Manual of Regulations For Non-Bank Financial Institutions Vol. 2 - March 2016

FOREWORD
The Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) codifies

and logically organizes Bangko Sentral rules and policy issuances governing non-bank financial
institutions supervised by, or are under the regulatory ambit of, the Bangko Sentral such as
quasi-banks, investment houses, non-stock savings and loan associations, pawnshops and
trust corporations in the country.
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.
The MORNBFI is updated regularly to reflect regulatory developments. This edition

covers issuances and regulations cumulatively issued as of end-March 2016.
AMANDO M. TETANGCO, JR.

Governor
PREFACE
Manual of Regulations for Non-Bank Financial Institutions
The 31 March 2016 Manual of Regulations for 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
07 December 1994, directed the creation of a multi-departmental Ad Hoc Review Committee
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:
1. Incorporate relevant issuances;
2. Propose revisions/amendments/deletions of provisions which have
become obsolete, redundant, irrelevant or inconsistent with laws/
rules and regulations;
3. Reformulate provisions as the need arises; and
4. Oversee the publication and printing of the MORNBFI in coordination
with the Economic and Financial Learning Center and Corporate
Affairs Office.
The present Committee, as reconstituted under Office Order No. 2257 dated
21 September 2015 is composed of:
Adviser - Nestor A. Espenilla Jr.

Deputy Governor
Supervision and Examination Sector
Chairman - Atty. Mel Georgie B. Racela

Officer-in-Charge
Office of Supervisory Policy
Development (OSPD)
Vice Chairman - Atty. Asma A. Panda

Deputy Director
OGCLS
Members:
Ma. Belinda G. Caraan Betty Christine C. Bunyi

Director Director
Central Point of Contact Department Examination Department (ED) II
(CPCD) IV
Maria Josefina G. Nabong Rhodora M. Brazil- De Vera

Deputy Director Bank Officer V
Integrated Supervision Department OSPD
(ISD) II
Atty. Florabelle S. Madrid Maria Cynthia M. Sison

Deputy Director Deputy Director
Anti-Money Laundering Specialist OSPD
Group (AMLSG)
Atty. Ma. Corazon Bilgera-Cordero Celedina P. Garbosa

Bank Officer V Manager
AMLSG CPCD II
Atty. Lord Eileen S. Tagle Amelia B. Damian

Legal Officer III Bank Officer V
OGCLS OSPD
Concepcion A. Garcia
Acting Deputy Director
Micro, Small and Medium Enterprise
Finance Specialist Group
The Committee Secretariat is headed by Ms. Ma. Cecilia U. Contreras, Supervision
and Examination (SE) Specialist II, OSPD, and is assisted by Maria Evette T. Santos, SE Analyst
II, OSPD, and two (2) other personnel.
The Bangko Sentral ng Pilipinas

INSTRUCTIONS TO USERS
(31 March 2016 Edition)
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.
To illustrate, Subsection 4143Q.1 indicates:
Main Section on “Disqualification of Directors/Trustees and Officers”
Subsection on “Persons disqualified to become officers”
4 1 4 3 Q . 1
Regulation addressed to quasi-banks
Part One on “Organization, Management and Administration"
Regulations addressed to NBFIs
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
PART ONE - ORGANIZATION, MANAGEMENT AND ADMINISTRATION
A. SCOPE OF AUTHORITY
SECTION 4101S Scope of Authority of Non-Stock Savings and Loan Associations

4101S.1 Membership
4101S.2 Organizational requirements
SECTIONS 4102S - 4105S (Reserved)
B. CAPITALIZATION
SECTION 4106S Capital of NSSLAs

4106S.1 Regulatory treatment of capital contributions
of members
4106S.2 - 4106S.6 (Reserved)
4106S.7 Revaluation surplus
C. (RESERVED)
D. CAPITAL-TO-RISK ASSETS RATIO
SECTION 4116S Capital-to-Risk Assets Ratio
SECTION 4117S Withdrawable Share Reserve
SECTION 4118S Surplus Reserve for Ledger Discrepancies
SECTION 4119S Reserve for Office Premises, Furniture, Fixtures and Equipment
ix
SECTION 4120S (Reserved)
E. (RESERVED)
F. NET INCOME DISTRIBUTION
SECTION 4126S Limitations on Distribution of Net Income

4126S.1 Reporting and verification
4126S.2 Recording of net income for distribution
G. TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS
SECTION 4141S Definition; Qualifications; Responsibilities and Duties of

Trustees
4141S.1 Definition of trustees
4141S.2 Qualifications of trustees
4141S.3 Powers/responsibilities and duties of trustees
4141S.4 General responsibility of the board of trustees
4141S.5 Duties and responsibilities
SECTION 4142S Definition and Qualifications of Officers

4142S.1 Definition of officers
4142S.2 Qualifications of officers
4142S.3 Duties and responsibilities of officers
SECTION 4143S Disqualification of Trustees and Officers

4143S.1 Persons disqualified to become trustees
4143S.2 Persons disqualified to become officers
4143S.3 Disqualification procedures
4143S.4 Effect of non-possession of qualifications or
possession of disqualifications
4143S.5 (Reserved)
4143S.6 Watchlisting
SECTION 4144S Compensation of Trustees, Officers and Employees

4144S.1 Compensation increases
4144S.2 Liability for loans contrary to law
SECTION 4145S Bonding of Officers and Employees
x
SECTION 4146S Agents and Representatives
SECTION 4147S Bio-data of Trustees and Officers
SECTION 4148S Full-Time Manager for NSSLAs
H. BRANCHES AND OTHER OFFICES
SECTION 4151S Establishment of Branches/Extension Offices

4151S.1 Application
4151S.2 Conditions precluding acceptance/processing of
application
4151S.3 Internal control system
4151S.4 Permit to operate
I. BUSINESS DAYS AND HOURS
SECTION 4156S Business Days and Hours
J. REPORTS
SECTION 4161S Records

4161S.1 Uniform System of Accounts
4161S.2 Philippine Financial Reporting Standards/
Philippine Accounting Standards
SECTION 4162S Reports

4162S.1 Categories and signatories of reports
4162S.2 Manner of filing
4162S.3 Sanctions and procedures for filing and payment
of fines
SECTION 4163S Internal Control Framework

4163S.1 Management oversight and control culture
4163S.2 Risk recognition and assessment
4163S.3 Control activites
4163S.4 Information and communication
xi
4163S.5 Monitoring activites and correcting
deficiencies
SECTION 4164S Internal Audit Function

4164S.1 Qualifications of the head of the internal audit
function
4164S.2 Duties and responsibilities of the head of the
internal audit function or the chief audit
executive
4164S.3 Professional competence and ethics of the
internal audit function
4164S.4 Independence and objectivity of the internal
audit function
4164S.5 Internal audit charter
4164S.6 Scope
K. INTERNAL CONTROL
SECTION 4171S External Auditor
SECTION 4172S Financial Audit

4172S.1 Audited financial statements of NSSLAs
4172S.2 Posting of audited financial statements
SECTION 4174S Risk Management Function
SECTION 4180S Selection, Appointment, Reporting Requirements and Delisting

of External Auditors and/or Auditing Firm; Sanction
L. MISCELLANEOUS PROVISIONS
SECTION 4181S Publication Requirements
SECTION 4182S Business Name
SECTION 4183S Prohibitions
xii
SECTION 4190S Guidelines on Outsourcing
SECTIONS 4191S (Reserved)
SECTION 4192S Prompt Corrective Action Framework
SECTION 4193S Supervision by Risks
SECTION 4194S Market Risk Management
SECTION 4195S Liquidity Risk Management
SECTION 4196S Information Technology Risk Management (ITRM)

4196S.1 Declaration of policy
4196S.2 Purpose and scope
4196S.3 Complexity of IT risk profile
4196S.4 IT rating system
4196S.5 Definition of terms
4196S.6 Description of IT-related risks
4196S.7 IT Risk Management System (ITRMS)
4196S.8 Reports
4196S.9 Sanctions and penalties
SECTION 4199S General Provision on Sanctions
PART TWO - DEPOSIT AND BORROWING OPERATIONS
A. DEMAND DEPOSITS
SECTION 4201S Checking Accounts
B. SAVINGS DEPOSITS
SECTION 4206S Definition
xiii
SECTION 4207S Minimum Deposit
SECTION 4208S Withdrawals
SECTION 4209S Dormant Savings Deposits
C. (RESERVED)
D. TIME DEPOSITS
SECTION 4222S Minimum Term and Size of Time Deposits
SECTION 4223S Withdrawals of Time Deposits
E. - F. (RESERVED)
G. INTEREST ON DEPOSITS
SECTION 4241S Interest on Savings Deposits
SECTION 4242S Interest on Time Deposits

4242S.1 Time of payment
4242S.2 Treatment of matured time deposits
H. (RESERVED)
xiv
I. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS
SECTION 4261S Opening and Operation of Deposit Accounts

4261S.1 Who may open deposit accounts
4261S.2 Identification of member-depositors
4261S.3 Number of deposit accounts
4261S.4 Signature card
4261S.5 Passbook and certificate of time deposit
4261S.6 Deposits in checks and other cash items
J. (RESERVED)
K. OTHER BORROWINGS
SECTION 4286S Borrowings
PART THREE - LOANS AND INVESTMENTS
A. LOANS IN GENERAL
SECTION 4301S Lending Policies

4301S.1 Authority; loan limits; maturity of loans
SECTION 4302S Basic Requirements in Granting Loans
SECTION 4303S Loan Proceeds
SECTION 4304S Loan Repayment
SECTION 4305S Interest and Other Charges

4305S.1 - 4305S.2 (Reserved)
4305S.3 Interest in the absence of stipulation
xv
4305S.4 Escalation clause; when allowable
4305S.5 Interest accrual on past due loans
4305S.6 Method of computing interest
SECTION 4306S Past Due Accounts

4306S.1 Accounts considered past due
4306S.2 Extension/renewal of loans
4306S.3 Write-off of loans as bad debts
4306S.4 Updating of information provided to credit
information bureaus
SECTION 4307S "Truth in Lending Act" Disclosure Requirements

4307S.1 Definition of terms
4307S.2 Information to be disclosed
4307S.3 Inspection of contracts covering credit
transactions
4307S.4 Posters
4307S.5 Sanctions and penal provisions
SECTION 4308S Restructured Loans; General Policy
SECTION 4309S Renewal of Loans
SECTION 4310S Minimum Required Disclosure
SECTION 4311S Unfair Collection Practices
SECTION 4312S Confidentiality of Information
SECTION 4313S Sanctions
B. SECURED LOANS
SECTION 4321S Kinds of Security
C. - D. (RESERVED)
xvi
SECTION 4337S Policies on salary-based general-purpose consumption loans
4337S.1 Definition; Transactions covered; Exclusions;
Report
4337S.2 Credit granting
4337S.3 Consumer protection
4337S.4 Sanctions
E. LOANS/CREDIT ACCOMMODATIONS TO TRUSTEES, OFFICERS,

STOCKHOLDERS AND THEIR RELATED INTERESTS
SECTION 4356S General Policy
SECTION 4357S Direct/Indirect Borrowings; Ceilings
SECTION 4358S Records; Reports
SECTION 4370S Sanctions
F. - I. (RESERVED)
J. OTHER OPERATIONS
SECTION 4391S Fund Investments

4391S.1 - 4391S.2 (Reserved)
4391S.3 Investment in debt and marketable equity securities
4391S.4 - 4391S.10 (Reserved)
SECTION 4392S Loan Portfolio and Other Risk Assets Review System
K. MISCELLANEOUS PROVISIONS
xvii
PART FOUR - BSP REGULATIONS ON FINANCIAL CONSUMER
PROTECTION
A. CONSUMER PROTECTION OVERSIGHT FUNCTION
SECTION 4401S Consumer Protection Oversight Function

4401S.1 Role and Responsibility of the Board and Senior
Management
4401S.2 Consumer Protection Risk Management Syetem
(CPRMS)
B. CONSUMER PROTECTION STANDARDS OF CONDUCT FOR BSFIS
SECTION 4402S Consumer Protection Standards

4402S.1 Disclosure and Transparency
4402S.2 Protection of Client Information
4402S.3 Fair Treatment
4402S.4 Effective Recourse
4402S.5 Financial Education and Awareness
C. ENFORCEMENT ACTIONS
SECTION 4403S Enforcement Actions
PART FIVE - (RESERVED)
PART SIX - MISCELLANEOUS
A. OTHER OPERATIONS
SECTION 4601S Fines and Other Charges

4601S.1 Guidelines on the imposition of monetary
penalties; payment of penalties or fines
xviii
SECTION 4631S Revocation/Suspension of Non-Stock Savings and Loans
Association License
SECTION 4641S Electronic Services
SECTION 4642S Issuance and Operations of Electronic Money

4642S.1 Declaration of policy
4642S.2 Definitions
4642S.3 Prior Bangko Sentral approval
4642S.4 Common provisions
4642S.5 Quasi-bank license requirement
4642S.6 Sanctions
4642S.7 Transitory provisions
4642S.8 - 4642S.10 (Reserved)
4642S.11 Outsourcing of services by Electronic Money
Issuers (EMIs) to Electronic Money Network
Service Providers (EMNSP)
SECTION 4650S Philippine and Foreign Currency Notes and Coins
B. SUNDRY PROVISIONS
SECTION 4651S Notice of Dissolution
SECTION 4652S Confidential Information
SECTION 4653S Examination by the Bangko Sentral
SECTION 4654S Applicability of Other Rules
SECTION 4655S Annual Supervisory Fees
SECTION 4656S Basic Law Governing Non-Stock Savings and Loan

Associations
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
xix
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.
SECTION 4660S Disclosure of Remittance Charges and Other Relevant

Information
SECTION 4691S Anti-Money Laundering Regulations

4691S.1 - 4691S.8 (Reserved)
4691S.9 Sanctions and penalties
SECTION 4695S Valid Identification Cards for Financial Transactions
xx
List of Appendices
15.12.31
LIST OF APPENDICES
No. SUBJECT MATTER
S-1 Safeguards in Bonding of NSSLA Accountable Officers and Employees
S-2 List of Reports Required from Non-Stock Savings and Loan Associations
Annex S-2-a - Reporting Guidelines on Crimes/Losses
S-3 Guidelines on Prescribed Reports Signatories and Signatory Authorization

Annex S-3-a - Format of Resolution for Signatories of Category A-1
Reports
Annex S-3-b - Format of Resolution for Signatories of Category A-2
Reports
Annex S-3-c - Format of Resolution for Signatories of Categories A-3
and B Reports
S-4 Format of Disclosure Statement on Small Business/Retail/Consumer

Credit
S-5 Abstract of "Truth in Lending Act" (Republic Act No. 3765)
S-6 Anti-Money Laundering Regulations (Deleted pursuant to Circular No.

706 dated 05 January 2011)
Annex S-6-a - Certification of Compliance with Anti-Money
Laundering Regulations (Deleted pursuant to Circular
No. 706 dated 05 January 2011)
Annex S-6-b - Rules on Submission of Covered Transaction Reports
and Suspicious Transaction Reports by Covered
Institutions (Deleted pursuant to Circular No. 706
dated 05 January 2011)
S-7 Revised Implementing Rules and Regulations R.A. No. 9160, as

amended by R.A. No. 9194 (Deleted pursuant to Circular No. 706 dated
05 January 2011)
S-8 Guidelines to Govern the Selection, Appointment, Reporting

Requirements and Delisting of External Auditors and/or Auditing Firm
of Covered Entities
xxi
List of Appendices
15.12.31
LIST OF APPENDICES
No. SUBJECT MATTER
S-9 Guidelines in Classifying Loans and Other Risk Assets and Setting up
Allowance for Probable Losses
S - 10 Guidelines and Procedures Governing the Consumer Assistance

Management System (CAMS) of BSP-Supervised Financial Institutions
xxii
§§ 4101S - 4101S.2
08.12.31
PART ONE
ORGANIZATION, MANAGEMENT AND ADMINISTRATION
A. SCOPE OF AUTHORITY foregoing definition, shall be allowed to

continue as such.
Section 4101S Scope of Authority of The Monetary Board may, as
Non-Stock Savings and Loan Associations circumstances warrant, require NSSLAs
(NSSLA). An NSSLA shall include any non- mentioned in the immediately preceding
stock, non-profit corporation engaged in the paragraph to amend their by-laws to comply
business of accumulating the savings of its with the concept of a well-defined group.
members and using such accumulations for c. In no case shall the total amount of
loans to members to service the needs of entrance fees exceed one percent (1%) of
households by providing long-term financing the amount to be contributed or otherwise
for home building and development and for paid-in by the particular member: Provided,
personal finance. An NSSLA may also That for new members, the fee shall be based
engage in a death benefit program meant on the amount of contributions computed
exclusively for the benefit of its members. in accordance with the revaluation of the
An NSSLA shall accept deposits from assets of the NSSLA.
and grant loans to its members only and shall
not transact business with the general public.
§ 4101S.2 Organizational
requirements1
§ 4101S.1 Membership
a. Articles of Incorporation; by-laws
a. NSSLAs shall issue a certificate of
The articles of incorporation and by-laws
membership to every qualified member and
of a proposed NSSLA, or any amendment
shall maintain a registry of their members.
thereto, shall not be registered with the SEC
b. An NSSLA shall confine its
unless accompanied by a certificate of
membership to a well-defined group of
persons. approval from the Monetary Board.
A well-defined group shall consist of any b. Application for approval. The articles
of the following: of incorporation and by-laws of a proposed
(1) Employees, officers, and trustees of NSSLA, both accomplished in the
one (1) company, including member- prescribed forms, shall be submitted to the
retirees; Monetary Board through the appropriate
(2) Government employees belonging to department of the SES together with a
the same office, branch, or department, covering application for the approval
including member-retirees; and thereof, signed by a majority of the board of
(3) Immediate members of the families trustees and verified by one of them. The
up to the second degree of consanguinity or application shall include:
affinity of those falling under Items “(1)” and (1) The proposed articles of
“(2)” above. incorporation and by-laws together with the
NSSLAs whose articles of incorporation names and addresses of the incorporators,
and by-laws were approved and registered trustees and officers, with a statement of
prior to the effectivity of R. A. No. 8367 and their character, experience,and general
which limit and/or allow membership fitness to engage in the non-stock savings
coverage broader or narrower than the and loan business;
1
See SEC Circular No. 3 dated 16 February 2006.
Manual of Regulations for Non-Bank Financial Institutions S Regulations

Part I - Page 1
§§ 4101S.2 - 4106S.1
13.12.31
(2) An itemized statement of the NSSLAs shall adopt policies to

estimated receipts and expenditures of the encourage their members to increase their
proposed NSSLA for the first year; capital contributions which shall be
(3) Filing fee of P1,000; and classified by the NSSLA as either fixed/non-
(4) Such other information as the withdrawable or withdrawable capital in
Monetary Board may require. accordance with the definition provided
c. Grounds for disapproval of under Subsec. 4106S.1. Partial withdrawal
application. The Monetary Board may deny from the amount paid by a member as
the application to organize an NSSLA on the withdrawable capital contributions, during
basis of a finding that: his membership, may be allowed unless the
(1) The NSSLA is being organized for by-laws of the NSSLA provide otherwise:
any purpose other than to engage in the Provided, That policies allowing the partial
business of a legitimate NSSLA; withdrawal by a member of his
(2) The NSSLA’s financial program is withdrawable capital contributions shall
unsound; comply with the provisions of Subsec.
(3) The proposed members are 4106S.1.
adequately served by one (1) or more (As amended by Circular Nos.789 dated 28 February 2013 and
existing NSSLAs; and 573 dated 22 June 2007)
(4) There exist other reasons which the
§ 4106S.1 Regulatory treatment of
Monetary Board may consider as sufficient
capital contributions of members. An
ground for such disapproval.
NSSLA shall ensure that monies received
d. Certificate of authority to operate;
representing capital contributions are duly
revocation or suspension thereof. NSSLAs,
registered in the books of the Association
prior to transacting business, shall procure
under the name of the member making such
a certificate of authority to transact business
contributions.
from the Monetary Board. After due notice
Capital contributions of members shall
and hearing, the Monetary Board may
be classified by an NSSLA as either fixed/
revoke or suspend, for such period as it
non-withdrawable or withdrawable as
determines, the certificate of authority of any
herein defined.
NSSLA, the solvency of which is imperiled
a. Fixed/non-withdrawable capital refers
by losses or irregularities, or of any NSSLA
to the member’s capital contribution in the
which willfully violates any provision of
NSSLA which he must maintain for the
R. A. No. 8367, these rules or any pertinent
duration of his membership thereon.
law or regulation.
(As amended by CL-2008-078 dated 15 December 2008) (1) Minimum Amount - Every member
of an NSSLA shall be required to maintain
Secs. 4102S - 4105S (Reserved) a fixed/non-withdrawable capital
contribution of at least P1,000.00 unless a
B. CAPITALIZATION higher minimum is prescribed under the
NSSLA’s by-laws.
Sec. 4106S Capital of NSSLAs. A newly (2) Ceiling. An NSSLA shall encourage
organized NSSLA shall have a minimum all its members to increase their fixed/non-
initial aggregate capital contribution of P1.0 withdrawable capital over time beyond
million. Thereafter, an NSSLA shall maintain the minimum amount prescribed under Item
a minimum capital that would allow it to “(1)” hereof.
comply with the capital adequacy ratio However, to ensure that control over
requirement as provided under Sec. 4116S. the affairs of the NSSLA remains
S Regulations Manual of Regulations for Non-Bank Financial Institutions

Part I - Page 2
§§ 4106S.1 - 4116S
13.12.31
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
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.

Part I - Page 3
§§ 4116S - 4118S
13.12.31
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

Part I - Page 4
§§ 4118S - 4126S
13.12.31
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

Part I - Page 5
§§ 4126S - 4141S.2
13.12.31
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.

Part I - Page 6
§§ 4141S.2 - 4141S.5
13.12.31
In addition, such person shall have the § 4141S.3 Powers/responsibilities and

qualifications and none of the duties of trustees. The corporate powers of
disqualifications as provided in pertinent an NSSLA shall be exercised, its business
laws and Bangko Sentral rules. A trustee conducted and all its property controlled
shall have the following minimum and held by its board of trustees. The powers
qualifications: of the board of trustees as conferred by law
(1) He shall be at least twenty five (25) are original and cannot be revoked by the
years of age at the time of his election or members. The trustees hold their office
appointment; charged with the duty to exercise sound and
(2) He shall be at least a college graduate objective judgment for the best interest of
or have at least five (5) years experience in the NSSLA.
business, or shall have undergone any (As amended by Circular Nos.757 dated 08 May 2012 and 749
Bangko Sentral training in NSSLA or banking dated 27 February 2012)
operations: Provided, however, That an
undergraduate eligible to be elected as § 4141S.4 General responsibility of the
trustee in the NSSLA’s by-laws may be board of trustees. The position of an NSSLA
allowed as may be approved by the Bangko trustee is a position of trust. A trustee
Sentral: Provided, further, That Bangko assumes certain responsibilities to different
constituencies or stakeholders, i.e., the
Sentral approval shall no longer be required
NSSLA itself, member-depositors, its clients
for a re-elected college undergraduate who
and other creditors, its management and
was previously allowed to sit as trustee: employees, the regulators, deposit insurer
Provided, finally, That (1) the previous and the public at large. These constituencies
approval was obtained on or after or stakeholders have the right to expect that
01 January 2011; and (2) the trustee has had the institution is being run in a prudent and
continuous service within the said NSSLA; sound manner. The board of trustees is
(3) He must have attended a special primarily responsible for approving and
seminar on corporate governance for board overseeing the implementation of the
of trustees conducted or accredited by the NSSLA’s strategic objectives, risk strategy,
Bangko Sentral; and corporate governance and corporate values.
(4) He must be fit and proper for the Further, the board of trustees is also
position of a trustee of the NSSLA. In responsible for monitoring and overseein the
determining whether a person is fit and performance of senior management as the
proper for the position of a trustee, the latter manages the day- to- day affairs of the
following matters must be considered: institution.
(As amended by Circular Nos. 757 dated 08 May 2012 and 749
integrity/probity, physical/mental fitness,
dated 27 February 2012)
competence, relevant education/financial
literacy/training, diligence and knowledge/
§ 4141S.5 Duties and responsibilities
experience.
The members of the board of trustees a. Board of trustees
shall possess the foregoing qualifications for (1) To approve and monitor the
trustees in addition to those required or implementation of strategic objectives
prescribed under R.A. No. 8791 and other Consistent with the institution’s strategic
existing applicable laws and regulations. objectives, business plans shall be
(As amended by Circular No. 800 dated 21 June 2013) established for the NSSLA including its trust

Part I - Page 7
§ 4141S.5
12.12.31
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

Part I - Page 8
§ 4141S.5
12.12.31
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

Part I - Page 9
§ 4141S.5
12.12.31
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.

Part I - Page 10
§ 4141S.5
12.12.31
(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

Part I - Page 10a
§ 4141S.5
12.12.31
report directly to the audit committee. In operations of an NSSLA on a going-concern

cases of appointment or dismissal of external basis and communicate the same
auditors, it is encouraged that the decision throughout the NSSLA. This shall be
be made only by independent, non- displayed by undertaking timely and
executive audit committee members. It shall effective actions on issues identified.
monitor and evaluate the adequacy and Further, non-executive board members
effectiveness of the internal control system. shall meet regularly, other than in meetings
The audit committee shall review and of the audit committee, in the absence of
approve the audit scope and frequency. It senior management, with the external
shall receive key audit reports, and ensure auditor and heads of the internal audit and
that senior management is taking necessary compliance functions.
corrective actions in a timely manner to b. Specific duties and responsibilities of
address the weaknesses, non-compliance a trustee
with policies, laws and regulations and other (1) To remain fit and proper for the
issues identified by auditors. position for the duration of his term. A
The audit committee shall have explicit trustee is expected to remain fit and proper
authority to investigate any matter within its for the position for the duration of his term.
terms of reference, full access to and He should possess unquestionable
cooperation by management and full credibility to make decisions objectively and
discretion to invite any trustee or executive resist undue influence. He shall treat board
officer to attend its meetings, and adequate trusteeship as a profession and shall have a
resources to enable it to effectively clear understanding of his duties and
discharge its functions. The audit committee responsibilities as well as his role in
shall ensure that a review of the promoting good governance. Hence, he
effectiveness of the institution’s internal shall maintain his professional integrity and
controls, including financial, operational continuously seek to enhance his skills,
and compliance controls, and risk knowledge and understanding of the
management, is conducted at least annually. activities that the trustee is engaged in or
The audit committee shall establish and intends to pursue as well as the
maintain mechanisms by which officers and developments in the NSSLA industry
staff shall, in confidence, raise concerns including regulatory changes through
about possible improprieties or malpractices continuing education or training.
in matters of financial reporting, internal (2) To conduct fair business transactions
control, auditing or other issues to persons with the NSSLA and to ensure that personal
or entities that have the power to take interest does not bias board decisions.
corrective action. It shall ensure that Trustees should, whenever possible, avoid
arrangement are in place for the independent situations that would give rise to a conflict
investigation, appropriate follow-up action, of interest. If transactions with the
and subsequent resolution of complaints. institution cannot be avoided, it should be
(8) To effectively utilize the work done in the regular course of business and
conducted by the internal audit and upon terms not less favorable to the
compliance functions and the external institution than those offered to others. The
auditors. The board of trustees shall basic principle to be observed is that a
recognize and acknowledge the importance trustee should not use his position to make
of the assessment of the independent, profit or to acquire benefit or advantage for
competent and qualified internal and himself and/or his related interests. He
external auditors and compliance officers in should avoid situations that would
ensuring the safety and soundness of the compromise his impartiality.

Part I - Page 10b
§§ 4141S.5 - 4142S.1
12.12.31
(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

Part I - Page 10c
§§ 4142S.1 - 4143S.1
12.12.31
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,

Part I - Page10d
§ 4143S.1
12.12.31
extortion, forgery, malversation, swindling, position for a specific/indefinite period of

theft, robbery, falsification, bribery, violation time. Included are:
of B.P. Blg. 22, violation of Anti- Graft and (1) Persons who refuse to fully disclose
Corrupt Practices Act and prohibited acts the extent of their business interest or any
and transactions under Section 7 of material information to the appropriate
R.A. No. 6713 (Code of Conduct and Ethical department of the SES when required
Standards for Public Officials and pursuant to a provision of law or of a circular,
Employees); memorandum, rule or regulation of the
(2) Persons who have been convicted Bangko Sentral. This disqualification shall
by final judgment of a court sentencing them be in effect as long as the refusal persists;
to serve a maximum term of imprisonment (2) Trustees who have been absent or
of more than six (6) years; who have not participated for whatever
(3) Persons who have been convicted reasons in more than fifty percent (50%) of
by final judgment of the court for violation all meetings, both regular and special, of the
of banking/quasi-banking/NSSLA laws, board of trustees during their incumbency,
rules and regulations; and trustees who failed to physically attend
(4) Persons who have been judicially for whatever reasons in at least twenty-five
declared insolvent, spendthrift or percent (25%) of all board meetings in any
incapacitated to contract; year, except that when a notarized
(5) Trustees, officers or employees of certification executed by the corporate
closed banks/QBs/trust entities who were secretary has been submitted attesting that
found to be culpable for such institution’s said trustees were given the agenda materials
closure as determined by the Monetary prior to the meeting and that their
Board; comments/decisions thereon were
(6) Trustees and officers of banks, QBs submitted for deliberation/discussion and
and trust entities found by the Monetary were taken up in the actual board meeting,
Board as administratively liable for violation said trustees shall be considered present in
of banking laws, rules and regulations the board meeting. This disqualification
where a penalty of removal from office is applies only for purposes of the immediately
imposed, and which finding of the Monetary succeeding election;
Board has become final and executory; or (3) Persons who are delinquent in the
(7) Trustees and officers of banks, QBs payment of their obligations as defined
and trust entities or any person found by hereunder:
the Monetary Board to be unfit for the (a) Delinquency in the payment of
position of trustees or officers because they obligations means that an obligation of a
were found administratively liable by person with an NSSLA where he/she is a
another government agency for violation of trustee or officer, or at least two (2)
banking laws, rules and regulations or any obligations with other banks/FIs, under
offense/violation involving dishonesty or different credit lines or loan contracts, are
breach of trust, and which finding of said past due pursuant to existing regulations;
government agency has become final and (b) Obligations shall include all
executory. borrowings from a bank/QB/trust entity/
b. Temporarily disqualified. Trustees/ NSSLA/other FIs obtained by:
officers/employees disqualified by the (i) A trustee or officer for his own
Monetary Board from holding a trustee account or as the representative or agent of

Part I - Page 10e
§ 4143S.1
12.12.31
others or where he/she acts as a guarantor, (iv) A partnership of which a trustee or

endorser or surety for loans from such FIs; officer, or his/her spouse is the managing
(ii) The spouse or child under the partner or a general partner owning a
parental authority of the trustee or officer; controlling interest in the partnership; and
(iii) Any person whose borrowings or (v) A corporation, association or firm
loan proceeds were credited to the account wholly-owned or majority of the capital of
of, or used for the benefit of a trustee or officer; which is owned by any or a group of persons
(Next page is Page 11)

Part I - Page 10f
§ 4143S.1
08.12.31
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

Part I - Page 11
§§ 4143S.1 - 4143S.3
10.12.31
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

Part I - Page 12
§ 4143S.3
08.12.31
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
(Next Page is Part I - Page 13)

Part I - Page 12a
§ 4143S.3
08.12.31
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.

Part I - Page 13
§§ 4143S.3 - 4143S.6
12.12.31
j. The board of trustees of the § 4143S.5 (Reserved)

concerned institution shall be
immediately informed of cases of § 4143S.6 Watchlisting. To provide the
disqualification approved by the Monetary Bangko Sentral with a central information
Board and shall be directed to act thereon file to be used as reference in passing upon
not later than the following board meeting. and reviewing the qualifications of persons
Within seventy-two (72) hours thereafter, elected or appointed as trustee or officer of
the corporate secretary shall report to the an NSSLA, the SES shall maintain a watchlist
Governor of the Bangko Sentral through of disqualified NSSLA trustees/officers under
the appropriate department of the SES the the following procedures:
action taken by the board on the trustee/ a. Watchlist categories. Watchlisting
officer involved. shall be categorized as follows:
k. Persons who are elected or (1) Disqualification File “A”
appointed as trustee or officer in any of the (Permanent)
Bangko Sentral supervised institutions for the -Trustees/officers/employees
first time but are subject to any of the permanently disqualified by the Monetary
grounds for disqualification provided for Board from holding a trustee/officer position
under Subsecs. 4143S.1 and 4143S.2, shall in any institution under the supervision/
be afforded the procedural due process regulation of Bangko Sentral.
prescribed above. (2) Disqualification File “B”
l. Whenever a trustee/officer is cleared (Temporary)
in the process mentioned under Item “c” -Trustees/officers/employees
above or, when the ground for temporarily disqualified by the Monetary
disqualification ceases to exist, he/she would Board from holding a trustee/officer position
be eligible to become trustee or officer of in any institution under the supervision/
any bank, QB, trust entity or any institution regulation of Bangko Sentral.
under the supervision of the Bangko Sentral b. Inclusion of trustees/officers/
only upon prior approval by the Monetary employees in the watchlist. Upon
Board. It shall be the responsibility of the recommendation by the appropriate
appropriate department of the SES to elevate department of the SES, the inclusion of
to the Monetary Board the lifting of the trustees/officers/employees in watchlist
disqualification of the concerned trustee/ disqualification files “A” and “B” on the
officer and his/her delisting from the basis of decisions, actions or reports of the
masterlist of watchlisted persons. courts, banks, QBs, other NSSLAs and FIs
(As amended by Circular No. 584 dated 28 September 2007) under Bangko Sentral supervision, Bangko
Sentral, NBI or any other administrative
§ 4143S.4 Effect of non-possession of agencies shall first be approved by the
qualifications or possession of Monetary Board.
disqualifications. Trustees/officers elected c. Notification of trustees/officers/
or appointed without possessing the employees. Upon approval by the Monetary
qualifications in Subsecs. 4141S.2/4142S.2 Board, the concerned trustee/officer/
or possessing any of the disqualifications as employee shall be informed through
enumerated in Subsecs.4143S.1/4143S.2, registered mail, with registry return receipt
shall vacate their respective positions card at his/her last known address of his/
immediately. her inclusion in the masterlist of watchlisted

Part I - Page 14
§§ 4143S.6 - 4144S
12.12.31
persons disqualified to be a trustee/officer Board in the following cases:

in any FI under the supervision of the (1) Watchlist – Disqualification File “B”
Bangko Sentral. (Temporary) –
d. Confidentiality. Watchlist files shall (a) After the lapse of the specific period
be for internal use only of the Bangko Sentral of disqualification;
and may not be accessed or queried upon (b) When the conviction by the court
by outside parties including banks, QBs, for crimes involving dishonesty, breach of
trust corporations, NSSLAs, and such trust and/or violation of banking laws
institutions under the supervisory and becomes final and executory, in which case
regulatory powers of the Bangko Sentral the trustee/officer/employee is relisted to
except with the authority of the person Watchlist – Disqualification File “A”
concerned (without prejudice to the (Permanent);
authority of the Governor and the Monetary (c) Upon favorable decision or clearance
Board to authorize release of the by the appropriate body, i.e., court, NBI,
information) and with the approval of the bank, QB, trust entity or such other agency/
concerned SES Department Head or SES body where the concerned individual had
Subsector Head or the Deputy Governor, derogatory record. Trustees/officers/
SES or the Governor, or the Monetary Board. employees delisted from the Watchlist –
The Bangko Sentral will disclose Disqualification File “B” other than those
information on the person included in its upgraded to Watchlist – Disqualification File
watchlist files only upon submission of a “A” shall be eligible for re-employment with
duly notarized authorization from the any bank, QB, trust entity, NSSLA or other
concerned person and approval of such FI under Bangko Sentral supervision.
request by the concerned SES Department (As amended by Circular No. 758 dated 11 May 2012, CL-2007-
Head or SES Subsector Head or the Deputy 001 dated 04 January 2007 and CL-2006-046 dated 21 December
2006)
Governor, SES or the Governor or the
Monetary Board. The prescribed Sec. 4144S Compensation of Trustees,
authorization form to be submitted to the Officers and Employees. No trustee, officer
appropriate department of the SES is in or employee of an NSSLA shall receive from
Appendix Q-45. such NSSLA and no NSSLA shall pay to any
NSSLAs can gain access to said trustee, officer, or employee of such NSSLA,
information in the said watchlist for the sole any commission, emolument, gratuity or
purpose of screening their nominees/ reward based on the volume or number of
applicants for trustees/officers and/or loans made, or based on the interest or fees
confirming their elected trustees and collected thereon. Nothing in this Section,
appointed officers. NSSLAs must obtain the however, prohibits or limits any of the
said authorization on an individual basis. following:
e. Delisting. All delistings shall be a. Receipt or payment of salaries of
approved by the Monetary Board upon trustees, officers and employees;
recommendation of the appropriate b. Receipt or payment of commissions
department of the SES except in cases of to agents whether or not based on the
persons known to be dead, where delisting volume or number of loans or on the
shall be automatic upon proof of death and interest and fees collected thereon; or
need not be elevated to the Monetary Board. c. Receipt or payment of bonuses of
Delisting may be approved by the Monetary trustees, officers or employees if such

Page 15
§§ 4144S - 4147S
15.10.31
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.
§ 4144S.1 Compensation increases. All Sec. 4147S Bio-data of Trustees and

increases in compensation, in any form, of Officers.
all trustees and trustee-officers in excess of a. NSSLAs shall submit to the
ten percent (10%) thereof per annum shall appropriate department of the SES a biodata
require the approval of the Bangko Sentral. with ID picture of their trustees/officers with
rank of senior vice president (SVP) and
§ 4144S.2 Liability for loans contrary above (or equivalent ranks) upon every
to law. No NSSLA shall make or purchase election/re-election/appointment/promotion
any loan or investment not authorized or in a prescribed form and for first-time

Page 16
§§ 4147S - 4151S.1
15.10.31
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;

Page 16a
§§ 4151S.1 - 4161S.2
08.12.31
e. Certification as to the actual except when extraordinary instances

number of members that will be serviced caused by unforeseen, unavoidable event
by the branch/extension office; and directly affect the NSSLA’s ability to open
f. Undertaking that the branch/ for business. NSSLAs shall post
extension office will service only members conspicuously at all times in their place of
of the NSSLA. 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 Sec. 4161S Records. NSSLAs shall have a
filing of application was unprofitable; true and accurate account, record or
b. Total capital accounts of the statement of their daily transactions. The
NSSLA are less than P100 million as of making of any false entry or the willful
the date of 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.
d. Non-compliance by the NSSLA No. 7653, without prejudice to the criminal
with any of the pertinent provisions of liability of the director or officer responsible
banking laws, rules, regulations and therefore under Sections 35 and 36 of R.A.
policies of the BSP. No. 7653 and/or the applicable provisions
of the Revised Penal Code. Records shall
§ 4151S.3 Internal control system. The be up to-date and shall contain sufficient
NSSLA shall submit to the appropriate detail so that an audit trail is established.
department of the SES a system of internal
safeguards and control measures to be § 4161S.1 Uniform System of
adopted for compliance by the staff of the Accounts. NSSLAs are required to pattern
proposed branch/extension office. their charts of accounts and recording
systems after the Uniform System of
§ 4151S.4 Permit to operate. Actual Accounts prescribed for NSSLAs including
operation shall commence only after a reportorial and publication requirements.
permit to operate has been issued by the The voucher system of accounting or the
BSP. ticket system, or such other accounting
system acceptable to the BSP as well as
Secs. 4152S - 4155S (Reserved) the prescribed chart of accounts shall be
adopted for use by NSSLAs.
§ 4161S.2 Philippine Financial
Sec. 4156S Business Days and Hours Reporting Standards/Philippine Accounting
NSSLAs may, with the prior approval of the Standards
appropriate department of the SES, adopt Statement of policy. It is the policy of
such business days and hours as may be the Bangko Sentral to promote fairness,
convenient for them. NSSLAs shall be open transparency and accuracy in financial
for business during business hours and days reporting. It is in this light that the BSP aims

Part I - Page 17
§§ 4161S.2 - 4162S.1
08.12.31
to adopt all PFRS and PAS issued by the The difference between the fair value and
ASC to the greatest extent possible. the net proceeds of the loan shall be
NSSLAs shall adopt the PFRS and PAS recorded under “Unearned Income-
which are in accordance with GAAP in Others”, which shall be amortized over the
recording transactions and in the term of the loan using the effective interest
preparation of financial statements and method.
reports to BSP. However, in cases where The provisions on government grants
there are differences between BSP shall be applied retroactively to all
regulations and PFRS/PAS as when more outstanding government grants received.
than one (1) option are allowed or certain NSSLAs that adopted an accounting
maximum or minimum limits are treatment other than the foregoing shall
prescribed by the PFRS/PAS, the option or consider the adjustment as a change in
limit prescribed by BSP regulations shall accounting policy, which shall be
be adopted by all NSSLA/FIs. accounted for in accordance with PAS 8.
For purposes hereof, the PFRS/PAS Notwithstanding the exceptions in
shall refer to issuances of the ASC and Items “a”, “b” and “c”, the audited annual
approved by the PRC. financial statements required to be
Accounting treatment for prudential submitted to the BSP in accordance with
reporting. For prudential reporting, FIs shall Appendix S-2 shall in all respect be PFRS/
adopt in all respect the PFRS and PAS PAS compliant: Provided, That FIs shall
except as follows: submit to the BSP adjusting entries
a. In preparing consolidated financial reconciling the balances in the financial
statements, only investments in financial statements for prudential reporting with
allied subsidiaries except insurance that in the audited annual financial
subsidiaries shall be consolidated on a line- statements.
by-line basis; while insurance and non- (As amended by Circular No. 572 dated 22 June 2007)
financial allied subsidiaries shall be
accounted for using the equity method. Sec. 4162S Reports. NSSLAs shall submit
Financial/non-financial allied/non-allied to the appropriate department of the SES
associates shall be accounted for using the the reports in prescribed form listed in
equity method in accordance with the Appendix S-2.
provisions of PAS 28 “Investments in
Associates”; § 4162S.1 Categories and signatories
b. For purposes of preparing separate of reports. For purposes of designating the
financial statements, financial/non-financial signatories of reports, certain weekly,
allied/non-allied subsidiaries/associates, monthly, quarterly, semi-annual, and annual
including insurance subsidiaries/associates, statements/reports required to be submitted
shall also be accounted for using the equity to the BSP are hereby grouped into Category
method; and A-1, A-2, A-3 and Category B, as enumerated
c. FIs shall be required to meet the in Appendix S-3.
BSP recommended valuation reserves. Category A-1 reports shall be signed by
Government grants extended in the form the NSSLA’s chief executive officer (who
of loans bearing nil or low interest rates shall may be the president or chairman of the
be measured upon initial recognition at its board, or designated in the by-laws), or in
fair value (i.e., the present value of the his absence, by the executive vice president
future cash flows of the financial instrument or the officer duly authorized under a
discounted using the market interest rate). resolution approved by the board of

Part I - Page 18
§§ 4162S.1 - 4162S.3
08.12.31
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.

Part I - Page 19
§ 4162S.3
08.12.31
b. Fines for willful delay in The provisions of Section 34 of R. A.

submission of reports. NSSLAs incurring No. 7653 shall apply to any agent,
willful delay in the submission of required manager, or other officer-in-charge of any
reports shall pay a fine in accordance with NSSLA who willfully refuses any lawful
the following schedule: examination into the affairs of such NSSLA.
The willful making of a false statement
(1) For Categories A-1, A-2 and A-3 reports or misleading statement on a material fact
Per day of default to department of the BSP charged with the
until the report is filed P180 regulation of NSSLAs or to his examiner
(2) For Category B reports shall be punished in accordance with
Per day of default Section 36 of R. A. No. 7653.
until the report is filed 60 (2) Procedures in imposing the fine
(a) The BSP officer/examiner/employee
Delay or default shall start to run on the shall report the refusal of the NSSLA to
day following the last day required for the permit examination to the head of the
submission of reports. However, should the appropriate department of BSP, who shall
last day of filing fall on a non-working day forthwith make a written demand upon the
in the locality where the reporting NSSLA NSSLA concerned for such examination.
is situated, delay or default shall start to run If the NSSLA continues to refuse said
on the day following the next working day. examination without any satisfactory
The due date/deadline for submission of explanation therefor, the BSP officer/
reports to BSP as prescribed under Sec. examiner/employee concerned shall
4162S governing the frequency and submit a report to that effect to the
deadlines indicated in Appendix S-2 shall appropriate department head.
be automatically moved to the next (b) The fine shall be imposed starting
business day whenever a half-day on the day following the receipt by the
suspension of business operations in appropriate department of the written
government offices is declared due to an report submitted by the BSP officer/
emergency such as typhoon, floods, etc. examiner/employee concerned regarding
For the purpose of establishing delay or the continued refusal of the NSSLA to
default, the date of acknowledgment by the permit the desired examination.
appropriate department of the SES or the BSP d. Manner of payment or collection
Regional Offices/Units appearing on the of fines. The regulations embodied in Sec.
copies of such reports filed or submitted or 4601S shall be observed in the collection of
the date of mailing postmarked on the the fines from NSSLAs.
envelope/the date of registry or special e. Appeal to the Monetary Board.
delivery receipt, as the case may be, shall NSSLAs may appeal to the Monetary Board
be considered as the date of filing. a ruling of the appropriate department
Delayed schedules/attachments and imposing a fine.
amendments shall be considered late f. Other penalties. The foregoing
reporting subject to above penalties. penalties shall not preclude the application
c. Sanctions for willful refusal to permit of, or shall be without prejudice to, other
examination/making of false statement administrative sanctions as well as to the
(1) Any NSSLA which shall willfully filing of criminal case as provided for in
refuse to permit examination shall pay a fine the other provisions of the law, as may be
of P3,000 daily from the day of refusal and warranted by the nature of the offense.
for as long as such refusal lasts. (As amended by Circular No. 585 dated 15 October 2007)

Part I - Page 20
§§ 4163S - 4163S.1
15.10.31
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;

Part I - Page 21
§ 4163S.1 - 4163S.2
15.10.31
(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

Part I - Page 22
§§ 4163S.2 - 4163S.3
15.10.31
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:

Part I - Page 22a
§§ 4163S.3 - 4163S.5
15.10.31
(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

Part I - Page 22b
§§ 4163S.5 - 4164S
15.10.31
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

Part I - Page 22c
§§ 4164S - 4164S.2
15.10.31
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.

Part I - Page 22d
§§ 4164S.2 - 4164S.4
15.10.31
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

Part I - Page 22e
§§ 4164S.4 - 4164S.6
15.10.31
related to risks and internal controls without e. Responsibilities and accountabilities

tainting the latter’s independence: Provided, of the head of the internal audit function;
That: the internal auditor shall not be involved f. Requirement to comply with sound
in the development or implementation of internal auditing standards such as the
policies and procedures, preparation of reports Institute of Internal Auditor’s International
or execution of activities that fall within the standards for the Professional Practice of
scope of his review. Internal Auditing and other supplemental
Staff of the internal audit function shall standards issued by regulatory authorities/
be periodically rotated, whenever government agencies, as well as with
practicable, and without jeopardizing relevant code of ethics; and
competence and expertise to avoid g. Guidelines for coordination with
unwarranted effects of continuously the external auditor and supervisory
performing similar tasks or routine jobs that authority.
may affect the internal auditor’s judgment (Circular No. 871 dated 05 March 2015)
and objectivity.
(Circular No. 871 dated 05 March 2015) § 4164S.6 Scope. All processes,
systems, units, and activities, including
§ 4164S.5 Internal audit charter. outsourced services, shall fall within the
NSSLAs shall have an internal audit charter overall scope of the internal audit function.
approved by the board of trustees. The The scope of internal audit shall cover,
internal audit charter shall be periodically among others, the following:
reviewed by the head of the internal audit a. Evaluation of the adequacy,
function and any changes thereto shall be efficiency and effectiveness of internal
approved by the board of trustees. control, risk management and governance
The internal audit charter shall establish, systems in the context of current and
among others, the following: potential future risks;
a. Purpose, stature and authority, and b. Review of the reliability,
responsibilities of the internal audit function effectiveness and integrity of management
as well as its relations with other control and financial information systems, including
functions in the NSSLA. The charter shall the electronic information system and
recognize the authority of the internal audit electronic banking services;
function, to initiate direct communication c. Review of the systems and
with any NSSLA personnel; to examine any procedures of safeguarding the NSSLA’s
activity or entity; and to access any records, physical and information assets;
files, data and physical properties of the d. Review of compliance of trading
NSSLA, in performing its duties and activities with relevant laws, rules and
responsibilities; regulations;
b. Standards of independence, e. Review of the compliance system
objectivity, professional competence and due and the implementation of established
professional care, and professional ethics; policies and procedures; and
c. Guidelines or criteria for outsourcing f. Review of areas of interest to
internal audit activities to external experts; regulators such as, among others monitoring
d. Guidelines for consulting or of compliance with relevant laws, rules and
advisory services that may be provided by regulations, including but not limited to the
the internal audit function; assessment of the adequacy of capital and

Part I - Page 22f
§§ 4164S.6 - 4172S
15.10.31
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
(Next Page is Part I - page 23)

Part I - Page 22g
§ 4172S
08.12.31
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 as
the normal course of performing their 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 thirty (30) banking days
resolution shall show, among other after receipt of the report 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 the
directors. 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

Part I - Page 23
§§ 4172S - 4174S
12.12.31
observations and the names of the § 4172S.2 Posting of audited financial

directors present and absent, among other statements. NSSLAs shall post in
things. conspicuous places in their head offices, all
NSSLAs as well as external auditors their branches and other offices, as well as
shall strictly observe the requirements in in their respective websites, their latest
the submission of the financial audit report financial audit report.
and reports required to be submitted under (Circular No. 540 dated 09 August 2006)
Appendix Q-33.
The audited annual financial Sec. 4173S (Reserved)
statements required to be submitted shall
in all respect be PFRS/PAS compliant: Sec. 4174S Risk Management
Provided, That NSSLAs shall submit to the Function. The risk management function
Bangko Sentral adjusting entries is generally responsible for:
reconciling the balances in the financial (a) identifying the key risk exposures
statements for prudential reporting with and assessing and measuring the extent of
that in the audited annual financial risk exposures of the NSSLA and its trust
statements. operations;
The reports and certifications of (b) monitoring the risk exposures and
institutions concerned, schedules and determining the corresponding capital
attachments required under this Subsection requirement in accordance with the Basel
shall be considered Category B reports, capital adequacy framework and based on
delayed submission of which shall be the NSSLA’s internal capital adequacy
subject to the penalties under Subsec. assessment on an on-going basis;
4162S.3 (c) monitoring and assessing decisions
(As amended by Circular Nos. 554 dated 22 December 2006 to accept particular risks whether these are
and 540 dated 09 August 2006) consistent with board approved policies on
risk tolerance and the effectiveness of the
§ 4172S.1 Audited Financial Statements corresponding risk mitigation measures; and
of NSSLAs. The following rules shall govern (d) reporting on a regular basis to senior
the utilization and submission of AFS of management and to the board of directors
NSSLAs. of the results of assessment and monitoring.
For purposes of this Section, AFS shall Risk management personnel shall
include the balance sheets, income possess sufficient experience and
statements, statements of changes in equity, qualifications, including knowledge on the
statements of cash flows and notes to NSSLA business, the developments in the
financial statements which shall include market, industry and product lines, as well
among other information, disclosure of the as mastery of risk disciplines. They shall
volume of past due loans as well as loan- have the ability and willingness to challenge
loss provisions. On the other hand, financial business lines regarding all aspects of risk
audit report shall refer to the AFS and the arising from the NSSLA’s activities.
opinion of the auditor. The AFS of NSSLAs Chief Risk Officer (CRO). NSSLA may
with subsidiaries shall be presented side by appoint a CRO, or any equivalent position,
side on a solo basis (parent) and on a who shall be independent from executive
consolidated basis (parent and subsidiaries). functions and business line responsibilities,
(Circular No. 540 dated 09 August 2006) operations and revenue-generating

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 of Bangko Sentral list of selected auditors for
External Auditors and/or Auditing Firm; covered institutions or for hiring, and/or
Sanction. Pursuant to Section 58, R.A. No. retaining the services of the external auditor/
8791, and the existing provisions of the auditing firm in violation of any 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)

Part I - Page 25
§§ 4181S - 4191S
12.12.31
L. MISCELLANEOUS PROVISIONS and Loan Association”. Such NSSLAs shall

display in a conspicuous place at their
Sec. 4181S Publication Requirements business offices a sign including, among
NSSLAs shall, within 120 calendar days after other things, the following words:
the close of the calendar year or their fiscal “Authorized by the Bangko Sentral ng
year, as the case may be, furnish the Pilipinas”.
Monetary Board and post in any of the (As amended by CL Nos. 2008-053 dated 21 August 2008 and
NSSLAs’ bulletin boards or in any other 2008-007 dated 05 February 2008)
conspicuous place a copy of their financial
statements showing, in such form and detail Sec. 4183S Prohibitions
as the Monetary Board shall require, the a. No person, association,
amount and character of the assets and partnership or corporation shall do
liabilities of the NSSLAs at the end of the business as an NSSLA, or shall use the
preceding fiscal year. The Monetary Board terms “Savings and Loan Association” or
may, in addition to the foregoing, require any other title or name tending to give the
the disclosure of such other information as public impression that it is engaged in the
it shall deem necessary for the protection of operations and activities of an NSSLA
the members of the NSSLA. unless so authorized under R.A. No. 8367
The consolidated statements of and these regulations.
condition of an NSSLA and its subsidiaries b. The use by an NSSLA of any other
and associates shall conform with the name or title or combination of names and
guidelines of PAS 27 “Consolidated and titles or any other deviation from the
Separate Financial Statements”, except that requirements of this Section shall not be
for purposes of consolidated financial authorized except upon prior approval of
statements, only investments in financial the Monetary Board.
allied subsidiaries except insurance c. NSSLAs shall not issue, publish or
subsidiaries shall be consolidated on a cause or permit to be issued or published,
line-by-line basis; while insurance and any advertisement that it is doing or
non-financial allied subsidiaries shall be permitted to do business which is prohibited
accounted for using the equity method. by law to an NSSLA.
Financial/non-financial allied/non-allied d. No NSSLA shall advertise or
associates shall be accounted for using the represent itself to its members or to the
equity method in accordance with the public as a bank, or as a trust company.
provisions of PAS 28 “Investments in
Associates”. For purposes of separate Secs. 4184S - 4189S (Reserved)
financial statements, investments in
financial/non-financial allied/non-allied Sec. 4190S Guidelines on Outsourcing
subsidiaries/associates, including The rules on outsourcing of banking functions
insurance subsidiaries/associates, shall be as shown in Appendix Q-37 shall be adopted
accounted for using the equity method. insofar as they are applicable to NSSLAs.
(As amended by Circular No. 494 dated 20 September 2005) (As amended by Circular Nos. 764 dated 03 August 2012, 642
dated 30 January 2009, 610 dated 26 May 2008, 596 dated 11
January 2008, 548 dated 25 September 2006 and 543 dated 08
Sec. 4182S Business Name 1. NSSLAs
September 2006)
organized or operating under R.A. No. 8367
and licensed by the Bangko Sentral shall
Sec. 4191S (Reserved)
include in their names the words “Savings
1
See SEC Circular Nos. 5 dated 17 July 2008 and 14 dated 24 October 2000

Part I - Page 26
§§ 4192S - 4196S
13.12.31
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)
Manual of Regulations for Non-Banks Financial Institutions S Regulations

Part I - Page 27
§§ 4196S.1 - 4196S.3
13.12.31
§ 4196S.1 Declaration of policy. A additional regulations on new and emerging

growing number of Bangko Sentral products, services, delivery channels, and
supervised institutions (BSIs) employ the other significant applications of technology.
advances in technology as leverage to offer Subject guidelines, including the
innovative products, deliver fast and efficient Appendices Q-59a, Q-59b, Q-59c, Q-59d,
service at affordable prices, and venture to Q-59e and Q-59f, are not “one-size-fits-all”
new markets. Moreover, technology drives and implementation of these need to be risk-
the efficiency of operations and financial based and commensurate with size, nature
accounting of these institutions, and and types of products and services and
improves their decision-making process. As complexity of IT operations of the individual
technology becomes an integral part of the BSIs. BSIs shall exercise sound judgment in
business and operations of BSIs, such determining applicable provisions relevant
technology usage and dependence, if not to their risk profile.
properly managed, may heighten technology (Circular No. 808 dated 22 August 2013)
risks. The Bangko Sentral expects BSIs to
have the knowledge and skills necessary to § 4196S.3 Complexity of IT risk profile
understand and effectively manage The Bangko Sentral shall risk profile all BSIs
technology risks. These institutions are and classify them as either “Complex” or
required to have an integrated approach to “Simple”. The assessment of complexity of
risk management to identify, measure, IT risk profile is based largely on the degree
monitor and control risks. of adoption of technology and considers
(Circular No. 808 dated 22 August 2013) size, nature and types of products and
services and complexity of IT operations
§ 4196S.2 Purpose and scope. The among the risk factors. In assessing IT
enhanced guidelines aim to provide operations, the nature of IT organization,
guidance in managing risks associated with degree of automation of core processes and
use of technology. The guidelines outlined applications and extent and reach of online
are based on international standards and branch network are likewise considered.
recognized principles of international A BSI with “Complex” IT risk profile is
practice for ITRM and shall serve as Bangko highly dependent on technology. IT
Sentral’s baseline requirement for all BSIs. components are integral to the core business
The guidelines shall apply to BSIs which activities that major weaknesses on IT
include banks, non-banks with quasi- systems, maintenance and support, if not
banking function (NBQB), non-bank properly addressed, may cause operational
electronic money issuers and other non-bank inefficiencies, business disruptions and/or
institutions which under existing Bangko financial losses. On the other hand, a BSI
Sentral rules and regulations and special with “Simple” IT risk profile relies or
laws are subject to Bangko Sentral depends less on technology in the
supervision and/or regulation. Moreover, operations of its business, thus, is not
subject guidelines shall also apply to BSIs affected or lowly impacted by IT-related
with offshore data processing as may be risks.
appropriate to their situation. The Non-bank institutions which under
framework covers different facets of ITRM, existing Bangko Sentral rules and regulations
some of which are supplemented with and special laws are subject to Bangko
detailed guidelines in Appendices Q-59a, Sentral supervision/regulation shall be
Q-59b, Q-59c, Q-59d, Q-59e and Q-59f. notified in writing of their classification
The Bangko Sentral shall keep the immediately after 14 September 2013.
Appendices updated and, in the future, issue (Circular No. 808 dated 22 August 2013)
S Regulations Manual of Regulations for Non-Banks Financial Institutions

Part I - Page 28
§§ 4196S.4 - 4196S.5
13.12.31
§ 4196S.4 IT rating system.The Bangko Terminology Definitions

Sentral, in the course of its on-site incorporated or
examination activities, shall evaluate BSIs’ established outside the
ITRM system and measure the results based Philippines, this
on Bangko Sentral’s IT rating system. A may refer to the
composite rating is assigned based on a “1” functional oversight
to “4” numerical scale, as follows: equivalent such as
the Country Head
4 BSIs with this rating exhibit strong
(for foreign banks) or
performance in every respect.
management
Noted weaknesses in IT are minor
committee or body
in nature and can be easily
empowered with
corrected during the normal
oversight and
course of business.
supervision
3 BSIs with this rating exhibit
responsibilities.
satisfactory performance but may
Cyberfraud A deliberate act of
demonstrate modest weaknesses
omission or
in operating performance,
commission by any
monitoring, management
person carried out
processes or system development.
using the Internet and/
or other electronic
2 BSIs with this rating exhibit less
channels, in order to
than satisfactory performance and
communicate false or
require considerable degree of
fraudulent
supervision due to a combination
representations to
of weaknesses that may range
prospective victims,
from moderate to severe.
to conduct fraudulent
transactions, or to
1 BSIs with this rating exhibit
transmit the proceeds
deficient IT environment that may
of fraud to FIs
impair the future viability of the
connected with the
entity, thereby requiring
perpetrator. Examples
immediate remedial action.
of cyberfraud in the
(Circular No. 808 dated 22 August 2013)
financial industry may
§ 4196S.5 Definition of terms. In these include, but are not
guidelines, terms are used with the limited to, theft of
following meanings: credit card data,
computer hacking,
Terminology Definitions
electronic identity
Board of The governing body
theft, phishing scams,
Directors elected by the
ATM skimming and
(Board) stockholders that
non-delivery of
exercises the corporate
merchandise
powers of a locally
purhased online,
incorporated BSI. In
among others.
case of a BSI

Part I - Page 29
§ 4196S.5
13.12.31
Terminology Definitions Terminology Definitions
Electronic The delivery of Encryption A data security
Products and banking and financial technique used to
Services products and services protect information
through electronic, from unauthorized
interactive inspection or alteration.
communication Information is encoded
channels which so that data appears as
include automated meaningless string of
letters and symbols
teller machines
during delivery or
(ATMs), point of sales
transmission. Upon
(POS) terminals,
receipt, the information
internet, mobile
is decoded using an
phones, touch tone
encryption key.
telephones and Enterprise- Extending throughout
other similar wide Level or involving an entire
electronic devices. institution rather than
These encompass a single business
electronic banking, department or function.
electronic payments, In this document, the
electronic money and words "enterprise-wide"
other electronic and "organization-wide"
products and services are interchangeably
offered by BSIs. used.
EMV (stands It is a global standard Information Encompass people and
for Europay, for credit, debit Asset/ organization, IT
Mastercard and prepaid Resources processes, physical
and Visa) payment cards based infrastructure (i.e.
on chip card facilities, equipment),
technology. EMV chip- IT infrastructure
based payment cards, (including computing
also known as smart hardware, network
cards, contain an infrastructure,
embedded middleware) and other
microprocessor, a type enterprise architecture
of small computer. The components (including
microprocessor chip information,
contains the information applications).
needed to use the card Information The protection of
for payment, and is Security information assets from
protected by various unauthorized access,
security features. Chip use, disclosure,
disruption, modification
cards are a more secure
or destruction in order
alternative to traditional
to provide
magnetic stripe
confidentiality, integrity
payment cards.
and availability.

Part I - Page 30
§ 4196S.5
13.12.31
Information A single or a series of undertakes to provide
Security unwanted or to a BSI all or part of an
Incident unexpected IT function or service.
information security A BSI would use IT
events that have a outsourcing for
significant probability functions ranging from
of compromising infrastructure to
business operations software development,
and threatening the maintenance and
confidentiality,
support. The related
integrity or availability
IT service is integral to
of BSI's information or
information systems. the provision by BSI of
Information Automated means of a financial service and
Technology originating, processing, the BSI is dependent
(IT) storing and on the service on an
communicating ongoing basis.
information and covers IT Risk Any potential adverse
recording devices, outcome, damage, loss,
communications violation, failure or
network, computer disruption associated
systems (including with the use of or
hardware and software reliance on computer
components and data) hardware, software,
and other electronic devices, systems,
devices. applications and
IT Group/ The unit of an
networks.
Department organization within a
IT Strategic A long-term plan (i.e.,
BSI responsible for the
Plan three (3)- to five (5)- year
activities of IT
operations control, horizon) in which
monitoring of IT business and IT
services, infrastructure management
support and a cooperatively describe
combination of how IT resources will
technology, people contribute to the
and processes. institution's strategic
IT Operations Encompasses all objectives.
processes and services IT Risk Risk management
that are provisioned by Management system that enables a
an IT Unit to internal System BSI to identify, measure,
and external clients. (ITRMS) monitor and control
IT An arrangement under IT-related risks.
Outsourcing which another party
Management A general term for the
(either an affiliated
Information computer systems in an
entity within a
System (MIS) institution that provide
corporate group or an
entity external to the information about its
corporate group) business operations.

Part I - Page 31
§§ 4196S.5- 4196S.6
13.12.31

Network Two (2) or more a guaranteed level of
computer systems that system performance as
are grouped together to it relates to downtime
share information, or uptime, a specified
software and hardware. level of customer
Offshore BSIs Have their critical support and what
system processing and software or hardware
data located outside of will be provided and
the Philippines. These for what fee.
are usually maintained Triple Data A mode of the DES
and operated by Encryption encryption algorithm
organizations within Standard that encrypts data three
the same business group (3DES) times. Three 64-bit keys
that the BSIs belong to, are used, instead of one,
such as their head office, for an overall key length
subsidiary and/or of 192 bits (the first
affiliate. Locally- encryption is encrypted
maintained systems, if with second key, and
any, are limited to non- the resulting cipher text
core supporting is again encrypted with
applications such as a third key)
collaboration systems (Circular No. 808 dated 22 August 2013)
and report processing
tools. § 4196S.6 Description of IT-related
Project Planning, monitoring risks. As BSIs increase their reliance on IT
Management and controlling an to deliver products and services,
activity. inappropriate usage of IT resources may
Senior Officers of the have significant risk exposures. While IT
Management/ institution given the does not trigger new types of risks, it brings
Management authority by the Board in new dimensions to traditional banking
to implement the risks (i.e. strategic risk, credit risk, market
policies it has laid risk, liquidity risk and operational risk) that
down in the conduct require new or enhanced control activities
of the business of the (e.g. a failure of a credit risk measurement
institution. application is an IT failure and, therefore, a
Service Level Establishes mutual
systems failure in the sense of operational
Agreement expectations and
risk). Moreover, IT is an implied part of any
provide a baseline to
system of internal controls, regardless of the
measure IT
type of risk and, consequently, forms an
performance. An SLA
important element in organization-wide risk
should contain,
among others, the management. Among the risks associated
specified level of with the use of IT are the following:
service, support 1. Operational risk is the risk to earnings
options, enforcement and capital arising from problems with
or penalty provisions service or product delivery. This risk is a
for services not provided, function of internal controls, IT systems,

Part I - Page 32
§§ 4196S.6- 4196S.7
13.12.31
employee integrity and operating processes. technologies being installed by BSIs. As
Operational risk exists in all products and progress in technology shifts to higher gear,
services; the trend in cyber-attacks, intrusions, and
2. Strategic risk is the risk to earnings other form of incidents on computer systems
and capital arising from adverse business shows that it will not only persist but will
decisions on IT-related investments or continue to increase in frequency and spread
improper implementation of those in magnitude.
decisions. The risk is a function of the Management of IT risks and information
compatibility of an organization’s strategic security issues becomes a necessity and an
goals, the business strategies developed to important part of BSIs’ risk management
achieve those goals, the resources deployed system. BSIs are therefore required to
against these goals and the quality of establish a robust ITRM system covering four
implementation. The resources needed to (4) key components: 1) IT governance,
carry out business strategies are both 2) risk identification and assessment, 3) IT
tangible and intangible which include controls implementation, and 4) risk
communication channels, operating measurement and monitoring.
systems, delivery networks and managerial 1. IT Governance. This is an integral
capacities and capabilities; part of BSIs’ governance framework and
3. Reputation risk is the risk to earnings consists of the leadership and organizational
and capital arising from negative public structures and processes that ensure the
opinion. This affects the institution’s ability alignment of IT strategic plan with BSIs’
to establish new relationships or services business strategy, optimization of resources
or continue servicing existing relationships. management, IT value delivery, performance
The risk can expose the institution to measurement and the effective and efficient
litigation, financial loss or damage to its use of IT to achieve business objectives and
reputation; and effective IT risk management
4. Compliance risk is the risk to earnings implementation. BSIs must establish an
and capital arising from the violations of, effective IT governance framework covering
or non-conformance with laws, rules and the following:
regulations, prescribed practices or ethical a. Oversight and organization of IT
standards. Compliance risk also arises in functions. Accountability is a key concern
situations where the laws and rules of IT governance and this can be obtained
governing certain products activities of the with an organizational structure that has
BSI’s clients may be ambiguous or untested. well-defined roles for the responsibility of
Compliance risk exposes the institution to information, business processes,
monetary penalties, non-monetary sanctions applications, IT infrastructure, etc.
and possibility of contracts being annulled The Board of Directors is ultimately
or declared unenforceable. responsible for understanding the IT risks
(Circular No. 808 dated 22 August 2013) confronted by a BSI and ensuring that they
are properly managed, whereas the Senior
§ 4196S.7 IT Risk Management System
Management is accountable for designing
(ITRMS). As BSIs become more dependent
and implementing the ITRMS approved by
on IT systems and processes, technology
the Board. For Complex BSIs, the Board may
risks and information security issues have
delegate to an IT Steering Committee (ITSC)
become progressively more complex and
or its equivalent IT oversight function to
pressing in recent years. Information
cohesively monitor IT performance and
security is just as important as the new
institute appropriate actions to ensure

Part I - Page 33
§ 4196S.7
13.12.31
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;

Part I - Page 34
§ 4196S.7
13.12.31
• Development and Acquisition; • Documentation of IT audits,

• IT Operations; including work papers, audit reports, and
• Communication networks; follow-up.
• Information security; In case in-house IT audit expertise is not
• Electronic Banking/Electronic available, such as for a simple BSI, the IT
Products and Services; and audit support may be performed by external
• IT Outsourcing/Vendor Management. specialists and auditors of other institutions
For simple BSIs, some of the above areas consistent with existing Bangko Sentral rules
(i.e. development, electronic banking, etc.) and regulations on outsourcing. (Detailed
may not be applicable, thus sound judgment guidelines/standards on IT Audit are shown
should be employed to ensure that the BSI’s in Appendix Q-59a)
IT policies and procedures have adequately d. Staff competence and training. The
covered all applicable areas. rapid development in technology demands
c. IT audit. Audit plays a key role in appropriate, skilled personnel to remain
assisting the Board in the discharge of its competent and meet the required level of
corporate governance responsibilities by expertise on an ongoing basis.
performing an independent assessment of BSIs should have an effective IT human
technology risk management process and resources management plan that meets the
IT controls. requirements for IT and the business lines it
Auditors provide an assurance that supports. Management should allocate
important control mechanisms are in place sufficient resources to hire and train
for detecting deficiencies and managing risks employees to ensure that they have the
in the implementation of IT. They should expertise necessary to perform their job and
be qualified to assess the specific risks that achieve organizational goals and objectives.
arise from specific uses of IT. BSIs should Management needs to ensure that
establish effective audit programs that cover staffing levels are sufficient to handle present
IT risk exposures throughout the and expected work demands, and to cater
organization, risk-focused, promote sound reasonably for staff turnover. Appropriate
IT controls, ensure the timely resolution of succession and transition strategies for key
audit deficiencies and periodic reporting to officers and personnel should be in place
the Board on the effectiveness of institution’s to provide for a smooth transition in the
IT risk management, internal controls, and event of turnover in vital IT management or
IT governance. Regardless of size and operations functions.
complexity, the IT audit program should e. Management Information Systems
cover the following: (MIS). The BSIs’ IT organization often
• Independence of the IT audit provides an important support role for their
function and its reporting relationship to the MIS. Accurate and timely MIS reports are
Board or its Audit Committee; an essential component of prudent and
• Expertise and size of the audit staff reasonable business decisions. At the most
relative to the IT environment; senior levels, MIS provides the data and
• Identification of the IT audit information to help the Board and
universe, risk assessment, scope, and management make strategic decisions. At
frequency of IT audits; other levels, MIS allows management to
• Processes in place to ensure timely monitor the institution’s activities and
tracking and resolution of reported distribute information to other employees,
weaknesses; and customers, and members of management.

Part I - Page 35
§ 4196S.7
13.12.31
Advances in technology have increased • formulation of a remedial plan to

the volume of information available to reduce risk; and
management and directors for planning and • approval of risk acknowledgement
decision-making. However, if technology from the owner of the risk and senior
is not properly managed, the potential for management.
inaccurate reporting and flawed decision ITRM processes should be integrated
making increases. Because report into the enterprise-wide risk management
generation systems can rely on manual data processes to allow BSIs to make well-
entry or extract data from many different informed decisions involving business plans
financial and transaction systems, and strategies, risk responses, risk tolerance
management should establish appropriate levels and capital management, among
control procedures to ensure information is others.
correct, relevant, and adequately protected. 2. Risk identification and assessment.
Since MIS can originate from multiple BSIs should maintain a risk assessment
equipment platforms and systems, the process that drives response selection and
controls should ensure all information controls implementation. An effective IT
systems have sufficient and appropriate assessment process begins with the
controls to maintain the integrity of the identification of the current and prospective
information and the processing
IT risk exposures arising from the
environment. Sound fundamental principles
institution’s IT environment and related
for MIS review include proper internal
processes. The assessments should identify
controls, operating procedures, safeguards,
all information assets, any foreseeable
and audit coverage.
internal and external threats to these assets,
f. IT risk management function.
the likelihood of the threats, and the
Management of risk is a cornerstone of IT
adequacy of existing controls to mitigate the
Governance. BSIs should have a policy
identified risks. Management should
requiring the conduct of identification,
measurement, monitoring and controlling of continually compare its risk exposure to the
IT risks for each business function/service value of its business activities to determine
on a periodic basis. BSIs should define and acceptable risk levels.
assign these critical roles to a risk Once management understands the
management unit or to a group of persons institution’s IT environment and analyzes
from different units collectively performing the risk, it should rank the risks and prioritize
the tasks defined for this function. its response. The probability of occurrence
The function should have a formal and the magnitude of impact provide the
technology risk acknowledgement and foundation for reducing risk exposures or
acceptance process by the owner of risk to establishing mitigating controls for safe,
help facilitate the process of reviewing, sound, and efficient IT operations
evaluating and approving any major appropriate to the complexity of the
incidents of non-compliance with IT control organization. Periodic risk assessment
policies. The process can be supported by process should be done at the enterprise-
the following: wide level and an effective monitoring
• a description of risk being program for the risk mitigation activities
considered for acknowledgement by owner should be manifested through mitigation or
of risk and an assessment of the risk that is corrective action plans, assignment of
being accepted; responsibilities and accountability and
• identification of mitigating controls; management reporting.

Part I - Page 36
§ 4196S.7
13.12.31
3. IT controls implementation. Controls organization-wide IS program. The duly

comprise of policies, procedures, practices appointed ISO should have sufficient
and organizational structures designed to knowledge, background, and training, as
provide reasonable assurance that business well as organizational position, to enable
objectives will be achieved and undesired him to perform assigned tasks. To ensure
events will be mitigated. Management appropriate segregation of duties, the ISO
should establish an adequate and effective should report directly to the Board or senior
system of internal controls based on the management and have sufficient
degree of exposure and the potential risk of independence to perform his mandate. The
loss arising from the use of IT. Controls for ISO should perform the tasks of a risk
IT environment generally should address the manager and not a production resource
overall integrity of the environment and assigned to the IT department. In the case
should include clear and measurable of simple BSIs, hiring a personnel to
performance goals, the allocation of specific specifically perform the function of an ISO
responsibilities for key project may not be necessary. The ISO function
implementation, and independent may be assigned to an existing independent
mechanisms that will both measure risks officer who meets the requirements
and minimize excessive risk-taking. BSI mentioned in this Subsection. (Detailed
Management should implement satisfactory guidelines/standards on Information Security
control practices that address the following are shown in Appendix Q-59b)
as part of its overall IT risk mitigation b. Project management/development
strategy: 1) Information security; 2) Project and acquisition and change management.
management/development and acquisition BSIs should establish a framework for
and change management; 3) IT operations; management of IT-related projects. The
4) IT outsourcing/Vendor management; and framework should clearly specify the
5) Electronic banking, Electronic payments, appropriate project management
Electronic money and other Electronic methodology that will govern the process
products and services. of developing, implementing and
a. Information security. Information is maintaining major IT systems. The
a vital asset that must be managed to support methodology, on the other hand, should
BSI management in making decisions. BSIs cover allocation of responsibilities, activity
should have a comprehensive information breakdown, budgeting of time and
security program, approved by the Board, resources, milestones, checkpoints, key
to maintain the confidentiality, integrity, and dependencies, quality assurance, risk
availability of computer systems for reliable assessment and approvals, among others.
and timely information. Unauthorized In the acquisition and/or development of IT
access, destruction, or disclosure of solutions, BSIs should ensure that business
confidential information can adversely affect and regulatory requirements are satisfied.
earnings and capital. The program should (Detailed guidelines/standards on Project
monitor information security function Management/ Development and Acquisition
throughout the organization’s business and Change Management are shown in
processes and establish clear accountability Appendix Q-59c)
for carrying out security responsibilities. c. IT operations. IT has become an
The Board or Senior Management integral part of the day-to-day business
should appoint an independent information operation, automating and providing
security officer (ISO) who will be support to nearly all of the business
responsible and accountable for the processes and functions within the

Part I - Page 37
§ 4196S.7
13.12.31
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 I - Page 38
§ 4196S.7
13.12.31
posture such as the following: should be submitted to management to

i. The entire ATM system shall be provide assurance that established controls
upgraded/converted to allow adoption of are functioning effectively, resources are
end-to-end Triple DES (3DES) encryption operating properly and used efficiently and
standards by 01 January 2015. The 3DES IT operations are performing within
encryption standards shall cover the whole established parameters. Any deviation noted
ATM network which consists of the host in the process should be evaluated and
processors, switches, host security module management should initiate remedial action
(HSM), automated teller machines (ATMs), to address underlying causes. The scope
point-of-sale (POS) terminals and all and frequency of these performance
communication links connected to the measurement activities will depend on the
network; complexity of the BSI’s IT risk profile and
ii. ATMs to be installed after should cover, among others, the following:
14 September 2013 should be 3DES a. Performance vis-à-vis approved IT
compliant; and strategic plan. As part of both planning and
iii. ATMs, POS terminals and payment monitoring mechanisms, BSI management
cards are also vulnerable to skimming should periodically assess its uses of IT as
attacks due to the lack of deployment of part of overall business planning. Such an
globally recognized EMV enabled
enterprise-wide and ongoing approach
technology by BSIs. Magnetic stripe only
helps to ensure that all major IT projects are
ATMs, POS Terminals and cards are largely
consistent with the BSI’s overall strategic
defenseless against modern fraud
goals. Periodic monitoring of IT
techniques. Therefore, all concerned BSIs
performance against established plans shall
should shift from magnetic stripe technology
confirm whether IT strategic plans remain
to EMV chip-enabled cards, POS Terminals
in alignment with the business strategy and
and ATMs. The entire payment card
the IT performance supports the planned
network should be migrated to EMV by
01 January 2017. This requirement shall strategy.
cover both issuing and acquiring programs b. Performance benchmarks/service
of concerned BSIs. A written and Board- levels. BSIs should establish performance
approved EMV migration plan should be benchmarks or standards for IT functions
submitted to Bangko Sentral within six (6) and monitor them on a regular basis. Such
months from 22 August 2013. Likewise, the monitoring can identify potential problem
detailed guidelines covering subject EMV areas and provide assurance that IT
requirement shall be issued separately. functions are meeting the objectives. Areas
Detailed guidelines/standards on to consider include system and network
Electronic Products and Services are shown availability, data center availability, system
in Appendix Q-59f. reruns, out of balance conditions, response
4. Risk measurement and monitoring. time, error rates, data entry volumes, special
BSI Management should monitor IT risks requests, and problem reports.
and the effectiveness of established controls Management should properly define
through periodic measurement of IT services and service level agreements (SLA)
activities based on internally established that must be monitored and measured in
standards and industry benchmarks to assess terms understandable to the business units.
the effectiveness and efficiency of existing SLA with business units and IT department
operations. Timely, accurate, and complete should be established to provide a baseline
risk monitoring and assessment reports to measure IT performance.

Part I - Page 39
§§ 4196S.7- 4196S.9
13.12.31
c. Quality assurance/quality control. following:

BSI should establish quality assurance (QA) 1. Annual IT Profile, electronically to
and quality control (QC) procedures for all the Bangko Sentral Supervisory Data Center
significant activities, both internal and (SDC) within twenty five (25) days from the
external, to ensure that IT is delivering value end of reference year (Guidelines to be
to business in a cost effective manner and observed in the preparation and submission
promotes continuous improvement through of this report was issued under Bangko
ongoing monitoring. QA activities ensure Sentral Memorandum to All Banks No.
that product conforms to specification and M-2012-011 dated 17 February 2012);
is fit for use while QC procedures identify 2. Report on breach in information
weaknesses in work products and to avoid security, especially incidents involving the
the resource drain and expense of redoing use of electronic channels, pursuant to the
a task. The personnel performing QA and provisions of Items “a” or “b” of Appendix
QC reviews should be independent of the Q-60 following the guidelines provided in
product/process being reviewed and use Item “d” thereof. Depending on the nature
quantifiable indicators to ensure objective and seriousness of the incident, Bangko
assessment of the effectiveness of IT Sentral may require the BSI to provide
activities in delivering IT capabilities and further information or updates on the
services. reported incident until the matter is finally
d. Policy compliance. BSIs should resolved; and
develop, implement, and monitor processes 3. Notification letter to the Core
to measure IT compliance with their Information Technology Specialist Group
established policies and standards as well (CITSG) of the Bangko Sentral of disruption
as regulatory requirements. In addition to of IT services/operations that resulted to the
the traditional reliance on internal and third activation of disaster recovery and business
party audit functions, BSIs should perform continuity plan immediately upon activation
self-assessments on a periodic basis to gauge of the plan.
performance which often lead to early
identification of emerging or changing risks
requiring policy changes and updates. § 4196S.9 Sanctions and penalties. BSIs
e. External assessment program. should make available IT policies and
Complex BSIs may also seek regular procedures on the foregoing and other
assurance that IT assets are appropriately related documents during the on-site
secured and that their IT security risk examination as well as provide a copy
management framework is effective. This
thereof when written request was made to
may be executed through a formal external
determine their compliance with this
assessment program that facilitates a
Section.
systematic assessment of the IT security risk
and control environment over time. Any violation of the provisions of this
(Circular No. 808 dated 22 August 2013) Section, its appendices and annexes, shall
be subject to the monetary and non-
§ 4196S.8 Reports. To enable the monetary sanctions provided under Section
Bangko Sentral to regularly monitor IT risk 37 of R.A. No. 7653. Enforcement actions
profile and electronic products, services, shall be imposed on the basis of the overall
delivery channels, processes and other assessment of BSIs’ ITRMS. Whenever a
relevant information regarding the use of BSI’s ITRMS is rated “1” pursuant to
technology, BSIs are required to submit the Subsection 4196S.4, the following

Part I - Page 40
§§ 4196S.9- 4199S
13.12.31
additional sanctions may be imposed: Secs. 4197S - 4198S (Reserved)

1. Suspension/revocation of authority
to provide electronic products and services; Sec. 4199S General Provision on Sanctions
and Unless otherwise provided, any violation of
2. Prohibition against offering/ the provisions of this Part shall be subject
provision of new electronic products and to the sanctions provided in Sections 34, 35,
services. 36 and 37 of R.A. No. 7653, whenever
(Circular No. 808 dated 22 August 2013) applicable.

Part I - Page 41
§§ 4201S - 4240S
08.12.31
PART TWO
DEPOSIT AND BORROWING OPERATIONS
A. DEMAND DEPOSITS may be charged by the NSSLA for every

withdrawal made in excess of the maximum
Section 4201S Checking Accounts. No number allowed in any one (1) month.
NSSLA shall have or carry upon its books
for any person any demand, commercial Sec. 4209S Dormant Savings Deposits
or checking account, or any credit to be NSSLAs may charge a fee, the amount of
withdrawn upon the presentation of any which shall be approved by the BSP for
negotiable check or draft. the maintenance of dormant savings
deposits. Savings deposit shall be classified
Secs. 4202S - 4205S (Reserved) as dormant if no deposit or withdrawal has
been made for the last two (2) years.
B. SAVINGS DEPOSITS
Secs. 4210S – 4215S (Reserved)
Sec. 4206S Definition. Savings deposits
are deposits evidenced by a passbook C. (RESERVED)
consisting of funds deposited to the credit
of one (1) or more individuals with respect Secs. 4216S - 4220S (Reserved)
to which the depositor may withdraw
anytime, unless prior notice in writing of D. TIME DEPOSITS
an intended withdrawal is required by the
NSSLA. Sec. 4221S (Reserved)
Sec. 4207S Minimum Deposit. Savings Sec. 4222S Minimum Term and Size of
deposits with NSSLAs may be opened Time Deposits
with a minimum deposit of P100. a. Term - No time deposit shall be
accepted for a term of less than thirty (30)
Sec. 4208S Withdrawals. Withdrawal days.
from a savings deposit shall be made b. Minimum Size - NSSLAs shall not
through the presentation to the NSSLA of require a minimum amount of time
a duly accomplished withdrawal slip deposit greater than P1,000.
together with the depositor’s passbook.
NSSLAs shall reserve the right to Sec. 4223S Withdrawals of Time
require the depositor to give prior written Deposits. The withdrawal of a time
notice of withdrawal of not more than thirty deposit can be made only by presentation
(30) days. of the certificate of time deposit on the
NSSLAs may limit the number of day of or after its maturity.
withdrawals that a depositor may make:
Provided, That the number of the Secs. 4224S - 4230S (Reserved)
withdrawals allowed shall not be less than
three (3) times a month. A service charge E. - F. (RESERVED)
to be determined by the board of trustees
of the NSSLA and approved by the BSP, Secs. 4231S - 4240S (Reserved)

Part II - Page 1
§§ 4241S - 4261S.5
08.12.31
G. INTEREST ON DEPOSITS deposit account for himself, provided he

has sufficient discretion. However, he
Sec. 4241S Interest on Savings Deposits cannot withdraw therefrom, except
Savings deposits of NSSLAs shall not be through, or with the assistance of a guardian
subject to any interest rate ceiling. authorized to act for him. Parents may
deposit for their minor children, and
Sec. 4242S Interest on Time Deposits guardians for their wards.
Interest on time deposits shall not be subject Notwithstanding the provisions of the
to any interest rate ceiling. preceding paragraph, the cashier,
bookkeeper and their assistants, and other
§ 4242S.1 Time of payment. Interest employees of an NSSLA whose duties entail
on time deposits may be paid at maturity the handling of cash or checks are prohibited
or upon withdrawal or in advance: from opening savings deposit accounts with
Provided, however, That interest paid in the head office or branch of the NSSLA in
advance shall not exceed the interest for which they are assigned as such.
one (1) year.
§ 4261S.2 Identification of member-
§ 4242S.2 Treatment of matured depositors. NSSLAs shall be responsible
time deposits. A time deposit not for the proper identification of their
withdrawn or renewed on its due date shall member-depositors.
be treated as a savings deposit and shall
earn an interest from maturity to the date § 4261S.3 Number of deposit accounts
of actual withdrawal or renewal at a rate A member-depositor may open and have
applicable to savings deposits. more than one (1) savings deposit in his own
name in the same capacity, and he may open
Secs.4243S - 4250S (Reserved) and have various deposits in different
capacities such as guardian, agent, or trustee
for others.
H. (RESERVED)
§ 4261S.4 Signature card. A signature
Secs. 4251S – 4260S (Reserved) card bearing at least three (3) specimen
signatures of each member-depositor shall
I. SUNDRY PROVISIONS ON be required upon opening of a deposit
DEPOSIT OPERATIONS account.
Sec. 4261S Opening and Operation of § 4261S.5 Passbook and certificate

Deposit Accounts. The following are basic of time deposit. A savings deposit
provisions on the opening and operation of passbook, signed by the receiving teller and
deposit accounts of NSSLAs. an authorized officer, shall be issued to a
member-depositor showing, among other
§ 4261S.1 Who may open deposit things, his name and address, account
accounts. Only members who have number, date, amount of deposit, interest
contributed P1,000 or more to the capital credits and balance. NSSLAs shall pre-
of the NSSLA may open deposit accounts number their savings deposit passbooks. In
with NSSLAs. A natural person, although the case of a time deposit, a certificate of
lacking capacity to contract, may time deposit signed by two (2) authorized
nevertheless open a savings or time officers, shall be issued to the member-

Part II - Page 2
§§ 4261S.5 - 4299S
08.12.31
depositor containing, among other things, public lending institution, and from private
his name, amount of deposit, date when banking institutions, and such private
the deposit was made, its due date and lending institutions as may be approved
interest rate. by the Monetary Board: Provided, That
the proceeds of such loan shall be used
§ 4261S.6 Deposits in checks and exclusively to meet the normal credit
other cash items. Checks and other cash requirements of its members. The
items may be accepted for deposit by Monetary Board may, in meritorious
NSSLAs: Provided, That withdrawals cases, raise the ceiling on the borrowing
from such deposits shall not be made until capacity of an NSSLA to not more than
the check or other cash item is collected. thirty percent (30%) of its total assets.
NSSLAs organized by employees of an
Secs. 4262S - 4280S (Reserved) entity or a corporation may borrow funds
from said entity or corporation, but not
J. (RESERVED) vice-versa.
Secs. 4281S - 4285S (Reserved) Secs. 4287S - 4298S (Reserved)
K. OTHER BORROWINGS Sec. 4299S General Provision on

Sanctions. Unless otherwise provided,
Sec. 4286S Borrowings. An NSSLA may any violation of the provisions of this Part
borrow money or incur such obligation up shall be subject to the sanctions provided
to not more than twenty percent (20%) of in Sections 34, 35, 36 and 37 of R.A. No.
the total assets of the NSSLA, from any 7653, whenever applicable.

Part II - Page 3
§§ 4301S - 4301S.1
13.12.31
PART THREE
LOANS AND INVESTMENTS
A. LOANS IN GENERAL other things, the following in the definition

of its loan products:
Section 4301S Lending Policies. It shall be (1) the nature or purpose of the loan;
the responsibility of the board of trustees of (2) the repayment capacity and
NSSLAs to formulate written policies on the circumstances of the member-borrower;
extension of credit. Well-defined lending (3) terms of the loan; and
policies and sound credit risk management (4) normal loan collection cycles.
practices are essential if NSSLAs are to The definitions and characterization of
perform their lending function effectively all loan products shall be embodied in a
and minimize the risk inherent in any product manual approved by the board of
extension of credit. The responsibility trustees. The product manual shall, at a
should be approached in a way that will minimum, contain the term of the loan, the
provide assurance to the members, other maturity of which shall in no case exceed
stakeholders and the supervisory authority the maximum provided under Item “d” of
that timely and adequate action will be taken this Subsection, interest rate, net-take home
to maintain the quality of the loan portfolio. pay requirement vis-a-vis the type of
(As amended by Circular No. 789 dated 28 February 2013) member-borrower, repayment terms,
collection scheme, documentary
§ 4301S.1 (2012-4301S) Authority; loan requirements and applicable work-out
limits; maturity of loans. The board of strategies. The normal collection period,
trustees of NSSLAs shall be responsible for which refers to the normal period of time
the design of appropriate loan products in within which the Association is able to effect
accordance with the Association’s business the first periodic amortization/salary
strategies and its members’ requirements. deduction for amortization of a loan
The board of trustees shall ensure that they reckoned from loan release date, shall
fully understand all the risks attendant to the likewise be set by the NSSLA’s board of
Association’s lending activities and shall trustees and shall be based on the recent
adopt appropriate risk management policies historical experience of the NSSLA (e.g., last
and practices that are commensurate to the three years) and/or the remittance period
risk attendant to their operations, and which, specified in contracts entered into with
at a minimum, shall comply with the private companies or department/branch/
regulations and standards prescribed herein. office of government employing the NSSLA’s
NSSLAs deemed to be engaged in hazardous members. The NSSLA’s normal collection
lending practices shall be cited as operating period and the manner by which it is
in an unsafe and unsound manner. established shall be set forth in the NSSLA’s
a. Loans products. NSSLAs may grant loan policies and considered in its overall
loans to members to service the needs of risk assets review system in order to reflect
households by providing long term financing the true status of loan accounts and ensure
for home building and development, for that adequate loss reserves are provided. In
personal finance and for agricultural and no case, however, shall the normal
entrepreneurial projects. The board of collection period exceed six (6) months from
trustees of NSSLAs shall consider, among the date of release of the loan.

Part III - Page 1
§§ 4301S.1 - 4302S
13.12.31
b. Loan limit to a single borrower. An maturities not exceeding twenty-five (25)

NSSLA may grant loans not exceeding the years and medium or long-term loans to
amount deposited and/or contributed by the finance agricultural projects.
member-borrower plus his twelve (12) (As amended by Circular No. 789 dated 28 February 2013)
months salary or retirement pension from
his employment, or up to seventy percent Sec. 4302S Basic Requirements in
(70%) of the fair market value of any Granting Loans
property acceptable as collateral on first a. Application. A member-borrower
mortgage that he may put up by way of applying for a loan must submit an
security: Provided, That direct indebtedness application stating the purpose of the loan
to an NSSLA of any member-borrower for and such other information as may be
money borrowed with the exception of required by the NSSLA. The loan
money borrowed against obligations of the application and other required documents
Bangko Sentral or of the Philippine shall form part of credit information file of
Government, or borrowed with the full the member-borrower in the NSSLA.
guarantee of the Philippine Government in b. Credit investigation. No loan shall
the payment of principal and interest, shall be approved unless prior investigation has
not exceed fifteen percent (15%) of the been made to determine the credit standing
unimpaired capital and surplus of the of the applicant and/or the fair market value
NSSLA. of the property offered as security and the
For purposes of this Section, regular report thereon shall be made part of the
income of persons who are self-employed loan application: Provided, however, That
shall be their average monthly income this requirement may be waived by an
during the twelve (12)-month period NSSLA in the case of permanent employee
immediately preceding the date of loan or wage earner who is borrowing an
application. amount not exceeding his deposit plus his
c. Limitations on lending authority. twelve (12) months regular salary or
NSSLAs shall not commit to make any loan retirement pension.
for amounts in excess of the total of the c. Credit information file/collateral
following amounts: file. An NSSLA shall maintain as far as
(1) Amount of cash available for loan practicable, a credit information file which
purposes; must contain, among other things, the
(2) Amount of cash which can be readily member-borrower’s application and
realized upon the sale or redemption of financial record. Other information relative
permissible investments made by NSSLAs; to the member-borrower, where
and applicable, shall also be maintained which
(3) Amount of credit available for loan must contain among other things, the
purposes from government or private FIs. collateral and other documents pertinent
d. Maximum loan maturity. No loan to the loan.
granted by NSSLAs shall have a maturity d. Loan approvals. Loans shall be
date of more than five (5) years except loans approved by the NSSLA’s board of trustees
on the security of unencumbered real estate or if approved by a body or officer/s duly
for the purpose of home building and home authorized by the board, such loan must
development which may be granted with be confirmed by the board of trustees.

Part III - Page 2
§§ 4302S - 4305S.5
13.12.31
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
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.

Part III - Page 3
§§ 4305S.5 - 4306S.3
13.12.31
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:

Part III - Page 4
§§ 4306S.3 - 4307S.1
12.12.31
(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,

Part III - Page 5
§§ 4307S.1 - 4307S.2
12.12.31
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

Part III - Page 6
§§ 4307S.2 - 4308S
13.12.31
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

Part III - Page 7
§§ 4308S - 4310S
13.12.31
resolution shall embody, among other or the NSSLA by-laws, as applicable:

things: Provided, That at least thirty percent (30%)
1. basis of or justification for the of the loan shall have been paid.
approval; (As amended by Circular No. 789 dated 28 February 2013)
2. basis for the determination of the
borrower’s capacity to pay; and Sec. 4310S Minimum Required Disclosure
3. nature and extent of protection of the NSSLAs shall provide a table of the
exposure. applicable fees, penalties and interest rates
The restructuring of loans granted to on loan transactions, including the period
trustees and/or officers of an NSSLA should covered by and the manner of and reason
be upon terms not less favorable to the for the imposition of such penalties, fees
Association than those offered to other and interests; fees and applicable conversion
members. reference rates for third currency
In case of loans secured by real estate transactions, in plain sight and language,
collateral, such security shall be appraised on materials for marketing loans, such as
at the time of restructuring to ensure that brochures, flyers, primers and advertising
current market values are being used. materials, on loan application forms, and
A second restructuring of a loan may be on billing statements: Provided, That these
allowed only if there are reasonable disclosures are in addition to the full
justifications, and after the borrower has disclosure of the fees, charges and interest
paid at least twenty percent (20%) of the
rates in the terms and conditions of the loan
principal obligation and updated the
agreement found elsewhere on the
payment of all interest accruing to the loan
application form and billing statement:
as first restructured.
Provided further, That such table of fees,
Restructured loans shall be classified
penalties and interest rates shall be printed
and provided with adequate allowance for
in plain language and in bold black letters
probable losses in accordance with
against a light or white background, and
Appendix S-9.
(Circular No. 789 dated 28 February 2013) using the minimum Arial 12 theme font and
size, or its equivalent in readability, and on
Sec. 4309S (2012-4306S.2) Renewal of the first page, if the applicable document
Loans. Loans payable in periodic has more than one (1) page.
installments may be renewed for the full or Transitory provision: NSSLAs covered
beyond the amount of such loans but within in 4312N.12 - shall be given a period of
the limit prescribed under Subsec. 4301S.1b 120 days from 6 January 2011 to fully

Part III - Page 8
§§ 4310S - 4312S
10.12.31
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

Part III - Page 9
§§ 4312S - 4337S
16.03.31
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
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.

Part III - Page 10
§§ 4337S.1 - 4337S.3
15.10.31
§ 4337S.1 Definition; Transactions comprehensive assessment of the

covered; Exclusions; Report. borrower’s creditworthiness, and shall not
a. Definition. Salary-based general- be reliant on mere formula such as those
purpose consumption loans. Refer to automatically granted based on certain
unsecured loans for a broad range of multiples of monthly salary or other regular
consumption purposes, granted to compensation.
individuals mainly on the basis of regular b. Individual borrowing capacity should
salary, pension or other fixed compensation, be prudently assessed considering
where repayment would come from such reasonable estimates of total personal and
future cash flows, either through salary household indebtedness as well as
deductions, debits from the borrower’s disposable income available for family and
deposit account, mobile payments, pay- personal needs after considering debt
through collections, over-the-counter servicing.
payments or other type of payment c. Original loan term shall not exceed
arrangement agreed upon by the borrower three (3) years but may have longer maturity
and lender. in meritorious cases provided that in no
b. Transactions Covered. Salary-based case shall maturity exceed five (5) years;
general-purpose consumption loans may No loan renewal shall be granted
include credit accommodations for without re-assessing borrowing capacity and
education, hospitalization, emergency, establishing continuing creditworthiness.
travel, household and other personal Further, no loan renewal shall be allowed
consumption needs. without payment of accrued interest
c. Exclusions. Credit cards, motor receivable and substantial reduction in
vehicles and other personal loans which are principal.
covered by other existing applicable d. ln the case of loan “takeout” from
regulations are excluded from the coverage another Fl, the Fl taking out the loan(s)
of this Section. should ensure that the loan from the
d. Report. For the purpose of reporting originating Fl has been fully settled. Fls are
in the Financial Reporting Package, financial expected to institute adequate controls over
assistance under an approved fringe benefit loan “takeout” such as: (a) directly releasing
program should be reported/classified the loan proceeds to the Fls where the loan
according to the purpose of the financial will be taken out; and (b) obtaining a copy
assistance (e.g., housing/real estate, motor of the official receipt evidencing full
vehicle, salary-based general-purpose settlement of account from the originating
consumption, etc.) Fl, among others.
(Circular No. 837 dated 18 June 2014, as amended by Circular (Circular No. 886 dated 08 September 2015)
§ 4337S.3 Consumer protection. Fls are
§ 4337S.2 Credit granting. required to strictly adhere to Bangko Sentral
a. Policies of financial institutions (Fls) regulations on Financial Consumer
shall be consistent with best practices and Protection as prescribed under Part Four
sound credit processes prescribed under entitled Consumer Protection.
Bangko Sentral regulations, including a (Circular No. 886 dated 08 September 2015)

Part III - Page 10a
§§ 4337S.4 - 4356S
15.10.31
§ 4337S.4 Sanctions. The Monetary E. LOANS/CREDIT

Board may, at its evaluation and discretion, ACCOMMODATIONS TO TRUSTEES,
impose sanctions on an Fl and/or its Board, OFFICERS, STOCKHOLDERS AND
directors and officers, proportionate to the THEIR RELATED INTERESTS
gravity/seriousness of the offense in cases
of persistent non-observance of the
Sec. 4356S General Policy. The transactions
provisions contained herein.
(Circular No. 886 dated 08 September 2015)
of all trustees or officers with the NSSLA
shall not be under terms more favorable than
Secs. 4338S - 4355S (Reserved) those transacted with other members.
(Next page is Part III page 11)

Part III - Page 10b
§§ 4357S - 4391S.3
08.12.31
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)
F. - I. (RESERVED) § 4391S.3 Investments in debt and

marketable equity securities. The
Secs. 4371S - 4390S (Reserved) classification, accounting procedures,
valuation, sales and transfers of investments
J. OTHER OPERATIONS in debt securities and marketable equity
securities shall be in accordance with the
Sec. 4391S Fund Investments. An NSSLA guidelines in Appendices Q-20 and Q-20a.
may invest its funds in any or all of the Penalties and sanctions. The following
following: penalties and sanctions shall be imposed
a. In bonds and securities in an aggregate on FIs and concerned officers found to
amount not exceeding ten percent(10%) of its violate the provisions of these regulations:

Part III - Page 11
§§ 4391S.3-4399S
13.12.31
a. Fines of P2,000/banking day to be include, at least, an independent and

imposed on NSSLAs for each violation, periodic review of quality of risk assets.
reckoned from the date the violation was b. Controls in place, and policies and
committed up to the date it was corrected; procedures to determine the adequacy of
and booked allowance for probable losses on
b. Sanctions to be imposed on loans and other risk assets, consistent with
concerned officers: the Philippine Accounting Standards and
(1) First offense – reprimand the officers the minimum standards required in
responsible for the violation; and Appendix S-9. The allowance for losses
(2) Subsequent offenses–suspension- of required in the said appendix shall likewise
ninety (90) days without pay for officers be set-up immediately; and
responsible for the violation. c. A robust process to ensure that the
(Circular No. 476 dated 16 February 2005 as amended by Circular board of trustees is informed of the results
Nos. 628 dated 31 October 2008 and 626 dated 23 October of independent and periodic reviews, and
2008)
determination of adequacy of booked loss
reserves, and that appropriate actions on
§§ 4391S.4 - 4391S.10 (Reserved)
such reports are undertaken consistent with
the specific duties and responsibilities of the
Sec. 4392S Loan Portfolio and Other Risk
board of trustees as provided under Subsec.
Assets Review System. To ensure that timely
4141S.5.a(7).
and adequate management action is taken
to maintain the quality of the loan portfolio
and other risk assets, and that adequate loss
reserves are set-up and maintained at a level Secs. 4393S - 4395S (Reserved)
sufficient to absorb the loss inherent in the
loan accounts and other risk assets, each K. MISCELLANEOUS PROVISIONS
NSSLA shall establish a system of identifying
and monitoring existing or potential problem Secs. 4396S - 4398S (Reserved)
loans and other risk assets, and of evaluating
credit and asset management policies vis-a- Sec. 4399S General Provision on Sanctions
vis prevailing circumstances and emerging Unless otherwise provided, any violation
portfolio trends. of the provisions of this Part shall be subject
The board of trustees is responsible for to the sanctions provided in Sections 34,
ensuring that the NSSLA has, at a minimum: 35, 36 and 37 of R.A. No. 7653, whenever
a. A robust risk management that shall applicable.

Part III - Page 12
§§4401S - 4401S.2
15.12.31
PART FOUR
BSP REGULATIONS ON FINANCIAL CONSUMER PROTECTION
A. CONSUMER PROTECTION BSFI. The Board may also delegate other

duties and responsibilities to senior
OVERSIGHT FUNCTION
management and/or Committees created for
the purpose but not the function of
Section 4401S Consumer Protection
overseeing compliance with the
Oversight Function. The Board of Directors
BSP-prescribed Consumer Protection
(Board) of BSFIs is ultimately responsible in
Framework and the BSFI’s own Consumer
ensuring that consumer protection practices Protection Framework.
are embedded in the BSFI’s business (Circular No. 857 dated 21 November 2014, as amended by
operations. BSFIs must adhere to the highest Circular No. 890 dated 02 November 2015)
service standards and embrace a culture of
fair and responsible dealings in the conduct §4401S.2 Consumer Protection Risk
of their business through the adoption of a Management System (CPRMS)
BSFI’s Financial Consumer Protection All BSFIs, regardless of size, should have a
Framework that is appropriate to the BSFI’s CPRMS that is part of the corporate-wide
corporate structure, operations, and risk Risk Management System. The CPRMS is a
profile. The BSFI’s Financial Consumer means by which a BSFI identifies, measures,
Protection Framework shall be embodied in monitors, and controls consumer protection
its Board-approved Financial Consumer risks inherent in its operations. These
Protection Manual. include both risks to the financial consumer
(Circular No. 857 dated 21 November 2014, as amended by and the BSFI. The CPRMS should be directly
Circular No. 890 dated 02 November 2015) proportionate to the BSFI’s asset size,
structure, and complexity of operation. A
§4401S.1 Role and responsibility of the carefully devised, implemented, and
board and senior management. The monitored CPRMS provides the foundation
board and senior management are for ensuring an BSFI’s adherence to
responsible for developing the BSFI’s consumer protection standards of conduct
consumer protection strategy and and compliance with consumer protection
establishing an effective oversight over the laws, rules and regulations, thus ensuring
BSFI’s consumer protection programs. The that the BSFI’s consumer protection practices
Board shall be primarily responsible for address and prevent identified risks to the
approving and overseeing the BSFI and associated risk of financial harm
implementation of the BSFI’s consumer or loss to consumers.
protection policies as well as the a. Board and senior management
mechanism to ensure compliance with said oversight. The Board is responsible for
policies. While senior management is developing and maintaining a sound CPRMS
responsible for the implementation of the that is integrated into the overall framework
consumer protection policies approved by for the entire product and service life-cycle.
the Board, the latter shall be responsible for The Board and Senior Management should
monitoring and overseeing the performance periodically review the effectiveness of the
of senior management in managing the day CPRMS, including how findings are reported
to day consumer protection activities of the and whether the audit mechanisms in place

Part IV - Page 1
§ 4401S.2
15.12.31
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)

Part IV - Page 2
§§4402S - 4402S.1
15.12.31
B. CONSUMER PROTECTION accordance with the requirements set out

STANDARDS OF CONDUCT FOR BSFIS in the regulations.
(2) Readily and consistently makes
Sec. 4402S Consumer Protection available to the customer a written copy of
Standards. The following consumer the terms and conditions (T&C) that apply
protection standards reflect the core to a product or service. The contents of the
principles, which BSFIs are expected to T&C must be fully disclosed and explained
observe at all times in their dealings with to financial customers before initiating a
financial consumers. These should be transaction. Where and when warranted,
embedded into the corporate culture of the reference to the T&C should be made while
BSFI, enhancing further its defined transacting with the consumer and before
governance framework while addressing consummating the transaction, if such
conflicts that are inimical to the interests of reference is material to the understanding
the financial consumer. of the consumer of the nature of the product
(Circular No. 857 dated 21 November 2014, as amended by
Circular No. 890 dated 02 November 2015)
or service, as well as its benefits and risks.
As a written document, the T&C must
§4402S.1 Disclosure and transparency. be complete but concise, easily
BSFIs must take affirmative action to ensure understandable, accurate, and presented in
that their consumers have a reasonable a manner that facilitates the consumer’s
holistic understanding of the products and comprehension. The latter is taken to mean
services, which they may be acquiring or that the text of the document should be
availing. In this context, full disclosure and according to Subsec. 4320Q.4 (Amended
utmost transparency are the critical elements Regulations to Enhance Consumer
that empower the consumer to make Protection in the Credit Card Operations of
informed financial decisions. This is made Banks and Their Subsidiary or Affiliate
possible by providing the consumer with Credit Card Companies).
ready access to information that accurately The T&C should include at least the
represents the nature and structure of the following:
product or service, its terms and conditions, (a) The full price or cost to the customer
as well as its fundamental benefits and risks. including all interest, fees, charges, and
The BSFI demonstrates the competencies penalties. The T&C must clearly state
required of this principle if it complies with whether interest, fees, charges, and
the following: penalties can change over time. The method
a. Key information for computing said interest, fees, charges,
(1) Ensures that offering documents of and penalties shall be presented in
products and services contain the accordance with Subsec. 4305S.6;
information necessary for customers to be (b) General information about the
able to make an informed judgment of the operation of the products or services
product or service and, in particular, meet including the customer’s obligations and
the full disclosure requirements specified liabilities;
under existing laws or regulations. All key (c) Cooling-off period, if applicable;
features and risks of the products should be (d) Cancellation, return and exchange
highlighted prominently in a succinct policies, and any related cost;
manner. Where a product is being offered (e) The actions and remedies which the
on a continuous basis, its offering BSFI may take in the event of a default by
documents should be updated in the customer;

Part IV - Page 3
§ 4402S.1
15.12.31
(f) Procedures to report unauthorized understandable, comprehensive, and

transactions and other contingencies, as well transparent manner, for the duration of the
as the liabilities of parties in such case; and contract. Such information covers the
(g) A summary of the BSFI’s complaints characteristics and the risks of the
handling procedure. products sold by the BSFI and their
(3) Advises customers to read and authorized agents.
understand the applicable T&C, when (10) Imparts targeted information to the
considering a product or service. specific groups of clients to whom specific
(4) Ensures that its staff communicates products are being marketed, with a
in such a manner that clients can understand particular consideration for vulnerable
the terms of the contract, their rights and customers. Communication channels
obligations. Staff should communicate with employed for such targeted marketing
techniques that address literacy limitations initiatives may be accordingly calibrated.
(e.g., materials are available in local language). (11) Offers enhanced disclosure for
(5) Provides customers adequate time to more complex products, highlighting the
review the T&C of the product or service, costs and risks involved for the customer.
asks questions and receives additional For structured investment products, a
information prior to signing contracts or Product Highlight Sheet (PHS) is required.
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
may entail additional expense. possible; and
Communication channels should be (b) A non-interest charge on any account
sufficiently responsive to address the literacy of the customer within a number of days as
limitations of the financial consumer. Said provided under existing regulations prior to
channels may be written and/or verbal as the effective date of the change.
may be warranted. If the revised terms are not acceptable
(8) Discloses pricing information in to the customer, he or she should have the
public domains (e.g., websites). right to exit the contract without penalty,
(9) Updates customers with relevant provided such right is exercised within a
information, free of charge in a clear, reasonable period. The customer should

Part IV - Page 4
§§4402S.1 - 4402S.2
15.12.31
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

Part IV - Page 5
§ 4402S.2
15.12.31
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.

Part IV - Page 6
§§ 4402S.2 - 4402S.3
16.03.31
(h) Imposing strong disciplinary promotional partners, and other relevant

measures for security policy violations. external parties.
(i) Preventing terminated employees (3) Provide access to customers to the
from accessing customer information by information shared and should allow
immediately deactivating their passwords customers to challenge the accuracy and
and user names and taking other measures. completeness of the information and have
(5) Have a strong IT System in place to these amended as appropriate.
protect the confidentiality, security, (4) Appropriate penalties should be
accuracy, and integrity of customer’s imposed by the BSFI to erring employees
personal information. This includes for exposing or revealing client data to third
network and software design, and parties without prior written consent from
information processing, storage, client.
transmission, retrieval, and disposal. (Circular No. 857 dated 21 November 2014, as amended by
Maintaining security throughout the life-
cycle of customer information, from data §4402S.3 Fair treatment. Fair treatment
entry to disposal, includes: ensures that financial consumers are treated
(a) Knowing where sensitive customer fairly, honestly, professionally and are not
information is stored and storing it securely. sold inappropriate and harmful financial
Make sure only authorized employees have products and services. BSFIs should ensure
access. they have the necessary resources and
(b) Taking steps to ensure the secure procedures in place, internal monitoring,
transmission of customer information. and control mechanisms, for safeguarding
(c) Disposing customer information in the best interest of their customers. These
a secure way. include general rules, such as those
(d) Maintaining up-to-date and addressing ethical staff behavior, acceptable
appropriate programs and controls to selling practices as well as regulating
prevent unauthorized access. products and practices where customers are
(e) Using appropriate oversight or audit more likely to be offered services that are
procedures to detect the improper disclosure inappropriate for their circumstances.
or theft of customer information. The BSFI demonstrates the principle of
(f) Having a security breach response fair treatment towards financial consumers
plan in the event the BSFI experiences a data if it is able to:
breach. a. Affordability and suitability of
b. Sharing of customer information product or service
(1) Inform its customers in writing and (1) When making a recommendation to
explain clearly to customers as to how it a consumer:
will use and share the customer’s personal (a) Gather, file, and record sufficient
information. information from the customer to enable the
(2) Obtain the customers’ written BSFI to offer an appropriate product or
consent, unless in situations allowed as an service to the customer. The information
exception by law or BSP-issued regulations gathered should be commensurate to the
on confidentiality of customer’s information, nature and complexity of the product or
before sharing customers’ personal service either being proposed to or sought
information with third parties such as credit by the customer and should enable the BSFI
bureau, collection agencies, marketing and to provide an appropriate level of

Part IV - Page 7
§ 4402S.3
16.03.31
professional service. As a minimum, (9) Have a system in place for approval

information includes the customers’ when selling high-risk instruments to
financial knowledge and experience, consumers.
financial capabilities, investment objectives, b. Prevention of over-indebtedness
time horizons, needs, priorities, risk (1) Have appropriate policies for good
affordability, and risk profile. repayment capacity analysis. The loan
(b) Offer products or services that are in approval does not rely solely on guarantees
line with the needs/risk profile of the (co-signers or collateral) as a substitute for
consumer. The BSFI should provide for and good capacity analysis.
allow the customer to choose from a range of (2) Properly assess the creditworthiness
available products and services that can meet and conduct appropriate client repayment
his needs and requirements. Sufficient and capacity analysis when offering a new credit
right information on the product or service product or service significantly increasing
should enable the customer to select the most the amount of debt assumed by the customer.
suitable and affordable product or service. (3) Ensure to have an appropriate
(2) Inform or warn the customers that system in place for credit analysis and
if they do not provide sufficient information decisions including appropriate criteria to
regarding their financial knowledge and limit the amount of credit.
experience, the BSFI is not in a position to (4) Monitor enforcement of policies to
accurately determine whether the product prevent over-indebtedness. The Board and
or service is appropriate to them, given the Senior Management of the BSFIs should be
limited information available. This aware of and concerned about the risks of
information or warning may be provided in over-indebtedness of its 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)
1
The effectivity of the cooling-off provisions shall be deferred to 16 January 2016.

Part IV - Page 8
§ 4402S.3
16.03.31
banking days] immediately following the of the risk mismatch. In such instances, there
signing of any agreement or contract, should be a written disclosure of
particularly for financial products or services consequences which is accepted by the client.
with a long-term savings component or (4) Ensure that the customer’s
those subject to high pressure sales contract. suitability and affordability are assessed
Cooling-off shall be applicable to a against specific risks of the investment
customer who is a natural person and to 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 view of the products or services they sell.

Part IV -Page 9
§ 4402S.3 - 4402S.4
16.03.31
(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. 898 dated 14 January 2016 and 890 dated
evaluations. 02 November 2015)
(8) Have a system or internal processes
in place to detect and respond to customer §4402S.4 Effective Recourse. Financial
mistreatment as well as serious infractions. consumers should be provided with
In case of violation of Code of Conduct (e.g., accessible, affordable, independent, fair,
harassment), sanctions shall be enforced. accountable, timely, and efficient means for
(9) Inform staff of penalties for non- resolving complaints with their financial
compliance with Code of Conduct. transactions. BSFIs should have in place
(10) Perform appropriate due diligence mechanisms for complaint handling and
before selecting the authorized agents/ redress.
outsourced parties (such as taking into The BSFI demonstrates the ability to
account the agents’ integrity, provide effective recourse if it is able to:
professionalism, financial soundness, a. Establish an effective Consumer
operational capability and capacity, and Assistance Management System (CAMS).
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;

Part IV - Page 10
§§ 4402S.4 - 4402S.5
15.12.31
(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.

Part IV - Page 11
§§ 4402S.5 - 4403S
15.12.31
(3) Distributing to customers, at the point (3) Market monitoring; and

of sale, a pamphlet on questions, which (4) Bangko Sentral Consumer Assistance
customers need to ask before accepting a Mechanism
financial product or service. c. The following enforcement action
c. Clearly distinguish between financial may be taken depending on:
education from commercial advice. Any (1) Rating-based enforcement actions for
financial advice for business purposes on-site periodic assessment. To implement
should be transparent. Disclose clearly any the foregoing enforcement actions, the
commercial nature where it is also being following rules shall apply:
promoted as a financial education initiative. (a) A Consumer Protection Rating (CPR)
It should train staff on financial education of 4 will require no enforcement action.
and develop codes of conduct for the (b) A CPR of 3 will require issuance of
provision of general advice about a written reminder on consumer protection
investments and borrowings, not linked to areas that may lead to weaknesses in the
the supply of a specific product. BSFI’s Consumer Protection Framework.
d. Provide via the internet or through (c) A CPR of 2 will require a written
printed publications unbiased and Action Plan in response to the written
independent information to consumers reminder issued by the BSP. The written
through comparative information about the Action Plan shall be duly approved by the
price and other key features, benefits and Board. It shall aim to correct the identified
risks, and associated fees and charges of weaknesses in the BSFI’s Consumer
products and services. Protection Framework or the noted
e. Regularly track, monitor, and assess
violations of the BSP Regulations on
campaigns and programs and use the results
Consumer Protection. FCPD shall assess the
of the evaluation for continuous improvement.
viability of the plan and shall monitor the
Circular No. 890 dated 02 November 2015) BSFI’s performance.
(d) A CPR of 1 shall also be considered
C. ENFORCEMENT ACTIONS as poor/grossly inadequate Financial
Consumer Protection Framework. For this
Section 4403S Enforcement Actions. reason, a written action plan fully
a. Enforcement is the implementation executable within ninety (90) days shall be
of corrective measures and imposition of prepared. The action plan shall be duly
sanctions to BSFIs to: approved by the Board aimed at instituting
(1) Ensure compliance with the BSP immediate and strong measures to restore
regulations on consumer protection and the BSFI to acceptable consumer protection
consumer protection laws and regulations; operating condition, where it does not pose
(2) Inform the management of the BSFIs any risk of financial loss or harm to the
of the consequences of their decisions and financial consumers.
actions; In the event of non-submission of the
(3) Instill discipline to the BSFIs; and written Action Plan within the deadline or
(4) Serve as deterrent to the commission failure to implement its action plan, FCPD
of violations. shall recommend appropriate enforcement
b. The bases for enforcement actions are actions on the BSFI and its responsible
the results of the: officers including monetary penalties to be
(1) On-site consumer protection computed on a daily basis until
framework assessment; improvements are satisfactorily
(2) Off-site surveillance; implemented.

Part IV - Page 12
§§ 4403S - 4499S
15.12.31
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
d. Enforcement actions for violations b. Stopping/suspending operations/

of consumer protection regulations products or restricting approval of new
Depending on the seriousness operations/products;
and impact of the breaches of Bangko c. Requiring the withdrawal/
Sentral Regulations on consumer modification of advertising/marketing
protection and specific consumer materials; and
protection rules and regulations, the d. Requiring submission of additional
following administrative sanctions shall reports for monitoring.
be imposed: (Circular No. 857 dated 21 November 2014, as amended by
a. Fines in amount as may be Circular No. 890 dated 02 November 2015)
determined by the Monetary Board to be
appropriate; Secs. 4404S - 4499S (Reserved)

Part IV - Page 13
§§ 4501S - 4599S
08.12.31
PART FIVE
Sections 4501S - 4599S (Reserved)

Part V - Page 1
§§ 4601S - 4601S.1
09.12.31
PART SIX
MISCELLANEOUS
A. OTHER OPERATIONS (1)-time monetary penalty on a per

transaction basis.
Section 4601S Fines and Other Charges. The (3) Continuing penalty refers to the
following regulations shall govern monetary penalty imposed on continuing
imposition of monetary penalties on offenses/violations on a per calendar day
NSSLAs, their trustees and/or officers and basis reckoned from the time the offense/
payment of such penalties or fines and other violation occurred or was committed until
charges by NSSLAs. the same was corrected/rectified.
(As amended by Circualr No. 585 dated 15 October 2007) (4) Transactional penalty refers to a
one (1)-time penalty imposed on a
§ 4601S.1 Guidelines on the imposition transactional offense/violation.
of monetary penalties; payment of penalties b. Basis for the computation of the
or fines. The following are the guidelines period or duration of penalty. The
on the imposition of monetary penalties on computation of the period or duration of all
NSSLAs, their trustees and/or officers and penalties shall be based on calendar days.
the payment of such penalties or fines and For this purpose the terms “per banking
other charges: day”, “per business day”, “per day”
a. Definition of terms. For purposes of and/or “a day” as used in this Manual, and
the imposition of monetary penalties, the other BSP rules and regulations shall mean
following definitions are adopted: “per calendar day” and/or “calendar day”
(1) Continuing offenses/violations are as the case may be.
acts, ommisions or transactions entered c. Additional charge for late payment
into, in violation of laws, BSP rules and of monetary penalty. Late payment of
regulations, Monetary Board directives, monetary penalty shall be subject to an
and orders of the Governor which persist additional charge of six percent (6%) per
from the time the particular acts were annum to be reckoned from the business
committed or omitted or the transactions day immediately following the day said
were entered into until the same were penalty becomes due and payable up to the
corrected/rectified by subsequent acts or day of actual payment.
transactions. They shall be penalized on d. Appeal or request for reconsideration.
a per calendar day basis from the time the A one (1)-time appeal or request for
acts were committed/omitted or the reconsideration on the monetary penalty
transactions were effected up to the time approved by the Governor/Monetary Board
they were corrected/rectified. to be imposed on the NSSLA, its directors
(2) Transactional offenses/violations are and/or officers shall be allowed: Provided,
acts, omissions or transactions entered into That the same is filed with the appropriate
in violation of laws, BSP rules and department of the SES within fifteen (15)
regulations, Monetary Board directives, and calendar days from receipt of the Statement
orders of the Governor which cannot be of Account/billing letter. The appropriate
corrected/rectified by subsuquent acts or department of the SES shall evaluate the
transactions. They shall be meted with one appeal or request for reconsideration of

Part VI - Page 1
§§ 4601S.1 - 4631S
09.12.31
the NSSLA/individual and make Sec. 4631S Revocation/Suspension of

recommendations thereon within thirty (30) Non-Stock Savings and Loan Association
calendar days from receipt thereof. The License. In reference to Section 22 of
appeal or request for reconsideration on the R.A. No. 8367 or the “Revised Non-Stock
monetary penalty approved by the Savings and Loan Association Act of 1997”,
Governor/Monetary Board shall be elevated the Monetary Board, upon due notice and
to the Monetary Board for resolution/ hearing, has the authority to either revoke
decision. The running of the penalty period or suspend the license of any NSSLA for
in case of continuing penalty and/or the such period as it deems necessary, based
period for computing additonal charge shall on any of the following grounds:
be interrupted from the time the appeal or a. Suspension of license:
request for reconsideration was received by (1) Repeated violations [uncorrected
the appropriate department of the SES up to similar examination findings for the last two
the time that the notice of the Monetary (2) examinations, regular or special] of any
Board decision was received by the NSSLA/ of the provisions of R.A. No. 8367, and/or
individual concerned. any rules or regulations promulgated to
e. Due date; payment of penalty or implement said law, or BSP directives
fines. The penalty approved by the and/or instructions; and
Governor/MB to be imposed on the NSSLA, (2) Paid-up capital is impaired by
its directors and/or officers shall become due continuing losses for the last two (2) fiscal
and payable fifteen (15) calendar days from years.
receipt of the Statement of Account from the Lifting of the suspension of license shall
BSP. For NSSLAs which maintain DDA with be approved by the Monetary Board upon
the BSP, penalties which remain unpaid after recommendation of the appropriate BSP
the lapse of the fifteen-day period shall be supervising department.
automatically debited against their b. Revocation of license:
corresponding DDA on the following (1) When the solvency of the NSSLA is
business day without additional charge. If imperiled by losses and irregularities;
the balance of the concerned NSSLA’s DDA (2) When the NSSLA willfully violates
is insufficient to cover the amount of the any provision of R.A. No. 8367, any rule or
penalty, said penalty shall already be subject regulation promulgated to implement said
to an additional charge of six percent (6%) law and BSP directives and/or instructions;
per annum to be reckoned from the business (3) When the NSSLA is conducting
day immediately following the end of said business in an unsafe and unsound manner;
fifteen (15)-day period up to the day of actual (4) When it is unable to pay its
payment. liabilities as they become due in the ordinary
Failure to settle the full amount of the course of business;
fines within the period or on the day (5) When it has insufficient realizable
prescribed herein shall, in addition to the assets, as determined by the BSP, to meet
additonal penalty as provided in item “c” its liabilities;
above, make an NSSLA, its trustees and (6) When it cannot continue in
officers liable to the sanctions imposed business without involving probable losses
under Sec. 4199S. to its members or creditors; and
(As amended by Circular Nos. 662 dated 09 September 2009 and (7) When it has willfully violated a cease
585 dated 15 October 2007) and desist order of the Monetary Board
involving acts or transactions which amount to
Secs. 4602S - 4630S (Reserved) fraud or a dissipation of assets of the institution.

Part VI - Page 2
§§ 4631S - 4642S.2
09.12.31
As to the effects of the revocation/ money (e-money) and the operations of

suspension of license of the NSSLA, the electronic money issuers (EMIs).
NSSLA is prohibited from engaging in the (Circular No. 649 dated 09 March 2009)
business of accumulating the savings of its
members and using such accumulations for § 4642S.1 Declaration of policy. It is
loans to its members, subject to applicable the policy of the BSP to foster the
sanctions and penalties provided by law in development of efficient and convenient
case of violation thereof. After the cessation retail payment and fund transfer mechanism
of its operations due to revocation of its in the Philippines. The availability and
license, the NSSLA should proceed with its acceptance of e-money as a retail payment
dissolution, in acccordance with the medium will be promoted by providing the
provisions under the Corporation Code. The necessary safeguards and controls to
dissolution of a corporation involves the mitigate the risks associated in an e-money
termination of its corporate existence, at business.
least, as far as the right to go on doing (Circular No. 649 dated 09 March 2009)
ordinary business is concerned, and the
winding up of its affairs, the payments of § 4642S.2 Definitions
its debts and distribution of its assets among E-money shall mean monetary value as
the members or stakeholders or other represented by a claim on its issuer, that is -
persons involved. The board of trustees of a. electronically stored in an
the corporation also has the option of instrument or device;
adopting a plan for the distribution of its b. issued against receipt of funds of an
assets, as stated under Section 95 of the amount not lesser in value than the
Corporation Code. monetary value issued;
After the revocation/suspension of its c. accepted as a means of payment
license, the Monetary Board may direct the by persons or entities other than the
board of trustees of the NSSLA to proceed issuer;
with the voluntary dissolution of the d. withdrawable in cash or cash
corporation. In the event that the board of equivalent; and
trustees refuses to effectuate such e. issued in accordance with this
dissolution, the Monetary Board may refer Section.
the matter to the Solicitor General for the Electronic money issuer shall be
filing of a quo warranto case against the classified as follows:
corporation in accordance with the a. Banks (hereinafter called EMI-
provisions of the Corporation Code. Bank);
b. NBFI supervised by the BSP
Secs. 4632S - 4640S (Reserved) (hereinafter called EMI-NBFI); and
c. Non-bank institutions registered
Sec. 4641S Electronic Services. The with the BSP as a money transfer agent
guidelines concerning electronic activities, under Sec. 4511N of the MORNBFI
as may be applicable, are found in Sec. (hereinafter called EMI-Others).
4701Q and its Subsections. For purposes of this Section:
(Circular No. 649 dated 09 March 2009) a. Electronic instruments or devices
shall mean cash cards, e-wallets accessible
Sec. 4642S Issuance and Operations of via mobile phones or other access device,
Electronic Money. The following guidelines stored value cards, and other similar
shall govern the issuance of electronic products.

Part VI - Page 3
§§ 4642S.2 - 4642S.4
09.12.31
b. E-money issued by NSSLAs shall e. It is the responsibility of EMIs to

not be considered as deposits. ensure that their distributors/e-money agents
(Circular No. 649 dated 09 March 2009) comply with all applicable requirements of
the Anti-Money Laundering laws, rules and
§ 4642S.3 Prior Bangko Sentral approval regulations.
NSSLAs planning to be an EMI-NBFI shall f. EMIs shall provide an acceptable
comply with the requirements of Sec. 4641S redress mechanism to address the
and with Sec. 4190Q, when applicable. complaints of its customers.
(Circular No. 649 dated 09 March 2009) g. EMIs shall disclose in writing and its
customers shall signify agreement to the
§ 4642S.4 Common provisions. The information embodied in Item “c” above upon
following provisions are applicable to all their participation in the e-money system. In
EMIs: addition, it shall provide clear guidance in
a. E-money instrument issued shall be English and Filipino on consumers’ right of
subject to aggregate monthly load limit of redemption, including conditions and fees for
P100,000 unless a higher amount has been redemption, if any. Information on available
approved by the BSP. In case an EMI issues redress procedures for complaints together
several e-money instruments to a person (e- with the address and contact information of
money holder), the total amount loaded in the issuer shall also be provided.
all the e-money instruments shall be h. Prior to the issuance of e-money,
consolidated in determining compliance EMIs should ensure that the following
with the aggregate monthly load limit; minimum systems and controls are in place:
b. EMIs shall put in place a system to (1) Sound and prudent management,
maintain accurate and complete record of administrative and accounting procedures
e-money instruments issued, the identity of and adequate internal control mechanisms;
e-money holders, and the individual and (2) Properly-designed computer
consolidated balances thereof. The system systems which are thoroughly tested prior
must have the capability to monitor the to implementation;
movement of e-money transactions and link (3) Appropriate security policies and
e-money instruments issued to common measures intended to safeguard the integrity,
e-money holders. The susceptibility of a authenticity and confidentiality of data and
system to intentional or unintentional operating processes;
misreporting of transaction and balances (4) Adequate business continuity and
shall be sufficient ground for imposition by disaster recovery plan; and
the BSP of sanctions, as may be applicable. (5) Effective audit function to provide
c. E-money may only be redeemed at periodic review of the security control
face value. It shall not earn interest nor rewards environment and critical systems.
and other similar incentives convertible to i. EMIs shall provide the SDC
cash, nor be purchased at a discount. quarterly statements containing, among
E-money is not considered a deposit, hence, others, information on investments,
it is not insured with the PDIC. volume of transactions, total outstanding
d. EMIs shall not ensure that e-money e-money balances, and liquid assets in
instruments clearly identify the issuer who such forms as may be prescribed later on.
is ultimately responsible to the e-money j. EMIs shall notify the BSP in writing
holders. This shall be communicated to the of any change or enhancement in the
client who shall acknowledge the same in e-money facility thirty (30) days prior to
writing. implementation. If said change or

Part VI - Page 4
§§ 4642S.4 - 4642S.11
10.12.31
enhancement requires prior Bangko Sentral Nature of Violation/ Sanction/Penalties

approval, the same shall be evaluated Exception
accordingly. Any change or enhancement 3. Violation/s of Penalties and sanctions
that shall expand the scope or change the this Section under the
abovementioned laws
nature of the e-money instrument shall be
and other applicable
subject to prior approval of the Deputy
laws, rules and
Governor, SES. These changes or regulations
enhancements may include the following:
(1) Additional capabilities of the In addition, the susceptibility of a
e-money instrument/s, like access to new system to intentional or unintentional
channels (e.g., inclusion of internet misreporting of transactions and balances
channel in addition to merchant Point of shall be sufficient ground for appropriate
Sale terminals); Bangko Sentral action or imposition of
(2) Change in technology service sanctions, whenever applicable.
providers and other major partners in the (Circular No. 649 dated 09 March 2009)
e-money business (excluding partner
merchants), if any; and § 4642S.7 Transitory provisions.
(3) Other changes or enhancements.
EMI-NBFIs granted authority to issue
e-money prior to 26 March 2009 may
continue to exercise such authority:
§ 4642S.5 Quasi-bank license
Provided, That it shall submit to the
requirement. EMI-NBFIs and EMI-Others that
Bangko Sentral, within one (1) month
engage in lending activities must secure a
from 26 March 2009 a certification
quasi-banking license from the Bangko Sentral.
signed by the President or Officer with
equivalent rank and function that it is
§ 4642S.6 Sanctions. Monetary in compliance with all the applicable
penalties and other sanctions for the requirements of this Section.
following violations committed by EMI- Otherwise, they are required to submit
NBFIs shall be imposed: within the same period the measures
they will undertake, with the
Nature of Violation/ Sanction/Penalties corresponding timelines, to conform to
Exception the provisions that they have not
1. Issuing e-money Applicable penalties complied with, subject to Bangko
without prior Bangko under Sections 36 & Sentral approval.
Sentral approval 37 of R.A. No. 7653; (Circular No. 649 dated 09 March 2009)
Watchlisting of
owners/partners/ §§ 4642S.8 - 4642S.10 (Reserved)
principal officers
2. Violation of any Applicable penalties
of the provisions of prescribed under
§ 4642S.11 Outsourcing of services
R.A. No. 9160 (Anti- the Act by Electronic Money Issuers (EMIs) to
Money Laundering Electronic Money Network Service
Law of 2001 as Providers (EMNSP). The guidelines on
amended by R.A. outsourcing of services by Electronic
No. 9194) and its Money Issuers (EMIs) to Electronic Money
implementing rules Network Service Providers (EMNSP) are
and regulations shown in Appendix Q-55.

Part VI - Page 5
§§ 4642S.11 - 4655S
15.12.31
Sanctions. Violations committed by of the Bangko Sentral: Provided, however, That

EMIs pertaining to outsourcing activities to in the case of NSSLAs under examination, the
EMNSP shall be subject to monetary head of the appropriate department of the SES
penalties as graduated under Appendix may furnish findings of examination to the office
Q-39 and/or other non-monetary sanctions or firm where such NSSLAs do business.
under Section 37 of RA No. 7653. All deposits of whatever nature with
Transitory provisions. EMIs that were NSSLAs are considered absolutely
granted an authority to outsource their e- confidential in nature, and may not be
money activities to an EMNSP may continue examined, inquired or looked into by any
to exercise such authority provided that they person, government official, bureau or
have to conform to the provisions of office, except upon written permission of
Appendix Q-55 within a six (6)-month period the depositor, or in cases of impeachment,
from 20 January 2011. or upon order of competent court in cases
(Circular 704 dated 22 December 2010) of bribery or dereliction of duty of public officials
or in cases where the money deposited or
Secs. 4643S - 4649S (Reserved) invested is the subject matter of litigation.
No official or employee of NSSLAs shall
Sec. 4650S Philippine and Foreign Currency disclose to any person any information
Notes and Coins. The rules and regulations concerning said deposits, except in cases
that shall govern the treatment and disposition mentioned in the preceding paragraph. Any
of counterfeit Philippine and foreign currency official or employee of NSSLAs who violates
notes and coins, the reproduction and/or use this Section shall be punished under R.A.
of facsimiles of legal tender Philippine No. 1405, as amended.
currency notes and coins, the replacement and
redemption of legal tender Philippine currency Sec. 4653S Examination by the Bangko
notes and coins considered mutilated or unfit Sentral. The head of the appropriate
for circulation, and the treatment and department of the SES, personally or by
disposition of Philippine currency notes and deputy, shall make at least once a year and
coins called in for replacement are provided at such other times as he or the Monetary
in Section 4950Q. Board may deem necessary and expedient,
(Circular No. 829 dated 13 March 2014, M-2009-021 dated an examination, inspection or investigation
16 June 2009, as amended by Circular No. 890 dated
of the books and records, business affairs,
02 November 2015)
administration and financial condition of
B. SUNDRY PROVISIONS NSSLAs.
Sec. 4651S Notice of Dissolution. Sec. 4654S Applicability of Other Rules.

NSSLAs contemplating to dissolve shall give Other rules and regulations applicable to
written notice thereof to the Monetary Board the examination of thrift banks, insofar as
through the appropriate department of the SES they are applicable and not inconsistent with
at least thirty (30) days before taking steps to these rules shall apply to NSSLAs.
effect dissolution.
Sec. 4655S Annual Supervisory Fees.
Sec. 4652S Confidential Information. The prescribed rate of annual supervisory fees
No trustee, officer or employee of NSSLAs for an NSSLA, beginning assessable year 2012
or of the Bangko Sentral shall disclose any shall be one-sixty-fifth of one percent (1/65 of
information relating to member-borrowers and 1%) of its Average Assessable Assets (AAA) of
their applications or to the operations of the the immediately preceding year but shall not
NSSLAs unless permitted by the Monetary Board exceed the maximum amount provided below:

Part VI - Page 6
§§ 4655S - 4657S.9
13.12.31
Total AAA of Maximum Sec. 4657S Non-Stock Savings and Loan

NSSLA Amount of Associations Premises and Other Fixed
Annual Fees Assets. The following rules shall govern
the premises and other fixed assets of
>P1.0 billion P500,000.00 NSSLAs.
>P750.0 P400,000.00
million - P1.0 § 4657S.1 Accounting for non-stock
billion savings and loans associations premises;
>P500.0 P200,000.00 other fixed assets. NSSLAs premises,
million - furniture, fixture and equipment shall be
P750.0 million accounted for using the cost model under
>P250.0 P100,000.00 PAS 16 "Property, Plant and Equipment".
million - (Circular No. 494 dated 20 September 2005)
P500.0 million
>P100.0 P 50,000.00 § 4657S.2 (Reserved)
million -
P250.0 million § 4657S.3 Reclassification of real and
other properties acquired as non-stock
Up to P100.0 P 10,000.00
savings and loans association premises
million
Real and Other Properties Acquired (ROPA)
reclassified either as Real Property- Land or
Provided, That the minimum amount of
Real Property-Building shall be booked at
annual fees of NSSLAs with AAA of up to
their ROPA balance, net of any valuation
P100.0 million shall be P10,000.00. reserves: Provided, That only such acquired
The annual supervisory fee shall be asset or a portion thereof that will be
payable within thirty (30) days from receipt immediately used or earmarked for future
of the billing statement from the Bangko use may be reclassified and booked as Real
Sentral. Failure to pay the annual fee within Property-Land/Building.
the prescribed period shall subject the NSSLAs, prior to the reclassification of
NSSLA to administrative sanctions. their ROPA accounts to Real Property-Land/
For purposes of computing the annual Building, shall first secure prior Bangko
supervisory fees, AAA shall be the Sentral approval before effecting the
summation of end-of-quarter total reclassification and shall submit, in case of
assessable assets (end-of-quarter total assets future use, justification and plans for
per balance sheet, after deducting cash on expansion/use.
hand and amounts due from banks) divided
by the number of quarters in operation §§ 4657S.4 - 4657S.8 (Reserved)
during the particular assessment period.
(As amended by Circular No. 789 dated 28 February 2013) § 4657S.9 Batas Pambansa Blg. 344 -
An Act to Enhance the Mobility of Disabled
Sec. 4656S Basic Law Governing Non- Persons by Requiring Certain Buildings,
Stock Savings and Loan Associations Institutions, Establishments and Public
R.A. No. 8367, as amended, also known Utilities to Install Facilities and Other
as the "Revised Non-Stock Savings and Devices. In order to promote the realization
Loan Association Act of 1997", regulates of the rights of disabled persons to
the organization and operation of NSSLAs. participate fully in the social life and the

Part VI - Page 7
§§ 4657S.9 - 4660S
13.12.31
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 -

Part VI - Page 8
§§ 4660S - 4699S
13.12.31
commisions or service fees, if any; No. 9160, as amended, or of this Section,

e. Other related charges - e.g., the officer(s) or other persons responsible
surcharges, postage, text message or for such violation shall be punished by a
telegram; fine of not less than P50 thousand nor more
f. Amount/currency paid out in the than P200 thousand or by imprisonment of
recipient country - exact amount of money not less than two (2) years nor more than
the recipient should receive in local currency ten (10) years, or both, at the discretion of
or foreign currency; and the court pursuant to Section 36 of R.A. No.
g. Delivery time to recipients/ 7653, otherwise known as “The New
beneficiaries - delivery period of remittance Central Bank Act”.
to beneficiary stated in number of days, b. Without prejudice to the criminal
hours or minutes. sanctions prescribed above against the
Non-bank remittance service providers culpable persons, the Monetary Board may,
shall likewise post said information in their at its discretion, impose upon any covered
respective websites and display them institution, its directors and/or officers for
prominently in conspicuous places within any violation of Section 9 of R.A. No. 9160,
their premises and/or remittance/service as amended, the administrative sanctions
centers. provided under Section 37 of R.A. No. 7653.
(Circular No. 534 dated 26 June 2006)
Sec. 4695S Valid Identification Cards for
Sec. 4691S Anti-Money Laundering Financial Transactions. The provisions of
Regulations. Covered institutions, including Part 8 of the Q Regulations on valid
their subsidiaries and affiliates, shall comply identification documents shall apply.
with the provisions of Part 8 of (Circular No. 564 dated 03 April 2007, as amended by Circular
Q Regulations, R.A. No. 9160 (Anti-Money Nos. 792 dated 03 May 2013, 706 dated 05 January 2011,
Laundering Act of 2001), as amended, and 657 dated 16 June 2009 and 608 dated 20 May 2008)
its IRR.
(As amended by Circular Nos. 706 dated 05 January 2011, Secs. 4696S - 4698S (Reserved)
661 dated 01 September 2009 and 612 dated 13 June 2008)
Sec. 4699S General Provision on Sanctions
§§ 4691S.1 - 4691S.8 (Reserved) Unless otherwise provided, any violation
of the provisions of this Part shall be subject
§ 4691S.9 Sanctions and penalties to the sanctions provided in Sections 34,
a. Whenever a covered institution 35, 36 and 37 of R. A. No. 7653, whenever
violates the provisions of Section 9 of R.A. applicable.

Part VI - Page 9
APP. S-1
08.12.31
SAFEGUARDS IN BONDING OF NSSLA ACCOUNTABLE

OFFICERS AND EMPLOYEES
(Appendix to Sec. 4145S)
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.

Appendix S-I - Page 1
APP. S-2
15.10.31
LIST OF REPORTS REQUIRED FROM NON-STOCK SAVINGS AND LOAN ASSOCIATIONS

Category Form No. MOR Ref. Report Title Frequency Submission Deadline Submission Procedure
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
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-2 Unnumbered 4691S Report on Covered Transactions -do- -do- -do-
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
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
-If sent by electronic mail - Notarized

first page of Biographical or Notarized
list of names of Trustees/Officers whose
Biographical Data were submitted thru
electronic mail to be faxed to SDC
1
Required of NSSLAs with total resources of P 10 million or more
Page 3 of 5
APP. S-2
15.10.31
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
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
REPORTING GUIDELINES ON CRIMES/LOSSES
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.

Appendix S-2 - Page 4
APP. S-3
08.12.31
GUIDELINES ON PRESCRIBED REPORTS SIGNATORIES

AND SIGNATORY AUTHORIZATION
(Appendix to Subsec. 4162S.1)
Category A-1 reports shall be signed managers/officers in-charge. Likewise, the

by the chief executive officer, or in his signing authority in this category shall be
absence, by the executive vice-president, contained in a resolution approved by the
and by the comptroller, or in his absence, board of directors in the format prescribed
by the chief accountant, or by officers in Annex S-3-b.
holding equivalent positions. The
designated signatories in this category, Categories A-3 and B reports shall be
including their specimen signatures, shall signed by officers or their alternates, who
be contained in a resolution approved by shall be duly designated by the board of
the board of directors in the format directors. A copy of the board resolution,
prescribed in Annex S-3-a. with format as prescribed in Annex S-3-c.
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.

APP. S-3
08.12.31
Annex S-3-a
FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORY A-1 REPORTS
Resolution No. _____
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) .
Done in the City of ________________ Philippines, this ____day of , 20____.
CHAIRMAN OF THE BOARD
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
______________________
CORPORATE SECRETARY

APP. S-3
08.12.31
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, 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;
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) .
Done in the City of ________________ Philippines, this ____day of ____, 20____.
_________________________
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY

APP. S-3
08.12.31
Annex S-3-c
FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORIES

A-3 AND B REPORTS
Whereas, it is required under Subsec. 4162S.1 that Categories A-3 and B reports be
signed by officers or their alternates;
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
resolved that:
Name of Authorized Signatory/Alternate Specimen Signature Position Title Report
1. Authorized
(Alternate)
2. Authorized
(Alternate)
etc.
are hereby authorized to sign the Category A-2 reports of (Name of Institution) .
_________________________
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY

APP. S-4
12.12.31
FORMAT OF DISCLOSURE STATEMENT ON

SMALL BUSINESS/RETAIL/CONSUMER CREDIT
[Appendix to Subsec. 4307S.2]
_________________________________
(Business Name of Creditor)
DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION

(As required under R.A. No. 3765, Truth in Lending Act)
NAME OF BORROWER
ADDRESS
1. LOAN AMOUNT P XXX
2. OTHER BANK CHARGES/DEDUCTIONS COLLECTED1 P XXX

a. Documentary/Science Stamps P
b. Mandatory Credit Insurance
c. Others (Specify)
3. NET PROCEEDS OF LOAN (Item 1 less Item 2) P XXX
4. SCHEDULE OF PAYMENTS
a. Single payment due on (date) P XXX
b. Installment Payments (Please see attached amortization schedule)
5. EFFECTIVE INTEREST RATE (Interest and Other Charges) XXX%

Explanation: The effective interest rate is higher than the contractual interest
rate of ___% because of some deductions in Item 2 above.
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)
I ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT PRIOR TO THE CONSUMMATION

OF THE CREDIT TRANSACTION.
_______________________________ _________________________
(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

APP. S-4
12.12.31
AMORTIZATION SCHEDULE
(Sample Only)
Installment Loan Principal Interest Total O/S Balance

(A) (B) (C) (D) (E) (F)
xxx xxx
1 xxx xxx xxx xxx
2 xxx xxx xxx xxx
3 xxx xxx xxx xxx
4 xxx xxx xxx xxx
5 xxx xxx xxx xxx
6 xxx xxx xxx xxx
7 xxx xxx xxx xxx
8 xxx xxx xxx xxx
9 xxx xxx xxx xxx
10 xxx xxx xxx xxx
11 xxx xxx xxx xxx
12 xxx xxx xxx xxx
Total xxx xxx xxx
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)

APP. S-5
08.12.31
ABSTRACT OF “TRUTH IN LENDING ACT” (Republic Act No. 3765)

(Appendix to Subsec. 4307S.4)
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.

APP. S-6
11.12.31
ANTI-MONEY LAUNDERING REGULATIONS

(Appendix to Section 4691S)
(Deleted pursuant to Circular No. 706 dated 05 January 2011)

APP. S-6
11.12.31
Annex S-6-a
CERTIFICATION OF COMPLIANCE
WITH ANTI-MONEY LAUNDERING REGULATIONS
(Deleted pursuant Circular No. 706 dated 05 January 2011)

APP. S-6
11.12.31
Annex S-6-b
AMLC Resolution No. 292
RULES ON SUBMISSION OF COVERED TRANSACTION REPORTS AND

SUSPICIOUS TRANSACTION REPORTS BY COVERED INSTITUTIONS1
(Annex to Appendix S-6)

APP. S-7
11.12.31
REVISED IMPLEMENTING RULES AND REGULATIONS

R.A. NO. 9160, AS AMENDED BY R.A. NO. 9194

APP. S-8
09.12.31
GUIDELINES TO GOVERN THE SELECTION, APPOINTMENT, REPORTING

REQUIREMENTS AND DELISTING OF EXTERNAL AUDITORS AND/OR
AUDITING FIRM OF COVERED ENTITIES
(Appendix to Secs. 4180S and 4190S)
Pursuant to Section 58 of the Republic B. COVERED ENTITIES

Act No. 8791, otherwise known as "The The proposed amendment shall apply
General Banking Law of 2000", and the to the following supervised institution, as
existing provisions of the executed categorized below, and their external
Memorandum of Agreement (hereinafter auditors:
referred to as the MOA) dated 12 August 1. Category A
2009, binding the Bangko Sentral ng a. UBs/KBs;
Pilipinas (BSP), Securities and Exchange b. Foreign banks and branches or
Commission (SEC), Professional subsidiaries of foreign banks, regardless of
Regulation Commission (IC) - Board of unimpaired capital; and
Accountancy (BOA) and the Insurance c. Banks, trust department of qualified
Commission (IC) for a simplified and banks and other trust entities with additional
synchronized accreditation requirements derivatives authority, pursuant to Sec. X611
for external auditor and/or auditing firm, regardless of classification, category and
the Monetary Board, in its Resolution No. capital position.
950 dated 02 July 2009, approved the 2. Category B
following revised rules and regulations a. TBs;
that shall govern the selection and b. QBs;
delisting by the BSP of covered institution c. Trust department of qualified banks
which under special laws are subject to and other trust entities;
BSP supervision. d. National Coop Banks; and
e. NBFIs with quasi-banking functions.
A. STATEMENT OF POLICY 3. Category C
It is the policy of the BSP to ensure a. RBs;
effective audit and supervision of banks, b. NSSLAs;
QBs, trust entities and/or NSSLAs c. Local Coop Banks; and
including their subsidiaries and affiliates d. Pawnshops.
engaged in allied activities and other FIs The above categories include their
which under special laws are subject to subsidiaries and affiliates engaged in allied
BSP supervision, and to ensure reliance activities and other FIs which are subject to
by BSP and the public on the opinion of BSP risk-based and consolidated supervision:
external auditors and auditing firms by Provided, That an external auditor who has
prescribing the rules and regulations that been selected by the BSP to audit covered
shall govern the selection, appointment, entities under Category A is automatically
reporting requirements and delisting for qualified to audit entities under Category B
external auditors and auditing firms of said and C and if selected by the BSP to audit
institutions, subject to the binding covered entities under Category B is
provisions and implementing regulations automatically qualified to audit entities under
of the aforesaid MOA. Category C.

APP. S-8
09.12.31
C. DEFINITION OF TERMS d. Recording of transactions without

The following terms shall be defined as substance;
follows: e. Intentional misapplication of
1. Audit – an examination of the accounting policies; or
financial statements of any issuer by an f. Omission of material information.
external auditor in compliance with the rules 5. Error - an intentional mistake in
of the BSP or the SEC in accordance with financial statements, which will reduce the
then applicable generally accepted auditing consolidated total assets of the company by
and accounting principles and standards, for five percent (5%). It may involve:
the purpose of expressing an opinion on a. Mathematical or clerical mistakes
such statements. in the underlying records and accounting
2. Non-audit services – any data;
professional services provided to the b. Oversight or misinterpretation of
covered institution by an external auditor, facts; or
other than those provided to a covered c. Unintentional misapplication of
institution in connection with an audit or a accounting policies.
review of the financial statements of said 6. Gross negligence - wanton or
covered institution. reckless disregard of the duty of due care in
3. Professional Standards - includes: complying with generally accepted auditing
(a) accounting principles that are standards.
(1) established by the standard setting body; 7. Material fact/information - any fact/
and (2) relevant to audit reports for particular information that could result in a change in
issuers, or dealt with in the quality control the market price or value of any of the
system of a particular registered public issuer’s securities, or would potentially affect
accounting firm; and (b) auditing standards, the investment decision of an investor.
standards for attestation engagements, 8. Subsidiary - a corporation or firm
quality control policies and procedures, more than fifty percent (50%) of the
ethical and competency standards, and outstanding voting stock of which is directly
independence standards that the BSP or SEC or indirectly owned, controlled or held with
determines (1) relate to the preparation or power to vote by a bank, QB, trust entity or
issuance of audit reports for issuers; and NSSLA.
(2) are established or adopted by the BSP or 9. Affiliate - a corporation, not more
promulgated as SEC rules. than fifty percent (50%) but not less than
4. Fraud – an intentional act by one (1) ten percent (10%) of the outstanding
or more individuals among management, voting stock of which is directly or
employees, or third parties that results in a indirectly owned, controlled or held with
misrepresentation of financial statements, power to vote by a bank, QB, trust entity
which will reduce the consolidated total or NSSLA and a juridical person that is
assets of the company by five percent (5%). under common control with the bank,
It may involve: QB, trust entity or NSSLA.
a. Manipulation, falsification or 10. Control - exists when the parent
alteration of records or documents; owns directly or indirectly more than one
b. Misappropriation of assets; half of the voting power of an enterprise
c. Suppression or omission of the unless, in exceptional circumstance, it can
effects of transactions from records or be clearly demonstrated that such
documents; ownership does not constitute control.

APP. S-8
09.12.31
Control may also exist even when D. GENERAL CONSIDERATION AND

ownership is one half or less of the voting LIMITATIONS OF THE SELECTION
power of an enterprise when there is: PROCEDURES
a. Power over more than one half of 1. Subject to mutual recognition
the voting rights by virtue of an agreement provision of the MOA and as implemented
with other stockholders; in this regulation, only external auditors and
b. Power to govern the financial and auditing firms included in the list of BSP
operating policies of the enterprise under a selected external auditors and auditing firms
statute or an agreement; shall be engaged by all the covered
c. Power to appoint or remove the institutions detailed in Item "B". The external
majority of the members of the board of auditor and/or auditing firm to be hired shall
directors or equivalent governing body; or also be in-charge of the audit of the entity’s
d. Power to cast the majority votes at subsidiaries and affiliates engaged in allied
meetings of the board of directors or activities: Provided, That the external auditor
equivalent governing body. and/or auditing firm shall be changed or the
11. External auditor - means a single lead and concurring partner shall be rotated
practitioner or a signing partner in an every five (5) years or earlier: Provided
auditing firm. further, That the rotation of the lead and
12. Auditing firm – includes a concurring partner shall have an interval of
proprietorship, partnership limited liability at least two (2) years.
company, limited liability partnership, 2. Category A covered entities which
corporation (if any), or other legal entity, have engaged their respective external
including any associated person of any of auditors and/or auditing firm for a
these entities, that is engaged in the practice consecutive period of five (5) years or more
of public accounting or preparing or issuing as of 18 September 2009 shall have a one
audit reports. (1)-year period from said date within which
13. Associate – any director, officer, to either change their external auditors
manager or any person occupying a similar and/or auditing firm or to rotate the lead
status or performing similar functions in the and/or concurring partner.
audit firm including employees performing 3. The selection of the external auditors
supervisory role in the auditing process. and/or auditing firm does not exonerate the
14. Partner - all partners including those covered institution or said auditors from
not performing audit engagements. their responsibilities. Financial statements
15. Lead partner – also referred to as filed with the BSP are still primarily the
engagement partner/partner-in-charge/ responsibility of the management of the
managing partner who is responsible for reporting institution and accordingly, the
signing the audit report on the consolidated fairness of the representations made
financial statements of the audit client, and therein is an implicit and integral part of
where relevant, the individual audit report the institution’s responsibility. The
of any entity whose financial statements independent certified public accountant’s
form part of the consolidated financial responsibility for the financial statements
statements. required to be filed with the BSP is
16. Concurring partner - the partner confined to the expression of his opinion,
who is responsible for reviewing the audit or lack thereof, on such statements which
report. he has audited/examined.
17. Auditor-in-charge – refers to the 4. The BSP shall not be liable for any
team leader of the audit engagement. damage or loss that may arise from its

APP. S-8
09.12.31
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

APP. S-8
09.12.31
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

APP. S-8
09.12.31
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.

APP. S-8
09.12.31
G. APPLICATION FOR AND/OR e. Copy of the latest AFS of the

AUDITING FIRMS of total assets; and
1. The initial application shall be f. Copy of firm’s AFS for the
signed by the managing partner of the immediately preceding two (2) years.
auditing firm and shall be submitted to 2. Subject to BSP’s provision on early
the appropriate department of the SES deletion from the list of selected auditing
together with the following documents/ firm, the selection may be renewed within
information: two (2) months before the expiration of the
a. copy of effective and valid BOA three (3)-year effectivity of the selection upon
Certificate of Accreditation with attachment submission of the written application for
listing the names of qualified partners; renewal to the appropriate department of the
b. notarized certification that the firm SES together with the following documents/
is in compliance with the general information:
qualification requirements under Item "E.2" a. a copy of updated BOA Certificate
and that the firm shall keep an audit or of Registration with the attached list of
review working papers for at least seven qualified partner/s of the firm;
(7) years insufficient detail to support the b. amendments on Quality Assurance
conclusions in the audit report and making Manual, inclusive of written explanation on
them available to the BSP’s authorized such revision, if any; and
representative/s when required to do so; c. notarized certification that the firm
c. copy of audit work program which is in compliance with the general
shall include assessment of the audited qualification requirements under Item
institution’s compliance with BSP rules and "G.1.b" hereof;
regulations, such as, but not limited to the The application for initial or renewal
following; accreditation of an auditing firm shall be
(1) capital adequacy ratio, as currently accompanied by a fee of P5,000.00.
prescribed by the BSP;
(2) AMLA framework; H. REPORTORIAL REQUIREMENTS
(3) risk management system, 1. To enable the BSP to take timely and
particularly liquidity and market risks; and appropriate remedial action, the external
(4) loans and other risk assets review auditor and/or auditing firm must report to
and classification, as currently prescribed the BSP within thirty (30) calendar days after
by the BSP rules and regulations. discovery, the following cases:
d. If the applicant firm will have a. Any material finding involving fraud
clients falling under Category A, copy or dishonesty (including cases that were
Quality Assurance Manual where, aside resolved during the period of audit);
from the basic elements as required under b. Any potential losses the aggregate of
the BOA basic quality assurance policies which amounts to at least one percent (1%)
and procedures, specialized quality of the capital;
assurance procedures should be provided c. Any finding to the effect that the
relative to, among others review asset consolidated assets of the company, on a
quality, adequacy of risk-based capital, risk going concern basis, are no longer
management systems and corporate adequate to cover the total claims of
governance framework of covered entities; creditors; and

APP. S-8
09.12.31
d. Material internal control accordance with generally accepted

weaknesses which may lead to financial auditing standards and identified non-audit
reporting problems. services.
2. The external auditor/auditing firm
shall report directly to the BSP within fifteen I. DELISTING AND SUSPENSION OF
(15) calendar days from the occurrence of SELECTED EXTERNAL AUDITOR/
the following: AUDITING FIRM
a. Termination or resignation as 1. An external auditor’s duly selected
external auditor and stating the reason pursuant to this regulation shall be
therefor; suspended or delisted, in a manner
b. Discovery of a material breach of provided under this regulation, under any
laws or BSP rules and regulations such as, of the following grounds:
but not limited to: a. Failure to submit the report under
(1) CAR; and Item "H" of this Appendix or the required
(2) Loans and other risk assets review reports under Subsec. X190.1;
and classification. b. Continuous conduct of audit despite
c. Findings on matters of corporate loss of independence as provided under
governance that may require urgent action Item "E.1" or contrary to the requirements
by the BSP. under the Code of Professional Ethics;
3. In case there are no matters to report c. Any willful misrepresentation in the
(e.g. fraud, dishonesty, breach of laws, etc.) following information/documents;
the external auditor/auditing firm shall (1) application and renewal for
submit directly to BSP within fifteen (15) accreditation;
calendar days after the closing of the audit (2) report required under Item "H"; and
engagement a notarized certification that (3) Notarized certification of the
there is none to report. external auditor and/or auditing firm.
The management of the covered d. The BOA found that, after due
institutions, including its subsidiaries and notice and hearing, the external auditor
affiliates, shall be informed of the adverse committed an act discreditable to the
findings and the report of the external profession as specified in the Code of
auditor/auditing firm to the BSP shall include Professional Ethics for CPAs. In this case,
pertinent explanation and/or corrective the BOA shall inform the BSP of the results
action. thereof;
The management of the covered e. Declaration of conviction by a
institutions, including its subsidiaries and competent court of a crime involving moral
affiliates, shall be given the opportunity to turpitude, fraud (as defined in the Revised
be present in the discussions between the Penal Code), or declaration of liability for
BSP and the external auditor/auditing firm violation of the banking laws, rules and
regarding the audit findings, except in regulation, the Corporation Code of the
circumstances where the external auditor Philippines, the Securities Regulation Code
believes that the entity’s management is (SRC); and the rules and regulations of
involved in fraudulent conduct. concerned regulatory authorities;
It is, however, understood that the f. Refusal for no valid reason, upon
accountability of an external auditor/ lawful order of the BSP, to submit the
auditing firm is based on matters within the requested documents in connection with an
normal coverage of an audit conducted in ongoing investigation. The external auditor

APP. S-8
09.12.31
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

APP. S-8
09.12.31
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

APP. S-8
09.12.31
had no reasonable cause to believe that such K. AUDIT BY THE BOARD OF

procedures and system were not being DIRECTORS
complied with. Pursuant to Section 58 of RA. No. 8791,
f. The BSP shall discipline any otherwise known as “The General Banking
selected external auditor that is suspended Law of 2000” the Monetary Board may also
or delisted from being associated with any direct the board of directors of a covered
selected auditing firm, or for any selected institution or the individual members thereof,
auditing firm that knew, or in the exercise to conduct, either personally or by a
or reasonable care should have known, committee created by the board, an annual
of the suspension or delisting of any balance sheet audit of the covered
selected external auditor, to permit such institution to review the internal audit and
association, without the consent of the the internal control system of the
Monetary Board. concerned entity and to submit a report
g. The BSP shall discipline any of such audit to the Monetary Board
covered institution that knew or in the within thirty (30) calendar days after the
exercise of reasonable care should have conclusion thereof.
known, of the suspension or delisting of its
external auditor or auditing firm, without L. AUDIT ENGAGEMENT
the consent of the Monetary Board. Covered institutions shall submit the
h. The BSP shall establish for audit engagement contract between them,
appropriate cases an expedited procedure their subsidiaries and affiliates and the
for consideration and determination of the external auditor/auditing firm to the
question of the duration of stay of any appropriate department of the SES within
such disciplinary action pending review fifteen (15) calendar days from signing
of any disciplinary action of the BSP under thereof. Said contract shall include the
this Section. following provisions:
1. That the covered institution shall be
J. SPECIFIC REVIEW responsible for keeping the auditor fully
When warranted by supervisory informed of existing and subsequent changes
concern, the Monetary Board may, at the to prudential regulatory and statutory
expense of the covered institution require requirements of the BSP and that both
the external auditor and/or auditing firm parties shall comply with said requirements;
to undertake a specific review of a 2. That disclosure of information by the
particular aspect of the operations of these external auditor/auditing firm to the BSP as
institutions. The report shall be submitted required under Items “H” and “J” hereof, shall
to the BSP and the audited institution be allowed; and
simultaneously, within thirty (30) 3. That both parties shall comply with
calendar days after the conclusion of said all the requirements under this Appendix.
review. (As amended by Circular No. 660 dated 25 August 2009)

APP. S-9
13.12.31
GUIDELINES IN CLASSIFYING LOANS AND OTHER RISK ASSETS AND

SETTING UP OF ALLOWANCE FOR PROBABLE LOSSES
(Appendix to Sections 4308S and 4392S)
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:

APP. S-9
13.12.31
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:

APP. S-9
13.12.31
Provided, That an SCR account shall be Classification Minimum Specific

automatically classified “substandard” and Allowance (Percent)
Loans Accounts
considered non-performing in case of Clean Fully Receivables
non-payment of any amortization due: Secured
Provided further, That an SCR which has Unclassified 0 0 0
been classified “substandard” may only be Loans Especially
Mentioned (LEM) 10 5 N/A
upgraded to unclassified/performing status
Substandard 25 12.5 25
after a satisfactory track record of at least Doubtful 50 25 50
three (3) consecutive payments of the Loss 100 50 100
required amortization of principal and/or
interest has been established. Provided, That prudent level of
The Bangko Sentral however, reserves provisioning should be increased beyond
the right to require that specific provisions the minimum prescribed depending on the
on ROPA and SCR be made, if based on its estimated realizable net present value of the
assessment, the NSSLA is unable to make collateral less transaction costs of realizing
necessary impairment provisioning. its value: Provided further, That for purposes
B. Accounts receivables shall be of comprehensive estimating the minimum
classified in accordance with age as follows, required level of provisioning for the loan
unless there is good reason for non- portfolio, the Bangko Sentral reserves the
classification: right to rely on valid sampling techniques
and to group loans with similar
No. of Days Outstanding Classification characteristics.
61-180 Substandard B. General allowance. In addition to the
181-360 Doubtful
Beyond 361 Loss specific allowance for probable losses under
Item “1”, a general provision for loan losses
The classification according to age of shall also be set-up as follows:
accounts receivable shall be used in (a) Two percent (2%) of the outstanding
classifying other risk assets not covered balance of unclassified restructured loans;
above. However, their classification should and
be tempered by favorable information (b) One percent (1%) of the outstanding
gathered in the review. balance of unclassified loans.
3. In addition to the foregoing minimum
III. Allowance for Probable Losses. The prudential requirements, NSSLAs are also
allowance for losses for classified loans and required to comply with the provisions of
other risk assets shall be set up immediately the Philippine Accounting Standards (PAS)
in accordance with the following on the recognition of impairment losses on
guidelines: its financial assets: Provided, That NSSLAs
A. Specific allowance. Specific are required to meet the Bangko Sentral
minimum allowance shall be immediately minimum allowance for losses or the
set-up based on the qualitative review of required provisioning under the PAS,
loans and accounts receivable, as follows: whichever is higher.

APP. S-10
14.12.31
GUIDELINES AND PROCEDURES GOVERNING THE

CONSUMER ASSISTANCE MANAGEMENT SYSTEM (CAMS)
OF BSP-SUPERVISED FINANCIAL INSTITUTIONS
[Appendix to Subsec. 4402S.4]
I. Statement of Policy be resolved without the need of third-party

The Bangko Sentral acknowledges the intervention, such as outsource service
indispensable role of financial consumers providers, external auditors, or other banks.
in bringing about a strong and stable Resolution thereof must be achieved within
financial system, their right to be protected a 7-day period.
in all stages of their transactions with c. Complex complaint/request-
Bangko Sentral- Supervised Financial complaint/request which needs assessment,
Institutions (BSFIs), and be given an avenue verification, or investigation with third-party
to air out their grievances in the products intervention. Resolution thereof may ideally
and services of BSFIs. Consumer protection be achieved within a 45-day period.
is regarded as a core function d. BSFIs- include banks, quasi-banks,
complementary to Bangko Sentral's pawnshops, foreign exchange dealers,
prudential regulation and supervision, money changers, remittance agents,
financial stability, financial inclusion, and electronic money issuers, non-stock savings
financial education agenda. Towards this and loan associations and other Bangko
end, the Bangko Sentral hereby issues the Sentral-Supervised Financial Institutions.
following minimum guidelines e. Consumer- refers to a natural or
institutionalizing consumer assistance juridical person who has a complaint,
mechanism of BSFIs. inquiry or request relative to the BSFI's
products and services.
II. Applicability and Scope
The CAMS requirements and minimum IV. Role of the Board and Senior
guidelines on receiving, recording, Management
evaluating, resolving, monitoring, reporting, The board of BSFIs shall be responsible
and giving feedback to consumers shall for the delivery of effective recourse to its
apply to a BSFI and its branches/other offices. consumers. Pursuant thereto, the board shall:
The provisions of these guidelines shall, as a. Approve the consumer assistance
far as practicable, also apply to inquiries and policies and procedures;
requests received from clients and potential b. Approve risk assessment strategies
clients. relating to effective recourse by the consumer;
c. Ensure compliance with consumer
III. Definition of Terms assistance policies and procedures;
a. Complaint- is an expression of d. Provide adequate resources devoted
dissatisfaction relative to a financial product to consumer assistance; and
or service in which a response or resolution e. Review the consumer assistance
is expected. policies at least annually.
b. Simple complaint/request- complaint/ The BSFI's senior management shall be
request where frontline staff solution or responsible for the implementation of the
immediate explanation or action can be consumer assistance policies and
rendered. A resolution is immediate if it can procedures.
Manual of Regulations for Non-Bank Financial Institutions Appendix S-10 - Page 1

APP. S-10
14.12.31
V. Minimum Requirements (1) Consumer assistance officer. The

A. Manual of Consumer Assistance Policies consumer assistance officer shall have the
and Procedures following responsibilities:
A BSFI must have a manual of policies and (a) Receive and acknowledge consumer
procedures (Manual) in handling consumer concerns;
complaints, inquiries, and requests from (b) Record concerns in a Register/
financial consumers. The Manual, as a Database;
minimum, provide for the following: (c) Make an initial review and
(1) Corporate structure of the group on investigation of concerns;
consumer assistance with specified roles and (d) Process concerns;
responsibilities/tasks; (e) Provide official reply to consumer;
(2) Capability building for customer (f) Request client feedback; and
assistance team; (g) Prepare and submit report to the
(3) Consumer assistance process and head consumer assistance officer or
timeline; consumer assistance group.
(4) Complaint recording/data management (2) Consumer assistance group/head
system; consumer assistance officer. The consumer
(5) Risk assessment strategies; assistance group/head consumer assistance
(6) Reporting of complaints data to BSFI's officer shall, as a minimum, perform the
board and senior management and Bangko following:
Sentral; (a) Monitor consumer assistance process;
(7) System for evaluating effectiveness of (b) Keep track, identify, and analyze the
the CAMS; and nature of complaints and recommend
(8) Glossary of technical components in solutions to avoid recurrence;
the Manual. (c) Report to senior management the
complaints received on a monthly basis
B. Corporate Structure including reasons for such complaints, the
A BSFI shall have a consumer assistance recommended solutions to avoid
officer/independent business unit or group recurrence, and the suggestions for process
with defined roles and responsibilities in or personnel competency needing
handling consumer concerns. The corporate improvement; and
structure shall depend on the BSFI's asset size, (d) Ensure immediate escalation of any
as follows: significant complaint to concerned unit of
Consumer Assistance BSFIs with total assets the BSFI.
Group of at least P1.0 billion
Dedicated Head BSFIs with total assets of
Consumer less than P1.0 billion but C. Capacity building
Assisstance more than 100 million All consumer assistance personnel must
Officer be equipped with knowledge on the
Head Consumer BSFIs with total assets of structure and implementation of the BSFI's
Assistance Officer less than 100 million consumer assistance mechanism. As a
minimum, they shall be provided with
At least one (1) consumer assistance officer periodic trainings on the following:
per branch, extension office or banking office (1) Solid interpersonal skills/customer
must be designated to handle consumer service;
concerns. (2) Basic and advanced listening skills;
Appendix S-10 - Page 2 Manual of Regulations for Non-Bank Financial Institutions

APP. S-10
14.12.31
(3) Written and verbal communication F. Consumer Assistance Process and

skills; Timelines
(4) Handling financial consumer (1) Complaint/Request
feedback; SIMPLE1 COMPLEX1
(5) Dealing with difficult people; Acknowledgment Within 2 days Within 2 days
(6) Problem solving and conflict Processing and Within 7 days Within 45 days
resolution; and resolution
(7) BSFI's corporate structure and (assess,
investigate,
and resolve)
Communication Within 9 days Within 47 days
D. Publication of Consumer Assistance of Resolution
Management System
(1) BSFI's shall publish details of their (a) Receiving and acknowledging
CAMS in a clear and plain language. complaints/requests
(2) Publication shall be made through (i) A BSFI shall obtain and record the
any two of the following means: following data from the consumer: (1) full
(a) Posting of summary details of the name and contact details, (2) nature of
CAMS in conspicuous places within the complaint or request and its details; (3)
premises of BSFIs and their branches/other resolution requested; (4) signature of the
offices; complainant/requester; and (5) name of BSFI
(b) A leaflet or primer given to all personnel directly handling/in-charge of the
consumers who sign up for new banking complaint.
service. (ii) The consumer assistance officer must
(c) Terms and Conditions of a BSFI's be able to explain the consumer assistance
product or service; process and timelines.
(d) Posting in the BSFI's website; and (iii) The acknowledgment shall provide
(e) Any analogous manner. an assurance that the BSFI is dealing with
the complaint, request additional
E. Consumer Assistance Channels documents, if necessary, and that the
(1) Consumers may lodge their concerns complainant shall be kept informed of the
through any reasonable means, such as, a progress of the measures being taken for the
centralized web-portal, walk-in or personal complaint’s resolution
visit, letter, e-mail, telephone, and facsimile. (b) Investigating and resolving
(2) A BSFI must maintain a consumer
complaints
assistance helpdesk or hotline dedicated for
(i) A BSFI must establish an institutional
customer concerns and service and manned
approach in assessing and investigating
by a consumer assistance group.
complaints/requests and options in resolving
(3) A BSFI shall ensure that consumers
them, considering the peculiarities of the
know how and where to lodge their
concerns. complaints/requests and the desired
(4) A BSFI is encouraged to provide remedies of the party.
alternative modes of resolution, such as (ii) If assessment and investigation on
conciliation, mediation and arbitration, in complex complaints/requests cannot be
order to achieve settlement of the issues at completed within the timeframe stated
the BSFI level. above, complainants shall be informed of
1
all periods are reckoned from receipt of complaint.

APP. S-10
14.12.31
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.

APP. S-10
14.12.31
(a) A master register of all complaints (iii) Aging of complaints or requests;

received by the BSFIs and its branches/ (iv) Explanations on deviations, if any,
other offices; and from required resolution period; and
(b) A complaint database to identify (v) General description of resolutions
the trend of complaints received, potential and actions taken to resolve complaints/
problems, and risks. requests;
(d) The report shall include
K. Risk Assessment Strategies recommendation on how to avoid recurring
Pursuant to the BSFI’s consumer protection complaints and suggestions for process/
risk management system, the BSFI shall put personnel competency improvement, as
in place appropriate management controls needed.
and take reasonable steps to ensure that in (e) The report of the BSFI’s compliance
handling complaints/requests, it: (1) identifies and internal audit departments concerning
and remedies any recurring or systemic the independent review conducted on the
problems; and (2) identifies weaknesses in complaints report, policy recommendations,
the BSFI’s internal control procedure or and consumer protection compliance, shall
process. This may be done by: be elevated to Board every quarter.
(a) Analyzing complaints/requests data; (f) The BSFI shall include complaints/
(b) Analyzing causes for complaints/ requests statistics in its Annual Report.
requests; (2) Reporting to the Bangko Sentral
(c) Considering whether such identified A BSFI shall submit a consolidated
weaknesses may also affect other processes Complaints Report to the Supervisory Data
or products, including those not directly Center (SDC) of the Supervision and
complained of/requested; and Examination Sector on a quarterly basis.
(d) Correcting, whether reasonable to Such report shall be submitted in the format
do so, such causes taking into consideration required by Bangko Sentral. Submission of
the concomitant costs and other resources. the report to the SDC shall not be later than
one (1) month after the end of every quarter.
L. Complaint Reporting A Complaints Report is a Category B Report
(1) Internal Reporting for purposes of applying the appropriate
(a) The consumer assistance officers in monetary penalty.
the branches, extensions office and other
offices of the BSFI shall submit a complaints M. Interface with Bangko Sentral
report to the consumer assistance group / (1) Pursuant to Bangko Sentral’s
head consumer assistance officer on a Consumer Protection Framework, a BSFI
monthly basis. shall exhaust all internal remedies
(b) Complaints report shall be submitted available to address the issues raised by the
on a monthly basis by the consumer consumers in their complaints/requests.
assistance group/head consumer (2) Consumers dissatisfied with BSFI’s
assistance officer to the board and senior response or action may seek assistance with
management. BSP-FCPD (previously FCAG) in accordance
(c) The report shall include, as a with Bangko Sentral Consumer Assistance
minimum: Mechanism.
(i) General category of complaints (3) Allegations of consumers that the
received; BSFI has not properly and efficiently
(ii) Statistics/frequency of said handled, processed, and responded to their
complaints; concerns shall be validated, and where

APP. S-10
14.12.31
appropriate, considered in FCPD’s outsource entity/person of the outsourced

(previously FCAG) assessment of the BSFI’s consumer assistance activities/services.
compliance with Bangko Sentral Consumer
Protection regulations. This is without O. Accountability and Rewards
prejudice to the imposition of appropriate In order to ensure fair treatment and
enforcement actions. It is presumed that the responsible business conduct of personnel
higher number of complaints received by engaged in consumer relations, a
the Bangko Sentral reflects the non- performance appraisal system which
effectiveness of the BSFI’s CAMS. considers the performance of the personnel
assigned to manage/handle complaints shall
N. Outsourcing of Handling Consumer be put in place. The performance appraisal
of the personnel shall be linked to their
Concerns
efficiency in handling consumer complaints.
In outsourcing handling of consumer
This could be done through rewards/
concerns, a BSFI shall:
remuneration for excellent behavior.
(1) Conduct due diligence in the
selection of the outsourced entity/person; P. Consumer Assistance to Persons with
(2) Be responsible for the performance Disabilities (PWDs) and non-English
thereof in the same manner and to the same Speakers
extent as if performed by itself; As far as practicable, a BSFI shall take
(3) Comply with all laws and into account the needs of PWDs, such as,
regulations governing the consumer but not limited to those with learning
assistance activities/services performed by difficulties, people who are deaf or hard of
the outsource entity/person in its behalf; hearing, the visually impaired, and the non-
and English speakers, in ensuring that they
(4) Manage, monitor, and review on an understand the CAMS.
ongoing basis the performance by the (Circular No. 857 dated 21 November 2014)

P REGULATIONS
(Regulations Governing Pawnshops)
TABLE OF CONTENTS
SECTION 4101P Basic Law Governing Pawnshops

4101P.1 Scope of authority of pawnshops
4101P.2 Form of organization
4101P.3 Organizational requirements
4101P.4 Requirement to register with the Bangko Sentral
4101P.5 Pawnshop regulations briefing and Anti-Money
Laundering Act seminar
4101P.6 Processing and annual fees
4101P.7 Renewal of the Bangko Sentral registration of
pawnshop head office and branches (Deleted
by Circular No. 711 dated 28 January 2011)
4101P.8 Documentary requirements to renew the Bangko
Sentral registration (Deleted by Circular No. 711
SECTION 4102P Definition of Terms
SECTIONS 4103P - 4105P (Reserved)
B. CAPITALIZATION
SECTION 4106P Capital of Pawnshops

4106P.1 Sanctions (Deleted by Circular No. 711 dated
28 January 2011)
SECTION 4107P Prudential Capital Ratio

4107P.1 Capital build-up program
iii
C. - F. (RESERVED)
G. PROPRIETOR/ PARTNERS/ DIRECTORS, OFFICERS AND EMPLOYEES
SECTION 4141P Safeguarding of Pawnshop Assets

28 January 2011)
SECTION 4142P Definitions, Qualifications, and Duties and Responsibilities of

Proprietor/Partners/Directors/Officers
4142P.1 Definitions
4142P.2 General qualifications of a proprietor, partner,
director, president, and manager or
officer-in-charge of head office or branch
4142P.3 Corporate governance
SECTION 4143P Disqualification of Directors and Officers

4143P.1 Persons disqualified from becoming directors
4143P.2 Persons disqualified from becoming officers
4143P.3 Disqualification procedures
4143P.4 Effect of possession of disqualifications
4143P.5 (Reserved)
4143P.6 Watchlisting
4143P.7 Applicability of Section 4143P to the proprietor
and managing partner of a pawnshop (in the case
of a sole proprietorship/partnership
H. BRANCH OFFICES
SECTION 4151P Establishment of Branch Offices

4151P.1 Definition of branch office
4151P.2 Operations and functions
4151P.3 Basis for establishment
4151P.4 Documentary requirements
4151P.6 Date of opening for business
4151P.7 Pawnshop branches without business permit and
authority to operate considered operating
illegally
iv
SECTION 4156P Business Days and Hours
J. RECORDS AND REPORTS
SECTION 4161P Records

4161P.1 Uniform system of accounts
4161P.2 Philippine Financial Reporting Standards/
Philippine Accounting Standards
4161P.3 Accounting for pawnshops premises; other
fixed assets
4161P.4 Retention of records
SECTION 4162P Reports

4162P.1 Categories of and signatories to reports
4162P.2 Manner of filing
4162P.3 Definition relevant to reports to Bangko Sentral
SECTION 4163P Report on Crimes/Losses
SECTION 4164P Audited Financial Statements/Annual Report of Pawnshops

4164P.1 Financial audit (Deleted by Circular No. 711
4164P.2 Disclosure of external auditor's adverse findings
to the Bangko Sentral (Deleted by Circular No.
4164P.3 Sanction (Deleted by Circular No. 711 dated
28 January 2011)
4164P.4 Selection, appointment, reporting requirements
and delisting of external auditors and/or auditing
firm; sanction
SECTION 4165P General Information Sheet (Deleted by Circular No. 711 dated
28 January 2011)
v
K. INTERNAL CONTROL
SECTION 4171P Internal Control System

4171P.1 Proper accounting records
4171P.2 Number control
4171P.3 Safekeeping of records and insurance of
premises
4171P.4 Miscellaneous
SECTION 4172P Separation of Pawnshop Business from Other Businesses
SECTION 4181P Registered/Business Name

4181P.1 Change of registered/business name
4181P.2 Use of registered business name in signage, pawn
tickets and other forms
28 January 2011)
SECTION 4182P Transfer/Relocation of Business

4182P.1 Documentary requirements for transfer within the
same city/municipality
4182P.2 Documentary requirements for transfer outside
the city/municipality
SECTION 4183P Closure of Pawnshops

4183P.1 Voluntary closure
4183P.2 Delisting of pawnshops/involuntary closure
(Deleted by Circular No. 711 dated
28 January 2011)
4183P.3 Other grounds for delisting (Deleted by Circular
SECTION 4184P Transfer of Ownership

4184P.1 Requirements for transfer of ownership
SECTION 4185P Processing Fee for Replacement of Acknowledgement of

Registration of Head Office/Authority to Operate
vi
SECTION 4190P Guidelines on Outsourcing
SECTION 4191P (Reserved)
SECTION 4192P Prompt Corrective Action Framework
SECTION 4193P Information Technology Risk Management (ITRM)

4193P.1 Declaration of policy
4193P.2 Purpose and scope
4193P.3 Complexity of IT risk profile
4193P.4 IT rating system
4193P.5 Definition of terms
4193P.6 Description of IT-related risks
4193P.7 IT Risk Management System (ITRMS)
4193P.8 Reports
4193P.9 Sanctions and Penalties
SECTION 4199P General Provision on Sanctions
PART TWO - BORROWING OPERATIONS
A. - J. (RESERVED)
K. OTHER BORROWINGS
SECTION 4285P Securities and Exchange Commission Registration of

Borrowing
SECTION 4286P Borrowings Constituting Quasi-Banking Functions
SECTION 4299P General Provision on Sanctions (Deleted by Circular No. 711

vii
PART THREE - LOANS AND INVESTMENTS
A. LOANS IN GENERAL
SECTION 4301P Grant of Loans

4301P.1 General guidelines
4301P.2 Prohibitions
4301P.3 Know your pawner
28 January 2011)
SECTION 4302P Loan Limit
28 January 2011)
SECTION 4303P Interest and Surcharges

4303P.1 Rate of interest in the absence of stipulation
4303P.2 Other charges
4303P.3 Method of computing interest
4303P.4 Poster
4303P.5 Sanctions and penal provisions
SECTION 4304P (Reserved)
SECTION 4305P Past Due Accounts; Renewal

4305P.1 Right of pawner to redeem pawn within ninety
(90) days from maturity
28 January 2011)
SECTION 4306P Interest Accrual on Past Due Loans
B. LOAN COLLATERAL/SECURITY
SECTION 4321P Acceptable Security and Safekeeping of Pawns
SECTION 4322P Redemption of Pawns

28 January 2011)
viii
SECTION 4323P Pawn Ticket
4323P.1 Stipulations in pawn ticket
28 January 2011)
SECTION 4324P Notices to the Pawner and to the Public

4324P.1 Poster
28 January 2011)
SECTION 4325P Public Auction of Pawns

4325P.1 Auction of pawned items covered by a single
pawn ticket
C. - J. (RESERVED)
K. MISCELLANEOUS
SECTION 4399P General Provision on Sanctions
PART FOUR - BSP REGULATIONS ON FINANCIAL CONSUMER

PROTECTION
SECTIONS 4401P Consumer Protection Oversight Function

4401P.1 Role and Responsibility of the Board and Senior
Management
4401P.2 Consumer Protection Risk Management System
(CPRMS)
B. CONSUMER PROTECTION STANDARDS OPF CONDUCT FOR BSFIS
SECTION 4402P Consumer Protection Standards

4402P.1 Disclosure and Transparency
ix
4402P.2 Protection and Client Information
4402P.3 Fair Treatment
4402P.4 Effective Recourse
4402P.5 Financial Education and Awareness
C. ENFORCEMENT ACTIONS
SECTION 4403P Enforcement Actions
PART FIVE (RESERVED)
PART SIX - MISCELLANEOUS
A. (RESERVED)
SECTION 4641P Electronic Services
SECTION 4642P Issuance and Operations of Electronic Money

4642P.1 Declaration of policy
4642P.2 Definitions
4642P.3 Prior Bangko Sentral approval
4642P.4 Common provisions
4642P.5 Quasi-bank license requirement
4642P.6 Sanctions
4642P.7 Transitory provisions
4642P.8 - 4642P.10 (Reserved)
4642P.11 Outsourcing of services by Electronic Money
SECTION 4650P Philippine and Foreign Currency Notes and Coins
x
B. SUNDRY PROVISIONS
SECTION 4651P Supervisory Powers of the Bangko Sentral

4651P.1 Refusal to permit examination
28 January 2011)
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
SECTION 4658P Republic Act No. 9994 - An Act of 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
SECTION 4691P Anti-Money Laundering Regulations

4691P.1 Required seminar/training
4691P.2 Anti-money laundering program
4691P.3 - 4691P.8 (Reserved)
4691P.9 Sanctions and penalties (Deleted by Circular No.
SECTION 4699P Administrative Sanctions (Deleted by Circular No. 711 dated

28 January 2011)
xi
List of Appendices
15.12.31
LIST OF APPENDICES
No. SUBJECT MATTER
P-1 Chart of Accounts and Description of Loan Register of Pawnshops
P-2 List of Reports Required from Pawnshops
Annex P-2-a - Reporting Guidelines on Crimes/Losses
P-3 Guidelines on Prescribed Reports Signatories and Signatory Authorization

Annex P-3-a - Format of Resolution for Signatories of Category A-1
Reports
Annex P-3-b - Format of Resolution for Signatories of Category A-2
Reports
Annex P-3-c - Format of Resolution for Signatories of Categies A-3
and B Reports
P-4 Standard Pawn Ticket
P-4-a Format of Statement of Understanding on Pawnshop Transaction
P-4-b Standard Additional Stipulations in Pawn Tickets
P-4-c Stipulations not Allowed in Standard Pawn Tickets
P-5 Anti-Money Laundering Regulations (Deleted pursuant to Circular No.

Annex P-5-a - Certification of Compliance with Anti-Money
Laundering Regulations (Deleted by Circular No. 706
Annex P-5-b - Rules on Submission of Covered Transaction Reports
P-6 Revised Implementing Rules and Regulations of R.A. No. 9160, as

amended by R.A. No. 9194 (Deleted pursuant to Circular No. 706 dated
05 January 2011)
P-7 "Know-Your-Pawner” Policy
xi
List of Appendices
15.12.31
No. SUBJECT MATTER
P-8 Abstract of “Section 13 and 14 of P.D. No. 114”

(Pawnshop Regulation Act)
P-9 Guidelines to Govern the Selection, Appointment, Reporting

of Covered Entities
P-10 Guidelines and Procedures Governing the Consumer Assistance

xii
§§ 4101P - 4101P.3
09.12.31
PART ONE
A. SCOPE OF AUTHORITY percent (30%) of the capital stock of such

pawnshop.
Section 4101P Basic Law Governing In the case of a pawnshop organized
Pawnshops. P.D. No. 114, known as the as a corporation, at least seventy percent
Pawnshop Regulation Act, regulates the (70%) of the voting stock therein shall
establishment and operation of pawnshops. be owned by citizens of the Philippines,
(Circular No. 656 dated 02 June 2009) or if there be no capital stock, at least
seventy percent (70%) of the members
§ 4101P.1 Scope of authority of entitled to vote shall be citizens of the
pawnshops. A duly organized and licensed Philippines.
pawnshop has, in general, the power to Pawnshops registered as a corporation
engage in the business of lending money with foreign equity participation in excess
on the security of personal property within of thirty percent (30%) of the voting stock,
the framework and limitations of P.D. No. or members entitled to vote, of the
114 and the following regulations, subject pawnshop may retain the percentage of
to the regulatory and supervisory powers foreign equity as of 29 January 1973, and
of the BSP. said percentage shall not be increased, but
(Circular No. 656 dated 02 June 2009) may be reduced and once reduced, shall not
be increased thereafter beyond thirty
§ 4101P.2 Form of organization. A percent (30%) of the voting stock, or number
pawnshop may be established as a single of members entitled to vote, of such
proprietorship, a partnership or corporation. pawnshop.
Only Filipino citizens may establish The percentage of foreign-owned voting
and own a pawnshop organized as a single stock in a pawnshop corporation shall be
proprietorship. A pawnshop established determined by the citizenship of its
as a single proprietorship by a non-Filipino individual stockholders. If the voting stock
owner prior to 29 January 1973 may in a pawnshop corporation is held by
continue as such during the lifetime of the another corporation, the percentage of
registered owner. foreign ownership in that pawnshop, shall
If a pawnshop is organized as a be computed on the basis of the foreign
partnership, at least seventy percent citizenship of the individuals owning voting
(70%) of its capital shall be owned by stocks in, or members entitled to vote of,
Filipino citizens. Pawnshops established the stockholder corporation.
as partnerships prior to 29 January 1973, (Circular No. 656 dated 02 June 2009)
with non-Filipino partners whose
aggregate holdings amount to more than § 4101P.3 Organizational requirements
thirty percent (30%) of the capital may Any person or entity desiring to establish a
retain the percentage of their aggregate pawnshop shall register with the Department
holdings as of 29 January 1973, and said of Trade and Industry (DTI), in the case of a
percentage shall not be increased, but may single proprietorship; or with the Securities
be reduced, and once reduced shall not and Exchange Commission (SEC), in the case
be increased thereafter beyond thirty of a partnership/corporation.
Manual of Regulations for Non-Bank Financial Institutions P Regulations

Part I - Page 1
§§ 4101P.3 - 4101P.5
11.12.31
Pawnshops with foreign equity No application for registration shall be

participation shall also register with the accepted from a person or entity other than
Board of Investments. the proprietor, partner, or incorporator of a
After registering with the DTI or with pawnshop unless the person or entity
the SEC, the single proprietorship or the applying on behalf of the proprietor, partner
partnership/corporation, as the case may be, or incorporator submits a duly executed and
shall secure a business license from the city notarized special power of attorney
or municipality where the pawnshop is to authorizing the person or entity to act on
be established and operated, in accordance behalf of the proprietor, partner, or
with the requirements of the pertinent incorporator. In the case of a corporate
ordinance in that city or municipality. applicant, a certified true copy of the board
(Circular No. 656 dated 02 June 2009) resolution authorizing the person or entity
shall likewise be submitted.
§ 4101P.4 Requirement to register with A pawnshop shall commence actual
the Bangko Sentral. Pursuant to Section 6 of operations within six (6) months from the
P.D. No. 114, which requires pawnbrokers date of issuance of the AOR. Failure to
to register with the BSP before commencing commence actual operations within the
actual business operations, every pawnshop aforementioned six (6) months period shall
shall submit to the BSP an Information Sheet render the BSP AOR as automatically
on the entity (using BSP-prescribed form) cancelled.
duly accomplished by the proprietor/ The pawnshop shall notify the BSP in
managing partner/president under oath that writing of the start of operations within five
shall be the basis for the issuance by the (5) business days from the actual start of
BSP of an Acknowledgement of Registration operations.
(AOR). The Information Sheet shall be Any pawnshop that is found operating
accompanied by the following documents: that does not have a current business permit
a. A Certificate of Registration (COR) issued by the city or municipality where it
of business name from the DTI, in case of a is located and an AOR issued by the BSP is
sole proprietorship; considered operating illegally. Such
b. Articles of Partnership/Incorporation pawnshop shall be reported to the Office
and by-laws duly registered with the SEC, of the Mayor of the concerned city or
in the case of a partnership or a corporation municipality, for appropriate action,
which Articles shall indicate that the primary without prejudice to whatever legal action
purpose of the partnership/corporation is to the BSP may pursue under Section 18 of
engage in the business of a pawnshop or a P.D. No. 114 and other applicable laws
pawnbroker; against the pawnshop, its proprietor,
c. City/municipal license/business partners, incorporators, stockholders,
license/mayor’s permit for the current period; directors, president and officers.
d. Personal data sheet (using BSP- (Circular No. 656 dated 02 June 2009, as amended by Circular
prescribed form for pawnshops) with No. 711 dated 28 January 2011)
passport size picture duly accomplished by
the proprietor or partners or directors, § 4101P.5 Pawnshop regulations
president and manager or officer-in-charge briefing and Anti-Money Laundering Act
of the head office; and seminar. As a prerequisite for the issuance
e. Such other documents that may be by the BSP of the AOR, the proprietor,
required by the BSP that are enumerated in partner, director, president as well as
a list attached to the Information Sheet. manager or officer-in-charge of the head
P Regulations Manual of Regulations for Non-Bank Financial Institutions

Part I - Page 2
§§ 4101P.5 - 4102P
12.12.31
office and branch shall have attended the: premises as loan collateral. The term shall
(a) briefing on pawnshop regulations be synonymous, and may be used
conducted by the Bangko Sentral or any interchangeably, with pawnbroker or
accredited service provider; and (b) seminar pawnbrokerage.
on the Anti-Money Laundering Act as b. Pawner shall refer to the borrower
prescribed in Subsec.4691P.1. from a pawnshop.
(Circular No. 656 dated 02 June 2009, as amended by Circular c. Pawnee shall refer to the pawnshop
No. 711 dated 28 January 2011) or pawnbroker.
d. Pawn is the personal property
§ 4101P.6 Processing and annual fees delivered by the pawner to the pawnee as
Every pawnshop head office shall pay a security for a loan.
one-time processing fee of P1,000.00 for the e. Pawn ticket is the pawnbroker’s
initial registration, and P500.00 annual fee receipt for a pawn and shall not be
upon approval of application for registration. considered as an official receipt for amounts
Thereafter, the annual fee shall be paid not collected.
later than 31 March of every year. f. Property shall include only such
Transitory provision. The annual fee personal property which can be physically
shall commence for the year 2010. It shall delivered to the control and possession of
be collected from all pawnshop’s head the pawnee.
offices and branches registered as of g. Voting stock is that portion of the
31 December 2009. The deadline for authorized capital which is subscribed and
payment of the annual fee for 2010 is 31 entitled to vote.
March 2011. h. Vital records shall consist of the
Pawnshop head offices and branches Loans Extended/Paid Registers, General
that have paid the registration fee/renewal Ledger/Journal, that may in electronic
of registration fee of P3,000.00, pursuant form, covering the current and at least
to BSP Circular No. 656, shall be considered the preceding five (5) years of operation,
to have paid the annual fee for six (6) years unused accountable forms and
starting 2010. permanent records, e.g., articles of
(Circular No. 656 dated 02 June 2009, as amended by Circular incorporation/co-partnership, by-laws,
stock certificates, etc.
§ 4101P.7 Renewal of the Bangko i. Bulky pawns shall refer to
Sentral registration of pawnshop head household appliances, office machines and
office and branches the like, which occupy considerable amount
(Deleted by Circular No. 711 dated 28 January 2011) of space, i.e., measuring at least 1.5 x 1.5 x
0.5 feet.
§ 4101P.8 Documentary requirements j. Premises shall refer to the area
to renew the Bangko Sentral registration where the pawnshop conducts its business
(Deleted by Circular No. 711 dated 28 January 2011) and maintains office. It includes office or
storage spaces maintained and/or used by
Sec. 4102P Definition of Terms the pawnshop which are adjacent to the
a. Pawnshop shall refer to a person pawnshop’s location.
or entity engaged in the business of lending k. Simple annual rate is the uniform
money on personal property that is percentage which represents the ratio
physically delivered to the pawnshop between the finance charge and the amount

Part I - Page 3
§§ 4102P - 4107P
12.12.31
to be financed under the assumption that value of land and buildings is usually
the loan is payable in one (1) year with single determined from market-based evidence
payment upon maturity and there are no up- by appraisal that is normally
front deductions to principal. undertaken by professionally qualified
For loans with terms different from the appraisers.
above assumptions, the effective annual The value of the tangible properties
interest rate shall be calculated and contributed as capital shall not exceed
disclosed to the borrower as the relevant twenty-five percent (25%) of said paid-in
true cost of the loan comparable to the capital and surplus/acumulated surplus:
concept of simple annual rate. For pawnshops existing as at 29 January
For loans with contractual interest rates 1973 whose value of properties exceeds
stated on monthly basis, the effective interest the prescribed ratio, such percentage may
rate may be expressed as a monthly rate. be retained or reduced but shall not be
In accordance with the PAS definition, increased thereafter. Should the ratio, on
effective interest rate is the rate that exactly the other hand, fall below the prescribed
discounts estimated future cash flows level, it may be increased but not beyond
through the life of the loan to the net amount twenty-five percent (25%).
of loan proceeds. For consistency, (Circular No. 656 dated 02 June 2009)
methodology and standards for discounted
cash flow models shall be prescribed to be § 4106P.1 Sanctions
used for the purpose. (Deleted by Circular No. 711 dated 28 January 2011)
No. 754 dated 17 April 2012)
Sec. 4107P Prudential Capital Ratio. The
Secs. 4103P - 4105P (Reserved) minimum capital ratio of a pawnshop,
expressed as a percentage of total capital
B. CAPITALIZATION to pledge loans, shall not be less than fifty
percent (50%): Provided, That total pledge
Sec. 4106P Capital of Pawnshops. Every loans shall not exceed P3.0 million. If and
pawnshops shall have a minimum paid-in when the pledge loans exceed P3.0
capital of P100,000. million, additional capital of 30% of
A pawnshop’s paid-in capital may be pledge loans in excess of P3.0 million
in the form of: shall be required.
a. Cash; For this purpose, the term total capital
b. Tangible properties, including real shall be defined as total assets minus:
estate and improvements thereon; and (a) total liabilities;
c. A combination of cash and tangible (b) deferred tax assets;
properties. (c) unbooked valuation reserves; and
Tangible properties shall be limited to (d) other capital adjustments as may be
those that are necessary for the conduct required by the Bangko Sentral.
of the pawnshop business. They may be Any appraisal surplus or appreciation
valued at fair value which is the amount credit as a result of appreciation or an
for which an asset could be exchanged increase in book value of the assets of the
between knowledgeable, willing parties pawnshop shall be excluded.
in an arm’s length transaction. The fair (Circular No. 656 dated 02 June 2009)

Part I - Page 4
§§ 4107P.1 - 4141P
11.12.31
§ 4107P.1 Capital build-up program G. PROPRIETOR/PARTNERS/

Any pawnshop that fails to comply with DIRECTORS, OFFICERS AND
the prudential capital requirement shall EMPLOYEES
submit within thirty (30) days from date
of notice from the Bangko Sentral, a Letter Sec. 4141P Safeguarding of Pawnshop
of Undertaking to implement a capital Assets. In order to safeguard pawnshop’s
build-up program for a period not to assets (pawned items) and mitigate the risk
exceed one (1) year from date of of loss arising from malfeasance or
undertaking. fraudulent practices of their employees,
(Circular No. 656 dated 02 June 2009, as amended by Circular pawnshops shall adopt any of the following
No. 711 dated 28 January 2011) measures:
a. Bonding of accountable officers/
Secs. 4108P - 4110P (Reserved) employees with reputable insurance/surety
companies accredited by the Insurance
Commissioner; or
C. - F. (RESERVED) b. Equivalent self-insurance mechanism
acceptable to Bangko Sentral.
Secs. 4111P - 4140P (Reserved) (Circular No. 656 dated 02 June 2009, as amended by Circular

Part I - Page 4a
§§ 4141P.1 - 4143P.1
11.12.31
§ 4141P.1 Sanctions § 4142P.2 General qualifications of a

(Deleted by Circular No. 711 dated 28 January 2011) proprietor, partner, director, president, and
manager or officer-in-charge of head office
Sec. 4142P Definitions, Qualifications, and or branch. Any person can be a proprietor,
Duties and Responsibilities of Proprietor/ partner, director, president, manager or officer-
Partners/Directors/Officers. For purposes of in-charge of a pawnshop’s head office or
this Section the following shall be the branch, provided he/she:
definitions and qualifications, duties and a. Must have undergone a briefing on
responsibilities of proprietor/partners/ pawnshop regulations conducted by the BSP
directors/officers. or any accredited service provider;
(Circular No. 656 dated 02 June 2009, as amended by Circular No. b. Must have undergone a briefing on the
711 dated 28 January 2011) Anti-Money Laundering Law (AMLA) as
prescribed by Subsec. 4691P.1;
§ 4142P.1 Definitions c. Must not be included in the BSP
a. Proprietor is the person named in the Watchlist; and
Certificate of Registration issued by the DTI d. Must not possess any derogatory
and in the city/municipal license and mayor’s information from the National Bureau of
permit as the owner of the business. Investigation (NBI). The NBI clearance shall
b. Partners are the persons named in be submitted pursuant to Subsecs. 4101P.4
the articles of partnership. and 4151P.4.
c. Incorporators are those mentioned as The NBI clearance shall also be required
such in the articles of incorporation as for any newly elected/appointed director,
originally forming and composing the president, manager or officer-in-charge and
corporation and who are signatories thereof. newly accepted partner or director of an
d. Directors – Directors shall include: existing pawnshop.
(1) directors who are named as such in (Circular No. 656 dated 02 June 2009, as amended by Circular
the articles of incorporation; No. 711 dated 28 January 2011)
(2) directors duly elected in subsequent
meetings of the pawnshop’s stockholders; and § 4142P.3 Corporate governance. A
(3) those elected to fill vacancies in the corporate pawnshop with total resources of
board of directors. at least P50.0 million shall comply with the
The number of members of the board of SEC requirements on corporate governance,
directors, pursuant to Section 10 of Batas and as proof of compliance, the said corporate
Pambansa No. 68, shall be at least five (5), pawnshop shall submit to the BSP a notarized
and a maximum of fifteen (15) directors. certification to that effect.
e. Officers - are those persons whose (Circular No. 656 dated 02 June 2009, as amended by Circular No.
duties as such are defined in the by-laws 711 dated 28 January 2011)
(for corporations) or those who are generally
known to be the officers of the pawnshop Sec. 4143P Disqualification of Directors and
either thru announcement, representation, Officers. The following regulations shall
publication or any kind of communication govern the disqualification of pawnshop
made by the pawnshop. The term officer directors and officers.
shall include, but not limited to the (Circular No. 656 dated 02 June 2009)
following: the proprietor, managing partner,
president, and manager or officer-in-charge § 4143P.1 Persons disqualified from
of head office or branch. becoming directors. Without prejudice to
(Circular No. 656 dated 02 June 2009, as amended by Circular No.
specific provisions of law prescribing

Part I - Page 5
§ 4143P.1
11.12.31
disqualifications for directors/trusteees, the or any offense/violation involving

following are disqualified from becoming dishonesty or breach of trust, and which
directors of pawnshops: finding of said government agency has
a. Permanently disqualified become final and executory.
Directors/trustees/officers/employees b. Temporarily disqualified
permanently disqualified by the Monetary Directors/officers/employees
Board from holding a director position: disqualified by the Monetary Board from
(1) Persons who have been convicted holding a director/trustee position for a
by final judgment of a court for offenses specific/indefinite period of time. Included are:
involving dishonesty or breach of trust such (1) Persons who refuse to fully disclose
as, but not limited to, estafa, embezzlement, the extent of their business interest or any
extortion, forgery, malversation, swindling , material information to the appropriate
theft, robbery, falsification, bribery, violation supervising and examining department
of B.P. Blg. 22, violation of Anti-Graft and when required pursuant to a provision of
Corrupt Practices Act and Prohibited Acts law or of a circular, memorandum or rule
and Transactions under Section 7 of R.A. No. or regulation of the BSP. This
6713 (Code of Conduct and Ethical Standards disqualification shall be in effect as long as
for Public Officials and Employees); the refusal persists;
(2) Persons who have been convicted (2) Directors who have been absent or
by final judgment of the court sentencing who have not participated for whatever
them to serve a maximum term of reasons in more than fifty percent (50%) of
imprisonment of more than six (6) years; all meetings, both regular and special, of
(3) Persons who have been convicted the board of directors during their
by final judgment of the court for violation incumbency, or any twelve (12)-month
of banking laws, rules and regulations; period during said incumbency. This
(4) Persons who have been judicially disqualification applies only for purposes
declared insolvent, spendthrift or of the immediately succeeding election;
incapacitated to contract; (3) Persons who are delinquent in the
(5) Directors, officers or employees of payment of their obligations as defined
closed banks/QBs/trust entities who were hereunder:
found to be culpable for such institution’s (a) Delinquency in the payment of
closure as determined by the Monetary Board; obligations means that an obligation of a
(6) Directors and officers of banks, QBs, person with the institution where he/she is
trust entities found by the Monetary Board a director or officer, or at least two (2)
as administratively liable for violation of obligations with other FIs, under different
banking or other relevant laws, rules and credit lines or loan contracts, are past due
regulations where a penalty of removal from pursuant to Secs. X306, 4308Q, 4306S and
office is imposed, and which finding of the 4305P;
Monetary Board has become final and (b) Obligations shall include all
executory; or borrowings from any FI obtained by:
(7) Directors and officers of banks, QBs, (i) A director/trustee or officer for his
trust entities or any person found by the own account or as representative or agent of
Monetary Board to be unfit for the position others or where he/she acts as guarantor,
of director or officer because they were endorser or surety for loans from such FIs;
found administratively liable by another (ii) The spouse or child under the parental
government agency for violation of banking authority of the director/trustee or officer;
or other relevant laws, rules and regulations (iii) Any person whose borrowings or

Part I - Page 6
§ 4143P.1
11.12.31
loan proceeds were credited to the account irregularity or upon clearance, on their request,
of, or used for the benefit of a director/trustee from the Monetary Board after showing good
or officer; and justifiable reasons;
(iv) A partnership of which a director/ (8) Those under preventive suspension; and
trustee or officer, or his/her spouse is the (9) Persons with derogatory records as
managing partner or a general partner owning certified by, or on the official files of, the
a controlling interest in the partnership; and judiciary, NBI, PNP, quasi-judicial bodies,
(v) A corporation, association or firm other government agencies, international
wholly-owned or majority of the capital of police, monetary authorities and similar
which is owned by any or a group of persons agencies or authorities of foreign countries for
mentioned in the foregoing Items “(i)”, “(ii)” irregularities or violations of any law, rules
and “(iv)”. and regulations that would adversely affect the
This disqualification shall be in effect as integrity of the director/officer or the ability to
long as the delinquency persists. effectively discharge his duties. This
(4) Persons who have been convicted by disqualification applies until they have cleared
a court for offenses involving dishonesty or themselves of the alleged irregularities/
breach of trust such as, but not limited to, violations or after a lapse of five (5) years from
estafa, embezzlement, extortion, forgery, the time the complaint, which was the basis
malversation, swindling, theft, robbery, of the derogatory record, was initiated;
falsification, bribery, violation of B.P. Blg. 22, (10) Directors and officers of banks, QBs
violation of Anti-Graft and Corrupt Practices and trust entities found by the Monetary Board
Act and Prohibited Acts and Transactions as administratively liable for violation of
under Section 7 of R.A. No. 6713 (Code of banking or other relevant laws, rules and
Conduct and Ethical Standards for Public regulations where a penalty of removal from
Officials and Employees), violation of banking office is imposed, and which finding of the
laws, rules and regulations or those sentenced Monetary Board is pending appeal before the
to serve a maximum term of imprisonment of appellate court, unless execution or
more than six (6) years but whose conviction enforcement thereof is restrained by the court;
has not yet become final and executory; (11) Directors and officers of banks, QBs,
(5) Directors/trustees and officers of and trust entities or any person found by the
closed institutions under the supervisory and Monetary Board to be unfit for the position of
regulatory powers of the BSP pending their director or officer because they were found
clearance by the Monetary Board; administratively liable by another government
(6) Directors/ trustees disqualified for agency for violation of banking or other
failure to observe/discharge their duties and relevant laws, rules and regulations, or any
responsibilities prescribed under existing offense/violation involving dishonesty or
regulations. This disqualification applies until breach of trust, and which finding of said
the lapse of the specific period of government agency is pending appeal before
disqualification or upon approval by the the appellate court, unless execution or
Monetary Board or the appropriate department enforcement thereof is restrained by the court;
of the SES of such directors’/trustees' election/ or
reelection; (12) Directors and officers of banks, QBs,
(7) Persons dismissed/terminated from trust entities found by the Monetary Board as
employment in the institutions under the administratively liable for violation of banking
supervision of the BSP. This disqualification or other relevant laws, rules and regulations
shall be in effect until they have been cleared where a penalty of suspension from office or
themselves of involvement in the alleged fine is imposed, regardless whether the finding

Part I - Page 7
§§ 4143P.1 - 4143P.3
11.12.31
of the Monetary Board is final and executory director/trustee/officer/employee from being

or pending appeal before the appellate court, elected/appointed as director/ trustee/officer
unless execution or enforcement thereof is in any FI under the supervision of the BSP.
restrained by the court. The disqualification Grounds for disqualification made known to
shall be in effect during the period of the institution shall be reported to the
suspension or so long as the fine is not fully appropriate department of the SES of the BSP
paid. within 72 hours from knowledge thereof.
(Circular No. 656 dated 02 June 2009, as amended by Circular b. On the basis of knowledge and
No. 711 dated 28 January 2011) evidence on the existence of any of the
grounds for disqualification mentioned in
§ 4143P.2 Persons disqualified from Subsecs. 4143P.1 and 4143P.2, the director
becoming officers or officer concerned shall be notified in writing
a. The disqualifications for directors either by personal service or through registered
mentioned in Subsec. 4143P.1 shall likewise mail with registry return receipt card at his/
apply to officers, except those stated in Items her last known address by the appropriate
“b(2)”. department of the SES of the existence of the
b. Except as may be authorized by the ground for his/her disqualification and shall
Monetary Board or the Governor, the spouse be allowed to submit within fifteen (15)
or a relative within the second degree of calendar days from receipt of such notice an
consanguinity or affinity of any person holding explanation on why he/she should not be
the position of chairman, president, executive disqualified and included in the watchlisted
vice president or any position of equivalent file, together with the evidence in support of
rank, general manager, treasurer, chief cashier his/her position. The head of said department
or chief accountant is disqualified from holding may allow an extension on meritorious
or being elected or appointed to any of said ground.
positions in the same pawnshop and the c. Upon receipt of the reply/explanation
spouse or relative within the second degree of the director/trustee/officer concerned, the
of consanguinity or affinity of any person appropriate department of the SES shall
holding the position of manager, cashier, or proceed to evaluate the case. The director/
accountant of a branch or office of a trustee/officer concerned shall be afforded to
pawnshop is disqualified from holding or defend/clear himself/herself.
being appointed to any of said positions in d. If no reply has been received from the
the same branch or office. director/trustee/officer concerned upon the
expiration of the period prescribed under Item
“b” above, said failure to reply shall be deemed
§ 4143P.3 Disqualification procedures a waiver and the appropriate department of
a. The board of directors/trustees and the SES shall proceed to evaluate the case
management of every pawnshop shall be based on available records/evidence.
responsible for determining the existence of e. If the grounds for disqualification is
the ground for disqualification of the delinquency in the payment of obligation, the
pawnshop’s directors/trustees/officer or concerned director/trustee or officer shall be
employee and for reporting the same to the given a period of thirty (30) calendar days
BSP. While the concerned pawnshop may within which to settle said obligation or,
conduct its own investigation and impose restore it to current status or, to explain why
appropriate sanction/s as are allowable, this he/she should not be disqualified and
shall be without prejudice to the authority of included in the watchlisted file, before the
the Monetary Board to disqualify a pawnshop evaluation on his disqualification and

Part I - Page 8
§ 4143P.3
09.12.31
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/trustees/officers of concerned. The appropriate department of
closed banks, the concerned department of the SES may decide to recommend to the
the SES shall make appropriate Monetary Board a penalty lower than
recommendation to the Monetary Board disqualification (e.g., reprimand, suspension,
clearing said directors/trustees/officers when etc.) if, in its judgment the act committed or
there is no pending case/complaint or omitted by the director/trustee/officer
evidence against them. When there is concerned does not warrant disqualification.
evidence that a director/trustee/officer has h. All other cases of disqualification,
committed irregularity, the appropriate whether permanent or temporary shall be
department of the SES shall make elevated to the Monetary Board for approval
recommendation to the Monetary Board and shall be subject to the procedures
that his/her case be referred to the Office of provided in Items “a”, “b”, “c” and “d” above.
Special Investigation (OSI) for further i. Upon approval by the Monetary
investigation and that he/she be included Board, the concerned directors/trustees/
in the master list of temporarily disqualified officers shall be informed by the appropriate
persons until the final resolution of his/her department of the SES in writing either by
case. Directors/trustee/officer with pending personal service or through registered mail
cases/complaints shall also be included in with registry return receipt card, at his/her
said master list of temporarily disqualified last known address of his/her disqualification
persons upon approval by the Monetary from being elected/appointed as director/
Board until the final resolution of their cases, trustee/officer in any FI under the supervision
If the director/trustee/officer is cleared from of BSP and/or of his/her inclusion in the
involvement in any irregularity, the master list of watchlisted persons so
appropriate department of the SES shall disqualified.
recommend to the Monetary Board his/her j. The board of directors/trustees of the
delisting. On the other hand, if the director/ concerned institution shall be immediately
trustee/officer concerned is found to be informed of cases of disqualification
responsible for the closure of the institution, approved by the Monetary Board and shall
the concerned department of the SES shall be directed to act thereon not later than the
recommend to the Monetary Board his/her following board meeting. Within seventy-
delisting from the disqualified persons and two (72) hours thereafter, the corporate
his/her inclusion in the master list of secretary shall report to the Governor of the
permanently disqualified persons. BSP through the appropriate department of
g. If the disqualification is based on the SES the action taken by the board on the
dismissal from employment for cause, the director/trustee/officer involved.
appropriate department of the SES shall, as k. Persons who are elected or
much as practicable, endeavor to establish appointed as director/trustee or officer in any
the specific acts or omissions constituting of the BSP-supervised institutions for the first
the offense of the ultimate facts which time but are subject to any of the grounds
resulted in the dismissal to be able to for disqualification provided for under
determine if the disqualification of the Subsecs. 4143P.1 and 4143P.2 shall be
director/trustee/officer concerned is afforded the procedural due process
warranted or not. The evaluation of the case prescribed above.
shall be made for the purpose of determining l. Whenever a director/trustee/officer
if disqualification would be appropriate and is cleared in the process mentioned under

Part I - Page 9
§§ 4143P.3 - 4143P.6
09.12.31
Item “c” above or, when the ground for recommendation by the appropriate
disqualification ceases to exist, he/she would department of the SES, the inclusion of
be eligible to become director/trustees or directors/trustees/officers/employees in
officer of any bank, QB, trust entity or any watchlist disqualification files “A” and “B”
institution under the supervision of the BSP on the basis of decisions, actions or reports
only upon prior approval by the Monetary of the courts, institutions under the
Board. It shall be the responsibility of the supervisory and regulatory powers of the
appropriate department of the SES to elevate BSP, NBI or other administrative agencies
to the Monetary Board the lifting of the shall first be approved by the Monetary
disqualification of the concerned director/ Board.
trustee/officer and his/her delisting from the c. Notification of directors/trustees/
masterlist or watchlisted persons. officers/employees. Upon approval by the
(Circular No. 656 dated 02 June 2009) Monetary Board, the concerned director/
trustee/officer/employee shall be informed
§ 4143P.4 Effect of possession of through registered mail, with registry return
disqualifications. Directors/trustees/officers receipt card, at his last known address of
elected or appointed possessing any of the his inclusion in the masterlist of watchlisted
disqualifications as enumerated herein, shall persons disqualified to be a director/trustee/
vacate their respective positions immediately. officer in any institution under the supervisory
(Circular No. 656 dated 02 June 2009) and regulatory powers of the BSP.
d. Confidentiality. Watchlisting shall
§ 4143P.5 (Reserved) be for internal use only and may not be
accessed or queried upon by outside parties
§ 4143P.6 Watchlisting. To provide the including such institutions under the
BSP with a central information file to be used supervisory and regulatory powers of the
as reference in passing upon and reviewing BSP, except with the authority of the person
the qualifications of persons elected or concerned and with the approval of the
appointed as directors/trustees or officer of Deputy Governor, SES, the Governor, or the
an institution under the supervisory and Monetary Board.
regulatory powers of the BSP, the SES shall The BSP will disclose information on
maintain a watchlist of disqualified its watchlist files only upon submission of
directors/trustees/officers under the a duly accomplished and notarized
following procedures: authorization from the concerned person
a. Watchlist categories. Watchlisting and approval of such request by the Deputy
shall be categorized as follows: Governor, SES or the Governor or the
(1) Disqualification File “A” Monetary Board. The prescribed authorization
(Permanent) - Directors/trustees/officers/ form to be submitted to the concerned
employees permanently disqualified by the department of the SES is in Appendix Q-45.
Monetary Board from holding a director/ Pawnshops can gain access to
trustee/officer position. information in the said watchlist for the sole
(2) Disqualification File “B” purpose of screening their applicants for
(Temporary) - Directors/trustees/officers/ hiring and/or confirming their elected
employees temporarily disqualified by the directors/trustees and appointed officers.
Monetary Board from holding a director/ Pawnshops must obtain the said
trustee/officer position. authorization on an individual basis.
b. Inclusion of directors/trustees/ e. Delisting. All delistings shall be
officers/employees in the watchlist. Upon approved by the Monetary Board upon

Part I - Page 10
§§ 4143P.7 - 4151P.2
11.12.31
recommendation of the appropriate In case the disqualification shall cause the

department of the SES except in cases of persons dissolution of the proprietorship or partnership,
known to be dead where delisting shall be the AOR and AO, if any, shall be cancelled
automatic upon proof of death and need not and the pawnshop shall be removed from
be elevated to the Monetary Board. Delisting the BSP List of Registered Pawnshops as
may be approved by the Monetary Board in prescribed in Subsec. 4183P.2.
the following cases: (Circular No. 656 dated 02 June 2009)
(1) Watchlist - Disqualification File “B”
(Temporary) - Secs. 4144P - 4150P (Reserved)
(a) After the lapse of the specific period
of disqualification; H. BRANCH OFFICES
(b) When the conviction by the court for
crimes involving dishonesty, breach of trust Sec. 4151P Establishment of Branch Offices
and/or violation of banking laws becomes final In line with Section 6 of P.D. No. 114 which
and executory, in which case the director/ requires pawnshops to register with the BSP
trustee/officer/employee is relisted to Watchlist before commencing actual business
- Disqualification File “A” (Permanent); or operations, no pawnshop shall open, maintain
(c) Upon favorable decision or clearance or operate a branch office without first
by the appropriate body, i.e., court, NBI, applying for and obtaining from the BSP,
institutions under the supervisory and through the appropriate department of the SES,
regulatory powers of the BSP, or such other an Authority to Operate (AO) such branch
agency/body where the concerned individual which shall be processed in accordance with
had derogatory record. the following guidelines. A new pawnshop
Directors/trustees/officers/employees applying for an AOR that has complied with
delisted from the Watchlist - Disqualification the minimum paid-in capital of P100,000.00
File “B” other than those upgraded to Watchlist may open one (1) branch if it so desires,
- Disqualification File “A” shall be eligible for subject to compliance with the applicable
re-employment with any institution under the branching requirements.
supervisory and regulatory powers of the BSP. (Circular No. 656 dated 02 June 2009, as amended by Circular No.
(Circular No. 656 dated 02 June 2009) 711 dated 28 January 2011)
§ 4143P.7 Applicability of Section § 4151P.1 Definition of branch office

4143P to the proprietor and managing As used in these rules, the term “branch
partner of a pawnshop (in the case of a sole office” refers to any place of business
proprietorship/partnership). The foregoing outside the head or main office of a
disqualification and watchlisting provisions pawnshop where pawnshop operations and
of this Section shall apply, where transactions are conducted under the control
practicable, to the managing proprietor or and supervision of the head or main office.
managing partner of a pawnshop that is a (Circular No. 656 dated 02 June 2009)
sole proprietorship or partnership, in which
case, the BSP shall initiate the § 4151P.2 Operations and functions
disqualification proceedings against the The operations and transactions of a branch
managing proprietor/managing partner. For office shall likewise be subject to the
purposes of this subsection, a managing provisions of P.D. No. 114 governing
proprietor or managing partner shall refer operations and transactions of a head or
to a person directly involved in the main office, as well as by other pertinent
operation of a pawnshop business. laws, BSP rules and regulations.

Part I - Page 11
§§ 4151P.2 - 4151P.7
11.12.31
The primary purpose of branching is to municipality where the pawnshop branch

provide additional source of credit to small is to be established;
borrowers not served by the banks and other d. Personal data sheet (using
FIs. BSP-prescribed form for pawnshops) with
(Circular No. 656 dated 02 June 2009) passport size picture duly accomplished
by the proposed branch manager or
§ 4151P.3 Basis for establishment officer-in-charge; and
Branch offices shall be allowed on the basis e. Such other documents that may be
of the head office’s ability to conduct required by the BSP for the evaluation of
operations in accordance with P.D. No. 114 the branch application as enumerated in a
and BSP rules and regulations. The BSP list attached to the application form.
department concerned shall not process an (Circular No. 656 dated 02 June 2009, as amended by Circular
application for branching of a pawnshop if No. 711 dated 28 January 2011)
any of the following conditions:
a. has an approved but unopened § 4151P.5 Processing and annual
branch; fees. Every branch of a pawnshop shall
b. has unpaid annual fee or penalty pay a one-time processing fee of
assessed by the BSP; P1,000.00 and P500.00 annual fee upon
c. has not complied with the required approval of application for registration.
prudential capital ratio as prescribed in Sec. Thereafter, the annual fee shall be paid not
4107P; or later the 31 March of every year.
d. has not submitted any of the (Circular No. 656 dated 02 June 2009, as amended by Circular
periodic reports listed in Appendix P-2.
§ 4151P.6 Date of opening for
business. The pawnshop branch shall
commence actual operations within six (6)
§ 4151P.4 Documentary
months from the date of issuance of the AO.
requirements. A pawnshop that intends
Failure to commence actual operations
to open a branch office shall submit to
within the aforementioned six (6) months
the BSP an application (using a
period shall render the BSP AO as
BSP-prescribed form) duly accomplished
automatically cancelled.
and signed by the proprietor/managing
The pawnshop head office shall notify
partner/president under oath that shall be
the BSP in writing of the start of operations
the basis for the issuance by the BSP an
of the branch within five (5) business days
Authority to Operate (AO). The following
from the actual start of the operations of
documents shall be submitted together
the branch.
with every application for a branch (Circular No. 656 dated 02 June 2009, as amended by Circular
office: No. 711 dated 28 January 2011)
a. Duly notarized certification from the
head office as to its compliance with the § 4151P.7 Pawnshop branches
minimum amount of capital under Secs. without business permit and authority to
4106P and 4107P; operate considered operating illegally
b. Certified true copy of the board Any pawnshop branch that is found
resolution authorizing the establishment of operating that does not have a
the branch (in case of corporation); current business permit issued by the
c. City/municipal license/business city or municipality where it
license/mayor’s permit from the city or is located and an AO issued by the BSP is

Part I - Page 12
§§ 4151P.7 - 4161P.1
11.12.31
considered operating illegally. Such Secs. 4157P - 4160P (Reserved)

pawnshop shall be reported to the Office
of the Mayor of the concerned city or J. RECORDS AND REPORTS
municipality, for appropriate action,
without prejudice to whatever legal action Sec. 4161P Records. The accounting period
the Bangko Sentral may pursue under of pawnshops shall be on the calendar year
Section 18 of P.D. No. 114 and other basis.
applicable laws against the pawnshop, its The accounting records of pawnshops
proprietor, partners, stockholders, directors shall consist of records of original entry and
and president or officer of equivalent rank.
books of final entry.
The records of original entry shall consist
of pawn tickets, official receipts, vouchers
Secs. 4152P - 4155P (Reserved) and other supporting documents. The books
of final entry shall consist of the general
I. BUSINESS DAYS AND HOURS ledger, subsidiary ledgers and registers of
loans extended and loans paid.
Sec. 4156P Business Days and Hours Pawnshops may use any form of loans
Pawnshops, including their branches, shall extended and loans paid registers as long
transact business at a minimum of five (5) as they contain spaces and columns for
days a week, for a minimum of six (6) hours information enumerated in Section 11 of
a day, both to be selected by them. They P.D. No. 144.
may, at their discretion, remain open A pawnshop that uses a computerized
beyond the aforesaid requirement as they system may record its loan transactions in
deem it necessary. individual loan extended vouchers which
The business hours and business days shall contain the same information
shall be printed on the face of the pawn necessary to comply with Section 11 of
ticket and shall be posted together with the P.D. No. 114 in lieu of the loan extended
original Bangko Sentral AOR/AO and loans paid registers. Such pawnshops
conspicuously at all times within the shall periodically compile or bind the loan
premises of the pawnshop, preferably at the extended vouchers and shall be made
window or door that is clearly visible to
available for Bangko Sentral examination
the pawning public.
upon request.
Pawnshops shall only transact business
The Description of Loan Registers of
in the pawnshops’ registered place of
business or premises of the head office and Pawnshops provided in Appendix P-1 shall
branches, if any. Transacting business be followed.
outside the pawnshops’ registered place of (Circular No. 656 dated 02 June 2009, as amended by Circular
business or premises shall be a ground for No. 711 dated 28 January 2011)
cancellation of pawnshop’s AOR or AO,
as the case may be. § 4161P.1 Uniform system of
During business days and hours, the accounts. Pawnshops shall strictly adopt/
pawnshop head office and every branch implement the Uniform System of Accounts
shall have at least one (1) personnel, prescribed for pawnshops in the recording
(manager or officer-in-charge, if any) that has of daily transactions including reportorial
attended the briefing on pawnshop requirements.
regulations and AMLA seminar mentioned The Uniform Chart of Accounts for
in Subsec. 4101P.5. Pawnshops is provided in Appendix P-1.
(Circular No. 656 dated 02 June 2009, as amended by Circular (Circular No. 656 dated 02 June 2009)
Manual of Regulations for Non-Banks Financial Institutions P Regulations

Part I - Page 13
§§ 4161P.2 - 4162P
13.12.31
§ 4161P.2 Philippine Financial Bangko Sentral recommended valuation

Reporting Standards/Philippine Accounting reserves.
Standards Notwithstanding the exceptions in Items
Statement of policy. It is the policy of “a”, “b” and “c”, the audited annual
the Bangko Sentral to promote fairness, financial statements required to be
transparency and accuracy in financial submitted to the Bangko Sentral in
reporting. It is in this light that the Bangko accordance with Appendix P-2 shall in all
Sentral aims to adopt all Philippine Financial respect be PFRS/PAS compliant: Provided,
Reporting Standards (PFRS) and Philippine That FIs shall submit to the Bangko Sentral
Accounting Standards (PAS) issued by the adjusting entries reconciling the balances
Accounting Standards Council (ASC) to the in the financial statements for prudential
greatest extent possible. reporting with that in the audited annual
Pawnshops shall adopt the PFRS and financial statements.
PAS which are in accordance with generally (Circular No. 656 dated 02 June 2009)
accepted accounting principles in recording
transactions and in the preparation of § 4161P.3 Accounting for pawnshops
financial statements and reports to Bangko premises; other fixed assets. Pawnshop
Sentral. However, in cases where there are premises, furniture, fixtures and equipment
differences between Bangko Sentral shall be accounted for using the cost model
regulations and PFRS/PAS as when more
under PAS 16 “Property, Plant and
than one (1) options are allowed or certain
Equipment”.
minimum limits are prescribed by the PFRS/
PAS, the option or limit prescribed by
Bangko Sentral regulations shall be adopted
by all banks FIs. § 4161P.4 Retention of records
For purposes hereof, the PFRS/PAS shall Pawnshop records, ledgers, books and
refer to issuances of the ASC and approved documents (including those in electronic
by the PRC. media):
Accounting treatment for prudential (a) shall not be destroyed or disposed
reporting. For prudential reporting, FIs shall of for at least five (5) years;
adopt in all respect the PFRS and PAS except (b) shall have backup hard and/or soft
as follows: copy to allow reconstruction of records in
a. In preparing consolidated financial case of loss or destruction due to fire and
statements, only investments in financial other fortuitous events; and
allied subsidiaries except insurance (c) shall be made available for Bangko
subsidiaries shall be consolidated on a line- Sentral examination upon request.
by-line basis; while insurance and non- A pawnshop that does not have records,
financial allied subsidiaries shall be ledgers, registers, books or documents or
accounted for using the equity method. that refuses to permit access to its records,
Financial/non-financial allied/non-allied ledgers, registers, books or documents to
associates shall be accounted for using an authorized Bangko Sentral officer/
equity method in accordance with the examiner may be considered as refusal to
provisions of PAS 28 “Investments in permit an examination.
Associates”. (Circular No. 656 dated 02 June 2009, as amended by Circular
b. For purposes of preparing separate No. 711 dated 28 January 2011)
financial statements, financial/non-financial
allied/non-allied subsidiaries/associates, Sec. 4162P Reports. Pawnshops shall
including insurance subsidiaries/associates, submit to the appropriate department of the
shall also be accounted for using the equity SES the reports listed in Appendix P-2 in
method; and the forms as may be prescribed by the
c. FIs shall be required to meet the Deputy Governor (DG), SES.
P Regulations Manual of Regulations for Non-Banks Financial Institutions

Part I - Page 14
§§ 4162P - 4162P.3
13.12.31
Any change in, or amendment to, the b. Faulty report shall refer to an
articles of incorporation/co-partnership, by- inaccurate/improperly accomplished report.
laws or material documents required to be c. Willful delay or default in the
submitted to the Bangko Sentral shall be submission of reports shall refer to the failure
reported by submitting copies of the of a pawnshop to submit a report on time.
amended articles of incorporation, by-laws Failure to submit a report on time due to
or material document to the appropriate fortuitous events, such as fire and other
department of the SES within fifteen (15) natural calamities and public disorders,
days following such change. including strike or lockout affecting a
pawnshop as defined in the Labor Code or
No. 821 dated 06 December 2013)
a national emergency affecting operations
of pawnshops, shall not be considered as
§ 4162P.1 Categories of and signatories
willful delay.
to reports. Reports required to be submitted
d. False statement shall refer to any
to the Bangko Sentral are classified into
Categories A-1, A-2, A-3 and B reports as untruthful data or information or falsehoods
indicated in the list of reports required to made in a report to the Bangko Sentral or its
be submitted to the Bangko Sentral in authorized agents, with intent to deceive or
Appendix P-2. mislead. Any false statement which tends
Appendix P-3 prescribes the signatories to favor the pawnshop submitting the report
for each report category and the shall be prima facie evidence of intent to
requirements on signatory authorization. deceive or mislead.
Reports submitted in computer media shall e. Repeated violation shall mean the
be subject to the same requirements. commission of the same offense for at least
A report submitted to the Bangko Sentral two (2) times.
under the signature of an officer who is not f. Persistent violation shall mean the
authorized in accordance with the commission of the same offense for at least
requirements in this Subsection shall be three (3) times.
considered as not having submitted. g. Offense shall refer to submission of
(Circular No. 656 dated 02 June 2009) faulty report, willful delay in submission of
reports, or making of false statements in
§ 4162P.2 Manner of filing. The reports.
submission of the reports shall be effected h. Continuing offenses/violations are
by filing them personally with the acts, omissions or transactions entered into,
appropriate department of the SES or with in violations of laws, Bangko Sentral rules
the Bangko Sentral Regional Offices/Units, and regulations, Monetary Board directives,
or by sending them by registered mail or and orders of the Governor which persist
special delivery through private couriers,
from the time the particular acts were
unless otherwise specified in the circular
committed or omitted or the transactions
or memorandum of the Bangko Sentral.
were entered into until the same were
corrected/rectified by subsequent acts or
§ 4162P.3 Definition relevant to transactions. They shall be penalized on a
reports to Bangko Sentral per calendar day basis from the time the acts
Definition of terms. For purposes of were committed/ omitted or the transactions
these rules, the following definitions shall were effected up to the time they were
apply: corrected/rectified.
a. Report shall refer to any report or i. Transactional offenses/violations are
statement required of a pawnshop to be acts, omissions or transactions entered into in
submitted to the Bangko Sentral periodically violation of laws, Bangko Sentral rules and
or within a specified period. regulations, Monetary Board directives, and
Part I - Page 15
§§ 4162P.3 - 4164P.4
11.12.31
orders of the Governor which cannot be least P50.0 million as of reference year.
corrected/rectified by subsequent acts or (Circular No. 656 dated 02 June 2009, as amended by Circular
transactions. They shall be meted with No. 711 dated 28 January 2011)
one-time monetary penalty on a per
§ 4164P.1 Financial audit
transaction basis.
(Deleted by Circular No. 711 dated 28 January 2011)
j. Continuing penalty refers to the
monetary penalty imposed on continuing § 4164P.2 Disclosure of external
offenses/violations on a per calendar day auditor’s adverse findings to the Bangko
basis reckoned from the time the offense/ Sentral
violation occurred or was committed until (Deleted by Circular No. 711 dated 28 January 2011)
the same was corrected/rectified.
k. Transactional penalty refers to a one- § 4164P.3 Sanction
time penalty imposed on transactional (Deleted by Circular No. 711 dated 28 January 2011)
offense/violation.
(As amended by Circular Nos. 711 dated 28 January 2011, 662 § 4164P.4 Selection, appointment,
dated 09 September 2009 and 656 dated 02 June 2009) reporting requirements and delisting of
external auditors and/or auditing firm;
Sec. 4163P Report on Crimes/Losses sanction. Pursuant to Section 58, R.A. No.
Pawnshops shall submit a report on crimes 8791, and the existing provisions of the
and losses in accordance with Appendix P-2 executed MOA dated 12 August 2009,
together with the following: binding the BSP, SEC, PRC – BoA and the
a. Notarized list of lost pawned IC for a simplified and synchronized
articles, indicating the pawn ticket number, accreditation requirements for external
name of the pawner, date loan granted, brief auditor and/or auditing firm, following are
description of pawn, and amount of loan; the revised rules and regulations that shall
b. Police report on the investigation of govern the selection and delisting by the BSP
the fire/robbery incident; of covered institutions which under special
c. Proof of notification in writing to all laws are subject to BSP supervision.
concerned pawners about the incident; and Statement of policy. It is the policy of
d. Plan of settlement of pawners’ claim the BSP to ensure effective audit and
for lost pawned items, if any. supervision of banks, QBs, trust entities
Should a crime or loss result in a and/or NSSLAs including their subsidiaries
deficiency in the minimum capital and/or and affiliates engaged in allied activities and
prudential capital required under Secs. other FIs which under special laws are
4106P and 4107P, the pawnshop shall subject to BSP supervision, and to ensure
submit a capital build up program in the reliance by BSP and the public on the
accordance with Subsec. 4107P.1. opinion of external auditors and auditing
(Circular No. 656 dated 02 June 2009, as amended by Circular firms by prescribing the rules and regulations
No. 711 dated 28 January 2011) that shall govern the selection, appointment,
reporting requirements and delisting for
Sec. 4164P Audited Financial Statements/ external auditors and auditing firms of said
Annual Report of Pawnshops. Pawnshops institutions, subject to the binding provisions
shall submit a copy of the AFS, as duly of and implementing regulations pursuant
received by the BIR, to the BSP not later to the aforesaid MOA.
than 30 June following the reference a. Rules and regulations. The revised
calendar year. This requirement will apply rules and regulations that shall govern the
only to pawnshops whose total asset is at selection and delisting by the BSP of covered

Part I - Page 16
§§ 4164P.4 - 4171P.4
11.12.31
institutions which under special laws are § 4171P.2 Number control

subject to BSP supervision are shown in The following are the forms, instruments
Appendix P-9. and accounts that shall be number
Sanctions. The applicable sanctions/ controlled:
penalties prescribed under Sections 36 and (1) Pawn tickets;
37 of R.A. 7653 to the extent applicable (2) Official receipts; and
shall be imposed on the covered institutions, (3) Expense vouchers.
its audit committee and the directors
approving the hiring of external auditors/
auditing firm who/which are not in the BSP § 4171P.3 Safekeeping of records and
insurance of premises.
list of selected auditors for covered
Vital records for the current year must
institutions or for hiring, and/or retaining
be kept inside the safe or vault when not in
the services of the external auditor/auditing
use. Vital records are pawn ticket
firm in violation of any of the provisions of
duplicates, loan paid and loan extended
this Section and for non-compliance with registers or loan paid and extended
the Monetary Board directive under Item “K” vouchers. Other pawnshop records/
in Appendix P-9. Erring external auditors/ documents may be placed in filing cabinets/
auditing firm may also be reported by the shelves outside the vault or safe but within
BSP to the PRC for appropriate disciplinary the pawnshop premises.
action. For this purpose, a pawnshop’s vault,
i.e., its walls, ceiling and floor shall be made
of steel-reinforced concrete or such other
Sec. 4165P General Information Sheet equally safe materials/specifications. Vault
(Deleted by Circular No. 711 dated 28 January 2011) doors shall be made of steel or other drill
and torch-resistant materials.
Secs. 4166P - 4170P (Reserved) Safes should be sufficiently heavy or be
securely anchored to the floor of the premises.
K. INTERNAL CONTROL Vital records kept in electronic media
including back-up copies thereof shall be
Sec. 4171P Internal Control System. The kept in safes or vaults designed to protect
following provisions are the minimum them from damage due to fire or other
internal control standards for pawnshops fortuitous events.
to help promote effective control system.or The pawnshop premises and furniture,
fixtures and equipment of pawnshops must
safe but within the pawnshop premises.
be insured against fire.
§ 4171P.1 Proper accounting records
a. All pawnshops shall maintain proper
§ 4171P.4 Miscellaneous. Every
and adequate accounting records which
pawnshop shall adopt minimum internal
include reconciliation of due to/from head control measures to safeguard the assets of
office/branches, if the pawnshop has several the pawnshop. Such measures may include
offices. but is not limited to, dual control, check
b. Records should be kept up-to-date and balance and internal audit. No
and shall contain sufficient detail so that an employee shall be permitted to process a
audit trail is established. transaction affecting his own account.
(Circular No. 656 dated 02 June 2009) (Circular No. 656 dated 02 June 2009)

Part I - Page 17
§§ 4172P - 4181P.2
11.12.31
Sec. 4172P Separation of Pawnshop “pawnshop”, “pawnbrokerage”, or words of

Business from Other Businesses. A similar import, or transact in any manner the
pawnshop that is at the same time engaged business of a pawnshop without having first
in another business not directly related to complied with the provisions of P.D. No. 114
the business of a pawnshop, shall keep such and these regulations.
business distinct and separate from the A pawnshop that shall use/uses a name
pawnshop operation. that is different from its registered name
Allowable corollary business activities with DTI or SEC shall cause to have such
of pawnshops shall include acting as foreign name to also appear parenthetically under
exchange dealer/money changer and/or as its registered name in the certificate of
remittance agent, acting as bills payment registration with DTI or articles of
agent for utility companies and other partnership/incorporation and by-laws with
entities and such other activities as may SEC, as well as in the business permit issued
be allowed by the BSP. by the city or municipality.
A pawnshop must secure the necessary (Circular No. 656 dated 02 June 2009)
business permit from the city or municipality
for the corollary business. A pawnshop that § 4181P.1 Change of registered/
will engage in the business of a foreign business name. A pawnshop shall not
exchange dealer/money changer or act as a change its registered/business name without
remittance agent shall register with the BSP submitting the following documents to the
before engaging in such business pursuant appropriate department of the SES:
to Sec. 4511N. a. Certificate of Registration from DTI
The pawnshop should be able to show or SEC, as the case may be, indicating the
in its financial statements the appropriate new business/registered name;
accounts as well as the income or loss b. Mayor’s/municipal license/permit;
pertaining to the corollary business. and
(Circular No. 656 dated 02 June 2009) c. Original BSP Acknowledgement of
Registration of Head Office (AOR) and/or
Secs. 4173P - 4180P (Reserved) Authority to Operate (AO) issued under the
old name.
A new BSP AOR and/or AO shall be
issued indicating the new registered/
Sec. 4181P Registered/Business Name
business name of the pawnshop.
The registered name of a pawnshop shall
refer to the name appearing in the Certificate
of Registration (COR) of business name from
§ 4181P.2 Use of registered business
the DTI, in the case of a sole proprietorship,
name in signage, pawn tickets and other
or in the Articles of Partnership
forms. The following regulations shall be
Incorporation and By-Laws duly registered
with the SEC, in the case of a partnership or observed with respect to the use of the
corporation. business/registered name in the signage,
In case, the registered name shall pawn ticket and other forms of a pawnshop:
include the word “pawnshop” to reflect the a. As a general rule, the registered
nature of business it is engaged in. name appearing in the Certificate of
Conversely, no person or entity shall Registration from the DTI or SEC, as the
advertise, use signage or hold itself out as case may be, shall be used consistently
being engaged in the business of a pawnshop in the pawnshop’s signage and in all
or use in its business name the words documents including pawn tickets, official

Part I - Page 18
§§ 4181P.2 - 4182P.1
11.12.31
receipts, stationery and other similar submitted to the appropriate department of

documents of the pawnshop. the SES within ten (10) days before the
b. A pawnshop that uses or will use a effectivity of such transfer.
name that is different from its registered A pawnshop may transfer its place of
name as mentioned in Sec. 4181P above or business from one location to another within
that uses or will use a name already the territorial limits of the city or
registered and being used by another municipality upon compliance with the
pawnshop shall indicate parenthetically following requirements:
under such name, the registered name of a. Notice of transfer shall be published
the pawnshop with the DTI or SEC, as the in English and in Filipino or in the local
case may be, with the words “owned and dialect in two (2) daily newspapers of
operated by” before the registered name in general circulation in the city or
the pawnshop’s pawn tickets, official municipality where the pawnshop is closing
receipts, stationery and other similar business, and posted in English and Filipino
documents. or in the local dialect for one (1) month after
c. A pawnshop that is a subsidiary or date of publication in a conspicuous place
affiliate of another pawnshop shall likewise in the premises to be vacated and to be
indicate such relationship in the pawn transferred to;
tickets, official receipts, stationery and other b. The notice shall be published for at
similar documents. least three (3) consecutive days, the last day
A subsidiary is a corporation more than of which shall be five (5) days before the
fifty percent (50%) of the voting stock of actual transfer; and
which is owned by another corporation; c. Notice shall contain the following
while an affiliate is a corporation less than information:
fifty (50%) of the voting stock of which is (1) Date of transfer;
owned by another corporation. (2) Address of the premises to be
d. The exact address of the pawnshop vacated; and
shall be indicated consistently in all (3) Address of the premises to which
pawnshop documents (e.g., pawn tickets, pawnshop intends to transfer.
official receipts, stationery and other similar In remote areas where newspapers
documents) and in the business permit are not available, the publication
issued by the city or municipality. requirement shall be complied with by
(Circular No. 656 dated 02 June 2009, as amended by Circular posting notices at the city hall or
No. 711 dated 28 January 2011) municipal building of the city or
municipality where the pawnshop has its
§ 4181P.3 Sanctions place of business.
Sec. 4182P Transfer/Relocation of Business § 4182P.1 Documentary requirements

The following shall govern the transfer/ for transfer within the same city/
relocation of pawnshops. municipality. The following documents shall
No pawnshop shall transfer or relocate be filed with the appropriate department of
its place of business within three (3) months the SES in connection with transfer of
following the maturity of any loan or pledge, location within the same city or
or before any pawn shall have been sold or municipality:
disposed of as provided under existing a. A certification signed by the
regulations. A notice of transfer shall be proprietor/managing partner/president

Part I - Page 19
§§ 4182P.1 - 4184P
11.12.31
informing the appropriate department of the (1) Submission of the following

SES of the intended transfer and that the documentary requirement within thirty
requirements prescribed under Sec. 4182P calendar (30) days after the provision of
have been complied with; Subsec. 4183P.1:
b. Copy of notice of transfer duly a. Notarized statement stating that:
acknowledged by the DTI and by the (i) The pawnshop’s books of accounts,
licensing authority of the locality where the reports, records and documents shall be
pawnshop is operating; preserved for at least five (5) years from date
c. Sample copy of the pawn ticket of last entry;
bearing the new address; (ii) All unused accountable forms have
d. Sketch of pawnshop’s new location; been destroyed to prevent their
e. Original BSP AOR and/or AO issued unauthorized use;
to the pawnshop, or an affidavit in case of (iii) Proprietor/partners/president of the
loss; pawnshop shall be held liable for present
f. Board resolution authorizing the or future claims arising from its
transfer of the pawnshop (in case of pawnbroking transactions; and
corporations) (iv) All outstanding pawns have been
(Circular No. 656 dated 02 June 2009) redeemed/sold at public auction, or
otherwise disposed of, in accordance with
§ 4182P.2 Documentary requirements law.
for transfer outside the city/municipality b. Copy of the pawnshop’s application
A pawnshop that intends to transfer/relocate for retirement of business approved by the
its business outside the city or municipality licensing authority of the city or municipality
where it is located shall comply with the where the pawnshop operated.
following: c. Original BSP AOR and/or AO issued
(1) requirements on closure of business to the pawnshop.
under Sec. 4183P; and (2) Remittance of penalties or BSP
(2) requirements for the establishment assessments on the pawnshop, if any, such
and registration of a new pawnshop or as for non-submission/delayed submission
branch under Subsecs. 4101P.4 and of required reports.
4151P.4, respectively, where applicable. (Circular No. 656 dated 02 June 2009)
§ 4183P.2 Delisting of pawnshops/
Sec. 4183P Closure of Pawnshops. The involuntary closure
following rules shall govern the closure of (Deleted by Circular No. 711 dated 28 January 2011)
pawnshops:
(Circular No. 656 dated 02 June 2009) § 4183P.3 Other grounds for delisting
§ 4183P.1 Voluntary closure
Voluntary closure of a pawnshop may be Sec. 4184P Transfer of Ownership. No
effected only after three (3) months following pawnshop proprietor/partners/stockholders
the maturity of any loan or pledge, or before shall transfer ownership over the pawnshop
any pawn shall have been sold or disposed business without securing prior BSP
of and after it has complied with the approval.
following requirements: (Circular No. 656 dated 02 June 2009)

Part I - Page 20
§§ 4184P.1 - 4193P
13.12.31
§ 4184P.1 Requirements for transfer § 4184P.2 Processing and annual fees

of ownership. The owner(s) shall file the A pawnshop that is the subject of change of
following documents ten (10) days before ownership shall be subject to the Bangko
transferring the ownership of the pawnshop: Sentral processing and annual fees under
(1) Notarized statement by owner/ Subsec. 4101P.6.
managing partner/president or its equivalent (Circular No. 656 dated 02 June 2009, as amended by Circular
rank stating that: No. 711 dated 28 January 2011)
a. The pawnshop’s books of accounts,
Sec. 4185P Processing Fee for Replacement
records and documents shall be preserved
of Acknowledgement of Registration of
for five (5) years from date of last entries
Head Office/Authority to Operate. A non-
before the transfer of ownership;
refundable processing fee of P300.00 shall
b. All unused accountable forms such
be collected from each pawnshop that will
as official receipts and pawn tickets have
request for a replacement AOR or AO due
been destroyed to prevent their
to:
unauthorized use.
(a) loss of AOR/AO;
c. The owner/managing partner/
(b) change of business/registered name
president shall be held accountable for
under Subsec. 4181P.1; and
present and future claims arising from
(c) transfer of location or address under
transactions of the pawnshop under the
Subsec. 4182P.
former owner (new owner may assume this (Circular No. 656 dated 02 June 2009)
liability, in which case, he/she shall submit
a notarized statement to that effect). Secs. 4186P - 4189P (Reserved)
d. All outstanding pawns have been
redeemed or sold at public auction, or Sec. 4190P Guidelines on Outsourcing. The
otherwise disposed of in accordance with rules on outsourcing of banking functions
law; or the owners of outstanding pawns as shown in Appendix Q-37 shall be
have been notified by registered mail on the adopted insofar as they are applicable to
transfer of ownership of the pawnshop. Pawnshops.
(2) Copy of pawnshop’s notice of (Circular No. 656 dated 02 June 2009, as amended by Circular
retirement of business acknowledged by the No. 764 dated 03 August 2012)
licensing authority where the pawnshop
Sec. 4191P (Reserved)
operated.
(3) Original Bangko Sentral AOR and/
Sec. 4192P Prompt Corrective Action
or AO issued to the pawnshop, or an
Framework. The framework for the
affidavit in case of loss.
enforcement of prompt corrective action
(4) Payment of Bangko Sentral
(PCA) on banks which is in Appendix Q 40,
assessment on the pawnshop, if any, such
shall govern the PCA taken on pawnshops
as for non-submission or delayed
to the extent applicable, or by analogy.
submission of required reports.
If the vendee shall continue the
operation of the pawnshop, he shall comply Sec. 4193P Information Technology Risk
with the provisions of Subsecs. 4101P.3 and Management (ITRM). The enhanced
4142P.2. The vendee shall also submit a guidelines on ITRM keep abreast with the
copy of the duly executed contract affecting aggressive and widespread adoption of
the transfer of ownership. technology in the financial service industry

Part I - Page 21
§§ 4193P - 4193P.3
13.12.31
and consequently strengthen existing Sentral rules and regulations and special
Bangko Sentral framework for IT risk laws are subject to Bangko Sentral
supervision. ITRM should be considered a supervision and/or regulation. Moreover,
component and integrated with the subject guidelines shall also apply to BSIs
institutions’ risk management program. The with offshore data processing as may be
guidelines likewise provide practical plans appropriate to their situation. The
to address risks associated with emerging framework covers different facets of ITRM,
trends in technology and growing concerns some of which are supplemented with
on cyber security. detailed guidelines in Appendices Q-59a,
(Circular No. 808 dated 22 August 2013) Q-59b, Q-59c, Q-59d, Q-59e and Q-59f.
The Bangko Sentral shall keep the
§ 4193P.1 Declaration of policy. A Appendices updated and, in the future, issue
growing number of Bangko Sentral additional regulations on new and emerging
supervised institutions (BSIs) employ the products, services, delivery channels, and
advances in technology as leverage to offer
other significant applications of technology.
innovative products, deliver fast and efficient
Subject guidelines, including the
service at affordable prices, and venture to
Appendices Q-59a, Q-59b, Q-59c, Q-59d,
new markets. Moreover, technology drives
Q-59e and Q-59f, are not “one-size-fits-all”
the efficiency of operations and financial
and implementation of these need to be risk-
accounting of these institutions, and
based and commensurate with size, nature
improves their decision-making process. As
technology becomes an integral part of the and types of products and services and
business and operations of BSIs, such complexity of IT operations of the individual
technology usage and dependence, if not BSIs. BSIs shall exercise sound judgment in
properly managed, may heighten technology determining applicable provisions relevant
risks. The Bangko Sentral expects BSIs to to their risk profile.
have the knowledge and skills necessary to (Circular No. 808 dated 22 August 2013)
understand and effectively manage
technology risks. These institutions are § 4193P.3 Complexity of IT risk profile
required to have an integrated approach to The Bangko Sentral shall risk profile all BSIs
risk management to identify, measure, and classify them as either “Complex” or
monitor and control risks. “Simple”. The assessment of complexity of
(Circular No. 808 dated 22 August 2013) IT risk profile is based largely on the degree
of adoption of technology and considers
§ 4193P.2 Purpose and scope. The size, nature and types of products and
enhanced guidelines aim to provide services and complexity of IT operations
guidance in managing risks associated with among the risk factors. In assessing IT
use of technology. The guidelines outlined operations, the nature of IT organization,
are based on international standards and degree of automation of core processes and
recognized principles of international applications and extent and reach of online
practice for ITRM and shall serve as Bangko branch network are likewise considered.
Sentral’s baseline requirement for all BSIs. A BSI with “Complex” IT risk profile is
The guidelines shall apply to BSIs which highly dependent on technology. IT
include banks, non-banks with quasi- components are integral to the core business
banking function (NBQB), non-bank activities that major weaknesses on IT
electronic money issuers and other non-bank systems, maintenance and support, if not
institutions which under existing Bangko properly addressed, may cause operational

Part I - Page 22
§§ 4193P.3 - 4193P.5
13.12.31
inefficiencies, business disruptions and/or § 4193P.5 Definition of terms. In these

financial losses. On the other hand, a BSI guidelines, terms are used with the
with “Simple” IT risk profile relies or following meanings:
depends less on technology in the Terminology Definitions
operations of its business, thus, is not Board of The governing body
affected or lowly impacted by IT-related Directors elected by the
risks. (Board) stockholders that
Non-bank institutions which under exercises the corporate
existing Bangko Sentral rules and regulations powers of a locally
and special laws are subject to Bangko incorporated BSI. In
Sentral supervision/regulation shall be case of a BSI
notified in writing of their classification incorporated or
immediately after 14 September 2013. established outside the
(Circular No. 808 dated 22 August 2013) the Philippines, this
may refer to the
§ 4193P.4 IT rating system . The functional oversight
Bangko Sentral, in the course of its on-site equivalent such as
examination activities, shall evaluate BSIs’ the Country Head
ITRM system and measure the results based (for foreign banks) or
on Bangko Sentral’s IT rating system. A management
composite rating is assigned based on a “1” committee or body
to “4” numerical scale, as follows: empowered with
4 BSIs with this rating exhibit strong oversight and
performance in every respect. supervision
Noted weaknesses in IT are minor responsibilities.
in nature and can be easily Cyberfraud A deliberate act of
corrected during the normal omission or
course of business. commission by any
3 BSIs with this rating exhibit person carried out
satisfactory performance but may using the Internet and/
demonstrate modest weaknesses or other electronic
in operating performance, channels, in order to
monitoring, management communicate false or
processes or system development. fraudulent
2 BSIs with this rating exhibit less representations to
than satisfactory performance and prospective victims,
require considerable degree of to conduct fraudulent
supervision due to a combination transactions, or to
of weaknesses that may range transmit the proceeds
from moderate to severe. of fraud to FIs
1 BSIs with this rating exhibit connected with the
deficient IT environment that may perpetrator. Examples
impair the future viability of the of cyberfraud in the
entity, thereby requiring financial industry may
immediate remedial action. include, but are not
(Circular No. 808 dated 22 August 2013) limited to, theft of

Part I - Page 23
§ 4193P.5
13.12.31

credit card data, computer.
computer hacking, The microprocessor
electronic identity chip contains the
theft, phishing scams, information needed
ATM skimming and to use the card
non-delivery of for payment, and is
merchandise protected by various
purhased online, security features. Chip
among others. cards are a more
Electronic The delivery of secure alternative to
Products and banking and financial traditional magnetic
Services products and services stripe payment cards.
through electronic, Encryption A data security
interactive technique used to
communication protect information
channels which from unauthorized
include automated inspection or
teller machines alteration.
(ATMs), point of sales Information is
(POS) terminals, encoded so that
internet, mobile data appears as
phones, touch tone meaningless string of
telephones and other letters and symbols
similar electronic during delivery or
devices. These transmission. Upon
encompass electronic receipt, the
banking, electronic information
payments, electronic is decoded using an
money and other encryption key.
electronic products Enterprise- Extending throughout
and services offered wide Level or involving an entire
by BSIs. institution rather than
EMV (stands It is a global standard a single business
for Europay, for credit, debit and department or
Mastercard prepaid payment function.
and Visa) cards based on chip In this document, the
card technology. words "enterprise-wide"
EMV chip-based and "organization-wide"
payment cards, also are interchangeably
known as smart used.
cards, contain an Information Encompass people
embedded Asset/ and organization, IT
microprocessor, a Resources processes, physical
type of small infrastructure (i.e.

Part I - Page 24
§ 4193P.5
13.12.31

facilities, equipment), systems (including
IT infrastructure hardware and software
(including computing components and data)
hardware, network and other electronic
infrastructure, devices.
middleware) and IT Group/ The unit of an
other enterprise Department organization within a
architecture BSI responsible for the
components activities of IT
(including operations control,
information, monitoring of IT
applications). services, infrastructure
Information The protection of support and a
Security information assets combination of
from unauthorized technology, people
access, use, and processes.
disclosure, IT Operations Encompasses all
disruption, processes and services
modification that are provisioned by
or destruction in an IT Unit to internal
order to provide and external clients.
confidentiality, IT An arrangement under
integrity and Outsourcing which another party
availability. (either an affiliated
Information A single or a series entity within a
Security of unwanted or corporate group or an
Incident unexpected entity external to the
information security corporate group)
events that have a undertakes to provide
significant probability to a BSI all or part of an
of compromising IT function or service.
business operations A BSI would use IT
and threatening the outsourcing for
confidentiality, functions ranging from
integrity or infrastructure to
availability of BSI's software development,
information or maintenance and
information systems. support. The related
Information Automated means of IT service is integral to
Technology originating, the provision by BSI of
(IT) processing, storing a financial service and
and communicating the BSI is dependent
information and on the service on an
covers recording ongoing basis.
devices, IT Risk Any potential adverse
communications outcome, damage, loss,
network, computer violation, failure or

Part I - Page 25
§ 4193P.5
13.12.31

disruption associated core supporting
with the use of or applications such as
reliance on computer collaboration systems
hardware, software, and report processing
devices, systems, tools.
applications and Project Planning, monitoring
networks. Management and controlling an
IT Strategic A long-term plan (i.e., activity.
Plan three (3)- to five (5)- year Senior Officers of the
horizon) in which Management/ institution given the
business and IT Management authority by the Board
management to implement the
cooperatively describe policies it has laid
how IT resources will down in the conduct
contribute to the of the business of the
institution's strategic institution.
objectives. Service Level Establishes mutual
IT Risk Risk management Agreement expectations and
Management system that enables a provide a baseline to
System BSI to identify, measure IT
measure, monitor and performance. An SLA
control IT-related risks. should contain,
Management A general term for the among others, the
Information computer systems in an specified level of
System (MIS) institution that provide service, support
information about its options, enforcement
business operations. or penalty provisions
Network Two (2) or more for services not provided,
computer systems that a guaranteed level of
are grouped together to system performance as
share information, it relates to downtime
software and hardware. or uptime, a specified
Offshore BSIs Have their critical level of customer
system processing and support and what
data located outside of software or hardware
the Philippines. These will be provided and
are usually maintained for what fee.
and operated by Triple Data A mode of the DES
organizations within Encryption encryption algorithm
the same business group Standard that encrypts data three
that the BSIs belong to, (3DES) times. Three 64-bit
such as their head office, keys are used, instead
subsidiary and/or of one, for an overall
affiliate. Locally- key length of 192 bits
maintained systems, if (the first encryption
any, are limited to non- is encrypted

Part I - Page 26
§§ 4193P.5- 4193P.7
13.12.31
Terminology Definitions systems, delivery networks and managerial
with second key, and capacities and capabilities;
the resulting cipher text 3. Reputation risk is the risk to earnings
is again encrypted with and capital arising from negative public
a third key. opinion. This affects the institution’s ability
(Circular No. 808 dated 22 August 2013) to establish new relationships or services
or continue servicing existing relationships.
§ 4193P.6 Description of IT-related
The risk can expose the institution to
risks. As BSIs increase their reliance on IT
litigation, financial loss or damage to its
to deliver products and services,
reputation; and
inappropriate usage of IT resources may
4. Compliance risk is the risk to earnings
have significant risk exposures. While IT
and capital arising from the violations of, or
does not trigger new types of risks, it brings
non-conformance with laws, rules and
in new dimensions to traditional banking
regulations, prescribed practices or ethical
risks (i.e. strategic risk, credit risk, market
standards. Compliance risk also arises in
risk, liquidity risk and operational risk) that
situations where the laws and rules
require new or enhanced control activities
governing certain products activities of the
(e.g. a failure of a credit risk measurement
application is an IT failure and, therefore, a BSI’s clients may be ambiguous or untested.
systems failure in the sense of operational Compliance risk exposes the institution to
risk). Moreover, IT is an implied part of monetary penalties, non-monetary sanctions
any system of internal controls, regardless and possibility of contracts being annulled
of the type of risk and, consequently, forms or declared unenforceable.
an important element in organization-wide (Circular No. 808 dated 22 August 2013)
risk management. Among the risks
associated with the use of IT are the § 4193P.7 IT Risk Management System
following: (ITRMS). As BSIs become more dependent
on IT systems and processes, technology
1. Operational risk is the risk to earnings
risks and information security issues have
and capital arising from problems with
become progressively more complex and
service or product delivery. This risk is a
pressing in recent years. Information security
function of internal controls, IT systems,
is just as important as the new technologies
employee integrity and operating processes.
being installed by BSIs. As progress in
Operational risk exists in all products and
services; technology shifts to higher gear, the trend
2. Strategic risk is the risk to earnings in cyber-attacks, intrusions, and other form
and capital arising from adverse business of incidents on computer systems shows
decisions on IT-related investments or that it will not only persist but will continue
improper implementation of those to increase in frequency and spread in
decisions. The risk is a function of the magnitude.
compatibility of an organization’s strategic Management of IT risks and information
goals, the business strategies developed to security issues becomes a necessity and an
achieve those goals, the resources deployed important part of BSIs’ risk management
against these goals and the quality of system. BSIs are therefore required to
implementation. The resources needed to establish a robust ITRM system covering four
carry out business strategies are both (4) key components: 1) IT governance,
tangible and intangible which include 2) risk identification and assessment,
communication channels, operating 3) IT controls implementation, and 4) risk

Part I - Page 27
§ 4193P.7
13.12.31
measurement and monitoring. ITSC should regularly provide adequate

1. IT Governance. This is an integral information to the Board regarding IT
part of BSIs’ governance framework and performance, status of major IT projects or
consists of the leadership and organizational other significant issues to enable the Board
structures and processes that ensure the to make well-informed decisions about the
alignment of IT strategic plan with BSIs’ BSIs’ IT operations.
business strategy, optimization of resources BSIs should develop an IT strategic plan
management, IT value delivery, performance that is aligned with the institution’s business
measurement and the effective and efficient strategy. This should be undertaken to
use of IT to achieve business objectives and manage and direct all IT resources in line
effective IT risk management implementation. with the business strategy and priorities. IT
BSIs must establish an effective IT strategic plan should focus on long term
governance framework covering the goals covering three (3)- to five (5)- year
following: horizon and should be sufficiently
a. Oversight and organization of IT supplemented by tactical IT plans which
functions. Accountability is a key concern specify concise objectives, action plans and
of IT governance and this can be obtained tasks that are understood and accepted by
with an organizational structure that has both business and IT. The IT strategic plan
well-defined roles for the responsibility of should be formally documented, endorsed
information, business processes, by the Board and communicated to all
applications, IT infrastructure, etc. stakeholders. It should be reviewed and
The Board of Directors is ultimately updated regularly for new risks or
responsible for understanding the IT risks opportunities to maximize the value of IT
confronted by a BSI and ensuring that they to the institution.
are properly managed, whereas the Senior BSIs should also create an organization
Management is accountable for designing of IT functions that will effectively deliver
and implementing the ITRMS approved by IT services to business units. For “Complex”
the Board. For Complex BSIs, the Board may BSIs, a full-time IT Head or equivalent rank
delegate to an IT Steering Committee (ITSC) should be designated to take the lead in key
or its equivalent IT oversight function to IT initiatives and oversee the effectiveness
cohesively monitor IT performance and of the IT organization. In addition to
institute appropriate actions to ensure managing the delivery of day-to-day IT
achievement of desired results. The ITSC, services, the IT Head should also oversee
at a minimum, should have as members a the IT budget and maintain responsibility
non-executive Board director who oversees for performance management, IT acquisition
the institution’s IT function, the head of IT oversight, professional development and
group/department, and the highest rank training. The IT Head should be a member
officer who oversees the business user of executive management with direct
groups. The head of control groups should involvement in key decisions for the BSI and
participate in ITSC meetings in advisory usually reports directly to the President or
capacity only. Chief Executive Officer.
A charter should be ratified by the Board A clear description of roles and
to clearly define the roles and responsibilities for individual IT functions
responsibilities of the ITSC. Formal minutes should be documented and approved by the
of meeting should be maintained to Board. Proper segregation of duties within
document its discussions and decisions. The and among the various IT functions should

Part I - Page 28
§ 4193P.7
13.12.31
be implemented to reduce the possibility IT policies and procedures have adequately

for an individual to compromise a critical covered all applicable areas.
process. A mechanism should be in place c. IT audit. Audit plays a key role in
to ensure that personnel are performing only assisting the Board in the discharge of its
the functions relevant to their respective jobs corporate governance responsibilities by
and positions. In the event that an institution performing an independent assessment of
finds it difficult to segregate certain IT control technology risk management process and IT
responsibilities, it should put in place controls.
adequate compensating controls (e.g. peer Auditors provide an assurance that
reviews) to mitigate the associated risks. important control mechanisms are in place
b. IT policies, procedures and for detecting deficiencies and managing risks
standards. IT controls, policies, and in the implementation of IT. They should
procedures are the foundation of IT be qualified to assess the specific risks that
governance structure. It helps articulate the arise from specific uses of IT. BSIs should
establish effective audit programs that cover
rules and procedures for making IT
IT risk exposures throughout the
decisions, and helps to set, attain, and
organization, risk-focused, promote sound
monitor IT objectives.
IT controls, ensure the timely resolution of
BSIs should adopt and enforce IT-related
audit deficiencies and periodic reporting to
policies and procedures that are well-
the Board on the effectiveness of institution’s
defined and frequently communicated to IT risk management, internal controls, and
establish and delineate duties and IT governance. Regardless of size and
responsibilities of personnel for better complexity, the IT audit program should
coordination, effective and consistent cover the following:
performance of tasks, and quicker training • Independence of the IT audit
of new employees. Management should function and its reporting relationship to the
ensure that policies, procedures, and Board or its Audit Committee;
systems are current and well-documented. • Expertise and size of the audit staff
The ITSC should review IT policies, relative to the IT environment;
procedures, and standards at least on an • Identification of the IT audit
annual basis. Any updates and changes universe, risk assessment, scope, and
should be clearly documented and properly frequency of IT audits;
approved. IT policies and procedures • Processes in place to ensure timely
should include at least the following areas: tracking and resolution of reported
• IT Governance/Management; weaknesses; and
• Development and Acquisition; • Documentation of IT audits,
• IT Operations; including work papers, audit reports, and
• Communication networks; follow-up.
• Information security; In case in-house IT audit expertise is not
• Electronic Banking/Electronic available, such as for a simple BSI, the IT
Products and Services; and audit support may be performed by external
• IT Outsourcing/Vendor Management. specialists and auditors of other institutions
For simple BSIs, some of the above areas consistent with existing Bangko Sentral rules
(i.e. development, electronic banking, etc.) and regulations on outsourcing. (Detailed
may not be applicable, thus sound judgment guidelines/standards on IT Audit are shown
should be employed to ensure that the BSI’s in Appendix Q-59a)

Part I - Page 29
§ 4193P.7
13.12.31
d. Staff competence and training. The correct, relevant, and adequately protected.
rapid development in technology demands Since MIS can originate from multiple
appropriate, skilled personnel to remain equipment platforms and systems, the
competent and meet the required level of controls should ensure all information
expertise on an ongoing basis. systems have sufficient and appropriate
BSIs should have an effective IT human controls to maintain the integrity of the
resources management plan that meets the information and the processing
requirements for IT and the business lines it environment. Sound fundamental principles
supports. Management should allocate for MIS review include proper internal
sufficient resources to hire and train controls, operating procedures, safeguards,
employees to ensure that they have the and audit coverage.
expertise necessary to perform their job and f. IT risk management function.
achieve organizational goals and objectives. Management of risk is a cornerstone of IT
Management needs to ensure that Governance. BSIs should have a policy
staffing levels are sufficient to handle present requiring the conduct of identification,
and expected work demands, and to cater measurement, monitoring and controlling
reasonably for staff turnover. Appropriate of IT risks for each business function/service
succession and transition strategies for key on a periodic basis. BSIs should define and
officers and personnel should be in place assign these critical roles to a risk
to provide for a smooth transition in the management unit or to a group of persons
event of turnover in vital IT management or from different units collectively performing
operations functions. the tasks defined for this function.
e. Management Information Systems The function should have a formal
(MIS). The BSIs’ IT organization often technology risk acknowledgement and
provides an important support role for their acceptance process by the owner of risk to
MIS. Accurate and timely MIS reports are help facilitate the process of reviewing,
an essential component of prudent and evaluating and approving any major
reasonable business decisions. At the most incidents of non-compliance with IT control
senior levels, MIS provides the data and policies. The process can be supported by
information to help the Board and the following:
management make strategic decisions. At • a description of risk being
other levels, MIS allows management to considered for acknowledgement by owner
monitor the institution’s activities and of risk and an assessment of the risk that is
distribute information to other employees, being accepted;
customers, and members of management. • identification of mitigating controls;
Advances in technology have increased • formulation of a remedial plan to
the volume of information available to reduce risk; and
management and directors for planning and • approval of risk acknowledgement
decision-making. However, if technology from the owner of the risk and senior
is not properly managed, the potential for management.
inaccurate reporting and flawed decision ITRM processes should be integrated
making increases. Because report into the enterprise-wide risk management
generation systems can rely on manual data processes to allow BSIs to make well-
entry or extract data from many different informed decisions involving business plans
financial and transaction systems, and strategies, risk responses, risk tolerance
management should establish appropriate levels and capital management, among
control procedures to ensure information is others.

Part I - Page 30
§ 4193P.7
13.12.31
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 and
assessment process begins with the 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 should have a comprehensive information
the risk, it should rank the risks and prioritize security program, approved by the Board,
its response. The probability of occurrence to maintain the confidentiality, integrity, and
and the magnitude of impact provide the availability of computer systems for reliable
foundation for reducing risk exposures or and timely information. Unauthorized
establishing mitigating controls for safe, access, destruction, or disclosure of
sound, and efficient IT operations confidential information can adversely affect
appropriate to the complexity of the earnings and capital. The program should
organization. Periodic risk assessment monitor information security function
process should be done at the enterprise- throughout the organization’s business
wide level and an effective monitoring processes and establish clear accountability
program for the risk mitigation activities for carrying out security responsibilities.
should be manifested through mitigation or The Board or Senior Management
corrective action plans, assignment of should appoint an independent information
responsibilities and accountability and security officer (ISO) who will be
management reporting. responsible and accountable for the
3. IT controls implementation. Controls organization-wide IS program. The duly
comprise of policies, procedures, practices appointed ISO should have sufficient
and organizational structures designed to knowledge, background, and training, as
provide reasonable assurance that business well as organizational position, to enable
objectives will be achieved and undesired him to perform assigned tasks. To ensure
events will be mitigated. Management appropriate segregation of duties, the ISO
should establish an adequate and effective should report directly to the Board or senior
system of internal controls based on the management and have sufficient
degree of exposure and the potential risk of independence to perform his mandate. The
loss arising from the use of IT. Controls for ISO should perform the tasks of a risk
IT environment generally should address the manager and not a production resource
overall integrity of the environment and assigned to the IT department. In the case
should include clear and measurable of simple BSIs, hiring a personnel to

Part I - Page 31
§ 4193P.7
13.12.31
specifically perform the function of an ISO to adequately supervise any part of the IT
may not be necessary. The ISO function environment can heighten potential risks for
may be assigned to an existing independent all elements of IT operations and the
officer who meets the requirements performance of the critical business lines
mentioned in this Subsection. (Detailed of the BSIs. Such scenario necessitates the
guidelines/standards on Information Security coordination of IT controls throughout the
are shown in Appendix Q-59b) institution’s operating environment.
b. Project management/ development (Detailed guidelines/standards on IT
and acquisition and change management. Operations are shown in Appendix Q-59d)
BSIs should establish a framework for d. IT outsourcing/vendor management
management of IT-related projects. The program. IT outsourcing refers to any
framework should clearly specify the contractual agreement between a BSI and a
appropriate project management service provider or vendor for the latter to
methodology that will govern the process create, maintain, or reengineer the
of developing, implementing and institution’s IT architecture, systems and
maintaining major IT systems. The related processes on a continuing basis. A
methodology, on the other hand, should BSI may outsource IT systems and processes
cover allocation of responsibilities, activity except those functions expressly prohibited
breakdown, budgeting of time and by existing regulations. The decision to
resources, milestones, checkpoints, key outsource should fit into the institution’s
dependencies, quality assurance, risk overall strategic plan and corporate
assessment and approvals, among others. objectives and said arrangement should
In the acquisition and/or development of IT comply with the provisions of existing
solutions, BSIs should ensure that business Bangko Sentral rules and regulations on
and regulatory requirements are satisfied. outsourcing. Although the technology
(Detailed guidelines/standards on Project needed to support business objectives is
Management/Development and Acquisition often a critical factor in deciding to
and Change Management are shown in outsource, managing such relationships
Appendix Q-59c) should be viewed as an enterprise-wide
c. IT operations. IT has become an corporate management issue, rather than a
integral part of the day-to-day business mere IT issue.
operation, automating and providing While IT outsourcing transfers
support to nearly all of the business operational responsibility to the service
processes and functions within the provider, the BSIs retain ultimate
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 management

Part I - Page 32
§ 4193P.7
13.12.31
process which provides guidance on the ii. ATMs to be installed after

following areas: 1) risk assessment; 2) 14 September 2013 should be 3DES
selection of service providers; 3) contract compliant; and
review; and 4) monitoring of service iii. ATMs, POS terminals and payment
providers. Detailed guidelines/standards on cards are also vulnerable to skimming
IT Outsourcing/Vendor Management and attacks due to the lack of deployment of
on the adoption of outsourced cloud globally recognized EMV enabled
computing model are shown in Appendix technology by BSIs. Magnetic stripe only
Q-59e. ATMs, POS Terminals and cards are largely
e. Electronic products and services. The defenseless against modern fraud
evolution in technology revolutionized the techniques. Therefore, all concerned BSIs
way banking and financial products and should shift from magnetic stripe technology
services are delivered. Physical barriers to EMV chip-enabled cards, POS Terminals
were brought down enabling clients to and ATMs. The entire payment card
access their accounts, make transactions or network should be migrated to EMV by
gather information on financial products and 01 January 2017. This requirement shall
services anywhere they are, at any time of cover both issuing and acquiring programs
the day and at their own convenience. As of concerned BSIs. A written and Board-
development in technology continues to approved EMV migration plan should be
accelerate, innovative electronic products submitted to Bangko Sentral within six (6)
and services are foreseen to bring more months from 22 August 2013. Likewise, the
accessibility and efficiency. However, BSIs detailed guidelines covering subject EMV
may be confronted with challenges relating requirement shall be issued separately.
to capacity, availability and reliability of the Detailed guidelines/standards on
electronic services. Likewise, fraudulent Electronic Products and Services are shown
activities via electronic channels are also in Appendix Q-59f.
rising in number. 4. Risk measurement and monitoring.
BSIs should protect customers from BSI Management should monitor IT risks and
fraudulent schemes done electronically. the effectiveness of established controls
Otherwise, consumer confidence to use through periodic measurement of IT
electronic channels as safe and reliable activities based on internally established
method of making transactions will be standards and industry benchmarks to assess
eroded. To mitigate the impact of cyber the effectiveness and efficiency of existing
fraud, BSIs should adopt aggressive security operations. Timely, accurate, and complete
posture such as the following: risk monitoring and assessment reports
i. The entire ATM system shall be should be submitted to management to
upgraded/converted to allow adoption of provide assurance that established controls
end-to-end Triple DES (3DES) encryption are functioning effectively, resources are
standards by 01 January 2015. The 3DES operating properly and used efficiently and
encryption standards shall cover the whole IT operations are performing within
ATM network which consists of the host established parameters. Any deviation noted
processors, switches, host security module in the process should be evaluated and
(HSM), automated teller machines (ATMs), management should initiate remedial action
point-of-sale (POS) terminals and all to address underlying causes. The scope
communication links connected to the and frequency of these performance
network; measurement activities will depend on the

Part I - Page 33
§§ 4193P.7- 4193P.8
13.12.31
complexity of the BSI’s IT risk profile and the resource drain and expense of redoing
should cover, among others, the following: a task. The personnel performing QA and
a. Performance vis-à-vis approved IT QC reviews should be independent of the
strategic plan. As part of both planning and product/process being reviewed and use
monitoring mechanisms, BSI management quantifiable indicators to ensure objective
should periodically assess its uses of IT as assessment of the effectiveness of IT
part of overall business planning. Such an activities in delivering IT capabilities and
enterprise-wide and ongoing approach services.
helps to ensure that all major IT projects are d. Policy compliance. BSIs should
consistent with the BSI’s overall strategic develop, implement, and monitor processes
goals. Periodic monitoring of IT performance to measure IT compliance with their
against established plans shall confirm established policies and standards as well
whether IT strategic plans remain in as regulatory requirements. In addition to
alignment with the business strategy and the the traditional reliance on internal and third
IT performance supports the planned party audit functions, BSIs should perform
strategy. self-assessments on a periodic basis to gauge
b. Performance benchmarks/service performance which often lead to early
levels. BSIs should establish performance identification of emerging or changing risks
benchmarks or standards for IT functions requiring policy changes and updates.
and monitor them on a regular basis. Such e. External assessment program.
monitoring can identify potential problem Complex BSIs may also seek regular
areas and provide assurance that IT assurance that IT assets are appropriately
functions are meeting the objectives. Areas secured and that their IT security risk
to consider include system and network management framework is effective. This
availability, data center availability, system may be executed through a formal external
reruns, out of balance conditions, response assessment program that facilitates a
time, error rates, data entry volumes, special systematic assessment of the IT security risk
requests, and problem reports. and control environment over time.
Management should properly define
services and service level agreements (SLA) § 4193P.8 Reports. To enable the
that must be monitored and measured in Bangko Sentral to regularly monitor IT risk
terms understandable to the business units. profile and electronic products, services,
SLA with business units and IT department delivery channels, processes and other
should be established to provide a baseline relevant information regarding the use of
to measure IT performance. technology, BSIs are required to submit the
c. Quality assurance/quality control. following:
BSI should establish quality assurance (QA) 1. Annual IT Profile, electronically to
and quality control (QC) procedures for all the Bangko Sentral Supervisory Data Center
significant activities, both internal and (SDC) within twenty five (25) days from the
external, to ensure that IT is delivering value end of reference year (Guidelines to be
to business in a cost effective manner and observed in the preparation and submission
promotes continuous improvement through of this report was issued under Bangko
ongoing monitoring. QA activities ensure Sentral Memorandum to All Banks No.
that product conforms to specification and M-2012-011 dated 17 February 2012);
is fit for use while QC procedures identify 2. Report on breach in information
weaknesses in work products and to avoid security, especially incidents involving the

Part I - Page 34
§§ 4193P.8- 4199P
13.12.31
use of electronic channels, pursuant to the Secs. 4194P - 4198P (Reserved)

provisions of Items “a” or “b” of Appendix
Q-60 following the guidelines provided in Sec. 4199P General Provision on Sanctions
Item “d” thereof. Depending on the nature Unless otherwise provided, violations of
and seriousness of the incident, Bangko any provision hereof may subject a
Sentral may require the BSI to provide pawnshop, its proprietor, directors, trustees,
further information or updates on the partners, president, managers or officer-in-
reported incident until the matter is finally charge, where applicable, to sanctions
resolved; and which may include the following:
3. Notification letter to the Core a. Warning/reprimand;
Information Technology Specialist Group b. Suspension of AOR/AO;
(CITSG) of the Bangko Sentral of disruption c. Suspension of branching privilege;
of IT services/operations that resulted to the d. Disqualification of proprietor, partner,
activation of disaster recovery and business director, president, manager or officer-in-
continuity plan immediately upon activation charge;
of the plan. e. Monetary penalty not to exceed
(Circular No. 808 dated 22 August 2013) P1,000.00 per violation, per office, per day;
and
§ 4193P.9 Sanctions and penalties. BSIs f. Revocation of AOR/AO.
should make available IT policies and The imposition of the above sanctions
procedures on the foregoing and other is without prejudice to whatever legal action
related documents during the on-site the Bangko Sentral may pursue under Sec.
examination as well as provide a copy 18 of P.D. 114 (Pawnshop Regulation Act),
thereof when written request was made to and other applicable laws against the
determine their compliance with this pawnshop, its proprietor, partners,
Section. incorporators, stockholders, directors,
Any violation of the provisions of this president and officers.
Section, its appendices and annexes, shall A pawnshop whose AOR/AO is
be subject to the monetary and non- suspended or revoked shall be reported to
monetary sanctions provided under Section the office of the mayor of the concerned city
37 of R.A. No. 7653. Enforcement actions or municipality, for appropriate action. It is
shall be imposed on the basis of the overall understood that in case the AOR of a head
assessment of BSIs’ ITRMS. Whenever a office is revoked, the AO of all branches of
BSI’s ITRMS is rated “1” pursuant to said pawnshop are likewise revoked.
Subsection 4193P.4, the following Any pawnshop that is found operating
additional sanctions may be imposed: as a foreign exchange dealer/money changer
1. Suspension/revocation of authority and or remittance agent that does not have
to provide electronic products and services; a COR issued by the Bangko Sentral for such
and activity is considered operating such
2. Prohibition against offering/ activities illegally and shall be reported to
provision of new electronic products and the office of the mayor in accordance with
services. the rules above.
(Circular No. 808 dated 22 August 2013) (Circular No. 656 dated 02 June 2009, as amended by Circular

Part I - Page 35
§§ 4201P - 4299P
11.12.31
PART TWO
BORROWING OPERATIONS
A. - J. (RESERVED) notified of the issuance of the debt

instrument.
Sections 4201P - 4284P (Reserved) (Circular No. 656 dated 02 June 2009)
K. OTHER BORROWINGS Sec. 4286P Borrowings Constituting

Quasi-Banking Functions. Borrowing from
Sec. 4285P Securities and Exchange twenty (20) or more lenders for the purpose
Commission Registration of Borrowing of relending or purchase of receivables or
Borrowing by any pawnshop through the other obligations constitutes quasi-banking.
issuance of any instrument shall be subject A pawnshop cannot engage in quasi-
to the registration provisions of Section 8 banking unless it meets the pre-qualification
of the Securities Regulation Code (SRC) requirements under the MORNBFI-QBs and
and the applicable implementing rules obtains authority or a separate license to
and regulations of the Securities and engage in quasi-banking from the BSP.
Exchange Commission (SEC). While (Circular No. 656 dated 02 June 2009)
borrowing from nineteen (19) individuals
or less is exempt from the registration Secs. 4287P - 4298P (Reserved)
requirement under Section 10 of the SRC,
Rule 10-1 of the SEC implementing rules Sec. 4299P General Provision on Sanctions
and regulations still requires SEC to be (Deleted by Circular No. 711 dated 28 January 2011)

Part II - Page 1
§§ 4301P - 4302P.1
11.12.31
PART THREE
LOANS AND INVESTMENTS
A. LOANS IN GENERAL identification document (ID) issued by an

official authority.
Section 4301P Grant of Loans. The The valid ID should indicate the address
following regulations shall be observed in where the pawner resides, otherwise,
the grant of loans by pawnshops. pawner shall be required to present,
(Circular No. 656 dated 02 June 2009) together with the valid ID, a barangay
certification or a copy of a billing statement
§ 4301P.1 General guidelines. A that indicates the address where the pawner
pawnshop shall extend a loan only if such resides. Further, the provisions of Part 8 of
is secured by personal property that could the Q Regulations on valid identification
be physically delivered to the control and documents shall apply.
possession of the pawnshop. Pawnshops shall post excerpts of the
Before accepting articles as pawn, the above requirements conspicuously in its
pawnshop must ascertain whether the pawner principal place of business and branches.
is the true owner of the article offered as The poster (shown as Appendix 7) shall not
pawn. In the conduct of business, a pawnshop be smaller than 8.5 x 11 inches.
shall be guided by the standard of diligence Every pawnshop shall maintain records
that is expected of “a good father of a family”, containing all the information required
ensuring always that there is no ground to under this Subsection and Section 11 of P.D.
suspect that the article/ s offered as pawn was No. 114 for each of their clients.
an object of robbery or theft. (Circular No. 656 dated 02 June 2009, as amended by Circular
(Circular No. 656 dated 02 June 2009) Nos. 711 dated 28 January 2011, 706 dated 05 January 2011 and
657 dated 16 June 2009)
§ 4301P.2 Prohibitions. Pawnshop
owners/managers/officers/directors § 4301P.4 Sanctions
employees shall not: (Deleted by Circular No. 711 dated 28 January 2011)
a. Use pawned articles for themselves
or allowing employees to use said articles Sec. 4302P Loan Limit. Pawnshops may
for any purpose without the express consent grant such amount of loans as may be agreed
or authority of the pawner unless continued upon between the parties. The amount of
use is necessary to preserve the pawn; loan shall in no case be less than thirty
b. Grant loans to minors or incompetent percent (30%) of the appraised value of the
persons; or security offered, unless the pawner
c. Re-pledge/re-pawn the pawned article. manifests in writing that he is applying for
(Circular No. 656 dated 02 June 2009, as amended by Circular a lesser amount. Pawnshops shall not under
No. 711 dated 28 January 2011) appraise the security offered for the loan to
circumvent the restriction prescribed by this
§ 4301P.3 Know your pawner Section.
Pawnshops who transact with any pawner (Circular No. 656 dated 02 June 2009)
for the first time shall require the pawner to
present the original and submit a clear copy § 4302P.1 Sanctions
of at least one (1) valid photo bearing (Deleted by Circular No. 711 dated 28 January 2011)

Part III - Page 1
§§ 4303P - 4303P.5
13.12.31
Sec. 4303P Interest and Surcharges. The Towards this end, all loan-related
rate of interest including surcharges on any documents shall show repayment schedules
loan or forbearance of money extended by in a manner consistent with this provision.
a pawnshop shall not be subject to any Marketing materials and presentations shall
ceiling. However, pursuant to a decision of likewise be consistent with this provision.
the Supreme Court (case of Medel, et al vs (As amended by Circular No. 754 dated 17 April 2012)
Court of Appeals, GR No. 131622 dated
27 November 1998) the interest rate shall § 4303P.4 Posters. Pawnshops shall
not be iniquitous, unconscionable, or post in conspicuous places in their principal
place of business and branches, the annual
contrary to morals, if not against the law as
effective interest rate in percent, specifying
may be determined by the Court.
therein if such interest rate is yearly or
No pawnshop shall collect interest on
monthly, as well as other charges, if any, to
loans in advance for a period longer than be paid by the pawner.
the original term agreed upon as indicated (Circular No. 754 dated 17 April 2012)
in the pawn ticket.
(Circular No. 656 dated 02 June 2009, as amended by Circular § 4303P.5 (2011 - 4303P.4) Sanctions
No. 711 dated 28 January 2011) and penal provisions. Any pawnshop that
violates the foregoing provisions as
§ 4303P.1 Rate of interest in the determined by Bangko Sentral in the spot
absence of stipulation. The rate of interest checking of pawnshops or whenever a
for the loan or forbearance of any money, complaint brought to the attention of
goods or credit and the rate allowed in Bangko Sentral is found to be true, shall be
judgments, in the absence of express imposed the following sanctions:
contract as to such rate of interest, shall be a. Fine of P500.00 for each of the first
six percent (6%) per annum. three (3) offenses;
(Circular No. 656 dated 02 June 2009, as amended by Circular b. Fine of P1,000.00 for the next three
No. 799 dated 21 June 2013) (3) offenses;
c. For subsequent violation,
§ 4303P.2 Other charges. In addition to cancellation of Bangko Sentral
interest, pawnshops may impose a maximum Acknowledgement of Registration (AOR) or
Authority to Operate (AO) issued to the
service charge of five pesos (P5.00), but in no
pawnshop head office or branch, as the case
case to exceed one percent (1%) of the
may be, and issuance of a letter to the
principal loan. No other charges, such as but
concerned city or municipality advising
not limited to insurance premium for the them of the cancellation of the Bangko
safekeeping and conservation of the pawned Sentral AOR/AO and recommending the
item, shall be collected. revocation of their business/mayor’s
(Circular No. 656 dated 02 June 2009) permit(s). It is understood that if the AOR
of the HO is cancelled, the AO of the
§ 4303P.3 Method of computing interest branch/es is/are likewise cancelled; and
Pawnshops shall only charge interest based d. Such other sanctions as the
on the outstanding balance of a loan at the Monetary Board may deem warranted.
beginning of an interest period. Non-compliance with the provisions
For a loan where the principal is payable pursuant to Subsecs. 4303P.3 and 4303P.4
in installments, interest per installment shall be regarded at least as a less serious
period shall be calculated based on the offense, depending on the severity of non-
outstanding balance of the loan at the disclosure, number of loans and amount
beginning of each installment period. involved in the violation. In addition to

Part III - Page 2
§§ 4303P.5 - 4321P
12.12.31
sanctions under R.A. No. 3765, the If the maturity date of the loan or expiry
following sanctions may be imposed: date of redemption period falls on the
a. First offense. Reprimand on the pawnshop’s non-business day, a regular
erring officer/s; holiday or a special non-working holiday
b. Second offense. Reprimand on the in the locality, then the maturity date of the
entire board of directors; and loan or expiry date of redemption period
c. Subsequent offense/s: shall be on the next business day.
i. Suspension of the erring officer/s If the pawnshop is closed on the
and/or entire board of directors; and maturity date of the loan or expiry of the
ii. Restriction on lending activities. redemption period, with or without prior
This is without prejudice to other notice to the pawner, then the maturity date
penalties and sanctions provided under of the loan or expiry of redemption period
Sections 36 and 37 of R.A. No. 7653. shall be on the next business day and the
(As amended by Circular No. 754 dated 17 April 2012) pawnshop shall not charge additional
interest or surcharge to the pawner.
Sec. 4304P (Reserved) If the pawnshop is closed due to a
robbery, then the maturity date of the pledge
Sec. 4305P Past Due Accounts; Renewal or expiry of redemption period shall be on
A loan may be renewed for such amount the next business day when the pawnshop
and period as may be agreed upon between opens for business and the pawnshop shall
the pawnshop and the pawner, subject to not charge additional interest or surcharge
the same conditions provided in this Part to the pawners.
for new loans. (Circular No. 656 dated 02 June 2009)
No loan shall be renewed or its maturity
date extended unless a new pawn ticket as § 4305P.2 Sanctions
defined in Sec. 4102P shall be issued (Deleted by Circular No. 711 dated 28 January 2011)
indicating the new term of the loan agreed
upon by the pawnshop and the pawner. Sec. 4306P Interest Accrual on Past Due
(Circular No. 656 dated 02 June 2009) Loans. Interest income on past due loans
arising from discount amortization (and not
§ 4305P.1 Right of pawner to redeem from the contractual interest of the account)
pawn within ninety (90) days from maturity shall be accrued as provided in PAS 39.
A pawner who fails to pay or renew his loan (Circular No. 656 dated 02 June 2009)
with a pawnshop on the date it falls due
shall have ninety (90) days from the date of Secs. 4307P - 4320P (Reserved)
maturity of the loan within which to redeem
the pawn by paying the principal amount B. LOAN COLLATERAL/SECURITY
of the loan plus the amount of interest that
shall have accrued thereon. The amount of Sec. 4321P Acceptable Security and
interest due and payable after the maturity Safekeeping of Pawns. Only personal
date of the loan shall be computed upon property that is capable of being physically
redemption based on the sum of the delivered to the control and possession of
principal loan and interest earned as of the the pawnshop shall be accepted as security
date of maturity. The procedures to be for loans. Certain specified chattels, such
followed in case the pawner fails to redeem as guns, knives, or similar weapons, whose
his pawn are prescribed in Sec. 4324P. reception in pawn is expressly prohibited

Part III - Page 3
§§ 4321P - 4323P.1
13.12.31
by other laws, decrees, or regulations, shall hours, of the pawnshop. The business name
not be accepted by pawnshops as security indicated in the pawn ticket shall be in
for loans. accordance with the provision of Subsec.
Except for bulky pawns, pawns shall be 4181P.2;
placed in a tamper-proof sealed plastic b. Name of pawner;
envelop or bag which must be kept inside c. Pawner’s residential address;
the safe or concrete vault. Bulky pawns may d. Pawner’s contact number;
be placed outside the safe or vault but e. Date the loan was granted;
within the pawnshop premises. All pawns, f. Amount of the principal loan and net
except those which are kept inside the vault proceeds;
or safe, must be insured against fire. g. Effective interest rate in percent,
Pawnshop owners shall be liable for any indicating if monthly or annually;
pawned item lost or destroyed arising out h. Interest in absolute amount;
of their negligence, fault, delay in delivery i. Service charge in amount;
or willful violation of the loan agreement. j. Penalty interest in percent, if any;
(Circular No. 656 dated 02 June 2009, as amended by Circular k. Appraised value of pawn;
No. 711 dated 28 January 2011) l. Period of maturity;
m. Description of the pawn;
Sec. 4322P Redemption of Pawns. A
n. Expiry date of the redemption period;
pawnshop shall not release any pawn
o. Signature of the pawnshop’s
without first requiring the pawner to present
authorized representative;
and surrender the corresponding pawn
p. Signature or thumbmark of the
ticket. If the pawn ticket was lost and could
pawner; and
not be presented or surrendered, the
q. ID presented.
pawnshop shall require the owner-pawner
No other document or instrument shall
to execute and submit an affidavit of loss
be used/issued by a pawnshop for any loan
and shall ascertain the identity of the
granted by it to a pawner/borrower.
pawner, to ensure that the pawned item is
released only to the owner-pawner. Nos. 787 dated 20 February 2013, 754 dated 17 April 2012 and
The pawnshop shall return the pawn in 711 dated 28 January 2011)
the same condition when they were first
pawned by pawner, upon full settlement of § 4323P.1 Stipulations in pawn ticket
the loan. The contents of the standard pawn ticket,
(Circular No. 656 dated 02 June 2009) prescribed for pawnshops pursuant to the
requirements of P.D. No. 114, and the
§ 4322P.1 Sanctions “Standard Terms and Conditions” thereof,
are in Appendices P-4 (front) and P-4a (back).
Additional stipulations/information
Sec. 4323P Pawn Ticket1. Pawnshops shall,
enumerated under Appendix P-4b, which
at the time of the loan, deliver to each
pawnshops may wish to incorporate in their
pawner a pawn ticket which shall contain
pawn tickets, may be included without prior
the following:
approval from the Bangko Sentral.
a. The business/registered name,
The font size for the stipulations at the
address, telephone number, tax
back of the pawn ticket shall not be smaller
identification number, business days and
than “Arial Narrow 8”. Additional
1
A pawnshop may use pawn tickets bearing a rubber-stamp of its registered and trade name on the pawn ticket
until 30 June 2011. Starting 01 July 2011, all pawnshops shall only use pre-printed pawn tickets in accordance
with these rules.

Part III - Page 4
§§ 4323P.1 - 4324P.1
11.12.31
stipulations which may be included at the number given by the pawner. The report of
back of the pawn ticket shall also be printed the TELCO shall be made available to Bangko
in the prescribed font size. Sentral upon request.
Pawn ticket shall not be smaller than 8 In case no specific mode of notification
inches x 5 inches. The size of the pawn is agreed upon and indicated at the back of
ticket may have to be larger to accommodate the pawn ticket, the mode of notification
additional stipulations that should also be shall be by ordinary mail. Pawnshops shall
printed not smaller than “Arial Narrow 8”. exert reasonable effort to notify the pawner
Pawn tickets shall at least be in and put on record if it is unable to do so.
duplicate. The first copy shall contain the Pawnshops shall maintain proof of the
word “Original” which shall be given to the notice to pawner.
pawner when the loan is granted and b. If upon the expiration of the ninety
surrendered upon redemption of pawn, (90)-day grace period, the pawner fails to
while the second copy shall be marked redeem his pawn, the pawnshop may sell or
“Duplicate” which shall remain on file with dispose of the pawn only after it has published
the pawnshop. a notice of public auction of unredeemed
Pawn tickets shall be serially numbered. articles held as security for loans in at least
Pawnshops may choose the color or two (2) newspapers circulated in the city or
quality of the paper used as pawn ticket. municipality where the pawnshop has its
(Circular No. 656 dated 02 June 2009, as amended by Circular place of business, six (6) days prior to the
date set for the public auction.
The notice shall be in English, and in
§ 4323P.2 Sanctions
either Filipino or the local dialect and shall
contain the following:
Sec. 4324P Notices to the Pawner and to a. Name and address of the owner of
the Public the pawnshop; and
a. On or before the expiration of the b. Date, hour and place of the auction
ninety (90)-day grace period a pawnshop sale.
shall notify a pawner in writing that the In remote areas where newspapers are
pawn shall be sold or otherwise disposed neither published nor circulated, the
of in the event the pawner fails to redeem publication requirement shall be complied
the pawn within the ninety (90)-day grace with by posting notices at the city hall or
period, specifying in the same notification municipal building of the city or
the date, hour and place where the sale shall municipality and in two (2) other
take place. conspicuous public places where the
The notice shall be sent through the pawnshop has its place of business.
mode of notification agreed upon by the (Circular No. 656 dated 02 June 2009, as amended by Circular
pawner and the pawnshop as indicated at No. 711 dated 28 January 2011)
the back of the pawn ticket at the time the
loan was granted which may be through § 4324P.1 Poster. Pawnshops shall post
text/SMS message, electronic mail, fax or by conspicuously at the principal place of
mail to the residential address. If sent through business and branches an abstract
text/SMS, the pawnshop shall obtain a report (Appendix P-8) which shall be not be smaller
from the appropriate Telecommunications than 8.5 x 11 inches.
Company (TELCO) indicating that a text/ (Circular No. 656 dated 02 June 2009, as amended by Circular
SMS message was sent to the mobile phone No. 711 dated 28 January 2011)

Part III - Page 5
§§ 4324P.2 - 4399P
11.12.31
§ 4324P.2 Sanctions Sec. 4399P General Provisions on

(Deleted by Circular No. 711 dated 28 January 2011) Sanctions. Unless otherwise provided,
violations of any provision hereof may
Sec. 4325P Public Auction of Pawns. No subject a pawnshop, its proprietor,
pawnshop shall sell or otherwise dispose directors, trustees, partners, president,
of any article or thing received as security managers or officers-in-charge, where
for a loan except by public auction at any applicable, to sanctions which may include
of the following places: the following:
a. Pawnshop’s place of business; or a. warning/reprimand;
b. Any public place within the territorial b. suspension of AOR/AO;
limits of the municipality or city where the c. suspension of branching privilege;
pawnshop conducts its business. d. disqualification of proprietor, partner,
The auction shall be conducted under director, president, manager or officer-in-
the control and direction of a duly licensed charge;
auctioneer. In cities and municipalities e. monetary penalty not to exceed
where there is no duly licensed P1,000.00 per violation, per office, per day;
auctioneer, the public auction may be
and
conducted by a notary public of the city
f. revocation of AOR/AO.
or province where the pawnshop has its
The imposition of the above sanctions
place of business.
is without prejudice to whatever legal action
The Auction Sheet/Book containing
the Bangko Sentral may pursue under
entries of auctioned pawned articles duly
Section 18 of P.D. No. 114 (Pawnshop
signed by the auctioneer or notary public
under oath shall be maintained by the Regulations Act), and other applicable laws
pawnshop. against the pawnshop, its proprietor,
(Circular No. 656 dated 02 June 2009) partners, incorporators, stockholders,
directors, president and officers.
§ 4325P.1 Auction of pawned items A pawnshop whose AOR/AO is
covered by a single pawn ticket. If one (1) suspended or revoked shall be reported to
pawn ticket covers two (2) or more pledged the Office of the Mayor of the concerned
articles, and only one of the articles was city or municipality, for appropriate action.
sold during the auction, the pawnshop shall It is understood that in case the AOR of a
allocate the loan value for each article based head office is revoked, the AO of all
on their appraised value. branches of said pawnshop are likewise
(Circular No. 656 dated 02 June 2009) revoked.
Any pawnshop that is found operating
Secs. 4326P - 4335P (Reserved) as a foreign exchange dealer/money changer
and/or remittance agent that does not have
C. - J. (RESERVED)
a COR issued by the Bangko Sentral for such
activity is considered operating such
Secs. 4336P - 4395P (Reserved)
activities illegally and shall be reported to
the Office of the Mayor in accordance with
K. MISCELLANEOUS
the rules above.

Part III - Page 6
§§4401P - 4401P.2
15.12.31
PART FOUR
BSP REGULATIONS ON FINANCIAL CONSUMER PROTECTION
A. CONSUMER PROTECTION BSFI. The Board may also delegate other

duties and responsibilities to senior
OVERSIGHT FUNCTION
management and/or Committees created for
the purpose but not the function of
Section 4401P Consumer Protection
overseeing compliance with the
Oversight Function. The Board of Directors
BSP-prescribed Consumer Protection
(Board) of BSFIs is ultimately responsible in
Framework and the BSFI’s own Consumer
ensuring that consumer protection practices
Protection Framework.
are embedded in the BSFI’s business (Circular No. 857 dated 21 November 2014, as amended by
operations. BSFIs must adhere to the highest Circular No. 890 dated 02 November 2015)
service standards and embrace a culture of
fair and responsible dealings in the conduct §4401P.2 Consumer protection risk
of their business through the adoption of a management system (CPRMS).
BSFI’s Financial Consumer Protection All BSFIs, regardless of size, should have a
Framework that is appropriate to the BSFI’s CPRMS that is part of the corporate-wide
corporate structure, operations, and risk Risk Management System. The CPRMS is a
profile. The BSFI’s Financial Consumer means by which a BSFI identifies, measures,
Protection Framework shall be embodied in monitors, and controls consumer protection
its Board-approved Financial Consumer risks inherent in its operations. These
Protection Manual. include both risks to the financial consumer
(Circular No. 857 dated 21 November 2014, as amended by and the BSFI. The CPRMS should be directly
Circular No. 890 dated 02 November 2015) proportionate to the BSFI’s asset size,
structure, and complexity of operation. A
§4401P.1 Role and responsibility of carefully devised, implemented, and
the board and senior management. The monitored CPRMS provides the foundation
board and senior management are for ensuring an BSFI’s adherence to
responsible for developing the BSFI’s consumer protection standards of conduct
consumer protection strategy and and compliance with consumer protection
establishing an effective oversight over the laws, rules and regulations, thus ensuring
BSFI’s consumer protection programs. The that the BSFI’s consumer protection practices
Board shall be primarily responsible for address and prevent identified risks to the
approving and overseeing the BSFI and associated risk of financial harm
implementation of the BSFI’s consumer or loss to consumers.
protection policies as well as the a. Board and senior management
mechanism to ensure compliance with said oversight. The Board is responsible for
policies. While senior management is developing and maintaining a sound CPRMS
responsible for the implementation of the that is integrated into the overall framework
consumer protection policies approved by for the entire product and service life-cycle.
the Board, the latter shall be responsible for The Board and Senior Management should
monitoring and overseeing the performance periodically review the effectiveness of the
of senior management in managing the day CPRMS, including how findings are reported
to day consumer protection activities of the and whether the audit mechanisms in place

Part IV - Page 1
§ 4401P.2
15.12.31
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)

Part IV - Page 2
§§4402P - 4402P.1
15.12.31
B. CONSUMER PROTECTION accordance with the requirements set out

STANDARDS OF CONDUCT FOR BSFIS in the regulations.
(2) Readily and consistently makes
Sec. 4402P Consumer Protection available to the customer a written copy of
Standards. The following Consumer the terms and conditions (T&C) that apply
Protection Standards reflect the core to a product or service. The contents of the
principles, which BSFIs are expected to T&C must be fully disclosed and explained
observe at all times in their dealings with to financial customers before initiating a
financial consumers. These should be transaction. Where and when warranted,
embedded into the corporate culture of the reference to the T&C should be made while
BSFI, enhancing further its defined transacting with the consumer and before
governance framework while addressing consummating the transaction, if such
conflicts that are inimical to the interests of reference is material to the understanding
the financial consumer. of the consumer of the nature of the product
or service, as well as its benefits and risks.
As a written document, the T&C must
§4402P.1 Disclosure and Transparency. be complete but concise, easily
BSFIs must take affirmative action to ensure understandable, accurate, and presented in
that their consumers have a reasonable a manner that facilitates the consumer’s
holistic understanding of the products and comprehension. The latter is taken to mean
services, which they may be acquiring or that the text of the document should be
availing. In this context, full disclosure and according to Subsec. 4320Q.4 (Amended
utmost transparency are the critical elements Regulations to Enhance Consumer
that empower the consumer to make Protection in the Credit Card Operations of
informed financial decisions. This is made Banks and Their Subsidiary or Affiliate
possible by providing the consumer with Credit Card Companies).
ready access to information that accurately The T&C should include at least the
represents the nature and structure of the following:
product or service, its terms and conditions, (a) The full price or cost to the customer
as well as its fundamental benefits and risks. including all interest, fees, charges, and
The BSFI demonstrates the competencies penalties. The T&C must clearly state
required of this principle if it complies with whether interest, fees, charges, and
the following: penalties can change over time. The method
a. Key information for computing said interest, fees, charges,
(1) Ensures that offering documents of and penalties shall be presented in
products and services contain the accordance with Subsec. 4303P.3;
information necessary for customers to be (b) General information about the
able to make an informed judgment of the operation of the products or services
product or service and, in particular, meet including the customer’s obligations and
the full disclosure requirements specified liabilities;
under existing laws or regulations. All key (c) Cooling-off period, if applicable;
features and risks of the products should be (d) Cancellation, return and exchange
highlighted prominently in a succinct policies, and any related cost;
manner. Where a product is being offered (e) The actions and remedies which the
on a continuous basis, its offering BSFI may take in the event of a default by
documents should be updated in the customer;

Part IV - Page 3
§ 4402P.1
15.12.31
(f) Procedures to report unauthorized understandable, comprehensive, and

transactions and other contingencies, as well transparent manner, for the duration of the
as the liabilities of parties in such case; and contract. Such information covers the
(g) A summary of the BSFI’s complaints characteristics and the risks of the
handling procedure. products sold by the BSFI and their
(3) Advises customers to read and authorized agents.
understand the applicable T&C, when (10) Imparts targeted information to the
considering a product or service. specific groups of clients to whom specific
(4) Ensures that its staff communicates products are being marketed, with a
in such a manner that clients can understand particular consideration for vulnerable
the terms of the contract, their rights and customers. Communication channels
obligations. Staff should communicate with employed for such targeted marketing
techniques that address literacy limitations initiatives may be accordingly calibrated.
(e.g., materials are available in local language). (11) Offers enhanced disclosure for
(5) Provides customers adequate time to more complex products, highlighting the
review the T&C of the product or service, costs and risks involved for the customer.
asks questions and receives additional For structured investment products, a
information prior to signing contracts or Product Highlight Sheet (PHS) is required.
may entail additional expense. possible; and
Communication channels should be (b) A non-interest charge on any account
sufficiently responsive to address the literacy of the customer within a number of days as
limitations of the financial consumer. Said provided under existing regulations prior to
channels may be written and/or verbal as the effective date of the change.
may be warranted. If the revised terms are not acceptable
(8) Discloses pricing information in to the customer, he or she should have the
public domains (e.g., websites). right to exit the contract without penalty,
(9) Updates customers with relevant provided such right is exercised within a
information, free of charge in a clear, reasonable period. The customer should

Part IV - Page 4
§§4402P.1 - 4402P.2
15.12.31
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
basis for recommending the particular
period, opening balance/value of
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 02 November 2015)
may materially and/or adversely affect the
decision of the customer to avail of a service §4402P.2 Protection of client
or acquire a product. information. Financial consumers have the
(2) Ensures that advertising and right to expect that their financial
promotional materials are easily readable transactions, as well as relevant personal
and understandable by the general public. information disclosed in the course of a
It should disclose clear, accurate, updated, transaction, are kept confidential. Towards
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

Part IV - Page 5
§ 4402P.2
15.12.31
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.

Part IV - Page 6
§§ 4402P.2 - 4402P.3
16.03.31
(h) Imposing strong disciplinary promotional partners, and other relevant

measures for security policy violations. external parties.
(i) Preventing terminated employees (3) Provide access to customers to the
from accessing customer information by information shared and should allow
immediately deactivating their passwords customers to challenge the accuracy and
and user names and taking other measures. completeness of the information and have
(5) Have a strong IT System in place to these amended as appropriate.
protect the confidentiality, security, (4) Appropriate penalties should be
accuracy, and integrity of customer’s imposed by the BSFI to erring employees
personal information. This includes for exposing or revealing client data to third
network and software design, and parties without prior written consent from
information processing, storage, client.
transmission, retrieval, and disposal. (Circular No. 857 dated 21 November 2014, as amended by
Maintaining security throughout the life-
cycle of customer information, from data §4402P.3 Fair treatment. Fair treatment
entry to disposal, includes: ensures that financial consumers are treated
(a) Knowing where sensitive customer fairly, honestly, professionally and are not
information is stored and storing it securely. sold inappropriate and harmful financial
Make sure only authorized employees have products and services. BSFIs should ensure
access. they have the necessary resources and
(b) Taking steps to ensure the secure procedures in place, internal monitoring,
transmission of customer information. and control mechanisms, for safeguarding
(c) Disposing customer information in the best interest of their customers. These
a secure way. include general rules, such as those
(d) Maintaining up-to-date and addressing ethical staff behavior, acceptable
appropriate programs and controls to selling practices as well as regulating
prevent unauthorized access. products and practices where customers are
(e) Using appropriate oversight or audit more likely to be offered services that are
procedures to detect the improper disclosure inappropriate for their circumstances.
or theft of customer information. The BSFI demonstrates the principle of
(f) Having a security breach response fair treatment towards financial consumers
plan in the event the BSFI experiences a data if it is able to:
breach. a. Affordability and suitability of
b. Sharing of customer information product or service
(1) Inform its customers in writing and (1) When making a recommendation to
explain clearly to customers as to how it a consumer:
will use and share the customer’s personal (a) Gather, file, and record sufficient
information. information from the customer to enable the
(2) Obtain the customers’ written BSFI to offer an appropriate product or
consent, unless in situations allowed as an service to the customer. The information
exception by law or BSP-issued regulations gathered should be commensurate to the
on confidentiality of customer’s information, nature and complexity of the product or
before sharing customers’ personal service either being proposed to or sought
information with third parties such as credit by the customer and should enable the BSFI
bureau, collection agencies, marketing and to provide an appropriate level of

Part IV - Page 7
§ 4402P.3
16.03.31
professional service. As a minimum, (8) Do not use high pressure/aggressive

information includes the customers’ sales techniques and do not force clients to
financial knowledge and experience, sign contracts.
financial capabilities, investment objectives, (9) Have a system in place for approval
time horizons, needs, priorities, risk when selling high-risk instruments to
affordability, and risk profile. consumers.
(b) Offer products or services that are b. Prevention of over-indebtedness
in line with the needs/risk profile of the (1) Have appropriate policies for good
consumer. The BSFI should provide for and repayment capacity analysis. The loan
allow the customer to choose from a range approval does not rely solely on guarantees
of available products and services that can (co-signers or collateral) as a substitute for
meet his needs and requirements. Sufficient good capacity analysis.
and right information on the product or (2) Properly assess the creditworthiness
service should enable the customer to select and conduct appropriate client repayment
the most suitable and affordable product or capacity analysis when offering a new credit
service. product or service significantly increasing
(2) Inform or warn the customers that the amount of debt assumed by the customer.
if they do not provide sufficient information (3) Ensure to have an appropriate
regarding their financial knowledge and system in place for credit analysis and
experience, the BSFI is not in a position to decisions including appropriate criteria to
accurately determine whether the product limit the amount of credit.
or service is appropriate to them, given the (4) Monitor enforcement of policies to
limited information available. This prevent over-indebtedness. The Board and
Senior Management of the BSFIs should be
information or warning may be provided in
aware of and concerned about the risks of
a standardized format.
over-indebtedness of its customers.
(3) Ensure that the customer certifies in
(5) Draw the customer’s attention to
writing the accuracy of the personal
the consequences of signing a contract that
information provided.
may affect his financial position and his
(4) Ensure to offer market-based pricing.
collateral in case of default in payment of a
(5) Design products that are appropriate
loan/obligation.
to the varying needs and interests of different
(6) Prepare and submit appropriate
types of consumers, particularly the more reports (e.g., loan quality, write-offs,
vulnerable consumers. Adequate product restructured loans) to management.
approval should be in place. Processes (7) Ensure that corrective measures are
should be proper to ensure that products and in place for poor long-term quality of loan
services are fit for the targeted consumer. portfolio linked to over-indebtedness.
(6) Do not engage in abusive or (8) Have specific procedures to actively
deceptive acts or practices. work out solutions (i.e., through workout
(7) Seek customer feedback for product plan) for restructured loans/refinancing/
design and delivery and use this feedback writing-off on exceptional basis for clients
to enhance product development and in default who have the “willingness” but
improve existing products. Likewise, without the capacity to repay, prior to
investigate reasons for client drop out. seizing the assets.

Part IV - Page 8
§ 4402P.3
16.03.31
c. Cooling-off period1 tolerance assessment results, the BSFI should

(1) As may be appropriate, provide the draw to the customer’s attention that the
customer with a “cooling-off” period of a product may not be suitable for him in view
reasonable number of days [at least two (2) of the risk mismatch. In such instances, there
banking days] immediately following the should be a written disclosure of
signing of any agreement or contract, consequences which is accepted by the client.
particularly for financial products or services (4) Ensure that the customer’s suitability
with a long-term savings component or and affordability are assessed against specific
those subject to high pressure sales contract. risks of the investment products:
Cooling-off shall be applicable to a (a) Financial Needs Analysis (FNA) and
customer who is a natural person and to Client Suitability - to assess the customer’s
financial instruments whose remaining term risk profile and suitability of the product.
is equal to or beyond one (1) year. (b) Customer’s Declaration Form - to
(2) Permit the customer to cancel the confirm his acceptance and understanding
agreement without penalty to the customer of the highlighted features of the product.
of any kind on his or her written notice to (c) FNA, Client Suitability and
the BSFI during the cooling-off period. The Declaration Form should be duly completed
BSFI may however collect or recover to make sure that the product sold is
reasonable amount of processing fees. It is suitable and affordable for the customer.
further recognized that there may be a need e. Institutional culture of fair and
for some qualification to an automatic right responsible treatment of clients
of cooling off. For example, the right shall (1) There should be a Code of
not apply where there has been a Conduct (Code) applicable to all staff,
drawdown of a credit facility and a BSFI spelling out the organizational values and
shall be able to recover any loss arising from standards of professional conduct that
an early withdrawal of a fixed rate term deposit uphold protection of customers. This
which loss arises because of a difference in Code should be reviewed and approved
interest rates. This would be in addition to by the Board. The staff signs a document
any reasonable administrative fees associated by which they acknowledge that they will
with closure of the term deposit. abide by the Code and not engage in the
d. Objectivity behaviors prohibited as provided for in the
(1) Deal fairly, honestly, and in good Code. To ensure adherence to the Code, the
faith with customers and avoid making BSFI is required to implement measures to
statements that are untrue or omitting determine whether the principles of
information which are necessary to prevent consumer protection are observed, the
the statement from being false or misleading. clients’ concerns are appropriately
(2) Present a balanced view when selling addressed and problems are resolved in a
a product or service. While the BSFI highlights timely manner. These may include among
the advantages of a product/service, the others, the regular conduct of customer
customer’s attention should also be drawn to satisfaction survey.
its disadvantages and downside risks. (2) Ensure that recruitment and training
(3) Ensure that recommendations made policies are aligned around fair and
to customer are clearly justified and responsible treatment of clients.
explained to the customer and are properly (3) Ensure that staff, specifically those
documented. If the requested products are who interact directly with customers,
of higher risk rating than a customer’s risk receive adequate training suitable for the
1

Part IV -Page 9
§ 4402P.3 - 4402P.4
16.03.31
complexity of the products or services they f. Remuneration Structure

sell. (1) Design remuneration structure for
(4) Ensure that collection practices are staff of BSFI and authorized agents in a
covered during the initial training of all staff manner that encourages responsible
involved in collections (loan officers, business conduct, fair treatment and
collections staff, and branch managers). In avoidance/mitigation of conflicts of interest.
particular, collection staff should receive (2) Disclose to the customers the
training in acceptable debt collection remuneration structure where appropriate,
practices and loan recovery procedures. such as when potential conflicts of interest
(5) Strictly comply with Bangko Sentral’s cannot be managed or avoided.
existing regulation on what constitutes unfair (3) Ensure adequate procedures and
debt collection practices. The BSFI’s Code of controls so that sales staff are not remunerated
Conduct should clearly spell out the specific based solely on sales performance but that
standards of professional conduct that are other factors, including customer’s satisfaction
expected of all staff involved in collection (in terms of number of customer complaints
(including outsourced staff). served/settled) and compliance with regulatory
(6) Institute policy that guarantees that requirements, best practices guidelines, and
clients receive a fair price for any foreclosed Code of Conduct in which certain principles
assets and has procedures to ensure that are related to best interest of customers,
satisfactory audit/compliance review results
collateral seizing is respectful of clients’
and complaint investigation results, are taken
rights.
into account.
(7) Ensure that Managers and Supervisors (Circular No. 857 dated 21 November 2014, as amended by
review ethical behavior, professional Circular Nos. 898 dated 14 January 2016 and 890 dated
conduct, and quality of interaction with 02 November 2015)
customers as part of staff performance
evaluations. §4402P.4 Effective recourse. Financial
(8) Have a system or internal processes consumers should be provided with
in place to detect and respond to customer accessible, affordable, independent, fair,
mistreatment as well as serious infractions. accountable, timely, and efficient means for
In case of violation of Code of Conduct (e.g., resolving complaints with their financial
harassment), sanctions shall be enforced. transactions. BSFIs should have in place
(9) Inform staff of penalties for non- mechanisms for complaint handling and redress.
compliance with Code of Conduct. The BSFI demonstrates the ability to
(10) Perform appropriate due diligence provide effective recourse if it is able to:
before selecting the authorized agents/ a. Establish an effective Consumer
outsourced parties (such as taking into Assistance Management System (CAMS).
account the agents’ integrity, Appendix P-10 provides for the minimum
professionalism, financial soundness, requirements of an effective CAMS.
operational capability and capacity, and b. Develop internal policies and
compatibility with the FI’s corporate culture) practices, including time for processing,
and implement controls to monitor the complaint response, and customer access.
agents’ performance on a continuous basis. c. Maintain an up-to-date log and
The BSFI retains ultimate accountability for records of all complaints from customers
outsourced activities. subject to the complaints procedure. This
(11) Disseminate the main aspect of the log must contain the following:
Code of Conduct to clients through printed (1) Details of each complaint;
media or other appropriate means. (2) The date the complaint was received;

Part IV - Page 10
§§ 4402P.4 - 4402P.5
15.12.31
(3) A summary of the BSFI’s response; and education strategy and corporate
(4) Details of any other relevant governance. It is an integral component of
correspondence or records; the BSFI’s ongoing interaction and
(5) The action taken to resolve each relationship with clients. Dedicated and
complaint; and adequate resources should be provided for
(6) The date the complaint was resolved. the financial education initiatives.
d. Ensure that information on how to b. Develop financial education and
make a complaint is clearly visible in the awareness programs, either on their own
BSFI’s premises and on their websites. or in partnership or collaboration with
e. Undertake an analysis of the patterns industry associations, which contribute to
of complaints from customers on a regular the improvement of their clients’ knowledge
basis including investigating whether and understanding of their rights and
complaints indicate an isolated issue or a responsibilities, basic information and risks
more widespread issue for consumers. This of financial products and services, and
analysis of consumer complaints must be ability to make informed financial decisions
escalated to the BSFI’s compliance/risk and participate in economic activities.
management function and senior Financial education programs should be
management. designed to meet the needs and financial
f. Provide for adequate resources to literacy level of target audiences, as well as
handle financial consumer complaints those that will reflect how target audience
efficiently and effectively. Staff handling prefers to receive financial information.
complaints should have appropriate These may include:
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.
(Circular No. 857 dated 21 November 2014, as amended by financial planning, saving, investing,
Circular No. 890 dated 02 November 2015) borrowing, retirement planning, and self-
protection against fraud.
§4402P.5 Financial education and (2) Developing financial education tools
awareness. Financial education initiatives or information materials that are updated
give consumers the knowledge, skills, and and readily understood and transparent such
confidence to understand and evaluate the as customized advice and guidance (face to
information they receive and empower them face training); printed brochures, flyers,
to make informed financial decisions. posters, training videos (e.g., about money
Because BSFIs deal directly with financial management, debt management, saving),
consumers, they have the reach, expertise, and newsletters; websites, and interactive
and established relationships necessary to calculators that deliver key messages and
deliver financial education. Financial “call to action” concerning better money
education should be integral to the good management (e.g., protect your money,
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.

Part IV - Page 11
§§ 4402P.5 - 4403P
15.12.31
(3) Distributing to customers, at the point (3) Market monitoring; and

of sale, a pamphlet on questions, which (4) Bangko Sentral Consumer Assistance
customers need to ask before accepting a Mechanism
financial product or service. c. The following enforcement action
c. Clearly distinguish between financial may be taken depending on:
education from commercial advice. Any (1) Rating-based enforcement actions for
financial advice for business purposes on-site periodic assessment. To implement
should be transparent. Disclose clearly any the foregoing enforcement actions, the
commercial nature where it is also being following rules shall apply:
promoted as a financial education initiative. (a) A Consumer Protection Rating (CPR)
It should train staff on financial education of 4 will require no enforcement action.
and develop codes of conduct for the (b) A CPR of 3 will require issuance of
provision of general advice about a written reminder on consumer protection
investments and borrowings, not linked to areas that may lead to weaknesses in the
the supply of a specific product. BSFI’s Consumer Protection Framework.
d. Provide via the internet or through (c) A CPR of 2 will require a written
printed publications unbiased and Action Plan in response to the written
independent information to consumers reminder issued by the BSP. The written
through comparative information about the Action Plan shall be duly approved by the
price and other key features, benefits and Board. It shall aim to correct the identified
products and services. Protection Framework or the noted
e. Regularly track, monitor, and assess violations of the BSP Regulations on
campaigns and programs and use the results Consumer Protection. FCPD shall assess the
of the evaluation for continuous improvement. viability of the plan and shall monitor the
(Circular No. 857 dated 21 November 2014, as amended by BSFI’s performance.
Circular No. 890 dated 02 November 2015) (d) A CPR of 1 shall also be considered
as poor/grossly inadequate Financial
C. ENFORCEMENT ACTIONS Consumer Protection Framework. For this
reason, a written action plan fully
Sec. 4403P Enforcement Actions
executable within ninety (90) days shall be
a. Enforcement is the implementation
prepared. The action plan shall be duly
of corrective measures and imposition of
approved by the Board aimed at instituting
sanctions to BSFIs to:
immediate and strong measures to restore
(1) Ensure compliance with the BSP
regulations on consumer protection and the BSFI to acceptable consumer protection
consumer protection laws and regulations; operating condition, where it does not pose
(2) Inform the management of the BSFIs any risk of financial loss or harm to the
of the consequences of their decisions and financial consumers.
actions; In the event of non-submission of the
(3) Instill discipline to the BSFIs; and written Action Plan within the deadline or
(4) Serve as deterrent to the commission failure to implement its action plan, FCPD
of violations. shall recommend appropriate enforcement
b. The bases for enforcement actions are actions on the BSFI and its responsible
the results of the: officers including monetary penalties to be
(1) On-site consumer protection computed on a daily basis until
framework assessment; improvements are satisfactorily
(2) Off-site surveillance; implemented.

Part IV - Page 12
§§ 4403P - 4499P
15.12.31
Composite Rating
Numerical 4 3 2 1
Rating
Rating
concern monitoring
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

appropriate; Secs. 4404P - 4499P (Reserved)

Part IV - Page 13
§§ 4501P - 4599P
09.12.31
PART FIVE
Sections 4501P - 4599P (Reserved)

Part V - Page 1
§§ 4601P - 4642P.4
09.12.31
PART SIX
MISCELLANEOUS
A. (RESERVED) e. issued in accordance with this

Section.
Sections 4601P - 4640P (Reserved) Electronic money issuer shall be
classified as follows:
Sec. 4641P Electronic Services. The a. Banks (hereinafter called EMI-Bank);
guidelines concerning electronic activities b. NBFI supervised by the BSP
as may be applicable, are found in Sec. (hereinafter called EMI-NBFI); and
4701Q and its Subsections. c. Non-bank institutions registered
(Circular No. 649 dated 09 March 2009) with the BSP as a monetary transfer agent
under Sec. 4511N of the MORNBFI
Sec. 4642P Issuance and Operations of (hereinafter called EMI-Others).
Electronic Money. The following guidelines For purposes of this Section:
shall govern the issuance of electronic a. Electronic instruments or devices shall
money (e-money) and the operations of mean cash cards e-wallets accessible via
electronic money issuers (EMIs). mobile phones or other access device, stored
(Circular No. 649 dated 09 March 2009) value cards, and other similar products.
b. E-money issued by QBs shall not be
§ 4642P.1 Declaration of policy. It is considered as deposits.
the policy of the BSP to foster the (Circular No. 649 dated 09 March 2009)
development of efficient and convenient
retail payment and fund transfer § 4642P.3 Prior Bangko Sentral
mechanisms in the Philippines. The approval. Pawnshops planning to be an EMI-
availability and acceptance of e-money as a NBFI shall comply with the requirements
retail payment medium will be promoted of Sec. 4632P and Sec. 4190Q, when
by providing the necessary safeguards and applicable.
controls to mitigate the risks associated in (Circular No. 649 dated 09 March 2009)
an e-money business.
(Circular No. 649 dated 09 March 2009) § 4642P.4 Common provisions. The
following provisions are applicable to all EMIs:
§ 4642P.2 Definitions a. E-money instrument issued shall be
E-money shall mean monetary value as subject to aggregate monthly load limit of
represented by a claim on its issuer, that is: P100,000 unless a higher amount has been
a. electronically stored in an approved by BSP. In case an EMI issues
instrument or device; several e-money instruments to a person
b. issued against receipt of funds of an (e-money holder), the total amount loaded
amount not lesser in value than the in all the e-money instruments shall be
monetary value issued; consolidated in determining compliance
c. accepted as a means of payment by with the aggregate monthly load limit;
persons or entities other than the issuer; b. EMIs shall put in place a system
d. withdrawable in cash or cash to maintain accurate and complete record
equivalent; and of e-money instruments issued, the identity

Part VI - Page 1
§§ 4642P.4 - 4642P.5
09.12.31
of e-money holders, and the individual and (2) Properly-designed computer

consolidated balances thereof. The system systems which are thoroughly tested prior
must have the capability to monitor the to implementation;
movement of e-money transactions and link (3) Appropriate security policies and
e-money instruments issued to common measures intended to safeguard the
e-money holders. The susceptibility of a integrity, authenticity and confidentiality of
system to intentional or unintentional data and operating processes;
misreporting of transactions and balances (4) Adequate business continuity and
shall be sufficient ground for imposition by disaster recovery plan; and
the BSP of sanctions, as may be applicable. (5) Effective audit function to provide
c. E-money may only be redeemed at periodic review of the security control
face value. It shall not earn interest nor rewards environment and critical systems.
and other similar incentives convertible to cash, i. EMIs shall provide the SDC
nor be purchased at a discount. E-money is quarterly statements containing, among
not considered a deposit hence it is not insured others, information on investments, volume
with the PDIC. of transactions, total outstanding e-money
d. EMIs shall not ensure that e-money balances, and liquid assets in such forms
instruments clearly identify the issuer who is as may be prescribed later on.
ultimately responsible to the e-money holders. j. EMIs shall notify BSP in writing of
This shall be communicated to the client who any change or enhancement in the e-
shall acknowledge the same in writing. money facility thirty (30) days prior to
e. It is the responsibility of EMIs to implementation. If said change or
ensure that their distributors/e-money agents enhancement requires prior BSP approval,
comply with all applicable requirements of the same shall be evaluated accordingly.
the Anti-Money Laundering laws, rules and Any change or enhancement that shall
regulations. expand the scope or change the nature of
f. EMIs shall provide an acceptable the e-money instrument shall be subject
redress mechanism to address the to prior approval of the Deputy Governor,
complaints of its customers. SES. These changes or enhancements may
g. EMIs shall disclose in writing and include the following:
its customers shall signify agreement to the (1) Additional capabilities of the
information embodied in Item “c” above e-money instrument/s, like access to new
upon their participation in the e-money channels (e.g. inclusion of internet channel
system. In addition, it shall provide clear in addition to merchant Point of Sale
guidance in English and Filipino on terminals);
consumers’ right of redemption, including (2) Change in technology service
conditions and fees for redemption, if any. providers and other major partners in the
Information on available redress procedures e-money business (excluding partner
for complaints together with the address and merchants), if any; and
contact information of the issuer shall also (3) Other changes or enhancements.
be provided. (Circular No. 649 dated 09 March 2009)
h. Prior to the issuance of e-money.
EMIs should ensure that the following § 4642P.5 Quasi-bank license
minimum systems and controls are in place: requirement. EMI-NBFIs and EMI-Others
(1) Sound and prudent management, that engage in lending activities must secure
administrative and accounting procedures a quasi-banking license from the BSP.
and adequate internal control mechanisms; (Circular No. 649 dated 09 March 2009)

Part VI - Page 2
§§ 4642P.6 - 4651P
15.12.31
§ 4642P.6 Sanctions. Monetary timelines, to conform to the provisions that

penalties and other sanctions for the they have not complied with subject to
following violations committed by EMI- Bangko Sentral approval.
NBFIs shall be imposed: (Circular No. 649 dated 09 March 2009)
Nature of Violation/ Sanction/Penalties

§§ 4642P.8 - 4642P.10 (Reserved)
Exception
1. Issuing e-money Applicable penalties § 4642P.11 Outsourcing of services by
without prior Bangko under Sections 36 & Electronic Money Issuers (EMIs) to
Sentral approval 37 of R.A. No. 7653; Electronic Money Network Service
Watchlisting of Providers (EMNSP). The guidelines on
owners/partners/ outsourcing of services by EMIs to EMNSP
principal officers are shown in Appendix Q-55.
2. Violation of any Applicable penalties Sanctions. Violations committed by
of the provisions of prescribed under EMIs pertaining to outsourcing activities to
R.A. No. 9160 (Anti- the Act EMNSP shall be subject to monetary
Money Laundering penalties as graduated under Appendix
Law of 2001 as Q-39 and/or other non-monetary sanctions
amended by R.A.No. under Section 37 of RA No. 7653.
9194) and its Transitory provisions. EMIs that were
implementing rules granted an authority to outsource their e-
and regulations money activities to an EMNSP may continue
3. Violation/s of Penalties and sanctions to exercise such authority provided that they
this Section under the have to conform to the provisions of
abovementioned laws Appendix Q-55 within a six-month period
and other applicable from 20 January 2011.
laws, rules and (Circular No. 704 dated 22 December 2010)
regulations
In addition, the susceptibility of a
system to intentional or unintentional Sec. 4650P Philippine and Foreign Currency
misreporting of transactions and balances Notes and Coins. The rules and regulations
shall be sufficient ground for appropriate that shall govern the treatment and
Bangko Sentral action or imposition of disposition of counterfeit Philippine and
sanctions, whenever applicable. foreign currency notes and coins, the
(Circular No. 649 dated 09 March 2009) reproduction and/or use of facsimiles of
legal tender Philippine currency notes and
§ 4642P.7 Transitory provisions. An coins, the replacement and redemption of
EMI-NBFI granted an authority to issue legal tender Philippine currency notes and
e-money prior to 26 March 2009 may coins considered mutilated or unfit for
continue to exercise such authority: circulation, and the treatment and
disposition of Philippine currency notes and
Provided, That it shall submit to the Bangko
coins called in for replacement are provided
Sentral, within one (1) month from 26 March in Section 4950Q.
2009, a certification signed by the President (Circular No. 829 dated 13 March 2014, M-2009-021 dated 16 June
or Officer with equivalent rank and function 2009, as amended by Circular No. 890 dated 02 November 2015)
that it is in compliance with all the
applicable requirements of this Section. B. SUNDRY PROVISIONS
Otherwise, they are required to submit
within the same period the measures they Sec. 4651P Supervisory Powers of the
will undertake, with the corresponding Bangko Sentral. The head of the appropriate

Part VI - Page 3
§§ 4651P - 4658P
13.12.31
department of the SES and his duly designated including the act of refusing to accept or
representatives are authorized to conduct an honor a letter of authority to examine
examination, inspection, or investigation of presented by any officer/examiner/employee
books, records, business affairs, administration, of the Bangko Sentral and the act of refusing
and financial condition of any pawnshop, to present pawnshop’s vital records referred
whenever said official deems it necessary for to in Sec. 4102P upon request by any officer/
the effective implementation of P.D. No. 114, examiner/employee of the Bangko Sentral.
and other pertinent rules and regulations. Said (Circular No. 656 dated 02 June 2009)
official and his duly designated representatives
may administer oaths to any director, officer, § 4651P.2 Sanctions.
or employee of the pawnshop. (Deleted by Circular No. 711 dated 28 January 2011)
If, upon such examination, inspection,
or investigation, the official or his deputies Secs. 4652P - 4656P (Reserved)
shall establish that the pawnshop is violating
or is not complying with the requirements Sec. 4657P Batas Pambansa Blg. 344 - An
of P.D. No. 114 and of the provisions of Act to Enhance the Mobility of Disabled
other pertinent rules and regulations, said Persons by Requiring Certain Buildings,
official shall immediately inform the Institutions, Establishments and Public
Monetary Board of his findings and Utilities to Install Facilities and Other
recommendations, and the Monetary Board Devices. In order to promote the realization
shall take appropriate action to stop such of the rights of disabled persons to
violation or non-compliance, and punish the participate fully in the social life and the
pawnshop and/or the persons responsible. development of the societies in which they
Any business establishment which live and the enjoyment of the opportunities
represents itself as a pawnshop and/or available to other citizens, no license or
regularly grants loans against pawns/ permit for the construction, repair or
collaterals physically delivered to the renovation of public and private buildings
establishment or is suspected to be a for public use, educational institutions,
pawnshop may be subject to the visitatorial airports, sports and recreation centers and
authority of the Bangko Sentral to determine complexes, shopping centers or
whether the establishment is engaged in the establishments, public parking places,
business of a pawnshop or in workplaces, public utilities, shall be granted
pawnbrokering. or issued unless the owner or operator
Any establishment that is found to be thereof shall install and incorporate in such
operating as a pawnshop illegally shall be building, establishment or public utility,
reported to the office of the city or municipal such architectural facilities or structural
mayor where the establishment is located, features as shall reasonably enhance the
for appropriate action, without prejudice to mobility of disabled persons such as
whatever legal action that the Bangko Sentral sidewalks, ramps, railings and the like. If
may take against the owners and operators feasible, all such existing buildings,
of the establishment. institutions, establishments, or public
(Circular No. 656 dated 02 June 2009) utilities may be renovated or altered to enable
the disabled persons to have access to them.
§ 4651P.1 Refusal to permit (Circular No. 656 dated 02 June 2009)
examination. Refusal to permit examination
shall mean any act or omission which Sec. 4658P Republic Act No. 9994 – An
impedes, delays or obstructs the duly Act Granting Additional Benefits and
authorized Bangko Sentral officer/examiner/ Privileges to Senior Citizens, Further
employee from conducting an examination, Amending Republic Act No. 7432 of 1992

Part VI - Page 4
§§ 4658P - 4699P
13.12.31
as Amended by Republic Act No. 9257 of be conducted by the Anti-Money Laundering

2003. To be able to give full support to the Council (AMLC) or by any of its recognized
improvement of the total well-being of the accredited service providers. The provisions
elderly and their full participation in of this subsection shall also apply to officer(s)
society, and to motivate and encourage them of the branch(es).
to contribute to nation building, senior The officer(s) in-charge and the
citizens shall be provided with express personnel who have attended the required
lanes in all pawnshops, including all their seminar may echo the said training to all
branches and other offices. If the provision employees within thirty (30) calendar days
of express lanes is logistically impossible from such attendance or as new
in any particular branch or office of any employees are hired.
pawnshop, said branch or office shall In case of pawnshops belonging to the
ensure that senior citizens are accorded same group of related companies, the
priority service. The provision of express training/seminars may be cascaded to other
lanes and/or priority service shall be made pawnshops within the group, subject to the
known to the general public through a following conditions:
clearly written notice prominently (1) training officers shall have attended
displayed in the transaction counters of all the AMLA lectures conducted by the
pawnshop branches and/or offices. AMLC;
(As amended by Circular No. 805 dated 08 August 2013) (2) lecture materials to be used by
training officers should be approved by the
Secs. 4659P - 4690P (Reserved) AML Examination Group of the Bangko
Sentral; and
Sec. 4691P Anti-Money Laundering (3) training officers shall submit to the
Regulations. Banks, OBUs, QBs, trust Bangko Sentral, the list, under oath, of
entities, NSSLAs, pawnshops, FX dealers, pawnshop personnel who have attended the
money changers, remittance agents, lectures.
electronic money issuers and other FIs (Circular No. 656 dated 02 June 2009)
which under special laws are subject to
Bangko Sentral supervision and/or § 4691P.2 Anti-money laundering
regulation, including their subsidiaries and program. Every pawnshop is required to
affiliates shall comply with the provisions formulate a Money Laundering and Terrorist
of Part 8 of Q Regulations, R.A. No. 9160 Financing Prevention Program as provided
(Anti-Money Laundering Act of 2001), as in Part 8 of Q Regulations.
amended, and its IRR. (Circular No. 656 dated 02 June 2009, as amended by Circular
Nos. 711 dated 28 January 2011 and 706 dated 05 January 2011)
Nos. 706 dated 05 January 2011 and 661 dated 01 September
2009)
§§ 4691P.3 - 4691P.8 (Reserved)
§ 4691P.1 Required seminar/training
§ 4691P.9 Sanctions and penalties
Pawnshop personnel directly involved in
pawnshop operations shall attend a seminar
on the requirements of the anti-money
laundering law, particularly on customer Secs. 4692P - 4698P (Reserved)
identification, record keeping and reporting
Sec. 4699P Administrative Sanctions
of covered and suspicious transactions, to (Deleted by Circular No. 711 dated 28 January 2011)

Part VI - Page 5
APP. P-1
09.12.31
CHART OF ACCOUNTS AND DESCRIPTION

OF LOAN REGISTER OF PAWNSHOPS
(Appendix to Sec. 4161P)
A. General Ledger. The General Ledger is (4) Income - This account represents the
the controlling record of all subsidiary "general ledger control" account for all
ledger accounts. The general ledger income of the pawnshop. An "Income
accounts shall be grouped as follows: Subsidiary Ledger" shall be maintained and
the total of this ledger shall equal the
(1) Assets - Asset accounts shall consist of balance of "Income Control" account of the
the following: general ledger at all times.
(a) Cash on hand and in banks; The "Income Subsidiary Ledger" shall
(b) Pledge loans; contain the following accounts:
(c) Land; (a) Interests - pledge loans;
(d) Building; (b) Service charges;
(e) Furniture and fixtures; (c) Gain or loss at auction sale;
(f) Office equipment; (d) Interests on securities; and
(g) Leasehold improvements; (e) Other income
(h) Investment in securities; and
(i) Other assets. (5) Expenses - The expenses account shall
Other assets shall include all assets not include the following:
included in any of the above classification, (a) Salaries and allowances;
such as prepaid expenses, advances, (b) Interest on borrowed money;
accounts receivables. (c) Rental;
(d) Depreciation;
(2) Liabilities - Liabilities represent (e) Light and water;
obligations of the pawnshop, such as: (f) Taxes and licenses;
(a) Loans payable; (g) SSS contribution;
(b) Accounts payable; and (h) Costs of telephone, postage and/or
(c) Other liabilities. telegram;
Other liabilities are liabilities not (i) Stationery and/or supplies; and
included in the above classification, such (j) Miscellaneous expenses.
as SSS premiums and medicare, tax
withheld, accruals. B. Registers. The following registers shall
be maintained to trace loan transactions.
(3) Capital - Capital at the end of the year
is the excess of assets over liabilities, or the (1) Loans Extended Register - Every
sum of paid-in capital, surplus or retained pawnbroker shall keep a "Loans Extended
earnings accounts and net income for the Register" in which shall be entered in ink, at
year. The accounts under this group shall the time of each loan or pledge transaction,
consist of the following: an accurate account and description in English,
(a) Capital/capital stock; with corresponding translation in the local
(b) Drawings; dialect, the following minimum data:
(c) Retained earnings; and (a) Date of transaction;
(d) Net income for the year. (b) Number of pawn ticket;

Appendix P-1 - Page 1
APP. P-1
09.12.31
(c) Amount of money loaned or payments of loans. It shall contain the

principal; following minimum data:
(d) Rate of interest to be paid, in percent; (a) Date of payment;
(e) Service charge collected; (b) Number of pawn ticket;
(f) Description of pawn; (c) Name of pawner;
(g) Appraised value of pawn; (d) Principal amount;
(h) Name of pawner; (e) Amount of interest paid; and
(i) Address of pawner; (f) Signature or thumbmark of the
(j) Description of the pawner, pawner and the name of the pawner written
including: by and signature of the witness to the
(i) Nationality; thumbmarking.
(ii) Sex; and A pawnshop that uses a computerized
(iii) General appearance; and system may record its loan transactions in
(k) Signature or thumbmark of the individual loan extended vouchers which shall
pawner and the name of the pawner written contain the same information enumerated
by and signature of the witness to the above in lieu of the loan extended and loans
thumbmarking. paid registers. Such pawnshops shall
periodically compile or bind the loan extended
(2) Loans Paid Register - A "Loans Paid vouchers and shall be made available for BSP
Register" shall be maintained in which shall examination upon request.
be entered in ink, the principal and interest (As amended by Circular No. 656 dated 02 June 2009)

APP. P-2
13.12.31
LIST OF REPORTS REQUIRED FROM PAWNSHOPS

A-2 BSP 7-26- 4161P (As Statement of Condition (SOC) Annually 30-Apr SDC
02C amended by (Head office with no branch)
Cir. No. 821
dated Consolidated Statement of Condition -do- -do- -do-
12.06.13 (Head office and branches)
and CL-079 - List of Branches
dated
12.17.09)
A-3 BSP 7-26- 4161P Statement of Income and Expenses -do- -do- -do-
03C (As amended (Head office with no branch)
by Cir. No.
821 dated Consolidated Statement of Income and
12.06.13 Expenses
and CL-079 (Head office and branches)
dated
12.17.09
B Unnumbered 4164P Audited Financial Statement (AFS) for the -do- June 30 of the following Appropriate department of
(no prescribed previous year ended prepared by an reference year the SES
form) external auditor together with actions
taken on the financial audit report.
For pawnshops with assets of P50 million
and above.
B Unnumbered 4163P Report on Crimes/Losses As crime or 10th business day from Original – SDC
incident knowledge of Duplicate – BSP Security
occurs crime/incident coordinator c/o Director,
Security Investigation and
Transport Department
Page 1 of 2
APP. P-2
13.12.31
A-2 Unnumbered 4691P Report on Suspicious Transactions As transaction 10th business day from Anti- Money Laundering
occurs date of Council
transaction/knowledge
A-2 Unnumbered 4691P Report on Covered Transactions As transaction 10th business day from Anti- Money Laundering
occurs date of Council
transaction/knowledge

A-3 Unnumbered 4162P Report on Borrowings of BSP Personnel Quarterly 15 banking days after Original - SDC
(CL-059 end of reference quarter
dated
11.28.07
and
CL-050
dated
10.04.07)
B Forms I and M-031 Report on Electronic Money Transactions -do- -do- E-mail -
II Schedule 1 dated Quarterly Statement of E-Money sdcothers-emoney@bsp.
09.11.09 Balances and Activity - Volume and gov.ph
and Cir. Amount of E-Money Transactions Hard copy - SDC
No. 649 Quarterly Statement of Liquidity
dated Cover
03.09.09 Schedules
Unnumbered 4193P.8 IT Risk Profile Report Annually 25 calendar days after e-mail at sdcnbfi-
(Cir. No. 808 end of reference year itprofile@bsp.gov.ph
dated
08.22.14)
Page 2 of 2
APP. P-2
09.12.31
Annex P-2-a
REPORTING GUIDELINES ON CRIMES/LOSSES

(Annex to App. P-2)
1. Pawnshops shall report on the than arising from a crime: Provided, That if
following matters through the appropriate no pawned article is involved, the amount
department of the SES: involved per incident is P20,000 or more.
a. Crimes whether consummated, 2. The following guidelines shall be
frustrated or attempted against pawned observed in the preparation and submission
articles/property/facilities (such as robbery, of the report.
theft, swindling or estafa, forgery and other a. The report shall be prepared in two
deceits) and other crimes involving loss/ (2) copies and shall be submitted within ten
destruction of pawn/property of the (10) business days from knowledge of the
pawnshop: Provided, That if no pawned crime or incident, the original to the
article is involved, the amount involved in appropriate department of the SES and the
each crime is P20,000 or more. duplicate to the BSP Security Coordinator,
Crimes involving the pawnshop thru the Director, Security Investigation and
personnel, regardless of whether or not Transport Department.
such crimes involve the loss/destruction of b. Where a thorough investigation and
pawned articles/property of the pawnshop, evaluation of facts is necessary to complete
even if the amount involved is less than the report, an initial report submitted within
those above specified, shall likewise be the ten (10) business day deadline may be
reported to the BSP. accepted: Provided, That a complete report is
b. Incidents involving material loss, submitted not later than fifteen (15) business
destruction or damage to the institution's days from termination of investigation.
pawned articles/property/facilities, other (As amended by Circular No. 656 dated 02 June 2009)

APP. P-3
09.12.31

(Appendix to Subsec. 4162P.1 )
Category A-1 reports shall be signed by shall be duly designated in a resolution

the chief executive officer, or in his absence, approved by the board of directors in the
by the executive vice-president, and by the format as prescribed in Annex P-3-c.
comptroller, or in his absence, by the chief
accountant, or by officers holding equivalent Copies of the board resolutions on the
positions. The designated signatories in this report signatory designations shall be
category, including their specimen submitted to the appropriate department of
signatures, shall be contained in a resolution the SES within three (3) days from the date
approved by the board of directors in the of resolution.
format prescribed in Annex P-3-a.
In the case of pawnshops organized
Category A-2 reports of head offices as single proprietorship or partnership,
shall be signed by the president, executive the reports shall be signed by the
vice-presidents, vice-presidents or officers proprietor or managing partner, as the case
holding equivalent positions. Such reports may be, in place of chief executive officer
of other offices/units (such as branches) shall or president. Other signatories shall be
be signed by their respective managers/officers authorized by the proprietor/managing
in-charge. Likewise, the signing authority in partner in a letter of authority to be
this category shall be contained in a resolution submitted to the appropriate department
approved by the board of directors in the of the SES indicating the names, positions
format prescribed in Annex P-3-b. and specimen signatures of the designated
signatories as well as the reports they are
Categories A-3 and B reports shall be to sign.
signed by officers or their alternates, who (As amended by Circular No. 656 dated 02 June 2009)

APP. P-3
09.12.31
Annex P-3-a
Whereas, it is required under Subsec. 4162P.1 of the revised Manual of Regulations for
Non-Bank Financial Institutions - Pawnshops, 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, we, the members of the Board of Directors of (Name of Pawnshop) ,
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 Pawnshop) 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,
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 Pawnshop) ;
Done in the City of Philippines, this ____day of ____, 20____.

___________________ ___________________
DIRECTOR DIRECTOR
___________________ ___________________
DIRECTOR DIRECTOR
___________________ ___________________
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY

APP. P-3
09.12.31
Annex P-3-b
Whereas, it is required under Subsec. 4162P.1 of the revised Manual of Regulations for
Non-Bank Financial Institutions - Pawnshops, that Category A-2 reports be signed by the
president, executive vice-presidents, vice-presidents or officer holding equivalent position,
and that such reports of other offices be signed by the respective manager/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 Pawnshop) , are
Board of Directors in particular and (Name of Pawnshop) 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;
resolved that:
Name of Officer Specimen Signature Position Title Report No.
are hereby authorized to sign the Category A-2 reports of (Name of Pawnshop) .
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
________________________
CORPORATE SECRETARY

APP. P-3
09.12.31
Annex P-3-c
FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORIES

A-3 AND B REPORTS
Whereas, it is required under Subsec. 4162P.1 of the revised BSP Manual of Regulations
for Non-Bank Financial Institutions (Pawnshops), that Categories A-3 and B reports be signed
by officers or their alternates;
Whereas, we the members of the Board of Directors of (Name of Pawnshop) , 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 Pawnshop) 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;
resolved that:
Name of Authorized Signatory/Alternate Specimen Signature Position Title Report No.
1. Authorized
(Alternate)
2. Authorized
(Alternate)
are hereby authorized to sign the Category A-3 and B reports of (Name of Pawnshop) .
Done in the City of ___________________, Philippines, this ____day of ____, 20____.
___________________________
___________________ ___________________
DIRECTOR DIRECTOR
___________________ ___________________
DIRECTOR DIRECTOR
___________________ ___________________
DIRECTOR DIRECTOR
ATTESTED BY:
________________________
CORPORATE SECRETARY

APP. P-4
12.12.31
STANDARD PAWN TICKET FORMAT

(Appendix to Subsec. 4323P.1)
BUSINESS/REGISTERED NAME
Address
Taxpayer Identification Number
Business Days and Hours
Serial No.:001 Original

Principal Amount of Loan
Interest in absolute amount 1 Date Loan Granted
Service Charge in amount Maturity Date
Net Proceeds Expiry Date of Redemption
1
Formula (Principal x Rate x Time) Effective Interest Rate in percent: _______
Per annum Per Month (Others)
Penalty interest in percent, if any
Description of the Pawn Appraised Value
Information of the Pawner

Name Sex
Complete Residential Address Date of Birth
Telephone/Mobile Phone No. Nationality
E-mail address, if any: Height
Preferred Mode of notification: Weight
Mail to above address Text/SMS E-Mail ID Presented
TERMS AND CONDITIONS OF STANDARD PAWN TICKET

1. The pawner hereby accepts the pawnshop’s appraisal as proper.
2. The pawnshop hereby agrees not to collect advance interest for a period of more than
one (1) year.
3. The service charge is equivalent to one percent (1%) of the principal loan, but shall
not exceed five pesos (P5.00). No other charges shall be collected.
4. This loan is renewable for such amount and period as may be agreed upon between
the pawnshop and the pawner subject to the same requirements for a new loan.
5. Upon maturity of this loan, as indicated above, the pawner still has ninety (90) days
from maturity date within which to redeem the pawn by paying the principal loan
plus the interest that shall have accrued thereon.
6. The amount of interest due and payable after the maturity date of the loan up to the
redemption period shall be computed upon redemption at the rate of interest provided

APP. P-4
12.12.31
above based on the sum of the principal loan and interest earned as of the date of
maturity. Any additional penalty and/or interest shall also be computed in the same
manner.
7. The pawnshop shall notify the pawner of any change in its business address/location.
8. The pawner shall advise the pawnshop of any change of address/contact number/
e-mail address.
9. The pawnshop shall send a reminder to the pawner in the preferred mode of notification
given above, or at the new address/mobile phone number or e-mail address, if such
was provided by the pawner before the expiration of the ninety (90) day grace period.
The pawnshop shall have the right to sell or dispose of the pawn if the pawner fails to
redeem it within the ninety (90) day grace period.
10. This ticket shall be surrendered at maturity date upon payment of the loan. In case of
loss or destruction of this ticket, the pawner hereby undertakes to personally present
an affidavit to the pawnshop before the redemption period expires. The pawnshop
has two (2) days to decide whether to accept (1) the affidavit in place of the original
pawn ticket; or (2) to issue a substitute pawn ticket, thereby cancelling the original.
11. The pawner shall not assign, sell or in any other way alienate the pawn securing this
loan without prior written consent of the pawnshop. If the pawnshop agrees, the
terms and conditions of this contract remain enforceable.
12. In case of pre-payment of this loan by pawner, the interest collected in advance shall
accrue in full to the pawnshop.
13. The pawner shall not be entitled to the excess of the public auction sale price over
the amount of principal, interest and service fee; neither shall the pawnshop be
entitled to recover the deficiency from the pawner.
(Signature or Thumb mark) (Signature)

Pawner Pawnshop's Authorized Representative
(As amended by Circular Nos. 754 dated 17 April 2012 and 656 dated 02 June 2009)

APP. P-4
13.12.31
Annex A
Alternative No. 1
Use of Rubber Stamp in the Pawn Ticket1
FRONT PAGE
Serial No.__________ Original
Name of Pawnshop
Address and Telephone Number
Taxpayer Identification Number
Business Days and Hours
Date Loan Granted: _____________________ Maturity Date: ______________________

Expiry Date of Redemption: __________________________
Mr./Ms. _________________________ a resident of _______________________for a loan of PESOS _________________________
(No./Street/Barangay/Town or City/Province)
_______(P______) with an interest of ____ percent (__%) for (____ days/month), has pledged to this Pawnee, as security for
the loan, article(s) described below appraised at PESOS _________________________________(P____________) subject to the
terms and conditions stated on the reverse side hereof. Penalty interest, if any: ___________________.
Description of the Pawn Principal P_______________________

_____________________________________________ Interest _______________________
_____________________________________________ Service Charge _______________________
Net Proceeds P _______________________
Effective interest Rate in

Percent
Please check:
Per annum Per month (Others)
ID presented: __________________________________________ Contact Number: ________________________________
____________________________________________________ _____________________________________________________
(Signature or Thumbmark of Pawner) (Signature of Pawnshop's Authorized Representatives)
PAWNER IS ADVISED TO READ AND UNDERSTAND THE TERMS AND CONDITIONS ON THE REVERSE SIDE HEREOF
____________________________________________________________________________________________________________________
1
Pawnshops are allowed for a period of one (1) year starting 22 February 2013 to stamp on their
existing inventory of pawn tickets, or print on a separate sheet of paper to be attached to said pawn
tickets, the information about the effective interest rate (EIR), as an alternative compliance with the
requirements of Section 4323P.
Manual of Regulations for Non-Bank Financial Institutions Appendix P-4 Page 3

APP. P-4
13.12.31
Annex B
Alternative No. 2
Use of a separate sheet to be attached in the Pawn Ticket
Attachment for Pawn Ticket Serial No.
Interest in absolute amount _________________

(Formula = Principal x Rate x Time)
Effective Interest Rate in Percent
Please check:
Per annum Per Month Others
Signature or Thumbmark of Pawner
Signature of Pawnshop's Authorized Representative
(As amended by Circular Nos. 787 dated 20 February 2013, 754 dated 17 April 2012 and 656 dated 02 June 2009)
Appendix P-4 Page 4 Manual of Regulations for Non-Bank Financial Institutions

APP. P-4-a
09.12.31
FORMAT OF STATEMENT OF UNDERSTANDING ON

PAWNSHOP TRANSACTION
_________________________________
(Business Name of Pawnshop)
STATEMENT OF UNDERSTANDING
I ACKNOWLEDGE THAT I UNDERSTAND AND FULLY AGREE TO THE TERMS AND

CONDITIONS OF THIS CONTRACT OF PLEDGE/PAWNSHOP TRANSACTION, AND
TO THE FOLLOWING:
1. Agreement as to Interest Rates. The parties are generally free to agree in writing
on the interest rates to be imposed in loans secured by pledge/pawned properties. In
case of dispute, the regular courts of law have the vested power to determine the
reasonableness and legality of interest rates.
2. Degree of Diligence Required of a Pawnshop. In accordance with Republic Act No.
386, as amended, the Civil Code of the Philippines, pawnshops shall take care of the
thing pawned by exercising reasonable care and caution that an ordinary prudent
person would as to his own property.
a. Accountability in case of Fire. The office building/premises and all pawns in the
pawnshop, except those which are kept inside a fireproof vault, are insured against
fire in accordance with the pertinent regulations of the Bangko Sentral ng Pilipinas
(BSP). The amount of indemnity shall be dependent on the insurance policy agreement
between the pawnshop and the insurance company.
b. Accountability in case of robbery and other fortuitous events. Any claim for
restitution by pawners in case of loss, destruction or defect of the pawn due to robbery
and other fortuitous event, with or without the fault or negligence of the pawnshop,
its officers and directors, are cognizable by the regular courts.
I DECLARE UNDER THE PENALTY OF THE ANTI-FENCING LAW THAT I AM THE

OWNER OF THE PROPERTY SUBJECT OF THIS AGREEMENT.
(Signature of Pawner over Printed Name)

Date:

Appendix P-4-a - Page 1
APP. P-4-b
09.12.31
STANDARD ADDITIONAL STIPULATIONS IN PAWN TICKETS

On Face of Pawn Ticket
1. Member: Chamber of Pawnbrokers of the Philippines
On Reverse Side of Pawn Ticket

1. I hereby authorize M , whose signature appears below, to
redeem (or renew ) my pawn covered by this pawn ticket.
1
Signature of Representative Signature of Pawner

(Signed in the presence of pawner)
Received by:
Pawner/Authorized Representative
(Signed in the presence of pawnshop owner/employee)
2. Pinahihintulutan ko si G______________, na may lagda sa ibaba, para tubusin

(o mapanibago*) ang aking sangla na binanggit sa papel na ito.
Lagda ng Kinatawan Lagda ng Nagsangla

(Nilagdaan sa harap ng nagsangla)
Tinatanggap ko ang bagay/mga bagay na binanggit sa papel na ito:
Lagda ng Tumanggap
3. Received the article(s) in the same condition when pawned and redeemed.
Pawner
4. Acknowledgment: I hereby declare that the above-mentioned article(s) are my

personal property and are free from liens and encumbrances.
Pawner
1
As pawnshop may opt to allow/include in the pawn ticket.

Appendix P-4-b - Page 1
APP. P-4-b
09.12.31
5. Venue of all judicial and administrative cases or proceedings and other legal
incidents arising out of or in connection with this contract shall solely and
exclusively be brought before appropriate courts, departments, offices or agencies
of the government situated in (locality of pawnshop head office).
6. The authorized representative must present valid identification papers.
7. Upon expiration of the redemption period, the pawnshop has the right to open
the sealed pawn for purposes of public auction.
8. For purposes of computing the amount of interest for pledge loans paid after
maturity date, a fraction of (less than) a month shall be considered as one whole
month.
9. Any one of the following:
a. In case this loan is not paid on maturity date, the pawner hereby agrees to
pay in addition to accrued interest, two percent (2%) per month of the principal,
as liquidated damages. For purposes of computing the amount of liquidated
damages, a fraction of a month shall be considered as one (1) full month.
b. The pawnshop may at its sole option, allow redemption of pawn after
expiration of the 90-day grace period. Provided the pawner shall pay the
principal plus interest due at the rate prescribed herein and liquidated
damages of two percent (2%) per month on the principal, counted after grace
period. For purposes of computing the amount of liquidated damages, a
fraction of a month shall be considered as one (1) full month.
c. In case this loan is not paid on maturity date, the pawner hereby agrees to
pay in addition to accrued interest, two percent (2%) per month of the principal,
as liquidated damages. For purposes of computing the amount of liquidated
damages, a fraction of a month shall be considered as one (1) full month. The
pawnshop may, at its sole option, allow redemption of pawn after expiration
of the 90-day grace period upon payment by the pawner of the loan principal
plus interest due and liquidated damages at the rates and manner of
computation herein prescribed.
10. The pawner shall hereby notify the pawnshop of his/her intention to redeem the
pawn twenty-four (24) hours prior to actual redemption.

Appendix P-4-b - Page 2
APP. P-4-c
09.12.31
STIPULATIONS NOT ALLOWED IN STANDARD PAWN TICKETS

1. Advertisements such as “highest appraisal in town, dependable, honest”, or other

similar terms.
2. Facsimile signature of authorized pawnshop representative.
3. “Terms and conditions accepted and payment received.”
4. “By ordinary or registered mail” in standard Term and Condition No. 9.
5. “Letter of authorization”, as title of third-party redemption/authorization feature.
6. Additional features such as “demand for receipt”, “authorized by the Bangko Sentral
ng Pilipinas” and heading of ticket as “pawnshop receipt”.

Appendix P-4-c - Page 1
APP. P-5
11.12.31

(Appendix to Section 4691P)

APP. P-5
11.12.31
Annex P-5-a
CERTIFICATION OF COMPLIANCE
WITH ANTI-MONEY LAUNDERING REGULATIONS

Annex P-5-a Page 2
APP. P-5
11.12.31
Annex P-5-b

SUSPICIOUS TRANSACTION REPORTS BY COVERED INSTITUTIONS

Annex P-5-b - Page 3
APP. P-6
11.12.31


APP. P-7
11.12.31
“Know-Your-Pawner” Policy
(Appendix to Subsection 4301P.3)
A pawner who transacts with a • Seaman’s Book;

pawnshop for the first time shall be required • Alien Certification of Registration/
to present the original and submit a clear Immigrant Certificate of Registration;
copy of at least one (1) valid photo-bearing • Government Office and GOCC ID,
identification document (ID) issued by an [e.g. Armed Forces of the Philippines (AFP ID),
official authority. Home Development Mutual Fund (HDMF
The valid ID should indicate the ID)];
pawner’s residential address, otherwise, he • Certification from the National
she is also required to present the original Council for the Welfare of Disabled Persons
and submit a clear copy of a certification (NCWDP);
from the barangay where the pawner resides • Department of Social Welfare and
or a billing statement that indicates his/her Development (DSWD) Certification;
residential address. • Integrated Bar of the Philippines
Valid IDs include the following: (IBP) ID;
• Passport, including those issued by • Company IDs issued by private
foreign governments; entities or institutions registered with or
• Driver’s License; supervised or regulated either by the
• Professional Regulation Commission Bangko Sentral ng Pilipinas, Securities and
(PRC) ID; Exchange Commission or Insurance
• National Bureau of Investigation Commission.
(NBI) Clearance; Where the customer or authorized
• Police Clearance; signatory is a non-Philippine resident,
• Postal ID; similar IDs duly issued by the foreign
• Voter’s ID; government where the customer is a
• Tax Identification Number, resident or a citizen may be presented.
• Barangay Certification; The copy of the ID, barangay certificate
• Government Service Insurance or billing statement shall be kept by the
System (GSIS) e-Card; pawnshop for convenience of the pawner
• Social Security System (SSS) Card; who continues to transact with the
• Senior Citizen Card; pawnshop but said documents should be
• Overseas Workers Welfare updated at least every three (3) years.
Administration (OWWA) ID; (As amended by Circular Nos.706 dated 05 January 2011, 656
• OFW ID; dated 02 June 2009)

APP. P-8
09.12.31
ABSTRACT OF “SECTION 13 AND 14 OF P.D. NO. 114”

(PAWNSHOP REGULATION ACT)
(Appendix to Subsection 4324P.1)
Redemption of Pawn Items • A pawnshop shall publish a notice

A pawner who fails to pay his obligation of public auction in at least two
has ninety (90) days from maturity date to newspapers circulated in the city or
redeem the pawn by paying the principal municipality where the pawnshop has its
and interest. place of business six (6) days prior to the
date of public auction. In remote areas
Disposition of Unredeemed Pawn Items where newspapers are neither published
• Unredeemed pawn items shall be nor circulated, notice by newspaper
sold/disposed of only through public auction; publication shall be complied with by
• Pawner shall be notified of the public posting notices at the city or municipal
auction at least thirty (30) days before the hall and in two (2) other conspicuous
expiration of the ninety (90)-day grace period public places where the pawnshop has its
through his/her preferred mode of notification; place of business;
• The notice to pawner shall contain • Pawner may participate in the said
the date, hour and place where the public public auction.
auction shall be conducted; (Circular No. 656 dated 02 June 2009)

APP. P-9
09.12.31

(Appendix to Sec. 4190P and Subsec. 4164P.4)

950 dated 02 July 2009, approved the 2. Category B
following revised rules and regulations a. TBs;
that shall govern the selection and b. QBs;
delisting by the BSP of covered institution c. Trust department of qualified banks
which under special laws are subject to and other trust entities;
BSP supervision. d. National Coop Banks; and

APP. P-9
09.12.31

the purpose of expressing an opinion on a. Mathematical or clerical mistakes in
such statements. the underlying records and accounting data;
2. Non-audit services – any b. Oversight or misinterpretation of
professional services provided to the facts; or
covered institution by an external auditor, c. Unintentional misapplication of
other than those provided to a covered accounting policies.
institution in connection with an audit or a 6. Gross negligence - wanton or
review of the financial statements of said reckless disregard of the duty of due care in
covered institution. complying with generally accepted auditing
3. Professional Standards - includes: standards.
(a) accounting principles that are 7. Material fact/information - any fact/
(1) established by the standard setting body; information that could result in a change in
and (2) relevant to audit reports for particular the market price or value of any of the
issuers, or dealt with in the quality control issuer’s securities, or would potentially affect
system of a particular registered public the investment decision of an investor.
accounting firm; and (b) auditing standards, 8. Subsidiary - a corporation or firm
standards for attestation engagements, more than fifty percent (50%) of the
quality control policies and procedures, outstanding voting stock of which is directly
ethical and competency standards, and or indirectly owned, controlled or held with
independence standards that the BSP or SEC power to vote by a bank, QB, trust entity,
determines (1) relate to the preparation or NSSLA or pawnshop.
issuance of audit reports for issuers; and 9. Affiliate - a corporation, not more
(2) are established or adopted by the BSP or than fifty percent (50%) but not less than
promulgated as SEC rules. ten percent (10%) of the outstanding
4. Fraud – an intentional act by one (1) voting stock of which is directly or
or more individuals among management, indirectly owned, controlled or held with
employees, or third parties that results in a power to vote by a bank, QB, trust entity,
misrepresentation of financial statements, NSSLA or pawnshop and a juridical
which will reduce the consolidated total person that is under common control with
assets of the company by five percent (5%). the bank, QB, trust entity, NSSLA or
It may involve: pawnshop.
effects of transactions from records or be clearly demonstrated that such ownership
documents; does not constitute control.

APP. P-9
09.12.31
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: D. GENERAL CONSIDERATION AND
a. Power over more than one half of LIMITATIONS OF THE SELECTION
the voting rights by virtue of an agreement PROCEDURES
with other stockholders; 1. Subject to mutual recognition
b. Power to govern the financial and provision of the MOA and as implemented
operating policies of the enterprise under a in this regulation, only external auditors and
statute or an agreement; auditing firms included in the list of BSP
c. Power to appoint or remove the selected external auditors and auditing firms
majority of the members of the board of shall be engaged by all the covered
directors or equivalent governing body; or institutions detailed in Item "B". The external
d. Power to cast the majority votes at auditor and/or auditing firm to be hired shall
meetings of the board of directors or also be in-charge of the audit of the entity’s
equivalent governing body. subsidiaries and affiliates engaged in allied
11. External auditor - means a single activities: Provided, That the external auditor
practitioner or a signing partner in an and/or auditing firm shall be changed or the
auditing firm. lead and concurring partner shall be rotated
12. Auditing firm – includes a every five (5) years or earlier: Provided
proprietorship, partnership limited liability further, That the rotation of the lead and
company, limited liability partnership, concurring partner shall have an interval of
corporation (if any), or other legal entity, at least two (2) years.
including any associated person of any of 2. Category A covered entities which
these entities, that is engaged in the practice have engaged their respective external
of public accounting or preparing or issuing auditors and/or auditing firm for a
audit reports. consecutive period of five (5) years or more
13. Associate – any director, officer, as of 18 September 2009 shall have a one
manager or any person occupying a similar (1)-year period from said date within which
status or performing similar functions in the to either change their external auditors
audit firm including employees performing and/or auditing firm or to rotate the lead
supervisory role in the auditing process. and/or concurring partner.
14. Partner - all partners including those 3. The selection of the external auditors
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 consolidated responsibility of the management of the
financial statements of the audit client, and reporting institution and accordingly, the
where relevant, the individual audit report fairness of the representations made
of any entity whose financial statements therein is an implicit and integral part of
form part of the consolidated financial the institution’s responsibility. The
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,

APP. P-9
09.12.31
or lack thereof, on such statements which 6. The selection of external auditors

he has audited/examined. and/or auditing firm shall be valid for a
4. The BSP shall not be liable for any period of three (3) years. The SES shall make
damage or loss that may arise from its an annual assessment of the performance
selection of the external auditors and/or of external auditors and/or auditing firm and
auditing firm to be engaged by banks for will recommend deletion from the list even
regular audit or non-audit services. prior to the three (3)-year renewal period, if
5. Pursuant to paragraph (5) of the based on assessment, the external auditors’
MOA, SEC, BSP and IC shall mutually report did not comply with BSP
recognize the accreditation granted by any requirements.
of them for external auditors and firms of
Group C or D companies under SEC, E. QUALIFICATION REQUIREMENT
Category B and C under BSP, and The following qualification requirements
insurance brokers under IC. Once are required to be met by the individual
accredited/selected by any one (1) of external auditor and the auditing firm at the
them, the above-mentioned special time of application and on continuing basis,
requirements shall no longer be prescribed subject to BSP’s provisions on the delisting
by the other regulators. and suspension of accreditation:
For corporations which are required 1. Individual external auditor
to submit financial statements to different a. General requirements
regulators and are not covered by the (1) The individual applicant must be
mutual recognition policy of this MOA, primarily accredited by the BOA. The
the following guidance shall be observed: individual external auditor or partner
a. The external auditors of UBs in-charge of the auditing firm must have at
which are listed in the Exchange, should least five (5) years of audit experience.
be selected/accredited by both the BSP (2) Auditor’s independence.
and SEC, respectively; and In addition to the basic screening
b. For insurance companies and procedures of BOA on evaluating auditor’s
banks that are not listed in the Exchange, independence, the following are required
their external auditors must each be for BSP purposes to be submitted in the form
selected/accredited by BSP or IC, of notarized certification that:
respectively. For purposes of submission (a) No external auditor may be engaged
to the SEC, the financial statements shall by any of the covered institutions under Item
be at least audited by an external auditor "B" hereof if he or any member of his
registered/accredited with BOA. immediate family had or has committed to
that for banks and its subsidiary and or if his independence is considered
affiliate bank, QBs, trust entities, NSSLAs, impaired under the circumstances specified
their subsidiaries and affiliates engaged in in the Code of Professional Ethics for CPAs.
allied activities and other FIs which under In case of a partnership, this limitation shall
special laws are subject to BSP apply to the partners, associates and the
consolidated supervision, the individual auditor-in-charge of the engagement and
and consolidated financial statements members of their immediate family;
thereof shall be audited by only one (1) (b) The external auditor does not have/
external auditor/auditing firm. shall not have outstanding loans or any

APP. P-9
09.12.31
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 assurance procedures, such consultation
previously employed by the external auditor policies and stringent quality control, to
and participated in any capacity in the audit ensure full compliance with the accounting
of the covered institution during the one- and regulatory requirements.
year preceding the date of the initiation of c. At the time of application, the
the audit; applicant firm must have at least one (1)
(3) Individual applications as external signing practitioner or partner who is already
auditor of entities under Category A above selected/accredited, or who is already
must have established adequate quality qualified and is applying for selection by
assurance procedures, such consultation BSP.
policies and stringent quality control, to d. A registered accounting/auditing
ensure full compliance with the accounting firm may engage in any non-auditing service
and regulatory requirements. for an audit client only if such service is
b. Specific requirements approved in advance by the client’s audit
(1) At the time of application, committee. Exemptions from the prohibitions
regardless of the covered institution, the may be granted by the Monetary Board on a
external auditor shall have at least five (5) case-by-case basis to the extent that such
years experience in external audits; exemption is necessary or appropriate in the
(2) The audit experience above refers public interest. Such exemptions are subject
to experience required as an associate, to review by the BSP.
partner, lead partner, concurring partner or e. At the time of application, the
auditor-in-charge; and applicant firm must have the following track
(3) At the time of application, the record:
applicant must have the following track (1) For Category A, the applicant firm
record: must have had at least twenty (20) corporate
(a) For Category A, he/she must have clients with total assets of at least P50.0
at least five (5) corporate clients with total million each;
assets of at least P50.0 million each. (2) For Category B, the applicant firm
(b) For Category B, he/she must have must have had at least five (5) corporate
had at least three (3) corporate clients with clients with total assets of at least P20.0
total assets of at least P25.0 million each. million each;

APP. P-9
09.12.31
(3) For Category C, the applicant firm adequacy of risk-based capital, risk
must have had at least five (5) corporate management systems and corporate
clients with total assets of at least P5.0 governance framework of the covered
million each. entities.
e. Copy of the latest AFS of the
F. APPLICATION FOR AND/OR applicant’s two (2) largest clients in terms
RENEWAL OF THE SELECTION OF of total assets.
INDIVIDUAL EXTERNAL AUDITOR 2. Subject to BSP’s provision on early
1. The initial application for BSP deletion from the list of selected external
selection shall be signed by the external auditor, the selection may be renewed
auditor and shall be submitted to the within two (2) months before the expiration
appropriate department of the SES together of the three (3)-year effectivity of the
with the following documents/information: selection upon submission of the written
a. Copy of effective and valid BOA application for renewal to the appropriate
Certificate of Accreditation with the department of the SES together with the
attached list of qualified partner/s of the firm; following documents/information:
b. A notarized undertaking of the (a) copy of updated BOA Certificate of
external auditor that he is in compliance Accreditation with the attached list of
with the qualification requirements under qualified partner/s of the firm;
Item "E" and that the external auditor shall (b) notarized certification of the external
keep an audit or review working papers for auditor that he still possess all qualification
at least seven (7) years in sufficient detail to required under Item "F.1.b" of this Appendix;
support the conclusion in the audit report (c) list of corporate clients audited
and making them available to the BSP’s during the three (3)-year period of being
authorized representative/s when required selected as external auditor by BSP. Such
to do so; list shall likewise indicate the findings noted
c. Copy of Audit Work Program which by the BSP and other regulatory agencies
shall include assessment of the audited on said AFS including the action thereon
institution’s compliance with BSP rules and by the external auditor; and
regulations, such as, but not limited to the (d) written proof that the auditor has
following: attended or participated in trainings for at
(1) capital adequacy ratio, as currently least thirty (30) hours in addition to the
prescribed by the BSP; BOA’s prescribed training hours. Such
(2) AMLA framework; training shall be in subjects like international
(3) risk management system, financial reporting standards, international
particularly liquidity and market risks; and standards of auditing, corporate
(4) loans and other risk assets review governance, taxation, code of ethics,
and classification, as currently prescribed regulatory requirements of SEC, IC and BSP
by the BSP rules and regulations. or other government agencies, and other
d. If the applicant will have clients topics relevant to his practice, conducted
falling under Category A, copy of the Quality by any professional organization or
Assurance Manual which, aside from the association duly recognized/accredited by
basic elements as required under the BOA the BSP, SEC or by the BOA/PRC through a
basic quality assurance policies and CPE Council which they may set up.
procedures, specialized quality assurance The application for initial or renewal
procedures should be provided consisting accreditation of an external auditor shall be
of, among other, review asset quality, accomplished by a fee of P2,000.00.

APP. P-9
09.12.31
G. APPLICATION FOR AND/OR e. Copy of the latest AFS of the

AUDITING FIRMS of total assets; and
1. The initial application shall be f. Copy of firm’s AFS for the
signed by the managing partner of the immediately preceding two (2) years.
auditing firm and shall be submitted to 2. Subject to BSP’s provision on early
the appropriate department of the SES deletion from the list of selected auditing
together with the following documents/ firm, the selection may be renewed within
information: two (2) months before the expiration of the
a. copy of effective and valid BOA three (3)-year effectivity of the selection upon
Certificate of Accreditation with attachment submission of the written application for
listing the names of qualified partners; renewal to the appropriate department of the
b. notarized certification that the firm SES together with the following documents/
is in compliance with the general information:
qualification requirements under Item "E.2" a. a copy of updated BOA Certificate
and that the firm shall keep an audit or of Registration with the attached list of
review working papers for at least seven qualified partner/s of the firm;
(7) years insufficient detail to support the b. amendments on Quality Assurance
conclusions in the audit report and making Manual, inclusive of written explanation on
them available to the BSP’s authorized such revision, if any; and
representative/s when required to do so; c. notarized certification that the firm
c. copy of audit work program which is in compliance with the general
shall include assessment of the audited qualification requirements under Item
institution’s compliance with BSP rules and "G.1.b" hereof;
regulations, such as, but not limited to the The application for initial or renewal
following; accreditation of an auditing firm shall be
(1) capital adequacy ratio, as currently accompanied by a fee of P5,000.00.
prescribed by the BSP;
(2) AMLA framework; H. REPORTORIAL REQUIREMENTS
(3) risk management system, 1. To enable the BSP to take timely and
particularly liquidity and market risks; and appropriate remedial action, the external
(4) loans and other risk assets review auditor and/or auditing firm must report to
and classification, as currently prescribed the BSP within thirty (30) calendar days after
by the BSP rules and regulations. discovery, the following cases:
d. If the applicant firm will have a. Any material finding involving fraud
clients falling under Category A, copy or dishonesty (including cases that were
Quality Assurance Manual where, aside resolved during the period of audit);
from the basic elements as required under b. Any potential losses the aggregate of
the BOA basic quality assurance policies which amounts to at least one percent (1%)
and procedures, specialized quality of the capital;
assurance procedures should be provided c. Any finding to the effect that the
relative to, among others review asset consolidated assets of the company, on a
quality, adequacy of risk-based capital, risk going concern basis, are no longer
management systems and corporate adequate to cover the total claims of
governance framework of covered entities; creditors; and

APP. P-9
09.12.31
d. Material internal control the normal coverage of an audit

weaknesses which may lead to financial conducted in accordance with generally
reporting problems. accepted auditing standards and identified
2. The external auditor/auditing firm non-audit services.
shall report directly to the BSP within fifteen
(15) calendar days from the occurrence of I. DELISTING AND SUSPENSION OF
the following: SELECTED EXTERNAL AUDITOR/
a. Termination or resignation as AUDITING FIRM
external auditor and stating the reason 1. An external auditor’s duly selected
therefor; pursuant to this regulation shall be
b. Discovery of a material breach of suspended or delisted, in a manner
laws or BSP rules and regulations such as, provided under this regulation, under any
but not limited to: of the following grounds:
(1) CAR; and a. Failure to submit the report under
(2) Loans and other risk assets review Item "H" of this Appendix or the required
and classification. reports under Subsec. X190.1;
c. Findings on matters of corporate b. Continuous conduct of audit
governance that may require urgent action despite loss of independence as provided
by the BSP. under Item "E.1" or contrary to the
3. In case there are no matters to report requirements under the Code of
(e.g. fraud, dishonesty, breach of laws, etc.) Professional Ethics;
the external auditor/auditing firm shall c. Any willful misrepresentation in
submit directly to BSP within fifteen (15) the following information/documents;
calendar days after the closing of the audit (1) application and renewal for
engagement a notarized certification that accreditation;
there is none to report. (2) report required under Item "H";
The management of the covered and
institutions, including its subsidiaries and (3) Notarized certification of the
affiliates, shall be informed of the adverse external auditor and/or auditing firm.
findings and the report of the external d. The BOA found that, after due
auditor/auditing firm to the BSP shall include notice and hearing, the external auditor
pertinent explanation and/or corrective committed an act discreditable to the
action. profession as specified in the Code of
The management of the covered Professional Ethics for CPAs. In this case,
institutions, including its subsidiaries and the BOA shall inform the BSP of the results
affiliates, shall be given the opportunity thereof;
to be present in the discussions between e. Declaration of conviction by a
the BSP and the external auditor/auditing competent court of a crime involving
firm regarding the audit findings, except moral turpitude, fraud (as defined in the
in circumstances where the external Revised Penal Code), or declaration of
auditor believes that the entity’s liability for violation of the banking laws,
management is involved in fraudulent rules and regulation, the Corporation
conduct. Code of the Philippines, the Securities
It is, however, understood that the Regulation Code (SRC); and the rules and
accountability of an external auditor/ regulations of concerned regulatory
auditing firm is based on matters within authorities;

APP. P-9
09.12.31
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
Philippine Auditing Standards and f. The firm or any one (1) of its auditors
Philippine Auditing Practice Statements. has been involved in a major accounting/
2. An auditing firms; accreditation auditing scam or scandal. The suspension
shall be suspended or delisted, after due or delisting of the said firm shall depend on
notice and hearing, for the following the gravity of the offense or the impact of
grounds: said scam or scandal on the investing public
a. Failure to submit the report under or the securities market, as may be
Item "H" or the required reports under Sec. determined by the BSP;
(3) Notarized certification of the (3) the rules of the BSP under this
managing partner of the firm. Appendix; or

APP. P-9
09.12.31
(4) professional standards. with the consent of the parties to such

h. Refusal for no valid reason, upon proceedings.
order of the BSP, to submit requested c. A determination of the Monetary
documents in connection with an ongoing Board to impose a suspension or delisting
investigation. The firm should however be under this section shall be supported by
made aware of such investigation. a clear statement setting forth the
3. Pursuant to paragraph 8 of the following:
aforesaid MOA, the SEC, BSP and IC shall (1) Each act or practice in which the
inform BOA of any violation by an selected/accredited external auditor or
accredited/selected external auditor which auditing firm, or associated entry, if
may affect his/her accreditation status as applicable, has engaged or omitted to
a public practitioner. The imposition of engage, or that forms a basis for all or part
sanction by BOA on an erring practitioner of such suspension/delisting;
shall be without prejudice to the (2) The specific provision/s of this
appropriate penalty that the SEC, IC or BSP regulation, the related SEC rules or
may assess or impose on such external professional standards which the
auditor pursuant to their respective rules Monetary Board determined as has been
and regulations. In case of revocation of violated; and
accreditation of a public practitioner by (3) The imposed suspension or
BOA, the accreditation by SEC, BSP and delisting, including a justification for
IC shall likewise be automatically either sanction and the period and other
revoked/derecognized. requirements specially required within
The SEC, BSP and IC shall inform each which the delisted auditing firm or
other of any violation committed by an external auditor may apply for re-
external auditor who is accredited/selected accreditation.
by any one (1) or all of them. Each agency d. The suspension/delisting,
shall undertake to respond on any referral including the sanctions/penalties provided
or endorsement by another agency within in Sec. X189 shall only apply to:
ten (10) working days from receipt thereof. (1) Intentional or knowing conduct,
4. Procedure and Effects of Delisting/ including reckless conduct, that results in
Suspension. violation or applicable statutory,
a. An external auditor/auditing firm regulatory or professional standards; or
shall only be delisted upon prior notice (2) Repeated instances of negligent
to him/it and after giving him/it the conduct, each resulting in a violation of
opportunity to be heard and defend the applicable statutory, regulatory or
himself/itself by presenting witnesses/ professional standards.
evidence in his favor. Delisted external e. No associate person or employed
auditor and/or auditing firm may re-apply auditor of a selected/accredited auditing
for BSP selection after the period firm shall be deemed to have failed
prescribed by the Monetary Board. reasonably to supervise any other person
b. BSP shall keep a record of its for purpose of Item "I.2.g" above, if:
proceeding/investigation. Said (1) There have been established in
proceedings/investigation shall not be and for that firm procedures, and a system
public, unless otherwise ordered by the for applying such procedures, that comply
Monetary Board for good cause shown, with applicable rules of BSP and that

APP. P-9
09.12.31
would reasonably be expected to prevent within thirty (30) calendar days after the
and detect any such violation by such conclusion of said review.
associated person; and
(2) Such person or auditor has K. AUDIT BY THE BOARD OF
reasonably discharged the duties and DIRECTORS
obligations incumbent upon that person Pursuant to Section 58 of RA. No. 8791,
by reason of such procedures and system, otherwise known as “The General Banking
and had no reasonable cause to believe Law of 2000” the Monetary Board may also
that such procedures and system were not direct the board of directors of a covered
being complied with. institution or the individual members thereof,
f. The BSP shall discipline any to conduct, either personally or by a
selected external auditor that is suspended committee created by the board, an annual
or delisted from being associated with any balance sheet audit of the covered
selected auditing firm, or for any selected institution to review the internal audit and
auditing firm that knew, or in the exercise the internal control system of the
or reasonable care should have known, concerned entity and to submit a report
of the suspension or delisting of any of such audit to the Monetary Board
selected external auditor, to permit such within thirty (30) calendar days after the
association, without the consent of the conclusion thereof.
Monetary Board.
g. The BSP shall discipline any L. AUDIT ENGAGEMENT
covered institution that knew or in the Covered institutions shall submit the
exercise of reasonable care should have audit engagement contract between them,
known, of the suspension or delisting of its their subsidiaries and affiliates and the
external auditor or auditing firm, without external auditor/auditing firm to the
the consent of the Monetary Board. appropriate department of the SES within
h. The BSP shall establish for fifteen (15) calendar days from signing
appropriate cases an expedited procedure thereof. Said contract shall include the
for consideration and determination of the following provisions:
question of the duration of stay of any such 1. That the covered institution shall be
disciplinary action pending review of any responsible for keeping the auditor fully
disciplinary action of the BSP under this informed of existing and subsequent changes
Section. to prudential regulatory and statutory
requirements of the BSP and that both
J. SPECIFIC REVIEW parties shall comply with said requirements;
When warranted by supervisory 2. That disclosure of information by the
concern, the Monetary Board may, at the external auditor/auditing firm to the BSP as
expense of the covered institution require required under Items “H” and “J” hereof, shall
the external auditor and/or auditing firm to be allowed; and
undertake a specific review of a particular 3. That both parties shall comply with
aspect of the operations of these institutions. all the requirements under this Appendix.
The report shall be submitted to the BSP (As amended by Circular No. 660 dated 25 August 2009)
and the audited institution simultaneously,

APP. P-10
14.12.31

[Appendix to Subsec. 4402P.4]

Manual of Regulations for Non-Bank Financial Institutions Appendix P-10 - Page 1

APP. P-10
14.12.31

Appendix P-10- Page 2 Manual of Regulations for Non-Bank Financial Institutions

APP. P-10
14.12.31

skills; Timelines
investigate,
and resolve)
Management System
complaints
1

APP. P-10
14.12.31
1
deadline.

APP. P-10
14.12.31

minimum: Mechanism.

APP. P-10
14.12.31

Concerns

N REGULATIONS
(Regulations Governing Other Non-Bank Financial Institutions)
TABLE OF CONTENTS
SECTION 4101N Applicable Regulations on Trust and Other Fiduciary

Activities
4101N.1 Sanctions
SECTION 4102N Minimum Capital for Investment Houses
SECTION 4103N Prior Bangko Sentral Authority on Quasi-Banking Functions

4103N.1 Quasi-banking functions
4103N.2 Transactions not considered quasi-banking
4103N.3 Delivery of securities
4103N.4 Securities custodianship operations
SECTION 4104N Anti-Money Laundering Regulations

4104N.1 - 4104N.8 (Reserved)
4104N.9 Sanctions and penalties
SECTIONS 4105N - 4109N (Reserved)

4109N.1 - 4109N.15 (Reserved)
4109N.16 Qualification and accreditation of non-bank
financial institutions acting as trustee on any
mortgage or bond issuance by any
municipality, GOCC, or any body politic
SECTION 4140N Interlocking Directorships and/or Officerships

4140N.1 Representatives of government
SECTION 4143N Disqualification of Directors and Officers

4143N.1 Persons disqualified to become directors
4143N.2 Persons disqualified to become officers
4143N.3 Disqualification procedures
4143N.4 Effect of possession of disqualifications
4143N.5 (Reserved)
4143N.6 Watchlisting
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 4145N Bio-data of Directors and Officers
SECTION 4150N Rules of Procedure on Administrative Cases Involving

Directors and Officers of Trust Entities
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
SECTION 4161N Philippine Financial Reporting Standards/Philippine

Accounting Standards
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
SECTION 4163N Internal Control Framework

4163N.1 Management oversight and control
culture
4163N.2 Risk recognition and assessment
4163N.3 Control activities
4163N.4 Information and communication
4163N.5 Monitoring activities and correcting
deficiencies
SECTION 4164N Internal Audit Function

4164N.1 Qualifications of the head of the internal audit
function
4164N.2 Duties and responsibilities of the head of the
internal audit function or the chief audit
executive
4164N.3 Professional competence and ethics of the
internal audit function
4164N.4 Independence and objectivity of the internal
audit function
4164N.5 Internal audit charter
4164N.6 Scope
SECTION 4172N Financial Audit

4172N.1 Audited financial statements of non-bank
Financial institutions
4172N.2 Posting of audited financial statements
SECTION 4180N Selection, Appointment, Reporting Requirements and

Delisting of External Auditors and/or Auditing Firm;
Sanction
SECTION 4181N Publication Requirements
SECTION 4190N Guidelines on Outsourcing
v
SECTION 4191N (Reserved)
SECTION 4192N Prompt Corrective Action Framework
SECTION 4193N Supervision by Risks
SECTION 4194N Market Risk Management
SECTION 4195N Liquidity Risk Management
SECTION 4196N Information Technology Risk Management (ITRM)

4196N.1 Declaration of Policy
4196N.2 Purpose and Scope
4196N.3 Complexity of IT risk profile
4196N.4 IT rating system
4196N.5 Definition of terms
4196N.6 Description of IT- related risks
4196N.7 IT Risk Management System (ITRMS)
4196N.8 Reports
4196N.9 Sanctions and penalties
SECTION 4197N Credit Risk Management; Statement of Policy

4197N.1 Evaluation of credit risk management system
A. Establishing an Appropriate Credit Risk Environment
4197N.2 Role of the Board and Senior Management
4197N.3 Credit risk management structure
4197N.4 Credit risk strategy
4197N.5 Credit policies, processes and procedures
B. Operating Under a Sound Credit Granting
4197N.6 Credit approval process
4197N.7 Credit granting and loan evaluation/analysis
process and underwriting standards
4197N.8 Renewal or Extension of maturity date of credits
4197N.9 Credit limits, large exposures, and credit risk
concentrations
4197N.10 Credits granted to related parties
C. Maintaining an Appropriate Credit Adminitration,
Measurement, and Monitoring Process
4197N.11 Credit Administration
4197N.12 Credit Risk Measurement, Validation and Stress
Testing
4197N.13Credit Risk Management Information and
Reporting Systems
4197N.14 Credit Monitoring
D. Maintaining an Appropriate Credit Control Process
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
SECTION 4198N Operational Risk Management; Policy Statement

4198N.1 Definition of operational risk
4198N.2 Duties and responsibilities
4198N.3 Roles and function
4198N.4 Operational risk management framework
4198N.5 Management of human resource-related risk
4198N.6 Management of Information-Technology Related
Risk
4198N.7 Management of integrity of prudential reports or
reports submitted to Bangko Sentral
4198N.8 Management of legal risk exposures
4198N.9 Management of operational risk arising from
financial inclusion initiatives
4198N.10 Notification/Reporting to Bangko Sentral
4198N.11 Supervisory Enforcement Actions
SECTION 4301N Credit Card Operations; General Policy

4301N.2 Risk management system
4301N.3 Minimum requirements
4301N.4 Information to be disclosed
4301N.5 Interest accrual on past due loans
4301N.6 Method of computing interest
4301N.7 Finance charges
4301N.8 Deferral charges
4301N.9 Late payment/penalty fees
4301N.10 Confidentiality of information
4301N.11 Suspension, termination of effectivity and reactivation
4301N.12 Inspection of records covering credit card transactions
4301N.13 Offsets
4301N.14 Handling of complaints
4301N.15 Unfair collection practices
4301N.16 Sanctions and penal provisions
4301N.17 Submission of credit card business activity
report
vii
SECTION 4302N Classification of Credit Card Receivables (Deleted by Circular
No. 855 dated 29 October 2014)
SECTION 4303N Updating of Information Provided to Credit Information Bureaus
SECTION 4311N Secured Loans and Other Credit Accommodations
SECTION 4312N Grant of Loans and Other Credit Accommodations

4312N.1 Additional Requirements
4312N.2 Purpose of loans and other credit
accommodations (Deleted by Circular No. 855
dated 29 October 2014)
4312N.3 Prohibited use of loan proceeds
4312N.4 Signatories
4312N.5 Sanctions
4312N.6 Accrual of interest earned on loans
4312N.7 - 4312N.9 (Reserved)
4312N.10 Minimum required disclosure
4312N.11 Unfair collection practices
4312N.12 Confidentiality of information
4312N.13 - 4312N.14 (Reserved)
4312N.15 Sanctions
SECTION 4313N Bank DOSRI Rules and Regulations Applicable to

Government Borrowings in Government-Owned or
Controlled Financial Institutions
SECTION 4314N Loans Against Personal Security (Deleted by Circular

No. 855dated 29 October 2014)
SECTION 4350N Agricultural Value Chain Financing Framework; Statement

of Policy
4350N.2 Features of agricultural value chain financing
program
4350N.3 Regulatory incentives
SECTION 4391N Investment in Debt and Marketable Equity Securities
viii
SECTION 4460N Personal Equity and Retirement Account (PERA) Market

Participants and PERA Investment Products
SECTION 4511N Foreign Exchange Dealers/Money Changers and/or

Remittance Agents Operations
4511N.1 Registration
4511N.2 Application for registration
4511N.3 Applicability of other laws/regulations
4511N.4 Required seminar/training
4511N.5 Sale and purchase of foreign currencies by FXDs/
MCs
4511N.6 Application to sell/purchase foreign currencies by
FXDs/MCs
4511N.7 Additional requirement
4511N.8 Requirements for remittance agents
4511N.9 Anti-money laundering council reportorial
requirements
4511N.10 - 4511N.14 (Reserved)
4511N.15 Sanctions
4511N.16 Industry association
SECTION 4601N Fines and Other Charges

4601N.1 Guidelines on the imposition of monetary
penalties; payment of penalties or fines
SECTION 4602N (Reserved)
SECTION 4603N Non-Bank BSP Supervised Entities
SECTIONS 4604N- 4640N (Reserved)
SECTION 4641N Electronic Services
SECTION 4642N Issuance and Operations of Electronic Money

4642N.1 Declaration of policy
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
SECTION 4650N Philippine and Foreign Currency Notes and Coins
SECTION 4653N Accounting for Financial Institution Premises; Other Fixed

Assets
SECTION 4660N Disclosure of Remittance Charges and Other Relevant

Information
SECTION 4695N Valid Identification Cards for Financial Transactions
SECTION 4699N General Provision on Sanctions
SECTIONS 4700N (Reserved)
SECTION 4701N Consumer Protection Oversight Function

4701N.1 Role and Responsibility of the Board and Senior
Management
4701N.2 Consumer Protection Risk Management System
(CPRMS)
x
B. CONSUMER PROTECTION STANDARDS OF CONDUCT FOR BSFIS
SECTION 4702N Consumer Protection Standards

4702N.1 Disclosure and Transparency
4702N.2 Protection of Client Information
4702N.3 Fair Treatment
4702N.4 Effective Recourse
4702N.5 Financial Education and Awareness
C. ENFORCEMENT ACTION
SECTION 4703N Enforcement Actions
SECTION 4704N - 4799N (Reserved)
SECTION 4901N - 4999N (Reserved)
xi
List of Appendices
16.03.31
LIST OF APPENDICES
No. SUBJECT MATTER
N-1 List of Reports Required from Non-Bank Financial Institutions
N-2 Guidelines on Prescribed Reports Signatories and Signatory Authorization

Annex N-2-a - Format of Resolution for Signatories of Category A-2
Reports
Annex N-2-b - Format of Resolution for Signatories of Category B
Reports
N-3 Anti-Money Laundering Regulations (Deleted pursuant to Circular

Annex N-3-a - Certification of Compliance with Anti-Money
Laundering Regulations (Deleted pursuant to Circular
Annex N-3-b - Rules on Submission of Covered Transaction Reports
N-4 Revised Implementing Rules and Regulations R.A. No. 9160, as

amended by R.A. No. 9194 (Deleted pursuant to Circular No. 706
N-5 Guidelines to Govern the Selection, Appointment, Reporting

of Covered Entities
N-6 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
N-7 Format Certification

(Deleted by Circular No. 873 dated 25 March 2015)
N-8 Registration and Operations of Foreign Exchange Dealers/Money

Changers and Remittance Agents
Attachment 2 - Computation Sheet
xiv
List of Appendices
16.03.31
LIST OF APPENDICES
No. SUBJECT MATTER
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
N - 10 Acts Tantamount to the Act of Issuing Pre-approved Credit Cards
N - 11 Basic Guidelines in Setting Up of Allowance for Credit Losses
N - 12 Guidelines and Procedures Governing the Consumer Assistance

N - 13 Agriculture Value Chain - Business Models
xv
§§ 4101N - 4103N.1
09.12.31
BSP Manual of Regulations for Non-Bank Financial Institutions
N Regulations
(Regulations Governing Other Non-Bank Financial Institutions)
Section 4101N Applicable Regulations on shall govern the imposition of monetary

Trust and Other Fiduciary Activities. Trust penalty for violations/offenses with
operations and investment management administrative sanctions falling under
activities of NBFIs not performing Section 37 of R.A. No. 7653 on NBFIs not
quasi-banking functions shall be subject to performing quasi-banking functions, their
the applicable regulations on such activities directors and/or officers.
of NBFIs performing quasi-banking (Circular No. 673 dated 10 December 2009)
functions in Part IV of the Q Regulations of
this Manual, to the regulations in the other Sec. 4102N Minimum Capital for
parts of the Q Regulations addressed also Investment Houses. Investment houses not
to trust entities and to the regulations performing quasi-banking functions shall
implementing the Truth in Lending Act in also be subject to the minimum capital
Sec. 4307Q. requirement in Sec. 4112Q of this Manual.
§ 4101N.1 Sanctions. Pursuant to Sec. 4103N Prior Bangko Sentral Authority

Section 91 of R.A. No. 8791, the Monetary on Quasi-Banking Functions. Borrowing by
Board may impose sanctions and monetary NBFIs from twenty (20) or more lenders for
penalty for any violation of the provisions the purpose of relending or purchase of
of Part IV of the Q Regulations, of the receivables or other obligations, which
regulations in the other parts of the Q constitutes quasi-banking functions, shall be
Regulations addressed also to trust entities, subject to prior BSP authority on
and of the regulations implementing the performance of quasi-banking functions
Truth in Lending Act in Sec. 4309Q. This is under BSP regulations.
without prejudice to the imposition of other
sanctions as the Monetary Board may § 4103N.1 Quasi-banking functions
consider warranted that may include the Quasi-banking functions shall consist of the
suspension or revocation of an institution’s following:
authority to engage in trust and other a. Borrowing funds for the borrower’s
fiduciary business or in investment own account;
management activities, and such other b. Twenty (20) or more lenders at any
sanctions as may be provided by law. If one (1) time;
the offender is a director or officer of the c. Methods of borrowing: issuance,
trust entity, the Monetary Board may also endorsement, or acceptance of debt
suspend or remove such director or officer. instruments of any kind, other than deposits,
If the violation is committed by a such as:
corporation, such corporation may be (1) acceptances;
dissolved by quo warranto proceedings (2) promissory notes;
instituted by the Solicitor General. (3) participations;
The guidelines for the imposition of (4) certificates of assignment or similar
monetary penalty shown in Appendix Q-39 instruments with recourse;
Manual of Regulations for Non-Bank Financial Institutions N Regulations

Page 1
§ 4103N.1
08.12.31
(5) trust certificates; payees on the face of each debt instrument

(6) repurchase agreements; and shall serve as the primary basis for counting
(7) such other instruments as the the lenders/placers except when proof to the
Monetary Board may determine; and contrary is adduced such as the official
d. Purpose: receipts or documents other than the debt
(1) relending, or instrument itself. In such case the actual/
(2) purchasing receivables or other real lenders/placers as appearing in such
obligations. proof, shall be the basis for counting the
As used in the definition of quasi- number of lenders/placers.
banking functions, the following terms and In a debt instrument issued to two (2)
phrases shall be understood as follows: or more named payees under an and/or and
Borrowing shall refer to all forms of or arrangement, the number of payees
obtaining or raising funds through any of appearing on the instrument shall be the
the methods and for any of the purposes basis for counting the number of lenders/
provided in Item "c" and "d", above whether placers: Provided, however, That a debt
the borrower’s liability thereby is treated as instrument issued in the name of a husband
real or contingent. and wife followed by the word spouses,
For the borrower’s own account shall whether under an and, and/or or or
refer to the assumption of liability in one’s arrangement or in the name of a designated
own capacity and not in representation, or payee under an in trust for (ITF) arrangement
as an agent or trustee, of another. shall be counted as one borrowing/
Purchasing of receivables or other placement.
obligations shall refer to the acquisition of 2. Each debt instrument payable to
claims collectible in money, including bearer shall be counted as one (1) lender/
interbank borrowings or borrowings placer, except when the NBFI can prove
between FIs, or of securities, of any amount that there is only one (1) owner for several
and maturity, from domestic or foreign sources. debt instruments so payable.
Relending shall refer to the extension 3. Two (2) or more debt instruments
of loans by an institution with antecedent issued to the same payee, irrespective of
borrowing transactions. Relending shall be the date and amount shall be counted as
presumed in the absence of express one (1) borrowing or placement.
stipulation, when the institution is regularly 4. Debt instruments underwritten by
engaged in lending. investment houses or traded by securities
Regularly engaged in lending shall dealers/brokers whether on a firm, standby
refer to the practice of extending loans, or best efforts basis shall be counted on the
advances, discounts or rediscounts as a basis of the number or purchasers thereof
matter of business, i.e., continuous or and shall not be treated as having been
consistent lending as distinguished from issued solely to the underwriter or trader:
isolated lending transactions. Provided, however, That in case of unsold
The following guidelines shall govern debt instruments in a firm commitment
lender count on borrowings or funds underwriting, the underwriter shall be
mobilized by NBFIs not performing quasi- counted as a lender.
banking functions: 5. Each buyer, assignee, and/or
1. For purposes of ascertaining the indorsee shall be counted in determining the
number of lenders/placers to determine number of lenders/placers of funds
whether or not an NBFI is engaged in mobilized through sale, assignment,
quasi-banking functions, the names of and/or indorsement of securities or
N Regulations Manual of Regulations for Non-Bank Financial Institutions

Page 2
§§ 4103N.1 - 4103N.3
15.10.31
receivables on a without recourse basis above-required accompanying statement,

whenever the terms and/or attendant the instrument so issued, endorsed or
documentation, practice, or circumstances accepted shall automatically be considered
indicate that the sale, assignment, and/or as falling within the purview of the rules on
indorsement thereof legally obligates the quasi-banking:
NBFI not performing quasi-banking Provided, further, That any of the
functions to repurchase or reacquire the following practices or practices similar and/
securities/receivables sold, assigned, or tantamount thereto in connection with a
indorsed or to pay the buyer, assignee, or without recourse transaction renders such
indorsee at some subsequent time. transaction as with recourse and within the
6. Funds obtained by way of advances purview of the rules on quasi-banking.
from (a) Issuance of postdated checks by a
stockholders, directors, or officers, financial intermediary, whether for its own
regardless of account or as an agent of the debt instrument
nature, shall be considered borrowed funds issuer, in payment of the debt instrument
or funds mobilized and such stockholders, sold, assigned or transferred without
directors or officers shall be counted in recourse;
determining the number of lenders/placers. (b) Issuance by a financial intermediary
of any form of guaranty on sale transactions
§ 4103N.2 Transactions not or on negotiations or assignment of debt
considered quasi-banking. The following instruments without recourse; or
shall not constitute quasi-banking: (c) Payment with the funds of the
a. Borrowing by commercial, financial intermediary which assigned, sold
industrial and other non-financial or transferred the debt instrument without
companies, through the means listed in recourse, unless the financial intermediary
Subsec. 4103N.1 for the limited purpose can show that the issuer has with the said
of financing their own needs or the needs financial intermediary funds corresponding
of their agents or dealers; and to the amount of the obligation.
b. The mere buying and selling Any investment house violating the
without recourse of instruments provisions of this Subsection shall be subject
mentioned in Subsec. 4103N.1: Provided, to the sanctions provided in Sections 12 and
That: 16 of P.D. No. 129, as amended.
(1) The institution selling without
recourse shall indicate or stamp in § 4103N.3 Delivery of securities.
conspicuous print on the instrument/s, as a. Securities sold on a without recourse
well as on the confirmation of sale, the basis allowed under Subsec. 4101Q.3(b)
phrase without recourse or sans recourse shall be delivered directly to the purchaser
and the following statement: or to the purchaser’s designated Bangko
Sentral accredited securities custodian or
(Name of non-bank) assumes SEC authorized central securities depository
no liability for the payment, in accordance with the guidelines set forth
directly or indirectly, of in Appendix Q-38. The securities custodian
this instrument. shall hold the securities in the name of the
buyer: Provided, That a QB/non-bank
(2) In the absence of the phrase without financial institution (NBFI)/other entity
recourse or sans recourse and the authorized by the Bangko Sentral to perform

Page 3
§§ 4103N.3 - 4104N.9
15.10.31
custodianship function or an SEC-authorized (d) Suspension or revocation of the

central securities depository may not be authority to engage in trust and other
allowed to be custodian/depository of fiduciary business.
securities issued or sold by said custodian b. The guidelines to implement the
or central securities depository, by entities delivery by the seller of securities to the
belonging to the same financial buyer or to his designated securities
conglomerate or banking group as that of custodian or central securities depository are
the custodian or depository, or of securities shown in Appendix Q-38.
in bearer form. The guidelines on the delivery of
The delivery shall be effected upon government securities to the investor’s
payment and shall be evidenced by a principal securities account with the RoSS
securities delivery receipt duly signed by the are in Appendix Q-38a.
authorized officer of the custodian/central Sanctions. Violation of any of the
securities depository and delivered to the provisions of Appendix Q-38 shall be subject
purchaser. to the sanctions/penalties under Subsec.
Sanctions. Violation of any 4144N.29.
provision of Item “a” shall be subject (As amended by Circular Nos. 873 dated 25 March 2015, 714
to the following sanctions/penalties: dated 10 March 2011, M-2007-002 dated 23 January 2007,
M-2006-009 dated 06 July 2006 and M-2006-002 dated 05 June
(1) Monetary penalties 2006, Circular No. 524 dated 31 March 2006)
First offense – Fine of P10,000 a day
for each violation reckoned from the § 4103N.4 Securities custodianship
date the violation was committed up to operations.
the date it was corrected. (Deleted by Circular No. 873 dated 25 March 2015)
Subsequent offenses – Fine of
P20,000 a day for each violation Sec. 4104N Anti-Money Laundering
reckoned from the date the violation Regulations. Covered institutions, including
was committed up to the date it was their subsidiaries and affiliates, shall comply
corrected. with the provisions of Part 8 of Q
(2) Other sanctions Regulations, R.A. No. 9160 [Anti-Money
First offense – Reprimand for the Laundering Act (AMLA) of 2001], as
directors/officers responsible for the amended, and its Implementing Rules and
violation. Regulations (IRR).
(As amended by Circular Nos. 706 dated 05 January 2011 and
Subsequent offense – 612 dated 13 June 2008)
(a) Suspension for ninety (90) days
without pay of directors/officers §§ 4104N.1 - 4104N.8 (Reserved)
responsible for the violation;
(b) Suspension or revocation of the § 4104N.9 Sanctions and penalties. The
accreditation to perform custodianship provisions of Part 8 of the Q Regulations
function; on sanctions and penalties are applicable
(c) Suspension or revocation of the for violation of the provisions of the AMLA.
authority to engage in quasi-banking (As amended by Circular No. 706 dated 05 January 2011)
function; and/or

Page 4
§§ 4105N - 4109N.16
08.12.31
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.

Page 5
§ 4109N.16
08.12.31
f. Waiver of confidentiality. An NBFI Subsection shall form part of these rules.

designated as trustee of any mortgage or i. Sanctions. Without prejudice to the
bond issued by any municipality, GOCC, penal and administrative sanctions
or any body politic shall submit to the provided for under Sections 36 and 37,
appropriate department of the SES a waiver respectively, of R.A. No. 7653, violation
of the confidentiality of information under of any provision of this Subsection shall
Sections 2 and 3 of R.A. No. 1405, as be subject to the following sanctions/
amended, duly executed by the issuer of the penalties depending on the gravity of the
mortgage or bond in favor of the Bangko offense:
Sentral. (1) First offense –
g. Reportorial requirements. An NBFI (a) Fine of up to P10,000 a day for the
authorized by the Bangko Sentral to act as institution for each violation reckoned
trustee of the proceeds of mortgage or bond from the date the violation was committed
issuance of a municipality, GOCC, or body up to the date it was corrected; and
politic shall comply with reportorial (b) Reprimand for the directors/officers
requirements that may be prescribed by the responsible for the violation.
Bangko Sentral. (2) Second offense –
h. Applicability of the rules and (a) Fine of up to P20,000 a day for the
regulations on trust, other fiduciary business institution for each violation reckoned
and investment management activities. The from the date the violation was committed
provisions of the Rules and Regulations on up to the date it was corrected;
Trust, Other Fiduciary Business and (b) Suspension for ninety (90) days
Investment Management Activities not without pay for directors/officers
inconsistent with the provisions of this responsible for the violation; and

Page 6
§§ 4109N.16- 4140N
14.12.31
(c) Revocation of the authority to act as changers, lending investors, pawnshops,

trustee on any mortgage or bond issuance fund managers, mutual building and loan
by any municipality, GOCC, or body associations, remittance agents and all other
politic. NBFIs without quasi-banking functions.
(3) Subsequent offense – a. Interlocking directorships.
(a) Fine of up to P30,000 a day for the While concurrent directorship may be
institution for each violation reckoned from the least prejudicial of the various
the date the violation was committed up to relationships cited in this Section to the
the date it was corrected; interests of the FIs involved, certain
(b) Suspension or revocation of the trust measures are still necessary to safeguard
license; against the disadvantages that could result
(c) Suspension for 120 days without pay from indiscriminate concurrent
of the directors/officers responsible for the directorship.
violation. (1) Except as may be authorized by the
Monetary Board or as otherwise provided
Secs. 4110N - 4139N (Reserved) hereunder, there shall be no concurrent
directorships between QBs or between a
Sec. 4140N Interlocking Directorships QB and a bank; and
and/or Officerships. In order to safeguard (2) Without the need for prior approval
against the excessive concentration of of the Monetary Board, concurrent
economic power, unfair competitive directorships between entities notinvolving
advantage or conflict of interest situations an investment house shall be allowed in the
to the detriment of others through the following cases:
exercise by the same person or group (a) A bank and one (1) or more of its
of persons of undue influence over the subsidiary bank/s, QB/s, and NBFI/s; and
p o l i c y m a k i n g a n d / o r management (b) A QB and an NBFI.
functions of similar FIs while at the same For purposes of the foregoing, a
time allowing banks, QBs and NBFIs husband and his wife shall be considered
without quasibanking functions to benefit as one (1) person.
from organizational synergy or economies b. Interlocking directorships and
of scale and effective sharing of managerial officerships.
and technical expertise, the following In order to prevent any conflict of
regulations shall govern interlocking interest resulting from the exercise of
directorships and/or officerships within the directorship coupled with the reinforcing
financial system consisting of banks, QBs influence of an officer’s decision-making
and NBFIs. and implementing powers, the following
For purposes of this Section, QBs shall rules shall be observed.
refer to investment houses, finance (1) Except as may be authorized by the
companies, trust entities and all other Monetary Board or as otherwise provided
QB s w h i l e N B F I s s h a l l r e f e r t o hereunder, there shall be no concurrent
investment houses, finance companies, directorship and officership between QBs,
trust entities, insurance companies, or between a QB and a bank, and between
securities dealers/brokers, credit card a QB and an NBFI.
companies, NSSLAs, holding companies, (2) Without the need for prior approval
investment companies, government of the Monetary Board, concurrent
NBFIs, asset management companies,
directorship and officership between a
insurance agencies/brokers, venture
bank and one (1) or more of its subsidiary
capital corporations, FX dealers, money

Page 7
§ 4140N
14.12.31
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;

Page 8
§§ 4140N - 4143N.1
14.12.31
(7) Concurrent officership positions officers of institutions under the supervisory

as corporate secretary or assistant and regulatory powers of the Bangko Sentral
corporate secretary between QB/s and/ other than banks, QBs, NSSLAs and
or NBFI/s or between bank/s, QB/s and pawnshops.
NBFI/s, other than IH/s, outside of those
covered by Item “c(6)” of this Section: § 4143N.1 Persons disqualified to
Provided, That proof of disclosure to become directors. Without prejudice to
and consent from all of the involved FIs, specific provisions of law prescribing
on the concurrent officership positions, disqualifications for directors, the following
shall be submitted to the Bangko are disqualified from becoming directors:
Sentral. a. Permanently disqualified
For purposes of this Section, members Directors/trustees/officers/employees
of a group or committee, including permanently disqualified by the Monetary
sub-groups or sub-committees, whose Board from holding a director/trustee
duties include functions of management such position:
as those ordinarily performed by regular (1) Persons who have been convicted
officers, shall likewise be considered as by final judgment of the court for offenses
officers. involving dishonesty or breach of trust such
It shall be the responsibility of the as estafa, embezzlement, extortion, forgery,
Corporate Governance Committee to malversation, swindling and theft;
conduct an annual performance evaluation (2) Persons who have been convicted
of the board of directors and senior by final judgment of the court for violation
management. When a director or officer has of banking laws;
multiple positions, the Committee should (3) Persons who have been judicially
determine whether or not said director or declared insolvent, spend thrift or
officer is able to and has been adequately incapacitated to contract; or
carrying out his/her duties and, if necessary, (4) Directors, trustees, officers or
recommend changes to the board based employees of closed institutions under the
upon said performance/review. supervisory and regulatory powers of the
(As amended by Circular Nos. 851 dated 30 September 2014, Bangko Sentral who were responsible for
and 592 dated 28 December 2007) such institutions’ closure as determined by
the Monetary Board.
§ 4140N.1 Representatives of b. Temporarily disqualified
government. The provisions of this Section Directors/trustees/officers/employees
shall apply to persons appointed to such disqualified by the Monetary Board from
positions as representatives of the holding a director/trustee position for a
government or government-owned or specific/indefinite period of time. Included
controlled entities unless otherwise are:
provided under existing laws. (1) Persons who refuse to fully disclose
the extent of their business interest to the
appropriate department of the SES when
Secs. 4141N - 4142N (Reserved)
required pursuant to a provision of law or
of a circular, memorandum or rule or
Sec. 4143N Disqualification of Directors
regulation of the Bangko Sentral. This
and Officers. The following regulations shall
disqualification shall be in effect as long as
govern the disqualification of directors and
the refusal persists;

Page 9
§ 4143N.1
10.12.31
(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

Page 10
§§ 4143N.1 - 4143N.2
10.12.31
disqualification applies until they have mentioned in Subsec. 4143N.1 shall

cleared themselves of involvement in the likewise apply to officers, except those
alleged irregularity. stated in Item “b(2)”.
(As amended by Circular No. 584 dated 28 September 2007) b. The spouses or relatives within the
second degree of consanguinity or affinity
§ 4143N.2 Persons disqualified to are prohibited from holding officership
become officers positions across the following functional
a. The disqualifications for directors categories within an NBFI:
(Next Page is Page 11)

Page 10a
§§ 4143N.2 - 4143N.3
10.12.31
1. Decision making and senior disqualification made known to the

management function, e.g., chairman, institution shall be reported to the
president, chief executive officer (CEO), appropriate department of the SES within
chief operating officer (COO), general seventy-two (72) hours from knowledge
manager, and chief financial officer (CFO) thereof.
other than the treasurer or controller; b. On the basis of knowledge and
2. Treasury function, e.g., Treasurer and evidence on the existence of any of the
Vice President – Treasury; grounds for disqualification mentioned in
3. Recordkeeping and financial Subsecs. 4143N.1 and 4143N.2, the director
reporting functions, e.g., controller and or officer concerned shall be notified in
chief accountant; writing either by personal service or through
4. Safekeeping of assets, e.g., chief registered mail with registry return receipt
cashier; card at his/her last known address by the
5. Risk management function, e.g., chief appropriate department of the SES of the
risk officer; existence of the ground for his/her
6. Compliance function, e.g., disqualification and shall be allowed to
compliance officer; and submit within fifteen (15) calendar days from
7. Internal audit function, e.g., internal receipt of such notice an explanation on why
auditor. he/she should not be disqualified and
The spouse or relative within the second included in the watchlisted file, together
degree of consanguinity or affinity of any with the evidence in support of his/her
person holding the position of manager, position. The head of said department may
cashier, or accountant of a branch or allow an extension on meritorious ground.
extension office of an NBFI or their c. Upon receipt of the reply/
respective equivalent positions is explanation of the director/officer
disqualified from holding or being concerned, the appropriate department of
appointed to any of said positions in the the SES shall proceed to evaluate the case.
same branch or extension office. The director/officer concerned shall be
(As amended by Circular No. 699 dated 17 November 2010) afforded the opportunity to defend/clear
himself/herself.
§ 4143N.3 Disqualification procedures d. If no reply has been received from
a. The board of directors and the director/officer concerned upon the
management of every institution shall be expiration of the period prescribed under
responsible for determining the existence of Item “b” above, said failure to reply shall
the ground for disqualification of the be deemed a waiver and the appropriate
institution’s director/officer or employee and department of the SES shall proceed to
for reporting the same to the BSP. While the evaluate the case based on available
concerned institution may conduct its own records/evidence.
investigation and impose appropriate e. If the ground for disqualification is
sanction/s as are allowable, this shall be delinquency in the payment of obligation,
without prejudice to the authority of the the concerned director or officer shall be
Monetary Board to disqualify a director/ given a period of thirty (30) calendar days
officer/employee from being elected/ within which to settle said obligation or,
appointed as director/officer in any FI under restore it to its current status or, to explain
the supervision of the BSP. Grounds for why he/she should not be disqualified and

Page 11
§4143N.3
08.12.31
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

Page 12
§§ 4143N.3 - 4143N.6
12.12.31
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,

Page 13
§§ 4143N.6 - 4144N.1
15.10.31
or the Monetary Board. court, NBI, institutions under the

The Bangko Sentral will disclose supervisory and regulatory powers of the
information on the person included in its Bangko Sentral, or such other agency/body
watchlist files only upon submission of a where the concerned individual had
duly notarized authorization from the derogatory record.
concerned person and approval of such Directors/trustees/officers/employees
request by the concerned SES Department delisted from the Watchlist –
Head or SES Subsector Head or the Deputy Disqualification File “B” other than those
Governor, SES or the Governor or the upgraded to Watchlist – Disqualification File
Monetary Board. The prescribed “A” shall be eligible for re-employment with
authorization form to be submitted to the any institution under the supervisory and
appropriate department of the SES is in regulatory powers of the Bangko Sentral.
Appendix Q-45. (As amended by Circular No. 758 dated 11 May 2012, CL-2007-
FIs can gain access to said information 001 dated 04 January 2007; and CL-2006-046 dated 21 December
2006)
in the said watchlist for the sole purpose of
screening their nominees/applicants for Sec. 4144N Securities Custodianship and
directors/officers and/or confirming their Securities Registry Operations 1 . The
elected directors and appointed officers. FIs following rules and regulations shall govern
must obtain the said authorization on an securities custodianship and securities
individual basis. registry operations of NBFIs under Bangko
e. Delisting. All delistings shall be Sentral regulations.
approved by the Monetary Board upon The guidelines to implement the
recommendation of the appropriate delivery of securities are provided in
department of the SES except in cases of Appendix Q-38.
persons known to be dead where delisting Violation of any provision of the
shall be automatic upon proof of death and guidelines in Appendix Q-38 shall be subject
need not be elevated to the Monetary Board. to the sanctions/penalties under Subsec.
Delisting may be approved by the Monetary 4144N.29.
Board in the following cases: (As amended by Circular Nos. 873 dated 25 March 2015 and
(1) Watchlist - Disqualification File “B” 714 dated 10 March 2011, M-2007-002 dated 23 January 2007,
M-2006- 009 dated 06 July 2006, M 2006- 002 dated 05 June
(Temporary) - 2006 and Circular No. 524 dated 31 March 2006)
(a) After the lapse of the specific period
of disqualification; § 4144N.1 Statement of policy.
(b) When the conviction by the court It is the policy of the Bangko Sentral to
for crimes involving dishonesty, breach of promote the protection of investors in order
trust and/or violation of banking laws to gain their confidence and encourage their
becomes final and executory, in which case participation in the development of the
the director/trustee/officer/employee is domestic capital market. Therefore, the
relisted to Watchlist – Disqualification following rules and regulations are
File “A” (Permanent); or promulgated to enhance transparency of
(c) Upon favorable decision or securities transactions with the end in view
clearance by the appropriate body, i.e., of protecting investors.
1
Within ten (10) calendar days from 14 April 2015, all concerned banks shall submit to the Bangko Sentral a
declaration on the status of compliance with the requirements on the delivery of securities sold to clients/
investors. NBFIs which intend to convert to another mode of delivery shall submit to the appropriate SES
department wihtin ten (10) calendar days days from 14 April 2015, a Letter of Undertaking (LOU), and plan of
actions for an orderly transfer of securities on or before 31 March2015 including measures undertaken/to be
undertaken to ensure that the interests of the investors are adequately protected. The LOU and plan of actions
shall be signed by the President or equivalent officer.

Page 14
§§ 4144N.2 - 4144N.5
11.12.31
§ 4144N.2 Applicability of this shall file an application with the

regulation. This regulation shall govern appropriate department of the SES.The
securities custodianship and securities application shall be signed by the
registry operations of banks and NBFIs highest ranking officer of the NBFI and
under Bangko Sentral supervision. It shall shall be accompanied by a certified true
cover all their transactions in securities as copy of the resolution of the NBFI’s
defined in Section 3 of the SRC, whether board of directors authorizing the NBFI
exempt or required to be registered with to engage in securities custodianship
the SEC, that are sold, borrowed, purchased, and/or registry.
traded, held under custody or otherwise
transacted in the Philippines where at least § 4144N.5 Pre-qualification
one (1) of the parties is a bank or an NBFI requirements for a securities custodian/
under Bangko Sentral supervision. registry
However, this regulation shall not cover the a. The securities custodian must be a
operations of stock and transfer agents duly NBFI under Bangko Sentral supervision that
registered with the SEC pursuant to the is authorized to engage in investment
provisions of SRC Rule 36-4.1 and whose management (for IHs with QB authority
only function is to maintain the stock and only) or trust business. The securities
transfer book for shares of stock. registry must be a NBFI under Bangko
Sentral supervision whether or not
§ 4144N.3 Prior Bangko Sentral authorized to engage in investment
approval. NBFIs under Bangko Sentral management (for IHs with QB authority) or
supervision may act as securities custodian trust business;
and/or registry only upon prior Monetary b. It must have complied with the
Board approval. minimum capital accounts required under
existing regulations not lower than an
§ 4144N.4 Application for authority adjusted capital of P 300.0 million or such
A BSP-supervised entity desiring to act amounts as may be required by the
as securities custodian and/or registry Monetary Board in the future;

Page 14a
§§ 4144N.5 - 4144N.6
11.12.31
c. It must have a CAMELS composite i. It has not been found engaging in

rating of at least “4” (as rounded off) in the unsafe and unsound practices during the last
last regular examination; six (6) months preceding the date of
d. It must have in place a application;
comprehensive risk management system j. It has generally complied with laws,
approved by its board of directors rules and regulations, orders or instructions
appropriate to its operations characterized of the Monetary Board and/or BSP
by a clear delineation of responsibility for Management;
risk management, adequate risk measurement k. It has submitted additional
systems, appropriately structured risk limits, documents/ information which may be
effective internal control and complete, requested by the appropriate department of
timely and efficient risk reporting systems. the SES, such as, but not limited to:
In this connection, a manual of operations (1) Standard custody/registry agreement
(which includes custody and/or registry and other standard documents;
operations) and other related documents (2) Organizational structure of the
embodying the risk management system custody/registry business;
must be submitted to the appropriate (3) Transaction flow; and
department of the SES at the time of (4) For those already in the custody or
application for authority and within thirty registry business, a historical background
(30) days fromupdates; for the past three (3) years;
e. It must have adequate technological l. It shall be conducted in a separate
capabilities and the necessary technical unit headed by a qualified person with at
expertise to ensure the protection, safety least two (2) years experience in custody/
and integrity of client assets, such as: registry operations; and
(1) It can maintain an electronic registry m. It can interface with the clearing and
dedicated to recording of accountabilities settlement system of any recognized
to its clients; and exchange in the country capable of
(2) It has an updated and comprehensive achieving a real time gross settlement of
computer security system covering system, trades.
network and telecommunication facilities n. A securities custodian which
that will: provides the value-added service of
(a) limit access only to authorized users; securities lending involving securities that
(b) preserve data integrity; and are sold, offered for sale or distributed
(c) provide for audit trail of transactions. within the Philippines must be a
f. It has complied, during the period duly-licensed lending agent registered with
immediately preceding the date of the SEC.
application, with the following: (As amended by Circular No. 714 dated 10 March 2011)
(1) ceilings on credit accommodation
to DOSRI; and § 4144N.6 Functions and responsibilities
(2) single borrower’s limit. of a securities custodian. A securities
g. It has no reserve deficiencies during custodian shall have the following basic
the eight (8) weeks immediately preceding functions and responsibilities:
the date of application; a. Safekeeps the securities of the client;
h. It has set up the prescribed b. Holds title to the securities in a
allowances for probable losses, both nominee capacity;
general and specific, as of date of c. Executes purchase, sale and other
application; instructions;

Page 15
§§ 4144N.6 - 4144N.8
11.12.31
d. P e r f o r m s a t l e a s t a m o n t h l y d. Prepares regular statement of

reconciliation to ensure that all positions securities balances at such frequency as may
are properly recorded and accounted for; be required by the owner on record but not
e. Confirms tax withheld; less frequent than every quarter; and
f. Represents clients in corporate e.Follows appropriate legal documentation
actions in accordance with the direction to govern its relationship with the Issuer.
provided by the securities owner;
g. Conducts mark-to-market valuation § 4144N.8 Protection of securities of
and statement rendition; the customer. A custodian must incorporate
h. Does earmarking of encumbrances the following procedures in the discharge
or liens such as, but not limited to, Deeds of its functions in order to protect the
of Assignment and court orders; and securities of the customer:
i. Acts as a collecting and paying agent a. A d m i n i s t r a t i o n o f s e c u r i t i e s
in respect of dividends, interest earnings or custodianship accounts. Securities
proceeds from the sale/redemption/ custodianship accounts must be
maturity of securities held unde custodianship: administered in the entity’s Trust Unit.
Provided, That the custodian shall immediately b. A c c o u n t i n g a n d r e c o r d i n g f o r
make known to the securities owner all securities. Custodians must employ
collections received and payments made accounting and safekeeping procedures that
with respect to the securities under custody. fully protect customer securities. It is
j. I n a d d i t i o n t o t h e a b o v e b a s i c essential that custodians segregate customer
functions, it may perform the value-added securities from one another and from its
service of securities lending as agent: proprietary holdings to protect the same
P r o v i d e d , That it complies with the from the claims of its general creditors.
pre-qualification requirements under Item Securities held under custodianship shall
“n” of Subsec. 4144N.5: Provided, further, be recorded in the books of the custodian at
That the securities lending service shall be the face value of said securities in the other
covered by a Securities Lending fiduciary sub-account “Custodianship”.
Authorization Agreement (SLAA) which c. Documentation. The appropriate
shall be attached to the custody contract. documentation for custodianship shall be
A securities custodian which renders the made and it shall clearly define, among
value-added service of securities lending others, the authority, role, responsibilities,
involving securities that are sold, offered fees and provision for succession in the
and distributed within the Philippines shall event the custodian can no longer discharge
comply with the pertinent rules and its functions. It shall be accepted in writing
regulations of the SEC on securities lending by the counterparties.
and borrowing operations. The governing custodianship agreement
(As amended by Circular No. 714 dated 10 March 2011) shall be pre-numbered and this number
shall be referred to in all amendments and
§ 4144N.7 Functions and responsibilities supplements thereto.
of a securities registry. d. Confirmation of custody. The custodian
a. Maintains an electronic registry shall issue a custody confirmation to the
book; purchaser or borrower of securities to
b. D e l i v e r s c o n f i r m a t i o n o f evidence receipt or transfer of securities as
transactions and other documents within they occur. It shall contain, as a minimum,
agreed trading periods; the following information on the securities
c. Issues registry confirmations for under custody:
transfers of ownership as it occurs; (1) Owner of securities;

Page 16
§§ 4144N.8 - 4144N.12
15.10.31
(2) Issuer; custody agreement with features at par

(3) Securities type; with the standards set under this
(4) Identification or serial numbers; Subsection drawn or prepared by the
(5) Quantity; parent company owning more than fifty
(6) Face value; and percent (50%) of the capital stock of the
(7) Other information, which may be purchaser and executed by the purchaser
requested by the parties. itself and its custodian.
e. Periodic reporting. The custodian Purchases by non-residents and
shall prepare at least quarterly (or as insurance companies that are exempted
frequent as the owner of securities will from the independence requirement of this
require) securities statements delivered to Subsection shall, however, be subject to
the registered owner’s address on record. all other provisions of this Subsection.
Said statement shall present detailed (As amended by Circular No. 873 dated 25 March 2015)
information such as, but not limited to,
inventory of securities, outstanding § 4144N.10 Registry of Scripless
balances, and market values. Securities of the Bureau of the Treasury.
(As amended by Circular No. 714 dated 10 March 2011) The RoSS, operated by the Bureau of the
Treasury, which is acting as a registry for
§ 4144N.9 Independence of the government securities is deemed to be
registry and securities custodian. A Bangko automatically accredited for purposes of
Sentral-accredited securities registry must this Section and is likewise exempted from
be a third party that does not belong to the
the independence requirement under
same financial conglomerate or banking
Subsec. 4144N.9. Securities registered
group as that of the issuer of securities. A
under the RoSS shall be delivered in
Bangko Sentral-accredited custodian must
accordance with the guidelines set forth
be a third party that does not belong to the
in Appendices Q-38 and Q-38a.
same financial conglomerate or banking
(As amended by Circular No. 873 dated 25 March 2015)
group as that of the issuer or seller of
securities held under custody. An NBFI
accredited by Bangko Sentral as securities § 4144N.11 Confidentiality. A
custodian may, however, continue holding Bangko Sentral-accredited securities
securities it sold under the following cases: custodian/registry shall not disclose to any
a. where the purchaser is a related unauthorized person any information relative
entity acting in its own behalf and not as to the securities under its custodianship/
agent or representative of another; registry. The management shall likewise
b. where the purchaser is a ensure the confidentiality of client accounts
non-resident with existing global custody of the custody or registry unit from other
agreement governed by foreign laws and units within the same organization.
conventions wherein the NBFI is designated
as custodian or sub-custodian;and § 4144N.12 Compliance with
c. upon approval by the Bangko Sentral, anti-money laundering laws/regulations.
where the purchaser is an insurance For purposes of compliance with the
company whose custody arrangement is requirements of R.A. No. 9160, otherwise
either governed by a global custody known as the “Anti-Money Laundering Act
agreement where the NBFI is designated as of 2001,” as amended, particularly the
custodian or sub-custodian or by a direct provisions regarding customer

Page 17
§§ 4144N.12 - 4145N
15.10.31
identification, record keeping and comply with reportorial requirements that

reporting of suspicious transactions, a may be prescribed by the Bangko Sentral,
Bangko Sentral-accredited custodian may which shall include as a minimum, the face
rely on referral by the seller/issuer of and market value of securities held under
securities: Provided, That it maintains a custodianship.
record of such referral together with the
minimum identification, information/ §§ 4144N.15 - 4144N.28 (Reserved)
documents required under the law and
its implementing rules and regulations. § 4144N.29 Sanctions. Without
A Bangko Sentral accredited custodian prejudice to the penal and administrative
must maintain accounts only in the true and sanctions provided for under Sections 36 and
full name of the owners of the security. 37, respectively, of the R.A. No. 7653, viola-
However, said securities owners may be tion of any provision of this Section shall be
identified by number or code in reports and subject to the following sanctions penalties:
correspondences to keep his identity a. First offense –
confidential. (1) Fine of up to P10,000 a day for the
Securities subject of pledge and/or institution for each violation reckoned from
deed of assignment as of 14 October 2004 the date the violation was committed up to
(date of Circular 457), may be held by a the date it was corrected; and
lending NBFI up to the original maturity of (2) Reprimand for the directors/
the loan or full payment thereof, whichever officers responsible for the violation.
comes earlier. b. Second offense -
(1) Fine of up to P20,000 a day for the
§ 4144N.13 Basic security deposit. institution for each violation reckoned from
Securities held under custodianship the date the violation was committed up to
whether booked in the Trust Department the date it was corrected; and
or carried in the regular books of the NBFI (2) Suspension for ninety (90) days
shall be subject to a security deposit for faith- without pay of directors/officers responsible
ful performance of duties at the rate of 1/25 for the violation.
of one percent (1%) of the total face value c. Subsequent offenses–
or P500,000 whichever is higher. (1) Fine of up to P30,000 a day for the
However, securities held under institution for each violation from the date
custodianship where the custodian also the violation was committed up to the date
performs securities lending as agent shall it was corrected;
be subject to a higher basic security (2) Suspension or revocation of the
deposit of one percent (1%) of the total authority to act as securities custodian and/
face value. or registry; and
Compliance shall be in the form of (3) Suspension for 120 days without
government securities deposited with the pay of the directors/officers responsible for
Bangko Sentral eligible pursuant to existing the violation.
regulations governing security for the faithful
performance of trust and other fiduciary Secs. 4145N Bio-data of Directors and
business. Officers.
(As amended by Circular No. 714 dated 10 March 2011) a. FIs shall submit to the appropriate
department of the SES a bio-data with ID
§ 4144N.14 Reportorial requirements. picture of their directors/officers with rank
An accredited securities custodian shall of senior vice president (SVP) and above (or

Page 18
§§ 4145N - 4156N
15.10.31
equivalent ranks) upon every election/re- examination or when required by the

election/appointment/promotion in a Bangko Sentral for submission for off-site
prescribed form and for first-time directors/ verification.
officers with rank of senior vice president c. The FI shall also submit to the
and above (or equivalent ranks) within a appropriate department of the SES, a duly
particular FI, the duly notarized notarized list of the incumbent members of
authorization form per Appendix Q-45, the board of directors and officers (President
within twenty (20) business days from the or equivalent rank, down the line, format
date of election/re-election of the directors/ attached as Appendix N-10), within
meeting of the board of directors in which twenty (20) business days from the annual
the officers are appointed/promoted, in election of the board of directors as provided
accordance with Appendix N-1. in the FI’s by-laws, in accordance with
The bio-data shall be updated and Appendix N-1.
submitted in cases of change of name due (As amended by Circular Nos. 887 dated 07 October 2015 and
to change in civil status and change of 758 dated 11 May 2012)
residential address, within twenty (20)
Secs. 4146N – 4149N (Reserved)
business days from the date the change
occurred. Sec. 4150N Rules of Procedure on
For other officers below the rank of SVP, Administrative Cases Involving Directors
the FI shall not be required to submit their and Officers of Trust Entities. The rules of
bio-data to the Bangko Sentral. procedure on administrative cases involving
b. The FI shall, however, keep a directors and officers of QBs in Sec. 4150Q
complete record of the bio-data of all its shall apply to directors and officers of trust
directors and officers and shall maintain a entities.
system of updating said records which shall
be made available during on-site Secs. 4151N – 4156N (Reserved)
(Next page is Page - 19)

Page 18a
§§ 4157N- 4161N
13.12.31
Sec. 4157N Batas Pambansa Blg. 344 –An of any NBFI, said branch or office shall
Act To Enhance The Mobility Of Disabled ensure that senior citizens are accorded
Persons By Requiring Certain Buildings, priority service. The provision of express
Institutions, Establishments And Public lanes and/or priority service shall be made
Utilities To Install Facilities And Other known to the general public through a
Devices. In order to promote the realization clearly written notice prominently displayed
of the rights of disabled persons to in the transaction counters of all NBFI
participate fully in the social life and the branches and/or offices.
development of the societies in which they (Circular No. 805 dated 08 August 2013)
live and the enjoyment of the opportunities
available to other citizens, no license or Secs. 4159N-4160N (Reserved)
permit for the construction, repair or
renovation of public and private buildings Sec. 4161N Philippine Financial Reporting
for public use, educational institutions, Standards (PFRS)/Philippine Accounting
airports, sports and recreation centers and Standards (PAS).
complexes, shopping centers or Statement of policy. It is the policy of
establishments, public parking places, the Bangko Sentral to promote fairness,
workplaces, public utilities, shall be granted transparency and accuracy in financial
or issued unless the owner or operator reporting. It is in this light that the Bangko
thereof shall install and incorporate in such Sentral aims to adopt all PFRS and PAS
building, establishment or public utility, issued by the Accounting Standard Council
such architectural facilities or structural (ASC) to the greatest extent possible.
features as shall reasonably enhance the Other NBFIs not performing quasi-
mobility of disabled persons such as banking functions shall adopt the PFRS and
sidewalks, ramps, railings and the like. If PAS which are in accordance with generally
feasible, all such existing buildings, accepted accounting principles in recording
institutions, establishments, or public transactions and in the preparation of
utilities may be renovated or altered to financial statements and reports to Bangko
enable the disabled persons to have access Sentral. However, in cases where there are
to them. differences between Bangko Sentral
regulations and PFRS/PAS as when more
Sec. 4158N Republic Act No. 9994 – An than one (1) option are allowed or certain
Act Granting Additional Benefits and maximum or minimum limits are prescribed
Privileges to Senior Citizens, Further by the PFRS/PAS, the option or limit
Amending Republic Act No. 7432 of 1992, prescribed by Bangko Sentral regulations
as Amended by Republic Act No. 9257 of shall be adopted by the NBFIs.
2003. To be able to give full support to the For purposes hereof, the PFRS/PAS shall
improvement of the total well-being of the refer to issuances of the ASC and approved
elderly and their full participation in society, by the PRC.
and to motivate and encourage them to Accounting treatment for prudential
contribute to nation building, senior citizens reporting. For prudential reporting, FIs shall
shall be provided with express lanes in all adopt in all respect the PFRS and PAS except
branches and offices of NBFIs. If the as follows:
provision of express lanes is logistically a. In preparing consolidated financial
impossible in any particular branch or office statements, only investments in financial

Page 19
§§ 4161N - 4162N.2
15.10.31
allied subsidiaries except insurance with that in the audited annual financial
subsidiaries shall be consolidated on a line statements.
by-line basis; while insurance and non- (As amended by Circular Nos. 572 dated 22 June 2007 and 494
financial allied subsidiaries shall be dated 20 September 2004)
accounted for using the equity method.
Financial/non-financial allied/non-allied Sec. 4162N Reports. NBFIs without quasi-
associates shall be accounted for using the banking functions but are subsidiaries/
equity method in accordance with the affiliates of banks and QBs and investment
provisions of PAS 28 “Investments in houses without quasi-banking functions but
Associates”. with trust operations shall submit to the
b. For purposes of preparing separate appropriate department of the SES the
financial statements, financial/non-financial reports listed in Appendix N-1 in the forms
allied/non-allied subsidiaries/associates, as may be prescribed by the Deputy
including insurance subsidiaries/associates, Governor, SES.
shall also be accounted for using the equity Any change in, or amendment to, the
method; and articles of incorporation, by-laws or material
c. FIs shall be required to meet the documents required to be submitted to the
Bangko Sentral recommended valuation Bangko Sentral shall be reported by
submitting copies of the amended articles
reserves.
of incorporation, by-laws, or material
Government grants extended in the form
documents to the appropriate department
of loans bearing nil or low interest rates shall
of the SES within fifteen (15) days following
be measured upon initial recognition at its
such change.
fair value (i.e., the present value of the future
(As amended by Circular No. 880 dated 22 May 2015)
cash flows of the financial instrument
discounted using the market interest rate).
§ 4162N.1 Categories and signatories
The difference between the fair value and of reports. Reports required to be submitted
the net proceeds of the loan shall be to the Bangko Sentral are classified into
recorded under “Unearned Income-Others”, Categories A-2 and B reports as indicated
which shall be amortized over the term of in the list of reports required to be submitted
the loan using the effective interest method. to the Bangko Sentral in Appendix N-1.
The provisions on government grants Appendix N-2 prescribes the signatories
shall be applied retroactively to all for each report category and the
outstanding government grants received. FIs requirements on signatory authorization.
that adopted an accounting treatment other Reports submitted by NBFIs in computer
than the foregoing shall consider the media shall be subject to the same
adjustment as a change in accounting policy, requirements.
which shall be accounted for in accordance A report submitted to the Bangko Sentral
with PAS 8. under the signature of an officer who is not
Notwithstanding the exceptions in Items authorized in accordance with the
“a”, “b” and “c”, the audited annual financial requirements in this Subsection shall be
statements required to be submitted to the considered as not having been submitted.
Bangko Sentral in accordance with the
provision of Sec. 4172N shall in all respect § 4162N.2 Manner of filing. The
be PFRS/PAS compliant: Provided, That FIs submission of the reports shall be effected
shall submit to the Bangko Sentral adjusting by filing them personally with the
entries reconciling the balances in the appropriate department of the SES or with
financial statements for prudential reporting the Bangko Sentral Regional Offices/Units,

Page 20
§§ 4162N.2 - 4162N.3
08.12.31
or by sending them by registered mail or (2) Willful delay in the submission of

special delivery through private couriers reports shall refer to the failure of an NBFI
unless otherwise specified in the circular to submit a report on time. Failure to submit
or memorandum of the Bangko Sentral. a report on time due to fortuitous events,
such as fire and other natural calamities and
§ 4162N.3 Sanctions in case of willful public disorders, including strike or lockout
affecting an NBFI as defined in the Labor
delay in the submission of reports.
Code or national emergency affecting
a. Definition of terms. For purposes of
operations of NBFIs, shall not be considered
this Subsection, the following definitions as willful delay.
shall apply: b. Fines for willful delay in submission
(1) Report shall refer to any report or of reports. NBFIs incurring willful delay in
statement required of an NBFI to be the submission of required reports shall pay
submitted to the Bangko Sentral periodically a fine in accordance with the following
or within a specified period. schedule:

Page 20a
§§ 4162N.3 - 4163N.1
15.10.31
I. For Categories A-2 reports achievement of objectives through efficient

Per day of default and effective operations; reliable, complete
until the report is filed P300 and timely financial and management
II. For Category B reports information; and compliance with
Per day of default applicable laws, regulations, supervisory
until the report is filed P 60 requirements, and the organization’s
policies and procedures.
Delay or default shall start to run on the FIs shall have in place adequate and
day following the last day required for the effective internal control framework for the
submission of reports. However, should the conduct of their business taking into
last day of filing fall on a non-working day account their size, risk profile and
in the locality where the reporting FI is complexity of operations. The internal
situated, delay or default shall start to run control framework shall embody
on the day following the next working day. management oversight and control culture;
The due date/deadline for submission of risk recognition and assessment; control
reports to Bangko Sentral as prescribed activities; information and communication;
under Sec. 4162N governing the frequency and monitoring activities and correcting
and deadlines indicated in Appendix N-1 deficiencies.
shall be automatically moved to the next (Circular No. 871 dated 05 March 2015)
business day whenever a half-day
suspension of business operations in § 4163N.1 Management oversight and
government offices is declared due to an control culture. Consistent with the
emergency such as typhoon, floods, etc. principles provided under Subsecs. X141.3
For purposes of establishing delay or and X142.3 of the MORB, the board
default, the date of acknowledgment by the of directors and senior management shall
appropriate department of the SES or the be responsible for promoting high ethical
Bangko Sentral Regional Offices/Units and integrity standards; establishing the
appearing on the copies of such reports filed appropriate culture that emphasizes,
or submitted, or the date of mailing demonstrates and promotes the
postmarked on the envelope/the date of importance of internal control; and
registry/special delivery receipt, as the case designing and implementing processes for
may be, shall be considered as the date of the prevention and detection of fraud.
filing by the NBFI. a. The board of directors shall be
c. Manner of payment or collection of ultimately responsible for ensuring that
fines – NBFIs shall, within fifteen (15) calendar senior management establishes and
days from receipt of the statement of account maintain an adequate, effective and efficient
from the appropriate department of the Bangko internal control framework commensurate
Sentral, pay the fines imposed thereon for with the size, risk profile and complexity of
willful delay on the submission of reports. operations of the FI. The board of directors
(As amended by Circular No. 585 dated 15 October 2007) shall also ensure that the internal audit
function has an appropriate stature and
Sec. 4163N Internal Control Framework. authority within the FI and is provided with
Internal control is a process designed and adequate resources to enable it to effectively
effected by the board of directors, senior carry-out its assignments with objectivity.
management, and all levels of personnel to Further, the board of directors shall, on
provide reasonable assurance on the a periodic basis:

Page 21
§ 4164N.1
15.10.31
(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

Page 22
§§ 4163N.1 - 4163N.3
15.10.31
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

Page 22a
§ 4163N.3
15.10.31
arrangements for delegating authority; of directors and the extent of authority at

adequate accounting policies, records and each level shall be clearly defined;
processes; robust physical and (2) implementing joint custody on
environmental controls for tangible assets certain assets. Joint custody shall mean the
and access controls to information assets; processing of transactions in the presence,
and appropriate segregation of conflicting and under the direct observation of a second
functions. person. Both persons shall be equally
a. Clear arrangements for delegating accountable for the physical protection of
authority. The functions and scope of the items and records involved: Provided,
authority and responsibility of each That persons who are related to each other
personnel should be adequately defined, within the third degree of consanguinity or
documented and clearly communicated. affinity shall not be made joint custodians;
The extent to which authorities may be (3) adopting dual control wherein the
delegated and the corresponding work of one (1) person is to be verified by a
accountabilities of the personnel involved second person to ensure that the transaction
shall be approved by the appropriate level is properly authorized, recorded and settled;
of management or the board of directors. (4) incorporating sequence number
b. Adequate accounting policies, control in the accounting system which
records and processes. FIs shall maintain shall also be used in promissory notes,
adequate financial policies, records and checks and other similar instruments.
processes. These records shall be kept up- Management shall also put in place
to-date and contain sufficient detail to appropriate controls to monitor the usage,
establish an audit trail. Further, FIs shall safekeeping and recording of accountable
conduct independent balancing and forms;
reconciliation of records and reports to (5) restricting access to information
ensure the integrity of the reported data and assets by classifying information as to degree
balances. FIs shall also put in place a reliable of sensitivity and criticality and identifying
information system that covers all of its information owners or personnel with
significant activities which shall allow the authorities to access particular
board of directors and management access classifications based on job responsibilities
to data and information relevant to decision and the necessity to fulfill one’s duties; and
making such as, among others, financial, (6) implementing authentication and
operations, risk management, compliance access controls prior to granting access to
and market information. Moreover, these information such as, among others,
systems shall be secured, monitored implementing password rules. This shall
independently and supported by adequate be supplemented by appropriate monitoring
contingency arrangements. mechanisms that will allow audit of use of
c. Robust physical and environmental information assets.
controls to tangible assets and access d. Segregation of conflicting functions.
controls to information assets. FIs shall FIs shall ensure that areas of potential
adopt policies and practices to safeguard conflicts of interest shall be identified,
their tangible and information assets. These minimized and subjected to independent
shall include, but shall not be limited to: monitoring. Further, appropriate
(1) identifying officers with authorities segregation of functions shall be observed
to sign for and on behalf of the FI. Signing in identified areas that may pose potential
authorities shall be approved by the board conflict of interest. Moreover, periodic

Page 22b
§§ 4163N.3 - 4164N
15.10.31
reviews of responsibilities and functions integrated in the operating environment and

shall be conducted to ensure that personnel should produce regular reports for review.
are not in a position to conceal In this regard, all levels of review shall be
inappropriate actions. adequately documented and results thereof
Examples of internal control measures reported on a timely basis to the appropriate
are in Appendix Q-66. level of management.
(Circular No. 871 dated 05 March 2015) Evaluations of the effectiveness of the
internal control system and the
§ 4163N.4 Information and corresponding monitoring activities may be
communication. An effective internal control done by personnel from the same
system requires that there are adequate and operational area in the form of self-
comprehensive internal financial, assessment or from other areas such as
operational and compliance data, as well internal audit: Provided, That, self-
as external information about events and assessment done by business units shall be
conditions that are relevant to decision subject to independent validation.
making. Information shall be reliable, timely,
Evaluations done shall be adequately
accessible, and provided in a consistent
documented and internal control
format. FIs shall have in place a reliable
deficiencies and weaknesses identified shall
management information system that covers
be reported on a timely basis to the
significant activities of the FI and has the
appropriate level of management or the
capability to generate relevant and quality
board of directors, where necessary, and
information to support the functioning of
addressed promptly.
internal control.
FIs shall also establish effective channels
of communication to ensure that all
Sec. 4164N Internal Audit Function.
personnel fully understand and adhere to
Internal audit is an independent, objective
policies and procedures and control
measures relevant to their duties and assurance and consulting function
responsibilities and that relevant established to examine, evaluate and
information is reaching the appropriate improve the effectiveness of internal control,
personnel. Management shall also ensure risk management and governance systems
that all personnel are cognizant of their duty and processes of an organization, which
to promptly report any deficiency to helps management and the board of
appropriate levels of management or to the directors in protecting the FI and its
board of directors, where required. These reputation. The internal audit function shall
shall enable them to quickly respond to both assess and complement operational
changing conditions and avoid unnecessary management, risk management, compliance
costs. and other control functions. In this respect,
(Circular No. 871 dated 05 March 2015) internal audit shall be conducted in
frequencies commensurate with the
§ 4163N.5 Monitoring activities and assessed levels of risk in specific FI areas.
correcting deficiencies. The overall a. Permanency of the internal audit
effectiveness of the internal controls shall function. Each FI shall have a permanent
be monitored on an ongoing basis. internal audit function. In the case of group
Monitoring functions and activities shall be structures involving a parent bank and
adequately defined by management, subsidiary or affiliate BSFI, the internal audit

Page 22c
§§ 4164N- 4164N.1
15.10.31
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.

Page 22d
§§ 4164N.1 - 4164N.3
15.10.31
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

Page 22e
§§ 4164N.3 - 4164N.5
15.10.31
with appropriate audit methodologies and scope limitations, restrictions on access to

tools as well as sufficient knowledge of records, personnel, and properties, and
auditing techniques in the conduct of audit resource limitations, such as funding.
activities. The internal audit function shall inform
All internal audit personnel shall act with senior management of the results of its
integrity in carrying-out their duties and audits and assessment. Senior management
responsibilities. They should respect the may consult the internal auditor on matters
confidentiality of information acquired in related to risks and internal controls without
the course of the performance of their duties tainting the latter’s independence. Provided,
and should not use it for personal gain or That: the internal auditor shall not be
malicious actions. Moreover, internal audit involved in the development or
personnel shall avoid conflicts of interest. implementation of policies and procedures,
Internally-recruited internal auditors shall preparation of reports or execution of activities
not engage in auditing activities for which that fall within the scope of his review.
they have had previous responsibility before Staff of the internal audit function shall
a one-year “cooling off” period has elapsed. be periodically rotated, whenever
The internal audit personnel shall adhere at practicable, and without jeopardizing
all times to the FI’s Code of Ethics as well competence and expertise to avoid
as to an established code of ethics for unwarranted effects of continuously
internal auditors such as that of the Institute performing similar tasks or routine jobs that
of Internal Auditors. may affect the internal auditor’s judgment
(Circular No. 871 dated 05 March 2015) and objectivity.
§ 4164N.4 (2014 - Code of Ethics and
Internal Auditing Standards) Independence § 4164N.5 Internal audit charter. FIs
and objectivity of the internal audit shall have an internal audit charter approved
function. The internal audit function must by the board of directors. The internal audit
be independent of the activities audited and charter shall be periodically reviewed by the
from day-to-day internal control process. It head of the internal audit function and any
must be free to report audit results, findings, changes thereto shall be approved by the
opinions, appraisals and other information board of directors. The internal audit charter
through clear reporting line to the board of shall establish, among others, the following:
directors or audit committee. It shall have a. Purpose, stature and authority, and
authority to directly access and responsibilities of the internal audit function
communicate with any officer or employee, as well as its relations with other control
to examine any activity or entity of the bank, functions in the FI. The charter shall
as well as to access any records, files or data recognize the authority of the internal audit
whenever relevant to the exercise of its function, to initiate direct communication
assignment. with any FI personnel; to examine any
If independence or objectivity of internal activity or entity; and to access any records,
audit function is impaired, in fact or files, data and physical properties of the FI,
appearance, the details of the impairment in performing its duties and responsibilities;
must be disclosed to the audit committee. b. Standards of independence,
Impairment to organizational independence objectivity, professional competence and
and individual objectivity may include, but due professional care, and professional
is not limited to, personal conflict of interest, ethics;

Page 22f
§§ 4164N.5 - 4172N
15.10.31
c. Guidelines or criteria for d. Review of compliance of trading

outsourcing internal audit activities to activities with relevant laws, rules and
external experts; regulations;
d. Guidelines for consulting or e. Review of the compliance system
advisory services that may be provided by and the implementation of established
the internal audit function; policies and procedures; and
e. Responsibilities and accountabilities f. Review of areas of interest to
of the head of the internal audit function; regulators such as, among others monitoring
f. Requirement to comply with sound of compliance with relevant laws, rules and
internal auditing standards such as the regulations, including but not limited to the
Institute of Internal Auditor’s International assessment of the adequacy of capital and
Standards for the Professional Practice of provisions; liquidity level; regulatory and
Internal Auditing and other supplemental internal reporting.
standards issued by regulatory authorities/ (Circular No. 871 dated 05 March 2015)
government agencies, as well as with
relevant code of ethics; and Secs. 4165N - 4171N (Reserved)
g. Guidelines for coordination with the
external auditor and supervisory authority. Sec. 4172N Financial Audit. FIs shall cause
(Circular No. 871 dated 05 March 2015) an annual financial audit by an external
auditor acceptable to the Bangko Sentral not
§ 4164N.6 Scope. All processes, later than thirty (30) calendar days after the
systems, units, and activities, including close of the calendar year or the fiscal year
outsourced services, shall fall within the adopted by the FI. Report of such audit shall
overall scope of the internal audit function. be submitted to the board of directors and
The scope of internal audit shall cover, the appropriate department of the SES not
among others, the following: later than 120 calendar days after the close
a. Evaluation of the adequacy, of the calendar year or the fiscal year
efficiency and effectiveness of internal adopted by the FI. The report to the Bangko
control, risk management and governance Sentral shall be accompanied by the:
systems in the context of current and (1) certification by the external auditor on
potential future risks; the: (a) dates of start and termination of
b. Review of the reliability, audit; (b) date of submission of the financial
effectiveness and integrity of management audit report and certification under oath
and financial information systems, including stating that no material weakness or breach
the electronic information system and in the internal control and risk management
electronic banking services; systems was noted in the course of the
c. Review of the systems and audit of the FI to the board of directors; and
procedures of safeguarding the bank’s (c) the absence of any direct or
physical and information assets; indirect financial interest and other

Page 22g
§ 4172N
08.12.31
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 BSP including copies of under oath submitted in lieu of the LOC and
adjusting entries on the reconciling items; shall submit, within thirty (30) banking days
and (3) other information that may be after receipt of the reports, a copy of its
required by the BSP. 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
a significant control deficiency, or banks, including their subsidiaries and
combination of deficiencies, that results in affiliates, as well as other FIs under BSP
more than a remote likelihood that a material supervision which are under the concurrent
misstatement of the financial statements will jurisdiction of the COA shall be exempt
not be detected or prevented by the entity’s from the aforementioned annual financial
internal control. A material weakness does audit by an acceptable external auditor:
not mean that a material misstatement has Provided, That when warranted by
occurred or will occur, but that it could supervisory concern such as material
occur. A control deficiency exists when the weakness/breach in internal control and/or
design or operation of a control does not risk management systems, the Monetary
allow management or employees, in the Board may, upon recommendation of the
normal course of performing their assigned appropriate department of the SES, require
functions, to prevent or detect misstatements the financial audit to be conducted by an
on a timely basis. A significant deficiency external auditor acceptable to the BSP, at
is a control deficiency, or combination of the expense of the institution concerned:
control deficiencies, that adversely affects Provided, further, That when circumstances
the entity’s ability to initiate, authorize, such as, but not limited to, loans from
record, process, or report financial data multilateral FIs, privatization, or public
reliably in accordance with generally listing warrant, the financial audit of the
accepted accounting principles. The term concerned institution by an acceptable
more than remote likelihood shall mean that external auditor may also be allowed.

Page 23
§§ 4172N - 4180N
09.12.31
Banks and other FIs under the subject to the penalties under Subsec.
concurrent jurisdiction of the BSP and COA 4162N.3
shall, however, submit a copy of the AAR (As amended by Circular Nos. 554 dated 22 December 2006
of the COA to the appropriate department and 540 dated 09 August 2006)
of the SES within thirty (30) banking days
after receipt of the report by the board of § 4172N.1 Audited financial statements
directors. The AAR shall be accompanied of non-bank financial institutions. The
by the: (1) certification by the institution following rules shall govern the utilization
concerned on the date of receipt of the AAR and submission of AFS of NBFIs.
by the board of directors; (2) reconciliation For purposes of this Section, AFS shall
statement between the AFS in the AAR and include the balance sheets, income
the balance sheet and income statement of statements, statements of changes in equity,
the FI and trust department submitted to statements of cash flows and notes to
the BSP, including copies of adjusting financial statements which shall include
entries on the reconciling items; and among other information, disclosure of the
(3) other information that may be required volume of past due loans as well as loan-
by the BSP. loss provisions. On the other hand,
The board of directors of said financial audit report shall refer to the AFS
institutions, in a regular or special meeting, and the opinion of the auditor. The AFS
shall consider and act on the AAR, as well of NBFIs with subsidiaries shall be
as on the comments and observations and presented side by side on a solo basis
shall submit, within thirty (30) banking days (parent) and on a consolidated basis
after receipt of the report, a copy of its (parent and subsidiaries).
resolution to the appropriate department of (Circular No. 540 dated 09 August 2006)
the SES. The resolution shall show the
action(s) taken on the report, including the § 4172N.2 Posting of audited financial
comments and observations and the names statements. FIs shall post in conspicuous
of the directors present and absent, among places in their head offices, all their branches
other things.” and other offices, as well as in their
FIs as well as external auditors shall respective websites, their latest financial
strictly observe the requirements in the audit report.
submission of the financial audit report and (Circular No. 540 dated 09 August 2006)
reports required to be submitted under
Appendix Q-33. Secs. 4173N - 4179N (Reserved)
The audited annual financial
statements required to be submitted shall Sec. 4180N Selection, Appointment,
in all respect be PFRS/PAS compliant: Reporting Requirements and Delisting of
Provided, That FIs shall submit to the BSP External Auditors and/or Auditing Firm;
adjusting entries reconciling the balances Sanction
in the financial statements for prudential a. Rules and regulations. The revised
reporting with that in the audited annual rules and regulations that shall govern
financial statements. the selection, appointment, reporting
The reports and certifications of requirements and delisting of external
institutions concerned, schedules and auditors and auditing firms by the BSP of
attachments required under this Subsection covered institutions which under special
shall be considered Category B reports, laws are subject to BSP supervision are
delayed submission of which shall be shown in Appendix N-5.

Page 24
§§ 4180N - 4193N
16.03.31
b. Sanctions. The applicable sanctions/ financial statements, investments in

penalties prescribed under Sections 36 and financial/non-financial allied/non-allied
37 of R.A. No. 7653 to the extent applicable subsidiaries/associates, including insurance
shall be imposed on the covered institution, subsidiaries/associates, shall be accounted
its audit committee and the directors for using the equity method.
approving the hiring of external auditors/ (As amended by Circular No. 494 dated 20 September 2004)
auditing firm who/which are not in the
Bangko Sentral list of selected auditors for Secs. 4182N - 4189N (Reserved)
covered institutions or for hiring, and/or
retaining the services of the external auditor/ Sec. 4190N Guidelines on Outsourcing.
auditing firm in violation of any of the The rules on outsourcing of banking
provisions of this Section and for non- functions as shown under Sec. X162 of
compliance with the Monetary Board the MORB and Appendix Q-37 shall
directive under Item “K” in Appendix N-5. likewise apply to NBFIs.
Erring external auditors/ auditing firm may also (As amended by Circular Nos. 899 dated 18 January 2016, 764
be reported by the Bangko Sentral to the PRC dated 03 August 2012, 642 dated 30 January 2009, 610 dated
26 May 2008, 596 dated 11 January 2008, 548 dated
for appropriate disciplinary action.
25 September 2006 and 543 dated 08 September 2006)
529 dated 11 May 2006)
Sec. 4191N (Reserved)
Sec. 4181N Publication Requirements. The Sec. 4192N Prompt Corrective Action
quarterly CSOC of a trust entity and its Framework. The framework for the
subsidiaries and affiliates shall be published enforcement of PCA on banks which is in
side by side with the statement of condition Appendix Q-40, shall govern the PCA taken
of its head office and its branches/other on FIs to the extent applicable, or by analogy.
offices as of such dates as the Bangko Sentral (Circular No. 523 dated 31 March 2006, as amended by Circular
may require within twenty (20) working days No. 664 dated 15 September 2009)
from receipt of call letter, in any newspaper
of general circulation in the country in the Sec. 4193N Supervision by Risks. The
prescribed format. guidelines on supervision by risk in
The CSOC of a QB/trust entity and its Appendix Q-42 which provide guidance on
subsidiaries and associates shall conform how QBs should identify, measure, monitor
with the guidelines of PAS 27 “Consolidated and control risks shall govern the
and Separate Financial Statements”, except supervision by risks of FIs to the extent
that for purposes of consolidated financial applicable.
statements, only investments in financial The guidelines set forth the expectations
allied subsidiaries except insurance of the Bangko Sentral with respect to the
subsidiaries shall be consolidated on a line- management of risks and are intended to
by-line basis; while insurance and non- provide more consistency in how the risk-
financial allied subsidiaries shall be focused supervision function is applied to
accounted for using the equity method. these risks. The Bangko Sentral will review
Financial/non-financial allied/non-allied the risks to ensure that an FI’s internal risk
associates shall be accounted for using the management processes are integrated and
equity method in accordance with the comprehensive. All FIs should follow the
provisions of PAS 28 “Investments in guidance in risk management efforts.
Associates”. For purposes of separate (Circular No. 510 dated 03 February 2006)

Page 25
§§ 4194N - 4195N
08.12.31
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

Page 26
§§ 4195N - 4196N.2
13.12.31
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
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,
Manual of Regulations for Non-Banks Financial Institutions N Regulations

Page 27
§§ 4196N.2 - 4196N.5
13.12.31
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.
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
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
N Regulations Manual of Regulations for Non-Banks Financial Institutions

Page 28
§ 4196N.5
13.12.31

Philippines, this through electronic,
may refer to the interactive
functional oversight communication
equivalent such as channels which
the Country Head include automated
(for foreign banks) or teller machines
management (ATMs), point of sales
committee or body (POS) terminals,
empowered with internet, mobile
oversight and phones, touch tone
supervision telephones and
responsibilities. other similar
Cyberfraud A deliberate act of electronic devices.
omission or These encompass
commission by any electronic banking,
person carried out electronic payments,
using the Internet and/ electronic money and
other electronic
or other electronic
products and services
channels, in order to
offered by BSIs.
communicate false or
EMV (stands It is a global standard
fraudulent
for Europay, standard for credit,
representations to
Mastercard debit and prepaid
prospective victims,
and Visa) payment cards based
to conduct fraudulent
on chip card
transactions, or to technology. EMV chip-
transmit the proceeds based payment cards,
of fraud to FIs also known as smart
connected with the cards, contain an
perpetrator. Examples embedded
of cyberfraud in the microprocessor, a
financial industry may type of small
include, but are not computer.
limited to, theft of The microprocessor
credit card data, chip contains the
computer hacking, information needed
electronic identity to use the card
theft, phishing scams, for payment, and is
ATM skimming and protected by various
non-delivery of security features. Chip
merchandise cards are a more
purhased online, secure alternative to
among others. traditional magnetic
Electronic The delivery of stripe payment cards.
Products and banking and financial Encryption A data security
Services products and services technique used to

Page 28a
§ 4196N.5
13.12.31

protect information disruption,
from unauthorized modification
inspection or or destruction in
alteration. order to provide
Information is confidentiality,
encoded so that integrity and
data appears as availability.
meaningless string of Information A single or a series
letters and symbols Security of unwanted or
during delivery or Incident unexpected
transmission. Upon information security
receipt, the events that have a
information significant probability
is decoded using an of compromising
encryption key. business operations
Enterprise- Extending throughout and threatening the
wide Level or involving an entire confidentiality,
institution rather than integrity or
a single business availability of BSI's
department or information or
function. information systems.
In this document, the Information Automated means of
words "enterprise-wide" Technology originating,
and "organization-wide" (IT) processing, storing
are interchangeably and communicating
used. information and
Information Encompass people covers recording
Asset/ and organization, IT devices,
Resources processes, physical communications
infrastructure (i.e. network, computer
facilities, equipment), systems (including
IT infrastructure hardware and
(including computing software components
hardware, network and data)
infrastructure, and other electronic
middleware) and devices.
other enterprise IT Group/ The unit of an
architecture Department organization within a
components BSI responsible for
(including the activities of IT
information, operations control,
applications). monitoring of IT
Information The protection of services, infrastructure
Security information assets support and a
from unauthorized combination of
access, use, technology, people
disclosure, and processes.

Page 28b
§ 4196N.5
13.12.31

IT Operations Encompasses all IT Risk Risk management
processes and services Management system that enables a
that are provisioned by System BSI to identify,
an IT Unit to internal measure, monitor and
and external clients. control IT-related risks.
IT An arrangement under Management A general term for the
Outsourcing which another party Information computer systems in an
(either an affiliated System (MIS) institution that provide
entity within a
information about its
corporate group or an
business operations.
entity external to the
Network Two (2) or more
corporate group)
undertakes to provide computer systems that
to a BSI all or part of an are grouped together
IT function or service. to share information,
A BSI would use IT software and hardware.
outsourcing for Offshore BSIs Have their critical
functions ranging from system processing and
infrastructure to data located outside of
software development, the Philippines. These
maintenance and are usually maintained
support. The related and operated by
IT service is integral to organizations within
the provision by BSI of the same business group
a financial service and that the BSIs belong to,
the BSI is dependent such as their head office,
on the service on an
subsidiary and/or
ongoing basis.
affiliate. Locally-
IT Risk Any potential adverse
outcome, damage, loss, maintained systems, if
violation, failure or any, are limited to non-
disruption associated core supporting
with the use of or applications such as
reliance on computer collaboration systems
hardware, software, and report processing
devices, systems, tools.
applications and Project Planning, monitoring
networks. Management and controlling an
IT Strategic A long-term plan (i.e., activity.
Plan three (3)- to five (5)- year Senior Officers of the
horizon) in which Management/ institution given the
business and IT Management authority by the Board
management to implement the
cooperatively describe
policies it has laid
how IT resources will
down in the conduct
contribute to the
institution's strategic of the business of the
objectives. institution.

Page 28c
§§ 4196N.5 - 4196N.6
13.12.31
Terminology Definitions application is an IT failure and, therefore, a

Service Level Establishes mutual systems failure in the sense of operational
Agreement expectations and risk). Moreover, IT is an implied part of any
provide a baseline to system of internal controls, regardless of the
measure IT type of risk and, consequently, forms an
performance. An SLA important element in organization-wide risk
should contain, management. Among the risks associated
among others, the with the use of IT are the following:
specified level of
1. Operational risk is the risk to earnings
service, support
and capital arising from problems with
options, enforcement
service or product delivery. This risk is a
or penalty provisions
for services not provided, function of internal controls, IT systems,
a guaranteed level of employee integrity and operating processes.
system performance as Operational risk exists in all products and
it relates to downtime services;
or uptime, a specified 2. Strategic risk is the risk to earnings
level of customer and capital arising from adverse business
support and what decisions on IT-related investments or
software or hardware improper implementation of those decisions.
will be provided and The risk is a function of the compatibility of
for what fee. an organization’s strategic goals, the
Triple Data A mode of the DES business strategies developed to achieve
Encryption encryption algorithm those goals, the resources deployed against
Standard that encrypts data three these goals and the quality of
(3DES) times. Three 64-bit implementation. The resources needed to
keys are used, instead carry out business strategies are both
of one, for an overall tangible and intangible which include
key length of 192 bits communication channels, operating
(the first encryption systems, delivery networks and managerial
is encrypted capacities and capabilities;
with second key, and 3. Reputation risk is the risk to earnings
the resulting cipher and capital arising from negative public
text is again encrypted opinion. This affects the institution’s ability
with a third key. to establish new relationships or services
or continue servicing existing relationships.
§ 4196N.6 Description of IT-related The risk can expose the institution to
risks. As BSIs increase their reliance on IT litigation, financial loss or damage to its
to deliver products and services, reputation; and
inappropriate usage of IT resources may 4. Compliance risk is the risk to earnings
have significant risk exposures. While IT and capital arising from the violations of, or
does not trigger new types of risks, it brings non-conformance with laws, rules and
in new dimensions to traditional banking regulations, prescribed practices or ethical
risks (i.e. strategic risk, credit risk, market standards. Compliance risk also arises in
risk, liquidity risk and operational risk) that situations where the laws and rules
require new or enhanced control activities governing certain products activities of the
(e.g. a failure of a credit risk measurement BSI’s clients may be ambiguous or untested.

Page 28d
§§ 4196N.6- 4196N.7
13.12.31
Compliance risk exposes the institution to information, business processes,
monetary penalties, non-monetary sanctions applications, IT infrastructure, etc.
and possibility of contracts being annulled The Board of Directors is ultimately
or declared unenforceable. responsible for understanding the IT risks
(Circular No. 808 dated 22 August 2013) confronted by a BSI and ensuring that they
are properly managed, whereas the Senior
§ 4196N.7 IT Risk Management System Management is accountable for designing
(ITRMS). As BSIs become more dependent and implementing the ITRMS approved by
on IT systems and processes, technology the Board. For Complex BSIs, the Board may
risks and information security issues have delegate to an IT Steering Committee (ITSC)
become progressively more complex and or its equivalent IT oversight function to
pressing in recent years. Information cohesively monitor IT performance and
security is just as important as the new institute appropriate actions to ensure
technologies being installed by BSIs. As achievement of desired results. The ITSC,
progress in technology shifts to higher gear, at a minimum, should have as members a
the trend in cyber-attacks, intrusions, and non-executive Board director who oversees
other form of incidents on computer systems the institution’s IT function, the head of IT
shows that it will not only persist but will group/department, and the highest rank
continue to increase in frequency and spread officer who oversees the business user
in magnitude. groups. The head of control groups should
Management of IT risks and information participate in ITSC meetings in advisory
security issues becomes a necessity and an capacity only.
important part of BSIs’ risk management A charter should be ratified by the Board
system. BSIs are therefore required to to clearly define the roles and
establish a robust ITRM system covering four responsibilities of the ITSC. Formal minutes
(4) key components: 1) IT governance, of meeting should be maintained to
2) risk identification and assessment, 3) IT document its discussions and decisions. The
controls implementation, and 4) risk ITSC should regularly provide adequate
measurement and monitoring. information to the Board regarding IT
1. IT Governance. This is an integral performance, status of major IT projects or
part of BSIs’ governance framework and other significant issues to enable the Board
consists of the leadership and organizational to make well-informed decisions about the
structures and processes that ensure the BSIs’ IT operations.
alignment of IT strategic plan with BSIs’ BSIs should develop an IT strategic plan
business strategy, optimization of resources that is aligned with the institution’s business
management, IT value delivery, strategy. This should be undertaken to
performance measurement and the effective manage and direct all IT resources in line
and efficient use of IT to achieve business with the business strategy and priorities. IT
objectives and effective IT risk management strategic plan should focus on long term
implementation. BSIs must establish an goals covering three (3)- to five (5)- year
effective IT governance framework covering horizon and should be sufficiently
the following: supplemented by tactical IT plans which
a. Oversight and organization of IT specify concise objectives, action plans and
functions. Accountability is a key concern tasks that are understood and accepted by
of IT governance and this can be obtained both business and IT. The IT strategic plan
with an organizational structure that has should be formally documented, endorsed
well-defined roles for the responsibility of by the Board and communicated to all

Page 28e
§ 4196N.7
13.12.31
stakeholders. It should be reviewed and establish and delineate duties and

updated regularly for new risks or responsibilities of personnel for better
opportunities to maximize the value of IT to coordination, effective and consistent
the institution. performance of tasks, and quicker training
BSIs should also create an organization of new employees. Management should
of IT functions that will effectively deliver ensure that policies, procedures, and
IT services to business units. For “Complex” systems are current and well-documented.
BSIs, a full-time IT Head or equivalent rank The ITSC should review IT policies,
should be designated to take the lead in key procedures, and standards at least on an
IT initiatives and oversee the effectiveness annual basis. Any updates and changes
of the IT organization. In addition to should be clearly documented and properly
managing the delivery of day-to-day IT approved. IT policies and procedures
services, the IT Head should also oversee should include at least the following areas:
the IT budget and maintain responsibility for • IT Governance/ Management;
performance management, IT acquisition • Development and Acquisition;
oversight, professional development and • IT Operations;
training. The IT Head should be a member • Communication networks;
of executive management with direct • Information security;
involvement in key decisions for the BSI and
• Electronic Banking/Electronic
usually reports directly to the President or
Products and Services; and
Chief Executive Officer.
• IT Outsourcing/Vendor Management.
A clear description of roles and
For simple BSIs, some of the above areas
responsibilities for individual IT functions
(i.e. development, electronic banking, etc.)
should be documented and approved by the
may not be applicable, thus sound judgment
Board. Proper segregation of duties within
should be employed to ensure that the BSI’s
and among the various IT functions should
IT policies and procedures have adequately
be implemented to reduce the possibility for
an individual to compromise a critical covered all applicable areas.
process. A mechanism should be in place c. IT audit. Audit plays a key role in
to ensure that personnel are performing only assisting the Board in the discharge of its
the functions relevant to their respective jobs corporate governance responsibilities by
and positions. In the event that an institution performing an independent assessment of
finds it difficult to segregate certain IT control technology risk management process and
responsibilities, it should put in place IT controls.
adequate compensating controls (e.g. peer Auditors provide an assurance that
reviews) to mitigate the associated risks. important control mechanisms are in place
b. IT policies, procedures and for detecting deficiencies and managing risks
standards. IT controls, policies, and in the implementation of IT. They should
procedures are the foundation of IT be qualified to assess the specific risks that
governance structure. It helps articulate the arise from specific uses of IT. BSIs should
rules and procedures for making IT establish effective audit programs that cover
decisions, and helps to set, attain, and IT risk exposures throughout the
monitor IT objectives. organization, risk-focused, promote sound
BSIs should adopt and enforce IT-related IT controls, ensure the timely resolution of
policies and procedures that are well- audit deficiencies and periodic reporting to
defined and frequently communicated to the Board on the effectiveness of institution’s

Page 28f
§ 4196N.7
13.12.31
IT risk management, internal controls, and event of turnover in vital IT management or

IT governance. Regardless of size and operations functions.
complexity, the IT audit program should e. Management Information Systems
cover the following: (MIS). The BSIs’ IT organization often
• Independence of the IT audit provides an important support role for their
function and its reporting relationship to the MIS. Accurate and timely MIS reports are
Board or its Audit Committee; an essential component of prudent and
• Expertise and size of the audit staff reasonable business decisions. At the most
relative to the IT environment; senior levels, MIS provides the data and
• Identification of the IT audit information to help the Board and
universe, risk assessment, scope, and management make strategic decisions. At
frequency of IT audits; other levels, MIS allows management to
• Processes in place to ensure timely monitor the institution’s activities and
tracking and resolution of reported distribute information to other employees,
weaknesses; and customers, and members of management.
• Documentation of IT audits, Advances in technology have increased
the volume of information available to
including work papers, audit reports, and
management and directors for planning and
follow-up.
decision-making. However, if technology
In case in-house IT audit expertise is not
is not properly managed, the potential for
available, such as for a simple BSI, the IT
inaccurate reporting and flawed decision
audit support may be performed by external
making increases. Because report
specialists and auditors of other institutions
generation systems can rely on manual data
consistent with existing Bangko Sentral rules
entry or extract data from many different
and regulations on outsourcing. (Detailed
financial and transaction systems,
guidelines/standards on IT Audit are shown
management should establish appropriate
in Appendix Q-59a)
control procedures to ensure information is
d. Staff competence and training. The
correct, relevant, and adequately protected.
rapid development in technology demands
Since MIS can originate from multiple
appropriate, skilled personnel to remain
equipment platforms and systems, the
competent and meet the required level of
controls should ensure all information
expertise on an ongoing basis.
systems have sufficient and appropriate
BSIs should have an effective IT human
controls to maintain the integrity of the
resources management plan that meets the
information and the processing
requirements for IT and the business lines
environment. Sound fundamental principles
it supports. Management should allocate
for MIS review include proper internal
sufficient resources to hire and train
controls, operating procedures, safeguards,
employees to ensure that they have the
and audit coverage.
expertise necessary to perform their job and
f. IT risk management function.
achieve organizational goals and objectives.
Management of risk is a cornerstone of IT
Management needs to ensure that
Governance. BSIs should have a policy
staffing levels are sufficient to handle present
requiring the conduct of identification,
and expected work demands, and to cater
measurement, monitoring and controlling of
reasonably for staff turnover. Appropriate
IT risks for each business function/service
succession and transition strategies for key
on a periodic basis. BSIs should define and
officers and personnel should be in place
assign these critical roles to a risk
to provide for a smooth transition in the

Page 28g
§ 4196N.7
13.12.31
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

Page 28h
§ 4196N.7
13.12.31
security program, approved by the Board, resources, milestones, checkpoints, key

to maintain the confidentiality, integrity, and dependencies, quality assurance, risk
availability of computer systems for reliable assessment and approvals, among others.
and timely information. Unauthorized In the acquisition and/or development of IT
access, destruction, or disclosure of solutions, BSIs should ensure that business
confidential information can adversely affect and regulatory requirements are satisfied.
earnings and capital. The program should (Detailed guidelines/standards on Project
monitor information security function Management/Development and Acquisition
throughout the organization’s business and Change Management are shown in
processes and establish clear accountability Appendix Q-59c)
for carrying out security responsibilities. c. IT operations. IT has become an
The Board or Senior Management integral part of the day-to-day business
should appoint an independent information operation, automating and providing
security officer (ISO) who will be support to nearly all of the business
responsible and accountable for the processes and functions within the
organization-wide IS program. The duly institution. Therefore, the IT systems should
appointed ISO should have sufficient be reliable, secure and available when
knowledge, background, and training, as needed which translates to high levels of
well as organizational position, to enable service and dependency on IT to operate.
him to perform assigned tasks. To ensure One of the primary responsibilities of
appropriate segregation of duties, the ISO IT operations management is to ensure the
should report directly to the Board or senior institution’s current and planned
management and have sufficient infrastructure is sufficient to accomplish its
independence to perform his mandate. The strategic plans. BSI management should
ISO should perform the tasks of a risk ensure that IT operates in a safe, sound, and
manager and not a production resource efficient manner throughout the institution.
assigned to the IT department. In the case Given that most IT systems are
of simple BSIs, hiring a personnel to interconnected and interdependent, failure
specifically perform the function of an ISO to adequately supervise any part of the IT
may not be necessary. The ISO function environment can heighten potential risks for
may be assigned to an existing independent all elements of IT operations and the
officer who meets the requirements performance of the critical business lines of
mentioned in this Subsection. (Detailed the BSIs. Such scenario necessitates the
guidelines/standards on Information Security coordination of IT controls throughout the
are shown in Appendix Q-59b) institution’s operating environment.
b. Project management/development (Detailed guidelines/standards on IT
and acquisition and change management. Operations are shown in Appendix Q-59d)
BSIs should establish a framework for d. IT outsourcing/vendor management
management of IT-related projects. The program. IT outsourcing refers to any
framework should clearly specify the contractual agreement between a BSI and a
appropriate project management service provider or vendor for the latter to
methodology that will govern the process create, maintain, or reengineer the
of developing, implementing and institution’s IT architecture, systems and
maintaining major IT systems. The related processes on a continuing basis. A
methodology, on the other hand, should BSI may outsource IT systems and processes
cover allocation of responsibilities, activity except those functions expressly prohibited
breakdown, budgeting of time and by existing regulations. The decision to

Page 28i
§ 4196N.7
13.12.31
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)

Page 28j
§ 4196N.7
13.12.31
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

Page 28k
§§ 4196N.7 - 4197N
14.12.31
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.
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.

Page 28m
§§ 4197N.2 - 4197N.3
14.12.31
of an FI are aligned with the credit risk recording of payments received;

strategy approved by the board of directors. maintenance of credit and collateral files;
It shall also be responsible for developing and compilation of management information
and implementing an FI’s credit policies and reports.
procedures that lay down the conditions and e. The middle office performs risk
guidelines for an effective credit risk management and control functions that
management process, as well as proper are independent from the credit originating
channels of communication to ensure that and administration functions. The risk
these policies are clearly communicated management function provides
and adhered to by all levels of the meaningful inputs in policy formulation
organization. and limits setting; designs and implements
(Circular No. 855 dated 29 October 2014) the FI’s internal credit risk rating system;
and performs periodic exposure and
§ 4197N.3 Credit risk management exception monitoring. The risk
structure management function shall report directly
a. Senior management or an to the Risk Management Committee (RMC)
appropriate level of management shall or appropriate board-level committee or the
implement a board-approved credit risk board.
management structure that clearly delineates f. An independent credit review is a
lines of authority, establish accountabilities function within the middle office that
and responsibilities of individuals involved performs an unbiased assessment of the
in the different phases of the credit risk quality of individual credits and the
management process. aggregate credit portfolio, including
b. Depending on the size, complexity appropriateness of credit risk rating,
and scope of credit activities, and in addition classification and adequacy of allowance
to the roles and responsibilities of the board for loan losses. In the case of simple FIs,
and senior management, an FI’s credit risk such independent credit review function
management organization may be broadly may be concurrently performed by qualified
classified into three (3) functional lines of personnel fulfilling other independent
activities: the front, back and middle offices, control oversight functions (e.g.
to properly segregate accountabilities, compliance, internal audit).
ensure that no individual is assigned g. The workout or problem loan
conflicting responsibilities, and effectively management is another function within the
monitor and control the risks being taken. middle office that is independent from the
c. The front office function performs credit originating function to ensure that
credit originating; recommends internal problem loans are managed effectively to
credit ratings, classifications and allowances minimize potential losses. For simple FIs,
for losses including changes thereon, when however, the function may still be
necessary; and the on-going monitoring of performed by the credit originating function
credit exposures of borrowers on a day-to- and/or unit responsible for monitoring the
day basis. quality of such credit.
d. The back office provides support in h. The structure shall likewise provide
the overall credit administration, including, for independent audits, i.e., internal audit
among others: ensuring complete and compliance, to conduct independent
documentation, credit disbursement and credit and compliance audits of the credit

Page 28n
§§ 4197N.3 - 4197N.5
14.12.31
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

Page 28o
§§ 4197N.5 - 4197N.7
14.12.31
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.

Page 28p
§ 4197N.7
14.12.31
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

Page 28q
§§ 4197N.7 - 4197N.8
14.12.31
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

Page 28r
§§ 4197N.8 - 4197N.10
14.12.31
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

Page 28s
§§ 4197N.10 - 4197N.12
14.12.31
clear policies in handling transactions with following credit administration functions:

directors, officers, stockholders, their a. Credit documentation. Procedures
related interests (DOSRI), the FI’s shall be put in place to ensure
subsidiaries and affiliates, and other completeness of documentation in
related parties, ensuring that there is accordance with policy including a file
effective compliance with existing laws, documentation tickler system;
rules, and regulations at all times and that b. Disbursement. Proper approval
no stakeholder is unduly disadvantaged. shall be obtained and complete
a. All extensions of credit must be documentation ensured prior to
made on an arm’s-length basis, in disbursement. Exceptions, if any, shall be
accordance with the FI’s credit-granting duly approved;
criteria and in the regular course of c. Billing and repayment. Payments
business, and upon terms not less favorable received shall be properly recorded.
to the FI than those offered to non-related Measures shall be in place to ensure that
borrowers. late payments are tracked and collected;
b. FI policies shall cover standards that and
require directors and/or officers to avoid d. Maintenance of credit files. Credit
placing themselves in a position that files shall include sufficient and updated
creates conflict of interest or the information necessary to ascertain the
appearance of conflict of interest. The financial condition of the obligor or
board and management shall likewise counterparty and include documents
establish and implement policies that covering the history of an FI’s relationship
require full disclosure of personal interests with the obligor. All loan and collateral
that they may have in credit transactions. documents shall be kept in a secured area
Directors and officers with personal under joint custody.
interest in a transaction shall not (Circular No. 855 dated 29 October 2014)
participate in any deliberation, approval,
or voting on the matter. § 4197N.12 Credit risk
(Circular No. 855 dated 29 October 2014) measurement, validation and stress
testing. FIs shall adopt sound and
C. MAINTAINING AN appropriate risk measurement
APPROPRIATE CREDIT methodologies which shall provide a
ADMINISTRATION, MEASUREMENT, framework to control and monitor the
AND MONITORING quality of credit as well as total loan
portfolio.
§ 4197N.11 Credit administration. FIs a. Internal credit risk rating system
shall have in place a system for the FIs shall develop and utilize an internal
ongoing administration of their various risk rating system appropriate to the
credit portfolios. Credit administration nature, size and complexity of the FI’s
refers to the back office activities that activities in order to help the board and
support and control extension and senior management differentiate risks
maintenance of credit. FIs shall ensure across the individual credits and groups
the efficiency and effectiveness of the and to facilitate informed decision making.

Page 29
§ 4197N.12
14.12.31
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

Page 29a
§ 4197N.12
14.12.31
and a facility dimension. The borrower (d) If a credit obligation of a borrower/

dimension shall focus on factors that affect obligor is considered to be in default, all
the inherent credit quality of each borrower. credit obligations of the borrower/obligor
The facility dimension, on the other hand, with the same bank shall also be considered
shall focus on security/collateral to be in default.
arrangements and other similar risk b. Credit scoring model. FIs may use
influencing factors of each transaction; a credit scoring model in measuring credit
(10) The rating assigned to a credit shall risk for pools of loans that are similar in
be well supported and documented in the purpose, risk characteristics and/or general
credit file; and exposure to groups, industries or
(11) Rating histories on individual geographical locations granted in small
accounts shall be maintained, which shall denomination; provided, that the FI ensures
include the ratings of the account, the dates that the credit scoring model sufficiently
the ratings w e r e a s s i g n e d , t h e captures the credit behavior and other
methodology and key data used to characteristics of the targeted borrowers.
derive the ratings and the analyst who These loans include retail loans, loans to
gave the ratings. The identity of micro and small enterprises, microfinance
borrowers and facilities that default, and loans and unsecured small business loans,
the timing and circumstances of such and consumer loans (i.e., housing loans, car
defaults, must be retained. FIs must also or auto loans, loans for the purchase of
retain data on the realized default rates appliance and furniture and fixtures, loans
associated with rating grades and ratings for payment of educational and hospital
migration in order to eventually track the bills, salary loans and loans for personal
predictive power of the risk rating system. consumption, including credit card loans).
As used in these standards, a default is Risks for these types of portfolio are
considered to have occurred in the following generally measured at portfolio level.
cases: c. Other credit risk measurement/
(a) If a credit obligation is considered non- methodologies. FIs may likewise adopt
performing under existing rules and other appropriate credit risk measurement
regulations; methodologies/models to estimate expected
(b) If a borrower/obligor has sought or losses from credit portfolio.
has been placed in bankruptcy, has been d. Validation of internal rating systems
found insolvent, or has ceased operations Validation is a process to assess the
in the case of businesses; performance of risk component
(c) If the bank sells a credit obligation at measurement systems consistently and
a material credit-related loss, i.e., excluding meaningfully, to ensure that the realized risk
gains and losses due to interest rate measures are within an expected range. It
movements. Banks’ board-approved not only increases the reliability of a model,
internal policies that govern the use of their but also promotes improvements and a
internal rating systems must specifically clearer understanding of a model’s strengths
define when a material credit-related loss1 and weaknesses among management and
occurs; and user groups.
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.

Page 29b
§§ 4197N.12 - 4197N.13
14.12.31
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

Page 29c
§§ 4197N.13 - 4197N.14
14.12.31
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

Page 29d
§§ 4197N.14 - 4197N.16
14.12.31
demand immediate repayment of the can be drawn. Moreover, sampling

obligation. methodology shall be documented and
d. FIs shall monitor individual and periodically reviewed to ensure its quality
aggregate exposures against prudential and and minimize bias.
internal limits on a regular basis. Large c. Credit review shall also evaluate
exposures shall be subject to more intensive credit administration function and ensure
monitoring. that credit files are complete and updated,
e. FIs shall develop a system that and all loan approvals and other necessary
allows monitoring of asset quality documents have been obtained.
indicators (e.g. non-performing loans, d. Credit reviews shall be performed at
collateral values, etc.) and trends in loan least annually, and more frequently for
growth to identify potential weaknesses substantial exposures, new accounts and
in the portfolio. classified accounts. Assessments shall be
(Circular No. 855 dated 29 October 2014) promptly discussed with the officers
responsible for the credit activities and
D. MAINTAINING AN escalated to senior management.
APPROPRIATE CREDIT CONTROL e. Results of the credit review shall be
PROCESS promptly reported to the board of directors
or the appropriate board-level committee for
§ 4197N.15 Credit review process their appropriate action. The board shall
a. FIs shall implement an independent mandate and track the implementation of
and objective credit review process to corrective action in instances of unresolved
determine that credits are granted in deficiencies and breaches in policies and
accordance with the FI’s policies; assess the procedures. Deficiencies shall be addressed
overall asset quality, including in a timely manner and monitored until
appropriateness of classification and resolved/corrected.
adequacy of loan-loss provisioning; (Circular No. 855 dated 29 October 2014)
determine trends; and identify problems
(e.g., risk concentration, risk migration, § 4197N.16 Credit classification and
deficiencies in credit administration and provisioning
monitoring processes). a. Classification of loans and other
b. FIs may employ an appropriate credit accommodations1. FIs shall have in
sampling methodology to determine the place a reliable credit classification system
scope of credit review. At a minimum, credit to promptly identify deteriorating credit
review shall be conducted on all individual exposures and determine appropriate
obligors with substantial exposures, and on allowance for credit losses. Classification
a consolidated group basis to factor in the can be done on the basis of internal credit
business connections among related entities risk rating system, including payment
in a borrowing group. Credit review for delinquency status. All credit classifications,
credits that are similar in purpose or risk not only those reflecting severe credit
characteristics may be performed on a deterioration, shall be considered in
portfolio basis. The portfolio sample determining the appropriate allowance for
selected for review shall provide reasonable credit losses.
assurance that all major credit risk issues (1) All FIs shall map their classification
have been assessed and valid conclusions of loans and other credit accommodations
1
Other credit accommodations include other credits such as accounts receivables, sales contract receivables,
accrued interest receivables and advances

Page 29e
§ 4197N.16
14.12.31
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

Page 29f
§ 4197N.16
14.12.31
undeterminable as yet. Classification as accommodations, depending on the

“Loss” is deferred because of specific recoverability and liquidity of the collateral.
pending factors which may strengthen the The secured portion may be classified as
assets. Some basic characteristics include “Substandard” or “Doubtful”, as
any of the following: appropriate, while the unsecured portion
(i) Secured loans and other credit shall be classified “Loss” if there is no
accommodations where properties offered other source of payment other than the
as collateral are either subject to an adverse collateral.
claim rendering settlement of the loan (3) In the case of syndicated loans, each
through foreclosure doubtful or whose participating FI shall maintain credit
values have materially declined without the information on the borrower, and grade and
borrower offering additional collateral for make provision for its portion of the
the loan/s to cover the deficiency; or syndicated loan in accordance with the
(ii) Loans and other credit requirements of these guidelines. The lead
accommodations wherein the possibility of FI shall provide participating FIs with the
loss is extremely high but because of certain credit information on the borrower upon
important and reasonable pending factors request by the participating FI and inform
(i.e., merger, acquisition, or liquidation the latter if the loan will be classified so as
procedures, capital infusion, perfecting liens to achieve uniform classification of the
on additional collateral, and refinancing syndicated loan.
plans) that may work to the advantage and (4) FIs may upgrade a classified loan or
strengthening of the asset, its classification restore it to a pass rating provided that it
as an estimated loss is deferred until the next does so on the basis of a written policy on
credit review. the upgrading of classification or rating and
(e) Loss. These are loans and other the credit review function is reliable and
credit accommodations which are effective. Such policy shall include a
considered uncollectible or worthless and comprehensive analysis of the repayment
of such little value that their continuance as capability/financial strength of the borrower
bankable assets is not warranted although and the corrective actions made on the
the loans may have some recovery or salvage weaknesses noted to support the upgrade
value. This shall be viewed as a transitional in classification. Upgrading may be
category for loans and other credit supported by the following developments:
accommodations which have been (a) When all arrears or missed payments
identified as requiring write-off during the on principal and interests including penalties
current reporting period even though partial have been cleared rendering the account
recovery may be obtained in the future. to be fully compliant with the original terms
Their basic characteristics include any of the of the loan;
following: (b) Upon establishing that the
(i) When the borrower’s and co-makers’/ weaknesses were substantially addressed
guarantors’ whereabouts are unknown, or and that the borrower has exhibited a
they are insolvent, or their earning power sustained trend of improvement and
is permanently impaired; or willingness and capability to fully pay its
(ii) Where the collaterals securing the loans and advances in a timely manner to
loans are without recoverable values. justify the upgrade;
(2) Split classification may apply for non- (c) Offering of new or additional
performing secured loans and other credit collateral security; or

Page 29g
§ 4197N.16
14.12.31
(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.

Page 29h
§ 4197N.16
14.12.31
classification, collateral type, geographical (i) Experienced credit judgments shall be

location and past-due status. subject to established policies and
Estimated credit losses shall reflect procedures;
consideration of the FI’s historical net (ii) With approved and documented
charge-off rate1 of the groups, adjusted for analytical framework for assessing loan
changes in trends, conditions and other quality applied consistently over time;
relevant factors that affect repayment of (iii) Estimates shall be based on
the loans in these groups as of the reasonable and verifiable assumptions and
evaluation date, and applied supported by adequate documentation; and
consistently over time; (iv) Assumptions concerning the impact
(e) Methods used to determine whether on borrowers of changes in general
and how loans individually evaluated, but economic activity, both favorable and
not considered to be individually impaired, unfavorable, shall be made with sufficient
shall be grouped with other loan (excluding prudence.
individually assessed loans that are The method of determining loan loss
impaired) that share similar credit risk provisions shall reasonably assure the timely
characteristics for collective impairment recognition of loan losses. While historical
evaluation; loss experience and recent economic
(f) The quality and net realizable values conditions are a reasonable starting point
of physical collateral and other financial for the institution’s analysis, these factors
guarantees and credit risk mitigants are not, by themselves, sufficient basis to
incorporated in the loan agreement, where determine the appropriate level of aggregate
applicable; loan loss provisions. Management shall also
(g) Address the methods used to consider any current factors that are likely
validate models for credit risk assessment; to cause loan losses to differ from historical
(h) The analyses, estimates, reviews loss experience, including changes in the
and other provisioning methodology following:
functions shall be performed by competent • Lending policies and procedures,
and well-trained personnel and be well including underwriting standards and
documented, with clear explanations of the collection, charge-off, and recovery
supporting analyses and rationale; and practices;
(i) Use experienced credit judgment. • International, national and local
Assessment of expected losses shall not be economic and business conditions and
based solely on prescriptive rules or formula developments, including the condition of
but must be enhanced with experienced various market segments;
credit judgment by the appropriate levels • Trend, volume and severity of past due
of management2 inasmuch as historical loss loans and loans graded as low quality, as
experience or observable data may be well as trends in the volume of impaired
limited or not fully relevant to current loans, troubled debt restructurings and other
circumstances. However, the scope for loan modifications;
actual discretion shall be prudently within • The experience, ability, and depth of
the following constraints: lending management and staff;
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.

Page 29i
§§ 4197N.16 - 4197N.17
14.12.31
• 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

Page 29j
§ 4197N.17
14.12.31
management policies, processes and loans without impairing or endangering the

strategies to revive and recover problem FI’s interest.
credits. The strategies shall take into (2) Accounts shall not be restructured
account the specific condition of the unless the financial capacity of the obligor
obligor and the FI’s interest, and shall be to repay has been re-established, the events
approved by the board of directors or or crises that triggered the financial stress
management, in accordance with internal had been identified, and the nature and
policy. extent of protection of the FI’s exposure had
c. At a minimum, the policies and been determined, to justify the need for
strategies shall cover the following areas: restructuring.
(1) authority and responsibilities of officers (3) At a minimum, the classification and
and staff in managing problem credits; provisioning of a loan, prior to the execution
(2) collection strategy to be adopted for of the restructuring agreement shall be
different types of loans; retained until the borrower has sufficiently
(3) restructuring and handling of exhibited that the loan will be fully repaid.
restructured accounts and/or loans for (4) A second restructuring of a loan
workout; shall be allowed only if there are reasonable
(4) supervision and monitoring of loan justifications: Provided, That it shall be
recovery performance; considered a non-performing loan and
(5) management and disposal of ROPA, classified, at least, “Substandard”. The
including appraisal process; restoration to a performing loan status and/
(6) management information system to or upgrading of loan classification, e.g.,
support the reporting, monitoring and from “Substandard” to “Especially
decision making processes; Mentioned”, may be allowed if
(7) defined timelines and provision for circumstances warrant an upgrading in
regular monitoring; and accordance with this Subsection.
(8) other strategies, such as the use of (5) When restructuring of exposures to
collection agencies, and criteria for hiring a DOSRI and other related parties is pursued,
consultant on problem credits. this shall be upon terms not less favorable
d. Restructuring strategies to the FI than those offered to others and
(1) Restructuring may be resorted to for shall be approved by the board, excluding
the purpose of lessening the financial the concerned director.
difficulty of the obligor towards full (6) Physical collaterals offered, such as
settlement of his obligation, and real estate, shall be appraised by an
restructuring agreements shall always take independent appraisal company (not a
into account the borrower’s capacity to pay subsidiary or an affiliate of the FI) acceptable
his obligation and available credit to the Bangko Sentral at the time of
enhancements such as financial guarantees restructuring and every year thereafter to
and physical collateral. Thus, except in ensure that current market values are being
special cases which also require approval used. A credit exposure benchmark of P1.0
by the Monetary Board, such as loans million for simple FIs and P5.0 million for
funded by foreign currency obligations, FIs all other FIs shall be observed, such that
shall have full discretion on whether to physical collaterals for credit exposures
restructure loans in order to provide beyond this amount will require an
flexibility in arranging the repayment of such independent appraisal.

Page 29k
§§ 4197N.17 - 4197N.19
14.12.31
e. Problem credits, including rank that write-off did not include

restructured accounts, shall be subjected to transactions with DOSRI and was
more frequent review and monitoring. undertaken in accordance with board-
Regular reports on the status of loan approved internal credit policy.
accounts and progress of any remedial plan An effective monitoring and reporting
shall be submitted to senior management system shall be in place to monitor debts
to facilitate an informed decision whether written off and future recoveries. Progress
escalated remedial actions are called for. on recovery shall be periodically reported
(Circular No. 855 dated 29 October 2014) to the board and senior management. A
database of loan accounts written off shall
§ 4197N.18 Writing off problem be maintained and must be periodically
credits. Policies for writing off problem reviewed for updates on individual loan
credits must be approved by the board of obligor’s information.
directors in accordance with defined (Circular No. 855 dated 29 October 2014)
policies, and shall incorporate, at a
minimum, well-defined criteria (i.e., § 4197N.19 Enforcement actions. The
circumstances, conditions and historical Bangko Sentral reserves the right to deploy
write-off experience) under which credit its range of supervisory tools to promote
exposures may be written off. Procedures adherence to standards and principles set
shall explicitly narrate and document the forth in these guidelines, bring about timely
necessary operational steps and processes corrective actions and compliance with
to execute the policies. Bangko Sentral directives and ensure that
Policies and procedures shall be FIs continuously observe the said standards.
periodically reviewed and if necessary, Persistent non-observance of the provisions
revised in a timely manner to address of Section 4197N and its subsections,
material internal changes (e.g., change in which may lead to material misstatement
business focus) or external circumstances of the financial condition or illiquidity of
(e.g., changes in economic conditions). the FI, may be a ground for declaration of
FIs shall write off problem credits, unsafe or unsound practices under Section
regardless of amount, against ACL or current 56 of R. A. No. 8791 and subject the FI to
operations within a reasonable period as appropriate sanctions.
soon as such problem credits are Enforcement actions shall be based on
determined to be worthless as defined in a holistic assessment to determine if FIs
the FIs’ written policies. However, problem adopt appropriate risk management
credits to DOSRI shall be written off only practices and maintain capital
upon prior approval of the Monetary Board. commensurate with the risk assumed based
Policies shall define and establish the on existing rules and regulations. These
reasonable period of time within which to may include, but are not limited to, the
write off loans already classified as “Loss”. following:
There shall be no undue delay in a. Corrective actions. These are
implementing write-offs. Notice of write- measures intended to primarily require FIs
off of problem credits shall be submitted in to rectify any deviations from the standards
the prescribed form to the Bangko Sentral and principles expected in the conduct of
through the appropriate department of SES its credit risk-taking activities to address the
within thirty (30) business days after every negative impact of such deviation.
write-off with a sworn statement signed by Corrective actions generally include
the President of the FI or officer of equivalent issuance of specific directives to address

Page 29l
§ 4197N.19 - 4198N.2
16.03.31
supervisory concerns within a reasonable adoption of effective risk management

timeframe. systems to sustain the safe and sound
b. Sanctions. The Monetary Board may operations of its supervised financial
impose sanctions on an FI and/or its Board, institutions (BSFIs). Cognizant that
directors and officers, as provided under operational risk is inherent in all activities,
existing laws, Bangko Sentral rules and products and services, and is closely tied in
regulations proportionate to the gravity/ with other types of risks (e.g., credit,
seriousness of offense. liquidity and market risks), the Bangko
c. Other enforcement actions. Subject Sentral is issuing these guidelines to clearly
to prior Monetary Board approval, the set out its expectations and define the
Bangko Sentral, when warranted, may minimum prudential requirements on
deploy other enforcement actions such as: operational risk management. These
(1) Initiation into the prompt corrective guidelines align existing regulations to the
action (PCA) framework whenever grounds extent possible, with international
for PCA exist; standards 2 and best practices. Bangko
(2) Issuance of cease and desist order Sentral expects its BSFIs to adopt an
(CDO) in case of persistence of unsafe/ operational risk management framework, as
unsound banking practices and/or violation part of the enterprise-wide risk management
of any banking law or any order, instruction system, that is suited to their size,
or regulation issued by the Monetary Board complexity of operations, and risk profile.
or any order, instruction or ruling issued by (Circular No. 900 dated 18 January 2016)
the Governor;
§ 4198N.1 Definition of operational
(3) Additional capital infusion in case
risk. Operational risk refers to the risk of
hazardous lending practices resulted in
loss resulting from inadequate or failed
excessive provisions for credit losses leading
internal processes, people and systems; or
to capital deficiency;
from external events. This definition
(4) Requiring the FI to gross up the includes legal risk, but excludes strategic
amount of required allowance for credit and reputational risk. Operational risk is
losses based on the examination of a inherent in all activities, products and
representative sample of loans, if in the services, and cuts across multiple activities
course of the Bangko Sentral examination, and business lines within the financial
a high incidence of non-reporting/ institution and across the different entities
concealment of past due and/or problem in a banking group or conglomerate where
loans is noted; or the financial institution belongs.
(5) Other appropriate non-monetary (Circular No. 900 dated 18 January 2016)
enforcement actions that the Monetary
Board may impose. § 4198N.2 Duties and responsibilities.
(Circular No. 855 dated 29 October 2014) a. Board of directors. Consistent with
the principles embodied under Subsec. X141.3,
Secs. 4198N Operational Risk the duties and responsibilities of the board
Management; Policy Statement1. It is the of directors in relation to the effective
thrust of the Bangko Sentral to promote the management of risk include the
(Next page is page 30)
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.

Page 29m
§ 4198N.2
16.03.31
establishment of a comprehensive and management), which should consider all

effective operational risk management material risk exposures as well as the BSFI’s
framework as part of the enterprise-wide financial condition and strategic direction;
risk management system. In this regard, the (b) Approve appropriate thresholds or
board of directors shall: management limits to ensure that the level of operational
framework as part of the enterprise-wide risk risk is maintained within tolerance and at
management system. In this regard, the board prudent levels and supported by adequate
of directors shall: capital. Relative to this, the board shall
(1) Ensure that it is aware of and approve policy on resolving limit breaches
understands the nature and complexity of which should cover escalation procedures
the major operational risks in the BSFI’s for approving or investigating breaches,
business and operating environment, approving authorities, and requirements in
including risks arising from transactions or reporting to the appropriate level of
relationships with third parties, vendors, management or the board;
suppliers including outsourced service (c) Ensure that operational risk is
providers, and clients of services provided. appropriately considered in the capital
This should include understanding of both adequacy assessment process;
the financial and non-financial impact of (d) Ensure that it receives adequate
operational risk to which the BSFI is information on material developments in the
exposed to; operational risk profile of the BSFI, including
(2) Approve the operational risk pertinent information on the current and
management framework which shall form emerging operational risk exposures and
part of the BSFI’s enterprise-wide risk vulnerabilities as well as information on the
management system and shall cover all effectiveness of the operational risk
business lines and functions of the BSFI, management framework. The board must
including outsourced services and services challenge the quality and
provided to external parties. The operational comprehensiveness of the operational risk
risk management framework should information it receives. It should also be
include an enterprise-wide definition of satisfied with the reliability of the said
operational risk, which should be consistent information and the monitoring system for
with the definition under Subsec. 4198N.1, operational risk;
governance, and reporting structures (e) Ensure that business objectives, risk
including the roles and responsibilities of appetite, the operational risk management
all personnel, feedback mechanism, as well framework, and the respective roles and
as standards and tools for operational risk responsibilities of personnel and officers at
management. In this respect, the board shall: all levels in terms of implementing the
(a) Define the operational risk operational risk management framework,
management strategy and ensure that it is are properly disseminated, clearly
aligned with the BSFI’s overall business communicated/discussed, and understood
objectives. Relative to this, the board should by personnel concerned;
set and provide clear guidance on the BSFI’s (f) Provide senior management with
operational risk appetite (i.e., the level of clear guidance and direction regarding the
operational risk the BSFI is willing to take principles underlying the operational risk
and able to manage in pursuit of its business management framework. The board shall
objectives as well as the type of risks that ensure that senior management
are not acceptable to the board and appropriately implements policies,

Page 30
§ 4198N.2
16.03.31
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

Page 30a
§ 4198N.2
16.03.31
(8) Oversee implementation of a sound (e) Approach to operational risk

business continuity management identification, assessment, monitoring and
framework. The board should create and reporting that utilizes appropriate
promote an organizational culture that operational risk management tools. This
places high priority on business should include an outline of the reporting
continuity.This shall include providing framework and types of data/information to
sufficient financial and human resources be included in the risk management reports;
associated with the BSFI’s business and
continuity initiatives. (f) Requirement for the conduct of
b. Senior management. Senior independent review of the framework as
management shall be responsible for the well as its implementation, on a periodic
implementation and consistent adherence basis, and whenever there are material
by all personnel to the operational risk changes in the BSFI’s operational risk profile.
management framework approved by the (2) Communicate individual roles and
board of directors. In this respect, senior responsibilities of personnel. It is important
management shall: that personnel at all levels understand their
(1) Translate the approved operational respective roles in the operational risk
risk management framework into specific management process. In this regard, senior
policies and processes covering all management should clearly assign
businesses and functions of the BSFI, authority, responsibility, and reporting
including outsourced services and services relationships to encourage and maintain
provided to external parties. Said policies accountability, and ensure that the
should be clearly documented, approved by necessary resources are available to manage
the board of directors and communicated operational risk effectively;
to personnel at all levels. Policies should (3) Establish systems to report, track,
include, among others: escalate, and resolve issues; and set the
(a) Definition of operational risk and frequency of operational risk management
operational risk loss. This should be reporting considering the level and type of
supported by common operational risk risks involved as well as the pace and nature
taxonomy that includes the operational risk of the operating environment of the BSFI;
event type and causes of losses to facilitate (4) Assess the appropriateness of the
the consistent identification of operational operational risk management process in
risks across the BSFI as well as the light of the changing business environment
management of operational risk in an and nature of risks arising from business
integrated manner; activities or functions;
(b) Appropriate governance and (5) Ensure that sufficient number of
oversight structures, reporting lines, and personnel, technical support, and other
accountabilities for managing operational resources are devoted for operational risk
risks; management such that the BSFI’s activities
(c) Clear description of risk limits and are conducted by qualified personnel with
thresholds that correspond to the BSFI’s the necessary experience and technical
approved operational risk appetite and capabilities. It shall also ensure that
tolerance; personnel responsible for monitoring and
(d) Risk mitigation strategies and tools enforcing compliance with the BSFI’s
for maintaining risks within the thresholds operational risk policy as well as the
and limits set; compliance and internal audit units have

Page 30b
§§ 4198N.2 - 4198N.3
16.03.31
authority independent from the units they coordinated to Operational Risk

review and are knowledgeable about the Management Function (ORMF) for risk
different areas of operations; and monitoring and reporting, in addition to the
(6) Establish policies, standards and usual reporting to senior management and/
processes for an effective business continuity or board.
management. (Circular No. 900 dated 18 January 2016)
c. Business units. Business line
management and personnel, as the first line § 4198N.3 Roles and Functions.
of defense, are responsible on a day-to-day a. Operational Risk Management
basis for identifying, managing and reporting Function. BSFIs are not required to create
operational risks inherent in the products, an ORMF. However, the board of directors
activities, processes and systems for which is expected to discuss operational risk issues
they are accountable. In this regard, business during its board meetings with discussions
line management shall ensure that: adequately documented in the minutes of
(1) Internal controls and practices within meetings. The board of directors of NBFIs
their business lines are consistent with the and trust corporations may, at its own
enterprise-wide policies and procedures to discretion, or as directed by the appropriate
support the management of operational risk; supervising department of the Bangko
(2) Business line specific policies, Sentral, create a Risk Management Unit
processes, and procedures are adequate and (RMU) or assign specific personnel under
effectively implemented, and personnel are
said unit to handle operational risk
adequate and competent to manage
concerns. The specific personnel or RMU
operational risk for all material products,
shall directly report to the head of the RMU
activities, and processes;
or to the board-level Risk Oversight
(3) Operational risk management
Committee (ROC), as appropriate. The ROC
framework within each business line reflects
or the board shall be responsible for
the scope of that business line and its
assessing the annual performance of the unit
inherent operational complexity and
operational risk profile; taking into account how said unit carried
(4) Risk mitigation strategies and out its duties and responsibilities. The ORMF
processes as approved by the board and shall be supported by a board-approved
senior management are established and charter that defines its stature, authority, and
executed; independence.
(5) Internal controls, and operational risk The ORMF shall primarily assist
mitigation strategies and processes are management in meeting its responsibility to
periodically reviewed within the business understand and manage operational risk
units to effectively manage operational risks exposures and ensure the development and
within approved risk tolerance, and consistent implementation of operational
consistent with enterprise-wide policies and risk policies, processes, and procedures
procedures established. There must be clear throughout the institution. In this regard, the
expectations and processes established to ORMF shall:
ensure prompt escalation and actions to (1) Recommend to the board of
address any gap or issue identified; and directors and senior management
(6) Operational risk-related information appropriate policies and procedures relating
(e.g., loss events, incidents, et al.) are to operational risk management and
adequately and timely communicated/ controls;

Page 30c
§§ 4198N.3 - 4198N.4
16.03.31
(2) Design and implement the operational risk management framework,

operational risk assessment methodology including the implementation of operational
tools and risk reporting system of the risk management policies and procedures.
institution; The board of directors, either directly or
(3) Coordinate risk management indirectly through the board-level Audit
activities across the institution; Committee shall ensure that the scope and
(4) Consolidate all relevant operational frequency of audit is appropriate to the risk
risk information/reports to be elevated/ exposures. Any operational risk issue
presented to the board and senior identified and reported in the audit process
management; should be addressed by senior management
(5) Provide operational risk management in a timely and effective manner, or raised
training and advice to business units on to the attention of the board as appropriate.
operational risk management issues; and (Circular No. 900 dated 18 January 2016)
(6) Coordinate with compliance
function, internal audit, and external audit § 4198N.4 Operational risk
on operational risk matters. management framework. BSFIs shall have
ORMF personnel should have technical in place an appropriate operational risk
proficiency, appropriate educational management framework, as part of the
background, and exposure to enable them enterprise-wide risk management system,
to effectively perform the unit's mandate. that is effective and efficient in identifying,
BSFIs shall have in place a training program assessing, monitoring and controlling/
to keep its personnel up-to-date on different mitigating operational risk. They shall ensure
operational risk issues and challenges. that their operational risk management
b. Compliance function. The framework is commensurate with the
compliance function shall conduct an complexity of their operations, range of
independent assessment of the compliance products and services, organizational
with relevant laws, rules and regulations, structure, and risk profile.
as well as internal policies of the institution, a. Risk identification and assessment.
and determine areas that may potentially Risk identification and assessment are
result in risk of loss due to inadequate or fundamental elements of an effective
failed internal processes, systems, and operational risk management system.
people. The latter includes inappropriate Effective risk identification shall consider
conduct/behavior of personnel, officers, and both internal factors (such as BSFI structure,
the board, that may lead to fraud or any form nature of activities, the quality of human
of business disruption. The compliance resources, organizational changes and
function shall assess whether the identified employee turnover, among others) and
operational risk exposure by the business external factors (such as changes in the
units or by the function itself shall affect the broader environment and the industry,
franchise value of the institution. In this advances in technology, and developments
regard, it shall advise and assist in political, legal, and economic factors,
management in establishing guidance on the among others). Risk identification and
appropriate implementation of relevant assessment allow the BSFI to better
laws, rules and regulations, and internal understand its risk profile and allocate risk
policies. management resources and strategies more
c. Internal audit. Internal audit shall effectively. Since the business lines are
conduct an independent assessment of the expected to have the best knowledge of their

Page 30d
§ 4198N.4
16.03.31
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

Page 30e
§ 4198N.4
16.03.31
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

Page 30f
§ 4198N.4
16.03.31
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.

Page 30g
§ 4198N.4
16.03.31
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

Page 30h
§§ 4198N.4 - 4198N.5
16.03.31
framework for systematically tracking and a. Recruitment and selection. The

recording the frequency, severity and other board shall establish efficient process that
relevant information on loss events. will facilitate timely recruitment and
c. Risk control and mitigation. Strong selection of personnel from a broad pool of
control environment is key to effective risk candidates with appropriate educational
control and mitigation. In this respect, BSFIs background, skills, experience and
are expected to adhere to the standards set competencies to fulfill the duties and
forth under pertinent provisions of Secs. responsibilities of the function. Management
4163N and 4164N on Internal Control and shall also ensure that the BSFI’s culture,
Internal Audit. values and expectations on behavior are
BSFIs shall decide whether to use compatible with those of its employees so
appropriate procedures to control and/or that there is unity of direction and purpose.
mitigate the risks, or bear the significant risks b. Performance management. The
that have been identified. In those instances board shall establish effective performance
where internal controls do not adequately management framework that will ensure
address risk and accepting the risk is not a that personnel’s performance is at par with
reasonable option, BSFIs may seek to transfer the standards set by the board/senior
the risk to another party such as through management. Results of performance
insurance. Relative thereto, the board shall evaluation should be linked to other human
determine the maximum loss exposure the resource activities such as training and
BSFI is willing to take and has the capacity development, remuneration, and succession
to assume, and should perform an annual planning. These should likewise form part
review of the BSFI’s risk and insurance of the assessment of the continuing fitness
management program. and propriety of personnel in carrying out
BSFIs, however, should not consider their respective duties and responsibilities.
risk transfer tools as substitute but as The assessment of continuing fitness and
complementary tools to sound controls and propriety of personnel should take into
risk management system. Management shall account factors that may affect the
also assess the extent to which risk performance of an individual. For instance,
mitigation tools such as insurance reduces the financial circumstances of an employee
risk, transfer the risk to another business who will be responsible for the custody of,
sector or area, or create a new risk (e.g., or handling of cash related transactions,
counterparty risk). shall be taken into consideration in the
(Circular No. 900 dated 18 January 2016) evaluation of his continuing qualification.
c. Training and development. The
§ 4198N.5 Management of human board shall establish training and
resource-related risk. One of the major development programs that will ensure
sources of operational risk is “people risk”. continuing development of employees’
In this regard, BSFIs shall embed in their knowledge, competence, and skill. Results
enterprise-wide risk management of gaps assessment in the performance
framework measures to identify, measure, evaluation/appraisal process can be used in
monitor, and control human resource the creation of training and development
related risks. BSFIs shall ensure that there programs for employees.
are adequate policies and risk management d. Remuneration and compensation.
and control measures in the following areas: The board shall establish sound

Page 30i
§§ 4198N.5 - 4198N.7
16.03.31
remuneration and compensation policies service (e.g., termination, dismissal,

that can be used by the institution to attract/ retrenchment, retirement, or resignation),
recruit and retain highly qualified which should include transfer of
workplace. Said policies should accountabilities and/or salient information
appropriately motivate personnel and (e.g., client data, business strategies and
discourage excessive risk taking. This can formula, other trade secrets, etc.) to the
be achieved through timely assessment of successor, and clearance requirements.
performance and competencies based on set Policies may also include “non-compete”
standards. Results of performance clauses, in accordance with existing laws.
assessment/appraisal can be used in the The Human Resource Department shall
organization’s remuneration decisions. assist the board in fulfilling its oversight
e. Succession planning. The board responsibilities in the areas of recruitment,
shall establish an effective succession manpower planning, personnel
planning program. The program should development, performance appraisal,
include a system for identifying and remuneration, termination, retrenchment
developing potential successors for key and and other key human resource issues.
or critical positions in an organization, (Circular No. 900 dated 18 January 2016)
through systematic evaluation process and
training. This will require identifying critical § 4198N.6 Management of information
skills and competencies; assessing gaps; and technology-related risk. BSFIs shall refer to
designing developing, and delivering Sec. 4196N for the management of
training and development programs to build information technology-related risk.
or improve critical skills and competencies. (Circular No. 900 dated 18 January 2016)
The program should be adequately
documented to facilitate monitoring and § 4198N.7 Management of integrity of
assessment of its implementation. prudential reports or reports submitted to
f. Adequacy of complement. The board Bangko Sentral. BSFI shall adopt a prudential
shall establish effective strategic manpower reporting framework that ensures the
planning to ensure that there is adequate and integrity of information submitted to the
right manpower complement to meet the Bangko Sentral. They shall establish a system
strategic goals and operational plans of the for ensuring effective compliance with the
organization. standards prescribed by the Bangko Sentral
g. Disciplinary actions. The board, on acceptable reporting quality. BSFIs shall
officers and all employees are expected to likewise maintain adequate documentation
conform to prescribed ethical culture and of the processes and procedures covering
guidelines, meet performance standards, and the prudential reporting framework and
to behave ethically/appropriately in the conduct a periodic review of their continuing
workplace. Disciplinary or corrective relevance.
actions may be taken to improve/arrest Management should be cognizant of
unacceptable behavior or performance. relevant guidelines that may be issued by
Disciplinary action must be in accordance the Bangko Sentral relative to issues on the
with the laws and the applicable rules. integrity and accuracy of prudential reports.
h. Separation from service. The board Persistent concerns on the integrity and
shall establish policies and procedures accuracy of prudential reports including
governing the separation of employees from failure to comply with the directives of the

Page 30j
§§ 4198N.7 - 4198N.11
16.03.31
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).

Page 30k
§§ 4198N.11 - 4301N.1
16.03.31
system, or impose sanctions to limit the stated in the statement of account/billing

level of or suspend any business activity that statement which may include: (1) total
has adverse effects on the safety or outstanding balance multiplied by the
soundness of the BSFI, among others. required payment percentage or a fixed
Sanctions may likewise be imposed on a amount whichever is higher; (2) any amount
BSFI and/or its directors, officers and/or which is part of any fixed monthly
employees. installment that is charged to the card;
(Circular No. 900 dated 18 January 2016) (3) any amount in excess of the credit line;
and (4) all past due amounts, if any.
Secs. 4199N- 4200N (Reserved) d. Default or delinquency. Shall mean
non-payment of, or payment of any amount
Secs. 4201N - 4300N (Reserved) less than, the “Minimum Amount Due” or
“Minimum Payment Required” within two (2)
Sec. 4301N Credit Card Operations; cycle dates, in which case, the “Total Amount
General Policy. The Bangko Sentral shall Due” for the particular billing period as
foster the development of consumer credit reflected in the monthly statement of account
through innovative products such as credit may be considered in default or delinquent.
cards under conditions of fair and sound e. Acceleration clause. Shall mean any
consumer credit practices. The Bangko provision in the contract between the bank
Sentral likewise encourages competition and the cardholder that gives the bank the
and transparency to ensure more efficient right to demand the obligation in full in case
delivery of services and fair dealings with of default or non-payment of any amount
customers. due or for whatever valid reason.
Towards this end, the following rules f. Subsidiary refers to a corporation or
and regulations shall govern the credit card firm more than fifty percent (50%) of the
operations of subsidiary/affiliate credit card outstanding voting stock of which is directly
companies of banks/QBs, aligned with or indirectly owned, controlled or held with
global best practices. the power to vote by a bank or other FI.
g. Affiliate refers to an entity linked
§ 4301N.1 Definition of terms. directly or indirectly to a bank or other FI
a. Credit card. Means any card, plate, through any one (1) or a combination of any
coupon book or other credit device existing of the following:
for the purpose of obtaining money, (1) Ownership, control or power to
property, labor or services on credit. vote, whether by permanent or temporary
b. Credit card receivables. Represents proxy or voting trust, or other similar
the total outstanding balance of credit contracts, by a bank or other FI of at least
cardholders arising from purchases of goods ten percent (10%) or more of the outstanding
and services, cash advances, annual voting stock of the entity, or vice-versa;
membership/renewal fees as well as interest, (2) Interlocking directorship or officership,
penalties, insurance fees, processing/service except in cases involving independent
fees and other charges. directors as defined under existing regulations;
c. Minimum amount due or minimum (3) Common stockholders owning at
payment required. Means the minimum least ten percent (10%) of the outstanding
amount that the credit cardholder needs to voting stock of each FI and the entity; or
pay on or before the payment due date for a (4) Management contract or any
particular billing period/cycle as defined arrangement granting power to the bank or
under the terms and conditions or reminders other FI to direct or cause the direction of

Page 30l
§§ 4301N.1 - 4301N.2
14.12.31
management and policies of the entity, or notwithstanding any contrary stipulations

vice-versa. in the contract.
h. Simple annual rate is the uniform n. Application is a documented
percentage which represents the ratio request of the credit card applicant to a
between the finance charge and the amount credit card issuer for the availment of a
to be financed under the assumption that credit card. The intention and consent for
the loan is payable in one (1) year with single the availment of the credit card must be
payment upon maturity and there are no clear and explicit.
upfront deductions to principal. (As amended by Circular Nos. 845 dated 15 August 2014, 812
For loans with terms different from the dated 23 September 2013 and 754 dated 17 April 2012 and M-
2012-018 dated 19 April 2012)
above assumptions, the effective annual
interest rate shall be calculated and
disclosed to the borrower as the relevant § 4301N.2 Risk management system.
true cost of the loan comparable to the To safeguard their interests, subsidiary/
concept of simple annual rate. affiliate credit card companies of banks/QBs
For loans with contractual interest rates are required to establish an appropriate
stated on monthly basis, the effective interest system for managing risk exposures from
rate may be expressed as a monthly rate. credit card operations which shall be
In accordance with the Philippine documented in a complete and concise
Accounting Standards (PAS) definition, manner. The risk management system shall
effective interest rate is the rate that exactly cover the organizational setup, records and
discounts estimated future cash flows reports, accounting, policies and procedures
through the life of the loan to the net amount and internal control.
of loan proceeds. For consistency, Written policies, procedures and
methodology and standards for discounted internal control guidelines shall be
cash flow models shall be prescribed to be established on the following aspects of credit
used for the purpose. card operations:
i. Credit card acquirer refers to the a. Requirements for application;
institution that accepts and facilitates the b. Solicitation and application
processing of the credit card transaction processing;
which is initially accepted by the merchant. c. Determination and approval of credit
j. Credit cardholder refers to a person limits;
who owns and benefits from the use of a d. Issuance, distribution and activation
credit card. of cards;
k. Credit card business activity report e. Supplementary or extension cards;
refers to report which contains the f. Cash advances;
quantitative data on credit card industry. g. Billing and payments;
l. Credit card issuer refers to a bank or a h. Deferred payment program or special
corporation that offers the use of its credit card. installment plans;
m. Pre-approved credit cards are i. Collection of past due accounts;
unsolicited credit cards issued by credit card j. Handling of accounts for write-off;
issuers to consumers who have not applied k. Suspension, cancellation and
for such credit cards. Acts described under withdrawal or termination of card;
Appendix N-10 and other similar acts are l. Renewal of cards, upgrade or
deemed tantamount to the act of issuing downgrade of credit limit;
pre-approved credit cards, m. Lost or stolen cards and their

Page 30m
§§ 4301N.2 - 4301N.4
14.12.31
replacement; installments, amount and due dates or

n. Accounts of DOSRI and employees; periods of payment schedules to repay the
o. Disposition of errors and/or questions indebtedness;
about the billing statement, statement of e. the default, late payment/penalty fees
account and other customers’ complaints; and or similar delinquency-related charges
p. Dealings with marketing agents/ payable in the event of late payments;
collection agents. f. the conditions under which interest
(As amended by Circular No. 702 dated 15 December 2010) may be imposed, including the time period,
within which any credit extended may be
§ 4301N.3 Minimum requirements. repaid without interest;
NBFIs and their subsidiary or affiliate credit g. the method of determining the
cards companies shall not issue pre- balance upon which interest and/or
approved credit cards as provided under delinquency charges may be imposed;
Appendix N-10, notwithstanding any h. the method of determining the
contrary stipulations in the contract. amount of interest and/or delinquency
702 dated 15 December 2010)
charges, including any minimum or fixed
amount imposed as interest and/or
§ 4301N.4 Information to be disclosed. delinquency charge;
Subsidiary/affiliate credit card companies of i. where one (1) or more periodic rates
banks/QBs shall disclose to each person to may be used to compute interest, each such
whom the credit card privilege is extended rate, the range of balances to which it is
in the agreement, contract or any equivalent applicable, and the corresponding simple
document governing the issuance or use of annual rate; and
the credit card or any amendment thereto j. for transactions made in foreign
or in such other statement furnished the currencies and/or outside the Philippines,
cardholder from time to time, prior to the for dual currency accounts (peso and
imposition of the charges and to the extent dollar billings), as well as payments made
applicable, the following information: by credit cardholders in any currency
a. the finance charges, individually other than the billing currency: the
itemized, which are paid or to be paid by the application of payments; the manner of
cardholder; conversion from the transaction currency
b. non-finance charges, individually and payment currency to Philippine pesos
itemized, which are paid or to be paid by or billing currency; definition or general
the cardholder in connection with the description of verifiable blended
transaction but which are not incident to exchange/conversion rates (e.g.,
the extension of credit; MASTERCARD and/or VISA International
c. the percentage that the finance charge rates on the day the item was processed/
bears to the total amount to be financed posted to the billing statement, plus mark-
expressed as a simple annual rate or an up, if any) including conversion
effective annual interest rate, as described commission; and/or other currency
in Item “h” of Subsec. 4301N.1. Effective conversion charges and costs arising from
annual interest rate may also be quoted as a the purchase by the card company of
monthly rate in parallel with the quotation foreign currency to settle the customer’s
of the contractual rate; transactions shall also be disclosed.
d. for installment loans, the number of NBFIs and their subsidiary or affiliate

Page 30n
§§ 4301N.4 - 4301N.6
12.12.31
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

Page 30o
§§ 4301N.6 - 4301N.11
12.12.31
in a manner consistent with this provision. § 4301N.10 (2011 - 4301N.9)

Marketing materials and presentations shall Confidentiality of information. Subsidiary/
likewise be consistent with this provision. affiliate credit card companies of banks/QBs
(As amended by Circular No. 754 dated 17 April 2012) shall keep strictly confidential the data on
the cardholder or consumer, except under
§ 4301N.7 (2011 - 4301N.6)Finance the following circumstances:
charges. The amount of finance charges in a. disclosure of information is with the
connection with any credit card transaction consent of the cardholder or consumer;
charged to the cardholder includes interest, b. release, submission or exchange of
fees, service charges, discounts, and such customer information with other FIs, credit
other charges incident to the extension of information bureaus, credit card issuers,
credit. their subsidiaries and affiliates;
(As amended by Circular No. 754 dated 17 April 2012) c. upon orders of court of competent
jurisdiction or any government office or
§ 4301N.8 (2011 - 4301N.7) Deferral agency authorized by law, or under such
charges.The bank and the cardholder may, conditions as may be prescribed by the
prior to the consummation of the Monetary Board;
transaction, agree in writing to a deferral d. disclosure to collection
agencies,counsels and other agents of the
of all or part of one or more unpaid
bank or card company to enforce its rights
installments and the bank may collect a
against the cardholder;
deferral charge which shall not exceed the
e. disclosure to third party service
rate previously disclosed pursuant to the
providers solely for the purpose of
provisions on disclosure.
assisting or rendering services to the bank
(As amended by Circular No. 754 dated 17 April 2012)
or card company in the administration of
its credit card business; and
§ 4301N.9 (2011 - 4301N.8) Late
f. disclosure to third parties such as
payment/penalty fees. No late payment insurance companies, solely for the
or penalty fee shall be collected from purpose of insuring the bank from
cardholders unless the collection thereof cardholder default or other credit loss, and
is fully disclosed in the contract between the cardholder from fraud or unauthorized
the issuer and the cardholder: Provided, charges.
That late payment or penalty fees shall be (As amended by Circular No. 754 dated 17 April 2012)
based on the unpaid minimum amount
due or a prescribed minimum fixed § 4301N.11 (2011 - 4301N.10)
amount: Provided, further, That said late Suspension, termination of effectivity and
payment or penalty fees may be based on reactivation. Subsidiary/ affiliate credit
the total outstanding balance of the credit card companies of banks/QBs shall
card obligation, including amounts formulate criteria or parameters for
payable under installment terms or suspension, revocation and reactivation of
deferred payment schemes, if the contract the right to use the card and shall include
between the issuer and the cardholder in their contract with cardholders a
contains an “acceleration clause” and the provision authorizing the issuer to
total outstanding balance of the credit suspend or terminate its effectivity, if
card is classified and reported as past due. circumstances warrant.
(As amended by Circular No. 754 dated 17 April 2012) (As amended by Circular no. 754 dated 17 April 2012)

Page 31
§§ 4301N.12 - 4301N.15
12.12.31
§ 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;

Page 32
§§ 4301N.15 - 4301N.17
13.12.31
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
Subsecs. 4301N.2 to 4301N.4, 4301N.6
defined as contact before 6:00 A.M. or after
and 4301N.15 shall be regarded at least as
10:00 P.M., unless the account is past due
a less serious offense, depending on the
for more than sixty (60) days or 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 business activity report. For purposes of
in-house collectors, or third-party collection transparency and availability of data on
agents, shall disclose his/her full name/true
credit card operations and in the light of
identity to the cardholder.
ensuring consumer protection, as well as
(As amended by Circular No. 754 dated 17 April 2012 and 702
managing risks involved in credit
dated 15 December 2010)
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:

Page 33
§§ 4301N.17 - 4311N
14.12.31
Credit Card Unit of monthly reports to these bureaus or

Issuance Expression organizations on the full payment or
I. Cards-in-force per Number
network/brand settlement of the previously reported accounts
II.Cards-in-force per card Number within five (5) business days from the end of
type the month when such full payment was
III. Approved credit card Number
received. For this purpose, it shall be the
applications
IV. Cards issued by status Number responsibility of the reporting FIs to ensure
V. Cards issued per credit Peso amount that their disclosure of any information about
limit their borrowers/clients is with the consent of
VI. Billings per mode of Peso amount
transactions
borrowers/clients concerned.
VII. Billings per network/ Peso amount (Circular No. 589 dated 18 December 2007)
brand
VIII. Billed fees/charges Peso amount Secs. 4304N – 4310N (Reserved)
IX. Gross payment Peso amount
X. Receivables Peso amount
XI. Rates/charges per Peso amount/ Sec. 4311N Secured Loans and Other
cardholder percentage Credit Accommodations. A loan may be
Cardholder Profile Unit of
considered secured by collateral to the
Expression extent the estimated value of net proceeds
I.Cardholder Number
information (age, at disposition of such collateral can be used
occupation, gender, civil without legal impediment to settle the
status, educational attainment,
geographic location) principal and accrued interest of such loan,
II. Cardholder by type of Number provided that such collateral must have an
payment
established market and the valuation
Complaints Unit of methodology used is sound, and provided
Expression
I. Cardholder issues Number further that in the case of real estate collateral,
II. Complaint/request resolution Number the maximum collateral value shall be sixty
III. External service provider Number
percent (60%) of its value as appraised by
Usage Location Unit of an appraiser acceptable to the Bangko
Expression
I. Incoming Peso amount Sentral.
II. Outgoing Peso amount A loan may also be considered as
As amended by Circular Nos. 812 dated 23 September 2013,
(
secured to the extent covered by a third
754 dated 17 April 2012 and 702 dated 15 December 2010) party financial guarantee or surety
arrangement where the credit enhancement
Sec. 4302N Classification of Credit Card provider is itself considered to be of high
Receivables. credit quality (credit rating of at least AA or
(Deleted by Circular No. 855 dated 29 October 2014) equivalent) or is considered to be such by
the Bangko Sentral.
Sec. 4303N Updating of Information Finally, a loan may be secured by a
Provided to Credit Information Bureaus combination of acceptable collateral and
FIs which have provided adverse guarantee arrangements as defined above,
information, such as the past due or provided such arrangements are
litigation status of loan accounts, to credit independent of one another for credit
information bureaus, or any organization enhancement purposes.
performing similar functions, shall submit (As amended by Circular No. 855 dated 29 October 2014)

Page 34
§§ 4312N - 4312N.4
14.12.31
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

Page 34a
§§ 4312N.4 - 4312N.11
14.12.31
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
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

Page 34b
§§ 4312N.11 - 4313N
10.12.31
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 assisting
10:00 P.M., unless the account is past due or rendering services to the NBFI in the
for more than sixty (60) days or the borrower administration of its lending business; and
has given express permission or said times f. disclosure to third parties such as
are the only reasonable or convenient insurance companies, solely for the purpose
opportunities for contact. of insuring the NBFI from borrower default
NBFIs shall inform their borrowers in or other credit loss, and the borrower from
writing of the endorsement of the fraud or unauthorized charges.
collection of their account to a collection
agency/agent, or the endorsement of their §§ 4312N.13 - 4312N.14 (Reserved)
account from one (1) collection agency/
agent to another, at least seven (7) days prior § 4312N.15 Sanctions. Any violation of
to the actual endorsement. The notification the provisions of Subsecs. 4312N.1 to
shall include the full name of the collection 4312N.4 shall be subject to the sanctions
agency and its contact details: Provided, provided under Sections 36 and 37 of R.A.
That the required notification in writing shall No. 7653.
be included in the terms and conditions of Violation of the provisions of
the loan agreement. NBFIs shall adopt Subsecs. 4312N.10 to 4312N.12 shall be
policies and procedures to ensure that subject to any or all of the following
personnel handling the collection of sanctions depending upon their severity:
accounts, whether these are in-house a. First offense. Reprimand for the
collectors, or third-party collection agents, directors/officers responsible for the
shall disclose his/her full name/true identity violation;
to the borrower. b. Second offense. Disqualification of
(As amended by Circular No.702 dated 15 December 2010) the NBFI concerned from the credit facilities
of the Bangko Sentral except as may be
§ 4312N.12 Confidentiality of allowed under Section 84 of R. A. No. 7653;
Information. NBFIs shall keep strictly c. Subsequent offense/s:
confidential the data on the borrower or i. Prohibition on the NBFI concerned
consumer, except under the following from the extension of additional credit
circumstances: accommodation against personal security; and
a. disclosure of information is with the ii. Penalties and sanctions provided
consent of the borrower or consumer; under Sections 36 and 37 of R. A. No. 7653.
b. release, submission or exchange of (Circular No. 702 dated 15 December 2010)
customer information with other financial
institutions, credit information bureaus, Sec. 4313N Bank DOSRI Rules and
lenders, their subsidiaries and affiliates; Regulations Applicable to Government
c. upon orders of court of competent Borrowings in Government-Owned Or -
jurisdiction or any government office or Controlled Financial Institutions. The
agency authorized by law, or under such provisions of Secs. X326 to X337 of the
conditions as may be prescribed by the Manual of Regulations for Banks (MORB),
Monetary Board; to the extent applicable, shall also apply to
d. disclosure to collection agencies, loans, other credit accommodations, and
counsels and other agents of the NBFIs to guarantees granted to the National

Page 34c
§ 4313N
08.12.31
Government or Republic of the Philippines, to the agricultural sector and MSMEs;

its political subdivisions and and/or (ii) rediscounting and guarantee
instrumentalities as well as GOCCs, subject facilities for loans granted to the said sector
to the following clarifications: or enterprises;
a. Loans, other credit accommodations, c. Loans, other credit accommodations,
and guarantees to the Republic of the and/or guarantees granted to state
Philippines and/or its agencies/departments/ universities and colleges (SUCs) shall be
bureaus shall be considered: (1) non-risk; and excluded from the thirty percent (30%)
(2) not subject to any ceiling; ceiling on unsecured loans under Secs.
b. Loans, other credit accommodations, X330 and X331 of the MORB;
and/or guarantees to: (1) GOCCs; and d. In view of the fiscal autonomy
(2) corporations where the Republic of the granted under R.A. No. 7653 and the
Philippines, its agencies/departments/ independence prescribed under the
bureaus, and/or GOCCs own at least twenty Constitution, the Bangko Sentral shall be
percent (20%) of the subscribed capital considered an independent entity, hence,
stock shall be considered indirect not a related interest of the Republic of the
borrowings of the Republic of the Philippines and/or its agencies/departments/
Philippines and shall form part of the bureaus. Loans, other credit accommodations
individual ceiling as well as the aggregate and guarantees of the Bangko Sentral shall
ceiling: Provided, That the following loans, be considered: (1) non-risk; and (2) not
other credit accommodations, and/or subject to any ceiling;
guarantees to GOCCs and corporations e. LGUs shall be considered separate
where the Republic of the Philippines, its from the Republic of the Philippines, other
agencies/departments/bureaus, and/or government entities, and from one another
GOCCs own at least twenty percent (20%) due to the full autonomy in the exercise of
of the subscribed capital stock, shall be their proprietary functions and in the
excluded from the thirty percent (30%) management of their economic enterprises
ceiling on unsecured loans under Secs. granted to them under the Local
X330 and X331 of the MORB: Government Code of the Philippines,
(1) Loans, other credit accommodations, subject to certain limitations provided by
and/or guarantees for the purpose of law, hence, not a related interest of the
undertaking priority infrastructure projects Republic of the Philippines and/or its
consistent with the Medium-Term agencies/departments/bureaus;
Development Plan/Medium-Term Public f. Local Water Districts (LWDs),
Investment Program of the National although GOCCs shall be considered
Government, duly certified as such by the separate from the Republic of the
Secretary of Socio-Economic Planning; Philippines, other government entities,
(2) Loans, other credit accommodations, and from one another due to their fiscal
and/or guarantees granted to participating independence from the National
financial institutions (PFIs) in the lending Government, hence, not related interests
programs of the government wherein the of the Republic of the Philippines and/or
funds borrowed are intended for relending its agencies/department/bureaus, for
to other PFIs or end-user borrowers; and purposes of these regulations;
(3) Loans, other credit accommodations, g. A director who acts as a
and/or guarantees granted for the purpose government representative in the lending
of providing (i) wholesale and retail loans institution shall not be excluded in the

Page 35
§§ 4313N - 4350N.2
16.03.31
d e l i b e r a t i o n as well as in the value chain financing framework shall be

determination of majority of the directors implemented in consonance with Sec. 4179N.
in cases of loans, other credit (Circular No. 908 dated 14 March 2016)
accommodations, and guarantees to the
Republic of the Philippines and/or its § 4350N.1 Definition of terms. For
agencies/departments/bureaus; and purposes of this Section, the following
h. A director of the lending institution definitions shall apply:
shall be excluded in the deliberation as well a. Value chain - refers to a set of actors/
as in the determination of majority of the players, e.g., producers (farmers/fisherfolks),
directors in cases of loans, other credit traders, suppliers, processors, aggregators,
accommodations, and guarantees to the who conduct linked sequence of value-
borrowing government entity other than the adding activities involved in bringing a
Republic of the Philippines, its agencies, product from its raw material stage to the
departments or bureaus where said director final consumers;
is also a director, officer or stockholder b. Value chain finance - refers to the
under existing DOSRI regulations. financial flows to those actors/players from
(Circular No. 514 dated 06 March 2006 as amended by Circular both within the value chain and financial
Nos. 635 dated 10 November 2008, 616 dated 30 July 2008, and flows to those actors/players from the outside
580 dated 09 September 2007) as a result of their being linked within a value
Sec. 4314N Loans Against Personal chain;
Security. c. Agricultural value chain analysis -
(Deleted by Circular No. 855 dated 29 October 2014) refers to the assessment of actors/players,
e.g., from input suppliers to producers to
Secs. 4315N- 4349N (Reserved) processors and to traders, their interests and
the factors influencing the performance of a
Sec. 4350N Agricultural Value Chain particular value chain, e.g., palay, corn,
Financing Framework; Statement of Policy1. livestock, marine products, as a whole, as
The Bangko Sentral supports the promotion opposed to only examining targeted sections
of agricultural value chain financing as an of the chain; it also includes understanding
effective and organized approach to channel the nature of the chain, identifying the
financing to the agriculture and fisheries weakest and strongest links along the chain
sectors and promote financial inclusion. By and the business models as shown in
encouraging the linking of various actors/ Appendix N-14; and
players in an agricultural value chain, credit c. Value chain aggregator - refers to any
risk of participating smallholder farmers/ value chain actor/player or any entity outside
fisherfolks can be reduced. As a result, this the value chain which initiates the
type of financing would facilitate and allow formalization and/or organization of a value
small farmers/fisherfolks to have, if not more, chain and/or which offers services that aim
access to credit. This is expected to further to strengthen existing value chains.
improve productivity in the agriculture and (Circular No. 908 dated 14 March 2016)
fisheries sectors and at the same time uplift
the lives of these marginalized farmers/ § 4350N.2 Features of agricultural
fisherfolks. value chain financing program. Consistent
The provisions covering the agricultural with existing provisions on sound credit risk
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.

Page 36
§ 4350N.2
16.03.31
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

Page 36a
§§ 4350N.2 - 4391N
16.03.31
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
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.

Page 36b
§§ 4392N - 4511N.1
15.12.31
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
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.

Page 36c
§§ 4511N.2 - 4511N.5
11.12.31
§ 4511N.2 Application for registration (Anti-Money Laundering Act of 2001), as

The application for a certificate of amended, its IRR, and Part 8 of Q
registration to act as FXD/MC and/or Regulations.
remittance agent, in the prescribed form (As amended by Circular No. 706 dated 05 January 2011)
(Item “A”, Appendix N-8), must be duly
supported by the following documents: § 4511N.4 Required seminar/training
a. Incorporation papers duly Prior to the issuance of the certificate of
authenticated by the SEC (for corporation/ registration, the officer(s) as well as the
partnership); or copy of the certificate of personnel directly involved in foreign
registration duly authenticated by the exchange operations shall attend a seminar
Department of Trade and Industry (DTI) on the requirements of the Anti-Money
(for single proprietorship); Laundering Act (AMLA) particularly on
b. Copy of business license/permit customer identification, record keeping and
from the city or municipality having reporting of covered and suspicious
territorial jurisdiction over the place of transactions, to be conducted by the AMLC
establishment and operation; or by any of its recognized or accredited
c. List of stockholders/partners/ service providers. The provisions of this
proprietor/directors/principal officers as the Section shall also apply to officers
case maybe; appointed after the issuance of the
d. Notarized Deed of Undertaking certificate of registration.
(Item “B”, Appendix N-8) to strictly comply The officer(s)-in-charge and the
with the requirements of all relevant laws, personnel who attended the required
rules and regulations, signed either by the seminar shall echo the said training to all
owner, partner, president or officer of employees within thirty (30) calendar days
equivalent rank; and from such attendance or as new employees
e. Any additional document which the are hired.
BSP may require from time to time.
FXDs/MCs and remittance agents § 4511N.5 Sale and purchase of foreign
existing prior to 12 May 2005 (effectivity currencies by FXDs/MCs. The following
date of Circular 471 dated 24 January 2005) minimum procedures shall be observed on
may continue to operate as such: Provided, sale and purchase of foreign currencies by
That an application for registration FXDs/MCs:
supported by documents mentioned above a. Official receipts, in case of sales, and
has been filed within ninety (90) calendar accountable forms in case of purchases,
days from 12 May 2005. shall be issued in numerical order to
A certificate of registration to act as FXD/ evidence sale/purchase of foreign currencies;
MC or remittance agent shall be issued by b. The amount of foreign currencies
the BSP and shall become the basis for an sold shall be indicated in the official
electronic registry of all BSP registered receipts both in words and in figures. The
FXDs/MCs and remittance agents in the staff serving the particular transaction as
country. well as the person buying/selling foreign
currency shall sign in their usual signatures
§ 4511N.3 Applicability of other laws/ on the receipt;
regulations. FX dealers, money changers, c. A daily record of foreign exchange
and remittance agents are subject to the transactions shall be maintained where all
provisions of R.A. No. 7653, R.A. No. 9160 foreign exchange sale and purchase

Page 37
§§ 4511N.5 - 4511N.8
09.12.31
transactions shall be posted chronologically. (5) Authority and identification of the

The daily record shall be kept on file at the person purporting to act in behalf of the client.
FXD/MC premises and shall be available For subsequent transactions with the
for AMLC inspection/examination any same corporate client, FXDs/MCs need not
time; require submission of additional documents
d. All copies of cancelled receipts shall enumerated in Item “b” above unless there
be marked and stamped “CANCELLED” for are changes thereto.
internal control purposes; and As a means of further identification,
e. Foreign exchange transactions shall FXDs/MCs shall require the presentation of
be conducted only at the entity’s principal a government-issued identification
place of business and other authorized document such as SSS/GSIS/voter’s ID,
branches. driver’s license or passport.
A sample of application to sell/purchase
§ 4511N.6 Application to sell/purchase foreign currencies is shown in Item “C”,
foreign currencies by FXDs/MCs. FXDs/ Appendix N-8.
MCs shall require the seller or buyer of
foreign currency to fill up and sign an § 4511N.7 Additional requirement
application form, which shall contain the FXDs/MCs shall require an accomplished
following minimum data and information: application form and submission/
a. For individual customers - presentation of supporting documents listed
(1) Date; in Item “D” of Appendix N-8 for the sale of
(2) Printed name and signature of foreign exchange in the amount exceeding
customer; US$10,000 or its equivalent for non-trade
(3) Present address; current account purposes. For the sale of
(4) Permanent address; foreign exchange for all other purposes,
(5) Date and place of birth; FXDs/MCs shall require submission of an
(6) Telephone number; accomplished application form and
(7) Nationality; supporting documents listed in Items “B”,
(8) Amount and currency sold/ “C” and “D” of Appendix N-8, regardless
purchased in words and figures; and of the amount involved.
(9) Source of foreign currency/ies or (As amended by Circular No. 652 dated 05 May 2009)
purpose of purchase
b. For corporate/juridical customers - § 4511N.8 Requirements for remittance
In addition to a signed application agents. RAs shall maintain accurate and
containing the applicable information in meaningful originator information on funds
Item “a” above, photocopies of the following transferred/remitted by requiring the sender/
documents shall be required: remitter to fill up and sign an application
(1) Articles of incorporation/ form, which shall contain the following
partnership; minimum data and information:
(2) By-Laws; a. For individual customers -
(3) Official address or principal (1) Date;
business address; (2) Printed name and signature of
(4) List of directors/partners/principal remitter;
stockholders; and (3) Present address;

Page 38
§§ 4511N.8 - 4601N.1
11.12.31
(4) Permanent address; § 4511N.15 Sanctions. Monetary

(5) Date and place of birth; penalties and other sanctions for the
(6) Telephone number; following violations committed by erring
(7) Nationality; FXDs/MCs and RAs may be imposed:
(8) Amount and currency to be
remitted; Nature of Violation/ Sanctions/Penalties
(9) Source of foreign currency; and Exception
(10) Name of and relationship with a. Operating without Applicable penalties
beneficiary/ies. prior BSP under Section 36 of
registration R.A. No. 7653;
b. For corporate/juridical customers
Watchlisting of
In addition to a signed application partners/principal
containing the applicable information officers
in Item "a", a photocopy of the authority b. Violation of any of Applicable penalty
and identification of the person the provisions of prescribed under
purporting to act in behalf of the client R.A. No. 9160, as the Act
shall be required. amended and its
As a means of further identification, RAs IRR
shall require the presentation of a c. Other violations of Penalties and sanctions
government-issued identification document the provisions/ which may be
requirements in imposed by the
such as SSS/GSIS/voter’s ID, driver’s license
this Section AMLC
or passport.
For purposes of compliance with the
§ 4511N.16 Industry association
requirements, an RA may rely on the
Membership in an existing association of
referral of its office/correspondent bank
BSP-registered FXDs/MCs as well as RAs is
abroad: Provided, That the RA maintains a
encouraged.
record of such referral together with the
minimum identification, information
documents required under the law and its
implementing rules and regulations.
Sec. 4601N Fines and Other Charges. The
following regulations shall govern
§ 4511N.9 Anti-Money Laundering
imposition of monetary penalties on NBFIs,
Council Reportorial Requirements. FXDs/
their directors and/or officers and the
MCs and RAs are required to submit to the
payment of such penalties or fines and other
AMLC a report on covered transactions and
charges by these entities.
suspicious transactions in accordance with
(Circular No. 585 dated 15 October 2007)
the applicable provisions of Part 8 of Q
Regulations.
§ 4601N.1 Guidelines on the imposition
(As amended by Circular No. 706 dated 05 January 2011)
of monetary penalties; payment of
penalties or fines. The following are the
§ 4511N.10 - 4511N.14 (Reserved) guidelines on the imposition of monetary

Page 39
§ 4601N.1
09.12.31
penalties on NBFIs, their directors and/or offenses/violations on a per calendar day

officers and the payment of such penalties basis reckoned from the time the offense/
or fines and other charges by these violation occurred or was committed until
entities: the same was corrected/rectified.
a. Definition of terms. For purposes of (4) Transactional penalty refers to a one
the imposition of monetary penalties, the (1)-time penalty imposed on a transactional
following definitions are adopted: offense/violation.
(1) Continuing offenses/violations are b. Basis for the computation of the
acts, omissions or transactions entered into, period or duration of penalty. The
in violation of laws, BSP rules and computation of the period or duration of all
regulations, Monetary Board directives, and penalties shall be based on calendar days.
orders of the Governor which persist from For this purpose the terms “per banking
the time the particular acts were committed day”, “per business day”, “per day” and/or
or omitted or the transactions were entered “a day” as used in this Manual, and other
into until the same were corrected/rectified BSP rules and regulations shall mean “per
by subsequent acts or transactions. They calendar day” and/or “calendar day” as the
shall be penalized on a per calendar day case may be.
basis from the time the acts were committed/ c. Additional charge for late payment
omitted or the transactions were effected of monetary penalty. Late payment of
up to the time they were corrected/ monetary penalty shall be subject to an
rectified. additional charge of six percent (6%) per
(2) Transactional offenses/violations are annum to be reckoned from the business
acts, omissions or transactions entered into day immediately following the day said
in violation of laws, BSP rules and penalty becomes due and payable up to the
regulations, Monetary Board directives, and day of actual payment. The penalty approved
orders of the Governor which cannot be by the Governor/MB to be imposed on the
corrected/rectified by subsequent acts or NBFI, its directors and/or officers shall
transactions. They shall be meted with one become due and payable fifteen (15)
(1)-time monetary penalty on a per calendar days from receipt of the Statement
transaction basis. of Account from the BSP. For banks which
(3)Continuing penalty refers to the maintain DDA with the BSP, penalties
monetary penalty imposed on continuing which remain unpaid after the lapse of the

Page 40
§§ 4601N.1 - 4642N.2
09.12.31
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:

Page 41
§§ 4642N.2 - 4642N.4
09.12.31
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

Page 42
§ 4642N.4
09.12.31
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)

Page 43
§§ 4642N.5 - 4650N
15.12.31
§ 4642N.5 Quasi-bank license signed by the President or Officer with

requirement. EMI-NBFIs and EMI-Others that equivalent rank and function that it is in
engage in lending activities must secure a compliance with all the applicable
quasi-banking license from the Bangko Sentral. requirements of this Section. Otherwise,
(Circular No. 649 dated 09 March 2009) they are required to submit within the same
period the measures they will undertake, with
§ 4642P.6 Sanctions. Monetary the corresponding timelines, to conform to the
penalties and other sanctions for the provisions that they have not complied with
following violations committed by EMI- subject to Bangko Sentral approval.
NBFIs shall be imposed: (Circular No. 649 dated 09 March 2009)
Nature of Violation/ Sanction/Penalties

Exception §§ 4642N.8 - 4642N.10 (Reserved)
1. Issuing e-money Applicable penalties
without prior Bangko under Sections 36 & § 4642N.11 Outsourcing of services by
Sentral approval 37 of R.A. No. 7653; Electronic Money Issuers (EMIs) to
Watchlisting of Electronic Money Network Service
owners/partners/ Providers (EMNSP). The guidelines on
principal officers outsourcing of services by EMIs to EMNSP
2. Violation of any Applicable penalties are shown in Appendix Q-55.
of the provisions of prescribed under
Sanctions. Violations committed by
R.A. No. 9160 (Anti- the Act
EMIs pertaining to outsourcing activities to
Money Laundering
Law of 2001 as EMNSP shall be subject to monetary
amended by R.A.No. penalties as graduated under Appendix
9194) and its Q-39 and/or other non-monetary sanction
implementing rules under Section 37 of RA No. 7653.
and regulations Transitory provisions. EMIs that were
3. Violation/s of Penalties and sanctions granted an authority to outsource their
this Section under the e-money activities to an EMNSP may
abovementioned laws continue to exercise such authority provided
and other applicable
that they have to conform to the provisions
laws, rules and
of Appendix Q-55 within a six (6)-month
regulations
In addition, the susceptibility of a system period from 20 January 2011.
(Circular 704 dated 22 December 2010)
to intentional or unintentional misreporting
of transactions and balances shall be
sufficient ground for appropriate Bangko Secs. 4643N - 4649N (Reserved)
Sentral action or imposition of sanctions,
whenever applicable. Sec. 4650N Philippine and Foreign
(Circular No. 649 dated 09 March 2009) Currency Notes and Coins. The rules and
regulations that shall govern the treatment
§ 4642N.7 Transitory provisions. An and disposition of counterfeit Philippine and
EMI-NBFI and EMI-Other granted an foreign currency notes and coins, the
authority to issue e-money prior to 26 March reproduction and/or use of facsimiles of
2009 may continue to exercise such legal tender Philippine currency notes and
authority: Provided, That it shall submit to coins, the replacement and redemption of
the Bangko Sentral, within one (1) month legal tender Philippine currency notes and
from the 26 March 2009 a certification coins considered mutilated or unfit for

Page 44
§§ 4650N - 4700N
15.12.31
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
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
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)

Page 45
§§4701N - 4701N.2
15.12.31
A. CONSUMER PROTECTION Framework and the BSFI’s own Consumer

Protection Framework.
OVERSIGHT FUNCTION
Section 4701N Consumer Protection
Oversight Function. The Board of Directors §4701N.2 Consumer protection risk
(Board) of BSFIs is ultimately responsible in management system (CPRMS).
ensuring that consumer protection practices All BSFIs, regardless of size, should have a
are embedded in the BSFI’s business CPRMS that is part of the corporate-wide
operations. BSFIs must adhere to the highest Risk Management System. The CPRMS is a
service standards and embrace a culture of means by which a BSFI identifies, measures,
fair and responsible dealings in the conduct monitors, and controls consumer protection
of their business through the adoption of a risks inherent in its operations. These
BSFI’s Financial Consumer Protection include both risks to the financial consumer
Framework that is appropriate to the BSFI’s and the BSFI. The CPRMS should be directly
corporate structure, operations, and risk proportionate to the BSFI’s asset size,
profile. The BSFI’s Financial Consumer structure, and complexity of operation. A
Protection Framework shall be embodied in carefully devised, implemented, and
its Board-approved Financial Consumer monitored CPRMS provides the foundation
Protection Manual. for ensuring an BSFI’s adherence to
(Circular No. 857 dated 21 November 2014, as amended by consumer protection standards of conduct
Circular No. 890 dated 02 November 2015) and compliance with consumer protection
laws, rules and regulations, thus ensuring
§4701N.1 Role and responsibility of that the BSFI’s consumer protection practices
the board and senior management. The address and prevent identified risks to the
board and senior management are BSFI and associated risk of financial harm
responsible for developing the BSFI’s or loss to consumers.
consumer protection strategy and a. Board and senior management
establishing an effective oversight over the oversight. The Board is responsible for
BSFI’s consumer protection programs. The developing and maintaining a sound CPRMS
Board shall be primarily responsible for that is integrated into the overall framework
approving and overseeing the for the entire product and service life-cycle.
implementation of the BSFI’s consumer The Board and Senior Management should
protection policies as well as the periodically review the effectiveness of the
mechanism to ensure compliance with said CPRMS, including how findings are reported
policies. While senior management is and whether the audit mechanisms in place
responsible for the implementation of the enable adequate oversight. The quality and
consumer protection policies approved by timeliness of the information provided to the
the Board, the latter shall be responsible for Board and Senior Management regarding
monitoring and overseeing the performance the BSFI’s CPRMS are especially important
of senior management in managing the day for assessing the program’s effectiveness.
to day consumer protection activities of the The Board and Senior Management must
BSFI. The Board may also delegate other also ensure that sufficient resources have
duties and responsibilities to senior been devoted to the program. The ability to
management and/or Committees created for achieve the consumer protection objectives
the purpose but not the function of depends, in large part, on the authority and
overseeing compliance with the independence of the individuals directly
BSP-prescribed Consumer Protection responsible for implementing the CPRMS

Part 45a
§ 4701N.2
15.12.31
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)

Page 45b
§ 4702N.1
15.12.31
§4702N.1 Disclosure and transparency. understandable, accurate, and presented in

BSFIs must take affirmative action to ensure a manner that facilitates the consumer’s
that their consumers have a reasonable comprehension. The latter is taken to mean
holistic understanding of the products and that the text of the document should be
services, which they may be acquiring or according to Subsec. 4320Q.4 (Amended
availing. In this context, full disclosure and Regulations to Enhance Consumer
utmost transparency are the critical elements Protection in the Credit Card Operations of
that empower the consumer to make Banks and Their Subsidiary or Affiliate
informed financial decisions. This is made Credit Card Companies).
possible by providing the consumer with The T&C should include at least the
ready access to information that accurately following:
represents the nature and structure of the (a) The full price or cost to the customer
product or service, its terms and conditions, including all interest, fees, charges, and
as well as its fundamental benefits and risks. penalties. The T&C must clearly state
The BSFI demonstrates the competencies whether interest, fees, charges, and
required of this principle if it complies with penalties can change over time. The method
the following: for computing said interest, fees, charges,
a. Key information and penalties shall be presented in
(1) Ensures that offering documents of accordance with Subsec. 4301N.6;
products and services contain the (b) General information about the
information necessary for customers to be operation of the products or services
able to make an informed judgment of the including the customer’s obligations and
product or service and, in particular, meet liabilities;
the full disclosure requirements specified (c) Cooling-off period, if applicable;
under existing laws or regulations. All key (d) Cancellation, return and exchange
features and risks of the products should be policies, and any related cost;
highlighted prominently in a succinct (e) The actions and remedies which the
manner. Where a product is being offered BSFI may take in the event of a default by
on a continuous basis, its offering the customer;
documents should be updated in (f) Procedures to report unauthorized
accordance with the requirements set out transactions and other contingencies, as well
in the regulations. as the liabilities of parties in such case; and
(2) Readily and consistently makes (g) A summary of the BSFI’s complaints
available to the customer a written copy of handling procedure.
the terms and conditions (T&C) that apply (3) Advises customers to read and
to a product or service. The contents of the understand the applicable T&C, when
T&C must be fully disclosed and explained considering a product or service.
to financial customers before initiating a (4) Ensures that its staff communicates
transaction. Where and when warranted, in such a manner that clients can understand
reference to the T&C should be made while the terms of the contract, their rights and
transacting with the consumer and before obligations. Staff should communicate with
consummating the transaction, if such techniques that address literacy limitations
reference is material to the understanding (e.g., materials are available in local language).
of the consumer of the nature of the product (5) Provides customers adequate time to
or service, as well as its benefits and risks. review the T&C of the product or service,
As a written document, the T&C must asks questions and receives additional
be complete but concise, easily information prior to signing contracts or

Page 45c
§ 4702N.1
15.12.31
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

Page 45d
§§4702N.1 - 4702N.2
15.12.31
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
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

Page 45e
§ 4702N.2
15.12.31
organization. Opportunities include security standards for handling customer

employees’ initial training sessions, regular information.
organization-wide training programs, (c) Limiting access to customer
employee handbooks, posters and posted information to employees who have a
signs, company intranet and internet business reason to see it.
websites, and brochures available to (d) Controlling access to sensitive
clients. information by requiring employees to use
(3) Have appropriate systems in place “strong” passwords that must be changed
to protect the confidentiality and security of on a regular basis.
the personal data of its customers against (e) Using automatic time-out or log-off
any threat or hazard to the security or controls to lock employee computers after
integrity of the information and against a period of inactivity.
unauthorized access. This includes a (f) Training employees to take basic
written information security plan that steps to maintain the security,
describes its program to protect customer confidentiality, and integrity of customer
personal information. The plan must be information. These may include locking
appropriate to its size and complexity, nature rooms and file cabinets where records are
and scope of its activities, and the sensitivity kept; ensuring that employee passwords are
of customer information it handles. As part not posted in work areas; encrypting
of its plan, the BSFI must: sensitive customer information when
(a) Designate employee accountable to transmitted electronically via public
coordinate its Information Security Program. networks; referring calls or other requests
(b) Identify and assess the risks to for customer information to designated
customer information in each relevant area individuals who have been trained in how
of the BSFI operation, and evaluate the BSFI safeguards personal data; and reporting
effectiveness of the current safeguards for suspicious attempts to obtain customer
controlling these risks. information to designated personnel.
(c) Design and implement a safeguards (g) Regularly reminding all employees
program, and regularly monitor and test it. of company policy to keep customer
(d) Select service providers that can information secured and confidential.
maintain appropriate safeguards. (h) Imposing strong disciplinary
(e) Evaluate and adjust the program in measures for security policy violations.
light of relevant circumstances, including (i) Preventing terminated employees
changes in the firm’s business or operations, from accessing customer information by
or the results of security testing and immediately deactivating their passwords
monitoring. and user names and taking other measures.
(4) Have appropriate policies and (5) Have a strong IT System in place to
practices for employee management and protect the confidentiality, security,
training to assess and address the risks to accuracy, and integrity of customer’s
customer information. These include: personal information. This includes
(a) Checking references and doing network and software design, and
background checks before hiring employees information processing, storage,
who will have access to customer transmission, retrieval, and disposal.
information. Maintaining security throughout the life-
(b) Asking new employees to sign an cycle of customer information, from data
agreement to follow BSFI confidentiality and entry to disposal, includes:

Page 45f
§§ 4702N.2 - 4702N.3
16.03.31
(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
(1) Inform its customers in writing and product 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. 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.

Page 45g
§ 4702N.3
16.03.31
(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

Page 45h
§ 4702N.3
16.03.31
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
statements that are untrue or omitting in the Code. To ensure adherence to the
information which are necessary to prevent Code, the BSFI is required to implement
the statement from being false or misleading. measures to determine whether the
(2) Present a balanced view when selling principles of consumer protection are
a product or service. While the BSFI highlights observed, the clients’ concerns are
the advantages of a product/service, the appropriately addressed and problems are
customer’s attention should also be drawn to resolved in a timely manner. These may
its disadvantages and downside risks. include among others, the regular conduct
(3) Ensure that recommendations made of customer 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
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 training in acceptable debt collection
suitability and affordability are assessed practices and loan recovery procedures.
against specific risks of the investment (5) Strictly comply with Bangko
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

Page 45i
§§ 4702N.3 - 4702N.4
16.03.31
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. 898 dated 14 January 2016 and 890 dated
customers as part of staff performance
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.

Page 45j
§§ 4702N.4 - 4702N.5
15.12.31
f. Provide for adequate resources to Financial education programs should be

handle financial consumer complaints designed to meet the needs and financial
efficiently and effectively. Staff handling literacy level of target audiences, as well as
complaints should have appropriate those that will reflect how target audience
experience, knowledge, and expertise. prefers to receive financial information.
Depending on the BSFI’s size and These may include:
complexity of operation, a Senior staff (1) Delivering public awareness
member should be appointed to be in campaigns and information resources that
charge of the complaint handling process. would teach consumers on certain aspects
of their financial lives particularly, budgeting,
financial planning, saving, investing,
borrowing, retirement planning, and self-
§4702N.5 Financial education and
protection against fraud.
awareness. Financial education initiatives
give consumers the knowledge, skills, and (2) Developing financial education tools
confidence to understand and evaluate the or information materials that are updated
information they receive and empower them and readily understood and transparent such
to make informed financial decisions. as customized advice and guidance (face to
Because BSFIs deal directly with financial face training); printed brochures, flyers,
consumers, they have the reach, expertise, posters, training videos (e.g., about money
and established relationships necessary to management, debt management, saving),
deliver financial education. Financial and newsletters; websites, and interactive
education should be integral to the good calculators that deliver key messages and
governance of the BSFIs. “call to action” concerning better money
The BSFI demonstrates this principle management (e.g., protect your money,
through various means and in particular: know your product, read and understand
a. Have a clear and defined financial the T&C, check your statements, pay credit
education and awareness program as part card bills on time, safeguard your Personal
of a wider financial consumer protection Identification Number, understand fees and
and education strategy and corporate charges) and consumer responsibility to ask
governance. It is an integral component of the right questions.
the BSFI’s ongoing interaction and (3) Distributing to customers, at the point
relationship with clients. Dedicated and of sale, a pamphlet on questions, which
adequate resources should be provided for
customers need to ask before accepting a
the financial education initiatives.
financial product or service.
b. Develop financial education and
c. Clearly distinguish between financial
awareness programs, either on their own
or in partnership or collaboration with education from commercial advice. Any
industry associations, which contribute to financial advice for business purposes
the improvement of their clients’ knowledge should be transparent. Disclose clearly any
and understanding of their rights and commercial nature where it is also being
responsibilities, basic information and risks promoted as a financial education initiative.
of financial products and services, and It should train staff on financial education
ability to make informed financial decisions and develop codes of conduct for the
and participate in economic activities. provision of general advice about

Page 45k
§§ 4702N.5 - 4703N
15.12.31
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
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
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.

Page 45l
§ § 4703N - 4900N
15.12.31
Composite Rating
Numerical 4 3 2 1
Rating
Rating
concern monitoring
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

appropriate; Secs. 4704N- 4799N (Reserved)

Page 45m
§§ 4901N - 4999N
15.10.31
TRUST CORPORATION
(Stand-Alone Trust)
Sections 4901N - 4999N (Reserved)

(Superseded by Circular No. 884 dated 22 July 2015)

Page 46
APP. N-1
15.10.31
LIST OF REPORTS REQUIRED FROM NON-BANK FINANCIAL INSTITUTIONS

(Appendix to Sec. 4162N)
A-1 4162N Report on Financial Assets Designated/ Monthly 15 business days after end of SDC
(Cir. No. Mandatorily Measured at Fair Value reference month
708 dated Through Profit or Loss
01.10.11)
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
Supplementary Report on Early Adoption of Monthly 15 business days after

PFRS 9 end of reference month
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)
BSP-7-26-03B Consolidated Statement of Income and -do- -do- -do-

Expenses (CSIE)
Control Prooflist -do- -do- SDC
Page 1 of 6
APP. N-1
15.10.31
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
Separate report for Head

Office and each Branch;
and a Consolidated
report for Head Office
and Branches
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
Separate report for Head

Office and each Branch;
and a Consolidated
Report for Head Office
and Branches
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
A-2 BSP-7-26-02 4162N Schedule of Bills Payables and Bonds -do- -do- Original – Appropriate
Duplicate – SDC or
e-mail
A-2 BSP-7-26-02 4162N Data on Firm's Businesses -do- -do- Original – Appropriate
(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
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
A-2 Unnumbered (Cir. 609 - Balance Sheet

dated
05.26.08 - A1 to A2 Main Report
as amended
by M-2008- - B to B2 Details of Investments in Debt
022 dated and Equity Securities
06.26.08 and
Cir. 880 dated
- C to C2 Details of Loans and
05.22.15)
Receivables
- D to D2 Wealth/Assets/Fund
Management–UITF
-E Fiduciary Accounts
- E1 to E1b Other Fiduciary Services - UITF
- Income Statement Quarterly 20th business day after SDC

end of reference quarter sdcnbfi-
Control Prooflist frpti@bsp.gov.ph
- 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
4109N.16 Waiver of the Confidentiality of Information As

under Sections 2 and 3 of R.A. No. 1405, transaction
as amended occurs
Page 4 of 6
APP. N-1
16.03.31
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
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
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

(Appendix to Subsec. 4162N.1)
Category A-2 reports of head offices Category B reports shall be signed by

shall be signed by the president, executive officers or their alternates, who shall be
vice-presidents, vice-presidents or officers duly designated in a resolution approved
holding equivalent positions. Such reports by the board of directors in the format as
of other offices/units (such as branches) prescribed in Annex N-2-b.
shall be signed by their respective Copies of the board resolutions on the
managers/officers in-charge. Likewise, the report signatory designations shall be
signing authority in this category shall be submitted to the appropriate supervising
contained in a resolution approved by the and examining department of the BSP
board of directors in the format prescribed within three (3) days from the date of
in Annex N-2-a. resolution.

Appendix N-2 - Page 1
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;
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
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;
resolved that:
Name of Specimen Position Report
Officer Signature Title No.
are hereby authorized to sign the Category A-2 reports of _______________________________.

(Name of Institution)
Done in the City of ___________, Philippines, this _____ day of __________, 20__ .
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY

APP. N-2
08.12.31
Annex N-2-b
FORMAT OF RESOLUTION FOR SIGNATORIES OF CATEGORY B REPORTS
Whereas, it is required under Subsec. 4162N.1 that Category B reports be signed by

officers or their alternates;
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 B reports, we are
Whereas, this Board has full faith and confidence in the institution’s authorized signatories
resolved that:
Name of Authorized Specimen Position Report
Signatory/Alternate Signature Title No.
1. Authorized
(Alternate)
2. Authorized
(Alternate)
etc.
are hereby authorized to sign the Category B reports of _______________________________.

(Name of Institution)
Done in the City of __________, Philippines, this ____ day of ____________, 20__ .
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
DIRECTOR DIRECTOR
ATTESTED BY:
CORPORATE SECRETARY

APP. N-3
11.12.31

(Appendix to Section 4104N)
(Deleted pursuant to Circular No. 706 date 05 January 2011)

APP. N-3
11.12..31
Annex N-3-a
CERTIFICATION OF COMPLIANCE WITH


Annex N-3-a Page 2
APP. N-3
11.12.31
Annex N-3-b

SUSPICIOUS TRANSACTION REPORTS BY COVERED INSTITUTIONS

APP. N-4
11.12.31


APP. N-5
09.12.31

(Appendix to Secs. 4180N and 4190N)

950 dated 02 July 2009, 2. Category B
approved the following revised rules and a. TBs;
regulations that shall govern the selection b. QBs;
and delisting by the BSP of covered c. Trust department of qualified banks
institution which under special laws are and other trust entities;
subject to BSP supervision. d. National Coop Banks; and

APP. N-5
09.12.31

the purpose of expressing an opinion on a. Mathematical or clerical mistakes
such statements. in the underlying records and accounting
2. Non-audit services – any data;
professional services provided to the b. Oversight or misinterpretation of
covered institution by an external auditor, facts; or
other than those provided to a covered c. Unintentional misapplication of
institution in connection with an audit or a accounting policies.
review of the financial statements of said 6. Gross negligence - wanton or
covered institution. reckless disregard of the duty of due care in
3. Professional Standards - includes: complying with generally accepted auditing
(a) accounting principles that are standards.
(1) established by the standard setting body; 7. Material fact/information - any fact/
and (2) relevant to audit reports for particular information that could result in a change in
issuers, or dealt with in the quality control the market price or value of any of the
system of a particular registered public issuer’s securities, or would potentially affect
accounting firm; and (b) auditing standards, the investment decision of an investor.
standards for attestation engagements, 8. Subsidiary - a corporation or firm
quality control policies and procedures, more than fifty percent (50%) of the
ethical and competency standards, and outstanding voting stock of which is directly
independence standards that the BSP or SEC or indirectly owned, controlled or held with
determines (1) relate to the preparation or power to vote by a bank, QB, trust entity or
issuance of audit reports for issuers; and NSSLA.
(2) are established or adopted by the BSP or 9. Affiliate - a corporation, not more
promulgated as SEC rules. than fifty percent (50%) but not less than
4. Fraud – an intentional act by one (1) ten percent (10%) of the outstanding
or more individuals among management, voting stock of which is directly or
employees, or third parties that results in a indirectly owned, controlled or held with
misrepresentation of financial statements, power to vote by a bank, QB, trust entity
which will reduce the consolidated total or NSSLA and a juridical person that is
assets of the company by five percent (5%). under common control with the bank,
It may involve: QB, trust entity or NSSLA.
effects of transactions from records or be clearly demonstrated that such
documents; ownership does not constitute control.

APP. N-5
09.12.31
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,

APP. N-5
09.12.31
or lack thereof, on such statements which 6. The selection of external auditors

he has audited/examined. and/or auditing firm shall be valid for a
4. The BSP shall not be liable for any period of three (3) years. The SES shall make
damage or loss that may arise from its an annual assessment of the performance
selection of the external auditors and/or of external auditors and/or auditing firm and
auditing firm to be engaged by banks for will recommend deletion from the list even
regular audit or non-audit services. prior to the three (3)-year renewal period, if
5. Pursuant to paragraph (5) of the based on assessment, the external auditors’
MOA, SEC, BSP and IC shall mutually report did not comply with BSP
recognize the accreditation granted by any requirements.
of them for external auditors and firms of
Group C or D companies under SEC, E. QUALIFICATION REQUIREMENT
Category B and C under BSP, and The following qualification requirements
insurance brokers under IC. Once are required to be met by the individual
accredited/selected by any one (1) of external auditor and the auditing firm at the
them, the above-mentioned special time of application and on continuing basis,
requirements shall no longer be prescribed subject to BSP’s provisions on the delisting
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 in-charge of the auditing firm must have at
which are listed in the Exchange, should least five (5) years of audit experience.
be selected/accredited by both the BSP (2) Auditor’s independence.
and SEC, respectively; and In addition to the basic screening
b. For insurance companies and procedures of BOA on evaluating auditor’s
banks that are not listed in the Exchange, independence, the following are required
their external auditors must each be for BSP purposes to be submitted in the form
selected/accredited by BSP or IC, of notarized certification that:
respectively. For purposes of submission (a) No external auditor may be engaged
to the SEC, the financial statements shall by any of the covered institutions under Item
be at least audited by an external auditor "B" hereof if he or any member of his
registered/accredited with BOA. immediate family had or has committed to
that for banks and its subsidiary and or if his independence is considered
affiliate bank, QBs, trust entities, NSSLAs, impaired under the circumstances specified
their subsidiaries and affiliates engaged in in the Code of Professional Ethics for CPAs.
allied activities and other FIs which under In case of a partnership, this limitation shall
special laws are subject to BSP apply to the partners, associates and the
consolidated supervision, the individual auditor-in-charge of the engagement and
and consolidated financial statements members of their immediate family;
thereof shall be audited by only one (1) (b) The external auditor does not have/
external auditor/auditing firm. shall not have outstanding loans or any

APP. N-5
09.12.31
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

APP. N-5
09.12.31
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

APP. N-5
09.12.31
association duly recognized/accredited by and procedures, specialized quality

the BSP, SEC or by the BOA/PRC through a assurance procedures should be provided
CPE Council which they may set up. relative to, among others review asset
The application for initial or renewal quality, adequacy of risk-based capital, risk
accreditation of an external auditor shall be management systems and corporate
accomplished by a fee of P2,000.00. governance framework of covered entities;
e. Copy of the latest AFS of the
G. APPLICATION FOR AND/OR applicant’s two (2) largest clients in terms
RENEWAL OF THE SELECTION OF of total assets; and
AUDITING FIRMS f. Copy of firm’s AFS for the
1. The initial application shall be immediately preceding two (2) years.
signed by the managing partner of the 2. Subject to BSP’s provision on early
auditing firm and shall be submitted to deletion from the list of selected auditing
the appropriate department of the SES firm, the selection may be renewed within
together with the following documents/ two (2) months before the expiration of the
information: three (3)-year effectivity of the selection upon
a. copy of effective and valid BOA submission of the written application for
Certificate of Accreditation with attachment renewal to the appropriate department of the
listing the names of qualified partners; SES together with the following documents/
b. notarized certification that the firm information:
is in compliance with the general a. a copy of updated BOA Certificate
qualification requirements under Item "E.2" of Registration with the attached list of
and that the firm shall keep an audit or qualified partner/s of the firm;
review working papers for at least seven b. amendments on Quality Assurance
(7) years insufficient detail to support the Manual, inclusive of written explanation on
conclusions in the audit report and making such revision, if any; and
them available to the BSP’s authorized c. notarized certification that the firm
representative/s when required to do so; is in compliance with the general
c. copy of audit work program which qualification requirements under Item
shall include assessment of the audited "G.1.b" hereof;
institution’s compliance with BSP rules and The application for initial or renewal
regulations, such as, but not limited to the accreditation of an auditing firm shall be
following; accompanied by a fee of P5,000.00.
(1) capital adequacy ratio, as currently
prescribed by the BSP; H. REPORTORIAL REQUIREMENTS
(2) AMLA framework; 1. To enable the BSP to take timely and
(3) risk management system, appropriate remedial action, the external
particularly liquidity and market risks; and auditor and/or auditing firm must report to
(4) loans and other risk assets review the BSP within thirty (30) calendar days after
and classification, as currently prescribed discovery, the following cases:
by the BSP rules and regulations. a. Any material finding involving fraud
d. If the applicant firm will have or dishonesty (including cases that were
clients falling under Category A, copy resolved during the period of audit);
Quality Assurance Manual where, aside b. Any potential losses the aggregate of
from the basic elements as required under which amounts to at least one percent (1%)
the BOA basic quality assurance policies of the capital;

APP. N-5
09.12.31
c. Any finding to the effect that the management is involved in fraudulent

consolidated assets of the company, on a conduct.
going concern basis, are no longer It is, however, understood that the
adequate to cover the total claims of accountability of an external auditor/
creditors; and auditing firm is based on matters within the
d. Material internal control normal coverage of an audit conducted in
weaknesses which may lead to financial accordance with generally accepted
reporting problems. auditing standards and identified non-audit
2. The external auditor/auditing firm services.
shall report directly to the BSP within fifteen
(15) calendar days from the occurrence of I. DELISTING AND SUSPENSION OF
the following: SELECTED EXTERNAL AUDITOR/
a. Termination or resignation as AUDITING FIRM
external auditor and stating the reason 1. An external auditor’s duly selected
therefor; pursuant to this regulation shall be
b. Discovery of a material breach of suspended or delisted, in a manner
laws or BSP rules and regulations such as, provided under this regulation, under any
but not limited to: of the following grounds:
(1) CAR; and a. Failure to submit the report under
(2) Loans and other risk assets review Item "H" of this Appendix or the required
and classification. reports under Subsec. X190.1;
c. Findings on matters of corporate b. Continuous conduct of audit despite
governance that may require urgent action loss of independence as provided under
by the BSP. Item "E.1" or contrary to the requirements
3. In case there are no matters to under the Code of Professional Ethics;
report (e.g. fraud, dishonesty, breach of c. Any willful misrepresentation in the
laws, etc.) the external auditor/auditing following information/documents;
firm shall submit directly to BSP within (1) application and renewal for
fifteen (15) calendar days after the closing accreditation;
of the audit engagement a notarized (2) report required under Item "H"; and
certification that there is none to report. (3) Notarized certification of the
The management of the covered external auditor and/or auditing firm.
institutions, including its subsidiaries and d. The BOA found that, after due
affiliates, shall be informed of the adverse notice and hearing, the external auditor
findings and the report of the external committed an act discreditable to the
auditor/auditing firm to the BSP shall profession as specified in the Code of
include pertinent explanation and/or Professional Ethics for CPAs. In this case,
corrective action. the BOA shall inform the BSP of the results
The management of the covered thereof;
institutions, including its subsidiaries and e. Declaration of conviction by a
affiliates, shall be given the opportunity competent court of a crime involving moral
to be present in the discussions between turpitude, fraud (as defined in the Revised
the BSP and the external auditor/auditing Penal Code), or declaration of liability for
firm regarding the audit findings, except violation of the banking laws, rules and
in circumstances where the external regulation, the Corporation Code of the
auditor believes that the entity’s Philippines, the Securities Regulation Code

APP. N-5
09.12.31
(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
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;

APP. N-5
09.12.31
(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

APP. N-5
09.12.31
(2) Such person or auditor has K. AUDIT BY THE BOARD OF

reasonably discharged the duties and DIRECTORS
obligations incumbent upon that person by Pursuant to Section 58 of RA. No.
reason of such procedures and system, and 8791, otherwise known as “The General
had no reasonable cause to believe that such Banking Law of 2000” the Monetary Board
procedures and system were not being may also direct the board of directors of a
complied with. covered institution or the individual
f. The BSP shall discipline any members thereof, to conduct, either
selected external auditor that is suspended personally or by a committee created by
or delisted from being associated with any the board, an annual balance sheet audit
selected auditing firm, or for any selected of the covered institution to review the
auditing firm that knew, or in the exercise internal audit and the internal control
or reasonable care should have known, system of the concerned entity and to
of the suspension or delisting of any submit a report of such audit to the
selected external auditor, to permit such Monetary Board within thirty (30) calendar
association, without the consent of the days after the conclusion thereof.
Monetary Board.
g. The BSP shall discipline any L. AUDIT ENGAGEMENT
covered institution that knew or in the Covered institutions shall submit the
exercise of reasonable care should have audit engagement contract between them,
known, of the suspension or delisting of its their subsidiaries and affiliates and the
external auditor or auditing firm, without external auditor/auditing firm to the
the consent of the Monetary Board. appropriate department of the SES within
h. The BSP shall establish for fifteen (15) calendar days from signing
appropriate cases an expedited procedure thereof. Said contract shall include the
for consideration and determination of the following provisions:
question of the duration of stay of any such 1. That the covered institution shall
disciplinary action pending review of any be responsible for keeping the auditor fully
disciplinary action of the BSP under this informed of existing and subsequent
Section. changes to prudential regulatory and
statutory requirements of the BSP and that
J. SPECIFIC REVIEW both parties shall comply with said
When warranted by supervisory requirements;
concern, the Monetary Board may, at the 2. That disclosure of information by
expense of the covered institution require the external auditor/auditing firm to the
the external auditor and/or auditing firm to BSP as required under Items “H” and “J”
undertake a specific review of a particular hereof, shall be allowed; and
aspect of the operations of these institutions. 3. That both parties shall comply
The report shall be submitted to the BSP with all the requirements under this
and the audited institution simultaneously, Appendix.
within thirty (30) calendar days after the (As amended by Circular No. 660 dated 25 August 2009)
conclusion of said review.

APP. N-6
08.12.31
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
A bank/NBFI applying for accreditation include among its powers or purposes,

to act as trustee on any mortgage or bond acting as trustee or administering any trust
issued by any municipality, government- or holding property in trust or on deposit
owned or controlled corporation, or any for the use, or in behalf of others;
body politic must comply with the f. The by-laws of the institution shall
following requirements: include among others, provisions on the
a. It must be a bank or NBFI under following:
BSP supervision; (1) The organization plan or structure
b. It must have a license to engage in of the department, office or unit which shall
trust and other fiduciary business; conduct the trust and other fiduciary
c. It must have complied with the business of the institution;
minimum capital accounts required (2) The creation of a trust committee,
under existing regulations, as follows: the appointment of a trust officer and
subordinate officers of the trust department;
UBs and KBs The amount required and
under existing regulations (3) A clear definition of the duties and
or such amount as may be responsibilities as well as the line and staff
required by the Monetary functional relationships of the various units,
Board in the future officers and staff within the organization.
g. The bank’s operation during the
Branches of The amount required under preceding calendar year and for the period
Foreign Banks existing regulations immediately preceding the date of
application has been profitable;
Thrift Banks P650.0 million or such h. It has not incurred net weekly
amounts as may be reserve deficiencies during the eight (8)
required by the Monetary weeks period immediately preceding the
Board in the future date of application;
i. It has generally complied with
NBFIs Adjusted capital of at least banking laws, rules and regulations, orders
P300.0 million or such or instructions of the Monetary Board and/
amount as may be required or BSP Management in the last two
by the Monetary Board in preceding examinations prior to the date
the future. of application, particularly on the following:
(1) election of at least two (2)
d. Its risk-based capital adequacy ratio independent directors;
is not lower than twelve percent (12%) at (2) attendance by every member of the
the time of filing the application; board of directors in a special seminar for
e. The articles of incorporation or board of directors conducted or accredited
governing charter of the institution shall by the BSP;

APP. N-6
08.12.31
(3) the ceilings on credit l. It has established a risk management

accommodations to DOSRI; system appropriate to its operations
(4) liquidity floor requirements for characterized by clear delineation of
government deposits; responsibility for risk management, adequate
(5) single borrower’s loan limit; and risk measurement systems, appropriately
(6) investment in bank premises and structured risk limits, effective internal
other fixed assets. controls and complete, timely and efficient
j. It maintains adequate provisions risk reporting system;
for probable losses commensurate to the m. It has a CAMELS Composite Rating of
quality of its assets portfolio but not lower at least "3" in the last regular examination with
than the required valuation reserves as management rating of not lower than "3"; and
determined by the BSP; n. It is a member of the PDIC in good
k. It does not have float items standing (for banks only).
outstanding for more than sixty (60) Compliance with the foregoing as well as
calendar days in the “Due From/To Head with other requirements under existing regulations
Office/Branches/Other Offices” accounts shall be maintained up to the time the trust license
and the “Due from Bangko Sentral” is granted. A bank that fails in this respect shall
account exceeding one percent (1%) of the be required to show compliance for another test
total resources as of date of application; period of the same duration.

APP. N-7
15.10.31
FORMAT CERTIFICATION
[Appendix to Subsec. 4211N.2]
(Deleted by Circular No. 873 dated 25 March 2015)
Manual of Regulations for Non-Bank Financial Institutions Appendix N-7 - Page 1

APP. N-8
09.12.31
REGISTRATION AND OPERATIONS OF FOREIGN EXCHANGE DEALERS/

MONEY CHANGERS AND REMITTANCE AGENTS
A. Application for Registration
Name of Applicant
Address
Telephone No./Fax No.
Date
Bangko Sentral ng Pilipinas

A. Mabini St., Malate, Manila
Gentlemen:
We hereby apply for authority to act as (foreign exchange dealer/money changer or

remittance agent). We are currently engaged in this business since _____ (if applicable).
In support of this application, we submit the following documents:
• 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.
Very truly yours,
(Signature of authorized officer over printed name)
Designation

APP. N-8
09.12.31
B. Deed of Undertaking
Name of Applicant
Address
Telephone No./Fax No.
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.
(Signature over printed name)
_________________________
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

APP. N-8
09.12.31
C. Application to Sell/Purchase Foreign Currency
___________________________________________________________
Name of Foreign Exchange Dealer/Money Changer/Remittance Agent
________________________________
Address
APPLICATION TO SELL/PURCHASE FOREIGN CURRENCY
1. Date :_________________________
2. Printed Name of Customer :_________________________
3. Signature :_________________________
4. Present Address :_________________________
5. Date and Place of Birth :_________________________
6. Telephone Number :_________________________
7. Nationality :_________________________
8. Currency Sold/Purchased : US Dollar _____ Others (specify)
9. Amount Sold/Purchased : In figures _________________

In words _________________
10. Source of Foreign Currency :_________________________
__________ OFW/Balikbayan/Returning Resident

__________ Tourist
__________ Expatriate based in the Philippines
__________ Foreign Currency Deposit Account
Holder
__________ Domestic Resident – Excess Travel
Funds
__________ Others (please specify)
11. Purpose of Purchase :__________________________

APP. N-8
09.12.31
D. Minimum Documentary Requirements for the Sale of Foreign Currencies
A. Sale of foreign exchange for non-trade current account purposes exceeding USD10,000
Purposes Documents Required

(All originals except as indicated)
1. Foreign travel funds Applicant's passport and passenger ticket
2. Educational expenses/student Photocopy of proof of enrolment with,

maintenace abroad or billing statement from, school abroad
3. Correspondence studies Photocopy of proof of enrolment with,

or billing statement from, school abroad
4. Medical Expenses Photocopy of billing statement (for services

rendered/expenses incurred abroad) or
certification issued by doctor/hospital
abroad indicating cost estimate (on the
treatment to be administered)
5. Emigrants' assets (including inheritance, a. Photocopies of:

legacies, and income from properties) i. Emigrant's visa or proof of residence
of emigrant abroad
ii. Notarized Deed of Sale covering
assets (e.g., real estate, vehicles,
machineries/equipment, etc.) and;
iii. Proof of income received from
properties in the Philippines.
b. In the absence of the emigrant, a
notarized Special Power of Attorney
(SPA) for emigrant's representative/
agent. If SPA was executed abroad,
original of SPA authenticated by
Philippine consulate abroad.
6. Salary/bonus/dividend/other benefits of a. Employment contract/Certification of

foreign expatriates (including peso employer on the amount of compensation
savings) paid to the foreign national during the
validity of the contract stating whether the
same had been paid in foreign exchange
or in pesos, and if in foreign exchange,
proof that the foreign exchange was
previously sold for pesos to AABs;
b. ACR I-Card and DOLE Alien Employment
Permit of the foreign national;

APP. N-8
09.12.31

c. Applicant's notarized certification that

the FX remitted is net of local expenses
incurred or net of previous transfers
abroad; and
d. If amount to be remitted comes from
sources other than salaries, information
regarding the sources supported by
appropriate documents should be
submitted.
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.
8. Sales proceeds of domestic assets by a. ACR I-Card; and

foreign expatriates b. Photocopy of proof of sale of asset/s.
9. Producers' share in movie revenue/TV 1. Statement of remittable share rental or

film rentals rental; and
2. Copy of contract/agreement.
10. Commissions on exports due foreign a. Billing statement from non-resident

agents agent; and
b. Photocopy of contract/agreement.
11. Freight charges on exports/imports a. Billing statement; and

12. Charters and leases of vessels/aircrafts a. Billing statement from non-resident

lessor/owner of vessel/aircraft; and
13. Port disbursements abroad for aircraft a. Billing statement; and

and vessels of Philippine registry or b. Photocopy of contract/agreement.
chartered by domestic operators and
salvage fees
14. Satellite and other telecommunication a. Billing Statement; and

services b. Photocopy of contract/agreement.
15. Other services such as advertising, a. Billing statement; and

consultancy, IT, fees for other b. Photocopy of contract/agreement.
professional services

APP. N-8
09.12.31

16. Share in head office expenses a. Audited schedules of allocation of

(including reimbursements) expenses for the periods covered;
b. Certification from the head office
that the share in head office
expenses remain unpaid and
outstanding; and
c. Audited financial statements of the
Philippine branch.
17. Insurance/Reinsurance premium due to Billings/Invoices of insurance companies/

foreign insurance companies brokers abroad.
18. Claims against domestic insurance Billings/Invoices from foreign insurer/

companies by brokers abroad reinsurer.
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
20. Royalty/Copyright/Franchise/Patent/ a. Statement/Computation of the royalty/

Licensing fees copyright/franchise/patent/licensing
fee; and
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.
22. FX obligations of Philippine credit card Summary billings

companies to international credit card
companies/non-resident merchants
23. Support of dependents abroad a. Consular certificate or its equivalent

documents to prove that the dependent
is permanently residing abroad not
earlier than one (1) year from FX
application date; and
b. Certified true copy of birth certificate,
marriage contract, adoption papers,
whichever is applicable.

APP. N-8
09.12.31

24. Subscriptions to foreign magazines or a. Billing statement

periodicals
25. Membership dues and registration fees a. Proof of membership; and

to associations abroad b. Billing statement
26. Mail fees a. Copy of contract or agreement; and

b. Billing statement
B. Sale of foreign exchange for payment of foreign/foreign currency loans, regardless of

amount

Foreign/foreign currency loan payments Billing statement from creditor.
Amounts that may be purchased shall

be limited to maturing amounts on
scheduled due dates. Remittance of FX
purchased shall coincide with the due
dates of the obligations to be serviced.
FX-selling entity shall stamp "FX SOLD",
date of sale and the amount/s sold on
the original billing statement.
Payments related to guarantees and similar

arrangements including risk take over
arrangements
Resulting FX liabilities arising from Copies of:

guarantees and similar arrangements a. Arrangements/contracts covered by the
including Risk Take Over Arrangements guarantee/similar arrangement;
(RTO) not involving foreign/FCDU loans b. Standby Letter of Credit (SLC) or
guarantee contract/agreement;
c. Proof/notice of original obligor's default
and creditor's call on the guarantee; and
d. Billing statement from the non-resident
or local bank guarantor
Payments related to Build-Operate-Transfer

and similar financing schemes with transfer
arrangements

APP. N-8
09.12.31

Regular Fees Copies of:

a. Covering arrangements/contracts;
and
b. Billing statement from private
sector project company/proponent
C. Sale of foreign exchange for capital repatriation/remittance of dividends/profits/earnings,

outward investments and residents' investments in foreign currency-denominated bonds/
notes issued by the Republic of the Philippines and other Philippine entities, regardless
of amount

1. Capital repatriation of:
a. Portfolio investments in:

i. PSE-listed securities Broker's sales invoice
ii. Peso government securities Confirmation of purchase for peso
government securities
iii. Money market instruments (MMI) Matured contract for MMI
iv. Peso bank deposits Proof of withdrawal of deposit or matured
certificate of deposit, as applicable
b. Foreign direct equity investments a. Photocopy of proof of sale or relevant

documents showing the amount to be
repatriated; in case of dissolution/
capital reduction, proof of distribution
of funds/assets such as statement of net
assets in liquidation;
b. Detailed computation of the amount
applied for in the attached format
(Attachment 2) prepared by the selling
stockholder's representative; and
c. Photocopy of pertinent audited
financial statements
2. Remittance of dividends/profits/earnings/ a. Photocopy of PSE-cash dividends notice

interests and Phil. Central Depository (PCD)
printout of cash dividend payment or
computation of interest earned issued
by MMI issuer or bank;

APP. N-8
09.12.31

b. Photocopy of secretary's sworn

statement on the board resolution
covering the dividend declaration;
c. Photocopy of latest audited financial
statements or interim financial statements
covering the dividend declaration period
(for direct foreign equity investments)
3. Residents' outward investment

a. Direct equity investments a. Photocopy of investment proposal/
agreement, or subscription agreement;
and
b. Photocopy of deed of sale or assignment
of the investments
b. Portfolio investments a. Photocopy of subscription agreement,

or bond/stock offering;
b. Swift payment order instruction from
the counterparty/broker/trader
indicating the name of payee and type
kind of investment authenticated by the
broker/trader; and
c. Photocopy of investor's order to broker/
trader to buy the securities
4. Residents' investments in FX-denominated a. Photocopy of subscription agreement or

bonds/notes issued by the Republic of the bond offering;
Philippines and other Philippine entities b. Swift payment order instruction from the
counterparty/broker/trader indicating
the name of payee and type/kind of
investment authenticated by the broker/
trader; and
c. Photocopy of investor's order to broker/
trader to buy the securties
D. Sale of foreign exchange for payment of importations, regardless of amount

Payment of merchandise imports a. Bill of lading or airway bill covering

the merchadise imports; and
b. Commercial invoice
(As amended by Circular No. 652 dated 05 May 2009)

APP. N-8
09.12.31
Attachment 2
COMPUTATION SHEET
Name of FX FXD/MC: Date of FX Sale:
TYPE OF INWARD FOREIGN INVESTMENT TRANSACTION
Remittance of Cash Dividends/Profits
Repatriation of Capital
Name of Investee Firm:
Name of Investor:
REMITTANCE OF CASH DIVIDENDS/PROFITS
Record Date:
Payment Date:
Amount of Dividends/Share
or Rate of Profits:
Base Shares (Php) Dividends/Profits per Share Total Amount (Php)
A. Gross Peso Amount Remittable

B. Less: Taxes/Charges
C. Net Peso Amount Remittable
D. Foreign Exchange Applied for
Remittance (C/FX rate1/)
REPATRIATION OF CAPITAL
Total Amount/ Outstanding Balance Amount/No. of Shares

No. of Shares Before This Repatriation Applied for Repatriation
A. Total No. of Shares/Amount Applied

For Repatriation
B. Selling Price/Share (if applicable)
C. Gross Peso Amount Repatriable (A x B)
D. Taxes/Charges
E. Net Peso Amount Repatriable (C - D)
F. Foreign Exchange Applied for
Repatriation (E/FX rate1/)
Prepared by:
Signature over Printed Name Company Affiliation of

of Authorized Representative Investor’s Representative
of Applicant
Date
1/
To be supplied by FX Selling Bank

APP. N-9
15.10.31
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
(Superseded by Circular No. 884 dated 22 July 2015 ; incorporated in Appendix T-2)

APP. N-10
14.12.31
ACTS TANTAMOUNT TO THE ACT OF ISSUING

PRE-APPROVED CREDIT CARDS
(Appendix to Subsections 4301N.1 and 4301N.3)
i. Sending of credit cards to consumers v. Sending of mails with credit card

with no prior application, written request enclosed which will be deemed accepted
and supporting documents required for upon the receipt of such card by a receiver,
prudent credit card evaluation; whether authorized or not;
ii. Sending of unsolicited supplementary vi. Sending to a consumer an unsolicited
cards and other cards with added features credit card which is deemed accepted
which are not in replacement or substitute to unless a request for termination is promptly
an existing cardholder's initial credit card; instructed by the cardholder to the credit
iii. Unsolicited calls by credit card card issuer; and
issuers requesting updated information from vii. Sending of credit cards as free offers
selected clients in order to be entitled to to consumers who availed themselves of the
receive credit card as a reward for his/her bank's other financial products.
continued patronage of the bank's other The acts described above and other
financial product; similar acts are deemed tantamount to the
iv. Unsolicited calls by the bank to its act of issuing pre-approved credit cards
depositors informing them that they already notwithstanding any contrary stipulations in
have a credit card from the bank's Credit the contract.
Card Department due to good standing as (Circular No. 845 dated 15 August 2014)
a depositor;

APP. N-11
14.12.31
BASIC GUIDELINES IN SETTING UP OF ALLOWANCE FOR CREDIT LOSSES

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
Manual of Regulations for Banks Appendix N-11 - Page 1

APP. N-11
14.12.31
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
Appendix N-11 - Page 2 Manual of Regulations for Banks

APP. N-12
14.12.31

[Appendix to Subsec. 4702N.4]


APP. N-12
14.12.31

Appendix N-12 - Page 2 Manual of Regulations for Non-Bank Financial Institutions

APP. N-12
14.12.31

skills; Timelines
investigate,
and resolve)
Management System
complaints
1

APP. N-12
14.12.31
1
deadline.

APP. N-12
14.12.31

minimum: Mechanism.

APP. N-12
14.12.31

Concerns

APP. N-13
16.03.31
AGRICULTURE VALUE CHAIN - BUSINESS MODELS

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
Buyer-driven - processors; - assure supply;

- exporters; - increase supply volumes;
- retailers; - supply more discerning
- traders, wholesalers and other customers - meeting market
traditional market actors niches and interests
Facilitator-driven - NGOs and other support agencies; - 'make markets work for the
- National and local governments poor';
- Regional and local
development
Integrated - lead firms; - new and higher value
- supermarkets; markets;
- multi-nationals - low prices for good
quality;
- market monopolies;
Reference:
Miller, C. and Jones, L. 'Agricultural Value Chain Finance, Tools and Lessons'. Published by FAO and
Practical Action Publishing, 2010.

T REGULATIONS
(Regulations Governing Trust Corporations)
TABLE OF CONTENTS
POWER OF THE BANGKO SENTRAL TO EXAMINE

TRUST CORPORATIONS
SECTION 4001T Examination by the Bangko Sentral
SECTION 4002T - 4008T (Reserved)
SECTION 4009T Supervisory Enforcement Policy
SECTION 4101T Applicable Regulations on Trust Corporations
SECTION 4102T Statement of Policy

4102T.1 Definitions
4102T.2 Powers and Scope of Authority
4102T.3 Limitations
B. ESTABLISHMENT AND ORGANIZATION
SECTION 4103T Establishment and Organization

4103T.1 Basic Guidelines in Establishing TCs
4103T.2 Commencement of Trust, Other Fiduciary
Business and Investment Management
Activities
SECTION 4104T Unauthorized Conduct of Trust and Other Fiduciary Business
SECTIONS 4105T - 4107T (Reserved)
iii
C. MERGER AND CONSOLIDATION
SECTION 4108T Authority Resulting from Merger or Consolidation
D. CAPITALIZATION
SECTION 4111T Minimum Required Capital

4111T.1 Capital build-up program
4111T.2 Sanctions
E. BASIC SECURITY DEPOSIT
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)
G. ALLOWABLE PROPRIETARY ASSETS
SECTION 4121T Allowable Proprietary Assets
H. STOCK, STOCKHOLDERS AND DIVIDENDS
SECTION 4126T Shares of Stocks of TCs

4126T.1 Limits of Stockholdings in a Single TC
4126T.2 Transactions Involving Voting Shares of Stocks
SECTION 4136T Dividends
iv
I. DIRECTORS, OFFICERS AND EMPLOYEES
SECTION 4141T Definition; Qualifications; Powers; Responsibilities and Duties

of Board of Directors.
4141T.1 (Reserved)
4141T.2 Qualifications of a director
4141T.3 Powers/responsibilities and duties of board of
directors
4141T.4 - 4141T. 9 (Reserved)
SECTION 4142T Definition; Qualifications; and Duties and Responsibilities of

Officers
4142T.1 - 4142T. 2 (Reserved)
4142T.3 Duties and responsibilities of officers
4142T.4 Prohibitions to become officers
SECTION 4143T Disqualifications of Directors and Officers

4143T.1 - 4143T. 5 (Reserved)
SECTION 4144T Bio-data of Directors and Officers
SECTION 4145T Interlocking Directorship/Officership

4145T.1 Representatives of government
SECTION 4149T Conducting Business in Unsafe/Unsound Manner
SECTION 4150T Rules of Procedure on Adminitrative Cases Involving

Directors and Officers of TC
J. BRANCHES/MARKETING OFFICES
SECTION 4151T Establishment of Branches/Marketing Offices

4151T.1 - 4151T. 2 (Reserved)
4151T.3 Prerequisites for the grant of authority to establish
a branch/marketing office
4151T.4 Prohibition
4151T.5 Documentary Requirements
4151T.6 Filing/Processing Fee
4151T.7 Date of Opening
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
SECTION 4152T General Policy

4152T.1 Governance in Marketing
4152T.2 Marketing Personnel
4152T.3 Marketing Materials
4152T.4 Complaints Resolution
4152T.5 Reports
L. DISTRIBUTION OF TRUST PRODUCTS
SECTION 4153T Distribution of Trust Products
M. BUSINESS DAYS AND HOURS
SECTION 4156T Business Days and Hours
N. TRUST CORPORATION PREMISES
SECTION 4160T Trust Corporation Premises; Other Fixed Assets
O. MANAGEMENT CONTRACTS AND OUTSOURCING OF OTHER

FUNCTIONS
SECTION 4161T Management Contracts
SECTION 4162T Duties and Responsibilities of TCs and their Directors/

Officers in All Cases of Outsourcing of Other Functions
vi
P. RISK MANAGEMENT GUIDELINES
SECTION 4173T Risk Management Guidelines
SECTION 4178T Credit Risk Management
SECTION 4179T Operational Risk Management; Policy Statement

4179T.1 Definition of operational risk
4179T.2 Duties and responsibilities
4179T.3 Roles and functions
4179T.4 Operational risk management framework
4179T.5 Management of human resource-related risk
4179T.6 Management of information technology-related
risk
4179T.7 Management of integrity of prudential reports or
reports submitted to Bangko Sentral
4179T.8 Management of legal risk exposures
4179T.9 Management of operational risk arising from
financial inclusion initiatives
4179T.10 Notification/Reporting to Bangko Sentral
4179T.11 Supervisory enforcement actions
SECTION 4180T Compliance System
SECTION 4185T Internal Control System
SECTION 4186T Internal Audit Function
SECTION 4189T Selection, Appointment, Reporting Requirements and

Delisting of External Auditors and/or Auditing Firm; Sanction
SECTION 4190T Audited Financial Statements of TCs; Financial Audit

4190T.1 Audited Financial Statements of TCs
4190T.2 - 4190T.3 (Reserved)
4190T.4 Disclosure Requirements in the Notes to the
Audited Financial Statements
vii
SECTION 4191T Records
SECTION 4192T Reports/Manner of Filing
Q. PROMPT CORRECTIVE ACTION FRAMEWORK
SECTION 4193T Prompt Corrective Action Framework
SECTION 4194T (Reserved)
R. LIQUIDATION AND RECEIVERSHIP
SECTION 4195T Voluntary Liquidation
SECTION 4196T Receivership and Involuntary Liquidation
S. GENERAL PROVISION ON SANCTIONS
SECTION 4199T General Provisions on Sanctions
PART TWO - (RESERVED)
PART THREE - ASSET MANAGEMENT OPERATIONS
SECTION 4301T Management of Risk Assets/Minimum Guidelines on

Investment Operations
SECTION 4302T Loan Portfolio and Other Risk Assets Review System
SECTION 4303T Large Exposures
SECTION 4304T Applicable Regulations on Credit and Investment Operations
SECTION 4326T Loans/Credit Accommodations to Directors, Officers,

Stockholders and their Related Interests (DOSRI) and Related
Parties
viii
SECTION 4328T Transactions Not Covered

4328T.1 - 4328T.5 (Reserved)
SECTION 4329T Reports
SECTION 4399T General Provision on Sanctions
PART FOUR - TRUST, OTHER FIDUCIARY BUSINESS AND

INVESTMENT MANAGEMENT ACTIVITIES
SECTION 4401T Statement of Principles
SECTION 4402T Applicable Regulations on Trust and Other Fudiciary Activities

4409T.1 - 4409T.16 (Reserved)
4409T.17 Trust Fund of Pre-Need Companies
SECTION 4412T Foreign Currency Denominated Trust, Other Fiduciary and

Investment Management Accounts
4412T.1 Applicabilty of rules and regulations
4412T.2 Allowable loans and investments
4412T.3 Accounting
SECTION 4441T Securities Custodianship and Securities Registry Operations

4441T.1 - 4441T.4 (Reserved)
4441T.5 Pre-qualification requirements for a securities
custodian/registry
4441T.6 - 4441T.14 (Reserved)
4441T.15 Trust Rating System and Rating downgrade
4441T.16 - 4441T.29 (Reserved)
ix
PART FIVE - EIGHT - (RESERVED)
PART NINE - MISCELLANEOUS
A. SUNDRY PROVISIONS

4901T.1 Annual Supervision Fees
SECTION 4902T Payment of Fines and Other Charges
SECTION 4904T Applicable Regulations on TCs
SECTION 4905T Transitory Provision
SECTION 4999T General Provision on Sanctions
x
List of Appendices
15.10.31
LIST OF APPENDICES
No. SUBJECT MATTER
T-1 List of Appendices to MORB/Q Regulations Applicable to Trust

Corporations
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
T-3 List of Required Reports from Trust Corporations
xi
§ 4001T - 4008T
16.03.31
POWER OF THE BANGKO SENTRAL TO EXAMINE

TRUST CORPORATIONS
Section 4001T Examination by the Bangko effectiveness of risk measurement,

Sentral. The Bangko Sentral ng Pilipinas monitoring and management information
(Bangko Sentral) shall have supervision system, and robustness of internal control;
over, and conduct periodic or special c. Review of the institution’s operations
examinations of trust corporations (TC). and overall risk profile;
The head and examiners of the d. Evaluation of financial performance,
appropriate department of the Supervision capital adequacy, asset quality and liquidity;
and Examination Sector (SES) are authorized and
to administer oaths to any director, officer e. Any other activity relevant to the
or employee of TCs, and to compel the above.
presentation of all books, documents, Regular or periodic examination shall
papers or records necessary in their be done once a year, with an interval of
judgment to ascertain the facts relative to twelve (12) months from the last date
the true condition of the institution as well thereof. Special examination may be
as the books and records of persons and conducted earlier, or at a shorter interval,
entities relative to or in connection with the when authorized by the Monetary Board by
operations, activities or transactions of the an affirmative vote of five (5) members.
institution under examination, subject to the In the full exercise of the supervisory
provision of existing laws and regulations. powers of the Bangko Sentral, examination
The term “examination” shall refer to an by the Bangko Sentral of institutions shall
investigation of an institution under the be complemented by overseeing thereof. In
supervisory authority of the Bangko Sentral this regard, the term overseeing shall refer
to determine whether the institution is to a limited investigation of an institution,
operating on a safe and sound basis, inquire or any investigation/s that is limited in
into its solvency and liquidity, and assess scope, conducted to inquire into a particular
the effectiveness of its compliance function area/aspect of an institution’s operations, for
to ascertain that it is conducting business the purpose of overseeing that laws and
in accordance with laws and regulations. regulations are complied with, inquiring into
Consistent with a risk-based approach to the solvency and liquidity of the institution,
supervision, the scope of examination may enforcing prompt corrective action, or such
include but need not be limited to the other matters requiring immediate
following: investigation: Provided, That (i) specific
a. Appraisal of the overall quality of authorizations be issued by the Deputy
corporate governance; Governor, SES, and (ii) periodic summary
b. Assessment of risk management reports on overseeings made be submitted
system, which shall include the evaluation by the Monetary Board.
of the effectiveness of management oversight (Circular 884 dated 22 July 2015, as amended by Circular No.
and self-assessment functions (e.g., internal 903 dated 29 February 2016)
audit, risk management and compliance),
adequacy of policies, procedures, and limits, Secs 4002T - 4008T (Reserved)
Manual of Regulations for Non-Bank Financial Institutions T Regulations

Page 1
§ 4009T
16.03.31
Section 4009T Supervisory Enforcement of guiding FIs under its supervision to

Policy. The Policy sets forth guidance on the mitigate risk and achieve the desired changes.
Bangko Sentral’s supervision-by-risk framework. Bangko Sentral’s risk-based supervision,
It also puts together in a holistic manner all of which enforcement action is a key part,
the enforcement tools available to the focuses on the safety and soundness of
Bangko Sentral as contained in various laws operations of the FIs. This policy sets forth
and rules and regulations 1 and the expectations of the Bangko Sentral when
communicates the deployment thereof in a it deploys enforcement action and the
consistent manner by the Bangko Sentral in consequences when expected actions are
the course of performing its supervisory not performed within prescribed timelines.
function. It further sets out the guiding Thus, this over-arching policy is
principles and objectives behind the needed - (a) as a collation of various
deployment of such enforcement actions. enforcement actions already present in
Nothing in this Section shall be various laws, rules and regulations; (b) for
construed as superseding enforcement better guidance of the FIs and the bank
actions previously imposed against supervisors; and (c) as a means to broadcast
to the banking/financial industry the
Bangko Sentral-supervised FIs pursuant to
consequences of failure to address the
existing laws, Bangko Sentral rules and
Bangko Sentral requirements and
regulations.
supervisory expectations.
a. Statement of Policy and Rationale
b. Objectives of the Enforcement Policy
The Bangko Sentral is issuing this
The Bangko Sentral’s Supervisory
Supervisory Enforcement Policy to provide
Enforcement Policy aims to achieve the
guidance on its supervision-by-risk following two (2) key objectives:
framework. The Bangko Sentral recognizes (1) Achieving the desired change.
that risk-taking is intergral to a financial Effect a change in the overall condition
institution’s business. The existence of risk and governance of Bangko Sentral-
is not necessarily a reason for concern so supervised FIs consistent with the
long as Management exhibits the ability expectations set under relevant laws and
to effectively manage that level of risk and regulations; and
operates the financial institution (FI) in a safe (2) Mitigating Risk. Mitigate risks to the
and sound manner. Thus, when risk is not FIs and other stakeholders in order to
properly managed, the Bangko Sentral may maintain the stability of the financial system.
deploy a wide range of enforcement actions
provided under existing laws, Bangko Sentral c. General Principles
rules and regulations, taking into The Bangko Sentral, in the deployment
consideration the nature and extent of the of enforcement actions, is guided by the
supervisory issues and concerns and the level following general principles:
of cooperation provided by Management. (1) Root cause diagnosis. The
The Bangko Sentral adopts a holistic enforcement action addresses the underlying
approach to supervision with the objective cause of the supervisory issues and concerns.
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)
T Regulations Manual of Regulations for Non-Bank Financial Institutions

Page 2
§ 4009T
16.03.31
(2) Consistently matching the severity a. Bangko Sentral Directives

of enforcement action to the supervisory Directives are basically orders and
issue. The deployment of appropriate instructions communicated by the
enforcement action is commensurate to the appropriate supervising department in
severity of the supervisory issues and Bangko Sentral requiring the FI to undertake
concerns. The severity of the supervisory a specific positive action or refrain from
issues and concerns is assessed in terms of performing a particular activity within a
prevalence1 and persistence. prescribed timeline.
(3) Successive or simultaneous b. Letter of Commitment (LOC)
deployment of enforcement actions. The LOC is an enforcement action
Enforcement actions may be deployed where the FI’s Board of Directors (Board) is
successively or simultaneously taking into required, upon approval and/or confirmation
account the nature and seriousness of the by the Monetary Board (MB), to make a
difficulties encountered by the FIs and the written commitment to undertake a specific
ability and willingness of the FI’s positive action or refrain from performing a
Management to address the supervisory particular activity within a given time period.
issues and concerns. The LOC is generally used to arrest
(4) Monitorability and follow-through. emerging supervisory concerns before these
The Bangko Sentral monitors the FI’s develop into serious weaknesses or
progress/compliance with the expected problems, or to address remaining
actions to address the supervisory issues, supervisory issues and concerns.
concerns and problems. 2. Sanctions
(5) Escalation of enforcement actions. Sanctions that may be imposed on an FI
Enforcement actions may be escalated if the and/or its directors and officers, as provided
desired change is not achieved and the root under existing laws, Bangko Sentral rules and
causes of the FI’s issues, concerns and regulations, are subject to the prior approval
problems are not addressed by the FI within and/or confirmation by the MB. Such sanctions
prescribed timelines. include the following:
a. FIs
d. Categories of Enforcement Actions • Restrictions on Activities and
The three main categories of Privileges
enforcement action are: (1) corrective • Suspension of Authorities, Privileges
actions, (2) sanctions and (3) other and Other Activities
supervisory actions. These enforcement • Divestment and/or Unwinding
actions may be imposed singly or in • Monetary Sanction - Penalties/Fines
combination with others. Against the FI
1. Corrective Actions b. Directors and officers
Corrective actions are enforcement • Reprimand
actions intended to require the FI to address • Restriction on Compensation and
the underlying cause of supervisory issues, Benefits
concerns and problems. These include the • Divestment
following: • Suspension
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.

Page 3
§ 4009T
16.03.31
• Disqualification (c) Conservatorship; and

• Removal (d) Placement under Receivership.
• Monetary Penalties/Fines
The foregoing sanctions to individuals e. Due Process
are without prejudice to the filing of separate An integral part of the deployment of
civil or criminal actions against them, when enforcement actions is the observance of
appropriate. due process in all cases.
3. Other Supervisory Actions The FI and/or its directors and officers
Subject to prior MB approval, the are afforded fair and reasonable opportunity
Bangko Sentral, when warranted, may to explain their side and to submit
deploy other supervisory actions such as: evidence/s in support thereof, which are
(a) Initiation into the PCA Framework; given due consideration in determining the
(b) Issuance of a cease and desist order appropriate enforcement action(s) to be
(CDO) against the FI as well as its directors imposed.
(Circular No. 875 dated 15 April 2015, as amended by Circular
and officers;
No. 903 dated 29 February 2016)

Page 4
§§ 4101T - 4102T.1
15.10.31
PART ONE
Section 4101T Applicable Regulations on b. A trust corporation (TC) shall be a

Trust Corporations. Trust operations and stock corporation created, and duly
investment management activities of trust authorized by the Monetary Board, to engage
corporations shall be subject to the primarily in trust, other fiduciary business
applicable Q Regulations of the Manual of and investment management activities,
Regulations for Non-Bank Financial which shall act as trustee or administer any
Institutions (MORNBFI), as referred to and trust or hold property in trust or on deposit
unless otherwise specified by the provisions for the use and benefit of others, and/or as
of this Manual. financial consultant, investment adviser or
(Circular No. 884 dated 22 July 2015) portfolio manager.
A TC may be a subsidiary or an affiliate
A. SCOPE OF AUTHORITY of a bank and/or an NBFI: Provided, That the
investing bank and/or NBFI cannot engage in
Section 4102T Statement of Policy. It is the trust, other fiduciary business and investment
policy of the Bangko Sentral to promulgate management activities through its separate
rules and regulations necessary for the and distinct department or other similar unit
proper conduct and development of trust, in the bank or NBFI and through a TC.
other fiduciary business and investment c. Trust business shall refer to any
management activities. Towards this end, activity resulting from a trustor-trustee
authority to engage in trust, other fiduciary relationship (trusteeship) involving the
business and investment management appointment of a trustee by the trustor for
activities shall be granted to all qualified trust the administration, holding, management of
corporations which meet the requirements funds and/or properties of the trustor by the
provided herewith. trustee for the use, benefit or advantage of
(Circular No. 884 dated 22 July 2015) the trustor or of others called beneficiaries.
d. Other fiduciary business shall refer
§ 4102T.1 Definitions. For purposes of to any activity resulting from a contract or
regulating the operations of a trust agreement whereby the TC binds itself to
corporation, unless the context clearly render services or to act in a representative
connotes otherwise, the following shall have capacity such as in an agency, guardianship,
the meaning indicated: administratorship of wills, properties and
a. Trust entity shall refer to a: (a) bank estates, executorship, receivership and other
or non-bank financial institution (NBFI), similar services which do not create or result
through its specifically designated business in a trusteeship. Investment management
unit to perform trust functions, or (b) trust activities, which are considered as among
corporation, authorized by the Bangko other fiduciary business, shall be
Sentral to engage in trust and other fiduciary separately defined in the succeeding item
business under Section 79 of Republic Act to highlight its being a major source of
(R.A.) No. 8791 (The General Banking Law of fiduciary business.
2000) or to perform investment management e. Investment management activity shall
services under Section 53 of R.A. No. 8791. refer to any activity resulting from a contract

Part I - Page 1
§§ 4102T.1 - 4102T.2
15.10.31
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,

Part I - Page 2
§§ 4102T.2 - 4103T.1
16.03.31
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:

Part I - Page 3
§ 4103T.1
16.03.31
(a) Accomplished biographical data of For this purpose, substantial or major

each incorporator, subscriber, proposed shareholder shall mean a person, whether
director and officer; natural or juridical, owning such number
(b) Certificate of net worth as of a date of shares that will allow him to elect at least
not earlier than ninety (90) days prior to the one (1) member of the board of directors of
filing of the application of each of the a TC, or who is directly or indirectly the
subscriber. Such certificate shall indicate registered or beneficial owner of more than
a minimum net worth that will demonstrate ten percent (10%) of any class of its equity
the certifying person’s financial capacity to security;
invest in the TC. A waiver of rights under (v) A copy each of the corporation’s
R.A. No. 1405, as amended, shall also be audited financial statements for the last two
submitted for purposes of verification of the (2) years prior to the filing of the application;
declared net worth; (vi) A copy of the corporation’s annual
(c) Certified photocopies of Income Tax report to the stockholders for the year
Returns (ITRs) for the last two (2) calendar immediately preceding the date of filing of
years of each incorporator, subscriber, the application;
proposed director and officer or similar (vii) Certified photocopies of the
document from the home country in the case
corporation’s ITRs and BIR clearance for the
of non-Filipino citizens;
last two (2) calendar years; and
(d) Clearance from the National Bureau
(viii) For foreign corporations, in
of Investigation (NBI) of each of the
addition to Items “(e)i” to “(e)vi”, it shall
incorporator, subscriber, proposed director
also submit (1) a certification from its
and officer or similar document from the
home country’s supervisory authority that
home country in the case of non-Filipino
citizens; it has no objection to the investment of
(e) For corporate subscribers, the such company in a TC in the Philippines
following additional documents shall be and that adequate information on such
submitted: foreign corporation shall be provided to
(i) Copy of the board resolution the Bangko Sentral to the extent allowed
authorizing the corporation to invest in such under existing laws; (2) certification from
TC and designating the person who will the foreign bank/entity applicant’s
represent the corporation in connection corporate secretary or any officer holding
therewith; equivalent position that the bank/entity is
(ii) Copy of the latest articles of established, reputable and financially
incorporation and by-laws duly stamped sound; and (3) if the proposed ownership
received by the SEC; represents controlling interest1 in the TC,
(iii) Updated list of directors and certification from the foreign bank/entity
principal officers; applicant’s corporate secretary or any officer
(iv) Current list of substantial or major holding equivalent position containing the
shareholders, indicating the citizenship and information that the bank/entity is widely-
the number, amount and percentage of the owned and publicly-listed, duly authenticated
voting and non-voting shares held by them. by the Philippine Consulate;
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.

Part I - Page 4
§ 4103T.1
16.03.31
(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

Part I - Page 5
§ 4103T.1
16.03.31
(cc) Licensing fee - A licensing fee of provisions on the appointment of a

P500,000.00 shall be charged upon president, equivalent position/officer, and
approval of the application. Licensing fee other subordinate officers, and a clear
shall be inclusive of the processing fee. definition of their duties and responsibilities;
In submitting its application, the and
applicant shall include a written (b) Deposit with any universal/
authorization in favor of the Bangko commercial bank the initial paid-up capital
Sentral giving consent to the conduct of of the proposed TC.
verification/validation of the documents (3) Within thirty (30) days after the
or representations stated in the articles of incorporation and by-laws had
application for the establishment of a TC. been cleared by the Bangko Sentral, and
The application shall be considered filed the corresponding certificate of authority
and submitted on a first-come, first-served to register had been issued, the
basis: Provided, That all required documents incorporators shall effect the filing and
are complete and properly accomplished. registration of said documents with the SEC.
Otherwise, the application shall be returned (4) Within six (6) months from receipt
unacted. of advice of approval by the Monetary Board
b. Grounds for disapproval of of their application for authority to establish
application. The Monetary Board may a TC, the incorporators shall secure the
deny the application to organize a TC certificate of authority to operate the trust,
on the basis of any of the findings that: other fiduciary business and investment
(1) The TC is being organized for any management activities and submit to the
purpose other than to engage in the business appropriate supervising and examining
of a legitimate TC; department of the Bangko Sentral the
(2) The TC’s detailed plan of operations following:
is against the law, Bangko Sentral rules and (a) Proof of registration of articles of
regulations, and public policy; and incorporation and by-laws;
(3) There exist other reasons, which the (b) Certification of compliance with the
conditions of approval duly signed by the
Monetary Board may consider as sufficient
incorporators, including the set-up of the
ground for such disapproval.
required basic security deposit;
c. Requirements for the issuance of the
(c) Names and positions of individuals
certificates of authority to register and to
designated as chairman and members of the
operate.
board of directors, president and other
(1) Within thirty (30) days from receipt subordinate officers of the TC with their
of advice of approval by the Monetary Board respective bio-data and statement of duties
of its application for authority to establish a and responsibilities;
TC, the aplicant shall pay a non-refundable (d) Organizational chart which shows
license fee, as stated above, to the Bangko the names of departments/units with
Sentral. respective functions and responsibilities and
(2) Within sixty (60) days from receipt designations of officers/employees
of advice of approval by the Monetary Board including responsibilities of personnel
of their application for authority to establish within the said departments/units. The
a TC, the incorporators shall: organizational chart should show clear
(a) Submit seven (7) copies of the articles accountability of the management structure
of incorporation, treasurer’s sworn and should provide for independent check
statement and by-laws which shall include and balance by the board of directors;

Part I - Page 6
§ 4103T.1 - 4103T.2
16.03.31
(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)

Part I - Page 7
§§ 4104T - 4108T
15.10.31
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

Part I - Page 8
§§ 4108T - 4112T
15.10.31
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)
§ 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)

Part I - Page 9
§§ 4112T.1 - 4112T.4
15.10.31
§ 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

Part I - Page 10
§§ 4112T.4 - 4121T
15.10.31
Examination. Appropriate sanctions (4) Subsequent offense(s) - sixty (60)

provided below shall be imposed on the calendar day-suspension without pay.
TC and/ or the erring officer for failure to For purposes of determining the
deposit the required securities within said frequency of the violation, the TC’s
period or for incurring any deficiency during compliance profile for the immediately
a particular quarter due to failure to replace preceding three (3) years or twelve (12)
matured and/or withdrawn securities quarters will be reviewed: Provided, That
deposits. for purposes of determining appropriate
(Circular No. 884 dated 22 July 2015) penalty on the president and/or other
responsible officer(s), any offense committed
§ 4112T.5 Sanctions. Without prejudice outside the preceding three (3)-year or
to the imposition of sanctions for capital twelve (12) quarter-period shall be
deficiency, the following sanctions shall be considered as the first offense: Provided,
imposed for any deficiency in the basic further, That if the offense cannot be
security deposit for the faithful performance attributed to any other officer of the TC, the
of trust and other fiduciary duties and president shall be held responsible, as
investment management activities: evidence may warrant.
a. On the TC
(1) Daily monetary penalty of
P1,000.00 or one tenth of one percent
F. RESERVED
(1/10 of 1%) per day on the amount of the
deficiency, whichever is higher but not to
Secs. 4113T - 4120T (Reserved)
exceed P10,000.00 per day, shall be
assessed on the TC, reckoned after thirty
G. ALLOWABLE PROPRIETARY ASSETS
(30) days from the occurrence of the
deficiency until the same is rectified.
(2) Non-monetary penalty beginning Sec. 4121T Allowable Proprietary Assets.
with the third offense – Prohibition against Assets owned by the TC shall be for the
the acceptance of new trust and other purpose of engaging in the business of trust,
fiduciary accounts, introduction of new other fiduciary and investment management
trust products or UITF, and/or from activities and for maintaining the minimum
renewing expiring trust and other fiduciary capital requirement. The TC shall not
contracts up to the time the violation is engage in any manner in proprietary trading
corrected. and speculative investing activities. The
b. On the president and/or other allowable proprietary assets shall include
officer(s) responsible for the deficiency/non- eligible government securities deposited
compliance: with the Bangko Sentral in compliance with
(1) First offense - warning that the basic security deposit requirement
subsequent violations shall be dealt with provided under Section 4112T.
more severely; The allowable proprietary assets shall
(2) Second offense - written reprimand consist of:
with a stern warning that subsequent a. Investments in eligible government
violations shall be subject to suspension; securities earmarked as basic security
(3) Third offense - thirty (30) calendar deposits as defined under Subsection
day-suspension without pay; and 4112T.2;

Part I - Page 11
§§ 4121T - 4126T.1
16.03.31
b. Investments in securities issued by or interest in the administration of fiduciary

guaranteed by the Philippine government, business.
or the Bangko Sentral; (Circular No. 884 dated 22 July 2015)
c. Investments in bank deposits, and
highly liquid and investment grade Secs. 4122T - 4125T (Reserved)
securities, including: (1) money market
instruments, (2) those issued by central H. STOCK, STOCKHOLDERS AND
governments and central banks of foreign DIVIDENDS
countries with the highest credit quality
given by any two (2) internationally accepted Sec. 4126T Shares of Stocks of TCs. The
rating agencies, and (3) securities issued by following shall govern transactions affecting
any supranational entity; shares of stock of TCs and limits on
d. Loans and other credit stockholdings in a single TC.
accommodations: (1) secured by obligations (Circular No. 884 dated 22 July 2015)
of the Philippine Government or of the
Bangko Sentral; (2) fully guaranteed by the § 4126T.1 Limits of stockholdings in a
Philippine Government as to the payment single TC. The stockholdings in any TC shall
of principal and interest; (3) secured by be subject to the limits as prescribed below:
highly liquid and investment grade a. Domestic stockholders
securities; (4) to the extent covered by the (1) Banks may own stockholdings of a
hold-out on or assignment of, bank deposits TC: Provided, That the acquisition or
held in the Philippines; and (5) which the investment in the equity of a TC shall be
Monetary Board may from time to time subject to all relevant laws, rules and
specify as non-risk items; regulations on equity investment of banks
e. Real and other properties, including in a financial allied enterprise.
building, furniture and fixtures, safes, (2) Regulated non-bank entities
equipment, and other fixed assets, utilized/ engaged in finance, insurance, asset
to be utilized by the TC in the conduct of its management and other similar activities
trust, other fiduciary business and acceptable to the Bangko Sentral may own
investment management activities; and up to 100% of the TC’s stockholdings unless
f. Other assets, not inconsistent with the otherwise provided in their respective
provisions of paragraphs "a" to "d" hereof, governing laws, charters and regulations.
which are deemed to be readily realizable (3) Filipino individuals and non-
and available for the payment of liabilities, regulated domestic entities may each own
losses or claims at values to be determined up to forty percent (40%) of the voting stock
in accordance with existing Bangko Sentral of a TC. There shall be no ceiling on the
guidelines. aggregate ownership by Filipino individuals
For purposes of investing the allowable and non-regulated domestic entities in a TC.
assets, the TC shall not: (a) commingle their b.Foreign stockholders may own
proprietary funds or assets with the AUM stockholdings in a TC, subject to the limits
and (b) invest the same in their own UITF as stated below:
or other trust products. (1) Unless otherwise provided by laws,
The TC is expected to adopt policies charters and regulations, foreign banks and
and processes that will address relevant regulated foreign non-bank entities engaged
exposures as well as potential conflict of in finance, insurance, asset management, and

Part I - Page 12
§ 4126T.1
16.03.31
other similar activities acceptable to the information derived from submitted

Bangko Sentral may own more than documents. Further, if the foreign bank/
forty percent (40%) up to 100% of the voting entity is owned/controlled by a holding
stock of a TC, subject to the following factors: company, this requirement may apply to the
(a) Strategic trade and investment holding company.
relationships between the Philippines and Moreover, the reciprocity rights enjoyed
the home country of the foreign bank/entity; by Philippine banks and other financial
(b) Relationship between the applicant institutions in the applicant’s country shall
foreign bank/entity and the Philippines; be considered.
(c) Demonstrated capacity, global c. An individual and a non-regulated
reputation for financial innovations and entity or entities which are wholly-owned,
stability in a competitive environment of the or a majority of the voting stock of which is
applicant foreign bank/entity; owned, by him, may own only up to a
(d) Reciprocity enjoyed by Philippine combined forty-percent (40%) of the voting
banks and other financial institutions in the stock of a TC.
applicant’s country; and d. Stockholdings of family groups or
(e) Willingness to share technology. related interests. Individuals related to each
(2) Others, such as individuals and other within the fourth degree of
other entities not identified above may own consanguinity or affinity, whether legitimate,
up to forty percent (40%) of the voting stock illegitimate or common-law, shall be
of a TC: Provided, That the aggregate voting considered family groups or related interests
stock owned by foreign individuals and but may each own up to forty percent (40%)
other entities not identified above shall not of the voting stock of a TC: Provided, That
exceed forty percent (40%) of the said relationship must be fully disclosed in
outstanding voting stock of the TC. all transactions by such individuals or family
The limits as stated above are further groups or related interests.
subject to the limits imposed by the respective e. Two (2) or more corporations owned
laws/regulations in the home country of or controlled by the same family group or
investing companies or country of origin. same group of persons shall be considered
A foreign bank or non-bank entity related interests but may each own up to
seeking to operate in the Philippines shall
forty percent (40%) of the voting stock of a
satisfy the criteria in Item No. "b(1)(c)"
TC: Provided, That said relationship must
above, i.e., demonstrated capacity, global
be fully disclosed in all transactions by such
reputation for financial innovations and
corporations or related groups of persons
stability in a competitive environment of the
with the TC.
applicant foreign bank/entity. Provided, That
f. Determination of foreign-owned
if it has controlling interest in the TC, it must
be widely-owned and publicly-listed in the voting stock and citizenship of corporate
country of origin, unless the foreign bank/ stockholders in a TC as well as the
entity is owned and controlled by the relationship of stockholders of a TC.
government of its country of origin. (1) The percentage of foreign-owned
The determination of whether a foreign voting stock in a TC should be based on
bank/entity is widely-owned and publicly citizenship of individual stockholders,
listed, established, reputable, and including beneficial owners1 of shares being
financially sound shall be based on the held by nominees, custodians and other
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.
Part I - Page 13
§§ 4126T.1 - 4141T.2
16.03.31
vehicles; and (3) Engaging in activities without the

(2) The citizenship of the corporation, required prior approval or license from the
which is a stockholder of a TC, shall follow Bangko Sentral such as, but not limited to
the citizenship of the controlling derivatives; and
stockholders of the corporation. For (4) Refusal to permit examination into
purposes hereof, the term “controlling the affairs of the institution or any willful
stockholders” shall refer to stockholders making of a false or misleading statement
holding more than fifty percent (50%) of the to the Monetary Board or to the appropriate
voting stock of the corporate stockholders department of the SES.
of the TC. The provisions under Subsections
(3) The relationship of individuals who 4136Q.1, 4136Q.2.b, 4136Q.4, 4136Q.5
are stockholders of a TC shall be determined and 4136Q.7 of the MORNBFI shall be
in accordance with the provisions of Articles adopted relative to dividends declaration of
963 to 966 of the Civil Code of the a TC.
Philippines. (Circular No. 884 dated 22 July 2015)
(Circular No. 884 dated 22 July 2015, as amended by Circular No.
903 dated 29 February 2016) Secs. 4137T - 4140T (Reserved)
§ 4126T.2 Transactions involving I. DIRECTORS, OFFICERS AND

voting shares of stocks. The provisions EMPLOYEES
relevant to the transactions involving voting
shares of stocks as provided under Sec. 4141T Definition; Qualifications;
Subsection X126.2 of the Manual of Powers; Responsibilities and Duties of
Regulations for Banks (MORB), in so far as Board of Directors. Unless otherwise
applicable to TCs, shall apply. provided specifically, the provisions of
(Circular No. 884 dated 22 July 2015) Section 4141Q, and its Subsections, of the
MORNBFI, in so far as applicable, shall be
Secs. 4127T - 4135T – (Reserved) adopted.
Sec. 4136T Dividends. No TC shall declare
dividends greater than its accumulated net § 4141T.1 (Reserved)
profits then on hand, deducting therefrom
its losses. At the time of declaration, the TC § 4141T.2 Qualifications of a director.
shall have complied with the following: In addition to the provisions of Subsection
a. Minimum capitalization; 4141Q.2 of the MORNBFI, the members
b. Basic security deposit; of the Board are expected to be familiar
c. No net losses from operations in any with Philippine laws, rules and
one of the two calendar or fiscal years regulations, and best practices on trust
immediately preceding the date of dividend business, as well as uphold at all times,
declaration; and ethical and good governance standards.
d. Has not committed any of the Accordingly, the members of the board
following major violations: of directors shall possess the necessary
(1) Unsafe and unsound practices as technical expertise and relevant
defined under existing Bangko Sentral experience in such trust business which
regulations; may be indicated by any of the following:
(2) Uncorrected major violations/ a. At least one (1) year of actual
exceptions cited in the previous experience in trust, other fiduciary business,
examination; or investment management activities;

Part I - Page 14
§§ 4141T.2 - 4142T.3
15.10.31
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)
§ 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

Part I - Page 15
§§ 4142T.3 - 4149T
15.10.31
g. Submission of periodic reports to Sec. 4144T Bio-data of Directors and

regulatory agencies on the conduct of the Officers. The applicable provisions of
trust operations. Section 4144Q of the MORNBFI shall be
The other duties and responsibilities adopted by the TC.
for officers as provided under Subsection (Circular No. 884 dated 22 July 2015)
4142Q.3 of the MORNBFI shall likewise
apply to the officers of the TC. Sec. 4145T Interlocking Directorship/
(Circular No. 884 dated 22 July 2015) Officership.
a. Interlocking directorship between a
§ 4142T.4 Prohibitions to become TC and another FI shall be allowed.
officer. No appointive or elective public b. No interlocking directorship and
official, whether full-time or part-time, shall officership, and interlocking officership and
at the same time serve as officer of the TC. secondments, shall be allowed between
(Circular No. 884 dated 22 July 2015) TCs and between a TC and any FI except,
with prior approval of the Monetary Board,
Sec. 4143T Disqualification of Directors on concurrent officership position in the
and Officers. In so far as applicable, Section same capacity which do not involve
4143Q of the MORNBFI shall be adopted management functions such as internal
by the TC. In addition, Subsections 4143Q.1 auditor, corporate secretary, assistant
and 4143Q.2 of the MORNBFI as well as corporate secretary, and security officer,
the following shall also be considered within a group. For this purpose,
grounds for disqualification of directors and secondment shall refer to the transfer/
officers: detachment of a person from his regular
a. Negligence in the performance of organization for temporary assignment
the duties and responsibilities stipulated elsewhere where the seconded employee
in the contract creating the trust, other remains the employee of the home
fiduciary and investment management employer although his salaries and other
account and which directly or indirectly remuneration may be borne by the host
organization.
caused material loss/impairment of the
managed trust, other fiduciary and
investment management assets;
§ 4145T.1 Representatives of
b. Entering into an arrangement or
government. The provisions of this
scheme which will compromise or
Subsection shall apply to persons appointed
prejudice the interest, rights and privileges to such positions as representatives of the
of the trustor, principal and/or government or government-owned or
beneficiaries; and controlled entities unless otherwise
c. Other grounds as may be approved provided under existing laws.
by the Monetary Board. (Circular No. 884 dated 22 July 2015)
The foregoing grounds for
disqualification for directors shall be in Secs. 4146T - 4148T (Reserved)
addition to those prescribed under the
Corporation Code of the Philippines (Batas Sec. 4149T Conducting Business in Unsafe/
Pambansa Blg. 68) and other existing Unsound Manner. Section 4408Q, and its
applicable laws and regulations. Subsections, of the MORNBFI on unsafe
(Circular No. 884 dated 22 July 2015) and unsound practices shall be adopted for
TCs.
§§ 4143T.1 - 4143T.5 (Reserved) (Circular No. 884 dated 22 July 2015)

Part I - Page 16
§§ 4150T - 4151T.5
15.10.31
Sec. 4150T Rules of Procedure on §§ 4151T.1 to 4151T.2 (Reserved)

Administrative Cases Involving Directors
and Officers of TC. Section 4150Q of the § 4151T.3 Prerequisites for the grant
MORNBFI on the rules of procedure on of authority to establish a branch/
administrative cases involving directors and marketing office. TCs may establish a
officer of QBs shall likewise be adopted for branch/marketing office subject to the
TCs. following pre-qualification requirements:
(Circular No. 884 dated 22 July 2015) a. Capital adequacy and solvency;
b. No uncorrected findings of unsafe
J. BRANCHES/MARKETING OFFICES and unsound practices;
c. It has complied with the required
Sec. 4151T Establishment of Branches/ basic security deposits for the preceding four
Marketing Offices. TCs may establish (4) quarters prior to application;
branch(es) only upon prior approval of the d. It has established a risk management
Monetary Board. However, it shall carry out system appropriate to its operations,
its trust and other fiduciary business only at characterized by clear delineation of
the place of business specified in its articles responsibility for risk management, adequate
of incorporation. In the case of marketing risk measurement system, appropriately
office(s), it may be established subject to structured risk limits, effective internal
prior notification to the Bangko Sentral: control system and complete, timely and
efficient risk reporting system; and
Provided, That the marketing activities is in
e. It has no major supervisory concerns
accordance with the provisions stated under
outstanding on safety and soundness
Section 4152T of this Manual. immediately preceding the date of
For purposes of this Section, a branch application.
shall refer to any permanent office or place (Circular No. 884 dated 22 July 2015)
of business other than the head office and
maintains a complete set of books of § 4151T.4 Prohibition. No application
accounts. A marketing office shall refer to for establishment of new branch(es) shall
any permanent office or place of business be accepted if the TC has approved but
other than the head office which engages unopened branch(es).
only in non-transactional activities such as (Circular No. 884 dated 22 July 2015)
marketing of its products. Marketing shall
only include the promotion and § 4151T.5 Documentary requirements.
presentation of the TC’s trust products to a. All branch applications shall be
clients or prospective clients and shall not supported by the following documents:
involve the actual opening of trust/fiduciary (1) Certification that a TC has the ability
to conduct operations from the head office
account, and the receiving or dealing with
as not to be a cause for delayed submission
client’s money and/or property. The
of reports to the Bangko Sentral and/or
account opening shall be strictly undertaken recording of transactions in the head office;
by the TC in accordance with the Basic (2) Certified true copy of the board
Standards set forth in Appendix Q-48 of the resolution authorizing the establishment of
MORNBFI. a branch;
(Circular No. 884 dated 22 July 2015) (3) Areas to be served;

Part I - Page 17
§§ 4151T.5 - 4151T.10
15.10.31
(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
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
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
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

Part I - Page 18
§§ 4151T.10 - 4152T.2
15.10.31
as required in this Section is found to be false, 3. Establish proper customer feedback

the following sanctions shall be imposed: and complaint-handling mechanisms; and
a. On the TC. Suspension for one (1) 4. Comply with all laws and
year of the privilege to establish and/or open regulations applicable in the Philippines
approved branches/marketing office, and/ including labor laws, anti-money laundering
or relocate branches/marketing office. rules, outsourcing and those governing the
b. On the certifying officer. A fine of trust activities/services performed by the
P5,000 per day from the time the marketing personnel on the TC’s behalf.
certification was made up to the time the (Circular No. 884 dated 22 July 2015)
certification was found to be false for each
branch/marketing office opened, relocated, § 4152T.2 Marketing personnel. TCs
or closed without prejudice to the sanctions shall ensure that its marketing personnel are
under Section 35 of R.A. No. 7653. fit and proper, act within the bounds of their
(Circular No. 884 dated 22 July 2015) functions, and adhere to the Code of Ethics
and Professional Standards required under
K. MARKETING Section 4401T. Accordingly, TCs shall
establish policies and procedures covering
Sec. 4152T General Policy. TCs shall put the following:
in place sound policies and procedures a. Duties and responsibilities of its
covering its marketing arrangement giving marketing personnel;
primary consideration in upholding b. Conduct of due diligence check on
consumer protection in accordance with the the fitness and propriety of its marketing
Consumer Protection Framework of the personnel which includes monitoring and
Bangko Sentral. Such policies and reviewing on an ongoing basis their
procedures shall be embodied in a marketing performance; and
plan and in case of significant changes to c. Conduct of continuing training and
be made thereon, TCs shall notify the education especially on updates relative to
appropriate department of the SES within the TC’s trust products.
thirty (30) calendar days prior to the With respect to the marketing personnel
implementation of such change. themselves, they shall be required to:
(Circular No. 884 dated 22 July 2015) 1. Undergo training program on trust,
other fiduciary and investment management
§ 4152T.1 Governance in marketing. activities. This training program may be
In marketing its trust products, TCs shall: conducted by their respective trust entities
1. Establish policies and procedures or by the Trust Officers Association of the
covering the marketing of its trust products Philippines (TOAP) or any training provider
such as, but not limited to, verification and acceptable to the Bangko Sentral. However,
handling of client information, disclosures if the training is conducted by the trust
of key features of trust products, extent of entities, such training program shall be
authority of marketing personnel, and risk regularly reviewed/validated by TOAP. It is
disclosures; understood that all training materials shall
2. Be responsible for the conduct and be made available for review and/or
regular training of its marketing personnel. validation, whenever necessary;
For purposes of this Section, marketing 2. Continuously update themselves on
personnel shall mean any person the features and characteristics of the trust
performing marketing functions for the TC; products they are selling; and

Part I - Page 19
§§ 4152T.2 - 4160T
15.10.31
3. Conduct themselves with integrity, system of monitoring the activities and

honesty and with proper representation to performance of its marketing personnel.
the clients of the TC. Said certification shall be submitted on
(Circular No. 884 dated 22 July 2015) or before 30 January of the following year
and shall be considered a Category A-2
§ 4152T.3 Marketing materials. TCs report.
shall ensure that its marketing materials give (Circular No. 884 dated 22 July 2015)
a fair and balanced view of the trust product
being offered. Marketing materials may be L. DISTRIBUTION OF TRUST
considered fair and balanced when they are PRODUCTS
clear and easily understood; highlight the
purpose and risks of the product; and do Sec. 4153T Distribution of Trust Products.
not omit any material information that would TCs shall adopt a distribution arrangement
cause the marketing materials to be that is consistent with its strategic plan of
misleading. All marketing materials should operation. Such arrangement shall be
specify (a) that the same is a trust product conducted in a manner that is not prohibited
and therefore not insured nor governed by by laws, rules and regulations. Further, a
the Philippine Deposit Insurance TC shall only be allowed to distribute its
Corporation (PDIC); (b) that any loss/income own products, otherwise, outsourcing
is for the account of the client/investor; and should be taken into consideration as
(c) that the TC is not liable for losses unless provided under Section 4162T of this
upon willful default, bad faith or gross Manual.
negligence. (Circular No. 884 dated 22 July 2015)
Subsection 4410Q.7 of the MORNBFI,
on the minimum disclosure requirements Secs. 4154T - 4155T (Reserved)
shall be adopted by the TC, in so far as
applicable to the trust product. M. BUSINESS DAYS AND HOURS
Sec. 4156T Business Days and Hours. TCs
§ 4152T.4 Complaints resolution. TCs, may adopt such business days and hours
in the marketing and distribution of its as they deem proper in the conduct of their
products, shall establish systems and operations: Provided, That such business
controls regarding the recording and days and hours are properly disclosed to
handling of complaints. The provisions on clients/investor: Provided, further, That TCs
Consumer Protection Framework of the shall post conspicuously at all times in their
Bangko Sentral shall apply. place of business their schedule of regular
(Circular No. 884 dated 22 July 2015) business days and hours.
§ 4152T.5 Reports. TCs shall submit
on an annual basis a certification signed by Secs. 4157T - 4159T (Reserved)
the president and the compliance officer
that: N. TRUST CORPORATION PREMISES
a. The appointed marketing personnel
are fit and proper and has undergone the Sec. 4160T Trust Corporation Premises;
requisite training; and Other Fixed Assets. The regulations under
b. The TC has a policy on handling and Section 4160Q of the MORNBFI and its
ensuring the accountability, as well as a Subsections (except Subsection 4160Q.3

Part I - Page 20
§§ 4160T - 4179T
16.03.31
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)
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.

Part I - Page 21
§§ 4179T - 4179T.2
16.03.31
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.

Part I - Page 21a
§ 4179T.2
16.03.31
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

Part I - Page 21b
§ 4179T.2
16.03.31
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

Part I - Page 21c
§ 4179T.2
16.03.31
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

Part I - Page 21d
§§ 4179T.2 - 4179T.3
16.03.31
adequately and timely communicated/ (2) Design and implement the

coordinated to Operational Risk operational risk assessment methodology
Management Function (ORMF) for risk tools and risk reporting system of the
monitoring and reporting, in addition to the institution;
usual reporting to senior management and/ (3) Coordinate risk management
or board. activities across the institution;
(Circular No. 900 dated 18 January 2016) (4) Consolidate all relevant operational
risk information/reports to be elevated/
§ 4179T.3 Roles and functions. presented to the board and senior
a. Operational Risk Management management;
Function. Trust corporations are not (5) Provide operational risk
required to create an ORMF. However, the management training and advice to business
board of directors is expected to discuss units on operational risk management
operational risk issues during its board issues; and
meetings with discussions adequately (6) Coordinate with compliance
documented in the minutes of meetings. The function, internal audit, and external audit
board of directors of trust corporations may, on operational risk matters.
at its own discretion, or as directed by the ORMF personnel should have technical
appropriate supervising department of the proficiency, appropriate educational
Bangko Sentral, create a Risk Management background, and exposure to enable them
Unit (RMU) or assign specific personnel to effectively perform the unit's mandate.
under said unit to handle operational risk Trust corporations shall have in place a
concerns. The specific personnel or RMU training program to keep its personnel up-
shall directly report to the head of the RMU to-date on different operational risk issues
or to the board-level Risk Oversight and challenges.
Committee (ROC), as appropriate. The ROC b. Compliance function. The
or the board shall be responsible for compliance function shall conduct an
assessing the annual performance of the unit independent assessment of the compliance
taking into account how said unit carried with relevant laws, rules and regulations,
out its duties and responsibilities. The ORMF as well as internal policies of the institution,
shall be supported by a board-approved and determine areas that may potentially
charter that defines its stature, authority, and result in risk of loss due to inadequate or
independence. failed internal processes, systems, and
The ORMF shall primarily assist people. The latter includes inappropriate
management in meeting its responsibility to conduct/behavior of personnel, officers, and
understand and manage operational risk the board, that may lead to fraud or any form
exposures and ensure the development and of business disruption. The compliance
consistent implementation of operational function shall assess whether the identified
risk policies, processes, and procedures operational risk exposure by the business
throughout the institution. In this regard, the units or by the function itself shall affect the
ORMF shall: franchise value of the institution. In this
(1) Recommend to the board of regard, it shall advise and assist
directors and senior management management in establishing guidance on the
appropriate policies and procedures relating appropriate implementation of relevant
to operational risk management and laws, rules and regulations, and internal
controls; policies.

Part I - Page 21e
§§ 4179T.3 - 4179T.4
16.03.31
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

Part I - Page 21f
§ 4179T.4
16.03.31
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

Part I - Page 21g
§ 4179T.4
16.03.31
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.

Part I - Page 21h
§ 4179T.4
16.03.31
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

Part I - Page 21i
§§ 4179T.4 - 4179T.5
16.03.31
management functions, management letters received, management should regularly

issued by external auditors, and reports verify the timeliness, accuracy, and
generated by supervisory authorities, as relevance of reporting systems and internal
appropriate, should be included in regular controls in general.
reports to the board and the senior (5) Management should keep track of the
management to ensure that timely and information provided in the reports,
appropriate measures are undertaken to particularly the loss data, to establish a
address the issues/findings. framework for systematically tracking and
(2) Management shall ensure that recording the frequency, severity and other
regular reports on operational risk are relevant information on loss events.
received on a timely basis and in a form c. Risk control and mitigation. Strong
and format that will aid in the monitoring control environment is key to effective risk
and control of their business areas. The control and mitigation. In this respect, trust
board should receive sufficient high-level corporations are expected to adhere to the
information to enable it to understand the standards set forth under pertinent
trust corporation’s overall operational risk provisions of Secs. 4185T and 4186T on
profile and focus on the material and Internal Control and Internal Audit.
strategic implications for the business. Trust corporations shall decide whether
(3) Management reports should contain to use appropriate procedures to control
relevant internal financial, operational, and and/or mitigate the risks, or bear the
compliance data, as well as external market significant risks that have been identified.
information about events and conditions In those instances where internal controls
that are relevant to decision making. They do not adequately address risk and
should aim to provide information such as: accepting the risk is not a reasonable option,
(a) The critical operational risks facing, trust corporations may seek to transfer the
or potentially facing, the trust corporation risk to another party such as through
(e.g., as shown in KRIs and their trend data, insurance. Relative thereto, the board shall
changes in risk and control self- determine the maximum loss exposure the
assessments, comments in audit/ trust corporation is willing to take and has
compliance review reports, etc.); the capacity to assume, and should perform
(b) Major risk events/loss experience, an annual review of the trust corporation’s
issues identified and intended remedial risk and insurance management program.
actions; Trust corporations, however, should not
(c) The status and/or effectiveness of consider risk transfer tools as substitute but
actions taken; and as complementary tools to sound controls
(d) Exception reporting (covering among and risk management system. Management
others authorized and unauthorized shall also assess the extent to which risk
deviations from the trust corporation’s mitigation tools such as insurance reduces
operational risk policy and likely or actual risk, transfer the risk to another business
breaches in predefined thresholds for sector or area, or create a new risk (e.g.,
operational exposures and losses). counterparty risk).
(4) Reports should be analyzed with a (Circular No. 900 dated 18 January 2016)
view to improving existing management
performance as well as developing new risk § 4179T.5 Management of human
management policies, procedures and resource-related risk. One of the major
practices. Moreover, to ensure the sources of operational risk is “people risk”.
usefulness and reliability of the reports In this regard, trust corporations shall

Part I - Page 21j
§ 4179T.5
16.03.31
embed in their enterprise-wide risk knowledge, competence, and skill. Results

management framework measures to of gaps assessment in the performance
identify, measure, monitor, and control evaluation/appraisal process can be used in
human resource related risks. Trust the creation of training and development
corporations shall ensure that there are programs for employees.
adequate policies and risk management and d. Remuneration and compensation.
control measures in the following areas: The board shall establish sound
a. Recruitment and selection. The remuneration and compensation policies
board shall establish efficient process that that can be used by the institution to attract/
will facilitate timely recruitment and recruit and retain highly qualified
selection of personnel from a broad pool of workforce. Said policies should
candidates with appropriate educational appropriately motivate personnel and
background, skills, experience and discourage excessive risk taking. This can
competencies to fulfill the duties and be achieved through timely assessment of
responsibilities of the function. Management performance and competencies based on
shall also ensure that the trust corporation’s set standards. Results of performance
culture, values and expectations on behavior assessment/appraisal can be used in the
are compatible with those of its employees organization’s remuneration decisions.
so that there is unity of direction and e. Succession planning. The board
purpose. shall establish an effective succession
b. Performance management. The planning program. The program should
board shall establish effective performance include a system for identifying and
management framework that will ensure developing potential successors for key and
that personnel’s performance is at par with or critical positions in an organization,
the standards set by the board/senior through systematic evaluation process and
management. Results of performance training. This will require identifying critical
evaluation should be linked to other human skills and competencies; assessing gaps; and
resource activities such as training and designing developing, and delivering
development, remuneration, and succession training and development programs to build
planning. These should likewise form part or improve critical skills and competencies.
of the assessment of the continuing fitness The program should be adequately
and propriety of personnel in carrying out documented to facilitate monitoring and
their respective duties and responsibilities. assessment of its implementation.
The assessment of continuing fitness and f. Adequacy of complement. The
propriety of personnel should take into board shall establish effective strategic
account factors that may affect the manpower planning to ensure that there is
performance of an individual. For instance, adequate and right manpower complement
the financial circumstances of an employee to meet the strategic goals and operational
who will be responsible for the custody of, plans of the organization.
or handling of cash related transactions, g. Disciplinary actions. The board,
shall be taken into consideration in the officers and all employees are expected to
evaluation of his continuing qualification. conform to prescribed ethical culture and
c. Training and development. The guidelines, meet performance standards,
board shall establish training and and to behave ethically/appropriately in the
development programs that will ensure workplace. Disciplinary or corrective
continuing development of employees’ actions may be taken to improve/arrest

Part I - Page 21k
§§ 4179T.5 - 4179T.9
16.03.31
unacceptable behavior or performance. the Bangko Sentral relative to issues on the

Disciplinary action must be in accordance integrity and accuracy of prudential reports.
with the laws and the applicable rules. Persistent concerns on the integrity and
h. Separation from service. The board accuracy of prudential reports including
shall establish policies and procedures failure to comply with the directives of the
governing the separation of employees from Bangko Sentral in this respect may be
service (e.g., termination, dismissal, considered by the Bangko Sentral as
retrenchment, retirement, or resignation), conducting business in an unsafe or
which should include transfer of unsound manner, subject to applicable
accountabilities and/or salient information provision of laws and regulations.
(e.g., client data, business strategies and (Circular No. 900 dated 18 January 2016)
formula, other trade secrets, etc.) to the
§ 4179T.8 Management of legal risk
successor, and clearance requirements.
exposures. Trust corporations shall adopt a
Policies may also include “non-compete”
system for identifying and assessing legal
clauses, in accordance with existing laws.
risks related to business line functions as well
The Human Resource Department shall as products and services offered. This shall
assist the board in fulfilling its oversight include a process for assessing the trust
responsibilities in the areas of recruitment, corporation’s rights and obligations in
manpower planning, personnel contractual relationships and in ensuring
development, performance appraisal, that all agreements/contracts entered into by
remuneration, termination, retrenchment the trust corporation conform with legal and
and other key human resource issues. regulatory requirements and that no party is
(Circular No. 900 dated 18 January 2016)
unduly disadvantaged. This shall also
include the assessment of trends of customer
§ 4179T.6 Management of information complaints to determine potential legal risk
technology-related risk. Trust corporations exposures.
shall refer to Sec. 4177Q for the management There should be a system in place to
of information technology-related risk. manage outstanding legal cases involving the
(Circular No. 900 dated 18 January 2016) trust corporation or any of its directors and
officers, with respect to suits filed in line
§ 4179T.7 Management of integrity of with the performance of their duties. Said
prudential reports or reports submitted to system should cover a periodic review of
Bangko Sentral. Trust corporation shall the status of cases, an assessment of potential
adopt a prudential reporting framework that outcome including probable liability or
ensures the integrity of information receivable, and regular reporting of the same
submitted to the Bangko Sentral. They shall to the appropriate level of management and
establish a system for ensuring effective the board.
compliance with the standards prescribed (Circular No. 900 dated 18 January 2016)
by the Bangko Sentral on acceptable
reporting quality. Trust corporations shall § 4179T.9 Management of operational
likewise maintain adequate documentation risk arising from financial inclusion
of the processes and procedures covering initiatives. Trust corporations that provide
the prudential reporting framework and financial services to the unserved and
conduct a periodic review of their continuing underserved sector generally handle small
relevance. and voluminous transactions, which have
Management should be cognizant of inherently high operational risk. Incremental
relevant guidelines that may be issued by operational risk also comes from the higher

Part I - Page 21l
§§ 4179T.9 - 4186T
16.03.31
number of personnel or from the use of actions to promote adherence with the
technology-based platform to effectively and requirements set forth in this Section and
efficiently deliver financial services. Trust bring about timely corrective actions. The
corporations are expected to identify and Bangko Sentral may issue directives to
understand the distinct operational risk improve the operational risk management
arising from the products and services they system, or impose sanctions to limit the
offer or innovative delivery channels they level of or suspend any business activity that
use. They should also be cognizant of has adverse effects on the safety or
potential transformation or transfer or risk soundness of the trust corporation, among
exposures. In this regard, trust corporations others. Sanctions may likewise be imposed
shall adopt an operational risk management on a trust corporation and/or its directors,
framework appropriate to the nature and officers and/or employees.
scale of their operations. Said framework (Circular No. 900 dated 18 January 2016)
shall consider the principles embodied in
this Section designed to suit the trust Sec. 4180T Compliance System. The
corporation's business model and ensure applicable provisions under Sec. 4180Q
sustained delivery of financial services to the and its Subsections shall be adopted by the
unserved and underserved sector. trust corporations.
(Circular No. 900 dated 18 January 2016) (Circular No. 884 dated 22 July 2015)
§ 4179T.10 Notification/Reporting to Secs. 4181T - 4184T (Reserved)

Bangko Sentral. Trust corporations shall
notify the appropriate department of the Sec. 4185T Internal Control System. The
Supervision and Examination Sector, applicable provisions under Sec. 4185Q
Bangko Sentral, within ten (10) calendar and its Subsections shall be adopted by the
days from the date of discovery, of any trust corporations.
operational risk event1 that may result in any (Circular No. 884 dated 22 July 2015)
of the following:
a. Significant operational losses or Sec. 4186T Internal Audit Function. Internal
exposures; audit is an independent, objective assurance
b. Activation of business continuity and consulting function established to
plan; or
examine, evaluate and improve the
c. Any material change in business and
effectiveness of risk management, internal
operating environment.
control, and governance processes of an
Upon receipt of notification, the Bangko
organization.
Sentral may require, if warranted, the
The board of directors, in a resolution
reporting trust corporation to submit a report
entered in its minutes, may adopt a suitable
detailing the causes and impact of such
events and an acceptable action plan to continuous audit system to supplement and/
address the issue and any other weakness or replace the performance of an annual
identified. audit. The audit may be conducted in
(Circular No. 900 dated 18 January 2016) intervals commensurate with the assessed
levels of risk in trust and investment
§ 4179T.11 Supervisory Enforcement management operations: Provided, That
Actions. Consistent with Sec. 4009T, the such intervals shall be supported and
Bangko Sentral may deploy enforcement reassessed regularly to ensure
1
As enumerated under Sec. 4179T.4.a.(1).

Part I - Page 21m
§§ 4186T - 4190T.1
15.10.31
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.

Part I - Page 22
§§ 4190T.1 - 4193T
15.10.31
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 I - Page 23
§ 4194T - 4196T
15.10.31
Sec. 4194T (Reserved) It shall be unlawful for any such TC to

thereafter perform or engage in trust, other
R. LIQUIDATION AND fiduciary business and investment
RECEIVERSHIP management activities.
Whenever a receiver is appointed by the
Sec. 4195T Voluntary Liquidation. A TC Monetary Board for a TC, the receiver shall,
which intends to surrender its trust license pursuant to the instructions of the Monetary
shall file with the Bangko Sentral a certified Board, proceed to close the trust, other
copy of the resolution of its board of fiduciary and IMAs promptly and/or transfer
directors manifesting such intention. The all other accounts to substitute trustees,
appropriate department of the SES shall then fiduciaries or investment managers acceptable
conduct an examination of the TC’s trust, to the trustors, beneficiaries, principals or
other fiduciary business and investment other parties in interest: Provided, That where
management activities. If the TC is found to the trustee, fiduciary or investment manager
have satisfactorily discharged its duties and is acting as such under appointment by a
responsibilities as trustee, fiduciary or court, the receiver shall proceed pursuant
investment manager, and has provided for to the instructions of said court.
the orderly closure or transfer of its trust, The guidelines on receivership and
fiduciary or IMAs, the Monetary Board, on liquidation of banks found in Section X198
the basis of the recommendation of the and its Subsections of the MORB, shall
examining department, shall order the apply to the placement of a trust corporation
revocation of the institution’s authority to under receivership or liquidation, to the
extent possibly, or by analogy.
engage in trust and other fiduciary
In case of a TC which license has been
management activities.
revoked by the Monetary Board, any director
TCs shall adopt the provisions of
or officer thereof
Appendix Q-58 of the MORNBFI on the
a. who refuses to turn over the
guidelines on voluntary liquidation.
corporation’s records and assets under
management to the appointed successor-
trustee(s), or
Sec. 4196T Receivership and Involuntary b. who tampers with the corporation’s
Liquidation. The Monetary Board, after records, or
considering the report of the appropriate c. who appropriates for himself for
department of the SES, may revoke the another party or destroys or causes the
TC’s authority to engage in trust, other misappropriation and destruction of the
fiduciary business and investment TC’s assets under management, or
management activities in accordance with d. who receives or permits or causes
Section 37 of R.A. No. 7653. Upon to be received in said corporation any part
revocation of the trust, other fiduciary and or all of the assets under management, or
investment management license, the TC e. who pays out or permits or causes
shall be required to wind down and to be transferred any part thereof,
liquidate its trust, other fiduciary business shall be subject to the penal provisions
and investment management activities, and of the R.A. No. 7653.
distribute proceeds thereof to its clients. (Circular No. 884 dated 22 July 2015)

Part I - Page 24
§ 4197T - 4199T
15.10.31
Sec. 4197T - 4198T (Reserved) such other sanctions as may be provided

by law and existing regulations. If the
S. GENERAL PROVISION ON offender is a director or officer of the TC,
SANCTIONS the Monetary Board may also suspend or
remove such director or officer. If the
Sec. 4199T General Provisions on violation is committed by a corporation,
Sanctions. Pursuant to Section 91 of R. A. such corporation may be dissolved by quo
warranto proceedings instituted by the
No. 8791, the Monetary Board may impose
Solicitor General.
sanctions and monetary penalty for any
The guidelines for the imposition of
violation of the provisions of this Part. This monetary penalty shown in Appendix T-2
is without prejudice to the imposition of shall govern the imposition of monetary
other sanctions as the Monetary Board may penalty for violations/offenses with
consider warranted that may include the administrative sanctions falling under
suspension or revocation of a TC’s authority Section 37 of R.A. No. 7653 on TCs, their
to engage in trust, other fiduciary business directors and/or officers.
and investment management activities and (Circular No. 884 dated 22 July 2015)

Part I - Page 25
§§ 4201T - 4299T
15.10.31
PART TWO
Sections 4201T - 4299T (Reserved)

Part 2 - Page 1
§§ 4301T - 4304T
15.10.31
PART THREE
ASSET MANAGEMENT OPERATIONS
Sec. 4301T Management of Risk Assets/ 4178Q.15 Credit Monitoring

Minimum Guidelines on Investment 4178Q.16 Credit Review Process
Operations. It shall be the responsibility of 4178Q.17 Credit Classification and
the board of directors of a TC to formulate Provisioning
written policies on credit and investment 4178Q.18 Credit Workout and
activities, and risk diversification and to set Remedial Management of Problem Credits
the guidelines for evaluation of proprietary 4178Q.19 Writing off problem credits
and fiduciary assets. Sound credit and 4178Q.20 Enforcement Actions
investment processes are essential if a TC (Circular No. 884 dated 22 July 2015)
is to perform its asset management function
effectively and minimize the risk inherent Sec. 4303T Large Exposures. TCs are
in any credit and investment activity. The expected to adopt policies and processes
responsibility should be approached in a that will identify, measure, monitor and
way that will provide assurance to the client, control large exposures as well as potential
the stockholders and supervisory authorities conflict of interest in the administration of
that timely and adequate action will be taken fiduciary business.
to maintain the quality of the loan and Large exposures should be kept under
investment portfolio and other fiduciary assets. regular review to ensure quality and
(Circular No. 884 dated 22 July 2015) controls thereof to safeguard against credit
risk concentrations.
Sec. 4302T Loan Portfolio and Other Risk Large exposures shall refer to exposures
Assets Review System. The following to counterparty or a group of related
provisions of Section 4178Q of the counterparties equal or greater than five
MORNBFI on operating under a sound percent (5%) of TC’s combined capital
credit granting process shall be adopted, in account as defined under Section 4111T of
so far as applicable to the TC: the MORNBFI.
4178Q.6 Credit approval process (Circular No. 884 dated 22 July 2015)
4178Q.7 Credit granting and loan
evaluation/analysis process and Sec. 4304T Applicable Regulations on
underwriting standards Credit and Investment Operations. Unless
4178Q.8 Renewal or extension of otherwise provided herein, the following
maturity date of credits regulations in Part Three of the MORNBFI
4178Q.10 Country and Transfer Risks shall be adopted, in so far as applicable to
4178Q.12 Credit Administration the TC:
4178Q.13 Credit Risk Measurement, Sec. 4304Q Grant of Loans and Other
Validation and Stress Testing Credit Accommodations, and its
4178Q.14 Credit Risk Management Subsections (except for Subsection 4304Q.2
Information and Reporting Systems which is now renumbered as 4178Q.7)

Part III - Page 1
§§ 4304T - 4399T
15.10.31
Sec. 4305Q Interest and Other Charges, Sec. 4327T (Reserved)

and its Subsections
Sec. 4306Q Past Due Accounts, and Sec. 4328T Transactions Not Covered. The
Subsections 4306Q.1, 4306Q.2 and provisions under Section 4328Q of the
4306Q.7 MORNBFI (except its Subsections) shall be
Sec. 4307Q Truth in Lending Act adopted by the TC.
Disclosure Requirement, and its Subsections (Circular No. 884 dated 22 July 2015)
Sec. 4309Q Non-Performing Loans,
and its Subsections § 4328T.1 - 4328T.5 (Reserved)
Sec. 4327Q Transactions Covered
Sec. 4334Q Procedural Requirements Sec. 4329T Reports. The TC shall submit a
Sec. 4388Q Purchase of Receivables report to the appropriate supervising
and Other Obligations department covering transactions of the TC
Sec. 4394Q Acq u i r e d A s s e t s in with its DOSRI and related parties within
Settlement of Loans (except Subsections twenty (20) calendar days from end of the
4394Q.10 Transfer/Sale of Non-Performing reference quarter. Moreover, TC’s records
Assets to a Special Purpose Vehicle or to on monitoring large exposures and loans to
an individual; 4394Q.15 Joint Venture of DOSRI and its related parties shall be made
QBs with Real Estate Development available to the Bangko Sentral examiners
Companies) for verification at any given time. When
(Circular No. 884 dated 22 July 2015) warranted, the Bangko Sentral may impose
additional reporting requirements on TC in
Secs. 4305T - 4325T (Reserved) relation to its large exposures and credit risk
concentrations.
Sec. 4326T Loans/Credit Accommodations (Circular No. 884 dated 22 July 2015)
to Directors, Officers, Stockholders and
their Related Interests (DOSRI) and Related Secs. 4330T - 4398T (Reserved)
Parties. Dealings of a TC with any of its
DOSRI and related parties1 shall be in the Sec. 4399T General Provision on Sanctions.
regular course of business and upon terms Pursuant to Section 91 of R. A. No. 8791,
not less favorable to the TC and/or its clients the Monetary Board may impose sanctions
than those offered to others. DOSRI shall and monetary penalty for any violation of
be defined in accordance with the the provisions of this Part. This is without
definitions under Subsection 4326Q.1 of the prejudice to the imposition of other
MORNBFI and Sections 12 and 13 of R.A. sanctions as the Monetary Board may
8791 on related interests. consider warranted that may include the
The TC is expected to clearly articulate suspension or revocation of a TC’s authority
policies and procedures on the handling of to engage in trust, other fiduciary business
any transaction with DOSRI and other and investment management activities and
related parties ensuring that there is such other sanctions as may be provided
appropriate disclosure and effective by law. If the offender is a director or officer
compliance with existing laws, rules and of the TC, the Monetary Board may also
regulations at all times and no stakeholder suspend or remove such director or officer.
is unduly disadvantaged. If the violation is committed by a
(Circular No. 884 dated 22 July 2015) corporation, such corporation may be
1
As defined under Subsec. 4141Q.3.c.5.a of the MORNBFI

Part III - Page 2
§§ 4399T
15.10.31
dissolved by quo warranto proceedings penalty for violations/offenses with

instituted by the solicitor general. administrative sanctions falling under
The guidelines for the imposition of Section 37 of R.A. No. 7653 on TCs, their
monetary penalty shown in Appendix T-2 directors and/or officers.
shall govern the imposition of monetary (Circular No. 884 dated 22 July 2015)

Part III - Page 3
§ 4401T
15.10.31
PART FOUR
TRUST, OTHER FIDUCIARY BUSINESS

AND INVESTMENT MANAGEMENT ACTIVITIES
Section 4401T Statement of Principles. property entrusted. Fiduciary assets shall be

The cardinal principle common to all trust kept legally separate and distinct from
and other fiduciary relationships is fidelity. proprietary assets and from one fiduciary/
Policies predicated upon this principle shall trust/investment management account to
be directed towards observance of the another.
following: e. Keeping and rendering accounts. A
a. Prudent administration. The trust, true and accurate account or record of
investment management and other fiduciary transactions entered into shall be kept.
accounts shall be administered in Reports on the trust, investment
conformity with the intention and purpose management and other fiduciary accounts
of the client as manifested in the terms of shall be rendered to the trustor, principal,
the agreement, and with the skill, care, beneficiary or other party in interest, or the
prudence and diligence necessary under the court concerned, or any party duly
circumstance then prevailing that a prudent designated by a court order, as the case may
man acting in like capacity and familiar with be, in accordance with Section 4421Q of
such matters would exercise in the conduct the MORNBFI. Likewise, all material facts
of an enterprise of like character and with within the knowledge or reasonably
similar aims. discoverable by the TC, particularly
b. Undivided loyalty and utmost care information that would enable clients to
In the discharge of fiduciary responsibility, make well-informed decisions, shall be
the interests of clients shall be placed above promptly transmitted/relayed to clients for
those of the TC. Clear policies and them to protect their interests.
procedures shall be developed in dealing Furthermore, practices shall be carried
with conflict of interest situations. The out in accordance with the basic standards
fiduciary assets shall be objectively and (Appendix Q-48 of MORNBFI) and risk
fairly administered, invested and distributed management guidelines for trust, other
giving due regard to the beneficiaries’ fiduciary business and investment
respective interests. management activities (Appendix Q-48a of
c. Non-delegation of responsibilities MORNBFI).
The administration of the trust, investment An institution incorporated or
management, or fiduciary responsibilities or authorized to engage in trust and fiduciary
the performance of acts that should be business is under no obligation, either legal
personally performed shall not be delegated or moral, to accept any such business being
as the client’s confidence is reposed on the offered nor has it the right to accept if the
TC. same is contrary to law, rules, regulations,
d. Preserving and protecting property public order and public policy. It shall
Reasonable care and diligence shall be advertise its services in a dignified manner
observed to preserve and protect the and enter such business only when demand

Part IV - Page 1
§§ 4401T - 4412T
16.03.31
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
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.
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)

Part IV - Page 2
§§4412T.1 - 4441T.15
15.10.31
§ 4412T.1 Applicability of rules and of preparing the FCD financial statements,

regulations. Unless otherwise revised by the TC shall use the US dollar (USD) as its
the provisions of this Section, the rules and functional currency. However, for purposes
regulations governing the administration of of consolidating the FCD financial statements
trust, other fiduciary or investment with the Peso financial statements, these shall
management accounts, including UITFs, be translated into the presentation currency,
shall be observed. i.e. Philippine Peso (PHP).
(Circular No. 884 dated 22 July 2015) The TC shall also prepare financial
reports to clients as required under Section
§ 4412T.2 Allowable loans and 4425Q of the MORNBFI, reflecting dollar
investments. FCD accounts may be denominated assets and accountabilities and
invested in loans and investments as consolidated reports reflecting the peso and
allowed under the written contract foreign currency (translated into Philippine
between the TC and its clients: Provided, Peso) denominated assets and
That the loans and investments are allowed accountabilities.
under existing Bangko Sentral regulations (Circular No. 884 dated 22 July 2015)
and are properly disclosed to trustors/
principals/fund participants: Provided Secs. 4413T - 4440T (Reserved)
further, That the pertinent rules and
regulations in the Manual of Regulations Sec. 4441T Securities Custodianship and
on Foreign Exchange Transactions (Part V Securities Registry Operations. The
of MORB) are complied with. provisions under Section 4441Q of the
The TC shall adopt a written policy on MORNBFI, and its Subsections, shall be
the determination of the level of liquid adopted for TC with the following changes:
assets appropriate to each client after (Circular No. 884 dated 22 July 2015)
considering the client’s mandate/s or
objective/s, given constraints and unique §§ 4441T.1 to 4441T.4 (Reserved)
needs and circumstances. The Investment
Policy Statement of each client shall show § 4441T.5 Pre-qualification requirements
the basis for the client’s liquidity for a securities custodian/registry. The pre-
requirement. qualification requirements for a securities
(Circular No. 884 dated 22 July 2015) custodian/registry under Subsection 4441Q.5
of the MORNBFI shall apply, except for items
§ 4412T.3 Accounting. TCs shall a (QB requirement); and c (CAMELS composite
maintain a separate accounting for these rating requirement), of said Subsection. In
foreign currency transactions that will enable addition to the said requirements, TC must
have a Trust Composite Rating of at least “3”
preparation of the Balance Sheet and Income
in the last regular examination.
Statement covering said funds. FCD assets and
accountabilities shall be recorded at their
foreign currency amounts and their local §§ 4441T.6 - 4441T.14 (Reserved)
currency equivalent using the Philippine
Dealing System (PDS) Peso/US Dollar § 4441T.15 Trust Rating System and
closing rate and the New York US Dollar/ Rating downgrade. In the event that the TC’s
Third Currencies closing rate. For purposes trust rating of “3” is downgraded during a

Part IV - Page 3
§§ 4441T.15 - 4499T
15.10.31
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 IV - Page 4
§§ 4501T - 4599T
15.10.31
PART FIVE

Part V - Page 1
§§ 4601T - 4699T
15.10.31
PART SIX

Part VI - Page 1
§§ 4701T - 4799T
15.10.31
PART SEVEN

Part VII - Page 1
§§ 4801T - 4899T
15.10.31
PART EIGHT

Part VIII - Page 1
§§ 4901T - 4999T
15.10.31
PART NINE
MISCELLANEOUS
A. SUNDRY PROVISIONS (Treasury and Money Market Operations),

Seven (Electronic Operations and Other
Section 4901T (Reserved) Services) and Eight (Anti-Money Laundering
Operations) of the MORNBFI, unless
§ 4901T.1 Annual supervision fees. otherwise provided in this Manual.
TCs shall pay to the Bangko Sentral an (Circular No. 884 dated 22 July 2015)
annual supervision fee of 0.01% of the
average monthly balance of assets under Sec. 4905T Transitory Provision. TCs spun
management for the first three (3) years of off from trust departments of banks/NBFIs,
the TC’s operations. However, a supervision may continue to operate as a trust
fee of 0.02% of the average monthly balance department within a reasonable period of
of assets under management shall be time, to be determined by the Bangko
imposed on the 4 th year and onwards. Sentral, after the grant of the Authority to
Securities held under custodianship shall be Operate as TC. Necessary documentations
exempt from annual fees. The average and transfer of resources may be done
monthly balance shall refer to the sum of during this period: Provided, That new
the twelve (12) month-end balances of the services and/or products to be offered by
preceding calendar year divided by a factor the TC during this period shall be rendered
of twelve (12). Said annual supervision fee by the newly incorporated TC: Provided,
shall be paid by the TCs on or before end- further, That all necessary arrangements,
February of every year. Non-payment of the notices to clients/investors/creditors shall be
supervisory fee within the prescribed period made by the TC immediately after receipt
shall subject the concerned TC to the of approval from the Bangko Sentral of its
sanctions prescribed under Section 37 of Authority to Establish as a TC.
R.A. No. 7653. (Circular No. 884 dated 22 July 2015)
Sec. 4902T Payment of Fines and Other
Charges. The provisions of Section 4902Q Sec. 4999T General Provision on Sanctions.
of the MORNBFI shall apply to TCs. Pursuant to Section 91 of R. A. No. 8791,
(Circular No. 884 dated 22 July 2015) the Monetary Board may impose sanctions
and monetary penalty for any violation of
Sec. 4903T (Reserved) the provisions of this Part. This is without
prejudice to the imposition of other
Sec. 4904T Applicable Regulations on TCs. sanctions as the Monetary Board may
Trust operations and investment consider warranted that may include the
management activities of TCs shall be suspension or revocation of a TC’s
subject to the applicable regulations in Parts authority to engage in trust, other fiduciary
Five (Foreign Exchange Operations), Six business and investment management

Part IX - Page 1
§ 4999T
15.10.31
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)

Part IX - Page 2
APP. T-1
15.10.31
List of Appendices of MORB/Q Regulations Applicable

to Trust Corporations
Appendix Reference in T Regulations

MORB
4 Format of Affidavit on Transactions Subsec. 4126T.2 Transactions Involving
Involving Voting Shares of Stocks Voting Shares of Stocks
69 Prompt Corrective Action Framework Sec. 4193T Prompt Corrective Action Framework
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
Sec. 4411Q Investment Management

Activities (except on the required pre-
numbered contractual agreement form; and
except Subsections 4411Q.7 Ceilings on Loans;
4411Q.10 Tax-Exempt Individual IMA)
Q-15 Risk Management Guidelines for Sec. 4904T Applicable Regulations on TCs
Derivatives
Q-16 Sales and Marketing Guidelines for
Derivatives
Q-16a Sample Risk Disclosure Statement
for Derivatives Activities
Q-20 Classification, Accounting Procedures, Sec. 4304T Applicable Regulations on Credit
Valuation and Sales and Transfers of and Investment Operations.
Investments in Debt Securities and
Marketable Equity Securities Sec. 4388Q Purchase of Receivables and Other
Obligations

Appendix T-1 - Page 1
APP. T-1
15.10.31

20a Establishing the Market Benchmarks/
Reference Prices and Computation
Method Used to Mark-to-Market
Debt and Marketable Equity
Securities
Q-21 Guidelines on the Use of Scripless Subsec. 4112T.1 Basic Security Deposit
Securities (RoSS) as Security Deposit for
the Faithful Performance of Trust Duties
Q-22 Procedures on Collection of Fines/ Sec. 4902T Payment of Fines and Other
Penalties from Quasi-banks and/or Charges
Directors/Officers of QBs
Q-22a Pro-Forma Payment Form
Q-23 (Reserved)
Q-24 Activities which may be Considered Sec. 4149T Conducting Business in
Unsafe and Unsound Practices Unsafe/Unsound Manner
Q-29 Guidelines and Minimum Documentary Sec. 4904T Applicable Regulations on
Requirements for Foreign Exchange TCs
Forward and Swap Transactions
Q-30 Guidelines to Govern the Selection, Sec. 4189T Selection, Appointment,
Appointment, Reporting Requirements Reporting Requirements and Delisting of
and Delisting of External Auditors and/ External Auditors and/or Auditing Firm;
or Auditing Firm of Covered Entities Sanction.
Q-31 Qualification Requirements for a Bank/ Sec. 4402T Applicable Regulations on Trust
Non-Bank Financial Institution and Other Fiduciary Activities
Applying for Accreditation to Act as
Trustee on any Mortgage or Bond Section 4409Q Trust and Other Fiduciary
Issued by any Municipality, Business (except Subsections 4409Q.4
Government-Owned or Controlled Ceiling on Loans; 4409Q.8 Tax-exempt
Corporation, or any Body Politic Individual Trust Accounts)
Q-33 Checklist of BSP Requirements in the Sec. 4190T Audited Financial Statements of
Submission of Financial Audit Report, TCs; Financial Audit.
Annual Audit Report and Reports
Required Under Appendix Q-30
Q-34 Key Information and Investment Sec. 4402T Applicable Regulations on Trust
Disclosure Statement (pursuant to and Other Fiduciary Activities
Circular No. 852 dated 21 October 2014)
Q-34a Unit Investments Trust Funds Section 4410Q Unit Investment Trust Funds
Risk Disclosure Statement
Q-35 Bangko Sentral Rules of Procedure on Sec. 4150T Rules of Procedure on
Administrative Cases Involving Administrative Cases Involving Directors
Directors and Officers of Quasi-banks and Officers of TC
and Trust Entities
Q-37 Documents Required Under the Revised Sec. 4162T Duties and Responsibilities of
Outsourcing Framework for Non- TCs and their Directors/ Officers in All Cases
Banks of Outsourcing of Other Functions

APP. T-1
15.10.31

Q-38 Implementation of the Delivery by Sec. 4441T Securities Custodianship and
the Seller of Securities Directly to the Securities Registry Operations.
Buyer or to his Designated Securities
Custodian/Central Securities
Depository
Q-38a Delivery of Government Securities to
the Investor's Principal Securities
Account w i t h t h e R e g i s t r y o f
Scripless Securities
Q-39 The Guidelines for the Imposition of Replaced by Appendix T-2 (Guidelines for
Monetary Penalty for Violations/ the Imposition of Monetary Penalty for
Offenses with Sanctions Falling Under Violations/Offenses with Sanctions Falling
Section 37 of R.A. No. 7653 on Quasi- Under Section 37 of R.A. No. 7653 on Trust
Banks, Directors and/or Officers Corporations, Directors and/or Officers)
Q-42 Guidelines on Supervision by Risk Sec. 4173T Risk Management Guidelines
Q-43 Guidelines on Market Risk
Management
Q-44 Guidelines on Liquidity Risk
Management
Q-45 Authorization Form for Querying the Sec. 4143T Disqualification of Directors
Bangko Sentral Watchlist Files for and Officers
Screening Applicants and Confirming
Appointments of Directors and
Officials
Q-47 Guidelines for Trust Departments’ Sec. 4402T Applicable Regulations on Trust
Placements in the Special Deposit and Other Fiduciary Activities
Account Facility of the Bangko Sentral
Q-47a Special Deposit Account Placements Sec. 4409Q Trust and Other Fiduciary
of Trust Departments/Entities as Agent for Business (except Subsections 4409Q.4
Tax-Exempt Institutions and Accounts Ceiling on Loans; 4409Q.8 Tax-exempt
Q-47b Guidelines on the Prohibition Against Individual Trust Accounts)
Non-Residents from Investing in the
SDA Facility
Q-47c Access of Trust Department/Entities
which are counterparties in Special
Deposit Account (SDA) Facility of the
Bangko Sentral
Q-48 Basic Standards in the Administration Subsec. 4142T.3 Duties and responsibilities
of Trust, Other Fiduciary and of officers
Investment Management Accounts
Sec. 4401T Statement of Principles
Q-48a Risk Management Guidelines for Trust Sec. 4173T Risk Management Guidelines
and Other Fiduciary Business and Sec. 4401T-Statement of Principles
Investment Management Activities

APP. T-1
15.10.31

Q-49 Guidelines for Days Declared as Sec. 4904T Applicable Regulations on TCs
Public Sector Holidays
Q-50 Guidelines on the Submission of Sec. 4108T Authority Resulting from Merger
Application for Merger and or Consolidation
Consolidation
Q-56-Guidelines Governing the Sec. 4191T Records
Implementation/Early Adoption of
Philippine Financial Reporting
Standards (PFRS 9) Financial
Instruments
Q-57 List of Documentary Requirements- Sec. 4141T Definition; Qualifications;
Confirmation of the Election/ Powers; Responsibilities and Duties of Board
Appointment of the Members of the of Directors.
Board of Directors/SVPs and Above
or Equivalent Ranks of Non-Banks
with Quasi-Banking Functions
Q-57b List of Members of the Board of
Directors and Officers
Q-58 Guidelines on Receivership and Sec. 4195T Voluntary Liquidation
Liquidation Proceedings of Non-
Banks with Quasi-Banking Functions Sec. 4196T Receivership and Involuntary
and Trust Entities. Liquidation
Q-59a IT Risk Management Standards and Sec. 4173T Risk Management Guidelines
Guidelines Area: IT Audit
Q-59b IT Risk Management Standards and
Guidelines Area: Information
Security
Q-59c IT Risk Management Standards and
Guidelines Area: Project
Management/ Development,
Acquisition and Change
Management
Q-59d IT Risk Management Standards and
Guidelines Area: IT Operations
Q-59e IT Risk Management Standards and
Guidelines Area: IT Outsourcing/
Vendor Management
Q-59f IT Risk Management Standards and
Guidelines Area: Electronic
Banking, Electronic Payment,
Electronic Money and Other
Electronic Products and Services
Q-60 Report on Breach in Information
Security

APP. T-2
15.10.31
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
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:
A. For Serious Offense
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
B. For Less Serious Offense
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
C. For Minor Offense
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

APP. T-2
15.10.31
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.

APP. T-2
15.10.31
6. Maximum refers to the penalty to be Both the aggravating and mitigating

imposed if the aggravating circumstances factors shall be considered for initial penalty
outweigh the mitigating factor(s). imposition and subsequent requests for
In determining the amount of penalty, a reconsideration thereto.
two-stage assessment shall be conducted as
follows: The foregoing monetary penalties shall
Step 1: Determine the nature of offense be without prejudice to the imposition of
non-monetary sanctions, if and when
whether it is: (a) Serious; (b) Less Serious;
deemed applicable by the Monetary Board.
or (c) Minor Offense; and
Violations of banking laws and Bangko
Step 2: Determine whether there are Sentral regulations with specific penal
aggravating and/or mitigating factors (as clause are not covered by this Regulation.
listed and defined in Appendix T-2a) (Circular No. 884 dated 22 July 2015)

APP. T-2a
15.10.31
Aggravating and Mitigating Factors to be Considered in the

Imposition of Penalty
1. Aggravating Factors: been elevated accordingly. This covers the

a. Frequency of the commission of period after the final notification of the
specific violation – This pertains to existence of the violation until such time
commission or omission of a specific that the violation has been corrected and/or
offense involving either the same or different remedied. The corrective action shall be
transaction. This will also refer to a violation reckoned from the date of notification.
which may have been corrected in the past d. Concealment – This factor pertains
but found repeated in another transaction/ to the cover up of a violation. In evaluating
account in the subsequent examination. this factor, one shall consider the intention
In determining frequency, the number of the party(ies) involved and whether
of times of commission or omission of a pecuniary benefit may accrue accordingly.
specific offense during the preceding Intention precedes concealment. The act of
three (3) - year period shall also be concealing an offense or omission carries
considered. with it the intention to defraud regulators.
The word “offense” pertains to a Moreover, the amount of pecuniary benefit,
violation that connotes infraction of existing which may or may not accrue from the
BSP rules and regulations as well as non- offense or omission, shall also be
compliance with Bangko Sentral/MB directives. considered under this factor.
b. Duration of Violations Prior to Concealment may be apparent in cases
Notification – This pertains to the length of when trust corporation officers purposely
time prior to the latest notification on the complicates the transaction to make it diffi-
violation. Violations that have been existing cult to uncover or refuse to provide infor-
for a long time before it was revealed/ mation/ documents that would support the
discovered in the regular examination or are violation/offense committed.
under evaluation for a long time due to Inasmuch as concealment and intention
pending requests or correspondences from are speculative matters and may be difficult
trust corporations on whether a violation to establish, appropriate support of facts or
has actually occurred shall be dealt with circumstantial evidence in this factor shall
through this criterion. Violations be considered.
outstanding for more than one (1) year prior e. Loss or risk of loss to trust
to notification, at the minimum, will qualify corporation- In assessing this factor,
as violations outstanding for a long time. “potential loss" refers to any time at which
c. Continuation of offense or omission the trust corporation was in danger of
after notification – This pertains to the sustaining a loss.
persistence of an act or offense after the (1) Substantial actual loss – The trust
latest notification on the existence of the corporation has been exposed to a significant
violation, either from the appropriate loss of earnings and capital. The volume of
Supervision and Examination Department accounts involved in the loss is substantial/
or from the Monetary Board and/or Deputy significant in relation to the institution’s
Governor, in cases where the violation has assets and capital. The trust corporation/

Appendix T-2a - Page 1
APP. T-2a
15.10.31
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
corporation1 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
Appendix Q-30 (Appendix to 4189Q) 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.

APP. T-2a
15.10.31
trust corporation during the investigation (3) Voluntary disclosure of offense -

and/or examination conducted relative to Voluntary disclosure of the trust
the cited offense and/or omission may be corporation of the offense committed
viewed favorably when computing the before it is discovered by Bangko Sentral
amount of penalty to be imposed on the trust examiners in the regular/special
corporation/individual. examination or in the supervisory work
(2) With positive measures/action (e.g. submission of reports to the Bangko
undertaken although not corrected Sentral disclosing the violation committed by
immediately. The trust corporation is the trust corporation based on the internal
willing to remedy/correct the violation but auditor’s findings) may be considered as
is being restrained of its capacity to take the highest level of mitigation under this
immediate action thus, will undertake a factor.
Memorandum of Undertaking/Commitment The burden of proof, however, falls on
for a specified period as a sign of good faith. the trust corporation/individual to support
The trust corporation has started to rectify its/his/her claim of good faith and may be
the infraction by instituting reforms in their used as basis to mitigate the amount of
operations or systems. penalty that may be imposed.

APP. T-3
15.10.31
LIST OF REPORTS REQUIRED FROM TRUST CORPORATIONS
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
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
15.10.31
A-2 Unnumbered 4801Q Report on Covered Transactions As transaction 10th business day from date of Original and duplicate
occurs transaction/knowledge Anti-Money Laundering
Council (AMLC)
A-2 Unnumbered 4191T Financial Reporting Package for Trust Quarterly 20th business day after end of SDC
Institutions reference quarter
Schedules:
Balance Sheet
A1 to A2 Main Report
B to B2 Details of Investments in Debt

and Equity Securities
C to C2 Details of Loans and
Receivables
D to D2 Wealth/Asset/Fund
Management-UITF
E-Fiduciary Accounts
E1 to E1B – Other Fiduciary Services-

UITF
Income Statement
Control Prooflist Quarterly 20th business day after end of SDC

reference quarter
A-3 4328Q.5/4326T Transmittal of Board As loans to 20th business day after date of Original and duplicate to
Resolution/Written Approval on Credit affiliate is approval appropriate department of the
Accommodations to Affiliates approved SES
Page 3 of 8
APP. T-3
15.10.31
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 4103T.1 Documentary Upon submission -do-

requirements/information on of application to
organizational structure and engage in TC
operational policies
As changes occur 15th calendar day from -do-

change/issuance
B 4141Q.4 Notice of Election/Appointments of As changes occur 10th day from -do-

Members of Board of Directors and election/assumption of office
Committees
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
Directors/Officers whose Biographical

Data were submitted thru electronic
mail to be faxed to SDC
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/proof directors in which the
motion officers are appointed/promoted
Page 5 of 8
APP. T-3
15.10.31
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
Control Prooflist duly signed by the

authorized officer of the institution
B 4192Q Annual Report of Management to Annually As soon as available Appropriate department of

Stockholders Covering Results of the SES
Operations for the Previous Year
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
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
(ii) Board resolution approving write-off
B 4409Q.16 Waiver of Confidentiality of As transaction Appropriate department of

Information under Sections 2 and 3 of occurs the SES
R.A. No. 1405, as amended
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
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
Control Prooflist Fax to SDC
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

Manual of Regulations For Non-Bank Financial Institutions Vol. 2 - March 2016

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Manual of Regulations For Non-Bank Financial Institutions Vol. 2 - March 2016

Uploaded by

Copyright:

Available Formats

FOREWORD

The Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) codifies

The MORNBFI is updated regularly to reflect regulatory developments. This edition

AMANDO M. TETANGCO, JR.

The 31 March 2016 Manual of Regulations for Non-Bank Financial Institutions

07 December 1994, directed the creation of a multi-departmental Ad Hoc Review Committee

1. Incorporate relevant issuances;

2. Propose revisions/amendments/deletions of provisions which have

become obsolete, redundant, irrelevant or inconsistent with laws/

rules and regulations;

3. Reformulate provisions as the need arises; and

4. Oversee the publication and printing of the MORNBFI in coordination

with the Economic and Financial Learning Center and Corporate

21 September 2015 is composed of:

Adviser - Nestor A. Espenilla Jr.

Chairman - Atty. Mel Georgie B. Racela

Vice Chairman - Atty. Asma A. Panda

Ma. Belinda G. Caraan Betty Christine C. Bunyi

Maria Josefina G. Nabong Rhodora M. Brazil- De Vera

Atty. Florabelle S. Madrid Maria Cynthia M. Sison

Atty. Ma. Corazon Bilgera-Cordero Celedina P. Garbosa

Atty. Lord Eileen S. Tagle Amelia B. Damian

II, OSPD, and two (2) other personnel.

The Bangko Sentral ng Pilipinas

To illustrate, Subsection 4143Q.1 indicates:

Main Section on “Disqualification of Directors/Trustees and Officers”

Subsection on “Persons disqualified to become officers”

Regulation addressed to quasi-banks

Part One on “Organization, Management and Administration"

Regulations addressed to NBFIs

PART ONE - ORGANIZATION, MANAGEMENT AND ADMINISTRATION

SECTION 4101S Scope of Authority of Non-Stock Savings and Loan Associations

SECTIONS 4102S - 4105S (Reserved)

SECTION 4106S Capital of NSSLAs

SECTIONS 4107S - 4110S (Reserved)

SECTIONS 4111S - 4115S (Reserved)

D. CAPITAL-TO-RISK ASSETS RATIO

SECTION 4116S Capital-to-Risk Assets Ratio

SECTION 4117S Withdrawable Share Reserve

SECTION 4118S Surplus Reserve for Ledger Discrepancies

SECTIONS 4121S - 4125S (Reserved)

F. NET INCOME DISTRIBUTION

SECTION 4126S Limitations on Distribution of Net Income

SECTIONS 4127S - 4140S (Reserved)

G. TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS

SECTION 4141S Definition; Qualifications; Responsibilities and Duties of

SECTION 4142S Definition and Qualifications of Officers

SECTION 4143S Disqualification of Trustees and Officers

SECTION 4144S Compensation of Trustees, Officers and Employees

SECTION 4145S Bonding of Officers and Employees

SECTION 4147S Bio-data of Trustees and Officers

SECTION 4148S Full-Time Manager for NSSLAs

SECTIONS 4149S - 4150S (Reserved)

H. BRANCHES AND OTHER OFFICES

SECTION 4151S Establishment of Branches/Extension Offices

SECTIONS 4152S - 4155S (Reserved)

I. BUSINESS DAYS AND HOURS

SECTION 4156S Business Days and Hours

SECTIONS 4157S - 4160S (Reserved)

SECTION 4161S Records

SECTION 4162S Reports

SECTION 4163S Internal Control Framework

SECTION 4164S Internal Audit Function