1. Organization of banks.

a. How do banks organize? Who supervises their organization? Okay, for this, let us
refer to Sec. 8 of R.A. 8791, GENERAL BANKING LAW OF 2000.

CHAPTER III
ORGANIZATION, MANAGEMENT AND ADMINISTRATION OF BANKS. QUASI-
BANKS AND TRUST ENTITIES

Section 8. Organization. - The Monetary Board may authorize the organization

of a bank or quasi-bank subject to the following conditions:

8.1 That the entity is a stock corporation (7);

8.2 That its funds are obtained from the public, which shall mean twenty (20) or more
persons (2-Da); and

8.3 That the minimum capital requirements prescribed by the Monetary Board for
each category of banks are satisfied. (n)

No new commercial bank shall be established within three (3) years from the
effectivity of this Act. In the exercise of the authority granted herein, the
Monetary Board shall take into consideration their capability in terms of their
financial resources and technical expertise and integrity. The bank licensing
process shall incorporate an assessment of the bank's ownership structure,
directors and senior management, its operating plan and internal controls as
well as its projected financial condition and capital base.

1. THE MONETARY BOARD

- Under the New Central Bank Act, the Monetary Board is not only empowered to
determine whether a person or entity is performing banking or quasi-banking
functions when exercised without the BSP’s authority, but the Board also has the
power to authorize entities or persons to engage in money service businesses.

- Next slide please

- Now there are other factors that the monetary board takes into
consideration.

- During a bank licensing process, the monetary board shall take into consideration
the capabilities of the applicant bank in terms of their financial resources and
technical expertise, and integrity. So during this time, the Monetary Board will
incorporate an assessment of:

a. The banks’s ownership structure

b. Directors and senior management

c. Its operating plans, and

 d. Internal controls, as well as

e. Its projected financial condition and capital base

- Next slide please

- On determining an entity’s capability in integrity moreover, the entity’s

Incorporators/Subscribers, proposed directors and officers must:

(i) be persons of integrity and of good credit standing in the business

community. The subscribers must have adequate financial strength to pay
for their proposed subscriptions in the bank.

(ii) They must not have been convicted of any crime involving moral turpitude,
and unless otherwise allowed under the provisions of existing laws are not
officers and employees of a government agency, instrumentality, department
or office charged with the supervision of, or the granting of loans to banks.

- Okay, so those are the other factors the Monetary board considers during the
bank licensing process, let’s look again into those 3 conditions enumerated
under sec. 8.

- NEXT SLIDE PLEASE

1. It must be a stock corporation

- Under sec. 3 of the revised corporation code, a stock corporation is that

which has capital stock divided into shares, dividends, or allotments of the
surplus profits on the basis of the shares held. Banking institutions also are
only allowed to issue par value shares. Under sec. 10 of the RCCP moreover,
on the number and Qualifications of Incorporators. It states that Any person,
partnership, association or corporation, singly or jointly with others but not
more than fifteen (15) in number, 2 of whom must be independent directors,
may organize a corporation for any lawful purpose or purposes. sec. 116 of
the RCCP prohibits banks and quasi-banks from incorporating as a one-
person corporation or that corporation with a single stockholder.
- Since they are required to be stock corporations, they must submit those
requirements required by the RCCP to the SEC and one among those is an:
1. Name Verification Slip (through SEC’s website or at the Name
Verification Unit at SEC’s office building)
2. Articles of Incorporation and By-Laws
3. Treasurer’s Affidavit
4. Notarized Bank Certificate of Deposit (notarized in place where bank is
located)
5. Written Undertaking to Change Corporate Name by any Incorporator or
Director
 6. Endorsement or Clearance from other government agencies (if
company will engage in a regulated industry)

NEXT SLIDE PLEASE

- This endorsement or Certificate of Authority to Register is issued by the

monetary board, and shall not be issued unless the monetary board is
satisfied from the evidence submitted to it. This requirement is evident
under sec. 14 of the GBL 2000 & sec. 16 of the RCCP, second
paragraph. For the GBL of 2000, it states that the Securities and
Exchange Commission shall not register the articles of incorporation of
any bank, or any amendment thereto, unless accompanied by a
certificate of authority issued by the Monetary Board, under it seal. Such
certificate shall not be issued unless the Monetary Board is
satisfied from the evidence submitted to it:

14.1 That all requirements of existing laws and regulations to engage in

the business for which the applicant is proposed to be incorporated have
been complied with;

14.2 That the public interest and economic conditions, both general and
local, justify the authorization; and

14.3 That the amount of capital, the financing, organization, direction

and administration, as well as the integrity and responsibility of the
organizers and administrators reasonably assure the safety of deposits
and the public interest. (9)

- From the RCCP on other hand, it states that no articles of

incorporation or any amendment thereto of banks, banking and
quasi-banking institutions, preneed, insurance and trust companies,
NSSLAS, pawnshops, and other financial intermediaries shall be
approved by the Commission unless accompanied by a favorable
recommendation of the appropriate government agency to the
effect that such articles or amendment is in accordance with law.

- What if the bank intends to branch its offices out?

E. Bank Branches

- (i) Universal or commercial banks may open branches or other offices

within or outside the Philippines upon prior approval of the Bangko
Sentral. Branching by all other banks shall be governed by pertinent
laws. A bank may, subject to prior approval of the Monetary Board, use any
or all of its branches as outlets for the presentation and/or sale of the financial
products of its allied undertaking or of its investment house units.
 - (ii) A bank authorized to establish branches or other offices however
shall be responsible for all business conducted in such branches and
offices to the same extent and in the same manner as though such
business had all been conducted in the head office. A bank and its
branches and offices shall be treated as one unit.

- *Note: Cooperatives may organize a rural bank. Upon consultation with the
rural banks in the area, duly established cooperatives and corporations
primarily organize to hold equities in rural banks may organize a rural bank
and/or subscribe to the shares of stock of any rural bank: Provided, That a
cooperative or corporation owning or controlling the whole or majority of the
voting stock of the rural bank shall be subject to special examination and to
such rules and regulations as the Monetary Board may prescribe.

NEXT SLIDE PLEASE

2. The second condition under sec. 8 is that the funds must be obtained from
the public. Sec. 3 of the GBL of 2000 defines banks as.The second condition
under section 8 requires these banking or quasi-banking entities engaged in the
lending of funds to obtain the said funds in the form of deposits obtained from the
public, the public meaning twenty (20) or more persons (2-Da).

NEXT SLIDE PLEASE

3. And the third condition under sec. 8 is Capital requirements: That the minimum
capital requirements prescribed by the Monetary Board for each category of
banks are satisfied.

- According to sec. 121, part 1 of the 2018 Manual of Regulations for Banks
(MORB), The term capital shall be synonymous to unimpaired capital and
surplus, combined capital accounts and net worth and shall refer to the total
of the unimpaired paid-in capital, surplus and undivided profits

- NEXT SLIDE PLEASE

- Moreover, it is provided for by the New Central Bank Act (RA 11211,
amending RA 7653 or the New Central Bank Act) (sec. 41 which amended
sec. 108 of the GBL 2000) on Minimum Capital Ratios that the Monetary
Board may prescribe minimum risk-based capital adequacy ratios based on
internationally accepted standards and may alter said ratios whenever it
deems necessary. In the exercise of its authority under this section, the
Monetary Board may require banks to hold capital beyond the minimum
requirements commensurate to then risk profile."

NEXT SLIDE PLEASE

- Okay, so referred in this slide is the minimum capitalization required from

banks as provided by the 2018 MORB. These requirements shall also be the
required minimum capitalization upon (a) establishment of a new bank, (b)
 conversion of an existing bank from a lower to a higher category bank and
vice versa, and (c) relocation of the head office of a TB/RB in an area of
higher classification.

Required
Bank Category Minimum Capitalization

Universal Banks

Head Office Only P3.00 billion

Up to 10 branches1 6.00 billion
11 to 100 branches2 15.00 billion
More than 100 branches3 20.00 billion

Commercial Banks

Head Office Only P2.00 billion

Up to 10 branches4 4.00 billion
11 to 100 branches5 10.00 billion
More than 100 branches6 15.00 billion

Thrift Banks

Head Office in National Capital Region (NCR)

Head Office Only P500 million

Up to 10 branches7 750 million
11 to 100 branches8 1.00 billion
More than 100 branches9 2.00 billion

Head Office in all Other Areas Outside NCR

Head Office Only P200 million

Up to 10 branches10 300 million
11 to 100 branches11 400 million
More than 100 branches12 800 million

Rural Banks and Cooperative Banks

Head Office in NCR

Head Office Only P50 million

Up to 10 branches13 75 million
11 to 100 branches14 100 million
More than 100 branches15 200 million

Head Office in All Other Areas Outside NCR

(All Cities up to 3rd class municipalities)

Head Office Only P20 million

Up to 10 branches16 30 million
11 to 100 branches17 40 million
More than 100 branches18 80 million

Head Office in All Other Areas Outside NCR

(4th class to 6th class municipalities)

Head Office Only P10 million

Up to 10 branches19 15 million
11 to 100 branches20 20 million
More than 100 branches21 40 million

- OKAY, So, upon submission of the RCCP requirements to the SEC,

accompanied with the Monetary Board’s certificate of authority to register, the
SEC will issue their certificate of incorporation. The bank is now A STOCK
CORPORATION AUTHORIZED TO ENGAGE IN MONEY SERVICE
BUSINESS. If the bank is a stock corporation, which law then must govern
them? WOULD it be the revised corporation code or the special laws
applicable to them like the general banking law of 2000?
NEXT SLIDE PLEASE

- The revised corporation code dictates that that corporations created by

special laws or charters shall be governed primarily by the provisions of the
special law or charter creating them or applicable to them, supplemented by
the provisions of the RCCP, insofar as they are applicable.

- The General Banking Law of 2000 (GBL) along with its amendments, is the
law that generally governs the regulation, organization and operation of
banks, quasi-banks, and other quasi-entities. It primarily governs Universal
Banks (UB) and Commercial Banks (CB), and has suppletory application to
other banks like Thrift Banks (which is primarily governed by RA 7906, the
Thrift Banks Act), Rural Banks (primarily governed by RA 7353, the Rural
Banks Act), and Cooperative Banks (primarily governed by RA 6938, the
Cooperative Code), The organization, ownership and capital
requirements, powers, supervision and general conduct of business of
Islamic banks shall be governed by special laws.

- Thank you. The next reporter will now be discussing the stockholdings
of banks.

- As mentioned by the previous group, Sec. 6 of GBL 2000 (Authority to

Engage in Banking and Quasi-Banking Functions) states that No person or
entity shall engage in banking operations or quasi-banking functions
without authority from the Bangko Sentral:. Provided, however, That an
entity authorized by the Bangko Sentral to perform universal or commercial
banking functions shall likewise have the authority to engage in quasi-
banking functions.
- Section 2. Section 3 of the same Act is hereby amended to read as follows:

- It is provided by the new Central Bank Act (R.A. No. 11211, July 23, 2018)
that it is the Bangko Sentral that will provide policy directions in the areas of
money, banking, and credit. It shall have supervision over the operations of
banks and exercise such regulatory and examination powers as provided in
this Act and other pertinent laws over the quasi-banking operations of non-
bank financial institutions.

- Relative to its exercise of supervisory powers moreover, the Monetary Board

was empowered to authorize entities or persons to engage in money service
business. As may be determined by the Monetary Board, it shall likewise
exercise regulatory and examination powers over money service businesses,
credit granting businesses, and payment system operators. The Monetary
Board is hereby empowered to authorize entities or persons to engage in
money service businesses.

- The determination of whether a person or entity is performing banking

or quasi-banking functions without Bangko Sentral authority shall be
decided by the Monetary Board. To resolve such issue, the Monetary
Board may; through the appropriate supervising and examining department of
the Bangko Sentral, examine, inspect or investigate the books and records of
such person or entity. Upon issuance of this authority, such person or entity
may commence to engage in banking operations or quasi-banking function
and shall continue to do so unless such authority is sooner surrendered,
revoked, suspended or annulled by the Bangko Sentral in accordance with
this Act or other special laws.

The department head and the examiners of the appropriate supervising and
examining department are hereby authorized to administer oaths to any such
person, employee, officer, or director of any such entity and to compel the
presentation or production of such books, documents, papers or records that
are reasonably necessary to ascertain the facts relative to the true functions
and operations of such person or entity. Failure or refusal to comply with the
required presentation or production of such books, documents, papers or
records within a reasonable time shall subject the persons responsible
therefore to the penal sanctions provided under the New Central Bank Act.

Persons or entities found to be performing banking or quasi-banking functions

without authority from the Bangko Sentral shall be subject to appropriate
sanctions under the New Central Bank Act and other applicable laws. (4a)