines materiality as any information, which if omitted or misstated, could influence the economic
decisions of users taken on the basis of the financial statements. Per Financial Accounting Standard Board
(FASB), it is defined as the magnitude of an omission or misstatement of accounting information.
individual may have substantial/serious Sources of data may come from news
violations that could impact the reputation reports.
and earnings of the trust corporation. (1) Substantial impact on trust
(2) Minimal actual loss or substantial risk corporation. No impact on trust/asset or
of loss – The trust corporation has incurred investment management industry. This may
minimal loss or will be exposed to involve reputational risk of the trust
substantial risk of loss of earnings or capital corporation as a result of negative publicity
although both do not materially impact generated, for example, by involvement of
financial condition. The volume of accounts trust corporation’s director/officer in
involved for minimal loss or substantial risk activities not acceptable to the regulatory
of loss is reasonable and manageable. bodies. This may also involve insider abuse
While a loss was incurred, the trust of authority/power. However, the trust/asset
corporation could absorb the loss in the or investment management industry is not
normal course of business. Substantial risk affected for this isolated case.
of loss includes any potential losses the (2) Moderate impact on trust/asset or
aggregate of which amounts to at least one investment management industry or on
percent (1%) of the capital of the trust public perception of trust/asset or
corporation.1 investment management industry. This may
(3) Minimal risk of loss – The risk involve poor corporate governance and
exposure on earnings or capital is minimal. mismanagement of trust corporation that
Trust corporation is not vulnerable to may result to erosion of public confidence.
significant loss. The volume of accounts (3) Substantial impact on trust/asset or
involved for potential loss/risk is minimal/ investment management industry or on
negligible. The risk of loss would have little public perception of trust/asset or
impact on the trust corporation or its investment management industry. This is a
financial condition. The risk of loss worst-case scenario. The violations/irregular
aggregating to less than one percent (1%) of activities of the trust corporation may totally
the capital of the trust corporation will fall erode the trust and confidence of the
under this classification. investing public resulting to a nationwide
f. Impact to trust/asset or investment mass redemption/withdrawal of trust
management industry– In assessing this investments or termination of trust, other
factor, it is appropriate to consider any fiduciary or investment management
possible negative impact or harm to the trust accounts. Pessimistic perception of the
corporation (e.g., a violation of law investing public on the trust/asset or
involving insider abuse may result in investment management is highly observed.
adverse publicity for the institution, possibly
causing a sudden mass redemption/ 2. Mitigating Factors
withdrawal of trust investments or a. Good Faith – Good faith is the
termination of trust, other fiduciary or absence of intention of the erring individual/
investment management accounts and entity in the commission of a violation.
affecting the trust corporation’s trust (1) Full Cooperation - This is determined
business). Resulting effect on the trust/asset by the actions of the individual and/or trust
or investment management industry on the corporation towards the regulators after or
violation/offenses committed by the trust even before notification of the offense and/
corporation, if any, will also be considered. or omission. Assistance rendered by the
1
Item H 1 (b) Appendix Q-30 provides that external auditors of trust entities must report to Bangko Sentral, among others,
any potential losses the aggregate of which amounts to at least one percent (1%) of the capital to enable the
Bangko Sentral to take timely and appropriate remedial action.
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
A-1 4192T/4192Q.3 Copy of Published Statement of Quarterly 5th business day from Appropriate department of
Condition with Publisher’s Certificate publication date the SES
A-1 Unnumbered 4611Q.5 Report on Outstanding Derivatives Monthly 15th business day from end of -do-
Contracts reference month
A-1 Unnumbered 4611Q.5 Report on Trading Gain/(Loss) on Monthly 15th business day from end of -do-
Financial Derivatives reference month
A-2 BSP 7-16-11 X126.2/4126T.2 Consolidated List of Stockholders and Annual/quarterly 12th business day after the end -do-
Their Stockholdings when any changes of the calendar year and if there
occur are changes, 12th business day
after the end of the reference
quarter
A-2 Unnumbered 4141Q.9 Certification under oath of directors Upon election as 10th business day from date of -do-
(no prescribed that they have received copies of the first-time director election
form) general responsibility and specific with a TC
duties and responsibilities of the board
of directors and that they fully
understand and accept the same
A-2 4152T.5 Certification on the Fitness and Annual On or before 30 January of the -do-
Propriety of marketing personnel and following year
the existence of policy on the handling
of TCs’ marketing personnel. (NEW
REPORT)
Page 1 of 8
APP. T-3
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
A-2 BSP-7-26-02-A 4192T Consolidated Statement of Condition Monthly 15th business day from end of Separate report for Head
reference month Office and each branch;
Email to SDC
Schedules:
A-2 BSP-7-26-02-A 4192T Loans/Receivables and Trading Separate report for Head
(Schedule 1) Account Securities Office and each branch;
Email to SDC
A-2 BSP-7-26-02-A 4192T Remaining Maturities of Selected -do-
(Schedule 4) Accounts Interest Rate and Maturity
Matching
A-2 BSP-7-26-02-A 4192T Interest Rate and Maturity Matching -do-
(Schedule 3)
A-2 BSP-7-26-02-A 4192T Underwritten Securities, Trading -do-
(Schedule 2) Account Securities-Investments,
Available for Sale Securities and
Investments in Bonds & Other Debt
Instruments
A-2 BSP-7-26-03-A 4192T Consolidated Statement of Income and Monthly 15th business day of the Separate report for Head
Expenses following end of reference Office and each branch;
month Email to SDC
A-2 BSP-7-26-24 4192Q Credit and Equity Exposures to Quarterly 15th business day from end of Electronic submission-SDC
Individuals/Companies/Groups reference quarter
Aggregating P1 million & above
Notarized Control Prooflist Quarterly 15th business day from end of Fax to SDC
reference quarter
A-2 Unnumbered 4801Q Report on Suspicious Transaction As transaction 10th business day from date of Original and duplicate
occurs transaction/knowledge Anti-Money Laundering
Council (AMLC)
Page 2 of 8
APP. T-3
16.06.30
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
A-2 Unnumbered 4801Q Report on Covered Transactions As transaction 10th business day from Original and duplicate
occurs date of Anti-Money Laundering
transaction/knowledge Council (AMLC)
A-2 Unnumbered 4191T Financial Reporting Package for Trust Quarterly 20th business day after SDC
(As amended by Institutions (FRPTI) end of reference quarter
Circular No. 913
dated 06.05.16
and M-009 dated
06.23.16)
Schedules:
Balance Sheet
A1 to A2 Main Report
D to D2 Wealth/Asset/Fund Management-UITF
E-Fiduciary Accounts
Income Statement
A-3 4328Q.5/4326T Transmittal of Board Resolution/Written As loans to 20th business day after Original and duplicate to
Approval on Credit Accommodations to affiliate is date of approval appropriate department of the
Affiliates approved SES
Page 3 of 8
APP. T-3
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
A-3 BSP-7-26-18.1 4329T Credit Accommodations to Directors, Quarterly 20 calendar days from end of Appropriate department of
Officers, Stockholders and Their reference quarter the SES
Related Interests
A-3 Unnumbered 4334Q/4326T Copy of Written Approval on Board of As approved 20th business day from date of Appropriate department of
Directors on Credit Accommodations approval the SES
to directors, Officers, Stockholders, and
Their Related Interests
B Unnumbered 4143Q.4 Report on Disqualification of As disqualification Within 72 hours from receipt of -do-
(no prescribed Director/Officer occurs report by board of directors
form)
B Indicate the form 4144Q Biographical Data of Directors/Officers Upon every 10th business day from the date Hard copy to appropriate
no. (for QB – with ID picture election/re- of the meeting of the board of department of the SES
SES II Form 15 election or directors/officers are elected or
(NP08-TB) - if submitted in CD form-Notarized appointment/pro- appointed/promoted
first page of each of the motion or if
directors’/officers Biographical Data change in name
saved in CD and control proof list occurs, or if 10th business day from the date
-if sent by electronic mail-Notarized requesting the change of name occurred
first page of Biographical Data or approval for
Notarized list of names of interlocks.
Page 4 of 8
APP. T-3
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
B Unnumbered 4144Q List of Members of the Board of Annually 10th business day from the Hard copy to appropriate
Directors and Officers annual election of the board of department of the SES
directors
B 4144Q Duly accomplished and notarized Upon election or 10th business day from date of -do-
authorization form for querying the appointment/pro- election of the
BSP watchlist files motion as first directors/meeting of the board
time of directors in which the
director/officer officers are appointed/promoted
within a TC
B Unnumbered 4190T/4190T.1/ Audited Financial Statements (two (2) Annually 120th calendar day after the Appropriate department of
(no prescribed 4190Q sets of AFS: AFS of the TC proper and end of reference year the SES
form) AFS covering trust operations) for
Previous Year Prepared by the External
Auditor and the corresponding
Auditor’s Letter of Comments
B 4192Q Certification under oath of independent Upon election 10th business day from the date Hard copy to appropriate
directors that he/she is an independent of election department of the SES
director as defined under
Subsec. 4141Q.2 and that all the
information thereby supplied are true
and correct
B 4192Q/ Certification under oath of Upon every 10th business day from date of Hard copy to appropriate
4141Q.9 directors/officers that he/she has all the election/re- election of the department of the SES
qualifications and none of the election or directors/meeting of the board
disqualifications appointment/pro- of directors in which the
motion officers are appointed/promoted
Page 5 of 8
APP. T-3
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
B 4192T Report on Intra-Group Transaction Quarterly 20 calendar days after the end -do-
of reference quarter
B BSP 7-26-26 4192Q.3 Statement of Condition for Publication Quarterly 20th business day from receipt Appropriate department of
of call the SES
B Unnumbered 4192Q Report on Crimes/Losses for Head As crime or Within five (5) business days In two (2) copies: the original
Office/Branches incident occurs from knowledge of the crime or to the appropriate department
incident; of the SES and the duplicate
Where a thorough investigation to the BSP Security
and evaluation of facts is Coordinator, thru the
necessary to complete the Director, Security
report, an initial report Investigation and Transport
submitted within the five (5)- Department
business day deadline may be
accepted: Provided, That a
complete report is submitted
not later than fifteen (15)
business days from termination
of investigation.
B Unnumbered 4192Q Board Resolution on trust corporation’s As authorized 3rd day from date of resolution Appropriate department of
signatories of report submitted to BSP the SES
Page 6 of 8
APP. T-3
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
B Unnumbered 4192Q Corporate Secretary’s Certification As change in Immediately after change -do-
(no prescribed under oath on list of stockholders composition of
form) and/or groups of stockholders stockholders
occurs
B BSP 7-26-13 4306Q Past Due Receivables, Loans and/or Quarterly 15th calendar day after end of -do-
Commercial Papers/Private Securities reference quarter
B SES Form 6H 4306Q.5 Notice of Write-offs of Loans, Other As write-off Within 30 business days after -do-
(CBP-7-16-21), Credit Accommodations, Advances and occurs every write-off
revised Other Assets
(i) Sworn statement signed by the
President or officer of equivalent
rank stating that the write-off did not
include DOSRI
B Unnumbered 4625Q.9 Report on FX Swaps with Customers’ Monthly 5th business day after end of IOD @ e-mail:
where 1st leg is a Purchase of FX reference month iod@bsp.gov.ph
Against Pesos (For TCs with derivative cc: mail SDC
license)
B Unnumbered 4625Q.9 Report on Cancellations, Roll-overs and Monthly 5th business day after end of IOD @ e-mail:
Non-delivery of FX Forwards Purchase- reference month iod@bsp.gov.ph
Sales Contracts and Forward Leg of cc: mail SDC
Swap Contracts (for TC with derivatives
license)
Page 7 of 8
APP. T-3
15.10.31
Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
M-019 dated Report on NDF transactions with non- Weekly 2nd business day after end of Email to SDC
05.05.08 resident reference week
B SEC Form MAB dated General Information Sheet Annually or as 30th day from date of Annual Appropriate department of
09.02.05 changes occurs Stockholders’ meeting or if the SES
changes occur, 7th day from
date of change.
Unnumbered 4177Q.8 IT Risk Profile Report Annually 25 calendar days after end of Electronically to the SDC
reference year
Page 8 of 8