Banking Regulation Review

Classification of banks

1. Universal – commercial bank with additional authority to exercise the powers of an investment
house and invest in non-allied enterprises
2. Commercial
3. Thrift
4. Rural
5. Cooperative
6. Islamic
7. Government-owned
8. Others as classified by BSP

Universal and commercial

- dominant; represents 70% of the resources in the banking system

- + subsidiaries, affiliates, offshore (limited functions) banking units of foreign banks are
registered as such

BSP, Through MONETARY BOARD, mandated to ensure that control of 60% of resources/assets of the
banking system is HELD BY DOMESTIC BANKS that are AT LEAST MAJORITY-OWNED by PHILIPPINE
NATIONALS.

General Banking Law

- Governs UNIVERSAL and COMMERCIAL banking

- Still applies to other banks insofar as it is not in conflict with special laws for those banks
o Philippine Cooperative Code – recognized primacy of the GBL in the regulation of
cooperative banks

Manual of Regulations by BSP

- Rules implementing various banking laws

- Supplemented and modified from time to time

New Central Bank Act

- The BSP charter

- Contains provisions on banking regulation in line with mandate of BSP as the primary overseer in
the PH

Charter of the Philippine Deposit Insurance (PDIC) = R.A. 10846

 - Insurer of bank deposits

Prudential regulation

1. Relationship with a prudential regulator

a. Prudential regulator – central to a safe and sound banking system; role fulfilled entirely
by BSP
b. Section 4 GBL – operations and activities of the banks shall be subject to supervision of
BSP
c. Supervision – promulgation of rules, conduct, standards of operations for banks (in
Manual of Regulations for Banks), visitorial powers
d. Visitorial powers – conducting of examinations and investigations of activities of banks
to determine COMPLIANCE; enforcing prompt and corrective action in cases of breach
i. ULTIMATE AIM: ENSURED SOLVENCY AND LIQUIDITY OF BANKS
ii. Regularity of investigations
1. Not more than once a year
2. 5 (out of 7) votes of Monetary Board – special examination (immediate
address findings of irregularities/deficiencies)
iii. BSP is also authorized to examine ENTERPRISES THAT ARE WHOLLY/MAJORITY-
OWNED BY THE BANK
iv. PDIC can also examine banks once a year PRIOR to the approval of the BSP
1. To avoid overlapping efforts = PDIC shall maximize efficient use of
reports and findings of BSP
2. PDIC determined unsound banking practices and NO CORRECTIVE
ACTION WITHIN 45 DAYS from MB = PDIC can motu prioprio (official act
taken without no formal request from another party) perform corrective
action and inform MB thereafter
2. Management of locally incorporated banks
a. BOD with 5 – 15 members
b. AT LEAST 2 must be INDEPENDENT DIRECTORS
c. Foreign nationals may become directors to the extent of foreign equity